Interim Results

Tottenham Hotspur PLC 26 February 2003 EMBARGOED UNTIL 07:30 Date: 26 February 2003 Enquiries: Daniel Levy, Chairman Paul Viner, Finance Director Tel: 020 8365 5000 Tottenham Hotspur plc www.spurs.co.uk John Bick/Trevor Phillips Tel: 020 7929 5599 Holborn TOTTENHAM HOTSPUR PLC Interim Results for the Six Months Ended 31 December 2002 Summary of Results Six months Six months ended ended 31 December 2002 31 December £m 2001 £m Turnover 32.8 29.4 Operating profit before profit on sale of player 2.7 2.9 registrations and amortisation Net interest payable (0.2) (0.4) Profit on sale of player registrations 0.1 5.8 Profit before tax and player amortisation 2.6 8.3 Amortisation of players (11.2) (5.5) (Loss) / profit before tax (8.6) 2.9 (Loss) / earnings per share (8.5)p 1.9p Daniel Levy, Chairman of Tottenham Hotspur plc, said: 'We currently face some very significant challenges, but your Board is confident that the changes that have taken place in the business to date mean that we are well positioned to benefit from the future success of the team. We now have a strong management in place across the business but know that we must continue to develop additional income and carefully manage the fixed cost base.' Chairman's Statement Financial Results The results for the first six months of this financial year compared to the six months to December 2001 show a decrease in operating profitability before player trading of £0.3m to £2.7m. Excluding one-off administration costs totalling £1.7m, the underlying operating profit indicates that the business is performing successfully in these more challenging times. The one off costs include the expensing to the Profit and Loss Account of £1.2m worth of costs relating to the proposed Academy and first team training facility at Abridge. These costs were previously carried as an asset in the Balance Sheet, however due to the uncertainty surrounding the project created by the refusal of planning permission by Epping Forest District Council, your Board feels it is no longer prudent to adopt such a policy. Your Board has also taken a prudent approach in relation to £0.5m of professional costs incurred in the period for the possible future development of the White Hart Lane site. There is a loss before taxation of £8.6m against a profit before tax of £2.9m in the equivalent prior period. The main reason for the difference in results below the operating profit level is that this year's player trading takes account of a material accounting write down of £5.1m on the valuation of Sergei Rebrov's registration. Whilst this is a significant accounting adjustment, the decision to dispose of this player on a long-term loan agreement reinforces the company's commitment to reducing player wages in the future. In the comparable period to December 2001, the company showed profits on player disposals of £5.8m coming from the sale of two 'home-grown' players. Since the collapse of ITV Digital in the UK and the curtailment of various media operations across Europe early last year, falling player valuations and recently imposed transfer windows, player-trading opportunities have diminished as a result of the severe illiquidity in the transfer market. Turnover for the group shows a like for like increase of £3.4m (11%) to £32.8m. With the exception of Cup income, turnover has increased across all areas of the business. In the half year to 31 December 2002 the number of competitive home fixtures was eleven, consisting of ten games in the FA Premier League and one in the Worthington Cup. This compares with ten in the FA Premier League and two in the Worthington Cup for the comparable six months to 31 December 2001. League gate receipts, which include programme income, Spurs members income, matchday ticket income, season ticket income, executive club memberships and executive box income have increased by £1.3m to £12.0m (2001: £10.7m). This increase is due to a number of factors; an increase in average prices and match day attendances, an increase in executive box and executive members income and an increase in the numbers and income from our Spurs Members. By contrast, our Cup fortunes have been disappointing this year and an exit in the third round away at Burnley in the Worthington Cup meant that only one Worthington Cup match was played at White Hart Lane in the period. In total there were two Worthington Cup games played this season as against four in the half year to December 2001. Shareholders should note that there will be little additional income to report from Cup competition in the second half of the year, as we were eliminated from the FA Cup in the third round away to Southampton. Media and Broadcasting income shows an increase of 12% to £10.2m, during this reporting period (2001: £9.1m). There are four key factors for this increase; an increase in the basic television fee received from the FA Premier League, an increase in the number of Pay Per View games shown (four against two last year), a sharp increase in the amount of money paid by the FA Premier League to Clubs for each Pay Per View appearance and an increase in the amounts paid by the FA Premier League to Clubs for the sales of their overseas television rights. In total, we were shown live five times on Sky television in the half year, one less appearance than in the six months to 31 December 2001. Sponsorship income includes the income from our two new sponsorship partners Thomson and Kappa. Together with matchday and stadium sponsorship these factors account for the increase in turnover from £2.9m to £3.4m. We are pleased with the performance of our merchandising division where turnover has increased to £3.9m from £3.1m. However shareholders should note that our early cup exit will have a negative effect on turnover growth in the second half. This period's revenue includes the launch of the new Kappa branded products including the sales of new home and away kits, which have been very well received by our supporters. Additionally, much effort has taken place across all areas of this business division over the past two years to increase turnover, margin, product range, operational efficiency and profitability. A simple change in store layout in our Megastore this summer, together with an increase in the number of tills has substantially improved the volume of products sold by this store each matchday. I am also pleased to report that Web-based sales continue to rise. Other income, which mainly includes catering royalties and pre-season friendly revenue increased by 34% to £2.2m, largely as a result of the pre-season friendly campaign, with two fixtures being played at White Hart Lane in August 2002. Cost of sales before amortisation but including player wages increased by 8% to £24.2m. The player additions of Robbie Keane and Jamie Rednapp last summer and in September 2001 of Dean Richards, account for a substantial part of the £1.7m increase. Other costs of sales remain largely in line with last year although costs of sales for the Merchandise Division rose as a result of the increased sales of £0.8m. Although player wage costs have increased when compared to the six months to December 2001, the ratio of player salary costs versus total revenues remains unchanged from the prior period. Amortisation of player registrations is distorted by the adjustment made to the remaining net book value of Sergei Rebrov's registration. Underlying amortisation showed an increase of £0.6m at £6.1m as the effects of the Club's investments in new players over the last 18 months is reflected. Administrative expenses increased from £4.0m to £5.9m. As previously explained, there are one-off items of expenditure in this half-year totalling £1.7m, as your Board adopts a prudent view on the non-capitalisation of development costs relating to possible future capital projects. On-going administrative expenses were entirely in line with last year, with the exception of our group insurance costs, which increased above inflation, reflecting the much more challenging insurance market place, particularly on terrorist cover. Profit on the disposal of player registrations amounts to just £0.1m in the period, reflecting the poor state of the transfer market. The sale of Ian Walker and Luke Young ensured a profit on disposal of player registrations of £5.8m in the six months to December 2001. The interest charge of £0.2m (2001: £0.4m) takes account of the lower average debt in the period. The tax charge for the period is £nil (2001: £0.9m) as a result of estimated tax losses for the full year for which no deferred tax asset has been recognised. The Balance Sheet shows net assets of £29.0m (2001: £39.1m). The overall Group debt shows a year on year decrease of £3.0m from £19.8m to £16.8m. There was a net cash outflow from operating activities of £0.7m (2001: cash inflow of £2.2m). During the period instalments on player transfers and the payment for fixed assets of £12.1m were paid, however the draw down of £10.0m working capital (repayable over 20 years) resulted in an overall cash inflow of £0.8m (2001: cash outflow of £5.4m). Football As we enter the final few months of the season, Tottenham Hotspur is well placed in the FA Premier League. This year in particular, we have seen the team achieve greater consistency in its league results. Consequently, the Club remains a challenger this season for qualification to European competition next season. Despite our disappointment with the team's early exit from both Cup competitions, we have generally performed very well at home, in front of capacity crowds and we have achieved an all-time high take-up of season tickets. The arrival of Robbie Keane in August was an important step for the Club as the manager added to the squad a proven young player. Another addition in January of this year was the arrival of the Japanese international, Kazuyuki Toda. A number of players left the Club in January and we thank them all for their services. The disposal of four players namely Les Ferdinand, Stephen Clemence, Sergei Rebrov and Tim Sherwood were completed in an extremely challenging market place. In particular, we have learnt lessons from the expensive acquisition of Rebrov. We continue to monitor our players' contractual situations. Over the last six months we have seen more clubs coming under increasing financial pressures. It is a priority for every Club, regardless of size, to achieve a workable balance between costs and income, particularly against the background of a very difficult player trading market where few cash transactions have taken place. Your Board continues to pursue its policy regarding player contracts that can sensibly reflect both the rewards commensurate with the team's performance on the pitch and our strict criteria for maintaining a level of fixed costs the business can sustain. We will be working hard with the Manager in the next transfer window during the summer to strengthen the squad where appropriate and where availability of funds allow. The Club continues to strive for success without compromising its playing ideals and everyone at the Club is working together to achieve that goal. Commercial We have continued to achieve solid progress with the development of the Club's commercial operations. Our two primary sponsorship partners Thomson and Kappa have both been well received at the Club and we continue to work hard at these partnerships to our mutual benefit. We are also in the early stages of developing a second tier of partnerships that will exist alongside the main Club sponsor, Thomson and kit sponsor, Kappa. Partners in this area are intended to have a strong business connection with the Club's supporter base and business objectives. These future partnerships will be lower in overall value than our primary sponsorship partners but will offer category exclusivity to each partner respectively and designed to bring the benefits of specific services and products to the Club's supporter base. I am pleased to say that Coors has joined this tier of partners as official beer sponsor to the Club with pouring rights at White Hart Lane stadium and MBNA continues as the official credit card partner to the Club where we enjoy our fifth successful year in partnership together. As part of our ongoing customer care policy we are determined to improve the quality of the offer to our customers, both public and corporate. In this regard I have commissioned a survey, which is currently taking place, of all box holders to obtain their views on the quality of the product offering. We have now completed our customer care survey of public area catering, the results of which are currently undergoing analysis. In addition, the Club's ground breaking Ticket Charter, published in August 2002, recently received specific praise from The Independent Football Commission Report published in January of this year recommending that other Premiership Clubs produce similar Charters. Finally, our new CRM system, the culmination of a year of planning and preparation, will be fully operational later this year and will allow us to communicate in a timely and relevant manner with our fans through their preferred channel, be that e-mail, post or mobile phone. Media Despite the strong performance of the business we remain mindful of the current deliberations regarding the next round of FA Premier League media rights negotiations with broadcasters. Premiership clubs receive income from a media rights contract negotiated under a collective arrangement with the FA Premier League. The current contract is still in the second year of a three-year agreement, however the FA Premier League has been notified by the EU Competition Commission to change the structure of the distribution of the next package of media rights. Whilst we believe the Premier League product is stronger than ever, it is still not clear how any new arrangement will be structured, in particular, how the demands of the EU Competition Commission can be met without an erosion of the overall financial benefits that the Premiership Clubs receive under the current arrangement. This issue is creating uncertainty as to this most important revenue stream and we must remain cautious when planning the longer-term development of our business. Development Projects In my last report to shareholders I set out the Club's ambitions for a new Tottenham Hotspur Academy and First team training facility and we were subsequently able to announce the start of a planning process at a proposed green belt site in Abridge, Essex. Despite the hard work of everyone at the club involved in the project, the result from the Planning Committee of the Local Authority on 24 February 2003 was to reject our proposal. Whilst the decision did not come as a complete surprise it is nonetheless disappointing and the Board will now reassess all of its options, including a possible appeal, with regard to the youth and first team training and development facilities. We have continued to pursue a solution to the local transport infrastructure that services White Hart Lane stadium on match days. I am pleased to say that a report has now been commissioned by the London Transport Authority to carry out a feasibility study for the extension of the Victoria Line underground to Northumberland Park. I have said in prior statements that any further significant stadium improvements which involve increasing the overall capacity of the stadium can only proceed successfully with the support of the various government authorities. Without a definitive agreement that can fund the essential improvements in the local infrastructure necessary for us to accommodate an expansion at White Hart Lane, we must keep all options open, including the alternative measure of a move away from our current stadium. In this regard I would like to thank the 13,000 supporters that recently completed a questionnaire on our web site relating to these issues. Financing and Dividends Shareholders will be aware that in November 2002, we agreed project finance facilities of up to £65.0m. There are very specific conditions attached to the use of this money, specifically for capital development projects such as the Stadium and the Academy. We also secured as working capital an additional £10.0m, which has replaced an existing drawn facility at our clearing bank. There has been no change in your Board's view on the payment of dividends and we continue to believe that any surplus funds are best re-invested in the business. Outlook We currently face some very significant challenges, but your Board is confident that the changes which have taken place in the business to date mean that we are well positioned to benefit from the future success of the team. We now have strong management in place across the business but know that we must continue to develop additional income and carefully manage the fixed cost base. We are doing all we can to ensure that our playing squad is capable of sustained success and the development of the Academy remains a priority to support the longer term aims of the Club in both domestic and European competition. Finally, I would like to thank our loyal employees, supporters and shareholders for their continued support of Tottenham Hotspur. Daniel Levy Chairman 25 February 2003 Consolidated Profit and Loss Account For the six months ended 31 December 2002 Six months ended 31 December 2002 Operations Player Total Six months Year ended 30 excluding trading* ended 31 June 2002 player (Note 2) December 2001 trading* Note £'000 £'000 £'000 £'000 £'000 Turnover: Gate receipts - Premier League 12,031 12,031 10,737 20,094 - Cup competitions 1,061 1,061 1,841 7,582 Media and Broadcasting 10,197 10,197 9,137 22,594 Sponsorship and match day 3,377 3,377 2,914 6,763 hospitality Merchandising 3,875 3,875 3,124 4,626 Other 2,209 2,209 1,641 3,374 32,750 32,750 29,394 65,033 Cost of sales (24,206) (11,170) (35,376) (28,029) (61,755) Gross profit 8,544 (11,170) (2,626) 1,365 3,278 Administrative expenses (5,875) (5,875) (3,963) (7,956) Operating profit/(loss) 2,669 (11,170) (8,501) (2,598) (4,678) Profit on disposal of - 118 118 5,844 6,308 registrations Profit/(loss) before interest 2,669 (11,052) (8,383) 3,246 1,630 and taxation Net interest payable (245) (389) (684) (Loss)/profit on ordinary (8,628) 2,857 946 activities before taxation Tax charge on profit on 3 (905) (479) ordinary activities (Loss)/profit on ordinary (8,628) 1,952 467 activities after taxation Equity dividends - - - Retained (Loss)/profit for the (8,628) 1,952 467 period (Loss)/earnings per share - 5 (8.5)p 1.9p 0.5p basic (Loss)/earnings per share - 5 (8.5)p 1.9p 0.5p diluted *Player trading represents the amortisation of registrations and the profit or loss on disposal of registrations. There were no recognised gains or losses other than as stated in the Consolidated Profit and Loss Account above. The results for each period are all from continuing operations. Consolidated Balance Sheet as at 31 December 2002 31 December 31 December 30 June 2002 2002 2001 £'000 £'000 £'000 Fixed assets: Intangible 24,243 34,701 27,741 Tangible 46,777 46,569 46,306 71,020 81,270 74,047 Current assets: Stocks 969 409 260 Debtors 8,720 11,208 9,582 9,689 11,617 9,842 Creditors - Amounts falling due within one year (35,225) (47,100) (40,564) Net current liabilities (25,536) (35,483) (30,722) Total assets less current liabilities 45,484 45,787 43,325 Creditors - Amounts falling due after more than one year (14,705) (4,696) (3,918) 30,779 41,091 39,407 Provisions for liabilities and charges: Deferred taxation (1,744) (1,943) (1,744) Net assets 29,035 39,148 37,663 Capital and reserves: Called-up share capital 5,102 5,102 5,102 Share premium account 11,358 11,358 11,358 Revaluation reserve 2,552 2,600 2,576 Profit and loss account 10,023 20,088 18,627 Equity shareholders' funds 29,035 39,148 37,663 Consolidated Cash Flow Statement For the six months ended 31 December 2002 6 months ended 6 months ended Year ended 31 December 31 December 2001 30 June 2002 2002 £'000 £'000 £'000 Net cash (outflow)/inflow from operating activities (note 6) (683) 2,248 17,621 Returns on investments and servicing of finance: Interest received 12 2 2 Interest paid (177) (306) (663) Interest element of finance lease payments (1) (8) (15) Net cash outflow for returns on investments and servicing of (166) (312) (676) finance UK corporation tax paid - - (120) Capital expenditure and financial investment: Payments to acquire fixed assets (12,084) (10,069) (12,935) Receipts from sales of fixed assets 3,199 3,424 4,153 Net cash outflow from capital expenditure and financial (8,885) (6,645) (8,782) investment Cash (outflow)/inflow before use of liquid resources and (9,734) (4,709) 8,043 financing Financing: Issue of ordinary share capital - 88 88 Bank loan repayments (588) (588) (1,177) Bank loan drawn down 1,375 - - Other loan drawn down 10,000 - - Capital element of finance lease payment (215) (176) (323) Net cash inflow/(outflow) from financing 10,572 (676) (1,412) Increase/(decrease) in cash 838 (5,385) 6,631 Notes to the Consolidated Interim Statements For the six months ended 31 December 2002 1. Accounting policies The financial information given above does not constitute statutory accounts within the meaning of Section 240(5) of the Companies Act 1985. The figures for the year ended 30 June 2002 have been extracted from the statutory accounts which have been delivered to the Registrar of Companies. The audit report on these accounts was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. Basis of preparation The interim financial statements have been prepared on the basis of the accounting policies set out in the statutory accounts for the year ended 30 June 2002. Intangible fixed assets The costs associated with the acquisition of players' registrations and coaching staff are capitalised as intangible fixed assets. These costs are fully amortised over their useful economic lives, generally in equal annual instalments over the period of the respective contracts. Players' registrations are written down for impairment when the carrying value exceeds the amount recoverable through use or sale. Signing on fees Signing on fees are charged to player and match expenses in the Profit and Loss Account in the accounting period in which they are payable. Income recognition Ticket income is recognised when the matches take place. Fixed elements of broadcasting contracts are taken over the football season, with facility fees taken when earned. One unit of the merit award is taken over the course of the season, with the remainder of the award recognised when known at the end of the season. These statements were approved by the Board of Directors on 25 February 2003 and are neither audited nor reviewed. These results were announced to the Stock Exchange on 26 February 2003 and are being posted to all shareholders. Copies will be available to personal callers at the registered office, Bill Nicholson Way, 748 High Road, Tottenham, London, N17 0AP. 2. Player Trading 6 months ended 6 months ended Year ended 31 December 31 December 2001 30 June 2002 2002 £'000 £'000 £'000 Proceeds 118 5,844 6,308 Net book value of disposals - - - Profit on disposal of registrations 118 5,844 6,308 The amortisation charges on registrations included in cost of sales for the comparative periods were £5,532,000 for the six months ended 31 December 2001 and £13,918,000 for the year ended 30 June 2002. 3. There is no current tax charge for the period as a result of estimated tax losses for the full year. No deferred tax asset has been recognised in respect of these losses. Other deferred taxation movements in the period are not considered to be material. 4. The Directors do not recommend an interim dividend. Notes to the Consolidated Interim Statements For the six months ended 31 December 2002 continued 5. The calculation of (loss)/earnings per share is based on the basic and fully diluted earnings attributable to shareholders as follows: 6 months ended 6 months Year ended 31 December ended 30 June 2002 31 December 2002 2001 £'000 £'000 £'000 Profit/(loss) after taxation (8,628) 1,952 467 Weighted average number of shares in issue 102,041,520 101,726,543 101,880,912 Effect of dilutive potential ordinary shares Options 11,981 19,578 17,866 102,053,501 101,746,121 101,898,778 Basic EPS Earnings/(loss) per share (8.5)p 1.9p 0.5p Diluted EPS Earnings/(loss) per share (8.5)p 1.9p 0.5p 6. Reconciliation of operating loss to net cash (outflow)/inflow from operating activities. 6 months ended 6 months ended Year ended 31 December 31 December 30 June 2002 2001 2002 £'000 £'000 £'000 Operating profit/(loss) (8,501) (2,598) (4,678) Depreciation charge 2,054 840 2,175 Amortisation of registrations 11,170 5,532 13,918 Profit on disposal of tangible fixed assets - - 18 (Increase)/decrease in stock (709) 503 652 (Increase)/decrease in debtors (2,219) (1,190) 171 (Decrease)/increase in creditors (2,478) (839) 5,365 Net cast (outflow)/inflow from operating activities (683) 2,248 17,621 7. Reconciliation of net cash flow to movement in net debt 6 months ended 6 months ended Year ended 31 December 31 December 30 June 2002 2001 2002 £'000 £'000 £'000 Increase/(decrease) in cash in the period 838 (5,385) 6,631 Cash (inflow)/outflow from (increase)/decrease in debt and (10,572) 764 1,500 lease financing Movement in net debt in the period (9,734) (4,621) 8,131 Net debt at start of period (7,055) (15,186) (15,186) Net debt at end of period (16,789) (19,807) (7,055) This information is provided by RNS The company news service from the London Stock Exchange

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