Financial Deadline Looms for Aston Villa

February 28th is an important deadline for Aston Villa and fans may not be aware of its importance. The 2016/17 accounts are due to be filed by this date and they will indicate if Financial Fair Play regulations have been breached.

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Recon Sports Limited, the company that holds all the assets and liabilities, has to file accounts to 31st May 2017 by this date. Apart from meeting the requirements of the Companies Act 2006 (legislation that governs companies in the UK), this financial result is the third year of the cycle for FFP monitoring.

The company was formed by Randy Lerner, under the name of Reform Acquisitions Limited, and was renamed Recon Sports Limited by the sole director, Dr Tony Xia. He is registered as ‘Xia Jiantong’ with Companies House. He has the regulatory responsibility to file the accounts by the deadline. The information is in the public domain and can be accessed here.

In 2014, EFL Championship clubs agreed the ‘Profitability and Sustainability’ Regulations‘ that govern FFP in the division. To summarise, teams are measured over a three year period and are permitted to lose up to £39m. Teams that have been in the Premier League during this period are permitted to lose £35m for each season in the top flight.

Aston Villa’s total losses in this assessment period can be no more than £83m.

Financial Year	Permitted Loss	Actual Loss*
2014/15	£35m	£27.3m
2015/16	£35m	£80.7m
2016/17	£13m	???
	£83m	£108m

*- as per the financial statements filed at Companies House

There are allowable exclusions that will reduce the losses. Items such as youth development costs (circa £10m over two years) and non-playing fixed asset costs (such as stadium etc) are excluded from any losses for FFP purposes.

In the 2015/16 accounts, an impairment charge was incurred for £44.6m for land & buildings which will surely be excluded. An impairment of an asset incurs when its book value is less that the actual market value of that asset.

If we take the £108m loss from the table, add the youth costs back plus the asset impairment then the loss is reduced to £53.4m for the two years. This means that Aston Villa could lose £29.6m in 2016/17 and still be under the limit. These numbers are estimates only and other exclusions could apply.

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Just as importantly, this will be the first set of accounts filed completely under the control of Dr Tony and his Recon Group. It will give us a good view of the cost base for life in the Championship. Also, it will be an indicator of potential future FFP compliance issues should promotion not be achieved this season.

According to the Express, Aston Villa had received £40.9m in ‘parachute payments’ from the Premier League to end of May 2017. This will reduce this season which will exacerbate the precarious situation of not achieving promotion. Usually, such mundane items such accounts aren’t a concern for football fans. Not this season for fans of Aston Villa.

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