Everton come unstuck with towering £111.8 m loss as Usmanov lurks in wings

By David Owen

January 15 – Everton have become the second Premier League club this month to report losses of more than £100 million. 

The Merseyside club actually outdid Chelsea in posting a pre-tax loss of a swingeing £111.8 million for the 13 months to end-June 2019. This compared with a loss of £13.1 million the previous year. The Londoners managed to lose £10 million less, or £101.8 million at the pre-tax level.

For the Toffees, who recently lured Carlo Ancelotti to take over as manager, it was a story of flat revenues, inexorably rising costs – in spite of efforts to trim the first-team squad – and, most of all, tumbling transfer profits.

These reached only £20.3 million this time around, against £87.8 million in 2017-18, when big names such as Romelu Lukaku and Ross Barkley had been offloaded. There was, however, no let-up in spending as the club pursued elusive success, with the likes of Richarlison and Yerry Mina arriving. While costs are spread over the length of players’ contracts, this has had the effect of pushing up amortisation costs. These stood at £95.1 million in the latest period, up from £66.9 million the previous year. The cash flow statement indicates that the club from the blue half of Merseyside has splashed more than £290 million on players in just the past two financial years.

With no European football, turnover at the club, which hopes in time to move to a shining new stadium planned for Bramley-Moore Dock, actually dipped by £1.5 million to £187.7 million. This was mainly explained by a near halving in revenue from “other commercial activities” – hospitality, catering and the like – though gate receipts also fell.

Usmanov in the wings

Sponsorship, advertising and merchandising revenue actually climbed more than 40%, or £8.35 million, to £29.1 million. This was mainly due to the former Arsenal investor, Alisher Usmanov, whose USM private holding company paid £12 million for naming rights to the club’s Finch Farm training complex, up from £6 million in 2017-18.

The club said that as well as retaining the Finch Farm rights, USM had “acquired the right to promote its group of companies across an enhanced suite of both digital and physical marketing assets”. Another Usmanov brand, MegaFon, is currently displayed prominently on the Everton website. Chief finance and commercial officer, Sasha Ryazantsev, has also disclosed that USM has entered a £30 million naming rights contract for Bramley-Moore.

Farhad Moshiri, the majority shareholder, is also a shareholder in USM. It looks like the amount owed by the club to Moshiri’s Bluesky Capital has now risen to £350 million. The balance-sheet at 30 June 2019 showed that “other reserves” had doubled during the year from £149.25 million to £298.5 million. A note to the accounts stated that this represented an interest-free £300 million loan from Bluesky, from which a £1.5 million arrangement fee had been deducted. The note on post balance-sheet events disclosed that since year-end Moshiri had provided further interest-free loans of £50 million. Since these loans are to be repaid at a date agreed by Bluesky and Everton, they have been classified as equity.

Payroll costs climbed from £145.5 million to £160 million, in spite of a reduction from 172 to 151 in the number of playing, training and management employees. The wage:turnover ratio now stands at a lofty 85%, though this is said to be “artificially inflated” by the change of year-end. This is said to have been implemented to better align the reporting period with “the seasonal nature of the industry”.

The huge loss has not prevented directors’ remuneration from jumping once again, from £2.49 million to £3.61 million, though the highest-paid director continued to receive £927,000. As Insideworldfootball reported last year, directors’ remuneration stood at £370,000 as recently as 2015.

Contact the writer of this story at moc.l1709589893labto1709589893ofdlr1709589893owedi1709589893sni@n1709589893ewo.d1709589893ivad1709589893