Half-yearly Report

Arsenal Holdings plc Results for the six months ended 30 November 2011 ARSENAL ANNOUNCE HALF YEAR PROFITS * Group profit before tax was Â£49.5 million (2010 - loss of Â£6.1 million). * Profit on sale of player registrations amounted to Â£63.0 million (2010 - Â£4.0 million). * Â£74.7 million of investment in new players and extended contracts pushed amortisation charges up to Â£17.3 million (2010 - Â£10.1 million). * The resulting profit from player trading was Â£46.1 million (2010 - loss of Â£5.9 million). * Turnover from football rose to Â£113.5 million (2010 - Â£97.6 million) with increases from match-day (4 additional games played) and commercial income streams. * Operating profits (before depreciation and player trading) from football increased to Â£15.2 million (2010 - Â£9.4 million). * Period of minimal activity, as expected, in the property business with turnover of Â£3.2 million (2010 - Â£22.5 million) and operating profits of Â£0.5 million (2010 - Â£3.3 million). * Group has no short-term debt and continues to have a solid financial platform from cash reserves of Â£115.2 million (2010 - Â£110.4 million). Commenting on the results for the six months, Peter Hill-Wood, non-executive Chairman, said: "We are proud of Arsenal's record and consistency over many seasons and have the foundations in place, at every level of the Club, to ensure we remain a force in the seasons ahead." CHAIRMAN'S STATEMENT It has been something of a rollercoaster season to date but I remain confident that we will have a positive conclusion to the campaign. At the time of writing, we remain involved in the race for the top four in the Premier League and the UEFA Champions League, albeit with only a slim chance of progressing beyond the Round of 16. I know that ArsÃ¨ne Wenger and his players are focused on the challenges ahead and the continued support of our tremendous fans will be invaluable in taking us forward. We are proud of our record and consistency over many seasons and have the foundations in place, at every level of the Club, to ensure we remain a force in the seasons ahead. Those foundations are built on 125 years of history and we have celebrated this special milestone during the current season. The celebrations around the 125th anniversary game against Everton will long stay in the memory as will the unveiling of the statues to Herbert Chapman, Tony Adams and Thierry Henry. With regard to Thierry, it was a special moment to have him back with us for his statue unveiling. This was only surpassed by that winning goal against Leeds United on his return to action in an Arsenal shirt during his loan period with the Club. It was a truly memorable football moment from an outstanding Arsenal servant. I would also like to recognise another outstanding Arsenal servant, our captain Robin van Persie. He has been in tremendous form and has scored many spectacular and valuable goals. In addition, he has proved to be an exceptional leader of the team and I am delighted by his contribution on and off the pitch. Our financial results are covered in more detail later in this report. They show a profit before tax of Â£49.5 million. While profits from sale of players, including Cesc Fabregas and Samir Nasri, contributed Â£63.0 million, it is important to recognise that, in the same period, we invested Â£74.7 million in the acquisition of new players and the extension of contract terms for certain existing players. This is indicative of our commitment to invest in the squad and this will continue. Another example of investment has been the opening of our new medical centre at our London Colney training ground. This has been an important development and we now have a state of the art complex designed to give our players the best facilities to aid recovery and recuperation. This investment is only made possible by the hard work we do off the pitch and I am encouraged by the increase in revenue we are reporting in a number of areas. This is particularly strong progress in what remains a difficult economic environment. We will continue to work hard on growing our revenues on multiple fronts and, to support this, we are planning a summer tour to Asia and Africa, further investment in our retail operation and development of our successful media partnership with MP&Silva. In addition, we will be hosting Coldplay at Emirates Stadium in June. This season we have a global partnership with Save the Children designed to help young people fulfil their potential through education. We have a number of exciting projects in progress at home and abroad and I would like to thank everyone who has already contributed to our fund-raising efforts through www.justgiving.com/beagoonerbeagiver. Many of you have given very generously. There is also still time to sign up for our annual `Be a Gunner Be a Runner Event' at Emirates Stadium on March 31 - for further information about this event, please visit www.arsenal.com/savethechildren. FINANCIAL REVIEW The financial results for the six months ended 30 November 2011, which show a profit before tax of Â£49.5 million (30 November 2010 - loss of Â£6.1 million), have been significantly influenced by the changes in the squad which occurred in the summer transfer window. Profits from the sale of player registrations amounted to Â£63.0 million which was significantly higher than the Â£4.0 million accounted for in the comparative period last year. The other main component of player trading is the amortisation of the cost of player registrations. During the period we invested Â£74.7 million in the acquisition of new players and, to a lesser extent, the extension of contract terms for certain existing players. The cost of this investment will be charged against profit over the life of the underlying player contracts and, as a consequence, the amortisation charge for the six month period was increased to Â£17.3 million (2010 - Â£10.1 million). The changes in playing personnel have also contributed to an increased wage bill. 2011 2010 Â£m Â£m Turnover Football 113.5 97.6 Property development 3.2 22.5 Total turnover 116.7 120.0 Operating profits* Football* 15.2 9.4 Property development 0.5 3.3 Total operating profit* 15.7 12.7 Player trading 45.8 (6.0) Depreciation (5.8) (6.2) Joint venture 0.5 0.4 Net finance charges (6.7) (7.1) Profit / (loss) before tax 49.5 (6.2) *= operating profits before depreciation and player trading Turnover from football was positively impacted by the fact we played four more home games (2 Carling Cup and 2 Champions League) than in the same period for last year. Our gate and match day revenues rose to Â£47.0 million (2010 - Â£36.5 million). However, this component of our income remains skewed to the second half of the season and at 30 November 2011 we had played only 14 of the 29 fixtures we are so far certain of playing for the full season. Despite some variable performances on the pitch and the challenging economic climate we have continued to achieve ticket sales at sell out levels for all Premier League, UEFA Champions League and FA Cup games - this reflects the outstanding quality of the Club's support. Football revenues were also increased as a result of: * Our pre-season tour to Malaysia and China; * UEFA distributions (included within broadcasting) to reflect participation in the Champions League qualifying round and, subsequently, our performances as Group winners; * Strong retail performance across all of the Club's stores and on-line; and * A number of new and renewed partnerships, representing the first steps in anticipated growth in our commercial revenue streams over the next five years. Overall football revenues were increased to Â£113.5 million (2010 - Â£97.6 million). The Group's employment costs have continued to rise, primarily as a result of growth in the player wage bill, and contributed Â£8.4 million of the increase in football operating costs to Â£98.4 million (2010 - Â£88.1 million). Retail costs of goods sold and match staging costs were also increased in line with the additional retail sales revenues achieved and the additional four home fixtures played. Outside of these headings we have worked hard to contain our cost base against a backdrop of inflationary pressure. Operating profits from football (before depreciation and player trading) were increased to Â£15.2 million from Â£9.4 million for the prior half year. As expected there was little sales activity in the Group's property business in the first half of the year. We continue to sell off the few remaining apartments at Highbury Square and five sales completed in the period generating Â£3.2 million and a contribution to profits of Â£0.6 million (2010 - sales of Â£ 22.5 million and profits of Â£3.3 million from 50 units sold). Sales activity is expected to pick up in the final quarter of the financial year as we release the final phase of the Highbury Square project - a mix of 21 new / refurbished property units with addresses on Avenell Road, Gillespie Road and Highbury Hill. The construction works being undertaken by Newlon Housing Trust on the Queensland Road site are advancing and it is expected that we will reach the point where our sale of the remainder of the site to Barratt can complete early in the summer - it is not yet clear whether this transaction will be concluded by our financial year end on 31st May. We continue to consult with Islington Council in relation to the optimum development schemes for the property sites on Hornsey Road and Holloway Road. The Group continues to have a strong balance sheet. Â£6.2 million of stadium finance bonds were repaid in the period and, other than next year's annual instalment on the bonds, the Group has no short-term debt. Cash balances at 30th November amounted to Â£115.2 million (2010 - Â£110.4 million). We have continued to invest, for the long-term, in the development of the Club's facilities and fixed asset investment of Â£4.8 million in the period was divided between the new medical centre and pitch facilities at London Colney and Arsenalisation projects and further Club Tier enhancements at Emirates Stadium. The significant investment in player registrations during the period, which has been referred to above, led to an increased book value of intangible assets at Â£107.2 million (2010 - Â£65.3 million). The Group enters into a number of transactions, relating mainly to its participation in European competition (UEFA Champions League distributions are paid in â‚¬) and player transfers, which create exposure to movements or volatility in foreign exchange, including â‚¬. The Group monitors this foreign exchange exposure on a continuous basis and will usually hedge any significant exposure in its currency receivables and payables. SUMMARY The Group's overall profit after tax for the six months was Â£38.0 million (2010 - loss of Â£2.5 million). Historically the financial operating results of the football business are better for the second half of the year as the timing differences around gate and broadcasting revenue come back into balance. The actual outcome for the second half will inevitably be strongly influenced by the extent of progress in the knock-out competitions and final Premier League position. As recent events in football emphasise, a solid financial platform is important to secure the on-field success of any professional football club, for both the short and the long term, but our goal is that of any fan - to make sure Arsenal is as successful as it can be on the pitch and to make us all proud. As fans ourselves, we all share in the ups and downs of every football season and remain committed to doing all we can every day to ensure that the club we love continues to compete at the very highest levels of the game. I hope you all enjoy the rest of the season. P D Hill-Wood Chairman 27 February 2012 Arsenal Holdings Plc Consolidated profit and loss account For the six months ended 30 November 2011 Six months to 30 Year ended November 31 May Six months to 30 November 2011 2010 2011 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 117,607 394 118,001 121,130 257,842 including its share of joint ventures Share of turnover of (1,276) - (1,276) (1,087) (2,150) joint ventures ________ ________ _______ ________ ________ Group turnover 4 116,331 394 116,725 120,043 255,692 Operating expenses - other (106,817) - (106,817) (113,453) (212,128) - amortisation of player - (17,266) (17,266) (10,109) (21,658) registrations Total operating expenses 5 (106,817) (17,266) (124,083) (123,562) (233,786) ________ ________ _______ ________ ________ Operating profit/(loss) 9,514 (16,872) (7,358) (3,519) 21,906 Share of operating 528 - 528 446 822 profit of joint venture Profit on disposal of - 63,010 63,010 4,042 6,256 player registrations ________ ________ _______ ________ ________ Profit on ordinary activities before net finance charges 10,042 46,138 56,180 969 28,984 ________ ________ Net finance charges 6 (6,717) (7,115) (14,208) ________ ________ ________ Profit/(loss) on ordinary activities before taxation 49,463 (6,146) 14,776 Taxation 7 (11,414) 3,627 (2,143) ________ ________ ________ Profit/(loss) after taxation retained for the financial period 38,049 (2,519) 12,633 ________ ________ ________ Earnings/(loss) per 8 Â£611.55 (Â£40.49) Â£203.05 share ________ ________ ________ 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 2011 Notes 30 November 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed assets Tangible assets 9 430,357 434,344 431,428 Intangible assets 10 107,159 65,345 55,717 Investment in joint venture 2,176 1,375 1,648 ________ ________ ________ 539,692 501,064 488,793 ________ ________ ________ Current assets Stock - Development properties 11 38,815 28,216 33,460 Stock - Retail merchandise 3,024 3,731 1,114 Debtors - Due within one year 12 52,652 35,318 27,435 Debtors - Due after one year 12 5,905 2,320 2,214 Cash and short-term deposits 13 115,150 110,357 160,229 ________ ________ ________ 213,546 179,942 224,452 Creditors: Amounts falling due 14 (123,321) (117,480) (131,104) within one year ________ ________ ________ Net current assets 90,225 62,462 93,348 ________ ________ ________ Total assets less current 629,917 563,526 582,141 liabilities Creditors: Amounts falling due after 15 (263,181) (271,535) (275,912) more than one year Provisions for liabilities 16 (60,732) (39,188) (38,274) ________ ________ ________ Net assets 306,004 252,803 267,955 ________ ________ ________ 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 17 249,246 196,045 211,197 ________ ________ ________ Shareholders' funds 18 306,004 252,803 267,955 ________ ________ ________ 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 2011 Six months to 30 November Year ended 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Net cash (outflow)/inflow from operating (21,822) (4,822) 53,142 activities Player registrations 399 1,586 (1,528) Returns on investment and servicing of (6,629) (10,822) (17,220) finance Taxation (4,681) 9,721 13,664 Capital expenditure (6,138) (7,023) (9,546) ________ ________ ________ Cash (outflow)/inflow before financing (38,871) (11,360) 38,512 Financing (6,208) (5,890) (5,890) Management of liquid resources (61,319) 47,125 49,340 ________ ________ ________ Change in cash in the period (106,398) 29,875 81,962 Change in short-term deposits 61,319 (47,125) (49,340) ________ ________ ________ (Decrease)/increase in cash and short-term (45,079) (17,250) 32,622 deposits ________ ________ ________ Arsenal Holdings Plc Notes to the cash flow statement Six months to 30 November Year ended 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 a) Reconciliation of operating (loss)/ profit to net cash inflow from operating activities Operating (loss)/profit (7,358) (3,519) 21,906 Profit on disposal of tangible fixed assets - (35) (35) Depreciation 5,780 6,151 12,498 Amortisation of player registrations 17,266 10,109 21,658 Decrease in stock (5,265) 15,695 13,068 (Increase)/decrease in debtors (10,478) 1,317 4,500 Decrease in creditors (21,767) (34,540) (20,453) ________ ________ ________ Net cash (outflow)/inflow from operating (21,822) (4,822) 53,142 activities ________ ________ ________ b) Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash for the period (45,079) (17,250) 32,622 Cash outflow from decrease in debt 6,208 5,890 5,890 ________ ________ ________ Change in net debt resulting from cash flows (38,871) (11,360) 38,512 Increase in debt resulting from non cash (349) (353) (700) changes Net debt at start of period (97,827) (135,639) (135,639) ________ ________ ________ Net debt at close of period (137,047) (147,352) (97,827) ________ ________ ________ c) Analysis of changes in net debt At 1 June Non cash Cash At 30 November 2011 Changes flows 2011 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and in hand 115,509 - (106,398) 9,111 Short-term deposits 44,720 - 61,319 106,039 _______ _______ _______ _______ 160,229 - (45,079) 115,150 Debt due within one year (bank (5,583) - (345) (5,928) loans/bonds) Debt due after more than one year (bank loans/bonds) (225,712) (175) 6,553 (219,334) Debt due after more than one year (debenture subscriptions) (26,761) (174) - (26,935) _______ _______ _______ _______ Net debt (97,827) (349) (38,871) (137,047) _______ _______ _______ _______ Non cash changes represent Â£315,000 in respect of the amortisation of costs of raising finance, Â£174,000 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 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Player registrations: Payments for purchase of players (50,299) (22,414) (28,561) Receipts from sale of players 50,698 24,000 27,033 _______ _______ _______ 399 1,586 (1,528) _______ _______ _______ Returns on investment and servicing of finance: Interest received 416 205 565 Interest paid (7,045) (11,027) (17,785) _______ _______ _______ (6,629) (10,822) (17,220) _______ _______ _______ Capital expenditure: Payments to acquire tangible fixed assets (6,138) (7,058) (9,581) Receipts from sale of tangible fixed assets - 35 35 _______ _______ _______ (6,138) (7,023) (9,546) _______ _______ _______ Financing: Repayment of borrowings (6,208) (5,890) (5,890) _______ _______ _______ Total debt repayment (6,208) (5,890) (5,890) _______ _______ _______ Arsenal Holdings Plc Notes to the interim accounts 30 November 2011 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 2011. 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 2011. 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 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 113,541 97,566 225,410 _______ _______ _______ Profit/(loss) on ordinary activities before 48,864 (9,440) 2,212 taxation _______ _______ _______ Segment net assets 275,761 229,696 237,053 _______ _______ _______ Class of business Property development Six months to 30 November Year ended 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 3,184 22,477 30,282 _______ _______ _______ Profit on ordinary activities before taxation 599 3,294 12,564 _______ _______ _______ Segment net assets 30,243 23,107 30,902 _______ _______ _______ Class of business Group Six months to 30 November Year ended 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 116,725 120,043 255,692 _______ _______ _______ Profit/(loss) on ordinary activities before 49,463 (6,146) 14,776 taxation _______ _______ _______ Net assets 306,004 252,803 267,955 _______ _______ _______ 4 Turnover Six months to 30 November Year ended 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Gate and other match day revenues 45,954 36,530 93,108 Player trading 394 140 735 Broadcasting 40,642 37,775 85,244 Retail and licensing income 9,776 8,763 17,702 Commercial 16,775 14,358 28,621 Property development 3,184 22,477 30,282 _______ _______ _______ 116,725 120,043 255,692 _______ _______ _______ 5 Operating costs Six months to 30 November Year ended 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Football - amortisation and depreciation 23,046 16,262 34,156 Football - other operating costs 98,353 88,104 178,929 Property development - operating costs 2,684 19,196 25,484 Property development - impairment - - - (7,860) exceptional Costs of takeover transaction - exceptional - - 3,077 _______ _______ _______ 124,083 123,562 233,786 _______ _______ _______ The impairment credit in the prior year reflected an increase in the carrying value of the Group's unsold development site at Queensland Road, following Ashburton Trading Limited, a subsidiary company, exchanging contracts for the sale of part of the site. The carrying value being increased to reflect the value expected to be realised when the sale of the site is completed. 6 Net finance charges Six months to 30 November Year ended 31 May 2011 2010 2011 Unaudited Unaudited Audited Interest payable and similar charges: Â£'000 Â£'000 Â£'000 Bank loans and overdrafts (4) (25) (34) Fixed/floating rate bonds (6,614) (6,776) (13,462) Other (175) (170) (341) Costs of raising long-term finance (393) (384) (937) _______ _______ _______ Total interest payable and similar charges (7,186) (7,355) (14,774) Interest receivable 469 240 566 _______ _______ _______ Net finance charges (6,717) (7,115) (14,208) _______ _______ _______ 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 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Corporation tax on result for the period at (2,607) (124) (5,083) 25.83% Movement in deferred taxation (8,807) 3,751 2,940 _______ _______ _______ Total tax (charge)/credit (11,414) 3,627 (2,143) _______ _______ _______ From 1 April 2012 the rate of UK corporation tax will reduce from 26% to 25%. The Group's deferred tax liabilities have been revalued based on the 25% rate. The impact of the rate change is a deferred tax credit of Â£1.24 million. The comparative rates of corporation tax were 27.83% for the six months ended 30 November 2010 and 27.67% for the year ended 31 May 2011. 8 Earnings per share The calculation of earnings per share is based on the profit/loss for the period divided by the weighted average number of ordinary shares in issue being 62,217 (period to 30 November 2010 - 62,217 shares and year to 31 May 2011 - 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 2011 399,579 6,509 87,388 493,476 Additions 3,469 9 1,305 4,783 Disposals - - - - _______ _______ _______ _______ At 30 November 2011 403,048 6,518 88,693 498,259 _______ _______ _______ _______ Depreciation At 1 June 2011 28,978 2,781 30,289 62,048 Charge for period 2,822 191 2,841 5,854 Disposals - - - - _______ _______ _______ _______ At 30 November 2011 31,800 2,972 33,130 67,902 _______ _______ _______ _______ Net book value At 30 November 2011 371,248 3,546 55,563 430,357 _______ _______ _______ _______ At 31 May 2011 370,601 3,728 57,099 431,428 _______ _______ _______ _______ 10 Intangible fixed assets Â£'000 Cost of player registrations At 1 June 2011 138,322 Additions 74,659 Disposals (26,080) _______ At 30 November 2011 186,901 _______ Amortisation of player registrations At 1 June 2011 82,605 Charge for the period 17,266 Disposals (20,129) _______ At 30 November 2011 79,742 _______ Net book amount At 30 November 2011 107,159 _______ At 31 May 2011 55,717 _______ 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 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Amounts recoverable within one year: Trade debtors 5,897 5,532 10,032 Other debtors 16,392 2,221 3,182 Prepayments and accrued income 30,363 23,379 14,221 Corporation tax - 4,186 - _______ _______ _______ 52,652 35,318 27,435 _______ _______ _______ Amounts recoverable after more than one year: Other debtors 3,799 - - Prepayments and accrued income 2,106 2,320 2,214 _______ _______ _______ 5,905 2,320 2,214 _______ _______ _______ Other debtors of Â£20.2 million, include Â£19.0 million in respect of player transfers (30 November 2010 Â£1.3 million and 31 May 2011 Â£0.7 million) of which Â£3.8 million is recoverable after more than one year. 13 Cash at bank and in hand 30 November 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Debt service reserve accounts 23,056 22,498 31,687 Other accounts 92,094 87,859 128,542 _______ _______ _______ 115,150 110,357 160,229 _______ _______ _______ 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. Included in other accounts is a balance of Â£2.3 million (30 November 2010 Â£6.6 million and 31 May 2011 Â£4.5 million) which is held in connection with the site works at Queensland Road. The use of this deposit is restricted to that purpose and Newlon Housing Trust is a joint signatory. The Group uses short-term bank treasury deposits as a means of maximising the interest earned on its cash balances. 30 November 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Cash at bank and in hand 9,111 63,422 115,509 Short-term deposits 106,039 46,935 44,720 _______ _______ _______ 115,150 110,357 160,229 _______ _______ _______ 14 Creditors: Amounts falling due within one year 30 November 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed and floating rate bonds - secured 5,928 5,575 5,583 Trade creditors 11,309 10,766 10,324 Corporation tax 2,537 - 4,612 Other tax and social security 5,190 5,421 16,867 Other creditors 23,627 11,493 9,717 Accruals and deferred income 74,730 84,225 84,001 _______ _______ _______ 123,321 117,480 131,104 _______ _______ _______ Other creditors, above and as disclosed in note 15, include Â£22.9 million (30 November 2010 Â£13.1 million and 31 May 2011 Â£10.7 million) in respect of player transfers. 15 Creditors: Amounts falling due after more than one year 30 November 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed rate bonds - secured 166,406 172,470 172,713 Floating rate bonds - secured 52,928 53,071 52,999 Debentures 26,935 26,593 26,761 Other creditors 4,323 5,734 5,802 Grants 4,063 4,210 4,137 Deferred income 8,526 9,457 13,500 _______ _______ _______ 263,181 271,535 275,912 _______ _______ _______ The fixed rate bonds above and disclosed in note 14 comprise: 30 November 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed rate bonds 177,220 183,428 183,428 Costs of raising finance (4,886) (5,383) (5,132) _______ _______ _______ 172,334 178,045 178,296 _______ _______ _______ Due within one year 5,928 5,575 5,583 Due after more than one year 166,406 172,470 172,713 _______ _______ _______ 172,334 178,045 178,296 _______ _______ _______ The fixed rate bonds bear interest at 5.1418% per annum. The floating rate bonds above comprise: 30 November 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Floating rate bonds 50,000 50,000 50,000 Interest rate swap 5,505 5,785 5,645 Costs of raising finance (2,577) (2,714) (2,646) _______ _______ _______ 52,928 53,071 52,999 _______ _______ _______ Due within one year - - - Due after more than one year 52,928 53,071 52,999 _______ _______ _______ 52,928 53,071 52,999 _______ _______ _______ 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 0.65% of the 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£315,000 (period to 30 November 2010 Â£323,000 and year ended 31 May 2011 Â£642,000). 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£28.5 million (30 November 2010 Â£25.7 million, 31 May 2011 Â£59.5 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: 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Between one and two years 6,900 6,545 6,545 Between two and five years 23,026 21,842 21,842 After five years 217,995 225,736 225,904 __________ __________ __________ 247,921 254,123 254,291 Within one year 6,545 6,209 6,209 __________ __________ __________ 254,466 260,332 260,500 __________ __________ __________ Interest rate profile After taking into account interest rate swaps, the interest rate profile of the Group's financial liabilities at 30 November 2011 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 2011 2011 2011 2011 Unaudited Unaudited Â£'000 Â£'000 Â£'000 Â£'000 % Yrs Bonds - fixed rate 177,220 - - 177,220 5.8 17.5 Bonds - floating 50,000 - - 50,000 6.6 19.5 rate Debentures 12,816 - 14,430 27,246 2.8 16.5 _______ _______ _______ _______ 240,036 - 14,430 254,466 _______ _______ _______ _______ 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 2011 the total unrecognised loss on the Group's interest rate swaps was Â£23.2 million (31 May 2011: Â£15.1 million). The interest rate profile at 30 November 2010 for comparative purposes was: Weighted average Fixed Floating Interest Weighted period for Rate rate free Total average which rate Unaudited Unaudited Unaudited Unaudited fixed is fixed rate 2010 2010 2010 2010 Unaudited Unaudited Â£'000 Â£'000 Â£'000 Â£'000 % Yrs Bonds - fixed rate 183,428 - - 183,428 5.6 18.5 Bonds - floating 50,000 - - 50,000 6.6 20.5 rate Debentures 12,474 - 14,430 26,904 2.8 17.5 _______ _______ _______ _______ 245,902 - 14,430 260,332 _______ _______ _______ _______ The interest rate profile at 31 May 2011 for comparative purposes was: Weighted average Fixed Floating Interest Weighted period for rate rate free Total average which rate Audited Audited Audited Audited fixed is fixed rate 2011 2011 2011 2011 Audited Audited Â£'000 Â£'000 Â£'000 Â£'000 % Yrs Bonds - fixed rate 183,428 - - 183,428 5.6 18 Bonds - floating rate 50,000 - - 50,000 6.6 20 Debentures 12,642 - 14,430 27,072 2.8 17 _______ _______ _______ _______ 246,070 - 14,430 260,500 _______ _______ _______ _______ 16 Provisions for liabilities 30 November 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Pensions provision 867 1,073 970 Transfers provision 18,810 6,680 5,057 Deferred taxation 41,055 31,435 32,247 __________ __________ __________ 60,732 39,188 38,274 __________ __________ __________ 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 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 At start of period 211,197 198,564 198,564 Profit/(loss) for the period 38,049 (2,519) 12,633 __________ __________ __________ Balance at end of period 249,246 196,045 211,197 __________ __________ __________ 18 Reconciliation of shareholders' funds 30 November 31 May 2011 2010 2011 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Opening shareholders' funds 267,955 255,322 255,322 Profit/(loss) for the period 38,049 (2,519) 12,633 __________ __________ __________ Closing shareholders' funds 306,004 252,803 267,955 __________ __________ __________ 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£11.0 million (30 November 2010 Â£ 14.3 million, 31 May 2011 Â£12.5 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£0.3 million (30 November 2010 Â£1.4 million, 31 May 2011 Â£0.3 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 2011 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 will be announced to PLUS on 27 February 2012 and posted to all shareholders on the register at 24 February 20 12. Copies of this interim report will be available from the company's registered office at Highbury House, 75 Drayton Park, London N5 1BU. 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 2011 which comprises the consolidated profit and loss account, the consolidated balance sheet, the consolidated cash flow statement, the notes to 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 it 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 Financial 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 2011 is not prepared, in all material respects, in accordance with the Plus Markets Rules for Issuers and the ASB Statement Half-Yearly Financial Reports. Deloitte LLP Chartered Accountants and Statutory Auditor London, United Kingdom 27 February 2012

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