Half-yearly Report

Arsenal Holdings plc Results for the six months ended 30 November 2013 ARSENAL ANNOUNCE HALF YEAR RESULTS * Turnover from football increased to Â£136.0 million (2012 - Â£106.1 million) with strong growth across each of the Club's key areas of activity. * Match day income increased to Â£45.0 million (2012 - Â£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 Â£52.0 million (2012 - Â£40.1 million) principally as a result of the Premier League's new contracts with Sky and BT. * Commercial and retail revenues rose to Â£38.4 million (2012 - Â£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 Â£22.2 million (2012 - Â£4.4 million). * Property revenues were significantly lower at Â£2.0 million (2012 - Â£32.3 million which included the sale of the Queensland Road market housing site) and operating profits from property amounted to Â£0.7 million (2012 - Â£1.9 million). * Profit on sale of player registrations amounted to Â£6.1 million which was significantly lower than the prior year comparative (2012 - Â£42.5 million). * Group loss before tax was Â£2.2 million (2012 - profit of Â£17.8 million). * The Group has no short-term debt and cash reserves, excluding the balances designated as debt service reserves, amounted Â£120.6 million (2012 - Â£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 Chips Keswick, said: "When I was appointed Chairman last summer, there was good reason to believe that the hard work which has been put in, by many people across the Club, over recent years had created the momentum for a successful season in every aspect of our activities. Thus far that optimism has been well founded. We believe we are in a strong position to take the Club forward both in the short term and beyond and to deliver future on-field success." Chairman's Statement When I was appointed Chairman last summer, I was quite clear that our collective aim was to be successful on the pitch whilst remaining true to the principles 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, by many people across the Club, over recent years had created the momentum for a successful season in every aspect of our activities. Thus far that optimism has been well founded. We must continue to take each game as it comes as there is clearly a long way to go in this exciting season and I am sure there will be many unexpected twists in the months ahead. If I have learned anything in all my years as a fan of this Club, it has been to never get too excited when things are going well or too down when things go against us. The team has put in an excellent performance so far this season. Our manager ArsÃ¨ne Wenger has built another supremely talented team with a blend of young players and those with more experience from around the world. Kieran Gibbs, Aaron Ramsey, Wojciech Szczesny and Jack Wilshere are all flourishing. We are also seeing the emergence of Serge Gnabry and Gedion Zelalem into the first team squad. This is testimony again to ArsÃ¨ne Wenger's philosophy of giving young talented players a chance. It is a philosophy we will continue to back both in terms of facilities and expertise. We have recently announced that Andries Jonker is to become Head of the Youth Academy in the summer, succeeding Liam Brady. Andries has tremendous experience from Holland and Germany in leading exciting programmes to identify and develop the best young players. I have no doubt he will build successfully on the outstanding work which has been done by Liam and his team over many years. In addition, plans are in place to improve our training academy facilities at Hale End, where our youngest players start their Arsenal journeys. Whilst youth development continues to be an important focus, we fully recognise the importance of getting the balance right between youth and experience. As you well know, we signed Mesut Ã–zil for a Club record transfer fee in the summer and, in addition, the signing of Mathieu Flamini has proved to be an astute acquisition. We have also continued to invest in the squad by retaining some 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 is important for the stability of the squad. We will continue to work hard to keep the players ArsÃ¨ne believes can take us forwards. We will also continue to support the manager in the transfer market when he identifies players he believes can further strengthen the squad. We also have significant momentum off the field in terms of growing our revenues. The financial results for the first half of the year, which are considered in more detail in the Financial Review section of this report, show that the Club has recorded significantly increased revenue across each of its key areas of activity - match day, broadcasting and commercial. This is excellent 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 the biggest partnership agreement the Club has ever completed. The financial impact, in terms of profits and cash-flow, will not begin to be realised until the start of the next financial year but it will clearly provide a further significant 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 a successful partnership. The fact that PUMA intend to use Arsenal as one of their primary assets around the world will undoubtedly help with our ambitions to grow the Club's profile on a global basis. We all look forward to seeing the new kits when they are launched in July. In the meantime, it would be remiss of me not to thank Nike for their enormous contribution to Arsenal. They have been an excellent partner and we are grateful for their long-standing support which goes back 20 years. In addition to Puma, we have also welcomed Gatorade, Huawei, Cooper Tires Europe, Lanvin and JEANRICHARD to the Club as global partners and BT Sport as a regional partner. Earlier this season we were delighted to announce the appointment of Josh Kroenke as a director. Josh has a wealth of commercial experience gained across a range of sports businesses and I am sure he will make a significant contribution to the Board. This season has also seen us commemorate the 100 year anniversary of our historic move from Woolwich to Islington, with a range of special activities to mark the centenary. As part of the celebrations and to recognise our ongoing commitment to the local community, The Arsenal Foundation announced a donation of Â£150,000 to local organisation Islington Giving. This will help to engage more young people in the Borough through a range of sport and leisure activities and is delivered with the help of our own community department. Our work through The Arsenal Foundation continues to make a meaningful difference to lives both here in the UK and overseas. Since its launch in 2012, the Foundation has committed more than Â£1 million to projects that are directly helping more than 100,000 young people. Once again, players, staff and supporters showed tremendous generosity towards our dedicated charity match day in December, raising a record total in excess of Â£225,000. This money will enable us to continue doing even more work that transforms young peoples' lives for the better. To find out more about The Arsenal Foundation or to make a donation, please visit www.arsenal.com/ thearsenalfoundation. FINANCIAL REVIEW The financial results for the six months ended 30 November 2013 show strong growth in revenue across all of the Club's principal areas of activity. This is partly a consequence of new contractual arrangements coming on line and partly a reflection of the team's on field performance. Overall our turnover from football was Â£135.9 million, which is 28% higher than the Â£106.1 million reported for the comparative period last year. Broadcasting was the largest source of income for the period at Â£52.0 million (2012 - Â£40.1 million). This is the first of three years under the Premier League's new broadcasting contracts with Sky and BT which, as previously reported, are at a significantly improved level. This heading also includes revenue from sale of the TV rights to the Emirates Cup; due to the London Olympics there was no Emirates Cup in the prior period. We include revenues from the UEFA Champions League within the broadcasting line and looking beyond the current year, the exclusive acquisition of the UK rights by BT will likely drive further growth in values for the participating English clubs, therefore further increasing the significance of a top four Premier League finish. Our match day revenues also benefited from the return of the Emirates Cup to the pre-season schedule and from one additional game, the UEFA Champions League qualifying round, compared to last season. These additional fixtures meant that match day revenue for the period was Â£45.0 million (2012 - Â£37.8 million). As ever, match day revenue is weighted to the second half of the financial year and at 30 November we had played 11 of the 28 home fixtures we are so far certain of playing for the full season. Commercial and Retail revenues for the period amounted to Â£38.4 million, which was 39% higher than the Â£27.7 million reported this time last year. The main driver 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. As mentioned elsewhere in this report we have also added a number of new commercial partnerships and, in particular, Puma as our kit partner from this summer. It should be noted that no revenue from the Puma contract will be included in the results for the current financial year. Elsewhere our commercial activities have benefited from improved trading conditions and on field performance with good levels of growth from our retail business and in areas such as stadium tours and membership. In the second half of the year retail sales may be impacted by lower available stocks as part of the planned transition from Nike to Puma. Operating costs for the football side of the business were increased to Â£113.2 million (2012 - Â£101.1 million). This time last year we pointed out that the financial impact of new contracts which had then recently been awarded to a number of key young players - including Theo Walcott, Jack Wilshere, Aaron Ramsey and Alex Oxlade-Chamberlain - would only come through in later periods. The incremental impact of those contracts, together with more recent player contract renewals and the addition to the squad of Mesut Ã–zil has meant that some Â£9.2 million of the increase in operating expense is attributable to employment costs. Of the remaining cost change, Â£2.1 million was directly attributable to increased revenues. Overall operating profit from football has improved to Â£22.2 million, from Â£4.4 million for the comparative period. This clearly demonstrates the significant positive impact which is derived from the combination of the new broadcasting contracts and our own commercial growth. 2013 2012 Â£m Â£m Turnover Football 135.9 106.1 Property development 2.0 32.3 Total turnover 137.9 138.4 Operating profits* Football* 22.2 4.4 Property development 0.7 1.9 Total operating profit* 22.9 6.3 Player trading (12.6) 23.2 Depreciation and (6.4) (5.6) amortisation Joint venture 0.4 0.4 Net finance charges (6.5) (6.5) (Loss) / profit before tax (2.2) 17.8 *= operating profits before depreciation and player trading In contrast to football, activity in the Group's property business was at a very much lower level. This was entirely expected, as the prior period contained a significant one-off sale of the north east section of Queensland Road to Barratts. All instalments of the Â£27 million sale price for that transaction have now been received from Barratts. Property activity for the first half of this financial year was confined to the sale of a small number of houses associated with the Highbury Square development, which produced revenue of Â£2.0 million and Â£0.7 million of operating profit. Looking ahead, the timing of sale for the remaining property sites, on Hornsey Road and Holloway Road, is tied to the resolution of the underlying planning consents and the outcome of a judicial review which is not expected until the spring. As is frequently the case, player trading has had a material impact on the overall result for the period. There was a low level of outward transfer activity during the summer window with only the sales of Gervinho and Vito Mannone generating appreciable fees and contributing to an overall profit on sale of player registrations of Â£6.1 million. This was very much lower than the comparative period which included a profit on sale of Â£42.5 million. The other components of player trading are the amortisation cost of player registrations, which was broadly similar to the prior year, at Â£19.3 million (2012 - Â£19.9 million) and loan fees of Â£0.5 million (2012 - Â£0.6 million). The net loss on player trading was therefore Â£12.6 million compared with a net profit in the comparative period of Â£23.2 million. The Group continues to have a strong balance sheet. Â£6.9 million of stadium finance bonds were repaid on schedule in the period and, other than next year's annual instalment on the bonds, the Group has no short-term debt. In accordance with the original issue terms there has been a small step up of 0.33% in the interest cost for our Â£50 million floating rate note. The book value of player registrations (intangible fixed assets) has been increased significantly to Â£130 million, from Â£96.6 million as at 31 May 2013, principally as a result of the acquisition of Ã–zil's registration. In cash terms, after the collection of receivables from player sales, including instalments on sales made in prior years, the net outlay on transfers for the period was Â£12.7 million. This meant that the Group has maintained a strong cash position with balances at 30 November of Â£120.6 million (2012 - Â£99.7 million), which excludes debt service reserve balances, which are not available for football purposes, of Â£22.8 million (2012 - Â£23.7 million). The Group enters into a number of transactions, relating mainly to its participation in European competition (UEFA Champions League distributions are paid in â‚¬) and player transfers, which create exposure to movements or volatility in foreign exchange, including â‚¬. The Group monitors this foreign exchange exposure on a continuous basis and will usually hedge any significant exposure in its currency receivables and payables. There is an overall tax credit for the period of Â£5.0 million which arises principally due to the fact that the rate of UK corporation tax has been reduced, leading to a revaluation downwards of the Group's deferred tax liabilities. Tax legislation allows the Club to roll over profits on player sales provided that certain conditions are met including reinvestment of the applicable sales proceeds. One of the main components of the Group's deferred tax liability is in respect of its accumulated rolled over transfer gains and these deferred gains will now be taxed at the reduced rate of corporation tax applicable to future periods. SUMMARY The Group's overall after tax profit for the six months was Â£2.8 million (2012 - profit of Â£14.9 million). Historically the financial results of the football business are better for the second half of the year as the timing differences around gate and broadcasting revenue come back in balance. As always, the actual outcome for the second half will be strongly influenced by the extent of progress in the knock-out competitions and final Premier League position. We expect the overall result for the year to be fully compliant with all of the requirements of both the Premier League and UEFA financial regulatory regimes. We believe we are in a strong position to take the Club forward both in the short term and beyond and to deliver future on-field success. Our majority shareholder Mr Stan Kroenke, myself and the rest of the Board, our manager and all our staff are clear in that aim. Finally I should thank everyone for their support so far this season. The atmosphere at Emirates Stadium has reached new levels and the support at every away game has been outstanding. Keep backing the team and enjoy the rest of the season. Sir Chips Keswick Chairman 14 February 2014 Arsenal Holdings Plc Consolidated profit and loss account For 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 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Turnover of the Group 138,609 540 139,149 139,564 282,774 including its share of joint ventures Share of turnover of (1,214) - (1,214) (1,132) (2,400) joint ventures ________ ________ _______ ________ ________ Group turnover 4 137,395 540 137,935 138,432 280,374 Operating expenses - other (120,862) - (120,862) (137,190) (261,634) - amortisation of player - (19,284) (19,284) (19,904) (47,021) registrations Total 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 - 405 403 945 profit of joint venture Profit on disposal of - 6,120 6,120 42,501 46,986 player registrations ________ ________ _______ ________ ________ Profit/(loss) on 16,938 (12,624) 4,314 24,242 19,650 ordinary activities before net finance charges ________ ________ Net finance charges 6 (6,490) (6,467) (12,996) ________ ________ ________ (Loss)/profit on ordinary activities before taxation (2,176) 17,775 6,654 Taxation 7 4,988 (2,873) (849) ________ ________ ________ Profit after taxation retained for the financial period 2,812 14,902 5,805 ________ ________ ________ Earnings per share 8 Â£45.20 Â£239.52 Â£93.30 ________ ________ ________ All trading resulted from continuing operations. The accompanying notes are an integral part of these statements. Arsenal Holdings Plc Consolidated balance sheet At 30 November 2013 Notes 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed assets Goodwill 1,711 - 1,924 Tangible assets 9 418,826 424,890 421,539 Intangible assets 10 130,001 104,951 96,570 Investment in joint venture 3,340 2,677 3,031 ________ ________ ________ 553,878 532,518 523,064 ________ ________ ________ Current assets Stock - Development properties 11 12,467 14,783 12,987 Stock - Retail merchandise 2,426 2,694 2,131 Debtors - Due within one year 12 59,572 69,739 88,484 Debtors - Due after one year 12 9,741 21,075 8,287 Cash and short-term deposits 13 143,474 123,374 153,457 ________ ________ ________ 227,680 231,665 265,346 Creditors: 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 614,072 622,729 638,479 liabilities Creditors: Amounts falling due after 15 (251,881) (255,754) (274,721) more than one year Provisions for liabilities 16 (56,029) (54,525) (60,403) ________ ________ ________ Net assets 306,162 312,450 303,355 ________ ________ ________ 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 17 249,404 255,692 246,597 ________ ________ ________ Shareholders' funds 18 306,162 312,450 303,355 ________ ________ ________ The accompanying notes are an integral part of this consolidated balance sheet. Arsenal Holdings Plc Consolidated cash flow statement For the six months ended 30 November 2013 Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Net cash inflow/(outflow) from operating 20,129 (5,767) 53,359 activities Player registrations (12,728) (8,061) (25,915) Returns on investment and servicing of (6,227) (6,279) (12,356) finance Taxation 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) 6,381 Financing (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) 36,643 Change in short-term deposits (24,283) (17,481) (36,811) ________ ________ ________ (Decrease) in cash and short-term deposits (9,983) (30,251) (168) ________ ________ ________ Arsenal Holdings Plc Notes to the cash flow statement Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 a) Reconciliation of operating loss to net cash inflow/(outflow) from operating activities Operating loss (2,211) (18,662) (28,281) Profit on disposal of tangible fixed assets (9) (14) (53) Amortisation of goodwill 213 - 213 Depreciation (net of grant amortisation) 6,211 5,629 12,294 Amortisation of player registrations 19,284 19,904 41,349 Impairment of player registrations - - 4,740 Decrease in stock 225 21,799 24,158 Decrease/(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) 53,359 activities ________ ________ ________ b) Reconciliation of net cash flow to movement 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) 6,381 Increase in debt resulting from non cash (341) (345) (684) changes Net 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 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and in hand 65,915 - 14,300 80,215 Short-term deposits 87,542 - (24,283) 63,259 _______ _______ _______ _______ 153,457 - (9,983) 143,474 Debt 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 one year (debenture subscriptions) (27,463) (184) - (27,647) _______ _______ _______ _______ Net debt (93,221) (341) (3,084) (96,646) _______ _______ _______ _______ Non cash changes represent Â£297,000 in respect of the amortisation of costs of raising finance, Â£184,000 in respect of rolled up, unpaid debenture interest for the period less Â£140,000 in respect of amortisation of the premium on certain of the Group's interest rate swaps. d) Gross cash flows Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Player 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 of finance: Interest received 418 567 1,162 Interest 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 Plc Notes to the interim accounts 30 November 2013 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 2013. 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 2013. The status of the Group's financing arrangements is reported in notes 14 and 15 and is summarised in the Chairman's Statement. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and the financial statements continue to be prepared on the going concern basis. 2 Significant accounting policies Income recognition Gate and other match day revenue is recognised over the period of the football season as games are played and events are staged. Sponsorship and similar commercial income is recognised over the duration of the respective contracts. The fixed element of broadcasting revenues is recognised over the duration of the football season whilst facility fees for live coverage or highlights are taken when earned at the point of broadcast. Merit awards are accounted for only when known at the end of the financial period. UEFA pool distributions relating to participation in the Champions League are spread over the matches played in the competition whilst distributions relating to match performance are taken when earned; these distributions are classified as broadcasting revenues. Fees receivable in respect of the loan of players are included in turnover over the period of the loan. Income from the sale of development properties is recognised on legal completion of the relevant sale contract. Where elements of the sale price are subject to retentions by the purchaser the retained element of the sale price is not recognised until such time as all of the conditions relating to the retention have been satisfied. Player registrations The costs associated with acquiring players' registrations or extending their contracts, including agents' fees, are capitalised and amortised, in equal instalments, over the period of the respective players' contracts. Where a contract life is renegotiated the unamortised costs, together with the new costs relating to the contract extension, are amortised over the term of the new contract. Where the acquisition of a player registration involves a non-cash consideration, such as an exchange for another player registration, the transaction is accounted for using an estimate of market value for the non-cash consideration. Under the conditions of certain transfer agreements or contract renegotiations, further fees will be payable in the event of the players concerned making a certain number of First Team appearances or on the occurrence of certain other specified future events. Liabilities in respect of these additional fees are accounted for, as provisions, when it becomes probable that the number of appearances will be achieved or the specified future events will occur. The additional costs are capitalised and amortised as set out above. 3 Segmental analysis Class of business Football Six months to 30 November Year ended 31 May 2013 2012 2013 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Turnover 135,958 106,145 242,825 _______ _______ _______ (Loss)/profit on ordinary activities before (3,111) 15,616 1,604 taxation _______ _______ _______ 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 Â£'000 Â£'000 Â£'000 Turnover 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 Â£'000 Â£'000 Â£'000 Turnover 137,935 138,432 280,374 _______ _______ _______ (Loss)/profit on ordinary activities before (2,176) 17,775 6,654 taxation _______ _______ _______ 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 Â£'000 Â£'000 Â£'000 Gate and other match day revenues 44,961 37,785 92,780 Player trading 540 564 1,598 Broadcasting 52,025 40,108 86,025 Retail and licensing income 10,389 9,813 18,057 Commercial 28,043 17,875 44,365 Property 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 Â£'000 Â£'000 Â£'000 Football - amortisation and depreciation 25,721 25,533 41,349 Football - impairment - - 5,672 Football - other operating costs 113,190 101,136 228,556 Property 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 Audited Interest payable and similar charges: Â£'000 Â£'000 Â£'000 Bank 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 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 2013 2012 2013 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Corporation 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 deferred tax liabilities have been revalued based on the 20% rate. The impact of the rate change is a deferred tax credit of Â£5.1 million. The comparative rate of corporation tax for the six months ended 30 November 2012 and the year ended 31 May 2013 was 23.83%. 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 2012 - 62,217 shares and year to 31 May 2013 - 62,217 shares). 9 Tangible fixed assets Freehold Leasehold Plant and property property equipment Total Â£'000 Â£'000 Â£'000 Â£'000 Cost At 1 June 2013 402,414 6,819 97,487 506,720 Additions 1,126 640 1,778 3,544 Disposals - - (32) (32) _______ _______ _______ _______ At 30 November 2013 403,540 7,459 99,233 510,232 _______ _______ _______ _______ Depreciation At 1 June 2013 40,212 3,600 41,369 85,181 Charge for period 2,988 145 3,123 6,256 Disposals - - (31) (31) _______ _______ _______ _______ At 30 November 2013 43,200 3,745 44,461 91,406 _______ _______ _______ _______ Net book value At 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 Â£'000 Cost of player registrations At 1 June 2013 235,307 Additions 58,462 Disposals (50,144) _______ At 30 November 2013 243,625 _______ Amortisation of player registrations At 1 June 2013 138,737 Charge for the period 19,284 Disposals (44,397) _______ At 30 November 2013 113,624 _______ Net book amount At 30 November 2013 130,001 _______ At 31 May 2013 96,570 _______ 11 Stock - Development properties Properties are held for resale and are recorded at the lower of cost and net realisable value. The directors consider the net realisable value of development property stocks to be greater than their book value. 12 Debtors 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Amounts recoverable within one year: Trade debtors 14,635 15,443 48,076 Other debtors 9,434 23,973 22,597 Prepayments 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 6,618 Prepayments and accrued income 1,718 1,595 1,669 _______ _______ _______ 9,741 21,075 8,287 _______ _______ _______ Other debtors of Â£17.5 million, include Â£15.7 million in respect of player transfers (30 November 2012 Â£31.4 million and 31 May 2013 Â£26.1 million) of which Â£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 Â£'000 Â£'000 Â£'000 Debt service reserve accounts 22,831 23,696 33,835 Other 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 to maintain specified amounts on bank deposit as security against future payments of interest and principal. Accordingly the use of these debt service reserve accounts is restricted to that purpose. Included in other accounts is a balance of Â£0.5 million (30 November 2012 Â£1.2 million and 31 May 2013 Â£0.9 million) which is held in connection with the site works at Queensland Road. The use of this deposit is restricted to that purpose and Newlon Housing Trust is a joint signatory. The Group uses short-term bank treasury deposits as a means of maximising the interest earned on its cash balances. 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Cash at bank and in hand 80,215 16,502 65,915 Short-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 Â£'000 Â£'000 Â£'000 Fixed rate bonds - secured 6,694 6,301 6,310 Trade creditors 8,295 10,527 9,191 Corporation tax 1,059 195 96 Other tax and social security 6,920 6,181 15,719 Other creditors 33,054 32,070 19,773 Accruals 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 Â£37.9 million (30 November 2012 Â£31.6 million and 31 May 2013 Â£20.5 million) in respect of player transfers. 15 Creditors: Amounts falling due after more than one year 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Fixed rate bonds - secured 153,137 159,968 160,192 Floating rate bonds - secured 52,642 52,785 52,713 Debentures 27,647 27,286 27,463 Other creditors 12,900 6,181 8,854 Grants 3,840 3,930 3,885 Deferred 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 Â£'000 Â£'000 Â£'000 Fixed rate bonds 163,774 170,674 170,674 Costs 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 6,310 Due 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 Â£'000 Â£'000 Â£'000 Floating rate bonds 50,000 50,000 50,000 Interest rate swap 4,945 5,225 5,085 Costs 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 a margin of 0.55% and the Group has entered into interest rate swaps which fix the LIBOR element of this cost at 5.75%. The fixed rate bonds and floating rate bonds are guaranteed as to scheduled payments of principal and interest by certain members of the Group and by Ambac Assurance UK Limited. The Group pays Ambac Assurance UK Limited annual guarantee fees at a rate of 0.65% of the bond principal outstanding. The costs of raising debt finance, in the form of fixed and floating rate bonds, are amortised to the profit and loss account over the term of the debt. The amortisation charge for the period was Â£297,000 (period to 30 November 2012 Â£306,000 and year ended 31 May 2013 Â£608,000). The Group's fixed rate bonds and floating rate bonds are secured by a mixture of legal mortgages and fixed charges on certain freehold and leasehold property and certain plant and machinery owned by the Group, by fixed charges over certain of the Group's trade debtors and the related bank guarantees, by fixed charges over Â£26.5 million (30 November 2012 Â£27.5 million, 31 May 2013 Â£ 54.2 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: 2013 2012 2013 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 Between one and two years 7,668 7,274 7,274 Between two and five years 25,590 24,274 24,274 After five years 201,200 209,647 210,000 __________ __________ __________ 234,458 241,195 241,548 Within one year 7,274 6,900 6,900 __________ __________ __________ 241,732 248,095 248,448 __________ __________ __________ Interest rate profile After taking into account interest rate swaps, the interest rate profile of the Group'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 Â£'000 Â£'000 Â£'000 Â£'000 % Yrs Bonds - fixed rate 163,774 - - 163,774 5.8 15.5 Bonds - floating 50,000 - - 50,000 7.0 17.5 rate Debentures 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, are not recognised in the financial statements until the hedged position matures. At 30 November 2013 the total unrecognised loss on the Group's interest rate swaps was Â£16.4 million (31 May 2013: Â£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 Â£'000 Â£'000 Â£'000 Â£'000 % Yrs Bonds - fixed rate 170,674 - - 170,674 5.8 16.5 Bonds - floating 50,000 - - 50,000 6.6 18.5 rate Debentures 12,991 - 14,430 27,421 2.8 15.5 _______ _______ _______ _______ 233,665 - 14,430 248,095 _______ _______ _______ _______ 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 Â£'000 Â£'000 Â£'000 Â£'000 % Yrs Bonds - fixed rate 170,674 - - 170,674 5.8 16 Bonds - floating rate 50,000 - - 50,000 6.6 18 Debentures 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 Â£'000 Â£'000 Â£'000 Pensions provision 2,403 2,834 2,619 Transfers provision 17,409 10,114 11,195 Deferred taxation 33,432 41,577 39,421 Onerous contracts - players 1,370 - 5,456 Property 1,415 - 1,712 __________ __________ __________ 56,029 54,525 60,403 __________ __________ __________ 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. The provision for onerous player contracts arose following the impairment of certain player registrations in the year ended 31 May 2013. The property provision relates to certain surplus operational properties, where activity is to be discontinued. 17 Profit and loss account 30 November 31 May 2013 2012 2013 Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 At start of period 246,597 240,790 240,790 Profit for the period 2,812 14,902 5,805 Exchange 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 Â£'000 Â£'000 Â£'000 Opening shareholders' funds 303,355 297,548 297,548 Profit for the period 2,812 14,902 5,805 Exchange difference (5) - 2 __________ __________ __________ Closing shareholders' funds 306,162 312,450 303,355 __________ __________ __________ 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£6.2 million (30 November 2012 Â£ 7.8 million, 31 May 2013 Â£6.6 million). 20 Additional information a) The interim financial statements do not constitute statutory financial statements within the meaning of Section 435 of the Companies Act 2006. The financial information for the year ended 31 May 2013 has been extracted from the statutory accounts for the year then ended which have been filed with the Registrar of Companies. The audit report on these accounts was unqualified and did not contain any statements under Section 498 (2) or (3) Companies Act 2006. b) These results will be announced to ICAP Securities & Derivatives Exchange (ISDX Growth Market) on 14 February 2014 and posted to all shareholders on the register at 13 February 2014. Copies of this interim report will be available from the company's registered office at Highbury House, 75 Drayton Park, London N5 1BU. INDEPENDENT REVIEW REPORT TO ARSENAL HOLDINGS PLC We have been engaged by the company to review the interim financial statements in the half-yearly financial report for the six months ended 30 November 2013 which comprises the consolidated profit and loss account, the consolidated balance sheet, the consolidated cash flow statement, the notes to the cash flow statement and related notes 1 to 20. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements. This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the ISDX Growth Market Rules for Issuers and the ASB Statement Half-Yearly Financial Reports. As disclosed in note 1, the annual financial statements of the company are prepared in accordance with United Kingdom Generally Accepted Accounting Practice. The interim financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the group intends to use in preparing its next annual financial statements. Our responsibility Our responsibility is to express to the Company a conclusion on the interim financial statements in the half-yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements in the half-yearly financial report for the six months ended 30 November 2013 is not prepared, in all material respects, in accordance with the ISDX Growth Market Rules for Issuers and the ASB Statement Half-Yearly Financial Reports. Deloitte LLP Chartered Accountants and Statutory Auditor London, United Kingdom 14 February 2014

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