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Arsenal and the money: what’s really going on?



By Phil Gregory

Here’s the first of a series of articles on the finances of the Premier League for Untold. There’s no hearsay going on in this series: all figures are straight from the accounts so you can trust the data I’m using is reliable (for most teams anyway!) and check it yourself as the accounts are publicly available.

Naturally we’ll start with Arsenal, and I’ll try to keep the accounting and finance language language to a minimum, for all our sakes. Anything that’s not common knowledge is explained, but just ask in the comments if you get lost at any point!

Matchday money

Matchday revenues doubled to £90million when we moved to the Emirates, and have grown solidly to over £100million since. TV money has increased too, partly as a result of an improved TV deal at the end of the 06-07 season but also due to much better European performances in recent years.

Commercial revenues aren’t great when compared to similar-sized clubs but they do have a strong trend of improvement (from £29million to £48million). The most recent figure of £48million is lower than that of Liverpool and light years away from Manchester United’s £70million (no figure is given for Chelsea). This is partly due to an under-achievement in this area in the past, but also due to the need to front-load (asking for a large amount at the start of the agreement, and the rest over the duration) the sponsorship agreements for the stadium work.

Such agreements aren’t popular with firms and so the concession was less money overall during the course of the agreement. Gazidis has brought in some big hitters to boost the commercial situation and we’ll no doubt see the benefit in the next few sets of accounts. Once the front-loaded deals come up for renewal, we’ll be able to push for the best possible deal and revenues will go up significantly accordingly.

Dare I say it, but a long-term part of the “Arsenalisation” project could be a the end of the sale of the stadium naming rights. Naturally, this would mean forsaking a revenue stream, but with the end of outgoings on interest in the medium term, we could afford it.

Commercial revenue

That said, there was a noticeable increase in commercial revenues in our first season at the Emirates Stadium. Despite all I said in the previous paragraph, the boost from the stadium move (likely thanks to greatly improved corporate hospitality facilities) more than compensated for lost revenue from front-loading commercial agreements.

Or to put it another way: the Emirates Stadium, despite boosting our commercial revenues by around 30% in a single season (further increases have been back to the trend growth of 10%) still has room to grow. Once the current commercial deals are renegotiated, we’ll see commercial revenues grow above trend for a good few years. With a board that doesn’t take any money out of the club in dividends (despite their entitlement to do so), any extra profit doesn’t just make the auditors happy, and will filter through to the playing squad. More money equals an ability to compete for the best players by offering the best contracts. Excellent.

Turnover

All these revenue streams are bundled together into turnover, which is simply all the takings of the club. Turnover stands at an impressive £225million, up from £138million in the 04-05 season. The move from Highbury boosted turnover significantly with a single-year rise of over £60million immediately after the stadium move.

Profit

Profit is a totally confusing thing for the average football fan, given there is an array of ways to quote profit figures and clubs only ever quote the one that shows them in a good light.

Operating profit shows the core strength of the business, and is often referred to a EBITDA (earnings before interest, taxation, depreciation and amortisation). Depreciation is just the general fall in value of club assets due to age, the other two are fairly obvious and I’ll touch on amortisation later.

For most clubs, the “ITDA” bit doesn’t account for a massive amount of money comparative to wages and the like, so you can trust an operating profit figure. Do however think it through: an operating profit doesn’t include interest so if David Gill of Manchester United is on 5Live telling you the club is fine, they turn an operating profit, ask him what the figure is if interest is considered!

If a club can’t make an operating profit, which takes into account the main costs and revenues, then it really is in a total mess. If any other business in a more sane industry was making an operating loss, the banks wouldn’t lend them money to cover their losses hand over fist due to the risk of default, but logic seems to go out of the window when people consider football clubs.

All the figures I ever quote for operating profit are before player trading as we are considering the core running of the club: if a club makes a loss of £30million, but then sells £50million of players, then it is fine for that season, but the operating loss will be roughly the same next year unless wages are slashed, and the club surely cannot sell £50million of players every season. Amusingly, certain clubs do actually try and do something similar to that, but I’ll save that for a separate article.

All Arsenal’s operating profit figures results have been consistently excellent, having not dipped below £11million since 04-05, and most recently stand at nearly £31million. ‘Nuff said.

Broadcasting

When I started writing this series, I only intended to quote TV revenue as a percentage of turnover in later articles about newly-promoted sides, but is worth mentioning here briefly. The measure itself is very easy to understand, and it’s implications are quite substantial.

A lower-table side highly reliant on TV money is basically totally dependent on its Premier League status to remain viable. For sides near the top of the table, the reliance is more on European football, particularly the Champions League.

We’ve all heard the stories of how Arsenal budget to hit the group stage once in every four years or some such conservative expectation. Some cite this as a low level of ambition, but it is simply great financial planning: the Premier League is highly competitive, and with 4th place now only yielding a guarantee of 180 minutes of knock-out football, consistently banking on the group stage is highly negligent for any club, especially ones who start with the letter L.

The Emirates Effect

The move to the Emirates greatly reduced our reliance on TV money: it went from contributing 40% of turnover to only 32.5% in the most recent set of accounts, with the lowest figure being 22.1% in the year immediately after the stadium move. Indeed, these figures would be even lower if I could adjust them for European success: we are generally going further in Europe in recent years, which yields more TV money. Due to the overall revenue growth, TV money contributes a smaller percentage of turnover with the result that we wouldn’t have to slash wages even if we dropped out of the Champions League for a few years.

Wages

The wage bill has gone up substantially since the days of 04-05, from a shade over £66million to over £100million. Not to worry however, as turnover has gone up by a much greater amount to compensate.

The only time wages as a percentage of turnover rose to anything approaching dangerous levels was 2005-2006 (60.5%) and that was most likely due to the inevitable boom in revenues once we moved home to the Emirates; the figure quickly fell back to a mere 45% and it now stands at 46.2%.

If we look at spending on wages compared to points gained, it has risen over the period to £1.46million, reflecting heavy pressure on wages due to the rise in revenues from the Emirates Stadium move. The move to the Emirates also resulted in a big jump in other operating charges (an umbrella term for various smaller financial costs) which were up by around 30%. This is likely simply due to the greater utility bills and general maintenance to a larger stadium, and isn’t anything to worry about.

Amortisation

Amortisation is simply the transfer fee paid for a player divided by the number of years on his contract, and it is simply a way to get large transfer fees into the accounts. It does however offer a good insight into transfer spending.

For Arsenal, amortisation has risen substantially in percentage terms over the period, but from a very low base. It now stands at just under £24million, substantially less than comparable clubs (United – £38million, Chelsea £57million, Liverpool £46million).

This is partly due to the fact that a lot of our first team players were bought in young and so had very little amortisation cost. Another reason is simply the fact we don’t spend much on new players: when we do buy, we spend wisely and almost always turn a profit on the trade too.

Wenger has regularly said that every new transfer is a gamble, and much better value for money is got by promoting from within. This is reflected in the amortisation figures. Some may cite these figures as a lack of ambition, but its common knowledge that transfer spending has no relationship with final league position, but wages do. And anybody can see our wage bill is up there with the rest of the top four.

Bank interest

Money spent on bank interest is down substantially since the move to the Emirates, peaking at £36.7million in the 06-07 season but then falling substantially to a mere £16.6million in the most recent season. For me, this completely justifies Wenger’s (likely self-imposed) frugality in recent seasons.

Take the summer after a sub-par 08-09: massive profits on Kolo and Adebayor, and only the addition of £12million Vermaelen. The Belgian’s transfer wouldn’t even have accounted for Wenger’s original transfer kitty, let alone the windfall from the sale of the two Africans. Yet no more money was spent as the team was stronger, both on the field and on the financial side. I believe the money that went unspent was directed with into paying down the debt (with Wenger’s consent, if indeed the idea was not his to begin with!).

Just look at the interest figures I quoted: we’re saving roughly £15million every year compared to the peak level of interest payments courtesy of Wenger’s prodigal transfer dealings allowing us to accelerate debt repayments, and that doesn’t even take into account the very recent reduction of the debt after the property development covered its costs and now yields pure profit.

Moreover, paying down the debt also means less years of paying interest in the future, so the saving to the club is potentially enormous. Once that debt is gone, the money can sustainably be poured into the squad. And all thanks to Wenger not spending what he could and instead seeing greater long-term benefit to himself and the club in paying down the debt.

In a nutshell – by paying down the debt Wenger is saving the club money and also bringing the day that we are debt free much closer. Such a day is the day that all our profits can be translated into investment into the playing squad, and Barcelona can become our feeder club (if indeed, or world-class youth facilities don’t produce all the players our first eleven ever needs).

One final note – all the above is considering only the football side of Arsenal. I didn’t want to distort the figures and make them look even better than our rivals by including the highly-profitable property development business.

This series will continue with analysis of the accounts of our rivals.  And if you by any chance felt that the above was a little short on laughs, just wait until you read what’s happening at some of the other clubs – Tony
Stuff – what else is on Untold Arsenal

Old Stuff – what is on Woolwich Arsenal

Funny old stuff Making the Arsenal

53 comments to Arsenal and the money: what’s really going on?

  • walter

    Thanks Phil for sharing this information with us and also for explaining what it all means.
    One questiong that I have (no two as it looks now):

    Do you know how much we still have to pay for the mortgage for the Emirates? (Or better wait till the new accounts come out?)

    Would it be a wise thing to pay this mortgage off faster than agreed? If this is legaly possible off course. Because if we could get rid of the mortgage also I think from that moment on we could have some 25M every year more money available to put in to the squad and to approve it.

    But question 2 is linked with question 1 because it all depends on how big the mortgage still is.

  • walter

    And correct me if I’m wrong but if we could make a rise in the commercial revenue from let’s say 15M a year (still much lower than MIOU) and add to that the money from the mortgage we could have an additional money available from around 40M?

    But I think this is a difficult question: paying of the mortgage faster will mean that AW has less money to spend on the team and could mean still a few years without prizes. But it could bring us benefit in the medium-long run because we will pay less intrests and we will be stronger in a few years and have more money available?

  • Gooneraside

    Excellent article, Phil.

    I too look forward to the day when no interest is payable. Any idea how far ahead this might be (assuming we continue as at present)? Or with the current state of overall financial problems, is that just a pipe-dream (not that I personally smoke a pipe 🙂 )

  • Phil

    Walter: it is perfectly legal to pay down the debt early. SOme banks may prefer to rake in the interest (Man U and the PIK) while others are happy with a bit of profit and to get their capital back earlier so they can reinvest it elsewhere. So yeah, the banks have no problem with us paying back early.

    The precise figure wasn’t covered in the accounts, but the most recent figure I’ve heard of is around £200million. With an operating profit we can pay that down just from the club’s footballing operations and therefore save on interest (as I mentioned in the article). The biggie is that the property development has now covered it’s costs – any money made is just profit that we’l use to pay down the debt.

    Yes, there’s big growth potential in the commercial side. We werent doing as well as we should’ve been (Gazidis got on this) and the fact that we had to front-load the agreements. Over the course of the next few years, I’d bet my house commercial revenue grows more than the trend improvement of 10%. As we’re profitable, any extra revenue is extra profit to pay down the debt, and later go into the playing budgets.

    That’s the debate, Walter. Wenger’s actions in the summer of 2009 said to me that he’d rather pay down the debt and get rid of the financial constraints early. Hell, he can still put a title challenging team together spending next to nothing with all the mad injuries !

    Gooneraside: not long. While I haven’t looked in depth at the recent debt statements, if it’s around £200mill, with the oeprating profit, any profit from player trading likely to go this way and the proceeds from the property development… my guess would be only five years.

    The debt is only a problem due to the cost of the interest. As we pay down the debt, there’s less outflow on interest, so more money to pay down the debt. As we get closer and closer to being debt-free the financial constraints get looser and looser. Once the debts down to less than £100million, we’ll be raking in so much money to pay it down to make it seem like it’s not year. I’d imagine Wenger will be able to compete in the transfer market as he likes within a couple of years.

  • IndianGooner

    This article explains perfectly the approach Wenger had taken in the last few years especially since 2007 when the Economic crisis began to take its toll.

    Correct me if I’m wrong, Isn’t the huge interest we used to pay due to the short-term loans we took for the Highbury Square project? And Now that we have cleared this loan, the only debt left is the Stadium Mortgage which is around £20m per year until 2026? If my memory serves me right, we’d taken an mortgage in 2001 for £260m with repayment period of 25years will an annual payment of £20m with an annual interest rate of 5-6%? I would like the Club to keep this mortgage the way it is as it keeps a level of sustainable debt attached to the club which would add an additional burden for anyone interested to take over the club(which I pray shouldn’t happen ever) or the new manager gets into the transfer market.

    The minimum spending we saw in the last couple of years was because Wenger and the board took on the task of clearing the Highbury Square loan. And now that the loan is almost cleared(or cleared by now, not sure though), there would be more than usual activities in the market.

  • Phil

    Indian: I havent analysed the ins and out of the debt itself, for me the most important figure is what we spend on interest (and the article took long enough to put together as it is! :P). You may be right about the aim being to clear the more expensive Highbury Square loan (I hadn’t seen any info on the specific interest rates on the various loans) but ultimately paying down any debt sooner saves us money on interest.

    Whether the sacrifice of paying down the debt sooner (investment in the playing squad) is too great and Wenger decides to spend his transfer budgets rather than allowing them to go into paying down the debt will be up to him, and either way I’m confident he knows exactly what he’s doing.

  • embryo

    brilliant article, just hope a few other blogs take note.

    it appears that Wenger and the board have gambled on the pitch much more than off of it,let’s hope the gamble pays off and we are able to compete through this last stage of the development. just imagine how powerful we could be in 5 years time when we’re debt free and all the others are imploading, Barca will be begging us to take Fab and messi off of their hands because they can’t pay his wages, hahahaha.

  • IndianGooner

    Phil, I too am in favour of reducing the interest payment as the more we save, the more can we invest in the squad. And I was very thrilled when the Highbury Square with high interest rate was cleared because that was a big liability.

    The reason why I feel the mortgage to be payed the way it is because of the low interest rate we pay on that. Also, this mortgage will be seen as an additional burden on the club which it isnt. Now if we can increase the yearly payment so that we can reduce the term by 8-10 years, we would save even more on interest. This would reduce the amount to spend in the short term but will strengthen our spending in the medium to long term.

    I’m sure Wenger and the board will decide what’s the best way forward as they know how much we need for strengthening the squad and how much more money we can use to clear the debt. They have done a remarkable job regarding this in the last few years and I’m confident this is going to continue in future as we have got a bigger and better management team under Ivan.

  • donkeykong

    wow, u lost me nearly straight away (i’m not the brightest i know before you all start slagging me off)but it was interesting reading.
    but arsenal must realise that to carry on getting full attendance,and to keep making huge profits,we need a team capable of winning trophys,instead of just be also runs,
    i noted last season once we lost the title race how half full the stadium was getting.
    we need to invest heaverly on players this season,or risk becomeing like liverpool and not quailfy for the champions league,the following season,we’ve srcapped past the last 3 or 4 years and it can’t carry on, spurs villa and man city are all getting steaderly better so we must watch out.
    a dept free club one thing a club with no decent players and no supporters another, i still remenber 1970’s when we did’t invest in the crumbling 71 team how we struggled for years to get back to winning ways,i’d hate see them days return.

  • yoges

    Great article! Completely with Wenger on this. Only concern is that after Arsenal finish paying off the loan, there is nothing stopping a new owner (Stan Kroenke or Usmanov for example) from loading their debt onto the club as it happened with Man U. 🙁 Lets hope that doesn’t happen and the extra money goes into investing in the squad.

  • I have often read comments that if we don’t win, people will leave.

    The fact is that each club has a fickleness quotient, which is quite different. Man U, during their season back in their spiritual home (the second division) were still getting 50,000, although people do quote the notorious 4,000 for a league game one season, generally speaking our crowds have held up, whether we are winning trophies or not.

    But it is clear that a half empty stadium is becoming a threat that is being used by the anti-Wengerian groups. What I can say at the moment is…

    Arsenal report that the waiting list for seats in the main body of the stadium is still 9 or 10 years.
    Every game sold out last year
    The waiting list on the Club Level seats is right down (it was never high because of the high registration cost) but as far as I know all the club level and all the diamond club seats are sold out once again.

    So if there is a crisis, it is not there yet.

  • embryo

    Tony, you’re absoloutley correct. but as a season ticket holder i experience the feeling in the stadium week in week out, and i think it’s fair to say that getting a ticket to a game in the last couple of seasons doesn’t have the “privealage” feeling that it used to, i’m offered extra tickets every home game now, even the big games, 3 years ago they were much more scarce. Does anyone know if the season ticket waiting list is growing or shrinking? surely that would show a worrying trend a few years early?

  • bc

    I am certain that this season will be the last of club level as we know it, deals are already there to be struck. IMO the club will need to consider the possibility of reducing the cost of season tickets. Currently the minimum price at the Emirates is more than double the minimum price at more than half of the other prem teams. One solution to this (that i know is being considered) is to change the layout of the lower tier seating. Presently the seats are over sized and with considerable tinkering extra rows and more seats per row could add 5-8000 extra seats. The extra revenue for these seats could be offset against the cost of the seats in the lower tier providing a far more reasonable ticket price, thus assuming more season ticket retention or at least a far more affordable matchday experience. I also know that the club are considering further changes to the stadium to increase capacity and reduce season ticket costs.

  • walter

    Oh my God BC, (doesn’t this look a bit funny?) would this mean I have to lose weight to get in the seats next year. 😉
    But must say that the seats in the Emirates are the most comfortable I have ever sat in a football stadium.

  • goonergerry

    Who is paying for these increased revenues at Arsenal? Why do we think this is so great when we are paying for it? Economists and accountants always act as if someone else is paying for this increase in income.
    Would we think it so great if this was a restaurant where we were regular customers- and following a revamp of the premises- we were asked to pay significantly more for the food-, Yes the facilities improved, but the food stayed the same or decreased in quality compared to competitors? Should we think this was great because the restaurant made a great profit but showed no sign of employing a better chef because it was paying off the interest for the new premises?
    Arsenal have weak commercial revenues because of the lack of star players-and unimaginative marketing. This wont change until we invest more in players and realise that there is an economic return to be had.

  • Phil

    Goonergerry, I’m sorry but you are talking rubbish. Commercial revenues have absolutely nothing to do with the so-called lack of star players. You’d probably argue there were more stars in 04-05, and yet commercial revenues have gone up every. single. year. since then!! If that’s what you believe, then so be it, but the facts are totally contrary to what you say: you may as well argue the sky is bright green.

    ANd how would we go about acquiring more star players? Why, by BUYING THEM and paying them MORE WAGES from the rising revenues that you seem to dislike so much. A fan has a decision to make: do I pay the money to see the team. If enough of them do, the team is rich, and makes money. This money goes on the team (remember the board don’t take any money out in dividends despite having the right to do so) and surely every fan wants as strong a team as possible? Strong revenues = strong team.

  • geoge

    Tony,We hear you loud and clear.But,those who claim that a half empty stadium is imminent will not, because these are just the sort of people who very well might stop attending

  • I would not be surprised if the waiting list went down at the moment – I think it reached its absolute height in the Unbeaten Season, and then obviously came tumbling down when we moved and about 20,000 people were offered seasons for the first time.

    And yes tickets are easier to come by, that’s true.

    But this is a complex issue. If you have a 10 year waiting list, with no annual payment for being on the list, then you get people who one day get sent their call up letter, and have moved, lost interest, lost their jobs etc.

    I think we should see this as a low moment. True, we have not won anything for a while – that’s one factor. So is…

    a) the recession – lose your job and you are not going to keep a season ticket

    b) the high point of the achievement of the impossible – the unbeaten season – we can’t offer that year in year out

    c) the high point in interest in football. It might feel that it will always be of such mega interest but it won’t.

    d) the offering of tickets to many wanna-bes when the Ems opened.

    But you have to recognise that there is still a full stadium, and there is still a waiting list, despite all that. The fact that the list has gone down in such circumstances would not be a surprise (although I think that it is holding up very well).

    We also have the historic fan base – even in the years that us old timers talk about when the club went 3000 seasons without winning a match under Billy Wright, we still pulled in big crowds.

    So I don’t see an eternal plunging of crowds, and would not be surprised that if something utterly dreadful happened we would still have the crowds there.

    And of course the winning of something would probably push everything back up again.

    What I can say for sure this year is that I applied to move my two season tickets (something which I did at Highbury as well) and failed – they said they had 4000 applications to move, and only 2000 people giving up tickets. (I wrote back and said, can we have a “move seats waiting list”.)

    At Highbury, after I met up with Roger and Ian, I decided to go and sit near them. I told the staff Roger and Ian’s seat number, and was offered a place two rows up and two to the left.

    We’ve come a long way since then.

  • PS – actually it was all rather good. When Roger started shouting about how awful Dixon was, in the second half, I could lob orange peel at him. Trouble is, he always drove, so I had to watch it a bit.

  • Marko

    Excellent article, only thing that could make us problems is the potential new owner, who can take a loan from some bank to buy another business somewhere, and transfer that loan to our club, and then we go all over again. It would be a disaster.

    Do you see a way to stop new owner, which is inevitable, to do us such a thing because we’ll make profit, and pay his debt for other businesses?

  • Phil

    My thoughts on Kroenke and Usmanov in a nutshell: the Russian is an idiot and would throw all the good work Wenger has done building up the club and just do a Chelsea, despite the fact we are nearly at the top of the pile and have done so within our means.

    Kroenke has no history of bad business (unlike Hicks and Gillett and the Glazers). The board wouldn’t have allowed him access if he had nefarious intentions, given how notoriously conservative they are. Then there’s the whole “can they even get 30%” given they’re at 29.9% and the only shares outside of the board (who don’t want to sell) don’t seem to be interested in selling either.

    Finally (not much of a nutshell this!) if they hit 30% and make the compulsory bid, there is no reason the current board members would accept it and cede control. Assume Lady Nina sells her shares to one of the two interested parties, they’d still be under 50% so would have no majority.

    No need to worry!

  • Ian B

    Tony

    You were such a bad shot, you always hit me!

  • Ian B

    Phil – Great article, will be interesting to see how we stack up agianst the other teams.

    Re the season ticket waiting list, i recently registered my two sons. They are at the 40,000 point. I was told the wait for season tickets is 6 – 7 years. If only 2,000 have not renewed then the wait is 20 years assuming everyone takes up when offered and peoples circumstances do not change.

  • simon bailey

    Great article Phil.

    It is encouraging to read that we seem to be ‘bucking the trend’ in relation to the global financial situation. Payment of debt is always money well spent and with our commercial figures set to keep on rising, it really is looking rosy.

    I think having Stan Kroenke on the board is a good thing for Arsenal, and if a takeover does happen, and as long as it is a cash takeover rather than an LBO, then he is the best candidate.

    Phil, one question; I watched the laughable panorama ‘expose’ on united and the glazers and they said on the show that Arsenal have £400 millions of debt. how does this square with the £200 million figure quoted in the article?

  • Phil

    Thanks Ian, there’s plenty to come about the other sides. I drafted a whole bunch of articles from my sun lounger on holiday and I wouldn’t be surprised if I wrote 10,000 odd words over various articles. So you’ll certainly be able to compare !

    Simon, I’m not sure. Perhaps the program was filmed before we recently announced a big paying down of the debt, but to be honest we haven’t been in debt to the tune of £400million for a while now. I’m putting the finishing touches on another piece (looking at United and Chelsea) but if I have time I’ll have a look around and see what the figure is at. The accounts are a little out of date (they’re for 08-09) considering how quick-moving the developments regarding the debt paying seem to be.

    I suppose it also depends on how you measure debt, a thing The Swiss Rambler touched on recently, which I’d advise you have a look at. Anything he writes is worth reading, but what I’m referring to was in a piece about Barcelona.

  • yuri M

    well well…this article should be in arsenal.com for every gooner to read and stop saying that rubbish of getting a new manager. Arsene is a genius, in every aspect(yes he can be a bit stubborn sometimes but who isnt??),and i really fear for the day he decides to retire. I doubt there’s a another manager who can do what he does with just little money, and have at the same time such a futuristic vision of a club.
    More than winning things now and seeing our beloved arsenal crumbling down later, i’d rather spend some more years in a dry spell and have our future secured.

    All things said… great great article Phil, it must have taken a lot of time to gather all this numbers.Congrats to you Tony and everyone in Untold Arsenal

    ps:sorry for any writing mistakes…english isnt really my mother language.

  • Junaid Tariq

    tony u r the best!

  • @Simon Bailey, Phil

    I also watched the ludicrous Panorama documentary on United’s debt and heard their £400m figure for Arsenal. I don’t know how they got that for sure, but my guess is that they obtained it from the last annual accounts (up to 31 May 2009). This had gross debt of £397m, which they probably rounded up to £400m. However, two points:

    1. The net debt at that time was £298m, as they had ignored around £100m of cash.
    2. Those accounts are more than a year out of date. When the interim accounts were published (up to 30 November 2009), the net debt was already down to about £180m, thanks to the property sales.

    Phil’s figure of £200m is in line with the £203.6m quoted for the interims, but the press release said that since the accounts were closed, the balance on the Highbury Square bank loan had further reduced from £35.7m to £12.9m, i.e. by £22.8m. Deduct that from the £203.6m and you have £180m.

    If you want more detail, I wrote about this in March in an article wittily entitled “I Owe You Nothing” after the Bros classic (at least my wife thinks so):

    http://swissramble.blogspot.com/2010/03/i-owe-you-nothing.html

  • Like I said, it was Roger who was driving home, so I had to be careful that he didn’t drive off without me.

    Anyway I always told Roger it was Andy.

    Actually I do remember him once driving off without Andy, and making him run after the car trying to catch us up. The atmosphere in the car on the way home after that match was a little frozen, I seem to remember.

    (Sorry everyone else – Roger, Ian, Andy and I used to travel to Highbury together from Northants in the George Graham era – old stories, old memories)

  • Phil

    Thanks the Swiss Rambler. My background is in economics so I’ve only done basic accounting so I wanted to steer clear of debt figures as I wasn’t clued up on reading them and would likely make a mess of it!

    From the figures, what would be your time-scale on the final removal of the debt? My rough guess without crunching the numbers was five or six years, but naturally that is assuming we keep the current minimalist approach to squad investment.

  • Robbie

    Sometimes I worry that Wenger doesn’t know that we are a lot of people that really appreciates how he runs the club. We should all sign a “we love you” -card and send it to him ^^ There’s too many idiots out there thinking trophies is the only meassure of success and that mercenary managers are great. I hope Gazidis is working hard on renewing Wenger’s contract.

  • @Phil,

    I’m not entirely sure that it makes sense (or is even possible) for Arsenal to pay off the remaining debt early. Yes, it would obviously reduce the interest charges, but my guess is that the club is in no hurry to do that, as Gazidis has argued that not all debt is bad, “The debt that we’re left with is what I would call ‘healthy debt’ – it’s long term, low rates, very affordable for the club, and it’s effectively a mortgage on our stadium, which generates revenue.”

  • Phil

    That would make sense now we’ve seemingly shed ourselves of the high-interest debt. I’m curious to see how Arsene acts once the financial handcuffs are removed.

  • Richard B

    Re Panorama – i must be remembered that it takes quite a while to puyt a TV programme together and half the time it its broasdcast date will get put back because of the need to show more time sensitive subjects. A long time fault of linear TV.
    Sadly what it also shows is that even the most prestigious of branded shows will get it wrong sometimes – or at least appear to.
    Unless it’s ‘live’ it’s out of date by the time it hits the screen.

  • Ken Standley

    On the general topic of finances (and by the way thanks to both Swiss Rambler, whose site I ‘discovered’ earlier this year, and to Phil for his article, readers might also like to look in at The Andersred blog, a MoanU blog which is anti Glazer. A very interesting (short) article today about season ticket waiting lists at the Theatre of Dreams! Or should that be Nightmares for the moneymen at MoanU?!

    Thanks also to Tony for the good work.

  • summitgunner

    Well I have to say I also had my doubts about Lloris

    And on and on it goes. Why do the copy cats bother?

    (To explain – any posts that are copied from elsewhere, get blocked.) Tony

  • summitgunner

    well wenger has just said that arsenal are very close to signing a defender. we can all assume that

    Oh no not another one of these copy things. How boring. Tony

  • arsenalal

    I was going to have a moan at the editors for the length of time the featured comment has remained the same..

    Oh dear the plaigiarists are baCK – THIS IS A TEAM TALK PIECE. Sorry but if you copy and paste to here the articles is removed and you get banned. Just the rules guys, I didn’t make them up.

    Oh, sorry, yes I did.

    Tony

  • comadant

    Hi

    All very interesting, and very nice to see that we are in a strong financial position, (only wish I had a Gazidis to manage my finances).

    I am interested to read in some spheres that the club are considering further expanding the stadium by a further 20,000 odd. I was wondering several points about this,

    1) Has the stadium been designed to be able to cope with this expansion, and if so where in the stadium?

    2) Do you think the club would have enough “liquid cash” to pay for this or are we talking about a re financing of the clubs current debt?

    3) Would the expansion be focused on the standard tickets or diamond class tickets, and depending on each how much do you think it would add to the annual income?

    4) or do you think the club would go in a different direction to try and develop some more income, through things such as more property development?

    Clearly it is at the very early stages of discussions but this must be the basis of the clubs considerations so it would be interesting to know your thoughts and views on the ideas?

    Thank you

  • Marc

    Can’t wait for the next piece Phil. It’s strange but the biggest threat to Arsenal is what has happened to ManU. A club that produces so much money it attracts the financial vultures that strip it to the bone and kill it. This is why I support not only the current board but the lack of a single controlling interest.

  • EvilFiek

    Wow, Phil, that is good and everything but…why not take the gamble, pay 100 million each year for “good” players that we “desperately” need to be “competitive” and hope that we win the Quadruple — cause otherwise we would be crushed by the debt faster than we can yell for an investor.

    No, but seriously, that is one great article, Phil and it shows, with facts nonetheless, why the way Wenger has choosen is the right, and the only, way. He knows exactly what he is doing and people that call for his release should stop a moment and think about what they are actually asking. Do the really want to risk everything we have now, for the promise of short term success, even if this means that we go down the drain in a couple of years?

    Another great example in my opinion are the ticket prices. People constantly moan that we have to pay the most, but I believe the only reason why the prices haven’t risen for the past couple of years is because our financial situation is so healthy. Just imagine how much you would have to pay after a season where we buy Akinfeev, Lloris, Melo, Schwarzer and every other damn player we have been linked with. If the financial situation of our club starts to detoriate (and the only way that will happen is when Wenger leaves…something I hope he won’t do in the next 10 to 20 years!), it is us fans who will have to pay the premium.

    Wenger is one of the few real visionaires in football today — something neither “the special one” nor “the great can claim to be. Losing him would be the worst case scenario. So just watch what Wenger is doing — in the end it will be worth it a 150%!

  • AndyY

    Tony, Swiss Rambler,

    I was wondering, how much Arsenal is expecting to make from the Highbury development project. Would it have been better to sell the stadium as a piece of land for pure profit and leave the risk of development to somebody else.

  • Rhys Jaggar

    All admirable.

    The question which wasn’t asked was this:

    If Wenger’s frugality was deliberate, with the clear knock-on consequence that winning trophies would be hard and as profits were so enormous, wouldn’t it be the case that the fans’ season tickets true price should in 2006/07 be 20% less, ramping it up gradually as the team got better?

    It’s the fans who were fleeced the past 4 years. Top, top, top prices for what you say was a reasonable policy of frugality.

    I return to my description which still stands: Arsenal charged fans Rolls Royce prices for watching a BMW.

    You can call it frugal if you want.

    I’d call it something slightly different.

    Acceptable collateral damage………

  • Phil

    Rhys, if the fans will pay it, the club have the right to charge it. With the size of the waiting list, I could argue the club could raise prices further if it was solely interested in the bottom line (what United have done, basically. Raise prices until the waiting list is all but eliminated. Granted it doesn’t look too smart now due to the green and gold business, but the principle is sound from a business point of view).

    Plus, any reductions in ticket prices would just lengthen the frugality period as we took longer to pay our debts down.

    There’s also the argument that Arsenal play the best football in the country, even if results don’t always follow so the ticket price is justified. I daresay £50 at Arsenal is better value for money than £20 at Blackburn.

  • RVP

    Arsene Wenger i love you maannn!

  • gooner-cymru

    Jus thinking about the players I feel we should let go, Either due to injuries affecting them or just not good enought for Arsenal. GK: Fabainski and Almunia, both very avearage keepers, Almunia wont improve, Fabaianski has a chance, but dont think he is mentally strong enough. Def: Silvestre – Nearly gone (fingers crossed), Senderos – (did ok, for a few seasons but then wasnt really given much of a chance after, Gallas – (Dont get me wrong he was a good player, but his attitude stinks) Mid: Denilson – to slow, doesnt bring anything to the team, Diaby – Might be a little contreversioal as a lot of you on here seem to love him, dont rate him, never will, shows glimpses of class, but then is just lazy and clumsy. Rosicky – Sicknote pointless keeping a player who spends moe time on the treament table. St: Bendntner – Best striker in World Cup?? i think not, waste of space, his arrogance is beyond belief.you maybe can have arrogance when you are actually a good player, but hen your not you just make yourself look like a right t*t. Thats my opinion, some new faces in and hopefully quality ones would be nice

  • goonergerry

    Phil
    Only an economist could think that paying twice as much for an inferior product constitutes success. The current Arsenal team is weaker than the team of Bergkamp, Henry, Pires, Ljungberg- and yes all those players were bought. So why is that strategy so unacceptable now?
    Strong revenues based on charging the maximum entry prices, one off capital payments and the sale of players does not guarantee anything other than the club wont fold this year. A strong team requires a willingness to invest in the team sufficient for the team to be truly competitive. Whilst there has been a willingness to invest in buying youth players, investment in experienced players has been less than any of the top 6 clubs in the EPL over the past 5 years. But I am not even suggesting that we invest in a way which endangers the clubs financial model- only that we invest further than we have and trim the youth pool.
    Since the move to the Emirates there has been no evidence that the so called growing revenues based almost exclusively on consumers paying top dollar result in a stronger team. Maybe that is your and my hope- but it hasn’t happened yet- and shows no signs of doing so.

    In fact the contrary is true- last year Arsenal sold 2 experienced players and used the bulk of the revenues directly to reduce interest payments- no doubt a strategy you would agree with. This was a decision made by the Board not AW.
    .
    The cost of one or 2 stars can raise our marketting profile and can be offset substantially by increased commercial revenue e.g.sponsorship- shirt sales? merchandise? InternetTV rights? China- an economy growing at 9%, Japan – (Wenger has huge cache in Japan)- but then I am talking rubbish.

  • Phil

    Good comment Goonergerry. I suppose quality of what’s on offer is subjective. What was our best-ever points total, the 90 of the Invincibles season? We weren’t far off that in 08-08, not far off at all. We’re a more successful European side now, how does that fit in with the previous sides being better? People tend to underrate the current side compared to their predecessors as they haven’t won anything. Yet the league now is vastly more competitive.

    Your reference to one-off capital payments – I take it to mean you are referring to the property side of things? I left it out of the article’s analysis as it distorts the football side of things. Property business is not included in any of the figures above.

    In the grand scheme of things, selling players doesn’t add much to our bottom line, if you consider the size of the turnover. Add in the cost of contract renewals and much of what the average Joe thinks is profit is eaten up by the time you look at the accounts. There is always the argument thgat buying doesn’t equal stronger side – we solid Toure and Ade and improved, while Real Madrid spent a quarter of a billion and won nothing.

    The top 6 in the EPL have spent more than they could afford. We don’t play that game, and neither do I think we should (and neither do I think we need to to win the league).

    The extra revenues for the Emirates have been partly eaten up by repayments and interest on debt, so not all of it filters through to the first team. However, to claim that non of it does is simply erroneous. I’ve just checked my spreadsheet with all the data . There was a big rise in wages (30%ish) the season before we movd to the Emirates, in anticipation of the future revenue. In the next three sets of accounts, wages grew by a further 25% which roughly equates to the increase in turnover over the same period (which rose by 60-70%). Apologies for the rough %s, I didn’t fancy diggin a calculator out when I’ve just woken up, but the figures are more than accurate enough for the purpose of our discussion.

    The board state that all proceeds from sales go into the transfer budget. Wenger has control of that budget, hence Wenger said OK to the decision to pay it down. He strengthened the team despite a big net profit, so why would he spend money he didn’t need to?

    I agree with you on star players and marketing, but whether they would increase commercials by enough to cover wages is a very different story. I also cannot see Wenger (and agree with him) buying players almost solely for their commercial appeal. Doesn’t fit with giving youth a chance and could disrupt the dressing room if they get insufficient gametime.

    Good comment though Goonergerry, some good arguments.

  • Chris66

    Is it just possible that we should be giving some of the praise to someone else than AW for Arsenal’s financial planning. I know this site is about “the Lord Wenger” but it somewhat belies commercial belief to think that the manager of operations (which is what a football manager is) is also responsible entirely for the financial modeling and execution of the financial plan.

    This isn’s a criticism of AW as I am sure his support his crucial in getting things approved by the board to move forward, but when we are discussing this side of the game I would fathiom that he is not the prime mover. He has pulled off miracles on remaining (mostly) competitive with a restricted budget during a period of financial craziness elsewhere, but I think we may be giving him more praise than he is due and denying it to others, such as Ken Friar and the board.

  • Phil

    Chris, most of what I am positive about in the article is all done by the Board. I only praise Wenger for doing a good job with little money, allowing us to save a fortune in interest

  • Tycochphil

    Excellent article and comments, and replies. My knowledge of economics is not great (“O”level in 1965 !!) but I wonder what effect the rapidly approaching economic downturn will have on football finances ? I am constantly surprised but the extravagant efforts made by Barca and Real Madrid to attract players to a country that is on the edge of financial ruin with 20% unemployment and a moribund property market.

    And we in the UK must be wondering if the steady rise in income in football clubs will continue ? The sign are not good with HMRC (my old employers) actually getting tougher with clubs like Cardiff and Pompey and virtually everyone expecting a reduction in salary or pension.

    I live in S Wales and when Cardiff failed to get promoted to the Premiership last season the media slant wasn’t on the ‘how unlucky to miss the chance to see big clubs play at Cardiff’ rather on how much money they were now NOT going to ‘earn’.

    How many of us on fixed incomes like a civil service pension like me with a small amount of savings will look much more carefully at what “treats” like going to a football match or a celebrity concert or similar, even holidays we can afford ?

    Sorry to sound depressing

  • precious ibanitoru

    i love arsenal but was getting angry wit d board and d gaffer.thank u for informing me of our fantastic positon.oooooohhh to be a gunner!!!!!!!!!!!!!!!!!!

  • alan samuels

    Excellent article. I hope everyone recalls this when Larry “penis” Gold offers some verbal turds about Wenger Out.