Arsenal’s commercial revenue dropped from £142.3 million to £136.4 million, with the club citing “pandemic-related factors” as the key cause of the shortfall. Other clubs, such as Manchester United, experienced more dramatic losses in commercial terms. However, this did not happen across the board: in the same period, Manchester City’s commercial revenue rose from £246 million to a record £271 million.
Arsenal have also experienced a drop-off in revenue in the transfer market. In 2019-20, they turned a profit of £60.1 million through player sales. That figure has fallen to just £11.8 million (albeit it does not include the £25 million departure of Joe Willock to Newcastle, which took place later last summer). It’s the lowest amount Arsenal have recouped since 2017. Arguably, there is a case that this, too, is a consequence of the pandemic: with most clubs strapped for cash, it has not been a sellers’ market.
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In July 2020, KSE restructured the debt Arsenal had incurred through building the Emirates Stadium. This meant paying several penalties to improve interest rates and to end Arsenal’s obligation to hold £36 million in a Bondholders’ debt service reserve account — essentially, it improved Arsenal’s cash flow. It did, however, incur exceptional costs of £32.2 million. Arsenal say that this decision to refinance, which many supporters felt was overdue, was also a direct consequence of the pandemic. They point out that “elements of the stadium finance bond arrangements were linked to gate revenues”.
Arsenal’s statement is emphatic about the degree of financial reliance on KSE and Stan Kroenke: “Significant funding has been provided by the ultimate parent company, KSE UK Inc, which is wholly owned by the ultimate controlling party, Mr Kroenke. During the year, KSE UK Inc provided funds to refinance the stadium finance bonds and for working capital purposes as required. The financial challenge remains significant, but the club continues to have the unwavering support and commitment of its ownership, Kroenke Sports & Entertainment.”
In the full report, they seemingly go further: “The group is reliant on its ultimate parent undertaking, KSE UK Inc, for its continued financial support.”
The Kroenkes’ financial support to Arsenal has come in the form of loans. The upshot here is that KSE’s support has allowed Arsenal to drop their “external” debt from around £180 million to £16.3 million. Instead, they now have a £201.5 million debt to parent company KSE UK.
The interest rate on these loans remains private, although The Athletic has been told the terms are favourable to the club. The loan is repayable on two years’ notice, but as yet, no such notice has been received.
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Arsenal do not pay dividends to owners but it is interesting to note that the remuneration for directors doubled from £529,000 to £1.1 million. These higher fees reflect the increased involvement of board members Lord Harris and particularly Tim Lewis in the running of the club. As the report puts it: “Included in the above amounts are fees paid to Harris Ventures Limited in respect of services provided by Lord Harris of Peckham and fees paid to Clifford Chance LLP in respect of services provided by T J Lewis.”
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Will next year’s financial results be better?
Yes, next year’s accounts will look somewhat healthier. The return of match-day revenue is obviously a major boost, and the club have also been able to reduce their wage bill.
Nevertheless, Arsenal still expect to record a loss for a fourth consecutive year. This will be partly due to their significant expenditure in the transfer market — some post-balance notes on the account state that since the close of the 2020-21 financial year, Arsenal have spent £125.8 million net on player transfers. That figure accounts for the signings of the likes of Ben White, Martin Odegaard, Aaron Ramsdale, Takehiro Tomiyasu, Albert Sambi Lokonga and Nuno Tavares.
These results for 2020-21 also include broadcast revenues for the Europa League, in which Arsenal reached the semi-final. This year’s results will not be boosted by any revenue from European football. A return to the Champions League would boost Arsenal’s chances of returning a profit in 2022-23.
