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
£m |
2015
(restated)
£m |
Group turnover |
353.5 |
344.5 |
Operating profit before
amortisation, depreciation and player trading |
84.0 |
77.2 |
Player trading (see table
below) |
(54.0) |
(25.6) |
Amortisation of goodwill and
depreciation |
(14.7) |
(15.0) |
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
£m |
2015
£m |
Profit on disposal of player
registrations |
2.0 |
28.9 |
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
£m |
2015
£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
£m |
2015
(restated)
£m |
Turnover |
350.6 |
329.3 |
Operating profit before depreciation
and player trading |
82.2 |
64.4 |
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
£m |
2015
£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) |
|
Note |
Operations excluding
player trading
GBP’000 |
Player trading
GBP’000 |
Total
GBP’000 |
Operations excluding
player trading
GBP’000 |
Player trading
GBP’000 |
Total
GBP’000 |
|
|
|
|
|
|
|
|
Turnover of the group including
its share of joint ventures |
|
353,318 |
3,230 |
356,548 |
346,498 |
805 |
347,303 |
Share of turnover of joint
venture |
|
(3,009) |
- |
(3,009) |
(2,779) |
- |
(2,779) |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
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
operating result |
|
1,004 |
- |
1,004 |
762 |
- |
762 |
Profit on disposal of player
registrations |
|
- |
2,047 |
2,047 |
- |
28,944 |
28,944 |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
Profit/(loss) on ordinary
activities before net finance charges |
|
70,220 |
(53,980) |
16,240 |
63,035 |
(25,616) |
37,419 |
|
|
-------- |
-------- |
|
-------- |
-------- |
|
Net finance charges |
|
|
|
(13,373) |
|
|
(19,227) |
|
|
|
|
-------- |
|
|
-------- |
Profit on ordinary activities
before taxation |
|
|
|
2,867 |
|
|
18,192 |
|
|
|
|
|
|
|
|
Taxation charge |
|
|
|
(1,218) |
|
|
(3,376) |
|
|
|
|
-------- |
|
|
-------- |
Profit after taxation retained
for the financial year |
|
|
|
1,649 |
|
|
14,816 |
|
|
|
|
-------- |
|
|
-------- |
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
GBP’000 |
|
2015
(restated)
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
GBP’000 |
|
2015
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 |
746 |
|
863 |
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 the
year |
(1,708) |
|
20,289 |
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 from
operating activities |
2016 |
|
2015
(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
2015
(restated)
GBP’000 |
|
Non cash changes
GBP’000 |
|
Cash
flows
GBP’000 |
|
At 31 May
2016
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 (bonds) |
(193,997) |
|
7,556 |
|
- |
|
(186,441) |
Derivative financial
instruments |
(23,736) |
|
(675) |
|
- |
|
(24,411) |
Debt due after more
than one year (debentures) |
(13,808) |
|
(389) |
|
- |
|
(14,197) |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
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
GBP’000 |
|
2015
(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
GBP’000 |
|
2015
(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
GBP’000 |
|
2015
(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, comprises the following: |
2016
GBP’000 |
|
2015
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.