Half-yearly Report

Arsenal Holdings plc

Results for the six months ended 30 November 2015

ARSENAL ANNOUNCE HALF YEAR RESULTS

• Turnover from football increased to £158.0 million (2014 - £148.5 million) with growth in UEFA Champions League broadcasting distributions and commercial activity led mainly by partnerships.
• Stability in the playing squad meant profits on sale of player registrations amounted to only £0.3 million which was significantly lower than the prior period comparative (2014 - £26.7 million).
• Amortisation charge on player registrations further increased to £29.2 million (2014 - £25.6 million).
• The Group’s property business recognised the final instalment of the Queensland Road sales overage but otherwise activity was minimal with profits amounting to £1.8 million (2014 - £0.4 million).
• The Group recorded an overall loss after tax of £3.4 million (2014 – profit of £6.2 million).
• First period of reporting under FRS 102 and comparative figures restated. Minimal impact on the profit reported for this half year.
• The Group has no short-term debt and its cash reserves, excluding the balances designated as debt service reserves, amounted to £135.9 million (2014 - £138.8 million).
• Overall result for the year expected to be fully compliant with all of the requirements of both the Premier League and UEFA financial regulatory regimes.
• Significant uplift of Premier League broadcasting revenues with effect from the start of next financial year.

Commenting on the results for the six months, the Club’s Chairman, Sir Chips Keswick, said:

“This has been an unpredictable Premier League season thus far. What is important is that we are in contention and I am sure we have the resources and ability within the squad to sustain a strong challenge. The end of season run-in is going to be an exciting one and I am confident we will be very much at the centre of the action.

We continue to see robust growth around our commercial revenues and build our support globally through our marketing and media channels.

The result for the period has been impacted by a reduction in transfer profits but this reflects the overall stability we have within the squad which, in my view, is a positive factor for the Club.”

CHAIRMAN’S STATEMENT

The end of season run-in is going to be an exciting one and I am confident we will be very much at the centre of the action over the coming months.

As we all know, this has been an unpredictable Premier League season thus far. What is important is that we are in contention and I am sure we have the resources and ability within the squad to sustain a strong challenge.  In addition, we continue our unbeaten run in the FA Cup, which now stretches back to February 2013, and, at the time of writing, are in the middle of a Champions League encounter with Barcelona.

Turning to our interim financial results, you will see the Group reported an overall loss of £3.4 million for the half year (2014 – profit of £6.2 million). This is considered in more detail in the financial section of this report but in summary this figure is primarily driven by a drop of £26.4 million in profits from player sales, partially offset by increased broadcasting and commercial revenues. The reduction in transfer profits reflects the overall stability we have within the squad which, in my view, is a positive factor for the Club and under-rated in the modern game.

We continue to see robust growth in our commercial revenues, with our number of partners around the world now numbering 33. Recent partnerships have been announced in Africa, China, Australia, the US and Europe, including companies such as DraftKings, Dashen Breweries, SportPesa and Destination New South Wales. We remain an attractive partner for brands to align with and we can expect further growth in this area as we move forwards. Strong progress is also being made within our retail business, where demand for merchandise continues to be very strong. We continue to maximise our efforts to build our support globally through our marketing and media channels; and in addition to this we have confirmed summer tours which will take the team to California and Australia over the next 18 months.

Turning back to the football, we know we will have to find greater consistency to maintain our challenge. The recent acquisition of Mohamed Elneny from Basel added to our strength in depth and we are seeing a number of potentially important players returning from injury. This bodes well for the final months of the season.

Substantial redevelopment works continue at our London Colney training centre and our Youth Academy at Hale End.  This involves significant investment which we view as central to supporting the Club’s long term success. We need to ensure our first team squad have the best possible environment in which to develop whilst the Academy remains a critical part of our strategy to identify, recruit and develop the best young players for the future. With this in mind, it has been very rewarding to see Alex Iwobi emerge into the first team squad from the Academy this season. This follows last year’s breakthroughs by Francis Coquelin and Hector Bellerin and is further evidence of the excellent work being done by all our Academy coaches and staff. As a result of the work at London Colney the Arsenal Ladies will also benefit from improvements in their training facilities.

The Arsenal Foundation continues to play an important role raising funds and making grants to organisations here in Islington and further afield. Once again players, staff and supporters showed their generosity through our dedicated match-day in December, raising some £250,250. We are hugely grateful for everyone’s contribution. It allows us to make a difference to many people’s lives in special ways and remains an important part of where we stand as a football club at the heart of our community.

Financial Review

The financial results for the six months ended 30 November 2015 show further growth in the Group’s football revenues.

The total turnover from football was £158.1 million compared with £148.5 million for the same period last year.  The increase was mainly attributable to higher Champions League distributions in the first year of a new three year UEFA revenue cycle and commercial growth, mainly from our partnerships portfolio.

There were two less home games compared to the prior year (one Champions League and one Capital One Cup) and this meant match day revenue was lower at £41.2 million (2014 - £42.9 million).  Match day revenue remains weighted to the second half of the financial year and at 30 November we had played 9 (2014 – 11) of the 26 home fixtures we are so far certain of playing for the full season.

Our football operating costs were slightly decreased at £123.9 million as compared to £125.8 million this time last year.  As mentioned in the last Annual Report, the players’ bonus relating to qualification for this season’s Champions League group stage was earned as a result of last season’s third place finish and accordingly accounted for in the 2014/15 results.  Consequently, there is no qualification bonus in the wage costs for the first half of 2015/16.  This has been offset by increases in the underlying wage bill arising from certain contract extensions within the squad.

The impact of these changes is that operating profits from football have increased by some £10.6 million to £33.0 million (2014 - £22.4 million).

There was limited activity in the Group’s property business, with the only transaction of note being recognition of the final instalment of the Queensland Road overage payment consequent to the developer’s sale of the remaining units.  The operating profit from property was £1.6 million (2014 - £0.1 million).

	2015	2014 (as restated)
	£m	£m
Turnover
Football	158.1	148.5
Property development	2.1	0.3
Total turnover	160.2	148.8
Operating profits*
Football*	33.0	22.4
Property development	1.6	0.1
Total operating profit*	34.6	22.5
Player trading	(27.5)	1.4
Depreciation and amortisation of goodwill	(7.2)	(6.5)
Joint venture	0.5	0.5
Net finance charges	(6.6)	(11.7)
(Loss)/profit before tax	(6.2)	6.2
*= operating profits before depreciation and player trading costs

The most significant year to year change is in the figures for player trading (the profits on sale or loan of players less the amortisation charge on the cost of player registrations held).  The significant investment in the squad in recent years means that the amortisation component of player trading has further increased to £29.2 million (2014 – £25.6 million).  However, profits on sale of players were significantly reduced at just £0.3 million in contrast to £26.7 million for the comparative period.  There were no major sales in the period as the Club retained all of its key players going into the current campaign.

This is the first reporting period where our results have been compiled under the newly introduced Financial Reporting Standard 102 (FRS 102).  The impact on the current period is relatively minor – pre-tax losses would have been some £0.2 million higher under the previous UK accounting rules.

The most significant change on adoption of FRS 102 is that the interest rate swap, used to fix the interest rate on our floating rate stadium finance bonds, has to be included on the balance sheet at fair value (market value) with changes in fair value reported in the profit and loss of each period.  As is normal on adoption of a new set of accounting rules, the comparative numbers have been restated in order to maintain comparability.

For the swap there was a significant increase in negative fair value last year as the financial markets anticipated that UK interest rates would remain lower and for longer than previously expected.  As a consequence, net finance costs appear reduced against the restated comparative period at £6.6 million (2014 - £11.7 million).  The volatility introduced by fair value accounting for the swap is not particularly helpful in understanding our results.  The fair value represents, in our case, the potential cost at the balance sheet date of settling the swap, however, in reality, we continue to pay and account for the underlying stadium bonds at the same fixed interest rate as last year.  If the stadium debt runs to its full maturity, this will continue to be the case.  The value of the swap will vary with market rates; however, at maturity, its fair value will be zero such that all the negative fair value of £24.0 million accounted for at this half year end will have reversed with no cash flow impact.

Despite the increased revenues and operating profit from football, the change in the player trading result and, in particular, the lack of transfer profits means that the overall outcome for this half year is a loss before tax of £6.2 million (2014 – profit of £6.2 million).

There is a tax credit against this loss.  This is mainly as a result of the UK’s lower future rates of corporation tax which mean that the Group’s deferred tax balances have been revalued to the lower tax rates expected to apply when the underlying liabilities fall due to be taxed.

The Group has maintained a strong cash position with balances as at 30 November 2015 of £159.4 million (2014 - £161.5 million), inclusive of debt service reserves, which are not available for football purposes, of £23.5 million (2014 - £22.8 million). The cash balance is some £68.7 million lower than the 31 May 2015 figure. This reflects net cash outflows for the period on player transfers, of £39.4 million, and capital expenditure, of £10.5 million.

We also paid corporation tax of £4.8 million being the balance of the tax bill on our 2014/15 profits. The contribution that football makes to the economy as a whole is sometimes overlooked and it is worth noting that during the first half of the financial year the Group paid across to the Exchequer £77.6 million of taxation being corporation tax, PAYE, national insurance and VAT.

The cash outflow on transfers reflects mainly the settlement of instalments due on past transfers and means that the net outstanding liability on transfers has reduced from £65.6 million at 31 May 2015 to £45.4 million at 30 November 2015. The capital expenditure for the period is comparatively high and reflects the important development projects underway at the London Colney and Hale End training grounds, as well as enhancements at the Emirates, such as the new LED floodlights.

The Group enters into a number of transactions, relating mainly to its participation in European competition (UEFA Champions League distributions are paid in €) and player transfers, which create exposure to movements or volatility in foreign exchange, including €. 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 after tax result for the period is a loss of £3.4 million (2014 – profit of £6.2 million).

As always, the actual outcome for the second half will be strongly influenced by the extent of progress in the knock-out competitions and final Premier League position. We fully expect the overall result for the year to be compliant with all of the requirements of both the Premier League and UEFA financial regulatory regimes.

Looking ahead to next season we have already confirmed that there will be no general increase in ticket prices. Significantly 2016/17 will be the first year of the new Premier League broadcasting deals but the increased revenues will also very likely bring with them inflationary pressure in terms of both the wage bill and the transfer market.

In closing I should thank everyone for their support so far this season. The support at every game, home and away, has been top class. The closing chapters of the season will surely be exciting – let’s keep backing the team and enjoy them!

Sir Chips Keswick

Chairman

26 February 2016

Arsenal Holdings Plc

Consolidated profit and loss account

For the six months ended 30 November 2015

					Six months
					to 30				Year ended
					November				31 May
		Six months to 30 November 2015			2014 (restated)				2015 (restated)
		Unaudited			Unaudited				Audited
		Operations
		excluding
		player	Player
		trading	trading	Total			Total			Total
	Notes	£’000	£’000	£’000			£’000			£’000
Turnover of the Group including its share of joint ventures		160,175	1,452	161,627			150,217			347,303
Share of turnover of joint ventures		(1,454)	-	(1,454)			(1,449)			(2,779)
		________	________	_______			________			________
Group turnover	5	158,721	1,452	160,173			148,768			344,524
Operating expenses
- other		(131,300)	-	(131,300)			(132,474)			(281,446)
- amortisation of player registrations		-	(29,231)	(29,231)			(25,560)			(55,365)
Total operating expenses		(131,300)	(29,231)	(160,531)			(158,034)			(336,811)
		________	________	_______			________			________
Operating profit/(loss)		27,421	(27,779)	(358)			(9,266)			7,713
Share of operating profit of joint venture		451	-	451			470			762
Profit on disposal of player registrations		-	309	309			26,740			28,944
		________	________	_______			________			________
Profit/(loss) on ordinary activities before net finance charges		27,872	(27,470)	402			17,944			37,419
		________	________
Net finance charges				(6,565)			(11,725)			(19,227)
				________			________			________
(Loss)/profit on ordinary activities
before taxation				(6,163)			6,219			18,192
Taxation				2,770			(7)			(3,376)
				________			________			________
(Loss)/profit after taxation retained for
the financial period				(3,393)			6,212			14,816
				________			________			________
Earnings per share	6			(£54.53)			£99.84			£238.13
				________			________			________

All trading resulted from continuing operations.

The accompanying notes are an integral part of these statements.

Arsenal Holdings PLC

Consolidated Statement of Comprehensive Income

For the six months ended 30 November 2015

	Six months to 30 November		Year ended  31 May
	2015	2014	2015
	Unaudited	Unaudited (restated)	Audited (restated)
	£’000	£’000	£’000
(Loss)/profit for the period	(3,393)	6,212	14,816
Gains / (losses) on cash flow hedges	612	(384)	(1,000)
Exchange differences	2	6	7
	_______	_______	_______
	(2,779)	5,834	13,823
	_______	_______	_______

Arsenal Holdings Plc

Consolidated balance sheet

At 30 November 2015

	Notes	30 November		31 May
		2015	2014	2015
		Unaudited	Unaudited (restated)	Audited (restated)
		£’000	£’000	£’000
Fixed assets
Goodwill		874	1,285	1,082
Tangible assets		421,808	419,931	419,180
Intangible assets	7	160,792	181,269	171,658
Investment in joint venture		4,535	3,943	4,174
		________	________	________
		588,009	606,428	596,094
		________	________	________
Current assets
Stock – Development properties		11,003	9,843	9,741
Stock – Retail merchandise		4,206	4,169	4,530
Debtors – Due within one year		52,509	52,922	74,175
Debtors – Due after one year		5,657	10,624	6,658
Cash and short-term deposits	8	159,431	161,546	228,167
		________	________	________
		232,806	239,104	323,271
Creditors:  Amounts falling due within one year		(205,917)	(198,622)	(275,332)
		________	________	________
Net current assets		26,889	40,482	47,939
		________	________	________
Total assets less current liabilities		614,898	646,910	644,033
Creditors:  Amounts falling due after more than one year		(248,456)	(278,069)	(269,174)
Provisions for liabilities		(43,910)	(51,519)	(49,548)
		________	________	________
Net assets		322,532	317,322	325,311
		________	________	________
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
Hedging reserve		(481)	(476)	(1,092)
Profit and loss account		266,255	261,040	269,645
		________	________	________
Shareholders’ funds		322,532	317,322	325,311
		________	________	________

The accompanying notes are an integral part of this consolidated balance sheet.

Arsenal Holdings PLC

Consolidated Statement of Changes in Equity

For the six months ended 30 November 2015

	Share	Share	Merger	Hedging	Profit
	Capital	Premium	Reserve	Reserve	And Loss		Total
	£’000	£’000	£’000	£’000	£’000		£’000
At 31 May 2014	62	29,997	26,699	-	253,860		310,618
Transition to FRS 102 (see note 9)	-	-	-	(92)	962		870
	________	________	________	_______	________		________
At 1 June 2014 restated	62	29,997	26,699	(92)	254,822		311,488
Total comprehensive income for year ended 31 May 2015 restated	-	-	-	(1,000)	14,823		13,823
	________	________	________	_______	________		________
At 31 May 2015 restated	62	29,997	26,699	(1,092)	269,645		325,311
Total comprehensive income for the six months ended 30 November 2015	-	-	-	611	(3,390)		(2,779)
	_______	_______	_______	_______	________		________
As at 30 November 2015	62	29,997	26,699	(481)	266,255		322,532
	________	________	________	________	________		________

Arsenal Holdings Plc

Consolidated cash flow statement

For the six months ended 30 November 2015

	Six months to 30 November		Year ended  31 May
	2015	2014	2015
	Unaudited	Unaudited (restated)	Audited (restated)
	£’000	£’000	£’000
Net cash (outflow)/inflow from operating activities	(1,052)	5,490	102,395
Taxation	(4,823)	(996)	(2,206)
Cash flow from investing activities
Interest received	401	540	863
Proceeds from sale of fixed assets	681	23	47
Purchase of fixed assets	(10,479)	(6,890)	(14,302)
Player registrations (see note below)	(39,401)	(30,667)	(46,241)
	________	________	________
Net cash flow from investing activities	(48,798)	(36,994)	(59,633)
	________	________	________
Cash flows from financing activities
Interest paid	(6,395)	(6,558)	(12,993)
Repayment of debt	(7,668)	(7,274)	(7,274)
Management of cash equivalents	35,414	42,689	7,770
	________	________	________
Net cash flow from financing activities	21,351	28,857	(12,497)
	________	________	________
Net (decrease)/increase in cash	(33,322)	(3,643)	28,059
Change in cash equivalents	(35,414)	(42,689)	(7,770)
	________	________	________
(Decrease)/increase in cash and cash equivalents	(68,736)	(46,332)	20,289
	________	________	________
Note:  Gross cash flows – player registrations
Payments for purchase of players	(47,287)	(48,568)	(71,704)
Receipts from sale of players	7,886	17,901	25,463
	________	________	________
	(39,401)	(30,667)	(46,241)
	________	________	________

Arsenal Holdings Plc

Notes to the cash flow statement

	Six months to 30 November		Year ended  31 May
	2015	2014	2015
	Unaudited	Unaudited (restated)	Audited (restated)
	£’000	£’000	£’000
a)  Reconciliation of operating result to net cash (outflow)/inflow from operating activities
Operating (loss)/profit	(358)	(9,266)	7,713
(Profit)/loss on disposal of tangible fixed assets	(7)	297	273
Amortisation of goodwill	208	213	416
Depreciation (net of grant amortisation)	7,032	6,554	14,618
Amortisation of player registrations	29,231	25,560	54,430
Impairment of player registrations	-	-	935
	________	________	________
Operating cash flow before working capital	36,106	23,358	78,385
(Increase)/decrease in stock	(938)	772	513
Decrease/(increase) in debtors	16,915	17,574	(4,983)
(Decrease) / increase in creditors	(53,135)	(36,214)	28,480
	________	________	________
Net cash (outflow)/inflow from operations	(1,052)	5,490	102,395
	________	________	________

b)  Analysis of changes in net debt

	At 1 June			At 30 November
	2015 (restated)	Non cash changes	Cash flows	2015
	£’000	£’000	£’000	£’000
Cash at bank and in hand	108,614	-	(33,332)	75,292
Cash equivalents	119,553	-	(35,414)	84,139
	_______	_______	_______	_______
	228,167	-	(68,736)	159,431
Debt due within one year (bonds)	(7,119)	(8,095)	7,668	(7,546)
Debt due after more than one year (bonds)	(193,997)	7,818	-	(186,179)
Derivative financial instruments	(23,736)	(215)	-	(23,951)
Debt due after more than one year
(debenture subscriptions)	(13,808)	(194)	-	(14,002)
	_______	_______	_______	_______
Net debt	(10,493)	(686)	(61,068)	(71,247)
	_______	_______	_______	_______

Non cash changes represent £277,000 in respect of the amortisation of costs of raising finance, £194,000 in respect of rolled up, unpaid debenture interest and £215,000 in respect of the change in fair value of the Group’s interest rate swaps.

Arsenal Holdings Plc

Notes to the interim accounts

30 November 2015

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 2015. The accounts are prepared under the historical cost convention, modified to include certain items at fair value in accordance with Financial Reporting Standard 102 (FRS102) issued by the Financial Reporting Council, effective from 1 January 2015.

The prior period financial statements have been restated for material adjustments on adoption of FRS102 in the current period.  For more information see note 9.

These interim financial statements do not include all of the notes and disclosures required to comply with FRS102, as they have been prepared in accordance with the ISDX Growth Market Rules for Issuers.

The Group has two classes of business – the principal activity of operating a professional football club and property development.

The interim financial statements do not constitute statutory financial statements within the meaning of Section 435 of the Companies Act 2006.

2   Going concern

The Board has undertaken a full and thorough review of the Group’s forecasts and associated risks and sensitivities.  The extent of this review reflects the current economic climate as well as the specific financial circumstances of the Group.  The status of the Group’s financing arrangements 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.

3   Significant accounting policies

Income recognition

Gate and other match day revenue is recognised over the period of the football season as games are played and events are staged. 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 at the point of broadcast. 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.

Player registrations

The costs associated with acquiring players’ 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.  The additional costs are capitalised and amortised as set out above.

4   Segmental analysis

Class of business	Football
	Six months to 30 November		Year ended 1 May
	2015	2014	2015
	Unaudited	Unaudited (restated)	Audited  (restated)
	£’000	£’000	£’000
Turnover	158,041	148,498	329,337
	_______	_______	_______
(Loss)/profit on ordinary activities before taxation	(7,914)	5,853	4,838
	_______	_______	_______
Segment net assets	269,510	278,787	273,823
	_______	_______	_______

Class of business	Property development
	Six months to 30 November		Year ended 31 May
	2015	2014	2015
	Unaudited	Unaudited	Audited
	£’000	£’000	£’000
Turnover	2,132	270	15,187
	_______	_______	_______
Profit on ordinary activities before taxation	1,751	366	13,355
	_______	_______	_______
Segment net assets	53,022	38,535	51,488
	_______	_______	_______

Class of business	Group
	Six months to 30 November		Year ended 31 May
	2015	2014	2015
	Unaudited	Unaudited (restated)	Audited (restated)
	£’000	£’000	£’000
Turnover	160,173	148,768	344,524
	_______	_______	_______
(Loss)/profit on ordinary activities before taxation	(6,163)	6,219	18,192
	_______	_______	_______
Net assets	322,532	317,322	325,311
	_______	_______	_______

5   Turnover

	Six months to 30 November		Year ended 31 May
	2015	2014	2015
	Unaudited	Unaudited	Audited
	£’000	£’000	£’000
Gate and other match day revenues	41,207	42,939	100,401
Player trading	1,452	258	805
Broadcasting	60,293	52,992	124,844
Retail and licensing income	14,164	14,212	24,685
Commercial	40,925	38,097	78,602
Property development	2,132	270	15,187
	_______	_______	_______
	160,173	148,768	344,524
	_______	_______	_______

6   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 2014 – 62,217 shares and year to 31 May 2015 – 62,217 shares).

7   Intangible fixed assets

	£’000
Cost of player registrations
At 1 June 2015	328,522
Additions	20,173
Disposals	(19,897)
	_______
At 30 November 2015	328,798
	_______
Amortisation of player registrations
At 1 June 2015	156,864
Charge for the period	29,231
Disposals	(18,089)
	_______
At 30 November 2015	168,006
	_______
Net book amount
At 30 November 2015	160,792
	_______
At 31 May 2015	171,658
	_______

8   Cash at bank and in hand

	30 November		31 May
	2015	2014	2015
	Unaudited	Unaudited	Audited
	£’000	£’000	£’000
Debt service reserve accounts	23,498	22,781	35,024
Other accounts	135,933	138,765	193,143
	_______	_______	_______
	159,431	161,546	228,167
	_______	_______	_______

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.

The Group uses short-term bank treasury deposits (cash equivalents) as a means of maximising the interest earned on its cash balances.

	30 November		31 May
	2015	2014	2015
	Unaudited	Unaudited	Audited
	£’000	£’000	£’000
Cash at bank and in hand	75,292	76,912	108,614
Cash equivalents	84,139	84,634	119,553
	_______	_______	_______
	159,431	161,546	228,167
	_______	_______	_______

9   Explanation of transition to FRS 102

This is the first reporting period that the Group has presented its financial statements under Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council.  The following disclosures are required in the year of transition.  The last financial statements under previous UK GAAP were for the year ended 31 May 2015 and the date of transition to FRS 102 was therefore 1 June 2014.  As a consequence of adopting FRS 102, a number of accounting policies have changed to comply with that standard.  The key accounting policy changes are noted below, all other accounting policies are consistent with those set out in the last set of audited annual financial statements.

Financial assets and liabilities

Basic financial instruments (including the stadium finance bonds and the C and D debentures) are measured at amortised cost, using the effective interest method.  The effective interest rate is the rate which exactly discounts the estimated future payments of receipts over the life of the instrument to its carrying amount at initial recognition, re-estimated periodically to reflect changes in the market rate of interest.

Non basic financial instruments (including the A and B debentures) are recognised at fair value, and measured at the present value of the future payments, discounted at a market rate of interest.  Any periodic changes in fair value are recognised in the profit and loss.  These debentures were previously accounted for at their undiscounted historic cost.

Derivative financial instruments (including forward foreign exchange contracts and the Group’s interest rate swap) are recognised at fair value. The swap was previously accounted for at historic cost less amortisation over the term of the swap.

Deferred tax

Deferred tax is recognised in respect of all timing differences that may result in an obligation at the reporting date to pay more tax, or a right to pay less tax, at a future date.  The transition to FRS 102 has resulted in a requirement to recognise certain additional deferred tax assets and liabilities, in particular where the taxation of opening FRS 102 adjustments is subject to a ten year transitional rule for tax purposes.

Holiday pay

An accrual is made for the holiday pay entitlement of the Group’s employees which has not been taken as holiday at the financial period end.  Prior to the introduction of FRS 102 no provision was made.

	Group	Group	Group
	At 1 June	At 30 November	At 31 May
	2014	2014	2015
Reconciliation of Equity	£’000	£’000	£’000
Capital and Reserves (as previously reported)	310,618	320,685	330,669
Revaluation of Debentures	14,400	14,400	14,399
Revaluation of Interest Rate Swap	(12,736)	(18,123)	(19,211)
Movement in value of Forward Exchange contracts
	(92)	(476)	(1,092)
Holiday Pay	(461)	-	(507)
Tax	(241)	836	1,053
	__________	__________	__________
Capital and Reserves (as restated under FRS 102)	311,488	317,322	325,311
	__________	__________	__________

	Group	Group
	6 mths ended	Year ended
	2014	31 May 2015
Reconciliation of Profit	£’000	£’000
Profit for the financial period (as previously reported)	10,062	20,044
Revaluation of Debentures	(1)	(1)
Revaluation of Interest Rate Swap	(5,387)	(6,475)
Holiday Pay	461	(46)
Tax	1,077	1,294
	__________	__________
Profit for the financial period (as restated under FRS 102)	6,212	14,816
	__________	__________

10   Additional information

These interim results have been reviewed by the Group’s auditors, Deloitte LLP, who have issued a review report on the results.