Analysis of Tottenham Hotspur Financial Statements 2020-21

The way the finances of Tottenham Hotspur FC work is obviously of keen interest to fans, and is the subject of much discussion and speculation. We believe that discussion and speculation needs to be as factually informed as possible, and have urged the Club to be clearer in its explanation of its financial affairs, so that they are more accessible to those without extensive financial expertise. This year’s Club accounts went some way towards providing clarity, but we would still have liked to see more. So we undertook our own exercise, using the financial expertise on our board, and we’re presenting our conclusions here in order to inform debate.

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The release of Tottenham Hotspur’s financial statements for the year ending June 30 2021 make clear the impact of the pandemic on the Club but the underlying message is that if we can return to normality then the Club’s near-term financial position is relatively secure, albeit materially affected by participation, or otherwise, in European competitions.
 
The financial statements incorporate the consolidated accounts of Tottenham Hotspur Limited, which is the parent company for a number of subsidiaries. By number, a majority of these are held within the Club’s property division but in terms of scale these are dwarfed by Tottenham Hotspur Football & Athletic Co. Limited, which runs the football club, and Tottenham Hotspur Stadium Limited, which owns and operates the stadium. The consolidated accounts of THL capture all of these activities (together the “Club”), providing the best overall picture of the financial position of the Tottenham Hotspur group of companies as a whole.
 
This analysis looks at the elements that are likely to be of most interest to supporters of the Club.
 
Profitability
Over the last six years, year-on-year comparison has been complicated by the football team playing i) at a reduced capacity White Hart Lane (WHL) with Champions League (CL) games at Wembley; ii) wholly at Wembley; iii) at Wembley/Tottenham Hotspur Stadium (THS); and iv) wholly at THS. The smoke is now clearing however and the last two seasons have been played wholly at THS – making comparison easier but clearly underlining the impact of the pandemic. Headline numbers for the last three years are as follows.

	June 2021	June 2020	June 2019
Match receipts	£1.9m	£94.5m	£81.7m
UEFA prize money	£23.6m	£51.2m	£94m
TV and Media	£184.4m	£95.2m	£149.9m
Commercial	£152m	£161.5m	£135.2m
Total revenue	£361.9m	£402.4m	£460.8m
Staff costs	£204.9m	£181.2m	£178.6m
Other operating costs	£59.8m	£105.8m	£109.5m
Profit from operations	£97.1m	£115.3m	£172.7m
Player trading costs	£82.9m	£73.7m	£46.2m
Player trading profits	£18.9m	£15.4m	£10.9m
Interest	£36.8m	£43.2m	£25.2m
Profit/loss before tax	-£80.2m	-£67.7m	£87.4m

Calculations in this and subsequent tables may not always add up due to rounding

​The 2019 results underline the financial significance of participation in the Champions League with the run to the final generating £94m in prize money alone. With profits from operations of £173m (a figure arrived at by deducting operating costs - mainly salaries and match day costs) and profit before tax of £87m (further deductions being due to the accounting treatment of transfer activity, stadium depreciation and finance costs) – the 2019 accounts provide the high water mark for the Club’s financial performance before the pandemic struck.
 
In the 2019-20 season the Club ‘only’ reached the Round of 16 of the CL and consequently UEFA prize money almost halved to £51m. This also likely contributed to the reduction in TV and media money (TV revenues are not broken down by TV contract) alongside the postponement of five home Premier League (PL) games beyond the reporting date. Consequently, revenues and profits from operations were approximately each £60m lower than the year before and a profit before tax of £87m was turned into a loss before tax of £68m due to the Club returning to the transfer market and to increased interest payments on the Club’s debt. There was one silver lining however – match receipts totalled £95m, surpassing 2019’s £82m, despite only three quarters of home PL games being played at THS in 2019-20. This illustrates the importance of the new stadium to the Club’s income generation.
 
This is also demonstrated by the 2021 results, when all but three games were behind closed doors and those that weren’t were at significantly reduced capacities. Consequently, match receipts (which also include food and beverage sales on the day) plummeted from £95m to just £2m, while UEFA prize money halved again to £24m due to participation in the Europa League rather than the Champions League. Some compensation was achieved by TV and Media income which was inflated by the delay to the end of the 2019-20 season, and commercial revenues also held up well, showing a reduction of less than £10m caused by the lack of corporate match day hospitality. Daniel Levy did not thank corporate sponsors when announcing the financial results for no reason.
 
The impact of COVID-19 was difficult to itemise for 2020 but in 2021 it was clear: over £100m in lost revenues. A £45m reduction in costs partially mitigated this loss but with players’ wages continuing to rise Profit from Operations fell back to £97m while increased transfer spend resulted in a record net loss of £80m.
 
The comparability of the last two seasons  – the key differences being games played with/without fans and Champions League (CL) vs Europa League (EL) – also allow us to make an educated guess for this season’s financial performance.
 
With the Omicron variant now appearing to be receding, the threat of further stadium closures looks to have passed. In 2019-20, 14 of the 19 home PL games were played in front of crowds, giving total match receipts of £94.5m. Extrapolating that to a 19-game season gives a potential figure of £128m, but the 2019-20 number is inflated by participation in the CL and adjustments should also be made for crowds generally being lower in 2021-22 so far. Consequently, we adjust that £128m number down to £115m to compensate.
 
UEFA prize money however will be substantially down again and, based on football.london’s analysis, the Club will earn c. £8m from participation in the Europa Conference League (ECL), compared to £24m from the Europa League (EL) last season. The downgrading of one of England’s EL spots marks a reduction in UEFA cash flows to English football and, while not a large amount in the context of general UEFA cash transfers to England, it is a material amount to the clubs landing in the ECL that previously would have participated in the EL.
 
For TV and Media, for the sake of simplicity, we have taken the halfway point between 2020’s £95m (nine PL games less than normal) and 2021’s £184m (nine more than normal) giving a figure of £140m.
 
Commercial revenues have grown strongly in recent years and there is scope to grow further in 2021-22. Taking 2020’s £162m as the baseline, 2022 will feature a full year of the Cinch sleeve sponsorship as well as the return to THS of third party events. In addition to the Joshua/Usyk boxing match and the two NFL events that have already taken place, Saracens will play a home match in March and the Rugby League Challenge Cup final will take place at THS in May. There are also two Guns n’ Roses concerts scheduled for early July but it’s not clear whether revenues from these events will be recorded against the 2022 or 2023 financial years. Taken together, we consider that commercial revenues could have the potential to reach the £180m mark.
 
Scepticism is regularly expressed as to whether revenues from third party events such as the NFL games are ploughed back into the Club. The Club’s board has consistently stated that this is the case in meetings with THST and makes the same case in the Directors’ Strategic Report in the financial statements of both the Club and Tottenham Hotspur Stadium Limited, which legally owns the stadium. The external auditors do not audit the information provided in the Strategic Report but do review it to determine consistency with the financial statements which they do audit. The auditors have found no evidence of material misstatements in the Strategic Report.
 
Adding these estimates together gives a total revenue figure of £443m, a number that falls short of the 2019 result when the Club reached the CL final but substantially exceeds the result for 2020 and 2021. To arrive at an operating profit, however, we have to deduct operating costs – and these have been rising.
 
The biggest component of the Club’s cost base is staff costs, and players’ wages in particular. These rose from £179m in 2019 to £205m in 2021. Extrapolating this trend on a broadly linear basis would suggest something in the region of £220-225m. However the true figure will depend on whether the salaries of new players, returning loanees and/or those that have signed improved contracts outweigh the salaries of those that have left the Club. The former include Gollini, Gil, Romero and Royal while the latter include Lamela, Alderweireld, Hart, Sissoko and Aurier. The appointment of Antonio Conte and his team will also be a factor. Unsurprisingly, we have no privileged information on the salaries of these individuals but on balance we suspect that the growth in salary costs will be somewhat checked in 2022 and consequently estimate a figure of £210m for the year. This number does not take into account the Club’s activity in the recently closed January window.
 
The other major cost line is ‘other operating costs’. This is not broken down in the accounts but it is known that a substantial portion of this relates to matchday operating costs, which explains the substantial reduction in 2021. The reopening of the stadium to fans will therefore see these return at least to the levels seen in 2019 and 2020. However, current inflationary pressures in the UK are likely to see these exceeded and consequently we have added an estimate of £120m.

	Estimate, 2022	June 2021	June 2020	June 2019
Match receipts	£115m	£1.9m	£94.5m	£81.7m
UEFA prize money	£8m	£23.6m	£51.2m	£94m
TV and media	£140m	£184.4m	£95.2m	£149.9m
Commercial	£180m	£152m	£161.5m	£135.2m
Total revenue	£443m	£361.9m	£402.4m	£460.7m
Staff costs	£210m	£204.9m	£181.2m	£178.6m
Other operating costs	£120m	£59.8m	£105.8m	£109.5m
Profit from operations	£113m	£97.2m	£115.4m	£167.1m

Subtracting these estimated costs from estimated revenues gives an operating profit of £113m, an improvement on last year and on a par with 2020 (despite the lack of meaningful UEFA prize money) but still significantly short of 2019’s record result.
 
Three key elements that are missing from the above are i) player trading (i.e. the costs of new and previous transfers less the proceeds of any player sales); ii) finance costs and iii) ongoing capital expenditure. Subtracting these will give an indication of the net cash generated in a season that can therefore be reinvested in new player acquisitions (or used to pay down debt).
 
Player Trading
The Profit & Loss Account gives headline numbers for transfer costs and income. However, the accounting rules governing player registrations are not straightforward. Put simply, a club is required to spread the transfer cost of a player over the life of his/her contract so, for instance, a player who is signed for £50m on a five-year contract will require the booking of a cost of £10m for each of those five years. Unfortunately, this does not always follow the cash flows as a selling club will usually require settlement of the transfer fee in a shorter timeframe than that set out by the accounting rules. We therefore need to look at other elements of the financial statements in order to get a better understanding of Tottenham’s recent transfer activity and the cash flow implications for future transfers.

	June 2019	June 2020	June 2021
Staff costs (balance sheet)	£178.6m	£181.2m	£204.9m
Intangible assets (balance sheet)	£124.7m	£180.7m	£204.8m
Player trading (profit & loss account)	£46.2m	£73.7m	£82.9m
Player acquisitions (cash flow statement)	£49.2m	£83.5m	£78.9m
Player sales (cash flow statement)	£46.4m	£24.7m	£23.6m
Net player sales	-£2.7m	-£58.8m	-£55.4m
Short-term player payables (balance sheet)	£33m	£44.7m	£56m
Long-tern player payables (balance sheet)	£54.9m	£94.9m	£113.7m
Total player payables (balance sheet)	£87.9m	£139.6m	£169.7m
Short-term player receivables (balance sheet)	£4.5m	£14.1m	£15m
Long-term player receivables (balance sheet)		£11.7m	£4m
Total player receivables (balance sheet)	£4.5m	£25.7m	£19m
Net player trading account	-£83.4m	-£113.9m	-£150.7m

We have already seen that player salaries have started to rise as the Club has increased its transfer activity in recent seasons. This is also mirrored in the P&L, where the net amount for the amortisation of player contracts minus player sales has increased from £46m in 2019 to £83m in 2021. A much bigger rise is seen in the balance sheet value of the playing squad as a whole (referred to as ‘intangible assets’) which rose from £125m to £205m over the same period. This figure however has to be approached with similar caution as the P&L figure as it reflects the combined outstanding unamortised transfer fees, rather than market value. It does not reflect the value of players that did not command a transfer fee so does not capture players such as Harry Kane, Harry Winks and Oliver Skipp who have come through the academy. By contrast, the current market value of the squad is currently estimated by transfermarkt.co.uk as £580m.
 
In the Cash Flow Statement we can see the actual cash amounts that have been paid and received on transfers for the last three years. Cash spent on transfers has risen from £49m to £79m while cash received for player sales has fallen from £46m to £24m. The net annual spend has consequently increased from £3m to £55m.
 
Moreover, the Balance Sheet also gives details of future payments due (payables) or to be received (receivables) from transfer activity. It splits these into short term (due in less than one year i.e. for 2021 during the course of this season) and long term (due in more than one year). The amount due to be paid by the Club for transfer fees up until 30/06/22 amounts to £56m with a further £114m due thereafter. The corresponding amounts for transfer fees to be received are much smaller - £15m for this season and just £4m in later years. Netting these amounts off gives a figure of £151m due in total.
 
It should be remembered that last summer’s transfer activity is not included in these figures as it occurred after the balance sheet date. According to transfermarkt.co.uk the Club agreed transfer fees for incoming players totalling just short of £60m. Assuming these are paid over a two-year period, that’s £30m cash that the financials will need to support during this season. Offsetting this is the close to £30m to be received from players leaving the Club, halving that outflow to £15m.
 
A further wrinkle is the transfer of Romero, reported at £43m, which has been structured as a loan with an option to buy. This effectively kicks the payment of the transfer fee into next season and beyond.
 
So, the Balance Sheet tells us that there is £56m due to pay on previous years’ transfers this season with £15m due in from previous player sales. There is also an estimated additional £15m to pay from the last window’s activity (plus any activity from the current January window). Before we can estimate a net cash flow position for the year, however, we also need to consider the Club’s financing costs. Fortunately, this is relatively simple.
 
Debt
Debt levels showed a modest rise in 2021, with the main feature being the refinancing of the £175m of the government’s Covid Corporate Financing Facility (“CCFF”) debt, made available to investment-grade-rated businesses to support them during Covid, by a further issue of private bonds in the amount of £250m. The Club no longer owes any money to the Bank of England. The new issue also refinanced £50m of an existing £112m loan from Bank of America, allowing the Club to reduce its exposure to floating interest rates at a time when interest rates are expected to rise.

	June 2019	June 2020	June 2021
Short-term debt	£0.7m	£175.7m	£1.2m
Long-term debt	£657.1m	£655.1m	£852.6m
Total debt	£657.8m	£830.8m	£853.9m
Cash	£123.5m	£226.2m	£147.6m
Net debt	£534.3m	£604.6m	£706.3m
Interest paid	£26m	£14.3m	£18.3m

On a net basis however, which takes into account cash balances, the Club’s debt has risen by just over £100m to £706m from 2020 to 2021. This mirrors the cash cost from the Profit & Loss Account of the stadium being closed in the 2020-21 season. Nevertheless, the Club retains a cash buffer of nearly £150m as at 30/06/21 and has in addition unutilised credit facilities of £55m from HSBC.
 
The new bonds stretch the maturity of the club’s debt portfolio by replacing the CCFF debt, which had an initial maturity of one year but was extended for a further year, with financial instruments with maturities between 2029 and 2051. The Club’s current debt portfolio comprises the following:

Maturity	Debt provider	Amount	Security
2025	Investec	£22m	Training ground
2029	Bank of America	£62m	Tottenham Hotspur Stadium
2029-2050	US investors	£525m	Tottenham Hotspur Stadium
2029-2051	US investors	£250m	Tottenham Hotspur Stadium

All debt, apart from the Investec and Bank of America loans, is on a fixed rate basis, and is priced at a blended 2.7% for the bonds and the BoA loan and 3.5% for the Investec loan. All are repayable on a bullet basis, that is to say in full only at the repayment date (this is comparable to an interest-only mortgage). The bonds have a variety of maturities between 2029 and 2051 but the specific amounts and maturities are not broken down in the accounts other than to say that the average maturity of all bonds plus the BoA loan is 22 years. Early repayment of fixed rate debt (i.e. the bonds) may be subject to financial penalties.
 
The Club’s current financial position does not provide much room for repayment of principal, but its debt structure is robust. The Investec loan is due only in 2025 and the Club expects to refinance this debt. The bonds and the BoA loan start repaying from 2029. The thinking appears to be that the Club will increase its revenues/profits up to then such that it will be able to either (partially) repay principal and/or refinance the bonds/BoA loan as they fall due. The downside risk is that financial performance falls short to the extent that financial institutions no longer wish to support the Club or that financial markets are hit by the sort of event that happened in 2008 and renewed support is not available regardless of the financial position of the Club.
 
Despite the pandemic the Club is in compliance with the financial covenants associated with its debt facilities. These are conditions requiring a certain level of financial performance to which the Club must comply at risk of the debt becoming immediately payable if it does not.
 
The interest-only nature of the debt means that annual financing costs are relatively predictable. Interest costs of £18.3m were recorded on the Cash Flow Statement for the year ended 30/06/21. All things being equal, as the principal amount outstanding during this season is expected to remain unchanged, we would normally expect to see a similar amount charged for 2021-22. We must make adjustments for the fact that the CCFF attracted a lower interest rate and was only refinanced just before the financial year end, and for the effect of increasing interest rates on the minority of the Club’s debt that is subject to a floating rate. Consequently, our estimate of the Club’s interest costs for 2021-22 is £23m.
 
Capex
Despite completion of THS, the last two financial statements have included lines for ongoing capital expenditure - £84m in 2020 and £33m in 2021. These can cover expenditure on maintenance of the stadium and training ground and residual payments related to the stadium build. Costs associated with the Club’s property development arm would also likely be included here. There is no visibility on expected future capex commitments but our expectation is that this will continue to fall and consequently we estimate a figure of £20m for 2021-22.
 
We should also note that we have made no allowance for working capital changes. Unlike, say, a traditional manufacturing company, which has a relatively straightforward working capital base covering stocks and what is owed to suppliers and by customers, a football club’s covers areas such as deferred payments from season ticket holders and from sponsors. With limited visibility on the dynamics behind such items we have not incorporated an estimate for any material changes that could affect cash flow, rather trusting that the structure of such deferred payments will broadly follow previous years. If that is not the case there could be a material impact on cash flows.
 
With that caveat in mind, we can now complete our estimate for the Club’s cash flow for the 2021-22 season/financial year.
 
Cash Flow Estimate

	Estimate 2022
Match receipts	£115m
UEFA prize money	£8m
TV and media	£140m
Commercial	£180m
Total revenue	£443m
Staff costs	£210m
Other operating costs	£120m
Profit from operations	£113m
Net transfer costs	£56m
Interest costs	£23m
Capex	£20m
Net cash flow	£14m

Our original estimate was for revenues of £443m, which after deducting operating costs resulted in an operational profit of £113m. Further deductions for net transfer fee payments and interest costs for the year give net positive cash flow of £14m. In theory, the Club could choose to apply this to increasing cash reserves, paying down debt, capex (in particular the property developments it has in the Tottenham area), paying dividends or investment in the playing squad. In practice, cash reserves are already relatively healthy, there is no requirement to reduce debt and dividends haven’t been paid for a number of years. Clarity is required on the Club’s property development activity but it is clear that further investment is required in the first team squad.
 
It is important to understand the limitations of this exercise. Although we maintain a dialogue with the Club’s finance director, we do not have access to the source information. The £14m estimated cash flow figure could vary significantly depending on just one major change or mis-estimate. It will be subject to ‘exceptional items’, for instance severance payments due to Nuno and his team. The objective of this exercise is to identify the levers in Tottenham’s financial model that influence its financial performance. Even if the £14m number is bang on the money that does not mean that is the amount available for transfers as reported in newspaper headlines, due to the likely staged payment schedule – if this is over 2-3 years then it potentially gets multiplied 2-3 times, but wages have to be factored in as do ‘old’ transfer fees being paid off. If the Club wishes to spend more than that it will either need to draw down on cash reserves or increase debt, neither of which may appear particularly prudent given the continuing current volatile operating environment.
 
Key conclusions
Accepting that we are attempting to identify those levers in Tottenham’s financial performance, we can make the following conclusions, none of which are rocket science, based on the 2020-21 (and previous years’) financial performance:

• Assuming no further lockdowns the Club’s financial position is sound but is based on the structure of its debt for which payment is not required for some years.
• Qualification for the Champions League, and even the Europa League, make a material difference to the Club’s financial performance. The Europa Conference League does not, unless we win it.
• The Club’s commercial income has become increasingly important to its cash flow generation. Stadium naming rights could provide a significant boost to this as would increased use of the stadium for non-football activities.

• The Club’s net transfer spend has increased significantly in the last three years (even if not at the level of those we consider to be our peer group). This is not just down to increased spending on new players but also due to low levels of sales proceeds. Selling players is not on its own a desirable objective but we need to get better at churning the squad to maximise value from players who are not making the expected contribution to team objectives.

 
Other Items of Interest
The Club’s financial statements also contain other disclosures that may be of interest to fans: 

• Corporate Reorganisation
  The ‘ultimate controlling party’ of the Club is now listed as ENIC Sports and Development Holdings Limited (“ENICS&D”), whereas in previous years it has been listed as ENIC International Inc. Both of these entities are registered in the Bahamas and there are no intermediate companies in the ownership structure. The Club advises that this is the result of a rationalisation of historic entities to simplify the group structure under the same beneficial owners (i.e. Joe Lewis and Daniel Levy and family). We have no more visibility on the ENIC group structure.
  White Hart Lane Stadium Limited, the Club’s subsidiary that used to own the old stadium, was dissolved after the balance sheet date. It had been dormant for around three years and its sole assets and liabilities consisted of amounts owed by and to other group companies. These were settled during 2020-21 and the resultant balance of £23m paid to Tottenham Hotspur Limited as a dividend.
  In the last year, THST published a structure chart to reflect our understanding of the Club group structure. We will shortly update this to reflect these changes and other information subsequently received.
  
  
• Related party transactions with ENIC companies outside of the Club
  Note 23 to the standalone accounts of Tottenham Hotspur Limited itemises commercial transactions undertaken between the Club and ‘related parties’, or in other words, companies owned by ENIC outside of the Club structure. The majority of these by value related to land and property transfers between the two groups. During 2020-21 the Club purchased land and property from ENIC companies to the value of £2.2m; ENIC companies bought land and property from the Club to the value of £5.2m.
  The recent success of the Club in gaining planning permission for its Printworks development (819-827 High Road, currently the properties either side of the Royale venue) has increased scrutiny over the Club’s property development activity. Our concern is to ensure that resources are not diverted from the football operations into property. By law, commercial arrangements between related parties have to be conducted on an ‘arm’s length basis’, that is to say that they are undertaken on the same basis as if they were with external third parties. The Club advises that this was assured by the use of independent third-party valuation consultants to determine the market price of transferred properties. This is a recognised approach. However, in order to provide additional reassurance, THST asked for sight of one such valuation report. Regrettably, this request was declined on the basis of commercial confidentiality.
  
  

• Investments
  During the year, the Club invested €457 in shares in OneFootball GmbH and £363,000 (in USD) in shares in VivoPower International Plc. OneFootball is a football news site with its unique selling point appearing to be its offering of free live coverage of regional German football. VivoPower is a NASDAQ-listed company which offers sustainable energy solutions and became an official sponsor of the Club during the year. Its share price has come under pressure since the purchase and the Club’s investment was valued at £263,000 at financial year end.
  Investing in the equity of third parties appears to be a departure from previous practice. The Club advises that these are seen as strategic investments with new sponsors/partners and that it is becoming common, particularly with US sponsors, for part of any sponsorship arrangements to include an element of equity as part-payment. It should be noted that the value of the investments to date is immaterial against the scale of the Club’s operations.  
  
  
• Increasing Staff Numbers
  The average number of employees increased during 2020-21 to 672 from 647, despite the impact of the pandemic. The Club advises us that this is due to i) the impact of new HMRC rules requiring a number of contractors to be entered on the payroll and ii) the growth and full consolidation of the women’s team into the group.

 
Involvement of the Club in this Analysis
In the interests of transparency, we wish to set out the basis on which Tottenham Hotspur Football Club worked with THST in the preparation of this review. As in previous years, having read the full financial statements, a number of questions and comments were sent to Matthew Collecott, the Club’s Financial Director. We offer our thanks to him and his team for their cooperation in providing responses. In a small number of areas the Club declined to provide further detail, citing commercial confidentiality.
 
Prior to publication, a draft was sent to the Club for checking for material inaccuracies that may give rise to concern. The Club subsequently provided further detail on a number of areas which allowed us to finesses the analysis. Any assumptions, conclusions and recommendations within the analysis however are solely those of THST and are independent of any involvement of the Club.

Michael Green
THST Board
3 February 2022