A look at Arsenal’s financial position from 2020/21 to 2022/23

The figures for the financial year to 31^st May 2021 are actual figures as reported in Arsenal’s report and accounts as posted at Companies House in February 2022.

The figures for the financial years to May 2022 and May 2023 are an estimate and forecast respectively based on our best guesses, past experience of Arsenal’s finances and the information that is in the public domain about transfers, TV deals and prize money paid.

The year to 31^st May 2023 is likely to be a more accurate projection given it’s similarity to the 2018/19 season which was the last year unimpacted by Covid and in which Arsenal also competed and reached the final in the Europa league.

*Cash generated toward player trading is a simplified description of the amount we see the club generating for expenditure on players. The lower amounts recorded in 2021 and 2022 demonstrate the need for the refinancing that took place and likely further borrowing from KSE 

Matchday

There were almost no ticket sales in 20/21 season due to Covid and 21/22 was severely impacted by the absence of European football. 22/23 should see a return to 18/19 levels of matchday revenue plus 4% ticket price increases.  It may do even better than forecast as we understand all premium seating is a sell out this season which it certainly wasn’t in 2019.

Broadcast

21/22 is based on published EPL revenues and shows a considerable fall due to Arsenal not playing in European competition. 22/23 is based on our best estimate of an EPL uplift from a new USA TV rights deal and a return to European football with the club progressing into the knockout phases of the Europa League.

Commercial

Commercial income is more difficult to assess as contracts are increasingly performance based and there were probably further penalties / income foregone for not being in Europe at all last season.  Countering that should be the rumoured £10m the club received for the Amazon Prime TV series which though aired this season was recorded last year so can rightfully be claimed in 21/22 revenues.  There should also have been £5m-10m from the Socios arrangements in both 21/22 and 22/23 (we have included at £7m per year). 

The Rwanda and Adidas deals have been renewed at existing levels on longer terms extending beyond the 23/24 season and we expect 22/23 commercial incomes to at least match 19/20.

Other revenues

There will doubtless have been loan fees received and some income from the property portfolio but given the margin of error inevitable in our guesstimates we have ignored these as immaterial to the overall picture.

Wages

20/21 included £7m of exceptional costs arising from redundancies linked to Covid.  We hope a small reduction was achieved in 21/22 following the cancellation of Ozil’s contract but normally we find wages exceed our expectations when the accounts are published. For 22/23 it similarly may not seem unreasonable to hope for a further slight reduction in wages following the cancellation of Aubamayang’s and expiry of Lacazette’s contracts.  However, there has been considerable re- investment in new signings in summer 2022 (Jesus, Viera, Zinchenko, Turner, Marquinhos and Nketiah renewal) and there must have been plenty of settlements paid out to cancel the many contracts Arsenal ended over the period 2021-2022 (Ozil, Sokratis, Mustafi, Aubamayang etc) so don’t be surprised if wages come out on the higher side of our estimate.

Amortisation

This is the write down of the value of the playing pool including agents fees on new contracts for existing players and add-ons triggered by appearances etc. Arsenal added aggressively to the pool in 20/21 (£115m), went further still in 21/22 (probably £150m+ in gross terms) and have likely added £130-140m in 22/23. 

However, a significant number of high cost players left the club in 2022 (eg. Aubamayang, Lacazette, Torreira etc) and their departures will reduce the cost of the playing pool. On balance, we think the amortisation charge will be at least £120m in 2022 and 2023 (£117m in 2021).

Other football costs

These include hosting costs, travel, retail costs of sale, costs related to sponsorship agreements, medical costs and all the usual types of overhead present in any substantial organisation. They have also been the proverbial curates egg as far as knowing what is in them, what moves them and why they have changed season by season.  They fell by a staggering £32m in 20/21 to £47m when no games were played having already fallen £7m from the last normal season in 18/19 when they were £86m.  Logic says they will return to that level plus some inflation in 22/23 (especially for energy costs) but a crystal ball is needed to know what they were in 21/22.  We are therefore taking a chunk off the “normal” level for the reduction in home fixtures and absence of European travel but they may well have come in lower than the £80m forecast for above.

Finance costs

20/21 included £32m in one off costs to pay for the stadium debt refinancing by KSE.  Indebtedness to KSE stood at £202m at May 2021 and we allow for a modest amount of interest for that loan in 21/22 and a bit more in 22/23. 

Obviously recent developments in interest rates could have an impact on these charges unless they were fixed and we consider it likely that in lieu of the low operating cash flow in 21/22, KSE advanced further funds to cover transfers last season (possibly a further £50m). 

Money owed to other clubs is still a significant ‘source of funds’ for Arsenal with future payments for players now estimated to be a net £150m (£190m including add-ons to the selling clubs when certain criteria are met). Paying in instalments for players is common practice and clubs in receipt of an IOU from Arsenal can easily turn this into real cash via the many ‘football finance institutions’ active in the market. This £150m is due for payment in chunks over the next 1-4 years.

In 22/23, we think the club can just about meet its commitments on player payments from forecast trading (cash flow) and should not need further financial support (loans) from KSE.  The publication of 2022’s accounts in February 2023 will reveal much we hope in this regard including the rate of interest being paid on the loans that Arsenal has to KSE.

Overall picture

We believe the club has finally got a grip on its playing costs. The wage bill now equates more to a  Europa League cost base so securing Champions League football in 23/24 should ensure more cashflow to invest in the squad. The wage bill is however over £100m per season LESS than the Man City squad costs and we should be prepared for sizeable bonuses to paid to the current players should they qualify for this competition.

The return to form of the team sees ticket sales strong and the renewal of commercial contracts on similar terms is a positive step as the country enters a lasting recession.

With the young age profile of the squad and the stability now found in the finances there is a good foundation for Arsenal to build on in the next few years.

November 2022