Everton FC has warned over the club’s ability to continue as a going concern in the event of relegation this season, with the accounts of the Premier League side highlighting a reliance on its majority shareholder.
The accounts also said the Liverpool-based club “is in advanced negotiations for additional long-term funding” and had agreed “heads of terms” for the next stage of funding for a new stadium.
Everton said on Friday that it had “significantly reduced its losses” and made progress on construction of its new ground at Bramley-Moore Dock, a development that could transform the club’s revenue potential.
But the club’s financial release said it “remains reliant on the support of its majority shareholder”, Farhad Moshiri. The British-Iranian businessman, who controls Everton through an Isle of Man entity, had provided interest-free loans of £230mn in the period covered by the accounts, and a further £70mn since the financial year ended on June 30, 2022.
Crowe UK LLP, which replaced BDO as the club’s auditor, drew attention to a note in the financial statements that warned that Everton would require additional financial support from its majority shareholder in the event of relegation from the Premier League.
The accounts said Moshiri had written to the board to confirm the “intention to provide ongoing financial support for a period of no less than 12 months from the date of approval of the financial statements but this does not represent a legally binding commitment”.
Given the club’s financial issues and on-field performance, the report says that “conditions indicate the existence of a material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern”.
Like other clubs, Everton suffered because of the coronavirus pandemic and then Russia’s invasion of Ukraine. The war forced Everton to cut ties with sponsors connected to Uzbek-Russian billionaire Alisher Usmanov, who has been sanctioned by the EU, UK and US.
Everton narrowly avoided demotion from the Premier League last season. Having played 28 matches in the current campaign, the club is two points above the relegation zone.
“The board are confident in the club’s ability to remain in the Premier League and that, should they be relegated, funding will be secured or refinanced, and that they will be able to achieve the necessary levels of revenue and savings to allow the group to continue in operational existence for a period of 12 months after the date of signing these financial statements,” the accounts said.
The results come a week after the Premier League referred Everton to an independent commission over an alleged breach of the competition’s financial regulations relating to the 2021-22 season. The club has said it “strongly contests the allegation of non-compliance” and “is prepared to robustly defend its position to the commission”.
Everton chair Bill Kenwright said on Friday the club was “disappointed” with the league’s decision and reiterated that it was “confident it remains compliant” with all the financial rules and regulations.
Everton’s net debt increased to £141mn at the end of June 2022, from £58mn a year earlier, with the club pointing to additions made to the playing squad and investment in the new stadium.
The club made a net loss of £44mn in the year ended June 2022, versus a net loss of £120mn in 2020-21. Although annual revenues fell to £181mn from £193mn, the club cut operating expenses and made a gain of £67mn from trading players.
In the previous two financial years, Everton had recorded net losses of nearly £140mn and £111mn.