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Arsenal's Money Pile

Among the themes popular with those critical of some of the club's policies over recent years is the claim that as we are sitting on cash reserves it somehow confirms that we have under invested in the team. In most other businesses healthy cash flow would be considered a positive indicator of investment capacity. In football we've persuaded ourselves that the normal rules of business don't apply.

Alan Sugar, as former chairman and an owner of Spurs, once spoke despairingly of the 'prune juice' effect in football finances which prevented their sustained development as cash that came in left just as quickly. To illustrate how this might happen it's worth taking a look at the balance sheet in the interim accounts published last November. You'll see two figures for creditors - one payments due in more than one year of some £250m+ (mainly stadium debt) and another for creditors due in less than a year (mainly relating to season ticket obligations and other operating costs) of £167m. It's this second figure which should be kept in mind when looking at our cash reserves of £143m. While much of this is met from income (including debtors) the idea that cash is static and therefore serves no purpose other than to spend on players is misleading. From our cash reserves net current assets when set against liabilities are £60m.

Healthy cash reserves aren't a weakness in businesses that generate cash and self sustaining clubs like Bayern or ManU also hold good reserves. In 3 of the last 5 years ManU have shown reserves at or above £150m though it had dropped lower before rising again to some £100m in their last accounts. The recent agreement by PL clubs to adopt FFP is designed to try to limit wages and transfer costs sucking increased broadcasting income straight out of the clubs encouraging them to build up reserves. Uefa's own FFP rules, which also limit the amount owed between clubs, are also designed to promote healthy financial practices. There is a growing recognition that in an environment in which money has grown exponentially over the last couple of decades a more robust financial discipline is needed not just to avoid ever greater failures but to promote a fair competitive landscape.

For these reasons, when you hear or see supporters claim that the club is holding lots of cash which 'proves' that they're not interested in investing in the club tell them politely that they're living in the past. It helps provide the flexibility, opportunity and choice we need to compete. Cash reserves are a healthy indicator of our ability to invest on an enduring basis and should be seen as a strength to be celebrated - not a stick Arsenal need be beaten with.

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The Journalist

Writer: Amos Mail feedback, articles or suggestions

Date:Tuesday May 27 2014

Time: 9:03AM

Your Comments (oldest first)

Change to most recent first
Thanks so much for posting this, Amos. I have been waiting for an article like this to set out clearly what I had an inkling about but did not understand well enough to articulate. I hope I'm not being unfair when I say that Swiss Rambler bears the bulk of the responsibility for many misconceptions in this area.

Football fans do indeed have a warped view of finances - financial responsibility is seen as a sign of a lack of passion for the club or the game. High ticket prices and the lack of grassroots development are (rightly) bemoaned and yet many are happy to see all the extra billions going into football siphoned off by agents and a lucky few footballers at the top of the game.

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27/05/2014 10:32:00

Swiss Rambler produces excellent financial summaries but his last on Arsenal was some three weeks before the last summer window closed, hence transfer deals had not been completed, and in comparing ManU's cash balances he used a figure which was for ManU in recent times very low and therefore misleading. It has since climbed while ours had declined slightly. There's no doubt that Arsenal has the financial strength to invest in players - and in the last 3 seasons they have spent more on player transfers than in the previous 8 seasons combined. To be in a position to do that consistently is exactly where you would want them to be. But an expensive mistake for Arsenal could significantly inhibit future spending so taking the time to make sure, as far as possible, we're getting value for our spend is still essential and to be encouraged.
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27/05/2014 12:02:00

Most fans consider spending to be just the 'transfer fees' and completely ignore the wages that come with a player. We sure can buy a Diego Costa but can't afford his 250-300k a week bill. Arsene's philosophy of buying 1-2 stars, having a core from within the club and scouting for lesser known gems will help the club move forward in building teams in this destructive transfer market (David Luiz's 40m move to PSG shows just why). Cash reserves or no, football is what matters. People will forget the cash if Sanogo starts banging them goals in week in week out despite him being a free transfer on 25k per week.
Kaushal Vasa
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27/05/2014 12:31:00

I wasn't sure which one of these 'labels' was more frustrating: 'they haven't won anything since ... Arsenal won't spend any money ...". The surprising thing was how 'reputable' media houses played the money angle and got away with it. And as 'fair' as Swiss Rambler aspired to be his commentaries and conclusions --- as his reputation soared, in my opinion --- oftentimes veered from the story the financial figures were writing. I know we the fans suffer from relative depravation and deserve some slack with our irrational expectations especially when our neighbours spend obscene amount of money year in and year out. However, we should at least show some interest in the 'economy' of the game. What I will add to this excellent write-up is we should not be fixated so much on Arsene's philosophy but rather on the basic financial framework the club elected to follow. The self-sustainable model should be our point of reference whenever we wonder about cash reserves. Of course, this model is not what bind us to the club but it helps to have it in mind. If we have done so in the past perhaps we could have influenced those at the helm who for so long failed to see the commercial potential of our beloved Arsenal and did virtually nothing --- as far as available records indicate --- to open additional revenue stream. Thankfully, that is getting better.
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27/05/2014 13:55:00

Good points NYArse. I also have the feeling that Swiss Rambler wrote the conclusion to his piece first as much of his analysis provides support for the clubs policies. As you allude to much of ManU's consistency of success is owed to the fact that for the most part they ran their business on pragmatic and commercially driven lines.
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27/05/2014 18:29:00

Another very good point, Kaushal Vasa.

@ NYArse - that is exactly what I mean about Swiss Rambler. Also, he could have piped up at any time to correct misunderstandings or issue caveats.

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27/05/2014 20:33:00

Quite an interesting piece Amos. Tis always reassuring to drive home the point that spending about one's pay grade will only lead to decline. Rangers, Anzhi are a few examples. I identify with this club cos of its realistic approach to the game and the business. I think most fans are only endeared to the footballing aspect of the club and seem to forget that the financial health is also as critical. I mean if that were in jeopardy, then we will have no Arsenal to celebrate along with 250,000 others. Thank you Arsene and Thank you Board.
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28/05/2014 00:28:00

So where is this 100 mil pounds the media keep rambling about? The so called war chest...
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28/05/2014 00:29:00

Good write up Amos. I have argued these points with my colleague but keep getting shut out. " the game has moved on"; "we have to play according to the dictates of the times"; "everyone has a sugar daddy" etc. Even when I ask them to show me one prostitute that is happy doing what she is doing they shout me down. Luckily I have been a gunner long before the premiership started so I understand the impatience of the premiership fans. However nothing makes me prouder of my club than the fact that we need no Russian/Sheik sugar-daddy to achieve. We have not only achieved but have been a force to reckon with. Belittle us at your own risk!! However, I will join any revolution next season if we do not bring in some notable players to strengthen the team as the only thing we are hanging on to is the fact that we when the banter gets too much we can beat our chests and remind our haters that "we are the only team in the UK that has consistently made the champion's league". So understand that I do not want Arsenal to ever lose that WHATEVER IT TAKES!!. As of now it makes for good and consistent bragging as well as shutting up all the haters.
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28/05/2014 00:56:00

@ Guyfox.

The war chest is a media creation - "Arsene's £100 million war chest" sounds sexier than saying "Increased commercial revenue is available to be spent on players, and purchases will as always be assessed on a case-by-case basis, taking into account value to the squad". And it's shorter.

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28/05/2014 11:05:00

Well said, all round. The media obviously enjoy creating hypes around Arsenal because it helps readership and 'hits' on blogs/sites. The "Arsene's war chest" myth is just one example; we have had "English club with foreign legion", "Arsenal hasn't won a trophy in...", "Wenger is a tight......", etc. I can understand that not every fan is skilled at analyzing financial information so as to interpret Cash reserve as an item; what I can't understand is how everyone can be carried away with the notion that, because the media keeps going on about a war chest, Wenger is the only reason the club is not spending. Most forget how he paid big bucks, at the time, for the likes of DB10, Reyes, Marc Overmars and Wiltord. We need to have perspective and understand the club's philosophy is crucial to ensure it's going concern status. The rest is passing fancy.
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28/05/2014 11:42:00

Cor blimey, lot a backslapping going on here! Understanding that there's cash in the bank and not spunking it all up the wall is the best strategy doesn't mean you'll suddenly p1ss the CFA exams. Ask the Amazon CEO why he doesn't sit on the cash, yet still has investors clamoring - and also, while you're at it, ask the Apple CEO what's going on with all that they've got. Money that you're sitting on should be pumped back into the club/business on players/product development, whatever - if it's not, then give it back to shareholders! Or in our case, don't raise season ticket prices to even higher levels, forget the prune juice affect, that's a lemon squeezie.
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28/05/2014 13:22:00

If nothing else shewore it makes for a pleasant respite from the backstabbing some gooners are subjected to should they dare venture the thought that the club might be getting some things right. Amazon's last figures showed a cash pile of $12.5bn and Apple $45bn. Amazon has more than doubled it's cash pile over 5 years, Apple's has increased by 60% and Arsenal's by 20%. Makes ours seem pitiful by comparison so I'm not sure what point you think you might be making. How much do you think Arsenal should have in cash reserves then? How much would be too little do you think? Or can anything positive about the club simply be declared negative without the need to explain why? I'd be more than happy to slap you on the back if you can come up with a meaningful response.
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28/05/2014 14:22:00

Come off it, Shewore. If some "back-slapping" is deserved, it should be given. It doesn't have to be made to appear ingratiating just because it supports the notion that the club is doing something positive. The day a business stops improving in the right parameters (such as cash reserves), that's when it starts to regress, at least in most cases. It is not as if the club hasn't been investing, in any case, just that it does so prudently, with the reality of the times in focus.
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28/05/2014 14:53:00

@FunGunner. Lmao. Now that's a mouthful. I give up, war chest sounds sexier, as u put it. Loool
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28/05/2014 16:03:00

Football finances & politics eh? Any chance we can talk about real football. Places, times, dates, memories, players etc. Money is such a vulgar subject.
Chippy Brady
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28/05/2014 17:39:00

Maybe the World cup? Or the continuing search for the Spuds Messiah? Anything would be a nice change from financial willy waving.
Chippy Brady
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28/05/2014 17:42:00

The obvious point is that the key mantra of arguably the two most innovative and successful companies is to continually reinvest their profits into the business (Amazon) or when they stop doing it and have nowhere to really spread to, they face the heat re giving the cash back to the people who stumped it up in the first place, (apple) well, some of it. The numbers you mention are entirely relative, 12.5bn is miniscule compared to what they could sit on, which begs the question, if this is such a guaranteed positive move – why don’t they do it? let’s reinvest eh? Sitting on cash piles is no good for the football end of things despite what you might think about being able to ‘move quickly’ etc, if the opportunity arose we’d be able to come up with the necessary instruments to pay for it pretty quickly. Another key factor would be not to alienate customers, football is a unique business (arguably apple have this as well but to a far smaller extent due to the loyalty their products have driven) in which you cannot just go and buy another season ticket elsewhere cos you find it better value (despite what you’d have people believe, the entertainment ‘business’ that football in is far removed from a play, or a concert), Arsenal can afford to increase STs amongst their fanbase cos they don’t really need to care, the 3m they’ll make from the increase will prob just about cover Bentdner’s blowouts in West End casinos over the last few years. I don’t buy that Arsenal deserve praise for sitting on the ample money they have and demand more from their support
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28/05/2014 20:07:00

The obvious mantra is that you're finding fault with Arsenal that you don't find with Amazon or Apple despite not knowing anymore about their cash needs or investment plans than you know about Arsenal's - probably a good deal less in fact. Nobody can sensibly argue that Arsenal haven't continuously re-invested their profits. The stadium is probably one of the biggest investments undertaken by any club in the PL in the last 10 years. In the last 3 seasons they have 'invested' more in transfer fees than in the previous 8 seasons combined.Though purchasing intangible assets with limited life which is all player contracts really are is as much speculation as it is investment. Both Amazon and Apple have grown their cash piles significantly faster than Arsenal. But the question is how have you decided that Arsenal are sitting on too much money? How much money should they have and how much is too little?
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28/05/2014 20:37:00

Interesting question, probably as difficult to answer as someone wondering why Arsenal feel it required to possess another <3m in the bank straight from supporters' pockets, or not? Although what I will say is I think too much is made by you on the money in the bank being an all important tool, the world wouldn't go round without debt, for example, and with other clubs knowing we have it in the bank who knows they won't try and squeeze us for a few more mill here and there. What about net spend tho Amos, interesting that City have had a net spend sanction imposed when it's so obviously not a usable metric eh
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28/05/2014 21:02:00

It's not really any more difficult to explain why ticket prices are increasing than it is to explain why travel and energy prices are rising. Nobody having to pay any of them is going to accept any explanation as justified. The world would still go round with or without debt but Arsenal has debt. For every £50m of cash reserves it spends its net debt increases by £50m. So clubs would sell their players to us at a lower price if we didn't have any money in the bank would they? Little else in world works like that. You stand a better chance of buying most things at a better rate if you can put cash on the table. In the case of City's FFP penalty there's no difference between a net spend sanction and a spending sanction. It amounts to the same thing but your all too typical straw man tactic doesn't help you make any point that is unfavourable to Arsenal because if you take your favoured net spend 'metric' then Arsenal have 'invested' more in net transfer fees over the last 3 seasons than over the last 9 seasons combined - a better figure than gross spending! But any way we're getting away from the point. You suggest Arsenal is holding too much cash. I'd like to know on what basis you have reached this conclusion so how much cash should they hold and how much would be too little? I'm guessing you've absolutely no idea and are just running with the pack.
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28/05/2014 22:24:00

I may be wrong but it seems to me that Shewore is arguing against the self-imposed 'self-sustainable' model. No? The write-up we are contributing to though has a context. And that is the "prune juice effect in football finance which prevented their sustained development ..." This approach requires discipline accumulation of reserves and there are principled guidelines as to the 'floor and ceiling' levels or amount that should be kept. The complaint against Apple was largely based on the fear of a potentially nefarious intent and action by a market hegemon. In other words, there were real fears that the accumulation was a war chest to help Apple destroy competitors, disrupt market and industries, among other things.
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28/05/2014 22:24:00

What do you want Amos, a figure? To what purpose would that serve? I'm assuming you think we have exactly the right amount of cash in the bank at this present moment in time then? Or can you give a figure as to what's right?
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29/05/2014 07:06:00

The only purpose in asking for a figure is knowing that you couldn't really give one any more than any one else criticising the club for holding cash reserves can. Yet the club's reserves are being used as a criticism and those determined to seize on anything negative join in the chorus without really considering or being able to consider whether it's valid or not. A counterpoint to this tendency helps balance such criticism. The club needs cash in order to maintain a healthy cash flow as its short term creditor figure indicates and it also needs cash to be able to speculate on the squad. Yet in the rush to see nothing but fault in the management of the club they seem to be criticised for having any cash at all with the popular delusion that if we haven't spent the maximum our credit card allows at the end of each transfer window we're not trying hard enough. In fact what most fans should be seeking is a financially strong club maintaining the reserves to be able to make choices and take advantage of opportunities as they might come. I think our reserves are ok for a club that can be absolutely certain of CL qualification each year, not that any can as others have demonstrated, but we could certainly still be somewhere north of what we currently have and still not be over resourced.
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29/05/2014 07:46:00


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