Monday 2nd November 2020

How COVID-19 is affecting Arsenal’s financial position and what impact has the transfer window made?

In the last few months we have provided regular updates on how COVID-19 is affecting Arsenal’s finances for the financial years ending 31 May 2020 and 31 May 2021. Now that the transfer window has closed and we have more clarity about broadcasting arrangements we provide a further update.

We previously concluded that the club would require assistance from the owner to get through the summer and are pleased to report that Kroenke Sports and Entertainment (KSE) has provided some support by refinancing the club’s historic stadium building debt (insert link to article) – something the AST has raised before but the club always said was too expensive to countenance. The precise amounts provided and the terms of the money extended by KSE remain unknown so we are obliged to make some assumptions.

In addition, the 2019/2020 season finished behind closed doors (“BCD”) and there is now greater clarity on the club’s income and costs for last season. However, there remains considerable uncertainty over the level of some income streams for 2020 (notably commercial income) and for the 2020-21 season it remains an educated guessing game as to what will happen in terms of match day, broadcast and commercial income.

All that said, Arsenal fans are anxious for an idea as to the club’s financial situation and the implications of the new signings made this summer so we did our best to provide some reasoned analysis and thoughts.

Since that estimate was prepared a number of things have changed:

  • Due to a resurgence of COVID-19 cases the return of fans to stadiums has been postponed
  • The contract to broadcast the Premier League in China has been cancelled and replaced at significantly lower value
  • Increased support for the Football League by the Premier League is being negotiated
  • Rebates to broadcasters by UEFA for 2020 have been agreed
  • The transfer window has closed

Accordingly, we have updated our estimates for seasons ending May 2020 and May 2021 and these are set out below.

It should be stressed that this remains a very uncertain time and that all estimates and assumptions can (as we have already seen since August) rapidly change in light of policy changes by both the Government (match attendance) and football authorities such as UEFA and the Premier League (TV revenue streams).

AST analysis

The following analysis of Arsenal’s financial situation is set out in a simple table format.

The second column (Actual) reports Arsenal’s actual financial performance for the year ending 31 May 2019 from the figures made available on in December 2019.

The third column (AST – estimate before season suspension) sets out how we expected the financial year 2019/20 to conclude before COVID-19 occurred.

The fourth column (October 2020 estimate) is a revised estimate for the season 2019/20 made in October 2020. Note this is not what will be in the accounts for the year ended May 2020 as the season for Arsenal did not end until after the Cup Final on 1st August.

The fifth column (AST estimate) is an estimate of what season 2020-21 could look like if the majority of matches are played BCD. Again this is not what the actual accounts would look like because the 19/20 season numbers will be comingled with those for 20/21 season.


Year to May 2019

Year to May 2020

Season 2019-20

Season 2020-21



AST estimate before COVID-19

AST October 2020 estimate

AST October 2020 estimate











Commercial & Retail





Player loans





Football revenue










Total revenue











Football costs wages





Football costs other





Amortisation of squad










Property & loans




Total costs










Operating loss





Player sales and JV income share





Finance costs





Profit / (loss) before tax





Matchday revenue was set to be £92m for 2019-20, but was reduced to £77m as a result of the club having to refund all ticket holders for the final four Premier League games of the season. This figure also includes refunds (not COVID-19 related) to season ticket holders for two pre-paid cup credits.

If 2020-21 is played BCD there will be no matchday revenue. It was hoped a ‘1 seat in 4’ model would pass the necessary government tests and be allowed from the second home game of the season versus Sheffield United. This is now on hold due to a resurgence of COVID-19 cases. We have made an allowance of £5m for matchday revenue on the optimistic basis that some small crowds will be allowed to return toward the end of the season.

Broadcast revenue – Arsenal’s broadcast revenues from the 2019-20 Premier League season are estimated to have been about £150m as a result of finishing eighth. There has been a slight uplift in the value of Premier League’s overseas broadcast deals which explains the increase despite Arsenal having a poorer season than in 2018-19 season.

Their revenues from the Europa League are estimated to have been about £19m. This is a considerable reduction on the £35m earned the previous season when we reached the final compared to the R32 exit in 2019-20.

So the total broadcast income was estimated at about £169m.

However, it has been widely reported that rebates of £600m have been agreed by the Premier League with their UK and overseas broadcast partners for season 2019-20 as a result of COVID-19. The broadcasters cite the change in dates of matches and the lack of fans in the ground as material changes to the agreed contracts. This will reduce Arsenal’s income by about £33m. The cash for this rebate will be deducted at the end of the current tv cycle in 2022 (at the end of the current three-year TV broadcast deal), which will help Arsenal’s cash flow issues in 2020 and 2021.

It was also expected that there would be some rebate given by UEFA to their broadcasters and this has been settled at 15%, so the estimate of £19m from UEFA was reduced by £3m.

In August we assumed the same broadcast revenues in 2021 without any rebate. However, since then there has been the cancellation of the Premier League broadcast contract in China (subsequently replaced by a much smaller deal) and negotiations with the Football League over increased assistance to compensate for the absence of matchday revenue in the lower leagues (£250m has been mentioned). We have reserved £18m for the combined effect of these factors.

For Commercial & Retail in April we made a working assumption of a reduction of 12.5% in revenue from sponsors as some would seek refunds and deferrals but have now refined that down a little as the club won the FA Cup. This is a very hard figure to estimate as it will be reliant on whether Arsenal and their sponsors come to a voluntary agreement on how to share the ‘pain’ and the extent to which the main sponsorship agreements with Adidas and Emirates have force majeure clauses that the sponsors could invoke. There was no overseas summer tour which is an event that particularly benefits the large sponsors and is built into these commercial deals, but there is enhanced in-ground advertising and an increase in the number of televised matches.

Football costs: wages – we’ve reduced our estimate for 2020 from £230m to £219m. We believe that payroll figures for April and May 2020 dropped by about £2.5m in each month as a result of most of the players agreeing to a pay cut of 12.5% and the club’s 14-person senior executive team agreeing to a cut of 30% (for up to 12 months). Furthermore, our original estimates allowed a full eighteen months salary for Unai Emery and his team (£12m) whereas Emery has now taken up a new position at Villareal so we have cut that provision to just £4m.

However, as Arsenal qualified for the Europa League, the players will only take a wage cut of 7.5%, with the other 5% reinstated to 2020-21’s salary payments.

For 2020-21 we were assuming no net changes overall to the player wage bill with wages for new signings and pay rises matched by departures, while the absence of any severance provision for Unai Emery, a further three months of salary savings until the season ended in July, and recent management changes and redundancies reduced our estimate to £212m.

However events did not transpire like that. With the transfer window now closed we have added £30m to that estimate to allow for the additions of Willian, Gabriel and Partey to the squad plus the pay rises given to Saka and Aubameyang. Now it is likely the salary estimates reported in the press will be at the top end of what the players can earn and will include Champions League and other performance bonuses plus signing on fees/annual loyalty bonuses that will be treated as player purchase costs and amortised in the profit and loss rather than included in wages. However, in the absence of information to the contrary and to show a cautious outcome we have included the full amounts quoted in the press.

This is an incredible increase in wage costs for a club that was already facing losses of over £100m and is hard to rationalise but if the reports of the salaries paid are to be believed that is the sort of increase Arsenal committed to in paying Partey and Willian around £200k a week and significantly increasing Aubamayang’s wages to a similar level as those of Mesut Ozil.  It looks desperate stuff.

The wage bill is incredibly bloated and way, way too high for a club about to enter its fourth year in the Europa League and facing a global pandemic. Of course the wage bill should fall next summer when Ӧzil’s £18m annual wages comes off the payroll and the club can have another crack at shifting some of its surplus centre backs (both Mustafi and Luiz will be out of contract). In essence, the club have decided to take the risk and add quality to the core squad.

Other football costs for 2021 were expected to fall by £10m due to reduced operating costs from the absence of touring and hosting the Emirates Cup, the business rates saving, not staging home matches and general belt tightening.

Amortisation is increased for 2020 to £123m to allow for a provision against the remaining book value of Mkhitaryan who had his contract cancelled. At face value some £75m was added to the value of the playing squad in the transfer window but there will be more on top as provision for agents’ fees on new and improved contracts will also be made. Even after allowing for a saving from Mkhitaryan’s contract and for the extension of Aubameyang’s contract it is likely amortisation charges will increase a little. We have allowed £110m for the annual write down of the playing squad.

Profit on player sales: Arsenal struggled to sell players in the transfer window but because the book value of the players sold was low (ex academy players) this translates to a book profit equivalent to the estimated sum raised (£20m).

Finance costs: Finance costs comprise interest on the bonds and debentures that Arsenal took out to fund the building of the Emirates Stadium. These were very consistent but as a result of the refinancing of these arrangements they will see changes. In the immediate term there are charges related to the early repayment of the residual stadium debts (“bonds”). We cannot be certain if these costs have been added to the overall debt or taken as a charge on the club.

On 14 August KSE UK Inc refinanced the stadium bonds at a combined outlay estimated at £214m which will take the form of a new loan from KSE to Arsenal on terms and at interest rates as yet unconfirmed. The estimated outlay comprises £162m for repayment of the outstanding bonds, £25m in early repayment charges, £24m for cancelling interest rate swaps Arsenal had entered into to fix the rate of interest on the £50m of floating rate bonds, and £3m of accrued interest.

The benefits to Arsenal from the refinancing are prima facie immediate access to the £36m cash in the Debt Service Reserve Account (DRSA) and a reduction in the interest rate charged (we estimate approximately £5m pa will be saved assuming an interest rate of 3% for the new loan). In addition, it is hoped there will be no immediate debt repayments against the new £214m loan saving approximately £9m in cash in 2021.

In 2021 finance costs are estimated at £35m. This comprises:

  • the early repayment charges of £25m
  • £3m for writing off the residual deferred costs of raising the bonds in the first place
  • reduced interest bill of £7m

Cash position

In an analysis for the AST in February 2020, Simon Hill set out Arsenal’s cash position based on the published accounts to 31 May 2019 which showed that after the last summer transfer window Arsenal had residual cash reserves of about £69m.

Cash as at 31.5.19


Debt reserve (service)


Working capital


Net player payments due 2019-20


Tax and debt payments


One-off factors


Available Cash


Net spent – summer 2019


Residual Cash 1.9.19



*estimated initial cash outlay from a summer net spend of £92.7m (the initial payments that Arsenal had to make on their signings).

Rolling forward this analysis to the summer of 2020 is particularly complicated given the COVID-19 impact but we would highlight the following big changes to available cash for this transfer window

  • The club will have seen a considerable fall in cash flow due to the suspension of Executive box / Club Level renewals in March and April and Season Ticket renewals in May 2020. These “pre-payments” normally total close to £70m and provide working capital for the non-matchday months of June, July and some of August. The club has access to a £50m overdraft facility with Barclays to partly offset this loss of cashflow.
  • As of 31 May, 2020, we estimated Arsenal still owed a net £120m on player transfers. An estimate is that £40m of that is due to paid in summer 2020 and a further £30m in summer 2021. It is possible some clubs may delay or default on payments they owe to Arsenal.
  • Trading for the season 2020 should have generated approximately £50m in additional funds after allowing for the deferment in cash terms of the broadcast rebate until 2022.
  • The debt refinancing removes the need to maintain the debt service reserve (£36m)
  • Trading for the season 2021 is estimated to generate an accounting loss of £158m but we must remember amortisation and depreciation are non-cash costs (£125m) and it is assumed the early repayment premium payable on the debt refinancing (£25m) was funded by the KSE loan so it could be only marginally cash negative before allowing for the impact of player trading as it is unlikely much will be spent on capital expenditure or loan repayments to KSE.
  • The impact of player trading in cash terms for summer 2020 was assumed to generate net nil cash but we have to allow for the fact that it is unlikely all the proceeds received for the players sold and included as profits (£20m) will have been received now whilst a substantial portion of the cash spent on new players will have been paid out immediately (ie all of the Partey fee has been paid). The combined impact of these factors is likely to be at least £60m to £70m and possibly more.

So overall we can see that Arsenal will have used all of their available cash including taking advantage of both the debt refinancing and use of their overdraft facility. At this stage we do not know if any further support has been extended by KSE. Given that COVID-19 looks like extending well into 2021 it may well be that further support from the owner may be necessary to cover further falls in income and provide working capital beyond that provided by the £50m overdraft.

If reduced attendance remains a feature of the game for season 2021-22 further support will almost certainly be needed.

In summary

The AST estimates that COVID-19 is likely to take Arsenal from a situation where they would have reported a small profit of £4m for last season to one of recording a loss of £60m for 2019-20.

With Behind Closed Doors continuing for most of this season the club could face reporting losses of a further £158m in 2020-21.

KSE’s refinancing of the existing debt was an action the AST long advocated and improved the club’s short-term financial position.  We now await to see how this action was funded and the longer-term implications.

In our last update in August we called on Arsenal to invest to close the gap on the top four this season as the further widening of revenues between Champions League and Europa League will put the club at further disadvantage if a fifth season of Europa League compounds the COVID-19 impact. The club have clearly done this to the maximum of their capacity through buying Gabriel and Partey this window whilst shouldering a considerable burden from the salaries of unwanted highly paid players.

If future revenues do not see a marked improvement through the ending of the COVID-19 crisis and the return to Champions League football then we will face a situation where it is likely the owner will have to support the club financially. The great unknown is whether this is through increased debt and the cost of any such arrangement.

We will continue to ask Arsenal for more explanation of exactly how this financial position is being maintained, whether it was through loans, what the future exposure of the club is to repaying this debt including the interest charges. Our initial inquiries have met a firm no comment.

As things stand, we may have to wait for the publication of the 2020/21 financial accounts, which may not happen until February 2022.

November 2020

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