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Arsenal trump big six rivals with £118m reveal that ‘investors love’
Arsenal have trumped the rest of the Premier League according to one financial metric that makes them spectacularly attractive to investors.
ꦛStan Kroenke has been in the driving seat at the Emirates since he first invested in the club in 2007 – and there is no sign he is planning on getting a return on his investment yet.
However, if the American billionaireꦉ theoretically changed his mind, he would get a huge uplift on the capital he has already invested in the club.
▨They are the world’s tenth most valuable club and only AC Milan have bettered the £676m they have added to their value since last year.
There are many factors in play when it comes to valuing a football club, especially one with a brand as illustrious as Arsenal‘s.
๊But one criteria in particular goes some way to explaining why their value continues to soar.
Arsenal have the best EBITDA in the Premier League
Football finance expert Kieran Maguire has revealed that Arsenal have the highest EBITDA (earnings before interest, taxes, depreciation, and amortisation) in the Premier League.
ꦛSignificantly, the top four clubs in terms of EBITDA all benefited from being based in London.
Speaking on his , Maguire explained the merits of using a sophisticated metric like EBITDA in valuing the likes of Arsenal: First of all, it gets rid of many of the subjective items in the accounts.
“Secondly, it gets rid of the on-off items – stadiums, player sales and so on. So you get a cash type of profit, and I’ve always argued that cash is the most important thing, not just in football but in business in general.
“I ran the numbers and what came out is that, from an investment point of view, investors love London. It’s an iconic city and you can charge more money.
“To my complete surprise when I did this with the highest return in terms of EBITDA were, first of all, Arsenal.
“Second was Brentford, third West Ham and fourth Spurs. London has a premium.”
Does this impact Arsenal’s FFP position?
The Premier League‘s financial fair play system (now called Profit and Sustainability Rules) is the elephant in the room for all but a handful of top-flight clubs at present.
൩Arsenal were placed on UEFA’s FFP watchlist a few years ago, but their position has improved markedly since then, thanks in no small part to their sporting performance.
Their return to the Champions Leagueඣ has supercharged their revenue, as has the prize money they have banked for back-to-back 2nd-place Premier League finishes.
ꦗThe FFP system is set to evolve over the summer, with a new squad cost control ration and financial anchoring system to be phased in, mirroring developments at UEFA level.
🐟But Arsenal should be able to spend at a roughly equivalent rate as they have done over the past few transfer windows, although the new rules will make finding efficiencies a more pressing concern.
🃏While Arsenal’s value to investors does not directly affect their Profit and Sustainability performance, their EBITDA certainly does.
🍨As a measure of baseline business performance, it is exactly the sort of metric that the Premier League and UEFA will look at to signal which clubs are at risk of a breach and which aren’t.
🅰It’s safe to say that, in the long term, Arsenal fall into the latter camp.