Final Results

Tottenham Hotspur PLC 05 September 2002 5th September 2002 Enquiries: Daniel Levy/Paul Viner Tel: 020 8365 5000 Tottenham Hotspur plc John Bick/Trevor Phillips Tel: 020 7929 5599 Holborn TOTTENHAM HOTSPUR PLC Preliminary results for the year ended 30th June 2002 Summary of Results Eleven Twelve months months ended ended 30th June 2002 30th June 2001 £m £m Turnover 65.0 48.4 Operating profit before profit on sale of player registrations and amortisation 9.2 9.4 Net interest payable (0.7) (0.9) Profit/(loss) on sale of player registrations 6.3 (0.9) Amortisation of players (13.9) (11.1) Profit/(loss) before tax 0.9 (3.5) Earnings/(loss) per share 0.5p (2.5)p • Increased turnover in gate receipts, media, sponsorship and merchandising. • Two new major sponsorship partners commenced July 2002: Thomson - shirt sponsor, Kappa - kit partner. • Player expenditure of £16.7 million; principally Dean Richards, Gustavo Poyet, Christian Ziege and Goran Bunjevcevic. • Profit on player disposals of £6.3 million; principally Luke Young and Ian Walker • Strong balance sheet with Net Assets of £37.7 million and net debt at the year of £7.1 million. Commenting, Daniel Levy, Chairman of Tottenham Hotspur plc, said: 'A number of significant measures have been introduced this year to take the business forward. At the same time, we have worked diligently on our long-term objectives in order to give the necessary infrastructure to the manager to continue to develop a winning team. 'Whilst we remain mindful of maintaining control of costs within the business the current financial year has started positively. We view the remainder of year with the confidence that we will continue to make steady progress with the development of Tottenham Hotspur both on and off the pitch.' Chairman's Statement Results I am pleased to announce results for the year to 30th June 2002. In summary, the results compare favourably to the eleven-month period ended 30th June 2001. A detailed analysis of these results is included in the Operating and Financial Review. A Year of Change The conclusion of the purchase of shares in this Company by ENIC plc in February 2001, which resulted in ENIC plc owning a 29.9% stake, represented the start of a significant period of change for the business. Your Board is firmly focussed on the development of new business opportunities, whilst at the same time devoting the necessary attention to addressing operational issues. All these changes are being made in order to create long-term benefits to the club. As part of these changes, from October, my role became an executive one. This has enabled me to oversee our strategic plans and at the same time make changes to improve the efficiency of the day-to-day running of the business. Turning to the industry over the last year, the most notable changes have been in the media sector. Nationally we have witnessed the collapse of the ITV Digital broadcasting deal with the Football League. Internationally, media deals have collapsed in both Italy and Germany. Elsewhere, in December of last year, the Premier League narrowly averted a players strike. We take all these issues seriously and are conscious of the need to factor these risks into our business plans. All these changes, whether domestic or European, have led to a dramatic change in the football transfer market over the last six months. Coupled with this, in the UK, we are now experiencing the new phenomenon of the transfer window. This has resulted in an even greater need for sensible salary and transfer negotiation. Football Despite some obvious disappointments, I believe that this has been a season of progress for the Club. Although the Worthington Cup Final defeat was a setback, I am pleased that we reached a major Cup Final and the quarter final of the FA Cup in Glenn Hoddle's first full season. We have, in Glenn Hoddle, an extremely talented Team Coach. Glenn is committed to delivering exciting football and returning domestic and European honours to White Hart Lane. The style of football played has been more in the true traditions of the Club. A number of the younger players have flourished and the success of the youth team in reaching the Semi-Final of the FA Youth Cup is encouraging for the Club's long-term future. This shows the strength and depth we are trying to develop, particularly as we continue to put great emphasis on investing in the development of our youth. We are confident that this Summer's signings of Robbie Keane, Jamie Redknapp and Milenko Acimovic will form part of a winning team. In addition to this we have continued our policy of identifying the best young players available and to this end we have invested in Jonathon Blondel, the Belgium Under-19 captain. We thank the players who left this summer for their service to the Club in the past. Chris Armstrong and Oyvind Leonhardsen were released in the summer and we wish them well in their new careers at Bolton and Aston Villa respectively. We have worked hard with Glenn to ensure a balanced squad. We do not believe that we have fully achieved this yet, although we believe that we have made good progress. This summer has been a very challenging market place. Whilst the next transfer window is not until January, we will be working diligently to ensure we have a squad capable of sustained success. Sponsorship In this reporting period we have successfully negotiated our two major sponsorship contracts for our shirt and kit sponsor. I am very pleased to have the association with Thomson and Kappa respectively and I am looking forward to a successful relationship with them both. We have agreed a two-year deal with Thomson, our shirt sponsor. Of great significance is that this is a link up between two leisure companies and we are working with Thomson to develop several initiatives to benefit all parties; the Club, Thomson and our fans. We agreed a four-year deal with Kappa, as the official kit supplier and leisure wear partner. Kappa is at the forefront of sports apparel technology and design. Kappa's design team has a proven track record and provides the award-winning kit for the Italian National Team, along with that of AS Roma, Real Zaragoza and Feyenoord. I would like to take this opportunity to thank our former partners, Holsten and adidas, for their contribution to the business over the last three years. Customer Service, Communication and Marketing Our focus this year has been to improve attention paid to customer care. As part of our commitment to customer service, we have published a Ticket Charter, which has served to make the Club's ticketing policies much more transparent. We are proud to be the first Premiership club to produce such a document. We are striving to ensure that our ticket office delivers a first class service to all. Our ticket pricing changes, issued this Spring, were intended to address some of the imbalance in prices across the Stadium. For this reason, there were a number of large increases in certain areas of the stadium and none in others. In spite of these increases, I am delighted to confirm that for the forthcoming season we will have a record number of season ticket holders. In order to make the purchase of tickets easier, we have launched an online web based ticket sales system. We are proud to be the first club to have taken this initiative which we believe will greatly improve the service to our members with web access who are now able to see a three-dimensional view from each seat in the stadium, and then buy specific seats via our website. This facility will also help alleviate pressure on the ticket office, ensuring a greater level of service for those members who still wish to book tickets by telephone. This is just one of many benefits we offer to our members. The Internet is a key resource available to the business for both communication and marketing. Football is in a unique position as a business in that a substantial number of the clubs' customers regularly use the club website to obtain the latest news and information, in addition to the purchase of tickets and merchandise. We recognise that in order to capitalise on the business opportunities associated with this we need to ensure that our site is well designed and regularly updated. Our web site continues to evolve with new sections being added, most recently including the launch of an auction page where items of memorabilia are sold. The value of the Internet as a commercial channel continues to develop. The bulk of our mail order sales are now placed on line and 75% of the advance orders for our new first team home kit were also placed over the Internet. Although the dot-com bubble has burst, I am convinced that business opportunities on the Internet are there to those who are suitably inventive and who have a robust business model. Next Generation Your Board recognises the need to create and encourage the next generation of fans by encouraging youngsters to the ground. To help achieve this, we have a number of schemes, including the Junior Spurs Members Club, holiday football coaching courses and forthcoming initiatives with Thomson. In addition, to promote football as a day out for all the family, during the last season we designated six games as family games. In addition, we have capped the number of season tickets to ensure there are sufficient match day tickets available to encourage young fans to attend matches. During the last year we established a dedicated marketing department. To support this function we have sourced a Customer Relationship Management system ('CRM'). This CRM software will merge the different databases from Ticket Office, Members, Corporate Hospitality and Mail Order departments, giving a comprehensive overview of our supporter database. The first phase has seen the introduction of this software to our commercial and corporate hospitality business and includes the establishment of a computerised booking system. In the coming months the database will be extended to capture our ticketing, membership and mail order databases. By consolidating our data, we will gain an insight into customers' profiles and historical spend and then create targeted promotions with real benefits to both our corporate customers and our fans. Personnel The internal reporting structure was reorganised last October. We are now ready to embark on the second phase of this process. Paul Viner, our newly appointed Finance Director, is currently in the process of refining our group finance function. Additionally, the conference centre and corporate hospitality departments have been merged. We believe that both these measures will result in increased operational efficiencies for the group. I should like to take this opportunity to thank all our staff for their efforts last season, particularly with the heavy league and cup programme in the early part of this year. Dividends and Share Capital Your Board still hold the view that any surplus profits are currently best re-invested in the Company. We review this policy annually. Shortly, shareholders will receive a Circular seeking their permission to renew the authority to allow the Board to purchase shares up to 10% of the issued share capital of the Company in the market. Whilst this authority was sought but not used last year the Board believe that this authority should be renewed to allow the Company to utilise this flexibility if it is deemed to be in the interest of shareholders. Looking Ahead We have started the process of building the brand internationally. The World Cup finals greatly enhanced the exposure of our players to the Far Eastern market and this will, inevitably, increase commercial opportunities for leading clubs such as Tottenham. We have appointed an International Marketing Consultancy to advise us on the best strategy to exploit those international opportunities. Although this is initially a cost to the business, we believe that it will pay dividends in the longer term. We are currently planning an entry to target countries with a multi-strand programme that will include promotional work, skills schools, merchandise marketing and first team tours. This will be under-pinned with solid research, which should ensure that the gain is real and long-term. We still have all our media rights intact. The FA Premier League is still a year away from renegotiating their TV deal with Sky, which terminates in May 2004. In the meantime, we will continue to exploit our own Internet rights and consider all possibilities for 2004. Our most important current long-term focus is with the development of the Football Academy and the expansion of our White Hart Lane Stadium. We have appointed a firm of property consultants to oversee a clear ten to fifteen year vision of where this Company should be directing its resources in terms of both the development of the stadium and of the Academy. The Academy has been earmarked for a site in Abridge in Essex. To date, we have secured an option on the land of 54 acres and our plans have been submitted to Epping Forest District Council and detailed negotiations continue to obtain the appropriate consent.. I hope to be able to report on the preliminary findings from the planning authority at the time of our interim report next year and provide further details on the proposed joint venture we will undertake with the adjacent Golf Club. In the meantime, our first team and youth teams will continue to train at our Chigwell site. If we are successful in our planning application, once the new facility at Abridge is in use, the current Spurs Lodge training ground will become the home of our successful Football in the Community scheme. This will be the biggest centre of its kind in the UK and will be available for use by local schools, community groups, clubs and athletes. In my statement last year, I was able to report to Shareholders that we had secured planning permission for the East Stand. This was a project that I inherited. Upon review, your Board believe that alternative projects exist which will have a greater benefit to the Company. The aim is to ensure that we have a cohesive plan that will optimise stadium capacity combined with a clear investment rationale and a sensible financial payback. This strategic plan requires consultation with local and central Government, the Mayor's office and Transport for London. Consultations of this nature tend to be drawn out and laborious, and it is unlikely that I will be in a position to report further for some time. Before the Company can approve any expansion of the stadium your Board requires commitment from the various Government departments to invest in the regeneration of the local area. There is no sense in us increasing the capacity of the stadium if our fans are unable to get to and from the ground. Your Board continues to examine all potential sources of long term financing for the group, particularly for the support of major projects such as those outlined above. This includes equity finance in the form of ordinary or preference shares and debt instruments. Summary You will have found, in this statement, details of a number of significant measures we have introduced this year to take the business forward. At the same time, we have worked diligently on our long-term objectives in order to give the necessary infrastructure to the manager to continue to develop a winning team. This Board has a very clear vision of where it wants to take this football club. All associated with this Company are working very hard to position this Club with the elite of European Club football. Daniel Levy Chairman 4th September 2002 Operating and Financial Review Analysis of Results These results cover the year to June 2002 and are compared to the eleven-month period to June 2001. There is no significant revenue in the month of July and as such, comparison of turnover for the two periods is relatively straightforward. Cost comparisons, however, are more distorted and where this is significant the underlying trend has been explained. Turnover Turnover for the year was £65.0m, an increase of £16.6m over the comparative eleven month period. League gate receipts were £20.1m for the year, an increase of 10% over the prior period. These figures reflect record season ticket numbers, near capacity attendances at most home league games, as well as a slight increase in the average ticket price compared to last year. Increases in executive club income, receipts from match-day programmes and income from our members and Junior Spurs also contributed to this rise in turnover. Cup gate receipts were £7.6m (2001- £3.2m). This increase reflects our relative success in both domestic competitions. This year also includes £325,000 of prize money, £275,000 of which is as a result of the first year of the new FA Cup prize system. Television and Media income was £22.6m, an increase of £7.8m on the prior period. For the first time this is the highest income stream for the Group and highlights the relative importance of this high margin income. The main driver for this has been the new three year Premier League TV deal which commenced in August 2001. We have also negotiated significant radio deals with Talk Radio and BBC London that contribute to this annual increase. Sponsorship revenue has increased to £6.8m from £5.6m. This year's income does not include any receipts from our two new sponsors, Kappa and Thomson. These deals commenced on 1st July 2002. The increase of £1.2m arises from both income for the additional month this year and the comparatively higher level of income received from adidas during the final year of their contract. The Merchandising division performance was particularly pleasing given this is against the background of the final year of the adidas deal. Turnover increased by £0.5m to £4.6m. Other income increased by £1.0m to £3.4m, representing some ancillary increases in turnover from the cup performance as well as income earned from the England game staged at White Hart Lane. Cost of Sales and Administrative Expenses Cost of sales excluding player trading was £47.8m (2001 - £32.6m). Last year's eleven month figures did not include the traditionally expensive month of July, where player signing on fees are usually heaviest. The 2001 figures also include the compensation paid for the dismissal of George Graham. This year's figures include salaries for our signings since last summer- Poyet, Sheringham, Ziege, Richards and Bunjevcevic. On a like-for-like basis, the ratio of salary costs to turnover remained in line with the prior period. There were increased costs this year for seven cup games (including the postponed Bolton match) staged at White Hart Lane compared to three in the prior period. Administrative expenses for the year were £8.0m, an increase of £1.6m over the comparative eleven-month period. This year's figures included the costs associated with the additional month in addition to a significant number of one-off items. These one-off items included the costs associated with the reorganisation of the group and the legal expenses relating to the Kappa and Thomson contracts. Administration costs for the group were maintained in line with current inflation. Operating profit before player trading and amortisation Operating profit before player trading is £9.2m, £0.2m below the prior period due to the factors noted above. Net bank interest payable reduced to £0.7m from £0.9m in line with declining interest rates and the reduced bank overdraft. Player Trading and Amortisation Profit on disposal of players of £6.3m (2001 - loss - £0.9m) related largely to the sales last summer of Ian Walker to Leicester City for £2.5m and Luke Young to Charlton Athletic for £3.0m. The remaining £0.8m mainly comprises sell-on-fees received in the period. The major acquisition in the year was the registration of Dean Richards, bought from Southampton for £8.1m. Other purchases during the year were Gustavo Poyet, Christian Ziege and Goran Bunjevcevic. The amortisation charge for the year of £13.9m was £2.8m higher than the comparable eleven month period. The increase reflects both the additional one month's charges and £1.7m arising from the Board's review of the useful economic lives of the intangible assets in line with the relevant Financial Reporting Standards. Included in last year's charge of £11.1m was an impairment charge of £0.8m arising from the retirement through injury of Willem Korsten. Tax Tax of £479,000 is payable on a profit of £946,000, equating to an effective rate of 51%. This rate is higher than the statutory rate of 30% primarily because certain depreciation charges (mainly relating to land and buildings) do not attract tax relief. Last period a loss of £3.5m generated a tax credit of £1.0m. Dividends No dividend is proposed for the reasons outlined by the Chairman in his Statement. Balance Sheet Net Assets now stand at £37.7m, an increase of £0.6m over the restated prior period figure. Last year's Balance Sheet has been restated in line with the new Financial Reporting Standard on Deferred Tax. This resulted in a reduction in prior year Net Assets of £1.8m. Tangible Assets remain largely unchanged at £46.3m. Additions in the year of £1.9m were exceeded by depreciation of £2.2m. Intangible assets increased by £2.8m, the amortisation charge of £13.9m for the year was exceeded by player additions of £16.7m in the year. Stock of £0.3m at the year-end reflects the strong performance of the Merchandise Division. All adidas stock had been sold by the year end, therefore this stock is entirely our own brand products. At the year-end the Bank Overdraft stood at £4.1m (2001 - £10.7m). This broadly reflects the increased cash received in the period from operating activities over the prior year as well as amounts received and paid during the year in respect of player purchases and sales. Debtors at the year end stood at £9.6m, an increase of £2.0m from last year. This increase is largely as a result of a higher balance for monies due in respect of player sales. Creditors due within one year amounted to £40.5m at the Balance Sheet date (2001 - £34.5m). The increase of £6.0m primarily reflects the increase of £5.7m for player purchases. The decrease in the overdraft of £6.6m is largely offset by an increase in deferred income of £5.0m. Deferred income includes monies received from sponsors and season ticket holders which relates to the forthcoming year. Capital Investment Ongoing consideration of our options for capital investment at White Hart Lane and at our Training Ground at Chigwell, has meant that a prudent approach has been taken towards capital expenditure in the year. Only projects that the Board considered to be essential were undertaken. This resulted in additions in the year of £1.9m, the largest element of these relating to development costs for the Academy. Summary The Net Asset position will always, under current accounting standards, only include those player registrations purchased by the group. We have confidence in our youth policy, and the Balance Sheet does not reflect the market values of those players who are home-grown and on long term contracts. Paul Viner Finance Director 4th September 2002 Consolidated Profit and Loss Account For the year ended 30th June 2002 Year ended 30th June 2002 Restated (Note 2) Operations Player Total Eleven months excluding trading* ended 30th June player 2001 trading* Note £'000 £'000 £'000 £'000 (note 3) Turnover: 4 65,033 - 65,033 48,396 Cost of sales (47,837) (13,918) (61,755) (43,733) Gross profit/(loss) 17,196 (13,918) 3,278 4,663 Administrative expenses (7,956) - (7,956) (6,350) Operating profit/(loss) 9,240 (13,918) (4,678) (1,687) Profit/(loss) on disposal of - 6,308 6,308 (867) players' registrations Profit/(loss) before interest and 9,240 (7,610) 1,630 (2,554) taxation Net interest payable (684) (917) Profit/(loss) on ordinary activities 946 (3,471) before taxation Tax (charge)/credit on profit/(loss) (479) 976 on ordinary activities Profit/(loss) on ordinary activities 467 (2,495) after taxation Retained profit/(loss) for the year 467 (2,495) Earnings/(loss) per share - basic 5 0.5p (2.5)p Earnings/(loss) per share -diluted 5 0.5p (2.5)p *Player trading represents the amortisation, impairment and the profit or loss on disposal of players' registrations. Turnover and operating profit/(loss) all derive from continuing operations. Statement of Total Recognised Gains and Losses Year ended 30th June 2002 Restated (Note 2) Eleven Months Year ended 30th June Ended 30th June 2002 2001 £'000 £'000 Profit/(loss) for the financial period and total recognised gains 467 (2,495) and losses in the period Prior period adjustment (note 2) (1,773) - Total recognised gains and losses since last annual report (1,306) (2,495) Consolidated Balance Sheet as at 30th June 2002 Group Company Restated Restated (Note 2) (Note 2) 30th June 30th June 30th June 30th June 2002 2001 2002 2001 £'000 £'000 £'000 £'000 Fixed assets: Intangible assets 27,741 24,937 - - Tangible assets 46,306 46,611 46,289 46,572 Investments - - 1,345 1,345 74,047 71,548 47,634 47,917 Current assets: Stocks 260 912 260 912 Debtors 9,582 7,598 10,513 14,088 9,842 8,510 10,773 15,000 Creditors - Amounts falling due within one year (40,564) (34,519) (12,888) (17,349) Net current liabilities (30,722) (26,009) (2,115) (2,349) Total assets less current liabilities 43,325 45,539 45,519 45,568 Creditors - Amounts falling due after more than one year (3,918) (6,444) (3,918) (5,444) 39,407 39,095 41,601 40,124 Provisions for liabilities and charges: (1,744) (1,987) (1,754) (1,773) Net assets 37,663 37,108 39,847 38,351 Capital and reserves: Called-up share capital 5,102 5,085 5,102 5,085 Share premium account 11,358 11,287 11,358 11,287 Revaluation reserve 2,576 2,624 2,236 2,284 Profit and loss account 18,627 18,112 21,151 19,695 Equity shareholders' funds 37,663 37,108 39,847 38,351 Consolidated Cash Flow Statement For the year ended 30th June 2002 Year ended Eleven months ended 30th 30th June 2002 June 2001 Note £'000 £'000 £'000 £'000 Net cash inflow from operating activities 6 17,621 8,340 Returns on investments and servicing of finance: Interest received 2 21 Interest paid (663) (996) Interest element of finance lease payments (15) (41) Net cash outflow for returns on investments and servicing of finance (676) (1,016) UK corporation tax paid (120) (1,497) Capital expenditure and financial investment: Payments to acquire registrations (11,047) (10,201) Receipts from sales of registrations 4,153 8,084 Payments to acquire tangible fixed assets (1,888) (570) Net cash outflow for capital expenditure and financial investment (8,782) (2,687) Cash inflow before use of liquid resources and financing 8,043 3,140 Financing: Issue of ordinary share capital 88 - Bank loan repayments (1,177) (1,176) Capital element of finance lease payments (323) (299) Net cash outflow from financing (1,412) (1,475) Increase in cash 6,631 1,665 Notes to the Accounts For the year ended 30th June 2002 1. The financial information set out on the attached pages does not constitute statutory accounts for the periods ended 30th June 2002 or 30th June 2001 but is derived from those accounts. Statutory Accounts for the period ended 30th June 2001 have been delivered to the Registrar of Companies and those for the year ended 30th June 2002 will be delivered following the conclusion of the Company's forthcoming Annual General Meeting. The Auditors have reported on these accounts and their reports are unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. The Financial Statements have been prepared on the basis of the accounting policies in previous period's Financial Statements, except for the adoption of FRS 19 - see Note 2. 2. The adoption of FRS 19 'Deferred Tax' has decreased the equity shareholders' funds at 30th June 2001 by £1,773,000, and the profit for the eleven months ended 30th June 2001 by £132,000. The prior period results have been restated accordingly. 3. Analysis of comparative Profit and Loss Account Operations excluding player trading Player trading Total £'000 £'000 £'000 Turnover 48,396 - 48,396 Cost of sales (32,624) (11,109) (43,733) Gross profit 15,772 (11,109) 4,663 Administrative expenses (6,350) - (6,350) Operating profit/(loss) 9,422 (11,109) (1,687) Loss on disposal of registrations - (867) (867) Profit/(loss) before interest and taxation 9,422 (11,976) (2,554) 4. Turnover Turnover, which is all derived from the Group's principal activity, is analysed as follows: Eleven months ended Year June 2001 ended June 2002 £'000 £'000 Gate receipts - Premier League 20,094 18,272 Gate receipts - Cup Competitions 7,582 3,207 Media and Broadcasting 22,594 14,765 Sponsorship 6,763 5,631 Merchandising 4,626 4,135 Other 3,374 2,386 65,033 48,396 All turnover derives from activities in the United Kingdom and is exclusive of VAT 5. Earnings/(loss) per share Earnings per share have been calculated using the weighted average number of shares in issue in each period. Eleven Months Year ended ended June 2001 June 2002 £'000 £'000 Profit/(loss) after taxation 467 (2,495) Number Number Weighted average number of shares in issue 101,880,912 101,694,480 Effect of dilutive potential ordinary shares Options 17,866 (563,811) 101,898,778 101,130,669 Basic EPS Earnings/(loss) per share 0.5p (2.5)p Diluted EPS Earnings/(loss) per share 0.5p (2.5)p 6. Reconciliation of operating loss to net cash inflow from operating activities Eleven Year Months ended ended June 2002 June 2001 £'000 £'000 Operating loss (4,678) (1,687) Depreciation charge 2,175 1,442 Amortisation of registrations 13,918 11,109 Loss on disposal of fixed assets 18 - Decrease in stocks 652 139 Decrease/(increase) in debtors 171 (4,130) Increase in creditors 5,365 1,467 Net cash inflow from operating activities 17,621 8,340 7. Reconciliation of net cash flow to movement in net debt Eleven Year Months ended ended June 2002 June 2001 £'000 £'000 Increase in cash in the year 6,631 1,665 Cash outflow from decrease in debt and lease financing 1,500 1,475 Movement in net debt in the period 8,131 3,140 Opening net debt (15,186) (18,326) Closing net debt (7,055) (15,186) This information is provided by RNS The company news service from the London Stock Exchange

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