Arsenal Financial Results: How Much Is The ‘War Chest’ Now?

Arsenal’s financial results for the half year to the end of November 2012 are out. Expert finance commentators will be dissecting them in detail, including my AST colleagues. In the meantime the papers have had a quick go, some more successfully than others.

The Daily Mirror, for example, described Arsenal’s financial results as ‘the shock figures’. Idiots. Apparently this set of results “shatters the myth that Arsenal do not pay big wages”. Pardon? Where were you when the £143m wage bill for last year was announced?

The FT was generally better, but still said: “Arsenal further strengthened manager Arsène Wenger’s negotiating hand in transfer dealings by announcing cash reserves of £123.3m.” What? There was shedloads of money he wasn’t spending anyway. His hand was so strong he could have picked up an elephant! Arsenal have also signalled that there will be “significant purchases in the summer.” Uh-huh. Yes. Just one thing: THAT’S WHAT THEY ALWAYS SAY!

Anyway, what we all want to know is how much can be spent on a new set of Gervinhos and Parks. In other words:

How Big Is The (Available) Cash Pile?

Cash reserves at the end of November were £123.3m. This is £30m down on the position at June 1 last year (when the bulk of season ticket money for 2012-13 was in), but up from the £115.2m reported a year ago for the period ending Nov 2011.

There are all kinds of small ups and downs in the figures to account for that increased cash of £8m, so I’ll leave it to the accountants to match off every debit and credit.

Out of the £123.3m, Arsenal must maintain a cash reserve under the financing agreements, currently around £24m I think.

There are various other relatively small amounts that may need to be held back to do with property development and potential payments as part of transfer deals (eg for number of appearances).

Money is also needed for regular outgoings, including wages for all staff (approx. £12.5m a month) and running costs for the stadium, training centre, Highbury house, etc.

Side by side with these liabilities, TV money, non-season ticket gate money, (limited) commercial revenue, etc, comes in through the year.

So adding all that together, how much is the fabled ‘war chest’ right now?

Probably not much different to what it was before. I’d guess they could spend £80m without the danger of needing to borrow anything to cover it. The fact that we know there is more revenue due shortly from better deals means that even without Champions League money next year, costs could just about be covered after spending £70m-£80m, though it might be a bit tight depending exactly when money is due. Though that does depend on Arsene resisting the urge to award all round pay rises to the squad just for turning up.

The strength of the balance sheet, turnover and the upcoming extra money from TV deals, sponsorship, etc, means that in normal business terms there would be no problem with short term borrowing. However, if I recall correctly there are severe limits on that as part of the existing loan deals, which is one reason to maintain a healthy cash balance.

Of course a big pile of cash also suits Stan Kroenke, who is in no danger of having to dip his hand in his own pocket for Arsenal. Not when there are parts of Colorado he doesn’t yet own.

Still, on the face of it, there is money to spend. Whether it gets spent is of course a different matter. How wisely it gets spent is a different matter again.

 

Other bits of info from the accounts, if you’re interested:

  • Turnover for the six months to November rose £21.7m to £138.4m, predominantly as a result of property sales.
  • Pre-tax profits were £17.8m, down from £49.5m in the corresponding 2011 period.
  • Profits from the sale of players in the period were £40.9m, down from £63m in the same period in 2011.
  • The club made a net profit of £22.6m in player trading compared to £45.8m a year ago.
  • £40.9m was spent on contract extensions and buying new players last summer (this doesn’t include the new Wilshere / Walcott / etc deals).
  • The exact wage bill was not quoted. Operating costs overall were £157.1m for the six months. For the year ending May 31 2012, operating costs were £259m.
  • There is no short-term debt – debt continues to be repaid on schedule at a cost of around £20m a year.
  • Turnover from football fell to £106.1 million (2011 – £113.5 million) as a consequence of there being four fewer home fixtures.
  • Due to fewer home games in the period than in 2011, operating profits from football (before depreciation and player trading) decreased to £5m from £15m.
  • Property revenue was £32.3m from the sale of the Queensland Road site. Overall operating profits from property increased to £1.9m from £0.5m.
  • There is potential for around £15m of further profit from property development/sales.
  • Arsenal owed other clubs £31.6m in transfer fees, but were owed £31.4m on player sales.

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22 thoughts on “Arsenal Financial Results: How Much Is The ‘War Chest’ Now?

      • phil we could easily afford to fund spending 150 mill on new players this summer.
        even the wage bill next season will be reduced by 12 mill+ with likes of squid,aa23,flabi,mannone,rosicky,sagna being moved on.

        this does not include the 10+ players we have out on loan.

        wenger has made some terrible signings the last 5 years

  1. The wages of all the average players that dont actually play in the first team combined could pay the wages of two or three superstars that could give arsenal a real chance of competing for trophies, the war chest could pay for them, the question is: based on wengers acquisitions since david dein left should he be the man entrusted to choose these players? also his football philosophy is flawed, he is tactically inept! Thanks for elevating the club financially arsene, maybe you could continue in the accounts department upstairs but we need the next generation manager, as u once were!

  2. Hi Mark
    You say: “Even the wage bill next season will be reduced by 12 mill+ with likes of squid, aa23, flabi, mannone, rosicky, sagna being moved on.”

    They are squad players, and will need to be replaced by new players, so surely the wage bill will not be reduced if we pay the replacements approx the same salaries (?).

  3. And when i say spend i mean net spend.He will balance the books as always,seeing the current squad have no attractive sale items it will be a couple of free transfers like the Spanish defender at Bilbao and probably a young talented guy and that will be it.

  4. Hi Keith
    My comment to Mark also applies to your first couple of lines.
    “…the average players that don’t actually play in the first team combined could pay the wages…”
    So are you suggesting we don’t pay them any wages?
    If you’re suggesting instead that we sell them, as I said to Mark, they will need to be replaced, and the replacements will also presumably be paid.

    And are you actually implying that David Dein chose the players that Wenger supposedly bought?
    Dein’s departure had no bearing on the players Wenger bought or didn’t buy. The ‘reduced’ transfer funds are the reason for the drop in quality of purchased players, and the new stadium costs are the reason for the ‘reduced’ funds. You know, the bloody great big building that cost a bloody great big amount of money to build…

  5. Modern clubs need 2 first team squads to compete for places. Our bench looks mainly bare in talent when we compete. I believe we are short of one goalie, and two players in each of defense midfield and up front. There are some talented youth players that can come thru, but as mentioned, the sooner Bentner(£52k pw!), Denilson, Arsh and the squid are moved on the better.

  6. Forget about the figures. These are the facts:

    1) Kroenke doesn’t care about football. All he cares about is the returns on his investment. It does not matter whether Arsenal does not win any trophies for the next 100 years as long as it generates profits.

    2) Wenger is on a mission to prove everyone else is wrong…………and this will continue until his last breath, even if this means Arsenal will not win anything in the next 100 years.

  7. these are all lies no big money spending nothing , think about it we are never going to make it to CL next season thats a fact real fact over with that, but there dicption to the arsenal fan is that there goning to fight for it and in they end we summer time is here and we finsh in 5th or 6th i hope no further down wenger will come out the end of the summer and say its tough with out CL to get our targets we had money to spend not the mony football resons etc… and these is the future arsenal fans .

  8. Here we go again……all the entitled spoilt whiners moaning about how bad Wenger is at transfers, how we overpay our ¨deadwood¨ ad nauseam! As Phil said, nobody is sure exactly what we have to spend but Wenger did recently say that he had money to spend, more than most years previously. Good….now will he spend it on a few really big names or will he go his usual route and bring in affordable players? Here’s what I see, based on past and present experiences:

    1) He’ll definitely continue to clear out unwanted, under-performing or surplus players like Arshavin, Squillaci, Bendtner, Denilson, Park, Fabianski or Mannone (or both?), maybe Diaby and a few youth players who will never make the first team.
    2) He will certainly look for bargains like Giroud,Cazorla,Monreal, Podolski, and my guess is that they will be either Spanish (likely from Malaga???) or German players….as he has repeatedly said that those two leagues suoply the best of the best. He almost certainly won’t buy any British players unless a real bargain shows up. He likely will bring in more British youth players, since he does that every year.
    3) My guess is that he’ll reduce the overall wage bill by bringing in fewer players than he lets go and by keeping wages as they are. He resigned 5 youth players this year to long term contracts and he will definitely try and keep Sagna, Rosicky and Vermaelen. I can see him bringing back Miyachi, Frimpong, Campbell and Afobe for tryouts in the pre-season. He will also take a much closer look at Eisfeld, Akpom and Miguel in the pre-season.
    4) If we make the CL once again, he’ll want experienced CL players but won’t pay over the odds so forget Falcao,Neymar, Hulk and the like but possibly Benzema,Villa, Ramos, DiMaria or Abidal if any of them become available. Since this isn’t likely, we can expect another master-stroke transfer with an relatively unknown but talented player(s) in the summer.
    5) If we don’t get into the top 4, we can expect him to spend a little more to bring in 2-3 very strong and experienced CL players but which ones will be available will depend on the financial situation in Europe during the summer. Right now it is looking like another financial crisis is looming…good news for AFC and bad news for the big spenders.

      • What strategies are you whining about again Rahaizad? Did you even bother to read the article or are you just another winy moaner finding fault with everything Arsenal?

      • When you say ‘another’ master-stroke signing, I take it you are journeying into the past when Arsene vrought in players like Henry or Pires – or perhaps even more distant like Overmars. I certainly can’t remember any recent signing that deserves the description ‘master-stroke’. And yes, I AM moaning – and so should we all – about the calamitous financial policy.

  9. It’s not about whining, weedonald. It’s about fresh ideas after 8 years reading the same thing over and over again. Your article is absolutely remarkable because that is what Mr Wenger will exactly do.

    • Rahaizad….Please give us your strategies as I tried to do for the assembled AA community. If you don’t have anything to add to the debate that is advancing this blog, then please work on those fresh ideas you talk about and when you are ready, please enlighten us.

  10. Maybe I can help little bit because although I agree with weedonald on the strategy and likely behaviour of Arsene to say this is a good thing I think is misguided. Question I ask myself a lot is howmany world class players were we away from winning the league in 2011 season? I would say one maybe two solid buys and we would have walked it as we were really close anyway. So what does our club do? Well you know sell off the best players and make sure that we turn a profit to protect the boards investment. But that profit doesn’t come from commercial deals or an operational profit, it comes from selling assets either land or players and even then when these so called excellent buisness men are unable to sell off the clubs fixed assets to make a profits they sell the very people who could improve there operational turnover. Did you know that 60% of shirt sales last season had a certain dutchmans name on the back. If you add to this the systematic tearing apart of the core support for the club particulary in the local area then you have a club in major decline. These men can’t even tell the truth about matchday attendance let alone something important and are slowley trying to turn our beloved club into an american sports franchise and it sickens me. Remember that Arsene is an employee of the club and is not the dictorial leader who runs the whole show becuase that would be impossible and anyone who thinks that Arsene can do and say whatever he likes has never worked in a senior position for any corporation. Yes he has a lot of power and respect and quite rightly but to make out that he is in charge of everything is simply untrue. I would suggest the following, firstly get Stan out as he is the worst investor for a prem league team that could ever be imagined. He couldn’t even afford his shares as Deucth Bank had to underwrite his purchase of the club’s shares. Not only is he not rich enough but has absoulty no interrest in the sport or the club, in fact he won’t even meet the fans. He has got to go. Then we are left with Arsene who is the only football person left in a senior poistion. I would leave it like that as I feel he is covering for the boards failings as any good employee would. If after usmanov came in and Arsene still wasn’t prepared to buy players that will actually win trophies and sell shirts then unfourtnatly then it will be time for AW to leave of his own accord. This team as usual is a few good players from competeing and this will always be the case under Kroneke as financial freedom will be curbed under this owner. AW has been looking at the PSG job and if you watch french television, he talks openly about PSG and managing them. If he was unwilling to spend do you think they would even consider him? Change the board and we can compete again. Up until then continue to watch our club decline and Arsene desperatly paddling to keep our heads above water.

    • Scravaldio….It seems you have bought into the media ¨son et lumiere¨ about the ¨crisis¨at AFC. Here are a few pointers to help you regain your AFc equilibrium:

      1)¨one maybe two solid buys and we would have walked it¨ – Take Man City and Chelsea’s experience as a caveat – their investment in new players was almost 40% higher than ours but they have not dominated the EPL in any true sense of the word. It isn’t simple maths that fails you but that you believe that success is mathematical at all…it is so much more complicated than that, but we’ll keep it simple to help you along.
      2)¨But that profit doesn’t come from commercial deals or an operational profit,¨- another oversimplification. Their commercial and operational profits (ticket sales, ads, sponsorship etc.) play a significant factor in their overall profits. The player sales and deals allowed them to bring in new players and still make a profit.
      3)¨the systematic tearing apart of the core support for the club particulary in the local area then you have a club in major decline¨ – what in God’s name are you talking about? The support for AFc has never been stronger, the demand for season tickets never more intense, the sales of trinkets and related hardware never stronger and it is only growing. Club in decline – really mate, your powers of observation and cogency are in decline, more likely.
      4) ¨Stan…. he is the worst investor for a prem league team that could ever be imagined. ¨ – Your hyperbole and rancour outdo the worst anti-Arsenal fanboy I have seen. Just because he isn’t a football expert like you, and because he isn’t a billionnaire oilygarch or sugardaddy like Usmanov or abramovich makes him a ¨bad¨owner? IMO, he is not ideal for AFc but he is a lot better than Usmanov or any other ultra-rich sugardaddy. He is an astute businessman, and lets the professionals (Wenger and Gazidis) run the club…his silence is golden, unlike yours.
      5) What Wenger does at the end of his contract in 2014 is his own concern but be careful what you wish for mate, as Usmanov owning the Club and a new manager running it could prove to be its undoing more likely than its resurgence as a top Club.

      • Ok some fair points but you do realise we would have made a loss for the last financial year if we had not sold RVP right? So the profits do not come from our core buisness but from selling our best players. Our operational profits are dropping season after season so how do you explain that? Its because of the quality drop on the pitch and to say that we have not been two or three players away from success in the last few seasons flies in the face of everything virtually every gooner has been saying for years. So you know better then the entire Arsenal fan base? I am from the local area I know for a fact that less and less locals are going period. This is because the club do not respect the core support for the club ( see away fans for details). They would prefer tourists who spend tons of money in the armoury then the local support who will only buy something to eat if that. Calling people fanboys is really silly and quite funny, my nephew uses that term and he is eleven. Anyway we are leaking money every season by the bucket load and you think this is good? What part of we can only make a profit by selling our best players don’t you undertsand? We sell as manynof our fixed assets as possible every season and we see a falling turnover in every sector and if you add the fact that we haven’t actually improved our emirates deal at all because of a thing called inflation our 150 m is actually worth approx 3% less each year between the deals. So these brillant professionals you keep going on about have managed to not secure a significant increase in operational turnover or sponsership deals. Have sold off the best players in the squad to make up for there commercial failings and to add to all of this a massive decline on the pitch. Lets not forget though that the fixed assets owned by the club are also being sold off in attempt again to make up for failings in our core buisness which is football, you know selling tickets and shirts and getting big improved sponsership deals. So lets recap, we have an unhappy set of customers, a year on year fall in operational turnover, no improvment on the commercial front. We have to sell off fixed assest to get anywhere near a profit and even then we have to sell key players to make a piteful profit of 17.8m. So what happens this year well they will develop the last of the property around highbury after there consoltation with Islington council, bear in mind this is some of the last land owned by the club. The fall in operational turnover will be very large and there are no more 25m players to sell. Finally they will have to admit a loss because we have actually been making massive losses for a number of years which is why we sell these players. The funny thing is that you are clearly not interested in actually brining facts to the table you just keep slinging insults which shows you have no argument, you know this is not how to run a football club. With the massive lack of investment in the squad a 40m profit over the last seven seasons we have seen a decline in our core buisness to the point where the entire organisation is under threat of declining at an alarming rate. This is the complete opposite to sustanable, as this season has shown us you can’t keep tearing chunks out of the club in order to make up for your commercial inadaquacies and if you actually produce some facts rather than Ivan knows better or Usmanov is a scary foreigner then I think your opinon would hold more sway but what I am saying can be backed up by numbers. The locals are really pissed at the club right now and its only tourists I have spoken too who are happy with the club because they don’t care. Only online have I found anyone remotely happy who claim’s not to be a tourist. But lets make this clear we do not make any profit before player sales do you understand? I read the accounts like everyone else at the AST and it is very clear and not an oversimplification but the reality. Bring some numbers and facts to your argument.

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