Arsenal Football AGM

Yesterday, Arsenal Holdings, parent of Arsenal Football Club held their annual general meeting (AGM) at Emirates Stadium, London. There were news reports about some tense moments and here a full recap of the AGM

Here’s a peek at their latest 67-page annual report (PDF)  for the year ended, 31 May 2017.

For 2017, Arsenal income was £432 million (up from £353M the year before) and this comprised £100 million from match day revenue (26 home games had average ticket tales of 59,886), £198M from broadcasting, £90M from ‘commercial’, £26M from retail and £7M from player trading.

Group profit before tax was £44M in 2017 up from £3M and the tax charge for the year was £9 million up from £1.2M. This was at a tax rate of 19.86% and this will go down to 17% from April 2020.

Arsenal Assets and Achievements in the last 5 years.

Over five years, turnover has gone from £280M to £424M and profit after tax from £4.9 million to £35.2M. Over the same period, net assets have gone from £302M to £363 M and fixed assets are now £618M (up from £572M in 2016)

Operating expenses were £371M including £199 million on staff, £79M on other, expenses and £77M on amortization of players, (the increased amortization charge is a direct result of a record level of investment into the Club’s playing resources). Led by the acquisitions of Granit Xhaka, Shkodran Mustafi and Lucas Perez the Club invested £113.9 million in acquiring new players and to a lesser extent extending the contracts of certain existing players, for example Hector Bellerin).

Arsenal staff payments totaled £199M in 2017 to 695 employees who comprised 75 players, 117 training staff (the development of our own players through our academy remains a priority for our football club), 395 administration staff and 112 ground staff.

In 2017 Arsenal paid £111M for players compared to £66M the year before and received £9M (compared to £12M in 2016). The Club was fully compliant with the Premier League’s wage cap/short-term cost control regulations – The ratio of total wage bill to football revenues was reduced to 47.2% (2016 – 55.7%).

Arsenal directors earned £25,000 per year, but the total payment to directors was £3M with I. Gazidis (CEO – £2.6 million) and K. J. Friar (Club Managing Director – £664,000) earning the bulk, as one director, Lord Harris of Peckham, waived his director’s fee and donated it to charity. The accounts were audited by Deloitte who also earned £25,000 for this report.

The report lists highlight of the year;  how they did in tournaments, a win percentage of 63% (up from 52%,) and names individual players, goal scorers, and some transfers (we secured Sead Kolasinac and Alexandre Lacazette, our two primary targets for this transfer window)

Risks: These include the adverse impact of competing in the UEFA Europa League (they missed out on the 2017/18 Champion league), which is forecast to be £20 million. The full financial impact will depend on a number of factors including the actual progress made in the competition, as this impacts both performance and market pool distributions from UEFA. The Club has previously fully self-insured against a season’s participation in the UEFA Europa League within its cash reserves. Another risk highlighted in the annual report is from BREXIT the Group is monitoring the impact of the UK’s decision to leave the European Union. This weaker pound against the Euro has already made it more costly for them to get players from the European Union, but that the greatest risk is from an economic downtown in Britain which will affect their revenue from broadcasting and sponsorships.

Finances: Arsenal has approximately £200 million of debt most of which is long-term and which mature in over 5 years. For 2017, the fixed bonds were at 5.8% and the floating ones at 7.0%. As part of its bond covenants, Arsenal has to maintain a certain amount of cash in the bank – and had £103 million in 2017 (compared to £117 million in 2016). They owe £47 million from recent player transfers. Finance charges in the year were £14M, which included bond repayments of £11M. Arsenal has exposure to the Euro and the US dollar on currencies and uses interest rate swaps for its bonds.

Subsidiaries & Investments: The Arsenal group has about 20 subsidiaries in which they own 100% of and which are used to manage areas like property development, retail operations, ladies football, stadium operations, and data management. Arsenal has also invested £20 million in a company that runs the club’s portal – Arsenal.com has 25 million unique visits a year; the club has 10 million Twitter followers with 9.6 million others on Instagram.

Partnerships: Their main partnerships are with Puma and Emirates. During the year, there was an increase in commercial revenues of £10.3 million, driven primarily by secondary partnerships. There’s no mention of deals in Kenya, which may include Sportpesa and Wadi Degla.

Edit: On November 17, Arsenal welcomed WorldRemit as its first-ever official online money transfer partner. The partnership will support WorldRemit’s growth ambitions by helping them reach Arsenal’s 74 million followers on their official social media channels and 185 supporters’ clubs worldwide.

For Investors:

  • Over a five-year period, earnings per share have gone from £78 to £567 per share. There are 62,217 shares issued.
  • The ultimate parent of Arsenal is KSE UK (which owns 67.05%) which is wholly-owned and controlled by E.S. Kroenke.
  • The directors do not recommend the payment of a dividend for the year (2016 – £Nil).
  • See this on buying shares in Arsenal football club.

Zenith Money Market Fund

The initial public offering of the Zenith Money Market Fund closes today.

Here’s a peek at the prospectus from which comes from asset management wing of Zenith, Nigeria’s biggest bank by revenue and assets. Others in the top ten would include FBN Holdings, United Bank for Africa (UBA) Access Bank, Guaranty Trust Bank, Diamond Bank, Ecobank Nigeria, Fidelity Bank, Union Bank and Skye Bank

  • It was to run from September 25 to October 13 – (but seems to have been extended  October 27)
  • The offer aims to raise 1 billion Naira (approx. 295 million Kenya shillings) and the minimum investment to join is 10,000 Naira (approx. $28 or Kshs 2,940)
  • The fund manager Zenith Assets Management also managers other funds – Zenith Equity Fund, Zenith Ethical Fund, and Zenith Income Fund.
  • Zenith Managers has 298 million Naira in assets (down from 352 million) in 2015 and 857 million in 2013. They had a profit of 20 million Naira in 2016 (down from 67 million in 2015) as personnel cost doubled in 2016
  • It is an open-ended fund in which the fund manager will own 5% and an investment committee will advise and guide the Fund Manager on investment decisions.
  • The asset allocation of the fund will be treasury bills and short-term government securities (25-100%), and other money market securities (10-75%)
  • The fund trustee is Vetiva Trustees, custodian is Stanbic IBTC Bank, and auditors are
    KPMG.
  • For the issue, costs are estimated to be Naira 20.2 million (about 2%). Rating agency is Agusto & Co and Reporting accountants are Pro Edge Partners
  • The fund will attract an annual 1% management fee.
  • For the money market fund, Zenith projects to have assets of 1.5 billion Naira at the end of 2017, and 3.9 billion in 2019 and on to 12 billon in 2021.

Also see

UFAA: Snooze and Lose Your Investments: Part III

Kenya’s Unclaimed Financial Assets Authority (UFAA) is reminding companies that there is a  deadline of November 1 to surrender all unclaimed financial assets to the authority, and that failure to remit them will attract a penalty of 1% above prime rate per month per annum.

Earlier, there was a report that as at August 8.73 billion worth of assets had been surrounded, but that the UFAA was having difficulty finding the owners. 

An asset will be declared unclaimed where one or more of the following requirements are met:

  • The records of the holder do not reflect the identity of the person entitled to the assets;
  • The holder has not previously paid or delivered the assets to the apparent owner or other person entitled to the assets;
  • The last known address of the apparent owner is in a country that does not provide by law for passage of property to the State where there is no owner or is not applicable to the assets and the holder is a permanent resident in Kenya.

Some unclaimed assets include items left in safe deposit boxes (after two years), unclaimed salary (after one year), ownership interest, dividends (3 years) and deposits after utilities (like Kenya Power after 2 years). Some unclaimed assets are created by red tape by stubborn custodians who have made it difficult for people or companies to rightfully claim their own assets.

 

Bungoma Integrated Industrial Project

The Bungoma Integrated Industrial Project (BIIP) blueprint plan by the Stevenson Group of Washington DC has appeared as a full-page advertisement in the Kenyan newspapers inviting local firms to indicate interest in participating in a mega-project that encompasses affordable housing, agribusiness, industry, dams, airports etc.

 The BIIP will be done with all the counties along the 286 kilometers of River Nzoia. The 1.5 million population Bungoma county is mainly a farming area but is also known for being the home of the Panpaper Mills, an industrial plant at Webuye town that has been rehabilitated several times by successive governments.

The BIIP projects will be implemented by Shelter Solutions, but the request is too broad, and perhaps needs to be broken to different sectors. It requires firms who should all have experience handling projects of $100 million to apply by a deadline of November 1 in writing.

Future of Financial Services in Africa and the Middle East

Technology will continue to offer great opportunities for millions of unbanked people including groups of women, Muslims and governments in Africa, Middle East and South Asia (MEASA) and new companies who design financial services in these space.

These are the findings from a report by the Economist Intelligence Unit that was sponsored by the Dubai International Finance Centre which highlights that:

  • Findings Gaps in financial services present an opportunity for financial companies—both traditional and non- traditional players.
  • Overcoming a strong preference for cash in the MEASA region will be imperative to move towards a cashless economy
  • Blockchain has the potential to change the financial architecture in MEASA, particularly for banking.
  • New business models are being developed to reach the “missing middle” of retail investors and medium-sized businesses.
  • In Islamic finance, the approach is shifting from “sharia-compliant” to “sharia-based”
  • Governments and regulators have a crucial mandate to drive financial innovation.

It notes that there is a prevalence to use cash in the three continents (to receive wages, pay school fees and for utilities etc.) and that current regulations which require the use of ID cards are a barrier for women who need ID cards and other documents to receive these services.

The 3 billion people on the three continents will be a source of demand and supply for better financial services, and governments have a role, regulators should balance prudence with innovation, and financial service providers should collaborate for everyone to benefit.

There are opportunities for wealth and private equity funds and individuals (through crowd-funding) to support the growth of new players to take on financial sectors such as insurance, whose levels of penetration can be increased through the mobile phone as has been seen for banking and Islamic financing, by promoting sharia-based products, more than ‘sharia-compliant’ ones. Technology has the ability to address financial exclusion and scale services to millions while reducing costs and creating new revenue models; this can be through smart data to improve credit scoring models and the use of bitcoin to replace money transfers (with banks and currency conversions to international dollars).