The views in these blogs are those held by the individual blogger and do not necessarily reflect the views of Everton Football Club.
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A Club in Meltdown?
The past fortnight has seen much speculation on the financial state of our Club. Our Accounts are later than usual, and although not late in any legal sense, I hate to say it, being later than prior years suits the agenda of a small minority of fans who seem intent on painting only the bleakest picture. According to the minority, it seems that late accounts can only mean one thing; Everton must be in ‘financial meltdown?' The Blues are set to go bust? Of course, it's simply not true. A couple of conversations I've had recently have highlighted some of the things being said.
A week last Saturday, before the Cup tie, I spoke to a couple of passionate and committed fans who asked me if I'd heard there was a demonstration planned. They offered to show me the texts going round to rally the fans. When I asked why there was a protest, the response was that fans think our Directors have sold all our assets and have pocketed the money. They then said the Chairman was guilty of repeatedly turning billionaires way. I sensed a degree of embarrassment in their voices. Both points are clearly crazy. Truly, the billionaire is yet to knock on the front door at Goodison. Truly, our longed-for Russian, sheik or our media mogul has NOT been put off by a ridiculous selling price. Further, as for ‘asset stripping', there are many club directors out there who pay themselves generous salaries and enjoy plenty of perks. Ours don't, not a penny in any salaries or expenses; not even the Chairman's record-breaking mobile phone bill!
After the Blackpool game on Saturday, I spoke to fans in the Joe Mercer lounge who questioned the lack of investment in players. Four players have left - Yakubu, Yobo, Vaughan and Piennar and, as I kept being reminded, no one has arrived. Of course, the first three have been loaned out with the blessing of the Manager and will either be back in the summer, or will generate us substantial transfer income. And I can assure you, we worked incredibly hard, for almost two years, to keep Pienaar, offering a lucrative new contract that in the end was rejected. My response was to pull out the team sheet; to look at the Manager's starting line-up, to look at the depth and quality on the bench. No one could deny it was an enviable team sheet. We had and we still have a great squad of players. A squad tied down for the long term. A squad enhanced by the acquisition and development of some great youngsters. Following long and considered discussion last summer with the Manager, a squad that the Board was prepared to commit to, and invest in. A squad, as we've all seen, that's capable of competing with the best.
Where the Money Goes
Whether we like it or not, it really is all about money. So where does our money go? The £50 million we get from Sky, or the £20 million we earn through gate receipts, or the new Kitbag deal? The simple facts are approaching 85p in every £1 we bring in, ends up one way or another at our training ground. From young prospects, to scouts, to medical support, to coaches and, of course to our first team squad, almost £70 million, out of our £80 million of income ends up at the Finch Farm complex. And quite right too. We wouldn't want it any other way.
Of course, we've plenty to show for our money. We have a great Academy and, according to almost every Evertonian, as I said above, the best Blues' squad in years; a squad we all believe will see us in Europe next season. That investment, and most specifically a player wage bill that's increased significantly over the past three seasons demonstrates one thing above all else and that's ambition. It shows Everton has a Board of Directors that wants, and pushes hard for success on the pitch. Surviving on what's left? Well that's quite a challenge. The remaining 15p has to go a very long way, supporting the ground, the pitch, our matchday operation, our ticket office etc., etc., etc.
Ambitious or Foolhardy?
Of course, fans want and deserve ambition. But, fans who are quick to criticise and look for failings are also quick to conveniently interpret ambition as financial mismanagement. If we don't invest, we lack ambition. When we do invest, we're putting the Club at risk! Not one we are going to win. It is fair to say however, that our pursuit of success has stretched our finances, something our Chairman hasn't shied away from saying on a regular basis. Spending every last penny strengthening the team has meant that we spend every day of every week looking to drive revenues and raise funds. It means financially, no one could ever describe us as cosy. But then again, very few clubs are particularly comfortable. In football, if you're not pushing finances hard, why aren't you? And, when you push hard in today's financial climate, auditors want more assurances and lenders want more comfort. Over the past two or three weeks, that's exactly where we've been. But that's also where many Clubs are, indeed that's where many businesses are; in a financial world with a very different outlook and with a new set of rules.
What the Accounts Say
I'm pleased to say our accounts are now signed off , with a clean audit report. They have been published this week and show total income, in tough times, that has remained at £80m. However, away from income driven by on field performances -by league position and cup progress, other revenues increased. Matchday revenue per game held-up well with increased season ticket numbers and higher average attendances, albeit in 2009/10 we missed out on a Cup run which saw a small decrease in total receipts, and our sponsorship money improved with the new Kitbag deal. Costs also increased, and rose more rapidly than income. With further investment in player wages, - specifically, Heitinga, Distin and Bilyaletdinov replacing Lescott, our wage to turnover ratio increased. It's still under 70% and if we included our shop turnover and our catering revenues (neither is included in our accounts as they are both operated by third parties), the wage/turnover ratio remains under 65%. And did we make a profit? taking total costs from total revenues, we made a small operating loss - the measure of how we're performing before player trading.
Football balance sheets are unusual and unlike most other businesses. In our case, as a result of accounting convention, Jack Rodwell, Tim Cahill, Mikel Arteta, Seamus Coleman and many more players are recorded at or near to nil value and certainly way below market value. As far as our published balance sheet goes, our assets are hugely undervalued. Our debts, however, are recorded in full. I think we'd all agree the most important number on the balance sheet is total debt and at May 2010, our accounting period end, total debt was £48m (£41m in 2009), an increase explained by the continued investment in players and a rising player wage bill.
Debt needs to be managed and ultimately repaid and it should be recognised and acknowledged that Everton has a strong finance team and the long term support of our bankers and lenders. Specifically, the Club has built and benefited from an eight year relationship with our bank, a partnership which is founded on the strength of the management team at Goodison, the stability in our Boardroom and two decades of top flight experience ‘racked up' by a Chairman and Manager envied across the Game.
Changes to Auto Cup
To finish, some evidence of how we do listen to our fans and make changes that are right for the Club and its supporters. After trying again to satisfy too many fans with too few tickets for our Third Round tie at Scunthorpe United, you asked us to review our Auto Cup scheme. Whilst there are merits to the scheme, and it was very easy to join, it is clear to us that the scheme allowed fans to jump the loyalty queue. As I said at the time, our aim on every occasion when tickets are scarce is that tickets go to fans who, ‘rain or shine', don't miss games. Fans who'd been to Brentford were missing out to fans who'd simply ticked a box. As a result, next season Auto Cup will be dropped for away Cup games.
As I hope you all know, our doors are always open to suggestions which will improve the Club and allow us to ‘do the right thing'. Our Fans Forum is now bigger, has wider representation, and meets on a regular basis. Our recent Supporters' Clubs visits have included Wrexham and Southport, with Netherton, Milton Keynes and Dublin around the corner. I have a meeting with the Shareholders' Association in a fortnight's time and I'm meeting a couple of fans on an individual basis who want to discuss away game issues. Fans, quite rightly, shape our decisions. The door is always open.
And Forward as One Team
I am a firm believer that anyone who buys a ticket has the right to voice his or her opinions and should be listened to. Everton respects the views of its fans and has demonstrated time and time again that we listen, we ‘front up' and we tell it straight. We don't want sterile debate, we don't wish to muffle our critics and we do want to be kept on our toes. But, I hope you'd agree with me, criticism should be positive, it should be fair and above all, should be for the long term good of Everton Football Club.
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