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WHERE THE MONEY GOES
I spent almost two hours before the Swansea game with representatives of the Shareholders' Association answering questions on the Accounts. I spent time at the fans' forum just before Christmas talking through our numbers. I have looked back through my blogs and see how we've explained on many occasions our finances, our debt levels and our relationships with lenders. We have also explained how we generate our money and where we spend it. I recently presented a review of our 2011 financial results to the media and to our fans on evertontv. I've been through the ins and outs of our finances many times and I honestly don't know any other Clubs and organisations that stand up and respond to that level of scrutiny.
Everton accepts the close scrutiny of its fans. Contrasting with others, we stand up to that accountability. Fans have a right to know about their Club and we respect that. And almost all our fans respect there's a right way to go about getting the answers they want.
One question we regularly get asked and one question thrust into the face of the Chairman last weekend is ‘where's the money gone?' The answer is within our audited and publicly available accounts but that response, the response fans might get back from some Clubs, we know isn't the one you want. And we want to be more helpful so let me run through it again. Here's where Everton's money has gone...
SUMMARY OF THE FIVE SEASONS TO MAY 2011
Over the past five seasons, Everton's annual income has increased by over 60%, from £51m to £82m. In those five years, we have generated £368m, the 8th best in the Premier League. Motivated by nothing other than being more competitive on the pitch, much of that increase has been spent on an ever-increasing wage bill, from £38m in 2006/07 to £58m in 2010/11 - a cumulative wage spend of £244m, the 10th highest in the Premier League, representing 66% of every penny we earn. Over that period, as a result of being better than our rivals at negotiating, recruiting, signing, preparing and coaching players, we've finished an average of 6th, an enviable performance. I make no apologies for asking you to re-read this paragraph.
Other operating costs over the five year period, everything other than wages, including the maintenance of Goodison and Finch Farm, our utility bills, rates, insurance, police costs, security, travel, marketing, food and drink bills in our lounges, academy, scouting and medical expenses and many other costs have totalled £104m. In addition, we have paid £19m of interest and finance charges to our lenders. It means before buying any players, making the relatively small repayments on our long term ‘mortgage', investing in new technology, furniture and fittings, we have ‘broken even'. The money we've brought in has paid our wages, our overheads and expenses and the interest on our borrowings.
More precisely, over five years, we have generated a £1m ‘cash profit' to fund buying players. Of course, we've spent much more than this buying players. Over the same five-year period from June 2006, Everton paid out £94m (including agents' fees) on a stream of internationals like Johnson, Lescott, Howard, Jagielka, Baines, Yakubu, Fellaini, Bilyaletdinov and Heitinga. The Club sold Davies, Beattie, McFadden, Johnson and Lescott and raised £59m. And, accordingly, after all ins and outs, a net £35m has been spent buying new players.
Across these five seasons, we've also spent a further £3m on capital equipment, things like lawn mowers and lighting rigs, computers and carpets, ‘timelines' and technologies.
So how have we paid for £35m of players and £3m sundry equipment? It's a simple answer - Bellefield and more borrowing. The Club's net debt has increased from £22m in June 2006 to £45m in May 2011. At this point, one or two of you might be saying ‘stop spending?'
It can be difficult even for the best of us to get a grasp of finances so maybe the table below, covering the most recent five seasons in total, helps. It shows where every penny has come from and where every penny has gone.
A SEASON-BY-SEASON REVIEW
Just so there's no stone unturned, and apologies to those who ‘drop off', a season-by-season review goes like this:
2006/07 - we began 2006/07 on the back of an 11th placed league finish and with opening net debts of £22m. We finished 6th with income of £51m. Our wage bill rose to £38m representing 75% of our income, including new contracts for Yobo, Valente, Vaughan and Anichebe and after deducting all the other costs of running the Club we generated just over £1m before paying finance and interest charges on our borrowings. We spent £4m net on new players (money we paid out on signing including Kroldrup, Davies, Johnson and Lescott less money banked on the likes of Rooney, Bent, Kilbane and Davies) and we paid £3m of interest and finance charges. Borrowings increased by £4m to £26m.
2007/08 - 5th placed in the toughest league in the world and significant increase in our income to £76m. A large proportion of the increased revenues went to fund a wage increase of £7m, to £45m, including new contracts for Cahill, Arteta, Osman, Hibbert and Rodwell. Other operating costs increased to £22m and we earned a profit of £8m. A significant part of the additional money brought in went on signing new players with a net spend of £15m (further money we paid out for Kroldrup, Johnson and Lescott and new spending on the likes of Howard, Jagielka, Yakubu, Baines and Pienaar, less the money banked for Davies, Kroldrup, Beattie, McFadden and Naysmith). We also paid another £4m of interest and finance charges. Borrowings increased by £11m to £37m.
2008/09 - 5th again and, as we all remember, an FA Cup Final. Income grew to £80m partly as a result of reaching the Cup Final. Wages rose to £49m with new contracts for Neville, Rodwell, Howard and Yobo. Other costs remained flat at £23m and we earned a profit of £8m. We spent £6m net on players (payments for Yakubu, Baines, Howard, Kroldrup, Lescott and Fellaini, less monies in for McFadden, Kroldrup, Beattie and Johnson) and again incurred £4m of interest. Borrowings again went up, this time by a modest £1m, to £38m.
2009/10 - an 8th placed finish and a £1m drop in income to £79m (Europa League income not quite replacing the prior year FA Cup income). Wages continued to rise by a further £5m to £54m including new contracts for Jagielka, Vaughan, Saha, Cahill, Rodwell and Coleman. Other costs increased by £1m to £24m and we earned a profit of £1m. We spent £3m net on players (payments out on Yakubu, Fellaini, Bilyaletdinov, Distin and Heitinga, less monies in for Johnson, Rooney and Lescott) and incurred £4m of interest. Borrowings were up by £7m to £45m.
2010/11 - 7th in the League and income up to a record £82m. Wages rose more rapidly to £58m, to 71% of turnover, including new deals for Baines, Arteta, Osman, Hibbert, Coleman, Anichebe and Jagielka. Other costs remained unchanged at £24m and we earned a small profit of £0.4m. We spent a further £7m net on players (money spent on Fellaini, Heitinga and Gueye, less cash in for Lescott and Pienaar) and incurred again, another £4m of interest. We also generated £9m from the sale of Bellefield. At the end of the season, borrowings remained static at £45m.
THE SEASON AHEAD AND ‘THE ARTETA MONEY'
We entered the 2011/12 season with the continued and valued support of a more demanding bank - a phenomenon widely recognised. There is another, ever-more challenging, break-even budget for us all to meet, but with numbers that don't cover our finance and interest charges, approaching £5m, which we still needed to find. We remained confident, based on a strong squad, of another good season - add up the cost and the value of the players on the back of the programme, or the team sheet for Spurs. This is not an ageing, threadbare squad, portrayed by some as amongst the weakest in the Premier League.
Of course, in the last 48 hours the question ‘Where Has the Arteta Money Gone?' has been raised again. The first thing to repeat is the bank didn't force the sale. The £10m instantly became £9m when we paid sell-on fees to Real Sociedad. Sadly, and despite a lot of hard work, £9m could become £7.5m by the end of the year with gate revenues dropping below budget (made even sadder by rumours of the sabotage of ticket sales, programmes and other matchday income). And £7.5m may well become £5.5m as our live TV appearances drop below the budget we set based on previous seasons' appearances.
Even if these attendances and TV appearances pick up, out of what's left, significant money has gone on new deals for Marouane Fellaini and Ross Barkley, we've brought in James McFadden, Marcus Hahnemann and Landon Donovan and our newest arrival, Darron Gibson. It feels like we're getting the most for our money and whatever money is left will be stretched, squeezed and re-invested. The Chairman and the Manager have spent the last two months looking at several more potential acquisitions and as always, on all football-based matters at Everton, it will be the Manager making the decisions.
In truth, the answer to the question is simple and we can add in money from other player sales. The money flows into Finch Farm - in player wages, transfer fees, and the expenses of one of the country's best training grounds and academies - just look at the numbers and tables above. But what's behind the question is a lot more difficult. Constantly, relentlessly looking to improve our competitiveness on the field, but as always checked by the money in our pockets, the constraints imposed by our lenders and our responsibilities as custodians. A challenge, indeed a tension we seem to spend every waking minute managing.
So that is our financial position explained - completely and comprehensively - in order to provide our supporters with every piece of financial information at a level we believe no other Premier League club has done before.
Safe and enjoyable trip to those making the journey down to Villa Park and here's to three points.
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