On the face of it the business of football is in rude health at the Emirates. If anything, Arsenal’s financial performance has outpaced the on-pitch side of things with rising revenues, record match day income and a 25% hike in profits comparing favourably with four straight trophy-less seasons.
So, let the battle of the behind-the-scenes power brokers commence. Unlikely. Strange as it sounds fans have much in common with potential investors since past league and cup successes in football, just like yesterday’s profits in financial markets, should be regarded as no guide to future performance. Buying a stake in the club relies on optimistic assumptions on the clubs ability to continue to generate hefty hikes in profitability and cashflows in the years to come, yet evidence of such potential remains thin on the ground.
For a start, headline revenues have been boosted by the improbable sale of 208 plush apartments at Highbury Square, the clubs listed former stadium. Second, having stripped out this one-off gain, the resulting single-digit growth in overall income was largely because the club played more games than the year before, thanks to semi-finals in both the FA Cup and money-laden Champions League. Combined with a fourth-placed Premier League finish, the chances of significantly bettering this playing performance either this season or in years to come must be considered unlikely.
Also providing a significant cap to future performance is the fact that match day income growth offers very limited upside based on the dubious chances of stadium expansion while the club remains debt laden from building the thing, while season ticket prices are already just about the most expensive in the league.
Yet, like at football clubs across Europe, wage inflation continues to haunt the Arsenal bean counters. Players salaries rose from 101.3 million a year ago to £104 million last year. If this 3% increase seems modest, remember that player wages, for the time being at least, face none of the glass ceilings that the income side of the business does. And imagine what two or three big name signings would do to the figures.
The club has been supposedly ‘in play’ ever since American sports entrepreneur Stan Kroenke and Uzbek billionaire Alisher Usmanov bought significant stakes in the club. The pair now own 53% between them. But football does not operate in a bubble immune from normal economic pressures.
Arsenal are currently valued at £470 million on the Plus Markets exchange and still burdened by close to £300 million of borrowings, a very full price for even the most frivolous billionaire. They’d be better off buying one of clubs 210 still for-sale flats at Highbury Square, at least their value has fallen in line with the real world.