ASTON VILLA PLC
CHAIRMAN'S STATEMENT
I report to you at a time when there is extensive coverage on the contrasting
fortunes of football clubs. The financial difficulties that I forecast in my
previous reports regarding excessive playing costs has hit many clubs hard.
Most noticeably affected are, those clubs that have FA Premiership
infrastructures but have lost that status, and others who have reached for the
stars of the European Champions League but have fallen short and have had to
retrench or seek alternative solutions.
There has also been extensive coverage about the lack of a transfer market and
the inability of clubs to dispose of higher paid players and players out of
contract not being able to find continuing employment on the same terms.
Conversely we have recently witnessed a limited number of mega transfers, both
in terms of quoted fees and salaries, that can only be afforded by the few.
Furthermore, new buyers have been attracted into clubs or are reported to be
interested at prices which underline my conviction that our current share price
significantly undervalues our football club.
The game is increasingly being divided by the financial resources available to
clubs. Aston Villa continues to operate within its resources and this has made
the challenge of competing regularly for honours but remaining financially
stable extremely difficult.
I apologise for starting my comments on a depressing note, but believe that it
is my duty as Chairman to give shareholders and supporters an honest and
balanced appraisal of the current position.
I now turn to our results for 2003.
Playing Performance
Our first team performances were extremely disappointing in 2002/03. It was
unacceptable to directors and supporters alike that given the investment in the
squad in recent years, that not only was the team not in the top half of the
table alongside clubs with similar or less investment, but it was only in the
final weeks of the season that we secured our place in the FA Premiership for
the 2003/04 season.
In 2002/03, the first team failed to qualify for the UEFA Cup via the Intertoto
Cup Competition and finished 16th in the FA Premiership, our lowest position
since 1994/95. We were defeated at home by Blackburn Rovers at the first hurdle
in the FA Cup and having got to the quarter final of the Worthington Cup were
defeated in a 4 -3 thriller to the eventual winners, Liverpool.
However, there were some positive points to take from last season. Following on
from the success in the previous year in winning the Youth Cup, our youngsters
ranked amongst the best in the country in winning the U17 and U19 Academy
Leagues and qualifying for the final play-offs. The U17s suffered only two
defeats in 26 matches, unfortunately the last being in the Quarter Final of the
play-offs. The U19s went two stages further , eventually ending as losing
finalists. The Reserves finished 4th in the FA Premier League (North) finishing
only 3 points behind the eventual winners.
And continuing with our strategy of developing young talent, I was delighted
that 9 players aged 21 or under appeared in first team matches which will stand
us in good stead in the forthcoming seasons.
Coaching Staff
Following a disappointing season, the Board accepted first team manager, Graham
Taylor's, resignation. However, myself and the Board were delighted to secure
the services of David O'Leary, which has been met by widespread approval from
our supporters. He arrives with a pedigree of success as a player and manager
and a pledge to excite supporters with entertaining and competitive football.
In the short time since his appointment at the end of June he has overhauled his
support staff and reviewed the playing squad with a view to obtaining better
results in 2003/04 and subsequent seasons.
Financial Results
The results for the year ended 31 May 2003 are discussed in more detail in the
Financial Review set out on pages 5to 7.
I am delighted to report that our loyal supporters continued their support with
average attendances increased from 35,012 to 35,081, and season ticket sales
increased from 18,957 to 20,892. I am also delighted to report continued growth
in conference, banqueting and catering income and other commercial areas not
related to playing matters.
However, disappointing playing performances caused reductions in the merit award
element of broadcast income and other match related income and has resulted in
turnover decreasing by £1.3m from £46.7m to £45.4m. Costs inevitably increased
but we were able to stem the increases in player salary costs to less than 6% so
that costs before amortisation of players rose by £2.9m. Profits before player
trading therefore reduced to £0.3m from £4.5m.
As I forecast in previous years, there was a significant fall in profits on
player sales which were not sufficient to absorb amortisation costs continuing
at similar levels to the previous year. Net costs of amortisation and profits
on sales of £11.9m (2002 £4.9m) therefore create a net loss for the year of
£11.6m (2002 £0.4m).
Dividends and Shares
As a result of the losses for 2003 and the continuing difficulties for next
year, the Board have decided not to recommend a dividend. However, we continue
to implement strategies designed to overcome the financial difficulties being
experienced by the industry. These are aimed at a return to profitability in
2004/05 at which stage the payment of dividends would be reconsidered.
Following media speculation, we announced on 14 July 2003 that I had received
unsolicited approaches by telephone from intermediaries acting for parties who
they were not prepared to disclose at that stage, and who might be interested in
acquiring shares in the Company. These calls where speculative in nature and no
further details have become available.
Off the Pitch
I have already mentioned the continued growth in our non football related
business areas. In 2003 we have also continued with a major investment into our
Customer Relationship Management project, which is aimed at improving
communications and services to our supporters, which will also improve
relationships and increase income.
We have been working extremely hard at developing our property assets. The
former Siemens and adjoining site, totalling 11 acres, is now the subject of a
planning application in partnership with a major food retailer but will be
subject to the usual planning hurdles, for which we have positive Counsel
opinion and local community support. Aston has been identified as a
Regeneration Area by national government, and our development together with
other local developments aimed at improving the area will enable us to yield
enhanced values for our potential development site at the Aston Villa Leisure
Centre and the hotel development, for which we have planning permission, at the
former Holte public house.
We were able to convert the former Indoor Cricket Centre to qualify our
facilities for Academy status. Although we have permission to develop leading
edge Academy and training facilities at Bodymoor Heath we are now able to defer
that expenditure until calls on cashflow for playing requirements permit.
I was disappointed in the playing performance of the first team last season, but
nevertheless believe that we continue to improve the infrastructure at the Club
and believe that we can improve results substantially, on and off the pitch.
May I thank our shareholders, supporters and employees for their continued
loyalty.
H DOUGLAS ELLIS
CHAIRMAN
1 August 2003
ASTON VILLA PLC
ANNUAL REPORT 2003
FINANCIAL REVIEW
2003 2002
£m £m
Turnover 45.4 46.7
Wages & Salaries (32.3) (30.9)
Other costs less interest (12.8) (11.3)
Profit before Amortisation 0.3 4.5
Amortisation of Players (13.8) (14.0)
Loss before player sales (13.5) (9.5)
Profit on player sales 1.9 9.1
Loss before tax (11.6) (0.4)
The financial results for the year ended 31 May 2003 are set out in a statutory
accounts format on page 8 but are shown above in an amended format to give the
reader a better overview of those results. A summary of turnover is set out in
note 2 to the accounts on page 11.
Overview of Financial Results
Disappointing playing results for the 2002/03 season have adversely impacted on
turnover and despite growth in non football related business, falls in cup gate
revenues, match day merchandising and broadcast income have caused a small
decrease in turnover of £1.3m from £46.7m in 2002 to £45.4m in 2003.
Wages, salaries and other overheads have increased by £2.9m (7%) leaving a fall
in profit before amortisation of players of £4.2m from £4.5m to £0.3m.
The Chairman and I have reported that in previous years losses caused by excess
player costs were absorbed by profitable player sales. We had also made
shareholders aware of the collapse in the transfer market and the consequent
effect on this Club is clear to see in 2003 where profits on player sales have
fallen to £1.9m (2002 £9.1m) and have been insufficient to absorb amortisation
of players of £13.8m (2002 £14.0m).
The results for 2003 therefore disclose a loss before tax of £11.6m (2002
£0.4m).
Match Receipts
Despite disappointing team performances in 2002/03, our loyal supporters
increased average league attendances from 35012 to 35081 and the level of gate
receipts from league games was maintained. However, cup game receipts and pools
fell by £0.5m due to not qualifying for the UEFA Cup.
Broadcasting and Merit Awards
FA Premier League broadcast contracts were in the second year of a 3 year
agreement in 2002/03, which saw significant increases in the rate of merit
award, equal share, live and pay per view facility fees and also overseas
broadcast contracts.
However, our lowest league position in 8 years of 16th (2002 8th) saw income in
respect of the merit award element of broadcast income fall by £3.2m.
In 2002/03 BSkyB chose 5 games (2002 - 6) for live broadcast and 3 games (2002 -
4) for pay per view. However, as rates had improved, broadcast income
(excluding merit award) increased by £1.5m to £17.0m.
There is, therefore, a fall in total income from broadcasting of £1.7m which is
the main component in the fall of total turnover for the year.
Wages and Salaries
The increase of £1.4m in the year is mainly represented by an increase in
playing and playing management salaries. However, we are pleased to report that
the rates of increases in previous years has slowed considerably in 2002/03 and
playing wages and salaries have increased by 5.5%.
Tax and Dividends
No Corporation Tax charge arises as a result of the losses for the period which
are available to carry forward to reduce taxable profits in future periods and
there is a small credit from previous years of £0.1m.
The directors have decided that as a result of the losses for the year and the
current continuing difficult financial outlook that no dividend should be
recommended. However, we are progressing with a financial strategy to make the
Club profitable in the medium term and will return to paying dividends out of
profits at that stage.
Financial Position
The loss for the year is entirely attributable to the net cost of amortisation
and profits on sales of players. The original cost of those players was to a
large extent expended in earlier years and in 2003 player trading gave net
payments of £1.8m. Furthermore, after recent years of heavier capital
expenditure, the amount expended in 2003 is more than outweighed by the
depreciation charge. Therefore, despite the level of losses in the year, bank
borrowings have only increased by £1.9m to £4.0m at 31 May 2003. This is well
within the Company's facilities and still leaves the Club relatively lowly
geared compared to many clubs in the FA Premier League.
During the last year, creditors falling due within one year has fallen by £4.1m
as a result of the payment of deferred transfer fees payable from the previous
year.
The principal effect on net assets of the loss for the year has been to reduce
the net book value of the playing squad from £38.0m in 2002 to £24.8m in 2003.
Net assets of £50.7m at 31 May 2003 are stated before any revaluation of
properties and represent a net asset per ordinary share of £3.98 calculated on
the basis of the current issued ordinary shares and after treating the deferred
loan stock as converted into ordinary shares so that 12,721,242 ordinary shares
would be in issue.
Financial Outlook
As a result of the significant changes in the transfer market in recent years,
it is now often the case that players in general are depreciating assets,
amortisation is a real cost and the number of higher value transfers have
reduced for all but a few clubs. Aston Villa can no longer rely on profits on
players sales to absorb excess player costs and has embarked on a strategy of
reducing salary and amortisation costs. However, we still have to deal with
players under continuing contracts. 9 players in the first team squad come out
of contract in July 2004, some of whom will not be replaced and some will be
replaced with reduced amortisation and salary costs. Recent and future
purchases have and will be made with a strategy of reducing total player costs
as soon as is commercially practicable. Taken together with the development of
home grown talent this will see a significant reduction in the total of salary
and amortisation costs in 2004/05 whilst maintaining as competitive a squad as
possible.
Your directors, and the football industry in general, face continuing difficult
challenges but we have adopted strategies to protect the financial future of the
Club, but believe that they can also produce improved playing results.
MARK ANSELL
FINANCE DIRECTOR
1 August 2003
Consolidated Profit and Loss Account
for the year ended 31 May 2003
31 May 31 May
Notes 2003 2002
Operations
excluding
player Player
amortisation amortisation
and trading and trading Total Total
£'000 £'000 £'000 £'000
Turnover 2 45,447 - 45,447 46,724
Operating expenses (45,247) (13,750) (58,997) (56,354)
Operating profit/(loss) 200 (13,750) (13,550) (9,630)
Profit on disposal of players - 1,913 1,913 9,148
Profit/(loss) before interest
and taxation 200 (11,837) (11,637) (482)
Other interest receivable and similar income 119 245
Interest payable and similar charges (34) (113)
Loss on ordinary activities
before taxation (11,552) (350)
Tax credit/(charge) on loss on
ordinary activities 126 (136)
Loss for the year (11,426) (486)
Dividends 3 - (882)
Retained loss for the year (11,426) (1,368)
Loss per share 4 £(1.00) £(0.04)
Diluted loss per share 4 £(1.00) £(0.04)
Dividend per share 3 0.0p 7.7p
All activities are derived from continuing operations.
There are no recognised gains or losses other than the loss for the current
financial year and the loss for the preceding financial year. Accordingly, no
statement of total recognised gains and losses is given.
Consolidated Balance Sheet
as at 31 May 2003
31 May 31 May
Notes 2003 2002
£'000 £'000
Fixed assets
Tangible assets 40,638 41,599
Intangible assets 24,793 37,990
65,431 79,589
Current assets
Stocks 387 436
Debtors 6,846 9,752
Cash at bank and in hand 50 94
7,283 10,282
Creditors - Amounts falling due within one year (12,887) (17,005)
Net currentliabilities (5,604) (6,723)
Total assets less current liabilities 59,827 72,866
Creditors - Amounts falling due after more than one year (385) (599)
Provision for liabilities and charges (1,046) (1,263)
Deferred income (7,717) (8,899)
50,679 62,105
Capital and reserves
Called up share capital 572 572
Share premium account 15,150 15,150
Shareholders' other funds 21,103 21,103
Profit and loss account 13,854 25,280
Equity shareholders' funds 5 50,679 62,105
Consolidated Cash Flow Statement
for the year ended 31 May 2003
31 May 31 May
2003 2002
£'000 £'000 £'000 £'000
Net cash inflow from operating activities 1,415 4,861
Returns on investments and servicing of finance
Interest received 119 245
Interest paid (34) (113)
Net cash inflow from returns on investments
and servicing of finance 85 132
Taxation
Corporation tax received 43 7
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (893) (2,589)
Payments to acquire intangible fixed assets (9,421) (20,404)
Receipts from sale of tangible fixed assets - 4
Receipts from sale of intangible fixed assets 7,653 12,463
Net cash outflow from capital expenditure
and financial investment (2,661) (10,526)
(1,118) (5,526)
Dividends paid (756) (882)
Decrease in cash (1,874) (6,408)
Reconciliation of Operating Loss to
Net Cash Flow from Operating Activities
31 May 31 May
2003 2002
£'000 £'000
Operating loss (13,550) (9,630)
Amortisation of deferred grant income (149) (149)
Depreciation of tangible fixed assets 1,854 1,738
Amortisation of players 13,750 14,049
Loss on disposal of tangible fixed assets - 6
Decrease/(increase) in stocks 49 (54)
Decrease/(increase) in debtors 134 (1,014)
Decrease in creditors and deferred revenues (473) (210)
(Decrease)/increase in provisions (200) 125
Net cash inflow from operating activities 1,415 4,861