By David Owen
October 3 – Arsenal, the north London club whose French manager Arsène Wenger has just completed an extraordinary 20 years in the hot seat, have reported a sharp downturn in annual profits. The Gunners posted a pre-tax profit of just £2.9 million for the year to 31 May 2016 – down from a restated £18.2 million. Group turnover in the same period rose from £347.3 million to £356.5 million.
Two main factors underlay the downturn in profitability: a quiet year for the group’s property business, which contributed £2 million against £13.4 million the previous year; and a sharp reduction – from £28.9 million to £2 million – in profits on player sales.
The 2014-15 period featured notably the lucrative sale of Belgium’s Thomas Vermaelen to Barcelona for some £15 million.
The club remains outstandingly cash-rich, with year-end reserves of £226.5 million – a situation that tends to bring mixed reactions, with business analysts applauding its prudence while fans wish the club, which for all its consistency has not won the Premier League since 2003-04, would splash out on more big names to pursue its trophy hunt.
In an indication, perhaps, of the sensitivity of the issue, Sir Chips Keswick, chairman, noted that the £226.5 million figure would “doubtless attract the usual speculation from fans and other commentators.
“That being the case,” Sir Chips went on, “it is my duty to point out that after excluding debt service reserves and amounts owed to other clubs on past transfers the balance reduces to £149 million.
“This figure is in itself inflated due to the seasonality of our cash flows…
“Against the underlying balance of available funds we have…invested strongly in player acquisitions during the summer at a total transfer in cost of more than £90 million…”
Recent arrivals include Granit Xhaka and Shkodran Mustafi, the German World Cup-winning defender.
Chief executive Ivan Gazidis claimed that the club now had “the strongest squad we have had for many seasons”. In the five seasons since Stan Kroenke became majority shareholder, Gazidis said, “we have invested some £350 million in transfer fees”.
Operating profit was up from £7.7 million to £13.2 million. Of operating expenses of £340.4 million, up from £336.8 million, wage costs accounted for £195.4million. While this was a surprisingly modest increase from the prior year’s £192.3 million, the club explained that the comparison was distorted by a “double charge for Champions League qualification bonuses” during 2014-15.
The bottom-line result contrasted sharply with Manchester United, the only other Premier League club to have reported 2015-16 figures to date. United’s pre-tax profit was not far off £50 million, powered by a refinancing of debt and a new kit deal.
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