Everton’s latest set of accounts laid bare the financial reliance that the club has on majority shareholder Farhad Moshiri.
On Friday evening the club made public its financial statements for the year ending June 2022, with a loss of £44.7m recorded.
That figure was a £76m reduction on the losses seen in the previous financial year (2020/21) where a loss of £121.3m had seen the club rack up losses exceeding £370m. However, another loss-making year means that the club have now not turned a profit since 2017/18 and cumulative losses over the last four seasons stand at around £415m.
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The pandemic, the sanctions placed upon Moshiri’s long-time friend and business associate Alisher Usmanov that resulted in key sponsorship deals with the likes of USM and MegaFon being ended, and the need to continue ploughing ahead with a major financial commitment to the new stadium build at Bramley-Moore Dock were all factors in the club’s dismal financial performance in recent seasons.
However, poor recruitment and failing to have the correct people to lead the football side of the business resulted in poor performance which has exacerbated financial issues at the club.
Last season saw Everton stave off the threat of relegation eventually, with the focus for this campaign being one of ensuring that lessons were learned and the club didn’t have such concerns to contend with heading into the business end of 2022/23.
But another manager departed in January as Frank Lampard’s tenure came to a premature end, with Sean Dyche installed to try and lead the beleaguered club to safety.
Everton, at present, sit 15th in the Premier League and two points above the drop zone with 10 games remaining. While the outlook may be more positive around survival than it was in January, the threat of relegation to the Championship seems set to loom large over Goodison Park for some time yet at least.
Amongst the figures laid out and statements made, the reliance on Moshiri, who provided another £70m of financial support in the latest set of accounts, was underscored by the club as a ‘going concern’.
A statement in the accounts read: “The club remains reliant on the support of its majority shareholder, who has provided a letter of support to the board confirming the intention to provide ongoing financial support for a period of no less than 12 months from the date of approval of the financial statements but this does not represent a legally binding commitment by the majority shareholder.
“Collectively, the above conditions indicate the existence of a material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern. The board are confident that if the club is relegated funding will be secured or refinanced and that they will be able to achieve the levels of revenue and savings to allow the group to continue in operational existence for a period of 12 months after the date of signing these financial statements.”
Moshiri’s commitment to the Everton project, for the foreseeable future at least, remains intact. That commitment is likely being held firm by the heavy investment that he personally has made into the new stadium development, a project that requires additional funding for completion, funding that Moshiri may yet have to carry the can for if third party financing cannot be found. The club remains confident that the latter will be sought.
The club has produced two cash flow forecasts. One for the club retaining its Premier League status beyond the end of this season and another in the event of relegation to the Championship. The successful implementation of either remains dependent, at present, on the continued financial commitment of Moshiri.
Another passage from the club accounts said: “In assessing the appropriateness of the going concern assumption, the directors have produced detailed cash flow forecasts based on two scenarios, being 1 - considered to be the most likely - the club remaining in the Premier League or 2 - a severe but plausible downside - being relegation to the EFL Championship.
“In the event of the club securing its Premier League status, the board have assessed that there are sufficient facilities available to meet liabilities as they fall due. In a relegation scenario, the club would review its costs base, trading strategy and defer other planned discretionary expenditure in the short term to offset any likely reductions in revenue.
“Whilst the club has been able to secure longer term funding facilities during the year end 30 June 2022, some of these facilities include a covenant that assumes the club will remain in the Premier League, therefore the board have had to consider the scenario of relegation and the availability of these facilities in that scenario.
“The providers have indicated that they remain supportive to the group under each scenario. However, at the time of approval of the financial statements, there are no contractual commitments in place that would guarantee a waiver of the amounts payable in full or in part and therefore relegation would require a material repayment of debt as per the contract.”
While Moshiri’s letter to the board of directors stating his intention to continue to back the club financially allows for some forward planning, the club being so in thrall to the owner isn’t the financial position that would have been anticipated in the early years of his reign at Goodison Park.
For any would-be investor looking at making a play for an equity stake in the club, the heavy reliance on owner funding is something that they would likely want to see addressed, given the value of the club as a whole has not risen at the kind of rate seen by those that occupy the top six.
While the delivery of the new stadium would be something Moshiri would be able to hang his hat on as some kind of legacy, the ability for the club to stand on its own two feet and reduce its reliance on one individual in the coming seasons is of paramount importance.
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