Arsenal Holdings Plc – Interim Results/Potters Away

Arsenal Holding’s plc’s interim accounts to 30 November 2009 were published to the PLUS Market on which our shares are traded today (Fri 26 February 2010).
No big surprises, but there’s some good news. Profits continue to be generated by the football side of £25.8 million. A lot of this is accounted for by the transfers of Emmanuel Adebayor and Kolo Touré however. The players’ pay bill continues to explode with football operating costs up over eleven percent to £101.419 million over the same six month period last financial year. Most of this will be new contracts for current players. We can expect a further leap as the club re-negotiates with players to protect their net income from the coming increase in the top-earners’ rate of income tax in April this year.
We’re reaching the prudent outer limit of our pay bill at the moment, following a massive expansion in recent years. We can’t afford to push it much higher unless we have a big, big increase in income. If we’re going to find money for big transfer fees and player salaries we’re going to have to either cut the number of players or the lesser players are going to have to be paid significantly less than they are at the moment.
There’s good news on the property front with the outstanding construction loan for the old ground down to £12.9 million. 524 of the 655 flats have now been sold. By the end of this year we should have completely repaid this loan. Sales after the remaining balance of the loan has been repaid will all be profit for us – I’d guess we can look at £25-30 million coming in as a one-off injection of extra cash. I doubt we’re going to have enough to repay the £50 million floating rate note however without financially starving ourselves for a few more seasons (we refinanced after the building of the Grove with £210 million in fixed rate repayment loans and the £50 million “floating rate note”, which can be repaid at any time without early repayment penalty).
The forthcoming UEFA financial fair play regulations to be launched this spring should provide some respite. Clubs all over the continent are scrambling to get their balance sheets in order. About time too I say. This is why Roman Abramovich has converted his loans to Chelsea into shares. Share capital (or equity as its known) is treated differently in company accounts than loans. Shareholders are the very last in the queue for repayment in the event of a company going bust. Shares don’t show as loans on the books as a shareholder can’t demand their money back on a fixed timescale as a bank or other financial institution making a conventional repayment loan can.
The mad, bad state of football finances is graphically demonstrated by news today that Portsmouth has gone into administration ahead of a court hearing on a winding up petition for unpaid Value Added Tax, Pay As You Earn income tax and National Insurance Contributions served on the club by Her Majesty’s Revenue & Customs. The club’s debts are estimated at around £70 million. Madness. Absolute madness. At least we’re a very long way from that sort of mess. Premier League rules require a nine point deduction penalty for any club entering administration. That will all but certainly doom Pompey to relegation. They were in the drop-zone before administration.
On the field, we travel to the Potteries tomorrow to take on Stoke City in a vital League game. We’ll be without Andrey Arshavin, William Gallas and Abou Diaby due to our continuing injury plague. We need to be strong tomorrow. Three points is a real must if we’re to continue any hope of staying in the hunt for the title. Chelsea is at home to Manchester Citeh whose current form has gone off a cliff. I don’t hold out much hope there. United don’t have a League game as they face Aston Villa in the Carling Cup Final on Sunday. Having belted West Ham at home on Tuesday night however, they’re now five points ahead of us so we stay third this weekend no matter what the result tomorrow. Let’s hope that Everton can continue their excellent recent form on their visit to the Lane on Sunday afternoon.
Keep the faith!

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