Aston Villa may have played the PSR issue to the hilt after their £46m move

For several Premier League clubs, the end of the financial year on June 30 meant a mad scramble to do transfer business to positively impact their Profitability and Sustainability Position (PSR) ahead of the Premier League accounting deadline .

Aston Villa made a loss of £120m for the 2022/23 financial year, the high figure being the result of greater investment in the team, according to ownership, with that loss coming on the back of a small profit of £400,000 in the previous year.

But with further losses likely for this current financial year, which runs to June 30, despite increased revenue, some effort has had to be made to ensure compliance with the PSR and avoid potential Premier League sanctions, including a possible penalty with points.

Villa, who have Champions League football to look forward to this season thanks to a fourth-placed finish under Unai Emery last term, have been placed in the difficult position of having to make a profit from the transfer of players while adding depth and quality of their team.

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They are not alone in having to cut their cloth accordingly. Everton, Nottingham Forest, Chelsea, Leicester City and Newcastle United have all had to make similar moves to stay off the Premier League’s PSR radar.

For upwardly mobile clubs such as Villa, the PSR has been seen as a handbrake preventing them from closing the gap on the established top six. It allows top-flight clubs to make losses of up to £105m over a three-year period, although allowances are allowed for investment in infrastructure, women’s teams, academies and community initiatives. The impact of the pandemic, which will not be reflected in this three-year assessment period, was also an allowable deduction.

The challenge came as no surprise to Villa or the club’s wealthy owners. One of them, Nassef Sawiris, recently targeted the PSR rules in an interview with the Financial Times.

He said: “Some of the rules have actually resulted in reinforcing the status quo rather than creating upward mobility and fluidity in the sport. The rules make no sense and are not good for football.

“Managing a sports team has become more of a treasurer or a bean counter than looking at what your team needs. It is more about creating profits on paper, not real profits. It becomes a financial game, not a sports game.”

Villa have taken the decision to extend their financial year from May to June this year, allowing themselves more time to deal players with an open transfer window, while the club have also seen attempts to raise the cap from £105 million to £130 million, which would have been more in line with inflation, given that the figure has remained the same for more than a decade, but costs have risen exponentially, rejected by Premier League and most member clubs.

That meant swapping players was necessary and Villa had to be nice about it.

According to figures from Swiss football finance expert Ramble, who estimated the PSR positions of England’s top football clubs, adding in the profits made from the sales of the likes of Cameron Archer, Aaron Ramsey and Jaden Philogene, the club still needed over £50m in player trading profits before the end of the current financial year or 30 June.

Allowing for some wiggle room on both sides and the potential for the club to find a way to generate a bit more on the balance sheet, Villa’s dealings should take them to a place of relative safety when it comes to PSR, with the start of a new financial year on July 1 will likely see attempts to add more quality, given the extra income to be made from the adidas and Betano sponsorship deals, as well as an increase in Champions League revenue, which is believed to that’s around £50m more when prize money. and additional revenue from at least four games sold is considered.

Douglas Luiz’s sale of Villa to Juventus is nearing completion, the fee believed to be in the region of £43m, while a separate £18.5m deal has been completed which will see him he saw Samuel Iling-Junior and Enzo Barrenechea heading for Villa. Park from the club in Turin.

To begin with, profit from the sale of players can be immediately booked by clubs into their accounts, while transfer fees on receipts are accounted for through an amortized fee, which is the guaranteed fee divided by the length of a contract, with the maximum amortization period allowed being five years old.

Luiz arrived at Villa Park from Manchester City in 2019 for a fee believed to be around £15m, with City understood to have a 20% sell-on clause for any cash received above that after initial buyout clause expired in 2021. .

Luiz’s book value, after extending his contract in 2022 to 2026, stands at around £3m. Using the assumption that £43m is guaranteed, minus the remaining book value and the potential £8.5m Manchester City would receive if the clause remained, then they would make a profit of 31.5 million pounds for Luiz.

Selling academy graduates is also a profitable exercise as they have no book value and are pure profit on a club’s accounts. So the £9m deal to take Tim Iroegbunam to Everton and the £19m sale of Omari Kellyman to Chelsea add £28m to the positive side of Villa’s accounts, taking player profits to 59 .5 million pounds.

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But Villa have depreciation costs to consider through their acquisitions. The annual amortized costs of Iling-Junior and Barrenechea would amount to around £3.7m annually, assuming five-year contracts for both, which is now almost the industry standard at the highest level.

Then there is the signing of Ian Maatsen from Chelsea in a £37.5m deal, one that would bring in around £7.5m annually. Add to that the £2m annual amortized cost of signing Lewis Dobbin from Everton for £10m, a deal that was done because of the sympathetic relationship created by the PSR issues, and which brings in an amortized annual cost of £13.2 million.

All of this leaves Villa with an estimated £46.3m profit in player trading profit after selling three players and signing four, one of whom was included in the Champions League final last month.

Villa may have a bit more to do before June 30, but the likelihood is that the business they have carried out will push them over the PSR line, while also adding more than they lost, as well as giving Emery and co. more likely to add quality in July due to a new financial year and a swollen revenue stream.

What do Villa need to do in this transfer window? Is there a particular area you would improve? Let us know in the comments below