A glimmer of hope… my guide to saving AVFC
By David Jordan
The club is currently in as bad a position as it has arguably ever been in, in its entire history. The warnings signs have been there for the last c.12 years but only now is it coming to a head. Aston Villa has not been run as a business for at least the last 12 years. The model has not been sustainable and we have continually accrued losses year after year.
As many of you will know, I regularly defend Lerner to an extent and that is because he injected significant funds in to the club, kept us afloat through propping us up and during his cost cutting era, he was doing what we needed i.e. trying to make us a viable business with realistic prospects of continuing to trade as a “going concern”, without the support of one person (which is always a precarious position to be in). The problem was the huge contracts the club was saddled with meant that this process seemed very harsh and poor management throughout the club failed to implement a sustainable model effectively. That is when Dr Tony Xia came in.
Again, I am loathed to absolutely slaughter somebody who invests their own money into Aston Villa Football Club. I have seen fans comment that he has “only spent the parachute payments”. This is not true. Whilst he has recklessly gambled on gaining promotion, Dr Tony Xia has invested significant funds of his own. Those we already know about are the £57m he paid to Randy Lerner, the £17m bank loans he cleared upon purchasing the club and a £47.5m cash injection in the 16/17 accounts. Whilst this cash injection of £47.5m is recorded as a ‘loan’, it is not an interest bearing loan, Xia has taken no money out of the club (up to the most recent 16/17 accounts) and the prospects of him getting back any of his ‘loan’ is no chance currently. If AVFC were to be sold now, the purchase price would probably be £1 given the capital needed to stabilise the club without selling assets. Furthermore, we have been told that Xia transferred (up until May 2018) c.£5m every month to keep the club afloat. So there is another c.£50m. Therefore, Xia has been incredibly reckless but he does stand to lose something in the region of £172m
How to save Aston Villa Football Club – How big is the black hole?
With the scene setting now complete, there is a way out of this. It wouldn’t have been acceptable to the fans previously but now the realisation has hit that we genuinely might lose the club forever similar to Rangers, almost anything is acceptable providing AVFC survives to be rebuilt.
What we need to achieve (finance wise)
I estimate that based on our current playing squad (as at 7th June 2018) we have operating expenses of £80m per season (player wages of £52m);
I estimate, based on known falls in parachute payments, our expected revenue (before player trading) for the 18/19 season is expected to be £46m;
I predict AVFC will have an operating loss of £34m
(Operating losses for the purpose of this assessment is our income against of running expenses. Player amortisation doesn’t need to be considered as this is purely a cashflow assessment).
What about trade debtors due? As we know, we spent £88m on transfers under Dr Xia. From the 2016/17 accounts, £20m of this remains outstanding. For the purpose of this assessment, let’s assume 50% of this was paid in 17/18 and 50% is due this year.
I therefore estimate we have £10m trade creditors due in the next 12 months.
Finally, we know that we have accrued extra debts last year which are being carried over in to the 18/19 accounts.
For the purpose of this, I’m assuming that these immediate payments amount to £5m
In my view, AVFC have a cashflow deficit of £49m!
How to save Aston Villa Football Club – The plan…
The immediate future (next 6 weeks)
Secure funding to settle debts to HMRC and have sufficient funds to manage cashflow through to receipt of parachute payments (due July 2018)
The transfer window (the next 2 months)
AVFC need to clear £34m in operating losses. The current payroll is in the region of £52m per season. In order to be sustainable, we have to reduce our payroll by £27m this summer and reduced other operating expenses by £7m. To put this into context, we need to reduce our payroll by £519,000 per week to become sustainable. Even then, a wage bill of £25m would still be one of the highest in the Championship.
Almost every senior player, one way or another needs to be shifted. Even if that means taking much lower transfer fees if necessary. We need to clear the decks and stop these ridiculous losses.
Any transfer fees received will plug the remaining cash flow gap.
If, and it is a big IF, we can manage to completely clear the decks, we have to then move forward with a core of young players, playing with pace. Gone are the days where we can afford big wages. AVFC has to be run as a business from now on. If anything has been learned from this sorry state of affairs, it is that the club means more than any of the artificial Bol&£x.. I want AVFC to be competing at the top end of the table. However, I want AVFC to be around as an institution, more.
We can do this. It will be painfully. Some players we just won’t be able to shift. But we have to do everything we possibly can to make sure that from this season on, we do not make operational losses. If we then report player trading profits, we build that way, sustainably.
Let’s pull together guys and girls, let’s be happy when we shift players off our books as it is for the greater good and let’s cheers on the boys that wear the claret and blue, like we have never cheered them before.
Whilst you’re here, why not check out the latest edition of The Villa Filler Podcast? Hosts Dan Morgan and Dan Wiseman discuss the club’s financial issues and try to remain positive. Listen on YouTube and now on SoundCloud!!
YouTube: Xia back-stabbed by Wyness?
Categories: Opinion Piece