Since Tottenham Hotspur Ltd (THL) published its financial statements for 2015-16, finance professionals on the THST Board have been analysing them. That analysis has led us to pose a number of questions we believe are of legitimate interest to the Club’s supporters. It also provides us with an opportunity to begin to improve the conversation between the Club and its fans about finances and, in doing so, to move further towards establishing a standard for the game. A brief summary can be read below, and the full report is available as a PDF attached to this post.
We have complied this analysis as professionally as we can with the information available, taking time to cross-reference our observations with information we already have. As we have previously reported, we submitted a detailed set of financial questions to the Club after the reference to the current cost of the stadium build at the last meeting between the Club and THST Boards. We were told that information on financing would be announced “at the appropriate time” but have yet to receive any more specific answers to the questions we raised. We have, therefore, drawn on that set of questions, and the analysis of the financial statements published subsequent to our request, to make some key observations. Our view is that these are legitimate observations for supporters to make at this stage, and that they can be addressed in a manner that poses no commercial risk to the Club or THL.
• The ownership structure of the club we support is of paramount interest to fans. While the statement tells us that Daniel Levy has a 25.2% interest in THL and Joe Lewis 48%, Levy’s ability to fund potential equity calls for the Northumberland Development Project is less clear. Greater clarity is needed.
• The £7.6m profit on property sales and the 10.7% increase in “other operating costs” needs further explanation.
• The wage/income ratio fell slightly from 51% in 2014-15 to 48% in 2015-16. Fans will want assurances that this ratio will be maintained at a level that will enable THFC to attract the players needed to compete and, eventually, that cash flows in excess of debt service requirements will be available to attract and retain players of sufficient quality. Further assurances are required that player sales are not part of the financing strategy for the NDP.
• There needs to be much greater clarity in defining the costs of the Northumberland Development Project as a whole and of the stadium as a specific component of that project. The terms ‘NDP’ and ‘stadium’ are used interchangeably and this, in part, contributed to the sensationalist reporting of the £800m figure quoted at the February Board to Board meeting. Examination of the latest statements suggests that construction spend valued at £52m has been invested in work that is not formally part of the NDP as it seems to be defined by the Club. Much greater clarity is needed here, especially at a time when supporters are being asked to share the cost burden.
• Quoted figures under the Trade and Other Payables (TOP) heading raise some questions. The increase in current TOP of £52m prompts some theorising about the structure of the Wembley hire deal but we recognise there are legitimate commercial sensitivities around releasing further detail. However, no explanation is given for an accrual of £45m in non-current TOP. This appears to include a figure of £10m from an unnamed third party “as a contribution towards future construction expenses related to the NPD”. There has been speculation elsewhere that this money has come from the NFL. Fans are entitled to know what it is the NFL is contributing towards, especially as indications are that the cost of the stadium, and possibly of the NDP, have increased specifically because of NFL requirements. In short, how much of the NFL specific costs are the Premier League football audience being asked to shoulder?
• The number of Preference Shares in THL have been reduced, with £10m paid back to a company called Macon Inc, which is believed to be owned by Joe Lewis. This raises the question of whether withdrawing £10m in cash from the group was appropriate at this stage and, longer term, what group policy on returns to shareholders is.
• Greater detail on the structure of debt servicing would be appreciated. Again, it is recognised that some of this detail will be commercially sensitive, but much reassurance could be given by releasing more general information on structure. We would point out that the Trust of at least one other Premier League club has maintained commercial confidence after being privy to sensitive financial information.
As fans, we recognise commercial realities. We hold no formal financial stake in the corporate structure of THL – although we would be more than happy to explore a mutually beneficial way of attaining that – and we understand the nature of the football business. However, especially at a time when fans are being told we must help to carry the burden of the investment into the new stadium, we believe supporters should be provided with more clarity about and more input into financial decision-making processes.
While the specific circumstances around THFC prompt much of what we say above, we also believe that those questions have a wider bearing on the ongoing conversation within football about governance and the input of fans at Board level in their clubs. Football clubs operate as distinct micro-monopolies because of the unique ‘customer loyalty’ of supporters. But fans are treated as if we were customers of a business operating in an efficient competitive market. We are key stakeholders and, while that stakeholding is starting to be more widely recognised as fan representatives are brought into general policy discussions, there is still some way to go in the context of financial discussions – arguably the key area.
We hope that, by carrying out this analysis, we not only get some answers for the fans of THFC but we also begin to set an example of how the conversation should be pursued.
Please could supporters with any questions for us about this analysis email us with those questions at info@thstofficial.com We can’t enter into individual correspondence, but we will post answers online. As this is a fairly complex subject, we won’t be entering into conversation on Twitter, so please do email us and this will ensure both that you can ask clear questions and answers are shared with other fans. We’ll reply to any questions we receive in the next week, so please mail us by 5pm on 3 May if you have anything to ask.
THST Board
27 April 2017
• The ownership structure of the club we support is of paramount interest to fans. While the statement tells us that Daniel Levy has a 25.2% interest in THL and Joe Lewis 48%, Levy’s ability to fund potential equity calls for the Northumberland Development Project is less clear. Greater clarity is needed.
• The £7.6m profit on property sales and the 10.7% increase in “other operating costs” needs further explanation.
• The wage/income ratio fell slightly from 51% in 2014-15 to 48% in 2015-16. Fans will want assurances that this ratio will be maintained at a level that will enable THFC to attract the players needed to compete and, eventually, that cash flows in excess of debt service requirements will be available to attract and retain players of sufficient quality. Further assurances are required that player sales are not part of the financing strategy for the NDP.
• There needs to be much greater clarity in defining the costs of the Northumberland Development Project as a whole and of the stadium as a specific component of that project. The terms ‘NDP’ and ‘stadium’ are used interchangeably and this, in part, contributed to the sensationalist reporting of the £800m figure quoted at the February Board to Board meeting. Examination of the latest statements suggests that construction spend valued at £52m has been invested in work that is not formally part of the NDP as it seems to be defined by the Club. Much greater clarity is needed here, especially at a time when supporters are being asked to share the cost burden.
• Quoted figures under the Trade and Other Payables (TOP) heading raise some questions. The increase in current TOP of £52m prompts some theorising about the structure of the Wembley hire deal but we recognise there are legitimate commercial sensitivities around releasing further detail. However, no explanation is given for an accrual of £45m in non-current TOP. This appears to include a figure of £10m from an unnamed third party “as a contribution towards future construction expenses related to the NPD”. There has been speculation elsewhere that this money has come from the NFL. Fans are entitled to know what it is the NFL is contributing towards, especially as indications are that the cost of the stadium, and possibly of the NDP, have increased specifically because of NFL requirements. In short, how much of the NFL specific costs are the Premier League football audience being asked to shoulder?
• The number of Preference Shares in THL have been reduced, with £10m paid back to a company called Macon Inc, which is believed to be owned by Joe Lewis. This raises the question of whether withdrawing £10m in cash from the group was appropriate at this stage and, longer term, what group policy on returns to shareholders is.
• Greater detail on the structure of debt servicing would be appreciated. Again, it is recognised that some of this detail will be commercially sensitive, but much reassurance could be given by releasing more general information on structure. We would point out that the Trust of at least one other Premier League club has maintained commercial confidence after being privy to sensitive financial information.
As fans, we recognise commercial realities. We hold no formal financial stake in the corporate structure of THL – although we would be more than happy to explore a mutually beneficial way of attaining that – and we understand the nature of the football business. However, especially at a time when fans are being told we must help to carry the burden of the investment into the new stadium, we believe supporters should be provided with more clarity about and more input into financial decision-making processes.
While the specific circumstances around THFC prompt much of what we say above, we also believe that those questions have a wider bearing on the ongoing conversation within football about governance and the input of fans at Board level in their clubs. Football clubs operate as distinct micro-monopolies because of the unique ‘customer loyalty’ of supporters. But fans are treated as if we were customers of a business operating in an efficient competitive market. We are key stakeholders and, while that stakeholding is starting to be more widely recognised as fan representatives are brought into general policy discussions, there is still some way to go in the context of financial discussions – arguably the key area.
We hope that, by carrying out this analysis, we not only get some answers for the fans of THFC but we also begin to set an example of how the conversation should be pursued.
Please could supporters with any questions for us about this analysis email us with those questions at info@thstofficial.com We can’t enter into individual correspondence, but we will post answers online. As this is a fairly complex subject, we won’t be entering into conversation on Twitter, so please do email us and this will ensure both that you can ask clear questions and answers are shared with other fans. We’ll reply to any questions we receive in the next week, so please mail us by 5pm on 3 May if you have anything to ask.
THST Board
27 April 2017
| thl_2015-16_finances_analysis.pdf |
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