OUR FINANCES

[Bergkamp-Genius]

Having read a lot of the opinions on here regarding our finances, such as 'we have to sell players to pay the interest on our debt' and other similar nonsense, i thought it was time someone put the actual facts and figures on here so that there is no excuse for anyone to repeat the multitude of crap that they read in the paper or elsewhere about our finances like it might be true.

Hopefully i've covered most of what everyone would like to know.

Full year figures up to May 2008
.

29
ARSENAL HOLDINGS PLC
FINANCIAL STATEMENTS
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 May 2008

......................................................Operations
......................................................excluding
......................................................player..........Player
......................................................trading.........trading..........Total
......................................................£000’s..........£000’s...........£000’s

Turnover of the group including
its share of joint ventures................224,541..........472..............225,013

Share of turnover of joint venture....( 2,043 )...........-...............( 2,043 )

Group turnover................................222,498..........472.............222,970

Operating expenses........................(174,480).....(21,757)........(196,237)

Operating profit/(loss).......................48,018.......(21,285)...........26,733

Share of joint venture operating
result..................................................469...............-...................469

Profit on disposal of player
registrations..........................................-.............26,458...........26,458

Profit on ordinary activities
before finance charges.......................48,487..........5,173............53,660

Net finance charges - ordinary................................................( 16,992 )

Net finance charges - exceptional..................................................-.....

Net finance charges...............................................................( 16,992 )

Profit on ordinary activities
before taxation..........................................................................36,668

Taxation................................................................................( 10,942 )

Profit after taxation retained for
the financial year.......................................................................25,726
.

.

NOTES TO THE ACCOUNTS

For the year ended 31 May 2008

15. Cash at bank and in hand
.............................................................Group..........
.....................................................2008..........2007
....................................................£000’s.........£000’s

Debt service reserve accounts........31,553........32,952
Other accounts..............................61,711........40,905
....................................................93,264........73,857

The Group is required under the terms of its fixed rate bonds 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.
.

This is the 6 months to November 2008, the full year results come out this month.

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 £24.5 million as compared to £20.0 million for the same period last year.

......................................2008.................2007
........................................£m...................£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................(5.
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 £98.4 million (2007 - £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 € / £ conversion of Champions League distributions.

Football operating costs, excluding player trading and depreciation, were also up, to £74.1 million from £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 € 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 £8.0 million (2007 - £8.6 million) including gains from the sale of player registrations of £18.5 million (2007 – £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 £19.7 million (2007 - £19.1 million) and this is clearly a very satisfactory result.

November 2008 Review of Highbury square and Queensland road developments.

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 £58.1 in the first half of the financial year. Despite a further impairment write down of £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 £6.3 million (2007 - £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 £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 £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.
.

[hadareud]

I've read the statement when it came out. It doesn't tell you how much money there is available to spend though as it doesn't include all the information that would enable us to make such a judgement (as a company is not required to release all information).

You'll notice that despite the increased turnover and despite the operating profit of 26 million our debt has actually increased by 20 million.

So while the numbers are certainly good, they don't necessarily tell the whole story.

[Bergkamp-Genius]

Where has it increased by £20m

[Percy Dalton]

Having read a lot of the opinions on here regarding our finances, such as 'we have to sell players to pay the interest on our debt' and other similar nonsense, i thought it was time someone put the actual facts and figures on here so that there is no excuse for anyone to repeat the multitude of crap that they read in the paper or elsewhere about our finances like it might be true.

Hopefully i've covered most of what everyone would like to know.

Full year figures up to May 2008
.

29
ARSENAL HOLDINGS PLC
FINANCIAL STATEMENTS
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 May 2008

......................................................Operations
......................................................excluding
......................................................player..........Player
......................................................trading.........trading..........Total
......................................................£000’s..........£000’s...........£000’s

Turnover of the group including
its share of joint ventures................224,541..........472..............225,013

Share of turnover of joint venture....( 2,043 )...........-...............( 2,043 )

Group turnover................................222,498..........472.............222,970

Operating expenses........................(174,480).....(21,757)........(196,237)

Operating profit/(loss).......................48,018.......(21,285)...........26,733

Share of joint venture operating
result..................................................469...............-...................469

Profit on disposal of player
registrations..........................................-.............26,458...........26,458

Profit on ordinary activities
before finance charges.......................48,487..........5,173............53,660

Net finance charges - ordinary................................................( 16,992 )

Net finance charges - exceptional..................................................-.....

Net finance charges...............................................................( 16,992 )

Profit on ordinary activities
before taxation..........................................................................36,668

Taxation................................................................................( 10,942 )

Profit after taxation retained for
the financial year.......................................................................25,726
.

.

NOTES TO THE ACCOUNTS

For the year ended 31 May 2008

15. Cash at bank and in hand
.............................................................Group..........
.....................................................2008..........2007
....................................................£000’s.........£000’s

Debt service reserve accounts........31,553........32,952
Other accounts..............................61,711........40,905
....................................................93,264........73,857

The Group is required under the terms of its fixed rate bonds 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.
.

This is the 6 months to November 2008, the full year results come out this month.

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 £24.5 million as compared to £20.0 million for the same period last year.

......................................2008.................2007
........................................£m...................£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................(5.
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 £98.4 million (2007 - £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 € / £ conversion of Champions League distributions.

Football operating costs, excluding player trading and depreciation, were also up, to £74.1 million from £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 € 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 £8.0 million (2007 - £8.6 million) including gains from the sale of player registrations of £18.5 million (2007 – £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 £19.7 million (2007 - £19.1 million) and this is clearly a very satisfactory result.

November 2008 Review of Highbury square and Queensland road developments.

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 £58.1 in the first half of the financial year. Despite a further impairment write down of £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 £6.3 million (2007 - £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 £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 £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.
.

Thank you for this!

Now can someone turn this into English and tell me if we can afford a player or two?

[flash gunner]

Ask Boomer

[Boomer]

Thank you for this!

Now can someone turn this into English and tell me if we can afford a player or two?

Ask Boomer

I'm looking at it again now.

I did notice one of the press (broadsheets) said that Arsene has around £15M to spend this summer. That also includes contract renewals.

[JohnGoon]

I'm sure the moneys there given our turnover, it's just a matter of whether Wenger really wants to spend it. If he came out with the Madrid stuff to get the board to splash the cash then we're laughing, but if he did it to shut to fans up and carry on the way things are then we're f*cked

[Boomer]

Okay - it doesn't say alot as hadareud has said. Reason for this is that Arsenal Plc own lots of other companies as part of it's group (Arsenal Holdings etc...) so the money shown can be tied of else where.
The Stadium debt is held in Arsenal Holdings name.

One thing I have noticed is that it looks like we're still having to sell.
With all the increased revenue through gates, wages, TV, competition etc...we only made a profit of £19.7M. That's also taken into account the huge stadium debt/re-payments.
So the transfer of Hleb and the sell-on from Bentley were important.

Obviously this profit will increase after next year as currently we've no sponsor income as this was received up front.
To put it in comparison Man U get/got around £17+ from AIG a season alone that we don't have.

[Skooner]

Never easy to read between the lines on financial issues but it is usually around this sort of time that a Premier League list is released about wage bill and the wage bill is one of things that really annoys me.

Over the last few years we have been on a par with United and some way ahead of Liverpool. Who is getting all this money? Presumably at United when they sign players for a £30m fee they also getting massive contracts. So that suggests we have a number of players on fat contracts.

The only ones that I am aware of that are on £75k per week or more are Gallas, Cesc and Adebayor (previous stats would not include Arshavin). So where is the money going?! It can only mean that players that have a yet to prove themselves to be top class are getting top class wages.

This has to be wrong and part of the reason the club allegedly have much transfer kitty.

[hadareud]

Where has it increased by £20m

14 million for the half year. And the year before they rose from 268.2 million to 318.1. For the half year report they were 332.8, it's safe to assume that they haven't gone down since but still gone up.

[I Hate Hleb]

Guys, there is no need to use the entire quote when responding to someone's post - especially when they are as long as Bergkamp's initial one.

[Bergkamp-Genius]

I didn't post the whole financial review just what i think are the key points and the bits that are more understandable to the majority reading them on here.

For me the main points of interest are.

Firstly. Highbury Square, there seems to be a lot of reference on here to it being the reason for any financial problems people think we have, if you read what i have posted from the financial review and more related detail on the actual full review regarding Highbury Square you will firstly see that the project is as they put it 'ring fenced' from the football clubs finances that means it is essentially an entity unto itself the finances are gathered with the properties themselves as collateral and the sales of the properties will gradually or quickly, depending on how the mortgage and property market picks up clear the finance, they have no negative bearing on the football clubs profits.

If you read the accounts for this year and last year you will see our financing on these projects hit their peak last year and in Novembers half year review it was stated that not only had they reached the point of having covered all costs of development on Highbury Square but they had also began to pay back the financing, so although their predictions on sales didn't go as planned over the last year or so due to the collapse in the property market and the lack of availability in mortgages etc they are now in a position where the income from the project is earmarked for the repayment of the finance, now all they have to do is re negotiate the finance which will no doubt cost a few million but again it will be covered by sales in the development itself.

So the main point to derive from all this is the project is not gonna have any negative bearing on the football income.



Secondly, the profits and the stadium bond payments, i highlighted the gross and net profits and the deducted debt payments on the year end accounts for may 2008 to show that even after all our various expenses and debt payments we are still coming out with £25m in pure profit, not 13m not 15m not nothing and certainly not having to sell players to cover our debt payments, our debt on the stadium isn't getting bigger we paid back £5m on the stadium bond last year plus all the interest payments and this will be the same each year under the current bond agreement.

The half year results up to November show not only increased turnover but also a small increase in profit on the same period last year, so from that i think we can deduce that this years full year gross profits are going to be at least as high as they were last year especially considering our progression to the CL semi and FA semi will bring in a lot more revenue than was brought in from these competitions last year.
So we are going to be looking at £25m plus clear profit again in our accounts up to May 31 2009, thats after everything, wages, debt payments all club expenses.

Lets take the average figure of the 12.5m - 17m estimates of what we paid for AA and call it £15m, this in reality has come out of last years profits because they were not used on anything but topping up our cash at bank, the purchase will probably be on the year end accounts coming out this month so this will on the face of it probably show our net profits to be down this year but lets not forget we didn't touch last years profits at all.

Cash at bank figures, if you look at the cash at bank figures from year end May 2007 and also May 2008 you'll see a rise of around £20m to £93m, the total has reduced in the half yearly to November 2008 figures due to the seasonal aspect of our income, but as the income for the November to May period which is where most of our income comes from is added into that account i would expect that account to show the 93m plus most of our profits this year minus whatever the outlay on AA was, so i would surprised if that account wasn't around the £100m mark in our financial statement coming out at the end of this month. Taking into consideration we have to have a certain amount of cash reserve which year end May 2008 was £31.5m and half year November 2008 was £22.5m in that account the rest is for operational purposes i.e running of the club, buying players etc, so we had at the end of the financial year 2008 £60m over and above our required reserve and i expect this years final figures will show we have even more now.


What can we deduce from all this shite ?

Highbury Square is not going to be a drain on the football club it may not make the money they thought it would or as quick as they thought to help reduce the stadium bond, but it won't drain our profits.

We are making very good profits even after all our repayments our profits are very healthy and if you look at the evidence it's plain to see that those profits have not been used for anything other than sitting in the bank, it's not a coincidence that our profits last year were about 25m and in the same period our cash at bank went up around 20m.

I think we can all understand that the club want to err on the side of caution at the moment so it's not unnatural that they would want some extra cash in reserve in case of any problems in the future with regards our income or profit, but we have anywhere between 50 and 80m more than our minimum requirement sitting in the bank, we have all that money in the bank we cover all our debts and are still highly profitable.

So what sounds more feasible, that our manager through his own principles still admirably but wrongly thinks he should only spend on players what income he gets for selling players, or does anyone still seriously believe that the board have not made money available to AW over the last couple of years.

[Bergkamp-Genius]

Where has it increased by £20m

14 million for the half year. And the year before they rose from 268.2 million to 318.1. For the half year report they were 332.8, it's safe to assume that they haven't gone down since but still gone up.

The rise from 268m to 318m was the final lot of finance for the Highbury Square construction, if you read the review you'll see not only do they not need any more finance for that project they have actually started paying back the loans the only thing they need to do now is restructure the total repayment to finish on a later date than was originally planned due to the property market slowdown. The stadium bonds are also starting to be reduced.

The 14m change you are talking about was down to the seasonal cash flow adjustment, there was a 17m fluctuation in cash flow this combined with a small reduction in the debt figures created the 14m increase in the total debt, that fluctuation will correct itself and more in the second half of the financial year November to May where far more income is brought into the club than the first half of the financial year.

[northbankbren]

29
ARSENAL HOLDINGS PLC
FINANCIAL STATEMENTS
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 May 2008

......................................................Operations
......................................................excluding
......................................................player..........Player
......................................................trading.........trading..........Total
......................................................£000’s..........£000’s...........£000’s

Turnover of the group including
its share of joint ventures................224,541..........472..............225,013

Share of turnover of joint venture....( 2,043 )...........-...............( 2,043 )

Group turnover................................222,498..........472.............222,970

Operating expenses........................(174,480).....(21,757)........(196,237)

Operating profit/(loss).......................48,018.......(21,285)...........26,733

Share of joint venture operating
result..................................................469...............-...................469

Profit on disposal of player
registrations..........................................-.............26,458...........26,458

Profit on ordinary activities
before finance charges.......................48,487..........5,173............53,660

Net finance charges - ordinary................................................( 16,992 )

Net finance charges - exceptional..................................................-.....

Net finance charges...............................................................( 16,992 )

Profit on ordinary activities
before taxation..........................................................................36,668

Taxation................................................................................( 10,942 )

Profit after taxation retained for
the financial year.......................................................................25,726
.

.

NOTES TO THE ACCOUNTS

For the year ended 31 May 2008

15. Cash at bank and in hand
.............................................................Group..........
.....................................................2008..........2007
....................................................£000’s.........£000’s

Debt service reserve accounts........31,553........32,952
Other accounts..............................61,711........40,905
....................................................93,264........73,857

The Group is required under the terms of its fixed rate bonds 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.
.

This is the 6 months to November 2008, the full year results come out this month.

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 £24.5 million as compared to £20.0 million for the same period last year.

......................................2008.................2007
........................................£m...................£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................(5.
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 £98.4 million (2007 - £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 € / £ conversion of Champions League distributions.

Football operating costs, excluding player trading and depreciation, were also up, to £74.1 million from £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 € 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 £8.0 million (2007 - £8.6 million) including gains from the sale of player registrations of £18.5 million (2007 – £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 £19.7 million (2007 - £19.1 million) and this is clearly a very satisfactory result.

November 2008 Review of Highbury square and Queensland road developments.

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 £58.1 in the first half of the financial year. Despite a further impairment write down of £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 £6.3 million (2007 - £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 £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 £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.
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IF YOU DIVIDE THE FINAL FIGURE ABOVE BY 2009 IT =

4TH IN THE LEAGUE.