Good morning from a very cold Dublin. It’s like Winter has shifted to spring-time or something. Hopefully only a temporary cold snap.
I guess we should start with the financial results which were announced yesterday, and there’s a record post-tax loss of £107.3 million for the year ended 31 May, 2021. Just to be clear about this, I am not a finance guy, and like all of you I will wait for our good friend @SwissRamble to get into the nuts and bolts of it and make it accessible for chumps like me.
What I do know is that losses of over £100m are ‘not great’ (I think that’s the technical term), and the club statement puts much of this down to the impact of Covid-19:
The results for the financial year have been materially impacted by the coronavirus pandemic, which caused the majority of matches for the 2020/21 season to be played behind closed doors. For matches played behind closed doors there was a complete loss of ticket (and other matchday) revenue. Pre-tax losses (unaudited) of £85 million (2020 – £35 million (unaudited)) are considered to be attributable to the impacts of COVID-19.
All of which makes sense to me. After that, the numbers start to swill around in front of my eyes and while I understand all the words associated with them, there’s a part of my brain that just doesn’t click with this stuff at all. There’s a much longer, in-depth document which probably clarifies a lot of it, but I just can’t bring myself to go into it.
I found this a bit hard to get my head around too:
The total profit on sale of player registrations was £11.8 million (2020 – £60.1 million) and player loans amounted to £3.1 million (2020 – £3.5 million).
Given we spent big on Thomas Partey and Gabriel in the summer of 2020, the only departure of any significance was Emi Martinez, and we paid off a clutch of players to just go away, I’m struggling with this one. They go on to say:
Player trading profits continue to have a significant impact on overall profitability and the club’s ability to realise profits during 2020/21 may have been adversely impacted by market conditions with reduced overall liquidity as clubs’ acquisition budgets were impacted by the financial pressures of the pandemic. Average annual profits on sale of player registrations over the last five years, including 2020/21, have been £42.2 million.
I’m sure this has something to do with the way player values are accounted for on the balance sheets, but when we think about finances going forward, the big 2021 summer spend – coupled with only one significant sale (Joe Willock) and more incentivised departures – surely next year’s financials are going to be similarly bleak. Whether that has an impact on what we can do this summer, as we seek the striker we desperately need, among other things, remains to be seen.
Money has come from elsewhere, as the announcement makes clear:
Significant funding has been provided by the ultimate parent company, KSE UK Inc. During the year KSE UK Inc. provided funds to refinance the stadium finance bonds and for working capital purposes as required. The financial challenge remains significant, but the club continues to have the unwavering support and commitment of its ownership, Kroenke Sports & Entertainment.
I don’t know if Swiss Ramble or the financial experts at the Arsenal Supporters Trust will be able to ascertain this from the numbers released, but quite how that financial support has been provided would be so interesting to know. KSE have clearly facilitated spending on the squad, and provided financial support during the pandemic, but there’s no such thing as a free lunch, so where exactly does that debt lie?
Ultimately though, there’s not much that is hugely surprising about this club – or any other – experiencing a loss during a period when football was shut down then played behind closed doors for so long. Better management of the squad, improved recruitment and contract management, and the team being better in itself may well see us better able to sell well – and that could play a part, but there’s also the looming spectre of the financial behemoths looking at our top talent. That’s a natural consequence of having good players, and first and foremost that’s what we’ve needed for a long time, so we’ll just have to deal with those consequences.
The club also announced a 4% rise in season ticket prices yesterday, after 7 years of holding prices flat. As someone who is not a season ticket holder, I never feel like it’s my place to comment on prices and how it might hit people in the pocket, so I will point you in the direction of the AST response to the news. All I will say is that I think the concessions towards younger fans are a great idea, it’s obviously important to ensure new generations get to experience match-days as much as possible, but understandably there will be some less than impressed at another strain on their wallet in already tricky times.
Finally, this is certainly interesting in light of our not too distant past.
Finally, finally, I got right to the end and Swiss Ramble just posted his thoughts, which you can find in the Twitter thread below:
Arsenal’s 2020/21 financial results covered a season when they finished 8th in the Premier League and reached the Europa League semi-finals under head coach Mikel Arteta, but their finances were adversely impacted by COVID-19. Some thoughts follow #AFC
— Swiss Ramble (@SwissRamble) March 1, 2022
Right, I will leave it there for now – there’s a brand new Arsecast Extra for you below, and don’t forget the 20th birthday bonus podcasts which are all free and available too (see here for more).