May 2013. Aston Villa are relegated from the Premier League as Paul Lambert’s men fail to amass enough points to stay in the top flight. Despite a flurry of wins in March, poor form eventually got the best of the team and Villa now face the prospect of life in the Championship.
Of course, the above didn’t actually happen, but publishing of the club’s latest accounts – recording up to April 2013 – illustrate that had such a travesty occurred, it could have been the end for the club.
Such a statement may well sound dramatic, but a loss of £51.8m on turnover of £83.7m illustrates the high cost of maintaining the club, as well as the potential impact that relegation could have created.
Had Villa gone down last year, the turnover posted today of £83.7m would, with all other figures remaining equal, actually be ~£45.7m for a maximum of four future years (based on parachute payments) – just over half of what the club have actually made, with the reality being that the figure would have likely been even lower given the expected downturn in gate money & other revenues that relegation brings.
On its own, the figures listed above may well mean nothing, but consider the following – such a turnover figure would mean that an average of £35k per week per player would be 100% of the club’s turnover, and such a situation would undoubtedly have been unsustainable. Bear in mind that in the not too distant past, £40k a week was a regularly authorised wage.
Because of such issues had Villa been relegated, and regardless of the ability for Randy Lerner to waive any outstanding loans in those circumstances – something that today’s accounts illustrate he did again in December (waiving £90.1m of loans in favour of transferring them into share capital) – the club would have been in real danger of going under.
Why? In the past, the club have been known to both overpay players – offering £40k a week to many in the most successful (and expensive) years of Lerner’s ownership of the club – as well as failing to include relegation clauses that reduce the wages paid to the players if disaster was to strike at Villa.
As a result, going down would have been more catastrophic than many fans could imagine. We’ve seen this season that Villa are struggling to shift current high wage earners such as Darren Bent, Shay Given or Alan Hutton, and it is likely that the situation would have been no different had it been the Championship where Villa were playing rather than the lower half of the Premier League. In short, Villa could have found themselves up the proverbial creek without a paddle, and with the owner powerless to do anything to help.
As luck would have it, Villa have managed to avoid relegation, and despite an underwhelming season in the Premier League, have coped to the point where next season will either mean breaking even or making a profit, even if the club do go down this season.
Which, if I am honest, is not something I think will happen. Yes, we are in trouble and, yes, we should realise that the situation is serious, but I still think there will be three teams worse off than us come May.
Whatever happens, however, the posting of the recent accounts illustrate something very stark that many may not have been aware of – just how close Villa have come to being in danger of going under for good. After two seasons of combined losses of £80m, going down and losing and additional £38m would not only have been upsetting, but it may well have meant points deductions in the Championship – something that would have made survival, even in the league below, a very challenging prospect for whoever was in charge at Villa.
So, as the accounts reveal some clarity of what could have happened just a year ago, some of the reasons for the reduced wages come into account. Personally, I still think adopting such a cautious approach has led to its own issues, but the reality is that few can fail to understand why Lerner has been hesitant to spend again after losing millions since arriving, or why he felt costs had to be cut now rather than later.
In converting his loans to capital, Lerner will – eventually – get his money back, although that hinges on the ability of him to sell the club for a figure around £250m, a task far easier said than done and, according to the board in recent months, something that isn’t likely to occur any time soon anyway.
One thing that can be said, however, is that writing off the loans will, in the short term, assist the club in being able to move forwards. Whilst the accounts published are, in my opinion, not as high as expected, next year’s accounts will bring an increase of around £30m in TV revenue figures coming from this season’s bumper Sky TV payout.
At that point, Villa will likely be turning over £100m or more and will be operating in a sustainable, or even profitable, model. It is then a case of whether Lerner will choose to invest to progress, or face another risky challenge of keeping the club at its currently low wage rate.
Logic would dictate that investment is the way forward but, as with many aspects of Lerner’s reign, nothing is guaranteed. Villa fans may well find themselves in the doldrums given the poor home form, but the club’s accounts – the primary focus of the board over the past few years – have shown that things could be even worse than they are now.
What matters now for Villa is winning games. Whilst going down would be feasible in terms of turnover and sustainability, only a fool would choose to go down given its likely impact on both the squad and potential spending next year. Win against Norwich and the club takes a step closer to safety. Lose and, well, let’s cross that bridge when we come to it, eh?
So, overall, we can see why costs have needed to be cut, though there may well be limited sympathy considering it was poor financial management by the board that got us into the situation in the first place. Have Villa learned their lessons? The accounts suggest a fresh start, though some fresh thinking may well be the most important aspect of whether the club are to flourish or fail in the next few years.
The Author
