Our debt has increased significantly since the year end and our monthly outgoings exceed our income. As he points out the accounts are qualified and state that there is material uncertainty about the company being a going concern. We are technically bust in their view but the Directors are adamant that funding will be available over the next 12 months. Which it has, due to various people stumping up cash, including MSP, Andy Bell and 777.
Intangible assets are irrelevant. Player valuations are not worth the paper they are written on in a fire sale. I would also argue that the tangible assets, i.e. assets under construction, are overvalued in an administration - how are they recoverable?
If the funding stops, so does the club. I have no idea what is going on with 777 but that deal needs to conclude and we have to cross our fingers that they can pump in more funding to keep us and the stadium going. Or there needs to be an alternative should they fall away.
It isn’t a pretty situation. Yes, we already know all of this but it is what we don’t know which is crucial and I don’t know how anyone can think this is all negative headlines and that this has been overblown.
I think we are in dire straits unfortunately. Administration would indeed be a disaster and not a chance to start again.
Which brings me onto the manager. Relegation = administration. Another defeat against Newcastle and the threat of another points deduction is getting us closer to that disaster scenario. Any Board should be looking at this situation with urgency as it is an untenable situation that requires change. But we don’t have an effective Board and we likely don’t have the means to make the change if we wanted to. I would make it in a heartbeat - alas that looks highly unlikely.
So it’s a death spiral unless Dyche can turn around this 12 game run without a win and work a miracle. Every game that passes makes that look less likely.
I have no idea but relying on Beachside & NeilW to comment to either raise or decrease the old heart rate!
“I am relatively sanguine about the increased losses in 2022-2023.
1. The first cause is the drop in revenue, which is a once off due to USM. That relationship fully unwound in 2022-23 and we took the pain. There is no further unwinding in 2023-2024.
2. So our operational losses increased by £16m directly as a result of this USM termination (from £24.5m to £40.9).
3. The second cause of increased losses is the drop in profits from player trading. Remember in 2022-2023 the main outgoing was Gordon. The sale of Kean, Iwobi, Gray, Simms & Cannon will appear in 2023-24. Gordon helped us realise a fat profit in 2022-23, but the sales of Richy and Digne in 2021-2022 drove a higher profit on player trading.
4. Remember profits on player trading are calculated as: sale price received less the book value of the players (not their acquisition cost). Because Digne and Richy had relatively low book values, this resulted in significant profits.
5. I know certain individuals will be sharpening their pens to wind up the fan base about the threat of administration and imminent insolvency.
6. So I will say this:
A. Remember these financial statements are historic: for the financial year ended June 2023. We already knew the club faced significant losses because the Appeal Hearing inferred a PSR loss in 2022-23 of above £40m, well above the £10m PSR loss of 2021-22.
B. The borrowings in these financial statements total £340m as at June 2023. Since then, 777 have funded £200m in loans, so we stand at around £550m. Other Creditors of £75m (mainly football related) is easily covered by Trade debtors. Yes, £550m is alot of debt. Its over 3x revenue.
C. BUT, the massive borrowings do have a balancer. I encourage you to look at intangible assets (primarily player book values) and intangibles. The net book value of tangible assets (mainly stadium) is £400m and intangible assets (player registration) is £150m. So around £550m, which offsets the borrowings.
D. Farhad Moshiri put more funding in. These shareholder loans have no repayment date and under IAS 32 fail to meet the test as debt. They are treated as equity by the AUDITORS (not amateur financial analysts). Total equity of £770m comfortably exceeds losses of £460m to give a net equity position of £312m. Most of this is equity in the stadium. Construction of the stadium is *not* a bad thing. The problem is we are not yet enjoying the HIGHER REVENUES it will bring.
E. The auditors expressed concerns that there is a material uncertainty on the going concern basis of the club. Again, NOT NEW. Similar statement made last year. Yet here we are: April 2024 & club continued to pay wages & bills on time. Yes, it was via loans by 777: but I strongly believe they would NOT have put money in if they thought Everton were going to go bust. (Doesn't make them angels).
F. Note 1 (c) on page 21 spells out effect relegation would have: very significant cash requirement. So, not only do we need to start winning, Administration would be a DISASTER. It would lead to relegation. Which, the auditors say, would have a big negative impact.
G. These are some prelim views. 2nd PSR referal hinted at bigger losses & perhaps further punishment. Its all "priced in" as we say.
H. Crucially, it is not unusual for entities undertaking infrastructure projects (like building a stadium) to suffer poor P&L results whilst seeing the balance sheet swell with assets. Everton is well capitalised.
I. NB: wages fell in 2023 compared to 2022. In 2023-2024 we further offloaded big earners in Mina & Iwobi, so likely to fall again. Add decent profits from player trading & 2023-2024 will likely be healthier. Lets hope this is taken into account for PSR.
J. So: provided we stay up (ie start winning), I think these results represent a nadir.
K. Working on a valuation of the club which I will post in due course. But hope this analysis provides some perspective beyond the negative headlines.”
Apart from Clive Thomas and Clattenburg and bringing Ashley Young on to change a game etc...
We have clearly been secretly funded by someone who is now sanctioned...so....ok, he wasn't sanctioned when he presumably got involved, so why keep it a secret?
One of our mitigations for the PSR charges was that we lost money when he was sanctioned. So surely, if he'd paid the market value for the sponsorships, we'd just go to the next best offer which presumably should only be a little bit less.
I believe we had access to finance for the stadium at cheaper rates than the loans we've taken.....there was also a good deal from the council available, wasn't there?
I know, the club has to act in the best interest of the shareholders, and to all intents and purposes Moshiri IS the shareholders.
But something properly stinks.
I know you've covered all this before, I'm just wondering what unopened can of worms is currently getting approached by a tin-opener.
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