Half-yearly Report

Arsenal Holdings plc Results for the six months ended 30 November 2010 ROBUST FINANCIAL PERFORMANCE PUTS ARSENAL ON TRACK AT HALF WAY STAGE * Operating profit (before depreciation and player trading) of Â£12.6m (2009 - Â£29.3m) with, as expected, a reduction in the contribution from property. * Sale of 50 apartments at Highbury Square generated revenue of Â£22.5m (2009 - 261 apartments sales generated Â£96.6m) and an operating profit from property of Â£3.3m (2009 - Â£11.3m) reflecting the lower number of apartments now left for sale. * Property business continues to be debt free with all sales contributing to Group's cash position of Â£110.4m (2009 - Â£101.0m). * Further significant commitment to a determined policy of investing in the team with the re-signing of several key first team players and ArsÃ¨ne Wenger as the Club's Manager. * Football operating profits (before depreciation and player trading) of Â£9.3 million (2009 - Â£18.0m) reflect this increased investment in football wages and also timing differences in the number of home games played (2010 - 10 home matches in first half of 28 matches, so far confirmed, for full year / 2009 - 12 of 27). * Significantly reduced profit on player sales of Â£4.0m compared to Â£33.9m for the prior year. * Changes in property and player trading, which are essentially one-offs, impact overall result for the period - loss after tax of Â£2.5m (2009 - profit of Â£29.2m). Commenting on the interim results, Peter Hill-Wood, non-executive chairman, said: "This is a robust performance in the current climate and is where we expected to be at this stage of the financial year and at this stage in our longer term development plans for the growth of the Club. The Club is exactly where we want to be, competing for trophies across the closing months of the season. I know that ArsÃ¨ne Wenger and his players will remain focused and will be appreciative of the fantastic support they get from our fans around the world. I also want you to know that we are proud of the fact we continue to compete at the highest level while staying true to our principles. We continue to operate as a self-funding Club. This brings its own challenges in an increasingly competitive environment but provides the platform for a secure and positive long term future." CHAIRMAN'S STATEMENT It has been an exciting season so far. We are delighted to have reached our first final at the new Wembley and are looking forward to next Sunday's match against Birmingham City which will have the Carling Cup as its prize. We remain involved in all competitions and currently lie in second place in the Premier League. In the Champions League Round of Sixteen we hold a 2-1 advantage over Barcelona going into the second leg at the Nou Camp. It promises to be a compelling last three months of the season where every single match will count. This is exactly where we want to be, competing for trophies across the closing months of the season. I know that ArsÃ¨ne Wenger and his players will remain focused and will be appreciative of the fantastic support they get from our fans around the world. I also want you to know that we are proud of the fact we continue to compete at the highest level while staying true to our principles. We continue to operate as a self-funding Club. This brings its own challenges in an increasingly competitive environment but provides the platform for a secure and positive long term future. Our business goal is not to generate profits as such but rather to grow the Club's revenues so that they can be re-invested in the team and in the long term success of the Club as a whole. This is reflected in the financial results for the first half of the year, which are covered in more detail later in this report and which show an operating profit of Â£12.6 million and an after tax loss for the period of Â£2.5 million. This is a robust performance in the current climate and is exactly where we expected to be at this stage of the financial year and at this stage in our longer term development plans for the growth of the Club. In contrast to the equivalent period last year, there were no headline one-off profits either from property or player trading. Activity at Highbury Square has continued but at a much lower level as we have fewer apartments left to sell. At the same time we have continued to invest by extending the contracts of ArsÃ¨ne Wenger as our Manager and a number of key players. Additionally, we have invested in people and facilities to ensure we are well positioned for growth. This year our charity of the season is Centrepoint, an organisation which aims to give homeless young people a brighter future. The current fundraising total through the Club's annual, `Be a Gooner. Be a Giver.' campaign is Â£238,000. Our aim is to raise Â£500,000 to fund the refurbishment of a state of the art service at Centrepoint's Dean Street facility. A dedicated website - www.beagoonerbeagiver.org - follows the story behind the partnership and gives supporters the opportunity to get involved and donate to the charity throughout the course of the season. Financial Review With Highbury Square apartment sales now reaching their closing stages and following a low key summer transfer window for the Club, the Group's results for the first half of the financial year were always going to be significantly different from those for the comparative period of the previous year. In the six months ended 30 November 2010, we completed the sales of a further 50 apartments at Highbury Square generating turnover of Â£22.5 million (2009 - 261 apartment sales generated Â£96.6 million) and Â£3.3 million of operating profits from property (2009 - Â£11.3 million). This means 620 of 655 apartments in the Highbury Square development have been sold. The summer 2010 transfer window saw limited player sales activity and a profit on disposal of Â£4.0 million, mainly from the transfer of Eduardo's registration to Shakhtar Donesk. The same period last year recorded a player disposal profit of Â£33.9 million following the sales of Adebayor and Toure. These changes, from transactions which are essentially one-offs, have a material impact on our bottom line results. 2010 2009 Â£m Â£m Turnover Football 97.6 100.2 Property development 22.5 96.6 Total turnover 120.0 196.8 Operating profits* Football* 9.3 18.0 Property development 3.3 11.3 Total operating profit* 12.6 29.3 Player trading (5.9) 20.8 Depreciation (6.2) (6.0) Joint venture 0.4 0.3 Net finance charges (7.1) (9.2) (Loss) / profit before tax (6.2) 35.2 *= operating profits before depreciation and player trading costs At an operating profit level our half year results from football are impacted by timing differences arising from the way certain elements of income are accounted for across the full financial year. Revenue The first of these timing differences relates to match-day income and is particularly pronounced for this half year. At the time of writing, we are certain of playing 28 first team home fixtures in season 2010/11. This number could increase by a further three matches depending on cup results. This results in a significant skew in match-day income across the financial year with just 10 home first team fixtures played in the opening half of the year. There were 12 fixtures in the comparative period with the difference being one Champions League and one Carling Cup match (2009/10 full season 27 matches). 6 months 6 months Full Year 30 November 30 November 31 May 2010 2010 2009 Gate and match-day revenues Â£36.5 m Â£41.4 m Â£93.9 m The second area of income where there is a timing difference between half year and full year results is the part of the Premier League domestic broadcasting payment which is paid as a merit award on the basis of Â£756,000 per place in the final League table. Traditionally, we do not account for any merit award until the end of the season. Broadcasting revenue included an increase in the value of the overseas element of the Premier League distributions but overall, the lower number of home fixtures played, meant that football income for the first six months of the year was Â£97.6 million against Â£100.2 million for the prior period. Operating costs We indicated in last year's Annual Report that there was continuing pressure on the player wage cost line and that the full cost of a number of player contracts had yet to be realised. This upward trend is reflected in Â£4.5 million of higher player wage costs for the first half of 2010/11 compared to the prior year. This will also feed through into the full year figures. The increased wage cost reflects a deliberate policy, underwritten by our accumulated property profits and cash reserves, of significant investment in the current squad in terms of the contracts renegotiated over the last two years. Aside from player costs, there were also modest increases in the business rates expense for Emirates Stadium and in our head office costs, mainly associated with the strengthening of our commercial team which was started last year in readiness for the next phase of the Group's revenue growth. Property development Visitors to Emirates Stadium will be well aware of the construction works being undertaken by Newlon Housing Trust on the Queensland Road site to the south of the stadium. These works are on schedule and we continue to work closely with Newlon to ensure that there is no disruption to our match-day activities. The works include the clearance and remediation of the market housing section of the Queensland Road site and our discussions for the sale of this land, which has planning consent for 375 apartments within three towers, are at an advanced stage. We continue to work with Islington Council's planning department to determine the best development schemes for our two remaining property sites on Hornsey Road and Holloway Road. Although all of the Group's property projects will incur some costs to complete, the vast majority of the necessary development expenditure has already been incurred and our property business is debt free. This means that looking ahead the net cash generated from future property sales, being sales proceeds less costs to complete, will be significantly greater than the recorded profits from those sales, being sales proceeds less total development costs. This is already the case at Highbury Square. The next few years will see the accumulation of a fairly significant cash windfall for the Group. Emirates stadium During the first half of the year we have continued to invest in the Arsenalisation of Emirates Stadium with the return of the clock to the south stand roof as well as the renaming of the stands to bring back the famous Clock End and North Bank. Other initiatives have included the Arsenalisation of the upper tier concourses, personalisation of individual supporter seats and the laying of commemorative paving stones for an ever increasing number of fans within Armoury Square. The major redevelopment of some of the dining and hospitality facilities within club level has proved to be very successful. We have identified a programme of summer works for 2011 and this will include the construction of a state of the art medical and rehabilitation centre at London Colney. Summary Taking these timing differences and changes in revenues and costs into account the operating profit (before depreciation and player trading) from football for the half year was Â£9.3 million (2009 - Â£18.0 million). Including the results from property the Group operating profit was Â£12.6 million (2009 - Â£29.3 million). This result is consistent with our model for the year and falls very much in line with our expectation of the half year position. There were no significant changes in depreciation costs or profits from the Arsenal.com joint venture but net finance charges fell to Â£7.1 million (2009 - Â£9.3 million). This is because the Group's property business was debt free this half year but was still in the process of repaying its bank loans and hence paying interest during the comparative period. The Group's overall after tax loss for the six months was Â£2.5 million (2009 - profit Â£29.2 million). Historically the financial 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 in 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. The Group's cash position continued to be strong with balances of Â£110.4 million on hand at 30 November 2010 (2009 - Â£101.0 million) of which Â£22.5 million (2009 - Â£22.5 million) was restricted as debt service reserves. In accordance with the agreed repayment schedule a further Â£5.9 million of stadium financing debt was repaid at the start of September. The Group's net debt at 30 November 2010 amounted to Â£147.4 million (30 November 2009 - Â£203.6 million). In closing, I want to reinforce the point that as the Club moves forward, the cash windfall from property, together with the cash we deliver from the development and further growth of the football business commercially, will be invested back into the Club. Our investment of those funds will be made in a reasoned and sustainable way which builds the best opportunity for success on the field, which ensures that Arsenal teams continue to play exciting, entertaining football and which improves the experience of our fans wherever they are in the world. This approach is part of an Arsenal way of doing things and it is something of which I am rather proud. I know this feeling is widely shared by our fans. I hope you all enjoy the rest of the season. P D Hill-Wood Chairman 25 February 2011 Arsenal Holdings Plc Consolidated profit and loss account For the six months ended 30 November 2010 Six months to 30 Year ended November 31 May Six months to 30 November 2010 2009 2010 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 120,990 140 121,130 197,760 381,722 including its share of joint ventures Share of turnover of (1,087) - (1,087) (990) (1,866) joint ventures ________ ________ _______ ________ ________ Group turnover 4 119,903 140 120,043 196,770 379,856 Operating expenses - other (113,453) - (113,453) (173,395) (319,272) - amortisation of player - (10,109) (10,109) (13,215) (25,033) registrations Total operating expenses 5 (113,453) (10,109) (123,562) (186,610) (344,305) ________ ________ _______ ________ ________ Operating profit/(loss) 6,450 (9,969) (3,519) 10,160 35,551 Share of operating 446 - 446 333 463 profit of joint venture Profit on disposal of - 4,042 4,042 33,945 38,137 player registrations ________ ________ _______ ________ ________ Profit/(loss) on ordinary activities before net finance charges 6,896 (5,927) 969 44,438 74,151 ________ ________ Net finance charges 6 (7,115) (9,223) (18,183) ________ ________ ________ (Loss)/profit on ordinary activities before taxation (6,146) 35,215 55,968 Taxation 7 3,627 (5,985) 5,024 ________ ________ ________ (Loss)/profit after taxation retained for the financial period (2,519) 29,230 60,992 ________ ________ ________ (Loss)/earnings per 8 (Â£40.49) Â£469.81 Â£980.31 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 2010 Notes 30 November 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed assets Tangible assets 9 434,344 436,416 434,494 Intangible assets 10 65,345 68,218 60,661 Investment in joint venture 1,375 1,063 1,053 ________ ________ ________ 501,064 505,697 496,208 ________ ________ ________ Current assets Stock - Development properties 11 28,216 90,534 45,755 Stock - Retail merchandise 3,731 2,574 1,887 Debtors - Due within one year 12 35,318 46,866 62,289 Debtors - Due after one year 12 2,320 3,193 2,928 Cash and short-term deposits 13 110,357 101,029 127,607 ________ ________ ________ 179,942 244,196 240,466 Creditors: Amounts falling due 14 (117,480) (207,609) (154,835) within one year ________ ________ ________ Net current assets 62,462 36,587 85,631 ________ ________ ________ Total assets less current 563,526 542,284 581,839 liabilities Creditors: Amounts falling due after 15 (271,535) (279,657) (283,883) more than one year Provisions for liabilities 16 (39,188) (39,067) (42,634) ________ ________ ________ Net assets 252,803 223,560 255,322 ________ ________ ________ 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 17 196,045 166,802 198,564 ________ ________ ________ Shareholders' funds 18 252,803 223,560 255,322 ________ ________ ________ 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 2010 Six months to 30 November Year ended 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Net cash (outflow)/inflow from operating (4,822) 83,587 176,560 activities Player registrations 1,586 27,298 15,903 Returns on investment and servicing of (10,822) (8,524) (17,649) finance Taxation 9,721 (5,388) (6,294) Capital expenditure (7,023) (1,950) (5,342) ________ ________ ________ Cash (outflow)/inflow before financing (11,360) 95,023 163,178 Financing (5,890) (93,611) (135,188) Management of liquid resources 47,125 2,160 (48,542) ________ ________ ________ Change in cash in the period 29,875 3,572 (20,552) Change in short-term deposits (47,125) (2,160) 48,542 ________ ________ ________ (Decrease)/increase in cash (17,250) 1,412 27,990 ________ ________ ________ Arsenal Holdings Plc Notes to the cash flow statement Six months to 30 November Year ended 31 May 2010 2009 2010 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 (3,519) 10,160 35,551 Profit on disposal of tangible fixed assets (35) (2) (14) Depreciation 6,151 5,974 11,915 Amortisation of player registrations 10,109 13,215 25,033 Decrease in stock 15,695 75,754 121,261 Decrease/(increase) in debtors 1,317 (159) (869) Decrease in creditors (34,540) (21,355) (16,317) ________ ________ ________ Net cash (outflow)/inflow from operating (4,822) 83,587 176,560 activities ________ ________ ________ b) Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash for the period (17,250) 1,412 27,990 Cash outflow from decrease in debt 5,890 93,611 135,188 ________ ________ ________ Change in net debt resulting from cash flows (11,360) 95,023 163,178 Increase in debt resulting from non cash (353) (897) (1,137) changes Net debt at start of period (135,639) (297,680) (297,680) ________ ________ ________ Net debt at close of period (147,352) (203,554) (135,639) ________ ________ ________ c) Analysis of changes in net debt At 1 June Non cash Cash At 30 November 2010 Changes flows 2010 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and in hand 33,547 - 29,875 63,422 Short-term deposits 94,060 - (47,125) 46,935 _______ _______ _______ _______ 127,607 - (17,250) 110,357 Debt due within one year (bank (5,248) - (327) (5,575) loans/bonds) Debt due after more than one year (bank loans/bonds) (231,575) (183) 6,217 (225,541) Debt due after more than one year (debenture subscriptions) (26,423) (170) - (26,593) _______ _______ _______ _______ Net debt (135,639) (353) (11,360) (147,352) _______ _______ _______ _______ Non cash changes represent Â£323,000 in respect of the amortisation of costs of raising finance, Â£170,000 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 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Player registrations: Payments for purchase of players (22,414) (14,959) (29,940) Receipts from sale of players 24,000 42,257 45,843 _______ _______ _______ 1,586 27,298 15,903 _______ _______ _______ Returns on investment and servicing of finance: Interest received 205 342 738 Interest paid (11,027) (8,866) (18,387) _______ _______ _______ (10,822) (8,524) (17,649) _______ _______ _______ Capital expenditure: Payments to acquire tangible fixed assets (7,058) (1,952) (5,366) Receipts from sale of tangible fixed assets 35 2 24 _______ _______ _______ (7,023) (1,950) (5,342) _______ _______ _______ Financing: Repayment of borrowings (5,890) (93,540) (133,539) Increase in borrowings - 1,398 - Costs of raising finance - (1,469) (1,649) _______ _______ _______ Total debt repayment (5,890) (93,611) (135,188) _______ _______ _______ Arsenal Holdings Plc Notes to the interim accounts 30 November 2010 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 2010. 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 2010. 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 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 97,566 100,230 222,946 _______ _______ _______ (Loss)/profit on ordinary activities before (9,440) 25,841 44,781 taxation _______ _______ _______ Segment net assets 229,696 206,016 235,509 _______ _______ _______ Class of business Property development Six months to 30 November Year ended 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 22,477 96,540 156,910 _______ _______ _______ Profit on ordinary activities before taxation 3,294 9,374 11,187 _______ _______ _______ Segment net assets 23,107 17,544 19,813 _______ _______ _______ Class of business Group Six months to 30 November Year ended 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 120,043 196,770 379,856 _______ _______ _______ (Loss)/profit on ordinary activities before (6,146) 35,215 55,968 taxation _______ _______ _______ Net assets 252,803 223,560 255,322 _______ _______ _______ 4 Turnover Six months to 30 November Year ended 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Gate and other match day revenues 36,530 41,373 93,929 Player trading 140 104 460 Broadcasting 37,775 35,397 84,584 Retail income 7,360 7,469 12,613 Commercial 15,761 15,887 31,360 Property development 22,477 96,540 156,910 _______ _______ _______ 120,043 196,770 379,856 _______ _______ _______ 5 Operating costs Six months to 30 November Year ended 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Football operating costs 104,366 101,419 202,675 Property development - operating costs 19,196 85,191 138,830 Property development - impairment - - 2,800 _______ _______ _______ 123,562 186,610 344,305 _______ _______ _______ 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 2010 2009 2010 Unaudited Unaudited Audited Interest payable and similar charges: Â£'000 Â£'000 Â£'000 Bank loans and overdrafts (25) (1,371) (1,908) Fixed/floating rate bonds (6,776) (6,938) (13,790) Other (170) (180) 2 Costs of raising long-term finance (384) (1,151) (3,329) _______ _______ _______ (7,355) (9,640) (19,025) Finance costs capitalised - 104 145 _______ _______ _______ Total interest payable and similar charges (7,355) (9,536) (18,880) Interest receivable 240 313 697 _______ _______ _______ Net finance charges (7,115) (9,223) (18,183) _______ _______ _______ The interest capitalised of Â£Nil (period to 30 November 2009 Â£104,000 and year to 31 May 2010 Â£145,000) 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 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Corporation tax on result for the period at 124 314 1,056 27.83% Overprovision in respect of prior years - - (18,599) Movement in deferred taxation (3,751) 5,671 12,519 _______ _______ _______ Total tax (credit)/charge (3,627) 5,985 (5,024) _______ _______ _______ From 1 April 2011 the rate of UK corporation tax will reduce from 28% to 27%. The Group's deferred tax liabilities have been revalued based on the 27% rate. The impact of the rate change is a deferred tax credit of Â£1.3 million. 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 2009 - 62,217 shares and year to 31 May 2010 - 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 2010 393,131 6,418 84,458 484,007 Additions 4,241 26 1,808 6,075 Disposals - - (90) (90) _______ _______ _______ _______ At 30 November 2010 397,372 6,444 86,176 489,992 _______ _______ _______ _______ Depreciation At 1 June 2010 23,318 2,399 23,796 49,513 Charge for period 2,807 188 3,230 6,225 Disposals - - (90) (90) _______ _______ _______ _______ At 30 November 2010 26,125 2,587 26,936 55,648 _______ _______ _______ _______ Net book value At 30 November 2010 371,247 3,857 59,240 434,344 _______ _______ _______ _______ At 31 May 2010 369,813 4,019 60,662 434,494 _______ _______ _______ _______ 10 Intangible fixed assets Â£'000 Cost of player registrations At 1 June 2010 143,972 Additions 18,187 Disposals (23,447) _______ At 30 November 2010 138,712 _______ Amortisation of player registrations At 1 June 2010 83,311 Charge for the period 10,109 Disposals (20,053) _______ At 30 November 2010 73,367 _______ Net book amount At 30 November 2010 65,345 _______ At 31 May 2010 60,661 _______ 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 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Amounts recoverable within one year: Trade debtors 5,532 7,171 13,486 Other debtors 2,221 17,627 18,531 Prepayments and accrued income 23,379 22,068 16,365 Corporation Tax 4,186 - 13,907 _______ _______ _______ 35,318 46,866 62,289 _______ _______ _______ Amounts recoverable after more than one year: Trade debtors - 500 500 Other debtors - 141 - Prepayments and accrued income 2,320 2,552 2,428 _______ _______ _______ 2,320 3,193 2,928 _______ _______ _______ Other debtors of Â£2.2 million, include Â£1.3 million in respect of player transfers (30 November 2009 Â£17.3 million and 31 May 2010 Â£17.9 million) all of which is recoverable within one year. 13 Cash at bank and in hand 30 November 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Debt service reserve accounts 22,498 22,497 31,468 Other accounts 87,859 78,532 96,139 _______ _______ _______ 110,357 101,029 127,607 _______ _______ _______ 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£6.6 million (30 November 2009 Â£Nil and 31 May 2010 Â£6.6 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 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Cash at bank and in hand 63,422 57,679 33,547 Short-term deposits 46,935 43,350 94,060 _______ _______ _______ 110,357 101,029 127,607 _______ _______ _______ 14 Creditors: Amounts falling due within one year 30 November 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Bank loans - secured - 41,689 - Fixed and floating rate bonds - secured 5,575 5,239 5,248 Trade creditors 10,766 8,410 11,079 Corporation tax - 4,994 - Other tax and social security 5,421 3,406 13,987 Other creditors 11,493 22,779 13,721 Accruals and deferred income 84,225 121,092 110,800 _______ _______ _______ 117,480 207,609 154,835 _______ _______ _______ Other creditors, above and as disclosed in note 15, include Â£13.1 million (30 November 2009 Â£25.7 million and 31 May 2010 Â£17.7 million) in respect of player transfers. 15 Creditors: Amounts falling due after more than one year 30 November 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed rate bonds - secured 172,470 178,044 178,432 Floating rate bonds - secured 53,071 53,352 53,143 Debentures 26,593 26,259 26,423 Other creditors 5,734 5,216 6,921 Grants 4,210 4,358 4,284 Deferred income 9,457 12,428 14,680 _______ _______ _______ 271,535 279,657 283,883 _______ _______ _______ The fixed rate bonds above and disclosed in note 14 comprise: 30 November 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed rate bonds 183,428 189,318 189,318 Costs of raising finance (5,383) (5,897) (5,638) _______ _______ _______ 178,045 183,421 183,680 _______ _______ _______ Due within one year 5,575 5,377 5,248 Due after more than one year 172,470 178,044 178,432 _______ _______ _______ 178,045 183,421 183,680 _______ _______ _______ The fixed rate bonds bear interest at 5.1418% per annum. The floating rate bonds above comprise: 30 November 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Floating rate bonds 50,000 50,000 50,000 Interest rate swap 5,785 6,065 5,925 Costs of raising finance (2,714) (2,851) (2,782) _______ _______ _______ 53,071 53,214 53,143 _______ _______ _______ Due within one year - (138) - Due after more than one year 53,071 53,352 53,143 _______ _______ _______ 53,071 53,214 53,143 _______ _______ _______ 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£323,000 (period to 30 November 2009 Â£872,000 and year ended 31 May 2010 Â£1,089,000). 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£25.7 million (30 November 2009 Â£34.2 million, 31 May 2010 Â£46.5 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: 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Between one and two years 6,545 6,209 6,209 Between two and five years 21,842 20,719 20,719 After five years 225,736 232,759 233,234 __________ __________ __________ 254,123 259,687 260,162 Within one year 6,209 48,936 5,890 __________ __________ __________ 260,332 308,623 266,052 __________ __________ __________ Interest rate profile After taking into account interest rate swaps, the interest rate profile of the Group's financial liabilities at 30 November 2010 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 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 _______ _______ _______ _______ 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 2010 the total unrecognised loss on the Group's interest rate swaps was Â£14.7 million (31 May 2010: Â£14.9 million). The interest rate profile at 30 November 2009 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 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 profile at 31 May 2010 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 2010 2010 2010 2010 Audited Audited Â£'000 Â£'000 Â£'000 Â£'000 % Yrs Bonds - fixed rate 189,318 - - 189,318 5.6 19 Bonds - floating rate 50,000 - - 50,000 6.6 21 Bank loans - - - - - - Debentures 12,304 - 14,430 26,734 2.8 18 _______ _______ _______ _______ 251,622 - 14,430 266,052 _______ _______ _______ _______ 16 Provisions for liabilities 30 November 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Pensions provision 1,073 1,279 1,176 Transfers provision 6,680 9,449 6,272 Deferred taxation 31,435 28,339 35,186 __________ __________ __________ 39,188 39,067 42,634 __________ __________ __________ 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 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 At start of period 198,564 137,572 137,572 (Loss)/profit for the period (2,519) 29,230 60,992 __________ __________ __________ Balance at end of period 196,045 166,802 198,564 __________ __________ __________ 18 Reconciliation of shareholders' funds 30 November 31 May 2010 2009 2010 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Opening shareholders' funds 255,322 194,330 194,330 (Loss)/profit for the period (2,519) 29,230 60,992 __________ __________ __________ Closing shareholders' funds 252,803 223,560 255,332 __________ __________ __________ 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£14.3 million (30 November 2009 Â£ 11.2 million, 31 May 2010 Â£13.9 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£1.4 million (30 November 2009 Â£4.6 million, 31 May 2010 Â£1.8 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 2010 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 28 February 2011 and posted to all shareholders on the register at 25 February 2011 . 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 2010 which comprises the consolidated profit and loss account, the consolidated balance sheet, the consolidated 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 2010 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 2011

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