"No Blue Skies" - Swiss Ramble financial review

[MTK]

New article from Swiss Ramble. Worth reading if you want an independent view from a financial expert. Values the equity at £75m (taken from an unnamed investment bank). Depressingly he's not optimistic on finding a new owner as he estimates they would need about half a billion to turn us around. He is positive about the youth policy though

 

http://swissramble.blogspot.com/2011/09/everton-no-blue-skies.html

[GoodisonRoad]

http://www.independent.co.uk/sport/football/european/dortmunds-resurgence-down-to-klopp-who-spent-1635m-to-win-league-2353719.html

 

Little off Topic, but you've got to admire how they've turned themselves round and i think it's a model we could possibly follow? Obviously wont have the money generated by a 77,000 Capacity stadium, but i think we should look into how they run themselves.

[marcopaulo]

Specifically, they are not seeking Kenwright’s departure,

 

i see this often yet they have banners sayin kenwright out and they were sayin they want them gone in that chant wern't they? i just don't get it

[MTK]

Their management have done a great job in fending off the banks but I suspect that owning the best stadium in Europe may have been a big part of this. You have to admire Klopp though

[marcopaulo]

http://www.independe...ue-2353719.html

 

Little off Topic, but you've got to admire how they've turned themselves round and i think it's a model we could possibly follow? Obviously wont have the money generated by a 77,000 Capacity stadium, but i think we should look into how they run themselves.

 

 

didn't realise how well they had done..fair play to them

[StevO]

New article from Swiss Ramble. Worth reading if you want an independent view from a financial expert. Values the equity at £75m (taken from an unnamed investment bank). Depressingly he's not optimistic on finding a new owner as he estimates they would need about half a billion to turn us around. He is positive about the youth policy though

 

http://swissramble.b...blue-skies.html

 

great article.

[GoodisonRoad]

Their management have done a great job in fending off the banks but I suspect that owning the best stadium in Europe may have been a big part of this. You have to admire Klopp though

 

Obviously thats a big difference, but i bet the Bundesliga doesn't get half the money the Premiership does in TV revenue?

[marcopaulo]

New article from Swiss Ramble. Worth reading if you want an independent view from a financial expert. Values the equity at £75m (taken from an unnamed investment bank). Depressingly he's not optimistic on finding a new owner as he estimates they would need about half a billion to turn us around. He is positive about the youth policy though

 

http://swissramble.b...blue-skies.html

 

in that it says:

 

On the face of it, last season’s £3 million loss does not look too bad, but this would have been much worse without the benefit of £19 million profit on player sales, almost entirely due to Lescott’s departure. Without that once-off boost, the 2010 loss would have been a truly depressing £22 million.

 

now am i bein thick or did we not spend all that lescott money on transfers? so how could we have a 19million profit on player sales?

[Hafnia]

New article from Swiss Ramble. Worth reading if you want an independent view from a financial expert. Values the equity at £75m (taken from an unnamed investment bank). Depressingly he's not optimistic on finding a new owner as he estimates they would need about half a billion to turn us around. He is positive about the youth policy though

 

http://swissramble.b...blue-skies.html

 

Great article - some points made that stand out:

 

A series of ugly boardroom disputes ensued between Kenwright and fellow directors, Paul and Anita Gregg. Both sides tried to win over the Everton fans with ambitious investment plans, Kenwright’s version entitled the Fortress Sports Fund, but neither of these came to fruition. Finally, in 2006 the Greggs sold their shares to the entrepreneur Robert Earl, a friend of Kenwright, but all the infighting took its toll

 

 

As operating losses have increased since then, the importance of player sales becomes even more evident. The key point is that if Everton do not repeat player sales at the same level as 2010, namely around £20 million, then it is extremely doubtful that they will break-even in future.

 

The other major issue with Everton’s revenue is that it is not really growing. Elstone recently boasted, “We have signed record sponsorship deals and hugely increased our income”, but the reality is that any growth is almost entirely due to broadcasting revenue. This has risen from £28 million in 2007 to £50 million in 2010, but this has little to do with the club, being almost entirely due to the distributions from the collective sale of Premier League TV rights.

 

Although Everton have improved their commercial operations in the last few years, the revenue remains fairly feeble at £10 million. To place that into perspective, this is less than a third of Tottenham’s £32 million. Although the club complained that it was difficult to compete commercially with clubs “regarded as having a greater international profile”, such as Manchester United, Liverpool and Arsenal, Everton are surely at least as attractive a proposition as clubs like Spurs and Villa

 

To be fair, the club outsourced its merchandising and catering operations in 2006 and its retail business to Kitbag in 2009, which means that their reported income is around £7 million lower than it would be if these activities were still in-house, but the relatively small sponsorship deals should still be questioned.

 

Everton have enjoyed a long-term shirt sponsorship deal with Chang Beer, which has been extended no fewer than four times, the latest running until 2014. This increased the annual payment from £2.6 million to £4 million (partly performance-related), but this is still only half as much as Aston Villa’s new £8 million deal with Genting and a lot less than Tottenham’s £10 million deal with Auresma

 

Everton’s other operating costs of £24 million are a similar level to Tottenham £27 million and Aston Villa £25 million, but they seem very high in relation to the size of the club. The massive increase from £12 million in 2007 to £21 million in 2008 is unexplained, though it should be noted that theses costs averaged £17 million in 2005 and 2006. Part of the rise is certainly due to higher expenses at the Finch Farm training facility compared to Bellefield, but the lease here is no higher than £1.5 million. Kenwright did not exactly clear up the ambiguity of what is included here, when the Blue Union put the question to him, “When you say other operating costs what do you mean? I don’t know, I have no idea

 

Most of the club’s assets have been sold off, which also increases costs for higher rents, while Goodison’s value is declining

 

He maintains that “no-one can sell the club better than me”, despite all evidence to the contrary, such as the recent admission that Everton allowed one potential investor to conduct due diligence in the belief that he was the head of ICI in the Far East, even though that company was taken over three years ago

 

The fans really do deserve better from the board: a clear, coherent strategy would be a step in the right direction

 

 

 

Take a bow Mr Article writer...

[GoodisonRoad]

On the face of it, last season’s £3 million loss does not look too bad, but this would have been much worse without the benefit of £19 million profit on player sales, almost entirely due to Lescott’s departure. Without that once-off boost, the 2010 loss would have been a truly depressing £22 million.

now am i bein thick or did we not spend all that lescott money on transfers? so how could we have a 19million profit on player sales?

Just before that, it says this?

 

However, since then Moyes has had to sell to buy. Everton’s last major splurge came in the summer of 2009 as the £22 million proceeds from Joleon Lescott’s transfer to Manchester City was spent on Diniyar Bilyaletdinov £10 million, Johnny Heitinga £6 million and Sylvain Distin £4 million.

Edited September 15, 2011 by GoodisonRoad

[MTK]

GoodisonRoad - I'm not the best person to explain this but it's an accounting technicality. Money received from player sales is counted as one big payment in the year received. Money spent on players is amortised over the life of the contract (i.e. divided by the number of years of the contract and then put into the books gradually). Therefore we made a profit on players sales

The spending of the Lescott money is reflected in the cashflow which shows that the money we received for Lescott immediately left the club.

 

Err - like I said, I'm not the best person to explain

[StevO]

you explained that fine MTK.

its true, when a player is sold the fee goes into the account in a lump sum, when a player is bought the fee is spread over the contract.

[GoodisonRoad]

Ohh, thanks for clearing that up

[MTK]

 

Obviously thats a big difference, but i bet the Bundesliga doesn't get half the money the Premiership does in TV revenue?

 

No, but they are streets ahead on commercial revenue, particularly sponsorship. Of 60m euros commercial income received by Dortmund, 40m is sponsorship although interestingly they only get 7m euros a year for their shirt sponsorship (not that much more than our current £4m). So their CEO has found 33m euros of sponsorship money every year, seemingly for things that we haven't even thought of

Time for Mr Elstone to step up

[Matt]

New article from Swiss Ramble. Worth reading if you want an independent view from a financial expert. Values the equity at £75m (taken from an unnamed investment bank). Depressingly he's not optimistic on finding a new owner as he estimates they would need about half a billion to turn us around. He is positive about the youth policy though

 

http://swissramble.b...blue-skies.html

Very interesting read. However, published 2 weeks after the transfer window, it doesnt include the mention of 3 of our biggest earners being off the books + the transfer fees being taken into account (though to be fair, the guy has probably been working on this for several weeks).

 

Would be interesting to see the outlook without that 13m i keep going on about.

[Hafnia]

 

Very interesting read. However, published 2 weeks after the transfer window, it doesnt include the mention of 3 of our biggest earners being off the books + the transfer fees being taken into account (though to be fair, the guy has probably been working on this for several weeks).

 

Would be interesting to see the outlook without that 13m i keep going on about.

 

You mean we need to keep the squad paper thin and youth heavy to be ok? The £5m saved on yak and arteta is a fraction of the £20m of sales we need to make each year to break even.

 

Soon enough we will have a championship team Matt. There really isn't anything to be optimistic about other than hoping we produce a Ross Barkley every year, not going to happen.

[Louis]

Still..despite the problems.. expect a "record turnover" announcement

[MTK]

Very interesting read. However, published 2 weeks after the transfer window, it doesnt include the mention of 3 of our biggest earners being off the books + the transfer fees being taken into account (though to be fair, the guy has probably been working on this for several weeks).

 

Would be interesting to see the outlook without that 13m i keep going on about.

 

It's not a direct answer but he does say that we need to knock £15m off the wage bill plus sell £10m of players every year without buying anyone

 

 

All football clubs could cut costs, but this approach would almost certainly condemn Everton to a regular struggle against relegation. To achieve break-even, Everton would have to reduce the cost base by £15 million, assuming that £10 million profit is made on player sales each year.

 

Assuming that operating expenses are reasonably fixed, that would mean cutting the wage bill by nearly 30% to £39 million. Only three clubs had a lower wage bill that that in the 2009/10 Premier League – and two of those were relegated. If Moyes has been fighting with one arm tied behind his back up to now, this would be tantamount to also binding his legs together.

Edited September 15, 2011 by MTK

[Hafnia]

That article single handedly dismantles any argument that suggests that the club has been in good hands. We are outperformed in a business sense embarrassingly.

 

I could not bear to continue the selling policy we have adopted, I have had too many disappointments, Gary lineker, Trevor Steven, Rooney, lescott, arteta. The sale of fellaini and Barkley will completely piss me off.

[pete0]

We've got debts, why moan about it in every thread. Sell players and pay debt off faster so we have more money in the future. The debt was a to keep us in the league. Would you be happier if we still had all the old assests but were playing in the league below?

Even the best team in the league struggles to keep all their players. Cantona, Stam, Beckham, Ronaldo and Tevez. Get over it, this is part and parcel of the game.

 

As Evertonians we've been lucky compared to most. Arteta, Rooney and Lescott are the only players that stand out. Newcastle have lost there 3 best players. Villa have lost 5 English internationals. West ham sold their whole starting 11 when they went down. Wigan have been poached every season Palacios, Bullard, Scharner, Baines, Heskey, Bramble, Valencia and N'Zogbia. We could have very easily been in the same position as Middlesborough, Southampton or Charlton. Have a sip out of the half-full glass of water. Even bang a mirror in that bad boy and taste a rainbow http://www.wikihow.com/Make-a-Rainbow Life is no where as bad as it could have been.

[Hafnia]

Seriously, if you want me to be optimistic then construct an article that proves that I have been wrong to slate our business model and owners for the past 5 years?! Otherwise jog on with your patronising "be thankful" nonsense.

 

You still try to make light and compare us to villa and other selling clubs? Did you read the article?

 

We NEED to continue selling, we needed a striker, what did we do? Sold yak and beckford and brought in an unproven unfit Argentinian. Villa needed a striker, they go and buy £24m Darren bent. Forget the fact that villa sold 5 England internationals, two of them aren't good enough for England and were adequately replaced.

Edited September 15, 2011 by Hafnia

[pete0]

<p>

</p>

<p>Seriously, if you want me to be optimistic then construct an article that proves that I have been wrong to slate our business model and owners for the past 5 years?! Otherwise jog on with your patronising "be thankful" nonsense.</p>

<p> </p>

<p>You still try to make light and compare us to villa and other selling clubs? Did you read the article?</p>

<p> </p>

<p>We NEED to continue selling, we needed a striker, what did we do? Sold yak and beckford and brought in an unproven unfit Argentinian. Villa needed a striker, they go and buy £24m Darren bent. Forget the fact that villa sold 5 England internationals, two of them aren't good enough for England and were <strong>adequately replaced.</strong></p>

<p>

</p>

<p>Of course I read the article that you claim 'single handily dismantles any argument' even though it includes nothing we haven't already heard and yet the majority favour otherwise.</p>

<p>Did you see how villa performed against us? not one of their 11 would have got in ours and that includes Cahill upfront ahead of £24m Bent. Yak and Beckford were sold because they're not good enough. Felliani, Cahill, Arteta were all unproven, i'd take an unproven Moyes signing over most proven players, eg. Crouch £10 mil, no value in that at all. Unproven players are what makes football exciting. We didnt buy any one because we have no money and the board are right to pay off the debt through player sales as buying and paying them is what maintained it.

You ignore the board saved us from relegation and moan that they put us in debt an that we will fall down the league paying it. If it weren't for this debt we would be falling down leagues never mind league places. Thankful nonsense? Stop being ungrateful. Could the board have been more successful? Yes. Is it more likely a different board would have been? The stats say no.

You make the choice of being optimistic or otherwise, and I struggle to see why anyone would choose not to be.

Edited September 15, 2011 by pete0

[Hafnia]

<p></p>

<p>Of course I read the article that you claim 'single handily dismantles any argument' even though it includes nothing we haven't already heard and yet the majority favour otherwise.</p>

<p>Did you see how villa performed against us? not one of their 11 would have got in ours and that includes Cahill upfront ahead of £24m Bent. Yak and Beckford were sold because they're not good enough. Felliani, Cahill, Arteta were all unproven, i'd take an unproven Moyes signing over most proven players, eg. Crouch £10 mil, no value in that at all. Unproven players are what makes football exciting. We didnt buy any one because we have no money and the board are right to pay off the debt through player sales as buying and paying them is what maintained it.

You ignore the board saved us from relegation and moan that they put us in debt an that we will fall down the league paying it. If it weren't for this debt we would be falling down leagues never mind league places. Thankful nonsense? Stop being ungrateful. Could the board have been more successful? Yes. Is it more likely a different board would have been? The stats say no.

You make the choice of being optimistic or otherwise, and I struggle to see why anyone would choose not to be.

 

The very fact that you would have Cahill ahead of bent to justify an argument about debt gives me an insight into how your argument is formed. You are obsessed with what we have on the pitch, when in reality what we have on the pitch has been carefully crafted by our manager at a fraction of the cost. I'm not disputing who has the best team, oneill blew an absolute fortune of lerners money - an astute manager would and should have breached top 4 with the funds gr spent. £120m over 4 years.

 

That's enough to have bought Cahill, lescott, pienaar, arteta, jagielka and Coleman near ten times over. Villa have tightened the reigns temporarily as houllier discussed with Lerner the need to asses the new generation of villa players, next season after consolidation they turn the tap on again.

 

I am seriously concerned that the remaining marquee players under 27 will be off in the near future. If clichy doesn't do it at city this year, expect baines to go, expect enquiries for felli and it's a matter of time before Barkley attracts a bidding war.

 

[Matt]

You mean we need to keep the squad paper thin and youth heavy to be ok? The £5m saved on yak and arteta is a fraction of the £20m of sales we need to make each year to break even.

 

Soon enough we will have a championship team Matt. There really isn't anything to be optimistic about other than hoping we produce a Ross Barkley every year, not going to happen.

Aaaaah, I forgot that you are omnipotent. Still waiting on the weekends lottery numbers by the way.

 

its not 5m saved either, its closer to double that when you include all the players that left (Yobo is being covered by Fenebache again, Vaughn, Beckford).

[marcopaulo]

how could it be 5mil? wasn't arteta on almost 4m alone? not denyin anythin in that article or whatever but don't make numbers up haf

[Hafnia]

Aaaaah, I forgot that you are omnipotent. Still waiting on the weekends lottery numbers by the way.

 

its not 5m saved either, its closer to double that when you include all the players that left (Yobo is being covered by Fenebache again, Vaughn, Beckford).

 

 

I quoted the £5m on Yak and Arteta - which is aprrox correct... I used arteta and yak as being 2 assets we sold who were proven, regardless... you talk about wage savings as if we had an abundance of players? Bizarre. So we don't need to strengthen the squad Matt? We didn't need to loan Royston for £40k a week??? Plus we don't need to bring a striker in? well there goes your wage savings, anyhow, whats your plan to contribute to the £20m we need to shed each year given the banks are not going to loan any money?

[Matt]

 

 

I quoted the £5m on Yak and Arteta - which is aprrox correct... I used arteta and yak as being 2 assets we sold who were proven, regardless... you talk about wage savings as if we had an abundance of players? Bizarre. So we don't need to strengthen the squad Matt? We didn't need to loan Royston for £40k a week??? Plus we don't need to bring a striker in? well there goes your wage savings, anyhow, whats your plan to contribute to the £20m we need to shed each year given the banks are not going to loan any money?

Where do I talk about an abundance of players?! Where do I say we dont need to strengthen?! Christ, thats a womans argument if ever ive seen one (ie cant think of something relevant to argue with so throwing out random, made up statements in an attempt to confuse)....

 

My point is youre only pointing out part of the figures, rather than the whole picture. Also, youre assuming that our squad will collapse if we lose 1 or 2 of our best players. Even if we did lose 1 or 2, we wont become a Championship squad (only my opinion) but we might drop from the heights that weve become accustomed to in the last 10 years (under whos reign again? oh yeah... Moyes', noone else was involved of course) to mid to lower table regulars. Is this acceptable? No, but its a hypothetical. Its also hypothetical that the youth squad does produce a bunch of amazing youngsters that act as the springboard for Europe. Depends on how you want to look at the future.

 

You see selling Yak and Arteta as losing assets, I see it as cutting off deadwood. Half empty / half full.

 

Im going to say this 1 last time. I accept something needs to change. I recognize we need investment and soon. I accept things cannot continue this way. However, given the changes we have seen this summer (new sponsorship deals, massive wage reduction which was taking up a huge chunk of our income) there is something to be positive about.

 

You want to be a miserable git? Fine, be miserable. But I will not be brought down by negative hypotheticals and selective arguments.

[MTK]

On a slightly brighter note, there may be another way to make a few savings. Our other operating costs at £24m are extremely high. Swiss Ramble says

 

Everton’s other operating costs of £24 million are a similar level to Tottenham £27 million and Aston Villa £25 million, but they seem very high in relation to the size of the club. They represent 25% of total costs, only surpassed by Arsenal (due to the Emirates effect) among the leading eight clubs, and 30% of revenue, only below Manchester City, whose ratio will fall following their certain revenue growth

 

However he also mentions

 

To be fair, the club outsourced its merchandising and catering operations in 2006 and its retail business to Kitbag in 2009, which means that their reported income is around £7 million lower than it would be if these activities were still in-house, but the relatively small sponsorship deals should still be questioned.

 

So to be directably comparable to Spurs & Villa we would need to add £7m to our expenditure to account for the costs we save by outsourcing certain functions. This makes our comparable operating costs £31m &, although we do not know what's in it, I refuse to believe that a significant portion of the savings we need could not come from here rather than the squad

[Hafnia]

Where do I talk about an abundance of players?! Where do I say we dont need to strengthen?! Christ, thats a womans argument if ever ive seen one (ie cant think of something relevant to argue with so throwing out random, made up statements in an attempt to confuse)....

 

My point is youre only pointing out part of the figures, rather than the whole picture. Also, youre assuming that our squad will collapse if we lose 1 or 2 of our best players. Even if we did lose 1 or 2, we wont become a Championship squad (only my opinion) but we might drop from the heights that weve become accustomed to in the last 10 years (under whos reign again? oh yeah... Moyes', noone else was involved of course) to mid to lower table regulars. Is this acceptable? No, but its a hypothetical. Its also hypothetical that the youth squad does produce a bunch of amazing youngsters that act as the springboard for Europe. Depends on how you want to look at the future.

 

You see selling Yak and Arteta as losing assets, I see it as cutting off deadwood. Half empty / half full.

 

Im going to say this 1 last time. I accept something needs to change. I recognize we need investment and soon. I accept things cannot continue this way. However, given the changes we have seen this summer (new sponsorship deals, massive wage reduction which was taking up a huge chunk of our income) there is something to be positive about.

 

You want to be a miserable git? Fine, be miserable. But I will not be brought down by negative hypotheticals and selective arguments.

 

The point is Matt you are using desperate measures undertaken by the club as being signs of positivity - i'm not being miserable - i'm being realistic. The outgoing players will at a stage need to be replaced so it is a temporary measure - you talk about it being all and well and it will be ok when the new owners come in?! Whatever way you look at it, the sale of beckford was desperation, a free signing on a lower level wage who can nick a goal was sold - was he good enough? Better than what we have when you exclude Saha unless you want to get excited over Velios cameo and pin all hopes on him?

 

I am talking about the club being in a position to sustain the exisiting talent - which we are not in. It's not all about wages, it's about attraction and retention - sorry to put a cloud in the way of your ray of sunshine.

 

 

MTK, my take was that outsourcing has taken £7m from the coffers in terms of our income line due to outsourcing, clearly there will be savings from salaries and wages - but surely no where near this amount. Sodexo even do the corporate meals - they make a scandelous profit whereever they operate.

[MTK]

I'm presuming that £7m was an estimate but probably not so far off. If you look at Kitbag alone, we get £3m pure profit so adding £7m in costs would result in a 30% margin - about right

 

Does that make sense?