AST Review of Arsenal's Financial Report for 2017/18

AST estimate of Arsenal Holdings Accounts For the period 1 June 2017 to 31 May 2018

Arsenal would usually have published their accounts reporting on the financial year of June 2017 to May 2018 this September. They have not done so this year as a result of the club being taken private by Stan Kroenke.

The AST has previously expressed concern about the changes in ownership leading to reduced transparency and accountability and this is one example. The club now has until 28th February 2019 (nine months after financial year end) to file accounts at Companies House.

The AST will continue to monitor and comment on these accounts when they are made available after submission to Companies House but there is a long delay now after season end to see what has happened on a financial basis.

In this short note the AST has set out the financial outcomes we expect to see when the 2017/18 accounts are finally published.

Firstly, we set out a simplified overview of the Arsenal's accounts in a table format. The figures are drawn directly from the club's accounts for 2017, with the full year to 31 May 2018 being AST estimates based on the half year figures and our understanding of Arsenal's finances.

Overview

Arsenal's financial performance for the year 2017/18 shows the following developments:

Matchday, Broadcast and Commercial revenue have all fallen. This is largely a result of playing in the Europa League and overall the impact has been a loss of revenue of £40m (of which non participation in the CL has contributed a £35m reduction)

At the same time there was a major increase in the wage bill of about 17.5%, from £200 to £235m (this includes allowance for pay offs to AW and his staff which may be treated as an exceptional payment).

The amortisation costs (cost of buying players spread over length of their contract) also increased significantly - by £19m.

The result of this increase in costs and reduced revenue is an operating loss of £44m (£52m operating profit in the previous year)

However Arsenal had a major sale of players in this period including Oxlade-Chamberlain, Walcott and Sanchez. The impact of these sales gives Arsenal a profit before tax of almost £70m

It is not a sustainable position for Arsenal to rely on player sales to finance their business model year after year. Looking ahead to the current season there have been very few receipts from player sales and a wage bill that is still increasing

Taking all these factors together the AST predicts that in the present season of 2018/19 that Arsenal are heading toward making a loss of nearly £70m (in the absence of any player sales). At the operating level we predict a loss of c£60m.

There are new commercial deals starting to come on stream that will give a boost in 2019 but these figures demonstrate why Arsenal really do need to secure a Champions league position at the end of the season.

At the end of the current 2018/19 season we forecast cash available for player purchases of c £40m.

£millions Yr to May 17 Yr to May 18

Actual Estimate Revenues:



Matchday 100 98 Broadcast 199 170 Commercial 91 83 Retail 26 26 Player Loans 7 6 Football revenue 423

383 Property 1 10 Total Revenue 424 393







Costs





Football costs wages 200 235 Football costs other 79 82 Amortisation of squad 77 96 Depreciation 15 15 Property less JV share 1 9 Total Costs 372

437





Operating Profit 52

(44) Player Sales 7 124 Interest (15) (11) Profit before tax 44

69



