WHERE THE MONEY GOES

I spent almost two hours before the Swansea game with representatives of the Shareholders Association answering questions on the Accounts. I spent time at the fans forum just before Christmas talking through our numbers. I have looked back through my blogs and see how weve explained on many occasions our finances, our debt levels and our relationships with lenders. We have also explained how we generate our money and where we spend it. I recently presented a review of our 2011 financial results to the media and to our fans on EvertonTV. Ive been through the ins and outs of our finances many times and I honestly dont know any other Clubs and organisations that stand up and respond to that level of scrutiny. Everton accepts the close scrutiny of its fans. Contrasting with others, we stand up to that accountability. Fans have a right to know about their Club and we respect that. And almost all our fans respect theres a right way to go about getting the answers they want. One question we regularly get asked and one question thrust into the face of the Chairman last weekend is wheres the money gone? The answer is within our audited and publically available accounts but that response, the response fans might get back from some Clubs, we know isnt the one you want. And we want to be more helpful so let me run through it again. Heres where Evertons money has gone..................

SUMMARY OF THE FIVE SEASONS TO MAY 2011

Over the past five seasons, Evertons annual income has increased by over 60%, from 51m to 82m. In those five years, we have generated 368m, the 8th best in the Premier League. Motivated by nothing other than being more competitive on the pitch, much of that increase has been spent on an ever-increasing wage bill, from 38m in 2006/07 to 58m in 2010/11 - a cumulative wage spend of 244m, the 10th highest in the Premier League, representing 66% of every penny we earn. Over that period, as a result of being better than our rivals at negotiating, recruiting, signing, preparing and coaching players, weve finished an average of 6th, an enviable performance. I make no apologies for asking you to re-read this paragraph. Other operating costs over the five year period, everything other than wages, including the maintenance of Goodison and Finch Farm, our utility bills, rates, insurance, police costs, security, travel, marketing, food and drink bills in our lounges, academy, scouting and medical expenses and many other costs have totalled 104m. In addition, we have paid 19m of interest and finance charges to our lenders. It means before buying any players, making the relatively small repayments on our long term mortgage, investing in new technology, furniture and fittings, we have broken even. The money weve brought in has paid our wages, our overheads and expenses and the interest on our borrowings. More precisely, over five years, we have generated a 1m cash profit to fund buying players. Of course, weve spent much more than this buying players. Over the same five-year period from June 2006, Everton paid out 94m (including agents fees) on a stream of internationals like Johnson, Lescott, Howard, Jagielka, Baines, Yakubu, Fellaini, Bilyaletdinov, Distin and Heitinga. The Club sold Davies, Beattie, McFadden, Johnson and Lescott and raised 59m. And, accordingly, after all ins and outs, a net 35m has been spent buying new players. Across these five seasons, weve also spent a further 3m on capital equipment, things like lawn mowers and lighting rigs, computers and carpets, timelines and technologies. So how have we paid for 35m of players and 3m sundry equipment? Its a simple answer - Bellefield and more borrowing. The Clubs net debt has increased from 22m in June 2006 to 45m in May 2011. At this point, one or two of you might be saying stop spending?

It can be difficult even for the best of us to get a grasp of finances so maybe the table below, covering the most recent five seasons in total, helps. It shows where every penny has come from and where every penny has gone.

MONEY IN
Matchday, commercial and broadcast income Selling players Bellefield Working capital Increased borrowings 368m 59m 9m 5m 23m 464m

MONEY OUT
Wages Buying players Other operating costs - all overheads and expenses Interest and finance charges Purchase of sundry equipment 244m 94m 104m 19m 3m 464m

A SEASON-BY-SEASON REVIEW
Just so theres no stone unturned, and apologies to those who drop off, a season-by-season review goes like this: 2006/07 - we began 2006/07 on the back of an 11th placed league finish and with opening net debts of 22m. We finished 6th with income of 51m. Our wage bill rose to 38m representing 75% of our income, including new contracts for Yobo, Valente, Vaughan and Anichebe and after deducting all the other costs of running the Club we generated just over 1m before paying finance and interest charges on our borrowings. We spent 4m net on new players (money we paid out on signing including Kroldrup, Davies, Johnson and Lescott less money banked on the likes of Rooney, Bent, Kilbane and Davies) and we paid 3m of interest and finance charges. Borrowings increased by 4m to 26m. 2007/08 5th placed in the toughest league in the world and significant increase in our income to 76m. A large proportion of the increased revenues went to fund a wage increase of 7m, to 45m, including new contracts for Cahill, Arteta, Osman, Hibbert and Rodwell. Other operating costs increased by to 22m and we earned a profit of 8m. A significant part of the additional money brought in went on signing new players with a net spend of 15m (further money we paid out for Kroldrup, Johnson and Lescott and new spending on the likes of Howard, Jagielka, Yakubu, Baines and Pienaar, less the money banked for Davies, Kroldrup, Beattie, McFadden and Naysmith). We also paid another 4m of interest and finance charges. Borrowings increased by 11m to 37m. 2008/09 - 5th again and, as we all remember, an FA Cup Final. Income grew to 80m partly as a result of reaching the Cup Final. Wages rose to 49m with new contracts for Neville, Rodwell, Howard and Yobo. Other costs remained flat at 23m and we earned a profit of 8m. We spent 6m net on players (payments for Yakubu, Baines, Howard, Kroldrup, Lescott and Fellaini, less monies in for McFadden, Kroldrup, Beattie and Johnson) and again incurred 4m of interest. Borrowings again went up, this time by a modest 1m, to 38m. 2009/10 - an 8th placed finish and a 1m drop in income to 79m (Europa League income not quite replacing the prior year FA Cup income). Wages continued to rise by a further 5m to 54m including new contracts for Jagielka, Vaughan, Saha, Cahill, Rodwell and Coleman. Other costs increased by 1m to 24m and we earned a profit of 1m. We spent 3m net on players (payments out on Yakubu, Fellaini, Bilyaletdinov, Distin and Heitinga, less monies in for Johnson, Rooney and Lescott) and incurred 4m of interest. Borrowings were up by 7m to 45m.

2010/11 7th in the League and income up to a record 82m. Wages rose more rapidly to 58m, to 71% of turnover, including new deals for Baines, Arteta, Osman, Hibbert, Coleman, Anichebe and Jagielka. Other costs remained unchanged at 24m and we earned a small profit of 0.4m. We spent a further 7m net on players (money spent on Fellaini, Heitinga and Gueye, less cash in for Lescott and Pienaar) and incurred again, another 4m of interest. We also generated 9m from the sale of Bellefield. At the end of the season, borrowings remained static at 45m.

THE SEASON AHEAD AND THE ARTETA MONEY

We entered the 2011/12 season with the continued and valued support of a more demanding bank a phenomenon widely recognised. There is another, ever-more challenging, break-even budget for us all to meet, but with numbers that dont cover our finance and interest charges, approaching 5m, which we still needed to find. We remained confident, based on a strong squad, of another good season add up the cost and the value of the players on the back of the programme, or the team sheet for Spurs. This is not an ageing, threadbare squad, portrayed by some as amongst the weakest in the Premier League. Of course in last 48 hours the question Where Has the Arteta Money Gone? has been raised again. First thing to repeat is the bank didn't force the sale. The 10m instantly became 9m when we paid sell-on fees to Real Sociedad. Sadly, and despite a lot of hard work, 9m could become 7.5m by the end of the year with gate revenues dropping below budget (made even sadder by rumours of the sabotage of ticket sales, programmes and other matchday income). And 7.5m may well become 5.5m as our live TV appearances drop below the budget we set based on previous seasons appearances. Even if these attendances and TV appearances pick up, out of whats left, significant money has gone on new deals for Marouane Fellaini and Ross Barkley, weve brought in James McFadden, Marcus Hahnemann and Landon Donovan and our newest arrival, Darron Gibson. It feels like were getting the most for our money and whatever money is left will be stretched, squeezed and re-invested. The Chairman and the Manager have spent the last two months looking at several more potential acquisitions and as always, on all football-based matters at Everton, it will be the Manager making the decisions. In truth, the answer to the question is simple and we can add in money from other player sales. The money flows into Finch Farm in player wages, transfer fees, and the expenses of one of the countrys best training grounds and academies just look at the numbers and tables above. But whats behind the question is a lot more difficult. Constantly, relentlessly looking to improve our competitiveness on the field, but as always checked by the money in our pockets, the constraints imposed by our lenders and our responsibilities as custodians. A challenge, indeed a tension we seem to spend every waking minute managing. So that is our financial position explained - completely and comprehensively - in order to provide our supporters with every piece of financial information at a level we believe no other Premier League club has done before. Safe and enjoyable trip to those making the journey down to Villa Park and here's to three points.