Premier League Profitability & Sustainability Rules: What They Mean to Everton

A look at the financial regulations in the Premier League. Is it possible to forecast whether Everton are compliant and the impact if not?

Paul The Esk 28/07/2021 76comments  |  Jump to last

Rules E.45 through to E.52 of the Premier League Handbook control the degree to which football clubs can operate at a loss. Commonly referred to as FFP their correct title is profitability and sustainability rules. Despite the idea presented by some that financial regulation in football is on the wain, the rules are plain to see and the Premier League will continue to monitor, enforce, adjudicate and punish as necessary any breaches of those rules. If anyone had alternative thoughts, then the news that the Premier League and Manchester City continue to be involved in a lengthy legal dispute arising from their UEFA FFP case should provide evidence to the contrary.

So what exactly do the rules say?

Each member club of the Premier League have, in usual circumstances, to submit by March 1st in each season a set of accounts for the current season and the accounts for the previous two seasons. The accounts for the current season must:

”be based on the latest information available to the club and be, to the best of the club’s knowledge and belief, an accurate estimate as at the time of preparation of future financial performance”

From these three sets of accounts the Premier League creates a “PSR calculation” which is the aggregate of the adjusted earnings before tax for the current season (T) and previous seasons (T-1) and (T-2). I will explain adjusted earnings below.

Due to the impact of Covid on football finances, the current rules are slightly different. For this season (2021/22) the Premier League will look at the “PSR Calculation” from the adjusted earnings from the current season (T), the mean (average) of T-1 and T-2 (the two seasons impacted by Covid) and the previous year (T-3).

Similarly for last season there was an averaging for the two Covid related seasons.

So, what are adjusted earnings before tax?

In simple terms they’re the profit and loss account with a few exclusions. The exclusions are:

(i) depreciation and/or impairment of tangible fixed assets, amortisation or impairment of goodwill and other intangible assets (but excluding amortisation of the costs of Players’ registrations);

(ii) Women’s Football Expenditure;

(iii) Youth Development Expenditure;

(iv) Community Development Expenditure; and

(v) in respect of Seasons 2019/20 and 2020/21 only, COVID-19 Costs

What are the limits in terms of PSR calculation?

(i) losses up to £15 million: The Premier League Board will determine whether the club will be able to pay its liabilities (defined in the rules) until the end of the following season (T+1)

(ii) losses in excess of £15 million: The club has to provide financial information which forecasts aggregated adjusted earnings before tax for the following two seasons (T+1, T+2). In addition it has to provide evidence of “secure funding” to a level determined by the Premier League board.

In the absence of “secure funding” the Premier League board can use Rule E.15 as below.

(iii) If the PSR calculation is greater than £105 million: The Premier League board can use its powers within Rule E.15. They include setting a budget that the club must adhere to, provide any information the board requires it to do so, and has the power to prevent new registrations of players (an inward transfer embargo) or new contracts issued to existing players.

Most importantly, the club shall be treated as being in breach of the rules and accordingly referred to a “Commission” which is the means by which the Premier League investigate, adjudicate and punish breaches of the rules. I’ll cover some of the potential remedies later in the article.

So where do Everton sit with regards to profitability and sustainability rules?

Firstly a warning. Our P&S position includes projected figures not yet in the public domain (2020/21 financial results, unlikely to be published before December 2021) and estimates of various costs included in the calculation of adjusted earnings over previous years. With that condition, I have made some estimates to see how close or not we were as at the end of June 2021 to having adjusted losses over £105 million.

The £105 million figure is key here. Below that figure we are within the rules, albeit under scrutiny from the Premier League, but that’s not a problem. Adjusted earnings showing losses greater than £105 million put us in unchartered territories. No club has ever previously breached the profitability and sustainability rules.

Let’s start with the figures we know and that are relevant to these calculations.

Our unadjusted losses for 2019/20 and 2018/19 were £139 million and £111 million respectively. Our unadjusted loss in 2017/18 was £13 million.

To reach to a projected PSR calculation to the end of June 2021 we have to estimate losses for 2020/21 and estimate the adjustments that can be made under the rules outlined above.

Looking at 2020/21 I have forecast revenues of £210 million (including the broadcast revenue from the final games of the 2019/20 season played after 1 July 2020). Wages and operating costs of £210 million. Amortisation, depreciation and interest costs of £126 million. However we have to capitalise the previous costs relating to Bramley-Moore which gives a boost of approximately £40 million to the profit and loss account. That results in a forecast loss of £86 million for 2020/21.

Please bear in mind no adjustments have yet been made as permitted by the Premier League rules.

The aggregate losses for the mean of 2020/21 and 2019/20 plus 2018/19 and 2017/18 before adjustments is estimated at £237 million.

If we estimate women’s, youth and community expenditure at £15 million a year, that gives us an adjustment of £45 million.

Aggregate depreciation of fixed assets estimated at £15 million.

The mean of Covid costs over two years. We know from the 2019/20 accounts the club incurred Covid costs of £67.3 million including £25.9 m of deferred revenue which will appear in the 2020/21 accounts. Matchday revenues in 2020/21 will be approximately £11.3 million lower than 2019/20. Thus I arrive at a mean Covid cost of approximately £37.2 million.

I have made no provision for a further impairment in the value of our intangible assets (the players). For these calculations they would have no impact as they are excluded from the adjusted earnings calculation.

With the caveat that I have made many assumptions and there is bound to be some differences between my forecasts and actual results, I forecast that the aggregate of Everton’s adjusted earnings before tax for profitability and sustainability purposes, up to 30 June 2021 is £140 million.

Please recall that the limit permitted under the profitability and sustainability rules is £105 million.

Whilst I accept there is a considerable margin of error to be applied to my calculations I am not certain they would be sufficient to get the figure to the permitted level.

What else might have happened? It is conceivable that Everton have received much greater commercial revenue than I have anticipated (my model forecast £55 million) but that already includes significant increases based on existing and new commercial partnerships.

Regrettably, based on my own estimates it appears, to me at least, there is a reasonable probability that the club is likely to have breached the profitability and sustainability rules to June 30 2021.

I am aware that the club has good relations with the Premier League and throughout last season was in regular contact regarding our potential losses. Given projections had to be provided before March 1 2021, I am sure that whatever the aggregated position is, it will not be a surprise to the Premier League.

Assuming we are over the £105 million limit what does it mean for the club? We would obviously be at the mercy of the Premier League in terms of their response and potential punishment if found guilty of a breach. We might for example have transfer limits placed upon us or face financial penalties for continued breaches.

Regardless of whether we are under or over the limit, and not withstanding any margin of error in my own forecasts, and I stress they are just forecasts, it is clear to see why the mood around transfer activity has changed. The impulsive, sometimes ill-disciplined behaviour of the past must have been replaced by a new reality.

I am happy of course to correct any errors in my forecasts or in the light of income not yet in the public domain (thereby reducing losses) or any other adjustments should they be brought to my attention.

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Reader Comments (76)

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Larry O'Hara
1 Posted 28/07/2021 at 21:09:06
Paul, as usual very interesting but necessarily speculative.

Four questions:

1) Having seen this coming, might Usmanov & Moshiri bung more cash our way to help or is it retrospectively impossible?

2) who will make the key decisions on sanctions: The Premier League or Uefa?

3) If we are non-compliant, what is your best guess about sanctions?

4) Do you think this might be why Ancelotti walked?

Paul [The Esk]
2 Posted 28/07/2021 at 21:14:28
Larry, thanks...

1. It's nothing to do with the amount investors put into the company, it is purely the difference between costs and revenue.

2. This is a Premier League issue, nothing to do with Uefa.

3. Inbound transfer embargo, budget limitations, agreement to break even, possible fine.

4. I doubt it, he would have known of this as a possibility for some time (assuming he has good advisors).

Phillip Warrington
3 Posted 28/07/2021 at 22:08:26
That's definitely why Ancelotti walked. I read report that said if it wasn't for Covid Everton would be looking at point deductions and still might as their expenditure has spiked alarmingly compared to their income in the last three years.

The biggest problem is wages which are now 4 times higher than what they were 3 years ago. So with the same amount of players they haven't doubled, tripled but are around 4 times higher. I would say given Everton's rapport with the Premier League they were given warning of this before the season started.

It's why in some ways Rafa is a good signing because as evidence will come to light most of the managers who even thought about managing Everton would have wanted some sort of transfer money instead of having to generate it buy selling players in a buyers' market (meaning clubs know other clubs are strapped so they no clubs like Everton can't demand high fees because they need to offload players).

So I guess this is where the fans come into it. We need to lift the players so that when they play at home the atmosphere is so hostile towards the opposition and every touch by an Everton player brings the house down even if it's a shit touch, every tackle is like scoring a goal.
Kieran Kinsella
4 Posted 28/07/2021 at 23:01:33
Paul

I’ll trust your number crunching as it makes perfect sense. I’ve felt the last few years we had a Monte Carlo or bust approach hoping we’d win silverware or get Europe and to Hell with the consequences. We did neither so it’s time to pay the piper unfortunately. The positive is that some of our better seasons in the last 30 years have come when we are broke. Going back to Colin Harvey, big spending has never worked out. Over to you Rafa

John Zapa
5 Posted 29/07/2021 at 04:22:48
The club has been totally mismanaged for a few years, Rome is burning while the parties are still going on. This season is looking more similar to Benitez last season at Liverpool. Clueless owners, budget signings, broken promises and financial mismanagement. I don't recall that particular season ending well.
Alan J Thompson
7 Posted 29/07/2021 at 07:04:35
So if we take the above estimates as fairly accurate then we need to show either ground costs or sponsorships have increased by about 35 million more than expected and what steps will be taken in future to reduce the excess. Otherwise, agree to have imposed steps that will achieve this result. And these figures will have been presented about 5 months ago, should we have heard by now?
Matt Traynor
8 Posted 29/07/2021 at 08:05:00
I'm sure as a special favour they allowed the neighbours to book £100m in costs to the Stanley Park Stadium project - the one that never saw a spade in the ground. That was around the time that H&G almost took them into administration, and FSG bought them out So I'd fully expect us to have the book thrown at us and be demoted 6 divisions.
Jerome Shields
9 Posted 29/07/2021 at 08:55:15
Paul #2,

If stadium costs escalate beyond the £500 million that Alexander Ryazantsev, Everton's Director of Finance and Commercial Officer, gave as an answer to a shareholder at the AGM, what effect will this have on your forecasts and how would such an extra cost be financed, in your opinion?

Jerome Shields
10 Posted 29/07/2021 at 09:11:11
Having read this excellent report, I increasingly think that Benitez was employed because of his make-do-and-mend abilities at Newcastle and the fact that he has managed in the Championship and has first-hand knowledge of transfer targets who play in it. It's a bit Howard Kendall Mk 1.

Rodriguez will be kept because of his commercial value and may even get a 1-year contract extension (something I don't agree with, but I can see the commercial reasons in this case). Richarlison may be kept for commercial reasons but, if the right money is offered, he will go.

I am beginning to wonder if the right-back position will change and expect more of a Townsend or Gray type signing. Moise Kean will be sold but will be given more playing time if not.

Mike Galley
11 Posted 29/07/2021 at 09:18:24
Paul, thanks for an interesting, and sobering, read.
Do you think all this means a big sale is inevitable?
Would a player sale help the situation?
Dennis Stevens
12 Posted 29/07/2021 at 09:22:01
It's rather ironic, in light of Benitez's dig at Moyes' Everton, as much discussed, that he seems to have been brought in to do the same job that Moyes was tasked with. Will Benitez be able to make us "best of the rest" on a shoestring budget? Surely he won't have us playing like a "small team" ?!

For some unfathomable reason, I actually think he might do it. Furthermore, I suspect he may surpass the Moyes era by actually sneaking a piece of silverware. Perhaps I'm guilty of unwarranted pre-season optimism!

Jerome Shields
13 Posted 29/07/2021 at 09:42:34
Dennis #12

I think it is more Kendall PRE 1, probably over a extended period, with a continuation and stricter adopting of the Ancelotti plan. Silverware is possible, but not because of adopting a Moyes model.

Paul [The Esk]
14 Posted 29/07/2021 at 10:00:53
Jerome,

My understanding is that the stadium costs are in excess of £550 million. This will be funded by Moshiri, lending, and a naming rights partner (assumed to be USM). It's always been thought lending would be in the range of £300 to £350 million with Moshiri, USM and perhaps some (relatively minor) public finding from grants.

Mike, a player sale now won't help the position up to 30 June, the year end. But it might act as a mitigating factor, demonstrating the willingness to reduce costs and book some profits if possible.

Jim Lloyd
15 Posted 29/07/2021 at 10:12:10
Thanks for a good explanation of the mire that it looks like we're in. I wonder if it will mean that we have to sell the likes of Richarlison and Kean or anyone else, for a "bargain basement" amount. But then that might well mean we can't afford to bring in players to replace them...except bargain basement players.

It certainly looks like we will have to forget the "Koeman" purchase style, and have a canny transfer position over the next year or two.

If so, Rafa Benitez may well be the man, along with Brands, to get us through this iffy patch.

Jim Lloyd
16 Posted 29/07/2021 at 10:15:02
Ps, I forgot to ask about what form the proof of "secure funding" would be required?
Brian Harrison
17 Posted 29/07/2021 at 10:32:32
Paul,

This must take a long time to put together, so thanks for all the time and effort you have put into this post As you correctly say the Premier league will make a decision based on our figures as of the 30th June this year, so any sales will only help in being a mitigating factor as to what punishment they may hand out. I think the 6 who wanted to join the ESL may have really helped us when it comes to what judgement the Premier league will make, as in normal circumstances I think they may have looked at a points deduction, but because of the very light punishment they handed to the 6 I cant see anything more than a fine this time.

I said a few weeks back when Ancelotti left suddenly and out of nowhere Benitez name cam to the fore, that they had made Ancelotti aware that there would be very little to spend and he would have to consider losing at least one of the better players. That was the green light for Ancelotti to look for pastures new, and why Benitez became the number 1 choice of Usmanov/ Moshiri. They knew he was so desperate to get back managing in the Premier league he would gratefully accept a much reduced budget. I think Pauls figures highlight why we didnt go for the best candidates out there in Conte and Galtier as Conte would have wanted the sort of budget Koeman had and Galtier would also want a lot more than is apperently on offer.

You can also be well aware that other clubs are aware of Evertons current situation, hence why PSG would only take Kean on a loan. Also Juventus who were also interested in taking Kean back have so far not shown any interest. Maybe they know how desperate we are to turn our financial situation round that they will offer something really low nearer the deadline. Also we may have to sell Richarlison just to demonstrate to the Premier league that we intend to get our spending back under control.

Paul [The Esk]
18 Posted 29/07/2021 at 10:38:07
Jim #16,

A.1.185. “Secure Funding” means funds which have been or will be made available to the Club in an amount equal to or in excess of any Cash Losses which the Club has made in respect of the period from T-2 and is forecast to make up to the end of T+2. Secure

Funding may not be a loan and shall consist of:

(a) contributions that an equity participant has made by way of payments for shares through the Club's share capital account or share premium reserve account;

(b) an irrevocable commitment by an equity participant to make future payments for shares through the Club's share capital account or share premium reserve account.

This irrevocable commitment shall be evidenced by a legally binding agreement between the Club and the equity participant and may if the Board so requires be secured by one of the following:

(i) a personal guarantee from the ultimate beneficial owner of the Club, provided that the Board is satisfied that (a) he/she is of sufficient standing and (b) the terms of the guarantee are satisfactory;

(ii) a guarantee from the Club's Parent Undertaking or another company in the Club's Group, provided that the Board is satisfied that (a) the guaranteeing company is of sufficient standing and (b) the terms of the guarantee are satisfactory;

(iii) a letter of credit from a Financial Institution of sufficient standing and an undertaking from the Club's directors to the Premier League to call on the letter of credit in default of the payments from the equity participant being made;

(iv) payments into an escrow account, to be paid to the Club on terms satisfactory to the Board;

(v) such other form of security as the Board considers satisfactory; or (c) such other form of Secure Funding as the Board considers satisfactory;

Barry Hesketh
19 Posted 29/07/2021 at 10:57:57
Manchester City are still being investigated for alleged FFP transgressions from a couple of seasons ago, these investigations arose from the German magazine exclusive and it was thought that the Premier League would follow UEFA but apparently the investigation continues and has been ongoing in private for the majority of the period, until the courts decided that it was in the public interest to allow it to be reported.

I would imagine that Everton FC are fully aware of the consequences of breaking the rules, but it might be some considerable time before the punishment for any misdemeanours are seen. Manchester City have muddied the waters by their actions and their resolve to fight the governing bodies, but Everton FC cannot afford to become embroiled in long and costly trials, and will probably have to cut its spending and raise income significantly, probably by selling key assets to avoid any punishments.

It is quite clear that the driving force for FFP and its sanctions are the established richest clubs and nobody dare challenge the sanctity of that cartel.

Premier League FFP Man City

Income questions

Jim Lloyd
20 Posted 29/07/2021 at 11:01:21
Thanks for all that info, Paul, it must have taken a lot of time to sort that lot out, thanks. Would it mean then that in (i) Farhad Moshiri could give a personal guarantee, providing a) and b) conditions are met?

Sorry to ask all this, but it seems that Moshiri has the money but, for some reason, can't put it into the club. Is that about the situation?

Paul [The Esk]
21 Posted 29/07/2021 at 11:06:03
The issue, Jim, is always the balance between costs and income. The secured funding is a mechanism that ensures someone will pick up the accumulated losses in a guaranteed manner thus ensuring payment of players and any football (transfer) debts to other clubs.

Clearly Moshiri has that funding at his disposal although, equally clearly, regardless of any Premier League requirements he wants to fund the stadium to keep it on schedule for a 2024-25 opening.

Dennis Stevens
22 Posted 29/07/2021 at 11:18:37
Jerome #13

Kendall was in a worse position in some ways as the expectation he was contending with was not to be the "best of the rest", but to be the best, albeit that others were much more catchable in those days. Nonetheless, the Board did discuss the prospect of selling Bellefield in order to generate transfer funds for Kendall [Mk I].

Not too sure what you mean by a "Moyes model" or, indeed, by "the Ancelotti plan". The managers each have to manage within the set of circumstances as they stand at the time of their appointment. Each will do so in their own inimitable way.

It seems the reckless squandering of money over the last few years may now be over, making Benitez's situation somewhat less like that of the other post Moyes mangers & probably a little more comparable to that which Moyes had to deal with for the most part. Maybe we'll have Moyes at West Ham United describing Benitez's Everton as being set up to play "like a small team", tongue in cheek no doubt!

Brian Harrison
23 Posted 29/07/2021 at 11:52:29
The real reason that FFP was introduced was because the cartel in Europe didnt want the likes of City and PSG to come in plough in billions and threaten the positions of the Cartel. Because if it was that they were in the slightest concerned about owners like the Glaziers and Hicks and Gillette spending money and leveraging the clubs in doing so then there is and was a simple solution.

Make it that any new owner has to put a guaranteed bond with the Premier league that any money spent would not be leveraged against the club. That way when these owners leave the club isn't left with massive debts that they cant afford. But FFP was set up to keep the established cartel in place, like all the rules UEFA impose its all done to benefit the cartel. I say well done City and PSG for taking on UEFA and the cartel. I cant think of another business were its competitors limit how much they can plough into their businesses just complete madness.

Eric Myles
24 Posted 29/07/2021 at 12:50:40
Paul, first you say

"to submit by March 1st in each season a set of accounts for the current season and the accounts for the previous two seasons."

and you also say

"Given projections had to be provided before March 1 2021"

What is the cut off date that these accounts, or projected accounts, are to cover?

Is it the 30 June date you later mention?

Paul [The Esk]
25 Posted 29/07/2021 at 13:24:38
Eric, each season clubs have to provide projections of their end of year accounts ( 12 months to 30 June for Everton) before March 1st of each year
Jim Lloyd
26 Posted 29/07/2021 at 14:55:37
Thanks Paul, for taking the time to reply and clearing that question up for me.
It looks to me then, that Moshiri is walking a bit of a tightrope. If he want's to ensure the club's guaranteed survival from any form of Premier League "punishment" would he be better off picking up the tab now, rather than taking a chance that the PL will only fine the club.
I wouldn't trust that shower with any sort of leniency if a club is outside the Slimy Six.
I read what you said about the owner's priority being the stadium; and it maybe that his mind is made up to fund the stadium no matter what. So it looks like we better get enough points on the board to prevent the club ending up in a very embarassing position. It look like that if we can get through this season away from any danger zone, and "live within our means", we might get a bit of breathing space.
Jim Lloyd
27 Posted 29/07/2021 at 15:23:52
Ps, On reflection, it's probably unlikely to be so simple a matter, with the owner committing the funds to ensure outgoings are paid.
It makes me wonder who runs the Premier League and who made the rules, although if my dodgy memory serves me right, Everton FC were one of the group to form the PL.
Barry Hesketh
28 Posted 29/07/2021 at 16:33:16
PSV Eindhoven are working with Denzel Dumfries to get the player a move this summer, but suitors Everton cannot move due to Financial Fair Play restrictions.

That’s according to Eindhovens Dagblad journalist Rik Elfrink, who has provided an update on the defender’s future today amid the continued links to Everton.

FFP Stalling Move?

Does this report, if accurate, suggest that Everton FC is already in breach of the FFP rules, and are therefore subject to adhering to a budget set by the league for this current window?

Andrew Ellams
29 Posted 29/07/2021 at 16:48:19
Barry if that is true then this is going to be a very worrying season. Dumfries is going to cost somebody around £13m, not a bank breaker for a PL club.
Brian Murray
30 Posted 29/07/2021 at 16:59:48
Surely we can kid some Portuguese club to take Gomes on a free and the same with Davies and the anonymous number ten. Don’t believe for a minute Brands can’t be creative in this way even if we losing fees for these players. The plus is it keeps ffp happy or are the premier league so terrified that the likes of us villa and Leeds can upset the top six cash cow favourites so keep us where we belong.
Kieran Kinsella
31 Posted 29/07/2021 at 17:30:33
Brian 30,

"Surely we can kid some Portuguese club to take Gomes on a free and the same with Davies and the anonymous number ten. "

Gomes is on 80k a week, no one is going to pay close to that even if he's on a free. Davies is on low wages and has experience at least, so why get rid of him when we can't afford anyone better. Lastly, good luck getting anyone to take the "anonymous number 10" No one will touch him until the legal situation is resolved, if it's resolved that is in his favor.

Alan J Thompson
32 Posted 29/07/2021 at 17:38:45
Would buying Dumfries make any difference as the figures should have been lodged March 1st and this transfer would be in next years figures, unless you think that discussions about Everton's FFP situation are already taking place and some sort of cap and/or amelioration has been confidentially agreed.
Brian Harrison
33 Posted 29/07/2021 at 17:46:52
Alan

You are right that buying Dumfries wouldnt make any difference to the figures we submitted on June 30th which according to Paul will show we have transgressed the FFP rules. But if we carry on buying players knowing we have already transgressed the rules it will look like we are sticking 2 fingers up to the Premier league regarding their FFP rules.

Now while I absolutely detest FFP rules I would think that we wouldn't be doing anything to mitigate our cause by signing more players given our position. I assume if we do buy players without selling first it may well be that the Premier league impose a points deduction rather than just a fine. I don't believe the club would want a points deduction and will do whatever it takes so that doesn't happen.

Dale Self
34 Posted 29/07/2021 at 17:49:38
Brian 17 and 23, you brightened my day but good posts. Extra points for providing some constructive approach after critiquing FFP.
Brian Harrison
35 Posted 29/07/2021 at 17:54:20
Dale,

Thanks, I just wish mine was a more positive post to brighten your day.

Brian Murray
36 Posted 29/07/2021 at 17:57:59
Kieran post 31. I take your point about the wages but that’s why we are paying millions for a dof to find a way round this amongst other things like not acting like the idiot before him. There are at least two Gomes and Davies in every prem team as in can’t shoot or make an assist. No big loss. Same with Allen and iwobi if we being honest. Every half decent midfielder should chip in now and again. Took much to ask with the toffs obviously. Let’s hope gray can at least get near double figures to help the front two. Failing that loads of one nils from the waiter will do for now.
Craig Harrison
37 Posted 29/07/2021 at 18:03:07
If Everton sack a player for misconduct, how is this reflected in the accounts? Can the cost of the players transfer + wages be used to write off debt?
Alan J Thompson
38 Posted 29/07/2021 at 18:05:40
Brian(#33); I understand what you are saying but it might be a case of buying time or even arguing that the transfer window(s) is yet to close which offers the opportunity of balancing the books with some outgoing transfers. Or maybe I have too much faith in the major shareholder is successfully the accountant for an Russian oligarch, we may have an unwilling ally in City or the penalty will be less than those who threatened the Premier League by joining the "Super League".
Ian Bennett
39 Posted 29/07/2021 at 18:16:19
Craig - the accounts will amortise the remainder of his transfer fee or it could be immediately impaired.

His wages will be reflected in the accounts until we stop paying them. If his contract is ripped up, we save the wages - but lose any potential transfer fee we could recover.

Brian Murray
40 Posted 29/07/2021 at 18:16:25
for the sake of two or three quality additions which will transform us almost overnight. If we are stopped I don’t blame the thousands who are put off sky / premier football and will walk away from the game. Me included although will always be a blue but what’s the point if it’s such a closed shop. Initially it the ffp was started to stop a Pompey or Leeds disaster again. Now it’s just about protecting the usual suspects at or near the top. Hope I’m still alive to see a wages cap and agents severely limited.
Si Cooper
41 Posted 29/07/2021 at 22:28:40
Given that footballing recruitment always has a measure of speculation / chance what has EFC done so badly that it is in a minority of clubs that are failing the FFP rules (or are there actually many other clubs)?
How are clubs judged if their attempts to improve their squads looked reasonable on paper but the reality turned out much worse than expected, meaning the aimed for increase in revenue didn’t pan out?
Si Cooper
42 Posted 29/07/2021 at 23:01:15
Is it financially fair if very wealthy clubs use a club’s current difficulties with the FFP regulations to their negotiating advantage and thus prevent the less wealthy club from getting fair market value for players they are prepared to sell?
Jim Lloyd
43 Posted 29/07/2021 at 23:04:01
Well, Paul's article shows (as far as I can understand the rules of it it!!!) that we're about £45 million over the £105 million, that we shouldn't have reached in the first place!
The PL can then take a really close interest in our accounts and issue fines, or deduct points, maybe both, from any miscreant club...US by the look of it!
As far as I can gather, Mr Moshiri can give a legally binding financial imput into the club that will likeley satisify the PL and sort of help us out of the financial straight jacket.
However, Paul pointed out that Mr Moshiri has a timetable to have the stadium built by 2025, and it might well mean either/or.

As it's unlikely that we will be able to sell those players who are on massive wages, other clubs are not going to pay top whack even if they're interested in any of them...PSG and Kean loan. Richarlison?

Si (41) Only a guess but the PL would look at that and deem it a bad business model, and screw the club with a fine or deduction of points if the loss account looked anything like dangerous. What we seem to have done, is be very cavalier in our transfer dealings which as brought us to this situation.

I think Brian has it right about the motives of the PL and, in our case, they may not bend over backwards to get us off the hook. It might be totally different of course, if any of the Slimy Six come a cropper!

Si Cooper
44 Posted 29/07/2021 at 23:17:13
Jim, that is why I used ‘reasonable’ and ‘worse than expected’ in my post. How can you determine what is a good business model in a business where the results are determined purely by human endeavour (recognised as the major source of variation in any other business) and entertainment is another subjective factor that can give you relative success?
It is a ridiculous notion to try to treat professional football as just another business. You simply don’t get that desired ‘level playing field’ until you bite the bullet and bring in salary caps or a draft system to share the talent.
Jim Lloyd
45 Posted 29/07/2021 at 23:27:38
Si, I think we all agree with all what you've said. Unfortunately for us, and probably anyone else outside of the Slimy Six, The Premier League seem to be a body that look after the interests of a minority.
The rest of the clubs seem to be expected to be grateful for the crumbs off the table and to know there place.
Jerome Shields
46 Posted 29/07/2021 at 23:32:36
Paul the Esk #14

Thank you for the explaination. It makes it alot clearer.

Looking back at Benitez 's initial interview , he did mention finances as a consideration on future plans. The finance situation of the Club and how to improve it must have played a big part in employing Benitez. It is obvious that other candidates would not have had the experience and know how of Benitez.

Jim Lloyd
47 Posted 29/07/2021 at 23:33:37
PS, your point Si about variations in human endeavour is a good one. There's also the affect that long term injuries to players, that can a tremendous damaging effect on the team and thereby really skewing their chances of success, or survival.
Jerome Shields
48 Posted 29/07/2021 at 00:00:13
Dennis #22

The Ancelotti plan is play set up to defend and try to nick a goal. In Florida this seemed to be have been continued, with addition of pace via Gray and Townsend. Moyes model was to set up a team that was difficult to beat with a emphasis on workrate but failed to take the team to the next level in offensive play. Therefore his team was not consistently unbeatable.

I agree that Benitez is facing a similar scenario to Moyes spending wise for the waste you highlighted. I just think that Benitez will be hopefully better at taking Everton to the next level and may challenge for some silverware and more like Kendal in dealing with this scenario.

Jay Harris
49 Posted 30/07/2021 at 04:11:46
Paul, Once again thank you for the considerable effort you have put in to calculating our situation although it is depressing reading.

I assume that the club has to put forward the figures to the league as estimates and therefore there is a bit of scope for creative accounting so Bill can count every lawnmower at Finch farm twice and find the Arteta money.

Joking aside now that we have permission for BMD can we not capitalize every bit of expenditure that could loosely be described as "In the interest of BMD development"?

Laurie Hartley
50 Posted 30/07/2021 at 05:16:35
Thanks for a very easy to understand article Paul.

Personally, I am glad that there will be a limit on our spending. I think the money that has been wasted in the transfer market over the last 3 or 4 seasons borders on the obscene.

Having thought it through, I find our exploits in the transfer market this season somewhat refreshing.

Paul Hewitt
51 Posted 30/07/2021 at 06:14:31
What's the betting the Premier League give us a points deduction if we go over FFP? Try to destroy the English game (which is what the Big 6 tried to do) it's fine, just give us a few quid in fines. But they will see Everton as a way to flex their muscles.
Eric Myles
52 Posted 30/07/2021 at 06:26:02
Paul #18,

Does this "equity participant" have to be someone who currently owns shares in the Club? Or could it be a new shareholder?

And does the "Beneficial Owner" have to actually be someone who is registered as an owner of shares? Or would that put us into more problems with the league as was the case of our former purported "shadow director"?

Danny O’Neill
53 Posted 30/07/2021 at 08:48:55
Thought provoking and informative as always Paul.

The point on Manchester City's ongoing debate with the Premier League and UEFA is, in my opinion, welcomed. I get the need for some sort of regulation, but City's stance is to be encouraged for those trying to break into the elite. They are standing up to "the club" and not being beaten down. If it comes to it, I hope we have the same balls to do likewise.

Whilst FFP initially seemed a sound concept in principle, in reality it is there to close "the club" and prevent upstarts breaking into the inner circle. Within reason, name me another business vertical that constrains investment in order to allow growth? I'm no expert business person or investor, but to grow, you have to invest right? I understand the need for a fair playing ground and controlling recklessness, but we have to allow for investment to promote growth.

One thing that did surprise me is the wide goalposts between losses in excess of 15M and the threshold excess of 105M. That itself presents a relatively free ride for reckless spending. So it would appear clubs have a 95M buffer before being punished? And even then it seems there is scope for negotiation? Again, probably a drop in the ocean in today's football market, but still a big comfort zone of what is effectively a £95M overdraft.

The final point is an old one. Our scattergun approach to transfer activity in recent years has been nothing short of dreadful. No plan, no strategy and different individuals pulling in different directions. I actually thought last summer's was a good window for us. Not just in terms of the players we brought in, but the business we done. This summer we are clearly paying (excuse the reverse pun) for the damage done prior to that.

Thanks again Paul; your articles clearly take a lot of time and research.

Tony Abrahams
54 Posted 30/07/2021 at 10:06:53
I’ve heard that money was going to be made available to Benitez, but after reading this report I don’t know how that will be possible. More worrying would be that why would you fine a club for running at such a huge loss? They seem very controversial and even more contradictory some of these FFP rules.
Jim Lloyd
55 Posted 30/07/2021 at 11:03:51
It makes it all the more beneficial, that we now have Benitez as the manager; and my money as to why Ancelloti left was partly the break in at his home and mainly the task he face getting the fist team squad to improve, given the financial constraints and trying to make a silk purse out of a sows ear.

The way I read Paul's reply to my query, to the chances of a "beneficial Owner" making a "legally binding" donation (for want of a better word) to cover the gap between £105 million and £140 million, was that (not verbatim but rough memory!) Mr Moshiri could make such a donation but he has also the priority of getting the stadium built for 24/25.

So they must have sat down and had many long discussions about the next move, after Carlo doin a bunk. So far, it looks like the move is to bring someone in who can make the best with who we've got on the books, selling who we can and keeping who we can.

EG is Iwobi worth keeping, could/should, we sell him; and going through that discussion on each of our players. Also seeing who we could bring in to improve the squad without costing a mint.

I suppose,as the transfer window progresses to August, we'll see, what comings and goings lead to' hopefully, a better squad at the end of the window than we have now.

Up to now, I think a good start has been made with the 3 squad players that have been brought in. They've all played well in the 2 American games, with very little time to get to know the other players and Townsend and Gray looking very decent players who can cover a number of positions and both Fast! The Goalie looked really cool, calm and collected and impressed me, more to the point, he's impressed our manager and coaching staff.
Can we keep Richarlison? How much would we get for him if he's sold? Who could we bring in for less that we sell him for? Is Gomes good enough to keep in the first team squad? Can we improve the team to enable him to do what he's good at and can he do that often enough? How much, if anything would he sell for and how much for us us to get a replacement in? It looks like PSG are playing poker with us and offering a loan. We are in a position that, it's reckoned, the lad wants to leave and we might have to replace him with with very little funds to do so. Can we get a good player in to become our regular right back, within what looks like, a tight budget?

All that and probably much more, also with working with what we've got to improve every aspect possible, of our game. Especially in attacking. Our goals for was poor and our ghoal diiference was the worst in the top half of the division.

Dead easy!

Paul [The Esk]
56 Posted 30/07/2021 at 12:47:39
#52 Eric, the equity participant can be a new investor, it is not limited to existing shareholders (although it is not Moshiri's intention to bring in additional shareholders)
Re beneficial owner. A beneficial owner is a person or persons who ultimately own or control a legal entity. So in the case of Everton, Blue Heaven Holdings are the registered shareholder but Moshiri is the beneficial owner because ultimately he is the sole owner of Blue Heaven Holdings
John Raftery
57 Posted 30/07/2021 at 22:50:33
At Villa Park in March 2016 our fans sang ‘We’re rich, you’re shit’ at the home supporters who were enduring a relegation season. I remember hoping at the time those chants would not come back to haunt us. It has been obvious for some time they have. We were briefly rich but now we are in the shit.

A period of financial retrenchment could prove a blessing. Forcing the playing side of the club to manage with its existing, expensively assembled squad might just enable those responsible to look for solutions from the players already available rather than chasing quick fixes in the transfer market. The hope we might generate funds through a sale of our best players looks forlorn given that most potential purchasers are themselves wary of over-stretching themselves.

Barry Hesketh
58 Posted 31/07/2021 at 11:08:34
These are troubling times for Everton FC, hamstrung by FFP in its quest to rebuild the squad whilst simultaneously trying to find backers to finance the stadium, all in the face of unprecedented uncertainty surrounding the future of European football.

It seems that the trio of European clubs, Juventus, Barcelona and Real Madrid remain steadfast in their quest to re-shape the European game forever and of course the other nine plus a few others will be waiting in the wings to join them should the circumstances allow.

“The Court backs the request made by the promoters of the European Super League, dismisses UEFA’s appeal, and confirms its warning to UEFA that failure to comply with its ruling shall result in fines and potential criminal liability. The case will be assessed by the European Court of Justice in Luxembourg, which shall review UEFA’s monopolistic position over European football.


Super League Court Victory

Derek Taylor
59 Posted 31/07/2021 at 18:51:31
Regardless of the rights and wrongs of FFP, Moshiri made a right balls-up of his weird and wonderful takeover of Everton FC.

Whoever was advising him did him no favours and his latest mistake (Benitez) has reduced the club to a football strategy focussed on maintaining Premier League status whilst his fortune disappears down a dockland plug hole.

Bobby Mallon
60 Posted 31/07/2021 at 18:54:51
Barry 58: the court was in Madrid of course it was going to go the way of the Spanish 2. It will get defeated in Luxembourg.
Bobby Mallon
61 Posted 31/07/2021 at 19:04:04
Derek @59, the bloke is an astute businessman and I bet the money he’s spent has been regained. These billionaires don’t loose and throw money away Willy nilly. The ground is just the beginning of a bigger docklands picture.
John Raftery
62 Posted 31/07/2021 at 21:29:30
Derek (59),

I suggest the appointment of Benitez is a more sensible decision than some of his earlier ones; for example, the sacking of Allardyce in order to make way for Silva, a manager with no proven track record of success.

At least there is a rationale for Benitez, an experienced operator, taking over at a stage when the club is being compelled to manage within limited resources and an unbalanced squad.

Derek Taylor
63 Posted 01/08/2021 at 16:23:25
Excellent points from Bobby and John. But Moshiri ain't so bright if he really did choose to be guided by the man who sold him the gaff!

Like you, I want us to do well but, seeing as how 'half a £Bill' has gone down the sinkhole, I think it is asking too much to expect both a brand new ground and a top-notch team. I'm training myself to see 'halfway' as an acceptable mark for the next few years!

Derek Taylor
64 Posted 01/08/2021 at 19:11:16
I have just read that 'the chairman of Man City would rather spend £30m on the best 50 lawyers in the world to sue the UEFA, Premier League or whomsoever for the next 10 years than surrender documents for scutiny.'

So there!

Alan J Thompson
65 Posted 02/08/2021 at 06:46:34
Paul (the Esk), what is the difference between "secure funding" and the major shareholder standing as guarantor which I believe Mr Moshiri has done with transfers? That is, if he is the guarantor, then who, technically, has the debt – albeit the club has the responsibility in the first place to repay it?
Paul [The Esk]
66 Posted 02/08/2021 at 11:35:22
Hi Alan, I am not sure you are correct over Moshiri standing as guarantor regarding transfers, it is the first I have heard of such. Happy to be corrected of course.

Higher up the thread (#18), I give a description of "secured funding".

Alan J Thompson
67 Posted 02/08/2021 at 12:39:37
Paul(#66); I don't recall where exactly it was stated but it may have been around the time it was reported that he had renegotiated/refinanced (just plain moved, whatever the correct term is) the loans at excessive interest rates through, I think, the British Virgin Islands. However, for the sake of the discussion, what difference might it make to the position under FFP if his standing as guarantor is correct?
Paul Richardson
68 Posted 02/08/2021 at 12:47:25
It will be typical Everton (to reflect post 51) if the authorities decide to 'go for' some club outside the Slimy Six regarding FFP. And there aren't any bigger than Everton with all its rich history.

The law is there to be used in whatever way the lawmakers see fit, so the law is not necessarily applied equally and Man City are fighting back, so they will look for an easier target. With Moshiri being focused on the stadium, that could be us.

Robert Tressell
69 Posted 02/08/2021 at 16:32:54
Whilst FFP is deeply unfair and annoying, the rules do remind us that we were spending money so badly and excessively we could have gone bust.

Although this seasons signings are underwhelming, Benitez has already added 3 necessary signings for peanuts. These are the sorts of calibre of players we might previously have spent north of £30m on in the aggregate along with ludicrous wages.

In some ways I feel a bit sorry for Benitez. He could end up saving the club financially but be despised for failing to get us into a top 6 that probably isn't in reach of this squad anyway.

Paul [The Esk]
70 Posted 02/08/2021 at 18:47:44
#67 Alan. OK he is not acting as guarantor. A company in the IoM controlled by Moshiri replaced all the high cost loans and has pumped in £450 million since. That is not a problem in terms of financial regulation. The regulations look at income and expenditure and limit your losses not the amount the owner can put in
Barry McNally
71 Posted 02/08/2021 at 20:13:41
Thanks Paul The Esk - one day you might provide us with some good news but I fear this will be a long time away, if ever!
Thomas Lennon
72 Posted 03/08/2021 at 12:41:52
Estimates and projections based on estimates have their limitations. While I accept the Everton will be operating up to the limit – as we would expect them to at this stage – I doubt that there has been a huge overspend in terms of FFP. This will have been well worked out and rules changing by the month as UK government Covid restrictions came & went.

Wage levels are very high, well past the warning level but again we are far from alone and I think one or two new income sources came online since the new year? How many times have we heard of a substantial amount put in by Moshiri only when we read the annual accounts?

Covid is a very convenient write-off excuse – no one is going to be punished severely in the current environment.

Where this leaves us with spending money here and now is a different issue – we certainly need to reduce wages but that is sensible housekeeping after some of last season's failures.

Eddie Dunn
73 Posted 04/08/2021 at 09:30:41
Perhaps we should ignore FFP rules and get in the transfers we need. The threat of years of legal wranglings will surely make the Premier League back down, especially if more clubs in our position decide to take them on.
Derek Thomas
74 Posted 04/08/2021 at 11:31:01
Eddie Dunn @ 73; Normally I agree with you as money and time are big factors in legal cases, but if the PL start throwing points decuctions around its a whole different ball game.

Like Paul Richardson @ 68 says were the perfect target, not a sky darling, but big enough to matter.

I do think there are more than us teetering on a financial tightrope and they will be happy to sit quiet and for us to be on the naughty step acting as the lightening rod for all FFP ire.

Steavey Buckley
75 Posted 04/08/2021 at 12:04:01
If Everton's further transfer dealings are dependent on moving players out who are surplus to requirements to stay within the financial rules, then Everton FC must make it clear to the fans the dire situation who are expecting much better things from transfer dealings that so far have only meant £1.7 million spent on 3 players with just 10 days to go before the season begins against Southampton at home.
Brian Wilkinson
76 Posted 04/08/2021 at 16:04:17
So on that basis, we can look forward to a £3.6 Million fine, and a slap on the wrist for breaking the rules.

No points deduction, or transfer ban, anything more and you would expect Moshiri to hire the very best lawyers to fight our case of why we receive a bigger punishment than those who signed up to a breakaway league, before putting it into writing to the Premier League.

Eric Myles
77 Posted 06/08/2021 at 13:34:27
Paul #56, my thinking is in terms of maybe a friend of Moshiri's buying out an existing shareholder and thus being able to be an "equity participant"?

Alternatively if it was shown to be that Moshiri's friend was in fact the "beneficial owner" and Moshiri was just looking after his interests ('in trust'), would that put us in trouble with the regulators?


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