Arsenal Half-Year Accounts – So Far So Good, But......

Arsenal’s half year accounts from 1 June to 30 November 2008 were published yesterday. The bottom line is that we made a profit of just under £20 million, with a transfer surplus of £8 million. Football costs, including operating the ground and player wages are up nearly 10.5%. A big worry I think.
Peter Hill-Wood’s commentary on the figures says that this increased number represents increased utility costs (gas, water and electricity), increased fees for the opposition in the Emirates Cup and increased wages. This may explain why Al Ahly of Egypt, the current champion of Africa, is reported in the media there to have been invited to take part in the Emirates Cup in the coming pre-season. Their fee isn’t likely to be what Juventus or Real Madrid would be looking for. Part of the increase in playing costs is also due to the strengthening Euro against Sterling. The performance related elements of fees paid to Euro zone clubs we buy players from goes up as Sterling goes down of course. Remember, we brought you this story first here at back last year.
Hill-Wood’s report spends a lot of time on the situation of sales of the flats at Highbury Square. 140 sales out of the total of 326 available in the former West and South Stands have been completed. Work will finish on the East and North Stands in the next four months or so, with a total of 655 flats then available. The club says it has pre-sold 595 of these. So far the number of defaults is in “single figures”.
The half year report says the club is in the early stages of discussions with the banks to extend the £133 million outstanding on the loan taken out to fund the Highbury Square development. It is also exploring ways it can help those contracted to purchase to get the mortgages they need. Anybody who’s tried to get a mortgage recently will tell you the banks and building societies have suddenly gone ultra-cautious. It really might have been a bang-up plan for us all if the banks hadn’t  started throwing the money they were entrusted by us to manage around like drunken sailors in the first place, but that’s another story. For those who contracted to buy flats at Highbury Square and plonked down ten percent cash deposits a) they’re struggling to get a mortgage and b) they’re going to be stuck with huge negative equity (the value of the loan taken plus any deposit less what you can actually get for the property if you sell it tomorrow) if they do go ahead and buy. The agreed a top of the market price before the property market headed south, taking the rest of the economy with it.
Given that lots of lenders are reluctant to advance more than eighty percent of the current value of a property at the moment this means that the Highbury Square buyers are between the proverbial rock and a hard place. We can confidently expect the number of defaults to rise. To pay off the loan is its entirety the remaining 515 units have to sell for an average of nearly £260,000 a pop, that’s just to get out of jail. Hopes of seeing £50-£100 million profit to stick into the club as working capital are rapidly becoming a distant memory. As things stand I’ll be happy if we get out of our adventure into property development with our shirt and dignity in tact.
I don’t damn the board for the decision to take on the development and thus the risk of Highbury Square themselves. It seemed a bang-up idea at the time. Hindsight is a perfect science. If the entire development timetable had been two years earlier we’d all be congratulating the board for a master-stroke producing a one off injection of “free money” for the football club.
I’ve always wanted us out of the property development business as quickly as possible however. It was a distraction from football even when things seemed to be going swimmingly. No enterprise runs itself, least of all property development.
Aside from the Highbury Square headache, the numbers don’t look too bad but most of the period was before the economy really went off a cliff. Many corporate box and all bar centre-block Club level renewals are due soon, as are Diamond Club memberships. The centre-block Club renewals are due at the end of 2009/10 (they were sold on a minimum four season basis). Together these approximately nine thousand seats amount to a over a third of matchday ticket income.
Anecdotally demand for general admission tickets seems to have significantly loosened although we’re still selling out. Whether this will remain true for much longer we shall see. I sincerely hope so for the good of the club, but even with the welcome price freeze for next season just announced, our tickets are ludicrously expensive, as they are just about everywhere in this country. If we end up with no European football next season or in the Europa League rather than the Champions League, the club’s finance department really will be weeping in its beer.
Still let’s be thankful for small mercies. We could be really in the financial toilet like Liverpool. Or Darlington. The plight of a club not too many Gooners probably think or care about very much should concern us all. The sea of red ink into which Darlington is sinking is what happens if you allow a club to be owned by an ex safe-cracker and to do business with legalised vampires like the Sterling Consortium. Darlington might only have a few thousand fans but they care as much about their club as we do. Likewise Luton Town who have had the misfortune to be taken over by a succession of incompetents. The FA’s reaction so far has been to – do nothing. That’s GOT to change.
Enough of the bean-counting. Tomorrow brings a vital League match against Fulham at the Grove. We need the focus and desire that we showed against Roma last Tuesday night. Nothing else will do.
Keep the faith!

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