Half-yearly Report

Arsenal Holdings plc Results for the six months ended 30 November 2012 ARSENAL ANNOUNCE HALF YEAR RESULTS * Group profit before tax was Â£17.8 million (2011 - Â£49.5 million). * Profit on sale of player registrations amounted to Â£42.5 million (2011 - Â£63.0 million). * Â£40.9 million of investment in new players and extended contracts pushed amortisation charges up to Â£19.9 million (2011 - Â£17.3 million). * The resulting profit from player trading was Â£23.2 million (2011 - Â£46.1 million). * Turnover from football fell to Â£106.1 million (2011 - Â£113.5 million) as a consequence of there being four fewer home fixtures. * As a result of this change in football turnover and increased wage costs, operating profits (before depreciation and player trading) from football decreased to Â£5.0 million (2011 - Â£15.2 million). * Property revenues were boosted to Â£32.3 million (2011 - Â£3.2 million) by the sale of the market housing site at Queensland Road. However, the Queensland Road sale was essentially at break even in profit and loss terms. Overall operating profits from property increased to Â£1.9 million (2011 - Â£0.5 million). * The Group has no short-term debt and continues to have a robust financial platform from cash reserves of Â£123.3 million (2011 - Â£115.2 million). * Confirmed extension to Emirates partnership worth up to Â£150 million. Commenting on the results for the six months, Peter Hill-Wood, non-executive Chairman, said: "Our ability to compete at the top of the game here and in Europe is underpinned by our financial performance which gives the club strength and independence. Our desire is to make everyone connected with Arsenal proud of the Club. We know that comes through winning trophies but also through the way we do things and that will remain our constant guide." CHAIRMAN'S STATEMENT I would like to start by thanking all of you who have sent me your best wishes in recent weeks. I am glad to report I am recovering well. This is due in no small part to the support of my family, friends and Arsenal colleagues who have been a wonderful source of strength. Despite being unable to attend matches recently due to my health, I have been following the team's fortunes closely and am looking forward to another exciting end to the season. We are competing for a place in the top four of the Premier League and, for a tenth consecutive season, are involved in the UEFA Champions League Round of 16. Whilst we have our sights set on a 16th straight season in the Champions League, our aims are higher; our ambition is to win trophies. No-one is more focussed on that than our manager ArsÃ¨ne Wenger, our majority shareholder Stan Kroenke and the Board and it is what we work towards every day. Our ability to compete at the top of the game here and in Europe is underpinned by our financial performance. The financial results are covered in more detail later in this report but show a total pre-tax profit of Â£17.8 million for the six month period to November 30th 2012. Player sales in the summer 2012 transfer window contributed Â£42.5 million. Let me be quite clear that our intention is to keep our best players and recruit new talent to make us stronger. Although we were disappointed to see Robin van Persie leave the club, we have taken steps to secure our best players going forward and have recently signed Jack Wilshere, Theo Walcott, Kieran Gibbs, Aaron Ramsey, Alex Oxlade-Chamberlain and Carl Jenkinson to new long-term contracts. During this financial period we also invested Â£40.9 million in the acquisition of new players, Lukas Podolski, Santi Cazorla and Olivier Giroud, and the extension of other player contracts. More recently we added Nacho Monreal to our ranks from Malaga. This is a strong indicator of our ambition to compete and win trophies and, looking ahead, this will be further underpinned financially as a result of our extended partnership with Emirates. This will be worth up to Â£150 million over the next five years. It is one of the biggest sponsorship deals in the game and is an endorsement of the commercial approach we are taking. Emirates know us as well as anyone and the fact they have been prepared to invest this substantial sum over this period of time shows their strong belief in what we are trying to achieve and our way of working. Our financial position will be further strengthened as a result of the new Premier League broadcast rights deal. Central to our ethos is our self-sustaining model which gives the club strength and independence. The Board remains fully committed to this path and the rest of the football world is increasingly realising the strength of this model. As an early proponent, we welcome the development of Financial Fair Play rules in the Premier League, in addition to those adopted by UEFA. These new rules will be good for us, good for the Premier League and good for the game as a whole. It is important that we maintain the quality and level of competition if the game is to continue being a compelling spectacle and we believe the introduction of tighter financial regulation will assist all clubs to compete while remaining financially responsible. Once again we have been delighted by the level of support we have received home and away. My thanks go to all supporters for their continued support for the Club. We fully recognise the time and money it takes for supporters to follow us, particularly in the current economic circumstances, and this has played a big part in our decision to hold our ticket prices at this year's level for next season (2013/14). It also informed our decision to introduce a new pricing structure at the start of this season which has created 90,000 cheaper tickets for home and away supporters. Looking further afield we continue to make excellent progress in developing our supporter base all over the world. Last summer's tour of Malaysia and China was a great success and we have already announced a game in Indonesia this summer with more to follow. In all this, our aim is to bring Arsenal supporters together to share their passion for the Club wherever they may be in the world. Our Facebook following has passed 13 million while we have 2 million people following us on Twitter. We have recently launched a new version of our website www.Arsenal.com. In addition we have a website running in China http://arsenal.qq.com/ and have more than 1 million followers on Weibo - China's equivalent of Twitter. As we move towards the centenary of the Club's arrival in Islington, we continue to ensure we play a prominent role in making a difference in the community through the work of The Arsenal Foundation, which focuses on raising money and giving grants to help transform the lives of young people. In any given week 2,160 young people are engaged through Arsenal in the Community projects in the Islington area and in addition we continue to work with our global charity partner, Save the Children to make a difference both here in London and further afield in China. Once again many of you have provided great support to our fundraising activities for which we are very grateful. To learn more about our activities or to make a donation please visit http:// www.arsenal.com/thearsenalfoundation/donate. FINANCIAL REVIEW The financial results for the six months ended 30 November 2012, show a profit before tax of Â£17.8 million (2011 - full year profit of Â£36.6 million). Once again the half year results have been significantly influenced by the changes in the squad which occurred in the summer transfer window. Profits from sale of player registrations contributed an amount of Â£42.5 million although this was significantly lower than the Â£63.0 million gain accounted for in the comparative period last year. During the period we invested Â£40.9 million in the acquisition of new players and, to a lesser extent, extended contracts 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 has again increased to Â£19.9 million (2011 - Â£17.3 million). The changes in playing personnel have also contributed to an increased wage bill. However, the full wage impact of the revised contracts awarded to a number of key young players - including Walcott, Wilshere, Ramsey, Gibbs, Jenkinson and Oxlade-Chamberlain - will not come through until the second half of the year and subsequent periods. 2012 2011 Â£m Â£m Turnover Football 106.1 113.5 Property development 32.3 3.2 Total turnover 138.4 116.7 Operating profits* Football* 5.0 15.2 Property development 1.9 0.5 Total operating profit* 6.9 15.7 Player trading 22.6 45.8 Depreciation (5.6) (5.8) Joint venture 0.4 0.5 Net finance charges (6.5) (6.7) Profit before tax 17.8 49.5 *= operating profits before depreciation and player trading Broadcasting revenues for the period were slightly down on the previous year at Â£40.1 million (2011 - Â£40.6 million) which reflects the fact we were not involved in the qualifying Champions League round and a reduction in the UEFA market pool for English clubs for this season. The first six months of the year saw continued growth in our Commercial revenue line with the addition of Airtel and Malta Guinness to our partnership portfolio and additional sponsorships connected to the pre-season tour. In the second half of the year Commercial revenues will increase significantly as we will start to account for the extended partnership contract with Emirates; revenues from the Â£150 million contract extension will be combined with the remaining revenues from the original contract and spread evenly over the revised contract term. Compared to the same period for last year, there were four fewer home games (1 Premier League, 1 UEFA Champions League (qualifying round) and 2 Capital One Cup) although the Premier League fixture is only a scheduling difference with that game being played in the second half of the year. At the half year stage we had played 10 of the 26 fixtures we are so far certain of playing for the full season. As a result of the lower number of home games the Club's match day revenues for the half year fell by Â£8.1 million and this is the principal factor behind lower total football revenues of Â£106.1 million (2011 - Â£113.5 million). The impact of the new player signings and contract extensions previously referred to is an increase in our player wage costs. The Group's employment costs are the principal driver for the increase in football operating costs to Â£101.1 million (2011 - Â£98.4 million). Operating profits from football (before depreciation and player trading) were decreased to Â£5.0 million from Â£15.2 million for the prior half year. Revenues from the Group's property business were significantly increased to Â£ 32.3 million (2011 - Â£3.2 million). This included the completion of the sale of the north-east section of Queensland Road to Barratts for a consideration of some Â£27 million and Barratts have subsequently started work to construct three towers of market residential accommodation. This site had previously been re-valued in the Group's books, to reflect its expected sale price, and as such the transaction is effectively at break-even in profit and loss terms. Of the proceeds, Â£20 million is receivable in instalments over a two year period. At Highbury Square we completed the sale of three apartments to leave a single remaining unit, which is currently expected to be retained by the Group. The final phase of the Highbury development, a mix of 21 new / refurbished property units with addresses on Avenell Road, Gillespie Road and Highbury Hill, is also progressing well and 8 apartment sales were completed in the half year generating revenue of Â£2.9 million. 10 houses will be released for sale in the near future as the final stage of this project. The property business made an overall contribution to operating profits of Â£1.9 million (2011 - Â£0.5 million). There is an ongoing dialogue with Islington Council in relation to the planning consents for our remaining property sites on Hornsey Road and Holloway Road. The Group continues to have a strong balance sheet. Â£6.5 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£123.3 million (2011 - Â£115.2 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 after tax profit for the six months was Â£14.9 million (2011 - profit of Â£38.0 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. 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 expect the overall result for the year to be fully compliant with the requirements of UEFA's financial regulatory regime and to provide a strong base for any further financial regulations imposed within the Premier League. They will also put us in a good position for further re-investment in the team. In closing, I repeat our desire is to make everyone connected with Arsenal proud of the Club. We know that comes through winning trophies but also through the way we do things and that will remain our constant guide. Thank you again for your continued support and your best wishes for my health. I hope you all enjoy the rest of the season. P D Hill-Wood Chairman 25 February 2013 Arsenal Holdings Plc Consolidated profit and loss account For the six months ended 30 November 2012 Six months to 30 Year ended November 31 May Six months to 30 November 2012 2011 2012 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 139,000 564 139,564 118,001 245,478 including its share of joint ventures Share of turnover of (1,132) - (1,132) (1,276) (2,465) joint ventures ________ ________ _______ ________ ________ Group turnover 4 137,868 564 138,432 116,725 243,013 Operating expenses - other (137,190) - (137,190) (106,817) (217,018) - amortisation of player - (19,904) (19,904) (17,266) (42,319) registrations Total operating expenses 5 (137,190) (19,904) (157,094) (124,083) (259,337) ________ ________ _______ ________ ________ Operating profit/(loss) 678 (19,340) (18,662) (7,358) (16,324) Share of operating 403 - 403 528 952 profit of joint venture Profit on disposal of - 42,501 42,501 63,010 65,456 player registrations ________ ________ _______ ________ ________ Profit on ordinary activities before net finance charges 1,081 23,161 24,242 56,180 50,084 ________ ________ Net finance charges 6 (6,467) (6,717) (13,496) ________ ________ ________ Profit on ordinary activities before taxation 17,775 49,463 36,588 Taxation 7 (2,873) (11,414) (6,995) ________ ________ ________ Profit after taxation retained for the financial period 14,902 38,049 29,593 ________ ________ ________ Earnings per share 8 Â£239.52 Â£611.55 Â£475.64 ________ ________ ________ 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 2012 Notes 30 November 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed assets Tangible assets 9 424,890 430,357 427,157 Intangible assets 10 104,951 107,159 85,708 Investment in joint venture 2,677 2,176 2,326 ________ ________ ________ 532,518 539,692 515,191 ________ ________ ________ Current assets Stock - Development properties 11 14,783 36,815 37,595 Stock - Retail merchandise 2,694 3,024 1,681 Debtors - Due within one year 12 69,739 52,652 52,332 Debtors - Due after one year 12 21,075 5,905 5,201 Cash and short-term deposits 13 123,374 115,150 153,625 ________ ________ ________ 231,665 213,546 250,434 Creditors: Amounts falling due 14 (141,454) (123,321) (145,159) within one year ________ ________ ________ Net current assets 90,211 90,225 105,275 ________ ________ ________ Total assets less current 622,729 629,917 620,466 liabilities Creditors: Amounts falling due after 15 (255,754) (263,181) (268,066) more than one year Provisions for liabilities 16 (54,525) (60,732) (54,852) ________ ________ ________ Net assets 312,450 306,004 297,548 ________ ________ ________ 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 17 255,692 249,246 240,790 ________ ________ ________ Shareholders' funds 18 312,450 306,004 297,548 ________ ________ ________ 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 2012 Six months to 30 November Year ended 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Net cash (outflow)/inflow from operating (5,767) (21,822) 27,694 activities Player registrations (8,061) 399 (1,785) Returns on investment and servicing of (6,279) (6,629) (13,071) finance Taxation (5) (4,681) (4,624) Capital expenditure (3,591) (6,138) (8,610) ________ ________ ________ Cash (outflow) before financing (23,703) (38,871) (396) Financing (6,548) (6,208) (6,208) Management of liquid resources 17,481 (61,319) (79,633) ________ ________ ________ Change in cash in the period (12,770) (106,398) (86,237) Change in short-term deposits (17,481) 61,319 79,633 ________ ________ ________ (Decrease) in cash and short-term deposits (30,251) (45,079) (6,604) ________ ________ ________ Arsenal Holdings Plc Notes to the cash flow statement Six months to 30 November Year ended 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 a) Reconciliation of operating loss to net cash (outflow)/inflow from operating activities Operating loss (18,662) (7,358) (16,324) Profit on disposal of tangible fixed assets (14) - (12) Depreciation (net of grant amortisation) 5,629 5,780 11,391 Amortisation of player registrations 19,904 17,266 36,802 Impairment of player registrations - - 5,517 Decrease/(increase) in stock 21,799 (5,265) (4,702) (Increase) in debtors (18,354) (10,478) (11,894) (Decrease)/increase in creditors (16,069) (21,767) 6,916 ________ ________ ________ Net cash (outflow)/inflow from operating (5,767) (21,822) 27,694 activities ________ ________ ________ b) Reconciliation of net cash flow to movement in net debt (Decrease) in cash and short term deposits (30,251) (45,079) (6,604) Cash outflow from decrease in debt 6,548 6,208 6,208 ________ ________ ________ Change in net debt resulting from cash flows (23,703) (38,871) (396) Increase in debt resulting from non cash (345) (349) (695) changes Net debt at start of period (98,918) (97,827) (97,827) ________ ________ ________ Net debt at close of period (122,966) (137,047) (98,918) ________ ________ ________ c) Analysis of changes in net debt At 1 June Non cash Cash At 30 November 2012 changes flows 2012 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and in hand 29,272 - (12,770) 16,502 Short-term deposits 124,353 - (17,481) 106,872 _______ _______ _______ _______ 153,625 - (30,251) 123,374 Debt due within one year ( (5,937) - (364) (6,301) bonds) Debt due after more than one (219,496) (166) 6,909 (212,753) year (bonds) Debt due after more than one year (debenture subscriptions) (27,110) (179) 3 (27,286) _______ _______ _______ _______ Net debt (98,918) (345) (23,703) (122,966) _______ _______ _______ _______ Non cash changes represent Â£306,000 in respect of the amortisation of costs of raising finance, Â£179,000 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 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Player registrations: Payments for purchase of players (37,116) (50,299) (57,406) Receipts from sale of players 29,055 50,698 55,621 _______ _______ _______ (8,061) 399 (1,785) _______ _______ _______ Returns on investment and servicing of finance: Interest received 567 416 832 Interest paid (6,846) (7,045) (13,903) _______ _______ _______ (6,279) (6,629) (13,071) _______ _______ _______ Capital expenditure: Payments to acquire tangible fixed assets (3,615) (6,138) (8,629) Receipts from sale of tangible fixed assets 24 - 19 _______ _______ _______ (3,591) (6,138) (8,610) _______ _______ _______ Financing: Repayment of borrowings (6,548) (6,208) (6,208) _______ _______ _______ Total debt repayment (6,548) (6,208) (6,208) _______ _______ _______ Arsenal Holdings Plc Notes to the interim accounts 30 November 2012 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 2012. 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 2012. 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 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. 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. 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. 3 Segmental analysis Class of business Football Six months to 30 November Year ended 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 106,145 113,541 235,329 _______ _______ _______ Profit on ordinary activities before taxation 15,616 48,864 34,089 _______ _______ _______ Segment net assets 278,023 275,761 265,280 _______ _______ _______ Class of business Property development Six months to 30 November Year ended 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 32,287 3,184 7,684 _______ _______ _______ Profit on ordinary activities before taxation 2,159 599 2,499 _______ _______ _______ Segment net assets 34,427 30,243 32,268 _______ _______ _______ Class of business Group Six months to 30 November Year ended 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 138,432 116,725 243,013 _______ _______ _______ Profit on ordinary activities before taxation 17,775 49,463 36,588 _______ _______ _______ Net assets 312,450 306,004 297,548 _______ _______ _______ 4 Turnover Six months to 30 November Year ended 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Gate and other match day revenues 37,785 45,954 95,212 Player trading 564 394 2,901 Broadcasting 40,108 40,642 84,701 Retail and licensing income 9,813 9,776 18,303 Commercial 17,875 16,775 34,212 Property development 32,287 3,184 7,684 _______ _______ _______ 138,432 116,725 243,013 _______ _______ _______ 5 Operating costs Six months to 30 November Year ended 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Football - amortisation and depreciation 25,533 23,046 48,193 Football - impairment - - 5,517 Football - other operating costs 101,136 98,353 200,164 Property development - operating costs 30,425 2,684 5,463 _______ _______ _______ 157,094 124,083 259,337 _______ _______ _______ 6 Net finance charges Six months to 30 November Year ended 31 May 2012 2011 2012 Unaudited Unaudited Audited Interest payable and similar charges: Â£'000 Â£'000 Â£'000 Bank loans and overdrafts (1) (4) (16) Fixed/floating rate bonds (6,571) (6,614) (13,265) Other (179) (175) (385) Costs of raising long-term finance (359) (393) (785) _______ _______ _______ Total interest payable and similar charges (7,110) (7,186) (14,451) Interest receivable 643 469 955 _______ _______ _______ Net finance charges (6,467) (6,717) (13,496) _______ _______ _______ 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 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Corporation tax on result for the period at (52) (2,607) (483) 23.83% Movement in deferred taxation (2,821) (8,807) (6,512) _______ _______ _______ Total tax charge (2,873) (11,414) (6,995) _______ _______ _______ From 1 April 2013 the rate of UK corporation tax will reduce from 24% to 23%. The Group's deferred tax liabilities have been revalued based on the 23% rate. The impact of the rate change is a deferred tax credit of Â£1.62 million. The comparative rates of corporation tax were 25.83% for the six months ended 30 November 2011 and 25.67% for the year ended 31 May 2012. 8 Earnings per share The calculation of earnings per share is based on the profit for the period divided by the weighted average number of ordinary shares in issue being 62,217 (period to 30 November 2011 - 62,217 shares and year to 31 May 2012 - 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 2012 400,956 6,608 92,498 500,062 Additions 709 68 2,654 3,431 Disposals - - (89) (89) _______ _______ _______ _______ At 30 November 2012 401,665 6,676 95,063 503,404 _______ _______ _______ _______ Depreciation At 1 June 2012 34,565 3,087 35,253 72,905 Charge for period 2,811 154 2,723 5,688 Disposals - - (79) (79) _______ _______ _______ _______ At 30 November 2012 37,376 3,241 37,897 78,514 _______ _______ _______ _______ Net book value At 30 November 2012 364,289 3,435 57,166 424,890 _______ _______ _______ _______ At 31 May 2012 366,391 3,521 57,245 427,157 _______ _______ _______ _______ 10 Intangible fixed assets Â£'000 Cost of player registrations At 1 June 2012 189,685 Additions 40,889 Disposals (13,071) _______ At 30 November 2012 217,503 _______ Amortisation of player registrations At 1 June 2012 103,977 Charge for the period 19,904 Disposals (11,329) _______ At 30 November 2012 112,552 _______ Net book amount At 30 November 2012 104,951 _______ At 31 May 2012 85,708 _______ 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 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Amounts recoverable within one year: Trade debtors 15,443 5,897 20,394 Other debtors 23,973 16,392 14,347 Prepayments and accrued income 30,323 30,363 17,591 _______ _______ _______ 69,739 52,652 52,332 _______ _______ _______ Amounts recoverable after more than one year: Trade debtors 10,000 - - Other debtors 9,480 3,799 3,570 Prepayments and accrued income 1,595 2,106 1,631 _______ _______ _______ 21,075 5,905 5,201 _______ _______ _______ Other debtors of Â£33.5 million, include Â£31.4 million in respect of player transfers (30 November 2011 Â£19.0 million and 31 May 2012 Â£16.5 million) of which Â£8.4 million is recoverable after more than one year. 13 Cash at bank and in hand 30 November 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Debt service reserve accounts 23,696 23,056 33,538 Other accounts 99,678 92,094 120,087 _______ _______ _______ 123,374 115,150 153,625 _______ _______ _______ 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£1.2 million (30 November 2011 Â£2.3 million and 31 May 2012 Â£1.0 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 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Cash at bank and in hand 16,502 9,111 29,272 Short-term deposits 106,872 106,039 124,353 _______ _______ _______ 123,374 115,150 153,625 _______ _______ _______ 14 Creditors: Amounts falling due within one year 30 November 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed rate bonds - secured 6,301 5,928 5,937 Trade creditors 10,527 11,309 10,983 Corporation tax 195 2,537 200 Other tax and social security 6,181 5,190 17,312 Other creditors 32,070 23,627 23,915 Accruals and deferred income 86,180 74,730 86,812 _______ _______ _______ 141,454 123,321 145,159 _______ _______ _______ Other creditors, above and as disclosed in note 15, include Â£31.6 million (30 November 2011 Â£22.9 million and 31 May 2012 Â£23.6 million) in respect of player transfers. 15 Creditors: Amounts falling due after more than one year 30 November 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed rate bonds - secured 159,968 166,406 166,640 Floating rate bonds - secured 52,785 52,928 52,856 Debentures 27,286 26,935 27,110 Other creditors 6,181 4,323 4,772 Grants 3,930 4,063 3,989 Deferred income 5,604 8,526 12,699 _______ _______ _______ 255,754 263,181 268,066 _______ _______ _______ The fixed rate bonds comprise: 30 November 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed rate bonds 170,674 177,220 177,220 Costs of raising finance (4,405) (4,886) (4,643) _______ _______ _______ 166,269 172,334 172,577 _______ _______ _______ Due within one year (see note 14) 6,301 5,928 5,937 Due after more than one year 159,968 166,406 166,640 _______ _______ _______ 166,269 172,334 172,577 _______ _______ _______ The fixed rate bonds bear interest at 5.1418% per annum. The floating rate bonds above comprise: 30 November 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Floating rate bonds 50,000 50,000 50,000 Interest rate swap 5,225 5,505 5,365 Costs of raising finance (2,440) (2,577) (2,509) _______ _______ _______ 52,785 52,928 52,856 _______ _______ _______ Due within one year - - - Due after more than one year 52,785 52,928 52,856 _______ _______ _______ 52,785 52,928 52,856 _______ _______ _______ 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, in the form of fixed and floating rate bonds, are amortised to the profit and loss account over the term of the debt. The amortisation charge for the period was Â£306,000 (period to 30 November 2011 Â£315,000 and year ended 31 May 2012 Â£626,000). The Group's fixed rate bonds and floating rate bonds 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£27.5 million (30 November 2011 Â£28.5 million, 31 May 2012 Â£ 49.6 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: 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Between one and two years 7,274 6,900 6,900 Between two and five years 24,274 23,026 23,026 After five years 209,647 217,995 218,170 __________ __________ __________ 241,195 247,921 248,096 Within one year 6,900 6,545 6,545 __________ __________ __________ 248,095 254,466 254,641 __________ __________ __________ Interest rate profile After taking into account interest rate swaps, the interest rate profile of the Group's financial liabilities at 30 November 2012 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 2012 2012 2012 2012 Unaudited Unaudited Â£'000 Â£'000 Â£'000 Â£'000 % Yrs Bonds - fixed rate 170,674 - - 170,674 5.8 16.5 Bonds - floating 50,000 - - 50,000 6.6 18.5 rate Debentures 12,991 - 14,430 27,421 2.8 15.5 _______ _______ _______ _______ 233,665 - 14,430 248,095 _______ _______ _______ _______ 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 2012 the total unrecognised loss on the Group's interest rate swaps was Â£19.8 million (31 May 2012: Â£18.1 million). The interest rate profile at 30 November 2011 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 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 _______ _______ _______ _______ The interest rate profile at 31 May 2012 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 2012 2012 2012 2012 Audited Audited Â£'000 Â£'000 Â£'000 Â£'000 % Yrs Bonds - fixed rate 177,220 - - 177,220 5.8 17 Bonds - floating rate 50,000 - - 50,000 6.6 19 Debentures 12,991 - 14,430 27,421 2.8 16 _______ _______ _______ _______ 240,211 - 14,430 254,641 _______ _______ _______ _______ 16 Provisions for liabilities 30 November 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Pensions provision 2,834 867 2,993 Transfers provision 10,114 18,810 13,103 Deferred taxation 41,577 41,055 38,756 __________ __________ __________ 54,525 60,732 54,852 __________ __________ __________ 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 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 At start of period 240,790 211,197 211,197 Profit for the period 14,902 38,049 29,593 __________ __________ __________ Balance at end of period 255,692 249,246 240,790 __________ __________ __________ 18 Reconciliation of shareholders' funds 30 November 31 May 2012 2011 2012 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Opening shareholders' funds 297,548 267,955 267,955 Profit for the period 14,902 38,049 29,593 __________ __________ __________ Closing shareholders' funds 312,450 306,004 297,548 __________ __________ __________ 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£7.8 million (30 November 2011 Â£ 11.0 million, 31 May 2012 Â£7.8 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 2011 Â£0.3 million, 31 May 2012 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 2012 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 ICAP Securities & Derivatives Exchange (ISDX Growth Market) on 25 February 2013 and posted to all shareholders on the register at 22 February 20 13. Copies of this interim report will be available from the company's registered office at Highbury House, 75 Drayton Park, London N5 1BU. 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 2012 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 ISDX Growth Market 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 2012 is not prepared, in all material respects, in accordance with the ISDX Growth Market Rules for Issuers and the ASB Statement Half-Yearly Financial Reports. Deloitte LLP Chartered Accountants and Statutory Auditor London, United Kingdom 25 February 2013

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