Arsenal Holdings plc
Results for the six months ended 30 November 2009
SIGNIFICANT REDUCTION IN GROUP'S DEBT FOLLOWING PROGRESS AT HIGHBURY SQUARE
* Profit before tax of £35.2m (2008 - £24.5m) with increased contributions
from both the Group's football and property businesses.
* Sale of 261 apartments at Highbury Square generated revenue of £96.6m (2008
- £58.4m) with all proceeds used in repayment of the project's bank debt.
The Group's property business recorded a pre-tax profit of £9.3m (2008 - £
4.9m).
* Pre-tax profit from the Group's core business of football increased to £
25.8m (2008 - £19.7m).
* Completed first stages of a programme of capital investment in the
appearance and "Arsenalisation" of Emirates Stadium.
* Further significant investment in determined policy of re-signing first
team players to new long-term contracts.
* By 30 November 2009, the Group's total net debt had been reduced to £203.6m
(31 May 2009 - £332.8m).
* Since 30 November, there have been a number of further positive
developments in relation to the Group's property projects:
- Of the 655 private apartments in the Highbury Square development,
sales have now completed on 524 units with a cumulative sales revenue
value of £217.0m.
- The balance on the Highbury Square bank loan has been further reduced,
from £35.7m at 30 November, to £12.9m (31 May 2009 - £123.6m).
- Sale of part of the Queensland Road development site means that the
Group's other property activities are now debt free.
Commenting on the interim results, Peter Hill-Wood, non-executive chairman,
said:
"I am pleased to report that the Group has delivered another profitable set of
results for the first six months of the financial year.
There has been remarkable progress at Highbury Square over the last twelve
months and it is clear that the next couple of years will see our property
activities delivering surplus cash. This is very good news, although I would
not want to speculate on the exact quantum or timing of this. How we will use
this surplus remains undecided but, in addition to investing in the team, I
think we will examine investment in Club projects and infrastructure, both in
and around Emirates Stadium, which will provide a long lasting benefit to the
Club and our tremendous, loyal supporters.
Looking ahead, our strong financial base allows us time to take a measured and
diligent approach to determining the Club's direction beyond our move to
Emirates Stadium and into the next phase of growth."
Chairman's Statement
I am pleased to report that the Group has delivered another profitable set of
financial results for the first six months of the financial year.
In my report this time last year I wrote about the uncertainty in the property
markets and the actions we were taking to secure the future of the Highbury
Square project and extend the term of the related £135 million bank loan. There
has been remarkable progress at Highbury Square over the last twelve months and
the position today is vastly different. At the time of writing this report, 524
of 655 apartments have completed sale and the loan balance has been reduced to
just £12.9 million. By the summer, we now expect to be in a position where
Highbury Square will be starting to deliver a positive cash return which will
be available for investment elsewhere in the Group. Clearly, this is very good
news. We have also made excellent progress elsewhere in the property
development business and, having recently completed the sale of the social
housing section of Queensland Road, this part of the Group's activities is now
debt free with three ongoing development projects from which we will look to
realise further cash surpluses over the next two years.
Following a couple of disappointing recent results, a challenge for this
season's Premier League title will not be easy but with just a six point gap to
the leaders and a reasonable fixture schedule there is much to fight for and I
am sure that the remaining months of the season will prove exciting. Arsène
Wenger and the players remain very focused and they will continue to strive for
the highest possible League finish and, of course, to prolong their UEFA
Champions League campaign.
A feature of our football management strategy over the last year has been an
intensive and determined policy of re-signing first team players to new
long-term contracts. 17 first team players have been re-signed and this
represents a significant level of investment in a very talented group of
players. From a business perspective, having the players tied to long-term
contracts is the best means of protecting the value of one of our most
important assets. We have one of the youngest squads in the Premier League and
their experience is growing with every game. We continue to believe that this
group of players can and will be one to win trophies for the Club and they will
certainly play some fantastic football along the way.
We have also invested in the appearance and feel of Emirates Stadium as a home
for our fans and, in particular, in the "Arsenalisation" of the stadium and its
immediate surrounds. To date, we have completed the Club Legends graphics to
the external cores, the Highbury Shrine and the decoration of the lower
concourses - the feedback we have from supporters has been hugely positive. In
April, we will begin to lay the personalised granite stones which an incredible
13,000 fans have so far purchased as part of the development of Armoury Square,
which will provide a new landmark at the stadium. We are committed to further
"Arsenalisation" and are already evaluating the next round of projects.
For 2009/10 season, the club is supporting Great Ormond Street Hospital
Children's Charity as its Charity of the Season. Great Ormond Street is the
UK's leading children's hospital and receives more than 200,000 patient visits
every year from children all over the UK and the world. This season's fund
raising target is £500,000 to build an all new and improved lung function unit
at the hospital and the initiative has already raised over £250,000. Our home
fixture against Chelsea on 29 November was the campaign's dedicated match day
which saw Arsenal players, Directors and some members of staff donating a day's
wages to the cause alongside supporters' generous donations. The Club continues
with its fundraising with the annual "Be a Gunner. Be a Runner" event at
Emirates Stadium on 13 March and the Annual Arsenal Charity Ball on 6 May 2010.
On the Field
At the time of writing, Arsenal's first-team has played 27 of 38 Premier League
matches and sits just six points from first place - thus retaining a healthy
interest in the League title, this despite disappointing results against direct
rivals Chelsea and Manchester United.
Those matches aside, the 2009/10 season to date has been notable for some
exciting attacking performances and the remarkable number of goals netted by
Arsène Wenger's team.
The tone was set with a 6-1 win at Everton on the opening day of the Premier
League season, with the side also scoring four or more times in league matches
against Portsmouth (twice), Wigan Athletic, Blackburn Rovers, Wolverhampton
Wanderers and Bolton Wanderers. Other notable league results have included a
3-0 home win in the north London `derby' against Tottenham Hotspur and a 2-1
victory at Anfield against Liverpool, made all the more memorable by Andrey
Arshavin's excellent winning goal.
The goal count has been achieved despite the frustrating absences of key
attackers over recent months with Robin van Persie's long-term injury,
sustained in November, being a crucial example. With other players returning to
fitness, we are confident that the team can finish the season with strong run.
In the UEFA Champions League, a 5-1 aggregate win over Celtic in the Play Off
qualifying round secured Arsenal's passage to a group comprising AZ Alkmaar,
Olympiacos and Standard Liege. Qualification as group winners was achieved with
a game to spare - with a thrilling 3-2 comeback win in Liege and a 4-1 win over
AZ perhaps being the highlights of the Group Stage. A very young side - in fact
the youngest ever to have been fielded in a Champions League game - also
performed with huge credit despite losing 1-0 to Olympiacos in Athens as the
group campaign concluded. We have started our Knockout Round tie against FC
Porto with a narrow defeat in the away leg and we now anticipate a very
exciting second leg at Emirates Stadium. We will be hoping to progress in the
competition and better our semi-final finish of last season.
The team's FA Cup campaign was relatively short-lived, with a 2-1 win at West
Ham - achieved after being a goal down - followed by a 3-1 away exit against
Stoke City in the Fourth Round.
The Carling Cup again produced some excellent football from Arsenal's stars of
the future. A 2-0 win over West Bromwich Albion at Emirates Stadium in the
Third Round, which saw young forward Sanchez Watt score on his first-team
debut, preceded a fine 2-1 victory against Liverpool, also at home. A 3-0
defeat away to Manchester City in the Quarter-Finals furthered the learning
curve for some of the Club's young stars.
New signing Thomas Vermaelen, a central defender who joined from Ajax in the
summer, has settled into his role with great aplomb and has impressed at both
ends - finding time to score seven goals so far this season, as well as proving
extremely competent at the back. The defensive ranks were further boosted in
January when Sol Campbell made a welcome return to the Club, signing a deal
until the end of the season and immediately featuring against both Stoke City
and Aston Villa.
As ever, a number of young Arsenal players are building up their competitive
experience on temporary loan with other clubs. Presently Philippe Senderos
(Everton), Jack Wilshere (Bolton Wanderers), Henri Lansbury (Watford), Jay
Simpson (QPR), Kerrea Gilbert (Peterborough United), Sanchez Watt (Southend
United), Mark Randall (MK Dons), Wojciech Szczesny (Brentford), Gavin Hoyte
(Brighton & Hove Albion), Kyle Bartley (Sheffield United) and Havard Nordtveit
(FC Nurnburg) are all enjoying such spells, and we wish them continued good
fortune as they further their football education.
Financial Review
The Group has delivered another strong set of financial results with growth in
turnover and profits. This has been a particularly strong period for our
property business with Highbury Square making a significant contribution to the
results.
The consolidated pre-tax profit for the first six months of the financial year
rose from the £24.5 million achieved last year to £35.2 million.
2009 2008
£m £m
Turnover
Football 100.2 98.4
Property development 96.6 58.4
______ ______
Total turnover 196.8 156.8
______ ______
Operating profits*
Football* 18.0 23.5
Property development 11.3 6.3
______ ______
Total operating profit* 29.3 29.8
______ ______
Player trading 20.8 8.0
Depreciation (6.0) (5.8)
Joint venture 0.3 0.4
Net finance charges (9.2) (7.9)
______ ______
Profit before tax 35.2 24.5
______ ______
*= operating profits before depreciation and player trading costs
In the first half of the financial year we completed the sale of 261 apartments
at Highbury Square generating turnover of £96.6 million. This brought the
cumulative position up to 469 of the 655 apartments in the development having
been sold and the cumulative sales value to £196.7 million. All of the sales
proceeds generated in the period were applied in reduction of the bank loan for
Highbury Square and, consequently, by 30 November 2009 the loan balance had
been reduced to £35.7 million (31 May 2009 - £123.6 million).
The progress made on sales has allowed us to assess, with a far greater degree
of certainty, the likely final outcome of the development in terms of its
revenues and costs and, as a result, we have been able to book a small increase
in the profit margin at which we are accounting for Highbury Square sales.
The official opening ceremony for Highbury Square was held on 24 September 2009
with Arsène Wenger and a number of players in attendance. From that date we
launched the sales campaign for our stock of unsold units across the completed
development and, although market conditions remain uncertain, we have
subsequently generated a very healthy level of new sales exchanges and
completions. The level of completions from the original pre-sale exchanges has
inevitably slowed; however, a steady trickle of contracts is continuing to make
it over the line.
At the time of writing the cumulative sales figure has moved up to 524
completions and the loan balance has been further reduced to £12.9 million. We
are delighted with this progress. Although we prudently extended the term of
our Highbury Square loan out to December 2010 we can clearly now anticipate the
point at which the project will become debt free. Once the loan is repaid all
of the proceeds from the sale of the remaining apartments, the in-fill plots
around the site and certain commercial elements within the development will be
freely available for use elsewhere in the Group.
The revenues in our core football business rose to £100.2 million (2008 - £98.4
million). This increase was attributable to broadcasting and specifically to
the UEFA Champions League where there was a revenue distribution for the first
time to participants in the play-off round. We also benefited from improved
performance bonuses and market pool shares.
Match-day revenue fell from £44.4 to £41.4 million but this was simply a
reflection of the fact we played one less home fixture against the comparative
period for last year. The fixture schedule has also had some impact on the
level of our other football revenues but there were also recessionary factors
at play as both retail and commercial revenues dipped slightly.
Football operating costs, excluding player trading and depreciation, were
significantly increased, to £82.1 million from £74.1 million in the previous
year. This change is almost entirely attributable to an increased level of
investment in player wage costs, which rose by £8.6 million and reflect the new
contract signings which I have referred to elsewhere in this report.
Player trading produced an overall surplus of £20.8 million (2008 - £8.0
million) including gains from the sale of player registrations of £33.9 million
(2008 - £18.5 million). The most significant player sales were those of Kolo
Toure and Emmanuel Adebayor.
At 30 November 2009 the Group had cash and bank balances of £101.0 million
(2008 - £75.7 million) of which £22.5 million was restricted for debt service
(2008 - £22.6 million) and an overall net debt balance of £203.6 million (2008
- £332.8 million). The significant reduction in net debt reflects the
repayments made on the Highbury Square loan. Because the majority of the
Group's debt is at fixed rates of interest the most significant impact of the
fall, over the last year, in the level of interest rates has been on the
interest we are able to earn on our cash deposits rather than on our debt
service costs. Interest receivable for the period was £1.7 million down on last
year and as a result the Group booked a higher net interest cost of £9.2
million (2008 - £7.9 million).
Adjustments required to the calculation of Highbury Square profits on a tax
basis mean that the Group currently has a low effective rate of corporation tax
at 17% for this half year (2008 - 17.7 %) compared to the standard rate of
corporation tax of 28%.
The overall after tax profit for the period was £29.2 million (2008 - £20.2
million). Clearly this is a very satisfactory result and establishes a strong
base for the full year financial results.
In February we completed the sale of the social housing element of the
Queensland Road development site to Newlon Housing Trust. The payment received
from Newlon reflects the fact that they are taking on the responsibility for
the demolition, clearance and remediation of the entire site, including works
which will eventually move the road to the south. Work has now commenced on
site and given the proximity of the construction activity to the stadium we
will continue to work alongside Newlon and their contractors to ensure our own
operations are not impacted.
The sale to Newlon is essentially at no gain or loss in profit terms, because
we have previously adjusted the carrying value of the site to its estimated
recoverable sale value, but it is significant because it puts our other
property trading subsidiary, Ashburton Trading, into a position where it is
free of bank debt. As such any future property sales activity will generate
cash which will be available to use elsewhere in the Group. There are three
property assets which we will now be looking to sell over the next two years -
the market housing part of the Queensland Road development , the site on the
corner of Hornsey Road, opposite the Armoury, which includes a pedestrian link
through to Holloway Road tube station and a further site on Holloway Road.
It is clear that the next couple of years will see our property activities
delivering surplus cash back to the football club although I would not want to
speculate on the exact quantum or timing of this. How we will use this surplus
remains undecided but, in addition to investing in the team, I think we will
examine investment in Club projects and infrastructure, both in and around
Emirates Stadium, which will provide a long lasting benefit to the Club and its
tremendous, loyal supporters.
Looking ahead, Ivan Gazidis has initiated and is leading a strategic process to
develop the vision, direction and comprehensive plan which will take the Club
beyond its move to Emirates Stadium and into the next phase of its growth. This
review is at an early stage and our strong financial base allows us the time to
take a measured and diligent approach to this important process. The objective
is to set out a plan for the future of Arsenal Football Club which is
respectful of the Club's traditions and values as well as being truly ambitious
in its scope and which covers all aspects of our business, our fans'
experience, our operations and our commercial opportunities.
I hope you enjoy the rest of the season.
PD Hill-Wood
25 February 2010
Arsenal Holdings Plc
Consolidated profit and loss account
For the six months ended 30 November 2009
Six months
to 30 Year ended
November 31 May
Six months to 30 November 2009 2008 2009
Unaudited Unaudited Audited
Operations
excluding
player Player
trading trading Total Total Total
Notes £'000 £'000 £'000 £'000 £'000
Turnover of the Group 197,656 104 197,760 158,139 315,894
including its share of
joint ventures
Share of turnover of (990) - (990) (1,320) (2,555)
joint ventures
________ ________ _______ ________ ________
Group turnover 4 196,666 104 196,770 156,819 313,339
Operating expenses
- other (173,395) - (173,395) (131,990) (250,950)
- amortisation of player - (13,215) (13,215) (11,375) (23,876)
registrations
Total operating expenses 5 (173,395) (13,215) (186,610) (143,365) (274,826)
________ ________ _______ ________ ________
Operating profit/(loss) 23,271 (13,111) 10,160 13,454 38,513
Share of operating 333 - 333 376 455
profit of joint venture
Profit on disposal of - 33,945 33,945 18,545 23,177
player registrations
________ ________ _______ ________ ________
Profit on ordinary
activities before net
finance charges 23,604 20,834 44,438 32,375 62,145
________ ________
Net finance charges 6 (9,223) (7,852) (16,633)
________ ________ ________
Profit on ordinary
activities before
taxation 35,215 24,523 45,512
Taxation 7 (5,985) (4,341) (10,282)
________ ________ ________
Profit after taxation
retained for the
financial period 29,230 20,182 35,230
________ ________ ________
Earnings per share 8 £469.81 £324.37 £566.24
________ ________ ________
All trading resulted from continuing operations.
There are no recognised gains or losses other than those included in the profit
and loss account and, accordingly, no consolidated statement of total
recognised gains and losses is presented.
The accompanying notes are an integral part of these statements
Arsenal Holdings Plc
Consolidated balance sheet
At 30 November 2009
Notes 30 November 31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Fixed assets
Tangible assets 9 436,416 445,104 440,369
Intangible assets 10 68,218 63,226 68,446
Investment in joint venture 1,063 703 730
________ ________ ________
505,697 509,033 509,545
________ ________ ________
Current assets
Stock - Development properties 11 90,534 179,077 167,007
Stock - Retail merchandise 2,574 3,540 1,751
Debtors - Due within one year 12 46,866 42,467 45,981
Debtors - Due after one year 12 3,193 10,299 9,508
Cash and short-term deposits 13 101,029 75,659 99,617
________ ________ ________
244,196 311,042 323,864
Creditors: Amounts falling due 14 (207,609) (267,133) (314,096)
within one year
________ ________ ________
Net current assets 36,587 43,909 9,768
________ ________ ________
Total assets less current 542,284 552,942 519,313
liabilities
Creditors: Amounts falling due after 15 (279,657) (340,232) (292,748)
more than one year
Provisions for liabilities 16 (39,067) (33,428) (32,235)
________ ________ ________
Net assets 223,560 179,282 194,330
________ ________ ________
Capital and reserves
Called up share capital 62 62 62
Share premium 29,997 29,997 29,997
Merger reserve 26,699 26,699 26,699
Profit and loss account 17 166,802 122,524 137,572
________ ________ ________
Shareholders' funds 18 223,560 179,282 194,330
________ ________ ________
The accompanying notes are an integral part of this consolidated balance sheet.
Arsenal Holdings Plc
Consolidated cash flow statement
For the six months ended 30 November 2009
Six months to 30 November Year ended
31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Net cash inflow from operating activities 83,587 7,432 62,305
Player registrations 27,298 (3,635) (12,335)
Returns on investment and servicing of (8,524) (10,241) (17,689)
finance
Taxation (5,388) (5,567) (7,622)
Capital expenditure (1,950) (1,755) (2,950)
________ ________ ________
Cash inflow/(outflow) before financing 95,023 (13,766) 21,709
Financing (93,611) (3,839) (15,356)
________ ________ ________
Increase/(decrease) in cash 1,412 (17,605) 6,353
________ ________ ________
Arsenal Holdings Plc
Notes to the cash flow statement
Six months to 30 November Year ended
31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
a) Reconciliation of operating profit to
net cash inflow from operating activities
Operating profit 10,160 13,454 38,513
Profit on disposal of tangible fixed assets (2) (42) (42)
Depreciation 5,974 5,807 11,682
Amortisation of player registrations 13,215 11,375 23,876
Decrease in stock 75,754 10,167 25,940
Increase in debtors (159) (2,688) (4,680)
Decrease in creditors (21,355) (30,641) (32,984)
________ ________ ________
Net cash inflow from operating activities 83,587 7,432 62,305
________ ________ ________
b) Reconciliation of net cash flow to
movement in net debt
Increase/(decrease) in cash for the period 1,412 (17,605) 6,353
Cash outflow from decrease in debt 93,611 3,838 15,356
________ ________ ________
Change in net debt resulting from cash flows 95,023 (13,767) 21,709
Increase in debt resulting from non cash (897) (977) (1,316)
changes
Net debt at start of period (297,680) (318,073) (318,073)
________ ________ ________
Net debt at close of period (203,554) (332,817) (297,680)
________ ________ ________
Bank balances, included in net debt, of £122,000 (30 November 2008 £142,000, 31
May 2009 £129,000) are held in an employee benefit trust at the discretion of
the trustees.
c) Analysis of changes in net debt
At 1 June Non cash Cash At 30 November
2009 Changes flows 2009
£'000 £'000 £'000 £'000
Cash and short-term deposits 99,617 - 1,412 101,029
_______ _______ _______ _______
99,617 - 1,412 101,029
Debt due within one year (bank (134,102) - 87,174 (46,928)
loans/bonds)
Debt due after more than one
year (bank
loans/bonds) (237,101) (732) 6,437 (231,396)
Debt due after more than one
year
(debenture subscriptions) (26,094) (165) - (26,259)
_______ _______ _______ _______
Net debt (297,680) (897) 95,023 (203,554)
_______ _______ _______ _______
Non cash changes represent £872,000 in respect of the amortisation of costs of
raising finance, £165,000 in respect of rolled up, unpaid debenture interest
for the period less £140,000 in respect of amortisation of the premium on
certain of the Group's interest rate swaps.
d) Gross cash flows
Six months to 30 November Year ended
31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Player registrations:
Payments for purchase of players (14,959) (23,093) (35,398)
Receipts from sale of players 42,257 19,458 23,063
_______ _______ _______
27,298 (3,635) (12,335)
_______ _______ _______
Returns on investment and servicing of
finance:
Interest received 342 1,870 2,926
Interest paid (8,866) (12,111) (20,615)
_______ _______ _______
(8,524) (10,241) (17,689)
_______ _______ _______
Capital expenditure:
Payments to acquire tangible fixed assets (1,952) (1,797) (2,992)
Receipts from sale of tangible fixed assets 2 42 42
_______ _______ _______
(1,950) (1,755) (2,950)
_______ _______ _______
Financing:
Repayment of borrowings (93,540) (5,300) (15,838)
Increase in borrowings 1,398 1,461 795
Costs of raising finance (1,469) - (311)
_______ _______ _______
Total debt repayment (93,611) (3,839) (15,354)
Debenture repayments - - (2)
_______ _______ _______
(93,611) (3,839) (15,356)
_______ _______ _______
Arsenal Holdings Plc
Notes to the interim accounts
30 November 2009
1 Basis of preparation of Group financial statements
The Group financial statements consolidate the assets, liabilities and results
of the company and its subsidiary undertakings made up to 30 November 2009. The
Group has two classes of business - the principal activity of operating a
professional football club and property development.
The interim results have been prepared, in accordance with United Kingdom
Generally Accepted Accounting Practice, on the same basis and using the same
accounting policies as those used in the preparation of the full year's
accounts to 31 May 2009. The status of the Group's financing arrangements is
reported in notes 14 and 15 and is summarised in the Chairman's Statement. The
directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future and the
financial statements continue to be prepared on the going concern basis.
2 Significant accounting policies
Income recognition
Gate and other match day revenue is recognised over the period of the football
season as games are played. Sponsorship and similar commercial income is
recognised over the duration of the respective contracts. The fixed element of
broadcasting revenues is recognised over the duration of the football season
whilst facility fees for live coverage or highlights are taken when earned.
Merit awards are accounted for only when known at the end of the financial
period. UEFA pool distributions relating to participation in the Champions
League are spread over the matches played in the competition whilst
distributions relating to match performance are taken when earned; these
distributions are classified as broadcasting revenues. Fees receivable in
respect of the loan of players are included in turnover over the period of the
loan.
Income from the sale of development properties is recognised on legal
completion of the relevant sale contract. Where elements of the sale price are
subject to retentions by the purchaser the retained element of the sale price
is not recognised until such time as all of the conditions relating to the
retention have been satisfied. Where contracting work is undertaken for a third
party and the outcome of the construction contract can be estimated reliably,
revenue and costs are recognised by reference to the degree of completion of
the contract activity at the balance sheet date.
Player registrations
The costs associated with the acquisition of player registrations or extending
their contracts, including agents' fees, are capitalised and amortised, in
equal instalments, over the period of the respective players' contracts. Where
a contract life is renegotiated the unamortised costs, together with the new
costs relating to the contract extension, are amortised over the term of the
new contract. Where the acquisition of a player registration involves a
non-cash consideration, such as an exchange for another player registration,
the transaction is accounted for using an estimate of market value for the
non-cash consideration. Under the conditions of certain transfer agreements or
contract renegotiations, further fees will be payable in the event of the
players concerned making a certain number of First Team appearances or on the
occurrence of certain other specified future events. Liabilities in respect of
these additional fees are accounted for, as provisions, when it becomes
probable that the number of appearances will be achieved or the specified
future events will occur.
3 Segmental analysis
Class of business Football
Six months to 30 November Year ended
31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Turnover 100,230 98,433 225,052
_______ _______ _______
Profit on ordinary activities before taxation 25,841 19,661 39,934
_______ _______ _______
Segment net assets 206,016 175,599 188,101
_______ _______ _______
Class of business Property development
Six months to 30 November Year ended
31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Turnover 96,540 58,386 88,287
_______ _______ _______
Profit on ordinary activities before taxation 9,374 4,862 5,578
_______ _______ _______
Segment net assets 17,544 3,683 6,229
_______ _______ _______
Class of business Group
Six months to 30 November Year ended
31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Turnover 196,770 156,819 313,339
_______ _______ _______
Profit on ordinary activities before taxation 35,215 24,523 45,512
_______ _______ _______
Net assets 223,560 179,282 194,330
_______ _______ _______
4 Turnover
Six months to 30 November Year ended
31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Gate and other match day revenues 41,373 44,448 100,086
Player trading 104 827 3,589
Broadcasting 35,397 28,886 73,239
Retail income 7,469 7,979 13,858
Commercial 15,887 16,293 34,280
Property development 96,540 58,386 88,287
_______ _______ _______
196,770 156,819 313,339
_______ _______ _______
5 Operating costs
Six months to 30 November Year ended
31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Football operating costs 101,419 91,277 194,895
Property development - operating costs 85,191 51,188 77,331
Property development - impairment - 900 2,600
_______ _______ _______
186,610 143,365 274,826
_______ _______ _______
The impairment charge in the prior year reflected a reduction in the carrying
value of the Group's unsold development site at Queensland Road.
6 Net finance charges
Six months to 30 November Year ended
31 May
2009 2008 2009
Unaudited Unaudited Audited
Interest payable and similar charges: £'000 £'000 £'000
Bank loans and overdrafts (1,371) (4,621) (7,184)
Fixed/floating rate bonds (6,938) (7,088) (14,097)
Other (180) (631) (2,071)
Costs of raising long-term finance (1,151) (1,073) (1,511)
_______ _______ _______
(9,640) (13,413) (24,863)
Finance costs capitalised 104 3,602 5,516
_______ _______ _______
Total interest payable and similar charges (9,536) (9,811) (19,347)
Interest receivable 313 1,959 2,714
_______ _______ _______
Net finance charges (9,223) (7,852) (16,633)
_______ _______ _______
The interest capitalised of £104,000 (period to 30 November 2008 £3,602,000 and
year to 31 May 2009 £5,516,000) is included in stock development properties.
7 Taxation
The charge for taxation is based on the estimated effective tax rate for the
year as a whole.
Six months to 30 November Year ended
31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Corporation tax on result for the period at 314 349 8,111
28%
Overprovision in respect of prior years - - (2,425)
Movement in deferred taxation 5,671 3,992 4,596
_______ _______ _______
Total tax charge 5,985 4,341 10,282
_______ _______ _______
8 Earnings per share
The calculation of earnings per share is based on the profit for the period
divided by the weighted average number of ordinary shares in issue being 62,217
(period to 30 November 2008 - 62,217 shares and year to 31 May 2009 - 62,217
shares).
9 Tangible fixed assets
Freehold Leasehold Plant and
property property equipment Total
£'000 £'000 £'000 £'000
Cost
At 1 June 2009 390,152 6,370 81,543 478,065
Additions 764 41 1,289 2,094
Disposals - - (15) (15)
_______ _______ _______ _______
At 30 November 2009 390,916 6,411 82,817 480,144
_______ _______ _______ _______
Depreciation
At 1 June 2009 17,845 2,023 17,828 37,696
Charge for period 2,736 187 3,124 6,047
Disposals - - (15) (15)
_______ _______ _______ _______
At 30 November 2009 20,581 2,210 20,937 43,728
_______ _______ _______ _______
Net book value
At 30 November 2009 370,335 4,201 61,880 436,416
_______ _______ _______ _______
At 31 May 2009 372,307 4,347 63,715 440,369
_______ _______ _______ _______
10 Intangible fixed assets
£'000
Cost of player registrations
At 1 June 2009 131,462
Additions 15,747
Disposals (7,499)
_______
At 30 November 2009 139,710
_______
Amortisation of player registrations
At 1 June 2009 63,016
Charge for the period 13,215
Disposals (4,739)
_______
At 30 November 2009 71,492
_______
Net book amount
At 30 November 2009 68,218
_______
At 31 May 2009 68,446
_______
11 Stock - Development properties
Properties are held for resale and are recorded at the lower of cost and net
realisable value. The directors consider the net realisable value of
development property stocks to be greater than their book value.
12 Debtors
30 November 31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Amounts recoverable within one year:
Trade debtors 7,171 5,819 11,380
Other debtors 17,627 17,843 18,211
Prepayments and accrued income 22,068 18,805 16,390
_______ _______ _______
46,866 42,467 45,981
_______ _______ _______
Amounts recoverable after more than one year:
Trade debtors 500 2,500 1,500
Other debtors 141 5,319 5,319
Prepayments and accrued income 2,552 2,480 2,689
_______ _______ _______
3,193 10,299 9,508
_______ _______ _______
Other debtors of £17.8 million, include £17.3 million in respect of player
transfers (30 November 2008 £21.9 million and 31 May 2009 £22.9 million) all of
which is recoverable in more than one year.
13 Cash at bank and in hand
30 November 31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Debt service reserve accounts 22,497 22,557 32,283
Other accounts 78,532 53,102 67,334
_______ _______ _______
101,029 75,659 99,617
_______ _______ _______
The Group is required under the terms of its fixed and floating rate bonds to
maintain specified amounts on bank deposit as security against future payments
of interest and principal. Accordingly the use of these debt service reserve
accounts is restricted to that purpose.
14 Creditors: Amounts falling due within one year
30 November 31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Bank loans - secured 41,689 98,020 129,172
Fixed and floating rate bonds - secured 5,239 4,676 4,930
Trade creditors 8,410 11,886 13,698
Corporation tax 4,994 6,845 10,068
Other tax and social security 3,406 2,585 10,410
Other creditors 22,779 17,558 24,726
Accruals and deferred income 121,092 125,563 121,092
_______ _______ _______
207,609 267,133 314,096
_______ _______ _______
Other creditors, above and as disclosed in note 15, include £25.7 million (30
November 2008 £17.7 million and 31 May 2009 £25.8 million) in respect of player
transfers.
Bank loans of £41.7 million are categorised as either creditors falling due
within one year or after more than one year on the basis of the revised
expected repayment profile. The term date for repayment of the loans concerned
is December 2010.
Proceeds from the sale of apartments at Highbury Square are required to be used
for repayment of the bank loan.
The loan balance at 30 November 2009 was £35.7 million and subsequently sales
receipts have reduced the balance to £12.9 million.
15 Creditors: Amounts falling due after more than one year
30 November 31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Bank loans - secured - 42,389 -
Fixed rate bonds - secured 178,044 181,437 183,815
Floating rate bonds - secured 53,352 56,016 53,286
Debentures 26,259 25,937 26,094
Other creditors 5,216 4,204 4,803
Grants 4,358 4,505 4,431
Deferred income 12,428 25,744 20,319
_______ _______ _______
279,657 340,232 292,748
_______ _______ _______
The bank loans above and disclosed in note 14 comprise:
30 November 31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Bank loans - secured 43,046 140,807 129,602
Costs of raising finance (1,357) (398) (430)
_______ _______ _______
41,689 140,409 129,172
_______ _______ _______
Due within one year 41,689 98,020 129,172
Due after more than one year - 42,389 -
_______ _______ _______
41,689 140,409 129,172
_______ _______ _______
The fixed rate bonds above and disclosed in note 14 comprise:
30 November 31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Fixed rate bonds 189,318 194,905 194,905
Costs of raising finance (5,897) (8,792) (6,160)
_______ _______ _______
183,421 186,113 188,745
_______ _______ _______
Due within one year 5,377 4,676 4,930
Due after more than one year 178,044 181,437 183,815
_______ _______ _______
183,421 186,113 188,745
_______ _______ _______
The fixed rate bonds bear interest at 5.1418% per annum.
The floating rate bonds above comprise:
30 November 31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Floating rate bonds 50,000 50,000 50,000
Interest rate swap 6,065 6,345 6,205
Costs of raising finance (2,851) (329) (2,919)
_______ _______ _______
53,214 56,016 53,286
_______ _______ _______
Due within one year (138) - -
Due after more than one year 53,352 56,016 53,286
_______ _______ _______
53,214 56,016 53,286
_______ _______ _______
The floating rate bonds bear interest at LIBOR for three month deposits plus a
margin of 0.22% and the Group has entered into interest rate swaps which fix
the LIBOR element of this cost at 5.75%. The fixed rate bonds and floating rate
bonds are guaranteed as to scheduled payments of principal and interest by
certain members of the Group and by Ambac Assurance UK Limited. The Group pays
Ambac Assurance UK Limited annual guarantee fees at a rate of 0.50% of the
fixed rate bank principal outstanding and 0.65% of the floating rate bond
principal outstanding.
The costs of raising debt finance (bank loans and bonds) are amortised to the
profit and loss account over the term of the debt, the amortisation charge for
the period was £872,000 (period to 30 November 2008 £958,000 and year ended 31
May 2009 £503,000).
The Group's fixed rate bonds, floating rate bonds and bank loans are secured by
a mixture of legal mortgages and fixed charges on certain freehold and
leasehold property and certain plant and machinery owned by the Group, by fixed
charges over certain of the Group's trade debtors and the related bank
guarantees, by fixed charges over £34.2 million (30 November 2008 £26.0
million, 31 May 2009 £59.1 million) of the Group's bank deposits, by legal
mortgages or fixed charges over the share capital and intellectual property
rights of certain subsidiary companies and fixed and floating charges over the
other assets of certain subsidiary companies.
The Group's financial liabilities/debt is 30 November 31 May
repayable as follows:
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Between one and two years 6,209 48,343 5,890
Between two and five years 20,719 19,654 19,654
After five years 232,759 240,022 240,179
__________ __________ __________
259,687 308,019 265,723
Within one year 48,936 103,941 135,189
__________ __________ __________
308,623 411,960 400,912
__________ __________ __________
Interest rate profile
After taking into account interest rate swaps, the interest rate profile of the
Group's financial liabilities at 30 November 2009 was as follows:
Weighted
average
Fixed Floating Interest Weighted period for
rate rate free Total average which rate
Unaudited Unaudited Unaudited Unaudited fixed is fixed
rate
2009 2009 2009 2009 Unaudited Unaudited
£'000 £'000 £'000 £'000 % Yrs
Bonds - fixed rate 189,318 - - 189,318 5.6 19.5
Bonds - floating 50,000 - - 50,000 6.6 21.5
rate
Bank loans - 43,046 - 43,046 6.6 -
Debentures 11,829 - 14,430 26,259 2.8 18.5
_______ _______ _______ _______
251,147 43,046 14,430 308,623
_______ _______ _______ _______
The interest rate on the floating rate element of bank loans is currently set
at LIBOR plus 2% to 2.5% (30 November 2008 1.4% to 1.7% and 31 May 2009 1.3% to
2.0%).
Changes in the fair value of interest rate swaps, which are used as hedges, are
not recognised in the financial statements until the hedged position matures.
At 30 November 2009 the total unrecognised loss on the Group's interest rate
swaps was £13.9 million (31 May 2009: £11.9 million).
The interest rate profile at 30 November 2008 for comparative purposes was:
Weighted
average
Fixed Floating Interest Weighted period for
rate rate free Total average which rate
is
Unaudited Unaudited Unaudited Unaudited fixed fixed
rate
2008 2008 2008 2008 Unaudited Unaudited
£'000 £'000 £'000 £'000 % Yrs
Bonds - fixed rate 194,905 - - 194,905 5.6 20.5
Bonds - floating 50,000 - - 50,000 6.6 22.5
rate
Bank loans 32,982 107,825 - 140,807 6.6 0.5
Debentures 11,816 - 14,432 26,248 2.8 19.5
_______ _______ _______ _______
289,703 107,825 14,432 411,960
_______ _______ _______ _______
The interest rate profile at 31 May 2009 for comparative purposes was:
Weighted
average
Fixed Floating Interest Weighted period for
rate rate free Total average which rate
is
Audited Audited Audited Audited fixed fixed
rate
2009 2009 2009 2009 Audited Audited
£'000 £'000 £'000 £'000 % Yrs
Bonds - fixed rate 194,905 - - 194,905 5.6 20
Bonds - floating rate 50,000 - - 50,000 6.6 22
Bank loans - 129,602 - 129,602 - -
Debentures 11,973 - 14,432 26,405 2.8 19
_______ _______ _______ _______
256,878 129,602 14,432 400,912
_______ _______ _______ _______
16 Provisions for liabilities
30 November 31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Pensions provision 1,279 511 1,362
Transfers provision 9,449 10,857 8,204
Deferred taxation 28,339 22,060 22,669
__________ __________ __________
39,067 33,428 32,235
__________ __________ __________
The pensions provision relates to the expected contribution required towards
making good the Minimum Funding Requirements deficit which exists in the
Football League Pension and Life Assurance Scheme less payments made to the
scheme in this respect.
The transfers provision relates to the probable additional fees payable based
on the players concerned achieving a specified number of appearances.
17 Profit and loss account
30 November 31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
At start of period 137,572 102,342 102,342
Profit for the period 29,230 20,182 35,230
__________ __________ __________
Balance at end of period 166,802 122,524 137,572
__________ __________ __________
18 Reconciliation of shareholders' funds
30 November 31 May
2009 2008 2009
Unaudited Unaudited Audited
£'000 £'000 £'000
Opening shareholders' funds 194,330 159,100 159,100
Profit for the period 29,230 20,182 35,230
__________ __________ __________
Closing shareholders' funds 223,560 179,282 194,330
__________ __________ __________
19 Contingent liabilities
Under the conditions of certain transfer agreements in respect of players
purchased, further transfer fees will be payable to the vendors in the event of
the players concerned making a certain number of First Team appearances or in
the event of certain other future events specified in the transfer agreements.
The maximum unprovided potential liability is £11.2 million (30 November 2008 £
12.6 million, 31 May 2009 £7.1 million).
The Group has commitments outstanding under letters of credit, issued to
guarantee its performance of certain future contractual obligations in relation
to its new stadium and property development projects, of £4.6 million (30
November 2008 £6.3 million, 31 May 2009 £6.3 million).
20 Additional information
a) The interim financial statements do not constitute statutory financial
statements within the meaning of Section 435 of the Companies Act 2006. The
financial information for the year ended 31 May 2009 has been extracted from
the statutory accounts for the year then ended which have been filed with the
Registrar of Companies. The audit report on these accounts was unqualified and
did not contain any statements under Section 498 (2) or (3) Companies Act 2006.
b) These results were announced to PLUS on 26 February 2010 and posted to all
shareholders on the register at 25 February 2010. Copies of this interim report
will be available from the company's registered office at Highbury House, 75
Drayton Park, London N5 1BU.
Arsenal Holdings Plc
Independent auditors' report
INDEPENDENT REVIEW REPORT TO ARSENAL HOLDINGS PLC
We have been engaged by the company to review the interim financial statements
in the half-yearly financial report for the six months ended 30 November 2009
which comprises the consolidated profit and loss account, the consolidated
balance sheet, the cash flow statement and related notes 1 to 20. We have read
the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
This report is made solely to the company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 issued by the Auditing
Practices Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to them in an independent review
report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company, for our
review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Plus Markets Rules for
Issuers and the ASB Statement Half-Yearly Reports. As disclosed in note 1, the
annual financial statements of the company are prepared in accordance with
United Kingdom Generally Accepted Accounting Practice. The interim financial
statements included in this half-yearly financial report have been prepared in
accordance with the accounting policies the group intends to use in preparing
its next annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on the interim
financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements in the half-yearly financial
report for the six months ended 30 November 2009 is not prepared, in all
material respects, in accordance with the Plus Markets Rules for Issuers and
the ASB Statement Half-Yearly Reports.
Deloitte LLP
Chartered Accountants and Statutory Auditors
London, United Kingdom
25 February 2010
END