Half-yearly Report

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 Â£35.2m (2008 - Â£24.5m) with increased contributions from both the Group's football and property businesses. * Sale of 261 apartments at Highbury Square generated revenue of Â£96.6m (2008 - Â£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 Â£9.3m (2008 - Â£ 4.9m). * Pre-tax profit from the Group's core business of football increased to Â£ 25.8m (2008 - Â£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 Â£203.6m (31 May 2009 - Â£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 Â£217.0m. - The balance on the Highbury Square bank loan has been further reduced, from Â£35.7m at 30 November, to Â£12.9m (31 May 2009 - Â£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 Â£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 Â£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. ArsÃ¨ne 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 Â£500,000 to build an all new and improved lung function unit at the hospital and the initiative has already raised over Â£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 ArsÃ¨ne 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 Â£24.5 million achieved last year to Â£35.2 million. 2009 2008 Â£m Â£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 Â£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 Â£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 Â£35.7 million (31 May 2009 - Â£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 ArsÃ¨ne 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 Â£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 Â£100.2 million (2008 - Â£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 Â£44.4 to Â£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 Â£82.1 million from Â£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 Â£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 Â£20.8 million (2008 - Â£8.0 million) including gains from the sale of player registrations of Â£33.9 million (2008 - Â£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 Â£101.0 million (2008 - Â£75.7 million) of which Â£22.5 million was restricted for debt service (2008 - Â£22.6 million) and an overall net debt balance of Â£203.6 million (2008 - Â£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 Â£1.7 million down on last year and as a result the Group booked a higher net interest cost of Â£9.2 million (2008 - Â£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 Â£29.2 million (2008 - Â£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 Â£'000 Â£'000 Â£'000 Â£'000 Â£'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 Â£469.81 Â£324.37 Â£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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£122,000 (30 November 2008 Â£142,000, 31 May 2009 Â£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 Â£'000 Â£'000 Â£'000 Â£'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 Â£872,000 in respect of the amortisation of costs of raising finance, Â£165,000 in respect of rolled up, unpaid debenture interest for the period less Â£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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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: Â£'000 Â£'000 Â£'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 Â£104,000 (period to 30 November 2008 Â£3,602,000 and year to 31 May 2009 Â£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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'000 Â£'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 Â£'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 Â£'000 Â£'000 Â£'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 Â£17.8 million, include Â£17.3 million in respect of player transfers (30 November 2008 Â£21.9 million and 31 May 2009 Â£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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£25.7 million (30 November 2008 Â£17.7 million and 31 May 2009 Â£25.8 million) in respect of player transfers. Bank loans of Â£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 Â£35.7 million and subsequently sales receipts have reduced the balance to Â£12.9 million. 15 Creditors: Amounts falling due after more than one year 30 November 31 May 2009 2008 2009 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£872,000 (period to 30 November 2008 Â£958,000 and year ended 31 May 2009 Â£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 Â£34.2 million (30 November 2008 Â£26.0 million, 31 May 2009 Â£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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'000 Â£'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 Â£13.9 million (31 May 2009: Â£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 Â£'000 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£11.2 million (30 November 2008 Â£ 12.6 million, 31 May 2009 Â£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 Â£4.6 million (30 November 2008 Â£6.3 million, 31 May 2009 Â£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

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JD Sports tanks after management tighten profit guidance towards the lower end of expectations, Halma finds support from strong earnings and capital return commitment cheers shareholders in Ithica Energy.

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