AFC ENERGY PLC

Interim / Quarterly Report • Feb 14, 2014

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ARSENAL HOLDINGS PLC - Half-yearly Report

PR Newswire

London, February 14

Arsenal Holdings plcResults for the six months ended 30 November 2013ARSENAL ANNOUNCE HALF YEAR RESULTS * Turnover from football increased to £136.0 million (2012 - £106.1 million) with strong growth across each of the Club's key areas of activity. * Match day income increased to £45.0 million (2012 - £37.8 million) with the Emirates Cup returning to the pre-season schedule and the UEFA Champions League qualifying round providing an additional home game. * Broadcasting revenue was boosted to £52.0 million (2012 - £40.1 million) principally as a result of the Premier League's new contracts with Sky and BT. * Commercial and retail revenues rose to £38.4 million (2012 - £27.7 million) mainly due to the extended partnership arrangements with Emirates which were not yet in force for the comparative period. * The Group has confirmed a significant five year contract with PUMA, as the Club's new kit partner, which will come into effect from the start of next financial year. * As a result of these changes in football turnover, partially offset by increased costs, (mainly relating to player wages), operating profits (before depreciation and player trading) from football increased to £22.2 million (2012 - £4.4 million). * Property revenues were significantly lower at £2.0 million (2012 - £32.3 million which included the sale of the Queensland Road market housing site) and operating profits from property amounted to £0.7 million (2012 - £1.9 million). * Profit on sale of player registrations amounted to £6.1 million which was significantly lower than the prior year comparative (2012 - £42.5 million). * Group loss before tax was £2.2 million (2012 - profit of £17.8 million). * The Group has no short-term debt and cash reserves, excluding the balances designated as debt service reserves, amounted £120.6 million (2012 - £99.7 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.Commenting on the results for the six months, the Club's Chairman, Sir ChipsKeswick, said:"When I was appointed Chairman last summer, there was good reason to believethat the hard work which has been put in, by many people across the Club, overrecent years had created the momentum for a successful season in every aspectof our activities. Thus far that optimism has been well founded. We believe weare in a strong position to take the Club forward both in the short term andbeyond and to deliver future on-field success."Chairman's StatementWhen I was appointed Chairman last summer, I was quite clear that ourcollective aim was to be successful on the pitch whilst remaining true to theprinciples which this great club has adhered to over successive generations.There was good reason to believe that the hard work which has been put in, bymany people across the Club, over recent years had created the momentum for asuccessful season in every aspect of our activities.Thus far that optimism has been well founded. We must continue to take eachgame as it comes as there is clearly a long way to go in this exciting seasonand I am sure there will be many unexpected twists in the months ahead. If Ihave learned anything in all my years as a fan of this Club, it has been tonever get too excited when things are going well or too down when things goagainst us.The team has put in an excellent performance so far this season. Our managerArsène Wenger has built another supremely talented team with a blend of youngplayers and those with more experience from around the world. Kieran Gibbs,Aaron Ramsey, Wojciech Szczesny and Jack Wilshere are all flourishing. We arealso seeing the emergence of Serge Gnabry and Gedion Zelalem into the firstteam squad. This is testimony again to Arsène Wenger's philosophy of givingyoung talented players a chance.It is a philosophy we will continue to back both in terms of facilities andexpertise. We have recently announced that Andries Jonker is to become Head ofthe Youth Academy in the summer, succeeding Liam Brady. Andries has tremendousexperience from Holland and Germany in leading exciting programmes to identifyand develop the best young players. I have no doubt he will build successfullyon the outstanding work which has been done by Liam and his team over manyyears. In addition, plans are in place to improve our training academyfacilities at Hale End, where our youngest players start their Arsenaljourneys.Whilst youth development continues to be an important focus, we fully recognisethe importance of getting the balance right between youth and experience. Asyou well know, we signed Mesut Özil for a Club record transfer fee in thesummer and, in addition, the signing of Mathieu Flamini has proved to be anastute acquisition. We have also continued to invest in the squad by retainingsome of our key players. We expect to be able to confirm, in the near future,that a number of our senior players have signed extended contracts. This isimportant for the stability of the squad.We will continue to work hard to keep the players Arsène believes can take usforwards. We will also continue to support the manager in the transfer marketwhen he identifies players he believes can further strengthen the squad.We also have significant momentum off the field in terms of growing ourrevenues. The financial results for the first half of the year, which areconsidered in more detail in the Financial Review section of this report, showthat the Club has recorded significantly increased revenue across each of itskey areas of activity - match day, broadcasting and commercial. This isexcellent news.You will have seen last month's announcement of our new partnership with PUMA.Whilst I am unable to state the figures publicly, it is fair to say this is thebiggest partnership agreement the Club has ever completed. The financialimpact, in terms of profits and cash-flow, will not begin to be realised untilthe start of the next financial year but it will clearly provide a furthersignificant boost to our income and further strengthen our financial position.We are delighted to welcome PUMA to the Arsenal family and we look forward to asuccessful partnership. The fact that PUMA intend to use Arsenal as one oftheir primary assets around the world will undoubtedly help with our ambitionsto grow the Club's profile on a global basis. We all look forward to seeing thenew kits when they are launched in July.In the meantime, it would be remiss of me not to thank Nike for their enormouscontribution to Arsenal. They have been an excellent partner and we aregrateful for their long-standing support which goes back 20 years.In addition to Puma, we have also welcomed Gatorade, Huawei, Cooper TiresEurope, Lanvin and JEANRICHARD to the Club as global partners and BT Sport as aregional partner.Earlier this season we were delighted to announce the appointment of JoshKroenke as a director. Josh has a wealth of commercial experience gained acrossa range of sports businesses and I am sure he will make a significantcontribution to the Board.This season has also seen us commemorate the 100 year anniversary of ourhistoric move from Woolwich to Islington, with a range of special activities tomark the centenary. As part of the celebrations and to recognise our ongoingcommitment to the local community, The Arsenal Foundation announced a donationof £150,000 to local organisation Islington Giving. This will help to engagemore young people in the Borough through a range of sport and leisureactivities and is delivered with the help of our own community department.Our work through The Arsenal Foundation continues to make a meaningfuldifference to lives both here in the UK and overseas. Since its launch in 2012,the Foundation has committed more than £1 million to projects that are directlyhelping more than 100,000 young people.Once again, players, staff and supporters showed tremendous generosity towardsour dedicated charity match day in December, raising a record total in excessof £225,000. This money will enable us to continue doing even more work thattransforms young peoples' lives for the better. To find out more about TheArsenal Foundation or to make a donation, please visit www.arsenal.com/thearsenalfoundation.FINANCIAL REVIEWThe financial results for the six months ended 30 November 2013 show stronggrowth in revenue across all of the Club's principal areas of activity. This ispartly a consequence of new contractual arrangements coming on line and partlya reflection of the team's on field performance. Overall our turnover fromfootball was £135.9 million, which is 28% higher than the £106.1 millionreported for the comparative period last year.Broadcasting was the largest source of income for the period at £52.0 million(2012 - £40.1 million). This is the first of three years under the PremierLeague's new broadcasting contracts with Sky and BT which, as previouslyreported, are at a significantly improved level. This heading also includesrevenue from sale of the TV rights to the Emirates Cup; due to the LondonOlympics there was no Emirates Cup in the prior period. We include revenuesfrom the UEFA Champions League within the broadcasting line and looking beyondthe current year, the exclusive acquisition of the UK rights by BT will likelydrive further growth in values for the participating English clubs, thereforefurther increasing the significance of a top four Premier League finish.Our match day revenues also benefited from the return of the Emirates Cup tothe pre-season schedule and from one additional game, the UEFA Champions Leaguequalifying round, compared to last season. These additional fixtures meant thatmatch day revenue for the period was £45.0 million (2012 - £37.8 million). Asever, match day revenue is weighted to the second half of the financial yearand at 30 November we had played 11 of the 28 home fixtures we are so farcertain of playing for the full season.Commercial and Retail revenues for the period amounted to £38.4 million, whichwas 39% higher than the £27.7 million reported this time last year. The maindriver for this increase being the Group's renewed partnership with Emirates,which only came into force for the second half of the last financial year. Asmentioned elsewhere in this report we have also added a number of newcommercial partnerships and, in particular, Puma as our kit partner from thissummer. It should be noted that no revenue from the Puma contract will beincluded in the results for the current financial year.Elsewhere our commercial activities have benefited from improved tradingconditions and on field performance with good levels of growth from our retailbusiness and in areas such as stadium tours and membership. In the second halfof the year retail sales may be impacted by lower available stocks as part ofthe planned transition from Nike to Puma.Operating costs for the football side of the business were increased to £113.2million (2012 - £101.1 million). This time last year we pointed out that thefinancial impact of new contracts which had then recently been awarded to anumber of key young players - including Theo Walcott, Jack Wilshere, AaronRamsey and Alex Oxlade-Chamberlain - would only come through in later periods.The incremental impact of those contracts, together with more recent playercontract renewals and the addition to the squad of Mesut Özil has meant thatsome £9.2 million of the increase in operating expense is attributable toemployment costs. Of the remaining cost change, £2.1 million was directlyattributable to increased revenues.Overall operating profit from football has improved to £22.2 million, from £4.4million for the comparative period. This clearly demonstrates the significantpositive impact which is derived from the combination of the new broadcastingcontracts and our own commercial growth. 2013 2012 £m £mTurnoverFootball 135.9 106.1Property development 2.0 32.3Total turnover 137.9 138.4Operating profits*Football* 22.2 4.4Property development 0.7 1.9Total operating profit* 22.9 6.3Player trading (12.6) 23.2Depreciation and (6.4) (5.6)amortisationJoint venture 0.4 0.4Net finance charges (6.5) (6.5)(Loss) / profit before tax (2.2) 17.8*= operating profits before depreciation and player tradingIn contrast to football, activity in the Group's property business was at avery much lower level. This was entirely expected, as the prior periodcontained a significant one-off sale of the north east section of QueenslandRoad to Barratts. All instalments of the £27 million sale price for thattransaction have now been received from Barratts.Property activity for the first half of this financial year was confined to thesale of a small number of houses associated with the Highbury Squaredevelopment, which produced revenue of £2.0 million and £0.7 million ofoperating profit. Looking ahead, the timing of sale for the remaining propertysites, on Hornsey Road and Holloway Road, is tied to the resolution of theunderlying planning consents and the outcome of a judicial review which is notexpected until the spring.As is frequently the case, player trading has had a material impact on theoverall result for the period. There was a low level of outward transferactivity during the summer window with only the sales of Gervinho and VitoMannone generating appreciable fees and contributing to an overall profit onsale of player registrations of £6.1 million. This was very much lower than thecomparative period which included a profit on sale of £42.5 million. The othercomponents of player trading are the amortisation cost of player registrations,which was broadly similar to the prior year, at £19.3 million (2012 - £19.9million) and loan fees of £0.5 million (2012 - £0.6 million). The net loss onplayer trading was therefore £12.6 million compared with a net profit in thecomparative period of £23.2 million.The Group continues to have a strong balance sheet. £6.9 million of stadiumfinance bonds were repaid on schedule in the period and, other than next year'sannual instalment on the bonds, the Group has no short-term debt. In accordancewith the original issue terms there has been a small step up of 0.33% in theinterest cost for our £50 million floating rate note.The book value of player registrations (intangible fixed assets) has beenincreased significantly to £130 million, from £96.6 million as at 31 May 2013,principally as a result of the acquisition of Özil's registration. In cashterms, after the collection of receivables from player sales, includinginstalments on sales made in prior years, the net outlay on transfers for theperiod was £12.7 million. This meant that the Group has maintained a strongcash position with balances at 30 November of £120.6 million (2012 - £99.7million), which excludes debt service reserve balances, which are not availablefor football purposes, of £22.8 million (2012 - £23.7 million).The Group enters into a number of transactions, relating mainly to itsparticipation in European competition (UEFA Champions League distributions arepaid in €) and player transfers, which create exposure to movements orvolatility in foreign exchange, including €. The Group monitors this foreignexchange exposure on a continuous basis and will usually hedge any significantexposure in its currency receivables and payables.There is an overall tax credit for the period of £5.0 million which arisesprincipally due to the fact that the rate of UK corporation tax has beenreduced, leading to a revaluation downwards of the Group's deferred taxliabilities. Tax legislation allows the Club to roll over profits on playersales provided that certain conditions are met including reinvestment of theapplicable sales proceeds. One of the main components of the Group's deferredtax liability is in respect of its accumulated rolled over transfer gains andthese deferred gains will now be taxed at the reduced rate of corporation taxapplicable to future periods.SUMMARYThe Group's overall after tax profit for the six months was £2.8 million (2012- profit of £14.9 million).Historically the financial results of the football business are better for thesecond half of the year as the timing differences around gate and broadcastingrevenue come back in balance. As always, the actual outcome for the second halfwill be strongly influenced by the extent of progress in the knock-outcompetitions and final Premier League position. We expect the overall resultfor the year to be fully compliant with all of the requirements of both thePremier League and UEFA financial regulatory regimes.We believe we are in a strong position to take the Club forward both in theshort term and beyond and to deliver future on-field success. Our majorityshareholder Mr Stan Kroenke, myself and the rest of the Board, our manager andall our staff are clear in that aim.Finally I should thank everyone for their support so far this season. Theatmosphere at Emirates Stadium has reached new levels and the support at everyaway game has been outstanding. Keep backing the team and enjoy the rest of theseason.Sir Chips KeswickChairman14 February 2014Arsenal Holdings PlcConsolidated profit and loss accountFor the six months ended 30 November 2013 Six months to 30 Year ended November 31 May Six months to 30 November 2013 2012 2013 Unaudited Unaudited Audited Operations excluding player Player trading trading Total Total Total Notes £'000 £'000 £'000 £'000 £'000Turnover of the Group 138,609 540 139,149 139,564 282,774including its share ofjoint venturesShare of turnover of (1,214) - (1,214) (1,132) (2,400)joint ventures ________ ________ _______ ________ ________Group turnover 4 137,395 540 137,935 138,432 280,374Operating expenses- other (120,862) - (120,862) (137,190) (261,634)- amortisation of player - (19,284) (19,284) (19,904) (47,021)registrationsTotal operating expenses 5 (120,862) (19,284) (140,146) (157,094) (308,655) ________ ________ _______ ________ ________Operating profit/(loss) 16,533 (18,744) (2,211) (18,662) (28,281)Share of operating 405 - 405 403 945profit of joint ventureProfit on disposal of - 6,120 6,120 42,501 46,986player registrations ________ ________ _______ ________ ________Profit/(loss) on 16,938 (12,624) 4,314 24,242 19,650ordinary activitiesbefore net financecharges ________ ________Net finance charges 6 (6,490) (6,467) (12,996) ________ ________ ________(Loss)/profit onordinary activitiesbefore taxation (2,176) 17,775 6,654Taxation 7 4,988 (2,873) (849) ________ ________ ________Profit after taxationretained forthe financial period 2,812 14,902 5,805 ________ ________ ________Earnings per share 8 £45.20 £239.52 £93.30 ________ ________ ________All trading resulted from continuing operations.The accompanying notes are an integral part of these statements.Arsenal Holdings PlcConsolidated balance sheetAt 30 November 2013 Notes 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Fixed assetsGoodwill 1,711 - 1,924Tangible assets 9 418,826 424,890 421,539Intangible assets 10 130,001 104,951 96,570Investment in joint venture 3,340 2,677 3,031 ________ ________ ________ 553,878 532,518 523,064 ________ ________ ________Current assetsStock - Development properties 11 12,467 14,783 12,987Stock - Retail merchandise 2,426 2,694 2,131Debtors - Due within one year 12 59,572 69,739 88,484Debtors - Due after one year 12 9,741 21,075 8,287Cash and short-term deposits 13 143,474 123,374 153,457 ________ ________ ________ 227,680 231,665 265,346Creditors: Amounts falling due 14 (167,486) (141,454) (149,931)within one year ________ ________ ________Net current assets 60,194 90,211 115,415 ________ ________ ________Total assets less current 614,072 622,729 638,479liabilitiesCreditors: Amounts falling due after 15 (251,881) (255,754) (274,721)more than one yearProvisions for liabilities 16 (56,029) (54,525) (60,403) ________ ________ ________Net assets 306,162 312,450 303,355 ________ ________ ________Capital and reservesCalled up share capital 62 62 62Share premium 29,997 29,997 29,997Merger reserve 26,699 26,699 26,699Profit and loss account 17 249,404 255,692 246,597 ________ ________ ________Shareholders' funds 18 306,162 312,450 303,355 ________ ________ ________The accompanying notes are an integral part of this consolidated balance sheet.Arsenal Holdings PlcConsolidated cash flow statementFor the six months ended 30 November 2013 Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Net cash inflow/(outflow) from operating 20,129 (5,767) 53,359activitiesPlayer registrations (12,728) (8,061) (25,915)Returns on investment and servicing of (6,227) (6,279) (12,356)financeTaxation 58 (5) (47)Capital expenditure (4,316) (3,591) (6,496)Acquisition of subsidiary - - (2,164) ________ ________ ________Cash (outflow)/inflow before financing (3,084) (23,703) 6,381Financing (6,899) (6,548) (6,549)Management of liquid resources 24,283 17,481 36,811 ________ ________ ________Change in cash in the period 14,300 (12,770) 36,643Change in short-term deposits (24,283) (17,481) (36,811) ________ ________ ________(Decrease) in cash and short-term deposits (9,983) (30,251) (168) ________ ________ ________Arsenal Holdings PlcNotes to the cash flow statement Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000a) Reconciliation of operating loss to netcash inflow/(outflow) from operatingactivitiesOperating loss (2,211) (18,662) (28,281)Profit on disposal of tangible fixed assets (9) (14) (53)Amortisation of goodwill 213 - 213Depreciation (net of grant amortisation) 6,211 5,629 12,294Amortisation of player registrations 19,284 19,904 41,349Impairment of player registrations - - 4,740Decrease in stock 225 21,799 24,158Decrease/(increase) in debtors 17,033 (18,354) (29,659)(Decrease)/increase in creditors (20,617) (16,069) 28,598 ________ ________ ________Net cash inflow/(outflow) from operating 20,129 (5,767) 53,359activities ________ ________ ________b) Reconciliation of net cash flow tomovement in net debt(Decrease) in cash and short term deposits (9,983) (30,251) (168)Cash outflow from decrease in debt 6,899 6,548 6,549 ________ ________ ________Change in net debt resulting from cash flows (3,084) (23,703) 6,381Increase in debt resulting from non cash (341) (345) (684)changesNet debt at start of period (93,221) (98,918) (98,918) ________ ________ ________Net debt at close of period (96,646) (122,966) (93,221) ________ ________ ________c) Analysis of changes in net debt At 1 June Non cash Cash At 30 November 2013 changes flows 2013 £'000 £'000 £'000 £'000Cash at bank and in hand 65,915 - 14,300 80,215Short-term deposits 87,542 - (24,283) 63,259 _______ _______ _______ _______ 153,457 - (9,983) 143,474Debt due within one year ( (6,310) - (384) (6,694)bonds)Debt due after more than one (212,905) (157) 7,283 (205,779)year (bonds)Debt due after more than oneyear(debenture subscriptions) (27,463) (184) - (27,647) _______ _______ _______ _______Net debt (93,221) (341) (3,084) (96,646) _______ _______ _______ _______Non cash changes represent £297,000 in respect of the amortisation of costs ofraising finance, £184,000 in respect of rolled up, unpaid debenture interestfor the period less £140,000 in respect of amortisation of the premium oncertain of the Group's interest rate swaps.d) Gross cash flows Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Player registrations:Payments for purchase of players (35,054) (37,116) (65,041)Receipts from sale of players 22,326 29,055 39,126 _______ _______ _______ (12,728) (8,061) (25,915) _______ _______ _______Returns on investment and servicing offinance:Interest received 418 567 1,162Interest paid (6,645) (6,846) (13,518) _______ _______ _______ (6,227) (6,279) (12,356) _______ _______ _______Capital expenditure:Payments to acquire tangible fixed assets (4,326) (3,615) (6,559)Receipts from sale of tangible fixed assets 10 24 63 _______ _______ _______ (4,316) (3,591) (6,496) _______ _______ _______Financing:Repayment of borrowings (6,899) (6,548) (6,549) _______ _______ _______Total debt repayment (6,899) (6,548) (6,549) _______ _______ _______Arsenal Holdings PlcNotes to the interim accounts30 November 20131 Basis of preparation of Group financial statementsThe Group financial statements consolidate the assets, liabilities and resultsof the company and its subsidiary undertakings made up to 30 November 2013. TheGroup has two classes of business - the principal activity of operating aprofessional football club and property development.The interim results have been prepared, in accordance with United KingdomGenerally Accepted Accounting Practice, on the same basis and using the sameaccounting policies as those used in the preparation of the full year'saccounts to 31 May 2013. The status of the Group's financing arrangements isreported in notes 14 and 15 and is summarised in the Chairman's Statement. Thedirectors have a reasonable expectation that the Group has adequate resourcesto continue in operational existence for the foreseeable future and thefinancial statements continue to be prepared on the going concern basis.2 Significant accounting policiesIncome recognitionGate and other match day revenue is recognised over the period of the footballseason as games are played and events are staged. Sponsorship and similarcommercial income is recognised over the duration of the respective contracts.The fixed element of broadcasting revenues is recognised over the duration ofthe football season whilst facility fees for live coverage or highlights aretaken when earned at the point of broadcast. Merit awards are accounted foronly when known at the end of the financial period. UEFA pool distributionsrelating to participation in the Champions League are spread over the matchesplayed in the competition whilst distributions relating to match performanceare taken when earned; these distributions are classified as broadcastingrevenues. Fees receivable in respect of the loan of players are included inturnover over the period of the loan.Income from the sale of development properties is recognised on legalcompletion of the relevant sale contract. Where elements of the sale price aresubject to retentions by the purchaser the retained element of the sale priceis not recognised until such time as all of the conditions relating to theretention have been satisfied.Player registrationsThe costs associated with acquiring players' registrations or extending theircontracts, including agents' fees, are capitalised and amortised, in equalinstalments, over the period of the respective players' contracts. Where acontract life is renegotiated the unamortised costs, together with the newcosts relating to the contract extension, are amortised over the term of thenew contract. Where the acquisition of a player registration involves anon-cash consideration, such as an exchange for another player registration,the transaction is accounted for using an estimate of market value for thenon-cash consideration. Under the conditions of certain transfer agreements orcontract renegotiations, further fees will be payable in the event of theplayers concerned making a certain number of First Team appearances or on theoccurrence of certain other specified future events. Liabilities in respect ofthese additional fees are accounted for, as provisions, when it becomesprobable that the number of appearances will be achieved or the specifiedfuture events will occur. The additional costs are capitalised and amortised asset out above.3 Segmental analysisClass of business Football Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Turnover 135,958 106,145 242,825 _______ _______ _______(Loss)/profit on ordinary activities before (3,111) 15,616 1,604taxation _______ _______ _______Segment net assets 268,111 278,023 266,037 _______ _______ _______Class of business Property development Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Turnover 1,977 32,287 37,549 _______ _______ _______Profit on ordinary activities before taxation 935 2,159 5,050 _______ _______ _______Segment net assets 38,051 34,427 37,318 _______ _______ _______Class of business Group Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Turnover 137,935 138,432 280,374 _______ _______ _______(Loss)/profit on ordinary activities before (2,176) 17,775 6,654taxation _______ _______ _______Net assets 306,162 312,450 303,355 _______ _______ _______4 Turnover Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Gate and other match day revenues 44,961 37,785 92,780Player trading 540 564 1,598Broadcasting 52,025 40,108 86,025Retail and licensing income 10,389 9,813 18,057Commercial 28,043 17,875 44,365Property development 1,977 32,287 37,549 _______ _______ _______ 137,935 138,432 280,374 _______ _______ _______5 Operating costs Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Football - amortisation and depreciation 25,721 25,533 41,349Football - impairment - - 5,672Football - other operating costs 113,190 101,136 228,556Property development - operating costs 1,235 30,425 33,078 _______ _______ _______ 140,146 157,094 308,655 _______ _______ _______6 Net finance charges Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited AuditedInterest payable and similar charges: £'000 £'000 £'000Bank loans and overdrafts - (1) (2)Fixed/floating rate bonds (6,419) (6,571) (12,999)Other (188) (179) (357)Costs of raising long-term finance (351) (359) (762) _______ _______ _______Total interest payable and similar charges (6,958) (7,110) (14,120)Interest receivable 468 643 1,124 _______ _______ _______Net finance charges (6,490) (6,467) (12,996) _______ _______ _______7 TaxationThe charge for taxation is based on the estimated effective tax rate for theyear as a whole. Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Corporation tax on result for the period at (1,001) (52) (184)22.67%Movement in deferred taxation 5,989 (2,821) (665) _______ _______ _______Total tax credit/(charge) 4,988 (2,873) (849) _______ _______ _______From 1 April 2014 the rate of UK corporation tax will reduce from 23% to 21%and from 1 April 2015 the rate will further reduce to 20%. The Group's deferredtax liabilities have been revalued based on the 20% rate. The impact of therate change is a deferred tax credit of £5.1 million.The comparative rate of corporation tax for the six months ended 30 November2012 and the year ended 31 May 2013 was 23.83%.8 Earnings per shareThe calculation of earnings per share is based on the profit for the perioddivided by the weighted average number of ordinary shares in issue being 62,217(period to 30 November 2012 - 62,217 shares and year to 31 May 2013 - 62,217shares).9 Tangible fixed assets Freehold Leasehold Plant and property property equipment Total £'000 £'000 £'000 £'000CostAt 1 June 2013 402,414 6,819 97,487 506,720Additions 1,126 640 1,778 3,544Disposals - - (32) (32) _______ _______ _______ _______At 30 November 2013 403,540 7,459 99,233 510,232 _______ _______ _______ _______DepreciationAt 1 June 2013 40,212 3,600 41,369 85,181Charge for period 2,988 145 3,123 6,256Disposals - - (31) (31) _______ _______ _______ _______At 30 November 2013 43,200 3,745 44,461 91,406 _______ _______ _______ _______Net book valueAt 30 November 2013 360,340 3,714 54,772 418,826 _______ _______ _______ _______At 31 May 2013 362,202 3,219 56,118 421,539 _______ _______ _______ _______10 Intangible fixed assets £'000Cost of player registrationsAt 1 June 2013 235,307Additions 58,462Disposals (50,144) _______At 30 November 2013 243,625 _______Amortisation of player registrationsAt 1 June 2013 138,737Charge for the period 19,284Disposals (44,397) _______At 30 November 2013 113,624 _______Net book amountAt 30 November 2013 130,001 _______At 31 May 2013 96,570 _______11 Stock - Development propertiesProperties are held for resale and are recorded at the lower of cost and netrealisable value. The directors consider the net realisable value ofdevelopment property stocks to be greater than their book value.12 Debtors 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Amounts recoverable within one year:Trade debtors 14,635 15,443 48,076Other debtors 9,434 23,973 22,597Prepayments and accrued income 35,503 30,323 17,811 _______ _______ _______ 59,572 69,739 88,484 _______ _______ _______Amounts recoverable after more than one year:Trade debtors - 10,000 -Other debtors 8,023 9,480 6,618Prepayments and accrued income 1,718 1,595 1,669 _______ _______ _______ 9,741 21,075 8,287 _______ _______ _______Other debtors of £17.5 million, include £15.7 million in respect of playertransfers (30 November 2012 £31.4 million and 31 May 2013 £26.1 million) ofwhich £7.0 million is recoverable after more than one year.13 Cash at bank and in hand 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Debt service reserve accounts 22,831 23,696 33,835Other accounts 120,643 99,678 119,622 _______ _______ _______ 143,474 123,374 153,457 _______ _______ _______The Group is required under the terms of its fixed and floating rate bonds tomaintain specified amounts on bank deposit as security against future paymentsof interest and principal. Accordingly the use of these debt service reserveaccounts is restricted to that purpose. Included in other accounts is a balanceof £0.5 million (30 November 2012 £1.2 million and 31 May 2013 £0.9 million)which is held in connection with the site works at Queensland Road. The use ofthis deposit is restricted to that purpose and Newlon Housing Trust is a jointsignatory.The Group uses short-term bank treasury deposits as a means of maximising theinterest earned on its cash balances. 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Cash at bank and in hand 80,215 16,502 65,915Short-term deposits 63,259 106,872 87,542 _______ _______ _______ 143,474 123,374 153,457 _______ _______ _______14 Creditors: Amounts falling due within one year 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Fixed rate bonds - secured 6,694 6,301 6,310Trade creditors 8,295 10,527 9,191Corporation tax 1,059 195 96Other tax and social security 6,920 6,181 15,719Other creditors 33,054 32,070 19,773Accruals and deferred income 111,464 86,180 98,842 _______ _______ _______ 167,486 141,454 149,931 _______ _______ _______Other creditors, above and as disclosed in note 15, include £37.9 million (30November 2012 £31.6 million and 31 May 2013 £20.5 million) in respect of playertransfers.15 Creditors: Amounts falling due after more than one year 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Fixed rate bonds - secured 153,137 159,968 160,192Floating rate bonds - secured 52,642 52,785 52,713Debentures 27,647 27,286 27,463Other creditors 12,900 6,181 8,854Grants 3,840 3,930 3,885Deferred income 1,715 5,604 21,614 _______ _______ _______ 251,881 255,754 274,721 _______ _______ _______The fixed rate bonds comprise: 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Fixed rate bonds 163,774 170,674 170,674Costs of raising finance (3,943) (4,405) (4,172) _______ _______ _______ 159,831 166,269 166,502 _______ _______ _______Due within one year (see note 14) 6,694 6,301 6,310Due after more than one year 153,137 159,968 160,192 _______ _______ _______ 159,831 166,269 166,502 _______ _______ _______The fixed rate bonds bear interest at 5.1418% per annum.The floating rate bonds above comprise: 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Floating rate bonds 50,000 50,000 50,000Interest rate swap 4,945 5,225 5,085Costs of raising finance (2,303) (2,440) (2,372) _______ _______ _______ 52,642 52,785 52,713 _______ _______ _______Due within one year - - -Due after more than one year 52,642 52,785 52,713 _______ _______ _______ 52,642 52,785 52,713 _______ _______ _______The floating rate bonds bear interest at LIBOR for three month deposits plus amargin of 0.55% and the Group has entered into interest rate swaps which fixthe LIBOR element of this cost at 5.75%. The fixed rate bonds and floating ratebonds are guaranteed as to scheduled payments of principal and interest bycertain members of the Group and by Ambac Assurance UK Limited. The Group paysAmbac Assurance UK Limited annual guarantee fees at a rate of 0.65% of the bondprincipal outstanding.The costs of raising debt finance, in the form of fixed and floating ratebonds, are amortised to the profit and loss account over the term of the debt.The amortisation charge for the period was £297,000 (period to 30 November 2012£306,000 and year ended 31 May 2013 £608,000).The Group's fixed rate bonds and floating rate bonds are secured by a mixtureof legal mortgages and fixed charges on certain freehold and leasehold propertyand certain plant and machinery owned by the Group, by fixed charges overcertain of the Group's trade debtors and the related bank guarantees, by fixedcharges over £26.5 million (30 November 2012 £27.5 million, 31 May 2013 £54.2 million) of the Group's bank deposits, by legal mortgages or fixed chargesover the share capital and intellectual property rights of certain subsidiarycompanies and fixed and floating charges over the other assets of certainsubsidiary companies.The Group's financial liabilities/debt is 30 November 31 Mayrepayable as follows: 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Between one and two years 7,668 7,274 7,274Between two and five years 25,590 24,274 24,274After five years 201,200 209,647 210,000 __________ __________ __________ 234,458 241,195 241,548Within one year 7,274 6,900 6,900 __________ __________ __________ 241,732 248,095 248,448 __________ __________ __________Interest rate profileAfter taking into account interest rate swaps, the interest rate profile of theGroup's financial liabilities at 30 November 2013 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 2013 2013 2013 2013 Unaudited Unaudited £'000 £'000 £'000 £'000 % YrsBonds - fixed rate 163,774 - - 163,774 5.8 15.5Bonds - floating 50,000 - - 50,000 7.0 17.5rateDebentures 13,531 - 14,427 27,958 2.8 14.5 _______ _______ _______ _______ 227,305 - 14,427 241,732 _______ _______ _______ _______Changes in the fair value of interest rate swaps, which are used as hedges, arenot recognised in the financial statements until the hedged position matures.At 30 November 2013 the total unrecognised loss on the Group's interest rateswaps was £16.4 million (31 May 2013: £19.0 million).The interest rate profile at 30 November 2012 for comparative purposes was: Weighted Weighted average Fixed Floating Interest average period for Rate rate free Total fixed which rate Unaudited Unaudited Unaudited Unaudited rate is fixed 2012 2012 2012 2012 Unaudited Unaudited £'000 £'000 £'000 £'000 % YrsBonds - fixed rate 170,674 - - 170,674 5.8 16.5Bonds - floating 50,000 - - 50,000 6.6 18.5rateDebentures 12,991 - 14,430 27,421 2.8 15.5 _______ _______ _______ _______ 233,665 - 14,430 248,095 _______ _______ _______ _______The interest rate profile at 31 May 2013 for comparative purposes was: Weighted Weighted average Fixed Floating Interest average period for rate rate free Total fixed which rate Audited Audited Audited Audited rate is fixed 2013 2013 2013 2013 Audited Audited £'000 £'000 £'000 £'000 % YrsBonds - fixed rate 170,674 - - 170,674 5.8 16Bonds - floating rate 50,000 - - 50,000 6.6 18Debentures 13,347 - 14,427 27,774 2.8 15 _______ _______ _______ _______ 234,021 - 14,427 248,448 _______ _______ _______ _______16 Provisions for liabilities 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Pensions provision 2,403 2,834 2,619Transfers provision 17,409 10,114 11,195Deferred taxation 33,432 41,577 39,421Onerous contracts - players 1,370 - 5,456Property 1,415 - 1,712 __________ __________ __________ 56,029 54,525 60,403 __________ __________ __________The pensions provision relates to the expected contribution required towardsmaking good the Minimum Funding Requirements deficit which exists in theFootball League Pension and Life Assurance Scheme less payments made to thescheme in this respect.The transfers provision relates to the probable additional fees payable basedon the players concerned achieving a specified number of appearances.The provision for onerous player contracts arose following the impairment ofcertain player registrations in the year ended 31 May 2013.The property provision relates to certain surplus operational properties, whereactivity is to be discontinued.17 Profit and loss account 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000At start of period 246,597 240,790 240,790Profit for the period 2,812 14,902 5,805Exchange difference (5) - 2 __________ __________ __________Balance at end of period 249,404 255,692 246,597 __________ __________ __________18 Reconciliation of shareholders' funds 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited £'000 £'000 £'000Opening shareholders' funds 303,355 297,548 297,548Profit for the period 2,812 14,902 5,805Exchange difference (5) - 2 __________ __________ __________Closing shareholders' funds 306,162 312,450 303,355 __________ __________ __________19 Contingent liabilitiesUnder the conditions of certain transfer agreements in respect of playerspurchased, further transfer fees will be payable to the vendors in the event ofthe players concerned making a certain number of First Team appearances or inthe event of certain other future events specified in the transfer agreements.The maximum unprovided potential liability is £6.2 million (30 November 2012 £7.8 million, 31 May 2013 £6.6 million).20 Additional informationa) The interim financial statements do not constitute statutory financialstatements within the meaning of Section 435 of the Companies Act 2006. Thefinancial information for the year ended 31 May 2013 has been extracted fromthe statutory accounts for the year then ended which have been filed with theRegistrar of Companies. The audit report on these accounts was unqualified anddid 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 14 February 2014 and posted to all shareholders on theregister at 13 February 2014. Copies of this interim report will be availablefrom the company's registered office at Highbury House, 75 Drayton Park, LondonN5 1BU.INDEPENDENT REVIEW REPORT TO ARSENAL HOLDINGS PLCWe have been engaged by the company to review the interim financial statementsin the half-yearly financial report for the six months ended 30 November 2013which comprises the consolidated profit and loss account, the consolidatedbalance sheet, the consolidated cash flow statement, the notes to the cash flowstatement and related notes 1 to 20. We have read the other informationcontained in the half-yearly financial report and considered whether itcontains any apparent misstatements or material inconsistencies with theinformation in the interim financial statements.This report is made solely to the company in accordance with InternationalStandard on Review Engagements (UK and Ireland) 2410 issued by the AuditingPractices Board. Our work has been undertaken so that we might state to thecompany those matters we are required to state to it in an independent reviewreport and for no other purpose. To the fullest extent permitted by law, we donot accept or assume responsibility to anyone other than the company, for ourreview work, for this report, or for the conclusions we have formed.Directors' responsibilitiesThe half-yearly financial report is the responsibility of, and has beenapproved by, the directors. The directors are responsible for preparing thehalf-yearly financial report in accordance with the ISDX Growth Market Rulesfor Issuers and the ASB Statement Half-Yearly Financial Reports. As disclosedin note 1, the annual financial statements of the company are prepared inaccordance with United Kingdom Generally Accepted Accounting Practice. Theinterim financial statements included in this half-yearly financial report havebeen prepared in accordance with the accounting policies the group intends touse in preparing its next annual financial statements.Our responsibilityOur responsibility is to express to the Company a conclusion on the interimfinancial statements in the half-yearly financial report based on our review.Scope of reviewWe conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making inquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.ConclusionBased on our review, nothing has come to our attention that causes us tobelieve that the interim financial statements in the half-yearly financialreport for the six months ended 30 November 2013 is not prepared, in allmaterial respects, in accordance with the ISDX Growth Market Rules for Issuersand the ASB Statement Half-Yearly Financial Reports.Deloitte LLPChartered Accountants and Statutory AuditorLondon, United Kingdom14 February 2014