The AVFC FFP thread

[villa4europe]

For how many years can we play with the Grealish money and our accounts? 

We didn't spend it this summer but can we sit on it, creep up the league for a couple of years and then summer 2023 this £100m comes back in to play and we have say a £250m splurge? 

[villalad21]

18 minutes ago, villa4europe said:

For how many years can we play with the Grealish money and our accounts? 

We didn't spend it this summer but can we sit on it, creep up the league for a couple of years and then summer 2023 this £100m comes back in to play and we have say a £250m splurge? 

If we want to keep improve every season I'm afraid we will have to keep spending 80-100M every season.

That's just the name of the game in this league. It is what it is.

[villa4europe]

2 minutes ago, villalad21 said:

If we want to keep improve every season I'm afraid we will have to keep spending 80-100M every season.

That's just the name of the game in this league. It is what it is.

£80-100m is within our means based on revenue, TV money etc I would expect us to keep spending that much 

What I mean is we haven't spent the Grealish money this summer trying to go from 11th to 7th, how many years do we have to spend it under the FFP rules? So one summer will it reappear and our spending goes to £180-200m

[villalad21]

2 minutes ago, villa4europe said:

£80-100m is within our means based on revenue, TV money etc I would expect us to keep spending that much 

What I mean is we haven't spent the Grealish money this summer trying to go from 11th to 7th, how many years do we have to spend it under the FFP rules? So one summer will it reappear and our spending goes to £180-200m

Can't see us being able to attract 50-60 Million players in the coming years so can't see us spending at that level.

Edited September 4, 2021 by villalad21

[sidcow]

25 minutes ago, MaVilla said:

as Peppy Pepper said, they sold 35m worth of fringe talent, so on balance they only spent 65m this window....

In reality, its clear we have cottoned on to this and are working towards this type of cash flow, yes some of our youth players may get in to the first team, or even move on for big money at some point, but if we can bring through a plethora of young talent and sell the ones that dont make it, even making 10-20m a season from fringe sales, would be a huge help to the balance sheet and FFP, and by extension, the money we have to invest in the first team squad.

Probably more than that.   Once The Championship recover from Covid £10m or so will probably be a common transfer fee, sell the odd one or two  there, and lower Premier League teams and as both Citeh and Chelsea have found you can soon see your carrying round £30-£40m in your back pocket. 

[MaVilla]

1 minute ago, sidcow said:

Probably more than that.   Once The Championship recover from Covid £10m or so will probably be a common transfer fee, sell the odd one or two  there, and lower Premier League teams and as both Citeh and Chelsea have found you can soon see your carrying round £30-£40m in your back pocket. 

yep agreed, i was just trying to be..."understated"

[CVByrne]

1 hour ago, villa4europe said:

For how many years can we play with the Grealish money and our accounts? 

We didn't spend it this summer but can we sit on it, creep up the league for a couple of years and then summer 2023 this £100m comes back in to play and we have say a £250m splurge? 

It appears in this year's accounts as profit. We the have it for three years after that as part of the FFP. Then it rolls off, so from 24/25 season. 

But remember when we sign a player for say £50m on 5 year contract his transfer fee appears as -10m per year for 5 years.

This is why we have signed Ings for 3 years so we have his 25m fee spread over the three years we have Grealish money in our FFP accounts

Edited September 4, 2021 by CVByrne

[Vive_La_Villa]

7 hours ago, villa4europe said:

£80-100m is within our means based on revenue, TV money etc I would expect us to keep spending that much 

What I mean is we haven't spent the Grealish money this summer trying to go from 11th to 7th, how many years do we have to spend it under the FFP rules? So one summer will it reappear and our spending goes to £180-200m

Maybe it’s being factored towards paying larger wages rather than transfer fees.

[fruitvilla]

Where does do monies wrt the FPP rules go when up grading or renovating Villa Park?

ie television rights, advertising/sponsorship income, player sales, merchandizing, tickets ... can some be spent on improving the facilities? Another 10 000 seats for instance?

[MaVilla]

Just now, fruitvilla said:

Where does do monies wrt the FPP rules go when up grading or renovating Villa Park?

ie television rights, advertising/sponsorship income, player sales, merchandizing, tickets ... can some be spent on improving the facilities? Another 10 000 seats for instance?

afaik, stadium upgrades/works, training facility upgrades, youth related upgrades (pitches, gyms etc etc), do not count towards FFP, so in theory we could spend hundreds of millions on that, with zero FFP impact (if someone wanted to spend that money ofc).

If you look at our massive training ground upgrades at Bodymoor etc, i dont believe any of that was factored in to FFP, it was just improvement money completely separate to FFP.

[Czarnikjak]

8 minutes ago, MaVilla said:

afaik, stadium upgrades/works, training facility upgrades, youth related upgrades (pitches, gyms etc etc), do not count towards FFP, so in theory we could spend hundreds of millions on that, with zero FFP impact (if someone wanted to spend that money ofc).

If you look at our massive training ground upgrades at Bodymoor etc, i dont believe any of that was factored in to FFP, it was just improvement money completely separate to FFP.

This is correct. Spurs for example spent over £1 bilion on their stadium ( some their own cash but most via various bonds and loans) without impacting their FFP position. 

They did have to cut their transfer spend during the build, but that was due to the cash being diverted towards the stadium not FFP pressure.

Edited September 4, 2021 by Czarnikjak

[villaglint]

18 minutes ago, Czarnikjak said:

This is correct. Spurs for example spent over £1 bilion on their stadium ( some their own cash but most via various bonds and loans) without impacting their FFP position. 

They did have to cut their transfer spend during the build, but that was due to the cash being diverted towards the stadium not FFP pressure.

How many billion would it cost to get a beer at half time without leaving after 35mins? 
 

I feel like we’d struggle to do it for 1 

[Villa_Stateside]

9 hours ago, villa4europe said:

£80-100m is within our means based on revenue, TV money etc I would expect us to keep spending that much 

What I mean is we haven't spent the Grealish money this summer trying to go from 11th to 7th, how many years do we have to spend it under the FFP rules? So one summer will it reappear and our spending goes to £180-200m

80m-100m within our means? Nooo that is mostly eaten by wage bill of around 100m a year. I heard it could be more. 

We are playing with owner money right now going forward until we get more revenue from commercial or other areas.

 

The thing is we guessing on when we will use that Grealish money for ffp purposes as I think we getting installments. It all depends on who we still paying off as well from our last couple of seasons of big spending 

[Vive_La_Villa]

10 hours ago, Villa_Stateside said:

80m-100m within our means? Nooo that is mostly eaten by wage bill of around 100m a year. I heard it could be more. 

We are playing with owner money right now going forward until we get more revenue from commercial or other areas.

 

The thing is we guessing on when we will use that Grealish money for ffp purposes as I think we getting installments. It all depends on who we still paying off as well from our last couple of seasons of big spending 

Yep. People look at transfer fee’s but it’s wages that do the damage. Under MON it became unsustainable and then again under Bruce.  The club is well run now but as you say they really do need to increase revenue some how to have any chance of continuing to progress whilst FFP compliant.

[nepal_villan]

Unfortunately we are in transfer market purgatory where the players we need to bring in to challenge for Europe will command top dollar and the ones we want to move on - there is hardly a market for. Let's take Traore as an example. He bought him for around GBP 17M including add-ons. Based on last season (7 goals, 6 assists) he should probably be worth 25-30M now, but which club would potentially pay that much for him? He is not good enough for the Greedy 6  and the rest could not really afford him.  I feel this will become a reality to our management in the next few windows and we will focus much more on promoting the Academy players and scouting for players with high upside like Konsa. 

[CVByrne]

25 minutes ago, nepal_villan said:

Unfortunately we are in transfer market purgatory where the players we need to bring in to challenge for Europe will command top dollar and the ones we want to move on - there is hardly a market for. Let's take Traore as an example. He bought him for around GBP 17M including add-ons. Based on last season (7 goals, 6 assists) he should probably be worth 25-30M now, but which club would potentially pay that much for him? He is not good enough for the Greedy 6  and the rest could not really afford him.  I feel this will become a reality to our management in the next few windows and we will focus much more on promoting the Academy players and scouting for players with high upside like Konsa. 

Who cares when the transfer fee is amortised over 4 / 5 seasons and the player leaves on a free or for a small fee like 10m near the end of the contract. It's a net positive to the accounts.

The thing we are doing differently is having a squad where all the players contribute on the field and not having players we have to ship on. 

Sale fees are only important for players other clubs want from us and we don't want to sell. We then get compensated to a level that is a net positive to us. If Trez or an AEG finish up the last 2 years of their contracts andove on we have got our value from their contribution over those 4 years and it's not an issue.

Too many fans see purchase price and sale price and assume they are they only two factos that matter, this net spend nonsense. 

[Czarnikjak]

In this post I will try to summarise our 2021 Summer transfer window from financial point of view. I will show how it affected 3 particular aspects of our finances:

1. Premier League Profit & Sustainability calculation (often referred to as FFP)

2. Wages

3. Cash Flow

 

PS. I base my calculations only on publicly available information, so a certain degree of inaccuracy is to be expected.

 

Premier League Profit & Sustainability calculation

Having sailed dangerously close to the FFP limits over last few years, Aston Villa achieved £82.4 swing in positive direction this summer. As per the transactions below:

 

It is worth remembering however, that the £100m sale profit on Grealish is a one-off injection and will disappear from our FFP balance in 3 years time. Therefore a better representation of our actual FFP situation would be splitting the £100m into 3 years and including only £33m from JG sale this year. This still leaves us with £15.4m surplus on FFP balance (29.4+33-47). This is a welcomed breathing space, allowing us some flexibility in next transfer windows.

Had there been any willing buyers for our fringe players (Kalinic, Hourihane, Gilbert), our position could have been even better. Unfortunately only another set of loans was secured for these players, not changing our FFP situation in comparison to last year.

 

Wages

For season 21/22 I estimate our total wages to be around £122m*. This is an increase from £109m reported in 19/20 accounts (our first season in Premier League). This figure puts us in 9th place in the league (behind Big 6, Everton and Leicester), on par or very close to West Ham. Wages to Revenue ratio will be around 70%. Its interesting to note that the 70% ratio is widely accepted as an upper limit for a sustainable club and its reported to be the Salary Cap limit UEFA is looking to introduce in the future.

It will be a challenge for the club to keep improving playing squad in the future while keeping the wages in check. More academy products and less expensive transfers are probably to be expected.

*estimated by adjusting 19/20 figure with incoming and outgoing players and new contracts given to Konsa, Mcginn, Target and Mings. The actual figure is most likely to be higher as it doesn't include new non-playing staff (coaches, physios, admin, etc) and academy players added since then as the club grows.

 

Cash-flows behind the transfers

The actual flow of cash behind each transfer is very difficult to estimate as the terms of payments are very rarely published. We can only estimate to some degree and make some assumptions. Lets try the following scenario:

It has been reported that Man City are paying us £75m up front and the remaining £25m over the next 2 years.

Lets assume the same structure for our incoming transfers (75% upfront, 12.5% after one year, 12.% after two years).

In this case our cash received this summer is £75m and our cash spend is 75% of 2021 purchases + 12.5% of 2020 purchases + 12.5% of 2019 purchases.

That gives us cash spent on transfers this summer: £101m (£70m + £12m + £19m). 

The actual cash is still flowing out of the club faster than it comes in, £26m deficit. This is pretty conservative scenario, the actual cash spent might be higher if we include performance related bonuses to former clubs for players like Mings or Watkins that could trigger this summer (for Mings alone, we transferred £6m cash payment this summer to Bournemouth).

Take Sky's "Net Spend" figures with a pinch of salt, they do not represent any meaningful information if you want to asses the situation correctly.  Very likely that another cash injection from NSWE will be required this season to cover the transfer spend and operating loses. Although nowhere near the level that was required in previous years, where NSWE had to inject circa £100m each season.

 

[MaVilla]

1 hour ago, Czarnikjak said:

It is worth remembering however, that the £100m sale profit on Grealish is a one-off injection and will disappear from our FFP balance in 3 years time. Therefore a better representation of our actual FFP situation would be splitting the £100m into 3 years and including only £33m from JG sale this year.

 

I understand the "fact" of the 3 year presence on the balance sheet, but i find it really hard to get my head around the benefit of this long term, in the "old days" you would get £100m for a player (in this scenario), and you have that in your back pocket for whenever you might need it, even if that be in 5 years time, 8 years time, or whatever, the money doesnt "vanish".

However in the current scenario, that 100m windfall, coupled with losing our best player, can only benefit us for 3 years, and then its as if it never happened.

I find that really hard to get my head around, in terms of the fairness of it, as a 3 year cycle, if i am correct, doesnt even let us invest that 100m in a couple of huge deals over a 5 year period, as in the 4th and 5th year we will have huge payments for these purchases/salary, but the grealish money will have disappeared in to the ether.

Am i missing some benefit somewhere related to this?

[Czarnikjak]

30 minutes ago, MaVilla said:

I understand the "fact" of the 3 year presence on the balance sheet, but i find it really hard to get my head around the benefit of this long term, in the "old days" you would get £100m for a player (in this scenario), and you have that in your back pocket for whenever you might need it, even if that be in 5 years time, 8 years time, or whatever, the money doesnt "vanish".

However in the current scenario, that 100m windfall, coupled with losing our best player, can only benefit us for 3 years, and then its as if it never happened.

I find that really hard to get my head around, in terms of the fairness of it, as a 3 year cycle, if i am correct, doesnt even let us invest that 100m in a couple of huge deals over a 5 year period, as in the 4th and 5th year we will have huge payments for these purchases/salary, but the grealish money will have disappeared in to the ether.

Am i missing some benefit somewhere related to this?

Well, the actual £100m cash we receive from City doesn't disappear. The only thing that disappears after 3 years is the £100m profit we accounted for FFP purposes.

So if you were to fully "allocate" this £100m to new signings after 3 years you hoping for one of 2 things to happen :

1. Your revenue has increased sufficiently to cover those signings from now on.

2. You sell somebody for significant profit.

In reality, current ffp regulations are likely to be replaced in 3 years time by some sort of Salary Cap, so this scenario might not apply to us. But stricter wage control will be needed instead.

Edited September 5, 2021 by Czarnikjak

[MaVilla]

26 minutes ago, Czarnikjak said:

Well, the actual £100m cash we receive from City doesn't disappear. The only thing that disappears after 3 years is the £100m profit we accounted for FFP purposes.

So if you were to fully "allocate" this £100m to new signings after 3 years you hoping for one of 2 things to happen :

1. Your revenue has increased sufficiently to cover those signings from now on.

2. You sell somebody for significant profit.

In reality, current ffp regulations are likely to be replaced in 3 years time by some sort of Salary Cap, so this scenario might not apply to us. But stricter wage control will be needed instead.

thanks.

A salary cap is going to be shocking if its not done correctly, as it will cement the "big" clubs without the "smaller" clubs being able to close the gap, probably even worse than FFP does.

We need to up our revenue(s), in any way(s) possible asap.

It will be interesting to see if breaking this cap will incur points deductions/competition bans etc for breaking it, or just fines or "luxury taxes", if its the latter, that might be a wholly different scenario, allowing rich owners to "luxury tax" the clubs wages.

Will be interesting to see how it goes.

Edited September 5, 2021 by MaVilla