Aston Villa FFP position explained amid Jhon Duran transfer and Arsenal Ollie Watkins bid

Having been the subject of much interest during January, Jhon Duran looks set to depart Aston Villa for Saudi Arabia in a bumper deal.

While being reluctant to let the 21-year-old Colombian striker leave Villa Park, especially so late in the window and with a Premier League and UEFA Champions League campaign in full effect, the reality of the club’s financial position meant that it was a deal that was too good for them to turn down.

Duran passed his medical in London ahead of a €77m (£64.5m) move to Saudi Pro League side Al-Nassr, where he will become teammates with Cristiano Ronaldo. The deal also includes a number of add-ons that could see the deal rise even further.

Duran, despite the impact he has made on the pitch for Villa this season, has had to play second fiddle to Ollie Watkins - himself the subject of a bid from Arsenal - for much of the campaign, but with 12 goals to his name, including the winner to seal a famous Champions League win over Bayern Munich back in October, his departure will be felt keenly by a team that is striving to achieve a top four finish once again this season.

But, as other Premier League clubs have found to their cost, the reality of financial controls and the competition’s profit and sustainability regulations (PSR), which are in their final year in 2024/25 before being replaced by a squad cost ratio from next season, means that such decisions have to be taken for the greater good of the club.

Duran arrived at Villa in 2023 for an initial £14.75m from MLS side Chicago Fire on a five year deal. Last year he inked a new deal to take him up to the summer of 2030.

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The £14.75m was accounted for on Villa’s books as a £2.95m amortisation charge per year, with the guaranteed sum spread across the life of the contract. When he inked a new deal in October last year the club had cleared one year of that, meaning his remaining book value stood at £11.8m. That figure was then divided over the new contract length of five-and-a-half years, taking it to an amortisation cost of £2.15m per year. His salary significantly increased.

Profit for Villa would only come after the club cleared that £11.8m remaining book value, meaning that the actual realised profit from his sale, which can be accounted for in this financial year, which counts towards the final year of PSR, where the last three years are assessed and clubs allowed to lose £105m over that period minus allowable deductions, came to around £52.7m.

Villa, like all Premier League clubs, were under the PSR radar when it came to the 2023/24 season, a financial year that ended on June 30 for Villa due to them opting to extend the financial year by a further month to 13 months, a manoeuvre allowed by Companies House, so that additional revenue could be realised.

Villa lost almost £120m for the 2022/23 accounting period, but figures presented by football finance expert Swiss Ramble estimate that the loss this time around will be around £82m. With allowable deductions of around £27m, up £3m from the previous year, and with the June player sales of the likes of Tim Iroegbunam, Omari Kellyman and Douglas Luiz realising profit, and to be accounted for in the soon-to-be published 2023/24 accounts, the PSR net result for the year is estimated to be a negative £20m.

What that means in terms of the rolling three-year picture, which includes a positive PSR net result of £22m for 2021/22, a period when Villa sold Jack Grealish to Manchester City for £100m, and a £96m PSR deficit for 2022/23, is that Villa were estimated to fall £12m under the threshold for PSR for the current assessment period, meaning that they are likely to escape any Premier League punishment for breaching.

However, there was work to be done, and the desire for Villa to raise the PSR threshold to £135m from £105m over three years, which they argued in favour of, is understandable given the tight breathing space.

The Swiss Ramble figures forecast that, as things stand, Villa would only be able to post a £17m loss in 2024/25 to be compliant with PSR, and that takes into consideration the increased revenue that is to be enjoyed this season, a rise of some £45m anticipated.

Should Villa continue to go deeper into the Champions League then they could solve some problems without having to look at player trading, but the more likely, and safer scenario was always going to be through player trading, and while not wanting to lose Duran, to book a near £53m profit on a player who wasn’t a guaranteed starter for Unai Emery’s men probably solves the headaches that they may have had at the end of the season, when they likely would have had to act fast to move some players on, and that would have left them with a weaker negotiating position given that clubs knew they were desperate.

The sale of Duran removed the risk and allows some breathing space for Villa, and likely removes any concerns they had around a potential PSR breach for 2024/25.

With the end of PSR as we know it coming down the tracks at the end of this season, it was also key to raise revenues so as to be compliant with the replacement for PSR, the squad cost ratio, where a club’s wages, amortisation costs, severance costs and payments to agents are worked out as a ratio compared to total revenue. Clubs in Europe are expected to be at 70%, while those outside of Europe will be at 85%, although there will be a period of grace of a couple of seasons on a sliding scale for clubs to ensure compliance.