Record losses, partly attributed to Covid, Moshiri’s funding plans & stadium finance update

An assessment of Everton's accounts for 2019-20

Paul The Esk 12/11/2020 18comments  |  Jump to last

Record losses, partly attributed to Covid, Moshiri’s funding plans & stadium finance update

There are two headlines from today’s release of the report and accounts to June 30 2020. One is a record loss of £139.9 million of which the club attribute £67.3 million directly to the impact of Covid-19. However, that fails to acknowledge underlying losses of £72.6 million resulting from expenditure remaining much higher than income.

The second item of note is the continued financial support from Farhad Moshiri, £350 million up to the end of the accounting period, a further £50 million in November 2020, and a commitment to further fund the club through a placement of new shares, more of which below

Financial Year 2019-2020


£m2019/202018/19*Change %
Other commercial12.311.705.13

Broadcast revenue reflects the following: 31 out of 38 games played in the period so only reflects the pro-rata revenue. The revenue from the remaining 7 games will appear in the 2020/21 accounts

Matchday reflects the absence of supporters from the March lockdown onwards

The club are making big claims on the increase in commercial income. Whilst no doubt commercial income has increased, these figures include the £30 million received from USM in relation to the naming rights option. Remove the £30 million (which is a one off payment) and commercial income has grown by 12%, a reasonable performance but still relatively low if the objective is to catch up rivals.

The accounts show a total loss of revenue arising from Covid-19 at £33 million (plus £34 million of associated costs, see below)

Operating expenses

2019/20 2018/19* Change £m
Staff costs 164.8 160 4.8
Other operating costs 33.1 43.1 -10
Depreciation 6.9 6.5 0.4
Operating costs pre player/management trading 204.8 209.6 -4.8
Bramley-Moore costs 19.9 7.2 12.7
Provision for onerous contract 4.4 0 4.4
Pension revaluation 0 0.5 -0.5
Operating expenses and exceptional items 24.3 7.7 16.6
Operating loss pre player/management trading -43.1 -29.6 -13.5
  • Staff costs increase by £4.8 million to £164.8 million (88.6% of turnover)
  • Other operating costs fell by 23% to £33.1 million
  • Bramley-Moore costs £19.9 million reflecting planning application, revised design and preparatory expenditure
  • Operating loss increases by 45.6% to £43.1 million

Profit/(Loss) including player trading

£ millions 2019/20 2018/19* Change £m
Staff costs 164.8 160 4.8
Other operating costs 33.1 43.1 -10
Depreciation 6.9 6.5 0.4
Operating costs pre player/management trading 204.8 209.6 -4.8
Bramley-Moore costs 19.9 7.2 12.7
Provision for onerous contract 4.4 0 4.4
Pension revaluation 0 0.5 -0.5
OC and exceptional items 24.3 7.7 16.6
Operating loss pre player/management trading -43.1 -29.6 -13.5
Operating loss pre player/management trading -43.1 -29.7 -13.4
Amortisation -99.2 -95.1 -4.1
Impairment of player registrations -26.3 -2.5 -23.8
Amount payable to former employees -6.6 0 -6.6
Profit on player trading 40.5 20.3 20.2
Statutory loss before interest & tax -134.7 -107 -27.7
Interest and tax -5.1 -4.9 -0.2
Statutory loss -139.8 -111.9 -27.9
Loss directly attributable to Covid-19 67.3 0 67.3
Underlying loss -72.5 -111.9 39.4

Onerous contract charges of £4.4 million relate to the re-valuing of an existing contract due to Covid-19. Contract unspecified by club due to commercial confidentiality

Amortisation increased to £99.1 million reflecting continued investment in the playing squad

The value of player registrations dropped by £26.3 million reflecting the lower value of players in the Covid-19/post Covid world

Marco Silva and his staff’s departure cost £6.6 million

Player trading profit increased to £40.5 million through the sales of Gueye, Lookman, Vlasic and Onyekuru

Interest and tax costs £5.1 million

Statutory loss of £139.9 million of which the accounts claim £63.3million is directly attributable to Covid-19. This is calculated by the £33 million loss of revenue plus the impairment charges

Whilst the club is right to highlight the impact of Covid-19 on revenues and the additional costs in terms of impairment, it should not escape anyone’s attention that even without Covid losses since Moshiri acquired 49.9% in February 2016 amount to more than £190 million despite over £210 million in player trading profits. Add in Covid and that rises to more than £250 million.

What is clear is that costs continue to outstrip income. This arises from the legacy of 2017/18, the failure to increase commercial income beyond that of USM, and the ongoing costs of Bramley-Moore. When planning permission is eventually granted those costs will be capitalised and will improve the Profit and Loss account by some £40 plus million.

How have we funded such losses?

We have funded the losses from three sources

  • Player trading (see above)
  • Shareholder loans
  • External debt

I have already noted the £210 million in player trading profits since Moshiri arrived in 2016.

Since his arrival (to the date of the accounts 23 November 2020) Moshiri has provided the club with a total of £400 million in shareholder loans.

External debt (partially as a result of Covid) has grown too

  • £40 million secured against future broadcasting revenue supplied by Rights and Media Funding
  • £18.7 million through Metro Bank through the The Coronavirus Business Interruption Loan Scheme

Connected Parties

Those that read the detail of the accounts may notice that USM no longer appear as a connected party in the accounts (due to Moshiri’s shareholdings in USM and Everton). Moshiri’s shareholding in USM has changed to the extent that USM are no longer considered to be a connected party to Everton. As a result the accounts will no longer detail the degree of financial support USM provide Everton.

Moshiri’s continued financial support

The club announced their intention to issue new shares to Farhad Moshiri through Blue Heaven Holdings Limited. The shares will represent up to £250 million reflecting his previous loans and his recent commitment to a further £50 million injection in November. As a result (including the November injection) at least £100 million will have been provided and up to £150 million of existing shareholder loans will be converted into shares. At a price of £3,000 a share Moshiri’s shareholding in the club will increase to above 90% assuming he takes up the full placement offered. Moshiri continues to support the continued holdings of smaller shareholders and I am informed that intention will not change.

It should be noted also that the financial support is directly from Moshiri, it is not of Usmanov’s doing, Moshiri should be given the credit for his financial commitment.

Bramley-Moore Funding

The club continue to make progress on the funding package for Bramley-Moore. Ostensibly there are two options, the type of construction funding used by Arsenal and Tottenham Hotspur in the early days of their stadium financing – so called construction funding (before converting to long-term debt) or as Everton hope, to be the first club to achieve long term funding through private placement during the pre-construction/construction phase. The club is currently completing their due diligence obligations to potential lenders through JP Morgan and Mitsubishi Bank. When completed the club will have access to draw down facilities to be used through the construction progress. It is hoped that the interest costs of such lending will be capitalised until the stadium is operational (a standard practice on construction lending, less so in the private placement market). If Everton achieve a private placement in the pre construction/construction phase it will be highly innovative.


It is clear that Covid-19 has impacted the financial performance of the club in the year 2019/20. That impact will continue to be felt in 2021/21. However it is also clear that even in normal conditions the club continues to have costs greater than income. This can only be addressed by reducing the number of unproductive players previously acquired plus a much greater concerted effort to build revenue streams around the globe, even in a post Covid world.

The issue of Premier League Profit and Sustainability rules, let alone UEFA’s Financial Fair Play have not been addressed in these accounts partially due to the effective suspension. However, when looking though the impact of Covid-19 it is clear we would not comply to the previous existing rules and regulations.

Having an owner prepared to soak up losses is an enormous luxury. As I have consistently spoken of, we must become sustainable through increasing income whilst reducing costs not least because of Profit & Sustainability and Financial Fair Paly. Continual player sales and/or shareholder bailouts are not a sustainable model.

Moshiri for all his financial support must address the management of the club at board and executive levels and bring people in who can make his business sustainable. He (and the club) are carrying a huge cost in not doing so.

Having someone to fund losses is not (despite his apparent willingness to do so) good news. Having people who turn losses into profits is far more preferable.

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Reader Comments (18)

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Anthony Murphy
1 Posted 12/12/2020 at 00:35:49
Could the intention to issue new shares to inject 𧶲 million indicate Morshiri thinks Planning Permission is a done deal or a formality?
Derek Thomas
2 Posted 12/12/2020 at 00:51:30

Misery loves company... We won't be the only ones up this particular creek.

Paul [The Esk]
3 Posted 12/12/2020 at 01:29:15
#1 Anthony, Moshiri will not be injecting 𧶲 million: an additional 㿞 million at most.
Robert Tressell
4 Posted 12/12/2020 at 08:55:31
Thanks for doing this Paul. Sobering reading. I expect a lot of Premier League clubs are fragile - but it does not get away from the fact that we're operating in a very risky way.

For me the key messages are:

- wage bill must come down (that means sales of big earners and replacement with younger players with lower wage demands)

- the stadium must go ahead, otherwise Moshiri is disincentived from the continuous bail out

- we must get better commercially

- the recruitment strategy must guard against stockpiling unproductive high earners

Unless we do all 4 there must be a genuine risk we go bust.

I bang on about the benefits of youth based recruitment (and get a bit of stick for doing so). But you can see in the analysis above how it helps a club. The fact that we made money on youth failure (Onyekuru, Lookman and Vlasic) is in stark contrast to the drain on the club that is Bolasie, Sigurdsson, Tosun, Bernard, Walcott etc.

John Keating
5 Posted 12/12/2020 at 09:36:33
Fully agree with your post, especially about youth
However, these days supporters want instant success - see some on ToffeeWeb
Youngsters will make howlers and contribute to losses thereby earning the wrath of some - see ToffeeWeb

Paul [The Esk]
6 Posted 12/12/2020 at 10:11:26
#4 Robert - I absolutely agree with your analysis, especially youth
Tony Everan
7 Posted 12/12/2020 at 10:53:37
Thanks Paul for the article, and me too I completely agree with with Roberts summary and key messages. With regards the more youth recruitment policy - that must come. I think the signing of James, Allan and Doucoure was to address the real and present danger of us being catastrophically weak in midfield. We needed a core of strength that Allan and Doucoure helps give. God knows where we'd be without those signings. I can accept them as being good decisions.

That said the policy now has to shift towards youthful quality that are an investment , an asset and at the same time can invigorate the club with an energy we are sorely lacking. It doesn't have to be a revolution, but an evolution cherry picking the best we can get.

Derek Wadeson
9 Posted 12/12/2020 at 12:25:16
Very interesting if not easy to digest article.

As regards for the clamour to invest in youth rather than pay over the top for experience. Perhaps it would be an idea to get behind these young players when they do break through. e,g Tom Davies, Jonjoe Kenny.

Also players like Calvert-Lewin bought in for small fees, ('Championship at best' according to many), who was on the end of a more than a few choice pelters from my seat in the lower Bullens.

John Zapa
10 Posted 12/12/2020 at 14:48:26
The business model is highly unsustainable. I cant see how in the next financial year the big losses can be stemmed. The wage bill as a % of turnover continues to rise, soon if construction starts at the new stadium, the additional annual costs will further add to the drain.
Everything is highly reliant on good recruitment, coaching and management follow. Unfortunately the club had been extremely poor with all 3. Generally signings have been poor value, players who join seem to regress.
Moshiri cannot keep throwing money and the club is going backwards. A day of reckoning is coming
Jerome Shields
11 Posted 13/12/2020 at 17:47:02
It's a concern with the continual need of a cash injection into Everton, increasing losses, and a Big Project looking as the solution. All these are the classic signs of overtrading.

If the business is continually making losses and the commercial side is going nowhere, the first thing to look at is the management. It is obviously not good enough and should be replaced.

Moshiri may be a billionaire, but a considerable amount of his money is now tied to Everton. He has been an advisor to Usmanov who ran a business. Anyone who knows how to run a business would be asking questions and insisting on changes. There were problems before Covid as regards to running of the business.

It is also worrying that the connectivity to Usmanov is getting weaker. Moshiri has been re-investing away from the business he made money in, and losing money.

Ancelotti and his calm demeanour are here to stay. There will be no transfers in January. Next transfer window, like January, will consist of an emphasis on getting rid. Next summer's window will be based on strategic squad requirements, with limited funds available for transfers in.

The end will come, hopefully Everton are still standing after it.

Great analysis by Paul the Esk. Thank you.

Laurie Hartley
12 Posted 13/12/2020 at 20:50:31
He is certainly committed, isn't he, Paul?

The wealthy people that I have worked for in my life have been willing to take risks to reap reward – and, in most cases, it has paid off handsomely.

It would be interesting to get your opinion on what he sees as the long-term prize.

Brian Wilkinson
13 Posted 13/12/2020 at 20:52:15
When I heard about this in the week, my first thought was I hope Paul puts all this into a post for more understanding.

Yet again, Paul, you have done a great job in keeping fellow Evertonians well informed, and up to date.

Paul [The Esk]
14 Posted 13/12/2020 at 21:58:53
Thank you, Gents, very kind of you to pass such comments.
Jerome Shields
15 Posted 13/12/2020 at 23:25:28
Laurie #12

I don't know any wealthy peop!e like that either. Any of those that where businessmen consider it a good decision to cut their losses. The most successful ones would close down a business as soon as it was apparent that it was not going to wash its face.

This is why I have doubts myself about Moshiris business ability. In my own case I have sailed close to the wind, but have always had a safety value , with a Exit strategy , to get myself out of the shit.

Of course some will say he's a Billionaire and can survive big losses. But the bigger you are the bigger the losses and in Moshiris case in regard to Everton they have been huge. A bad business can lose money at a frighting rate.

John Zapa
16 Posted 14/12/2020 at 15:30:00
Paul, what are your thoughts to the situation the club will be in when the day comes that Moshiri is unable/unwilling to continue funding the club?
Paul [The Esk]
17 Posted 15/12/2020 at 14:52:31
#16 John if that ever comes we would have to sell the most valuable/most expensive players. Reduce our costs and reinvest some of the proceeds in cheaper players
Brian Harrison
18 Posted 15/12/2020 at 15:12:51

Your articles are always interesting and always well researched, and this is no exception. I read that the accounts published last week showed an increase in salaries rising from 85% to 89%. I remember an accountant from one of the big companies a year or so ago saying that any club operating at salaries above 75% wasnt sustainable. So if that is true then unless we unload many of the high earners, how can the board possibly endorse any future signings.

I would imagine that the board must have told Ancelotti and Brands that there can be no purchases of players, until we get the salaries down to somewhere near the 75% mark To do this we would have to part with quite a few players, and not those on moderate salaries but a few of the top end earners. Paul I would be interested to hear your thoughts on us continuing to operate at well above 75% of salaries against turnover.

Paul [The Esk]
19 Posted 15/12/2020 at 17:02:10
Thanks Brian - I think the trend is set to continue unless we get extra revenue from qualifying in Europe and from higher league placings.

Looking at this season although we lost some hefty wage earners last summer we also brought in James, Allan, Doucoure and Godfrey, plus Ancelotti's full year wages (as against 7 months in the last accounts).
Turnover will increase on the back of the broadcasting revenue from the last 7 games of last season falling into this accounting period.

I'd estimate total wages of £170 million on turnover of £206 million (83%)

Until we increase income we are going to make eyewatering losses funded by Moshiri. It really concerns me that when FFP and Profit and Sustainability rules are reintroduced we are going to be massively non-compliant

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