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Villa's finances and FFP


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10 hours ago, AnAstonVillafan said:

Even I don't agree with that assessment.

Definitely a sizeable minority who duck the issue- on social media, forums etc at least.

I do look periodically just through search results on Twitter and undoubtedly there are numbers who think FFP will be cancelled, or significant compensation or the like- I've got to wonder...

I think FFP should be eased in some areas- how can it not be with Covid 19, but grounds for abandonment or suspension? Not really- and certainly not with existing potential or live cases.

In general terms, I still think that just because the club statement says you have complied doesn't mean it is, for the EFL POV at least, the final word on the matter. Nothing to stop them reviewing it, especially under Parry who seems very keen to look in depth- compared to Harvey there's a major difference.

Derby's statement was very bullish last September once an investigation into Pride Park had been launched.

Sheffield Wednesday's post charge was quite bullish too.

Derby's certainly and possibly Sheffield Wednesday's were quite assertive and self-confident. May yet be exonerated but the EFL can certainly investigate items, material items that may shift the FFP picture.

I'd argue these would be the ground sale, the method of payment for the ground sale and the 2nd tranche of HS2- this 2nd tranche because both were classed as "Exceptional Operating Income". To me, exceptional means non-recurring- so from an FFP POV, I wonder?

Projected accounts in March 2019- all clubs submitted them and Aston Villa no exception- vs real accounts maybe another area to explore.

Edited by Mr Popodopolous
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With he financial pressures being caused by Covid 19, I can see it leading to some sort of moratorium and reset of ffp. While this would see some clubs wriggle off the hook, I also hope it might lead to a sea change as regards club finances and in particular player wages.

That's not to blame players for clubs financial woes, as they only get the wages they do if clubs agree to pay them, but what the current situation has shown is just how precarious clubs' finances are,  While this applies to all football league clubs, there is little doubt that the championship has created an almost suicidal level of financial commitment as a result of owners' quest for the riches the premier league offers. The ratio of wages to income would not be tolerated in almost any other area of business.

However, to address this problem  also means addressing the elephant in the room, namely parachute payments. How can you expect the majority of clubs to reign in spending and reduce the size f players' contracts, while relegated clubs are give a financial crutch that will enable them to outspend most f their competitors to a degree that will give them a huge advantage on the pitch?

The premier league seem only interested in looking after their own, with apparently little concern for the plight of football league clubs. It will be interesting to see if the premier league attitude has changed with the impact of the virus on the whole football world.

 

 

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On 17/05/2020 at 19:34, Mr Popodopolous said:

Definitely a sizeable minority who duck the issue- on social media, forums etc at least.

I do look periodically just through search results on Twitter and undoubtedly there are numbers who think FFP will be cancelled, or significant compensation or the like- I've got to wonder...

I think FFP should be eased in some areas- how can it not be with Covid 19, but grounds for abandonment or suspension? Not really- and certainly not with existing potential or live cases.

In general terms, I still think that just because the club statement says you have complied doesn't mean it is, for the EFL POV at least, the final word on the matter. Nothing to stop them reviewing it, especially under Parry who seems very keen to look in depth- compared to Harvey there's a major difference.

Derby's statement was very bullish last September once an investigation into Pride Park had been launched.

Sheffield Wednesday's post charge was quite bullish too.

Derby's certainly and possibly Sheffield Wednesday's were quite assertive and self-confident. May yet be exonerated but the EFL can certainly investigate items, material items that may shift the FFP picture.

I'd argue these would be the ground sale, the method of payment for the ground sale and the 2nd tranche of HS2- this 2nd tranche because both were classed as "Exceptional Operating Income". To me, exceptional means non-recurring- so from an FFP POV, I wonder?

Projected accounts in March 2019- all clubs submitted them and Aston Villa no exception- vs real accounts maybe another area to explore.

Parry can look again but he can look at all clubs in the Championship again. I see no reason why ours are special. The Wuhan Coronavirus has changed everything so these things may take a while before they are finally sorted. But it will force a rethink on how revenues are shared around the football pyramid.

I'm very confident we've complied thus far. I'll admit I thought summer 2016 spending spree would finish the club off if we didnt gain promotion.

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44 minutes ago, AnAstonVillafan said:

Parry can look again but he can look at all clubs in the Championship again. I see no reason why ours are special. The Wuhan Coronavirus has changed everything so these things may take a while before they are finally sorted. But it will force a rethink on how revenues are shared around the football pyramid.

I'm very confident we've complied thus far. I'll admit I thought summer 2016 spending spree would finish the club off if we didnt gain promotion.

Oh that's true he can look at any and every club. I suppose my point is on the wrong platform it's just on Twitter you will certainly get Aston Villa fans who consider it case closed eg. Or who would consider the club statement the final word on the matter.

It might well cause a rethink as you say, though I'm unsure the signs are promising as you say. Wouldn't be a bad thing however!

I'm on the fence. Think there is scope to debate those issues or reassess the method of payment for ground sale, arguably the counting of Exceptional income in successive seasons for FFP purposes and maybe the Projected accounts.

Would've been very interesting had you lost at Wembley last May, from an FFP pov. No way of actual financial issues though, your owners are very wealthy.

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Interesting article about salary caps in the EFL by Martin Samuel albeit over a month ago.

This section was interesting with respect to this- and the bolded bit certainly:

Quote

One imagines there would be a few plotting revenge on Aston Villa or Wolves if they ever had the misfortune to return. Long before COVID-19 brought Championship economics into greater disrepute, clubs were as good as fighting a proxy war over profit and sustainability, with Middlesbrough in particular lined up against Derby and Sheffield Wednesday over the sale of their grounds.

Follow on from this section of a prior article, also by Samuel:

Well I can't find it right now but he stated in an article that the EFL were furious that Aston Villa had managed to escape further and closer scrutiny through promotion...

That is a good sign- Samuel has been a journo for a long time so I have to wonder if it is the end of the FFP saga for Aston Villa if they come down.

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Interesting take on another Villa forum though.

All this pre-Covid of course, but someone called Mike Field, he of the rather classless articles one example of which was Gibson is crying again writes:

Quote

:laugh: Tarzan. I've further edited to try and be more clear in my line of thought but you snuck your reply in too quickly.

But, yes, I 'think' we've put ourselves into the position where relegation means we don't have to sell and can keep the complete group (minus those naturally out of contract) together (for at least the 2020/21 season) BUT the offshoot of that is our spending power would mean short term/Championship experience/2/3 additions only to bolster the group to aid promotion at the first attempt again.

Unless we chose to sell
so to speak - it's just the difference between being forced to sell which is where I thought we'd be with one of the Jack/Mings/McGinn.

So according to him, their financial and FFP position is so strong now that even with relegation they wouldn't need to sell any of Mings, McGinn or Grealish...I'm not so sure about that.

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I thought I'd have a look at- pre Covid- some possibles for this season. Wages are an unknown, fully accept that.

Using the NSWE UK Accounts for last season as a bit of a basis, starting point.

Their loss- including both exceptional costs and income- in 2018-19 was £68,884,000.

Exceptional Costs- this takes the loss down to £23,076,000. However, exceptional income- see Stadium and see HS2 2nd tranche- this takes it up to £73,944,000.

Now of course, doom and gloom isn't the only aspect.

Let's assume at some conservative estimate the following:

  • Broadcasting in Total was £22,270,000- this is inclusive of EFL media cash, media cash perse, radio, and PP- let's assume it's an additional £80m now once net effect of PP etc removed.
  • Sponsorship- £7,339,000- let's add another £2.5m net.
  • Commercial- Ditto.
  • Combined sum of Gate Receipts and run to CC final- maybe another £5m?

Profit so far, net= £16,056,000. That's before excludable and allowable costs.

That's the benefits, or some of them- but are there not costs to promotion?

Well, yes there are. Quite hard to estimate- not least as a number of their players contracts are not disclosed in length but the fees from varied sources seem roughly commensurate as a whole with their own accounts for Summer 2019.

The method I am choosing is total fee/average contract length. That's one additional cost right there- amortisation.

First though, players who left. Amortisation will have fallen there too.

Tshibola- One year left on deal, and had maybe £1.25-1.3m left in amortisation but leaving will also have wiped it from the books. Neutral.

Richards- Finally left on a free summer 2019- joined on a free, left on a free.

Hutton- Signed all the way back in summer 2011 so any amortisation removed surely quite minimal- signed a couple of new contracts in his time there.

McCormack took an early termination- or was given one. £3m loss surely given it was £12m/4 year deal but anyway it would also remove it from the cost of. Net gain/loss zero?

Jedinak free- fee listed as £4.14m, so let's say £1.38m- elsewhere listed as £4m- so let's say somewhere between £1.33m-£1.38m Improvement.

Bunn- Joined on a free, left on a free so nothing gained.

Bjarnason- Joined for £1.8m on a 3.5 year contract, left with a year left on deal- that'd be a loss of £0.257m. Again though, it would fall off amortisation costs so neutral?

Adomah- Listed as £3.15m and 3 year deal. Left on a free a year early so that'd be another loss but again removal from amortisation will cancel out. Other sources list it as a 3 year deal so anywhere between neutral and £1.05m improvement.

Whelan- listed as £1.53m, contract up- Improvement of £0.765m.

De Laet- Listed as £2.07m, 3 year deal- expired- Improvement of £0.69m.

Elphick- Listed as £3.15m- 3 year deal expired- Improvement of £1.05m.

Improvement- this is after loss on player and amortisation cancelled out and reduced A costs of players leaving all factored in:

Taking best case scenarios here- £4,935,000.

Profit- £20,991,000- Yay.

Oh yeah they sold Kodjia in the final 6 months of his deal. That means that the net effect of remaining book value will be cancelled out by removed amortisation. £2.5m I think I saw cited.

£23,491,000 Profit- Yay!

Now the questions arise.

For a start, they made a profit of £10,598,000 in 2018/19- as per their accounts. I reckon that's down by £8-8.5m.

£15,491,000-£14,991,000 Profit.

Additionally, players they signed in Jan 2019 on 4.5 year deals and it seems to fit rather netly, totalled £9.9m. £9.9m/4.5 year deal means add on £1.1m in amortisation for this season, give or take.

Profit reduced by a further £1.1m.

In the summer of 2019, they added some £131.9m of new players, that's in terms of fees paid

The simplest way for increased amortisation using the straight line method to be calculated is to take total fees added, and divide it by average contract length. Problem is a number of these are not disclosed, curiously. Surely an average length maybe something between 3-4 years though?

The likely increased amortisation cost anyway would surely tip them into loss.

They also signed a guy in Jan for £9m, on a 4.5 year deal. A shade under a million added to amortisation costs, £944k I make it- will double next season as was 4.5 years.

What I also find interesting is even clubs who didn't spend stacks- Villa for example appear to have spent 50% more than Huddersfield did gross spend wise in their two years combined- didn't make as large profits as might be expected. See Huddersfield in Year 2. See Cardiff but then again in their case,a number of exceptional costs or frontloading of losses. Also see Middlesbrough in 2016/17. I assumed their profit might be higher.

Then we have a big unknown- a second big unknown after Wages. Impairment. Impairment of Intangible Assets- in this instance Player Registrations- is a double-edged sword. It reduces the cost of amortisation in future seasons as it is a writedown of valuation or perceived valuation and of course can help enable a club to sell for a bigger profit when they inevitably get more in years to come, but it doesn't come without a cost. That cost is that quite rightly Impairment of Player Registrations isn't excluded from FFP calcs, unlike say Impairment of Fixed Assets. So if you write down your squad by £10m as season hasn't gone to plan, quite simply it adds £10m to that seasons losses.

Now here's the kicker. It's certainly not impossible to believe that they may have written down player registrations given their season surely falls below expectations. What is then though quite funny is that if the Transfer market gets a bit of a whack through Covid, they will have written down but the payoff with higher profits may not materialise the following season- that'd help with FFP!

What a shame! 🤣

Will certainly return to this at some point, add to it, amend it- debate further etc.

Coming down would be interesting- they'd be stuck with the extra amortisation etc costs but Central ie TV revenue etc surely falling by about £60m or so. Perhaps the EFL would've closed the Fixed Asset loophole by then too...before we even analyse whether payments in the form of "Loans Receivable" in such a transaction should be stuck in P&L. For FFP purposes I still question this. I also question whether Exceptional Operating Income for the same thing in successive years should be allowed under FFP- see HS2 x 2. It's no longer exceptional if it's recurring is it! Again for FFP purposes. Lastly I wonder about the difference between Projected Accounts and actuals and the contents of said Projected Accounts in March 2019.

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On 13/06/2020 at 23:54, Mr Popodopolous said:

Interesting article about salary caps in the EFL by Martin Samuel albeit over a month ago.

This section was interesting with respect to this- and the bolded bit certainly:

Follow on from this section of a prior article, also by Samuel:

Well I can't find it right now but he stated in an article that the EFL were furious that Aston Villa had managed to escape further and closer scrutiny through promotion...

That is a good sign- Samuel has been a journo for a long time so I have to wonder if it is the end of the FFP saga for Aston Villa if they come down.

Instead of being furious, perhaps the EFL should be asking themselves just how and why Villa managed to escape further and closer scrutiny!

 

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1 hour ago, downendcity said:

Instead of being furious, perhaps the EFL should be asking themselves just how and why Villa managed to escape further and closer scrutiny!

 

Quite so. Those regulations for in-season punishment, were fudged, ignored or mis-applied- perhaps a combination of all 3? Not just with Aston Villa but in general!  The question I guess might be why- and the EFL certainly should be asking themselves this! Or maybe a certain ex CEO...?

Found the bit in question- it highlights uncertainty but that feels like the situation atm with Aston Villa IMO!

Quote

Think about relegation in the current climate. Where are football’s displaced being relegated to? What will the Championship look like when the new season starts? Will its clubs have voted for radical regulatory measures — the maximum wage, or a salary cap perhaps? Will the Football League still be looking to get their claws into Aston Villa, furious that they avoided further financial investigation by winning promotion last season? Do the elite even care about this? Of course not.

It's worth noting though that Samuel is very opposed to FFP and has been for some time.

To add a bit of history...it's worth noting that they WERE under a soft embargo in May 2019 or reportedly so.

Presumably the EFL would wish to pick up that investigation if they return, as well as the most recent FFP 3 year cycle. I think the threat of legal action by clubs may force EFL to do so anyway? If Gibson is angry over Derby he surely must be even angrier over Aston Villa- I doubt that's dissipated.

Derby's statement was emphatic last September that they couldn't be touched by the EFL FFP for the 3 year period to June 2018. That was wrong, as they were charged in mid January. I assume Sheffield Wednesday held a view along similar lines.

Now whether they- or Sheffield Wednesday- might be found guilty and docked points is a different mater but the principle that they couldn't be reinvestigated, let alone charged, was demonstrably wrong. Or perhaps trying it on.

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As it is quite likely that both villa and Bournemouth will be relegated this year I was wondering if anyone knows what will happen to them regarding FFP?  

I think I am correct that they both broke the rules but couldn't be punished because of the promotion so was out of the football leagues control.

Would it mean points deductions? Fines? No parachute payments? 

Looking ahead to next season and I expect which ever one (possibly 2) of the current top 4 in championship don't go up to be strong and Norwich to be strong but apart from that I see a lot of clubs of similar standard which could go either way.

The 3 coming up from league 1 I think will all struggle. 

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  • phantom changed the title to Villa's finances and FFP
2 hours ago, marcofisher said:

Will Norwich be that strong? Outside of their first 11 they don't seem to be that strong, and you can imagine they will receive offers for Pukki, Buendia, Cantwell, Lewis and Aarons. 

Would guess it comes down to the offers they receive.

Can only guess what the transfer market will look like this summer, Championship in particular.

 

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2 hours ago, marcofisher said:

Will Norwich be that strong? Outside of their first 11 they don't seem to be that strong, and you can imagine they will receive offers for Pukki, Buendia, Cantwell, Lewis and Aarons. 

I would imagine they should be quite strong just because they have a decent side and will have parachute payments and they are a big well run club. If they lose a few they should be in a strong position to replace them 

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7 hours ago, Littlesh*t said:

As it is quite likely that both villa and Bournemouth will be relegated this year I was wondering if anyone knows what will happen to them regarding FFP?  

I think I am correct that they both broke the rules but couldn't be punished because of the promotion so was out of the football leagues control.

Would it mean points deductions? Fines? No parachute payments? 

Looking ahead to next season and I expect which ever one (possibly 2) of the current top 4 in championship don't go up to be strong and Norwich to be strong but apart from that I see a lot of clubs of similar standard which could go either way.

The 3 coming up from league 1 I think will all struggle. 

Villa fan in peace.

We did overspend but the stadium sale saw us pretty much break even. The EFL wanted to investigate but after promotion they could no longer take any sanctions against us, just request the Premier League look into it. The Premier league didn't find any wrongdoing.

- Do I think the EFL will re-open investigation if we go down? Probably not
- Would I be surprised if they did? Absolutely not!  Especially with what's currently going on with Derby and Sheffield Wednesday, and they sold their stadiums in the same season as us, but both at inflated prices...

But we did not cheat and we did not break the rules.

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That's a fair and reasonable assessment by @AnAstonVillafan but not necessarily one I agree with.

*If I am Derby County and Sheffield Wednesday, let alone the many other truly compliant clubs, well there will be massive pressure to look again. Don't forget Gibson.

*Villa Park fair value measurement poses a problem. As I've stated on countless occasions, it was shown at cost under Tangible fixed Assets. Then it got seemingly changed to Investment Property.

Don't forget about the Impairment between that, then using a Triennial Review it was I think restated to Deemed Cost? This basically reset the value of it but it's hard to measure objectively! 

*Payment method. This poses a problem for me. LOANS receivable...How will these loans be paid back? In the event of them being written off, this wouldn't count as income, profit or revenue under FFP. This feels like a workaround in terms of equity limits for FFP purposes. 

*Rental arrangements. While rent of £2.6m per season on a £56.7m transaction feels fine on the face of it, a problem is posed because FRS 102 states that rent due within 1 year, more than 1 year and no later than 5 and beyond 5 years should all be disclosed under FRS 102.

This poses a problem because I'm looking at NSWE Stadium Limited accounts right now and £10.4m rental payments on a £56.7m transaction is very low.  Because an issue is that it shows one year and it shows later than one and not later than 5- so at most it is £7.8m in 3 years, may even be 4 which is a rent that is sliding downwards...point is whether it's 4 years or 5 years, the non-disclosure of rent receivable beyond this point is odd with respect to such a large transaction!

Your neighbours however have disclosed quite well! £22.76m stadium sale and leaseback, £1.25m rent per season! That's more like it commercially speaking. Your transaction doesn't look as commercial as it should. 

*That's another thing too. How is Villa Park basically worth 2.5 x St Andrews! Or not at all far off it.

*HS2. Problem again. In year one that's fine, it was classed as "Exceptional Operating Income" and explained further down. Problem is, that exceptional operating income tends to be non-recurring...exceptional Income often is,  the clue is in the name! 

One more issue with PL. They don't even have a points tariff sanction for FFP breaches yet apparently. I think the EFL are further along that road in some ways.

PPS (not Pride Park Stadium as this thread is about Aston Villa ;) )

Here's another oddity too- I found this a while ago and @YorkshireAVFC was a good Twitter account, on FFP. Good read. He laid out this stuff...

img_20190601_174147.jpg

img_20190601_174152.jpg

Was a dormant shell company- yet controlled ultimately by NSWE SCS which is registered in in Luxembourg- much like Aston Villa Limited and NSWE UK Limited are. However a greater puzzle is the name switches- just look at that! I'm sure I could take that and build on it over the entire 3 year period...it shouldn't really matter as the company name is irrelevant in a way and the number is the one to look for but this seems curious...maybe he has laid it out over the entire 3 years!

I also forgot to add, do not underestimate a) The Bury factor- this puts some pressure on the EFL to go harder on FFP and b) The change in head. Rick Parry apparently on taking the job described it as a new regime...or words to that effect. What was acceptable to Shaun Harvey I suspect, well Rick Parry I believe has significantly different standards.

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7 minutes ago, Mr Popodopolous said:

, That's a fair and reasonable assessment but not necessarily one I agree with.

*If I am Derby County and Sheffield Wednesday, let alone the many other truly compliant clubs, well there will be massive pressure to look again. Don't forget Gibson.

*Villa Park fair value measurement poses a problem. As I've stated on countless occasions, it was shown at cost under Tangible fixed Assets. Then it got seemingly changed to Investment Property.

Don't forget about the Impairment between that, then using a Triennial Review it was I think restated to Deemed Cost? This basically reset the value of it but it's hard to measure objectively! 

*Payment method. This poses a problem for me. LOANS receivable...How will these loans be paid back? In the event of them being written off, this wouldn't count as income, profit or revenue under FFP. This feels like a workaround in terms of equity limits for FFP purposes. 

*Rental arrangements. While rent of £2.6m per season on a £56.7m transaction feels fine on the face of it, a problem is posed because FRS 102 states that rent due within 1 year, more than 1 year and no later than 5 and beyond 5 years should all be disclosed under FRS 102.

This poses a problem because I'm looking at NSWE Stadium Limited accounts right now and £10.4m rental payments on a £56.7m transaction is very low. 

Your neighbours however have disclosed quite well! £22.76m stadium sale and leaseback, £1.25m rent per season! That's more like it commercially speaking. Your transaction doesn't look as commercial as it should. 

*That's another thing too. How is Villa Park basically worth 2.5 x St Andrews! 

*HS2. Problem again. In year one that's fine, it was classed as "Exceptional Operating Income" and explained further down. Problem is, that exceptional operating income tends to be non-recurring...exceptional Income often is,  the clue is in the name! 

One more issue with PL. They don't even have a points tariff sanction for FFP breaches yet apparently. I think the EFL are further along that road in some ways.

Nerd!

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37 minutes ago, ZiderEyed said:

Nerd!

🙃

 I'd be happy to give the EFL a clue or two about where to look- unless it's us in that situation of course!

Some on Twitter have described the scrutiny or if there was an investigation as a witch-hunt, or akin to it. Some Aston Villa fans that is!

Tbh they (the EFL) will know- much better than me you'd hope. Not under Shaun Harvey however, they wouldn't have!

Edited by Mr Popodopolous
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Something else I note, just searching on Twitter in general.

A reasonable number- maybe it's a small number with an amplified voice making it misleading so let's go with a minority but how big or small is unclear- appear to believe FFP to be suspended or on hold or frozen or extended for a year.

At UEFA level perhaps but nothing yet confirmed in this League! I'd say you have to make adjustments owing to Covid 19 but not suspend it, no free passes etc etc at this stage. They seem to equate, some of them anyway, UEFA decision with a decision that Championship clubs have to vote on and you need 16/24 to get a rule change.

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