Yes, inflation is real, all over.
And now … we play the waiting game
Rohit wrote:invisibleman18 wrote:It's all relative though right? Good players didn't cost 50m when we built the stadium either.
Not 50 Mn. But Abramovich's arrival changed the game. There was a big jump. We were in for Essien weren't we? Just an example but I agree with Ricky here. Our greatest flaw was we were too persistent with under performaning players.
Because AW & Co refused to accept the new norm and refused to pay market rates. Let alone that AW's methodology only works when the majority of the squad are fit for purpose, then he only needs to allow them the freedom to develop their intuitive play as a team.
Gunner89 wrote:Spurs stadium cost is much more than ours
Ours was 390m then or 554m in 2018 money.
The TH stadium is part of a project with an overall cost that rose from 850m to 1bn.
They have borrowed 637m on a short term 5 year loan and plan to raise 100m/year from ticket sales along with hospitality etc, with the stadium generating twice the revenue of WHL.
Essentially they are looking to spend over 100-150m per year each year for the next 4-5 years just to repay the stadium debt.
What I don't get is how they are also going to be able to spend on players, let alone making offers over 50m an any single player.
If they can generate more revenues than us, pay-off greater debt in 1/5th of the time AND still invest more than us into their team, then we have f*cked up BIG time.
Tottenham didn't buy a single player last year. The idea that they're splashing left right and centre is nonsense. They will have made 100m odd from getting to the final much of with they wouldn't have budgeted for, while they may also have Eriksen going to Madrid. Of course they might have a bit of money to spend in the summer.
goon wrote:Tottenham didn't buy a single player last year. The idea that they're splashing left right and centre is nonsense. They will have made 100m odd from getting to the final much of with they wouldn't have budgeted for, while they may also have Eriksen going to Madrid. Of course they might have a bit of money to spend in the summer.
I think it's mainly bluff and BS putting on a strong face, but I'd not be surprised if the only transfer business they do is based upon selling first.
Ricky1985 wrote:Kel Varnsen wrote:This is one of those things that seems baffling to me. I don't know a lot about the situation (maybe there is a good explanation), but it seems we essentially wasted a lot of money by not spending it when player prices were far lower.
Can someone explain this? Was the transfer fee inflation of players really that surprising? Was the money tied up into other things?
The cash reserve stories circulated every season in the press were always right after the money from season ticket sales. We also had to keep a substantial amount of money in the bank as part of the terms of the loan refinancing.
I don't think the problem is that we didn't spend enough; I'm pretty sure we nearly always soent what we had. The problem is we made error after error on what we spent the money on. New contracts for poor players chief among those bad decisions.
Swiss Ramble begs to differ. It was a known fact we sat on a mountain of cash from 2013 to 2016 and subsequently the players cost too much for us to improve. Average players like Lemar demanded 92m when the previous window it was 30m.
Mirth wrote:Ricky1985 wrote:Why would you ignore the fact that the revenues Spurs receive in TV money from the Champions League and Premier League is orders of magnitude higher than we were receiving in the initial years after building the Emirates?
There's plenty to legitimately criticise Arsenal for: I have done a lot of it myself recently, but oversimplified analysis of various aspects of the club to suit various agenda is not helpful.
Exactly, it's nonsense to compare the events of 2004 with 2019. That's a 15 year gap, it's like comparing the league in 1989 to 2004. Blaming the stadium move now is also childish, it was great that we moved the club forward. Unfortunately that's the last time the club came together and did something good.
The club is in a shit state but you don't need to jump through more hoops to try and prove that.
Nobody blamed the stadium move. We needed it to move forward and it was one of the best things Wenger done for us.
Subsequently we often dithered on transfer decisions for a few million or so, preferring to trust the players we have instead of playing the transfer game for the next entire decade. Nobody else struggled as much as us in the market after moving to a new stadium at the expense of trophies. We just aren't smartly run from the top since awhile ago and we are suffering the consequences now.
Clrnc wrote:Ricky1985 wrote:The cash reserve stories circulated every season in the press were always right after the money from season ticket sales. We also had to keep a substantial amount of money in the bank as part of the terms of the loan refinancing.
I don't think the problem is that we didn't spend enough; I'm pretty sure we nearly always soent what we had. The problem is we made error after error on what we spent the money on. New contracts for poor players chief among those bad decisions.
Swiss Ramble begs to differ. It was a known fact we sat on a mountain of cash from 2013 to 2016 and subsequently the players cost too much for us to improve. Average players like Lemar demanded 92m when the previous window it was 30m.
Care to provide a link to that so I can have a read? I'd be genuinely interested because it's not my understanding that we left money sitting in the bank as opposed to making bad decisions on transfers/contract renewals.
I can’t remember all the detail of our cash balances from a few years ago, but I’m almost certain our cash flows weren’t good. Whilst the ‘profits’ from each year looked good that didn’t tell the full story, the cash from that money didn’t always move in the year it was accounted for. I’m sure we had rather poor cash flow which is where I believe a lot of the risk averseness arose with the club at the time. We simply couldn’t afford to splash out and not get a return in terms of results. However that doesn’t excuse some of the poorer decisions that were made.
Also profits only came from player sales.
Ricky1985 wrote:Clrnc wrote:Swiss Ramble begs to differ. It was a known fact we sat on a mountain of cash from 2013 to 2016 and subsequently the players cost too much for us to improve. Average players like Lemar demanded 92m when the previous window it was 30m.
Care to provide a link to that so I can have a read? I'd be genuinely interested because it's not my understanding that we left money sitting in the bank as opposed to making bad decisions on transfers/contract renewals.
Wenger himself has always insisted that he would have no problems spending if the right players to strengthen the squad were available, “I would spend £300 million if I find the right player – and if I have £300 million”, though he has also described the current spending levels as “quite scary”.
“Le Professeur” has further explained that English clubs suffer from having to pay a premium, as everyone knows that they are awash with money from the new TV deal, though this does make it even more perplexing that Arsenal did not spend their riches before when prices were much lower.
A couple of years ago £50 million would have bought two world-class players, while it is now barely enough for one. When Wenger was asked about the rise in transfer fees, he said, “We knew that would happen, it was not difficult to anticipate.” Well, precisely, so why keep the powder dry?
In the latest accounts for the year ended 31 May 2016, Arsenal’s cash balance has very slightly fallen by £2 million to £226 million, but the upward trend remains intact despite the higher spending. In the decade since Arsenal moved to the Emirates Stadium, cash has risen by more than 500% from £36 million to nearly a quarter of a billion.
In 2015/16 Arsenal’s cash balance has been overtaken by the cash machine that is Manchester United with £229 million, but the Gunners are far higher than the rest of the Premier League with the closest challengers in 2014/15 being Manchester City £75 million, Newcastle United £48 million and Crystal Palace £29 million.
To further place this into perspective, Arsenal’s cash balance is more than Real Madrid, Barcelona and Bayern Munich combined.
This is nothing new. Since 2007 Arsenal have produced a very healthy £722 million operating cash flow, though a draining £251 million has had to be used for stadium financing (£159 million on loan interest and £92 million on debt repayments) with a further £117 million on infrastructure (“hugely important investments which, whilst not grabbing headlines, will help underpin our long-term future” per Keswick) and £22 million on tax.
Only 20% (£141 million) of the available cash flow has been spent in the transfer market, though virtually all of that (£137 million) has been in the last four seasons. The other notable “use” of cash in that period is to increase the cash balance, which has risen by a cool £191 million.
Major shareholder Alisher Usmanov has noted that Wenger had been put in a very difficult position, as the shareholders did not put any money in to finance the new stadium, which meant that the quarter of a billion incurred to date on stadium financing was not available to improve the squad. That’s obviously correct, but it is equally true that Arsenal have left a lot of available money in the bank to attract one of the lowest interest rates in history, while transfer inflation has been running amok.
Go back a few posts for the previous year's accounting summary and its the same, we have sat on our laurels till it became worthless. It's just ridiculous and given that transfers don't even take full fees most of the time, imagine the amount of good players we could have accumulated those days, even right from 2 years after our stadium move?
https://www.football365.com/news/emery-wenger-kroenke-who-to-blame-for-arsenals-shtshow
This is on Kroenke and Wenger
Things do not look good at Arsenal.
A squad carried by 2 strikers who probably both want out.
Two number 10s on combined wages of over £500k a week who will be frightfully hard to sell given they’d both be turned down by any top 8 club due to their inconsistency.
A midfield “lynchpin” that cost more than £30m and cannot offer any meaningful form of defensive cover.
A defence with maybe 2-3 players that would be wanted by a top 8 club, including a £30m+ singing that appears to be worth less than £10-15m just 3 years after signing him.
They’re losing their only top quality, star midfielder (and third top goal scorer) on a free.
They’re losing their back-up striker and back-up goalkeeper on frees / retirement.
They’re probably losing 3 full-backs on free transfers.
They’re probably losing their third choice, international goalkeeper for next to nothing.
Arsenal appear to be 7-8 successful new signings and 3-4 successful academy promotions away from having a squad that could compete for a top 4 spot or a Europa League Final win… and that’s if their recruitment and talent management is up to scratch and their star strikers don’t push for a move away. Given that:
1) The clubs around them have a lot of money to spend on improving their squads;
2) They let their “Diamond Eye” head of recruitment leave without a replacement; and
3) The club claim to have just £40m plus sales proceeds to spend in the summer window…things do look pretty bad.
With Wolves and Leicester showing ambition, Arsenal appear to have a much better chance of falling into the top 8 category than they do of breaking back into the top 4.
The galling thing for Arsenal fans though is that the club had the opportunity to cement themselves in the top 4 but chose not to take it. Kroenke and Wenger refused to invest in building a strong squad – they allowed it to rot for an unknown and inconceivable reason but it wasn’t due to lack of resources as they once proclaimed.
Comparing Arsenal with how Liverpool and Spurs have acted over the past 11 financial years illustrates this best.
In the 6 year period 2008-2013, after Arsenal had moved into the Emirates but in the run-up to FFP being implemented, Profit before Interest and Tax (a sound approximation for measuring FFP) was on average each year:
– Positive £48m at Arsenal (total of £289m over the 6 years).
– Positive £9m at Spurs (total of £54m over the 6 years).
– Negative £19m at Liverpool (total of negative £114m over the 6 years).
This was the period where supposedly Arsenal could not invest in its squad and fans had to be patient because eventually, the new stadium would allow them to compete. With hindsight access to the accounts, these statements appear to be false. Falsehoods told to fans to keep them spending big money on tickets whilst the shareholders effectively pocketed it all by building up the accounts for a sale.
Even if you accept that they couldn’t raise equity instead of debt (which they definitely could have) the average Profit Before Tax (what Arsenal had free to spend after paying off any debt) was £31m per year over that period. £185m over 6 years that could have been spent on the squad at a time when that would have had a huge impact.
Whilst Liverpool and Spurs were investing as best they could, Fiszman et al. plumped the club up for an eventual sale, at the expense of supporters funding everything.
Whilst Liverpool and Spurs were trying to invest and compete, Arsenal rested on their laurels and allowed the club to rot.
Now, let’s look at how that’s paid off for the club. Over the past 5 years of published financial data (2014-201, average PBIT has been:
– Positive £42m at Arsenal (total of £210m over the 6 years)
– Positive £75m at Spurs (total of £373m over the 6 years)
– Positive £47m at Liverpool (total of £236m over the 6 years).
At first, Arsenal appears to be doing well but consider three things:
1) Liverpool and Spurs show growth into positive profitability in an FFP world, whereas Arsenal shows erosion. Despite the huge increases in TV money and Commercial deals, their profitability is declining.
2) Liverpool’s and Spurs’ squads (the clubs’ true value) are both probably worth double what Arsenal’s is worth.
3) In the most recent financial year, 2018: Arsenal yielded PBIT of £79m, with an expectation this could crash to below zero in 2019, whereas Spurs recorded PBIT of £157m and Liverpool £133m.
Spurs’ and Liverpool’s investment at a time when they could do so, before FFP fully kicked in, has paid off. Arsenal’s refusal to even invest their own resources, let alone that of their shareholders, has resulted in a hole which they cannot dig out of. They’re stuck now and I don’t see any leadership at the club, from the owner or the “management”, which suggests they are able to remedy this.
I’m not a “football man” as Arsene Wenger would put it but I have been involved in the finances and strategy for some of the top organisations around the world and my take is this – barring a miracle of good fortune in recruitment such as finding the next 1-2 Messi’s, Ronaldo’s or Neymar’s; Arsenal is finished as a top 4 club.
It can’t ever again compete for the Premier League or Champions League – it has allowed itself to fall too far behind at a time when it could easily have pushed onto great things. Like I said, galling for fans and supporters but also truly bizarre acts from a supposedly smart businessman. The value of the club is plummeting and Kroenke appears to have no interest in correcting this. It would be a sad fizzling out for what was once a great club of the English game and Premier League.
Ben
So pleased this season is over. Surely we can’t be any worse next?
Tam wrote:I can’t remember all the detail of our cash balances from a few years ago, but I’m almost certain our cash flows weren’t good. Whilst the ‘profits’ from each year looked good that didn’t tell the full story, the cash from that money didn’t always move in the year it was accounted for. I’m sure we had rather poor cash flow which is where I believe a lot of the risk averseness arose with the club at the time. We simply couldn’t afford to splash out and not get a return in terms of results. However that doesn’t excuse some of the poorer decisions that were made.
And that was the primary reason for Dein's concerns regarding building the stadium, and more importantly the way the finances were structured.
By front loading our commercial deals and locking us into a 10 year deal our cash flow was going to be less than 10m a year for the decade, meaning we would have no cash on hand to be able to react to changes in the market. It is then telling that at the peak of our success on the field was the beginning of Abramovich at CFC and the market changed forever before we had even moved.
It is also telling that Dein's search to bring in an investor didn't take place until after the move and after seeing that nothing had changed in our approach, and that his actions re selling shares to both Kroenke and then Usmanov were no different to his earlier sale of shares to bring Fiszman in to provide a cash loan that enabled the club to give Wright a new deal, and to buy DB10 and Platt.
I read an article about GG's bung controversy, and a point was raised that GG had asked the BoD for more money to invest in the team and had been refused. It then went on to say that this same issue had arisen with both Neill before GG and Rioch after him.
There was another article a few years ago that said that after the move Dein had spoken to the scouting team and had told them that with the new revenues generated by the stadium the club could buy a 20m player each summer. The inference was that this was not a total spend for the summer but that we could break our then transfer record every year, yet we did not do so until we signed Ozil.
@lorddulaarsenal wrote:So pleased this season is over. Surely we can’t be any worse next?
According to the letter in the f365 mailbox it would seem that unless we seriously re-structure our finances, then there is a concern that we are simply on a downward trajectory and are finished as a top4 club.
As such it would mean that this season and the appointment of Emery as a Europa 'specialist', was akin to being a 'Hail Mary' pass that we dropped in goal.
Clrnc wrote:Ricky1985 wrote:Care to provide a link to that so I can have a read? I'd be genuinely interested because it's not my understanding that we left money sitting in the bank as opposed to making bad decisions on transfers/contract renewals.
Wenger himself has always insisted that he would have no problems spending if the right players to strengthen the squad were available, “I would spend £300 million if I find the right player – and if I have £300 million”, though he has also described the current spending levels as “quite scary”.
“Le Professeur” has further explained that English clubs suffer from having to pay a premium, as everyone knows that they are awash with money from the new TV deal, though this does make it even more perplexing that Arsenal did not spend their riches before when prices were much lower.
A couple of years ago £50 million would have bought two world-class players, while it is now barely enough for one. When Wenger was asked about the rise in transfer fees, he said, “We knew that would happen, it was not difficult to anticipate.” Well, precisely, so why keep the powder dry?
In the latest accounts for the year ended 31 May 2016, Arsenal’s cash balance has very slightly fallen by £2 million to £226 million, but the upward trend remains intact despite the higher spending. In the decade since Arsenal moved to the Emirates Stadium, cash has risen by more than 500% from £36 million to nearly a quarter of a billion.
In 2015/16 Arsenal’s cash balance has been overtaken by the cash machine that is Manchester United with £229 million, but the Gunners are far higher than the rest of the Premier League with the closest challengers in 2014/15 being Manchester City £75 million, Newcastle United £48 million and Crystal Palace £29 million.
To further place this into perspective, Arsenal’s cash balance is more than Real Madrid, Barcelona and Bayern Munich combined.
This is nothing new. Since 2007 Arsenal have produced a very healthy £722 million operating cash flow, though a draining £251 million has had to be used for stadium financing (£159 million on loan interest and £92 million on debt repayments) with a further £117 million on infrastructure (“hugely important investments which, whilst not grabbing headlines, will help underpin our long-term future” per Keswick) and £22 million on tax.
Only 20% (£141 million) of the available cash flow has been spent in the transfer market, though virtually all of that (£137 million) has been in the last four seasons. The other notable “use” of cash in that period is to increase the cash balance, which has risen by a cool £191 million.
Major shareholder Alisher Usmanov has noted that Wenger had been put in a very difficult position, as the shareholders did not put any money in to finance the new stadium, which meant that the quarter of a billion incurred to date on stadium financing was not available to improve the squad. That’s obviously correct, but it is equally true that Arsenal have left a lot of available money in the bank to attract one of the lowest interest rates in history, while transfer inflation has been running amok.
Go back a few posts for the previous year's accounting summary and its the same, we have sat on our laurels till it became worthless. It's just ridiculous and given that transfers don't even take full fees most of the time, imagine the amount of good players we could have accumulated those days, even right from 2 years after our stadium move?
Had we used our financial capability at any time after the move, and moreso ahead of the TV deal and the FA's wages baseline, we could have effectively achieved a lock out re top4 that LFC and TH would not have been able to break into. There was an article a few seasons ago that indicated the cost to gain/retain top4 was a nett spend in excess of 100m in at least 1 summer transfer window.
Of the top4 at the time we were the weakest link as we had never done so and still have not, whereas I think every one of the other top6 have done - even TH when they did their last rebuild and signed the likes of Vertongen, Alderweireld, Lloris etc. Had we spent our cash reserves as a 1 shot war chest then the cost to regain top4 would have been much more than 100m, because of the quality and squad value of all of the top4.
Instead we were too busy patting AW on the back for being so clever to have the lowest net spend in the PL over his tenure, and were busy looking at our pre-tax profits each season.
We don't change what/how we are doing things on or off the pitch unless there is an irrefutable reason to do so. As such IMO we are at as big a cross-roads for the club as when AW arrived, except this time we are in a much weaker position on and off the pitch as our team is dis-functional and we have no ambition evident in the BoD/owner or any appetite to change.
Anzac wrote:@lorddulaarsenal wrote:So pleased this season is over. Surely we can’t be any worse next?
According to the letter in the f365 mailbox it would seem that unless we seriously re-structure our finances, then there is a concern that we are simply on a downward trajectory and are finished as a top4 club.
As such it would mean that this season and the appointment of Emery as a Europa 'specialist', was akin to being a 'Hail Mary' pass that we dropped in goal.
That looked like a bit of an exaggeration, but we'll definitely struggle in the near future. Best case scenario is Bellerin and Holding come back better than ever, Leno keeps developing, Torreira finds a bit of form again, some of the kids step up, and we hit jackpot in the transfer market.
Rohit wrote:Also profits only came from player sales.
If you step back and look at this from a wider perspective it also gives 2 other indicators:
Firstly that we needed player trading to raise cash flow for transfers as opposed to revenues (remembering that our normal cash flow from our commercial revenues was less than 10m per season);
Secondly that even with selling players we still did not reinvest all those funds into the team because of the way we structured our finances and because of our lack of activity inn the Jan window. Essentially our season profits were based upon the unused finances remaining after the summer transfer window closed, along with the sponsorship and prize money received at the end of the season.
Just want to highlight some points from SwissRamble's figures
"To further place this into perspective, Arsenal’s cash balance is more than Real Madrid, Barcelona and Bayern Munich combined."
This is from 2015/16 = only 3 seasons ago & our last season in the CL.
"Only 20% (£141 million) of the available cash flow has been spent in the transfer market, though virtually all of that (£137 million) has been in the last four seasons. The other notable “use” of cash in that period is to increase the cash balance, which has risen by a cool £191 million."
The significance/relevance of this is in regards to our initial finances structures with our front loaded commercial deals and the decade of single figure cash flow.
There were 2 criteria made by our sponsors regarding our finances:
Firstly that the club retained 30% of annual revenues against debt payments incase we dropped out of the CL;
Secondly that the club re-invested the other 70% of annual revenues directly back into the team to ensure the product remained attractive and capable.
The club then refinanced the loans in 2006 and converted them into Bonds with a repayment of 20-25m over 25 years where the Home gate from 5-8 games per season covered the repayment each season.
The second and most damning number is the drop in % of investment made back into the team, from an initial required 70% to an actual 20% made of our own choice, and that 20% came mostly only once the original sponsorship deals ended and our cash flow increased from the new deals.
This financial structure was put in place long before either Kroenke or Usmanov were on the scene, and the refinancing was done they year we moved and saw what our match day gates were worth, and a year before Kroenke bought his initial 9.9% shareholding from ITV. All this was done whilst PHW was chairman.
Kel Varnsen wrote:Anzac wrote:According to the letter in the f365 mailbox it would seem that unless we seriously re-structure our finances, then there is a concern that we are simply on a downward trajectory and are finished as a top4 club.
As such it would mean that this season and the appointment of Emery as a Europa 'specialist', was akin to being a 'Hail Mary' pass that we dropped in goal.
That looked like a bit of an exaggeration, but we'll definitely struggle in the near future. Best case scenario is Bellerin and Holding come back better than ever, Leno keeps developing, Torreira finds a bit of form again, some of the kids step up, and we hit jackpot in the transfer market.
IU think the point of the letter is that we'll continue to struggle unless we make some radical changes to our finances and structure.
Despite all the increased revenues we are showing a downward trend particularly regards to disposable income, whilst the rest of the contenders have shown a strong upwards growth.