AFC ENERGY PLC
Arsenal Holdings plc Results for the year ended 31 May 2016
ARSENAL ANNOUNCE FULL YEAR RESULTS
* Group profit before tax was GBP2.9 million (2015 - GBP18.2 million).
* Turnover from football increased to GBP350.6 million (2015 - GBP329.3
million) with strong growth in broadcasting supported by commercial
activity.
* Additional GBP15.8 million from broadcasting driven by UEFA Champions
League, record level of Premier League live coverage and second place prize
money.
* Commercial growth led by an additional GBP5.0 million from secondary
partnerships showing 40% year on year growth.
* Continued significant investment in the squad is reflected in higher
amortisation charges and higher wage costs.
* Wage costs rose to GBP195.4 million (2015 - GBP192.3 million) and
represented 55.7% (2015 - 58.4%) of football revenues. Year on year
comparison is distorted by double charge for Champions league qualification
bonuses in the prior year.
* Amortisation charge on player registrations rose to GBP59.3 million (2015 -
GBP54.4 million).
* Profit on sale of player registrations amounted to GBP2.0 million which was
significantly lower than the prior period comparative (2015 - GBP28.9
million).
* Quiet year for the Group's property business with a contribution to pre-tax
profits of GBP2.0 million (2015 - GBP13.4 million).
* The Group has no short-term debt and its cash balances, excluding the
accounts designated as debt service reserves, amounted to GBP191.1 million
(2015 - GBP193.1 million).
* The liabilities for player acquisitions are in part payable in instalments
and net transfer creditors amounted to GBP42.5 million (2015 - GBP65.6
million). Since the financial year end the Club has invested in the
acquisition of new players at a total transfer in cost of more than £90
million.
* Increased Premier League broadcasting revenues will apply from the start of
the new season 2016/17.
* First full year of reporting under FRS 102 and comparative figures have
been restated.
Commenting on the results for the year, the Club's Chairman, Sir Chips Keswick,
said:
"We enjoyed a season of progress both on and off the pitch. Looking ahead, the
new broadcast revenue has provided a further competitive stimulus to the
Premier League, which was already the best and most closely contested league in
world football. We know that the competition will be even tougher this season.
Accordingly, we have made further significant investment into what was already
a very competitive squad. As a result, we can and do look forward to the 2016/
17 season with optimism and confidence."
The Club's Chief Executive Officer, Ivan Gazidis, said:
"We are in a strong position to continue moving forward at every level of the
club. On the pitch we have an outstanding squad. Off the pitch we have
developed our infrastructure across all aspects of our operations to ensure we
have the right assets and skills to progress.
I am confident this progress, coupled with strong underlying values, will bring
the success we all seek. Our ultimate ambition is clear: to win major trophies
and make Arsenal fans at home and around the world proud of this great club.
Proud of our values, proud of the way we act and proud of our team."
Arsenal Holdings plc
Chairman's Statement
We enjoyed a season of progress both on and off the pitch. A second place
finish in the Premier League clinched a 19th successive season in the UEFA
Champions League and we are now all focussed on making a sustained challenge to
go one step further in 2016/17.
The new broadcast revenue has provided a further competitive stimulus to the
Premier League, which was already the best and most closely contested league in
world football. We know that the competition will be even tougher this season.
Accordingly, we have made further significant investment into what was already
a very competitive squad. As a result, we can and do look forward to the 2016/
17 season with optimism and confidence.
Midfielder Mohamed Elneny joined us in January, with Granit Xhaka, Lucas Perez
and Shkodran Mustafi joining us during the summer, along with Rob Holding,
Takuma Asano and Kelechi Nwakali who are all talented young players for the
future.
This is in line with our philosophy of investing significantly when appropriate
players, who can improve the squad, are available, whilst continuing to
identify and nurture players for the future. As Arsène has said many times, we
are not afraid to spend substantial sums, but it is important that when we do,
the money is used wisely.
The arrival of the new players provides extra depth to our squad and this has
also been boosted by the emergence of two young players: Alex Iwobi, who has
grown up through our own Academy, and Jeff Reine-Adelaide.
Following these additions to our squad, Jack Wilshere and Calum Chambers have
joined Bournemouth and Middlesbrough respectively on season-long loans, while
Serge Gnabry has joined Werder Bremen on a permanent transfer. We wish all
three the best of luck at their new clubs during 2016/17.
Looking back to the 2015/16 season, although the men's first team couldn't make
it three in a row, we did still make another memorable trip to Wembley in May,
courtesy of Arsenal Ladies. They produced a wonderful performance to beat
Chelsea and win the Women's FA Cup for the 14th time. The team also lifted the
FA Continental Cup and they continue to progress under manager Pedro Losa as
the women's game grows in popularity.
Off the pitch, we have continued to make significant investments in our London
Colney training facilities and we are in the final phase of the redevelopment
works at our Academy in Hale End. These are hugely important investments which,
whilst not grabbing headlines, will help underpin our long-term future.
In addition, we have constructed a completely new pitch at the Emirates Stadium
which is a remarkable piece of work by our ground staff given the briefness of
the close season period.
Financials
You will read in the following pages that our revenues for the year ending 31
May 2016 rose to £353.5m. The main source of this increase was football revenue
which was up £21 million year on year, £16 million of that was broadcast
related and £3.7 million arose from our commercial activities. The overall
outcome being a small profit before tax of £2.9 million.
Our cash reserves at the end of the year stood at £226.5 million and this
figure will doubtless attract the usual speculation from fans and other
commentators. That being the case, it is my duty to point out that after
excluding debt service reserves and amounts owed to other clubs on past
transfers the balance reduces to £149 million. This figure is in
itself inflated, due to the seasonality of our cash flows, by advance
sponsorship and season ticket receipts for the new season.
Against the underlying balance of available funds we have, as mentioned above ,
invested strongly in player acquisitions during the summer at a total transfer
in cost of more than £90 million with additional significant commitments to
player wages, agent's fees and performance related contingencies to book on top
of that.
Whilst we have spent strongly we have not over stretched. It would have been
bad business practice not to have retained some small degree of flexibility to
allow us to invest again in the right player and / or to maintain the current
squad as and where we want to offer improved and extended contracts for key
players. We make our investments on a prudent and reasoned basis which is
something this Club does well and which is even more important in a
competitively inflated marketplace. This approach has served us well and it
will continue.
Making a difference
As a Club we recognise the power we have to transform people's lives at home
and abroad. The Arsenal Foundation, working with partners here and around the
world, continues to thrive and its influence is growing. This is due, in large
part, to significant financial contributions from our players, staff and fans.
We are very appreciative of every donation and committed to ensuring that every
pound is used to make a difference.
More recently the very entertaining Arsenal Legends v Milan Glorie match saw
the Arsenal Foundation donate £1 million towards building pitches in Jordan,
Somalia and here in North London. This was a first class achievement and we
were delighted with the response from former players and all our fans who
filled Emirates Stadium for a special day.
Our Arsenal in the Community team continues to deliver an outstanding programme
in Islington and other nearby boroughs. The work is linked directly to the
local areas of need and I am proud that we continue to have significant focus
on this important work.
Thank you
I would like to thank our fans for their outstanding support. Emirates Stadium
was sold out for most games last season and the support for the team on its
travels is exceptional.
Finally, my thanks go to Stan Kroenke, for his continued support and guidance,
and my fellow directors, our management team and entire staff for all their
hard work and dedication. I would also like to recognise publicly the support
from our commercial partners who make such important contributions both
financially and in terms of helping build the Club's name around the world.
We look forward with confidence. The Club is progressing across every aspect of
its activities and we are optimistic of our future prospects.
Sir Chips Keswick
Chairman
30 September 2016
Arsenal Holdings plc
Chief Executive's Report
This annual update gives me a chance to pause and reflect on the progress we
have made on and off the pitch in recent times.
When I arrived at this great club in 2009 we were in a transitionary position.
We had made the move from our old Highbury home to Emirates Stadium a few years
earlier. Momentous though that was, it was clear that this was really only the
first step in a change in scale as we aspired to establish ourselves fully as
one of the leading clubs in Europe, competing both on and off the field with
the biggest clubs in the world.
At the same time the football landscape was developing dramatically, with
unprecedented levels of transfer and salary spending from some of our closest
rivals at the top of the Premier League and in Europe. The new stadium brought
increased revenue and expectation; but also a continuing need to adhere to the
principles of financial responsibility which had given us both the means and
market credibility to make the move from Highbury possible in the first place.
It was clear that resting on our laurels during this period would have seen us
left behind and so we recommitted again to moving the club forward.
During the subsequent years we have worked tirelessly to build and develop the
Club both on and off the field, across every aspect of its operations. Our main
focus will always be on having the best possible players for the Arsenal first
team but it is also vital to have first class infrastructure and support
functions around the team and across the wider Group to underpin that and to
make it sustainable over the longer term. In some areas all that has been
required is a fine tuning of our already high standards, in others we have had
to build capability from scratch. We have made substantial investments across
the Club in areas such as our commercial and support functions, analytics,
scouting, academy, medical and fitness support, as well as in our training
ground facilities. In elite sport, playing in the most competitive league in
the world, the margins between winning and losing are measured by fractions and
everything we do is focused on moving us closer to the success we all want for
the Club.
Thanks to huge efforts by everyone across the Club we have pushed the club
forward but there is more to do. Finishing the Premier League in the top four
19 years in a row is a sign of remarkable consistency but that is not enough
for us. We all want to win major trophies and that is what the hard work is
about.
We now have the strongest squad we have had for many seasons. This has taken
time and effort to construct and considerable investment. In the five seasons
since Stan Kroenke became our majority shareholder we have invested some £350
million in transfer fees. This is coupled with an increase in our wage bill
from £124 million to £195 million in the same period.
Our transfer policy has a simple and clear focus - to sign players who can add
quality to our squad either immediately or in the medium term. I believe the
players we have added this summer will deliver against that objective and help
us move closer to our ambition of winning the Premier League. This summer we
are delighted to have added Granit Xhaka, Shkodran Mustafi, Rob Holding and
Lucas Perez to our first team squad.
Equally importantly we have continued to make significant investments to ensure
we continue to sign talented young prospects and to bring young players through
to the first team.
Last season saw Alex Iwobi, a young man who has been with our Academy since the
age of eight, break into our first team squad and make an immediate impact. The
sight of him playing and shining against Barcelona in the Nou Camp will remain
one of my highlights of the season. To see a home grown talent performing at
the elite level is testimony to all the hours of hard work by Alex, his family
and the coaches and staff at Hale End. It is also testimony to our policy of
investing in young talent and the confidence our manager has to give our young
players the chance to succeed at the highest levels.
With continuing market escalation in transfer fees, it is vitally important
that we continue to find and develop talent. In recent seasons, Alex, Hector
Bellerin and Francis Coquelin have all broken into the first team and I am
confident we will have more players coming through at our Academy. This remains
a key part of our philosophy moving forwards and to that end we have further
extended our scouting network and opened more development centres around
London. We have also continued to invest significantly in acquiring top young
talent and this summer we added Takuma Asano and Kelechi Nwakali both of whom
we believe have potential for the future.
Work continues on the transformation of our Hale End Academy. This has involved
a complete redevelopment of the site to create a state of the art environment
for our players of the future. We are also redeveloping our training centre at
London Colney. These investments are substantial and will create an
outstanding environment for our players to train and develop.
That investment in world-class facilities has been coupled with the recruitment
of expert staff. Within our football operation we have welcomed 27 new coaches,
analysts, fitness experts and support staff in the last year. This is all part
of our relentless growth and transformation across the club and continuing
ambition to keep us at the top of the game and make our fans proud.
The Arsenal Ladies
The Arsenal Ladies are an important part of our club. We were pioneers in the
women's game, setting up the team in 1987, and we have had unparalleled success
in the intervening years. We are delighted that the women's game has developed
significantly in recent years with the birth of the Women's Super League and
increased investment from a number of competitor clubs. We are determined to
respond to the increased competition. This season has seen the Arsenal Ladies
go full-time and move into bespoke new facilities at our London Colney training
centre.
Last season was capped by a thrilling victory over Chelsea in the Women's FA
Cup Final. More than 30,000 fans were at Wembley as we won the trophy for a
14th time. It was a fantastic day for our club and one of the highlights of the
season.
I have no doubt that women's football will continue to grow in popularity and
Arsenal Ladies will remain a leading force at the top of the game.
Business update
The financial results for the year, which are covered in more detail in the
Financial Review section, show our turnover moved in excess of £350 million,
driven by our football revenue increasing by some £21 million. This was as a
result of having more games shown on television plus an increased share of
prize money by virtue of our runners-up finish in the League and the start of
the new Champions League broadcasting cycle. Our revenue from Commercial
operations grew by a further £3.7 million with the key area of secondary
commercial partnerships growing by some 40%.
Commercial Partnerships
We now have commercial partnerships in North America, South America, Europe,
Africa, Asia and Australasia. This demonstrates the worldwide interest from
organisations to partner with Arsenal, as well as the global capability of our
commercial operation to source and secure these partnership deals.
Over the course of this year new partnerships have been agreed with iRENA,
Santa Rita, Star Lager (Nigerian Breweries), 12Bet and Tempobet and we have
renewed our deals with Betfair and Markets.com. This means that we currently
have 30 partnerships. We continue to have a strong pipeline of potential
partnerships to further enhance our commercial revenues.
Retail
Our partnership with PUMA continues to develop and this summer saw us launch
new away and third kits at a star-studded event in Los Angeles attended by
Arsenal fans. We continue to build our e-commerce and retail presence
internationally to make it easier for supporters to buy merchandise from us
wherever they live. Closer to home, our Finsbury Park store has undergone a
refit while our Emirates Stadium tours attracted more than 220,000 visitors
last year from all around the world. Many of them are now also visiting the
Arsenal Museum which has undergone a modern facelift.
Arsenal Media Group
Our media group creates the platforms for us to drive strong reach and
engagement with supporters around the world through digital and social media
channels. We have one of the biggest social media followings in sport. By the
year end we had 36.3 million Facebook followers and 7.5 million on Twitter, and
these figures are growing daily. Our YouTube, Instagram, and Sina Weibo (China)
channels also continue to thrive. We launched on Snapchat earlier in the year
and this is working well in terms of reaching hundreds of thousands of younger
fans.
Ticketing
We announced earlier in the year we will be keeping general admission ticket
prices flat for both 2016/17 and 2017/18 seasons. This means that general
admission season ticket prices will have been held for 9 of the 12 seasons at
Emirates Stadium, with inflation-only increases in the three non-static years.
Thanks to the categorisation of matches, we also offer 43,000 tickets across
the season at £26 to watch top Premier League football in our world class
London stadium. In addition, some 14,000 £10 tickets are available per season
to 12-16 year olds within the Young Guns Enclosure and there are 26,000 tickets
priced as low as £10 for each potential home League Cup fixture.
Our away support is fantastic and we have been strong supporters of the
initiative to reduce the cost of away games. We went further than the £30 cap
agreed by the Premier League, ensuring our fans will not have to pay more than
£26 to attend our away Premier League matches. We also continue to provide
subsidised travel to games when public transport is difficult due to match
schedules.
Ticket Exchange and Ticket Transfer have been further enhanced, making it
easier for season ticket holders unable to attend matches to sell or transfer
their seats to other Arsenal supporters. Last season more than 85,000 tickets
were processed through these platforms. For the 2016/17 season we have
introduced a new cash back service, making it quicker for fans to get their
money back after selling tickets through the Exchange.
Pre-season 2016/17
Our pre-season schedule started with a short trip to Lens in France. This was
followed by a highly successful visit to the United States to play in the MLS
All-Star match in San Jose. We then travelled to Los Angeles for a game against
the Mexican side Chivas Guadalajara. We received a fantastic reception from our
US fans. On a personal note it was great to meet up with many of my old
colleagues from Major League Soccer. The value of the US broadcast rights sold
by the Premier League increased significantly for the new cycle and this
reflects ever growing support for our game in the States. I am sure it will
not be long before we play there again.
Due to player availability issues, driven by the European Championships, and
our own major pitch renovation at Emirates Stadium, we were unable to hold our
annual Emirates Cup competition and so the week before the season began we
headed to Scandinavia for games in Norway and Sweden. This was a great
opportunity for our passionate Scandinavian fans to see us in action and we
came back following victories over Viking FK and Manchester City. We look
forward to welcoming back the Emirates Cup to our pre-season schedule next
year.
Arsenal Foundation and Arsenal in the Community
We recognise that Arsenal can make a genuine difference to people's lives and
our commitment to the local and wider community remains a central part of what
we stand for as a football club.
Earlier this year the Arsenal Foundation and Save the Children combined to
build football pitches in camps for internally displaced people in Iraq, giving
boys and girls fleeing war a safe place to play and the chance to be children
again. Arsenal Ladies captain Alex Scott visited the camp in March and found it
a moving and inspirational experience. I am delighted that, thanks to the
recent Legends match here at Emirates Stadium, The Arsenal Foundation is
dedicating £1 million to support similar football projects in Jordan and
Somalia, as well as nearer to home in North London. We have also given our
support to a range of local charitable causes during the year.
Arsenal in the Community's 'Arsenal Hub' has been open for more than a year
now, and is getting busier all the time. We now welcome around 1,000
individuals to the centre every week for sports and education activities. As
ever, our community team is working hard across the local area to provide
support and guidance to young people who need it most.
Thanks to the generous donations from our supporters, players, manager and
partners, I am proud to say the Arsenal Foundation continues to go from
strength to strength.
Looking ahead
We are in a strong position to continue moving forward at every level of the
club. On the pitch we have an outstanding squad. Off the pitch we have
developed our infrastructure across all aspects of our operations to ensure we
have the right assets and skills to progress.
I am confident this progress, coupled with strong underlying values, will bring
the success we all seek. Our ultimate ambition is clear: to win major trophies
and make Arsenal fans at home and around the world proud of this great club.
Proud of our values, proud of the way we act and proud of our team.
Thank you for your support.
I E Gazidis
Chief Executive Officer
30 September 2016
Arsenal Holdings plc
Financial Review
The Group recorded a profit before tax for the 2015/16 year of £2.9 million as
compared to a profit of £18.2 million (as restated) in the prior year.
The principal factors influencing this result were:
* An increase of £15.8 million in revenue from broadcasting as a consequence
of higher Champions League distributions (in the first year of a new three
year UEFA revenue cycle), a record level of domestic live coverage for
Premier League matches involving the Club and the merit award associated
with our second place Premier League finish;
* Further investment into our playing resources leading to a combined
increase of £7.9 million in our wage bill and player amortisation costs;
* Significantly lower profits from the sale of player registrations at £2.0
million (2015 - £28.9 million);
* Reduced activity in the Group's property development business, contributing
only £2.0 million of pre-tax profits as against £13.4 million in the prior
year; and
* Less volatility in the market value of the Group's interest rate swaps
(which are now accounted for under the rules of FRS 102 - see below) with a
consequent reduction in net finance charges (as restated) of £5.8 million.
2016 2015
(restated)
£m £m
Group turnover 353.5 344.5
Operating profit before amortisation, 84.0 77.2
depreciation and player trading
Player trading (see table below) (54.0) (25.6)
Amortisation of goodwill and (14.7) (15.0)
depreciation
Joint venture 1.0 0.8
Net finance charges (13.4) (19.2)
Profit before tax 2.9 18.2
Player Trading
Player trading consists of the profit from the sale of player registrations,
the amortisation charge, including any impairment, on the cost of player
registrations and fees charged for player loans.
2016 2015
£m £m
Profit on disposal of player 2.0 28.9
registrations
Amortisation of player registrations (59.2) (54.4)
Impairment of player registrations - (0.9)
Loan fees 3.2 0.8
Total Player Trading (54.0) (25.6)
There were no major sales in the period as the Club retained all of its key
players going into the 2015/16 campaign. A sell on percentage from former
youth player, Benik Afobe's transfer to Bournemouth was the main element of
transfer profits of £2.0 million. Improved player retention is a direct
consequence of the Club's improved financial position over the last five years
with a clear trend away from transfer profits as an essential component of the
profit and loss account.
The increased amortisation charge is a direct result of continued investment
into the Club's playing resources at all levels. The acquisitions of Petr Cech,
Mohamed Elneny and the extension of contract terms for certain existing players
were the main components within £35.4 million of additions to the cost of
player registrations.
The amortisation charge, being the mechanism by which the cost of player
acquisitions is expensed to profit and loss over the term of a player's
contract, provides a direct indication of the level of underlying investment in
transfers and again the trend over the last five years is progressive.
In cash terms the impact of this year's acquisitions, together with instalments
due on those prior year acquisitions payable on deferred terms, was partially
offset by the collection of receivables on player sales (both current and
previous) and by the credit terms agreed with the vendor clubs. For the second
year running the net cash outflow on transfers established a new record level
for the Club of £54.2 million (2015 - £46.2 million). With the level of
transfer activity undertaken during this summer it is virtually certain that
these figures will be eclipsed in the 2016/17 accounts.
Cash position
At the balance sheet date, the Group's total cash and bank balances amounted to
£226.5 million (2015 - £228.2 million), inclusive of debt service reserve
balances of £35.4 million (2015 - £35.0 million). The Group's overall net debt
stood at £6.1 million (2015 - £10.5 million (as restated)).
Proper consideration of the Group's cash balance must include allowance for the
payments for the aforementioned transfers, as follows:
2016 2015
£m £m
Bank balance excluding debt service 191.1 193.1
Net balance payable on transfers (42.5) (65.6)
148.6 127.5
In addition, our year end bank balance includes advance receipts, of primary
sponsorship and season ticket sales, which represent working capital for the
2016/17 season. These advance receipts amounted to £100.6 million (2015 - £
102.4 million).
Football Segment
2016 2015
(restated)
£m £m
Turnover 350.6 329.3
Operating profit before depreciation 82.2 64.4
and player trading
Player trading (54.0) (25.6)
Profit before tax 0.9 4.8
There were 27 home fixtures (19 Barclays Premier League, four UEFA Champions
League and four FA Cup), the same number as in the prior year, with an average
tickets sold per game of 59,834 (2015 - 59,930). The mix of games (one
Champions League game less) and no involvement in the FA Cup semi-finals meant
that gate and match day revenue fell slightly to £99.9 million (2015 - £100.4
million).
Broadcasting revenues increased to £140.6 million (2015 - £124.8 million) for
the reasons referred to at the start of this commentary. Our League form meant
we attracted 27 live Premier League game facility fees (2015 - 25). Looking
ahead the Premier League broadcasting revenues will be at a significant uplift
for the three seasons commencing 2016/17 and Champions League revenues for 2016
/17 will be boosted by our 30% share of the first market pool (following
Premier League second place) and by a stronger Euro exchange rate.
Combined commercial and retail revenues for the year rose to £106.9 million
(2015 - £103.3 million). This is a lower level of growth than that reported in
the two previous years but this is not unexpected, given that both the primary
partnership deals, with Emirates and Puma, are effectively mid-term.
Encouragingly secondary partnership revenues rose, in a competitive
marketplace, by 39.6% to £17.1 million.
Our payroll was the largest and most important area of cost. Wage costs for the
year rose to £195.4 million (2015 - £192.3 million (as restated)), which was
mainly attributable to increases in the cost of our football playing and
support staff. As previously reported the wage cost for 2014/15 was inflated by
two trigger events for Champions League qualification bonuses. There was a
single trigger event in 2015/16.
The ratio of total wage bill to football revenues was reduced to 55.7% (2015 -
58.4%). We disclose this ratio as a benchmark which is widely used in the
analysis of football finance although our own monitoring in this area is based
on total player spend, a combination of wages plus transfer expenditure and
related costs, on a rolling three year basis against projections for the
available funds generated over that period by the Group's business activities.
The Club was fully compliant with the Premier League's wage cap / short term
cost control regulations. In light of the strong correlation which exists
between player wage expenditure and on-field success, a progressive wage bill,
where growth is rational and responsible, should be regarded as a positive
outcome.
Other operating costs, which include all the direct and indirect costs and
overheads associated with the Club's football operations and revenues, fell to
£70.2 million (2015 -£72.1 million) and represented 20.0% of football revenues
(2015 - 21.9%).
Property Segment
2016 2015
£m £m
Turnover 2.9 15.2
Operating profit 1.7 13.0
Profit before tax 2.0 13.3
There was limited activity in the Group's property business, with the only
transactions of note being recognition of the final instalment of the
Queensland Road overage payment, consequent to the developer's sale of the
remaining units, and the sale of our last flat at Highbury Square following the
expiry of a tenancy on the unit. The operating profit from property was £1.7
million (2015 - £13.0 million).
Of the two remaining development sites, we have carried out some preliminary
construction works at Holloway Road whilst progressing the various complex
negotiations and agreements which need to be concluded before a sale can be
finalised. Unlocking the future sale value of the other development site, at
Hornsey Road, requires viable planning consent and our discussions with the
local authority continue.
Profit after Tax
Overall there is a tax charge of £1.2 million (2015 - £3.4 million (as
restated)) on the pre-tax result for the period. This meant that the retained
profit for the year was £1.6 million (2015 - £14.8 million (as restated)).
The tax deductibility of the amortisation charge on player registrations is
partially restricted as a result of previous roll-over reliefs claimed on
player sales. This means that our taxable profit is higher than our accounts
pre-tax profit and this resulted in a corporation tax charge for the year of £
5.6 million (2015 - £6.3 million). During the year the Group paid UK
corporation tax of £8.3 million being the balance of the 2014/15 charge and due
instalments on account of the 2015/16 liability.
The corporation tax charge has been partially offset by a deferred tax credit
of £4.4 million (2015 - credit of £2.9 million (as restated)). This credit
reflects the downward revaluation of the Group's deferred tax liabilities in
light of the lower future rates of corporation tax enacted by the government
and expected to apply when the underlying tax deferrals unwind.
FRS 102
Throughout this commentary and the financial statements you will see various
references to the figures for the prior year being restated. This is because
2015/16 is the first reporting period where our results have been compiled
under the newly introduced Financial Reporting Standard 102 (FRS 102). As is
normal on adoption of a new set of accounting rules, the comparative numbers
have been restated in order to maintain comparability. The impact on the
current period is relatively minor - pre-tax profits would have been some £1.0
million higher under the previous UK accounting rules.
The most significant change on adoption of FRS 102 is that the interest rate
swap, used to fix the interest rate on our floating rate stadium finance bonds,
has to be included on the balance sheet at fair value (market value) with
changes in fair value reported in the profit and loss of each period. For the
swap there was a significant increase in negative value last year as the
financial markets anticipated that UK interest rates would remain lower and for
longer than previously expected. As a consequence, net finance costs appear
reduced against the restated comparative period at £13.4 million (2015 - £19.2
million). The volatility introduced by fair value accounting for the swap is
not particularly helpful in understanding our results - in reality, we continue
to pay and account for the underlying stadium bonds (our "mortgage" on the
stadium) at the same fixed interest rate as last year. If the stadium debt
runs to its full maturity, this will continue to be the case. The value of the
swap will vary with market rates; however, at maturity, its fair value will be
zero such that all the negative fair value of £24.4 million accounted for in
this year's balance sheet will have reversed with no cash flow impact.
Outlook
The Club has made significant investments since the year end both in terms of
transfers and wage growth. These investments were determined purely on the
basis of our football requirements but backed by a rational assessment of the
financial impacts. This has always been the way we operate and is the reason
that Arsenal remains in a strong financial position at the start of a new
season
Stuart Wisely
Chief Financial Officer
30 September 2016
Arsenal Holdings plc
Consolidated profit and loss account
For the year ended 31 May 2016
2016 2015
(restated)
Operations Operations
excluding excluding
player Player player Player
trading trading Total trading trading Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Turnover of the group 353,318 3,230 356,548 346,498 805 347,303
including its share of
joint ventures
Share of turnover of joint (3,009) - (3,009) (2,779) - (2,779)
venture
-------- -------- -------- -------- -------- --------
Group turnover 3 350,309 3,230 353,539 343,719 805 344,524
Operating expenses (281,093) (59,257) (340,350) (281,446) (55,365) (336,811)
-------- -------- -------- -------- -------- --------
Operating profit/(loss) 69,216 (56,027) 13,189 62,273 (54,560) 7,713
Share of joint venture 1,004 - 1,004 762 - 762
operating result
Profit on disposal of - 2,047 2,047 - 28,944 28,944
player registrations
-------- -------- -------- -------- -------- --------
Profit/(loss) on ordinary 70,220 (53,980) 16,240 63,035 (25,616) 37,419
activities before net
finance charges
-------- -------- -------- --------
Net finance charges (13,373) (19,227)
-------- --------
Profit on ordinary 2,867 18,192
activities before taxation
Taxation charge (1,218) (3,376)
-------- --------
Profit after taxation 1,649 14,816
retained for the financial
year
-------- --------
Earnings per share
Basic and diluted 4 £26.50 £238.13
-------- --------
Player trading consists primarily of loan fees receivable, the amortisation of
the costs of acquiring player registrations, any impairment charges and profit
on disposal of player registrations. All trading resulted from continuing
operations.
Arsenal Holdings plc
Consolidated balance sheet
At 31 May 2016
2016 2015
(restated)
GBP'000 GBP'000
Fixed assets
Goodwill 666 1,082
Tangible fixed assets 421,059 419,180
Intangible fixed assets 146,005 171,658
Investments 4,977 4,174
---------- ----------
572,707 596,094
Current assets
Stock - development properties 11,148 9,741
Stock - retail merchandise 4,834 4,530
Debtors - due within one year 57,961 74,175
- due after one year 4,404 6,658
Cash and short-term deposits 226,459 228,167
---------- ----------
304,806 323,271
Creditors: amounts falling due within one year (239,945) (275,332)
---------- ----------
Net current assets 64,861 47,939
---------- ----------
Total assets less current liabilities 637,568 644,033
Creditors: amounts falling due after more than one year (265,460) (269,174)
Provisions for liabilities and charges (44,047) (49,548)
---------- ----------
Net assets 328,061 325,311
---------- ----------
Capital and reserves
Called up share capital 62 62
Share premium 29,997 29,997
Merger reserve 26,699 26,699
Hedging reserve - (1,092)
Profit and loss account 271,303 269,645
---------- ----------
Shareholders' funds 328,061 325,311
---------- ----------
Arsenal Holdings plc
Consolidated cash flow statement
For the year ended 31 May 2016
2016 2015
GBP'000 GBP'000
Net cash inflow from operating activities 93,841 102,395
Taxation paid (8,331) (2,206)
Cash flow from investing activities
Interest received 863
746
Proceeds from sale of fixed assets 748 47
Purchase of fixed assets (14,232) (14,302)
Player registrations (54,190) (46,241)
---------- ----------
Net cash flow from investing activities (66,928) (59,633)
---------- ----------
Cash flow from financing activities
Interest paid (12,622) (12,993)
Repayment of debt (7,668) (7,274)
---------- ----------
Net cash flow from financing activities (20,290) (20,267)
---------- ----------
Net (decrease)/increase in cash and cash equivalents in (1,708) 20,289
the year
Cash and cash equivalents at start of year 228,167 207,878
---------- ----------
Cash and cash equivalents at end of year 226,459 228,167
---------- ----------
Reconciliation of operating profit to net cash inflow 2016 2015
from operating activities (restated)
GBP'000 GBP'000
Operating profit 13,189 7,713
Amortisation of player registrations 59,257 54,430
Impairment of player registrations - 935
Amortisation of goodwill 416 416
(Profit)/loss on disposal of tangible fixed assets (72) 273
Depreciation (net of grant amortisation) 14,258 14,618
---------- ----------
Operating cash flow before working capital 87,048 78,385
Decrease/(increase) in stock (1,711) 513
(Increase)/decrease in debtors 9,707 (4,983)
Increase in creditors (1,203) 28,480
---------- ----------
Net cash inflow from operating activities 93,841 102,395
---------- ----------
Analysis of changes in net debt At 1 June Cash At 31 May
2015 Non cash flows 2016
(restated) changes GBP'000 GBP'000
GBP'000
GBP'000
Cash at bank and in hand 108,614 - 9,008 117,622
Cash equivalents 119,553 - (10,716) 108,837
---------- ---------- ---------- ----------
228,167 - (1,708) 226,459
Debt due within one year (bonds) (7,119) (8,106) 7,668 (7,557)
Debt due after more than one year (193,997) 7,556 - (186,441)
(bonds)
Derivative financial instruments (23,736) (675) - (24,411)
Debt due after more than one year (13,808) (389) - (14,197)
(debentures)
---------- ---------- ---------- ----------
Net debt (10,493) (1,614) 5,960 (6,147)
---------- ---------- ---------- ----------
Non cash changes represent GBP550,000 in respect of the amortisation of costs
of raising finance, GBP389,000 in respect of rolled up, unpaid debenture
interest and GBP675,000 in respect of the change in fair value of the Group's
interest rate swaps.
Arsenal Holdings plc
Notes to preliminary results
For the year ended 31 May 2016
1. The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 May 2015 or 2016, but is derived from
those accounts. Statutory accounts for 2015 have been delivered to the
Registrar of Companies and those for 2016 will be delivered following the
company's annual general meeting. The auditor has reported on those accounts;
their reports were unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain statements under
s498(2) or (3) Companies Act 2006.
The accounting policies applied by the Group are as set out in detail in the
Annual Report for the year ended 31 May 2016.
The company has complied with the Guidance note 69.1 of the ISDX Growth Market
- Rules for Issuers throughout the year ended 31 May 2016.
2. Segmental analysis
Class of business:- Football
2016 2015
GBP'000 (restated)
GBP'000
Turnover 350,623 329,337
---------- ----------
Segment operating profit/(loss) 11,537 (5,244)
Share of operating profit of joint venture 1,004 762
Profit on disposal of player registrations 2,047 28,944
Net finance charges (13,705) (19,625)
---------- ----------
Profit on ordinary activities before taxation 883 4,837
---------- ----------
Segment net assets 274,572 273,823
---------- ----------
Class of business:- Property
development
2016 2015
GBP'000 (restated)
GBP'000
Turnover 2,916 15,187
---------- ----------
Segment operating profit 1,652 12,957
Net finance charges 332 398
---------- ----------
Profit on ordinary activities before taxation 1,984 13,355
---------- ----------
Segment net assets 53,489 51,488
---------- ----------
Class of business:- Group
2016 2015
GBP'000 (restated)
GBP'000
Turnover 353,539 344,524
---------- ----------
Segment operating profit 13,189 7,713
Share of operating profit of joint venture 1,004 762
Profit on disposal of player registrations 2,047 28,944
Net finance charges (13,373) (19,227)
---------- ----------
Profit on ordinary activities before taxation 2,867 18,192
---------- ----------
Segment net assets 328,061 325,311
---------- ----------
Operating profit from football before amortisation, depreciation and player
trading amounted to GBP82.2 million (2015 - GBP64.4 million); being segment
operating profit (as above) of GB11.5 million (2015 - loss of GBP5.2 million),
adding back depreciation (net of grant amortisation) of GBP14.3 million (2015 -
GBP14.6 million), amortisation of goodwill of GBP0.4 million (2015 - GBP0.4
million) and operating loss from player trading of GBP56.0 million (2015 -
GBP54.6 million).
3. Turnover
Turnover, all of which originates in the UK, 2016 2015
comprises the following: GBP'000 GBP'000
Gate and other match day revenues 99,907 100,401
Broadcasting 140,579 124,844
Retail and licensing 24,626 24,685
Commercial 82,281 78,602
Property development 2,916 15,187
Player trading 3,230 805
---------- ----------
353,539 344,524
---------- ----------
4. Earnings per share
Earnings per share (basic and diluted) are based on the weighted average number
of ordinary shares of the Company in issue being 62,217 shares (2015 - 62,217
shares).
5. Annual General Meeting
The annual general meeting will be held at Emirates Stadium, London, N7, on
Monday 24 October 2016 at 11.30 am. The full statement of accounts and annual
report will be posted to shareholders on 30 September 2016.
ARSENAL HOLDINGS PLC : - Final Results
September 30, 2016 at 10:31 am EDT
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