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The factors that led to Aston Villa’s massive financial loss explained

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Aston Villa posted massive losses in 2014-15. Why?

Aston Villa v Wycombe Wanderers - The Emirates FA Cup Third Round Photo by Michael Regan/Getty Images

Aston Villa have released their financial records for the year ending on 31 May 2015, and the uproar among fans has been both loud and predictable. I've sifted through the report and come up with a few highlights of what you should know.

Timeframe

It's vital to keep in mind that this report covers the 2014-15 season. The season that was begun with Paul Lambert in charge and ended with Tim Sherwood at the helm. This is the year that saw the purchase of players like Carlos Sánchez and Carles Gil.

And while I understand the type of reactions that I've seen on twitter all morning ("Tom Fox is getting paid what for our worst season ever?") those are missing a key point: these numbers do not reflect this season. Additionally, there is no indication of a causal link between these numbers and the performance this season.

If I were to speculate, I'd actually expect that the 2015-16 numbers will be some of the best that we've seen in a while. Selling Christian Benteke and Fabian Delph and dropping a minimal amount of that money back into the club should mean a tidy profit. A poor financial showing in 2014-15 can tell us a lot about Aston Villa, but there is no reason to believe it is the reason behind the disaster that is this year.

Net results

Well, which way do you want to look at this? Let's start on page 2 of the report (which can be read in full here): "The operating result for the year, before interest and taxation, amounted to a loss of £32,997,315." This compares to a profit of £114, 927 in the financial year ending on 31 May 2014. £33 million is an astonishing loss, especially when compared to the previous year that basically saw Aston Villa come out even.

If you simply want to look at turnover (revenues), administrative expenses, and tax, as is done on page seven, the picture becomes even more bleak. Aston Villa posted a loss of £48,860,109. Both of these numbers are indicative of a dismal performance financially, but neither really reflect the whole picture very well.

Thanks to holdover from previous profits to the tune of £20,933,878, Aston Villa were able to mitigate some of the losses and post a final loss of £27,926,487 (pages 8 and 16). Basically, the club went through their savings account twice this season. The problem is that the second time was just debt.

So what do these numbers mean? Well the smallest number at the end (still... a loss of nearly £28 million is not small) is what has the most impact on the club. The loss for the year was £28 million. End of story. But if you want to know how the club were actually run in 2014-15, look at the biggest numbers. Aston Villa burned through cash, for a number of reasons. Let's take a look at some of those.

Tom Fox

This was the big news from the report. Tom Fox received a salary of £1.25 million for his performance that didn't even begin until November. Before that, the club's highest-paid director in the 2013-14 fiscal year had made merely (ha) £265,792.

This is a great place to focus our anger. Tom Fox seemed like he was going to change this club drastically, and he started out by saying all of the right things to fans. But it's become increasingly clear in the months after his appointment that he wasn't going to change much. His heavy hand with fans has earned him hatred and his unwillingness to invest much into the club has only compounded that.

To be fair to Fox, the latter may be part of his mandate. He may (in fact probably is) hearing from Randy Lerner that budgets need to be tightened and costs need to be cut. Unfortunately for Fox, he's made it easy for we fans to villainize him.

And compared to other top-paid directors in the Premier League, he absolutely IS earning too much. Only those at Manchester United, Manchester City, Arsenal, Tottenham, and Chelsea earn more. What do those clubs have that Aston Villa don't? Success. The only other relegation-worried club paying a director more than £1m is Norwich City. Newscastle give their top suit £106,793 and Sunderland paid Margaret Byrne £663,196.

There's one problem with sending all of our hatred to Fox's salary. The losses were more than £27 million, any way you look at them. Even if Fox worked for free the overall picture would hardly be any different.

Wages and Staff

But wages HAVE played a large role in helping financially doom the club. In 2013-14, the wage bill for the club (including players and staff) £69.3 million. In 2014-15, that number rose by more than £14 million to £83.7 million.

Some of that can be explained by the fact that the club added 39 full-time staff positions in 2014-15. I'm taking a total stab in the dark here, but if the average salary there was £75,000 (probably too high? I'm not sure) then that accounts for approximately £3 million in the change. The numbers don't change too wildly if you slide that average wage up or down, so I'm comfortable with it.

That means that the rest is coming from... I'm not entirely sure. Some of it is certainly player wages. While players like Philippe Senderos, Joe Cole, Kieran Richardson, Aly Cissokho, Carlos Sánchez, Carles Gil, and Scott Sinclair were relatively cheap signings, their wages quickly add up. If you figure an average weekly wage of somewhere in the £25-30,000 range, you're looking at something in the £8-10 million range for that batch of players.

Add to that the addition of 70 part-time staff and you start to see where the numbers come from.

Stop signing bad managers to big contracts

Aston Villa spent £3.3 million on an "exceptional item" in 2014-15. This line includes "net termination and onerous contract costs." In other words, you can go ahead and read that as "Well, we saw that Paul Lambert won a few matches, we gave him a HUGE contract extension, and then immediately regretted it. So we paid him to go away."

I've got bad news. Guess what happened in the 2015-16 season? We gave the manager we'd just signed to a long-term contract the boot. Prepare for more stupid and senseless losses sent to Tim Sherwood's pocket.

And who knows, maybe we'll pay for Rémi Garde, too.

Someone stole a lot of biscuits

That or Villa Park is depreciating in value. It's not a huge issue, but in the 2013-14 fiscal year, Villa's tangible assets were worth £38.1 million. In 2014-15 they were down to £37. That's probably depreciation, but I think it'd be much funnier if it were stolen biscuits.

The value of the club

Finally, we all know Aston Villa are for sale. And if Randy Lerner wanted to sell for exactly what the club were worth on 31 May 2015, he should set his price at £246,587,487. That's the value of the club's net assets.

But of course that's never what he'll get. Impending relegation, a stunning drop-off in television revenue, and a stream of bad contracts that make even Martin O'Neill say "hoo boy that's bad" mean that Aston Villa don't look likely to be a profitable enterprise any time soon. As I said, I expect the 2015-16 numbers to be better thanks to the sales of Benteke and Delph, but "better" does not mean "good."

Conclusions

The worst part is that, despite the heavy financial losses in 2014-15, Aston Villa could have done something to stop the bleeding, both on and off the pitch. Stop giving out dumb contacts. Invest wisely in the team. Don't throw good money after bad, but also don't cling onto good money for the sake of it.

What happened in 2014-15 didn't doom Aston Villa in the current season, but it should have been a warning sign of some of the deeper problems at the club. While the report is just coming out now, it's shameful that executives at the club either didn't see or didn't address many of these issues. How can you, for instance, sign Tim Sherwood to a massive multi-year deal mere DAYS after having to pay a multi-million pound sum to Paul Lambert to get him away from a similar deal?

Despite their losses, though, Aston Villa are still a rich squad relative to most of the footballing world. Relegation is imminent, but appropriate reinvestment can turn things around, and there is no reason to think that the appropriate reinvestment cannot happen. These numbers are damning for one year, but the overall financial health of the club is still pretty strong.

Use this information as a basis for improvement. Fix this club. Make it better. And get us back to the top as quickly as is possible.