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2010 Accounts

By Joe Beardwood :  08/02/2011 :  Comments (106) :
Hi Guys,

Pretty amazing spin in the press on this years accounts ? didn't recognise the numbers and reports on sky as the same thing!

I have prepared my own summary and submitted it in prortable document format (pdf) that should open or download when you click this link: EFC Accounts 2010

I'd be glad to answer any questions you have on the accounts in this thread.


Joe provides replies to the first 50-odd comments below ? Ed

Reader Comments

Note: the following content is not moderated or vetted by the site owners at the time of submission. Comments are the responsibility of the poster. Disclaimer

Michael Kenrick
1   Posted 08/02/2011 at 14:48:55

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Brilliant work, Joe. A fantastic contribution. Very much appreciated.

Can you first explain the Share Premium Account? Why is this constant at £25M? Is that a set valuation of the 35,000 shares (nominally valued at £1) that somehow reflects "investment" in the club? Why is it an asset?
Paul Gladwell
2   Posted 08/02/2011 at 15:01:31

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We have gone back commercially for the third year running, says it all when we have gobshites bringing out new kits when the summer holidays are over and Pink kits which only girls bought and when we finally release a cracker of a kit (Vanilla one) it comes out in the winter when no kid can wear it only for bed.
Scott Goin
3   Posted 08/02/2011 at 15:10:20

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Good analysis, Joe. It looks like Everton pushed the finances to the wall (and over a little) in order to make a run at Europe again. If it had succeeded, our revenue would have gone up and the expenditures would have been sustainable. Unfortunately it hasn't worked and our current wage bill can't be supported in the long term.

Our options at this point seem to be either,

1) Find a way to get more revenue/money

2) Sell off players/cut the wage bill

It's hard to accept as a supporter but a business just can't spend more than it makes and continue to stick around. Everton will likely have to tighten its proverbial belt even further before it can get back to financial solvency.
Peter Anthony
4   Posted 08/02/2011 at 15:11:56

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Thanks, Joe, Really good summary (as in the quality and clarity of your analysis rather than than the news it presents).

It is easy to cry Sack the Board, Sack the Manager, bemoan why we didn't buy player X or Y, but as is clear from your analysis, the club is trying to punch above it's financial weight and without a sugar daddy, or massive over-achievement on the field (such as managing to bag the extra bunce that winning the Prem or getting on the CL gravy train would give us), there is no easy choice to me made to get us in better financial and footballing health.

If we were offered £8 mill for Saha then one could say we should have got the cash and invested elsewhere to replace with a younger striker. However, would he have it the ground running? Saha has hardly set the world alight consistently for us despite his great game and goal glut at the weekend. However, if he has the kind of finish to the season that Super Kevin Campbell did when he first came from Trabsonspur, then maybe Moyes's faith in him was vindicated.

If no suitable buyer is on the horizon, it seems clear the team needs to get back to hitting the heights we know they can, finish strongly this year, and take next season by storm from start to finish. That was of course the hope at the start of this season, and with only 2 losses in the last 24 games of last season there was reason for that optimism.

Being an Evertonian means it's very unlikely that we won't be let down again on the performance on the pitch front though. But as ever, here's hoping anyway. COYB!

Paul Carr
5   Posted 08/02/2011 at 15:17:31

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Jo, excellent analysis. A similar or worse story no doubt applies to most clubs in the PL Fantasy league ? but not Blackpool! Hopefully the new Uefa financial rules will bring back a degree of sanity.

Of more immediate concern is the continuing rise in short term creditors to a huge figure. This is presumably why rumours of administration surfaced. It shows an unsustainable business model.

Regretfully, unless we find a generous investor, the only solution will be to sell Jags or Rodwell in the summer to give us another 2 years breathing space. And a shared stadium is also the only sensible way forward.

David Israel
6   Posted 08/02/2011 at 15:26:28

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Well done, Joe.

The picture is pretty much as expected bu the level of short-term debt is worrying. However, as most of the year has passed since 31 May, one would presume that the bulk of those £50M has already been paid (or re-financed, see December Barclay's loan).

I do not subscribe to the view that this is all the Board could do taking account of the club's turnover. There is enormous ground for improvement in turnover other than gates, PL/Sky and season tickets.

If there is no "investment" in the club in the near future, then I think we'll just have to reconcile ourselves to a declining status, as many clubs around us are not just managing a poor situation, as we are, but are actually improving their teams. In this context it will be increasingly difficult to qualify for Europe and therefore we'll either have to sell regularly to foot the bills and invest in the team, or accept a loss of status ? which could eventually mean relegation.

ps: I'm no "doom-monger", just a realist, I think.
Greg Murphy
7   Posted 08/02/2011 at 15:44:25

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Indebted as always, Joe (no pun).

Resigned now to Fellaini's departure (at least). Unless the club can agree a sale prior to the opening of the window on June 1 - and somehow enable it to factor that income into the current year's figures - the accounts for the period ending May 31st are going to be horrendous. Expect a sale(s) in the very early days of the transfer window (effectively agreed as soon as the final season's whistle sounds on May 22)?

Paul (5): the way I understand the new Uefa "fair play" regs is that they only pertain to being able to compete in Europe. Basically, by 13/14 we have to have shown that we've operated within our means for three seasons prior to that and including it (so 11/12, 12/13 and 13/14) otherwise the sanctions (effectively a European ban - yeah, where have we heard that before?) will kick-in.

Effectively we've got this season and next to be able to qualify for Europe "traditionally". After that, if we can't demonstrate consistent "within our means" trading over the three previous years then, even if we do qualify for Europe during the season 2012/13 we'd be prevented from participating in 2013/14.

There is some leeway allowed but it's mightily complicated:
Paul Carr
8   Posted 08/02/2011 at 15:42:50

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The share premium account of a company is the capital that a company raises upon issuing shares that is in excess of the nominal value of the shares.

In other words, 35,000 shares were issued and sold for 25,035,000 in total, so the nominal one pound shares are shown as share capital and the balance as share premium. This will not change until there is another share issue.

One other solution for BK to consider is to offer 30,000 shares at 1000 pounds each to supporters, hence raising the 30 million we need to become solvent. Problem solved.

Of course, BK' s holding would be diluted. But Bill as an Evertonian, does that matter if we then become solvent and truly become a People's Club owned by loyal supporters not foreign speculators?

Alex Kociuba
9   Posted 08/02/2011 at 16:07:10

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Excellent work Joe, a nice digestible analysis of the financial report much appreciated.
Jeff Magee
10   Posted 08/02/2011 at 16:16:52

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I don't pretend to understand any of this, however, from scim reading Joe's hard work can I take it that Mr William Kenright is not quite the twat that he is portrayed on these hallowed pages?
Ajay Gopal
11   Posted 08/02/2011 at 16:16:34

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Thanks, Joe, for all the trouble you have taken.

Realistically, this is what we need to pray for:
Pray that Fella has a storming remainder of the season.
Pray that a silly bid (say, £30 million) comes in for him in the summer.
Pray that Moyes is realistic enough to let him go.
Pray that BK gives Moyes at least half of the sale i.e. £15 million.
Pray that Moyes can do once more what he does best - find 2-3 uncut gems for the £15 million, and so the cycle continues......

Maybe one day, the PL will have a level playing field....

Pretty depressing, but we need to be realistic.
Andrew Steen
12   Posted 08/02/2011 at 16:18:33

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Excellent financial analysis.

So... on current run rates EFC are losing £20m per annum net of players sales. The Lescott sale helping to bridge the gap in these financial figures.

The problems we have is that to correct this figure would require a headline sales increase by £20m ?- just to break even. Given that our season tickets / gate receipts / merchandising and catering deliver a total of £29m, Where & What are we going to do to generate an extra £20m (just to break even)?

We have tried (and failed) to compete at the top table, we came very close but just couldn't quite qualify for the Champions League (Group Stages)... Now we have to be realistic:

We need to adopt the "Wenger" approach to player management, buy young and sell in their prime. Giving 5-year deals to players like Cahill at his age is financial suicide. (For the record, I am a Cahill fan) ? We should be selling players once they reach 29.

This won't be the most popular suggestion but for me I would....

Sell Felliani ? £25m
Sell Rodwell ? £20m
Sell Arteta ? £20m

Total £65m

Set aside £20m for losses to ensure a break even position (this may not be sufficient).

Invest £25m in new players (younger, faster, cheaper wages type players).

Repay £20m Debt (Saving £1m per annum on Interest payments).
Aodhan O'Faolain
13   Posted 08/02/2011 at 16:43:11

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Well done Joe,

From my read it would tally that the club could change hands for about £100-120m?

I am also guessing that no lender would be prepared to give a loan to any prospective buyer as long as Everton remain at Goodison given the income figures?
Liam Reilly
14   Posted 08/02/2011 at 16:29:31

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Depressing stuff, so we can expect Fellaini and Rodwell to be gone in the summer.

What I fail to understand is; that if the company has unsustainable habitual debt, then where is the £100 Million valuation coming from?
Eugene Ruane
15   Posted 08/02/2011 at 16:22:27

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Joe, a great job of making something very complicated, accessible to all.

Jeff, if you read the pdf, you'll see the numbers tend to be facts, the words tend to be opinion.

Consequently, you CAN take it Mr William Kenright is not quite the twat that he is portrayed on these hallowed pages, but... only in Joe's opinion.

Fact is, there is not a calculator invented that can add lies together and come up with the truth.
Paul Carr
16   Posted 08/02/2011 at 16:17:00

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Joe, what is your view on the way the Group's properties have been valued?

After depreciation, they are now valued at ONLY £6.8 million. This is based on a valuation performed in 1999. Although no property expert (are there any on this forum?), I would expect the current value is significantly more, even allowing for the recent credit crunch effect.

One wonders why the Board have chosen not to reflect a higher realistic valuation in the accounts? This could have reduced the net liability figure significantly.

A question for the AGM?

Paul Carr
17   Posted 08/02/2011 at 16:53:36

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Liam, quite simply an investor will look behind these figures and see undervalued land / property and at least 6 big value players ( Jags, Arteta, Fellaini, Rodwell, Cahill, and Baines) who could easily generate in excess of £100 million if sold in today's crazy market.

It puts all the negatives into perspective ? things really are not that bad, assuming we keep Barrclays Bank on our side.

Kev Wainwright
18   Posted 08/02/2011 at 16:45:00

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A good piece of work, but like most stories it can be told another way.

The balance sheet tells very little of a company?s worth, after all a company can have very little assets and still sell for a fortune. A good example would be if someone tried to buy Wikipedia.

You can multiple the number of shares v the trading value today to reach the market capitalisation which will give you an idea. However, again, companies are seldom sold for this more often for multiples of EBITDA or potential earnings. Look at Everton on this basis, in particular potential and guaranteed income streams (as long as we stay in EPL), and you will have a different story; add in players and the sale value might build ? well at least in the owners' minds.

The balance sheet tells people what risk there is in their invested money in the form of shares or loans. A poor balance sheet equals more risk and will result in the cost of loans going up and even less cash flow, until the money runs out.

A key point in business is cash is king and all that matters ? debt is not a worry; only the ability to service it.

Everton on this basis will run out of money, via either having to payback loans or not being able to renew the loan or the servicing of debt going so high that bankruptcy is called.

The Directors have two choices ? reduce cash outgoings, mainly wages and loans, or issue more shares to dilute their ownership and raise cash... but 20% of something is better than 100% of nothing. It appears that our Board is going for the latter which is selfish and greedy I think for a professed fan director.

Waiting for a rich person to come might be a long wait. If I was watching Everton, I would play the long game and wait for the money to run out and buy a distressed company. Then two things will happen: either a Liverpool ? clear the decks and invest in a business... or a Portsmouth ? sell off every asset (if the current board haven?t) for cash and either walk away or just rely on 25,000 turning up and rebuild. This could be termed the ?Ken Bates? model.

I suspect that we will continue our asset selling policy e.g. buy low to develop and sell high. This takes us full circle as to why for a football club the balance sheet means little e.g. what was Carroll valued at in Newcastle?s balance sheet? Zero; what was he worth? £35,0000,000.
Richard Tarleton
19   Posted 08/02/2011 at 16:58:23

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Excellent analysis. This is rather like the banking crisis, where all he banks were lending beyond their means to people who could not afford their repayments. This is true of the Premier League, many clubs are existing on a level of expenditure beyond their means. Will a crash follow? ? presumably the laws of economics say yes.

Dubious about the figures quoted for some of our players, Saha £8 million? Too old and too fragile for £1 million; Arteta is nearer £10 million than £20 million; Rodwell has not progressed as one would have hoped, and £20 million may be optimistic; Fellaini, in all honesty I doubt if he'd realise anything like £25 million. Plus here's the factor, if you know a club is desperate for money, then other clubs offer a much lower valuation for their players, as happened with Portsmouth.

Paul Carr's idea is excellent and idealistic, I for one can't see our beloved chairman, diluting his assets in this way.

Steve Wolfe
20   Posted 08/02/2011 at 17:08:00

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@Eugene, quality as always lad.
Peter Fearon
21   Posted 08/02/2011 at 17:04:33

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Joe, I would like to know how the valuation of £8 Million for Goodison Park is arrived at. It seems remarkably low. Also, do I understand correctly that Jack Rodwell, Victor Anichebe and James Vaughan are valued at zero for accounting purposes? Also, given the bleak picture painted in this analysis, doesn't the figure of £100-120 Million sale price of the club appear to high?
Greg Murphy
22   Posted 08/02/2011 at 17:10:53

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Peter, have a read of Elstone's blog today:

Re - Arteta, Cahill, Rodwell, Coleman and other all valued at zero or near.
Joey Brown
23   Posted 08/02/2011 at 17:26:42

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All this leaves me with is a question How much could we get for Felli, Rodwell, Arteta? Enough to balance the budget? If so. Why not do it?
James McGlone
24   Posted 08/02/2011 at 17:37:05

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One good thing to come out of it is that, like Joe, I believe that...

"Personally, I think the stats also prove that David Moyes is the best £ for £ manager in the Premier League and that we have punched way above our weight every year for the last 5 years".
Kunal Desai
25   Posted 08/02/2011 at 17:31:36

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Thanks Joe.

Just a couple of points:

Is the £19M from the Lescott sale ofset against the incomings (Bily, Heitinga, Distin)

Is the sale of Bellfield and the Kitbag deal included in this?

Very concerning that creditors due within 1 yr have not reduced in the last 2 yrs. Approx £20M up on 2007.
John Jennings
26   Posted 08/02/2011 at 17:37:14

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Joe - great piece.

'Another year older, and deeper in debt' as the saying goes.

Time for the fans to stand up and pull together for the good of the club.

I want my granchildren pulling on Blue shirts and singing Royal Blue Mersey. At this rate, they will read about us in history books.
Paul Carr
27   Posted 08/02/2011 at 17:38:14

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Joe, you did well to perform such an analysis based on the set of accounts I have been sent ? there are duplicate pages and 4 missing pages in my set. Was yours OK?
Very unprofessional.
David Kennedy
28   Posted 08/02/2011 at 17:19:42

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Joe writes: "What destroys the energy in the club is the weight of unrealistic expectation....The fans constantly demand new signings, retaining the likes of Pienaar (£65,000 a week or £3.3m per year?? madness) and ask where all the money goes."

Football, as we well know, is like no other business. To wish for supporters to conform to business logic is an unreasonable expectation on the author's part, I feel. These pressures come with the territory. It could be counter-argued that if supporters took the considered, sanguine attitude to their club's ability to compete being expressed there'd be little incentive for change and that dynasties would build up in the boardroom as per the 'Golden Age' of football and act like a dead hand on forward motion.

I think Joe's concluding remarks are also pretty lenient on our board on the benefactor front. They might be up against 'a hundred other clubs in Europe seeking investment', but they've been at the helm for a long time, and that sort of timeframe should be the context to judge the lack of activity in this respect, not just what's happening in the present.
Paul Wharton
29   Posted 08/02/2011 at 17:04:29

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Paul 16 ? No AGMs anymore, only a Shareholders' Forum with the board.

Joe, thanks for putting this in layman's terms as you did at an EFC Shareholders Association Forum approx 6 years ago and then you said we couldn't afford to pay EFC players who were England Internationals and warned of the dangers that lied ahead. Some people in the room didn't believe the situation that evening and had a go at you but the writing has been on the wall for a long time, just that some people choose not to read.

Time now 20,000 or more Evertonians now need to get behind Trust Everton group and have the ground redevelopment plan to bring the Board of EFC and the fans together as one, stay at Goodison and let's build it back up for the generations to come.

We call ourselves the People's Club then lets show that we are and all come together. We need vision and leadership now with a way forward together.

Liam Reilly
30   Posted 08/02/2011 at 17:47:33

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Paul #17

Paraphrasing, "an investor would look at undervalued land and 6 players (Jags, Arteta, Fellaini, Rodwell, Cahill, and Baines) who could easily generate in excess of £100 million"

I tend to disagree Paul. There's is no way the return would be close to 100 million. The club is overpriced and need a more realistic value to become more appealing.
That?s the only way out of this ? that, or a ?Firesale?.
Paul Carr
31   Posted 08/02/2011 at 17:55:01

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Kunal, the Bellefield proceeds were received in December 2010 and were used to repay a "working capital" loan ? therefore not shown in these accounts.

Next KEY date is Feb 28th when the large overdraft facility is up for renewal. Hope we are still in the cup and outside of the relegation zone by then and that the bank manager is an Evertonian!

Everyone will now realise why we spent nothing in the January transfer window.

Paul Doyle
32   Posted 08/02/2011 at 18:46:36

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A frightening read! The final comment says it all... roll on the next set of accounts when the shit will hit the fan.
Paul Carr
33   Posted 08/02/2011 at 18:47:46

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Liam, based on Andy Carroll's valuation, I think our best 6 players would sell for significant sums ? obviously at the right time (ie when Arsenal desperately need a centre half or Man U decide they really do want Rodwell) and not all at once.

Don't forget that both Man City and Chelsea have bottomless pots of gold which will keep prices high for in-demand quality players.

David Israel
34   Posted 08/02/2011 at 18:58:38

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Peter (21), Rodwell, Vaughan and Anichebe, as well as any other player who hasn't been signed by the club but, rather, developed through the youth ranks, has an accounting value of zero. This is done in compliance with accounting standards.

As for the players who have been signed, at the start of their contracts their "book value" is equal to what it cost the club to sign them. You then divide that cost by the number of years in a player's contract and each year deduct the corresponding portion from the value of this "asset".

I hope this clear.
Howard Don
35   Posted 08/02/2011 at 19:03:25

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Joe - Thanks so much for this expert analysis and also for trying to set the real context in which we have to operate. What becomes apparent on sites like TW is how much latent talent/expertise there is in the fan base of this club and probably many of the others.

What also leaps out from your analysis is that there are no easy solutions. Also that far from being the disaster that many claim, the current regime isn't doing that bad a job of helping the club punch above its weight.
David Israel
36   Posted 08/02/2011 at 19:27:52

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The question, Howard, is that the current regime seem themselves to be punching above their weight!;-)
Jon Cox
37   Posted 08/02/2011 at 19:34:05

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It's the best tax dodge since the rock star Stig O'Nasty spent a year in the bath. The accountants are so creative that they should be offered a contract to play in midfield.
Dave Wilson
38   Posted 08/02/2011 at 19:35:39

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Terrific work Joe, presented in a way we can all understand.

Thanks very much
Alan Noon
39   Posted 08/02/2011 at 19:56:23

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Football looks like the banking crisis all over again. Too many clubs living above their means sitting on a time bomb, and then stupidity from the likes of Liverpool and Chelsea once again pushing up transfers and salaries and the madness goes on and on. It will take a few clubs to go under before football becomes better self regulated, let's hope it's not us that becomes a victim.
Paul Carr
40   Posted 08/02/2011 at 19:59:51

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Jon, fortunately EFC have probably never ever paid corporation tax as they have cumulative losses of 55 million. That is actually another attraction to potential investors who could utilise those losses to save tax.
Dan Brierley
41   Posted 08/02/2011 at 20:05:58

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Nope, it won't David. As some people on here simply do not believe the things put in front of their eyes, and will put more effort into trying to twist things to suit their own views, as opposed to dealing with the facts laid out by accountants and the Chief Executive.

No matter what is put out, you just regurgitated posts saying 'yeah, well he has lied in the past hasn't he, 24/7, ring fenced etc etc.'. This is the answer to any balanced point that is made, meaning debate ends up pretty futile.
Peter Laing
42   Posted 08/02/2011 at 21:04:49

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Quite simply, what Everton have become is a selling Club. Without the wealthy benefactors, corporate facilities, lack of any any real term business model, growth in support and financial quagmire that we continue with ad infinitum, our great Club has sadly become an also-ran.

Somebody once wrote on here an article concerning the growth of supermarkets and compared the footballing success in the past 20 years to that of Tesco. Given our perrilous state we are now trading like a Victor Value operation, i.e shabby premises, lack of clout, no sense of direction or long-term to medium-term strategy.

Expect Rodwell, Fellaini gone in the Summer to pay the bills.

Ian Bennett
43   Posted 08/02/2011 at 20:50:50

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Pretty good piece. The comments on creditors is important, but comparing to 2006 is fairly misleading without highlighting the significant investment spent on the playing side.

Points for me: Is the Bellefield cash already going to creditors or will moyes see a small part? I think Moyes does need to wheel and deal a lot more ? we have success of selling well and buying players with something to prove. This is negative but Wenger has done the same and made a solvent and sustainable team that probably could and should take more risk.

Commercially we are a joke with too many short-term deals that generate jot. A rich man with vision could do a lot.

Tony Wilson
44   Posted 08/02/2011 at 21:19:30

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Joe, I 'll have to take your word for it because I felt myself dying slightly whilst reading into the detail, but thankyou for your effort. It is much appreciated.

My overriding reaction is alienation from the Premier League, though I would be disappointed if the board had rested on their laurels regards revenue streams.

If rich egotists are the future of top club ownership, I'll be supporting Marine and saying goodbye to Everton. Very sad.
Ian Martin
45   Posted 08/02/2011 at 21:10:39

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The analysis for next year may look very different. Income will be £25m more from the new rights deals overseas rose from £624m to £1.4 bn and domestic from £1.4bn to £1.7bn so could add £25m to revenue line. Estimate £105m.

Salary costs will be £10m higher, Depreciation will rise a little so expect costs to be £105m. After player trading of say £2m profit and interest of £5m leaves loss of £3m.

Not great, but not a complete train wreck.

The bank and auditors would have not given it as a going concern if much worse than that. The above, if correct, would mean a cash inflow of £5-8m after debt repayment. That will be the level Moyes can invest in the team.

To stand still in accounting terms we should be investing the level of depreciation... so every year we do not spend a Net £17m, we go backwards.
Kieran Kinsella
46   Posted 08/02/2011 at 21:46:03

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BK says we don't need money...

"But the outcome of crucial matches are quite often decided not by the size of the bank balance but more by skill, good fortune or the whim of a referee."
Tim O'Connell
47   Posted 08/02/2011 at 21:06:47

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A good analysis and some good posts. I want to try to try to cover two things ? a summary of where the club is financially, and general investment criteria.


1) We have some financial challenges but these should not be terminal;
2) We should not (in financial terms) be able to buy any significant players without first selling;
3) We may have to sell to ensure meeting our liabilities;
4) BK may have faults but is not raping us.

So... not good... but at least we should have a team we can carry on and support.

So to look at the question of why people invest. If we assume that there is neither a billionaire blue out there, nor an egotist billionaire that just wants the prestige of owning a top flight club, so we look at purely financial reasons. To simplify, there are three reasons for a financial investment:

a) the profits of the company over a period of time, say 10 years, are more than the net investment price, taking account of the liabilities taken on and the tax effects;

b) The company can be sold at a future date for a greater amount than the investment, which assumes the acquirer can then do a) or b); or c) Asset strip, which basically means the balance sheet is undervalued and by selling the players this will be greater than the the net investment.

So, if we discount c), what will an investor be looking for? Basically that they can increase the revenue, which may mean investing more in players to get Champions League money etc but also fundamentally by being able to increase commercial revenue by increasing sponsorship and new territory revenue etc.

For example, an Indian billionaire may think that by marketing into an Indian market can generate significant revenues not currently available etc, ie, the investor can open new markets or is better commercially than the current team.

So fundamentally the investor would think that the team and manager are not far off from being successful so not needing a massive cash injection and that the brand can be commercial.

I will let you debate it but my view is that we do have value both in terms of team and fanbase that would be attractive to an investor.

John Malone
48   Posted 08/02/2011 at 21:47:44

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Top and bottom of it: we need to sell to buy, Moyes needs to keep scouring the bargain basement for the likes of Cahill, Pienaar, Arteta, Baines, Jagielka and hope the scouts keep producing the goods. Fat Bill needs to get to his finger out and get some worthwhile investment or find a bluenose billionaire and sell up.
Paul Carr
49   Posted 08/02/2011 at 22:06:34

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I hope that Terry Leahy, one of Britain's greatest businessmen, will get more involved in our club when he retires (at 55) in March, to focus on private investment.

Expect him to join the board and perhaps invest.

Ian Edwards
50   Posted 08/02/2011 at 22:09:20

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The comment about Moyes doing a good job is rather suspect and makes me wonder if this brings Joe's judgment into question in respect of his interpretation of the accounts.

Moyes assured us at the start of the season that we would challenge for the top four. We have had no injuries to speak of and are in a relegation battle. Rather than Moyes doing a good job, this suggests to me that he is in fact a complete waste of space and a tactical imbecile.
David Israel
51   Posted 08/02/2011 at 23:06:47

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Paul (47) I myself have expressed the hope that Leahy does take some interest, but rather than seeing him join the board, I would like to see him organise a consortium of some sort and take over the club.

Talking of which, there's a laughable piece of news today on Blue Kipper, saying that "Blue Bill" is in talks with the Indian businessman Anil Ambani about a take-over. Sadly, someone has pointed out in the comments section that this is an old bit of news going back to 2008!: -)
Dennis Stevens
52   Posted 09/02/2011 at 00:05:57

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It's hardly all that old, David - less than 3 hours prior to your post!
Joe Beardwood
53   Posted 09/02/2011 at 01:42:03

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Just to quickly try an answer some of the questions raised (so forgive any typos);

#1 Paul (thread 8) has given a great explanation. Paul is also spot on when he points out that a new share issue would mean the owners diluting so it?s unlikely.

#4 Peter summarises really well what Evertonians need to do between now and the end of the season because it?s the only positive option.

#6 David ? I too think I?m a realist; I fear however that we lost our status at the top table in the early nineties.

#7 I share Greg?s expectations for the end of the season but disagree with UEFA trying to create a level playing field. For me, Arsenal have pursued the best business strategy since the early nineties and I totally respect and support Wenger?s approach to a salary cap and transfers. I don?t like what Chelsea stand for. One is winning trophies but thankfully football is not all about winning trophies because if it was the other 88 clubs in England would give up!

#10 Jeff ? LOL!

#11 Ajay ? I share your sentiments but don?t be surprised if Moyes eventually gets the chance he has earned to manage a club with resources. There is also a large section of Everton support that don?t appreciate what he?s achieved in the last nine years and would welcome him gone.

#12 Andrew has neatly summed up the real issue which is the challenge of moving our £29m internally generated figure up by a huge percentage just to break even. Player trading seems to be the only way through.

#13 Aodhan raises the question of what the club is worth. Normally companies in the leisure sector are bought and sold by a multiple of the cash profit they generate. If you had £100 million you could put it in the bank or buy a business. To compensate you for the risk you?d want a minimum 10% return on your capital (£10m per year). Put another way the company would need to be generating £10m trading profit every year just to cover your dividend so a multiple of 10 times earnings is applied. In the UK at the moment multiples are dropping to nearer 6 times earnings in leisure.

Many people posting have rightly pointed out the value of the squad ? but this is working capital ? to be in the Premier League you have to have quality players so they are only realizable assets if the company is wound up.

If I had £100m I would still only pay £1 maximum for Everton in return for taking on and paying off the debt. I?d also realise that a minimum £50m would need to be invested in the squad and infrastructure so a £100m investment would quickly be swallowed up. The problem is that the current owners have put in millions of their own money and will want compensating so you can guess why so many potential buyers have been put off.

#14 THEREFORE Liam, the short answer is that if £100m sale price is indeed being touted then I would say there?s as much chance of us being sold as there was us having the money to move to a new stadium that Tesco were building us as the deal of the century.

#16 (Paul) #23 Peter ? the standard way the auditors want this valued is as the realistic realisable value if the business stopped trading. As there is little demand for 40,000 seat stadia outside of the 2 Merseyside football clubs then it would be safe to assume that the value is in the footprint of the land for a new supermarket or leisure complex.

It?s different to a new build ? If you build a new stadium for £300m then you would might depreciate it over the expected useful life of the asset (£10m a year for 30 year) assuming the business continues to trade. It would show in the balance sheet as an asset of £290m after one year, £280m after 2 years and so on.

Goodison Park has had many years to be written down and the value reflects how little has been spent in the last 20 years.

Ultimately valuation is a matter of opinion, but I think the banking world has changed for ever in terms of now being prudent and sensible on these matters.

#18 Totally agree with Kev ? I think that this story could certainly be told another way as fundamentally the P&L shows a business which is consistently making losses and appears to be out of financial control.

Carroll would have been in Newcastle?s books at zero and so is a wonderful exceptional profit. As a business model (i.e. expecting to do this type of deal every 3 ye

#21 Peter ? they will be in the books at zero but as Peter Carr rightly pointed out, the balance sheet is much less important than the cash flow and trading profit which are the real issue for management.

#24 Kunai ? It?s important to differentiate the effect transfers have on the balance sheet, P&L and cash flow.

A player signed for £10m on a 5 year contract is amortised at £2m per year over the 5 years. The P&L is charged £2m per year and this is the line ?Amortisation of Player registrations?. If the player is sold with a year left to go on his contract then he is likely in the books at £2m.

However, if the club has to pay the £10m upfront then this £10m all comes out of cash flow that year. The P&L only shows a £2m hit each year.

The profit on Lescott would be calculated as the sum received minus whatever he was on the books at. What would matter so much more is if the full £24m was paid in cash!

The purchases of Bily, Distin and Heitinga therefore didn?t effect the P&L in full ? only the cash flow and balance sheet. If all three cost £20m and they are on 5 year deals then the ?Amortisation of player registrations? on the P&L would have been £4m for this financial year and then £4m a year for the next 4 years.

#27 David ? very fair point made. I think the current business plan is wrong and have raised this since 2003 when I first presented to shareholders. I will never forget nearly being lynched for putting up a slide that said ?if Wayne has a good Euro 2004 they we will need to cash in because we simply can?t afford to pay anyone £50,000 a week.? I think I understood very quickly that this is very frustrating for all Evertonians as the heart rules the head. In fairness to Bill, the greatest pressure he came under at AGMs was to spend more, borrow more and buy more.

As I said, the alternative proper long term plan is simply unacceptable to emotional thinkers.

#28 Paul ? only read your thread

Thank goodness I was wrong however and we did manage to unearth some gems and sell them for a combined £60m?.

I just wish the fans would appreciate what Lescott and Rooney did for Everton ? without their transfer fees we simply couldn?t have competed.

Dick Fearon
54   Posted 09/02/2011 at 02:16:13

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Ok so we've had the good and bad news, two things come to mind,

1. Some people enjoy squeezing the last drop of misery out of the accounts. Compared to some of the horror financial stories emanating from many other clubs, we are doing OK.

2. Why sell our best players? Wouldn't the best thing be to win the league with them and wallow in the flood of cash and perhaps a rich benefactor it might bring.

C'mon lads and lasses don't give up now when we are within touching distance of a golden future.
Nurse, where's my pills?

David Ellis
55   Posted 09/02/2011 at 04:42:17

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Excellent work. I am also a shareholder and this helps a lot. I have one question and one observation.

Question ? the debt position is truely terrifying, but how much of that is shareholder loans from True Blue, Green, and other mates of Kenwright? Although these are debts in a legal sense, in an economic sense they are really capital (unless or until the shareholder asks for their money back, a la Portsmouth). If most of this is shareholder loans then the position is much better than if it is held by banks. Chelsea is entirely funded by shareholder loans ? that's how they can lose £70m a year, year after year, and still carry on.

Observation ? others have made this point indirectly... but the assets on the balance sheet are not calculated at market value. So to say we have a negative net worth of £30m is true in an accounting sense, but the break up value of the club is likely to be worth more ? i.e. although we have a mortgage of £90m, our house is probably worth more than £60m.

Goodison Park will be in the accounts at construction cost/acquisition cost and then depreciated every year (and this depreciation will feed into the profit and loss account, which reduces profits but does not affect cash). Player values are presumably treated in the same way, so profits are bound to take a hit after the acquisition of a big signing as depreciation costs his the P&L (is this right?). Homegrown players are valued at zero etc

Take these two factors into account and not only may our house be worth more than £60m, a chunk of the £90m we owe may be owed to ourselves (at least in Kenwright's eyes).

But I agree totally with your conclusions. As the business is incapable of making money, the current model is unsustainable. We have been over-spending on players over the last few years and this has to stop (and thankfully it has stopped).

Sell the family jewels as and when appropriate. Pay good wages to hang on to our best players who can't command a big sale fee. Never pay transfer fees. It does not matter if fans find this "unacceptable" ? they may find it unacceptable that the day is only 24 hours long ? it won't change the reality. This is reality. The alternative is total disaster...

Martin Mason
56   Posted 09/02/2011 at 05:41:36

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Exceptional analysis Joe, it's really helped me understand the reality.
Jason Lam
57   Posted 09/02/2011 at 06:11:16

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Many Thanks Joe for your time and report.

For us fans who buy replica shirts, that means I'm left with Hibbert or Osman right?
David Chait
58   Posted 09/02/2011 at 06:44:33

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David Ellis you are very right in your statement that the Financials don't reflect the market value of the assets. This is one of the issues people have with accounting... but as an accountant my work load would triple if everything had to be revalued every year.

This is also another reason why the net asset value per the books is the minimum really you could ask. The discounted cash flow going forward is the most used... which in our case might look a little sad, so we would probably look at a multiple of EBITDA..

End of the day, it makes me think anyone buying a football club does so for their ego ? nothing more. Unless they're speculating and reckon to sell it on.
David Ellis
59   Posted 09/02/2011 at 07:03:37

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What it means is that you need to buy 9m replica shirts to pay off EFC's debt. Buy now while stocks last!
Eric Myles
60   Posted 09/02/2011 at 09:47:46

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Thank god that Desperation Kirkby didn't get the go ahead, where would we have gotten the money from for our share?
Paul Carr
61   Posted 09/02/2011 at 09:47:42

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David, surprisingly there is no evidence of any current shareholder /director loans! Perhaps Joe can confirm this as my set of accounts is incomplete. It appears that the debt is all Bank Debt.

Based on the general message that BK is putting everything he can into the club, perhaps we have been misled. Why haven't they put money in other than their initial investment? Perhaps a rights issue is the short term answer as it would allow them to maintain their % control and guide the club towards solvency.

David Chait
62   Posted 09/02/2011 at 10:29:42

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I have done a review as well now on the financial position from Joe's summary and I would like to give my take on some key points. Although I considered making this a separate article for TW, I hope you take 5 minutes to read it in here. I am tackling this on the view of trends, and not 2010 in isolation, as per Joe's report.

Firstly, good report, Joe; I agree with many of the sentiments you have, and agree with you that if this were a company for gain then the interventions you would make would be spot on. But it's not, well not to the fans in any event. It's a business that is in the business of winning. It has to do whatever it can to compete and win, and runs a balancing act, which is really not about making money, but more about ensuring they are covering the debt that trying to compete requires and do not allow the club to face financial ruin. This is a significant difference. And if anything that is Bill's fault. If he wanted to drive a profitable business then forget about us having the likes of Baines and Fellaini in the side, or keeping Arteta. In fact we could probably have a very nice "healthy" business playing Championship football every weekend.

As always, there are one or two spots where I would love a breakdown of some numbers, e.g. what is the make-up of the "due within one year"? Presumably this is mostly bank overdraft as the long-term creditors in the balance sheet has only really grown in 2010 since 2002. But then I would expect to see the net cash position at the end of the cash flow being worse, but over the last nine years it has actually been an inflow of £15.3m. So that contradicts my assertion of bank overdraft and makes it more trade creditors. This might make sense as if you grow trade creditors or extend days then the cash inflow improves. Looking at the 2003 statements v 2009, the area that lights up is accruals and deferred income up £16m, then other loans up $8.2m. What makes these up? Interested to see where these stand in 2010.

Sign-on fees for renewing contracts are included in staff costs. With our efforts to keep marketable players, this cost could be increasing substantially over the previous year, not just the salaries required to compete.

Amortisation of players' registrations I would argue is not as important a P&L number as is perceived in the report. A player is a not a machine that gets written off over its useful life and then needs to be replaced at an even greater cost. A player is written off over the life of his contract, but that is not the useful life of a player and if good enough can be resigned and continue for another 5 years without the need or cost of replacing. The cost of resigning although significant no doubt is nothing compared to a replacement cost. To me it is an indicator that we are investing in players. It's an investment cost, not an operating one. I know this is medium-term thinking as ultimately a player ages and needs to be replaced, but if you want to argue about keeping in the amortisation then the business has every right to consider player proceeds to counteract it. Does this mean that Everton must sell to buy, which is the assertion? Let's look at it.

In light of this, I have reorganised the P&L to reflect those that we use in commerce. Where we strip out the depreciation and amortisation items from the operating expenses and reflect a "Cash operating profit (COP)", "Earnings before interest tax depreciation (EBITDA)" and "EBIT". EBITDA is considered a good measure to help value a business, and in fact COP also acts as an indicator for us for normalised cash operating profit.

Point to note: Everton have not made a COP loss since 2004, so the revenue is sufficient to run the operations in fact over 9 years (if 2010 is the same depreciation) they have made a COP gain of £44m (£20.4m in the last 3 years alone). Take off interest, this leaves us £16.6m to buy players over 9 years without incurring debt or having to sell. This is not enough to compete at the top and hence we have used debt and player proceeds to purchase new players.

2010 though is a concern that it was a gain of £1.3m, which is the lowest since 2007 and not enough to cover interest. Joe is right here; that is not sustainable and does need to be reviewed seriously.

Per the cash flow over 9 years, we received proceeds of £102.2m for players but paid out £141.9m, a shortfall of £39.6m which has to be paid out of COP less interest. That leaves us needing £23m additional debt (£39.6m less £16.6m) for players and other CAPEX. However our debt has grown much more than that, and largely through accruals as previously stated.

So this leads me to think that, although the cash outflow paid for by debt is $23m, the rest of our debt is in other expenses or as I suspect, we haven't paid off all our players yet, but that is conjecture and I can't say for sure. But if that is the case it might be the cause for an accrual account to have grown too much.

Summary ? the business is in a healthy condition at end of 2010. We are driving positive cash from our operations, over time more than enough to cover interest and even save a little for players. Yes, not enough to fund the big acquisition but more than enough to allow for our levels of debt financing. I don't believe we are in any financial trouble, unless the loans are called in, but that would be the case for any business. We're just not rich.

2010 COP is not pretty and is helped massively by the Lescott deal. I am concerned this might be an indication of our position going forward. This also means we can't fund new players by results, but only by further debt, or selling more players. So Joe is right on that point, but I don't want 2010 to mask some good years. Hopefully this low COP in 2010 can be turned around to 2008 and 2009 levels. Don't expect a big signing in the summer though without equity injection.

Apologies this is so long but the story can't be told in a paragraph. I hope you read it and see that the numbers can be interpreted a bit differently. Hope you found it vaguely interesting. COYB!!

Liam Reilly
63   Posted 09/02/2011 at 11:59:11

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Slightly off topic ? Question, Paul/Joe:

Where did you aquire your Shareholding, was it thorugh Blankstone Sington?
Rob Squires
64   Posted 09/02/2011 at 13:00:03

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Off the official accounts now on the Everton website:

"The Group?s current overdraft facility expires on 28 February 2011. Previously the facility was renewed on an annual basis at the end of each football season. This year the timing of the expiry of the current facility on 28 February 2011 allows the Group?s bankers and the Directors to agree appropriate facilities for the remainder of the 2010-11 Premier League season that reflect current activities, including the (then) possible receipt of the proceeds of the disposal of the Group?s land at Bellefield for commercial development and the Group?s player trading activity in the January 2011 transfer window."

Why have they moved the date of the overdraft renewal? It sounds as if it has been moved by the bank to ensure they're happy that Everton are solvent.

The Directors acknowledge the need for further discussion and agreement with the bank, thereby giving rise to a degree of uncertainty on the final outcome regarding bank funding.

"The sale of Bellefield was subsequently completed, and proceeds received, in December 2010. The majority of the proceeds from the sale of Bellefield were used to repay the previous working capital loan facility."

The money off Bellefield being used to pay off existing debts, what else is there left to sell?

"The Directors have considered the uncertainty surrounding the renewal of the overdraft facility and other inherent uncertainties and, in the event that they would be required, have identified a number of potential mitigating actions to manage any resulting forecast shortfall against current facilities including the ability within the industry to securitise additional future guaranteed revenues and flexibility around player trading."

So mortgage against the future again or sell any player we can.... Great, how will they sell the season tickets next year? Oh, I know: make up a fictional inventor. Fortress Finance, anyone?
Paul Carr
65   Posted 09/02/2011 at 13:33:14

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Liam, I inherited my shareholding from my father who bought via Blankstone in the early nineties.
I don't think the price has actually changed much since then.
Roberto Birquet
66   Posted 09/02/2011 at 13:38:35

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Not had time to read all the posts, but I am not as concerned as I was.

Elstone: Accountancy rules simply do not demonstrate reality. ?Football balance sheets are unusual and unlike most other businesses"

Jack Rodwell, Tim Cahill, Mikel Arteta, and Seamus Coleman are valued according to accountancy rules as being worth about £2.5 million for the lot.

Does anyone seriously believe that even closely resembles reality? I do not, and I suspect not one single financier looking at Everton's financial position takes that seriously.

I would hazard a guess that we would get £40 million. And if my maths is correct that deletes our net liability position completely.

Which is more important: accountancy rules that some businesses use to hide their indebtedness or what every creditor understands is the real estimated value of our assets?

I leave the answer to yous, so as not to be accused of having rose-tinted specs. But bare in mind. If we sold Jack for £20 million, and then bought an inferior replacement for £15 million, and the directors spent the profit on a lake of champagne, accountancy rules would have our finacial position improved by a whoppiong £15 million. Utter nonsense!
Liam Taubman
67   Posted 09/02/2011 at 14:00:24

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Just a quick question to anybody who has a set of the financials.

Do the financials give any indication of the level of deferred income at the end of the year. If so, is this included as being part of creditors due within 1 year?

(What I mean by deferred income are the season ticket sales for the 2010-11 season that were taken up prior to 31 May 2010. As this income relates to the following season it should not be included as part of the income but as an outstanding liability at the end of the year.)
John White
68   Posted 09/02/2011 at 14:16:17

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It is blatantly clear that we will now forever be in debt, regardless! Everton as a club cannot generate sufficient income / profit year on year to run at a margin whereby funds are delivered to the manager (even a moderate £10m pa) to remain in PL.

Attendances (at full capacity) and corporate hospitality will never bring enough money to allow us to compete with the top 6 of the league. Investment is required to increase these areas to increase the income, and only in this way will we dig ourselves out of this very black hole.

Or a billionaire to write off £95m of debt and plough money in to the team and stadium, who?s kind enough not to want any return... as he won't get any!

Paul Carr
69   Posted 09/02/2011 at 14:39:53

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Liam T, the figure is £10 million and it is included in short-term creditors. This figure will not change greatly from year to year.
Paul Carr
70   Posted 09/02/2011 at 15:02:30

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Does anyone know how much was wasted on the aborted new stadium project? It is expensed in these accounts but not identified. Amazingly Liverpool spent £45 million on their project! We might have reported a profit without that expense.
David Chait
71   Posted 09/02/2011 at 17:57:48

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Liam... I think you have answered one of my issues. The accruals and deferred income is the highest growth "creditor" since 2002. I queried what this was... I think you have hit the nail on the head. The amount for the category was about £20m or so off the top of my head... up from £4m in 2002.... I want that breakdown even more now!! That paints an even better picture.
Roberto Birquet
72   Posted 09/02/2011 at 20:11:06

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£95m of debt
Surely these accounts show that our debt is £40-odd million and not $95 m. I assume you are looking only at liabilities on the balance sheet.
Liam Taubman
73   Posted 10/02/2011 at 00:24:09

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Thanks Paul for your answer to the question, much appreciated!

The reason I asked is because deferred income/season ticket sales is one creditor that in all likelihood will not require repaying, but instead will end up being released as income in the 2011 accounts.

With regards to your question about the destination Kirkby project, prior to the failure of the planning application I can see an argument being put forward that the legal/planning costs should be capitalised and caried forward on the Balance Sheet and included as part of the cost of the new ground.

Now that this option is no longer available, I would expect that all costs, if they haven't already done so, will have been charged to the Income and Expense account last year. (Possibly hidden under the heading "other operating costs"). How much this figure would be is anyones guess, unless someone else can shed light on this?

The other figure that intrigues me is that of long tem debt.

Now we know that part of this will relate to the Investec(?) loan, but that wil not be all of it. It will be interesting to see if there is any disclosure in the notes as to who these funds are owed to and what the terms are?
David Chait
74   Posted 10/02/2011 at 06:57:28

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Liam I don't think Paul is right unless I am missing someting. The deferred income and accrual is not split out but the total is £21.084m per the latest set of accounts, not £10m.

Unless you have the breakdown of that account.
the other question was the cost of Kirkby. 2008 and 2009 had exceptional costs of £2.8m which related to the ground. It was expensed in those years. There should be no amounts capitalised in this respect still.
Michael Kenrick
75   Posted 10/02/2011 at 07:44:27

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I've been waiting for Colin or someone to mention this incredible "Other Operating Costs" ? an item which has been steadily rising over the years and now accounts for £23.8 million. That's a pretty significant chunk of spending that just gets classed as "other" ? why is there no explanation of what this represents?

Just to give this some context, in the years before Kenwright's reign, they averaged just £1.5M. They have since jumped as follows:

00-01 ? £1,239,621
01-02 ? £5,552,000
02-03 ? £2,914,000
03-04 ? £12,120,000
04-05 ? £17,360,000
05-06 ? £16,416,000
06-07 ? £11,694,000
07-08 ? £21,078,000
08-09 ? £21,213,000
09-21 ? £23,797,000

Does anybody know what sort of things will be covered under this vague category, and how reasonable it is? Seems astounding to me that there is no description provided in any of the accounts I've looked at.
Paul Carr
76   Posted 10/02/2011 at 10:38:27

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David, the £10 million figure for deferred income is shown on page 5 within the financial review. Not sure what else would be in the significant balance?
Richard Dodd
77   Posted 10/02/2011 at 10:54:05

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I see we are marked as 8th in the Prem in Deloitte`s Rich List ? which is, in itself, a misnomer, focussing, as it does, purely on income.

The truth is that all clubs adjust their spending on players in direct proportion to the income they receive and I would take bets that IN REAL TERMS all the clubs above us are in much more debt than Everton. All that seems to matter is that your club has enough income ? from any source ? to finance that debt and, in this aspect, Kenwright & Co are doing a sterling job.

Yes,we could do with the arrival of a billionaire investor but until that happens let's give credit to BB, Elstone and Moyes for keeping us in the top escholon.

Paul Carr
78   Posted 10/02/2011 at 11:12:38

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Michael, a very interesting question, specifically what happened 3 years ago when this figure suddenly doubled and has remained at this level. It will include all costs other than staff, player depreciation and interest.

So that covers things like leasing , travel, accommodation,business rates, utilities, police, temporary staff, security, marketing, PR, web site, community development, stationery, telephones, audit fees, consultancy, etc.

I agree with you that it is hard to see how this adds up to over £23 million.

One has to wonder if there are some large interesting consultancy payments! But normally these would have to be disclosed if Director related.

Perhaps a question for the next Shareholders Forum.

Paul Carr
79   Posted 10/02/2011 at 11:26:53

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Richard, Interesting to see that Villa have a revenue of £89 million which is £10 million more than us even though our respective league and cup performances have been similar for some time. That indicates that there is scope for us to gain more revenue through better commercial and sponsorship deals.

Perhaps of more significance, and this supports your positive conclusion, is a list of the latest available results of the big clubs:

Everton ? loss £3m

Spurs ? loss £6m
Villa ? loss £46m
Liverpool ? loss £55m
Chelsea ? loss £71m
Man Utd ? loss £83m
Man City ? loss £121m
Arsenal ? Profit £56m

Jamie Rowland
80   Posted 10/02/2011 at 14:21:57

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After reading Mr Beardwood's take on our accounts, I decided to take a closer look myself.

My understanding of business value was based on a very simple calculation. Calculate the shareholder equity:?

Equity = Assets ? Liabilities

With this in mind, if there is a deficit (or negative equity) whereby the liabilities are greater than the assets (and in 'normal' business often only tangible assets are considered) then you can normally assume that the company is heading towards bankruptcy ? in fact, a good definition of bankruptcy (not liquidation or administration) is when a company's liabilities outweigh its asset position.

With Everton showing a shareholder deficit (therefore a negative equity) of almost £30m (£29,774,000) ? doesn't that mean we are bankrupt in the traditional sense of the word?

If so, why are we still a going concern? How are the books balanced to obey the laws etc to show that we are not operating a negative affair?

Most definitely confused!

David Price
81   Posted 10/02/2011 at 15:16:53

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Excellent detailed analysis from the fans here and solid in it's explanation.Compare this to our Bill's comments.

?Yes, those clubs fortunate enough to boast a rich and generous benefactor undoubtedly have a clearly defined advantage but the outcome of crucial matches are quite often decided not by the size of the bank balance but more by skill, good fortune or the whim of a referee".

And there we were thinking it's all about money.
Dennis Stevens
82   Posted 10/02/2011 at 16:37:43

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"...let's give credit to BB, Elstone and Moyes for keeping us in the top escholon."[sic] How much lower is your definition of success going to sink, Doddy? I suppose if this bunch of clowns take us down you'll be commending them for the shade of blue shirts we play in!
David Chait
83   Posted 10/02/2011 at 20:05:33

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Paul you are 100% correct. thanks, that does answer then half of the huge accrual/def income amount that is referred to in note 15, where I got my number from and wanted the break down. To be fair though Paul this balance has grown extraordinarily over the last 9 years.. but yes, wouldn't grow too much more I would think, and not much since last year.
David Chait
84   Posted 10/02/2011 at 20:14:22

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About to have a rant, so excuse me now!!

The Guardian piece is typical bullshit journalism that is selling papers on the one eye shut view. If anyone took the time to read my analysis, which I doubt as no-one cared to comment, either because we have settled on the one line that fans seem to want to hear that we can't run the club without selling or because I didn't submit it as a separate article, they would maybe have a different view on how much in the shit we really are!

I will not go into it again, but will say: We do NOT have to sell anyone to run the club for the forseaable future. If we did, people, why have we tried to lock in Pienaar to a huge deal? The freakin year-end was 7 months ago ? we're still here offering improved contracts!!

I admitted we can't buy heavily but that is very different from selling just to pay the wages.... I'm actually going to stop now else this will become a novel.

John Shaw
85   Posted 10/02/2011 at 20:41:44

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David Chait (84) ? I did read your earlier analysis, and you obviously put a lot of effort into it in order to help shed light on things for those who don't understand Statutory Accounts.

However, as you admit yourself, they are now over eight months old and the question I would ask is this:

Why as recently as December 2010 did the club take out a new loan to cover the repayments due on a previously secured loan?

Now I may be missing something, and apologies if I am, but this certainly doesn't suggest we are capable of living within our means!!!!

Sounds a crazy way to run a business to me, and I've run a few.
David Chait
86   Posted 10/02/2011 at 21:24:10

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Thanks John... at least I know that whole morning I was meant to be working wasn't totally wasted... hehe....

I honestly can't answer that question without context. Businesses often extend, move loans etc to avoid payment. If they hadn't, would we be shut down? ? I can't say. But can anyone else without it being a wild assumption?

However, if we did need a loan to cover a small portion of another loan, then we in trouble. The way I see it is that we are maxed. I'm actually very worried about the loan only repayable in 5 years time, as I think that might be more than a small portion.

I know we generate enough cash to pay the operating expenses and largely the interest too. I'd have to do more work to factor in the capital repayments as well. not tonight.

Problem is... as soon as we generate any cash, it's going into the players pockets... would anyone here have it different? Maybe now... but we'll forget this when Chelsea come calling for Fellaini and we want him to sign a new contract.

John Shaw
87   Posted 10/02/2011 at 21:45:28

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David - I'm assuming, like me, you work in finance/business?

If so, you'll no doubt know that a lot of the time it isn't about what is written in a report or what the accounts show, but rather about instinct or how something 'feels', not literally of course!

The same is true here, I don't know mate but to me, something just doesn't 'feel' right right about the club and it's position at present.

The lack of transfer activity since summer 09, the new loan, using Bellefield to pay off another loan, letting players go and not giving Moyes comparable funds to reinvest, when added to the latest accounts for May 2010 and given this seasons factors (no European football, possibly no good cup run, increased player costs due to new contracts, and likely finishing even lower than last seasons 8th), it just makes me wonder how bad things really are.

I doubt we'll ever get to know.
John Shaw
88   Posted 10/02/2011 at 21:57:33

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Michael - I'd suggest that a significant portion of the 'Other Operating Costs' is down to the outsourcing of the catering, cafes etc within Goodison to Sodexo. The costs associated with this will be considerable, especially when you take into account that the catering staff are also 'third party' and covered by this agreement so would not be included in our Staffing Costs.
Karl Masters
89   Posted 10/02/2011 at 21:47:50

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David Chait.

Thanks for a more balanced view than some of the others I have read.

To my mind we are like a small ship that set out across the ocean, but has hit a storm (crazy EPL wages) and are now lost at sea with a hole in the bow.

For now we have enough fuel and food to survive, but if we don't get rescued soon (bought by a wealthy 'good intentioned' billionaire and not a Gaydamak or the other clowns suffered at Pompey) we'll soon be sinking and forced into eating our comrades (selling players and not replacing with equal quality) to stay alive...

David Ellis
90   Posted 11/02/2011 at 04:19:20

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Jamie - no.80
You are trying to "value" the club based on its balance sheet. This is not how businesses are valued. The balance sheet does not attempt to reflect market value (see discussions above about true value of the squad for example).

Other posters have explained that to value a business you look at the amount of cash (not profit) that it generates ? hence references to EBITDA and DCF (discounted value of cash flows) as better ways of valuing a company than its net assets.

Your "simple" approach is not the appropriate way to value a company like EFC, for example.

David Ellis
91   Posted 11/02/2011 at 04:26:58

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David Chait
I also read your post - very helpful.
Eric Myles
92   Posted 11/02/2011 at 09:14:50

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John (#88), I'd always thought that the outsourcing meant that Sodexco take over the operating costs of the catering themselves and pay us a 'rent' or commission on their sales. Not that we pay them to operate the catering service?
Paul Carr
93   Posted 11/02/2011 at 09:47:42

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Eric, that is correct ? the catering commission / rent will be shown as revenue but there will be no associated costs in the accounts.
Paul Carr
94   Posted 11/02/2011 at 09:58:17

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David (62). Many thanks for your valuable alternative analysis. The net outflow of £39 million for players over 9 years was very interesting and does show how good DM has been in the transfer market.

If we had performed as expected this season, I suspect these accounts would have been viewed more positively. A strong end to the season, including a good cup run, will make a big difference to what might happen in the summer with regard to the future of DM and Fellaini.

Dick Fearon
95   Posted 11/02/2011 at 09:46:38

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David Chatt, I assiduously read your posts plus most of the others and I appreciate and admire the time and effort everyone has put in. My knowledge of financial matters is pretty close to zero yet I honestly tried without much success I must admit to make any kind of sense out of it.

I am in no way trying to be flippant but the sheer magnitude and forensic input from so many of you has me flopping around like a stunned mullet.
John Shaw
96   Posted 11/02/2011 at 11:09:01

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Eric (92) & Paul (93) - I guess we're back to square one with regards the Other Operating Costs then.
David Chait
97   Posted 11/02/2011 at 11:55:17

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Paul (#94), I think you're right on that one. The amount of disappointment around all things Everton have tainted the financials as well.
ps: Thanks chaps for some comments. John Shaw... I share your concern over 2011 as I can't see how we will even match the revenue with having to give big payrises.
Paul Carr
98   Posted 11/02/2011 at 12:07:50

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John, I have emailed Mr Shaw (Company Secretary) to ask for an analysis of this number ? we shall see what their current "open communication" policy is...
Stephen Kenny
99   Posted 11/02/2011 at 18:02:45

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Joe, David, Paul thanks for all the effort it has been an eye opener even without any of the mysterious 'other costs' being detailed.

Perhaps someone can answer this for me?

I have read through this thread and it has been stated on a couple of posts that there is £50m? in short term debt due to be repaid imminently?

Could this be that we have tightened our belts short term in order to re-finance, have another go at team building, develop the Park end etc?

Or is this simply what players are due in wages, interest payments, final loan settlements etc?
John Shaw
100   Posted 11/02/2011 at 18:16:56

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Stephen (99) ? There is £52.088 million which the club owes as at 31 May 2010 and which is due to be paid before 31 May 2011, with a further £41.122 million due after 31 May 2011. Unfortunately it is definitely not what you had hoped as the comparative figures from the previous year were £51.979 million that was due between 1 June 09 and 31 May 2010 and £37.335 million which was due after 31 May 2010.

The £52.088 million due between 1 June 2010 and 21 May 2011 will be for Overdraft, Bank Loan, Other Loans, Trade Creditors, HMRC (PAYE & VAT), Accruals and Deferred Income (which is 10-11 season tickets paid for before 21 May 10).
David Minahan
101   Posted 11/02/2011 at 19:53:18

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Everybody seems to have overlooked the significance of Goodison Park Stadium Ltd.

As I understand things, the assets of Goodison Park football stadium were, on 20 March 2002, transferred to that company who would receive all receipts from the stadium operations and become responsible for all running costs. The last accounts published for Goodison Park stadium, those for 2009, show income (I assume essentially gate receipts) of £15,961,897 and operating expenses of £15,220.663.

Fixed assets (Goodison Park?) are given as £6,029.184.
Investments ? £2,767,321.
Cash in the bank ?£1,893,872.

It would seem from this that the Tangible asset shown in the main Everton balance sheet must have been Bellefield and/or Finch Farm.

Also, I assume that a chunk of the "Creditors due within one year" item relates to gate receipts that are to be passed over to the subsidiary company.

In some ways this might give a slightly stronger overall position than that shown by The main accounts in isolation. It does,however, make the "Other operating costs" item of £25,312,000 even more intriguing!!

John Shaw
102   Posted 11/02/2011 at 22:45:02

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David (101) - If I'm right, Goodison Park Stadium Ltd is a wholly owned subsidiary of Everton Football Club Ltd and as such the figures you mention are included in the latest accounts. The reason for this is that Everton Football Club Ltd, as the ultimate holding company, issues consolidated accounts which include any trading subsidiaries.
David Minahan
103   Posted 12/02/2011 at 12:36:43

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Ok John. Thanks for the info.

I am still a bit puzzled,however. For instance the 2009 accounts of Goodison Park Stadium Ltd. show cashbin the bank of £1,893,872. but the consolidated ones have a nil figure?
Steve Harris
104   Posted 12/02/2011 at 15:08:24

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As a passionate loyal follower of this great club, I'm saddended and shocked at the amount of fellow blues who seem content on settling for a life of mediocrity at the hands of Kenwright and his two-bob board.

11 years and counting and all the good work Moyes has done is slowly unravelling in front of our eyes. it's time to wake up people and start coming together as one to force Kenwright's hand. The shower across the park hired the chairman of BA to find a buyer and within 12 months he'd found two.

Stop the excuses about the ground, the tea lady whatever you want to use ? if you want to sell something, you can. I for one don't want us to be having this same conversation in 5 years time. Life's too short and something has to be done now, before it's too late!!!!

Kenwright Out... Kenwright Out... COYB!

Dennis Stevens
105   Posted 12/02/2011 at 21:15:33

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S Harris - it's worse than that, they're not just content : they're grateful!
Paul Johnson
106   Posted 14/02/2011 at 13:20:11

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The section "If I owned the club" is spot-on, as unpalatable as it is.

We don't make a profit, there are increasing debts to service, there are no substantial assets to sell/mortgage (bad idea anyway), we can't afford mega-wages (e.g. Arteta), we can't afford big signings and we can't afford a new/re-developed stadium...get used to it.

Balancing fans expectations against harsh economic reality is not a tightrope I'd like to walk.

We need a rich benefactor or to accept that our business plan is to nurture cheap/free talent which we sell at a premium to better funded clubs (the unspoken/unwritten business plan that has extended Bill's reign this far in my opinion).


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