Why Wenger Can Spend £100M in January
The Arsenal board and Wenger have constantly talked about the UEFA Financial Fair Play rules and how the Arsenal model is the model other clubs are striving for (financially if not trophy wise). Arsenal are of the opinion that our prudence in the transfer market will eventually ensure we are a successful club both on and off the field.
Let us look at the Financial Fair Play rules. This state that a club over a three year cycle can only lose €15M. What is excluded from the profit and loss are non-football related items. Any profits from our property ventures or income from hotels that some clubs have are disregarded. Any interest payments that relate to the football infrastructure, i.e. stadium or training ground development are ignored.
The next aspect to look at is how are transfers treated. When a club buys a player, say Gervinho for £10.7M, this £10.7M is charged to P&L over the duration of Gervinho’s contract (4 years). This means that for the next four years we will charge the P&L £2.675M per annum. This summer we spent £48M on players and our standard contract is 4 years, so for the next 4 years we will write-off the transfer fees at £12M per annum.
In terms of sales of players, the transfer fee is taken to P&L less any value in the balance sheet. So when we sold Clichy for instance, his book value was nil, so the P&L is credited with £7M for the year 2011/12. Our sales this summer amounted to £73M. As all the players had a balance sheet value of nil, the 2011/12 accounts will show a profit of £73M.
Looking at the accounts for the year ended 31 May 2011, Arsenal’s football profit is £16M per annum before player trading, this position will not change until 2014 when our sponsorship deals with Nike and Fly Emirates expire. This means we can spend £16M per annum on transfers before falling foul of UEFA’s Financial Fair Play rules, in effect our purchases this summer mean we have used ALL of our allowable transfer expenditure for the next three seasons.
However, due to our profit on sales of £73M this summer we can spend a further £100M on players and still be within UEFA’s rules.
So assuming we have no transfers out (highly unlikely with the contract position of our players), Wenger has £100M to spend on players this January and the club will stay within the UEFA Financial regulations.
If we take another look at the accounts as at 31 May 2011, when some season ticket money have been received, but before any transfer money and also before the £25M sale of Queensland Road and before new sponsorship deals with Bettson, Indesit, Citreon, Thomas Cook, O2 and Carlsberg were agreed, Arsenal Football Club had £160M in cash at the bank. Yes just to repeat that £160M in the bank.
Anybody who tells you the club does not have money is lying, we have more money that nearly all the clubs in the Premier League.
Wenger has the resources to go out and buy players in January and still stay within UEFA’s financial rules and I expect he will. The last two times we bought players in January was when we competing with Aston Villa for fourth place and we bought Arshavin and when bought Adebayor, Diaby and Walcott we were in fight for fourth place with Spurs.