The true impact of the pandemic on Everton's finances was laid bare with the publishing of their accounts for the 2020/21 period.
Having posted record losses of £139.9m for 2019/20 there were expected further losses for the most recent accounting period, with a £120.9m loss posted for the most recent financial year. That takes Everton's total losses for the past two financial years to £260.8m, the highest recorded in the Premier League across the two seasons so far. Of that figure, Everton make around £170m of it directly attributable to the impact of COVID-19.
There can be no sugar coating the financial situation that the accounts reveal, and Everton's challenges in ensuring they fly under the threshold for the Premier League's profit and sustainability rules have been proof of that. A lack of success on the pitch that didn't match the investment into the squad, a flat market with regards to player sales and trying to push ahead in the background with a £500m stadium build have all contributed to tough times for the Toffees and majority shareholder Farhad Moshiri.
But the picture painted in the accounts isn't exactly the picture right now. The wage bill for 2020/21 stands at £182m, a rise of £17m year on year. That figure means that the wage bill at the end of the most recent financial year accounted for 94.2 per cent of turnover, compared to 89 per cent in 2019/20. That is a figure way above UEFA's recommended wage to turnover spend of 70 per cent.
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But since the end of the 2020/21 financial year there have been squad exits that will likely have seen that figure, in real time, cut fairly significantly. James Rodriguez, who had been Everton's highest paid player, departed for Qatari side Al-Rayyan, while the likes of Bernard, Theo Walcott, Moise Kean, Yannick Bolasie and Lucas Digne have all seen their wages taken out of the equation, all permanently aside from Kean, who is on a two-year loan at Juventus, where the Italian club have an obligation to buy.
Everton and the Premier League have been in dialogue since before the publishing of last year's accounts, with the club's more austere approach in the transfer market last summer an indication of having to impose greater cost control, with Demarai Gray's £1.5m fee the only money paid last summer, the rest arriving on free transfers. January saw Digne's move to Aston Villa allow for the double swoop for Vitalii Mykolenko and Nathan Patterson, while the arrivals of Dele Alli on a structured deal that didn't require an immediate financial outlay and a loan move from Donny van de Beek also occurred.
Finding savings across the club is something that has been of paramount importance, with the club turning to outside help with regards to procurement, with experienced industry professional Paul Goodwin drafted in to aid that effort during the past year.
Everton have confidence that they are remaining within profit and sustainability rules and have some room for manoeuvre, although limited. They have also moved to try and allay any fears over the long term commitment of Moshiri to the club, something that was brought under the spotlight following the sanctions placed upon Moshiri's friend and long-time business associate Alisher Usmanov earlier this month following Russia's military invasion of Ukraine. Usmanov was a club sponsor through his USM Holdings business, of which Moshiri served as chairman of the board before resigning recently, has seen his ties with Everton severed through USM and Megafon, another of his businesses, with the club having suspended those deals in response to the sanctions. The indication from the club is that the suspension will be a permanent one.
USM had been a boon to Everton in recent years, sponsoring the Finch Farm training ground and paying £30m for the naming rights option for Bramley Moore Dock. Megafon had served as sponsors of Everton Women while both firms had high visibility around Goodison Park on matchdays through advertising. Those deals were reportedly worth around £20m per year to Everton, and finding replacements for those at a similar, if not better rate will be the challenge that Everton face ahead of the end of the current financial year.
Last year's accounts showed Everton posting record commercial revenues of £63.7m, a 119 per cent rise on 2018/19. That figure included the £30m from USM for the naming rights option, which now won't be taken up by USM, and the latest set of accounts have reflected the absence of that boost, with sponsorship, merchandising and advertising revenue totalling £35.5m – a reduction of £28.2m on 2020 accounts. However, without the £30m boost from USM last year somewhat distorting the picture, the £35.5m posted this year would have been a club record. The current accounts feature the first years of the Cazoo and Hummel deals.
But there are even more challenges ahead commercially. Without USM to lean on a new stadium naming rights partner must be found, while a new shirt sponsor must also be sourced after parting ways with Cazoo on a £10m per year deal. Sleeve partners are also sought, while the naming rights for Finch Farm is also up for grabs. The issue for Everton moving forward, given their exposure to bad publicity through sponsorship links means that they are having to be more selective when looking at partners moving forward, with the ECHO understanding they have already rejected some approaches from firms.
Another change since the end of the financial year that has just been published has been the return of fans to stadiums. In 2020/21 the Toffees brought in just £200,000 in gate receipts having played almost an entire campaign behind closed doors. The current season has seen fans return and also maximised revenue opportunities through merchandising and catering which will all make for a significant boost for next season's accounts. However, this current season has seen the media rights payments skewed considerably due to clubs receiving the deferred broadcast payments from the Premier League.
The numbers don't make for good reading, and four loss-making seasons in succession have meant that the club has made pre-tax losses in excess of £385m, and for the lack of success that has been achieved during that period it is a figure that looms large.
Measures that have been taken mean that the picture will have been eased in some respects in real time, but filling the void left by the exit of USM and Cazoo, and also a pay-off that will be due to Rafa Benitez means that there will be challenges in the next set of accounts too, although a compensation payment to Real Madrid for Carlo Ancelotti in this year's accounts may mitigate the severance due to Benitez.
The challenges remain great for Everton and Moshiri, and remaining a Premier League club beyond the end of this season will be absolutely key to how quickly the recovery takes place.
