An AST Source
This analysis, provided by the Arsenal Supporters’ Trust is based on figures in the last published AST summary from March 2018…
The new “head coach” appointment has been accompanied by much talk about funds available for transfer activity, before any player sales. Ivan Gazidis even said “go look at our accounts, it is all very transparent”. The Arsenal Supporters Trust have been analysing the club accounts for 15 years and provide below a short summary of the current position. The club’s financial year end is 31st May 2018 but we won’t see these numbers until late September 2018.
Arsenal reported cash reserves at 30 November 2017 of £136m – with further cash of £23m held back to guarantee debt service requirements. This was a modest decrease on cash reserves held in May (£180m total - £144m net of debt reserve) and reflected the net proceeds from transfer dealings over the summer (£9m) offset by instalments due on past player purchases (previously believed to have been £20m). These cash reserves are available for transfers and wages over the following 12 months assuming the revenues and costs stay the same, but also include outstanding instalments due on past transfers in the year ahead as well. It is estimated at £20m from 30/11/17.
The club has said little about amounts still due on player purchases at 30 November 2017 and provide no detail in the notes to the accounts for us to make educated estimates. We know from May 2017’s accounts there should be a further £23m to pay on player purchases plus the combined impact of the summer and winter’s business which was considerable but very little on a net basis, although there may well be considerable provision for agent fees due on the life of new player contracts in long term provisions. Payments to agents over the past season will be have been quite high. These are paid when players are signed (and sometimes when they are sold) or a new contract is agreed. The figure for this is likely to be around £12-£14m and this will be an ongoing cost going forward. This impacts the amount available for players this summer, as does the estimated £10 - £12 million cost of paying off Arsene Wenger and a number his staff due to the termination of their contracts.
In autumn 2017 we estimated spare cash before the impact of the summer’s transfers at £83m and believe this is a cautious estimate of free cash at the end of November 2017 too. Looking forward to May 2018 we estimate that the residual (free to use) cash available will grow in the second half of the financial year, which contains the bulk of TV revenues together with Platinum and Gold Season Ticket renewals to somewhere in the region of £100m come 31 May 2018 and the headline cash figure to somewhere in the region of £170m. The club will benefit from the likes of Cazorla and Mertesacker not being on the wage bill any longer, although increases on existing deals (such as Aaron Ramsey) will bite into this. The end of May 2018 figure could also be lower if a large number of season tickets holders renew late, although this only effects the accounts, assuming they do pay up at some point. The £100m figure for the transfer budget would include increase in wages and agent fees, although in reaching this figures we have already taken account of the payments to Arsene Wenger and his departing staff.
£100m is a lot of firepower and the summer and winter’s frantic transfer activity has done nothing to diminish the cash still available to invest in the team. (The purchase of Aubameyang was largely funded by the sales of Walcott, Giroud and Coquelin). Wage capacity exists too but the Board will have an eye to annual operating free cash flow before transfer payments and receipts which is down at around £30m pa - which is in effect the long term sustainable level of net transfer activity until the new sponsorship deals kick in in 2019. This £30m is an annual surplus, and goes towards other available cash which can be used for transfer activity. If the club were in the Champions League this figure would be larger.
The briefed £50m transfer kitty is a conservative figure. As Ivan Gazidis himself said in the press conference introducing Unai Emery, because the club’s figures are reported, they are indeed transparent. This is due to the ownership model of the club, which includes small shareholders who must be kept informed. Were Stan Kroenke able to take the club private, we would not be privy to the information relayed above. What we cannot judge is the mentality of the decision makers at the club. Might they be thinking of holding back some of the available funds as an insurance against not qualifying for European football at the end of Unai Emery’s first season? Without that, there would be no annual surplus at the conclusion of the following campaign.
One other thing to note. This month also sees a personal landmark for CEO Ivan Gazidis as it will take his gross payments from Arsenal over the £20 million mark.
