The sale of Richarlison to Tottenham Hotspur is predicted to significantly improve Everton's financial outlook for the 2021/22 financial year, a report has claimed.
Analysts at respected football business website Off The Pitch have analysed the finances of clubs in the Premier League and made their forecasts for the 2021/22 financial year, one that ended in May for some clubs and June for others, Everton falling into the latter category.
Heading in to the final day of their financial year on June 30 there was an acceptance that in order to mitigate their losses and bring themselves under the threshold for acceptable losses by the Premier League then a key asset would have to be sold.
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Richarlison ended up making a £60m move to Tottenham Hotspur, £50m of that guaranteed, with the deal done before the close of play on June 30 that meant the £50m could be accounted for in the 2021/22 financials. According to the newly published report the sale of the Brazilian has significantly changed the financial outlook for the Toffees.
The report forecasts that Everton will post pre-tax losses of around £59.8m. While that figure may seem extraordinarily high, in the context of their previous losses and work done to manage their payroll costs, as well as other clubs suffering far more in terms of losses, with Leicester City forecast to lose around £120m for the 2021/22 financial year, it is progress for the Toffees.
Previously the Premier League regulations over profit and sustainability had allowed clubs to make £105m in losses over a three-year period. Everton, over the last three years of published accounts, have lost more than £370m.
The impact of the pandemic meant that some Covid-related losses could be written off when considering the £105m cap, while the period was extended from three to four years and 2019/20 and 2020/21 rolled into one big financial year and the average over the two years used, meaning that stood at £130m.
Crucially for Everton, whose revenue is forecast to fall slightly below the £193.1m achieved in for 2020/21, they were able to include the £13m losses from the 2017/18 season. Factoring in all losses and the average over the new period, allowing for Covid losses and expenditure on infrastructure and women's football, among other things that don't count towards P&S and Everton's losses are likely to fly well under the £105m threshold.
That, allied with the disposal of some big wages through the exits of James Rodriguez, Lucas Digne, Richarlison, Gylfi Sigurdsson, Cenk Tosun and Fabian Delph means that Everton have been emboldened to enter the transfer market with more confidence and ability to manoeuvre than they had last summer when just £1.5m was spent, all of that being on Demarai Gray.
The report forecasts that commercial revenues will rise from £46.5m to £48.9m, a new club record, while matchday revenues will return to pre-pandemic levels at around £14.9m, up from the £0.2m that they were in the last accounts that included a full season of the Premier League played behind closed doors.
There were factors working against Everton in this period, most notably a reduction in the broadcasting revenues after the rebates that were accounted for in the last financials, while severance payments to Rafa Benitez would also being included as well as the issue over the exit of USM Holdings and MegaFon as club partners following the sanctioning of owner Farhad Moshiri's long-time friend and business partner Alisher Usmanov following Russia's military invasion of Ukraine and Usmanov's historic ties to Russian president Vladimir Putin.
The 2019 Off The Pitch report, the last report produced before Covid, claimed to have been '99.9 per cent accurate' when compared with the audited figures that came out.
According to the Off The Pitch report: "The forecasting method was based on incremental changes from the previous accounting year. Thus, for the 2021/22 forecast we use the respective 2020/21 figures adjusted for whatever changes happened during the accounting year of 2021/22.
"Several 2020/21 figures are severely impacted by the Covid-19 pandemic compared to 2021/22 which prompts us to take figures from pre-pandemic years into consideration as well. In case subsequent events and their financial impacts are reported in the financial statements, they overrule any given estimates made by Off The Pitch or constitute the baseline of further adjustments.
"Turnover estimates are based on the officially reported Premier League, FA and UEFA payments as well as values of e.g. new sponsorship deals reported from reliable sources. Wages are estimated based on newly signed contracts, departing players and managerial changes."
Off The Pitch also state in the report that they shared their findings with each of the 20 member clubs prior to publishing in order for discrepancies to be flagged and feedback to be given.
Total Premier League turnover is predicted to a new record high of £5.4bn in 2021/22, up by almost £250m compared to the latest pre-Covid figure in 2018/19, which was the previous all-time high. However, the clubs are set to accumulate the highest pre-tax losses ever of £600m in a non-pandemic impacted year.
The biggest loss in the Premier League is predicted to be seen at struggling Leicester City, with the report forecasting a £120m loss for the Foxes when they publish their annual accounts for 2021/22. Arsenal and Chelsea are both forecast heavy losses in excess of £80m each.
Mads Meisner Christensen, co-founder and CEO Off The Pitch, said: "While fans, sponsors, players, and other stakeholders have to wait almost a year before the financial reports are released, our forecast sheds light on the financial state of the 20 clubs shortly after closing of the accounting period.
"Our report gives insight into a lot of important questions: Who could fall into financial fair play problems? Who has seen the biggest wage bill increase? Why was Leicester absent in the transfer window? And much more.
"We hope that by doing this report we can contribute to a bit more transparency in football."
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