Between Arsenal releasing their half annual financial accounting, Wenger giving his presser a day early, and me needing to be in to work early it’s been a pretty crazy morning so far.
The Arsenal profit/debt report is deserving of its own column but I frankly just don’t have the time this morning to read through the entire report and find the aporia. Instead, I’ll just say that my initial reaction is one of surprise. The board are claiming that not only did they turn a profit of £35m on all projects but that sales of the Highbury Square development are going so well that total debt on that project is just down to £13m.
Moreover, the club’s debt at this time last year was a whopping £332m and that has been reduced in just six months to £203m with Gazidis trumpeting the fact that as of today that figure is “well below £190m.” With football now delivering nearly £50m in profit a year and with Highbury delivering nearly £10m a year Arsenal look to be in the greatest financial shape of their entire history. Oh, and that doesn’t even touch on what’s happening at Queensland road where they have already sold the affordable housing to a local trust.
All of this profit is a huge bone of contention among supporters with many asking why that money isn’t being invested in big name players on the pitch and Ivan Gazidis’ answer won’t help soothe those malcontents: we’ve the youngest squad in the Premier League and Arsenal signed 17 players to extended contracts this year.
I’m even starting to wonder what the hell is going on with all the money that this club is generating and until I have a look at the whole report I can’t make a really informed comment there. What I will say is that while the Arsenalization of the Emirates stadium is nice, most supporters who are paying $160 a seat to watch Arsenal in the Champions League would rather that we put money into “Arsenalizing” the squad. I see this Summer transfer window as a real opportunity for Arsenal to make good with their fans and purchase a big name player. Judging from the comments here and elsewhere if they fail to do that and keep reporting record profits they could have a serious fan revolt on their hands.
Gazidis tries to address this and you can check out his remarks on the report in the embedded video below.
Meanwhile, tomorrow marks the return to football where we can all put down the balance sheet for a moment and pick up a ball, and a towel, as Arsenal travel to Stoke for a rugby match played without hands and with a roundy ball.
Wenger is saying that every match Arsenal play for the rest of the season is “like a cup match” to which I reply; well we better not play them like we played them in the cup! You’ll remember that match, that’s where they beat us 20 to 8 in the fouls given category.
We can’t expect any relief from the match official in the fouls department because Peter Walton is in charge. You might remember him from the Everton match, where he allowed Phil Neville to hack down Denilson in the box and gave Fellaini free reign to kick everyone off the pitch. We have broken our Premier League penalty “curse” last week and maybe now that the FA lockdown on Arsenal penalties has been lifted the floodgates will be opened.
We all know what Stoke is going to do tomorrow and thankfully Arsenal have Sol Campbell and Thomas Vermaelen available for a little bit of heading practice. Let’s just hope that the really decent version of Manuel Almunia shows up and is able to punch away some of their direct throws. Which reminds me, is it legal to throw the ball directly into the goal?
As you already know, Gallas, Diaby, and Arshavin are all out for tomorrow and Eduardo’s fitness is going to be assessed today. I’d rather Arsene didn’t start Eduardo irregardless his match fitness. Let’s hold him in reserve in case we need a late, poached goal.
On the other side, Higginbotham and Etherington are out for Stoke which just means that we’ll probably see them bring in some absolute animal like Salif Diao to kick, I mean “mark” Cesc in the midfield. Make no mistake, that’s what we’re looking at tomorrow; the whole team will take turns kicking Cesc Fabregas. It’d be nice if Sol Campbell or someone would take a yellow for the team and just take one of their players out for once. Hey, I know, how about Rory Delap? Not that I’m advocating any form of violence against any of their players that they wouldn’t advocate for ours.
Right, the match is live here in the States on Fox Soccer Channel and it’s the late match. Since Chelsea will be hosting Team Bridge tomorrow we should know where we stand in the table by the time we kickoff at 9:30am PST. I have to say that the early match there (on ESPN2 here) could very well be a real cracker since Wayne Bridge is playing and it seems he hasn’t forgiven John Terry his cuckoldry quite yet. I’ll be tuning in to that for sure.
Meanwhile, over here I’m going to try to do the liveblog but I’ll be honest and say that it’ll mostly be you all just chatting since I get to be Mr. Mom tomorrow and watch the 2 year old all by myself.
That’s it for today from me, see you all tomorrow!
I can’t think of many people that are really, really happy that football, or any other sport for that matter, became a business years and years ago. And by the negative comments lamenting Arsenal’s growing pile of cash, you’d think that Arsenal started it all. No, Arsenal FC adapted to the times. The myopia of those saying that moving to the Emirates has paid no dividends, etc. is quite astounding. This club continues to set itself up for the long-run and by long-run I mean the rest of the lives of everyone here on this blog. What’s funny is that this criticism continues amidst the biggest period of financial turmoil any of us has seen in our lives to date. Not just in the world economy, but in football with Pompey going into administration and Utd and Liverpool bleeding money, wishing they could build a new stadium. I’m disappointed in not pulling the trigger more in the transfer markets, but I do believe it has more to do with Wenger than the board saying, no, Arsene, you can’t have any of this.
Takeaway – Football’s a business, sorry. And for Arsenal’s ownership adapting and trying to ensure that the current lot of supporters will have one of the best clubs to cheer on the rest of their lives, they are criticized. Rings hollow and false to me. Now, if they sell out to Kroenke and allow for a truckload of debt to be thrust on the club, all bets are off. I say, revolt. Until then, be thankful for the club’s management, be supportive of this current club, and if we come up well short this season, let’s hope Wenger gets a little more aggressive in transfers. Because there is no question the money is there.
oh how i would love to see wayne bridge put a zidanesque head butt right on terry’s nose and breaking it in two. one can only hope!
as for our finances – in all honesty, i wish the club would have held back the news of all our glorious profits till after the season. i mean, it’s great that our club is in good financial health but you have to admit it’s a bit of a slap in the face to all the fans who wanted arsenal to strengthen during the winter. i think most fans have been patient with the club and our lack of transfer activities and i would like to see the club repay some of that over the summer – not just to appease the fans but also because they do realize that team needs a little more quality is some very specific areas. however the season’s not over yet, and since there is still some hope i dont want to put too much negative spin on a positive story. UP THE ARSE!
well that’s the kicker innit? you make the club debt free for big stan to take over a club free of any debt and then pile on additional debt and making this whole exercise a futile PR scheme. the le grove blog is ripe today with such theories – and you have to say its not without total merit.
February 26th, 2010 at 6:55 am
All paranoid delusions have a kernel of truth to them but fall apart on inspection and that site which claims to “let you have an opinion” is the most one-sided, paranoid, delusional, devoid of facts Arsenal opinion web site on the net.
Just look at the title of the article. That’s not “letting you have an opinion” that’s cramming an opinion down the gullible gullets of their moaning fans. Not only that but all their “facts” and “questions” that they list are publicly available in the reports, if they bothered to read them.
They also delete any posts that they disagree with.
And finally, I believe that they are Xenophobic against Americans, with some of their clan calling for Usmanov to buy the club because of his associations with Dein.
It’s actually pretty funny to read
February 26th, 2010 at 8:00 am
oh there is certainly a high degree of paranoia and xenophobia in that site – no doubt about it. however the scenario of kroenke taking over doesn’t seem far fetched given his steady purchase of arsenal shares over the past few months.. and if that’s the case, then it’s certainly possible that there will be additional debt burdened by the club. question is how much and to what extent? if the debt is managable then the take over might be a good thing. i am inclined to believe that the reason why we are so hell bent in clearing off a long term debt in the short term is because of just that. these guys took a look at how the debt at united has spiralled out of control after the glazers’ take over and are positioning arsenal so that the take over by kroenke does not put the club in harm’s way.
February 26th, 2010 at 8:16 am
Won’t UEFA’s new rules re: club debt prevent that from happening?
February 26th, 2010 at 9:00 am
are there specific guidelines now as to how much debt the clubs can carry? i dont know but i would guess no. if they came up with a hard number for e.g. a certain % of the club’s assets, and immediately banned clubs man u, pool and madrid – can you imagine how much uefa would stand to lose? it will be tricky fo them to implement this rule but at the same time it must be done. there’s gotta be a good balance there somewhere…
February 26th, 2010 at 7:41 am
If the debt is removed it fees up free cash flow which would otherwise go towards debt servicing for other uses. This would inflate the share price. Making it more expensive for a buyer to purchase the club. Quite how this in any way helps or prepares the club for sale is frankly beyond me. Still;, some people don’t let a look at the facts get in the way of their biased, tendentious agendas….
February 26th, 2010 at 8:16 am
I spent a good deal of my morning trying to explain that very notion. The fact that I’m American immediately closed everyone on that site off to the possibility that I may know what I’m talking about. Not sure why I feel compelled to do so, but I feel that we have to defend the club sometimes when the facts are just clearly mis-stated as they are when someone says that hoarding cash or paying off debt sets the table up nicely for Stanny boy. It’s just not true. Now if it is discovered that the board has been paying off debt and maximizing profit by refraining from buying the best players and paying their higher salaries for the SOLE purpose of maximizing equity in a leveraged takeout, then yes, people should be angry. In the meantime, I hope that the board will strike the right balance between rightsizing the capital structure and being aggressive enough in the transfer window to contend for the title. People are arguing that they’re not doing enough and you can make a rational case for that. But when they start talking about conspiracies to set up the table for a buyer like Kroenke, it just cannot be the case. Why is Kroenke buying shares then? Hopefully not as a precursor to a leveraged buyout. Once Arsenal is debt free 10 years from now, the club could easily be both an aggressively buying club and a club that spits off nice dividends to the equity owners. This scenario is what we have to hope for.
That site is nuts. I remember them calling for wenger to be sacked not so long ago. They are the type of supporter who have the opinion “its our club and you cannot join” supporter I cant stand.
Personally, I feel that the point that ArseChicago touched on about the business of sports, is a big one.
I for one am frustrated with the degree to which sports businesses flirt with the limits of demand. Ticket prices raised just to the point where demand will not break. This pushes aside the little guy or at worst helps him on his way to bankruptcy as he does all he can to support his beloved club.
Couple that with the unprofessional and arrogant behaviour of the players (Adebayor for one) who benefit financially from all of this. It really leaves a bad taste in the mouth.
@nycgunner, Sport has been a business for a long, long time. As soon as people stopped playing for free (i.e. an amateur) and started doing it for a living (i.e. a profession) then money was going to be an issue. I hate it, but we’re talking about 50-60 years of the professional game…it is what it is.
Arsenal are simply trying to work out a different course to that of finding ‘outside investment’. “well under 190 million in debt” is STILL in debt, and I won’t expect 30-40 million being blown on any players until the debt-o-meter reads ZERO.
February 26th, 2010 at 9:05 am
well if all clubs are businesses (which I sadly agree with you), then i think you will recognize that most businesses carry some form of debt or the other. to that extent, i dont see how the debt-o-meter can ever completely say 0. i think gazidis makes a good point about debt quality. if you have low interest payments that spans out over a long time and have good cash flows, then i dont see why we cant spend good money for a good player if we want.
February 26th, 2010 at 10:31 am
Agreed. God knows we all go out and spend and live, even whilst saddled with our mortgages. Though mine’s below water at the moment and I definitely have curtailed spending in light of it. Arsenal’s non-mortgage debt should be to zero a year from now with plenty of cash to boot. No reason this offseason shouldn’t see a few 15MM pound additions to the club.
“irregardless his match fitness” meaning “without no regard for his match fitness” meaning “with regard for his match fitness” which is not what you meant to say which I believe was “regardless of his match fitness”.
Keep trying, Tim. Keep trying.
I don’t think that any of us are reading this right. any business worth it’s salt will have long term plans, spanning out over 5, 10, 15 years. Arsenal have taken the prudent view all the way down the line, minimum risk for maximum sustainable return. Why? Because Aresenal will become the biggest and best club in the world. That is a realisable ambition.
Why? Because theirs is a carefully worked out plan, with all the components fitted together. Why settle for being the same as MancsUntied, Unreal Madrid, Barca, when you can be better than?
How much more development can take place at the Grove? Ok it hold around 60k now, but what if it held 80k, how many seats would be empty at any price if it was to watch the best in the world?
Buying big names is short-termism, that is not what we are about. Why is Wenger buying-up, and collecting so many youngsters? Because in 3 to 4 years time he will have the cream of the world up-and-coming players, all denied to other clubs, all in the Arsenal fold.
The plan is so much bigger than we imagine!!!
Viva!
February 26th, 2010 at 10:49 am
@viva los gooners, Viva! Go to the head of the class… Apparently The Grove was designed as a 80k seater, but had to be scaled back due to some planning permission issue…it is expandable though, so may be redeveloped in the future….
Here’s what I said on the subject: http://www.7amkickoff.com/2010/thoughts-on-why-arsenal-chose-the-youth-experiment-by-guest-columnist-grimbo/
February 26th, 2010 at 11:51 am
Thanks for the link. EXACTLY!!!
60k, 70k, 80k, more? I’m sure is part of the plan. Little by little, capacity will increase, and planiing problems will be circumvented.
With debt paid off, the scenario is awesome. There is also a two edged sword at work, or one with a very long cutting edge. In the current period and forseeable future, Arsenal will continue to grow, whilst other leading clubs will have to retract.
A business model that sustains and grows an enterprise financed from cashflow is a thing of beauty and strength. If I was in charge of any other club, I would be very apprehensive of what is taking place at the Grove.
This is a plan for world domination!
Viva!
Why is there such a huge problem with us using the money we make (from all aspects of the business, including the fans willing to pay the prices!) to pay down our own debt??? Debt is a bad thing, always, always, always. Debt means you are using someone else’s money to run your affairs, and you will always pay a higher price to repay the money. So, in theory, you’re losing money with debt. You’re making money for your business, yes, but ultimately the profits you make in your business go to line the pockets of the bank through interest.
I strive to be debt free. The only debt I have is my mortgage. I love it. It is glorious. If someone became upset at ME because I didn’t want to go and get a credit card and run up thousands of dollars in debt to bring THEM enjoyment, that would be ludicrous! RIDICULOUS!! That is essentially what the fans are saying, that because I pay for a ticket to watch a match, you should use the money that I just paid to you on things that you cannot afford! And if you don’t use that money that I just paid for that ticket to purchase things that you cannot afford, I am going to be extremely upset because I chose to give you money and you are not in turn acting irresponsibly to benefit me!
I just can’t believe people who can’t realize that once we are debt free, our profits can and will be used to do glorious things for Arsenal Football Club. Instead of 20 million in profits, it will be more like 80 million in profits. Doesn’t that sound nice?
February 26th, 2010 at 10:49 am
@kevin, Amen…
February 26th, 2010 at 1:22 pm
@kevin, I agree 100%. Well said.
February 26th, 2010 at 2:29 pm
@kevin, yep
So I’m currently reading the full report over lunch here and had to pause to do some math. Currently there is 13MM pounds of Highbury Square-related debt outstanding and there are 130 apartments to be sold. From what I can find online, the apartments start at 250,000 pounds. For illustrative purposes, let’s assume each remaining one sells for 250,000 pounds. That gets you to 32.5MM pounds. Take 13MM of that to pay down the debt and right there the remaining activity could spit out at least 20MM pounds for the club to do with as it pleases. Here’s hoping they sell the rest and take that profit to splash on someone to man the striker spot next to Van Persie for the next 5 years or someone to be Vermy’s partner for the next 5.
February 26th, 2010 at 11:02 am
This doesn’t even take into consideration 3 other property developments the club has to ultimately sell. Apparently there is ZERO debt affixed to these 3 property projects and so any cash coming in from those sales over the next few years will flow to the club. Ka-ching.
All of this talk that we are not spending a lot of money on players because of the debt is fine, but there is just one little flaw in it: It has always been like that. Of course, I can only speculate about this, since I have no idea when the plan for the building of a new stadium was made, and if Henry, Toure, Silva and Pires were bought because there was a project in plan, and they fit the bill and have the talent, but Wenger almost NEVER bought an expensive player. So, we can console ourselves that this debt is the reason for us buying unknown Tasmanistanian 16year olds at the moment, and as soon as the debt is paid off, we will buy the Villas of the world, but I think we need a wake up call and stop overanalyzing how much does Arsenal owe, are the flats selling well, is the dividend for the board too high, etc. I believe that this is just the way Wenger works, and we should not fool ourselves that this will change as long as he is around. In no way am I saying that he should be sacked, god forbid, I just think that this debt thing has nothing to do with the man’s agenda.
February 26th, 2010 at 11:35 am
i do think there is some truth to this. although i also think that even by arsene’s standards he has been frugal of late – so if there is minimal debt to worry about then he may be willing to reach a little deepeer.
February 26th, 2010 at 1:04 pm
@Teampossible, the Stadium, debt, youth academy and our approach to the transfer market cannot be separated, they are all factors in the same equation. You are oversimplifying the issue…
Lets say we buy David Villa for 40 million quid. He’s also then paid in accordance to his cost 120k a week… he’d completely break the wage structure we have in place. Cesc, RVP, Arshavin and everyone else then gets their ‘Mr 20%’ to turn up at the club and ask for more cash, this then effects the dressing room and consequently what happens on the pitch.
These are HUMAN BEINGS, and react to things emotionally. It’s not just about cash and buying this guy or that bloke.
The only way to ensure you don’t get a bad apple, is to pick it from the tree…
February 26th, 2010 at 4:24 pm
@Grimbo,I am not saying we should we buying Villa, I apologize if my thoughts came in a little too black&white. In fact, I have no problem with our current policy of creating instead of purchasing, but only when it comes to cases of players like Vermaelen, or maybe Chamakh, which is the type of player not far from the finished article. I sincerely have a problem with my patience when it comes to signing another 8year old great prospect, who may or not be a fantastic player in 30 years time, when it is clear that we are only two or three players shy from being one of the top five teams in the world. What I am saying is that maybe we should stop competing who is the biggest expert on our debt issue, and what consequences it payment may bring to our club, since all the signs point to Wenger not buying a 30 million player, even if he has the cheddar for it. That was all:)
The one other interesting tidbit surrounds players wages. According to the semi-annual report, player wages went up 8.6MM pounds for this 6 month period versus the same period one year ago. Clearly this is the impact of the myriad long-term contracts signed with the youngsters. So for a year, player wages will have gone up more than 17MM pounds. Grimbo, I think you’ve pointed out that this is the other part of the equation that many folks forget when considering transfer economics. Nevertheless, even with that wage inflation, the club’s football operations (excluding property) raked in 100MM pounds in revenue and 25MM pounds in profit before taxes. Roughly annualize that and again, with all the investment in our youth, the club still is at a run-rate of 50MM in operating profit. The annual interest and principal burden on the Emirates is between 15 and 20MM by my calcs, so we’re sitting with a nice chunk left over as cushion.
Now as for these 17 players that the club has locked in to longer-term deals, I would be surprised if one or more are not sold over the next few years. But let’s assume any salary savings from player sales are negated by now having their salaries go to players currently on loan to other teams (we’ll have to pay them when they’re back from loan spell). So here’s where we are sitting at the moment:
-80MM+ pounds of unrestricted cash
-13MM pounds of Highbury debt, to be more than offset by the ultimate sale of 131 remaining units (32.5MM pounds raised if each sold for 250,000 pounds)
-3 properties with no debt attached to them to be sold
-50MM of annualized operating profit (pro forma for the inflated salary structure)
-Most if not all the remaining debt related to the Emirates mortgage
The story hasn’t changed much from 6 months ago. The club’s in terrific financial position and management should be commended for that. Wenger should have the means to add the final 2-3 pieces this offseason without adding 1 pound of debt and without materially diminishing the incredible profitability of the football operations. It won’t just be the supporters this offseason calling for the later action. It’ll be Fabregas and Robin and Arshavin among others…..
Let’s get a W at Stoke tomorrow, yeah? C’mon you GUNNERS!