INTERVIEW WITH ROBERT ELSTONE
Mickey Blue Eyes.
Friday, 19th October 2009: To Goodison Park for a 3.00pm interview of CEO Robert Elstone.
I hoped the Kirkby decision would be known by the time of our meeting. Alas.
This time only forty-five minutes could be afforded on account of another more important meeting at Finch Farm, so the closing third of the session was hurried.
Make up your own mind. Here's the transcript:
MBE Thanks for seeing me, Robert. I hoped the Kirkby thing would have been decided by now, so perhaps it's convenient to start with that. Can you give an update so far as the club is concerned?
RE Well, we're definitely into the rumour and speculation season. During the last month we found ourselves reacting to "leaks" from all sorts of sources claiming they knew the decision was coming out tomorrow. This led to calls to our partners to see if anyone had any inside knowledge. They hadn't. So far it's all been rumour without foundation. The decision backstop date is still the end of November, which is only five or six weeks away. That's what we are working to at the moment, though I suppose it could be any time between now and then. It's going to happen soon that's for sure.
MBE The biggest operational question that came up during the saga was the issue of fans transport to the site. Has there been any further movement on that issue? You did talk at one time about a "Transport Group."
RE At the moment, for good reason, many aspects of the stadium project have been put on ice until we get the decision. There's no point wasting time and incurring costs if the answer is a No. For instance there is little point in conducting talks for naming rights with a company if we don't have a stadium to show them. Any interested party would ask us to come back when we know we have something tangible to sell. Of course, we'll pick up on everything again once the decision is known. We agree and we acknowledge that providing a working transport plan is key to the success of the project. It is deliverable and we have the biggest reason of all to make sure it works.............
MBE ............Which is why I ask. During the inquiry and the debate it was rightly mooted that stadium capacity could be reduced if transport and access are not suitable. There seems little or no gain in continuing with a stadium of similar capacity (or only slightly more) than existing if the transport is not dealt with adequately...........
RE ...........That's true. Transport will be top of our priorities if the Government answer is Yes. There is an agreement with Knowsley concerning the matter because it is something they had to have for planning purposes, to protect them from the highly unlikely possibility of severe traffic problems. We are confident we can avoid such problems. Our message is that we cannot be in any way complacent on transport issues or any other project issue. We will deliver a transport plan that works. It's in everyone's interests to do so.
MBE That leads me on to a much more important strategic question if the answer is Yes, that of financing the project during a financial depression. Can we even secure the finance, let alone start the scheme?
RE It is certainly the case that the funding model we had twelve months ago – which was the sale of Goodison Park, the sale of naming rights, the sale of Bellefield, support from other sponsors, funding from caterers and other suppliers, and inevitably an element of borrowing – all of that mix is harder now than when the plans were first put together. We're under no illusions that funding will be much harder in the present climate. But, we remain confident it can be delivered using the sources of funds we anticipated. If we get a positive decision our first step will be to meet with our partners to explore all funding options. At the same time we will move forward on naming rights - a powerful marketing tool proven by the Emirates stadium. It will all be hard, but the Board is confident funding can be put in place and the stadium delivered.
MBE Then there's the question of timescale. If the answer is Yes are you still aiming for the same programme?
RE Yes, we are. We are still looking at 2012 opening, though that is contingent on obtaining necessary finance within the right timeframe. To date all our financial efforts have gone into developing first team and youth football, improving the squad, and supporting David Moyes's drive to take us further up the league table. We're certainly not sitting on funds tucked away for the new stadium. And we will still need to secure funds in the short term. Anybody going to the bank knows it isn't easy and we're no exception. But if we get naming rights in place then 2012 is very much deliverable.
MBE Fallback position if the government answer is negative? Are there any proposals to do anything at Goodison Park? Is there any ROOM to do anything at Goodison?
RE We said at the EGM that wholesale stadium change at Goodison isn't possible, practical or affordable. That remains the case. What we can do is relatively minor re-planning within existing space, but the overall economic affect would be minor. For instance, our new retail partner Kitbag is keen to get more retail space, which we can potentially deliver through use of the first floor at Everton One (formerly the Megastore) in Walton Lane. Also, our ticket office in Goodison Road could potentially be used for a lounge. We also need to re-house some of our office space. But none of it would materially affect the bottom line of club business, which is to give David Moyes more money to spend on the first team. But none of those measures would help us substantially protect our position at the top end of the Premier League. That can only be achieved in a new stadium with more revenue. Without the wholesale re-development of our facilities to offer fans and sponsors more opportunities and better value for money, the challenge of mounting a serious and prolonged challenge to the Champions League clubs is much greater.
Of course we're aware of various other outline ideas, of a possible shared stadium and other sites etc. But none of them deal with the most important factor of all and that is affordability and funding solutions, which are hard and unavoidable facts of life. I'm sure fans appreciate we have to deal with reality. We have to go out and find the money. The real beauty of the Kirkby project is that it is substantially funded by private sector support. Without that it wouldn't have any legs. It also has considerable support from Knowsley Council in various other ways. This private and public sector support has not come forward on any other scheme that has been considered or presented. As I said, the first questions we have to ask on any scheme is, "How much?" and "Where does the money come from?" If those questions aren't answered then it is obviously impossible to proceed. Nobody should lose sight of the fact that around 40 percent of the cost of the new stadium will be met by Tesco.
MBE Club finances. What has been the nett affect of season ticket sales this year?
RE The final figure was about fifteen hundred up on last season. We are delighted with that. The season ticket campaign set prices fairly and we introduced a payment plan that was reasonable and attractive. We also think we marketed it pretty well. Of course, it's also true that the season ticket numbers came on the back of a great season and a Cup Final. As for budgeted numbers, we always set our targets higher and it has been gratifying to see the fans respond so well. Final figures just about beat our budget. Fans will have also seen on Saturday the launch of our Half Season Ticket campaign. A great Christmas present for any Evertonian!
MBE Lounges take-up? That fell back slightly last year didn't it?
RE Yes. Occupancies continue to be static. However, we invested some money in what was "The Marquee" but is now "Club Everton," and, albeit slowly, that is paying dividends. For Saturday's game V Wolves, Club Everton was full, which we are delighted about. There's a great atmosphere in there, it's good value for money, and we've added to the entertainment. But it's fair to say corporate hospitality is the area where these difficult economic times are pinching hardest. Ultimately our lounges are filled with Everton businessmen. We used to "beat ourselves up" a bit because we had difficulty attracting a wider corporate clientele. In the end, though, having Evertonian clients has stood us in good stead because they are probably more resilient in an economic downturn. Our corporate support from Evertonians is excellent. But even there it is noticeable that Everton businessmen are going from a table for eight to a table for six, and a table for six to a table for four. It isn't that they're turning their backs in any way, just that they have to economise like everybody else. It's something we'll need to keep working hard on. To that end we're trying to recruit extra corporate sales staff – that's always been a challenge for me, finding good salespeople; we have a good team but it's too small.
MBE Merchandise? New shops and shirt sales, how are we doing on that?
RE That gives me a lot of pleasure on the business front. During the last twelve months I can't praise Kitbag enough for their investment in the club. The whole image and brand has advanced enormously to the point where we can all be tremendously proud of the achievement. I think we've got the best retail deal in the whole Premier League. Kitbag's tremendous work has shown in phenomenal sales figures. The opening day sales blitzed all Everton records. They outperformed some of the so-called big clubs and that has continued. The away shirts have proved to be remarkable success – at one point they were selling at the same rate as the home shirts, which has never happened before. Also, fans will have seen the publicity drive for the Liverpool Unites shirts, and the pre-orders for that are going through the roof. This is something all Evertonians can be proud of because it raises a hundred thousand pounds for a great cause. What it shows is that investment in the new shops and product range has paid a large dividend. Which maybe goes to show how improved facilities bring more people in.
MBE Sticking with finance, the increase in wages ratio that you mentioned at the EGM, when you said it went to sixty-two percent. In your early days at Deloitte you made the crucial point that as a general rule the ratio should not exceed sixty percent. So we are now in unknown financial territory. It has naturally made some fans uneasy. What will the increase do to our debt levels? Also, are we in a position to restore it to previous levels?
RE It's natural that some people are uneasy with it, though some others might want it to be quite a bit higher! It's perverse in business terms because we want to spend as much money on wages as we possibly can but, of course, within safe constraints. For me the way to get the ratio back down is to drive up our turnover. Of course, we have to be sensible about wages. We have made a big investment in talent and new players and they have come with good wages. If we don't deliver increased revenue, that's when the wages ratio begins to impact on debt. And, on turnover, we have an immediate, attainable gap of £2million each year – and my staff are sick of me reminding them of this – resulting from four thousand empty seats at almost every game. Again that comes back to facilities because these are four thousand seats with obstructed views. That is one area of revenue we need to improve on to help reduce the wages ratio. I know we can do better on that and on match-day hospitality revenue. In very clear terms that is our focus.
MBE Staying with finances, was all of the Joleon Lescott transfer money spent on incoming transfers?
RE One hundred percent. All of that money, and more, was spent on Heitinga, Distin and Bilyaletdinov. Moscow didn't want to divulge the Bilyaletdinov money, so that hasn't helped guesses from uninformed sources. The reality is when you add in everything such as agents' fees and financing fees and levies to the selling clubs, then all of the Lescott money and a considerable amount more was spent on bringing those three players in.
MBE That being the case, if Joleon Lescott hadn't been transferred would we have had any money for incoming transfers? The obvious implication is that we have to sell before we can buy.
RE We would have had money irrespective of the Lescott transfer. We had the discussion at board level in March/April as to what David would have available. The fans will have seen our efforts to get Kyle Naughton – in fact we thought we had secured his transfer – Elm and Senderos, and one or two others. David felt he wanted to spend available money on young emerging talent and we were spending at that level. We went forward with that in mind right through to August when we felt we still had a good chance of holding on to Joleon. Then he issued his transfer request and confirmed he wanted to leave. City continued to disrupt the situation to get Joleon, so we decided to sell. The Chairman did a great job in the deal. He is undoubtedly an excellent negotiator. And what that then meant was the original transfer spend was increased substantially to the point where we could bring in the three new players who did join us.
MBE Is it possible therefore to nail the implication that we need to sell before we can buy?
RE We had a reasonable budget that wasn't contingent on us selling players. The fact of the matter is over the last four years or so we have been a nett spender, and a nett spender to a high level. Unfortunately, not all of that spend has not been covered by the operating profits of the business. We have not been generating enough money through filling Goodison or prize money or sponsorship to fully fund transfer activity. Naturally then, the result is an increase in our debt levels. And, again, as everyone knows increasing borrowings at the moment is not an option. Looking forward, what we will need to do to drive transfer spending at similar levels to recent years is to drive up our income and keep a sensible lid on costs.
MBE Is there any prospect of a rights issue?
RE I don't believe that is currently on the agenda. It isn't being considered.
MBE Has there been any approach to buy the club?
RE There has been a steady stream of approaches to buy the club over the last two or three years. None of them have come to fruition. Ninety five percent of them were hot air. The remaining five percent progressed but weren't ultimately followed up by the bidders. That steady stream has now slowed considerably but it hasn't stopped, and the sarch for new investment, which is absolutely needed, as we are all too well aware, continues.
Of course, there are lots of examples where other clubs have had traumatic experiences on this issue. It means we have to be very careful where we go in the future. It's important we avoid the same difficulties. You could almost argue the only clubs who have prospered are Chelsea and to date, Manchester City. There are rumblings of dissatisfaction at some of the clubs even at the top of the league. There's the mess at Portsmouth, the chaos at Newcastle, and clearly some clubs have demonstrated that investment of the wrong type is a major "own goal." So, though we're actively looking for new investment, we need to make sure we don't go down the wrong road taken by other clubs.
As a consequence, it's important for us to take control of our own destiny as far as the day-to-day operation of Everton is concerned. We can't just assume a new figure would solve all our problems or elevate us to where we want to be. Nor can we sit back and wait for that day to arrive. We have a duty to manage the club in the right way. It's beholden to the club's traditions to ensure we don't lose sight of that, something the board is acutely aware of.
MBE Has the board placed a value on the club?
RE Of course the owners have a view on that. But the value of many things is a private agreement between two parties. It's a matter of bargaining and no bargainer worth his salt gives away his position in advance. It just isn't the way business is done.
MBE Can we discuss the prospects of an Everton V Everton Viña del Mar? I was fortunate enough to visit Chilé a few months ago in a group of five from The Ruleteros Society. It was organised by John Shearon and Tony Heslop of the Society, helped by Paul Wharton. It's impossible to praise their efforts enough. They've worked on the relationship for years and have real respect in Chilé, as I found out at first hand. It was a wonderful trip and the warmth, friendship and hospitality we received was almost beyond description. It was the same at the two community clubs, Everton La Plata in Argentina and Everton Rosario in Uruguay. This is one Evertonian who will never forget it.
RE Yes, I've just met John and Paul and they bent my ear on the subject too! What we said we would do is establish more formal links. I'm about to pass on some contacts to our marketing and communications team. We'd like to explore the chances of one of our junior teams going out to South America to play there. I will introduce John and Paul to Ray Hall who runs our Academy. We will certainly look very favourably to bringing Everton Chilé first team to Goodison, pre-season 2010/2011. It really is very difficult for us to take our first team to Chilé. Pre-season games are a big financial opportunity for us and we have to maximise the commercial possibilities of them. I'm not sure going to Chilé would do that. 2010 is going to be incredibly tight and short because of the World Cup...........
MBE ..........I think usually there's a two weeks opportunity between the end of the Chilé season and the beginning of ours..........
RE .........And what we said is there's an open door to come here and play a pre-season game sometime here at Goodison. We'll work hard to try and bring it about.
MBE During our stay we had dinner with their marketing and operations team and one of their directors. We asked how much they would want all-in to cover a first team visit for a match in England and they told me roughly eighty thousand dollars, which I thought a reasonable figure if they hold to it. I think John and Tony's long-cherished dream of Everton V Everton is a superb idea. I hope it can be arranged.
RE Paul Wharton said "Two Evertons for the price of one"!
MBE The other two Evertons in Argentina and Uruguay are community clubs. If we ever get round to holding the match it would be excellent PR if we could bring too a representative from each to be part of the "Everton Family" for the occasion. Both clubs were simply magnificent in their friendship and hospitality. I know our fans would welcome them with open arms.
RE I've seen the gifts the guys brought back with them and it was very humbling. I can see after my visit to Thailand that the culture of gifts matters a great deal. They really matter as a powerful way of demonstrating friendship.
MBE There was a recent clubs meeting at Chelsea. Did you attend?
RE It was a "Leaders in Football" Conference. We were invited but I was in Thailand. I have my doubts about the usefulness of it to be honest. I understand there was some reasonable debate, though. But my immediate priority was to meet with our main sponsor to bolster that important relationship. Overall I think we got more out of that meeting than at a forum in London. In the space of eight hours I met the Thai prime minister, the Governor of Bangkok, the owner of Chang and Prince Andrew, all of which gave me the opportunity to describe the work we do on coaching at the Chang Academy in Bangkok. We also did a presentation of our marketing plan via an in-house produced DVD and a personalised i-pod which also contained the club's Official History.
MBE Have we had any increase in racism complaints at Goodison?
RE I'm not aware of it, other than El Hadj Diouf! His allegation was totally unfounded. However, I am not in any way complacent about the situation and I would simply repeat what I said last time, that any complaints should be reported to us immediately for appropriate action. We had two incidents in the last six months which we dealt with promptly and effectively. We had the Premier League's Race and Diversity Team with us at the end of last season and they were impressed by what they saw here. It is a serious issue which we take very seriously indeed by applying a zero tolerance policy. We will continue to come down on it very heavily.
MBE Is there anything on Everton In The Community?
RE You may have seen the chief executive of Everton In The Community left us to go to Notts County. We wish him well in that, but I'm pleased to announce a new appointment and she will be joining us the first week in January 2010. We are looking forward to it very much.
MBE Injuries? Any prospect of an early return for the walking wounded?
RE I'll defer to the expertise of our medical team on that one. Of course, we want them all back as soon as we can and the excitement and anticipation of seeing them back in the royal blue jersey is mounting all the time. To endorse that, 'Jagielka' is still the top selling replica shirt in the club despite his months long absence.
MBE Okay. Thanks again, Robert.
RE My pleasure. [b](20/10/09)