An Explanation Of Villa's Recent Accounts

With somewhat confusing press reports about Villa's accounts for last season, Hanboroughvilla has taken the time to provide some clarity.

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So many misconceptions, with much of the confusion caused by 2 factors:

(1) The website Businessdesk and the Birmingham Post were quoting from 2 different sets of accounts, both for the year ended 31st May 2012.

(2) There was an "odd" accounting adjustment in the "businessdesk accounts" in the previous year (to May 2011) which seemed to artificially increase turnover and distort figures.

To explain the accounts, Randy runs Villa through a company called Reform Acquisitions Ltd. This company has 5 subsidiaries, the two major ones of these being:

(a) Aston Villa FC Limited - which deals with all of the "football stuff" such as players` contracts, transfer fees (in and out) and player/manager/coaches etc wages and also matchday revenue and income from media such as TV and radio.

(b) Aston Villa Football Club Limited - which deals with the "non-football" stuff such as the commercial and retail operations and non football salaries etc.

And all of the subsidiaries` accounts are added together to produce "group (totals) accounts" presented as Reform Acquisitions Limited.

Businessdesk seemed just looked at Aston Villa FC Limited and not at Reform Acquisitions Limited.

This explains the difference between the £80m turnover reported by the Birmingham Post and the club and the £65m turnover reported by Businessdesk. The £15m difference in turnover represents the club`s commercial income for the year ended 31st May 2012, this amount being in the group accounts but NOT in Aston Villa FC Ltd`s accounts.

Within the Aston Villa FC Ltd accounts for the year ended 31st May 2011 there is an accounting adjustment of about £20million which I think represents the fact that another subsidiary forgave Aston Villa FC Ltd its debt due to them. This should never have been included as turnover/sales but was and so artificially increased its income by that £20m.

Its true turnover for that year was £75m. So the football income did not fall by £30million but actually by £10million, £7 million from lower media sales (fewer matches televised, because knocked out of cups much earlier/crap etc) and £3million from matchday revenue with average attendances down by over 6000.

The fall in football income was "compensated for" by a fall of £12million in football wages.

It is right that the football wage bill as a percentage of the football (ie non-commercial) income has stuck at about 90% for the three years up to 31st May 2012 (and represents Lerner`s drive for youth which Lambert said that he could do).

Note that it was 65% when MON was appointed.

Eck actually "delivered" in that the % above under him fell from 96% to 91% and he kept us up.

Turning to Randy, unbelievably the tabloids are right. Up to 31st May 2012 he has spent £333 miilion on Villa.

£63million of this was paid to Ellis and was a private transaction, not in the accounts but, in terms of the actual club he (or rather his American company Reform Acquisitions LLC which I think is owned by him and various family Trusts) has inputted £270million made up as:

(1) £133 million in shares.
(2) £107 million in loan notes repayable in June 2018, bearing about 5% interest, NOT 20% (see below).
(3) £30 million short - term interest free loan.

Since he bought the club it has incurred £164million in losses, funded as above. About £110 miilion was during the MON years. The other £106million has been spent on net assets, which includes the value of the playing squad.

He has never drawn a salary or taken a dividend and in cash terms the loan notes have only paid out £5miilion in 2007/8 and not since.

Regarding the £20million this represents 4 years worth of accrued/rolled-up interest unpaid at 31st May 2012 which Randy waived completely to create a "write-back" in the accounts and to reduce the loss from £37million to £17million.

The accounts for Reform Acquisitions Ltd at 31st May 2012 show that the club is technically insolvent to the tune of £32million but this includes £137miilion due to Randy (and family) so we are nothing like Portsmouth or Leeds who fuelled a "dash for growth" with third party loans.

Equally, even if Randy wanted to ( which I doubt) he could not withdraw his shares without selling them, cannot repay the loan notes for another 5 years and although the short-term loan is repayable on demand he actually increased rather than reduced it in year ended 31st May 2012.

I am as concerned about the Club`s football position as anyone and yes, relegation would be a disaster financially and for us fans, but Randy appointed Lambert for a drive to cheaper youth and I bet Lambert told him he could keep us up at the same time so Randy appointed him.

I hope it works as much as the rest of you.

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With thanks to Hanboroughvilla for taking the time to explain it thoroughly.

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