Half-yearly Report

Arsenal Holdings plc Results for the six months ended 30 November 2008 STRONG RESULTS IN THE FIRST HALF OF THE YEAR * Profit before tax of Â£24.5m (2007 - Â£20.0m excluding exceptional costs) with increased contributions from both the Group's football and property businesses * Increase in football match day turnover of Â£3.3m to Â£44.4m thanks to an additional Carling Cup fixture, higher revenue from the Emirates Cup tournament and increase of 2.8% in ticket prices * Broadcasting revenues up Â£4.5m to Â£28.9m benefiting from a higher number of live TV games, the season to season step change in Premier League TV contracts and favourable rates of exchange on the â‚¬ / Â£ conversion of Champions League distributions * Overall pre-tax profit from the Group's core business of football increased to Â£19.7m (2007 - Â£19.1m) * Although conditions in the property sector are challenging the Group's property business recorded a pre-tax profit of Â£4.9m (2007 - Â£0.9m). Construction of Highbury Square is nearing completion; two of the four stands have been released with the sales of 186 apartments with a value of Â£76.7m having completed so far (sales to 30 November 2008 were Â£58.1m) * There is, inevitably, some backlog of Highbury Square completions as a consequence of the difficult conditions in the property market and tightening of mortgage availability. The receipt of part of the sales proceeds over a longer term than originally expected means there is a probable need to extend the term of the Highbury Square bank loan and discussions with the banking syndicate are at a preliminary stage Commenting on the interim results, Peter Hill-Wood, non-executive chairman, said: "I am pleased to report that the six months to 30 November 2008 has produced another strong set of financial results. Profits were ahead in both our football and property businesses and combined to deliver an overall pre-tax profit for the Group of Â£24.5 million compared to Â£20.0 million for the equivalent period last year. I believe these results are all the better for having been achieved against a background of what is clearly a very difficult economic climate." "Clearly there are some significant challenges ahead of us, both on and off the pitch, over the closing months of this financial year and beyond. We are closely monitoring the position with a view to ensuring, as we always have done, that the Group is on a robust footing and ready to respond to any challenges this exceptional economic climate may bring." CHAIRMAN'S STATEMENT I am pleased to report that the six month period to 30 November 2008 has produced another strong set of financial results. Profits were ahead in both our football and property businesses and combined to deliver an overall pre-tax profit for the Group of Â£24.5 million compared to Â£20.0 million for the equivalent period last year. I believe these results are all the better for having been achieved against a background of what is clearly a very difficult economic climate. Although results on the field could sometimes have been better, the Club remains well placed to challenge for at least a top four Premier League finish and, as February closes, we are still competing in two major cup competitions - the UEFA Champions League and FA Cup. Construction activity at Highbury Square is making excellent progress. Two of the four stands have been finished and the remaining building works will be completed by early summer. To date we have completed the sale of 186 apartments with a sale value of Â£76.7 million. We consider this to be good progress in a very difficult property market. However, the market conditions have, inevitably, had some impact on Highbury Square and I will return to this in more detail in the Financial Review section of this report. In December, we announced the restructuring of the board of directors of Arsenal Holdings plc. We were pleased to announce that Ivan Gazidis had joined Arsenal Holdings plc as Chief Executive with effect from 1 January 2009. Ivan joined the Company from Major League Soccer in the USA, where he was the Deputy Commissioner. We are delighted that Ivan has joined us; his credentials are first class and he has a wealth of business acumen together with a broad knowledge of the football industry. He will be a great asset to the Group and we are already enjoying working with him. It was also announced that Lady Nina Bracewell-Smith had left the board of both Arsenal Holdings plc and Arsenal Football Club plc. Richard Carr left the board of the Company at the same time but we are delighted that he remains a director of the football club. I would like to take this opportunity to thank Lady Nina for the contribution she made to the Group in her time as a director and thank Richard for the role he played whilst a director of Arsenal Holdings plc. Emirates Stadium has continued to collect awards, winning two more honours during the period and these are in addition to the 21 major awards the new stadium project has already received. The two new awards were: `Best Development Partnership - Arsenal FC and Newlon' in the 2008 Affordable Home Ownership Awards and `The UK's Coolest Sports Venue' in the 2008 Prestige Events Magazine Awards. As well as being a fantastic venue for all of the Club's competitive home matches, Emirates Stadium continues to be an ideal location for high profile `non-Arsenal' events and earlier this month we successfully hosted a sell-out international friendly match between Brazil and Italy. This match was the fourth time that the Brazil national team has played at Emirates Stadium and they recorded a 2-0 win thanks to first half goals from Elano and Robinho. As you will probably be aware the Club's Charity of the Season for 2008/09 is Teenage Cancer Trust, a charity dedicated to improving the lives of young people with cancer. Our home fixture against Liverpool on Sunday 21 December was the `Be a Gooner, Be a Giver' campaign's dedicated match day. We were delighted to announce that this match raised over Â£200,000 through many activities including the players, directors and many Club staff donating a day's wages to this fantastic charity. We are currently on course to reach our Â£300,000 fundraising target which will pay for an Education Zone within Teenage Cancer Trust's brand new Day Care Centre due to open in 2012 at University College Hospital, London. January 2009 marked the first anniversary of Arsenal TV, which currently runs from 4.30pm on weekdays and 6pm on Sundays on Sky Channel 435 and Virgin Media Channel 542. The first year of this new service has been very successful and we hope that supporters are enjoying the channel's content. During the period, Arsenal.com was named `Best Sports Website' at the 2008 UK Website of the Year awards. Also during the period, our Matchday Programme won the `2007/08 Programme of the Year Award' for all English clubs. This is the second time in the last three years that the Club has won this award. I would like to offer my congratulations to all the staff involved in these projects. The proposed regeneration of Queensland Road is still very much a part of the Group's plans. A planning application for the redevelopment of this area has been submitted, and at time of writing, was still waiting to be considered by the local planning authority. This proposal is one of the final elements of the Emirates Stadium project and is expected to deliver a new sports centre as part of the development, together with regeneration of the area and over 350 affordable new homes. On the Field With two thirds of the matches now played in the 2008/09 Premier League season, at time of writing, the Club is in fifth position and has a gap to close on the four teams currently occupying the UEFA Champions League qualification spots. Although we have experienced some disappointing results, the campaign has also seen some extremely good performances, most notably a 2-1 victory over Manchester United at Emirates Stadium and an impressive 2-1 win at Stamford Bridge against Chelsea. There is still a significant part of the season to play and we remain confident that the team can put together a good run of results to be challenging, for a top four finish at least, come the end of the season. After beating FC Twente in the Qualifying Round, progress from the Group Stage in the UEFA Champions League was secured from a difficult group, containing Dynamo Kyiv, FC Porto and Fenerbahce. The team remained unbeaten at Emirates Stadium and most notably won 4-0 at home to FC Porto and 5-2 in Turkey over Fenerbahce. In the Knockout Round we are now looking ahead to what is sure to be an exciting night in Rome, after Robin van Persie's penalty gave us a 1-0 advantage from the home leg against AS Roma. The UEFA Champions League trip to FC Porto in December marked ArsÃ¨ne Wenger's 700th match as manager of Arsenal Football Club. This is a tremendous achievement and, of course, we all hope ArsÃ¨ne will continue as our manager for many years to come. Our 2009 FA Cup campaign got off to a promising start with a 3-1 home win over Plymouth Argyle. This was followed by a goalless away draw and subsequent 4-0 replay, win over Cardiff City in the Fourth Round. In the Carling Cup, the Club's younger players were once again given an opportunity to gain first team experience and show their great potential. They did not disappoint, with two fantastic performances in the early stages of the competition. An emphatic 6-0 home victory over Championship side Sheffield United was followed by an equally pleasing 3-0 win over a full strength Wigan Athletic team. Unfortunately, in the quarter final our young side was unable to maintain this momentum and was beaten 0-2 at Burnley. During the January transfer window we were delighted to complete the signing of Russian international Andrey Arshavin. Andrey, who was the 2006 Russian footballer of the year, is a versatile player with great experience, who adds real quality to our squad. He is an exciting impact player with a huge amount of ability and has been an influential force with both Zenit St Petersburg and the Russian national team in recent seasons. We wish Andrey the best of luck during his career with Arsenal. Also during January, six of our young players joined clubs on loan in order to gain more first team experience. Jay Simpson (West Bromwich Albion), Gavin Hoyte (Watford), Henri Lansbury (Scunthorpe), Rui Fonte (Crystal Palace), Rene Steer (Gillingham) and Paul Rodgers (Northampton Town) will be looking to impress during their loan moves. They join Nacer Barazite (Derby County), Kerrea Gilbert (Leicester City), Abu Ogogo (Barnet), Philippe Senderos (AC Milan), Armand Traore (Portsmouth), Pedro Bothelo (Salamanca) and Vincent Van Den Berg (FC Zwolle) who are currently on loan away from the Club. We continue to wish all these players the best of luck throughout the rest of the season. Financial Review The Group has delivered another strong set of financial results with growth in turnover and operating profits in both its football and property businesses. The overall pre-tax profit for the six month period ended 30 November 2008 rose to Â£24.5 million as compared to Â£20.0 million for the same period last year. 2008 2007 Â£m Â£m Turnover Football 98.4 89.3 Property development 58.4 7.6 __________ __________ Total turnover 156.8 96.9 __________ __________ Operating profits* Football* 23.5 21.9 Property development 6.3 2.5 __________ __________ Total operating profit* 29.8 24.4 Player trading 8.0 8.6 Depreciation (5.8) (5.8) Joint venture 0.4 0.5 Net finance charges (7.9) (7.7) __________ __________ Profit before tax 24.5 20.0 __________ __________ *= operating profits before depreciation and player trading costs So far the impact of the recession on the financial results of our football business has been relatively minor and, crucially, match attendances at Emirates Stadium have continued to be at sell-out levels. We are, however, selling fewer stadium tours and our retail sales numbers are static rather than showing growth on previous year performance. Revenues in our core football business rose to Â£98.4 million (2007 - Â£89.3 million) and there were a number of reasons for this. Match day income benefited from: the staging of one additional Carling Cup home fixture, increased revenue from the pre-season Emirates Cup tournament and the general 2008/09 season price increase of 2.8%. Broadcasting revenues benefited from: a higher number of live TV games, the season to season step in the Premier League TV contracts and favourable rates of exchange on the â‚¬ / Â£ conversion of Champions League distributions. Football operating costs, excluding player trading and depreciation, were also up, to Â£74.1 million from Â£67.1 million in the previous year. There were a number of contributory factors underlying this increase with the main ones being changes in: player related costs, stadium utilities costs, the fees paid to Emirates Cup participant teams and retail costs, reflecting some tightening of our retail margins. In addition, we have booked exchange losses in the current period on certain â‚¬ denominated elements of our player transfers payable provisions. The timing of payment of these provisions is triggered by future events, such as player appearances, and as such any exchange exposure is not easily hedged. Player trading produced an overall surplus of Â£8.0 million (2007 - Â£8.6 million) including gains from the sale of player registrations of Â£18.5 million (2007 - Â£19.6 million). The most significant player sales were those of Alexander Hleb and Justin Hoyte; we also made a significant sell-on profit from David Bentley's move away from Blackburn Rovers. After deducting the interest costs of our fixed rate stadium financing bonds, the overall pre-tax profit from the Group's football activities was Â£19.7 million (2007 - Â£19.1 million) and this is clearly a very satisfactory result. The UK property market has been particularly affected by the economic downturn and, inevitably, this has had an impact on the Group's own property development activities in the period. Highbury Square apartment completions are running below the level projected in our original development plan and whilst disappointing this is a direct consequence of the very challenging conditions in the property and mortgage finance markets. The number of sales contracts which have actually failed and been rescinded remains very low - in single figures. However, we have a backlog of purchasers who still intend to complete but await confirmation of mortgages as a result of both the tightening of mortgage availability and the increased deposit required. These delayed completions are coming through albeit relatively slowly. We are actively examining proposals which, subject to the consent of our lending banks, would allow support to be given, in appropriate circumstances and on commercial terms, to those substantial purchasers who have requested assistance in completing on their units. That said, we believe that Highbury Square is outperforming other residential projects in London and the quality of the development combined with the stadium's history and association with the Club means that we completed on 140 units with a sales value of Â£58.1 in the first half of the financial year. Despite a further impairment write down of Â£0.9 million, on the carrying value of our Queensland Road site, those sales led to an operating profit contribution from our property business of Â£6.3 million (2007 - Â£2.5 million). To date we have only released the units in the South and West stands. The construction works on the North and East stands will be finished over the next four months or so, along with the communal garden areas, and the 326 apartments in those stands, of which 293 are pre-sold, will then become due for sales completion. Of the overall 655 apartments within the Highbury Square development, we are holding a residual stock of 60 unsold units and this number will increase to the extent that any pre-sold units fail to complete. As a result of the delay in completions, our most recent projections indicate a probable requirement to extend and revise the terms of the bank loan for Highbury Square beyond its current expiry date of April 2010. We are at a preliminary stage of discussions with the banking syndicate about an appropriate extension. In the current financial climate we do not expect these discussions to be concluded quickly, an increased cost is likely to be involved and there can be no certainty that a satisfactory agreement will be reached, but we believe that a positive outcome will be achieved in due course. At 30 November the balance of the Highbury Square loan stood at Â£135 million. Sales proceeds are required to be used first in payment of the construction costs on site and once these costs are fully funded, through to completion of the development, sales proceeds are then used for repayment of the bank loan. We reached the milestone of fully funding the costs to complete at the end of January and subsequently sales receipts have reduced the loan balance to Â£133 million. Future sales proceeds will continue to reduce the balance of the loan, We have a very much smaller property loan connected with the Queensland Road development site and, as a consequence of the delayed planning approval for the site, we have recently extended the term of this facility for another year. It is appropriate at this point to confirm once again that the financial arrangements for the Group's property activities are separate and largely operate independently from the financing of the football business. This has always been a key aspect of our financial structure for the Group and is intended to provide us with the ability to develop the football team as with, for example, the signing of Andrey Arshavin, irrespective of the difficult conditions in which our property business is having to operate. Clearly there are some significant challenges ahead of us, both on and off the pitch, over the closing months of this financial year and beyond. We have already established a strong base for the full year financial results but the ultimate quantum of profits for the 2008/09 year will be influenced by both results on the pitch and the level of further Highbury Square sales completions. It is important to note that a number of our key commercial contracts are secure for a number of years and, following the recent announcement by the Premier League, this includes the key domestic TV arrangements. However, looking ahead to 2009/10 I believe it would be imprudent not to expect the recession to have some impact on our finances. Hopefully, the loyalty of our supporters, both corporate and individual, means this impact will be limited. We are closely monitoring the position with a view to ensuring, as we always have done, that the Group is on a robust footing and ready to respond to any challenges which this exceptional economic climate may bring. PD Hill-Wood 25 February 2009 Arsenal Holdings Plc Consolidated profit and loss account For the six months ended 30 November 2008 Six months to 30 November Year ended Six months to 30 November 2007 31 May 2008 2008 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 157,312 827 158,139 97,695 225,013 including its share of joint ventures Share of turnover of (1,320) - (1,320) (830) (2,043) joint ventures ________ ________ ________ ________ ________ Group turnover 4 155,992 827 156,819 96,865 222,970 Operating expenses - other (131,990) - (131,990) (77,963) (174,480) - amortisation of player - (11,375) (11,375) (11,295) (21,757) registrations ________ ________ ________ ________ ________ Total operating expenses 5 (131,990 (11,375) (143,365) (89,258) (196,237) ________ ________ ________ ________ ________ Operating profit/(loss) 24,002 (10,548) 13,454 7,607 26,733 Share of operating 376 - 376 485 469 profit of joint venture Profit on disposal of - 18,545 18,545 19,593 26,458 player registrations ________ ________ ________ ________ ________ Profit on ordinary 24,378 7,997 32,375 27,685 53,660 activities before net finance charges ________ ________ Net finance charges 6 (7,852) (7,707) (16,992) ________ ________ ________ Profit on ordinary 24,523 19,978 36,668 activities before taxation Taxation 7 (4,341) (4,341) (10,942) ________ ________ ________ Profit after taxation 20,182 15,637 25,726 retained for the financial period ________ ________ ________ Earnings per share 8 Â£324.37 Â£251.33 Â£413.49 ________ ________ ________ 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 2008 Notes 30 November 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed assets Tangible assets 9 445,104 453,122 449,517 Intangible assets 10 63,226 69,215 55,665 Investment in joint venture 703 420 406 __________ __________ __________ 509,033 522,757 505,588 __________ __________ __________ Current assets Stock - Development properties 11 179,077 141,294 187,964 Stock - Retail merchandise 3,540 2,522 1,218 Debtors - Due within one year 12 42,467 30,868 32,340 Debtors - Due after one year 12 10,299 9,460 13,939 Cash at bank and in hand 13 75,659 69,128 93,264 __________ __________ __________ 311,042 253,272 328,725 Creditors: Amounts falling due 14 (267,133) (198,111) (334,252) within one year __________ __________ __________ Net current assets/(liabilities) 43,909 55,161 (5,527) __________ __________ __________ Total assets less current 552,942 577,918 500,061 liabilities Creditors: Amounts falling due after 15 (340,232) (390,637) (310,203) more than one year Provisions for liabilities 16 (33,428) (38,270) (30,758) __________ __________ __________ Net assets 179,282 149,011 159,100 __________ __________ __________ 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 17 122,524 92,253 102,342 __________ __________ __________ Shareholders' funds 18 179,282 149,011 159,100 __________ __________ __________ 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 2008 Six months to 30 Year ended November 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Net cash inflow/(outflow) from operating 7,432 (29,760) (21,013) activities Player registrations (3,635) 4,296 4,010 Returns on investment and servicing of finance (10,241) (9,169) (19,655) Taxation (5,567) - (4,177) Capital expenditure (1,755) (3,255) (6,944) __________ __________ __________ Cash outflow before financing (13,766) (37,888) (47,779) Financing (3,839) 33,159 67,186 __________ __________ __________ (Decrease)/increase in cash (17,605) (4,729) 19,407 __________ __________ __________ Notes to the cash flow statement Six months to 30 Year ended November 31 May a) Reconciliation of operating profit to net 2008 2007 2008 cash inflow/(outflow) from operating Unaudited Unaudited Audited activities Â£'000 Â£'000 Â£'000 Operating profit 13,454 7,607 26,733 Profit on disposal of tangible fixed assets (42) - (19) Depreciation 5,807 5,766 11,555 Amortisation of player registrations 11,375 11,295 21,757 Decrease/(increase) in stock 10,167 (40,790) (82,958) (Increase)/decrease in debtors (2,688) 159 (1,172) (Decrease)/increase in creditors (30,641) (13,797) 3,091 __________ __________ __________ Net cash inflow/(outflow) from operating 7,432 (29,760) (21,013) activities __________ __________ __________ b) Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash for the period (17,605) (4,729) 19,407 Cash outflow/(inflow) from increase in debt 3,838 (33,159) (67,186) __________ __________ __________ Change in net debt resulting from cash flows (13,766) (37,888) (47,779) Increase in debt resulting from non cash (977) (974) (2,097) changes Net debt at start of period (318,073) (268,197) (268,197) __________ __________ __________ Net debt at close of period (332,816) (307,059) (318,073) __________ __________ __________ Bank balances, included in net debt, of Â£142,000 (30 November 2007 Â£189,000, 31 May 2008 Â£307,000) are held in an employee benefit trust at the discretion of the trustees. c) Analysis of changes in net debt At 1 June Non cash Cash At 30 2008 November changes flows 2008 Â£'000 Â£'000 Â£'000 Â£'000 Cash in hand, at bank 93,264 - (17,605) 75,659 __________ __________ __________ __________ 93,264 - (17,605) 75,659 Debt due within one year (bank (142,835) - 40,139 (102,696) loans/bonds) Debt due after more than one (242,726) (816) (36,300) (279,842) year (bank loans/bonds) Debt due after more than one (25,776) (161) - (25,937) year (debenture subscriptions) __________ __________ __________ __________ Net debt (318,073) (977) (13,766) (332,816) __________ __________ __________ __________ Non cash changes represent Â£958,000 in respect of the amortisation of costs of raising finance, Â£161,000 in respect of rolled up, unpaid debenture interest for the period less Â£142,000 in respect of amortisation of the premium on certain of the Group's interest rate swaps. d) Gross cash flows Six months to 30 Year ended November 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Player registrations: Payments for purchase of players (23,093) (23,165) (28,027) Receipts from sale of players 19,458 27,461 32,037 __________ __________ __________ (3,635) 4,296 4,010 __________ __________ __________ Returns on investment and servicing of finance: Interest received 1,870 2,096 4,131 Interest paid (12,111) (11,265) (23,786) __________ __________ __________ (10,241) (9,169) (19,655) __________ __________ __________ Capital expenditure: Payments to acquire tangible fixed assets (1,797) (3,255) (6,963) Receipts from sale of tangible fixed 42 - 19 assets __________ __________ __________ (1,755) (3,255) (6,944) __________ __________ __________ Financing: Repayment of borrowings (5,300) (6,869) (6,869) Increase in borrowings 1,461 40,846 74,877 Costs of raising finance - (818) (822) __________ __________ __________ Total debt (repayment)/financing (3,839) 33,159 67,186 __________ __________ __________ Arsenal Holdings Plc Notes to the interim accounts 30 November 2008 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 2008. 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 2008. 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 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 98,433 89,250 207,723 __________ __________ __________ Profit on ordinary activities before taxation 19,661 19,055 39,699 __________ __________ __________ Segment net assets 175,599 149,659 162,138 __________ __________ __________ Class of business Property development Six months to 30 November Year ended 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 58,386 7,615 15,247 __________ __________ __________ Profit/(loss) on ordinary activities before 4,862 923 (3,031) taxation __________ __________ __________ Segment net assets/(liabilities) 3,683 (648) (3,038) __________ __________ __________ Class of business Group Six months to 30 November Year ended 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 156,819 96,865 222,970 __________ __________ __________ Profit on ordinary activities before taxation 24,523 19,978 36,668 __________ __________ __________ Net assets 179,282 149,011 159,100 __________ __________ __________ 4 Turnover Six months to 30 November Year ended 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Gate and other match day revenues 44,448 41,072 94,580 Player trading 827 303 472 Broadcasting 28,886 24,307 68,360 Retail income 7,979 7,846 13,052 Commercial 16,293 15,722 31,259 Property development 58,386 7,615 15,247 __________ __________ __________ 156,819 96,865 222,970 __________ __________ __________ 5 Operating costs Six months to 30 November Year ended 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Football operating costs 91,277 84,112 181,004 Property development - operating costs 51,188 5,146 11,145 Property development - impairment 900 - 4,088 __________ __________ __________ 143,365 89,258 196,237 __________ __________ __________ The impairment charge reflects 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 Interest payable and similar charges: 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Bank loans and overdrafts (4,621) (3,007) (7,307) Fixed/floating rate bonds (7,088) (7,414) (14,637) Other (631) (156) (1,844) Costs of raising long-term finance (1,073) (1,015) (2,219) __________ __________ __________ (13,413) (11,592) (26,007) Finance costs capitalised 3,602 1,780 4,978 __________ __________ __________ Total interest payable and similar charges (9,811) (9,812) (21,029) Interest receivable 1,959 2,105 4,037 __________ __________ __________ Net finance charges (7,852) (7,707) (16,992) __________ __________ __________ The interest capitalised of Â£3,602,000 (period to 30 November 2007 Â£1,780,000 and year to 31 May 2008 Â£4,978,000) 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 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Corporation tax on result for the period at 349 5,723 11,828 28% (period to 30 November 2007 and year to 31 May 2008 29.67%) Movement in deferred taxation 3,992 (1,382) (886) __________ __________ __________ Total tax charge 4,341 4,341 10,942 __________ __________ __________ 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 2007 - 62,217 shares and year to 31 May 2008 - 62,217 shares). 9 Tangible fixed assets Freehold Leasehold Plant and Total property property equipment Â£'000 Â£'000 Â£'000 Â£'000 Cost At 1 June 2008 389,288 6,534 80,909 476,731 Additions 384 405 679 1,468 Disposals - (318) (70) (388) __________ __________ __________ __________ At 30 November 2008 389,672 6,621 81,518 477,811 __________ __________ __________ __________ Depreciation At 1 June 2008 12,390 2,362 12,462 27,214 Charge for period 2,725 178 2,978 5,881 Disposals - (318) (70) (388) __________ __________ __________ __________ At 30 November 2008 15,115 2,222 15,370 32,707 __________ __________ __________ __________ Net book value At 30 November 2008 374,557 4,399 66,148 445,104 __________ __________ __________ __________ At 31 May 2008 376,898 4,172 68,447 449,517 __________ __________ __________ __________ 10 Intangible fixed assets Â£'000 Cost of player registrations At 1 June 2008 109,920 Additions 23,577 Disposals (19,756) __________ At 30 November 2008 113,741 __________ Amortisation of player registrations At 1 June 2008 54,255 Charge for the period 11,375 Disposals (15,115) __________ At 30 November 2008 50,515 __________ Net book amount At 30 November 2008 63,226 __________ At 31 May 2008 55,665 __________ 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 significantly greater than their book value. 12 Debtors 30 November 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Amounts recoverable within one year: Trade debtors 5,819 5,284 9,624 Other debtors 17,843 7,679 10,555 Prepayments and accrued income 18,805 17,905 12,161 __________ __________ __________ 42,467 30,868 32,340 __________ __________ __________ Amounts recoverable after more than one year: Trade debtors 2,500 2,500 2,500 Other debtors 5,319 6,094 8,845 Prepayments and accrued income 2,480 866 2,594 __________ __________ __________ 10,299 9,460 13,939 __________ __________ __________ Other debtors of Â£23.2 million, include Â£21.9 million in respect of player transfers (30 November 2007 Â£13.3 million and 31 May 2008 Â£18.1 million) of which Â£5.2 million is recoverable in more than one year. 13 Cash at bank and in hand 30 November 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Debt service reserve accounts 22,557 23,087 31,553 Other accounts 53,102 46,041 61,711 __________ __________ __________ 75,659 69,128 93,264 __________ __________ __________ 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. 14 Creditors: Amounts falling due within one year 30 November 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Bank loans - secured 98,020 49,555 138,454 Fixed and floating rate bonds - secured 4,676 4,649 4,381 Trade creditors 11,886 18,190 7,844 Corporation tax 6,845 10,211 12,142 Other tax and social security 2,585 2,780 15,922 Other creditors 17,558 10,039 13,464 Accruals and deferred income 125,563 102,687 142,045 __________ __________ __________ 267,133 198,111 334,252 __________ __________ __________ Other creditors, above and as disclosed in note 15, include Â£17.7 million (30 November 2007 Â£13.5 million and 31 May 2008 Â£16.0 million) in respect of player transfers. Bank loans of Â£135.4 million are categorised as either creditors falling due within one year or after more than one year on the basis of the revised expected repayment profile. The term date for repayment of the loan concerned is April 2010. Proceeds from the sale of apartments at Highbury Square are required to be used first in payment of the construction costs on site and once these costs are fully funded, through to completion of the development, sales proceeds are then used for repayment of the bank loan. The milestone of fully funding the costs to complete was reached at the end of January 2009 and subsequently sales receipts have reduced the loan balance to Â£133 million. Future sales proceeds will continue to reduce the balance of the loan. Of the overall 655 apartments within the Highbury Square development, a subsidiary company is holding a residual stock of 60 unsold units and this number will increase to the extent that any pre-sold units fail to complete. As a result of the delay in completions the Group's most recent projections indicate a probable requirement to extend and revise the terms of the bank loan for Highbury Square beyond its current expiry date of April 2010. The Group is at a preliminary stage of discussions with the banking syndicate about an appropriate extension. In the current financial climate the directors do not expect these discussions to be concluded quickly, an increased cost is likely to be involved and there can be no certainty that a satisfactory agreement will be reached, but they believe that a positive outcome will be achieved in due course. 15 Creditors: Amounts falling due after more than one year 30 November 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Bank loans - secured 42,389 54,233 - Fixed rate bonds - secured 181,437 186,113 186,662 Floating rate bonds - secured 56,016 56,017 56,064 Debentures 25,937 25,620 25,776 Other creditors 4,204 4,508 5,340 Grants 4,505 4,653 4,579 Deferred income 25,744 59,493 31,782 __________ __________ __________ 340,232 390,637 310,203 __________ __________ __________ The bank loans above and disclosed in note 14 comprise: 30 November 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Bank loans - secured 140,807 105,315 139,346 Costs of raising finance (398) (1,527) (892) __________ __________ __________ 140,409 103,788 138,454 __________ __________ __________ Due within one year 98,020 49,555 138,454 Due after more than one year 42,389 54,233 - __________ __________ __________ 140,409 103,788 138,454 __________ __________ __________ The fixed rate bonds above and disclosed in note 14 comprise: 30 November 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed rate bonds 194,905 200,204 200,204 Costs of raising finance (8,792) (9,535) (9,161) __________ __________ __________ 186,113 190,669 191,043 __________ __________ __________ Due within one year 4,676 4,556 4,381 Due after more than one year 181,437 186,113 186,662 __________ __________ __________ 186,113 190,669 191,043 __________ __________ __________ The fixed rate bonds bear interest at 5.1418% per annum. The floating rate bonds above comprise: 30 November 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Floating rate bonds 50,000 50,000 50,000 Interest rate swap 6,345 6,625 6,485 Costs of raising finance (329) (515) (421) __________ __________ __________ 56,016 56,110 56,064 __________ __________ __________ Due within one year - 93 - Due after more than one year 56,016 56,017 56,064 __________ __________ __________ 56,016 56,110 56,064 __________ __________ __________ 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£958,000 (period to 30 November 2007 Â£957,000 and year ended 31 May 2008 Â£2,065,000). 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£26.0 million (30 November 2007 Â£25.5 million, 31 May 2008 Â£53.2 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: 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Between one and two years 48,343 5,587 5,587 Between two and five years 19,654 72,987 18,644 After five years 240,022 246,603 246,760 __________ __________ __________ 308,019 325,177 270,991 Within one year 103,941 56,272 144,646 __________ __________ __________ 411,960 381,499 415,637 __________ __________ __________ Interest rate profile After taking into account interest rate swaps, the interest rate profile of the Group's financial liabilities at 30 November 2008 was as follows: Weighted average period Weighted for Fixed Floating Interest Total average which rate rate free fixed rate is Unaudited Unaudited Unaudited Unaudited rate fixed 2008 2008 2008 2008 Unaudited Unaudited Â£'000 Â£'000 Â£'000 Â£'000 % Yrs Bonds - fixed 194,905 - - 194,905 5.6 20.5 rate Bonds - floating 50,000 - - 50,000 6.6 22.5 rate Bank loans 32,982 107,825 - 140,807 6.6 0.5 Debentures 11,816 - 14,432 26,248 2.8 19.5 ______ ______ ______ ______ 289,703 107,825 14,432 411,960 ======= ====== ====== ====== The interest rate on the floating rate element of bank loans is currently set at LIBOR plus 1.4% to 1.7% (30 November 2007 1.4% and 31 May 2008 1.4% to 1.7%). 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 2008 the total unrecognised loss on the Group's interest rate swaps was Â£14.0 million (31 May 2008: Â£5.4 million). The interest rate profile at 30 November 2007 for comparative purposes was: Weighted average period Weighted for Fixed Floating Interest Total average which rate rate free fixed rate is Unaudited Unaudited Unaudited Unaudited rate fixed 2007 2007 2007 2007 Unaudited Unaudited Â£'000 Â£'000 Â£'000 Â£'000 % Yrs Bonds - fixed 200,204 - - 200,204 5.6 22 rate Bonds - floating 50,000 - - 50,000 6.6 24 rate Bank loans 74,136 31,179 - 105,315 6.6 2 Debentures 11,498 - 14,432 25,930 2.8 20 ______ ______ ______ ______ 335,838 31,179 14,432 381,449 ======= ====== ====== ====== The interest rate profile at 31 May 2008 for comparative purposes was: Weighted average period Weighted for Fixed Floating Interest Total average which rate rate free fixed rate is Audited Audited Audited Audited rate fixed 2008 2008 2008 2008 Audited Audited Â£'000 Â£'000 Â£'000 Â£'000 % Yrs Bonds - fixed rate 200,204 - - 200,204 5.6 21 Bonds - floating 50,000 - - 50,000 6.6 23 rate Bank loans 98,460 40,886 - 139,346 6.6 1 Debentures 11,655 - 14,432 26,087 2.8 20 ______ ______ ______ ______ 360,319 40,886 14,432 415,637 ======= ====== ====== ====== 16 Provisions for liabilities 30 November 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Pensions provision 511 640 576 Transfers provision 10,857 20,059 12,116 Deferred taxation 22,060 17,571 18,066 __________ __________ __________ 33,428 38,270 30,758 __________ __________ __________ 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 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 At start of period 102,342 76,616 76,616 Profit for the period 20,182 15,637 25,726 __________ __________ __________ Balance at end of period 122,524 92,253 102,342 __________ __________ __________ 18 Reconciliation of shareholders' funds 30 November 31 May 2008 2007 2008 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Opening shareholders' funds 159,100 133,374 133,374 Profit for the period 20,182 15,637 25,726 __________ __________ __________ Closing shareholders' funds 122,524 149,011 159,100 __________ __________ __________ 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£12.6 million (30 November 2007 Â£ 10.6 million, 31 May 2008 Â£12.3 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£6.3 million (30 November 2007 Â£7.7 million, 31 May 2008 Â£6.3 million). 20 Additional information a) The interim financial statements do not constitute statutory financial statements within the meaning of Section 240 of the Companies Act 1985. The financial information for the year ended 31 May 2008 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 s.237 (number 2) or (number 3) Companies Act 1985. b) These results were announced to PLUS on 26 February 2009 and posted to all shareholders on the register at 25 February 2009. 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 2008 which comprises the consolidated profit and loss account, the consolidated balance sheet, 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 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 2008 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 2009 - 1 -

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