Finance in football – Why Arsenal are still top of the league

The week of internationals has given me the time to clear my head, forget about the Spurs match and closely analyse Arsenal Football Club. Our unfortunate recent run of poor results has caused the media and so called football fans to start writing the obituaries of my beloved club. I agree that we have been awful recently and that the league never lies (currently 15^th at the time of writing) but I still think that the masses have been too quick to jump on the so called band wagon by overly criticising the club. Mistakes have been made and that is undeniable – our transfer policy has failed since 2005, our wage structure needs to be looked at and the current board of directors lacks someone with solid experience in football – but are these mistakes not rectifiable? Can we really say that based on our current infrastructure that we cannot make Arsenal a genuine European power?

In order to answer these questions we need to assess the facts that surround our club. Arsenal has always followed a long term strategy, and whilst this may be frustrating in the short to medium term, we need to commend the board for establishing such solid foundations for our great club:

• We currently have a state of the art football stadium worth £400m with an outstanding mortgage of less than £100m. For any property investors out there that equates to an amazing 25% LTV (loan to value)
• Our recent accounts show that we made a profit of £15.6m and this does not take into account the £35m profit we made on player sales as our accounting year end is 31 May 2011
• We currently have about £150m of cash in the bank – although £40m is withheld from the bank as part of our stadium loan deal
• We have one of the best training grounds in Europe with state of the art facilities
• We have one of the best youth systems in Europe that is consistently producing top class talent. Even if these players do not make it to our first team they are sold to other clubs which provides the club with a good stream of income
  
• There was a huge turnaround of players over the summer so its only natural that they will take time to “bed in”
• We are still missing world class players through injury such as Jack Wilshere and Thomas Vermaelen. Any team would struggle without them

Yesterday I was privileged to attend the League Managers Association annual conference at the Emirates stadium and one of the guest speakers was the former chairman of Manchester City, David Bernstein who is now the current chairman of the FA. He told us that when Manchester City were struggling in the 3^rd tier of the League he approached Arsene Wenger at the London Colony training ground and spoke with him for over 2 hours seeking his advice about how to run a football club. He even confessed that a lot of those ideas were immediately implemented at Manchester City – and that gave the club the platform to be sold to the current billionaire owners.

We should stop and appreciate the simple fact that Arsenal has set the standard for other football clubs to follow. We are a self sufficient, profitable club with world class foundations on which we can build on and we comfortably meet the criteria of the new Financial Fair Play rules which are currently being implemented. How many teams can say that? In fact in 2011 only 4 Premiership clubs showed a profit and guess who was the most profitable?

If we can remain competitive until January when the window opens and buy 3 genuine world class players (a centre back, a central midfielder and a striker) then this could still be a great season for us. Then again I have been asking / begging for player investment since 2005 – I just hope someone will hear me this time!

Nicholas Charles @TNCharles

Comments

[Gooner!]

Good post... need more positivity around Arsenal... negativity only breeds negativity...

[Joe]

Are you sure we've got under £100M of mortgage?

Our interest per season alone is £14M and we've got around 20 years left of the mortgage which we cant repay early.

[Thomas]

It's the performance on the pitch that counts. The table doesn't lie.Arsenal are 15th.However if soccer were about finances and how viable a club is,the gunners will be tops. Unfortunately it is not.
So get back to reality.

[Izedragon]

Awful performance in the pitch is unacceptable because the fan paid the money to support team to WIN not keep the team has good FINANCIAL . AW should think and plan for win and win and WIN only thing that should be done for team not for FINANCIAL or money. Today, AW looks so stupid because he concerns only money and financial and always accuse the team lack of luck that is not true that always hear and though the fan is foolish enough to lies. Arsenal fan should wake up and speak to AW that Please win or get out.

[Waktola Wakjira]

what matters is success on the pitch not financial aspect.

[Eastergooner]

Good article. The reality is that a professional football club which aspires to be consistently at the top for the long term must be managed and runned on the basis of sound prudent business and financial principles. This is the reality. It is unrealistic to expect the type of success that fans yearned for while ignoring modern day realities o the professional game.

[diabygetshowmuch]

Wow, great to have a positive approach, but your facts do miss huge chunks of reality. we may have £35m coming from player sales, but we have a grossly weaker teamas a result, maybe we should sell everyone and get the local school team in to play our matches? that would make the bank account look good. and as for us producing world class kids, have another look, no one wnats our kids, we pay them huge wages and then sell them for next to nothing, look at JET for example, Randall, Simpson??? the list is huge.
we all love our club, but the sad fact is it's in dire straights.

[finntalksFOOTBALL]

Good argument but your covering up the facts. 15th for a club that claims to be one of the 'top 4' is very very worrying. I see two problems with this, one, Wenger. Him and his policies must go, his philosiphy of young talent may have worked in the 90s, but the game has changed and to seriously compete with the top clubs, you have to open the bank account. something Wenger seems in capable of doing. Two, David Dein, he was largely responsible for the singings of most of 'the invincibles' and can bring in that strong aggresive Roy Keane like player that arsenal so desperatly need. It looks to me as though Arsenal are heading into that 2-3 year slump that Liverpool were involved in, Arsenal will finish outside the top four this season and probably net season too, at which point Wenger will resign and Arsenal can start afresh with a new manger and new ideas. Ancelotti, maybe?

[Nickwiggly]

It seems to me that people are missing some key issues in the whole "arsene in/arsene out" and the "arsenal fc not plc" debate.

1. Football has always been about money - from the very start of professional football the best players have been bought and sold by clubs seeking success. early on the players wages were capped and there was no freedom of contract. Now there is and the best football assets tend to fetch the best prices - sometimes bargains emerge, but rarely can you get real proven quality at a bargain price. The book "Winners and Losers" by Szymanski and Kuypers researched the financial impact in football and showed a direct correlation between performance in the league and wages spent, with few exceptions.

So to all those who say financial performance off the pitch does not matter - you are factually incorrect. On the pitch performance is directly linked to on-pitch success - FACT.

2. Arsenal's strategy when building the Emirates was all about creating the financial muscle to compete at the very top of European football, and to some extent this is evidenced by our financial performance. In parallel and in order to fund the stadium we had to take some short term actions - first, secure long term and front end loaded sponsorship deals to balance the funding needed and second, move towards developing rather than buying our talent. On both I believe we have executed well - AWs transfer spend pales into insignificance with the other top 6 clubs, and nobody could argue that we have developed some truly world class players..

Unfortunately, what could not be envisaged was that we would end up in an 'escalating' market, driven by debt at man Utd and new owners with unlimited resources at Chelski from 2003 and Man Citeh since 2008, both of which completely 'messed up' the market and led to player wages and transfer inflation that could not have been predicted. Real and Barca have added to this through the different TV rights arrangements within La Liga.

rather than the emirates revenues leading us to be a clear no 2 in the EPL we are certainly in 4th place in wages, and probably lower than that when we consider that we have more players paid and retained under contract across all age groups.........the downside of seeking to develop and retain rather than buying 'pre made' quality.

Given the circumstances we have performed well overall, and now is not the time to ditch the rational strategy we adopted. We just cannot afford to pay excessive transfer fees, and nor can many others....a slow down in this area is likely as all of the other clubs without 'sugar daddies' will be forced to adopt self sufficient strategies and this will impact wages and fees for any players other than those at the big 2 or 3........and there are certainly more than 30 excellent players around. the reputation of Arsenal should mean that players not at the big 2 or 3 will want to play for a progressive Club and manager. AW remains a big lure for players who wish to develop. Losing him now would be a huge error.

3 David Dein is not the answer to the current issues - Yes, he did help to secure and negotiate the terms of many key player transfers, but he did not identify the talent......the lure of working with AW was critical and we were able to compete at that stage because we had a scouting network that kept finding diamonds at a time when other teams had not invested in that activity - now all of the top clubs have competent scouting teams...there is less competitive advantage there. david Dein did not want to move to the Emirates, he wanted to go to wembley and that is why he left. I for one prefer the fact that we own and have our own home in N5.

So Money matters, it directly impacts what happens on the pitch. Our Club's strategy has been and remains correct, albeit there have been bumps in the road caused by external factors that we could not envisage in 2000/02, and with FFP coming in should still see us in the right place. Arsenal is still a huge Club, arguably bigger than ever. We all want on-pitch success, AW more than us I suspect.........support the players, support the manager and support the Club.....The Arsenal. And no booing in the stadium.....please