Everton reveal profit in annual accounts

30/01/2014  Comments (70)  jump
Latest results show improvement on 2011-12
Everton have announced that the club made an operating profit of £0.7M for 2012-2013, reversing a £6.4M loss for the previous year.

The annual accounts cite a 7.3% increase in turnover, thanks to increased broadcast revenue and gate receipts, a £10.7M swing in net profit on player trading and contracts for the season, and a £1M reduction in other operating costs.

The figures do not take into account the bumper Premier League broadcast deal that took effect last August, nor do they factor in any of last summer's transfer activity, compensation paid to Wigan Athletic for manager, Roberto Martinez, transfer fees of £6M+ which will become due when certain players reach appearance milestones, or signing on/bonus payments of £5m that will come due to current players on specific future dates.

Chief Executive, Robert Elstone said of the latest results: “The Board has consistently demonstrated its commitment to competing at the highest level, in the best league in the world. We continue to invest in a young playing squad through the acquisition of key talent and the excellent work of our Academy.

"This commitment to youth has been supported by the extension of contracts for many of our experienced performers, all of which continues to sustain a high value in our playing squad not represented on our Balance Sheet.

"Away from the pitch, I am also pleased that we have seen growth in all revenue streams, reductions in our cost base and debt levels slightly reduced. It's a very solid financial position that means we are well placed to take advantage of the new Premier League broadcast deal, already flowing through into our 2013-14 numbers.”

Chairman, Bill Kenwright, meanwhile expressed his satisfaction with the accounts in the Annual Report, saying, “Each year, when I sit down to carry out my review of the previous year, I focus on whether our Club is in a better position than it was a year ago.

“And while we have undoubtedly gone through a period of change, the answer can only be a resounding yes.

“On and off the field we continue to push forward on every front, led by the values and ethos that infuse every person and every aspect of the Club's life.”

Though Everton's balance sheet shows a £1.25M increase in debts due in the coming year, it also reflects a £1.6M decrease in Net Assets and Liabilities and a £5.5M increase in fixed assets, largely comprising a positive shift in player value.

Kenwright ended his statement in the accounts with a renewed pledge to find an investor capable of taking the club forward.

"We're making progress, we're optimistic about what lies ahead, but we're undeterred in our search to find the person, or institution with the finance to catapult us even further forward. No-one underestimates the investment needed to take us to the next level. No-one, least of all me, is underestimating the need to find that investment. Again — I promise we will.

"Until then, Everton Football Club will be the major part of my life, and I will do everything I can to support each and every one of us to get to where we belong."  

Reader Comments

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Kevin Tully
011 Posted 30/01/2014 at 10:48:06
Our annual accounts have been published here :

Link

Nike have had another honourable mention (same wording as last year) for supplying the paint to refurbish Everton 2.

No overall figure for commercial income - but how can receipts for player participation from UEFA for the Euro's be included? Does anyone know? We have increased our commercial income by £500k - Woo-hoo!

It's those sort of sponsorship deals that will give all the other top 8 clubs money for player purchases. The board don't have to inject any cash of their own, that's why we should employ the top people in the business to go out and find new sponsors.

"The Clubs sponsorship, advertising and merchandising revenue has also increased from £7.1M in 2012 to £7.6M in 2013 due to the long term support of key partners such as Chang, Kitbag and Nike. The increase in other commercial activities revenue from £3.0M in 2012 to £4.4M in 2013 is due to receipts from UEFA for players who participated in the European 2012 Championships and solidarity payments."

Shane Corcoran
021 Posted 30/01/2014 at 11:30:12
Got it. What a waste of a print cartridge that was.
Dean Adams
033 Posted 30/01/2014 at 12:07:24
So, our debt is no longer costing us in excess of £5M per annum, in fact we have a profit, that's before the bumper TV deal. So why do we still act like we cant afford to invest in our squad? Only answer for me is that the board want our debt cleared more than they want a successful team. That is the truly sad side to our predicament.
Kevin Tully
038 Posted 30/01/2014 at 12:21:14
Dean – we still shelled out over £4M in interest payments for Everton FC. Our usual Interest payable for the three companies the club operates under is IRO £7M per season. It's cost £35M in interest alone over the past 5 years.
Shane Corcoran
040 Posted 30/01/2014 at 12:34:35
Dean, I haven't gone through the accounts yet but maybe the bank might want some of the actual loan back sometime soon as well as that pesky interest cost.

Matt Traynor
059 Posted 30/01/2014 at 13:21:54
Dean #033, if you were in Bill's shoes would you:

a) Invest in the squad to give your boyhood team a shot at qualifying for the lucrative CL; or

b) Pay down debt so that if you sell you get more money for your shareholding?

If you answered a) you're probably not in a position to buy Bill out anytime soon, sadly.

Dean Adams
108 Posted 30/01/2014 at 15:07:48
Great, the money made last summer and this winter puts us well up, even before the broadcast money for this season!!!

Please Bill, where is it?

Alex Walsh
111 Posted 30/01/2014 at 15:10:38
Super. 1 point before the deadline. Martinez wanted cover for Kone and Gibson, I can't see that we've done that however we have replaced jela for the rest of this season.

That's 2 player still needed and supposedly targeted. I have a horrible fear the Roberto bubble may be about to burst come tomorrow night and we are back to the same old. Other teams are paying £15m plus on players. We will get left behind the 2nd half of the season. Mark my words.

Brian Waring
112 Posted 30/01/2014 at 15:15:37
Cue an influx of new lawnmowers!
Sean Lloyd
117 Posted 30/01/2014 at 15:26:19
There's new floodlights to be bought! Hold onto your hats..
Patrick Murphy
118 Posted 30/01/2014 at 15:20:29
Brian - I don't think that an influx of new Lawn-mowers would 'cut it' with the fans this time around. But whilst it does show that the custodians are managing the club's finances in a reasonable manner in so far that the debt has gone down albeit slightly- I can't help feel that we missed a trick last January and we are in danger of replicating that error again this January and the opportunity to push the squad on to CL.

But our summer spending will reveal the Board's true ambition unless there is a proposed new stadium in the offing or the club is sold?

Paul Niklas
121 Posted 30/01/2014 at 15:31:47
Well Done Everton, cue the cynical and the doubters.

Question 1 – where has all the money for Fellaini gone and others.?

Question 2 – other operating costs.?

Question 3 – Why are we spending no money.?

My question when will all be fit to show this league we are as good as the rest with a fully fit team.

The rest, In Everton and its custodians I trust.

Blue Union – where are you when your not wanted.?

Thomas Lennon
125 Posted 30/01/2014 at 15:29:47
Great news. Increase in profits across the board in all areas of business, cuts in costs, small cut in debt.

£6 million increase overall. Its virtually as if we had a new stadium! Small beer compared to the top 5/6 but going in the right direction.

Cue damning EBITDA figures from BU...choose your spin.

Linda Morrison
130 Posted 30/01/2014 at 15:42:59
This is very good news, Roberto stated that he had plenty of finance to rebuild the team from the summer and he no doubt will.

We will also have the increased revenue from BT sport and the new Sky deal which should cover the increase in wages costs as Baines, Coleman and Barkley are all having wage increases with their new contracts.

Nick Entwistle
132 Posted 30/01/2014 at 15:42:13
Are cuts in costs a sign of good management or belt tightening due to poor management?

As with previous published accounts it takes someone independent from the club to spell things out on TW, free of all the spin.

One thing for sure is that the missing millions of season's past will not be so much a concern with the whopping dollop of Sky money coming our way.

As with the whole of the PL era, poor management, no matter the size of the pot of gold, will leave us trailing, so even yet more money should not let us sweep things under the carpet.

The luvvy needs replacing.

Andrew Hawes
144 Posted 30/01/2014 at 15:56:06
With a day or so to go till transfer deadline day it looks like it's going to be the same old ,same old from the board.

Really thought we needed a signing this window to capitalise on the brilliant first half of the season and to really add momentum to our finish!

Just like United have done with Mata, we needed a playmaker along these lines to add to our team.

We've seen it all season with sideways passes and no one really knowing what to do once we enter the final third!

Not surprised just disappointed! Never mind the summer ,this was the season we needed to capitalise on other sides in transition and our loan signings who will be gone.
Dennis Stevens
151 Posted 30/01/2014 at 16:25:32
Does that all mean we're doing slightly less worse ?
Iain Johnston
160 Posted 30/01/2014 at 16:42:25
I think a read of the FFP rules might be in order to see how many clubs have already been sanctioned and who are on their way there.
www.financialfairplay.co.uk.
Ged Simpson
162 Posted 30/01/2014 at 16:53:47
Paul 121

Question 1 – where has all the money for Fellaini gone and others.?

Wrong financial year Paul

Geoff Freeman
163 Posted 30/01/2014 at 16:47:03
Good position in league, still in cup, good manager and small profit. In 55 years following Everton I have seen us in much worse positions, much to be cheerful about.
James Stewart
181 Posted 30/01/2014 at 17:15:09
Not surprising considering we keep selling 20m plus players every season and spend less than teams in the championship!
Geoff Freeman
186 Posted 30/01/2014 at 17:18:32
Just a thought James(181) if we are spending less money than teams in the Championship, we must be spending ours more wisely as we're 6th in the Prem.
Clive Rogers
187 Posted 30/01/2014 at 17:22:08
Ged, 162,

That doesn't stop us spending it this window. I think that may be Paul's point. With the extra tv money and Fellaini's, there should be £38M.

Clive Rogers
189 Posted 30/01/2014 at 17:26:41
When it comes to money, there is something not right at Goodison.
Dan Brierley
191 Posted 30/01/2014 at 16:53:31
Interest payments and wage bill is stable, Other Operating Costs again reduced showing we are managing our business in a sensible way.

A good bit of news is that the Bank overdraft has fallen from 11m to just 2.3m, which can only be good news as these facilities come at a premium. I think this has been done through a mix of refinancing other deals and cash from player trading although its hard to be sure.

But there is a 10 million loan in the accounts, shown in the cash-flow. I have no idea what that is, and whether or not it was short term loan to finance the Kone/Robles/Alcaraz moves.

Debt has been stable for 5 years now, meaning those who predicted financial meltdown, administration, and harked 'its not sustainable' were clearly wrong, as it has been.....sustained. And looks like it will continue to.

Patrick Murphy
200 Posted 30/01/2014 at 17:36:13
Dan it may not have resulted in a financial meltdown but the belt-tightening has had a detrimental effect on the playing side and it will probably have the same effect this term.

We truly are fighting above our weight when compared to the other clubs in the Premier League. It may be decent management as far as accountants are concerned but have we aided our managers to compete in the PL significantly since 2009?

I don't think we have and that is the main reason I get annoyed by BK and his Boardroom buddies.If we have a truly awful season in the PL the accounts won't look as rosy and the pressure will mount - but until that day arrives let's enjoy being in the top 6 PL clubs - although according to our finances we shouldn't actually be there.

Drew Hepburn
207 Posted 30/01/2014 at 17:39:11
I constantly see posts with simple maths we sold X players for X amount and only spent Y so that should leave us with Z but im sure its not as simple as that when considering different wages, signing on fees etc.

Also surely paying of the debts is equally (if not more) important as investing in the team?

How much better/Worse of would we be if we did sell players purely to get rid of the debt?

What do people predict would happen short and long term?

Drew Hepburn
209 Posted 30/01/2014 at 17:58:20
Patrick - 200

Seems to me the board have to do a fine balancing act between spending and the teams results. Spend to much and it could really back fire if we don't achieve in line with the spend. Spend to little and we wont finish high enough to bring in cash.

Not saying you are right or wrong but they certainly cannot just say here is 70 million, get us into the champions league. Fine if it works but it could so easily cripple us.

Mark Sleeman
213 Posted 30/01/2014 at 17:47:36
When you step back and take a long term view, these are great accounts. One more season with accounts in profit and we may actually find a bank interested in helping us build a new stadium.
Drew O'Neall
214 Posted 30/01/2014 at 18:09:11
I think the experts who analyse our accounts on here and foresee the end of days for Everton are usually doing so from a standpoint of normal business economics rather than the freakonomics of the FAPL.

Equally, I don't think the board deserve any credit for the debt position they have maneuvered us in to but the exponentially increasing TV money does rather temper any neurosis regarding the total annihilation of our club from history.

Glad to see that 'Other Operating Costs' were greedy Moyes' "keep quiet" money and have now been partially removed from the balance sheet presumably to further reduce next year when we have our first full year without his services.

Patrick Murphy
221 Posted 30/01/2014 at 18:06:42
Drew I certainly wouldn't advocate spending £70m (That won't happen in my lifetime) or any other fanciful figure, however, as has been discussed long and hard on this site a decent Centre-Forward has been required for at least five years and we have at this moment in time only Kone as a full-time striker who belongs to the Club outright.

Last January we did nothing save buying Stones, and the team ended up not achieving tangible success, the same seems to have happened this year as well. Injuries and loss of form are part and parcel of the game and therefore every pound spent is a gamble to some degree.

If we were in the bottom three in the PL would people still be saying that not buying in January is a good idea and gambling our PL future on a make-shift forward and as yet unproven loan signing would be acceptable?

Different circumstance but the same principle. If we are happy to finish in seventh or eighth as a club then fine stick to the budget and we'll all adjust our horizons accordingly.

Things have not altered a great deal since 2005 for the club as a business apart from the level of debt we now hold which is when compared to 2005 is radically higher - see figures on the other financial thread,

We have enjoyed some good football and some nice days out, but despite the lucrative TV deals and other sources of income the only beneficiaries at Everton FC have in real terms been the players.

Kevin Tully
231 Posted 30/01/2014 at 18:22:59
Some are getting a little mixed up with profit and just being able to bring the debt down by a few percent.

Any credit agency is still advising 'cash transactions only' if you were conducting any business with the club.

I think the £10m loan is short term finance from Vibrac. We have used this facility for the past 3 seasons.

We're treading water and relying on profit from sales to keep in touch, but hopefully the new T.V. money will enable us to keep Barkley for another season.

We are a little hamstrung on the commercial side because the Kitbag deal has a few more years to run. We get £3m every year no matter how much merchandise we sell, the accounts show a £500k increase on that side of the business - Liverpool get that much per week off Warrior alone.

Colin Wainwright
233 Posted 30/01/2014 at 18:39:22
Couple of good questions, Paul Niklas. Got any answers?
Patrick Murphy
236 Posted 30/01/2014 at 18:43:21
Kevin #231 I apologise if it wasn't you, but that circa £4m interest figure which I'm not questioning, how many years have we been paying that for? Because even if it has only been for the last five that is almost half of the debt burden right there and if it is closer to ten years then it almost accounts for the whole of the debt burden.
Shane Corcoran
243 Posted 30/01/2014 at 18:57:53
Lads, it's impossible to tell if we have money to spend on players from these figures as they're eight months old.

Even if we have, say, £15m from player sales we might have given some or all of this to the bank by now.

Of course our CEO says the RM and DM before him got the majority of the money we make on player sales but I'd rather here what the bank have to say.

Si Cooper
248 Posted 30/01/2014 at 18:35:03
"Each year, when I sit down to carry out my review of the previous year, I focus on whether our Club is in a better position than it was a year ago.

“And while we have undoubtedly gone through a period of change, the answer can only be a resounding yes.

“On and off the field we continue to push forward on every front.... "

I have severe doubts about the second and third paragraphs. I hope to be proved wrong in the relatively near future but I am not holding my breath.

Kevin Tully
252 Posted 30/01/2014 at 19:12:15
Patrick - You have to add the interest from the two other companies we operate under also, Everton Investments and Goodison Park Stadium.

£35m over the past 5 years - £7m per season. I would be surprised if it wasn't the same this year, but those accounts will be posted shortly.

Patrick Murphy
256 Posted 30/01/2014 at 19:19:22
Cheers Kevin, At least we're making a profit eh?
Dan Brierley
268 Posted 30/01/2014 at 19:23:58
Kev Tully, any particular reason why you have to add the interest of other companies that operate independently of Everton Football Club?
Kevin Tully
269 Posted 30/01/2014 at 19:31:51
This explains the structure here Patrick ;

Link

Kevin Tully
271 Posted 30/01/2014 at 19:33:50
No reason at all Dan.
Ian Bennett
276 Posted 30/01/2014 at 19:39:15
£22m loan due for repayment in 2013/4, £26m due after more than one year. This is what is driving the £4m interest bill.
Dan Brierley
279 Posted 30/01/2014 at 19:47:40
Have they also got incomes that we can add Kev or is it only debt? I have never seen accounts of these other companies.
Ian Bennett
294 Posted 30/01/2014 at 19:53:40
The full accounts are here. The one thing I don't really follow is that in note 24, post balance sheet review it says we will receive net transfer fees of £4.3m. The accounts were signed on 30th December, so this will exclude Jelavic, but will include all transfer fees from 31.5.13 to 30.12.12. However, my expectation from a Fellaini and Victor less McCarthy is more than £4.3m. Wtf?
Patrick Murphy
297 Posted 30/01/2014 at 19:47:18
Kevin, I have had a look at the structure but don't understand why you gave the answer you did to Dan.

As I see it, Everton FC Ltd took out a securitized loan in March 2002 for £30m, they got the loan because they could use future season ticket sales and Goodison Park (the actual stadium) into the holding company Goodison Park Stadium Ltd.

Everton Investments Ltd held the loan notes and subsequently moved the money to Everton FC Company Ltd. I assume that this loan was taken out to facilitate the failed Kings Dock project and was the money that BK referred to as ring-fenced?

Obviously the loan must have been written in stone and has been used to run the club in the initial few years following 2002. But I also seem to remember that an amortisation had taken place since that time – I assume this is what is now referred to as BVI?

Anyway it is as clear as mud and Everton FC's recent accounts don't truly reflect the economic state of the Corporation? Or am I being a little naive and far too cynical all at the same time?

Patrick Murphy
299 Posted 30/01/2014 at 20:11:50
Ian, because the accounts are up to and including the 31 May 2013 and so any of the summer transfers in or out will only appear in the accounts for year ending 31 May 2014.

Why do the accounts say 30 December 2012 to 31 May 2013 for transfers?

Ian Bennett
303 Posted 30/01/2014 at 20:17:44
Pat, sorry mine should of said 31/5/13 to 30/12/13. i.e from the year end until the accounts were signed.

My point was receiving £4.3m is a lot less than we expected is my point. Certainly not the figure we thought we had to spend.

Could be wrong, Fellaini £27.5m, Victor £5m Victor, less £13m McCarthy = £20m net. This would suggest Kone, Robles, Del Boy, Barry, sell ons, and Lukaku cost £16m.

Paul Ritchie
305 Posted 30/01/2014 at 20:22:08
Andrew 144 - you are bang on with what we need. A play maker and one good enough to lift the team. None of us expect it to be Mata but surely RM knows of some gem out there. There's still time before tomorrow!
Patrick Murphy
309 Posted 30/01/2014 at 20:28:20
Ian I've got a headache now it's not your fault easy mistake to make, but surely the money from summer 2013 cannot be included in the Accounts as published today? I now understand why I don't like accountancy.

But if the figure for transfers is as you say then the loan fees for Lukaku, Barry and Del Boy must be significantly more than many have suggested which might explain the figure of £4.3m but your guess is as good as mine. Tablets nurse! where's me tablets.....

Ian Bennett
310 Posted 30/01/2014 at 20:34:48
Pat correct, they aren't in the numbers presented on the P&L and balance sheet, but are included in a disclosure note. To Shane's point above, these numbers are 7 months old, so material events in the post period have to be disclosed.
Patrick Murphy
313 Posted 30/01/2014 at 20:38:19
Cheers Ian - so the war chest in the summer won't be anywhere close to some of the figures that have been bandied about on this site in recent days and weeks.

It's bad enough worrying about how the team will perform - but these other results are very important too - and I hope more people will continue to dig beneath the headlines and examine the story they tell as that is the only way to fully appreciate in what direction the club is going.

Ian Bennett
314 Posted 30/01/2014 at 20:41:39
Anyway, if the above is right our transfer kitty is about 10m tops post Jelavic, possibly less post Traore loan fee.
Colin Glassar
319 Posted 30/01/2014 at 20:45:53
So, have we or haven't we got money to spend? I read, somewhere, that Roberto will have £38m to spend in the summer. We could buy Mata with that.
Mick Davies
328 Posted 30/01/2014 at 20:43:48
I would be happy for us not to buy another player in summer bar a proven 25-35 goals per season striker. In the last 30 years, only Lineker and maybe Cottee were out and out goal getters. I'm sick of decades waiting for the one thing that other clubs always seem to have; and punish us with.

If it meant putting the club back in the red who cares? The aim of this football club is to compete and win things, but without this one vital ingredient, we will continue to dominate games frustratingly while not having the ability to win games. Please Messrs Kenwright and Martinez, find one ASAP or we will forever be also-rans.

Ian Bennett
331 Posted 30/01/2014 at 20:57:39
Hopefully I am wrong. But the above excluding the new tv money would suggest we are nearer £10m than £20m some were suggesting :-(
Drew Shortis
339 Posted 30/01/2014 at 20:51:05
Interesting reading. Its good to see we are making progress with the finances, but if it is the case that we are now stable and have been doing this in part by balancing the players signed / sold then why hasn't Martinez got more to spend now? We have made a considerable net profit on players signed / sold and there is also the £25-30m increase in TV income from the current season (2013/14).

As the figures show, a higher league finish means extra income (prize money and TV rights) and a Champions League finish would mean a huge boost in income. It makes good business sense to invest the money we have available to try and attain this massive financial reward. If we fail then then this seasons figures would be no worse than the ones just published (IE we will still be making modest progress towards reducing the debt). I'm not a financial expert, but I know you have to speculate to accumulate and if this can be done within our means then why not go for it?

It is possible that Martinez's stance that January is not the best time to recruit new players may well be true and he would prefer to bide his time and do a proper job in the summer. If that really is his plan then I think we have to respect that. I would not be happy if we rushed out and paid over the odds on risky overpriced deals now to chase a goal that may well be unobtainable and then have nothing left to spend in the summer when the transfer market comes to life.

Martinez does not strike me as a dishonest man or a man who will cover for the boards lack of ambition. I expect the financial plan was discussed when he signed and that he has formulated a long term plan to build his team. Its quite possible that our succesful season has come as a bit of a surprise and I'm sure he has considered ways of boosting the team for a Champions League charge, but if the players are not available then sticking to the long term plan would seem like the wisest move. Just my take on things.

Brian Wilkinson
341 Posted 30/01/2014 at 21:07:14
How many times have we heard this, the players we need are not available for the quality we expect, we will see what happens in January, January comes around, January is not the time to buy players, right players not available in January, will wait til summer, summer comes, we have investers interested just as season ticket reminders hit the doormat.

How many more times do we have to put up with the same year in, year out.

It's not rocket science we need a striker, even the new signing is 16 days away from playing, m surprised we have not gone for remy now he has a 3 match ban, be alright in 4 weeks time.

This is not a knee jerk reaction to the Derby result, we need a striker and now.

Andrew Hawes
346 Posted 30/01/2014 at 21:21:59
Paul 305: I can't help but think how Arteta would have loved to play in this style of play and what he would have brought us with the killer pass in the final third.

With the change of manager I thought Martinez would have had a few young arteta type players in mind from la liga, who maybe he couldn't attract to Wigan but could to a top 6 side.

Can't fault him with Barry and McCarthy the so called defensive side of midfield,

Apparently Newcastle are in for a young French player to replace Cabaye, excellent techniquely with an attack minded side to his game for 7million?

We must have double that to attract a little bit of flair to this side?

Mark Taylor
379 Posted 30/01/2014 at 23:12:49
Nothing really to report here. We have a business model that, with good management, can sustain us in a regular upper mid table position, but no more. The business model requires us every so often to sell a player for a decent fee with minimal valuation in the accounts (this time it was Rodwell, next time it will be Fellaini)

Those who were wondering why the accounts are not showing a bigger 'profit' on the summer transfer window need to remember that
1) Any new player we have just bought ( Kone, McCarthy) is going to have a big year 1 write down
2) In addition to loan fees, which may well be higher than some thought, there may well have been agents fees, and other costs associated with player trading. It will always be hard to separate these out.

With regard to point 1), the way we deal with players in the accounts might take some thinking time. We effectively reduce the value of the player from the point they are bought (assuming we bought them at all, if not, their accounts valuation will be minimal e.g Barkley). This may not reflect the reality of their current valuation. A player we buy for £10m will always be valued a year on at less than that in the accounts. But obviously, if he has had a good season, we might be offered much more than £10m.

Without getting into a deep conversation about this, one might reasonably argue that McCarthy is now worth considerably more than his accounts valuation, whereas Kone probably isn't.

Overall, these accounts are fine if you just want to bob along outside CL qualification, and wait for a buyer who might invest to get you there. That is basically where we are. Everyone, I think, knows this. But because we all like to dream, to one extent or another, we like to think that a truly great manager, maybe Martinez for example, could pull the rabbit out the hat and get us CL on a bottom half table transfer budget (at best).

Maybe so, but probably not...

Harold Matthews
427 Posted 31/01/2014 at 02:30:28
Martinez says he doesn't need money. Seems he's come to the right place.
Dan Brierley
434 Posted 31/01/2014 at 05:32:56
I think it's a bit more simple than that Mark Taylor? Those wondering why the summer transfer profits are not shown in the accounts , need to remember that the accounts only show activity up to May 31st of 2013. Our first transfer activity was in July.
Eric Myles
463 Posted 31/01/2014 at 08:45:01
Drew #207 " Also surely paying of the debts is equally (if not more) important as investing in the team?"

Only if you want to make a lot of money from the sale of your majority shares. But then neither the net debt nor net liabilites have significantly decreased while the total debt has increased.

Alan Williams
467 Posted 31/01/2014 at 08:29:38
Can people please stop using posted transfer figures as cleared funds its so frustrating. When we buy or sell a player the outgoing s or incomings can be spread over the term of the player’s contract so you don’t necessary pay or receive on the transfer date. When we loan out/in players sometimes we pay all their wages plus a fee on top sometimes we don’t so using the newspaper figures on transfer is complexly misleading. The £10 million loan I assume is to keep cash in the business for the trading year otherwise we would have large spikes that could hinder our ability to trade so this facility is needed when you have such a poor EBITA. I would be happy if we didn’t spend big this season and run down our liabilities, this wont go down with the fickle fan but in real terms I would prefer we did this than pay stupid wages to the players, lets face it we will never compete with Arsenal, Chelsea, United, City and the Shite on financial basis so why try, lets get the whole club on a level playing field as this gives us a better chance of us completing long term than taking big financial gambles with players, live with our means it’s the only way forward just ask Leeds fans.
Eric Myles
470 Posted 31/01/2014 at 09:02:07
Patrick #236, the reason why we are in debt is not because of the interesr payments, it's the other way round, we pay interest because we have debt.
Mark Taylor
474 Posted 31/01/2014 at 09:01:40
Dan, sorry, didn't express myself very well, I was talking about an earlier poster, Ian Bennet 294, who was referring to the note in the accounts saying what the player trading position would be likely to be, post the account closing period.

The figure quoted in the accounts was lower than he was expecting.

Patrick Murphy
478 Posted 31/01/2014 at 09:09:08
Eric I did know that but £4m to £7m of dead money in interest payments seems to be an extraordinary amount of money to be paying out year after year. Originally we borrowed 30M in 20002 and then I think the debt was restructured later, So my original point was 10 years at £4m = £40m in interest payments which is almost equivalent to our current indebtedness.

But the real question is why did the club need to borrow that original amount of £30m in the first place?


.

Patrick Murphy
646 Posted 31/01/2014 at 17:27:57

Perhaps the reason for the original £30m loan was to address the aggregate £26m losses we had between 99/00 and 00/01 but then we had another two years of heavy losses in 02/03 and 03/04 which combined equalled £28m and yet another heavy loss of £20m in 05/07 and 06/07. Then in 2007/08 we broke even. But have the losses in the accounts only been removed due to loans or re-financing or did the club borrow lots of money in the same years that it made heavy losses?

Year Turnover Profit/loss Wages (%) Employees

2007/08 75.65 0 58.8 210
2006/07 51.41 -9 74.7 227
2005/06 58.12 -11 63.6 259
2004/05 59.95 24 51.4 893
2003/04 44.30 -15 74.2 979
2002/03 46.78 -13 63.6 999
2001/02 38.23 2 76.5 975
2000/01 32.85 -4 80.2 214
1999/00 28.14 -11 79.4 197
1998/99 25.46 -11 79.5 199
1997/98 22.67 1 61.1 195
1996/97 18.88 -3 57.9 177
1995/96 17.00 -8 59.2 170
1994/95 13.55 -9 142

Whatever the sequence of events it just shows why nobody is likely to buy the club in the near future.

Eric Myles
933 Posted 01/02/2014 at 12:18:51
Patrick, I think the reason nobody is likely to buy us in the near future is the asking price.
Amit Vithlani
995 Posted 01/02/2014 at 12:59:04
I have Joe Beardwood's summary in front of me - excellent as usual. I did have to refer to the accounts mind you, as I could not reconcile the thorny issue of how the 10m of new borrowing was applied. It appears to be borrowing from Peter to pay Paul.

These are my observations:

1. From a footballing standpoint, wages of 63m v turnover of 86m is a 73% wages to turnover ratio. I believe the recommended norm (from Deloitte's and such like) for financial stability is a ratio of around 66-70%. So no complaints here.

2. Consequently, around 25% of turnover is spent on effectively running the rest of the football club, given that our EBITDA pre-player trading is negligible. This again, does not sound unreasonable - only a handful of clubs are profitable, most of them spend 66-70% of turnover on wages, therefore most of them incur around 25-30% in non-wage costs to run the football club.

3. Our wages, according to Joe's summary, were largely flat year on year at 63m, yet our turnover grew 7% to 86m. We therefore swung from a large negative loss to a small (effectively break-even level) of EBITDA. With wages held constant, our EBITDA swung from a loss of 5.6m to a profit of 1.5m, a 7m swing. Turnover grew by about 6m, so almost every additional pound of revenue fell through to the EBITDA line ( a reduction in operating costs also contributed to the swing).

4. Our interest bill stands at 4m on net debt of 45m. This is about a 11% rate. Not usurious by any means.

5. Before capex and player trading, we therefore need to generate EBITDA of 4m to cover our interest payments. Assuming no change in wage costs, we should be able to achieve this if our turnover grew to over 90m - highly probable in the coming financial year given the new TV contracts and the level of coverage we have had this year.

6. Given we were unable to cover our interest payments, and the small amount of non player related capex from our operational cash flow, this meant we ran a cash flow deficit at the operational level. We financed this by showing a small surplus between player purchases and player sales

7. We then had loan repayments to make. With no free cash flow to speak of, this was funded by borrowing.

8. The accounts show an increase in longer term loans which more or less was applied to reduce our overdraft. As a consequence, no change in our net debt.

Conclusion: Nothing new, but disconcerting all the same. The club remains in a fairly parlous financial state - reliant on selling players to fund purchases of new players and cover cash shortfalls in trading and interest payments. The shareholders are funding the club only through debt - whether from third parties or themselves, and as a result there is no relief from the obligations the club has to service its debt.

We remain at the glass ceiling as far as finances and wages are concerned - our best players are likely to leave if we fail to keep up with the Joneses as far as wage growth is concerned. With the shareholders not putting their hands in their pocket to fund the club through proper equity, we are reliant on growth from turnover to finance any expansion in our wage and transfer budget.

CL qualification would clearly change this dynamic - as will the new broadcasting contracts. Next year's accounts should therefore make interesting reading.

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