Other clubs may have a transfer news round-up at this time of year. There’s no point with that at Arsenal, so here’s a money news round-up instead.
There’s a very good video doing the rounds with some highlights from Arsenal’s recent trophyless years, which shows some of the great players and great football we’ve still managed to enjoy during this Brasso-free period. For me it was also a sad reminder that we no longer have players of the calibre of Henry, Bergkamp and Pires, or even Cesc (though you never know on that one, eh?), all of whom were there last time we won something. Even more unfortunately, the video also features the recent words of well-known accountant Gary Neville, claiming that Arsenal are ‘virtually debt-free’, despite the clear evidence on the balance sheet of a debt well in excess of £200m.
Did I say ‘accountant’? I remember now, he’s not an accountant is he, just some bloke who used to play football and has proved himself good at tactics on a fancy screen. That must be why his information about debt is totally wrong.
“Ah,” say some people (usually ones who don’t like to criticise Arsène Wenger at all), “but the NET debt is only £98m, and what our Lord Gary Neville (who must be right because he loves Arsène) meant was that the debt is very manageable.”
Well, a) no one knows whether Neville meant that, as he has refused to reply to my tweets on the matter, so you’re just guessing if you take his words to mean anything other than they actually say;
b) no one is denying that the debt is manageable, but £20m a year is still £20m a year – so that’s one £10m player and a four year contract at £50k a week that is going in debt repayments for the next 18 years. And I think it would undoubtedly strengthen the squad to spend that money on players, don’t you? Even Harry Redknapp would make some good signings out of that lot. Even Mark Hughes, for God’s sake!
c) Yes, the net debt is £98m if you look at the latest published figures for cash held against total debt, but if you’re going to take that as the position to quote then you are accepting that Arsenal must hold on to all that cash – WHICH MEANS NO TRANSFER SPENDING! The war chest remains tightly locked. Arsène signs only players from the French third division on free transfers. Unless of course we can actually sell someone to raise money. Like Bendtner, Chamakh, Arshavin, Denilson, Djourou, Park, Squillaci – who have so far raised between them in transfer fees, er . . . zero.
So if we are going to have the spending spree that Gooners from all positions on the Arsenal-supporting spectrum seem to want – the likes of Higuain, Fellaini, Rooney, Cesc, perm any three from four – then the net debt is suddenly going to be back up close to £200m again. Still manageable obviously, but twice as big as it is now. I will be awaiting Gary Neville’s comments with interest.
Follow me on twitter: @AngryOfN5
angryofislington 
That Neville clip is AKB’s favourite self pleasure material. No surprise it makes an appearance everywhere.
The transfer fund is ring fenced within the cash reserves and does not affect the debt position at all.
You have said this before…should have just taken the day off if nothing is happening.
The transfer window only opens tomorrow. The club doesn’t exist to cater to gossip mongers or mongs in general. There will be transfer news when we make transfers.
No mate, the window has been open ages. I quote from the Premier League website: “There are two transfer windows in each Barclays Premier League season.
The first commences at midnight on the last day of the season and ends on 31 August if a working day – or, if not, on the first working day thereafter, at a time determined by the Board.
The second transfer window commences at midnight on the 31 December and ends on the 31 January if a working day, and again, if not, on the first working day thereafter, at a time determined by the Board.”
Whilst your statement is correct, particulaly for players out of contract or free agents. With players, agents, directors holidays, and the confereration cup, and the europe under 21 competition. the official window is from tomorrow 01 july. I believe Arsenal will be very busy buying at least four top players. bearing in mind we have arranged and are arranging to get rid of the dead wood.
It is clear Wenger and the board cannot fail to act, and a plan is in place,to take Arsenal to another level to start competing for top place. Hopefully you will be happy of Islington!
Just waiting for the apology now . . .
I love Football admin; its so simple. The transfer window opens the day after the end of the season, BUT only between English clubs.
If you want a player from abroad (picking a name at random say..Higuain) you cannot finalize a deal before the 1st July, BUT you can announce a deal before then, even if they cannot actually sign (Neymar, for example) yet.
That said, that stage seems independent of transfer windows — after all Podolski’s deal last year was agreed in March.
So is the window open? Its Quantum 🙂
‘“Ah,” say some people (usually ones who don’t like to criticise Arsène Wenger at all), “but the NET debt is only £98m…’
That’s a very interesting conclusion, because I’d think that this would another argument for Wenger Out Brigade if he doesn’t sign big names, not an excuse for AKB (because it’s not really, it undermines them because it “proves” that there is money, he just isn’t spending it).
You really have a bee in your bonnet about that Neville thing!
You are right, we have about 200m worth of payments to make over the next 18-20 years. Neville was incorrect in his assertion that we are debt free.
But aspects of your article(s) on this subject are wrong too – for example, 20m a year in interest payments will not buy you much of a player in say 8-10 years. Each year, this payment will sting slightly less, much like a mortgage.
When you see the revenue we have coming in, this debt is very, very manageable.
Our financials and our commercial growth are the most positive things about the club. Seems to me there are far more obvious problems at AFC than debt management.
If you feel we should have stayed at Highbury and not gotten into debt, perhaps that would make a more interesting debate?
I believe Gary’s outburst was his way of asking the same question we all have been asking: is the current Arsenal regime a bunch of mean-minded profit-seeking bullsh**ters or are they forward-looking custodians doing what’s best for Arsenal’s future? And on that, Gary is as ignorant as the rest of us. The Great Gatz (one assumes) does know – and he has told us that Kroenke is an owner who never sells clubs nor ever takes money from them: in other words, the guy is a custodian. He assures us that this summer austerity ends, Wenger has plenty of cash at his disposal and, furthermore, by next summer our financial firepower will match that of Bayern M. What could be clearer?
Bit of a circular point this – much like a dog chasing it’s own tail. On the one hand we have a debt of £200m which requires up to £20m a year (mitigated in part by what the club earns on the cash it holds) to service meaning we have £20m a year less to invest in players and on the other hand we have an investment that currently leaves us with a debt of £200m resulitng from a capital investment which is generating some £40m or more year in revenue. Therefore, if we didn’t have that debt, we’d have some £20m a year less to invest in player budgets (wages plus transfer fees) than we do now with the debt.
Awww greta more bad news. So th board are going to use this as a excuse not to spend our cass reserves then? Just wait we will spend and the Net Debt will go up and Arsenal wont spend again.
Wait i was told on herethe debt was getting paid off 19 million a season for now on i was never told Net debt would shoot up, how much would we have to pay then?
We’re paying the interest on gross debt not net debt so the repayments on the fixed and floating rate notes won’t change. Reducing cash reserves will increase the net debt and reduce any interest we may earn but won’t affect debt repayments.
i think we have done very well in the transfer window this year.off loading loads of our shite we have been stuck with for years,and more to go i hope.Wenger needs someone else to buy for him.Joe Kinnear might be available soon !!!! the barren decade is on the way 😦
How will net debt be more?
£30mill upfront from the emirates deal, £30million addition foreign tv rights
Money still owed to us
1more year paid
New kit deal within 12 months
If we then spend £100 mill, say paid over 4years and our incomes set to increase by a minimum of £70 p/a in the next 12 months, we’re currently making a roughly £15million operational loss, so we have roughly £220milliin additional to spend on wages+transfer in the next 4-5years, based on qualification to champions league
Net debt will always increase if you reduce the amount of cash held without reducing the gross debt. Future income may well increase the amount of cash held (if it isn’t spent on higher wages and amortisation costs) and if you spend that excess rather than current cash reserves then net debt will reduce as gross debt is paid down. But the problem with spending future income before you receive it is that you can’t be certain of future income. Far better to spend the money you have got rather than the money you think you might have.
The upfront Emirates money was ‘up to’ £30m. No definitive statement has been made by Ivan or anyone else about actually receiving it.
The foreign TV money is next year.
Money owed to us trickles in, it’s not all arriving this summer.
One more year paid is a massive £6m in capital – the rest is interest.
New kit deal is 12 months away.
Point is, all these things have a small effect or are a little bit in the future. Just like they were last year, when there was money to spend as well, but because Gary Neville wasn’t banging on about it, half the Arsenal fanbase let Arsene off for not spending it.
If money has been received it’ll show up in the annual accounts presumably as part of the P&L account. Once you know the profit you’ve made for the year then it’s available to spend in the following year. Fair enough to blame Wenger for not spending (or wasting too much depending on your preference) money that was available once our accounts for the year had been finalised but there’s little point in condemning him for not spending projected income. The important point is that there’s money to spend and if they manage things properly there’ll always been money to spend. That’s the way you’d want it.
Firstly, what a great website. Always seems to touch upon subject matter that rarely gets discussed anywhere else.
I don’t’ think you can really blame Neville for offsetting debt against cash and arriving at £98mill. He’s just going on what a lot of top financial analysts quote (Swiss Ramble being one of them). But like yourself, I also believe that when you start netting off financial instruments then this can often cause the picture to become somewhat distorted. The information must be digested with a degree of caution.
The most important thing to recognise is that the debt is long term in nature and extremely manageable and can no longer be used an excuse for the lack of short term investment. Any aspiring organisation that has fallen as behind its competitors as much as we have, that still continues to pursue the policy of building up an already impressive bank account by sacrificing of investment is anti-growth. The level of risk-appetite currently displayed by the club can no longer be justified as prudent, it’s anti growth!
The club’s model is primarily there to preserve and enhance Long term Shareholder wealth. Kroenke knows fully well, that there aren’t to many investments out there that can match the risk to return rate currently derived at Arsenal. The club’s remuneration policy to directors and manager (often benchmarked against objectives that fall outside the scope of football matter) and its over cautious attitude to risk can be used as reliable strategic indicators. Guaranteed long term shareholder wealth is the club’s underpinning priority. It would be hard to argue otherwise. Particularly in full knowledge that our majority owner doesn’t give two hoots about the club or the sport.
Lastly, Mr Wenger often remarks about the fact that we have to keep delivering profits in line with the interest payments. So are we going to have to deliver profits without fail ,every single year for the next 15-20 years? Regardless of how impressive our cash flows may seem -this is still a big ask and just another example of financial agenda becoming the underlying objective rather then the purpose.
Sorry, but this is just the obvious one-dimensional explanation of our majority owner’s motive when you state that the ‘club’s model is…to enhance…shareholder wealth.’ Ziontrain’s view, if you like, but expressed with a deal less hubris. Along with ‘(Kroenke) doesn’t give two hoots about the Club or the sport’. I have to say that these are assumptions, certainly not axiomatic. We could just as well (from what is know about Mr K) turn them on their heads. For example, ‘The purpose of increasing the (self-)sustainable wealth of the Club is to enable it to compete with the elite’ and ‘Kroenke’s ambition (motive) is to own the most successful soccer club on the planet’.
I always thought the all business run on the same basis you have stock (the players ) which needs. To be valued. At forced sale .you have freeholds which have to be valued at forced sale . and any. Other assets. Such as endorsements naming rights which need to be counted at full (subject to covenant) value for length of contract .you then deduct your owing 98 mill from your assets and whatever. Is left is where. You stand either in front or behind and as I am seeing it through my rosé tinted glasses with the value of the club out weighing the 98 m
By ten times and our income confortably managing the 98 m why should we be discussing debt.
So additional revenue to the tune of about £70mill p/a over the next 12months means nothing?????
It means we have more disposable cash idiot.
If we spend £100million
Over 4 years that’s £25million a yr, plus wages of say £400,000 p/week
Is 20,800,000 p/a
That’s an out lay of £45,800,000 p/a
But then you can reduce that by players leaving perminantly over the next 12months
Squillaci, Djourou, Arshavin, Denilson, bendtner, Chamakh, Park, Santos,
This lots wages probably come to £350,000 p/week, and losing this lot will take nothing away from our current squad, because they haven’t contributed.
So that would put our wage bill up by about. 50k a week £ 2.6mill a yr and an outlay of £25mill on transfers, the extra tv revenue would cover that Splurge alone
also wages cannot increase by more than £5 mill p/a, unless funded by additional commercial revenue streams, leaving us sitting pretty.
And to the guy who said you don’t count on your revenue streams until they are in the bank????? Of course you do, it’s called turnover, you can’t rely on the CL revenue, because your not sure to qualify
But the new Emirates contract has been signed, and the club has stated that part of it is being front loaded, and there also talk of part of the Puma deal being front loaded, I can understand why ppl are a bit dubious about us having a serious splurge, but the only reason for us not to do it, is if we can’t attract the desired quality of player
Yes we need to clear dead wood, be done with this socialistic wage structure, and become more efficent with our wage output, but we’re certainly sitting pretty, and set to move forward over the next 12months, without increasing debt levels
Broadcasting revenues are increasing for everyone. Our commercial revenue will increase significantly over the 2 or 3 years as the existing sponsorship deals expire. The club has made no secret of the confidence that our financial position relative to our competitors should improve but they have also made it clear that we’re not quite there yet. The brakes are coming off but you can only spend profits – not turnover.
Turnover – your expenditure = your profit/loss margin, it’s not rocket science
And since we’re currently running at around a £15million operational loss
But our revenue stream are set to increase considerably over the next 12months, to the tune of around £70-80million p/a, I’m merely making the very valid point that the article is wrong, in that we can comfortably spend £100million this summer, and pay higher wages, without increasing our level of debt over the long term.
I’m not arguing that our efficiency of our wage budget doesn’t need amending, but looking at the duration of the contracts of certain players, I believe we can buy a higher calibre of player without significantly increasing our overall spend, particularly as we have 2 first team squad players out the door this summer, who haven’t contributed and another 8 out on loan, who serve no purpose, who I expect to leave if not this summer then definitely next
The emirates deal has been renewed as confirmed by the club this summer, and payments will be front loaded.
As for the foreign tv rights, yes the additional money is to be distributed evenly amongst the 20 PL clubs, but 17 of those clubs are running at much larger operational losses than we are, therefor I would imagine that they would be using the additional revenue to come inline with FFP?
Next season there’s talk of a £175million 5yr contract with Puma
To suggest that spending £100 million this summer would increase net debt, is misleading and inaccurate information to say the least.
With payments made over the duration of player contracts, theoretically over the next 5 years, based on CL qualification from the group stages, we have an additional £382,500,000 to spend over that period, either on transfers and/or wage increases, and yes I’m taking the current £15million operational losses in to consideration
The challenge is going to be how efficient we are in comparison to our rivals in our spend
Of course spending £100m this summer would increase net debt unless you had additional income of £100m to offset it. That is neither misleading nor inaccurate but a simple statement of fact. It may well be that future income will quickly restore the net debt levels if it replenishes cash reserves but until that happens net debt is what it is.
Turnover less spending will equal profit or loss but projected turnover isn’t turnover. It can be affected by a number of variable factors such as the number of home games played, ticket sales, tv appearances, player trading and competition success. They can all be projected but it remains a projection. Even the sponsorship deals will have variables built in. Of course the club can and does budget based on the minimum income it can anticipate but only a fool spends money before it’s made.
It’s worth noting that while spending £100m on transfers will show in the accounts as an increase in intangible assets these are written down over the period of the contract so that, if over 4 years, we’ll need to allow against profits an amortisation cost of £25m a year. If we spend another £100m (just for example) the following summer then the amortisation costs jump to £50m. This is invariably offset to some degree by player trading but you can see that it is possible to quickly get into operating losses unless spending is managed sustainably. In other words, as you point out yourself, we still have to spend efficiently. Not only relative to our competitors but relative to sustained earned income not projected income.
But not all players decrease in value, regardless of the remaining length of their contract, arsenal are the most successful club in the PL in increasing the value of their playing squad.
If we had a £100 million splash, surely the cost would be spread over 4 years, meaning we wouldn’t see a dent in our cash reserves, at the turn if the tax yr, once the annual accounts are published, if anything we could have an outlay of £100 mill this summer with an increase in cash at the bank
The £100 million might come out of the cash reserves in one go (usually the club has used this to squeeze the deal where they can) but the costs are accounted for over the period of the contract. Cashflow and P&L aren’t the same things.
We have been successful in adding value in the past but if the new policy is to buy the finished article that value might not be there to the same extent as previously. The club still has to account for the liability based on contract depreciation. If they end the contract early by selling the player then that shows in the player trading account. In fact it is possible to show a profit on a player even if you sell him below the purchase price. For example, if you buy a player for £20m and sell him for £10m 3 years later when his amortised value is £5m then player trading shows a profit of £5m. Then again there are contracts that are renewed which have a cost added to intangible assets and others, like Arshavin, which are written off completely.
I was wrong to claim only fools spend money before they have made it because that is exactly what we have done in building the stadium in mortgaging future income to purchase an asset. The difference is in spending on a capital asset which you can calculate to appreciate in value and earn revenue and spending on player contracts which are intangible. You may realise a profit on any future transaction but until you do (or not as the case maybe) you can only treat it as a liability and account for it as such. Transfer spending is a risk and the risk you can take has to be proportionate to the financial strength of your balance sheet.
So what your saying is I’m right? we could spend £100 million this summer, and not increase Debt?
Amortisation can and is at most clubs amended to reflect to what the club believes the player is valued at and not always the amount left on his contract? Or contracts are quite commonly resigned with 24-18 months left remaining.
We recently resigned contracts with Ramsey, Wilshere, Gibbs, Jenkinson, AOC+Walcott
That lot cost roughly £25million for the lot, but the value If we had a fire sale would be close to £80+million, you win some you lose some, it’s a balancing act the club perform very well IMO