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Discussion Starter #1
Very interesting & MUST READ for all Gooners. Simply we do not have a lot of money to invest in the transfer market and won't for quite a few years.


What do Arsenal's accounts show?

By Nigel Phillips of the Arsenal Supporters Trust



Eighteen months into the new stadium and one can see the financial impact of the move emerging. The Chairman sets out clearly in his commentary the key business objective of the Club:

• "Development of long term stability and success for the Club through maintaining a business that pays its own way"

Whilst total revenue fell slightly to £96.9m from £100.8m as income from property development fell substantially (£7.6m vs £23.7m) football turnover increased by 16% to £89.3m (£77.1m).

Most of this increase comes from the new TV deals. Profit before tax was £20m (£12.9m excluding the £21.4m exceptional finance charge).

Operating profit (before debt service costs) from the football business, excluding player sales and the cost of writing down the squad (basically depreciation of intangible assets – a non-cash cost) was £21.9m (£10.9m)

Arsenal’s football income increased to £89m from £77m and comprised four separately identified revenue streams, namely:

Match day £41.1m* (£38.0m) 46% (49%) of football revenue

Broadcasting £24.3m (£17.8m) 27% (23%) of football revenue

Commercial £15.7m (£14.1m) 18% (18%) of football revenue

Retail £7.8m (£7.0m) 9% (9%) of football revenue

* 12 home games and Emirates Cup v 11 home games and Argentina vs Brazil

Football costs were broadly unchanged at £67.4m (£66.2m) and reflected the likely wages balance of the departure of Henry and Ljungberg v new squad members and improved contracts for others.

The wages to football turnover ratio is likely to be close to a very reasonable 50% (£45m/£90m). There is no mention of whether the Club has yet reached agreement with David Dein over his employment termination payment (outstanding at September 2007).

The non wages costs of running the Club (stadium costs, retail expenses?) are huge at about £50m per season and a more detailed breakdown of this significant amount would be very informative.

Cash balances. There is much talk about the current need for squad strengthening and the cash available. However of the £69.1m (£53.1m) period end cash, £25.5m (£26.3m) is pledged and acts as security for the stadium debt.

It is unclear if the cash totals include the estimated £30m of deposits received from the Highbury Square apartment sales, or if these monies have been used to partially fund the development together with the loan facilities.

Debt levels rose as predicted as an additional £41m was borrowed to fund the property developments. The total gross debt now stands at £376m (£327m) of which £246.8m (£260m) relates to the new stadium, £103.8m (£44.6m) against Highbury Square and debenture subscriptions (the A, B, C and D bonds held by supporters) of £25.6m (£25.3m). The net interest charge was £7.7m (£6.8m).

The interest rates charged on the new stadium debt are either fixed contractually (on the £200m of the long term bonds) or by interest rate swaps (on the £50m of floating rate loans).

Arsenal are also paying about £1.6m per year for “repayment insurance” to Ambac on the stadium debt. This insurance is in favour of the lenders / investors although it’s now of reduced value as the creditworthiness of the insurer has declined.

Accruals and deferred income (revenue received in advance of the accounting period to which it relates – essentially Club, box and commercial monies) remain high at £162m (£164m).

Property development remains vitally important to Arsenal’s future financial position. It is reported that over the next two financial years the completion and sales of Highbury Square (95% pre-sold) and Queensland Road will generate funds of £350m.

With the current Highbury Square debt of £105m and rising and £30m of deposits received it is likely that the Club could net between £100m-£125m from these projects. The uncertainty in the financial markets and economy in general could impact upon legal completion on some of the Highbury Square apartments. It is difficult to predict at this stage how this could affect the Club. It is believed Arsenal are already re-marketing several apartments that have already been pre-sold.

Player trading figures are as always difficult to reconcile, as so many transfer deals are for “undisclosed” figures. The accounts show a profit on player sales of £19.6m (£12.2m). [Profit is the difference between the price paid / received and the book value of the player after amortisation charges].

Wenger’s ability to continually generate profits from his transfer dealings and keep the Club at the very top level (10 consecutive seasons in the Champions League) is amazing. From the figures disclosed related to the book value of players sold it appears that the signing-on fee paid to Henry at the time of his contract extension was substantial and probably in the region of £5m.

The accounts also show that Arsenal have a maximum of £30.6m (£19.7m) still to pay in transfer fees based on players achieving a specified number of appearances and other unspecified events. Of this amount £20m (£10.5m) is described as “probable” and £10.6m (£9.2m) has not yet been provided for.

Summary

Match day revenues are strong and are dependent on the football played and the stadium being full. The collectively negotiated broadcast income is also strong as the new three year TV deal becomes effective.

However the commercial and retail revenue streams appear weak in comparison with other top-tier clubs. This is a legacy of long-term deals signed with Emirates (shirt expiry 2014/15 and naming rights expiry 2020/21) and Nike (expiry 2010/11) when cash was desperately needed “up front” to complete the Stadium.

These deals are costing Arsenal at least £10m each year in revenue opportunity cost when compared to deals now being concluded by other clubs. The stadium debt deal looks an increasingly good piece of business as rates are fixed (and low) at a time when financial markets and lenders are under increasing amounts of stress.

Reaching completion of Highbury Square and Queensland Road during the next 18 months will be a major achievement. If all goes to plan and the level of completion defaults is low Arsenal should net at least £100m which will repay the £50m debt facility and one assumes be allocated to squad investment (to cover both transfers and wages).

Of the near £70m of cash balances, £25m is unavailable as it is used to partially secure future repayments of the debt facilities and one also assumes some is set aside to meet the probable £20m of additional transfer fees payable on existing squad members.

This does however leave maybe £25m for the squad building (transfer plus wages) that appears all too necessary to sustain a season long challenge for honours on several fronts.



Apr 23, 2008
 

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Discussion Starter #2 (Edited)
There it is lads once once and for all we're not skint but we are quite a few years away from matching the likes of Man Utd in the transfer market. Any hopes of signing "big names" should be put to bed until at least 2015 but more than likely 2020.

A good read and I for one tip my hat to the AST as at least now we know where we stand financially. AW should not have to get lampooned due to the board trying to spin our financial situation as they have done for years. Gooners are as loyal as they come, we're not going to abandon the Arsenal win, lose or draw. The reality is we can't and obviously won't be able to spend more than 20-25 MP per summer for at least the next 5 seasons but more than likely much longer than that. That is OK, the money is not just sitting in some bank but rather is being managed in a plethora of areas to make us competitive on the pitch whilst ensuring we're fiscally responsible and successful off the pitch.

I am also glad AW has made a clear and concise effort to not so subtle defend himself against the notion he can spend whatever he needs i.e the implications of the Webster clause and the fact that the focus of the club will be too retain it's best players by being able to compete with the wages paid by clubs such as Man Utd, Inter, Real Madrid and Barca. AW should not be made the heavy, he does not deserve too be the bad guy when it's clear once again he can spend no more than 20-25 MP every summer over the next 5 years or more.
 

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Some people seemed to think the stadium is built it's time to blow cash - but the club helped these thoughts with some of their statements
 

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Discussion Starter #4 (Edited)
Some people seemed to think the stadium is built it's time to blow cash - but the club helped these thoughts with some of their statements
Watching AW on ATVO the tone and sentiments of AW was obvious. He can spend more than he did a few seasons ago before the move to the Emirates to acquire a few experienced players each summer i.e Eduardo, Sagna in 07, Gallas and Rosicky in 2006 but most of the cash generated from our move will be invested on developing stars rather than buying them. From there the next step is to retain said stars who's wages will grow substantially every few seasons.

AW said the day we sealed the deal to begin construction of the new stadium that it would not be him that see the true benefits of the move but rather the managers that follow him in the coming decades.
 

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Again I will state I will be happy if we sign two players of the skill of Sagna and Eduardo for around the same kind of money. I'll be more than happy.
 

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The reality is often in the middle, as so many things in life. Ah, what a juggling act this is...

A clear revelation that sheds light on the past, I feel as I did when I read the last Harry Potter book.

Thanks for sharing this with us, Nigel and Tunis. :D
 

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Not really related to the topic, but I still believe in Wenger's youth policy. Not because it saves us a lot of money, but it is effective in long run. Among our graduates already have been emerged as important players in other clubs like Bentley, Aliadiere, Larsson, etc. And in our current squad, we have Fabregas, Senderos, Bendtner from our academy and other youngsters we brought as prospects like Clichy, Flamini, RVP, Walcott, etc. If you look at their quality, it's amazing and getting better and better.

I'm not saying that we don't need to add established and experienced player to our squad, but we do have a lot of options inside our club. Personally, I can't wait to see the likes of Merida, Barazite and Traore play regularly.
 

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Four Sagna's. Or maybe a Fabregas, Flamini, Toure, Van Persie, Clichy, Sagna and Hleb. Or maybe I'm living in cloud cuckoo land.
 

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£25M = 4 Sagna's. That's what we need.
Or like 11.6 Cygans.

I don't even want to imagine how bad that .6 of a Cygan would be.:howler:
 

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yeh but does that not mean £25M which includes wages and includes new deals for others ?
 

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The prize money for CL and EPL are paid out in the second 6 months.

In addition to the future transfer fees payable, ther are also future transfer fees receivalbe, so these are neutral.

As for Highbury Square and Queensland Road development, the interim statement said
"the related loan balances stood at £105.3 million at 30 November 2007. The Highbury Square development is 95% pre-sold and we are at an advanced stage of negotiations for the sale of Queensland Road; together the two sites are expected to generate turnover, as sales reach legal completion, over the next two financial years in excess of £350 million."

In anyone's eyes if the loan is £105M (though this will increase) and expected turnover is in ecess of £350M, then that gives us a net cash flow of around £200M.

Out total loans were £307M, ,of which £200M are against the Emirate repayable over 22 years.

This means that by 2009, we will over £200M i nthe bank in addition to anything generated from the football club.

Money is not an issue.
 

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Exactly.

£25M = 4 Sagna's. That's what we need.
:tongue: to win CL and title you only need 4 sagnas lol u sure? no david villa or messi?


its a very thin line to walk if you want to balance 1) winning silverware consistently 2) keeping financially in profit and 3) not selling out to a billionaire, so far I havent seen anyone in england achieve it...

the other jewel is fabregas, once he is sold (am thinking next summer not this one) then that money should buy 3 good players...this summer from selling flamini and hleb am thinking at least £16m?
 

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KHALID, Flamini's contract expires this summer, he can leave for free.

And why should we sell Cesc?
 

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KHALID, Flamini's contract expires this summer, he can leave for free.

And why should we sell Cesc?

eventually he will find it tempting to turn a crazy money offer from real or barca especially if he continues not to win much.....
 

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Discussion Starter #17 (Edited)
http://www.forbes.com/lists/2008/34/biz_soccer08_Soccer-Team-Valuations_Rank.html


LONDON (AP) -- Manchester United is the most valuable team in world soccer for a second straight season and likely to hold that position next year, according to Forbes magazine.

The Premier League club is worth $1.8 billion, a $347 million increase (24 percent) from last year's valuation, Forbes said Thursday.

Taking into account revenue growth, profitability and debt levels, Real Madrid remained second at $1.285 billion and Arsenal third at $1.2 billion.

United was among four English clubs in the top 10, with Liverpool the big mover on the list, going up from 11th last year to fourth despite the infighting between American co-owners Tom Hicks and George Gillett Jr. Bayern Munich was fifth, followed by AC Milan, Barcelona, Chelsea, Juventus and Schalke.

David Beckham returned to the top of the richest soccer players list after his lucrative move to the Los Angeles Galaxy pushed Ronaldinho down to second place.

Beckham is worth $49 million, according to Forbes, followed by Ronaldinho at $33 million.

Manchester United plays Chelsea in the Champions League final on May 21 at Moscow.

"Advancing to the Champions League final will mean in excess of $45 million for Man U. and likely assures it of returning atop our list next year," Forbes associate editor Jack Gage said.

"Actually winning the Champions League final wouldn't have much of an immediate impact on the team, but would bolster its already sterling brand as it tries to further expand its fan base throughout Europe and Asia."

Forbes attributed United's increased value partly to the expansion of Old Trafford's capacity to 76,000 and higher ticket prices.
 

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Discussion Starter #18
When you read that it's hard to swallow we could not acquire better wingers and avoid having having to use the likes of Diaby and Eboue.
 
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