Super Exciting Accountancy Review AVFC.

Hi Guys

I've been doing a bit of digging, mostly out of personal curiosity, and thought I'd share some facts and figures about our beloved Villa with you.

the source of these facts is predominantly a site called "companycheck.co.uk", incase you're interested.  Any company registered in the UK is required to file publically available accounting information, so I bothered to go and read them to see if I could work some stuff out.

So, here I'll try and explain:
- Where is the TV money and are we spending it?
- How much do players cost
- How much money has Lerner put in?  Is he bleeding us dry?
- anything else I can find....

The Accounting Bit

I've done this by looking at 3 companies, but it's absolutely imperfect.  There is a 5th company, called Acquisition Reforms LLC, which is an American company - I don't know how to get informaiton on American companies easily, and it probably varies from state to state.  AR LLC is the parent company which holds everything else, so I can't see EVERYTHING here.

The 3 companies I've looked at are:
Acquisition Reforms Ltd:  Owns the licenses of Villa players, handles the receipts
Aston Villa Ltd:  Owns the football grounds, but very little else
Aston Villa Football Club Ltd:  Handles the turnover and income

Also, although these are publically available sets of accounts, there's a limit to how much they need to disclose, so they don't give a full breakdown of their P&L, just the top line items.  

I've heard we now make a fortune on TV money - is Lerner pocketing the lot?

Ok, this is a bit of Media sensationalism.  In our latest published accounts (to May 2014), our income was £116m :

- Gate receipts - 13m (flat vs prior year)
- TV Money       - 72m (increased 26m vs prior year)
- Sponsorship   - 9m (up 0.5m)
- Commercial     - 22m (up 7m vs prior year)

So, our income rose from 82m to 116m.  When people have been saying that Villa are now recieving a certain amount of TV money, it's much more exciting to quote the absolute number (£72m in this case) rather than the increase.  But yes, our income has increased year on year by about £34m.  

Before I look at whether this is being re-invested, I want to also point out the cost of our players.

Here are the Player wages at Villa for the last 5 seasons:  (on top of this, we have about another £10m each season of staff wages for the whole AVFC operation)  

2010 - 80m
2011 - 84m
2012 - 69m
2013 - 72m
2014 - 69m

You can see the headache of the Martin O'Neill era, where our level of income was basically just matching the cost of players.  And don't forget, there are other expenses involved in running the club - .  So, in 2014, Villa made it's first profit in the 5 years I looked at...  So the TV money is taking us back to a position where we're making profit, but it's far from a lump of free cash.

Also, it's worth pointing out that there was an odd note in the accounts this year, which seems to suggest that Lerner has written off about £90m of debt from the ultimate parent company - this is basically him taking a loss on his investment.  Not a small number.

How much do players really cost?

Agian, a difficult one.  We do maintain a 'nominal' sum on our books which reflects the value of our squad, (£36m at May 2014) but it's a bit of a flawed number.  
If we sign say Adam Traore for £7m on a 5 year contract, we will write off 1/5 of his value each year, so that at the last year of his contract he's worth 1.4m, even if we might be able to sell him for £5m, £20m or £100m.  It doesn't take account of market value, so it's not very meaningful.

What's maybe more helpful is this:

http://www.soccerbase.com/teams/team.sd?team_id=154&teamTabs=transfers

In the 2014 season, we have transfers in with a "listed" price of £17m.  Our accounts recorded a value of £20m.
And in the 2013 season, the "listed" price was £25m.  Our accounts:  £24m.

So, the values you hear in the media (although they may be a bit wild to start with) do tend to settle down to a reasonable sum.

How Much money has Lerner put in?

I really can't tell without looking at the American Company Accounts (and even then, it would take a lot of work to calculate - I'd need to go through about 10 years of accounts!!!)
But the accounts are clear that Aston Villa FC are NOT making a lot of money, and they aren't capable of sustaining the level of player investment that we've had, even during the last 5 years.  It makes it clear that we are absolutely reliant on selling players to recoup their value and make further investments.  (And it's heartbreaking to say that).

But ultimately, a club which spends £70m on players wages, while making £13m on gate receipts....  we are 100% reliant on the TV money, and it is absolutely critical to maintain our PL status to keep our wage structure, and investment potential.  

And as I mentioned before, Lerner took a £90m loss on some kind of intercompany loan - my expectation is that came straight out of his own wallet.

So, Lerner is NOT making a profit on AVFC.  

What else can I say

Well, I laughed a bit at the opening "directors Statement".  I've written and read a tonne of these, and they're usually 'boiler plate' nonsense.  However, ours has a beautiful line:

the key risk facing any club in the Premier League is that of relegation

No shit sherlock.  As soon as you're an established club like Villa, with a wage structure like we have, we are absolutely screwed if we fall out of the PL, financially speaking.  Parachute payments or not, we would need to sell a lot of players, and fast, if we wanted to remain a viable football club.

Oh, and on the top of wage structure:  How do you spend £69m on football players?
Well, £8m was social security and employer taxes
so, £61m.  Across a squad of 30 players, that's £39k per week.

We have right now 28 first team players
Plus a reserves and youth squad, and a ladies team.  

So, the average wage in the squad seems to be about £40k?  That seems insanely high for me, but

Stoke have a wage of £60m
Wet Spam £64m.

So I guess that's about right?

Okay, that's it for me - hope you found it interesting...

Thanks Spadge that was very interesting. I've thought for a long time, that while RL could be accused of naivety, poor discision making and probably a host of other things, one thing he hasn't done, as some people try to claim, is take any money out of the club personally. In fact it's cost him a fortune. Ok that is largely his fault, but never the less the money has been spent. Unfortunately often unwisely. That's you I'm looking at Mr O'Neil.

I read somewhere about two years ago, that Abromavich had spent net £600m over 10 years, so that's £60m a year. Ok Randy hasn't spent that much, but I would imagine it's around £30-40m a year and for no return, financially or on the pitch. It's not really how much you spend, but how you spend it that is important.

Once you have a decent squad of quality players you can wheel and deal. For example Chelsea got £50m for David Louis (sp) last summer. Even the super wealthy clubs try ,to some extent, to balance the books

Great post.

Thanks for taking the time to research and come up with a great post.

Brilliant post, Mr Spadge.

Yes it is a great post but it poses a further question, If we can hardly sustain things how are the other "smaller" clubs doing it?

Saunders82 wrote:Yes it is a great post but it poses a further question, If we can hardly sustain things how are the other "smaller" clubs doing it?

We spent too much on dross and paying overpriced players on wages they shouldn't be on for me Faulkner was totally inept along with Lerner's lack of knowledge, lesser clubs have brought through quality players and bought bargains for example Swansea.

Reports that Sunderland have no money and a huge wage bill with loads of players that they can't shift is where we have been until now. MON strikes again.

Saunders82 wrote:Yes it is a great post but it poses a further question, If we can hardly sustain things how are the other "smaller" clubs doing it?

There are 4 business models.

1 - Have a rich owner who wants to invest (eg Cardiff)
2 - Keep your wage bill small, and invest to build a strong squad (eg Stoke, who's total wages are £20m a year less than ours?)
3 - Don't have a business model and go bankrupt (eg Portsmouth)
4 - Stay in the PL and for god sake don't get relegated (Eg Everyone else)

I think you can't keep your wage bill small when you become a succesful PL club, so clubs tend to start at 2 (like I'm sure Watford are now) and if they stay in the PL for 2 or 3 seasons, they end up with a well paid squad. Relegation at that point can be financial disaster...

I can understand why no one wants to buy us now - at least financially

Mr_Spadge wrote:

Saunders82 wrote:Yes it is a great post but it poses a further question, If we can hardly sustain things how are the other "smaller" clubs doing it?

There are 4 business models.

1 - Have a rich owner who wants to invest (eg Cardiff)
2 - Keep your wage bill small, and invest to build a strong squad (eg Stoke, who's total wages are £20m a year less than ours?)
3 - Don't have a business model and go bankrupt (eg Portsmouth)
4 - Stay in the PL and for god sake don't get relegated (Eg Everyone else)

I think you can't keep your wage bill small when you become a succesful PL club, so clubs tend to start at 2 (like I'm sure Watford are now) and if they stay in the PL for 2 or 3 seasons, they end up with a well paid squad.  Relegation at that point can be financial disaster...

I can understand why no one wants to buy us now - at least financially

I can understand why no one wants to buy us now - at least financially

I truly believe that Randy loves the club and that's why his last act has to be to find a buyer that meets the criteria to operate under business model no1.

He has made many mistakes but I believe he wants to get this right so that his beloved club can regain its rightful status as one of the top clubs in this league.

This is why its taking so long and in the interim he is allowing better qualified professionals to advise him and to probably run the club for him.

If we do not get a super rich owner, then sticking with the new Randy is the next best bet. An owner with similar wealth could well destroy the club and we all know what a bad owner can do to a club.

So lets all get behind the only thing that matters.............. Aston Villa Football Club

Mr.Spadge I'll echo others comments and thank you for the taking the time doing this (and either Mrs.Spadge or your boss for letting you!).

Terrifying that most clubs are essentially reliant upon one source of income....TV money.

Just think of the power that gives people like Scudamore and Sky! And seeing how utterly bent FIFA is, I just cannot imagine that the PL is squeaky clean.