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Arsenal final
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- 2. The Beginning… Arsenal Football Club was formed as Dial Square in 1886 by workers at the Royal Arsenal in Woolwich, south-‐east London, and was renamed Royal Arsenal shortly aCerwards.
- 3. In 1891, the club turned professional and changed its name to Woolwich Arsenal, and later joined the league in 1893. The Gunners moved to Highbury in 1993, as a second division side. The Highbury
- 4. • Investment of £ 357 million • Increased capacity to 60000 The Emirates(1/1) • Match day revenue increased from £37.4m to over £90m
- 5. The Emirates(2/2) • 150 ExecuWve Boxes and 8 rows of Club Level seats – 9000 seats • ConverWng Highbury to residenWal units(£157million)
- 6. • Appointed on1996 • Achievements – Emirates Stadium – The Invincibles – Titles • 3 Premier league • 5 FA cups • 5 FA community shield The Professor
- 7. The most successfulmanager at Arsenal…
- 8. SWOT Strengths • Emirates stadium • CompeWWve league • Champions league • Puma deal £30 million/year • Giving back to community • Strong and balanced current squad • Loyal fan base Threats • Other clubs buying out good players • Change in management • Foreign investments in other clubs • 6 Premier league clubs in London Opportuni1es • New markets – India, china, US • Homegrown players Weaknesses • Lack of trophies in past 10 years • UCL success • Lack of consistency
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- 10. Revenues x £ 000 2014 2013 2012 Turnover 301.872 280.374 243.013 Profit 7.271 5.807 29.593
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- 12. Future revenues • Match-day revenue: plansto increase the capacity of the stadium with 5.000 seats. At the moment 40.000 people on the waiting list for a season ticket. • Merchandising: Sell more outside the UK.
- 13. Future revenues • Sponsorships New 5-yearsponsorship with Puma from 2015: £ 22 million per year more than former deal with Nike Renewed 5-year sponsorship with Emirates from 2014: £ 30 million per year
- 14. Future revenues • Broadcasting revenues:increase of 70%!!!
- 15. Risk Not participating inthe Champion’s League: missing up to £ 6 - 30 million per year
- 16. Costs 2014 2013 2012 Total costs x £ 000 291.808 308.655 259.337 Wages/total costs 57,0% 50,0% 55,3%
- 17. Cost efficiency £1350£1558£1677Marketing efficiency Withoutbroadcast revenue 707379League points £4050£4673£5031Marketing efficiency revenue/gate £2.049£2.116£2.106Sporting efficiency wages/points 59,0%55,1%55,1%Wages/revenue £857£822£759Fan loyalty gate/points 201220132014 £1350£1558£1677Marketing efficiency Without broadcast revenue 707379League points £4050£4673£5031Marketing efficiency revenue/gate £2.049£2.116£2.106Sporting efficiency wages/points 59,0%55,1%55,1%Wages/revenue £857£822£759Fan loyalty gate/points 201220132014
- 18. Win-wage relationship win-wage relationship 0 50 100 150 200 250 300 350 020 40 60 80 100 points wages
- 19. Profit margin 2014 2013 2012 Profit margin 2,41% 2,07% 12,18% 2014 (in %) Chelsea 5,64 Manchester United 4,62 Arsenal 2,41 Liverpool 0,16 Manchester City -‐6,63
- 20. ROA 2014 2013 2012 Return on assets EBIAT/total assets 6,53% 6,2% 14,48% 2014 (in %) Liverpool 8,97 Arsenal 6,53 Manchester United 2,76 Manchester City -‐12,88
- 21. ROCE 2014 2013 2012 Return on Capital employed EBIAT/equity + interest bearing debt 3,52% 3,25% 7,62% 2014 (in %) Arsenal 3,51 Liverpool 3,45 Manchester United 2,32 Manchester City -‐7,7
- 22. Return on equity 2014 2013 2012 Return on equity 2,34% 1,91% 9,95% 2014 (in %) Arsenal 2,34 Manchester United 1,18 Liverpool 2,32 Manchester City -‐22,1
- 23. Future costs Will increase: • Pressure from fans to win prizes • Need to parWcipate in the Champion’s League • Demand from players: no wage limits • Financial Fairplay: restricWons • More revenue => more wages to compete for players
- 24. How is theclub financed Leverage raWos: 1. Debt-‐equity raWo: total liabiliWes equity 2013 2014 1.17 1.29
- 25. How is theclub financed 2. Debt raWo: total liabiliWes total assets 2013 2014 0.54 0.56
- 26. How is theclub financed 3. Times interest raWo : EBIT Interest expense 2013 2014 -‐2,18 1.36
- 27. How is theclub financed • Liquidity raWo: 1. Current raWo: current assets current liabiliWes Nov 2013 May 2014 Nov 2014 1.36 1.44 1.21
- 28. How is theclub financed 2. Quick raWo: Current assets – inventory current liabiliWes Nov 2013 May 2014 Nov 2014 212’787 = 127.04% 167’486 278’381 = 137.11% 203’032 225’092 = 113.59% 198’146
- 29. How is theclub financed — Cash raWo: cash + short-‐term securiWes current liabiliWes Nov 2013 May 2014 Nov 2014 123’123 = 127.04% 167’486 207’878 = 102.38% 203’032 161’546 = 81.52% 198’146
- 30. Who are theshareholders? 67%$ 29%$ 4%$ 0%$ Kroenke$ RWH$ Others$
- 31. Stan Kroenke 1. Stan Kroenkeà Kroenke Sports entreprises (KSE) à NBA, NHL, NFL, MLS à 66.76% of the share in Arsenal 2007 2008 2009 2010 2011 9,9% 20,5% 28,3% 29,9% 66,76%
- 32. Red and WhiteHoldings • In September 2011, Alisher Usmanov and Fahrad Moshiri from Red and White Holdings bought the share of vice chairman David Dein and others minor shareholders to hold a 29.25% shares holding. • The rest of the part are owned by remaining minority shareholders of the club; these include those owned by former players as well as three shares owned by the Arsenal Supporters’ Trust.
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- 34. Valuation Enterprise value accordingto Forbes (May 2015): USD 1.307 million
- 35. Valuation: Free cashflowConservative growth rate Income Match day rev increase steady 4% "Broadcasting increase by 5% 2016 and stay steady with same revenue 2016-2019 " Retail and Commercial, player trade increase 2% each year Property dev decrease by 50% each year new puma deal will increase annual revenue by 22 million Costs all costs increase steady 2% each year Tax applied 20% (according to the annual report) no change in the future Discount rate Risk Free Rate 2.5% Risk Premium 5% Beta 1.3% Currency £/$: 1.54 Market Value (millions $) 1.149
- 36. Valuation: Free cashflowHigh growth rate Income Match day rev increase steady 4% "Broadcasting increase by 70% 2016 and stay steady with same revenue 2016-2019 " Retail and Commercial, player trade increase 2% each year Property dev decrease by 50% each year new puma deal will increase annual revenue by 22 million Costs all costs increase steady 2% each year Tax applied 20% (according to the annual report) no change in the future Discount rate Risk Free Rate 2.5% Risk Premium 5% Beta 1.3% Currency £/$: 1.54 Market Value (millions $) 2.674
- 37. Valuation: Multiples Club millions $ EV (Forbes) Revnues Opera1ng Income EV/REVNUE Man U 3.104 703 211 4,42 Man City 1.375 562 122 2,45 Chelsea 1.370 526 83 2,60 Liverpool 982 415 86 2,37 TH 600 293 63 2,05 Applied Mul1ple Arsenal £'000 301.872 10.064 2,5 EV Arsenal: 754.680.000 £/$ 1,5470 EV Arsenal $ million 1.167
- 38. Conclusion Club with history, strong brand, loyal fan + Increasing revenues ++ Increasing costs: stay compeWWve -‐ Stable sports performance + Stable performance raWos + Finance structure: debt coverage and liquidity + LimWed opportuniWes to grasp shares for control -‐ Undervalued at the moment +