| AVISA LETTER TO CORPORATE SHAREHOLDERS (25th February 2002) | AVISA |
Dear Sir, This letter is written by representatives of a variety of supporters and Shareholders groups of Aston Villa. As shareholders in the club we are sure that you are aware of the current discontent amongst supporters at the performance of our board and we are also sure that you share our goal to have the best possible management in place to improve the fortunes of the club on the pitch and the performance of the share price off it. You may not be aware however of the depth of feeling against the current board or of their intransigence in failing to establish any meaningful dialogue between the board and supporters. We have legitimate concerns as supporters and shareholders at the current management of our club and there is a fundamental lack of confidence that the current board are able to meet the challenge of running a professional football club in the modern environment. Even though we represent the views of many thousands of supporters and shareholders we understand that the club can chose to ignore our views if they wish. Mr Ellis controls almost 40% of the shares which puts him in a powerful position. He does however need the support of you the institutions and he recognises that he cannot simply ignore your views. As he indicated in the 2001 Interim accounts he also feels that he has your full support. "We have a continuing dialogue with our institutions...They are very supportive of your Board, as demonstrated by the poll taken on my re-appointment at the last AGM." Set out below is our case as to why this support is no longer merited and why we believe it is time for a change of management at board level, with the installation of modern professional management. The current regime has presided over an 85% reduction in value since floatation which is a spectacular underperformance even in an underperforming industry. Lack of Good Corporate Governance We believe that the single biggest reason for the club being valued at a significant discount to other Premiership clubs despite the lack of debt is corporate governance. The large Ellis family stake and the way he has chosen to use it is fundamentally unhealthy. This indeed was recognised by Mr. Ellis in 1979 when he wrote, "I promised you in 1969 that no one person or group of persons would ever be allowed to control the club...I have no controlling interest in Aston Villa and have no wish to do so." This large shareholding could be counteracted by a strong and independent board. Instead, in complete disregard of the Cadbury proposals we have a 78 year old Chairman who is also Chief Executive and even acts as Director of Football. He has surrounded himself on the board with relative light weights that are completely incapable of challenging him. This was blatantly exposed last year when Mr Ellis appointed his son as a non-Executive Director. This complete lack of proper corporate governance gives us no confidence that the club is being managed properly and we would be very interested to hear your views on this. Lack of Competence Perhaps all the above could be forgiven if the club was being run with outstanding competence. Our contention is that this is far from the truth and indeed that by clinging to business and management methods that became outdated in the 1970's, the Board is restricting the club's ability to compete in the modern business environment. Set out below are three examples of this: 1) New Trinity Road Stand The very need for a new stand was disputed by many as its building resulted in the destruction of an important part of the Club's heritage and tradition at a time when the need for increased capacity was unproven. This has been underpinned by the continuing shortfall in attendances since completion. Leaving this aside however the mismanagement of the process of building the new stand causes great concern, particularly with the Board's appetite for further property developments. Whatever the excuses made, the board was in charge of a project which has ended up massively over budget, some 5 months behind schedule, and which delivered at least a third less additional capacity than anticipated. We would be very interested to see what return on investment this development has achieved. 2) Financial Strategy Perhaps the best indication of how out of date the board is comes in the form of their financial strategy. This was outlined by Mr Ellis as 'never borrow money or an apple'. Despite interest rates at 4% the board has refused to consider taking out any borrowing despite capital intensive developments such as the new Trinity Road stand and the continuing increase in player valuations. Whilst not recommending borrowing on the scale of Leeds or Chelsea, who both have around £100m of debt, it is incomprehensible in the modern age not to have a funding plan based upon a sensible mix of debt and equity. This cautious approach has left the playing side of the club unable to compete with the Top 5 clubs in the country in terms of salaries and transfer fees with the result that Champions League qualification remains an unachievable goal for successive managers. Mr Ellis remains unrepentant at his approach. He was quoted recently as saying that when he returned to the club in 1982 the club were £1.8m in debt and he would never let that happen again. He failed to add that in the 3 years he had been away from the club. They had won the League Championship and the European cup and that the value of the squad was probably 10 times that level of borrowing. Mr Ellis's steps to eliminate this borrowing lead to relegation within 5 years, and Graham Taylor when appointed at the time describing the Club as "a shambles, from top to bottom". 3) Treatment of fans The Board continue to have an adversarial approach to the fans. Mr Ellis's disdain for the 'man on the terraces' was made clear in Television interviews recently and this approach is enthusiastically taken up by other members of the Board.. The failures to establish proper dialogue with fans, to market the club and to extend the fan base have been key factors in the failure to grow attendances recently. Clubs such as Sunderland have managed to boost attendances well beyond the average at Villa Park through modern methods even from a much smaller supporter base. The Board's intransigent and isolationist attitude also causes damage in other commercial areas. For example the new kit adopted this season was expressly against fans' wishes for a traditional claret and blue kit. The new kit, without the traditional blue sleeves and in a strange pinky-purple colour, has not surprisingly failed to sell as well as previous kits thus depriving the club of further income. In conclusion we have no confidence in the Board of Aston Villa plc to either improve performances on the pitch or to improve the share price off it. We would welcome the opportunity to discuss our views and to try and establish a constructive approach to addressing the challenges facing Aston Villa.
For and on behalf of AVISA, Aston Villa Shareholders Association and Ellisout.com Ian Robinson Vice-Chair Aston Villa Independent Supporters Association (AVISA) | |