As Arsene Wenger keeps on talking to the press about economics (perhaps to divert their attention from our football?) I thought I might as well have a trawl through the accounts of Arsenal Holdings Plc to see what all the fuss is about. On the one hand we are shown as the 3rd richest football club in the world in April 2008 as ranked by Forbes magazine, and on the other hand we are apparently skint and can’t afford to buy any players. WTF is going on?
What follows is some of what is in the accounts as at 31 May 2008 (the latest available) and my personal interpretation, which is in no way a professional opinion. I wanted to find out the answers to some simple questions:
Q1. How much debt are we in?
Answer: £416 million, but net debt = £318 million (after knocking off cash in the bank and loans receivable)
Q2. Is that a lot?
Doh! Of course it is. But to get some perspective net debt is 1.4 times annual Group turnover. So it’s kind of like, if you earn £30,000 per year and your debts are £42,000. Well, my debts (including mortgage) are more like 2.5 times my annual salary so at least Arsenal are doing better than me.
Answer: Yes, but thankfully it is not as bad as the £600 million (or whatever) owed by Man Utd.
Q3. Why have we got this much debt?
It sure as hell isn’t because we bought loads of players! Borrowing money to get something tangible which increases future earnings (e.g. our stadium) is a good thing, especially if we can spread the cost over 20 years or so.
Stadium debt = £250 million
Development properties = £139 million
Other = £27 million
Q4. When is this debt repayable?
Stadium debt = over 21 to 23 years, average 5.3% interest
Properties = over 2 years, 6.6% interest
Other = 20 to 134 years, 2.75% interest
Q5. What interest do we pay
Answer: about £17 million last year (net)
Q6. How are they going to pay it off, then?
Well, the scary bit is the money borrowed for property development which is repayable within 2 years. The plan is that sales of the Highbury Square appartments over the next one or two years will be used to clear off this debt (currently £139 million). Any upside would be a “bonus” but the way the property market is going this might not happen.
Latest operating profit was £48 million (before player transfers) and cash increased by £19 million so if that keeps up there should be no problem servicing the long term debts.
Q7. How much money is there for players?
Once the property development loan is cleared off we will basically be paying off about £25 million per year in capital + interest. With the football side of the business generating £50 million per year of operating profit that should leave £25 million per year over. Until those appartments are built, sold and paid for I can understand the Board having slightly shitty pants, but in the medium term things are fine IF we keep qualifying for the Champions League.
Answer: I reckon about £20 million per annum if required, plus any proceeds of player sales, but zero if we don’t finish at least 4th.
Q8. Anything else of interest?
a) Red and White Securities Ltd own 24% of Arsenal (Our own Oligarch)
b) Number of employees went up by 5 to 379, but staff costs went up by £11.6 million to £101 million – a 13% increase in one year. “During the year we have improved and extended the contract terms of a large number of first team players and, of course, of Arsene Wenger himself” says K Friar in the Financial Review.
c) Highest paid Director was K Edelman who got £1 million for the year plus a “golden goodbye” of £1.67 million when he left.
d) The players are valued at £55 million in the balance sheet (cost, not market value)
Join the forum www.goonerforum.com