For the fifth consecutive year, Arsenal’s accounts have recorded a loss. Their books for the year ended May 31, 2023, show an overall deficit of £52.1million ($65.8m) — a £6.6million increase on their losses for 2021-22.

But, a little like the first team’s wobble in form over Christmas, the underlying numbers provide a little more room for encouragement.

Overall revenue was up to £467million — a 25 per cent increase on the previous year.

The financial result was however impacted by “impairment write-downs on certain player registrations amounting to £18.1million, which by virtue of their quantum are classified as exceptional”. Without those exceptional items, the loss before tax amounted to £34million — not great, but an improvement on the previous year.

Here, The Athletic explains what these results tell us about Arsenal’s financial position.

What exactly do these results cover?

These results cover Arsenal’s trading for the year up until May 31, 2023. That means it encompasses the signings of Gabriel Jesus, Oleksandr Zinchenko, Fabio Vieira, Leandro Trossard, Jakub Kiwior, Jorginho and Matt Turner. This summer’s spending — including the club-record £105million deal for Declan Rice — will appear in next year’s results.

How have Arsenal raised their revenue?

Arsenal’s improvement on the field has helped them generate more revenue. Their title challenge in the 2022-23 Premier League saw them earn more from broadcast revenue.

Crucially, this was also the season in which Arsenal returned to European football, in the form of the Europa League. As a consequence of playing in Europe and improving their Premier League position from fifth to second, broadcast income rose £45million to £191.2million. However, their relatively early exits from cup competitions put a cap on their earnings.

“During 2022-23 and subsequently during the summer 2023 transfer window, the club has again invested strongly in the development of its men’s first-team playing resources,” reads the report. “This investment recognises that qualification for UEFA competition represents a pre-requisite to re-establishing a self-sufficient financial base.”

Arsenal confirm they are “reliant on the continued financial support of its ultimate parent company, Kroenke Sports & Entertainment (KSE)”. The Arsenal board, however, have aspirations of returning to a financially self-sustaining model. For that to be the case, continued European qualification is essential.

A shift in strategy and emphasis on retail delivered club-record commercial income of £169.3million. The department is growing — commercial and administrative staff rose from 364 to 426. With the new Emirates deal set to start in 2024-25, commercial revenue should only increase.

Despite a club record in income, Arsenal’s overall revenue remained behind the declared figures for Manchester City, Manchester United, Liverpool, Chelsea and Tottenham Hotspur. This can be explained in large part by the fact four of those teams were playing Champions League football. Spurs’ new stadium has also seen their matchday revenue exceed Arsenal’s.

What are those ‘impairment write-downs’?

Impairment losses occur when a business asset suffers a depreciation in fair market value, which is more than the book value of the asset on the company’s financial statements. In football terms, it usually occurs when a player has sustained a serious injury or a player’s market value crashes far below what was originally paid for him.

The financial report is too discreet to name any specific players but presumably, the disastrous £72million signing of Nicolas Pepe is a factor here.

Arsenal’s inability to sell players continues to cost them. They made just a £10.7million profit from the sales of Matteo Guendouzi, Lucas Torreira, Bernd Leno and Konstantinos Mavropanos. The report explains: “The club’s ability to realise profits during 2022-23 was again adversely impacted by market conditions with reduced overall liquidity as clubs’ acquisition budgets continued to be impacted by financial pressures post-pandemic.”

How is the wage bill looking?

The last set of results saw the wage bill getting smaller, as a consequence of allowing highly paid stars, including Mesut Ozil and Pierre-Emerick Aubameyang, to leave.

The addition of several new players to the men’s and women’s teams has seen that grow to £234.8million. That is expected to rise again in the next set of accounts, with arrivals such as Rice and lucrative new contracts for Martin Odegaard and William Saliba.

Saliba has signed a new deal (Stuart MacFarlane/Arsenal FC via Getty Images)

Impressively, Arsenal outperformed their total salary cost with on-field achievements by some way. The wage bills at Manchester United (£331.4million) and Chelsea (£404.9million) dwarf Arsenal’s, yet it was Mikel Arteta’s team that ran Manchester City closest.

Wages now account for just 50 per cent of revenue — a very healthy position.

What is Arsenal’s FFP and PSR position?

As of the end of May 2023, Arsenal were confident the club “continues to be compliant with applicable financial sustainability regulations put in place by UEFA and the Premier League”.

In the Premier League profit and sustainability regulations (PSR), clubs are permitted to make overall losses no greater than £105million over a three-season period. Although Arsenal’s combined losses exceed this figure, the leeway clubs were granted as a consequence of the pandemic means they are still in a relatively comfortable position.

There has been significant expenditure since then and Arsenal have indicated that financial regulations were a factor in their decision not to enter the January transfer market. This may have been to ensure they could spend significantly in the summer of 2024.

What about the season ticket prices?

Arsenal recently announced a season ticket price hike of up to six per cent in certain parts of the ground. Part of the explanation was a rise in operating costs. There’s some justification here: Arsenal’s results illustrate a rise of £40million in their non-salary costs, partly due to UK inflation.

The increase in matchday revenue achieved by the price increase, however, will remain relatively small. Arsenal fans will still feel the additional funds could be generated by other means — especially as the new Champions League format means the club will most likely benefit from more home games next season.

What is the debt situation?

Aside from money owed on transfer fees, the majority of Arsenal’s debt is to Stan Kroenke. Arsenal borrowed a further £41million from their owners in 2022-23, taking their total debt to KSE to £259million.

It’s a lot of money, but Arsenal have spent much of the past decade in a similar degree of debt. The positive is that the debt is to parent company KSE rather than external creditors, with favourable interest rates.

Any other business?

Arsenal have confirmed that Ashburton Trading, a subsidiary of the football club with a focus on property development, have finally been granted permission to develop a new block of student accommodation in the shadow of the Emirates Stadium.

An artist’s impression of the proposed student accommodation (CZWG)

Arsenal’s original plan for a 25-storey building at 45 Hornsey Road was rejected by Islington Council in 2011. After more than a decade, a compromise has been reached on a 12-storey building that could house 284 students.

Arsenal have also included what is becoming their customary statement on the ongoing row over the dissolution of the European Super League. “The Group is monitoring certain ongoing matters relating to the closure of the European Super League project,” they write. “If any additional costs arise as a consequence, these additional costs would be fully recharged to the parent entity, KSE.”

If Arsenal are financially liable for reneging on the Super League agreement, it seems their owners will foot the bill.

(Top photo: Stuart MacFarlane/Arsenal FC via Getty Images)