Robert Elstone issued his latest blog last week titled 'Where The Money Goes' and The Blue Union took him to task with the latest press release.
We wholeheartedly agree with our Chief Executive when he says supporters have the right to know about THEIR club and here at The Blue Union we'll always strive to uncover the truth about OUR club, despite attempts to prevent us doing so, including the abolition of AGMs, the change in the company's Articles of Association which was designed to make it more difficult for ordinary shareholders to call Extraordinary General Meetings and the almost nepotistic methods employed to comply with the UEFA licensing platform requirement on fan engagement.
The Blue Union October 2011 newsletter, produced some three months before this latest blag, offers a comparable summary of the seasons 2007 to 2011. In chart form, it plots the rise and fall of Everton's fortunes, offers, possibly from an equally uninformed perspective, an identical explanation for those mysterious other operating costs and compares the performances of the directors of Everton, with an average league place of 6th between 2007 and 2011, to the directors of Spurs, whose average was 7th. We invite you all to compare and contrast.
Income
We have no anxious need to discuss five years cumulative figures in a bid to make them look more impressive; we simply show that, over the five year period, annual matchday income is on a slippery slope, £5m lost in the last three years alone, and that the massive £25m increase in media payments has been almost exclusively absorbed by the ever increasing wage demands of a rapidly decreasing squad.
Deloitte explain, when it comes to revenue generation, football clubs conduct a three pronged attack; we've already mentioned matchday and media revenues, the third is commercial revenue and it is in this area that Everton struggle most manifestly against their perceived peers.
Over the past five years we've seen a modest £5m increase in commercial income, from just £7m to £12m, and we can calculate that, due to outsourcing, this 2011 figure is representative of a non-outsourced commercial income of £17m; however it should be remembered that we began outsourcing in 2007, so that figure should also be adjusted which makes the improvement somewhat less impressive.
This is not to say Everton's staff haven't performed well under the circumstances. As ever, the limiting factor is the board's inability to provide resources. Everton were forced to sell their right to generate their own revenue due to an inability [financially] to address their loss making catering and merchandising operations. Potential new owners will no doubt take this severe restriction, on the business, into consideration and they'll hopefully consider returning the club to what is the norm in the Premier League.
Even at £17m our [adjusted] commercial figure is fooling nobody. Using their last available accounts, Liverpool's commercial income was £62m and 2011 will see the inclusion of their £80m four year Standard Chartered shirt sponsor deal, and, despite a decline in fortunes recently, they've now secured a new shirt supplier deal worth £25m per season; a sobering thought for all Evertonians is that Liverpool's commercial income alone will soon eclipse the total turnover of our club. Even humble Bolton managed £17m commercial revenue, so this puts into perspective our commercial performance; a small, town based club, from the back of beyond, has equalled the commercial activity of a club from a major city who are the fourth most successful in the country.
The income statement is relatively easy to understand, yet it is when you begin to examine the club's annual expenditure that you begin to experience a significant degree of ambiguity which is being passed off, in the blog, as a complete and comprehensive explanation at a level no other Premier League club has done before.
The need to explain this expenditure is threefold; firstly there is the long standing mystery over a line in Everton's accounts which is described as "other operating costs", secondly there appears to be a degree of confusion over the money received from Arsenal, as a result of the sale of Mikel Arteta, and the general level of expenditure on players overall and thirdly it is clear that Bill Kenwright is unable to explain anything except for the well rehearsed sound bites delivered through disingenuous interviews.
Other Operating Costs
One reason for the question, "where's the money gone Bill?" are these mysterious and unexplained other operating costs. The only people we know who repeatedly mention the possibility that somebody has their fingers in the till is Bill Kenwright and Robert Elstone, nobody to our knowledge has suggested this so we can only assume it's yet another tactic to stop people talking about the other operating costs.
The answer given for £24m of Everton's expenditure is simply misleading and insufficient. The questions being asked involve not just the level of expenditure [one of the many attempts to explain it focused on the similarity with other Premier League clubs, which is true, Spurs for example state their other operating costs as £35m] but, more specifically, the sharp rise in the accounts of 2008, an increase of 95% over the previous year.
This incredible increase of £11m was explained in the 2008 accounts as thus, "Further significant increases in operating costs were also incurred in the year following the opening of the new Finch Farm training facility." These operating costs have stayed at this level ever since; in fact they've risen by a further million, so over the four years we're talking about additional expenditure of £46m; an absolutely incredible sum of money we think you'll agree.
In 2007 "other operating costs" were £12m. The operation of Bellefield and the academy facilities cost less than £3m. With the greatest of respect, it does not cost £14m [£3m +£11m] per annum to operate a leased building and some fields and the explanation in 2008 was grossly inadequate. Take a hard look at Robert Elstone's 2012 explanations; how many of the costs, he describes, are applicable to Finch Farm as specified in the 2008 accounts?
The explanations for the 95% increase in costs have been varied; from medical equipment and supplies, to lawnmowers, to carpets. We are fully aware that lighting rigs and their UV bulbs cost an absolute fortune [you can see how many Goodison has; they're parked where the Goodison Place development should be]; but let's not pretend that Robert Elstone's explanation of this massive increase in expenditure is "complete and comprehensive"; it remains far from it.
Elstone: 'Costs such as the maintenance of Goodison, utility bills, rates, insurance, police costs, security, travel, marketing, food and drink bills in our lounges, academy, scouting and medical expenses were all present in the 2007 accounts and the many and varied explanations simply does not explain the 95% increase in a single year.'
These many and varied explanations are what brings about and increases suspicion over what is contained within those costs. KEIOC tell us that the suspicion over Kirkby was intensified when finances and costs were unexplainable and the suspicion was warranted when the truth over the plan was revealed during the public inquiry.
Player Expenditure
Many fans may have raised an eyebrow at Robert Elstone's explanation that David Moyes has received a net transfer sum of £35mover the course of the last five years, it's actually not beyond the realms of possibility that Mr Moyes would join them. However, one look at the accounts proves that this figure is correct. The cashflow statement in the accounts from 2007 to 2011 confirms Robert Elstone's explanation; the difference in the purchase and from the proceeds of the sale of intangible fixed assets [players] is indeed £35m, so it must be true, mustn't it?
Ask any Evertonian, journalist, or any football fan on the planet, what was the value of players bought by Everton last season and you'll get the same answer; nil, nothing, nada.
Ask Robert Elstone however and he'll tell you £11m; because, as CEO, he'll talk about spend and that's what is in the accounts. The accounts record the money that is being paid out on staged payments for players, they're historical records that do not represent what is happening on the pitch because, whilst the arrival or departure of a player has an immediate effect on the team, buying or selling has a delayed effect on the accounts.
The fact is Everton, irrespective of what the accounts say, have bought nobody for two years until the recent £500,000 signing of Darron Gibson. The squad is made up of ageing players, loan players, bargain buys and products of the academy that rarely play; that is why Evertonians describe it as a threadbare squad and it is no doubt something that a prospective owner will need to address as the current owners are unable to provide the resources to tackle the problem; their plan is to get somebody to say it doesn't exist.
The blog conveniently uses the combined five year cashflow figures on how much was spent on intangible assets to disguise the facts. And the facts are that we've underinvested in the squad for the past two years and we have the smallest squad in the division. Using historical financial activity to explain what is happening at the moment is fooling nobody. We have been champions of England on nine occasions and we are the fourth most successful in the country; does that mean we're going to win the league anytime soon? To find the answer to that question you wouldn't ask an accountant.
Robert Elstone makes a concerted effort to explain away the facts behind the sale of Mikel Arteta; he ignores facts such as the Mikel Arteta interview were he alluded to Everton's need for money, he ignores the leaked emails from the summer where Ian Ross is saying we need to sell players and he ignores the fact that even David Moyes himself believes the Mikel Arteta money went to the bank and he thought everybody knew!
The predictable accountancy explanation for the rapidly disappearing Arteta money becomes embarrassing when the blame gets laid at everybody's feet other than those responsible; including a ridiculous claim that income is being sabotaged by some unknown and unnamed party.
In paragraph eight of the blag the increasingly desperate Robert Elstone explains that the £35m spent on players was partially funded by the sale of Bellefield; but in the 2010 accounts Everton's company secretary, Martin Evans, who is legally and professionally obliged to give an accurate account of proceeding at Everton, stated that the money from the sale of Bellefield went to the bank.
It would appear that Mr Elstone, in his eagerness to protect the chairman and the board, is at odds with the statements of players, fellow employees and even the manager himself. The balance of evidence would appear not to favour his explanation.
Our colleagues from KEIOC inform us that three years ago they predicted the exact financial situation that Everton finds itself in now and when they put the scenario to Robert Elstone he informed them it would never happen because Everton employed experts. Experts in what field exactly wasn't explained.
Robert Elstone concludes that his blog is the complete and comprehensive explanation of Everton's financial position, but it's not; it's just an accountant's version of events and this is another. We'll leave it up to you to decide whose is the more accurate. Our position is that Robert Elstone is using historical facts to camouflage the true financial position of Everton Football Club.
The ambition of Robert Elstone and this board is exemplified in their belief that sixth is representative of success; well the Everton we all follow has the motto Nil Satis Nisi Optimum, not Nil Sixth.
The objective of the blog is to move attention away from the root cause of Everton's problem; the board, comprising of Bill Kenwright, Robert Earl, Jon Woods and Sir Philip Carter. The role of the board is to provide resources, ensure corporate governance and set strategy. Everton's board provides no resources, either through strategy, that would generate income, or through personal investment that would be designed to encourage commercial growth. A study of owners financing of mid-table clubs over five years reveals Bolton £85m, Sunderland £125m, Aston Villa £138m, Wigan £50m, Fulham £75m, Newcastle £140m and Everton absolutely zero.
Everton's board has invested nothing; not only over those five years, but over all the years they have been in power; years that have resulted in the clubs decline. They have no strategy except to sell the club and, with regard to ensuring corporate governance, some shareholders have been attempting to examine the actions of the board, if any, by requesting the minutes from the alleged board meetings; unsurprisingly, to date, the club have not been forthcoming.
The explanatory blog is indeed full of facts from the company accounts; well here's a few more facts from the accounts that have been left out. During Bill Kenwright's tenure there has been over £55m wiped from the balance sheet whilst the net debt has more than doubled to £47m, all assets have been disposed of or mortgaged, millions have been wasted on abortive stadium relocation schemes and accumulative losses of more than £54m have been limited only through the sale of inherited assets such as Rooney, Dunne, Jeffers and Bellefield.
We believe that our simple solution can put an end to what is a tragedy for all matchgoing Evertonians. We're asking Bill Kenwright to do the right thing for the club for once, the club he tells you he loves but is clearly running into the ground.
It's Time For Change.
The Blue Union'
The next Blue Union meeting is next Wednesday 25th Jan 2012 7pm at Casa, Hope St
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