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Arsenal release latest financial results

The club, as expected, posted a profit for the fiscal year ending May 31, 2013, of £6.7 million before tax

Ian Walton

I could go on and on about the financial results the club posted yesterday, that they're good, solid returns and the club is in a great place to continue the growth since the move to Ashburton Grove.  I'm afraid, though, that the numbers and ratios would bore most of you to tears.

However, embedded in every Arsenal financial report, before the numbers, are statements - actual words, contained in paragraphs - from various Board members and other key executives that we rarely hear from, individuals that offer us insight into the financial performance of the club, as well as the direction they're attempting to take the club in the future.  So while I'll provide a few numbers that you need to be aware of, I want to bring the discussion to the very well written statements of Sir Chips Keswick, Chairman of the Board; Ivan Gazidis, CEO; and Arsenal Chief Financial Officer Stuart Wisely and some choice quotes from each of them.

First off, from Sir Chips Keswick:

Stan, along with everyone on the Board, is fully committed to bringing success to the Club in the shape of titles and trophies and that will continue to be our collective goal.

Sure, it's lip-service, but if you haven't clicked on the actual report, you won't realize that this is the fifth sentence in his statement, which follows a short, but nice, tribute to Peter Hill-Wood.  Stan Kroenke, along with nearly every person involved in the club, have made it clear they expect trophies and success, and Keswick makes it a point to start off his statement by proclaiming he wants the same thing that fans demand.

We must continue to grow commercially to provide the Club with the best opportunity to achieve success and we must do this in a way which remains true to our values and which ensures and protects the long-term sustainability of the Club.

This is significant.  Yes, the club has secured the lucrative Emirates sponsorship extension and the soon-to-be announced Puma kit deal, but it's imperative Arsenal improve their commercial revenues.  Swiss Ramble had this to say yesterday:

That...that is not good.  It's great to see the club spending the money to get the Mesut Özil's of the world, but in order to continue this path of world-class signings they need to aggressively secure more primary and secondary sponsorships.  The Asian tours should see them advance towards their goals in this regard, and let's not forget that they'll have significantly more TV money coming in starting this fiscal year.  But an 8% rise in commercial revenues over a four-year period is poor, at best.

It is also appropriate to reiterate that the money we generate across the business is always available to our manager, Arsène Wenger, and that he quite properly makes the decisions regarding how to invest those funds based on his extensive football knowledge, experience and judgement. With the Özil transfer I believe we have made a significant statement and when Arsène decides the time is right to invest again, Stan Kroenke, myself and the rest of the Board will be delighted to support him.

In other words, forget about a Director of Football ever coming in as long as Arsene Wenger is managing the club.

This also, in a way, shifts the pressure onto Wenger's shoulders to deliver the players the fans demand.  As he basically stated here, "In Wenger We Trust," so therefore if January comes and goes without a player (or "super-duper, world-class player") bought, it's not on the Board or Kroenke, Keswick implies.  Direct all anger to the man in charge of making those decisions.  This guy:

From Ivan Gazidis:

The signing of Özil for a Club record fee is a significant step for us. This signing was a direct result of all the hard work we have put in over recent years to build the commercial capability of the Club to deliver the consistent revenues and financial strength required to compete for the world’s best players.

Not bad.  If a paltry 8% revenue growth over four years nets Özil, imagine what a 15% revenue growth over a two-year period nets.

Looking forward to the next financial year, we will continue to look to grow our regional and official partnerships and to significantly progress conversations on our kit supply partnership. This is due for renewal at the end of season 2013/14 and we are confident of achieving a significant uplift in value.

The initial numbers first rumored this past Spring had Arsenal obliterating their current Nike deal, and Gazidis hints that the club will see a sharp rise in kit sponsorship revenues.  Again, this is needed if they want to continue signing the best players in the world.

We are entering an exciting phase of the Club’s evolution as we continue with the transformation which started almost a decade ago with the move from Highbury to Emirates Stadium and which has continued, more recently, through the increase in our commercial capability off the pitch.

Translation: Asian tours are important.  By far the world's most populated continent that has millions upon millions of soccer-starved fans, Arsenal's seeking to capitalize on these two-week summer jaunts in the form of lucrative commercial deals.  Hopefully their travels abroad see some agreements arrive shortly.

From Stuart Wisely:

The Group has recorded a profit before tax for the 2012/13 year of £6.7 million (2012 - £36.6 million). The reduction in profit is, in the main, attributable to two factors:

  • A lower surplus on sale of player registrations of £47.0 million, as compared to £65.5 million in the prior year; and
  • Increased one-off charges primarily related to the impairment of certain player registrations and associated costs of £10.0 million, as compared to £5.5 million in the prior year.

This was to be expected; while we ditched Robin van Persie and Alex Song and other players, the total value of sold players was still less last summer than the summer previous when the club offloaded Cesc Fabregas, Samir Nasri and Gael Clichy, et al.

Further, while it's told who the players in question are in the latest financial report, the club clearly set out a goal this summer to get rid of as much dead weight as possible in the form of either transfers or writing their values off the books.  They must figure now's the best time to do most of the removal - if not all the removal - so they can continue to progress in their quest to sign top players.

During the period we invested £58.7 million in the acquisition of new players and, to a lesser extent, the extension of contract terms for certain existing players. The cost of this investment is being charged against profit over the life of the underlying player contracts and, as a consequence, the amortisation charge for the year was increased to £41.3 million (2012 - £36.8 million).

Yes, that's nearly £60 million reinvested into the squad.  In other words, they spend money on players.  For those claiming otherwise, if there's anyone out there who still believes otherwise after this summer, take your false narratives elsewhere now, please.

At the balance sheet date, the Group’s total cash and bank balances amounted to £153.5 million (2012 - £153.6 million), inclusive of debt service reserve balances, which are not available for football purposes, of £33.8 million (2012 - £33.5 million), and the Group’s overall net debt was £93.2 million (2012 - £98.9 million).

The Group does not set any particular wage ratio as a performance target but rather monitors its total player spend, being wages plus transfer expenditure and related costs, on a rolling three year basis against its projections for the available funds generated over that period by the Group’s business activities.

I had a lengthy discussion with Mr. Ted Harwood yesterday about this particular comment in Wisely's statement.  If the club felt confident enough to look ahead to see enough funds being generated over the next three years to justify Özil's purchase this summer, does this mean that we'll see at least one Özil-type purchase for the next few summers?  Or did they decide to spend a large amount of the future projected funds on Özil?

My initial instinct tells me to expect more purchases of Özil's nature in the short-term, but I've kinda back-tracked a bit on that for reasons mainly contained in "Yeah, I'll believe it when I see it."  I didn't expect any sort of numbers when Wisely broached this subject in his statement, but it leaves me curious as to what the club currently estimates going forward regarding future funds and how much of a chunk was taken out of those projected coffers with the Özil purchase.

The Group continues to be in a robust financial position, compliant with the requirements of the new regulatory landscape and with the resources to support further investment toward on-field success.