Arsenal Accounts And Finances All Explained In Five Minutes

Arsenal’s latest accounts to the end of May 2012 are now out and the full report is available on the club website. Swiss Ramble has done a comprehensive analysis and comparison with previous years and the Arsenal Supporters’ Trust has also published a summary on their website.

You can of course read all of those, but this is intended to be a five minute highlight report that picks the headlines out in bite-size chunks for the busy and lazy. A quick bluffers’ guide if you will. So let’s get going.

Has Arsenal made a profit?

Yes – but only by selling players, plus a bit of property money still trickling in. The loss before player sales was £31m; the profit with player sales was £36m. Beware though – these are accounting figures, and the player profit depends on what the departing players were valued at in the books as well as the sale price. Players close to the end of their contracts are deemed to have a very low book value.

Property and player sales have kept the club from needing a cash injection from shareholders (rights issue, loans, whatever) – Arsenal can’t borrow more because of restrictions in the loan agreements for the stadium debt.

Where do Arsenal get their money from?

Mainly gate receipts (£95m), TV money (£85m) and commercial deals and retail (£53m). The total of all receipts for the year was £235m, up £10m from the previous year.

How does that compare with our rivals?

Badly with Man Utd, but very well with everyone else in England. Though we have an obvious disadvantage compared to billionaire-funded clubs like Man City and Chelsea. Without the billionaires, the Premier League would probably still be the two-horse race it was from 1998 to 2004. In summary, our gate receipts are around level with Man Utd and far higher than everyone else, TV money is not too far different to the other big clubs, and on commercials Man Utd are streets ahead of everyone else with around £120m. Twenty years of success can do that.

Can we catch up?

Not with Man Utd. Luckily their owners are hampering them by siphoning off as much as they reasonably can. If FFP bites Man City and Chelsea then Arsenal could be back having a financial advantage over them. At the moment Arsenal rank eighth in PL commercial income whilst being top three in both gate receipts and broadcast income.

Arsenal’s commercial income will rise in 2014 when the deals with Nike and Emirates for kit and shirt sponsorship finally come up for renewal.

How much do Arsenal pay in wages?

Total wage bill for the year was £143m, up from £124m. This is for all club employees, of which there are close to 500, but well over 90 per cent of the total is players, the manager and executives. Chelsea and the Manchester clubs pay more in wages than Arsenal. By comparison, Spurs pay around £100m and Newcastle around £60m.

How much cash have Arsenal got?

Lots – though the headline cash figure actually fell £7m to £153m, bucking the trend of recent years. The available as at 31 May – ie for spending with no repercussions – was calculated fairly precisely by AST experts as £42.5m. Since then there has been a further £11m profit on player sales, plus property money coming in, so there should be a total of about £70-£80 million available to spend.

What is Arsenal’s debt?

Total gross debt stands at £254.6m. The stadium debt has been structured to reduce gradually to zero by 2031. Arsenal pay about £14m interest per year and currently repay about £6m of capital each year.

Will any of the headline figures change much in 2013?

No big change. Gate receipts are fairly static, the TV deal is set, Champions league money remains in the same ballpark (though winning it would help) and commercial revenues are likely to only show slow growth before 2014. There is some money to come in from property, but little change from last year.

And after that?

The new TV deal will mean extra for all clubs – perhaps a minimum of £35m a season. Arsenal will also have new kit and shirt sponsor deals, so potentially another £40m a season depending on negotiations. Because of this Arsenal’s turnover should comfortably exceed £300m a year, which could mean wages going up £40m a year without affecting the wages/turnover ratio.

So the players will get more?

Have you ever known them get less? They – well, their agents – know what’s coming. The likes of Theo won’t be too keen to sign a 4-year deal at today’s rates if they think that in two years there will be mega-deals on offer all round. Some would have you believe that it’s not all about money with Theo. Maybe it isn’t, but you can be damn sure it is with his agent.

Can Arsenal make a big signing?

Yes, if they want to. Given the spare cash now and the virtual guarantee (as much as anything in the future can be guaranteed) of more riches in 2014, then they could realistically spend the £70m+ that’s available now on one megastar – say £40m-£50m transfer fee – and pay him £200k/week. Or two £25m players at £100k a week. Basically there are few players in the world who are truly out of reach.

Will Arsenal make a big signing?

I doubt it. It’s not Arsène’s way. He likes value. He wouldn’t push the price on Xabi Alonso, or Mata, or any of several other examples you can probably think of. If he doesn’t think he’s getting value he won’t buy. Cazorla and Podolski are likely to be the nearest we get to signing a superstar. (Not that I don’t think they’re very good players, I do – but we got them because no one else was bidding. Man City and Chelsea are both stuffed with Cazorla-alikes already, and Man Utd wanted a much bigger statement.)

What else could Arsenal do with the cash?

  • Repay debt – though this would incur large penalties and repayments are easily manageable at present
  • Invest in fixed assets – though unless the stadium undergoes really major work there seems little to spend on
  • Start paying dividends – which is unlikely given that Stan Kroenke would be putting money into Alisher Usmanov’s capacious pockets
  • Pay Stan ‘management fees’ – the Glazers are doing this at Man Utd to rake of tens of millions of pounds, but so far there is no sign of Stan following suit
  • Invest more in player wages – of course!
  • Finance a two or three season break from the Champions League without getting in a panic – but wouldn’t it be better to spend in order to try and avoid that?
  • Reduce ticket prices – for example more League Cup pricing, £10 Junior Gunner games to rebuild the younger fanbase and no more Cat A games

Any other surprises in the accounts?

One item that has caused some discussion was that Arsenal booked a £5.5m impairment charge toward writing off a player’s value in the books. This can only relate to players not in the squad and with a book value the club can’t hope to recover on any future sale. Logically this must relate to Park, whose contract has three more years, as the likes of Denilson and Bendtner will have little carrying value as their contracts are almost at an end.

Man City might have written a few off footballing-wise over the last couple of years, but to do it as Arsenal have done requires that you first make a profit. It’s most unusual to see an asset treated this way in football, partly because so few clubs make money and partly because value is written down over the life of a contract – you don’t normally give up on a player one year in.

Who is the highest paid person at Arsenal?

Arsène Wenger, on about £7.5m a year. This is a straight salary, no bonus or shares. I suspect – and this is only my theory – that in his early Arsenal contracts Arsène was paid extra for success. By about 2004 or 2005 when it was time to renew, he probably negotiated a deal for himself where he got the bonuses without actually having to win anything. Given his record to that point, I’m sure the Board would have agreed to just boost the salary for fear of him walking away. And I’d have done the same in their position – and I’d certainly have tried to negotiate the same in Arsène’s position. And once that kind of deal is set, there’s no way that Arsène is going to drop his salary again in favour of bonuses, no matter how many times the deal is renewed, that just isn’t going to happen. So now there’s no financial advantage for Arsène in winning. You could say that his target is just to keep Arsenal competing, and Stan is happy as long as the value of the club continues to increase.

I’m not saying Arsène doesn’t care about winning, but he was put in a position where funds were limited for several years. It’s conceivable that as a result of that he sets himself goals that are more about doing things his way – competing with the big spenders while netting a profit on transfers – that mean he isn’t fully focussed on silverware.

I’m hypothesising here of course. To me it’s a logical hypothesis, though no doubt I’ll get people disagreeing with it. My Arsène theory is the only hypothesis here, by the way, the rest is all fact.

And for the facts I am deeply indebted to Nigel Phillips and Simon Hill of the AST, whose work I have bastardised horribly in the writing of this piece.

Follow me on Twitter: @AngryOfN5

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22 thoughts on “Arsenal Accounts And Finances All Explained In Five Minutes

  1. Very good and thoughtful analysis, rather than those who just want to spend the cash without thinking of the eventual consequences.
    Question? Wll Arsenal win the BPL even if we spend 50 million?

  2. Great post.

    Is the fact that AW isn’t getting bonuses due to no silverware, and he would earn more if he did win a trophy? We’d have to see his contract, or Arsenal confirm this is the case.

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  4. Great summary. On review the club looks in great financial shape. This could be further enhanced by selling or releasing the contracts of the following

    Eastmond
    Watts
    Boateng
    Shea
    Fabianski
    Squid
    Arshavin
    Bendtner
    Denilson
    Galindo
    Park

    It is possible too in January that Djourou Chamakh and Henderson may want to move on to get first team football.

    The generated cash plus salary saving of the above does allow financially the club to secure 2 ” super quality ” signings which might with the return of JW and Sagna make us genuine title contenders. My vote would be for another proven striker ( game changer) all other positions seem well covered at present. Even if JD left not sure we need another back as Miguel can cover even Squid as unlikely anyone will buy him. Zaha would be great as another back up prospect but is Ryo good enough to make this unnecessary ?

    Let the cash roll in

    • Unfortunately you can’t just ‘release’ contracts, you have to pay them up in full. That’s why Almunia has only just finally departed, no one would pay him anywhere near what he was on at Arsenal.

  5. Great article. I don’t agree that Arsene would do anything differnetly if he got a bonus, the club would still insist on the pragmatic approach and Arsene would still favour his method and style.

    I believe the club are not pending the money rather than Arsene.

  6. This all appears well and good. Tad worrying that we are relying on player sales in order to turn a profit though. A season of no CL football would hurt as well and could result in a few more big names packing their bags.

    Quick question, you have stated that our overall debt is £254m. This figure doesn’t appear to have reduced significantly since our move from Highbury. Is this really what we owe? Are property deals and player sales used to offset this debt and will the renewel of sponship deals in 2014 be used to pay this debt off sooner and result in a freeing up of available cash?

    • The debt has been structured mostly on fixed rate long term arrangements. Interest and repayments are already less than 10% of turnover, so it’s a burden but not a huge one. There’s no benefit now in early repayment.

  7. Certainly the AST current analysis is far better than the last summary of the accounts, I read.

    The players on loan may produce fees to be included in the turnover. Bendtner, I suspect was the main fee earner in the last year’s accounts.

    The accounts are based on probability, and not possibilities. Stuart Wisely’s comment is rather odd ” …registrations of players who are deemed to be excluded from the Arsenal squad”. I would suggest that it is the players who have been sold, have forfeited “loyalty” payments?

    It is a good question for Nigel Phillips or Simon Hill to ask at the next Q & A with Mr Gazidis!

    As for the Other Operating Expenses, it is breath-taking in the lack of explanation! Looking at the operating costs of the Everton new training centre, I would pencil in for London Colney, Hale End Academy, the stadia of Barnet (Arsenal Reserves) and Borehamwood (Arsenal Ladies) at circa £20 millions and the rest to cover The Emirates, Highbury House, the shops and the penthouse flat (?) for Stan the main man. I would assume the players would pay for the Council Tax on the Club’s property that they rent!

  8. The financial future looks fairly bright (insofar as any future can be judged as ‘bright’ given the various debt crises here and around the world). The unknown factor though is Stanley. Here I believe we owe a big ‘thank you’ to the redoubtable Mr U. Without him, Stanley would be sole owner, free to do whatever he wants with the Club. Let us hope that Alisher continues to hang in there.

  9. People keep mentioning that repayment of loan early would result in huge penalty. Yes, this is true but one would also save a on the interest that doesn’t need to be paid any more. This is the reason why financial institutes put this early repayment clause in loan agreement. But it is one can save loads of more from saved interest.

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