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AST Analysis of Arsenal Holdings PLC Half Year Accounts to 30 Nov 2012

Posted Thursday 21st March 2013

AST Analysis of Arsenal Holdings PLC Half Year Accounts

for the period 1 June to 30 November 2012

The following report is a short analysis produced by the Arsenal Supporters' Trust (AST) of the financial performance of Arsenal Football Club for the first half of the club's latest financial year (1 June 2012 to 30 November 2012). The full year report and accounts that cover season 2012-13 are published in late September.

For the first time we are also publishing a simplified version of the Club's accounts in table format as feedback suggests that members appreciate a snapshot view.

The figures in the table are all drawn directly from the club's accounts with the exception of the half year split between wages/other costs analysis where an estimate has been made as the club do not make full disclosure until year end. We have also included our own estimate of the results that will be published for the full year end up to 31 May 2013.

In the analysis that follows we explain some of the key factors behind these figures and then go on to address some of the questions that members have put to us. 


6mth to Nov11

Yr to May 12

6mth to Nov12

Yr to May 13




































Total revenue















Football costs wages





Football costs other





Amortisation of squad










Property & loans





Total costs










Operating profit





Player sales










Profit before tax










Loss before player sales and property





Stadium revenues (gate receipts)

Arsenal played 29 home games in season 2011-12 and staged an Emirates Cup compared to 2012-13 when there will be 26 home games and no Emirates Cup.

In addition to there being three fewer cup games in the first half of the reporting period, there was also one fewer EPL game played, which is why the match-day revenue looks poor in the recent six month figures. The impact of the three Coldplay concerts (stadium rental) in 2012/13 vs no concerts in 2011/12 is not reflected directly in "matchday income" so has been discounted for this comparison.

There is also a 'B' game to refund season ticket holders for at the end of this current season as only six pre-paid cup ties will have been played, costing approximately £1.4m.

Overall we believe that matchday revenue for the year will fall by about £4m.

This is a disappointing performance and matchday revenues are well below the 2009 peak of £100m (32 games), despite recent season ticket and Club Level price rises. We conclude that Executive Box revenues are down on their original levels, when many were bought on three and four year packages although the Club maintain box revenues have remained very consistent.

Broadcast revenues

Broadcast revenues for this period will be flat, despite finishing third in the Premier League last season. Whilst there was growth in the UEFA TV pool, we understand that nearly all the growth in Champions League revenues (20%) went to non-English leagues, as the English broadcasters did not up their TV bid in this contract round. There was also an impact in August from Arsenal not having to play a Champions League qualifying game.

Premier League TV revenues were a little higher in the first half of the year as the club had two extra televised games.

Commercial revenues

The club have played down the potential to generate substantial extra income from secondary sponsors, but will be booking an immediate increase generated by the new Emirates deal from 1 December 2012 by agreeing to combine the five year extension to the remaining 18 months of the old deal.

The deal was announced as being worth £150m over five years but we believe that Arsenal will actually spread this out over an accounting period of six and a half years, giving the club an annual value of £23m for their title sponsorship in the period 2012-19 and stadium naming rights until 2028. When this is added to the existing agreement of £12m to be paid from 1 December 2012 to June 2014, it means the overall value of the Emirates deal from now till 2019 averages circa £25m per annum, with some front-loading of cash.

This accounting process explains most of the uplift in commercial income we have assumed for the second half of this financial year. We also note that the values currently given to the Emirates deal by Arsenal are for the full value of the contract.

Emirates have subsequently stated that there are some bonus clauses within this deal (although not what the bonus targets are although it is suspected that Champions League qualification is one of them), so we will need to wait for publication of full accounts to see the full benefit of the new arrangements.

A new shirt manufacturing arrangement is also under negotiation for 2014-15 and an uplift of at least £10m pa should be achievable on the current £10m pa provided by Nike.

However, we remain well behind the leading 'brands' in this area such as Man Utd, who have been getting well over £20m a season from their Nike kit deal since 2002, and this season will bank around £38m from that source. They are currently in discussions for a significantly enhanced contract.

Property and player loans

In the first half of this financial year various 'in-fill' properties around the old Highbury ground were sold, as was the Queensland Road site, but most of the £20m revenues from these sales were received after 30 November 2012. In the second half of the accounting year there should be more revenue from further in-fill house sales (perhaps £10m) and the club will then be left with the Holloway Road and Hornsey Road sites. There's still substantial spare cash to be generated from property debts and assets held in the balance sheet over the next two years of over £30m.


Despite the huge increases of recent years, the wage bill continued to grow and will grow further in the remainder of the year as the new deals for the 'British Core' come on stream.  We believe the wage bill for season 2012-13 will be approximately £155m, an increase of about ten per cent on last season when one-off items are excluded.

In our last commentary we expressed continued concern at the club's policy of paying players in a narrower egalitarian spread than the pyramid style of most sporting organisations.

The manager has since confirmed publicly our assessment, and described this as his 'socialist' approach to team remuneration. We see the downside of this approach in the long list of players on loan or sitting idly by because their achievable wage elsewhere is so far below what they are being paid at Arsenal. Quite how the benefits of the socialist approach have manifested themselves is unclear, but Arsène maintains it helps team spirit.

Our view is that at present Arsenal have about £25m per annum of non-productive wage costs.

Ivan Gazidis has on more than one occasion responded to our questions on this issue by agreeing that a change in approach to the current wage structure is required, but it appears that actually implementing changes is akin to turning an oil tanker, no doubt made more difficult when the manager has such a big say in transfer and wage remuneration decisions.

Non-wage Football costs

These costs cover team support, travel and medical costs, stadium running costs, insurances and retail costs of sale (running costs of The Armoury, etc). They are remarkably constant other than being slightly impacted by the number of games held (approx £600k per home match day).


This is the cost of buying the team spread over the length of the relevant players' contracts and includes costs like agent fees, Premier League levies and contract extension fees as well as the actual transfer fee paid for a player.

As a minimum, we would expect the club to spend the amount of the annual amortisation charge on new players every season with extra sums spent to replace players who left at significant gain. Over the past two seasons Arsenal have spent close on £120m on new players and the amortisation charge has more than doubled as a consequence to over £40m pa as players sold at substantial profit (over £100m) have been in part replaced.

In this accounting effect, £40m should be the minimum for summer 2013 spending. Replacing Arshavin, Squillaci and quite probably Bendtner or Chamakh would roughly match up with this amount on a specific player basis.

Profit on player sales

Following on from £66m of gains from selling Fabregas, Nasri, Clichy, etc in 2011, Arsenal booked a profit of £43m in 2012 largely from selling Van Persie and Song. Most of the clubs competing at the top of the game do not rely on player sales for income. If they are a talent developer then they will, so clubs like Spurs and Everton have relied on gains from sales to balance the books. Arsenal's gains have increasingly come from player dissatisfaction forcing the club to allow developing players to leave before their sell-by date. Consequently, Arsenal are now a buyer of mature talent as well as a buyer of developing talent as one would expect from a top club, but this change in direction has not fully been taken on board by media and commentators alike. 


Arsenal's headline cash figure is always bloated by upfront season ticket cash that is then needed to pay the wages and bills for the rest of the season. There is also an allocation of cash on the balance sheet that the club can't spend because it's held to the order of its bond holders of the stadium loan (debt protections).

At the May 31 year-end this 'unavailable' cash accounts for close to £100m, and whilst by November some of the season ticket money has been spent it is estimated by the AST that close to £60m of the November 2012 cash figure of £123m is "tied up".

The AST estimate that the 'spare' cash available for investment in the squad was approximately £60m during the recent January transfer window.

Over the next six months we think that 'spare' cash available will grow organically by £20m as further funds come available from property assets. From next year there is also the new TV deal and so it is commonly accepted, and never refuted, that the club has £70m to spend in the summer on a combination of transfer fees / wages.

Remember too, that part of the annual football club cost base covered by season ticket revenues is an allowance for new player spending and Arsenal's cash flow will allow some of that 2013-14 season ticket cash to be added to the "free cash pile". This means that a bold club may well feel able to increase its spending in the summer knowing that further season ticket and commercial revenues are due.

Overall financial performance: what does it mean for Arsenal?

Arsenal's income has been fairly static for a long time, but that will now start to change as the new Premier League broadcast, Emirates and kit sponsorship deals kick in. In the meantime, Arsenal has been running at an operating loss before gains from player sales, as the club aimed to use the property cash raised from the redevelopment of Highbury to tide them over until the new deals were available.

This will to some extent mask the flat revenues secured from ticket sales and secondary sponsorship deals. In this regard the cost of selling the best players and not competing at the business end of the season for trophies is increasingly telling on the business model.

An additional problem has been that many of Arsenal's better players have forced exits, adding unplanned profits from their sales. A failure to reinvest the proceeds raised from sales has led to the club sitting on a spare cash pile for over two seasons now, as the manager has struggled to find sufficient better players he wants to invest in. 

With many of his recent purchases not working out (Chamakh, Wellington, Squillaci, Park, Santos and Gervinho) the spotlight is moving onto the quality of the squad he has chosen to construct and the decisions that have been taken on wage expenditure and 'keeping the financial powder dry'.

There is no doubt that with a more judicious and effective use of wage expenditure, together with the courage to utilise the cash reserves that Arsenal have in the transfer market, there is cause for optimism that Arsenal have a considerable opportunity to strengthen the team in the summer transfer window.

Some key questions:

Q1. How does the wage bill compare with other clubs?

For the 2011-12 season, the top wage spenders were:

Man City £200m                               Chelsea £171m                   Man Utd £160m      

Arsenal £143m                                 Liverpool £130m                  Spurs £94m

Everton £63.4m

For season 2012/13, Arsenal's wage bill will rise by 10% to approximately £155m.

This demonstrates that considerable resources are available to invest in the squad and is partly explained by the relatively high wages that Arsène likes to pay to players who would fairly be described at best as 'squad players'. Just one example is the fact that Nicklas Bendtner was on a higher salary at Arsenal than Luis Suarez secured in his first two seasons at Liverpool.

Arsenal's wage bill places them as the fourth largest spenders in English football and, although there are exceptions, there is generally a close correlation between wage expenditure and league performance. The club we have had the closest rivalry with over the last two seasons for a Champions League place is Spurs, whose wage bill is currently around £1m a week less than that spent by Arsenal. Manchester United's wage bill is just over ten per cent higher than Arsenal's.

At the end of this season both Squillaci and Arshavin will come off the wage bill, and quite possibly other experienced squad members, which will add to the financial firepower that is available to the manager. 

How much could Arsenal spend this summer?

The AST estimate that Arsenal could spend in the region of £70m to £90m on transfers this summer (assuming qualification for the Champions league). This does not take into account the wages these players are paid, though there will be money available from the departure of some squad members and known increases in revenue that would cover additions to the wage bill. Arsenal can comfortably plan for a wage bill of £180m in season 2014-15 when all new revenue streams are fully on line. This level of wage spend equates to 60% of revenue which is seen as being prudent and sensible.

How much debt is left and why don't Arsenal pay it off if they have spare cash?

In simple terms the penalties for early repayment don't make it worthwhile. Total gross debt at Arsenal reduced in line with expectations and stands at £219m (stadium debt) plus £27m in debentures (A,B,C and D bonds held by supporters). Interest rates are fixed and with scheduled repayments known until maturity the stadium debt will be zero come September 2031. The cost of servicing the debt in the last financial year was £13.5m in addition to a principal repayment of £6.2m. Debt service remains very manageable given the football revenues and is not a major factor in other spending decisions.

How much will failure to qualify for the Champions League cost Arsenal?

Over the last few seasons Arsenal have earned approximately £25m per annum in broadcast payments and prize money from participation in the Champions League (based on reaching the round of 16).

Failure to qualify for the group stage of the competition would see a loss of this revenue but there would be some income from competing in the Europa League, where we estimate that a run to the quarter finals could earn in the region of £2m in broadcast/prize money.

The club have also indicated that there would be a reduction in the cost of season tickets, and match-day tickets, allowing for Europa League games being classified in a lower price category (probably a mix of B and C).

Therefore one has to assume that not being in the Champions League will lead to smaller gate receipts (cheaper ST prices and less in matchday sales for the European games) of approximately £7m.

As a good educated guess, it seems that failure to qualify for the Champions League would cost the club in the region of £30m.

Of course there are many unknowns here. The opportunity cost of not being in the Champions League is as high as £75m (on the extremely optimistic notion that Arsenal would win it). We also know that not being in the CL will dampen demand for high level corporate tickets and season tickets and there would be reduced bonuses paid on sponsorship deals (including the renewed Emirates deal). Arsène Wenger has also noted that it would be harder to attract leading players without Champions League football.

But, in summary, the increasing revenues from UK broadcast monies and sponsorship deals at Arsenal perhaps means that not qualifying would have an impact that would not be disastrous in the short-term, but it would probably mean a reduction in the amount Arsenal can spend on transfers this summer.

March 2013

© Arsenal Supporters' Trust