Thoughts on Bramley-Moore Dock and the current financial conditions at Everton

The article highlights the sad reality that the people building this stadium don't truly have the football club's best interests at heart. It's a real estate deal for them.

When I looked for the Wolves game on Monday there were just THREE tickets available - family enclosure ones, so two were kids tickets, priced optimistically at 𧵏 each!

Demand is already sky high. I have said it before and I'll say it again, no way will 52,000 be enough for the vast majority of matches. It clearly needs to be 60,000 or very close to it. There are loads of Evertonians who don't go now because of the poor views. There are plenty like me who don't live close or have busy lives who only go occasionally, but would if the stadium offered better tickets and matchday family experience.

Demand will skyrocket. If the plans are to substantially raise prices, to dampen demand and get more £ per visitor, this will change the demographic of supporter and I think it's safe to predict will change the atmosphere. After going on about replicating Goodison's atmosphere and steep banks of seats and creating an intimidating effect to opposition players, this would be ironic to say the least.

There's an obvious gap in the design we've seen so far at the back of the Away end that would easily accommodate another 4,000 or so seats. I'd suggest filling that glass wall in with seats.

Finally, it's obvious the squad is still bloated with 4 or 5 overpaid players of no real use to Silva's plans. I'm pleased that our net spend this Summer may come in at virtually nothing if we can offload some of these players. We can't afford any more Klaasen, Sandro, Rooney type financial madness. With that in mind I'm still puzzled about the Zaha thinking. 㿼m???? Where is this money coming from?

It may be asking a lot but that surely should be the aim of any football club, success on the field at the highest level. Or is that more than occasional optimism?

Utter speculative nonsense by someone with no access to any hard facts from inside the club, trying to undermine the club's decisions which are based on far more information. Time to retire from ToffeeWeb, just like you did from GoT.

But I can't agree with a few of your viewpoints.

A) "Our current business model doesn't work. Our cost base is way too high relative to our income. We are reliant upon player sales for our future sustainability."

Define sustainable? For a business, it has to be first and foremost solvency and thereafter profitability. Our losses do not automatically make us sustainable; but being insolvent (assets worth less than liabilities) would. We do not have assets worth less than liabilities. Furthermore, your focus on Player Sales as a source of income provides a negative hue. Two things I would point out:

i) Everton are one of many Premier League Clubs making losses before Player Trading. In addition, the club has been doing so for the best part of 3 decades. That suggests to me that losses before player trading should not automatically raise sustainability concerns. You need to remember, the club spends a significant amount on its Academy each year. We have started to see a recoupment on that cost – the sales of Joe Williams and Antonee Robinson, although small, point to a source of valuable income and a recoupment of these costs. I expect us to sell Kieran Dowell for a reasonable sum too, whilst Jonjoe Kenny could fetch a decent price if Silva makes the move for Sidibe permanent.

ii) Ajax and PSV, amongst others, have made a habit of selling players for good profits. Both Clubs have over the years remained competitive. My belief is Brands will almost certainly pursue this model – indeed, he has crafted his reputation as someone who could sell at a profit and replace players without weakening the team. The disposals of Lookman, Vlasic and Onyekuru were an indicator that he is happy to take profit where it will not weaken the team.

iii) In real terms, we have lost money on player trading in recent times. We have, factually, been net spenders in each of the last 3 years. It is only the nature of accounting principles – which does not require the entire purchase price to be reflected – that results in a different result. Since your conclusion is based an accounting-based player trading profit, it is in fact a misleading judgement.

B) "Despite the 𧶲 million invested into Everton by Farhad Moshiri, despite over 𧶊 million of player trading profits (and still counting) between 1 June 2016 and present day, and projected accumulated revenues of over 𧾈 million to the end of June 2020, we trade with significant losses." — Your analysis focusses on EBIT and not EBITDA to reach this conclusion. This is a flawed approach for a number of reasons:

i) Depreciation and Amortization are non-cash costs. These are accounting measures used as a method of valuing assets on the balance sheet. The impairments taken are then posted as a loss on the Proft & Loss. But, as they are non-cash charges, they are not reflective at all of the cash generated from operations.

ii) EBITDA, not EBIT, is the profit measure typically used to value a business (where a multiple of EBITDA represents enterprise value). EBIT is less commonly used. Why? As EBITDA is the closest measure to operating cashflow generation, that is what ultimately drives valuation. If I look at your EBITDA trend, the club is doing fine, even before taking player profits into account.

iii) You do not analyse the value of the club's assets – its players – based on market price. Digne is probably worth 㿞M in this market? Yet the accounting principles require Amortization of his transfer fee (based on the life of his contract), meaning his value REDUCES in our financial statements. As you know, derivatives, financial instruments and property can be devalued based on a mark-to-market approach. Due to the increase in the value of many of our players, that would create the opposite of an Amortization charge and mean we have a positive EBIT.

C) My conclusion on the portion of your article that focusses on sustainability of the club is that it is still not properly reflective of the reality. I think you need to consider the difference between non-cash costs and cash when assessing solvency, the value of the club and sustainability. You also need to factor that the club has accumulated assets whose market value exceeds its liabilities.

D) If you adjust this view, then the analysis on the stadium looks different. Furthermore, is the 𧺬M cost of the stadium including or excluding interest? I have not seen an exact cost break down – have you? If it were included, the equity portion financing the stadium could in fact cover interest, reducing the burden on the matchday income.

E) On the revenue side of the new stadium, I think you ignore ancillary revenues from match-goers. There will be more catering facilities (for example) and, with a larger average attendance, matchday revenues should go up. A proper analysis of projected revenues would break up the streams into tickets, catering, matchday ancillaries (club merchandise etc). My feeling is it will be higher.

F) "Taking the interest cost of 㾽.5 million, adding the last matchday income figure of 㾼.3 million gives a figure just under 㿎 million in total matchday revenues to stand still."

i) This is again a misleading comment to make without full insight. The interest cost the club bears is towards the stadium – an asset. It includes the property value and future revenue-generating potential.

ii) So the club would not be "standing still" as a result of paying interest costs; it would be spending money on servicing debt which helped it purchase an asset whose value could likely grow.

iii) A reminder – businesses are valued on the basis of EBITDA – ie, earnings BEFORE interest (and depreciation and amortisation).

Buying young players and selling them at or near their peak value will continue to be part of the strategy. Increased ticket prices must also enter the equation along with additional revenues from the corporate world.

I find your reports very interesting, Paul, and your reticence to gleefully lap up the waffle coming out of the boardroom perfectly understandable. After all, we today read that Kenwright's allegedly been meaningfully re-embedded into the way the club's run.

Sigh.

Karl #3, I don't think the presence of "4 or 5 overpaid players of no real use to Silva's plans" makes the club "bloated". I think you must look at the situation in relative terms – every football club inevitably has players on their payroll who aren't contributors, because everybody makes bad signings. There's no way to avoid it. I think if you compare Everton's situation in this regard to other clubs of similar size, particularly after the offloads this summer, you might find that comparatively speaking we are not bloated at all. And, as John said, we did not go to those ridiculous heights in our Zaha pursuit – our one bid was perfectly rational.

Alan J #4, I was curious about that myself so I looked it up. The 32 clubs qualifying for the Champions League group stage collected €15.25M. Each of the 12 reaching the Champions League playoffs received €30M. These are the direct payouts from Uefa – I have no idea what kind of marketing rewards a club can generate from reaching the Champions League.

I think it would be a shame if the cost of the stadium is largely passed on to the match-going fans. The club has done a good job trying to maintain ticket prices to a reasonable level and some of the club's initiatives, like the ability to spread payments for season tickets, are welcome. I think I'm right in saying that Everton were the first club to introduce such a scheme. They've also done a decent job keeping prices low for young fans who are the future paying spectators.

On capacity, I'm not too concerned with a 52,000 capacity and a view to expand this in future. I think Man City's capacity is somewhere around 55,000. Their fanbase is very similar to ours in that they share the city with illustrious neighbours. For all of City's recent success, they struggle to fill their stadium on a regular basis. I would rather see us have a sold-out stadium for all games and a flexible pricing structure for cup games if required. For me, it's the atmosphere inside the ground that is paramount rather than a nominal figure of how many seats we have sold. I think an increase of around 12,000 on what we can hold now is okay.

I know nothing on financial matters but one thing I've not managed to find out is how much money we would earn from the Goodison Park legacy initiatives. Would this earn the club revenue or would it cost the club? For example, if the land is sold to developers, then could the club return a profit from this which can then be used to fund some of the Bramley-Moore Dock project?

I think who ever advised the club on 52,000 just haven't got it right. Other big clubs appear to make 60k the benchmark. Why are we always slow on the uptake?

As for Bramley-Moore Dock current plan. The north/south stands are limited but has no one asked, why can we not have the side stands triple tiers? Dan Meis has this in his locker – Lincoln Financial Field and Paul Brown stadiums. Also, throw a tier on the north stand.

This stems from Elstone trying to create a tight intimate (& intimidating ?) stadium, Meis has gone for small is bigger or better. Fill the survey in – tell them size matters!

Increased sponsorship, corporate hospitality, increasing prize money, young players with ever increasing values, better pies.

I'd say Moshiri knows what he's doing. With Brands and the appointment of Dan Meis, l recon we are going to be fine.

On top of that, it's conceivable that 10 or 11 players from today's squad or first 11 even could still be playing a lot of games for us when we are at Bramley-Moore Dock. Give Brands another window or two. No amount of the Olde Blue Union can make me doubt we are on the up. To the top, fellers!

I'll answer a couple of your points. Firstly, the purpose of the article is to point out three main points:

1. The business (because of the last few years' recruitment policies) is reliant upon the sale of players to meet Premier League profitability and sustainability rules, particularly in this financial year. This scenario will continue for the foreseeable future given the likelihood that income will not increase significantly and costs will not decrease significantly.

2. The accumulated operating losses and amortisation charges are so great as to potentially break the profitability and sustainability regulations. Brands has operated well given other clubs will recognise our need to sell in order to become compliant. I also wanted to point out that the “deadwood” are likely to hang around until the end of their ludicrous contracts. Loans are as good as we can realistically hope for.

3. The stadium – the combination of a relatively low capacity, a high build cost (due to the technical requirements of the site), the affordability policy (unless there is a major U-turn) which seems very unlikely will not generate significant levels of extra revenue. Even the laughable increase promoted for Kirkby of ٤m would require a 40% increase in ticket prices when the financing costs are taken into account.

If you recall in the letter Usmanov and Moshiri sent to the Arsenal Board regarding the financing of their stadium, they accused the Arsenal board of using debt as a means to increase shareholder value whilst burdening the club with interest costs (and restrictive covenants – something that no-one at Everton has yet confronted publicly), all of which would impact Arsenal's ability to compete financially with their peers.

I too, am making the simple observation that low or non-existent operating profits, low or non-existent income growth versus huge costs (cash and non-cash items), plus a stadium that does not provide the income growth enjoyed by our peers, plus a requirement to continue to sell players, is not a great business plan.

I used the word 'sustainability' in the context of becoming a major competitive force in English football and then Europe, because ultimately that's where I think we ought be. The state of the business and the model makes that event somewhat improbable in my eyes.

We can't guarantee participation every season, of course, and we can only see competition to get there increasing in future, but this is where we must aim. The alternative, to some risk, is mediocrity.

I too, lack an in-depth knowledge of current accounting procedures, but it's fairly obvious, even to laymen like me, that we CANNOT continue to spend more than we continue to generate in real terms, either via media income or gate receipts.

As far as 'naming rights' for the new stadium goes, forget it, those halycon days are over, just ask Spurs, their stadium is up and running with no-one beating a path to their doors to pay them millions for the 'Pukka Pie' stadium.

Craig (10) sorry to dash your hopes, but the Goodison legacy project, won't earn us a cent in additional revenue I'm afraid, instead it will add even more strain on an already tight expenditure budget over the next five years.

Why on earth Everton feel the need to leave a 'lasting legacy in L4' is beyond me.

At a time of probably the most important development in the club's history, we choose to add even more financial burden, because of a policy driven by our CEO, DBB.

This at a time when ALL focus should be on building the new stadium, and the many issues we face (many of them unknown at this stage), before a brick is laid.

DBB, clearly has the 'ears' of Uncle Bill and Farhad.

In actual fact it's nothing more than a repeated whinge that Bramley-Moore Dock stadium isn't bigger.

About bloody time.

I'm delighted to see Amit respond to Paul's food for thought (I ALWYAS await Amit's comments in such matters, because he can talk technical and then translate it into terrace talk); this thread has potential to become VERY interesting. Providing it doesn't become just an accountancy jousting tourney.

For blokes like me (a Plumber), please keep using examples of how particular acccounting and financing practices can limit/benefit our club and our "Brave New World".

Would it not be really something if our Current Owner, a Accountant of some track record, would comment? Or at least have "an urchin" comment upon his behalf?

And Joe @16, 52k – Bramley-Moore Dock really is NOT big enough. That's not a whinge Joe, it's the bloody truth. Dan Meis admitted that the footprint of BMD would better suit an East-to-West pitch and stadium. So that is a major factor in the capacity. Despite the fact that there is another derelict dock to the south. And that games are staged any time between midday and almost 23:00 hours in daylight, floodlight or a combination. So actually, our plot & TV are bigger factors in the ground capacity than the current or future fanbase.

Consider, that at 52k, hosting major football events (Europa League Final, Champions League Final, Nations League Fixtures, World Cup Fixtures, European Championship Fixtures) will go to considerably bigger grounds nearby... depriving Everton Football Club Co Ltd of these possible revenues and publicity, thereby reducing our sponsors' exposure etc.

Maybe the appeal of a thirteenth smaller, but riverside, stadium even with almost definite difficulties in egress of any event will be alluring to folks though (despite the proposed relative modesty of the extent of lucrative corporate facilities in BMD) surrounded as it currently is for well over a mile (or two, realistically) by zero social amenities where any sane person would want to celebrate whatever caused their visit to BMD in the first place (and yes, Anfield shares that characteristic, admittedly).

Farhad Moshiri is now 64. He's squandered three years and Lord knows how much of his actual wealth (and that's not much in my jaded opinion) in his bid to personally reap huge financial rewards by acquiring our club.

My take on his alleged ambition isn't from a Press release admittedly, but why would a "very modestly" (my italics) wealthy billionaire, living in Monaco, born in the Middle East, grown wealthy beyond imagination in servicing the accounts of a major Soviet "entrepreneur", seek out lil' ol' Everton (and that's what we are in the wider world) as a place to try to make his fortune?

The guy's obviously been badly stung financially by the faith he placed in Koeman, and Allardyce, and Kenwright as far as I'm concerned, so from hereon it's a damage limitation exercise to his pocket, understandably.

Build it cheap, market it big with a few paid-for immediate mega gigs and the like to persuade a buyer as gullible as him, Moshiri, and he'll karoake Goodnight Vienna all the way to the bank (or as they say in Monaco, "Bon Nuit Vienne").

Football is so depressing isn't it, especially to Evertonians?

And what a sad life you must lead to come up with it.

Don #18 - As far as the financials are concerned, I am sure Farhad Moshiri has his eyes on a prize that doesn't involve selling the club after going to all the trouble of building a new stadium. What it is I don't know but there will be one. Men like him work on a risk versus reward basis.

Paul, about that letter from Usmanov and Moshiri:

Alisher Usmanov's letter to the Arsenal board, 5 July 2012

It seems to me they had a different plan for funding the Emirates Stadium other than long term debt. As yet, none of us know how the new stadium will be funded but I can't see Moshiri doing a complete about-turn on the principles they set out in that letter.

I am looking forward to Amit's next post on this one.

Wealth generates an asset which brings a return. How else can a stunning new stadium be built? A whip-round in the Bullens Road?

Approximately £350 million of senior debt, perhaps some sponsor/naming rights funding and the rest met by Moshiri either through straight equity or mezzanine funding.

Approximately £350 million of senior debt, perhaps some sponsor/naming rights funding and the rest met by Moshiri either through straight equity or mezzanine funding.

The Club is being poorly run and revenue and expenses reflect this. The whole Stadium PR project is an attempt to flush out money available, just as the development of the Everton project was after Moshiri first came on board.

Both are similar in that the decisions were and are not taken in terms of revenue and expenditure in an overall financial plan.

We all now are familiar with the fallout of the Everton development plan and this is clear!y reflected in the figures presented by Paul the Esk. His projections regarding the Stadium project are correct and the course taken by the Club in regard to the Stadium, as has been already pointed to in decisions taken, will result in a similar fallout as the Everton development plan.

It is the same people involved in the Everton development plan and the Stadium development plan, therefore the outcome will be the same.

There are only one set of figures, they can only add up one way.

I think that Everton need a new Stadium like everyone else, but there are a lot of things that don't add up in the proposals that are being put forward, to make a serious attempt at providing one.

Firstly, the development of the revenues of Everton football Club are non existent, other than Premier League money and sponsorship. The gates receipts are affected by Baxendale Davies policy of affordable tickets. This has resulted in some qualifying season ticket holders getting tickets of 㿉. 00 per game. Overseas revenue development is neglegible. The increase in Stadium revenue on the capacity proposed will not redress , the shortfall by significantly increasing increase revenue.

The purchased site was part of the Peel Group site, the Peel Group still retain ownership of two areas in that site. The existing area could be a restriction on Stadium size and the development of the Stadium will significantly increase the value of the Peel Group s retained parts of the site. The purchase was not properly negotiated.

The site is actually a dock and probably has been piled. To prepare the site it will have to be dug out and re-piled. 𧴜 million is the allocated cost. It will be significantly higher in cost, double that cost in my opinion.

The actual Stadium at 52, 000 capacity is way below the capacity necessary for the future funding of finances and Everton FC.

The Management of the project is currently being managed by consultants. The initial leaked plans were of some German Stadium and the recent plan with balloons and waterside vista where the original plans sexed up.

The financing of the projects is vague, Moshiri finance arrangements and the Head of Liverpool Council, who has gone quiet. No actual figures exist and no financial. plan has been provided in the context of Everton's overall financial plan.

The provision of the necessary infrastructure is vague.

The Director responsible for the Stadium Development has been announced as Ryazanter, reporting to Baxendale Davies. Pretty lightweight for a multi-million-pound building development. There is no overall Financial plan provided with the Stadium Development as part of it.

The operation of Everton s development plan after the Moshiri takeover ; Managers, Director, transfers and contracts, which wasted millions, does not inspire confidence in the present team and their ability to deliver a multi-million pound project.

I want a new Stadium built, but I am not confident, given the above and the direction Everton are heading in, which is reflected in Paul the Esk's figures. I know that many will think I am using conjecture to justify my claims, but these provide Windows on the development, which I find, happen to coincide with Paul the Esk's analysis of his projections.

I wish I could come up with a different conclusion, but my experience tells me different.

When they actually go about building the Stadium, it will have to be different. You could not undertake to build a Stadium with this shambles, reality will bite quickly. People who will be able to build it will take charge and the overall Finances of the club will be looked at and changes made in the Management of the Club.

What we have at the moment is the start of a site build up and Everton in the Community tours lead by Barrett-Baxendale with a blue hard top hat on and blue balloons in her hand.

Hope you get to more matches and see some improvement every time you go.

Now I don't mind a bit of conjecture myself either as long as it has a positive slant, but all your “claims” seem to be directed at sabotaging the whole project and undermining the key people charged with the responsibility of delivering it.

I feel your most outrageous piece of conjecture is this one:-

“The initial leaked plans were of some German Stadium and the recent plan with balloons and waterside vista where the original plans sexed up.”

I watched the YouTube video of the presentation at the Titanic Hotel during which Dan Meis described the evolution of, and his contribution to, the current design.

If what you assert is true that would make him a plagiarist and or a liar depending upon whether the “German Stadium” design was his or some other architects. I cannot accept that that unless you can prove it with cold hard evidence.

You also question the ability of the people charged by the owner to deliver the project two of whom are Alexander Ryazantsev and Colin Chong.

Now Ryazantsev is a billionaires finance man with an impressive CV Link

In the course of a discussion I had with Paul (who's opinions I respect) on another thread Ryazantsev was one of two board members that he rated the other being Marcel Brands.

Colin Chong - Project Director
Link
has a similarly impressive track record in civil construction which includes involvement in major sports arenas. (The Etihad and redevelopment of Old Trafford)

In my experience major construction projects are rarely delivered on time and on budget and generally speaking it is the client who bears the cost. This is usually because the builder has identified loopholes in the tender and/or contract documents through which they can claim a variation.

Given Colin Chong's experience in the construction industry I feel quite confident he would be an expert in such contractual matters and so he looks to me like a very prudent appointment to me.

It is the reason why to date, only 2 of the larger clubs have relocated (excluding City and to a lesser extent WHU who both got freebies). Arsenal and Spurs had the relative luxury of a vast corporate sector on their doorsteps, and a massive floating vote in the capital and home counties. So much so that both clubs could have whole corporate tiers, with multiple lounges serving these and rows of high-earning executive boxes. These on there own have been able to fund the bulk of those constructions. We don't have that luxury.

As regards judging the finances, it is very difficult as there is so little transparency. The numbers are very broadbrush, and can be quite deceptive. The externals of the proposals are smart, and the internal arrangements are clean and reasonably imposing, but it is difficult to see how it all adds up at present, as I don't really see anything that shouts 𧼐m imo. However, there are so many unknowns that it isn't entirely inconceivable, but at that cost it does make me begin to question the viability of this site for our club.

For that outlay and at that capacity, I would be expecting a closing roof and/or moving pitch, as at Lille, which was only completed a few yrs ago at less than half that price.

The site itself can easily fit more than a 52k capacity stadium, whether or not access is sufficient might be another matter, and may yet be of much greater concern.

If the club had bought a whole development site, with a view to building multiple enabling projects to help fund the stadium, then we could perhaps begin to see the financial logic, but no-one is making those noises thus far.

𧴜m just to get the site "to grade" and 𧺬m for a 52k stadium requires a few leaps of faith imo.