Final Results

Tottenham Hotspur PLC 16 October 2001 16th October 2001 Enquiries: Daniel Levy, Chairman Tel: 020 8365 5000 David Buchler, Vice Chairman Tottenham Hotspur plc John Bick/Trevor Phillips Tel: 020 7929 5599 Holborn Tottenham Hotspur plc Preliminary Results for the eleven months ended 30th June 2001 Summary of Results Eleven Twelve Months Months Ended Ended 30th June 31st July 2001 2000 £m £m Turnover 48.4 48.0 Operating profit before player trading and 9.4 7.5 amortisation of players Net interest payable (0.9) (0.7) Player Trading (0.9) 3.9 Amortisation of players (11.1) (11.5) Loss before tax (3.5) (0.8) (Loss)/earnings per share (2.3)p 0.1p Commenting, Daniel Levy, Chairman of Tottenham Hotspur plc, said: 'Tottenham Hotspur has a strong and proud heritage. Looking to the future, we have two key objectives for the Club: firstly to continue to develop and strengthen our ability to compete for domestic and European honours and, secondly, to build a strong, clear brand position, nationally and internationally. 'We have outlined two significant investment initiatives which will be high priorities, the Spurs Academy and the development of the Stadium, and we will continue to explore these during the coming year. We are committed to delivering long term success on and off the pitch and improving shareholder value.' Chairman's Statement I am pleased to announce the results for the eleven month period to 30th June 2001. In February of this year ENIC plc concluded its purchase of 27.4 million ordinary shares in Tottenham Hotspur plc from Amshold Limited resulting in ENIC being a 29.9 per cent shareholder. Since then the new management team has concluded a thorough review of the business. I am pleased to report that many of its recommendations have already been actioned. During the second half of the financial period I have been delighted with the way in which everyone at the Club has embraced change. Results Earlier in the year we announced a change in the year-end from July to June and as a consequence we report to you today on the eleven months to 30th June 2001 compared to the twelve months to 31st July 2000. The comparative figures in this statement are therefore not always representative and more detail is given in the Operating and Financial Review that follows. Turnover of £48.4m (2000 - £48.0m) was essentially unchanged from last year with increases from domestic TV and broadcasting being offset by the absence of revenue streams from European football in which we participated the previous season. Operating profit before player trading of £9.4m (2000 - £ 7.5m) remains healthy but the costs of amortisation and player trading led us to a loss before interest and tax of £2.6m (2000 - £0.1m loss). I am delighted to report that the balance sheet remains strong despite a 6 per cent decrease in net assets to £38.9m. Gearing is also 5 per cent lower at 39 per cent of shareholders funds comprising some £15.1m. In addition, a number of very good young players are now qualifying for the first team squad either from our own Academy or acquired at relatively low cost, and this potential value is not reflected in the Balance Sheet. As in prior years, your Board has decided with respect to this financial period that any surplus funds will be re-invested into the Company and therefore there will be no dividend paid to shareholders. Management As previously reported to shareholders a Strategic Review of all operations and resources has been carried out. A number of recommendations have been made to the Board, some already implemented include initiatives which affect the working culture of the staff and improved internal communications. There has also been a tighter definition of roles and as a result, John Sedgwick, Chief Operating Officer and Finance Director and John Ireland, Company Secretary, leave the Company today. We would like to thank them both for their contribution to Tottenham Hotspur, particularly for their work with David Buchler over the last six months. We wish them well for the future. David Buchler, who has been responsible for the Strategic Review in his role as Executive Vice Chairman will now take a Non Executive role within the Company. With effect from today, I move from a Non Executive role to an Executive role and as such will be responsible for the management of the Company. Paul Viner ACA, who is the Company's Financial Controller, becomes Finance Director Designate and Company Secretary with immediate effect. Paul joined the Company in January 1996 as Financial Accountant and was appointed Financial Controller in July 1999. Football Glenn Hoddle was appointed first team manager on 1st April 2001. He has a proven managerial record for club and country. This together with his playing image gives us an advantage when attracting players of international quality. He also has an affinity with Spurs and I am confident in his capability to achieve long-term success at this Club. We were all disappointed by Sol Campbell's decision to leave, despite considerable attempts by the Club to strike an agreement. Recognising the fact that the Club had several talented youngsters who lacked experience the Manager has bought a number of experienced and international players. Goran Bunjecevic (Red Star Belgrade), Gus Poyet (Chelsea), Teddy Sheringham (Manchester United), Christian Ziege (Liverpool), Kasey Keller (Real Vallecano) and Dean Richards (Southampton) have joined and we wish them successful careers at Spurs. During the year two young players, Simon Davies (Wales) and Gary Doherty (Eire), are to be congratulated for winning their first senior international caps. Regularly selected international players were Stephen Carr (Eire), Neil Sullivan (Scotland), Oyvind Leonhardsen (Norway), Steffen Iversen (Norway) and Sergiy Rebrov (Ukraine). Also Ledley King became a regular England Under 21 international. We were all saddened by the forced retirement of Willem Korsten on medical grounds. He showed much promise since joining the Club in 1999 from Vitesse Arnhem and we wish him well. We were proud to host the first senior international match at White Hart Lane since November 1949, when England entertained Holland in August. As part of the Club's pre-season programme we were delighted to stage the Bill Nicholson Testimonial game against Italy's Fiorentina. It was a memorable evening for everyone in the capacity crowd at White Hart Lane and a suitable tribute to this great man of football and Tottenham Hotspur. The Spurs Academy We believe that our long-term strategy must be to focus on the development of home grown talent and build on the success of our young players. Young players who have progressed to senior football include Stephen Carr, Ledley King, Stephen Clemence and Alton Thelwell. Players leaving included Sol Campbell, Luke Young and Ian Walker, all of who came through our system. We wish them well. As a result your Board is currently considering a programme of investment in the development of the Spurs Academy over the medium term. The Spurs Academy, involving over 180 young players, has already shown itself to be invaluable in producing the Club's future players and as such is a top priority. We have drawn up extensive plans designed to create a world class arena for young talent and future First team candidates. We are currently in discussions with property consultants to extend the current site at Spurs Lodge in Chigwell, Essex or to relocate and I shall report on the outcome of these in due course. The Stadium Your Board is looking at the different options for improvements of the stadium. In particular we are looking at the complete redevelopment of the East Stand in order to increase total stadium capacity from around 36,000 to approximately 44,000 and improve the facilities available to fans in that part of the ground, now the oldest and least developed of our facilities. We have received conditional planning approval but whilst our plans for the development are advancing based on a new three-tier cantilever stand, we remain cautious not to incur any further major expense until the Club has more details from the Local Authority regarding its development plans for the area. In particular, these include proposed improvements to the transport infrastructure servicing the stadium. We are continuing our discussions with the Local Authority. Commercial As part of the restructuring of our commercial department, we have planned for a central marketing resource to sit alongside and support our sales team and support all other operational areas of the business. A priority for this team will be the development and extension of the Tottenham Hotspur brand. This is vital if the Club is to develop long-term, profitable relationships with key sponsors and commercial partners. The retail environment continues to be a challenging one and our Merchandising Division is no exception. We have already made improvements to the operational cost base of the business and are continuing to look at a number of economic improvements in order to improve overall margins in this area as well as increasing revenues which includes continued work on the development of our internet-derived sales. Media Whilst a number of English and European clubs have already agreed joint venture media deals in one form or another, Tottenham Hotspur has retained all of its rights in this regard including all of its Internet-based rights. In the long-term, with our rights intact, we believe we can secure greater value than is likely with any media relationship that could be concluded in today's difficult marketplace. The Tottenham Hotspur official site (www.spurs.co.uk) is managed by BSkyB, and we will continue to work with them to develop this important service. We believe that it will become an increasingly important medium with which to reach our fan base both in the UK and internationally. Our strategy regarding the use of delayed media rights will become progressively aligned to the ongoing development of our web-site, eventually carrying video streamed highlights of our Premiership games, goals and match reviews and interviews, particularly as the appropriate technology becomes more economically available to the consumer market in the UK. Youth Our Community Project, providing training for youngsters, has been running for three successful years. Additionally, we joined the national Football in the Community Scheme ('FITC'). A new initiative for the scheme is the creation of a forum which will involve local school heads and representatives from Haringey Council. Our new partnership with FITC will now enable us to run additional free coaching schemes and reach a wider range of youngsters. Our Junior Membership continues to enjoy good support. Families I am delighted that we have increased our family matches to six games this season, each with concessionary prices available in various parts of the ground. Youth and families continue to be important audiences for the Club and our current activities and ticket pricing policies reflect this. Supporter Forums We have also seen improved dialogue with the newly created Tottenham Hotspur Supporters Trust and Supporters Clubs (nationally and internationally). We look forward to this continuing to the mutual benefit of the fans and the Club. Finance Additional recommendations, of a longer-term nature, are now with the Board for further investigation to address a number of challenges that confront our Club both now and in the future. It is imperative to maintain a firm control of costs. At the same time we must generate revenue streams to enable us to maintain a competitive playing squad that in turn will enhance the former. It is no secret that they drive each other but it must be done carefully and responsibly. I have outlined two significant investment initiatives, the Spurs Academy and the Stadium that are, in the main, projects of a long-term nature and as such, we continue to be mindful of the investment required to take them through to completion. Our Balance Sheet remains strong and there are also a number of potential funding routes available to the Company that the Board will take into consideration in the future as and when it becomes appropriate to do so. Outlook The company continues to trade in-line with our expectations although we remain mindful of the prevailing difficult economic conditions. Our priority is to continue the solid progress achieved already this year and our aims for the longer-term success of the Club remain undiminished. Tottenham Hotspur has a strong and proud heritage and looking to the future, I have two key objectives for the Club: to continue to develop and strengthen our ability to compete for domestic and European honours and, secondly, to build a strong, clear brand position, nationally and internationally. We are committed to delivering long term success on and off the pitch and improving shareholder value. We enjoy the support of immensely loyal fans and the Board would like to thank them for their continued support of the Club. Finally, I would like to thank the staff both on and off the pitch for their committed endeavours since my arrival. Daniel Levy Chairman 15th October 2001 OPERATING AND FINANCIAL REVIEW Analysis of Results These results cover the eleven month period to 30th June 2001 and are compared to the twelve month period ended 31st July 2000. On the revenue side comparisons are still generally valid since the main business of the Football Club does not have a significant income stream in July. However, the cost comparisons are distorted and where this is significant I have tried to explain the underlying trend. Turnover Turnover for the eleven month period to June 2001 totalled £48.4m compared to £48.0m in the year to July 2000. Gate receipts for our 19 home league games remain unchanged at £18.3m as a result of the ticket price freeze last season. Attendances continued to be near capacity for the season at an average of 35,231, against a capacity of 36,226. Income from our 120 Executive Boxes and 8 Executive Clubs was comparable to the previous year. Cup gate receipts for the eleven months was £3.2m. There was no European football this season and we were eliminated from the Worthington Cup in the third round. Our FA Cup run was better, reaching the Semi-Final. Cup gate receipts in the year to July 2000 of £3.7m included two home UEFA Cup games. Television and media income of £14.8m (2000 - 12 months - £13.0m) included seven live appearances on Sky and a merit fee based on twelfth position. Team performance significantly affects this high margin income stream and last year's figure was inflated by our UEFA Cup TV contract. Sponsorship revenue fell to £5.6m compared to £6.5m for the year to July 2000. This income includes our share of central Premier League sponsorship and advertising as well as our own hospitality and matchday sponsorship income. Matchday hospitality was the main casualty particularly concerning Sunday and Monday matches which are not as popular for corporate entertaining. The Merchandising Division experienced a challenging year. This was the second year under the sponsorship of adidas and Holsten. After the hype of year one (the launch of three new kits, Megastore opening, the Harlow store opening and European football), the second year saw turnover fall to £4.1m (2000 - £4.8m), a decrease of 14%. Unaudited turnover for the comparable year to July 2001 stood at £4.4m, a year on year decrease of 9%. The highest growth area is inevitably internet sales and we continue to develop this area. Other income of £2.3m (2000 - £1.5m) includes catering royalties and income from the White Hart Lane Conference Centre. The main growth in this area stems from us taking the Executive Box catering 'in house'. This is now sold directly by the Club (rather than our contract caterers) in an attempt to monitor and improve service and as a result we have seen significant sales increases. Conferencing continued to perform in line with last year. Cost of Sales Cost of sales excluding player trading, was £32.6m (2000 - £33.9m). July is the Club's most expensive month due to the payment of the players' 'signing on fees' and is obviously excluded from the eleven month figures. Total staff costs for the eleven months were £25.1m (2000 - 12 months - £26.2m). The costs associated with the dismissal of George Graham have been provided for within these accounts. In addition, the Club has been informed that its share of underfunded pension contributions through the Football League Pension Scheme amounts to £0.3m. This has been provided for in full. Administrative expenses of £6.4m (2000 - £6.6m) show an annualised increase of 5%. We have made a full provision for the Strategic Review carried out by David Buchler. Profit Before Player Trading Operating profit before player trading amounted to £9.4m (2000 - £7.5m). Net interest payable increased to £0.9m from £0.7m as average bank indebtedness increased marginally. Player Trading and Amortisation There were no significant player acquisitions during the period, although it is now well documented that we paid compensation of £750,000 to Southampton for the acquisition of our manager Glenn Hoddle. This amount has been capitalised in line with our accounting policy. The loss of £0.9m largely relates to the write off of the net book value attributed to George Graham. Notable player sales during the period were Jose Dominguez to Kaiserslautern, Ruel Fox to West Bromwich Albion and Ramon Vega to Celtic. Total player sales for the period were £1.2m. Amortisation of £11.1m (2000 - £11.5m) would be £12.0m on an annualised basis. This period included a full charge for Rebrov and Thatcher bought for a combined total of £16.0m last year. In addition we have written off the net book value of Willem Korsten (£832,000) whose professional career was unfortunately ended prematurely by persistent hip problems. The transfers out of Ginola, Neilsen and Fox helped to limit the increase. Following the period end we sold Ian Walker and Luke Young at a combined profit of £5.5m. They were both players who came through our youth system successfully. Tax A total tax credit of £1.1m is recorded on a loss before tax of £3.5m. Dividends No dividend is proposed. The Chairman has explained the dividend policy earlier in his statement. Balance Sheet Net assets have decreased by £2.4m to £38.9m. The most evident movement relates to intangible assets which have fallen to £ 24.9m (2000 - £36.5m) mainly as a result of the amortisation charge described above. Debtors were £7.6m (2000 - £10.5m). Last year's amount contained debtors relating to player sales made just before the year end. Creditors falling due within one year have decreased to £34.5m (2000 - £45.0m) largely due to reduced commitments on player purchases, reduced trade creditors and a lower overdraft at the period end. At 30th June 2001 the Group had bank debts of £15.6m compared to £23.4m at 31st July 2000. The Group adopts a prudent approach to surplus cash and invests only with highly rated institutions. Cash investment has been rare during the period and most of the time we have run an overdraft with our clearing bank Lloyds TSB. For the period under review, ongoing capital expenditure and player acquisitions have been financed from our operating profit. Capital Investment There was no significant capital investment during the period. £570,000 has been spent on minor improvements to the stadium and training ground. It is worth noting that the new caterers (Crown - corporate and Lindleys - public) have made significant capital investments at the ground. Summary The Balance Sheet is healthy with net assets of £38.9m. 'Intangible assets' only contain the values of those players bought into the Club. With several home grown players making the first team squad together with young players bought at relatively low sums, there is much value not included on the Balance Sheet. Paul Viner Finance Director Designate 15th October 2001 Consolidated Profit and Loss Account for the eleven months ended 30th June 2001 Eleven months ended 30th June 2001 Year ended 31 July 2000 Operations, Player Total Total excluding player trading* trading* (Note 5) Note £'000 £'000 £'000 £'000 Turnover 6 48,396 - 48,396 47,974 Cost of sales (32,624) (11,109) (43,733) (45,397) _______ _______ _______ _______ Gross profit 15,772 (11,109) 4,663 2,577 Administrative expenses (6,350) - (6,350) (6,619) _______ _______ _______ _______ Operating profit / (loss) 9,422 (11,109) (1,687) (4,042) (Loss)/Profit on disposal - (867) (867) 3,987 of intangible fixed assets _______ _______ _______ _______ Profit / (loss) before 9,422 (11,976) (2,554) (55) interest and taxation ______ ______ Net interest payable (917) (702) _____ _____ Loss on ordinary activities (3,471) (757) before taxation Tax credit on loss on 1,108 815 ordinary activities _____ _____ (Loss)/profit on ordinary (2,363) 58 activities after taxation Equity dividends - - _____ _____ Retained (loss)/profit for (2,363) 58 the year _____ _____ (Loss)/Earnings per share - 7 (2.3)p 0.1p basic (Loss)/Earnings per share - 7 (2.3)p 0.1p diluted *Player trading represents the amortisation, impairment and the profit or loss on disposal of intangible fixed assets. Turnover and operating profit/(loss) all derive from continuing operations. A Statement of Total Recognised Gains and Losses has not been presented because there were no recognised gains or losses other than as stated in the Consolidated Profit and Loss Account above. Balance Sheets Group Company 30th 31st 30th 31st July June July June 2000 2001 2000 2001 £'000 £'000 £'000 £'000 Fixed assets Intangible assets 24,937 36,533 - - Tangible assets 46,611 47,483 46,572 47,424 Investments - - 1,345 1,345 71,548 84,016 47,917 48,769 Current assets Stocks 912 1,051 912 1,051 Debtors 7,598 10,541 14,088 11,282 8,510 11,592 15,000 12,333 Creditors: Amounts falling due (34,519) (45,038) (17,349) (15,471) within one year Net current liabilities (26,009) (33,446) (2,349) (3,138) Total assets less current liabilities 45,539 50,570 45,568 45,631 Creditors: Amounts falling due after (6,444) (8,024) (5,444) (7,014) more than one year 39,095 42,546 40,124 38,617 Provisions for liabilities and (214) (1,302) - - charges Net assets 38,881 41,244 40,124 38,617 Capital and reserves Called up share capital 5,085 5,085 5,085 5,085 Share premium account 11,287 11,287 11,287 11,287 Revaluation reserve 2,624 2,668 2,284 2,328 Profit and loss account 19,885 22,204 21,468 19,917 Equity shareholders' funds 38,881 41,244 40,124 38,617 Consolidated Cash Flow Statement for the eleven months ended 30th June 2001 Eleven months Year ended ended 30th June 31st July 2001 2000 Note £'000 £'000 £'000 £'000 Net cash inflow from 8 8,340 7,433 operating activities Returns on investments and servicing of finance Interest received 21 9 Interest paid (996) (455) Interest element of (41) (101) finance lease payments Net cash outflow for (1,016) (547) returns on investments and servicing of finance UK corporation tax paid (1,497) (1,081) Capital expenditure and financial investment Payments to acquire (10,201) (17,590) intangible fixed assets Receipts from sales of 8,084 1,013 intangible fixed assets Payments to acquire (570) (2,190) tangible fixed assets Net cash outflow for (2,687) (18,767) capital expenditure and financial investment Cash inflow / (outflow) 3,140 (12,962) before use of liquid resources and financing Financing Issue of ordinary share - 38 capital Long term bank loan - 5,000 Bank loan repayments (1,176) (250) Capital element of (299) (638) finance lease payments Net cash (outflow) / (1,475) 4,150 inflow from financing Increase / (decrease) 1,665 (8,812) in cash TOTTENHAM HOTSPUR PLC Notes to the preliminary announcement for the eleven months ended 30th June 2001. 1. The financial information set out on the attached pages does not constitute statutory accounts for the periods ended 30th June 2001 or 31st July 2000 but is derived from those accounts. Statutory accounts for the year ended 31st July 2000 have been delivered to the Registrar of Companies and those for the period ended 30th June 2001 will be delivered following 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 the previous year's financial statements. Copies of the Report and Accounts will be mailed to shareholders on 5th November 2001. 2. Changes in Directors' Responsibilities D. Levy, became Executive Chairman of the Company on 15th October 2001. His position was formerly Non Executive Chairman. D. Buchler, became Non Executive Vice Chairman of the Company on 15th October 2001. His position was formerly Executive Vice Chairman. 3. Purchase of Own Shares Circular At its forthcoming Annual General Meeting, the Company also proposes to seek a general authority from its shareholders to purchase its own equity shares representing up to 10 per cent, of the issued share capital of the Company. The authority will be subject to approval by the Company's shareholders of a waiver which the Company is proposing to seek from The Panel on Takeovers and Mergers in respect of ENIC Sports plc's obligations under Rule 9 of The City Code on Take-overs and Mergers. 4. No dividend payment. 5. Analysis of comparative Profit and Loss Account Operations Player Total excluding player trading trading £'000 £'000 £'000 Turnover 47,974 - 47,974 Cost of sales (33,877) (11,520) (45,397) Gross profit 14,097 (11,520) 2,577 Administrative expenses (6,619) - (6,619) Operating profit/(loss) 7,478 (11,520) (4,042) Profit on disposal of registrations - 3,987 3,987 Profit/(loss) before interest and 7,478 (7,533) (55) taxation 6. Turnover Turnover, which is all derived from the Group's principal activity, is analysed as follows: Eleven months ended June Year ended July 2001 2000 £'000 £'000 Gate receipts - Premier 18,272 18,341 League Gate receipts - Cup 3,207 3,737 Competitions Media and Broadcasting 14,765 13,026 Sponsorship 5,631 6,513 Merchandising 4,135 4,825 Other 2,386 1,532 48,396 47,974 All turnover derives from activities in the United Kingdom and is exclusive of VAT. 7. (Loss)/earnings per share Earnings per share have been calculated using the weighted average number of shares in issue in each period. Eleven months ended June Year ended July 2001 2000 £'000 £'000 (Loss)/profit after taxation (2,363) 58 Weighted average number of shares 101,694,480 101,613,129 in issue Effect of dilutive potential ordinary shares Options (563,811) 297,834 100,942,459 101,910,963 Basic EPS (2.3)p 0.1p (Loss)/Earnings per share Diluted EPS (2.3)p 0.1p (Loss)/Earnings per share 8. Reconciliation of operating loss to net cash inflow from operating activities Eleven months ended June Year ended July 2001 2000 £'000 £'000 Operating loss (1,687) (4,042) Depreciation charge 1,442 1,549 Amortisation of registrations 11,109 11,520 Decrease / (increase) in stocks 139 (601) (Increase) / decrease in debtors (4,130) 958 Increase / (decrease) in 1,467 (1,951) creditors Net cash inflow from operating 8,340 7,433 activities 9. Reconciliation of net cash flow to movement in net debt Eleven months Year ended ended June 2001 July 2000 £'000 £'000 Increase / (decrease) in cash in the year 1,665 (8,812) Cash outflow / (inflow) from decrease / 1,475 (4,112) (increase) in debt and lease financing Movement in net debt in the period 3,140 (12,924) Opening net debt (18,326) (5,402) Closing net debt (15,186) (18,326)

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