Everton are set to publish their accounts for the 2021/22 financial year on Friday.
The Blues' accounts will now arrive against the backdrop of allegations against the club by the Premier League that the Toffees breached the League’s profit and sustainability rules for the 2021/22 period, something that has now been referred to an independent commission. Everton refute the allegations.
Everton have been under the watchful eye of the Premier League in relation to P&S for some time, the club having posted losses of more than £370m over the past three years, way above the permitted £105m for the same period.
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The stance from Goodison Park has been that they have been in regular contact with Premier League chiefs over their P&S position and that they were remaining compliant. A club statement in response to the allegations stated that they would ‘robustly defend’ their position to an independent commission.
“The club strongly contests the allegation of non-compliance and together with its independent team of experts is entirely confident that it remains compliant with all financial rules and regulations,” read the statement.
But with the fresh set of 2021/22 accounts to be made public having been through the auditing process, what can be expected when compared to the 2020/21 accounts?
Everton recorded a loss of just under £121m for the 2020/21 season, a season that was significantly impacted by the coronavirus pandemic and the lack of fans in stadiums. The club attributed as much as of losses in the 12 months to June 30, 2021 to the global health crisis.
Everton, in the early part of 2022, severed ties with companies associated with the friend and long-time business partner of owner Farhad Moshiri, Alisher Usmanov. The sanctions placed upon Usmanov in the wake of Russia’s military invasion of Ukraine and the historical relationship between the Uzbek billionaire and Russia president Vladimir Putin, saw valuable sponsorship deals with the likes of USM and MegaFon come to an end.
The club also had to undergo a period of austerity due to their P&S issues, spending just £1.5m in the summer of 2021 under Rafa Benitez and selling assets such as Lucas Digne, as well as parting ways with the likes of big-earning James Rodriguez.
Losses are expected for the latest set of accounts to be published, although they are likely to be significantly reduced from where they were in the last published financials.
Back in September a report published by football business website Off The Pitch predicted that Everton would post pre-tax losses of around £59.8m for 2021/22. While these figures are estimates the results that have been published by clubs since Off The Pitch’s ‘Financial Forecast Report’ have been close in relation to the forecasts made. Liverpool’s, for example, was predicted to be £602m in revenue and came in at £594m, a club record.
Revenue is predicted to fall slightly below the £193m that was reported last year.
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 former boss Benitez would also being included as well as the issue over the exit of USM Holdings and MegaFon.
One thing that has allowed Everton to reduce losses is the sale of Richarlison to Tottenham Hotspur last year, a deal that was done a day before the end of the 2021/22 financial year that allowed for the Goodison Park club to book the initial £50m from Spurs straight on to the balance sheet. Unlike with the signing of players, where transfer fees are amortised over the life of a contract for accounting purposes, the selling of a player can see the profit realised immediately on the balance sheet.
In 2017, Everton's revenue from matchday, broadcasting and commercial income stood at £171m, fast forward five years and it stood at £193m last year, a rise of 13 per cent. Wages and amortisation had increased by £97m over the last five years, while revenue increased by £22m. One has not kept pace with the other, something that Everton need to turn around, and something that they will be hopeful that a completed new stadium at Bramley Moore Dock in the future will help them deliver.
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.
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