Part II of the review and analysis of Everton Football Club Company Limited Annual Report and Accounts 2022/23 released and published on 31st March 2024

For a more general overview of the Everton 2022/23 accounts please refer to part I, here

Part II provides details of the director’s report and the auditor’s report, accompanying notes, Moshiri’s funding, third party funding and stadium costs and financing. It should be noted at the time of writing (and publication) the Everton Stadium Development Company Limited Accounts due on or before 31st March 2024 are overdue.

Director’s Report

Under Section 415 of the Companies Act 2006, directors have a duty to provide a director’s report for each financial year. Under section 417, among other duties, the directors must provide a business review which must contain:

(a) a fair review of the company’s business, and (b) a description of the principal risks and uncertainties facing the company.

The review requires a balanced and comprehensive analysis of (a) the development and performance of the company’s business during the financial year, and (b) the position of the company’s business at the end of that year, consistent with the size and complexity of the business.

The director’s report in this year’s accounts is largely identical in it’s wording as to the previous year. The directors recognise the Group may “have to seek further funding from its majority shareholder (Farhad Moshiri) or the prospective new shareholder”.

As a result, conditions:

Indicate the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern

Regardless, based on expectations of cost savings, revenues and future financing, the directors have concluded that it is appropriate to prepare the financial statements on a going concern basis.

Auditor’s Report

Under Section 495 of the Companies Act 2006 a company’s auditor “must make a report to the company’s members on all annual accounts of the company”. Included within the auditor’s report is the requirement to “include a statement on any material uncertainty relating to events that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting”.

This auditor’s report indicates “that a material uncertainty exists that may cast significant doubt on the Group and the Company’s ability to continue as a going concern.”

The Group and Company’s auditors are Crowe U.K. LLP. Their report is dated 14th January 2024.

Both the director’s report and the auditor’s report point to the notes attached to the Report and Accounts, particularly referencing note 1c in the financial statements.

Note 1c

Note 1c can be found on page 21 of the Annual Reports and Accounts.

There are specific details which need to be drawn to attention:

• As at 14th January 2024, 777 Partners had provided £142 million of financial support
• Cash flow forecasts are based on two scenarios (i) securing Premier League status (ii) relegation to the Championship
  1. If Premier League status is secured, a cash injection is required in Q3 2024, i.e. in the three months beginning 1st July 2024
  2. If relegated, a more significant cash injection is required in Q3 2024. Additionally the club would review its cost base, trading strategy and defer planned discretionary spending

Some of the financing facilities secured by the Club include a covenant that assumes the club will stay in the Premier League. In the event of relegation, whilst funders have indicated they remain supportive there is no contractual commitment that there would be a waiver of the condition that requires (as per the contract) “a material repayment of debt”

Note 1c notes the agreement between Farhad Moshiri and 777 Partners and expects closure in “early 2024″.

Neither the current majority shareholder, nor 777 Partners could formally commit to providing a letter of support for ongoing financial support.

Contrary to several previous communications from the club and its officers, the auditors report confirms that with regards to the funding of Bramley-Moore:

the Club is yet to secure legally binding facilities (as at 14 January 2024) and the facility is not yet guaranteed.

Note 1c concludes “the above conditions indicate the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern.”

Funding:

Farhad Moshiri’s funding of Everton Football Club included (i) £70 million of funds in the year ending 30 June 2023. His total funding remains at £750 million, £450.75 million of which is unsecured, interest free debt requiring a mutually agreed repayment date (treated as equity within the accounts).

(ii) In addition (as referenced in note 22 – related party transactions, Moshiri provided an interest bearing loan of £22.5 million. Although not specified in the accounts, this loan forms part of the facility provided by MSP Sports Capital.

Third Party Funding

The accounts confirmed the following third party, commercial funders:

Rights and Media Funding: Three facilities, namely a 5 year, £150 million facility; a 3 year facility £52.66 million and a 34 month facility of €28 million. From previous reports in the public domain these loans are charged at base rate plus 5%.

Metro Bank: A CLBILS (Covid) facility, originally £30 million reduced to £11.25 million at 30th June 2023

777 Partners: £142 million as at 14th January 2024

MSP Partners: £158 million (not included in the Everton Football Club Company Limited accounts, but by reference to the Premier League conditions placed on 777 Partners)

As per numerous media reports, 777 Partners have pledged to increase their lending to Everton to circa £200 million at the time of writing.

Conclusion:

It almost doesn’t require saying but the financial condition of Everton Football Club is frankly absurd, and testament to the atrocious management of the club by Farhad Moshiri.

Despite his £750 million investment in the club, the club currently has circa £580 million of external debt (excluding Moshiri’s shareholder loans £450 million). It has not secured long term and complete financing for Bramley-Moore. It continues to require monthly additional loans to meet its expenses and its tenure within the Premier League remains perilous. Add in Moshiri’s choice of potential purchasers of his shares, unable, to date, to meet the conditions for Premier League approval and there is no wonder at all as to the severity of the warnings (and appropriateness of those warnings) as to the club’s future.

Part III will conclude this series and focus on the Everton Stadium Development Company Limited Accounts when available. Cash spent on the stadium in the last two years (to 30 June 2023) totalled £404 million