Final Results

5 Oct 2005 07:00

Tottenham Hotspur PLC05 October 2005 5 October 2005 TOTTENHAM HOTSPUR PLC Preliminary results for the year ended 30 June 2005 Summary of Results Year ended Year ended 30 June 2005 30 June 2004 £m £m Turnover 70.6 66.3Operating profit before football trading and depreciation 14.6 11.5 Operating profit before football trading 12.8 9.7 Amortisation and impairment of registrations (12.7) (10.9) Profit / (loss) on disposal of registrations 5.6 (0.4) Net interest payable (0.8) (0.9) Profit / (loss) before tax 4.9 (2.5) Retained profit / (loss) for the financial year 4.1 (2.7) Earnings / (loss) per share - basic 4.2p (2.6)p • Turnover up +6.5% • Operating profit before football trading and depreciation up +27% • Net assets up +8.4% to £45.8m • Nominal net debt of £1.4m • Retained profit of £4.1m Commenting, Daniel Levy, Chairman of Tottenham Hotspur plc, said: These are record results producing the Club's highest ever turnover andoperating profits. In addition we retain an enviable net debt position despiteinvesting heavily in the squad over the past couple of years. All these factorsunderline the robustness of the business we now have but also highlight itspotential to grow if we can get all elements of the club right both on and offthe pitch. Enquiries: Matthew Collecott, Finance Director tel: 020 8365 5000Tottenham Hotspur plc www.tottenhamhotspur.com John Bick tel: 07802 211 374 (AIM: TTNM) Chairman's Statement Financial Results The results for the financial year show turnover exceeding £70m for the firsttime, up from £66.3m in the prior year. Notable contributions came as a resultof the Club's progress in cup competitions, finishing ninth in the leagueagainst fourteenth in the prior year, and improved merchandising revenues. There was a substantial increase in operating profit before football trading anddepreciation to £14.6m compared to £11.5m in the prior year, the key indicatorin determining cash generated from the business. Operating profit beforefootball trading was £12.8m compared to £9.7m last year. Profits of £5.6m on thedisposal of player registrations during the year led to the club making a profitbefore tax of almost £5m, compared to a loss before tax of £2.5m in the prioryear. As a result the net asset position has increased, strengthening ourbalance sheet, whilst retaining a net debt position of only £1.4m. These results are discussed in more detail in the operating and financialreview. Overview The final league position was considerably better than the previous year andhaving completed the restructuring of so many departments during the year it wasgratifying to see these changes bring positive results - not just in terms ofour playing performances but also in terms of the team spirit throughout theclub and a renewed optimism from an influx of some of the best senior managementin the business. It was clearly disappointing when Frank Arnesen left the club in September thisyear. However, after an extensive interview and search process we have foundsomeone who we believe has the ability to meet the wide demands of the sportingdirector's role. Damien Comolli takes up the position with a remit coveringscouting, medical, academy and club secretarial and the objective of ensuring weapply best practice to all these areas of the club in order to achieve long termsuccess. Other considerable changes in our restructuring programme have been the completeoverhaul of the Academy which is now headed up by John McDermott who joins usfrom the F.A. John has brought renewed processes, enthusiasm and experience tothis key area of the club. We will continue to foster the team approach to everything we do. The key tothe Club's success is the continued commitment and enthusiasm of our people,every employee and we are pleased that Maarten Jol has signed a three yearcommitment to the Club. These latest changes are aligned with the operating andcommercial changes, the medical department changes, the coaching staff changesand the number of player changes that have taken place over the past twoseasons. We will continue to build on each department as a centre of excellencewithin the club. On the pitch Again this year there have been significant changes in the make up of the firstteam squad of players. The players that have left since we last reported to shareholders in our interimreport are Simon Davies, Timothee Atouba, Freddie Kanoute, Nicky Eyre, MichaelMalcolm, Paul O'Donoghue, Rohan Ricketts and Erik Edman with a number of youngplayers going out on loan to further their experience. We wish them all well. In the same period we welcomed Teemu Tainio, Tom Huddlestone, Jermaine Jenas,Grzegorz Rasiak, Lee Young-Pyo, Edgar Davids, Aaron Lennon, Paul Stalteri andWayne Routledge. They join Emil Hallfredsson, Mounir el Hamdaoui, Andy Reid,Michael Dawson, Radek Cerny and Mido who joined us part way through the season. Having noted in the prior year's Chairman's statement that the ongoing level ofinvestment was not sustainable, the financial stability and improvement inoperations have enabled further investment during the year and since the yearend. We now have some unrivalled talent and a young, but clearly large, squad.We will look to strengthen areas where we see weaknesses but ultimately we haveto ensure we do not overstep the balance between players being motivated tofight for places and players not being able to reach their potential throughlack of opportunity. Off the pitch The club's hospitality team, having been awarded the title of best overallprovider of corporate hospitality in both the Premier League and Football Leaguelast year, continue to improve their offers. A major investment in the Eaststand boxes resulted in the box seating being moved outside and all boxes beingupgraded to include the latest technology together with a completerefurbishment. Our supporters have, as always, been tremendously loyal and the stadium was 99%full for the 2004/2005 season. The start to the new season shows this level ofsupport continuing strongly in direct contrast to reports of lower attendancesat other grounds. The ever-increasing support for the club has resulted in thenumber of memberships and season ticket holders reaching levels unseenpreviously at the club. We cannot thank our fans enough for their loyalty andsupport which underpins this business. However, it remains a challenge for us toensure that members and a new generation of fans are able to experience the cluband we have therefore taken the decision to cap season tickets at a level thatenables a guaranteed float of individual match tickets to supporters. We decided to re-engineer the club's website, which has fast become a keycommunications tool and we have looked to set the standard rather than copy theformula that is so often seen. We have consulted extensively with fans andwebsite developers to bring what we hope will be an ever improving service andthis will be launched by the end of 2005. The Club has undertaken the preparatory research and design work for therebranding of club marks that will take place in phases between now and the endof the current season. The domain name has been changed to reflect the growinginternational recognition of the brand and is now tottenhamhotspur.com Internationally the club had a successful post-season tour of Mauritius, whichwas enjoyed by the players and set the scene for the summer break. On theplayers' return to training the club competed in the South Korean Peace Cup atthe start of their pre-season training and won it convincingly, which createdconfidence in the squad and tested a young team against recent League Championsin their own territories such as PSV Eindhoven and Olympique Lyonnais. We alsoundertook various community projects to coach children, develop relationshipsand leave a footprint in South Korea to extend our profile and support in theregion. At the end of the season Paul Barber joined the football club as ExecutiveDirector to oversee all commercial areas and move them to the next level. Pauljoined us from the board of Ogilvy and Mather and has previously worked with theF.A. and brings a mix of football and commercial experience to the club. Tottenham Hotspur Community have furthered their work locally with the Barclaysand Football Foundation grant funded refurbishment of Haringey's New RiverSports Centre. This will be rebranded as White Hart Lane Community Sports Centreand will be another key centre for our community programmes. With regard to the club's two principal capital projects we continue toprioritise the Academy and new First Team facilities and submitted our planningapplication at the end of September. There is still a long way to go withrespect to the planning and consultation process but it is a very excitingproject for the future of the club. The stadium remains the more difficult ofthe projects and progress remains very slow as we continue to galvanise anapproach that works for the local community and the club alike, something thatis unlikely to be solved in the short term as the London Development Authorityand central government focus on the 2012 Olympics. Outlook Our early exit from the Carling Cup clearly has to temper our overallexpectations regarding cup revenues in the current season. In respect oftelevision revenues we believe that a collective centralised deal is in the bestinterests of the club and its supporters and we support the FAPL's position. We have continued to drive all possible revenue streams to give us theflexibility to meet our objectives and with careful management and cost controlwe have retained the ability to invest in the squad . Last year we reported that the club had spent £37.5m on players from 1 July2003 to the end of the 2004 player trading window, since then a further £24.3mhas been spent on players. A total commitment of some £61.8m since 1 July 2003and it follows that we now need to deliver success on the pitch if we are tocontinue to invest at this level. The significant investment that has takenplace in the squad to date means that the Club has the playing resources toimprove performances on the pitch, however, with so many new team members timewill be needed to forge a strong playing unit. It is encouraging that we have been able to generate cash at the operating levelwhilst both aligning good young talent for now and the future and ensuring theclub's debt is manageable. All these factors underline the robustness of thebusiness we now have but also highlight its potential to grow if we can get allelements of the club right both on and off the pitch. I would like to thank our supporters, shareholders and employees for theircontinued support. D.P. LevyChairman 4 October 2005 Operating and Financial Review Turnover Turnover across the Group improved by £4.2m from £66.3m to £70.6m. The mostnotable increases were a 30% rise in merchandising sales, higher gate receiptsfrom the Cup competitions where the team reached the quarter-finals of bothdomestic competitions, and a higher finishing position in the F.A. PremierLeague (FAPL) of ninth, against fourteenth in the prior year, which resulted inan improved merit award from the central FAPL television deal. FAPL gate receipts saw a £0.6m increase to £16.9m. The number of season ticketssold rose by 4% and average attendances by 3% with the club at 99% capacity.Season ticket sales for 2005/2006 have now reached record levels. Cup competition gate receipts were £0.8m higher than in the prior year. Theimproved F.A. Cup performance meant the team played ten cup matches this year(2003/2004 - seven matches). Sponsorship and corporate hospitality income was broadly in line with last year,falling by 2% from £14.5m to £14.2m. An increase in corporate matchdayhospitality sales was offset by a fall in executive box revenue. Sponsorshipincome suffered as a result of lower income from central FAPL partners. Media and broadcasting revenue increased by £1.6m from £23.9m to £25.5m - thisis despite the fact that 2003/2004 was the last, and most lucrative, year of theprevious FAPL / Sky domestic television rights deal. The latest three year dealis similar in total value to the previous deal but because Sky are entitled toshow more live matches each season, the facility fee received by clubs for eachlive televised appearance is lower. Total revenue available to the clubs fromthe current deal is to be spread evenly over each of the three years whereaspreviously it was stepped and increased year on year. The latter two facts ledto a fall in income of £1.8m this year, however an improved FAPL overseastelevision rights deal (£1.4m), and the increased merit award noted above(£2.0m), more than offset this reduction. Although the current television deal does not expire until 2007, the EuropeanCommission has already placed pressure on the FAPL to change the way it sellsthese rights in order to avoid possible antitrust action for breaking EUcompetition law. It is possible that the rights will have to be sold to morethan one broadcaster from 2007, with the resulting lack of exclusivity meaningthat the overall value of the rights could be lower. The Board continuouslystrive to reduce the Group's dependence on any single revenue stream bydeveloping other areas of the business, and we are confident that should theFAPL suffer a fall in income when the next domestic rights deal is negotiatedany negative impact will be sufficiently compensated for by other areas of thebusiness. The Merchandising division has undergone a year of change, with a new managementteam having been put in place during Summer 2004. Merchandising turnoverincreased by £1.2m to £5.0m. This is largely due to a new home kit beinglaunched at the start of the season and to the team's improved performance onthe pitch. The division has also benefited from a review of its product rangeand its operations. The Board expects the Merchandising division to continue itsgrowth during 2005/2006. Operating expenses (excluding football trading) Operating expenses, excluding football trading, increased by £1.1m (2.0%) duringthe year from £56.6m to £57.7m. The largest cost to the business is player wage costs. Over the course of thelast few years the Board has aimed to manage these costs more effectively bylinking players' wages more closely to performance. This has had the effect ofnot only rewarding those players who contribute most to the success of the Club,but also results in sustainable player wage costs. Other cost increases in the year which contributed to the overall 2% rise inoperating expenses included merchandising cost of sales, which rose as a resultof the higher level of sales, buildings rates, and the cost of insuring alarger, younger squad. Operating profit before football trading and depreciation As stated in prior years, this figure is closely monitored by the Board as itinfluences the level of cash generation the business has achieved from its coreoperations. For the year ended 30 June 2005 operating profit before footballtrading and depreciation was a record £14.6m - an increase of £3.1m on theprevious year. Operating profit before football trading was £12.8m compared to£9.7m last year. These results illustrate the strength of the Group's businessmodel and provide a stable platform on which to build when striving for greaterachievements, on and off the pitch, in the future. Football trading The Club made a profit on disposal of registrations of £5.6m during the year,compared to a loss of £0.4m last year. The sales of Simon Davies, Stephen Carr,Gary Doherty and Helder Postiga generated a combined profit of £5.2m.Performance related receipts on player registrations sold in prior yearsincreased profits further. The profit made on the sale of these registrations provides evidence that theClub's policy of acquiring young players and combining them with the home grownplayers from the Club's academy provides a more sustainable football tradingoperation. Player amortisation rose by £1.8m from £10.9m in the prior year to £12.7m thisyear. The increase is a reflection of the significant level of investment in theplaying squad, during the transfer windows since 1 July 2003. Football trading is deducted from the operating profit figure of £12.8m notedabove, along with net interest payable, tax and other finance costs to produce aretained profit figure for the year of £4.1m, an improvement of £6.8m on theretained loss of £2.7m last year. Balance Sheet Football trading is responsible for the larger balance sheet movements in theyear. Intangible assets have increased by £6.3m - additions of £24.6m beingoffset by disposals of £5.6m and amortisation of £12.7m. Football trading alsoexplains the increase of £3.7m in debtors. Creditors falling due within one yearincreased by £4.9m largely due to football trading and an increase in deferredincome such as season tickets and corporate hospitality. Group net assets have increased by £3.5m and the strength of the balance sheetis enhanced by the Group's low level of net debt - £1.4m at 30 June 2005. Thisis particularly pleasing considering the significant investment made in theplaying squad during the year and has been achievable as a result of theoperating profits generated from a strong business performance. M.J. CollecottFinance Director 4 October 2005 Consolidated Profit and Loss Account Year ended 30 June 2005 Note Operations, Year ended excluding 30 June football Football 2004 trading * trading * Total Total (note 2) £'000 £'000 £'000 £'000 TURNOVER 3 70,550 - 70,550 66,324 Operating expenses (57,738) (12,741) (70,479) (67,513) OPERATING PROFIT / (LOSS) 12,812 (12,741) 71 (1,189) Profit / (loss) on disposal of intangible fixed assets - 5,632 5,632 (381) PROFIT / (LOSS) ON ORDINARY ACTIVITIES BEFOREINTEREST AND TAXATION 12,812 (7,109) 5,703 (1,570) Net interest payable (793) (894) PROFIT / (LOSS) ON ORDINARY ACTIVITIES BEFORETAXATION 4,910 (2,464) Tax charge on profit / (loss) on ordinary activities (707) (178) PROFIT / (LOSS) ON ORDINARY ACTIVITIES AFTERTAXATION 4,203 (2,642) Other finance costs in respect of non equity (99) (50)shares RETAINED PROFIT / (LOSS) FOR THE FINANCIALYEAR 4,104 (2,692) Earnings / (loss) per share - basic 4 4.2p (2.6)p Earnings / (loss) per share - diluted 4 2.2p (2.6)p *Football trading represents the amortisation, impairment, and the profit /(loss) on disposal, of intangible fixed assets. The above results for the above and prior year all derive from continuingoperations. There were no gains or losses in either year other than the profit for the year,and accordingly no statement of total recognised gains and losses is presented. Balance Sheet Group 30 June 30 June 2005 2004 £'000 £'000FIXED ASSETSIntangible Assets 31,348 25,053Tangible assets 49,105 48,219Investments - - 80,453 73,272CURRENT ASSETSStocks 395 355Debtors 11,875 8,171Cash at bank 9,976 11,497 22,246 20,023CREDITORS: amounts falling due within one year (37,648) (32,753) NET CURRENT LIABILITIES (15,402) (12,730) TOTAL ASSETS LESS CURRENT LIABILITIES 65,051 60,542 CREDITORS: amounts falling due after more than one year (15,315) (17,049) 49,736 43,493 PROVISION FOR LIABILITIES AND (3,923) (1,229)CHARGES NET ASSETS 45,813 42,264 CAPITAL AND RESERVESCalled up share capital 9,520 9,624Share Premium 21,439 21,340Revaluation Reserve 2,432 2,480Capital Redemption Reserve 268 164Profit and loss account 12,154 8,656 SHAREHOLDERS' FUNDS 45,813 42,264 SHAREHOLDERS' FUNDS MAY BE ANALYSED AS:Equity interests 31,046 27,596Non-equity interests 14,767 14,668 45,813 42,264 Consolidated Cash Flow Statement Year ended 30 June 2005 Year ended 30 June 2004 Note £'000 £'000 £'000 £'000 Net cash inflow from operating activities 5 21,146 14,892 Returns on investments and servicing of financeInterest received 143 67Interest paid (919) (824)Non-equity share issue costs - (382) Net cash outflow from returns on investments (776) (1,139)and servicing of finance TaxationUK Corporation tax paid (62) - Capital expenditure and financial investmentPayments to acquire intangible fixed assets (23,325) (16,696)Receipts from sales of intangible fixed assets 6,029 1,640Payments to acquire tangible fixed assets (3,593) (2,197)Receipts from sales of tangible fixed assets - 16 Net cash outflow from capital expenditure andfinancial investment (20,889) (17,237) Cash outflow before use of liquid resources and (581) (3,484)financing FinancingIssue of non-equity share capital - 15,000Redemption of ordinary shares (654) (950)Bank loan repayments (26) (1,470)Loan notes repayments (260) - Net cash (outflow) / inflow from financing (940) 12,580 (Decrease) / Increase in cash (1,521) 9,096 Notes to the Accounts For the year ended 30 June 2005 1. The financial information set out on the attached pages does notconstitute statutory accounts for the years ended 30 June 2005 or 30 June 2004but is derived from those accounts. Statutory Accounts for the year ended 30June 2004 have been delivered to the Registrar of Companies and those for theyear ended 30 June 2005 will be delivered following the Company's annual generalmeeting. The auditors reported on those accounts; their reports were unqualifiedand did not contain a statement under s237 (2) or (3) Companies Act 1985. 2. Analysis of comparative Profit and Loss Account Operations excluding player Football trading trading Total £'000 £'000 £'000 Turnover 66,324 - 66,324Operating Expenses (56,589) (10,924) (67,513) Operating profit/(loss) 9,735 (10,924) (1,189)Loss on disposal of intangible fixed assets - (381) (381) Profit/(loss) on ordinary activities before interest and taxation 9,735 (11,305) (1,570) 3. Turnover Turnover, which is all derived from the Group's principal activity, is analysedas follows: 2005 2004 £'000 £'000Turnover comprises:Gate receipts - premier league 16,861 16,307Gate receipts - cup competitions 4,225 3,446Sponsorship and corporate hospitality 14,249 14,459Media and broadcasting 25,488 23,891Merchandising 4,997 3,840Other 4,730 4,381 70,550 66,324 All turnover derives from the Group's principal activity in the United Kingdomand is exclusive of VAT. 4. Earnings / (loss) per share Earnings / (loss) per share has been calculated using the weighted averagenumber of shares in issue in each year. 2005 2004 £'000 £'000 Retained profit / (loss) 4,104 (2,692) Finance costs in respect of non equity shares 99 50 Profit / (loss) after taxation 4,203 (2,642) Number Number Weighted average number of shares in issue 98,574,822 101,909,150 Effect of dilutive potential: Ordinary shares options - - Convertible redeemable preference shares 93,720,000 - 192,294,822 101,909,150 Basic EPSEarnings / (loss) per share 4.2p (2.6)pDiluted EPSEarnings / (loss) per share 2.2p (2.6)p 5. Reconciliation of operating profit / (loss) to net cash inflowfrom operating activities 2005 2004 £'000 £'000 Operating profit / (loss) 71 (1,189)Depreciation of tangible fixed assets 1,807 1,718Amortisation and impairment of intangible fixed assets 12,741 10,924Profit on disposal of fixed assets - (11)(Increase) / decrease in stocks (40) 297Increase in debtors (536) (27)Increase in creditors 7,103 3,180 Net cash inflow from operating activities 21,146 14,892 6. Reconciliation of net cash flow to movement in net debt 2005 2004 £'000 £'000 (Decrease) / increase in cash in the (1,521) 9,096yearCash outflow from decrease in debt 286 1,470 Cash related (increase) / decrease in net debt in the year (1,235) 10,566Non cash related increase in net debt in the year (33) (35) (Increase) / decrease in net debt in the year (1,268) 10,531Opening net debt (110) (10,641) Closing net debt (1,378) (110) This information is provided by RNS The company news service from the London Stock Exchange