By Merlion
October 15 2015

I will attempt to summarise all the Financial Reports from 1997 to 2014 into simple tables to demonstrate how much we owe to Arsene Wenger who gives us a £390-million 60,000-seater Emirates Stadium and yet able to qualify for the Champions League for 18 successive seasons (or we could owe the fans who have been bled dry. Ed)

Arsene Wenger was well ahead of his time in “self-sustainable development” as his astute “player trading” business help substantially to tidy Arsenal over during the financially challenging Emirates Stadium construction period. None better illustrated that our player sales to FC Barcelona alone which may have contributed as much as one-third of £390-million 60,000-seater Emirates Stadium construction costs.

 Data is available from www.arsenal.com, but only for 2004/05 to 2013/14 Arsenal Holdings Annual Report. Data for Table 1 from FY1997 to FY2004 are obtained from http://abehnisch.com/arsenal-profit-since-1996/. Other data were also obtained from Deloitte Money League.

 Table 1 below shows during Arsene Wenger Era from FY1997 to FY2014, Arsenal Holdings had accumulative pre-tax profit amount to £297-million, a remarkable 9.6% on turnover and yet managed to control cost by keeping “Wage Bill” to less than 50% of turnover. Of course, those pre-tax profits include property development.

[b]Table 1: Arsenal Holdings Financial Report – FOOTBALL Group Turnover in £000’s

Arsene Wenger Era – 1996/97 to Present [/b]

… … … … … Turnover … ... Pre-Tax Profit … ... … Wage Bill

… … … … … … … …. … … … … .... % of ….. … … … … … ….. % of

[u]… … … … … £'000 … ... ..... £'000 … Turnover … ... £'000 ... ….. Turnover [/u]

FY1997: …… 27,158 … ….. 1,221 … ….. 4.5% … … 15,279 … … 56.3%

FY2006: ….. 138,244 … … 15,885 … … 11.5% … … 82,965 … … 60.0%

FY2007: ….. 201,987 … ….. 5,573 … ….. 2.8% … … 89,703 ……. 44.4%

FY2012: ….. 245,478 … … 36,588 … … 14.9% … .. 143,448 … … 58.4%

FY2013: ….. 282,774 … ….. 6,654 … ….. 2.4% … .. 154,490 … … 54.6%

FY2014: ….. 304,267 … ….. 4,668 … ….. 1.5% … .. 166,403 … … 54.7%

FY2015:________________________________________________________

TOTAL: …. 3,100,887 … 297,277 … … 9.6% … … 1,471,024 … … 47.4% … (FY1997 to FY2014)

The FY1997 turnover is £27-million and by FY2006, it increases by 500% to £138-million with increase commercial and broadcasting business plus property sales. The successes of the French Spine do contributed to this rapid growth in turnover.

Property development (Highbury Square) contributed substantially to turnover with £316-million in FY2009, and £382-million in FY2010. It was a “one off” never to repeat again.

The 2006/07 move to Emirates Stadium drove the turnover to above £200-million mainly due to the annual £90-million matchday revenues then. Turnover remained flat at around £250-million from FY2007 to FY2012 due to lack of successes on the pitch with broadcasting and commercial businesses not growing at all.

The revenue in retail business grew to £12.1 million (2006 - £10.2 million) boosted by the two new stores on the Emirates Stadium site – The Armoury and All Arsenal – and by increased match attendances. Four years later, retail business seems to peak at £18 million.

In FY2006/07, the Group’s most important commercial contracts are: naming rights and shirt sponsorship contracts with Emirates Airline which expire in 2021 and 2014 respectively, a kit sponsorship contract with Nike which expires in 2011 and a catering contract with Delaware North which expires in 2026. The naming rights deal with Emirates Airline is worth £42 million over the contract term, or a laughable amount of £2.625 million per annum over the 16-seasons contract term. This is one of the primary reasons why even with the Emirates Stadium naming rights and shirt sponsorship, the turnover remained flat during this period.

From FY2013 onward, the turnover jumps from an average £250-million to over £300-million in FY2014. This was mainly due to the new lucrative 3-Year Skysport TV Rights Deal, plus increase in commercial business due to summer tours. When the new Skysport TV Rights Deal start in FY2017, the turnover will easily exceeds £350-million.

The financial contributions during “Arsene Wenger Era” is broadly divided into two parts:

• Part 1 - French Football Golden Decade 1990s
• Part 2 – The Era of Sugar Daddy – June 2003 and September 2008

[b]Part 1 - French Football Golden Decade 1990s[/b]

Table 2 is a simple compilation from http://www.transfermarkt.co.uk/jumplist/startseite/verein/11 from 1996/97 to 1999/2000 since financial reports were not available from Arsenal Holdings plc. Arsene Wenger was clearly ahead of his peers and snap-up all those world-class French players at a bargain. It was never to repeat again, none better epitomised by ManU paying £36-million (which may rises to £47-million eventually) for Antony Martial.

“Player Trading” is paid via amortisation. E.g. if a player purchase price is £30-million and he signed a 5-Year Contract, his cost is write-off 30/5 as £6-million per Financial Year for the duration of his Contract.

Arsene Wenger spent £85-million and incurred a loss of (£20-million) from 1996/97 to 1999/00 to buy those French players and others that formed the French Spine who won us three titles.

[b]Table 2: 1996/97 to 1999/00 PLAYER TRADING Turnover in £000’s [/b]

[u] … … ... Player Purchase … Player Sale … Pre-Tax Profit [/u]

FY1997: …… 16,750 … … ..... 6,200 … ….. … -10,550

FY1998: …… . 2,100 … … ..... 2,070 … … … … ... -30

FY1999: …… 20,950 … … ... 23,500 … ….. …... 2,550

FY2000: …… 45,500 … … ... 33,480 … ..... … -12,020

FY2001:________________________________________________________

TOTAL: … … 85,300 … … ... 65,250 … ….. … -20,050

Table 3 is a compilation from Arsenal Holdings Financial Reports during those Emirates Stadium construction “lean years” and paying off those players purchased during French Spine Era:

[b]Table 3: 2000/01 to 2004/05 PLAYER TRADING Turnover in £000’s [/b]

[u] … … ... Player Registration … Player Sale … Pre-Tax Profit [/u]

FY2001: …… -15,145 … … ..... 25,121 … ….. …... 9,976

FY2002: …… -17,681 … … ....... 2,873 … ….. … -14,808

FY2003: …… -18,774 … … ....... 1,370 … ..... … -17,404

FY2004: …… -19,637 … … ....... 2,282 … ..... … -17,355

FY2005: …… -14,993 … … ....... 2,894 … ..... … -12,099

FY2006:________________________________________________________

TOTAL: … … -86,230 … … ..... 34,540 … ….. … -51,690

From 2002/03 onwards, transfer funds were limited and Arsene Wenger was under severe budgetary constraints due to the Emirates Stadium development. Arsene Wenger must sell before he can buy.

Arsene Wenger still incurred a deficit of (£52-million) from 2000/01 to 2004/05, still paying off those French players and others that formed the French Spine which won us three titles. Increasingly, he turned to his Youth Project and sniffed out bargains like Gilberto, Reyes and Lehmann to rebuild Arsenal with Thierry Henry as the FULCRUM. He got lucky with Fabregas, Clichy and Van Persie which formed the backbone of his 2^nd Arsenal Team. These are the bargains during 2003 to 2005 when limited funds were made available to buy players.

2002/03: Pascal Cygan, Gilberto Silva. Rami Shaaban, Guillaume Warmuz

2003/04: Lehmann, Jose Reyes, Cesc Fàbregas, Robin van Persie, Clichy, Senderos, Djourou,

2004/05: Manuel Almunia, Mathieu Flamini, Emmanuel Eboué

From 2005/06 to 2013/14, Arsene Wenger was still under financial constraints imposed by the Board; that is, he must sell before he can purchase new players. During this period, Arsene Wenger spent £245-million (Player Registration) and balanced the “Budget” by selling £251-million worth of players.

From 2011/12 onwards, “funds were made available” but the proviso was again, Arsene Wenger must sell before he can buy. Wenger was able to sign Mesut Ozil for £42.5-milion in August 2013 and Alexis Sanchez for £30-milion the next season with the accumulated £26-million “Player Trading” pre-tax profit from 2011/12 plus funds from “Player Sales”.

[b]Table 4: Arsenal Holdings Financial Report – FOOTBALL Group Turnover in £000’s

… … … … … Turnover … ... Pre-Tax Profit … ... … Wage Bill

… … … … … … … …. … … … … ... % of ….. … … … … … ….. % of

[u]… … … … … £'000 … ... ... £'000 … Turnover … ... £'000 ... ….. Turnover [/u]

FY2012: ….. 245,478 … … 36,588 … … 14.9% … .. 143,448 … … 58.4%

FY2013: ….. 282,774 … ….. 6,654 … ….. 2.4% … .. 154,490 … … 54.6%

FY2014: ….. 304,267 … ….. 4,668 … ….. 1.5% … .. 166,403 … … 54.7%

Table 4 (extracted from Table 1 for easy reference) demonstrated clearly that Arsene Wenger was able to sign marquee players from growing turnovers which generated more funds and cash flows. The Board released more funds for Arsene Wenger to sign marquee players like Mesut Ozil and Alexis Sanchez. Again, the Board demanded that Arsene Wenger must balance his Budget.

Even though Fabregas is available at £30-million and keen to return to Arsenal FC, the Board will not allow Arsene Wenger to bust the Budget and drive FY2014 into the red. For example:

Amortisation on Fabregas Transfer based on £30-million and 5-Year Contract paying say £160,000 pw salary:

• From FY2013/14 to 2017/18 – Player registration expenses = £30-million / 5 = £6-million per annum;
• Fabregas’ salary per annum = £160,000 x 52 weeks = £160,000 = £8.32-million
• Total Fabregas’ cost = 6 + 8.32 = £14.32-million per annum

The slim pre-tax profit for FY2014 will become (4.668 – 14.32) = £9.652-million pre-tax loss!

In August 2015, the only way Arsene Wenger can buy two out of say, this group of Benzema, Draxler, Reus, Schneiderlin, Vidal, et al may be only in August 2016 when the new £5.1-billion Skysport Broadcasting Contract kicks in. Arsene Wenger will then has at least a £100-million Transfer Budget (if the Board allows) to buy two marquee players from unused funds in 2015 and new funds in 2016. It will also need the personality and marquee standing of Arsene Wenger to persuade and convince marquee players to sign for Arsenal FC.

Do we really have the cash flows to buy two marquee players in August 2015?

Table 5 below gives inkling and I can only speculate why the Board refuses to dip into the Cash Reserve to provide Arsene Wenger with a £100-million Transfer Budget in August 2015.

An extract from FY2005/06 Report:

a) Refinancing of debt

“On 25 July 2006 the Group successfully completed a bond issue the proceeds of which have been used to refinance the project finance bank loans (£254.3 million outstanding at 31 May 2006) which the Group had used to fund the development of Emirates Stadium … … with a term of 25 years …”

“£206-million Debt” due after more than one year (bonds) is the remaining Emirates Stadium bond for up to 2031, and other debt, which we are currently redeeming at about £6.7-million per annum.

Total investment in Emirates Stadium and the associated infrastructure amounts to some £430 million.

And Silent Stan owes Arsene Wenger a vote of thanks for managing “Player Trading” and “salary Bill” within Budget so successfully that in less than 10 years, the FY2006 Net Debt was reduced from £262-million to £32-million by FY2014. With the cash hoard continues to accumulate in the bank, Arsenal Holdings plc. should be debt-free by FY2015 or latest by FY2016.

[b]Table 5: Arsenal Holdings Financial Report – Analysis of changes in net debt in £000’s [/b]   

… … … … Increase … Cash … … Short Term … Gross ….. Debt Due … Debt Due ... Debenture … Net Debt

[u]… … … … in Cash ….. in Bank … Deposit … ... Cash Flow … < 1 year ….. > 1 year … … … … … … … … …[/u]

FY2006 … (36,031) …… 35,598 … ... ... 0 … … 35,598 … ….. (22,816) … (249,761) … (25,165) … (262,144)

FY2014 ….. 14,640 …… 80,555 .... 127,323 … 207,878 … … … (6,704) … (205,921) … (27,830) ….. (32,577)

FY2015:__________________________________________________________________________________

Negative cash flow is indicated in ( ).

During Arsene Wenger Era from 1996/97 till 2013/14, Arsenal Holdings had accumulative pre-tax profit amount to £297-million, which forms the bulk of that £207-million Cash Reserve. This means Silent Stan is keeping all profits generated and will not spend on player purchases like what Abramovich, Abu Dhabi, Glazer Family and even John Henry are doing to continue building the team to generate successes on the pitch, which will generate more revenues – The Virtuous Cycle. Abramovich and Glazer Family proved the Virtuous Cycle works as both Chelski and ManU generated greater turnover and are self-sustaining profitable business corporation now.

My speculation as to why Silent Stan keeps on retaining all these cash flows every year is:

• This is the payback and dividends to redeem his £450-million investment into Arsenal Holdings plc.
• Self-defence mechanism against hostile takeover against the right of bond holders from demanding full redemption of £254.3 million Emirates Stadium Bonds by giving Arsenal Holdings plc, say 90 days’ notice in the Bond Agreement?
• A Reserve against missing out on CL Cup cash distribution from UEFA, including decline in advertisement and sponsors’ revenues tie to appearances in CL Cup and successes on the pitch, which can easily account for £50 million loss in revenues per annum.
• A healthy cash reserve will enhance Arsenal Holdings plc sales price should Silent Stan wishes to cash out.

In summary, Arsene Wenger will continue with his Youth Policy, knowing that the Board will limit his transfer budget. Moreover, he knew he will be out-bidden all the times by Sugar Daddy teams who are willing to pay what it takes to get the players they want.

Or is it Arsene Wenger who is not spending? Guess the truth will only come out after Arsene Wenger Autobiography is published.

More on this in Part 2 Here

Sustainable development or sugar daddies?

Discussion started by Arsenal Times , 15/10/2015 16:12

Arsenal Times
15/10/2015 16:12

What do you think? You can have your say by posting below.
If you do not already have an account Click here to Register.



Edited 1 time(s). Last edit at 2015:10:16:14:40:55 by Padre Pio.

Reply Quote Report

Indiangooner
15/10/2015 16:21

thanks for bringing me in here from twitter Padre.... a lil heads up it being a Merl write-up wld hv been good

Reply Quote Report

Padre Pio
15/10/2015 16:22

i am not allowed to discriminate, anyway you need a rest from all that tweeting

"When we had to suffer the team is a lion because they suffer together." 4 July 2020 at Wolverhampton Wanderers
Arteta on his team's first away victory at a club above them in the Premiership since September 2015 at Leicester.

Reply Quote Report

Jonny Kipper
15/10/2015 16:40

Fighting a lion
Drinking acid
Watch my sister masturbate
Let my children play rugby with Boris Johnson

There's a list of my things to do before I tuck into Merl's latest piece. No offence, it's just not my cup of tea, but a hell of a lot of work clearly went into it, so well done.



Edited 1 time(s). Last edit at 2015:10:15:16:40:50 by Shane.

Reply Quote Report

Indiangooner
15/10/2015 17:02

i'd rather be tweeting than commenting on Merl articles which ends up in all kinds of cheapshots regarding the place i come from or wat i am

Reply Quote Report

Merlion96
16/10/2015 06:09

Columns of Table 5 properly aligned.


Table 5: Arsenal Holdings Financial Report – Analysis of changes in net debt in £000’s
… … … … Increase … Cash … … Short Term … Gross ….. Debt Due … Debt Due ... Debenture … Net Debt
… … … … in Cash ….. in Bank … Deposit … ... Cash Flow … < 1 year ….. > 1 year … … … … … … … … …
FY2004 ….. ... ... ... ... ... 26,003 … ... ... 0 … … 26,003 … ….. (23,715) … (119,013) … (24,543) … (141,268)
FY2005 ….. 45,626 …… 71,629 … ... ... 0 … … 71,629 … ….. (19,572) … (180,559) … (24,829) … (153,331)
FY2006 … (36,031) …… 35,598 … ... ... 0 … … 35,598 … ….. (22,816) … (249,761) … (25,165) … (262,144)

FY2014 ….. 14,640 …… 80,555 .... 127,323 … 207,878 … … … (6,704) … (205,921) … (27,830) ….. (32,577)
FY2015:__________________________________________________________________________________

Reply Quote Report

weedz
16/10/2015 19:56

Thanks Merl

Your article confirms my belief that Wenger has been the best manager we could have had, over the past 20 odd yrs.

A couple of days ago, I read an article on SAFs belief that consistently in a clubs management, is all important.

And while the purple-nose-one felt Wenger had not taken Arsenal forward in the past couple of years, despite us winning our first silver-ware in quite some time, his general view was that Arsenal have been proven right, in maintaining Wenger as our manager, and pointed out that there was/is nobody out there, in management, who is better than Wenger or who could have done a better job.

It's my view that Arsene will retire in 2017 and will not leave us for PSG or Real Madrid after he finishes his time with us.

I don't believe Arsene will get the sack before this time.

Since the end of WW1, 1919, when the FA restarted its 4 tier football league, with Arsenal fc in the 1st div, there’s only ever been one club to have never been relegated from Div 1/ EPL.

Arsenal fc

Let’s keep making history

Reply Quote Report

Merlion96
17/10/2015 03:08

Thanks Weedz.

Just look at the importance of CL Cup even to ManU and why we can't compete against Sugar Daddy teams like Abu Dhabi City, who is prepared to absorb losses of £930 million and more since 2008 to build Abu Dhabi City to what it is today - a self-sustainable club that will pay its way through more broadcasting revenues and more commercial] revenues.

The other point I am driving at is that “money makes money”.

In the latest FY2015, Abu Dhabi City has made a pre-tax profit of £10.7-mil in contrast to years of losses since Abu Dhabi bought them in 2008.

Pre-tax Profit (Loss) After Taxation
FY2010 : £(126 million) loss
FY2011 : £(195 million) loss
FY2012 : £(97.9 million) loss
FY2013 : £(52 million) loss
FY2014 : £(23 million) loss
FY2015 : £10.7 million profit
:

That is the extremely tilted field that Arsene Wenger was competing against since FY2004 when Abramovch launched the "Era of Sugar Daddy Team".

All Arsenal fans owed Arsene Wenger a great debt to keep us competing in CL Cup for 18th consecutive season!

Just look at how far Liverpool FC had fallen .. and how far had ManU fallen post-Ferguson.

And it is good to hear that Arsene Wenger may very had started to handover to the next manager in a well-planned 2 seasons period before he may leave England in summer 2017.


..................................................................

This article was in the work before Seanski started his trolling here, before that 3-0 win against ManU.

And Seanski condemned me as a Wenger hater!

Where are you Seanski ..yahoo ....

Reply Quote Report

Goto: Forum List•Message List•Search• Log In

Sorry, only registered users may post in this forum.

We record all IP addresses on the Sportnetwork message boards which may be required by the authorities in case of defamatory or abusive comment. We seek to monitor the Message Boards at regular intervals. We do not associate Sportnetwork with any of the comments and do not take responsibility for any statements or opinions expressed on the Message Boards. If you have any cause for concern over any material posted here please let us know as soon as possible by e-mailing abuse@sportnetwork.net