Season 2011-12 Fan Articles
Why Everton haven't been sold
By Richard Larnder :: 13/01/2012
54 Comments (»Last)
Everton?s impending takeover, or not as the case may be, is the hot topic of discussion amongst Evertonians at the moment. According to Chairman Bill, it is potentially the most protracted asset sale of all time, having been trying to shift his (and his fellow shareholders?) shares for what seems like an eternity.
It?s always about the dough
I?ve been involved in the purchase and sale of private companies for a good few years and, believe me; the complexities of these transactions shouldn?t be underestimated. Putting a structure together that works for all parties, making the tax ?work?, trying to get financing (especially when banks aren?t lending) and negotiating with buyers/sellers (and their lawyers, accountants and bankers) and (heaven forbid) the Government can be a logistical minefield.
However, in my experience, any difficulty can be overcome (yes, even the Government) and the most complex transactions can be executed as long as everyone agrees on one thing: Price. And, for me, herein lies the problem.
I think even the most financially illiterate individuals could come to the conclusion that if Everton was put on the market this afternoon for £1, we would have new owners by tea time, such would be the appetite to own one of the oldest, most prestigious and famous football clubs in the world, currently in a secure position in the most lucrative league in the world (for now).
Following that logic must bring you to the natural conclusion that Everton?s ?fair value? lies somewhere between £1 and the current asking price. You see, the above complexities can delay a sale by six months, maybe a year, but assets that have been ?on the market? for ten years and have not been sold are over valued by the vendor. To borrow an Americanism, it?s ?economics 101?.
The devil is in the detail (valuation)
I?m not going to bore everyone with the finer points of valuation because, to be honest, it?s irrelevant and I?ve already bored you enough. You show me a private company valuation (including one of my own) and I?ll show you why it?s inaccurate. The reason for this is that they are all subjective and built on the architect?s assumptions.
However, two areas that always get focussed on in private sales, without fail, are: The level of debt at the point of sale and the historical lack of capital expenditure.
The reasons for this are that they will both be netted from the total value of the business or ?enterprise value? when arriving at the all important number, the amount of cash that will change hands at completion or ?purchase consideration?.
Leverage: Everybody?s friend except the vendor
Debt (and debt-like-items eg, historical transfer fees outstanding) gets knocked-off the enterprise value because it?s how the vendor has chosen to fund the business expansion (stop laughing at the back). He could have used his own cash (equity) after all.
We don?t know what Everton?s debt is today but at 31 May 2011 it was £47.7M. Let?s be kind and assume that the outstanding debt is now £35M due to player sales (which might not have gone to the bank depending on your choice of newspaper) and wage reductions. I?m also ignoring debt-like-items here as they would only be uncovered during due diligence but I?ve seen buyers try to include onerous finance leases in here too!
That?s a £35M reduction in purchase price before we?ve even started.
The Old Lady
The buyer is acquiring the right to the future cash profits of the business (that?s right, I said profit). This number is always estimated using EBITDA (earnings before interest, tax and amortisation) but after taking the required level capital expenditure into account i.e., all businesses need a certain level of capex and this will impact (reduce) the return a buyer can make on his investment.
Here comes the incumbent shareholders? second issue: There has been no investment in capex since the Park End stand was built with the proceeds of Alan Ball?s sale to Arsenal. This means that a buyer is going to need a large out-flow of post-acquisition cash in order to keep the business in its current state, never mind fund expansion. The buyer will add up the historical level of under-spend and knock it off the purchase price.
To be honest, this number is difficult to estimate for obvious reasons, but the Board has suggested in the past that Goodison needs substantial investment to avoid a safety certificate revocation. Again, let?s be kind and assume that £20m of investment is required to keep Goodison and its limited corporate facilities in working order. Remember, this isn?t money for a new stadium (which might also be needed) it?s money that really should have been spent already.
For those of you thinking I?ve overestimated this number, remember that there has also been significant under-spend on the playing side too. We are effectively renting players.
The final reckoning
You don?t need to be Warren Buffet to see that (based on my rudimentary assessment) a buyer could be looking for a £55M (maybe more) reduction in purchase consideration before even discussing enterprise value i.e., even if you conclude that the business is ?valued? at £80M based on its potential future profits, the outgoing shareholders would only get £25M.
In conclusion, it?s my view that the main reason the club hasn?t been sold to date is price. I don?t really see how it can be anything else.
ps ? I don?t think the value of the business is anywhere near £80M given that all you?re effectively buying is a tired, ageing brand and the right to incur future losses, but that?s a story for another day. Remember that, based on the above, the shareholders need a valuation of £55M to sell the club for £1.
Reader Comments (54)
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Stephen Kenny
2 Posted 13/01/2012 at 17:38:06
2 Posted 13/01/2012 at 17:38:06
I can't see how the current incumbents would choose not to sell at a half-decent price, or even to reduce their own future liabilities?
They are not going to spend anything to give them a chance of making a return and the business does not have the capacity to grow itself, that's as clear as day. In fact the longer they stay the more likely administration becomes IMO.
The only scenario I can see is maybe they are doing a Doug Ellis?
They are not going to spend anything to give them a chance of making a return and the business does not have the capacity to grow itself, that's as clear as day. In fact the longer they stay the more likely administration becomes IMO.
The only scenario I can see is maybe they are doing a Doug Ellis?
Jonathan Stockdale
3 Posted 13/01/2012 at 18:01:26
3 Posted 13/01/2012 at 18:01:26
The Trust Everton website says "The initial rationale for Trust Everton is to explore thoroughly the feasibility of a supporters? vehicle providing sustainable long-term funding for the real-estate assets of the football club. The two that spring to mind are the training ground and the stadium." So this is talking about the fans financing a new stadium. How would this affect price, EBITDA and enterprise value? Would it make the club more attractive to buy?
Alan Williams
4 Posted 13/01/2012 at 17:35:18
4 Posted 13/01/2012 at 17:35:18
Richard, in the normal business world what you have said above is real life but football and the finances that surround it aren?t. What you haven?t put a value on is good will and the prestige that goes with owning a football club which is the grey area. EFC as a business acquisition in its current form doesn?t add value that is obvious so the purchase price is exactly what it is, it?s the investment thereafter that will make or break our club. BK won?t sell to any party that will leverage the purchase against the club which is good news for us all but again makes the sale less attractive, my fear is he will sell up and walk away due to the abuse he is currently getting and that is a very dangerous game to play as we may well be worse off. We need to not make this sale a BK issue as EFC problems are deeper than the Chairman; regardless of how we have got in this mess doesn?t change our current predicament. I have faith that the club will be sold very, very soon along with some good announcements regarding sponsorship deals. I?m more confident in our future than I have felt for a while, things will change.
Barry Rathbone
5 Posted 13/01/2012 at 18:24:47
5 Posted 13/01/2012 at 18:24:47
I suspect someone's said take the heat by selling "whoever" to get the debt down and we've got a deal.
Arriving like the cavalry is always a good move.
Jain group would be my hope.
Arriving like the cavalry is always a good move.
Jain group would be my hope.
Howard Don
6 Posted 13/01/2012 at 19:22:38
6 Posted 13/01/2012 at 19:22:38
Really interesting Richard - thank you. Just one nitpick, surely the Park End was built 1994/95 ish, decades after Alan Ball was sold?
Joe McMahon
7 Posted 13/01/2012 at 19:28:08
7 Posted 13/01/2012 at 19:28:08
Good article Richrad. Many issues though. Years of negative uneasy on the eye football, a stadium that is laughable for 2012, not being Liverpool FC. West Ham will be the next huge money club, Olympic Stadium & London in one package. The Kenwright years have rotted Erverton past the point of no return.
Colin Fitzpatrick
8 Posted 13/01/2012 at 19:30:32
8 Posted 13/01/2012 at 19:30:32
Alan #533
I?d agree with you about the prestige, if fact I?d go further, I believe that there?s a value to be placed on our presence in the premiership and our history.
You say ?BK won?t sell to any party that will leverage the purchase against the club? I don?t think WON?T is the word to be honest; CAN?T would be a fairer assessment in my opinion. Liverpool and Manchester United were purchased using this methodology as that both carried vast assets and were massive generators of revenue. Everton as a business has been decimated since Kenwright?s consortium took control and a leveraged buy-out would be impossible so let?s not turn Bill into St Bill.
Also you fear that he ?will sell up and walk away due to the abuse he is currently getting and that is a very dangerous game to play as we may well be worse off? Bill?s not going to relinquish his shares anytime soon, although I wouldn?t put it past him to put a dying swan act on. I don?t think he?s getting abuse at all, he?s being asked questions he doesn?t want to answer, just like at the AGM?s, remember them? As for being worse off, the only way that can be prevented is if the sale isn?t handled by this bunch of incompetents, let?s not brush all the catastrophes under the carpet Alan, I believe a little contrition from Bill and his associates would go a long way to heal the rift between the fans and a club that, in recent years, has relied upon spin rather than results both on and off the field; to err is to human to forgive is divine.
For me Alan, Bill Kenwright may not be the whole reason why we are in a mess and let?s not fall for any nonsense attempting to prove otherwise, we know what we can see and if it looks like a duck, walks like a duck and quacks like a duck then it?s a duck. We all know we?re in a mess, a little humility by the board and many may be less inclined to attack them. Myself I?d welcome an apology for misleading the fans over the £52m from Tesco that didn?t exist instead of the quiet off the record mumbling.
I?m glad you believe in this good news that you mention; of course if it doesn?t happen, if it turns out to be another Sodexo or Kitbag then the first couple of rounds are on you!!
Barry #542
I hope it isn't Jain, they're not the type of owner we need.
Richard, very informative piece, I?m not going to be the pedant that mentions the Alan Ball thing!
I?d agree with you about the prestige, if fact I?d go further, I believe that there?s a value to be placed on our presence in the premiership and our history.
You say ?BK won?t sell to any party that will leverage the purchase against the club? I don?t think WON?T is the word to be honest; CAN?T would be a fairer assessment in my opinion. Liverpool and Manchester United were purchased using this methodology as that both carried vast assets and were massive generators of revenue. Everton as a business has been decimated since Kenwright?s consortium took control and a leveraged buy-out would be impossible so let?s not turn Bill into St Bill.
Also you fear that he ?will sell up and walk away due to the abuse he is currently getting and that is a very dangerous game to play as we may well be worse off? Bill?s not going to relinquish his shares anytime soon, although I wouldn?t put it past him to put a dying swan act on. I don?t think he?s getting abuse at all, he?s being asked questions he doesn?t want to answer, just like at the AGM?s, remember them? As for being worse off, the only way that can be prevented is if the sale isn?t handled by this bunch of incompetents, let?s not brush all the catastrophes under the carpet Alan, I believe a little contrition from Bill and his associates would go a long way to heal the rift between the fans and a club that, in recent years, has relied upon spin rather than results both on and off the field; to err is to human to forgive is divine.
For me Alan, Bill Kenwright may not be the whole reason why we are in a mess and let?s not fall for any nonsense attempting to prove otherwise, we know what we can see and if it looks like a duck, walks like a duck and quacks like a duck then it?s a duck. We all know we?re in a mess, a little humility by the board and many may be less inclined to attack them. Myself I?d welcome an apology for misleading the fans over the £52m from Tesco that didn?t exist instead of the quiet off the record mumbling.
I?m glad you believe in this good news that you mention; of course if it doesn?t happen, if it turns out to be another Sodexo or Kitbag then the first couple of rounds are on you!!
Barry #542
I hope it isn't Jain, they're not the type of owner we need.
Richard, very informative piece, I?m not going to be the pedant that mentions the Alan Ball thing!
Andy Riley
9 Posted 13/01/2012 at 19:33:45
9 Posted 13/01/2012 at 19:33:45
Alan Williams - you do sound quite confident that something better is imminent. Can you enlighten us with the basis of that confidence or is it just a triumph of hope over expectation?
Colin Fitzpatrick
10 Posted 13/01/2012 at 19:33:55
10 Posted 13/01/2012 at 19:33:55
Oh, Howard did lol
Keith Glazzard
11 Posted 13/01/2012 at 19:36:42
11 Posted 13/01/2012 at 19:36:42
Thank you Richard. You have lucidly explained many aspects of the situation I usually prefer not to think about.
I'm afraid that 'not the kind of owner we need' probably doesn't exist - and again I'm afraid that my double negative here doesn't make a positive. A recent winner of Euromillions netted, what?, £100mill, richer according to one list, than Ringo Starr. If a rabid blue had won that pot he or she would surely have been advised against wading in to 'rescue' the club. Pissing in the wind.
I've no idea whether we are going to be rescued - which is becoming increasingly urgent - nor who such an agent might be. Someone looking for a profit? How? Who?
The Sheik of Araby might, for reasons best known to his family, be our only hope. Or possibly Vladimir Putin. His resemblance to Tony Hibbert is startling, and he might fancy being smuggled on for a cameo in the Prem as part of his CV.
I'm afraid that 'not the kind of owner we need' probably doesn't exist - and again I'm afraid that my double negative here doesn't make a positive. A recent winner of Euromillions netted, what?, £100mill, richer according to one list, than Ringo Starr. If a rabid blue had won that pot he or she would surely have been advised against wading in to 'rescue' the club. Pissing in the wind.
I've no idea whether we are going to be rescued - which is becoming increasingly urgent - nor who such an agent might be. Someone looking for a profit? How? Who?
The Sheik of Araby might, for reasons best known to his family, be our only hope. Or possibly Vladimir Putin. His resemblance to Tony Hibbert is startling, and he might fancy being smuggled on for a cameo in the Prem as part of his CV.
Alan Williams
12 Posted 13/01/2012 at 20:19:37
12 Posted 13/01/2012 at 20:19:37
Hi Colin, BK Legacy isn't important to me and it will be whatever it is. Apologies are only worth it if they are sincere and I don't think it would ever be regarding DK. KD to me was the missed opportunity and I blame the board collectively for that including Gregg. I'm pretty certain my pint is safe regarding the sportswear tie up but I suppose EFC has the ability to cock up but the mass sale of product is a big clue! On the other possibility am 50/50 that we are either in DD or very close to it, Iet's see if am right in the coming weeks/months. Hope to see you soon.
David Hallwood
13 Posted 13/01/2012 at 20:15:59
13 Posted 13/01/2012 at 20:15:59
Great article Richard and I've been thinking along these lines for a while. As you point out it is all about the dough, and that includes the buyer expecting too much because (they think) they've worked their fingers to the bone.
But capitalism is unsentimental about these things, and the board (not just kenwright) must realise that things are only going to get worse, because which ever way you look at it, whether they are solely to blame or hostages of pure bad luck, they must accept that they have a failing business, with no hope of getting back on the straight and narrow.
A friend of mine had a medium sized successful business that went tits up very quickly, and because he was stubborn refused to accept the inevitable, thereby giving two years more debt and grief. He reminds me of Kenwright
But capitalism is unsentimental about these things, and the board (not just kenwright) must realise that things are only going to get worse, because which ever way you look at it, whether they are solely to blame or hostages of pure bad luck, they must accept that they have a failing business, with no hope of getting back on the straight and narrow.
A friend of mine had a medium sized successful business that went tits up very quickly, and because he was stubborn refused to accept the inevitable, thereby giving two years more debt and grief. He reminds me of Kenwright
Barry Rathbone
14 Posted 13/01/2012 at 20:17:50
14 Posted 13/01/2012 at 20:17:50
Colin Fitz
Shit!
I thought the Jain group - merseyside connections through the Halewood plant - might be the kiddies.
The "Fitz" calls it without fear or favour so no argument from me.
Shit!
I thought the Jain group - merseyside connections through the Halewood plant - might be the kiddies.
The "Fitz" calls it without fear or favour so no argument from me.
Paul Joy
15 Posted 13/01/2012 at 20:36:10
15 Posted 13/01/2012 at 20:36:10
Richard many thanks for your excellent piece - can't say it makes for pleasant reading but it does help in understanding our situation.
Peter Fearon
16 Posted 13/01/2012 at 20:43:08
16 Posted 13/01/2012 at 20:43:08
Why is the Jain Group "not the type of owner we need?"
Colin Fitzpatrick
17 Posted 13/01/2012 at 23:25:56
17 Posted 13/01/2012 at 23:25:56
Alan, #577
Ah you?re reneging already, a massive shift in the goalposts, the deal with **** is common knowledge, I was interested in your sponsorship comment. If anyone is conducting diligence I?d be amazed tbh as the one person who is loathed to tell porkies in the club informed shareholders recently that nobody was in, just the usual ?interested parties?. Of course that could all change, maybe in time for New Year ;-) 新年快樂
see you soon fella
Barry #586
lol
Ah you?re reneging already, a massive shift in the goalposts, the deal with **** is common knowledge, I was interested in your sponsorship comment. If anyone is conducting diligence I?d be amazed tbh as the one person who is loathed to tell porkies in the club informed shareholders recently that nobody was in, just the usual ?interested parties?. Of course that could all change, maybe in time for New Year ;-) 新年快樂
see you soon fella
Barry #586
lol
Peter Laing
18 Posted 13/01/2012 at 23:37:54
18 Posted 13/01/2012 at 23:37:54
Alan I heard a rumour months go that Everton would be signing a commercial deal with Nike once the contract with Le Coq Sportif finishes at the end of this season. Probably a move in the right direction but hardly the deal that Ian Ayre over at the shite managed to strike with Standard Chartered.
Peter Laing
19 Posted 13/01/2012 at 23:46:35
19 Posted 13/01/2012 at 23:46:35
Alan also ment to say have you managed to get your hands on those magic beans that Richard Dodd's been taking for the past couple of year's !
James Flynn
20 Posted 14/01/2012 at 03:15:34
20 Posted 14/01/2012 at 03:15:34
We just need this bunch to go. Let's worry about new ownership when they own the Club.
KENWRIGHT OUT!
KENWRIGHT OUT!
Eric Myles
21 Posted 14/01/2012 at 04:58:12
21 Posted 14/01/2012 at 04:58:12
Excellent information from someone who knows what he's talking about, thank you Richard.
Re: Alan's "What you haven?t put a value on is good will" comment. You must also balance this with how much the Club is losing per year (£27 million by my reckoning), and how long it will take to turn that around into a profit.
Re: Alan's "What you haven?t put a value on is good will" comment. You must also balance this with how much the Club is losing per year (£27 million by my reckoning), and how long it will take to turn that around into a profit.
Eric Myles
22 Posted 14/01/2012 at 05:20:09
22 Posted 14/01/2012 at 05:20:09
^oh, and not to mention the loss of 'good will' to a business that has to operate on a cash only basis because of the very real risk of non / late payment.
Bob Willis
23 Posted 14/01/2012 at 09:20:54
23 Posted 14/01/2012 at 09:20:54
Valuation and sale are intertwined we all know that.
IF we were offered £10M for Tim Cahill would we sell??
IF we asked £10M for Tim Cahill would we sell?
BK should and in my opinion probably does understand that there is a difference between trying to sell Everton as a GOING concern and not as a GONE concern. But he had better hurry!
IF we were offered £10M for Tim Cahill would we sell??
IF we asked £10M for Tim Cahill would we sell?
BK should and in my opinion probably does understand that there is a difference between trying to sell Everton as a GOING concern and not as a GONE concern. But he had better hurry!
Paul Ashcroft
25 Posted 14/01/2012 at 11:32:41
25 Posted 14/01/2012 at 11:32:41
I'm a regular reader of Toffeeweb but somewhat depressed by the lack of focus sometimes. I think Joe at 551 has hit the nail on the head - "we are past the point of no return". Bill Kenwright and all alongside him simply don't know WHAT TO DO!!
Ian Bennett
26 Posted 14/01/2012 at 11:39:47
26 Posted 14/01/2012 at 11:39:47
Eric - we aren't losing £27m a year.
Last year we lost £5m which included an £8m profit on Bellefield. Stripping away that exceptional, a loss of £13m. Included in that £13m is £17m charge for amortisation of player contracts. The amortisation charge has to be coming down as bar Vellios and Darron Gibson we haven't signed any one.
The club had a net cash outflow of £4m which includes £6.5m paid out on player purchases (i assume Felli, Heitinga and Billy deals that were staggered over the contracts). We must be in the position that these are near paid for in cash terms.
Not saying it great either.
Last year we lost £5m which included an £8m profit on Bellefield. Stripping away that exceptional, a loss of £13m. Included in that £13m is £17m charge for amortisation of player contracts. The amortisation charge has to be coming down as bar Vellios and Darron Gibson we haven't signed any one.
The club had a net cash outflow of £4m which includes £6.5m paid out on player purchases (i assume Felli, Heitinga and Billy deals that were staggered over the contracts). We must be in the position that these are near paid for in cash terms.
Not saying it great either.
Steavey Buckley
27 Posted 14/01/2012 at 13:23:18
27 Posted 14/01/2012 at 13:23:18
It has to be understood by Evertonians, BK and rest of the shareholders are not benefactors, but people who don't have any money to give, willingly or unwillingly. That means, Everton will be forced to sell players to finance new ones and pay off the imbalances between income and outgoings.
Bobby Thomas
28 Posted 14/01/2012 at 13:33:22
28 Posted 14/01/2012 at 13:33:22
Alan(533)
Im sorry but, what the fuck are you smoking?
Im sorry but, what the fuck are you smoking?
Eric Myles
29 Posted 14/01/2012 at 14:55:44
29 Posted 14/01/2012 at 14:55:44
Ian, you are forgetting though the (not) excepional sale of other assets to the tune of £13m being players.
So £5m loss on the books, £13m in stripped assets (players) £9m in stripped assets (Bellefield) gives us an 'operating' loss of £27 million.
So £5m loss on the books, £13m in stripped assets (players) £9m in stripped assets (Bellefield) gives us an 'operating' loss of £27 million.
Gavin Ramejkis
30 Posted 14/01/2012 at 15:12:38
30 Posted 14/01/2012 at 15:12:38
I think its highly disingenuous to claim the one off sale of Bellefield as a profit, even more so when the monies raised from this one off sale went straight to one of the many debts the board has lumbered the club with.
The club use player sales to show profits which can be genuine if a player is bought for x and sold for x + y but that doesn't take into account any costs the player has burnt up on Everton's clock in wages and medical treatment. It also doesn't include the tax dodging image rights type payments.
The club use player sales to show profits which can be genuine if a player is bought for x and sold for x + y but that doesn't take into account any costs the player has burnt up on Everton's clock in wages and medical treatment. It also doesn't include the tax dodging image rights type payments.
Bob Turner
31 Posted 14/01/2012 at 17:00:08
31 Posted 14/01/2012 at 17:00:08
Gavin, how is it disingenuous? It's basic accounting principle to say that you recognise profit (or loss) on the disposal of a fixed asset.
You do realise that the costs you refer to (wages and medical treatment) are charged to the profit and loss when incurred, rather than against the fees received when that player is disposed of? Otherwise clubs would "save up" those costs until they disposed of a player, in which case the profits each year would be higher (and since our biggest cost is player wages, massively higher) until they sold the player. Therefore, it is perfectly reasonable to claim a profit when a player is sold for more than they were bought.
You do realise that the costs you refer to (wages and medical treatment) are charged to the profit and loss when incurred, rather than against the fees received when that player is disposed of? Otherwise clubs would "save up" those costs until they disposed of a player, in which case the profits each year would be higher (and since our biggest cost is player wages, massively higher) until they sold the player. Therefore, it is perfectly reasonable to claim a profit when a player is sold for more than they were bought.
Eric Myles
32 Posted 14/01/2012 at 19:20:44
32 Posted 14/01/2012 at 19:20:44
^true Bob, but in Ian's statement "an £8m profit on Bellefield" I don't really think he knows what he's talking about, do you?
Danny Broderick
33 Posted 14/01/2012 at 21:10:54
33 Posted 14/01/2012 at 21:10:54
I think 1 important thing to remember with any valuation is that, whatever you think of them, our players are assets. I am sure I read somewhere that last year our squad was insured for around £180 million. Now I know we have sold £20 million worth of players, and it is also difficult to put an accurate value on players who have come through the youth system like Rodwell and Barkley, but the value of our squad would affect the valuation of the club. In my opinion, we have to be worth more than £80 million bearing this in mind.
To my mind, if Kenwright and co. had sold us a few years back, after we had got to the Cup final for example, I am sure the club would have been worth more then than it is now. Surely the board can not hope to get such a price now, because the squad has aged and some of our better players have gone.
To my mind, if Kenwright and co. had sold us a few years back, after we had got to the Cup final for example, I am sure the club would have been worth more then than it is now. Surely the board can not hope to get such a price now, because the squad has aged and some of our better players have gone.
Eric Myles
34 Posted 15/01/2012 at 01:27:47
34 Posted 15/01/2012 at 01:27:47
^but Danny, the players are a depreciating asset, they are worth less each year and if they do not renew their contracts they leave for free.
So the insurance value really has nothing to do with their replacement or disposal value, much the same as your house insurance.
So the insurance value really has nothing to do with their replacement or disposal value, much the same as your house insurance.
Mike Allison
35 Posted 15/01/2012 at 11:16:09
35 Posted 15/01/2012 at 11:16:09
Eric some of the players are worth more each year. They're just the ones we as fans don't want to sell.
Eric Myles
36 Posted 15/01/2012 at 12:07:15
36 Posted 15/01/2012 at 12:07:15
Mike, I'm afraid their value doesn't increase. Each year as they get nearer to the end of their contracts the value decreases. Take Pienaar and Gosling as examples.
They also get older, do you think Neville is worth more now than say 15 years ago?
They also get older, do you think Neville is worth more now than say 15 years ago?
Matt Traynor
37 Posted 15/01/2012 at 11:23:31
37 Posted 15/01/2012 at 11:23:31
Danny (992) the players are actually liabilities (stop laughing at the back!)
If you sign a player for £10m, fair enough, you can account for that cost over the life of the contract. But if you are paying that player a basic wage of £40k a week, approximately £2m a year, over a 5-year contract that's another £10m you are committed to pay.
The real problem clubs like Everton now face is player wages. You can thank Peter Ridsdale and latterly Man City for that.
If you sign a player for £10m, fair enough, you can account for that cost over the life of the contract. But if you are paying that player a basic wage of £40k a week, approximately £2m a year, over a 5-year contract that's another £10m you are committed to pay.
The real problem clubs like Everton now face is player wages. You can thank Peter Ridsdale and latterly Man City for that.
Richard Larnder
38 Posted 16/01/2012 at 13:25:57
38 Posted 16/01/2012 at 13:25:57
Thanks for everyone's comments.
A lot of people above have got it spot on when looking at the accounts so I won't bother going over old ground but one thing I would say is; don't get too excited about accounting profits/losses as they are inherently rubbish.
Best to focus on the cash we generate as a business, ie EBITDA and then look at how much interest we need to service and how much we have left for Capex. If you find anything, let me know, as I've been trying to find our residual cash for years.
The other way to look at the article is to say that a buyer is only really paying for goodwill or the Everton brand since they're certainly not going to turn a profit before significant investment. How much is someone willing to pay for that? Probably not as much as we would think any more.
Or, yet another way still, if you had £100m to throw at a football club (granted that's not loads in today's world) then try to justify to a buyer why he'd be better off buying Everton over, Norwich, Swansea, Blackburn, Sunderland or Wolves.
Maybe you would pay a bit more for Everton due to the fan base. However, if someone told you that the Wolves owners wanted £100m+ for the club, you'd laugh in their faces (and Molyneux isn't falling down).
Re the Alan Ball comment, I suppose sarcasm doesn't come over well on the Interweb.
A lot of people above have got it spot on when looking at the accounts so I won't bother going over old ground but one thing I would say is; don't get too excited about accounting profits/losses as they are inherently rubbish.
Best to focus on the cash we generate as a business, ie EBITDA and then look at how much interest we need to service and how much we have left for Capex. If you find anything, let me know, as I've been trying to find our residual cash for years.
The other way to look at the article is to say that a buyer is only really paying for goodwill or the Everton brand since they're certainly not going to turn a profit before significant investment. How much is someone willing to pay for that? Probably not as much as we would think any more.
Or, yet another way still, if you had £100m to throw at a football club (granted that's not loads in today's world) then try to justify to a buyer why he'd be better off buying Everton over, Norwich, Swansea, Blackburn, Sunderland or Wolves.
Maybe you would pay a bit more for Everton due to the fan base. However, if someone told you that the Wolves owners wanted £100m+ for the club, you'd laugh in their faces (and Molyneux isn't falling down).
Re the Alan Ball comment, I suppose sarcasm doesn't come over well on the Interweb.
Peter Knight
39 Posted 16/01/2012 at 18:54:58
39 Posted 16/01/2012 at 18:54:58
How would this work if Everton made a big push to sell as many season tickets as they can for next season... then, before the August deadline, sell every player they have, Moyes as well, get a team of amateurs to play... get the Parachute Payment, sell Goodison Park. Fold the club.
How much money would be left or would would we still be in debt?can anyone guess ?
How much money would be left or would would we still be in debt?can anyone guess ?
Colin Fitzpatrick
40 Posted 16/01/2012 at 21:37:11
40 Posted 16/01/2012 at 21:37:11
Richard #269
Re Alan Ball comment, ha ha nice recovery mate!
Re Alan Ball comment, ha ha nice recovery mate!
Gavin Ramejkis
41 Posted 16/01/2012 at 21:52:11
41 Posted 16/01/2012 at 21:52:11
Bob I'm aware how the disposal of assets works, its the promotion of the sale as a profit is banded as a good piece of business when it was a one of strip to appease yet another loan so the profit disappeared instantly with no benefit to the club's day to day business capability; it didn't wipe out a debt merely paid part of just one of them.
Bellefield has gone, what next?
Bellefield has gone, what next?
Ian Bennett
42 Posted 16/01/2012 at 21:52:52
42 Posted 16/01/2012 at 21:52:52
Eric, my point was that if you take away player sale profit, Bellefield profit, and player amortisation, we lose £5m in cash profit.
This is what an investor/bank would look at rather than the operating profit that you project would be £27m loss. Do you really think the bank are forcing sales through because of the value of amortisation, or in reality that the current cashflow is going to run out unless wages are reduced and players are/were sold.
Losing £17m in amortisation is clearly a big hit, but its not crtiical to what the business has to service. Amortisation is meaningless, as academy players have zero value, and if sold on with proceeds rolled over into new staff (Lescott, Rooney) wil skew profit.
The key is the cashflow running through the club and the value of the assets on the pitch.
More than happy to have discussion with you any day of the week.
This is what an investor/bank would look at rather than the operating profit that you project would be £27m loss. Do you really think the bank are forcing sales through because of the value of amortisation, or in reality that the current cashflow is going to run out unless wages are reduced and players are/were sold.
Losing £17m in amortisation is clearly a big hit, but its not crtiical to what the business has to service. Amortisation is meaningless, as academy players have zero value, and if sold on with proceeds rolled over into new staff (Lescott, Rooney) wil skew profit.
The key is the cashflow running through the club and the value of the assets on the pitch.
More than happy to have discussion with you any day of the week.
Bobby Thomas
43 Posted 16/01/2012 at 22:30:46
43 Posted 16/01/2012 at 22:30:46
So the club as a business is inherently worthless and if the valuation, of any sort, continues it will take a miracle to sell.
Great.
Great.
Paul Jamieson
44 Posted 17/01/2012 at 09:24:40
44 Posted 17/01/2012 at 09:24:40
#523 Rob Teo - here is where the £150m comes from - Orville's owner in diguise...
http://www.youtube.com/watch?v=qukb3xY7Feo&feature=youtube_gdata_player
As for Toffeeweb, I'm new on here but I've instantly found the level of debate to be of a much higher standard than other sites which I could mention.
Looks like u could be stuck with me for a while!!
Paul
http://www.youtube.com/watch?v=qukb3xY7Feo&feature=youtube_gdata_player
As for Toffeeweb, I'm new on here but I've instantly found the level of debate to be of a much higher standard than other sites which I could mention.
Looks like u could be stuck with me for a while!!
Paul
Ste Hawkins
45 Posted 17/01/2012 at 13:38:02
45 Posted 17/01/2012 at 13:38:02
Just a quick thing, but aren?t AGMs required by law? I had a very quick search (as I?m in work) and I know its wikipedia and in turn can be a bit dodgy but found this: http://en.wikipedia.org/wiki/Annual_general_meeting and in the introduction it does outline AGMs are generally required by law.
Ste Hawkins
46 Posted 17/01/2012 at 13:48:15
46 Posted 17/01/2012 at 13:48:15
I just read the part about UK law and it says since 2007 its become optional for private businesses to hold AGMs 'unless its articles of association specifically require it to do so.'
Alex Bonnar
47 Posted 17/01/2012 at 14:50:07
47 Posted 17/01/2012 at 14:50:07
The above figures are good but do not allow for any new buyer needing to invest another (say) £30 million to progress the team - if this is not done there will be no improvement/additional income to justify the outlay.
Alternatively some billionaire may be prepared to throw money away just for fun but no 'proper' investor would.
Alternatively some billionaire may be prepared to throw money away just for fun but no 'proper' investor would.
Eamonn Byrne
48 Posted 18/01/2012 at 17:44:13
48 Posted 18/01/2012 at 17:44:13
Richard, I think your absolutely right, it's the value they are putting on the business is the only reason why we have not been sold.
I'd like to think that Bill & Co would sell for the right offer/buyer but I suspect that they are not happy with the ROI.
Meanwhile we stagnate.
We should also remember this board could easily sell a few bright young prospects and settle the debt. I would, for sure it would improve their share value. So you have to be fair in your "value" or judgement of the board.
Equally they could use it to sort out issues at Goodison Park as you suggested would impact on the value.
It's bollocks to say player sales would all go back to the banks. It's truthful to say we need to sell some very talented youngsters to sort out our finances. That is the purpose of Finch Farm after all.
Things are still within our own hands if people make the right decisions. But wanting ROI for running a football club is folly. I want them to realise their time is spent.
I'd like to think that Bill & Co would sell for the right offer/buyer but I suspect that they are not happy with the ROI.
Meanwhile we stagnate.
We should also remember this board could easily sell a few bright young prospects and settle the debt. I would, for sure it would improve their share value. So you have to be fair in your "value" or judgement of the board.
Equally they could use it to sort out issues at Goodison Park as you suggested would impact on the value.
It's bollocks to say player sales would all go back to the banks. It's truthful to say we need to sell some very talented youngsters to sort out our finances. That is the purpose of Finch Farm after all.
Things are still within our own hands if people make the right decisions. But wanting ROI for running a football club is folly. I want them to realise their time is spent.
Dan Parker
49 Posted 20/01/2012 at 14:19:09
49 Posted 20/01/2012 at 14:19:09
The value of Everton football club is only what someone else is willing to pay for it. If Bill's asking for x but not getting any offers, it's not worth that much..simples.
If you buy some shares on the stock market and they fall in value, they're not worth what you originally paid for them.
You can either hold out and hope the market returns to it's original level or sell and accept the loss. Wake up Bill, lower your price.
If he's waiting, I can't see Everton being sold for a good few years at least.
If you buy some shares on the stock market and they fall in value, they're not worth what you originally paid for them.
You can either hold out and hope the market returns to it's original level or sell and accept the loss. Wake up Bill, lower your price.
If he's waiting, I can't see Everton being sold for a good few years at least.
Denver Daniels
50 Posted 20/01/2012 at 21:41:38
50 Posted 20/01/2012 at 21:41:38
Robert Earl bought a 23% stake in the club for about £7m back in 2006. So at the time the club would have been valued at approx. £30.4m.
Why would it be valued at anywhere near £100m 5 years later?
Why would it be valued at anywhere near £100m 5 years later?
Eric Myles
51 Posted 21/01/2012 at 08:23:18
51 Posted 21/01/2012 at 08:23:18
Ian #375, it's the opposite mate, if you take away player sale profit and Bellefield profit(?), we lose a record £17m in cash profit according to the accounts.
And I'm pretty sure that's the figure what the banks will be looking at, that's a negative cash flow of £17m per year.
I never mentioned amortisation in my post but I agree amortisation is meaningless as a player can be sold for less than his purchase price and show a profit in the accounts due to amortisation.
And I'm pretty sure that's the figure what the banks will be looking at, that's a negative cash flow of £17m per year.
I never mentioned amortisation in my post but I agree amortisation is meaningless as a player can be sold for less than his purchase price and show a profit in the accounts due to amortisation.
Stuart Gray
52 Posted 23/01/2012 at 13:42:40
52 Posted 23/01/2012 at 13:42:40
I have wondered recently if the real reason we haven't been sold is because there is too much dirty laundry and closets full of skeletons for BK to be able to open the club up to full scrutiny.
There are a couple of people who I won't name, but instead I'll call them Philip Earl and Robert Green (not the goalkeeper, these are entirely random names) who seem to have no interest in Everton and yet they have interest in Everton.
Maybe I should rephrase that; they have an interest in Everton for some reason but they don't have Everton's interests in mind.
Too me, their involvement has never been made clear but I'd really like someone to come out and say what the point of them is. Obviously that will be difficult because nobody will know who I'm talking about...
There are a couple of people who I won't name, but instead I'll call them Philip Earl and Robert Green (not the goalkeeper, these are entirely random names) who seem to have no interest in Everton and yet they have interest in Everton.
Maybe I should rephrase that; they have an interest in Everton for some reason but they don't have Everton's interests in mind.
Too me, their involvement has never been made clear but I'd really like someone to come out and say what the point of them is. Obviously that will be difficult because nobody will know who I'm talking about...
Nick Smith
53 Posted 26/01/2012 at 11:52:24
53 Posted 26/01/2012 at 11:52:24
Agree with Richard on this. Key factors for me is a completely unrealistic price, the ground, timing (economic downturn) and finally Kenwright's handling which, as time goes on, is going to distance him further from the fanbase. There's no doubt a bit of luck comes into it too as we haven't had some cash-rich overseas investor fall stupidly in love with Everton to the end that they don't view owning the club in a practical light. The biggest problem for me now is that a year from now the squad will be poorer, the debt higher and income dropping. If this continues we'll be in the Championship before you know it.
Steve Lowe
54 Posted 29/01/2012 at 09:18:01
54 Posted 29/01/2012 at 09:18:01
The bottom line is there ain't many Abramovichs or Sheiks with shit-loads of cash to piss up the wall these days as that's all they would be doing. Chelsea or Man City won't turn a profit any time soon and, unless we get a billionaire who is looking to lose his cash, we will be in the shit for the foreseeable future.
BK won't sell without a profit and the only people looking are probably looking for a bargain. Until it happens, we will be the bottom feeders trying to keep our heads above the water with the banks having their foot on our heads ready to drown us.
BK won't sell without a profit and the only people looking are probably looking for a bargain. Until it happens, we will be the bottom feeders trying to keep our heads above the water with the banks having their foot on our heads ready to drown us.
Robert Workman
55 Posted 06/02/2012 at 13:32:30
55 Posted 06/02/2012 at 13:32:30
On Saturday I was attending a party here in Vienna. I tried, unsuccessfully, to find a Rapid Vienna fan in order to discuss Jelavic. Nevertheless I did meet a guy called Edwin, who works in the world of finance with strong links to the oil rich Middle East. He admitted to not knowing much about football and not really supporting any team. When pushed he said Millwall ? which confirmed his earlier statement!
The interesting point to this story concerned Everton. He informed me that he had been approached by a businesswoman from Abu Dhabi, who had heard that Everton were for sale. As Edwin's only contact in the football world was Mike Ashley, the owner of Newcastle United, he contacted him. Ashley advised Edwin to warn her off as Everton were overpriced! Whether or not that is true, with friends like that who needs enemies!
Then Edwin asked me about Everton's management. I told him that our chairman was a fan and theatrical impresario. He told me that although Ashley is a fan and owns Newcastle, their chairman is not a football guy, but a businessman. He reckoned that, as a result, Newcastle are a well run club.
Finally I asked Edwin to contact me if he received any more potential offers. Which reminds me, what is the name of the guy who is trying to find a buyer for the club? No, not BK!
The interesting point to this story concerned Everton. He informed me that he had been approached by a businesswoman from Abu Dhabi, who had heard that Everton were for sale. As Edwin's only contact in the football world was Mike Ashley, the owner of Newcastle United, he contacted him. Ashley advised Edwin to warn her off as Everton were overpriced! Whether or not that is true, with friends like that who needs enemies!
Then Edwin asked me about Everton's management. I told him that our chairman was a fan and theatrical impresario. He told me that although Ashley is a fan and owns Newcastle, their chairman is not a football guy, but a businessman. He reckoned that, as a result, Newcastle are a well run club.
Finally I asked Edwin to contact me if he received any more potential offers. Which reminds me, what is the name of the guy who is trying to find a buyer for the club? No, not BK!
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1 Posted 13/01/2012 at 17:42:04
Not only that, it really gives a bit more context to what Kenwright is purportedly asking and what he paid for initially. (Was it in the region of £35 million? Anyone?) In light of your rudimentary calculations and how much reduction may be expected from any potential buyer, it does seem a lot to be asking for £150 million (if that is indeed the asking price).
Also, amidst all the subjective gloom and doom that's been swirling on this site for the past few days, it's good to have something more "objective" (i.e. figures) and concrete to latch on to.