Farhad Moshiri – GAME OF THE PEOPLE

THESE ARE grim days for Everton and they could get even worse. They are struggling to avoid relegation, under investigation for possible breaches of profit and sustainability rules and they are losing money on an annual basis. Furthermore, they have not won a major prize for close to 30 years. For a footballing institution once known as the “Bank of England club”, with 15 major prizes to its name, the slump into mediocrity is hard to take.

Everton lost £ 44.7 million before tax in 2021-22, their fifth consecutive campaign of losses, which brings the total to £ 420 million over five years. Since 2021’s £ 121 million deficit, the club has been on a cost cutting exercise that their status in the Premier League could have done without, but needs must. In 2021-22, the bottom line was assisted by a significant improvement in Everton’s player trading profits, rising from £ 13.2 million to £ 67.7 million.

Revenues, however, declined by some £ 12 million to £ 181 million, largely due to reduced TV money as the broadcasting cycle readjuste. In addition, sponsorship income dropped, partly due to the measures taken against the club’s Russian sponsors. Nevertheless, commercial earnings were up slightly to £ 50.3 million and matchday recovered to £ 15.6 million as restrictions implemented during the pandemic were lifted.

Everton’s cost management manifested itself in a drop in players’ wages by more than £ 20 million to £ 162 million, which amounted to 90% of income as opposed to 95% in 2020-21. The ratio has been too high for four years and way above UEFA’s optimal figure of 70%.

Also very high is the club’s net debt, which is now £ 141.7 million compared to £ 58.2 million a year earlier. This rise is attributable to expenditure on Everton’s new ground at Bramley-Moore Dock and additional transfer activity.

Everton’s management insists the club is in a secure financial position, but it does seem as though they are over-dependent on Farhad Moshiri to ensure the club is a going concern. Moshiri provided an additional loan of £ 70 million and overall, put in over £ 200 million through conversion of past lendings into new shares and equity. The club has a £ 150 million five-year facility with Rights & Media and a £ 30 million CLBILS facility with Metro Bank.

Aside from any shortcomings in their business model, Everton’s followers should be concerned about Moshiri’s comments recently about the club facing existential threats. One of those is obviously the recent referral by the Premier League, while the threat of relegation and the simultaneous development of the new stadium could place the club in jeapordy. Moshiri undoubtedly knows that if Everton drop out of the Premier, more cash will need to be pumped in. According to media reports, the club has a 12-month assurance that funds will be made available.

Some fans want Moshiri out of the club, but it has to be acknowledged that he has spent a lot of money since he arrived. He has been vocal about getting further investment into the club and ultimately, he will be looking to sell. Before that can happen, Everton may need to get their house in order and that also means getting clear of any controversies around financial fair play.

In the past five years up to 2021-22, Everton were among the top six spenders in the transfer market with a net spend higher than their neighbours, Liverpool. Over 10 years, they were in the top seven. They haven’t spent well and they have nothing much to show for their outlay. They are currently in 16^th place and by the end of the 2022-23 season, it will be three consecutive years below mid-table. Their last European campaign was in 2016-17.

They have 10 games to ensure they maintain Premier League status. Five of them – Tottenham, Manchester United, Newcastle, Brighton and Manchester City – are very tough, but when you’re in Everton’s position, all games are a big challenge.

IF THERE is a club that seems to have the walls closing in on them it is surely Everton, who are not only fighting for their Premier League lives but continue to lose vast sums of money. On top of that, the club has been badly affected by the sanctions on Russian oligarch Alisher Usmanov and, consequently, has a gap in sponsorship income.

There’s also continued lack of stability on the management front, with Carlo Ancelotti surprisingly leaving at the end of 2020-21 for Real Madrid, Rafa Benitez sacked after just a few months in charge and now former Chelsea manager Frank Lampard presiding over a run of poor results that have pushed Everton to the fringe of the relegation struggle.

Everton’s 2020-21’s financials show a third consecutive £ 100 million-plus pre-tax loss. Although revenues rose by 4% to a record £ 193.1 million, Everton lost £ 120.9 million, admittedly better than 2019-20’s £ 139.8 million and 2018-19’s £ 127.3 million, but still worryingly high. In four years, Everton have lost close to half a billion pounds, but investment made in infrastructure and academy football should help them keep below fair play and sustainability limits.

Everton’s wage bill has caught up with them and despite the big loss, players’ salaries increased by 11% to £ 182.6 million, representing 95% of earnings. In five years, the wage-to-income ratio has gone up from 61% to 95%, and Everton have little to show for their generosity. The club’s last major trophy was won in 1995, 27 years ago and the longest stretch in Everton’s history without a single piece of silverware.

Everton have been among the biggest spenders in the last five years, their gross outlay amounting to £ 483 million, making them the Premier League’s fifth biggest spender. In 2020-21, they had a net spend of £ 62 million, their biggest signings being Allan of Napoli (£ 21.7 million), Abdoulaye Doucouré (Watford £ 20 million) and Ben Godfrey (Norwich £ 20 million). Everton’s record in the market is questionable, witness the write-down of the book value of the squad and the increased provisions for burden-heavy contracts. The club also saw profits on player trading decline from £ 40.5 million to £ 14.8 million.

Despite making a strong start to 2020-21, Everton faded miserably and finished 10^th, enduring a dreadful home record in the Premier League. The malaise has continued into 2021-22, the 4-0 thrashing at Crystal Palace in the FA Cup being the latest setback.

The 2020-21 season was characterised by an almost complete lack of fixtures involving spectators, hence Everton’s matchday revenues fell 98% to £ 0.2 million. Only three of the club’s Premier League home games were played before a crowd. Fortunately, broadcasting bounced back by 49% to £ 146.4 million but the commercial stream was down by 38%. In response to Russia’s invasion of Ukraine, Everton have had to sever all connections with Usmanov’s companies USM, Megafon and Yota. This has cost the club some £ 20 million. The pandemic has been responsible for around £ 170 million of lost earnings although this figure could eventually head north of £ 200 million.

Everton’s net debt went up from £ 2.3 million to £ 58.2 million which was attributed to the investments made in the first team squad and the new stadium. The club has had to be buoyed by a £ 100 million share issue, providing new funds from the major shareholder and since the 2020-21 year-end, another £ 97 million was made available. The club has also secured a five-year facility with Right and Media (£ 90 million drawn), which includes a charge on club assets, and has also taken out a £ 30 million government-backed loan, repayable over three years.

The future revolves around the new Everton stadium at Bramley Moore Dock, but the situation in Ukraine means the original plan to name the ground after Usmanov has been shelved. The club insists its financial position is very secure thanks to stringent cost-cutting and the unwavering support of Farhad Moshiri, but they still has a very heavy cost base. All the more reason to ensure Premier League status is retained for 2022-23 – relegation would surely be a significant blow to their plans.