Hotspur Money - Discussion of the Accounts | Vital Football

Hotspur Money - Discussion of the Accounts

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Given the wide range of predictions of what is going to happen to football financially, it might be a good idea for everyone to understand what has happened up until now. Below is the simplest report from the latest published accounts dealing with the state of affairs up until June 2019.

It is worth reviewing this and there are enough people here that understand what the various terms mean to help explain it if you don't know. It is no different than not understanding tech talk so don't be shy!

Spurs 5 year review.png
 
Let's try to keep this on topic and not get into a rehash of Levy and how he runs the club player-wise. This is about the future, game-day revenues, sponsorships, TV rights contracts, player salaries, and transfer fees, etc. Also debt management and cash reserves.
 
Whilst not making this about the man Levy, I do think everyone should switch places with him and ask yourself what you would predict and do in his role as chairman and percentage owner of the club

A simple place to start would be the revenue. Last year that £460m was phenomenal and broken down as follows:

Match receipts £82m
UEFA Prize Money £94m
TV and Media £150m
Commercial £135m

Whatever scenario you paint, there isn't a rosy one when you start to throw in the variables of broadcasters, sponsors, NFL contracts, stadium repayments, gate receipts, no CL footie etc.

Right now, I think THFC need to figure out what the 30th June looks like and figure out the close strategy for the fiscal. Not sure I would recognise half of the TV and Media money as revenue in the 19/20 books and would be questioning whether to recognise some of any sponsor money that might also be at risk. I'm no accountant, but it feels like we need take the hit on costs now and get as much revenue into next year as possible. In other words don't be handing over tax on profit again when you're walking into a storm in the next fiscal. Run at a loss because nobody will be looking at things like FFP anyway. That's mostly about a rolling 3 year profit calculation anyway and we have 2 years of extreme profits to contra this year against.

It's then about building different best to worst case scenarios and keep re-running the numbers as more information becomes available on the coming weeks / months.

What do they say? Plan for the worst and hope for the best !!!
 
Whilst not making this about the man Levy, I do think everyone should switch places with him and ask yourself what you would predict and do in his role as chairman and percentage owner of the club

A simple place to start would be the revenue. Last year that £460m was phenomenal and broken down as follows:

Match receipts £82m
UEFA Prize Money £94m
TV and Media £150m
Commercial £135m

Whatever scenario you paint, there isn't a rosy one when you start to throw in the variables of broadcasters, sponsors, NFL contracts, stadium repayments, gate receipts, no CL footie etc.

Right now, I think THFC need to figure out what the 30th June looks like and figure out the close strategy for the fiscal. Not sure I would recognise half of the TV and Media money as revenue in the 19/20 books and would be questioning whether to recognise some of any sponsor money that might also be at risk. I'm no accountant, but it feels like we need take the hit on costs now and get as much revenue into next year as possible. In other words don't be handing over tax on profit again when you're walking into a storm in the next fiscal. Run at a loss because nobody will be looking at things like FFP anyway. That's mostly about a rolling 3 year profit calculation anyway and we have 2 years of extreme profits to contra this year against.

It's then about building different best to worst case scenarios and keep re-running the numbers as more information becomes available on the coming weeks / months.

What do they say? Plan for the worst and hope for the best !!!

I can absolutely see why you'd say that, but out of interest what do you think it would achieve and who would they be looking to impress?

I have a feeling the losses will be more than enough without having to carry over revenue (which isn't allowed anyway unless you're cooking the books!).

Overall, profitability is or should be a true reflection of your in-year performance and if you need to bring assets up to the value to support shareholders' expectations and of course lenders banking covenants.

My one big concern here is our freeflow of cash, once cash reserves are gone/depleted in a period of non-trading and either no or greatly reduced trading, that is when creditors start hitting alarm bells and looking at the syndicated loan/bond details.

If this carries on for another couple of months, we'll be getting squeezed and all the scenarios of major loss of income will occur.

But even if we recommence we may only be able to rely on media income; we could have a huge problem to deal with in that if (as I expect) major events remain taboo or even if partially lifted - can you imagine what social distancing will do to capacity and income?!

Levy and the board will have to look outside for external financing, or we too could be the victim of creditors pressure.

I should add this is why I think the board acted and hit the alarm bells; they'll have started modeling the cash flows and the impact and probably beginning to share them with creditors.

It's why I think at the moment all thoughts about spending shedloads in any window anytime soon is extremely unlikely.
 
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I can absolutely see why you'd say that, but out of interest what do you think it would achieve and who would they be looking to impress?

I have a feeling the losses will be more than enough without having to carry over revenue (which isn't allowed anyway unless you're cooking the books!).

Overall, profitability is or should be a true reflection of your in-year performance and if you need to bring assets up to the value to support shareholders' expectations and of course lenders banking covenants.

My one big concern here is our freeflow of cash, once cash reserves are gone/depleted in a period of non-trading and either no or greatly reduced trading, that is when creditors start hitting alarm bells and looking at the syndicated loan/bond details.

If this carries on for another couple of months, we're be getting squeezed and all the scenarios of major loss of income will occur.

But even if we recommence we may only be able to rely on media income; we could have a huge problem to deal with in that if (as I expect) major events remain taboo or even if partially lifted - can you imagine what social distancing will do to capacity and income?!

Levy and the board will have to look outside for external financing, or we too could be the victim of creditors pressure.

To me it's like a statement of work model. We have the booking and even the cash for the second half broadcasting money. Based on this SoW, you only recognise the revenue when the games are televised. Therefore deferring this revenue seems sensible and acceptable and aligns with the in-year performance. It's not as if the PL and the TV companies have been definitive on what happens in each scenario so until they do, you take the most cautious approach. I have no clue on the current stance of the sponsors. If there is a threat they want to recoup money because we haven't been putting their brand out there, then a similar approach.

As for who to impress, I would be less worried about the stakeholders Lewis and Levy and their board. If they can't understand a single loss / break even in a pandemic within a 5 year overall picture then that raises it's own questions. We've just had 2 amazing years of profits, given £40m to HMRC and delivered the new stadium. The optics to the creditors are the key one. You'd surely be worried that they want you to refinance any debt, pay over a longer term on a higher interest rate. Ideally, we wouldn't do that as I'm assuming we negotiated the previous deals from a position of strength.

As for what it achieves, it just buys us time in my mind so we can learn more about all these fluid variables. It's somewhat of a moot point anyway, as it's 19 May and I have a feeling we'll know so much more by 30 Jun.

The other big one is what does each club do on their stated valuation of players on the balance sheet? From what I know, these are mostly understated anyway based on the market value, especially the longer serving players or homegrown. I'm guessing there night be an opportunity to push some more loss to the P&L in by reducing a couple of new player values.

Out of interest, what would you do with the very few variables you have to play with at this end of the fiscal? Make 19/20 as strong as possible or smooth it into 20/21?
 
To me it's like a statement of work model. We have the booking and even the cash for the second half broadcasting money. Based on this SoW, you only recognise the revenue when the games are televised. Therefore deferring this revenue seems sensible and acceptable and aligns with the in-year performance. It's not as if the PL and the TV companies have been definitive on what happens in each scenario so until they do, you take the most cautious approach. I have no clue on the current stance of the sponsors. If there is a threat they want to recoup money because we haven't been putting their brand out there, then a similar approach.

As for who to impress, I would be less worried about the stakeholders Lewis and Levy and their board. If they can't understand a single loss / break even in a pandemic within a 5 year overall picture then that raises it's own questions. We've just had 2 amazing years of profits, given £40m to HMRC and delivered the new stadium. The optics to the creditors are the key one. You'd surely be worried that they want you to refinance any debt, pay over a longer term on a higher interest rate. Ideally, we wouldn't do that as I'm assuming we negotiated the previous deals from a position of strength.

As for what it achieves, it just buys us time in my mind so we can learn more about all these fluid variables. It's somewhat of a moot point anyway, as it's 19 May and I have a feeling we'll know so much more by 30 Jun.

The other big one is what does each club do on their stated valuation of players on the balance sheet? From what I know, these are mostly understated anyway based on the market value, especially the longer serving players or homegrown. I'm guessing there night be an opportunity to push some more loss to the P&L in by reducing a couple of new player values.

Out of interest, what would you do with the very few variables you have to play with at this end of the fiscal? Make 19/20 as strong as possible or smooth it into 20/21?

I'm a firm believer in just show it as it is, explain why it's like that and move on (if you can) as I said the accounts are a window-dressing exercise mostly anyway ( I am a cynic after all).

The cash position is what I think will hurt us, or certainly curtail any expenditure plans. And that I suspect will override all.

As you say and as we've agreed many times, there are so many variables at the moment and so many big decisions yet to be made, figuring out what the impact will have on key revenue streams is what the club will be focused on.