Financials 17/18

fortworthspur · Apr 6, 2019

Lilbaz said:
Arsenal are still paying for their stadium.

I dont know what the interest rate is on a 600 million dollar loan but if it isnt bad you'd be crazy not to pay it back over 20 years. what I take from the financials is servicing the debt shouldnt interfere with spending on players.

ComfortablyNumb · Apr 7, 2019

fortworthspur said:
I dont know what the interest rate is on a 600 million dollar loan but if it isnt bad you'd be crazy not to pay it back over 20 years. what I take from the financials is servicing the debt shouldnt interfere with spending on players.

We'll be paying less than 4%, if not now then certainly by the end of the season (assuming no disasters with the stadium). £600M over 20 years would suggest servicing the debt (capital and interest) would cost less than £50M per year.

Lilbaz · Apr 7, 2019

If anyone wants to read the full financials the pdf can be downloaded from here.

https://www.tottenhamhotspur.com/the-club/investor-relations/annual-reports/

LeParisien · Apr 7, 2019

ComfortablyNumb said:
We'll be paying less than 4%, if not now then certainly by the end of the season (assuming no disasters with the stadium). £600M over 20 years would suggest servicing the debt (capital and interest) would cost less than £50M per year.

In that case the increase in matchday revenue will more than cover it.

I can see the arguments people have made in this thread now. We will see increase in matchday income (minus loan repayments) of about £10m per year (barely enough to cover those agent fees!).

However throw in naming rights deal and that’s a big sum per year. Then of course the other income streams that had gone towards financing the stadium can now be spent on the team. We will have a lot more money to spend almost immediately.

I assume when the final stage of the project is completed (flats and hotel), the loan deal might be renegotiated. Perhaps in 10 years we’ll have paid everything off ?

ComfortablyNumb · Apr 7, 2019

LeParisien said:
In that case the increase in matchday revenue will more than cover it.

I can see the arguments people have made in this thread now. We will see increase in matchday income (minus loan repayments) of about £10m per year (barely enough to cover those agent fees!).

However throw in naming rights deal and that’s a big sum per year. Then of course the other income streams that had gone towards financing the stadium can now be spent on the team. We will have a lot more money to spend almost immediately.

I assume when the final stage of the project is completed (flats and hotel), the loan deal might be renegotiated. Perhaps in 10 years we’ll have paid everything off ?

That's my assumption for the £50M per year. I know that a lot of the early property transactions were reportedly done through off-balance sheet vehicles, so difficult to assess just through published accounts. At less than 4%, you'd probably not be in a hurry to pay off your debts by selling property right now, anyway, since the market doesn't seem to be vibrant.

RichieS · Apr 7, 2019

Sorry if I'm a broken record, but "A lot more money to spend almost immediately" is almost certain to manifest as new improved contracts for existing players. This is vitally important for the medium to long term but not the flashy big transfers that many seem to want, so I am already fearing the carnage of August.

MR_BEN · Apr 7, 2019

JamieSpursCommunityUser said:
Sorry think we're at crossed wires, that isn't my point.

THFC can, perfectly legally and ethically, re-invest (retain) it's own cash for the subsequent year, before tax.

Whether to re-invest in future operations (growth), assets, paying down debt, or even as a contingency.

Obviously no company will do that indefinitely, whether for commercial or tax purposes, as it also can't pay out dividends on cash sitting in the business.

Spurs could easily have taken any number of legal courses to play these numbers down, but chose not to.

Am assuming that is to look strong to investors, perhaps ahead of a Bond issue which I think was mentioned in the THST minutes - I'd be interested to know their thinking that's all.

I’m confused.... Profits isn’t about cash, profit has nothing to do with cash and reinvesting cash does not reduce your profit...?

Cash

worcestersauce · Apr 7, 2019

Are we accepting the £1 billion figure now then? I'm happy to call it the billion pound stadium as it has a nice ring to it but my understanding is that the stadium didn't cost that much although it may be that the whole project may do what with the hotel and all. Another thing to bear in mind is that it is apparently the third biggest conference centre in London and could be used through the week year round especially when the hotel is built so all more income streams.

TottenhamLegend · Apr 7, 2019

gregga said:
Thanks - I was wondering the same thing. Why elect to pay corporation tax when we’ve got massive construction bill to pay off?

This isn't a choice on our part. Even if we paid off more of the stadium costs, HMRC treat capital expenditure differently and it would come back into the tax calculation anyway.

Led's Zeppelin · Apr 7, 2019

There seems to be a lot of misunderstanding about how tax is calculated. You can’t avoid it by simply reinvesting profits.

In other words, Spurs haven’t chosen to pay more tax than necessary as some seem to be suggesting.

topper · Apr 7, 2019

MR_BEN said:
I’m confused.... Profits isn’t about cash, profit has nothing to do with cash and reinvesting cash does not reduce your profit...?

Cash

I think if you forget 'cash' per se and think of income, obviously investing income in the financial year reduces profit hence reducing tax.

Led's Zeppelin · Apr 7, 2019

topper said:
I think if you forget 'cash' per se and think of income, obviously investing income in the financial year reduces profit hence reducing tax.

It’s a bit more complicated than that though isn’t it?

For one thing, the investment would need to be allowable, and given the scale of expenditure already on the books, it may be that there isn’t much legitimate allowable investment left that Spurs actually want to do, and would rather have the cash for other purposes.

Operating profits aren’t calculated and reported just for the fun of it are they?

BehindEnemyLines · Apr 7, 2019

Generally, construction costs would be capitalised in the accounts as part of the value of the overall asset. The charge that would be attributable to the P&L would be annual depreciation over the lifespan of the asset - therefore any investment costs would not come off the same years profit on the P&L.
What would come straight off the P&L is the cost of any interest charges at the prevailing tax rate - what makes debt in business so cheap is that they can negotiate a great interest rate to start with dependant on security of the business and economies of scale (over an individual), and they then get 20% off that in corporation tax savings (and if losses exceed profits then the balance can be carried over into future years to save tax there too).
Modigliani & Miller argue that debt gets cheaper the more you have due to the tax saving combined with the cost of equity rising proportionately to the amount of debt (it makes your shares less attractive) the weighted cost of capital would remain relatively constant.

Yid-ol · Apr 7, 2019

worcestersauce said:
Are we accepting the £1 billion figure now then? I'm happy to call it the billion pound stadium as it has a nice ring to it but my understanding is that the stadium didn't cost that much although it may be that the whole project may do what with the hotel and all. Another thing to bear in mind is that it is apparently the third biggest conference centre in London and could be used through the week year round especially when the hotel is built so all more income streams.

Is it a 1 billion project? Or a 1 billion stadium? As the first one will include development outside the stadium.

spursfan77 · Apr 7, 2019

Lilbaz said:
If anyone wants to read the full financials the pdf can be downloaded from here.

https://www.tottenhamhotspur.com/the-club/investor-relations/annual-reports/

Anyone know what this was for, was it the training centre hotel? Seems a lot if it was (Page 28)

In May 2017 the Group agreed a letter of credit facility of £50,000,000 with an ENIC Group company. Associated arrangement costs of £594,000 are being amortised over the availability period of the facility, which expires in August 2022.

Led's Zeppelin · Apr 7, 2019

spursfan77 said:
Anyone know what this was for, was it the training centre hotel? Seems a lot if it was (Page 28)

In May 2017 the Group agreed a letter of credit facility of £50,000,000 with an ENIC Group company. Associated arrangement costs of £594,000 are being amortised over the availability period of the facility, which expires in August 2022.

I don't know, but I very much doubt it was for one specific item like that.

It would seem to be an inefficient use of their (ENIC's) funds if used that way. It's much more likely to be part of the supporting arrangements under the larger financing scheme, eg., we'll put in £50m if you put in £500m type of thing, possibly required by the lenders.

Lilbaz · Apr 7, 2019

spursfan77 said:
Anyone know what this was for, was it the training centre hotel? Seems a lot if it was (Page 28)

In May 2017 the Group agreed a letter of credit facility of £50,000,000 with an ENIC Group company. Associated arrangement costs of £594,000 are being amortised over the availability period of the facility, which expires in August 2022.

Lewis put in £50m the other year it might be that.

coys200 · Apr 7, 2019

What was Wembley rental ?

Led's Zeppelin · Apr 7, 2019

Lilbaz said:
Lewis put in £50m the other year it might be that.

Yes, I'm sure it was.

All part of the overall funding package.

CoopsieDeadpool · Apr 7, 2019

coys200 said:
What was Wembley rental ?

It was am agreed fee we paid for the use of Wembley stadium. :cautious:

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