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Arsenal’s Financial Situation Getting Worse

Arsenal released their financial results for the year ending May 31, 2012 today. You can read them here. Despite Arsenal Chief Executive Ivan Gazidis’s attempt to spin the results, this is what he said, there are some worrying trends in these numbers.

The Official Arsenal Position
Arsenal made a net profit of £36.6 million last season and that the club have made good progress in growing the commercial side of the club.

Top Line Numbers

To put Arsenal’s turnover into perspective, in 2009 it was 209m and in 2010 it was 223m. That is an anemic growth in turnover of around 26m in four years.

Turnover Breakdown

  • Match Day Revenue: Increased slightly to £95.2 million from £93.1 million mainly due to the fact that Arsenal had one extra home game last season.
  • Broadcasting Revenue: Basically unchanged at £84.7 million from £85.2 million)
  • Commercial Revenue: Increased to £52.5 million from £46.3 million. Still incredibly low numbers when compared to other big European clubs. Manchester United’s commercial revenue is about double Arsenal’s.

The lack of growth in Arsenal’s commercial turnover has to be really frustrating to Arsenal fans, despite what Gazidis says. Yes I know that the stadium and kit deals are not up until 2014, but look at the growth in commercial revenue the last four years:

  • 2009: £48m
  • 2010: £44m
  • 2011: £46.3m
  • 2012: £52.5m

To put these commercial numbers into perspective, Manchester United’s announced earlier this month that their commercial revenue for last season was £117.6m

This is the part that really shocked me as Arsenal had a massive jump in its wage bill from £124.4 million in 2011 to £143.4 million in 2012. Arsenal’s wage bill now represented 60.9% of the football revenues, up from 55.2% in 2011.

To put this in context, here is Arsenal’s wage bill over the last four years:

  • 2009: £104m (46% of turnover)
  • 2010: £111m (50% of turnover)
  • 2011: £124.4m (55.2% of turnover)
  • 2012: £143.4m (60.9% of turnover)

That is a massive increase in Arsenal’s wage and that kind of growth in expenses is not sustainable. Arsenal have traditionally kept their wage bill at around 50% of turnover, so to see them at almost 61% is really surprising.

Bottom Line
Arsenal is a club with little growth in turnover and an out of control wage bill. Unless they are planning on net transfer dealings of £25-30m each year, Arsenal needs to increase its turnover, specifically its commercial revenue quickly while reigning in its wage bill. To get the wage bill back to 50% of revenues, they need to lower it by about £25m this year. There has been a mass exodus of players from Arsenal this summer, but they also need to get rid of the likes of Chamakh and Arshavin. Deadwood that is driving up the wage bill.