FTK looks at the Arsenal accounts...

Well Arsenal Football club have provided the financial incentive for any prospective takeover by producing a significant increase in turnover yet only a modest increase in taxable profits which is good because I hate the tax man.
I have read the pdf accounts and find no major surprises except the “Impairment charges” incurred because of the discrepancy between the 24 million valuation of Queens Square and the true costs incurred through the fall in value and the placing in mothballs of the project. This rather seems like the Club have suffered a double whammy
not entirely due to it’s own doing. But I am not an accountant, so if anyone can help please comment below.
The Wages of ALL Arsenal employees (Including Directors) increase by 3 million to 104 million but the player profits (registrations) have increased and this money will be available to the manager for the January and Summer transfer windows. Now usually I don’t blink at headlines that our wages being paid are the third highest in the Premier League, but this is the first year that the Club have got to great lengths to point out that the £104 million is not the player wage bill. Transparency at last where as in previous years, the Club has not reacted to the media confusion of suggesting that the wage bill was only player related.
I have always tried to work out what constitutes the player element, and how this compares to other clubs. One way is to compare the total number of employees of the respective clubs, another is to add together the relevant valuations of our playing squad with the media speculation of the like wages being paid per year. However we arrive at a figure, what is clear, is that we shall not see the benefit of losing Adebayor until next years accounts. What has been confirmed by the club is that the profit on player transactions is being retained by Arsene Wenger for use in subsequent transfer windows.
The wages to turnover ratio is 46.2% which is two percent lower than last year and falls nicely within the 50% margin for Delloite’s definition of well managed clubs. The reduction is largely due to the increased turnover based upon our extended Champions League run and it shows how important our Champions League status is to our financial well being. Again if anyone can tell me exactly how much we spend on players, and how you have arrived at that figure, I shall be interested to hear your calculations.
The bulk of the Highbury square £137 million refurbishment loan was paid off (£88 millions) which leaves £47 millions payable at 2.5% until next December at a cost of £12 millions into the coffers of Barclays bank. 208 Legal completions generated the monies to reduce the loans due by the estates division, there are 210 units left uncompleted of the original 665 appartments. The potential revenue generation of the 445 units sold amounts to £175 millions. Just imagine what a housing recovery and the sale of the remaining units could do for the club. Another £80 millions of debt removed from the club. The rest of the completions are scheduled to occur during this financial year. That should leave the outstanding £47 millions and mean that with the sale of the rest of the units it might leave at least £30 million free. That could be good for Arsene Wenger, that is assuming that these profits generated are ploughed back into the football side of the business. There is however a get out clause for not reinvesting those funds which I find rather unhelpful, where the accounts note…

The bank facilities which the Group has used to fund the Highbury Square development are ring?fenced from and non?recourse to the financing of the football segment of the business. The use of property profits which may be transferred to the football segment is not determined until such time as those profits are realised and transferred in cash to the Club – accordingly, there is no current commitment to use any such profits and cash anywhere within the Group at any specific time for any specific purpose.

It makes one wonder what additional specific purpose could be found for these profits? The Queensland Road estate seems to be the most likely candidate, which would be grossly unfair as supporters have had to pay the price through so many seasons of lean investment in the playing squad. I hope that the club decides to sell the project to a development company and retain the freehold for any potential future profits from disposing of the site.
So in a nutshell the conclusion is that the club has managed to renegotiate the loans that were due until the end of the year. The renewals of season tickets and Club level are quote at maximal level (does this mean fully sold?). £23 millions were made from transfers and £10 million was lost through increase running costs and the effect of the euro/sterling exchange rates. The overall turnover increased from £223 millions to £313 millions. The club seems set fair financially to weather the credit crunch, the only Achilles heel being the Queensland Road project. Decisions need to be made about the viability of plans for it’s long term future to remove any uncertainty.
These results are good for the Club and the fans who wish to see the club remain Independent. After all Arsene Wenger’s efforts to help the club achieve such results, one would have thought that he deserved a nice birthday present, such as a harmonious Annual General Meeting, however I am speculating about the risk of one party pooper in the form of Alisher Usmanov who could be waiting in the corridor with a potential hand grenade to toss into the proceedings with the possible purchase of Lady Nina’s shares through a possible intermediary prior to an attempt to mount a hostile takeover bid.
Certainly on these figures, any potential purchaser of the club is going to have to have very big pockets indeed which reduces the apparent financial incentive of acquiring a well managed club, as the value of the club has just increased. With the loans for next year potentially being just the long term loans requiring £20 millions a year to pay off, that means much more income towards transfers. So the long suffering fans will finally be able to see the potential to make big signings in the summer of 2011. Until then we shall have to make due with the life saving youth project of Arsene Wenger who has contributed massively to preventing this big club sliding towards administration. Perhaps his critics should think on that before moaning about him. The best is yet to come, so for christs sake be patient!
Come on you Gunners!!!

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