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It’s taken years, but it has finally happened. It’s been long due but 2 consecutive trophies finally happened. Arsenal have added to their trophy cabinet and the true cracks underlying the glamor in the world of football financing and pricing are showing up. I’d in the past predicted a little bit what might happen if we have a stable squad and once the pricing game falls every team will face the consequences! Understandably, everyone (including me) thought we’d have injection of 2 or 3 more players to our squad – to ensure we contend for the Premier League as well as the Champions League – and not be exposed on injuries or dip in forms! Somewhere it has been fulfilled with the injection of a Petr Cech but yet many seem to be disappointed nevertheless!

Gunners Arsenal ChampionsLeague Anderlecht Belgium

Memories & Love – To me this lasts a lifetime!

We’ve done better than the last years but we’re far from what Arsenal is actually capable of producing. The funny part – we’re paying off the debts and are significantly stronger in cash positions than we’ve been in the past, yet some fans are troubled by the lack of transfer activity. Not harsh reality but it’s a sentiment, legends like Henry or existing directors like Lord Harris have publicly shared. Arsene Wenger has certainly been shrewd getting on Petr Cech from Chelsea but we’re really missing another 2 players in my opinion a centre-back and a player in the mid-field. There’s always a healthy debate I share with my cousin and another best friend on the need of a striker 🙂 – but then there’s never an end to it!

Arsenal has had expensive signings and some of them have payed off very well! Others are yet to show the consistent impact. The impact of Alexis Sanchez Vs a Welbeck or a Gabriel or a David Ospina is a whole lot different. Arsene Wenger does have a point in wanting the players who fit right, have the right attitude, hunger and actually make the club stronger. Clearly more important to Wenger was the fact that he might want a particular player but would they be available at a reasonable price? I use the word reasonable for a reason, because Arsenal’s cash balance stands at about £228 million. And although I presume that’s be the cash availability for the bottom 10 clubs in the league combined together, does it mean Arsenal behave irresponsibly? We are where we are today because Arsene and the the core-team knew how tight the money was when they moved to the new Emirates stadium. It’s not always about money, you can spend all what you want including trying to find some “Special Ones”. Halfway down the season you may very well be languishing 15th on the table….

Gunners Cech Arsenal

Check Mate! (Source: Arsenal.com)

Moving from Cash balance and Net Transfer spend

Arsenal’s cash balance has increased by a factor of 3 in the last 8 years. What stood at £74 million in May 2007 showed in May 2015, £228 million. Of course, this number doesn’t mean all that cash is available to spend. Cash-flows work on a completely different principle and Arsenal still have the the debt service reserves and bond agreements to keep in mind. The last balance sheet from Arsenal showed the breakup well to point out that £20 million went towards increasing the cash balance, perhaps one reason is the testing times Arsenal went thru while the stadium was being built. Over the years it should be become clear that the economics Arsenal is following is that of spending only what it earns – now this is the fundamental difference of how people perceive economics. In my first blog I’d specially debated – if Debt was good or bad? Still is a trick question!

Arsenal still have a pretty heavy player wages operating expense. Infact from the 2014 numbers we see it’s just shy of reaching the £200 million mark. Interestingly we see our 2 deluded neighbours (Chelsea & Tottenham) doing what Arsenal seemed to have done best in the past – bring in money thru outbound transfers! (Tottenham £104 million (Gareth Bale to Real Madrid), Chelsea £65 million (David Luiz to PSG).

Despite this has Arsenal cultivated themselves to success rather than “buying” it? It’s a question I’m trying to answer in this blog post!

The only way this question can be answered is if we end up winning more trophies thru a strict financial plan? Arsenal in the coming years have to offset their financial performance thru winning ways on the field. Arsenal have been clever in book keeping – for example amortization costs – when Arsenal buys a player the costs are spread over the term of the contract, but the profit made from selling the player is immediately reflected. This is a rule applied to everyone – it’s the basic principle of amortization. That’s how clubs like Manchester City & Manchester United can spend significant amounts but still comply with UEFA’s Financial Fair Play targets. Arsenal are bringing significant cash with commercial deals and broadcasting rights but the true revenue would come from match day revenue and memberships which have a direct co-relation to the performance on the field. Perhaps you have a better team with better financial results and better broadcasting and commercial deals – but you need more money to have the better team? Or you create a better team over the years to achieve all the perks! Arsenal have been doing that.

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Who is the richest of them all?! (Source:Deloitte)

Deloitte 2015 Money League shows some very very interesting stats.  Something that certainly never worked in Arsenal’s favor was banking on Financial Fair Play (FFP). The primary difference in FFP rules now is to pump in more investment in football. Losses are allowed as long as there is a strategy on recovering money. It rings a tone similar to “Is having Debt good a thing”? And with these changes, we can very well see inflation hitting the transfer market more than ever. And Arsenal must ensure not just qualification into the Champions League but winning trophies.

We have a fine squad today, a stable team playing, some sad departures like Podolski but the team overall is capable of winning and filling the cabinet with silverware. I wouldn’t be pessimistic about not flexing our financial muscle but certainly adding 2 more players in the right area will ensure after a long wait we will win the title. That’s why “In Arsene I Trust”.

 

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