To complete the analysis of Everton Football Club Company Limited Report and Accounts for 2022-23, Everton Stadium Development Limited warrants its own analysis, particularly in the context of the treatment of interest costs, the revision to the previous year’s Accounts and the impact this has on PSR calculations.

Everton Stadium Development Limited (ESDL) is a wholly owned subsidiary of Everton Football Club Company Limited (the Group). The sole purpose of the company is to “act as a development vehicle for future group activities in relation to the new stadium project”.

The previous directors, William Kenwright (deceased – although stated as resigned 24 October 2023), Denise Barrett-Baxendale (resigned, 12 June 2023) and Grant Ingles (resigned, 12 June 2023) were replaced by the current board which is composed of Colin Chong (appointed 16 June 2023) and John Spellman (appointed 16 June 2023).

Results

The profit and loss account is important in the impact that it ultimately has on the club’s overall PSR calculations. Obviously at this stage of the development, the company generates no income, therefore all expenses drop straight to the bottom line.

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The audited accounts show a loss for 2022-23 of £3.55 million – compared to a restated loss of £0.926 million for 2021-22. The original presentation of the 2021-22 accounts showed a loss of £21.67 million which included interest costs of £20.74 million.

In a change of accounting policy, all relevant interest costs relating to the stadium construction are now capitalised and not expensed through the profit and loss account.

The £3.55 million operating losses includes the cost of an average number of 13 employees costing £0.512 million.

Balance sheet

A company’s balance sheet displays the company’s total assets and how the assets are financed, either through debt or equity. In the case of ESDL, the assets are the value of the stadium development at the end of the year, plant and machinery, debtors and cash in the bank.

The value of the stadium is calculated by the cost of the development (including capitalised interest) at the end of the year. By 30 June 2023, it had increased to £410,607,997 an increase on the restated £189.1 million (2021-22) of £221.5 million. Until the stadium is completed, this asset will not attract any depreciation.

The current assets are debtors totalling £81.5 million and cash of £3.48 million. Included in debtors is advanced payments of £69.9 million to the main contractor Laing O’Rourke.

ESDL’s creditors (ie, people they owe money to) include trade creditors, amounts owed to the parent company, VAT, PAYE and accruals. In total, that amounts to £539.1million.

As at 30 June 2023, Everton Stadium Development Limited owed its parent company (Everton Football Club Company Limited) £422.7 million. This loan is unsecured. The interest cost has been capitalised within Assets Under Construction.

Additionally, Everton Stadium Development Limited owed £106.9 million as at 30 June 2023. This is secured by fixed and floating charges on the assets of the club. It is a 1-year facility and is the loan referred to in the conditions relating to 777 Partners acquisition attempt. The loan size increased beyond the year end date and now stands at £158 million – it is broadly known as the MSP loan.

Included within the funders of this loan are MSP Sports Capital, local business owners Andy Bell and George Downing, plus Farhad Moshiri via his Isle of Man company Bluesky Capital. The loan attracts market rates of interest and those interest costs have been capitalised within Assets Under Construction.

Net liabilities

As a result of the above, Everton Stadium Development Limited was in a net liability position at 30 June 2023 of £43.0 million.

The parent company has provided a letter confirming that intercompany balances will not be called in within 12 months of the signing of the financial statements (14 January 2024).

As with the parent company and the warnings contained within Note 1c of their Financial Statements, the directors state they recognise the uncertainty of future revenues, savings and future funding required. The Directors Report states efforts are underway to secure future funding.

Conclusion

The evidence of progress in construction of the new stadium is plain for all to see and the planned opening is set for the beginning of the 2025-26 season although construction is expected to be completed midway through the 2024-25 season – subject to financing.

Entering the final stages of construction, it is clear though that the stadium is not fully financed (as per the audited group accounts) and despite the previous public claims of the CEO, Colin Chong.

It is clear that the funding of the stadium, and indeed the very existence of the club, is entirely contingent on the resolution of the ownership issues which has tormented the club for many, many months, bringing undue stress and concern to fans and employees alike. We are very close to a resolution (good or bad, including the possibility of administration) one way or another, although I must stress I do not believe that Moshiri’s chosen new owners 777 Partners will succeed in their quest.

Moshiri’s role in this fraught, existential crisis should not be under-estimated.

I am genuinely concerned that, going forward, the amount of debt the stadium and the club has to bear as a result of the enormous increase in construction costs and the failure to secure long-term debt when interest rates were at historic lows will remove much, if not all of the financial benefits of a new stadium.

Of course, the threat remains of potential administration if there is not a resolution to the ownership issues. However, whoever ends up acquiring Everton Football Club has to provide sufficient equity funding (despite the numerous capital calls it will face) to maintain debt at sustainable levels.

Please follow these links for Part I and Part II of the analysis of Everton's 2022-23 accounts.

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Reader Comments (17)

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Peter Quinn
1 Posted 13/04/2024 at 08:15:38
Paul, thank you yet again for this information and your hard work.

Clearly the MSP loans can be directly attributed to the Stadium requirements. One would assume the Premier League have no objection to the capitalisation of the interest in respect of the MSP loan including the contribution from Bell, Downing and Moshiri.

What are your thoughts about the way the interest on the Rights & Media Funding loans have been capitalised by the Club, thus reducing the PSR losses? It is clear the Premier League are objecting to this and effectively saying it is a slight of hand to reduce PSR losses.

It will be the subject of another commission hearing later in the year with the potential of a further point deduction next season.

Trevor Tannenbaum
2 Posted 13/04/2024 at 08:46:59
We are all in agreement we are going to have to sell Onana and/or Branthwaite in order to meet existing PSR rules. However can someone confirm what the new rules voted in mean ? Do these rules change whether we have to ?
Probably will still do anyway but can maximise profit rather than be desperate.
Brian Harrison
4 Posted 13/04/2024 at 09:43:54
The Premier League list of what clubs spent on agents fees last year is staggering. Chelsea spent the most on agents fees £75M, followed by Man City £60M, Man Utd 34M, Liverpool £31M and Arsenal £24M. Not surprisingly Luton spent the least £2M, and Everton spent £10.6M.

When grassroots football is crying out for investment, which is were all players start, to see these sums paid to agents were none of it comes back into the game, just shows how broken the Premier League is.

John Raftery
5 Posted 13/04/2024 at 12:42:50
Trevor (2) My understanding from what I have read in the press is that the new rules will not be introduced until the financial year 24/25. For the 23/24 year, the current PSR regime will apply which almost certainly means we will have to sell a player(s) by the 30th June.

A barrier in the way of that is the reluctance of many clubs to spend money before the 30th June lest they themselves breach their PSR ceiling.

Eric Myles
6 Posted 13/04/2024 at 13:36:29
Paul, I remember reading on here some time ago that EFC transfered it's stadium shares to Everton Stadium Development which is owned by Moshiri.

How does that jive with 'wholly owned subsidiary'?

John Zapa
7 Posted 13/04/2024 at 15:06:58
My view is that MSP will agree to an extension to the loan maturity on condition of raising the interest rate significantly, which Everton in its current pathetic financial state, would have no option but to accept.
James Flynn
8 Posted 13/04/2024 at 23:31:58
We'll see if MSP extends the timeline on their loan. I cannot see why.

They're not in the lending business, they're in the purchasing business. We know they want a minority share in the Club because they tried to buy one.

I remain of a mind that Najafi already has partners lined up for a takeover if the 777 deal collapses.

Mike Gaynes
9 Posted 14/04/2024 at 05:02:42
James #8... exactly. It wouldn't surprise me if, knowing and disrespecting 777 Partner as they do, perhaps they saw this coming and this was their strategy all along.

It wouldn't be Najafi, however, who would be lining up partners. He's the money guy. Moorad is the dealmaker.

Kieran Kinsella
10 Posted 14/04/2024 at 05:04:00
Mike,

I'm hoping so.

John Zapa
11 Posted 14/04/2024 at 06:51:56
James #8, they are in the money making business.

They have an opportunity to further extract very healthy profit from this deal by extending the loan maturity on more favorable terms to themselves.

Brent Stephens
12 Posted 14/04/2024 at 09:37:49
James,

"We'll see if MSP extends the timeline on their loan. I cannot see why."

I thought, in any case, that the Esk was saying that, if 777 Partners gain Premier League approval to buy Everton, one of the four conditions would be conversion of loans into equity. I assume that the same condition would apply to MSP should they take us over?

Tony Abrahams
13 Posted 15/04/2024 at 08:13:11
This time last week, we were waiting to see if Everton, were going to be deduced more points, but the news that most of us must be anticipating today, if The Esk is correct, is a much bigger event in the history of Everton Football Club.

Please let's get decent owners with a plan, people who want to stop Everton from being a relic of the great club it once was and help us banish the stain of the last 25 years.

Paul Hewitt
14 Posted 15/04/2024 at 08:42:39
The only thing likely to happen today is MSP give 777 Partners an extension to pay back the loan.
Jerome Shields
15 Posted 15/04/2024 at 09:25:16
Hope you are right, Tony. I once posted over 2 years ago that it normally took as many years to get out of a financial mess as it took to get into it. I was afraid to quantify it in years.

It is an awful shock when one realises that managers are not interested in running a business properly. Needs a complete and utter clean out at Everton and a professional organisation like MSP Sports Capital would realise that.

I still think a creditors agreement is more likely, but total control of operations and finances would be necessary. I do think that 777 Partners could be granted an extension if the right fit is not there.

A bit like a serious drink problem where being in the gutter can be the turning point .

Brent Stephens
16 Posted 15/04/2024 at 09:26:14
Paul,

I suspect that extension to the repayment of the MSP loan is in the gift of the Premier League, not MSP, as it's part of the Premier League conditions for approval of 777 Partners.

Eric Myles
17 Posted 16/04/2024 at 03:36:22
Brent #16, as I keep saying, a fourth party cannot force a third party to be responsible for the obligations of the two parties to a contract.

It's up to MSP alone to agree to the extension and if the EPL don't like it that's just tough shit.

Bobby Mallon
18 Posted 16/04/2024 at 22:16:34
Just get Moshiri to sell his stake in the liverbirds to himself and use that money towards PSR, Chelsea have done it.

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