Everton FC AGM 2006 Minutes

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The AGM

15 Dec 2006As the clock approached the hour of seven in the evening, out they emerged – from aBoard meeting – chairman Bill Kenwright, his fellow directors, team manager DavidMoyes and Damien Saunders, from Deloitte and Touche. “Don’t Feel Like Dancing”,from the Scissors Sisters, booming from the pa system, gave way to silence as thegathered shareholders settled down, waiting for the chairman to commence with the proceedings.Mr Kenwright opened the meeting by asking for all present to think of all the goodthat Brian Labone brought to Everton Football Club. “God bless you, Brian…”

Director’s Report of Financial Statements

After apologies were read out from those who were unable to attend the AGM, Mr Kenwright opened with the first item of business: to receive the Director’s Report of Financial Statements for the year ended 31 May 2006. Customary for the chairman tolead the shareholders through the accounts, Mr Kenwright stated that he was “prettygood with money but terrible at looking at figures!” However, he promised to do better this year…“I know this is stating the obvious but the Board believes, as I’m sure do all of you,that success of this football club can only be achieved through constant investment inour playing squad. I mean constant investment when we can. Whilst at the sametime, improving the running of the club through operating more efficiently andgenerating additional revenue streams in whatever way we can. That is just a personal statement that everyone at this table concurs with."In the current year we have increased our commercial income together with reducingour other operating expenses and nett interest payments. However, these gains have been offset by investing in players and the loss of Sky revenue. In summary the Clubgenerated an operating profit before player trading of £3.1M. This was achieveddespite a fall in broadcast revenue of £3.2M and an increase in the total wage bill of £6.2M, primarily due to the investment in players. Remember we made seven newsignings at the start of that season and £4M of the £6.2M went on additional player salaries, which I think is pretty good for seven new signings."We talked about amortisation last year, how each year we have to take, of a contract,a certain amount of that contract – if it’s a four year contract, we have to take aquarter each year off, on each players’ contract. The inclusion of the amortisation of the players’ registrations of £11.4M means that in the current year the Club isreporting an operating loss of £8.4M. That’s obviously a direct consequence of thedecision to invest in the playing squad. Quite simply, £11.4M minus £3.1M, which isthe trading profit, is an £8.4M trading loss. [

Pedants need not note incorrect mathematical subtraction!

] The profit and loss account on page 13 highlights thatturnover this year stands at £58.1M. This is obviously a decrease of the £60Mreported last year but you’ve got to take into consideration that we dropped £3.2M on

broadcasting revenue and we had picked up some of that on generating year onincreases, thanks to Evertonians, in gate receipts and sponsorships of £1.8M.Operating expenses, excluding again the amortisation of players’ registrations haveincreased by £5.6M to £55.1M."I would just like to remind you that two years ago we were always looking at £40Min these figures, so there is quite a dramatic rise. As discussed earlier, this is principally due to a £6.2M increase in wages, together with a £900k reduction in other operating expenses. If you want to have a detailed analysis of this refer to note 3 on page 19: £6.2M minus £900k is £5.3M. So we go back to the operating loss of £8.4M and we add the annual nett interest charge, that’s the charge on thesecuritisation, ie, the mortgage we took out four years ago, of £2.2M. You add afurther loss on the disposal of players’ registrations, of £402k. That is, when we putin a player at say £1M in our players’ bible and we only get £600k for him, we’ve lost£400k. And a profit on sale of fixed assets of £200k the accounts show a pre-tax lossof £10.8M for the year."So that’s £8.4M plus the £2.2M interest plus the £402k that came in on overvaluingone of the players, minus £200k that we profited on fixed assets. The fixed assetsinclude £20.6M of intangible assets representing the nett book value of player registrations. You have to remember that this is the end of last season — so there’s noAndy there, there’s no Joleon Lescott there. And also there are no homegrown players, such as Vaughany, Victor, Hibbo, Leon Osman. So, without them, we werevalued at £20.6M for the playing squad. I should think it’s got a much much bigger value now."Creditors falling due within one year currently stand at £26.3M at the end of the year compared to £17.2M in 2005 — a £9M difference. However, this is not a £9Mdeficit. If you remember at the start of last season we opened the season ticket boxoffice earlier and we had the large proportion of that £9M, in season ticket income, sothat wasn’t actually owed, it’s owed to you and we pay you back by actually playingthe games. Another slice of it was better more prudent financial control, so we ekedout some payments. So that was not a deficit of £9M. It was advance season ticketsales and proactive cashflow management. Group borrowings of £28M are includedwithin the creditors falling due after one year. This is principally the securitisationthat we took out. And if you remember that was to be paid back over twenty-fiveyears and there’s twenty-one years still to go on that. I think that’s the end of thesummary of the accounts.”The chairman then asked the meeting for questions relating to the accounts. RichardLewis asked about the payments being made to Houston Securities, the companyowned by the Gregg family. Mike Cheston, in reply to Mr Lewis’ question told usthat Houston Securities is one of the companies that the Club use for propertytransactions. Other companies are used but Mr Cheston didn’t go into detail. Mr Kenwright added that Houston Securities had been very helpful with matters likeBellefield and had aided with Finch Farm.Mark Denny questioned the true debt of the Club, citing an article recently printed inthe

Liverpool Echo

, who claimed Everton’s true debt was £21M. Mr Kenwrightclaimed he’d not seen the aforementioned article. Wanting to know why the

Echo

peddles it as fact, the Club debt being £21M, could the PR people at Everton not put itright? Despite explaining it further, in detail, no real comment came from the toptable.A question about wages against turnover, outlining the increase from 51% (2005) to64% (2006), was put to the chairman, the shareholder asking was it sustainable.Acknowledging the obvious dangers the chairman went on to state that, if needed, hewould push that percentage higher, “I for one would support going higher than 50% if it was necessary.” Mr Kenwright was at pains to state how tight Everton were withwages, claiming that the Club were the best negotiators in the Premier League! “It’s a problem in as much as wages are a curse in football and a huge problem, gettingworse and worse. We have to live with it and we have to find ways of making it work for us — for you, for me, for everyone.”Mr Kenwright then invited Damien Saunders from Deloitte and Touche to read theAuditors Report and the formalities of adopting the Directors Report and financialstatements were passed. As was the reappointment of Deloitte and Touche as auditorsto The Company.Mr Kenwright then stepped aside to allow deputy chairman Jon Woods oversee thereappointment of Bill Kenwright as chairman of the Company, with the chairman being returned after a show of hands.Mr Kenwright then declared the meeting officially closed and invited the CEO KeithWyness to make his presentation.

Presentation by Keith Wyness, CEO

Before Mr Wyness could commence with his presentation a question was asked byFrank Hargreaves on the issue of the minutes of the meeting. Would questions fromthe floor be minuted in the official records? The chairman didn’t know. Mr Hargreaves highlighted the fact that questions from the shareholders were not minutedand commented on the chairman welcoming the media earlier in spite of a number of people, when asked by the Chair, objecting to their presence. Mr Hargreaves wantedclarification from the chairman that all comments from shareholders, before themeeting was officially closed, would be minuted. The chairman questioned Mr Hargreaves belief that this doesn’t happen. As we will see with the release of nextyear’s Annual Report it remains, as ever, that questions from the floor are notminuted. Mr Hargreaves didn’t get a proper answer from the chairman, on his pointthat shareholders questions would be included in the minutes.Mr Wyness began his presentation to the meeting by informing the gathering thatthere’d not be as much detail this year — no bubble charts! Shame, I was lookingforward to an increased Evertonian bubble dwarfing Southampton’s! He thanked thestaff at the Club for their hard work, their diligence during a time of dramatic changein the organisation at the Club. He invited his deputy, Robert Elstone, to detail someof the changes made over the past year. Mr Elstone showed us a progress reportdetailing problems the Club had with our Retail.

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