Sixth successive loss puts Everton at risk of further damaging points deduction

Everton FC is bracing for another significant points deduction by the Premier League after publishing its latest financial accounts for the year 2022/23.

Last November the club was deducted a record 10 points for breaching Profit and Sustainability Rules (PSR) which was later reduced to six points.

The Toffees were subject to a second PSR panel last week which considered these latest results and it is highly likely a further significant points deduction will follow in the coming week after the club revealed its pre-tax losses have more than doubled.

PSR allows clubs to lose up to £35m per season before facing sanctions.

However, Everton’s latest accounts show a pre-tax loss of £89.1m for the 2022/23 year, up from a restated £38.3m in 2021/22.

This means the club has made losses for the past six years – in 2017/18 a £131.1m loss, 2018/19 £111.8m loss, 2019/20 £139.8m loss, 2020/21 £121m loss, 2021.22 £38.3m loss and this year’s £89.1m loss.

Turnover fell from £181m in the previous year to £172.2m.

The loss is mainly due to the fall in turnover, a fall in player and management trading, and an increase in operating costs.

The turnover reduction was affected by the loss of USM-related sponsorship revenues following international sanctions against its owner, Alisher Usmanov, following Russia’s invasion of Ukraine. USM is a Russia-based media company.

Gate receipts rose from £15.6m to £17.3m, driven by season ticket sales.

However, sponsorship income fell for the third season, from £35m to £19.2m, mainly related to former USM deals.

Costs rose from £205.5m to £213.1m, including £7.1m in payments to former manager Frank Lampard and his team following their dismissal. In 2021/22 figures the club paid former manager Rafa Benitez and his team compensation of £10.5m.

While the emphasis should clearly have been on stripping out as much costs as possible to reduce losses, overall staff headcount actually rose, from 491 staff to 532.

The wage/turnover ratio also increased, from 90% the previous year, to 92%, substantially higher than the 70% level considered sustainable for the Premier League.

Construction costs relating to the club’s new stadium for the 2022/23 year were £210.9m, up from £207m in 2021/22.

The club’s net debt position increased to £330.6m because of significant investment in the Everton Stadium project.

In the auditor’s report, they highlight “the existence of a material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern”.

A further points deduction is likely to place the club at serious risk of being relegated for the first time in around 70 years, which will be a financial disaster for the club and the city.

British Iranian owner, Farhad Moshiri is, to all intents and purposes, now an absentee landlord, having seen the club make sustained losses, some would argue, through his rank incompetence at running the business.

He is in the throes of trying to offload his 94% stake to US-based 777 Partners, but the Premier League has been scrutinising the potential new owner since last September, which is unheard of, with most ‘fit and proper owner’ tests taking a couple of months.

It seems highly likely 777 Partners’ bid will be rejected, leaving Everton in limbo.