Arsenal had a difficult season in the Premier League, finishing outside the top 4 for the first time since 1996 – missing out on Champions League football in the process. Arsenal also had another poor Champions League, crashing out in familiar fashion at the last 16 stage to Bayern Munich.

As far as consolation prizes go, the FA Cup is a good one winning this trophy appeased fan unrest after a 2-1 victory over Chelsea at Wembley secured a 3rd FA Cup in 4 years – setting a new record of 13 FA Cup wins in the process.

Financially Arsenal once again improved, recording their highest profit figure in the last 6 years. Profits rose exponentially from £1.6m to £35.3m after increasing revenues outpaced rising expenses.

Lets delve into the numbers.

Revenue Analysis

Arsenal passed the £400m revenue barrier for the first time with revenue rising from £353.5m to £424.0m (19.9%), continuing their year on year growth record.

Commercial revenue rose from £106.9m to £117.3m (9.7%) after a successful commercial campaign yielded new and extended secondary partnerships with BNN Technology, MTN, Universal Pictures, Gatorade among others.

Matchday revenue stayed relatively stable, edging to £100.0m from £99.9m with the club near enough maxing out their stadium capacity for all home games, indicating an expansion may be necessary for the Emirates in order to increase matchday revenue.

Broadcasting revenue was the main reason for Arsenal’s 20% rise in overall revenue, increasing from £140.6m to £198.6m (41.3%) after the new Premier League TV deal came into effect as well as a boost in Champions League and FA Cup prize money.

Other income rose from £6.1m to £8.1m (32.8%) with the majority relating to Arsenal’s property business.

Arsenal are unfortunately likely to see revenue fall next year with the absence of Champions League football, the only hope of offsetting this lost revenue being a Europa League triumph which will be difficult after drawing Atletico Madrid in the Semi-Final. Manchester United received £48.5m after winning the Europa League, however this was helped by the club being in the Champions League group stage in the first place, dropping to the Europa League after a third place group finish.

The club also failed to have any significant domestic cup runs this season and as such matchday and broadcasting revenues will suffer from less games in these competitions while a 6th or 7th placed finish will reduce their Premier League merit payments.

Expense Analysis 

Expenses rose less significantly than revenue, increasing from £340.4m to £372.0m after the club managed to control its costs well despite player investment.

Amortisation costs rose from £59.2m to £77.1m (30.2%) after significant player investment, showcasing the club’s commitment to better support Arsene Wenger in the transfer market after years of being frugal, this being the third consecutive year of amortisation growth.

Net finance costs rose from £13.4m to £14.7m (9.7%) despite a fall in debt levels after adverse movement on the financial instruments they owe money on.

Depreciation on Arsenal’s fixed assets such as their stadium and training ground rose from £14.3m to £15.0m (4.9%) after the club invested significant funds into improving these.

Wages stayed relatively stable despite player investment, rising from £195.4m to £199.4m (2%) after failure to secure Champions League qualification led to smaller bonuses being payable to players, as it should be. This offset the rise in wages from the arrival of their new players while they also saw a few high earners depart on loan or on free transfers.

This small increase in wages does still equate to an extra £77k extra a week spend on players.

Arsenal had a hefty tax bill of £9.3m compared to only £1.2m last year, a new effective tax rate of 20.9% due to previous accounting/tax technicalities.

Transfers Analysis

Arsenal saw 5 players join the club with only 3 leaving after an expensive summer.

In came Xhaka (£40.5m), Mustafi (£36.9m), Perez (£12.6m), Asano (£3.6m) and Holding (£2.7m) for a combined £96.3m.

Out went Gnabry (£4.5m), Silva (£2.7m) while Wilshere left on loan for a fee of £2.1m, bringing in a total of £9.3m back into the club.

This led to a huge increase in Arsenal’s net spend, rising from £21.6m to £87.0m (303%).

Despite this, the signings can only be seen as poor after they failed to qualify for the Champions League or look like a threat in the Premier League. Mustafi, Xhaka and Perez failed to live up to their price tags with the latter already departing the club.

Arsenal did however see a huge increase in their profit on player disposals with Gnabry and Silva increasing this from £2.0m to £6.8m (240%) with both being brought for peanuts years ago as youth players. This still doesn’t amount to a huge amount of income to Arsenal however.

The club spent cash of £111.5m on player transfers compared to £66.8m last year, showcasing the enhanced commitment to try and compete financially in the transfer market.

Arsenal only received £8.9m in cash for transfers compared to the £12.6m received last year with few departures.

The club also potentially owe another £20.5m in transfers should certain clauses on ex players be met.

Asset/Liability Analysis

Arsenal saw net debt levels rise after player investment and stadium improvement costs saw cash levels drop.

Cash levels fell from £226.5m to £180.1m (25.8%) after a net transfer cash spend of £102.5m and a stadium/facility improvement cash spend of £25.3m. The club also paid interest of £12.3m and repaid £8.1m of debt.

Debt levels fell ever so slightly after the debt repayment, falling from £232.6m to £227.4m (2.2%).

This led to Arsenal’s net debt levels increasing 7 fold from £6.1m to £47.3m (675%) after being close to net cash position for the last two years. 

This suggests a slight change in strategy by Arsenal as they look to bridge the ever increasing financial gap as well as the gap in quality emerging on the pitch. Fans will suggest this move comes a little too late after their Champions League qualification failures however they will be hoping similar investment continues and increases over the next couple of seasons.

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