Arsenal make £92.2m operating loss

It is that day again where the brilliant Swiss Ramble gives his fantastic of analysis of Arsenal’s latest accounts.

His thread is below and I would highly recommend everyone reading.

For me the headline if the loss we made – and it will be the headline that most will be running with.

It is the operating loss of £92.2m rather than the loss after tax of £47.8m that is most concerning.

The operating loss (or profit) is the figure prior to player sales. As a business you do not want to rely on one off asset sales to make a profit – in the case selling a player.

If you rely on that strategy, eventually you have no assets left to sell – or the value of those assets decreases.

Arsenal should not be relying on selling a player to break even. But then we are in extraordinary times.

Our match day revenue dropped £17.5m following the cancellation of half a dozen home games last season.

Broadcasting is also down £64.1m. This is due to due to revenue from 10 games falling into 2020/21 accounts. Commercial revenue is up £31.4 with new deals having kicked in.

The other big change is the increase in player amortisation – IE transfers. This has gone up by £19.4million, which highlights the increased investment in the playing side of the squad.

So £92.2million is our operating loss.

Now there are two sides of a coin. One positive, the other negative.

Lets start with the positive.

The first tweet highlights that it is not Arsenal making huge losses.

The likes of Tottenham and Everton have already posted huge losses, and Manchester United and Liverpool are both expected to do similar.

According to Swiss Ramble, Arsenal’s revenue would have been £35million higher were it not for the drop in match day revenue and deferred broadcasting revenue. These losses of £54million were offset by £19million in cost savings during the Covid crisis.

So without Covid, we would “only” have made an operating loss of £57.2million. Or just £12.8million after player sales.

These figures show the importance of Champions League football.

Arsenal earned just £19.3million from the Europa League, whilst Tottenham who made the Last 16 generated £69.3million. That is a swing of £50million.

That £50million in additional revenue would have seen Arsenal make a post-tax profit even with Covid.

We also would have made an operating profit if Covid did not happen, once additional match day revenue for Champions League games is added in.

The concern for Arsenal is that even when European TV revenue is stripped away from the Big 6 club, we still have the lowest revenue – with both Arsenal and Tottenham generating £320million without European football.

So the positive is that without Covid, we still would have lost money, but just not a big a loss.

The negative is looking at this year, and next.

This year match day revenue will be almost non-existent. You can almost write off all of the £78.7m generated in 2020..

That alone would see Arsenal’s operating loss increase to £170.9million.

We also made just £16.79m in player sales in 2020/21 against £48.29m in 2019/20 (according to Transfermarkt). That is £31.5million less generated.

So our post tax loss, by the time you add the lack of match day revenue and drop in player sales could end up as high as £158million for 2020/21.

Very few businesses can absorb a £158million loss, which is why earlier this year we took advantage of the government loan scheme.

And next season things could get even worse.

Without European football, we will lose the £19.3million from the Europa League (if we do not make it). So any gain made from having fans back in the ground will be chipped away due to no European football.

A £19.3million drop from Europa League to no European football might not seem huge, but it will see us make a £60million loss against those teams in the Champions League.

And this is TV revenue only.7

Arsenal usually make £3.3million per game in gate receipts. Making the Champions League last 16 generates an additional £13.2million in match day revenue. And we do not know if commercial deals have a non-European football clause in them.

So not much positives about today, but well worth absorbing and understanding the data so that you can begin to understand why the club have been cost cutting and had to take out the government loan.

Keenos

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