Big loss for Arsenal underlines challenge to restore Gunners’ status

ARSENAL went into 2021-22 knowing they were not going to benefit from European competition for the first time since 1995. Finishing eighth for the second successive season, the club is still struggling to find consistency in the post-Wenger era. The latest financial report from the club emphasises that the Gunners’ continue to lose ground.

In 2020-21, Arsenal made a loss for the third consecutive campaign and the deficit increased to £ 127 million (pre-tax), up from £ 54 million in 2020 and £ 32 million in 2019. This was partly due to exceptional expenses of £ 39 million, but it also demonstrated the impact of covid-19. Since 2018-19, the last “normal” season, Arsenal have seen their revenues drop by 17% and between 2019-20 to 2020-21, they fell by 5% to £ 327.6 million. It is estimated the pandemic may have cost Arsenal around £ 80 million.

In the past five years, Arsenal’s position among the elite (aka the big six) has come under threat and they are now sixth in terms of total income and have been overtaken by their fierce rivals Tottenham. 

The club rearranged its debts and repayed some bank debt, which incurred a big chunk of exceptional items in the form of refinancing break costs. Arsenal rely on significant funding from KSE UK Inc (owned by Stan Kroenke) and they have a £ 70 million working capital facility with Barclays Bank. Their net debt has increased by 84% to £ 199 million due to a big reduction in cash.

On the pitch, while Arsenal have won four FA Cups since 2014, their league form has declined and from being a Champions League regular, they have spent five seasons outside the top four and four years in the Europa League. Rather clumsily, they went out of the Europa League at the semi-finals stage in 2020-21 to Villareal. Coach Mikkel Arteta still divides opinion among fans, although generally, he is popular and people appear to be buying into his “project”. His win rate, though, is 53.8%, lower than his predecessor Unai Emery, and there will be no silverware in 2021-22. Arsenal could still qualify for next season’s Champions League.

  • Revenues down 5% year-on-year
  • Pre-tax loss totals £ 127.2 million, net loss £ 107.3 million
  • Only Chelsea have posted a bigger loss in 2020-21
  • Wage-to-income ratio up to 73%
  • Profit on player sales drops by 80%.

Arsenal’s European run benefitted their broadcasting revenues, which increased by 55% to £ 184.4 million. Absence from Europe will obviously hit the club’s income in 2021-22, hurting almost as much as the ignominy of exclusion. Given the current climate, it was no surprise the Gunners’ matchday earnings fell dramatically from £ 78.7 million to just £ 3.8 million. With the return of crowds, Arsenal should see this revenue stream head towards the £ 100 million mark once more in the current season.  Commercial income fell slightly to £ 139.5 million in 2020-21, but was at a historic high level.

Arsenal’s profit on player sales fell by some 80% to £ 11.8 million, a far cry from the £ 120 million they made in 2018 and far less than the average over the past five years (£ 42 million). The club’s transfer market activity was relatively muted, their biggest signing being Atlético Madrid’s Thomas Partey, who cost £ 45 million, and Lille’s defender Gabriel, who was signed for £ 23 million. They sold goalkeeper Emiliano Martínez to Aston Villa for £ 20 million. Gross spend, according to Transfermarkt, was £ 77.4 million, the seventh highest in the Premier League, while their net outlay was £ 60 million. The club’s accounts show £ 115 million in additional player registrations. 

Even though revenues were 5% lower in 2020-21, Arsenal’s wage bill rose by 6% to £ 238 million, representing 73% of income. To the credit of the players, they agreed to a 12.5% pay cut during the peak of the pandemic. At the same time, the club made 55 people redundant, including their popular mascot, Gunnersaurus Rex. Since 2016, the Gunners’ wages have gone up by 22%, far less than the growth rate at the other big six clubs. For example, Tottenham’s salaries have grown by 105%, Manchester City’s 80% and Liverpool’s 51%. Interestingly, directors’ pay more than doubled in 2020-21. 

The financial news will do nothing to increase the popularity of the current regime at Arsenal, especially as they announced a 4% increase in season tickets for 2022-23 just before releasing their financials. However, Arsenal’s current malaise is a temporary thing and they will be bounce back. Whether they can become more successful depends on a more dynamic transfer policy that identifies talent at the right price as well as a longer-term view around developing a team that can be more competitive. A big change is also needed in the relationship between the club’s owners and the fans. If these factors can be improved, then Arsenal’s Emirates Stadium will be a happier place.