Monday 12th December 2016

AST analysis of Arsenal's finances for 2015/16

AST Analysis of Arsenal Holdings PLC Full Year Accounts for the financial year 1 June 2015 to 31 May 2016 The following report is a short analysis produced by Board members of the Arsenal Supporters' Trust (AST) examining the financial performance of Arsenal Football Club for the financial year ending 31 May 2016. We are again publishing a simplified version of the club's accounts in table format as feedback suggests that members appreciate this snapshot view. The figures are all drawn directly from the club's public accounts, a copy of which can be viewed on

Comparison with previous estimates

In our February review of the half-year figures, we gave an estimate that the club would report a loss before tax of £7m for the full financial year. In fact there was a profit of £3m. The principal reasons for this £10m variance came from the second place finish, extra TV appearances boosting TV revenues and from KSE waiving the £3m management fee.

Stadium revenues (matchday)

This year Arsenal again generated a record-equalling figure of close on £100m from match-going fans.

In 2015-16 Arsenal played 27 home games and hosted an Emirates Cup; the previous season Arsenal played 27 home games, hosted an Emirates Cup and staged a Brazil friendly.

The club squeezed in an extra A game (Bayern at home) but let season ticket holders off the extra charge, but still squeezed Red and Silver members and away fans for the extra cash (worth approx. £350k).

The club will also suffer from the absence of an Emirates cup in the coming financial year, which was replaced by a two game Scandinavian tour.

The AST have repeatedly argued that with revenues from TV and commercial contracts expanding by £150m over the five years ending May 31, 2017, the need to impose further ticket price increases has ended, and that the club has huge scope to reduce the cost of tickets. It is therefore pleasing that the Premier League agreed to a cap of £30 on away pricing for the current TV cycle. We estimate this will cost the club well under £1m pa.

Following AST and wider pressure the club announced a price freeze for home fans for the current TV cycle (20016 to 2019). This is the minimum they could reasonably do, and Ivan Gazidis has continued to defend their record on price rises by saying they have increased by less than the retail price index (RPI) since the move from Highbury.

This may be true, but it's a convenient cut off point as it ignores the fact that ticket price increases far outstripped inflation for the 15 years before that. Secondly, the vast bulk of Arsenal's costs are related to player wages and transfer fees and the amount spent by the manager on them is discretionary and not subject to the forces that influence the RPI.

Arsène Wenger's spending on players to date has not even required the full use of the club's annual income and cash reserves (which the Board repeatedly insist are at his disposal), so increases in ticket prices are in our opinion unnecessary, impossible to justify and inevitably further strain the club/supporter relationship.

Broadcast revenues

Broadcast revenues increased by £15m thanks to the club's improved second place finish in the Premier League (£8m) and the new Champions League deal (£10m), slightly offset by a poorer FA cup run. 

The new Premier League three-year deal, due to start in season 2016-17, is expected to add an eye-watering £45m pa to Arsenal's income with no associated cost. Other Premier League clubs will benefit by similar amounts.

Champions League income remains significant (approx €50m pa) and participation is important in achieving top level sponsorships.

Commercial revenues

Commercial revenues increased by 5 per cent to £82m. The club explained in depth this was down to a 40 per cent growth in secondary sponsorships to £17m pa.

Whilst the two headline deals with Emirates and Puma are significant (at £25m pa and £30m pa respectively), Arsenal's commercial and retail income is only 40 per cent of the figures reported by Manchester United whose new kit deal with Adidas (£75m pa) together with other commercial revenues gives them a £150m pa spending advantage over Arsenal.

Arsenal also lag behind the commercial revenues reported by Bayern, Barcelona and Real Madrid and the state-sponsored PSG and Manchester City, who all earn close to £200m pa in commercial revenues. 

Arsenal sit tenth in the European club table of commercial income meaning they are in the second tier of commercial income earners behind the likes of Chelsea, Dortmund and Liverpool, who all receive over £100m pa, but well ahead of clubs like Spurs who are not Champions League regulars and earn around £60m pa. The game at the top level in Europe is becoming increasingly polarised, leading to a less competitive Champions League. The super-rich Clubs are generating ever larger commercial revenues off the pitch through sponsorships and merchandise sales linked to success in the Champions League, with its large bonuses and TV-related payments.

Property and player loans

There was a final £2m bonus payment from the developer of Queensland Road. The remaining property sites at Holloway Road and Hornsey Road are held in the balance sheet at £11m and are still to be sold (note that £11m is a balance sheet figure and the eventual income may be higher or lower). We estimate in excess of £75m to have been generated from the property assets, including from Highbury Square, since the stadium move commenced. We believe all this cash is available to the football side of the business, although the bulk of it is held within one of the club's numerous property companies. This money makes up part of the overall Arsenal Holdings plc cash reserves, which stand at well over £100m even after the summer spending.  Player loans delivered £3m in revenues with Szczesny and Jenkinson notably out on loan. Loan deals do not always cover the player's wages.


The wage bill increased by £3m to £195m. The underlying increase was much larger as the previous year had two sets of Champions League qualification bonuses included which we estimate added over £10m to the wages for 2015.

A small part of this increase went on non-playing staff (for example the training team was expanded again by 27 to 122 people and has doubled in three years), but the vast bulk went on player wages.

The club invested modestly in players in summer 2015, signing one big wage earner in Cech, but also sent Szczesny out on loan and sold Podolski. Walcott, Iwobi and Monreal got new deals and Elneny joined in January 2016. This resulted in the near £13m underlying increase in wages.

The Premier League wage cap (no more than a £7m pa increase for the duration of the new TV deal) has certainly had an impact in cooling the wage war between clubs. Chelsea, Man City and Arsenal all spend similar amounts, but Man Utd have pulled ahead again as their bigger and still climbing commercial revenues allow them to increase wages well above the cap (by £30m last year to £230m).

In summer 2016 three major signings joined Arsenal, three older players retired and more players were placed on loan (notably Wilshere). So far, no new deals for existing squad members have been announced and it is likely this caution is in part driven by managing the cap.

Arsenal's wages are double those of Spurs and increasingly commentators are questioning whether wages alone guarantee success. Arsène Wenger has hinted that the risk of being stuck with high earners who do not perform and cannot be moved on is a driver to his caution in the transfer market. Certainly the loan market is littered with unwanted, overpaid, expensively signed talents, and it is also noticeable that contract renewals are being run more tightly than before across the game as a whole.

One last comment on wages is to draw attention to Ivan Gazidis's 15 per cent pay rise to £2.65m pa which was mainly due to a 40 per cent increase in his performance bonus to £1.1m. It went without justification in the accounts.

Non-wage football costs ("other costs")

These costs cover running the team (travel, medical costs, etc) stadium running costs, insurances and retail costs of sale (stock and running costs of the Armoury, etc). For many years they had been remarkably constant (£57-62m pa), changing only marginally to reflect the number of games and events staged at the stadium.

In the financial year to May 2014 they suddenly jumped unexpectedly to £70m, and despite the explanation in the accounts about staging more games and the costs of looking after sponsors, the biggest single factor was a payment of £3m to a Stan Kroenke's KSE for "strategic and advisory services".

The year to May 2015 saw non-wage football costs grow another £2m to £72m. There were savings from not touring and hosting fewer games, but some cost increase from the growth in shirt sales (ie the need to buy the stock before selling it to fans). However, even with increased retail stock costs, the total would have gone down if the £3m payment to KSE had not been repeated. This season the KSE fee was waived and other costs fell back to £70m. The AST has campaigned extensively against the fee, which appeared arbitrary and without sufficient economic justification. We hope it does not reappear.


Amortisation is the accounting cost of buying the team spread over the length of the relevant players' contracts and includes items like agents' 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 (currently £59m) on new players every season, with extra sums spent to replace players who leave at significant gain over their 'book' value in the accounts. Arsenal's spending slowed down in 2015 as the manager chose to stick with the squad rather than sell on, let go or pay off older players and invest his spare cash. You could argue that this approach did not pay off, and to fill the gaps in his squad over £90m was invested in three players at much increased prices in summer 2016.

Profit on player sales

In summer 2015 the only changes were in the goalkeeping position and the sale of Podolski for a small fee. In summer 2016, Gnabry moved on but otherwise there were no sales, just retirements and loans. Top clubs found it hard to move on unwanted players in summer 2016, with wages undoubtedly an issue in many cases. We can only speculate as to whether Arsenal were similarly frustrated. However, we find it ironic that to explain the clubs inactivity in 2015, the Chief Executive cited the retention of players bought over the past three seasons as a virtue of the squad and then did a volte face in 2016 to herald their bold spending in strengthening the team's entire spine as a sign of their commitment to winning. Arsenal's multi-layered approach to squad management appears to allow all options to be covered in justification of any current position, without a hint of self-reproach for past decision making!


Arsenal's end of financial year (May 31) headline cash figure of £226m is as usual bloated by up-front season ticket payments that are used to pay some of the wages and bills for the rest of the summer ("working capital"). This amount was assessed at £40m last season but will probably fall this season because of the higher Premier League TV fixed payments (up to £30m) normally made in August. However, there are also a number of other items that will use up the cash held at year end. These include:


·         An allocation of cash on the balance sheet (£35m) that the club can't spend because it's held to the order of its stadium bond holders ("debt reserve protections").


·         A net amount left in the balance sheet reflecting money to be spent and received on players, spread between debtors, creditors and provisions. A big chunk of this is on a long-term basis as it relates to the agents cut on player transfers and wages and renegotiated contracts, and to deferred instalments on players and performance-related fees the club thinks will become payable in the future (in all approx £43m). In the next year we estimate that some £27m net is due to go out.


·         One-off factors: favourable movements in working capital that added to cash balances at the end of both 2015 and 2016 may reverse in 2017, reducing available cash. Deferred income and accruals went up from £121m in 2013 to £145m in 2014, £175m in 2015, and stayed at £174m in 2016. Much of this increase was due to Puma and Emirates payments under the new deals and to higher season ticket revenues from higher pricing and a strict cut-off on renewals. Indeed, this season the club took the unusual step of disclosing that advance season ticket and sponsorship money was £101m (little changed on 2015). This is helpful but does not explain where all the cash that flowed in over the last three years (£54m) came from and whether it will stay for the foreseeable future. Furthermore, in 2016 pre-payments and accrued income dropped over £10m back to more historic levels. This added another £10m to cash in 2016, and again the question is will this cash stay in the business? We have to assume it will in the absence of explanations to the contrary, as the club have gone out of their way to highlight reasons why the headline cash figure should not be taken as free and are therefore considered unlikely to have overlooked good reasons to talk it down further.


·         Payments for players acquired in the summer: these are quoted in the accounts as £87m, plus agents fees due on the players' contracts. Not all this amount will have been due straight away and for the top signings we believe based on past experience it is fair to assume 75 per cent will not be due for at least another year. Accordingly, we have estimated £37m as being the maximum up-front outlay the club incurred.

In past reports we have made an allowance of £25m as the amount the club could sensibly hold as a contingency to cover a rainy day, or more specifically a season of not qualifying for the Champions League. However, given the extra TV revenues scheduled for season 2016-17 and the wage cap that will lock in surplus cash flow of at least £35m pa, we do not think any contingencies are required for this season. Accordingly, we estimate around £97m remained spare at the end of this summer's transfer window.

Our estimates of spare cash available for transfers have long been an irritation to the club, and of course they tell us they cannot explain exactly what is available without letting all shareholders and the world at large know - something they do not want to do. Whilst we appreciate the commercial sensitivity surrounding spare cash for transfers, it's inevitable fans want to understand what funds are available and we try and do this in as informed a way as possible, based on the official report and accounts.

Last year we encouraged Arsenal to help all fans and shareholders understand exactly why so much money needed to be held in reserve, by explaining more fully in the company's annual report and accounts what working capital is required for the financial year. It is only right therefore, that we acknowledge the steps they have taken to more fully explain what cash is not free and even to acknowledge that after this summer's high spending they still have reasonable reserves to invest further should the need or opportunity arise.

We continue to believe our current and past analysis is correct and we note that another widely read and valued independent report on Arsenal's finances by the blogger Swiss Ramble drew similar conclusions.

Indeed, his own commentary on these accounts re-iterated our observation last season that it was odd that with such resources available further additions weren't made to the squad in key positions in 2015 before prices rose for players as was widely expected by all, including the club.

Overall financial performance: what does it mean for Arsenal?

In 2013 Ivan Gazidis spoke about becoming like Bayern Munich and in 2014 about matching Chelsea's wage spend, but whilst the accounts demonstrate that Arsenal have ever more resources available to compete - even if they aren't all utilised - they are miles behind the commercial earning power of Bayern Munich, Barcelona, Real Madrid and Manchester United.

For 2015-16, the Board's emphasis in the accounts was resolutely defensive of their approach to cautious spending and running a mixed strategy of player development and acquisition.

This summer's spending and acknowledgement there is more cash in reserve certainly helps make that a more palatable message than 2015's unwavering insistence that they had a perfect squad and that it was a virtue that they did not need to spend, then losing the league to Leicester thanks to a run of 10 points from nine games after Christmas.

Our concern remains that Arsenal's position as a top 10 spending club critically relies on annual Champions League participation (€50m+ pa), and that participation extending support to match day incomes and higher level sponsorship deals. Arsenal spend all their income on the team at present so a long term major loss of income implies belt tightening, at least in relation to competitors.

Whilst United have been able to brush off missing out on Champions League qualification due to their logic-defying commercial revenue growth, other clubs, such as Chelsea and Arsenal, are more likely to be affected by losing that source of income. Whilst clubs like Spurs, Liverpool and Dortmund show annual participation is not a pre-requisite to having a competitive team, it would certainly up the risk profile of the club and probably result in top players leaving, which is why it is perhaps wise some level of cash is held back in reserve.

Certainly, it seems top flight football in England is becoming more of a meritocracy with eight or more highly competitive participants only one of whom seems to be on another financial level to the others, suggesting money of itself does not guarantee on-field success.

In large part this is because of the amount of TV cash English clubs earn, giving the whole Premier League an income better than all but the very top European teams, meaning they can compete for most of the world's best players.

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