The Emirates Stadium
Triplec1988, Proud member of The Gooner Forum
Over the past few summers growing criticism has surface in both the media and the ranks of fans regarding Arsenal’s spending habits and transfer activity. Fans have grown anxious for Arsene and the board to splash out the cash and bring in a big name to prove that we are serious about challenging for the Premier League and the Champions League. What Arsene and the board are aiming at though is something bigger than a huge transfer and substantial wages to bring in one star. They are laying the foundation for the future success and stability of the club, a noble feat that will take both time and patients on the part of supports but will be invaluable for the club’s long-term future.
Arsenal Holdings PLC, the group that runs the board and owns the club, embarked on an audacious new project a few years back: Bring the Gunners into a new, state of the art facility, which has become known as The Emirates. While it was accepted that much debt would have to be incurred to undertake the project, the board recognized that the benefits far outweighed the costs. And while the financial strains of the move might be being felt, the benefits of the new stadium and resulting development of Highbury Square are also starting to work their way through the book, as noted in the end of year financial report for May 2007.
As the report states, Arsenal Holdings PLC saw a 40% increase in group turnover, or income (before taxes) in the first year after the move to The Emirates. Much of this, as the board noted, was due to higher attendance (some 59,850 average attendants) for the first season as well as a number of non-Arsenal events hosted at The Emirates. The club saw TV deal revenue fall, but noted that merchandise sales were up. Furthermore, growth in commercial revenue was up as well £29.5 million as a result of Arsenal taking on Emirates Airlines as the shirt and club sponsor as well as continued work with the clubs other commercial partners such as EDF energy and Coca Cola. It should also be noted that match day revenues for Arsenal’s first year at The Emirates were £90.6, more than twice of what was achieved during the clubs final year at Highbury.
While the group’s revenue was up, so were operating expenses. This is attributed to a slight jump in pay-roll expenditures as well as the increase in the scale of operations of the group as a result of the move to the new venue. The board also saw a jump in revenue due to profit from player trading. At the end of the group’s fiscal year (May 2007), the board showed an increase in cash reserves to £77.2 million. This is perhaps where the media might have gotten the rumored £70 million in available transfer funds. However, it must be noted that the £77.2 million represents all of the group’s actual cash reserves, not just what has specifically been allocated for transfers. This is what is available for debt repayment, wage negotiations and player transfers. This number also does not reflect anything from this most current season due to the fact that this season’s report is not due to be released until September of this year.
As far as debt goes, the club noted that the total cost of the move to The Emirates Stadium was around £430 million, which was in line with the group’s forecast. Part of the long-term investment was financed by borrowings and during the 06/07 fiscal year, the group successfully completed the refinancing of these borrowings into £260 million of long-term fixed rate debt in the forms of bonds issued to investors rather than keeping the debt as bank debt. In doing this, the group was able to achieve a lower longer-term interest rate, thus reducing future interest and payments. It should also be noted that the repayment of the debt is over a substantial period of time, allowing the group the spread out the cost of repayment.
After a review how the move to the new stadium has effected the financial position of the club, what can we expect for the future stability and growth of the club and the group? Come back next Tuesday, when I will take a look as the prospects for the future and what both the Club and the supporters can expect to happen in the wake of our move to The Emirates.
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