Tottenham Club Focus – Why Spurs’ future looks bright on and off the pitch

This week Tottenham Hotspur chairman Daniel Levy, made two separate but interlinked announcements.

Spurs announced a net profit of £400,000 for the year ending the 30th June 2011 compared to a £6.5m loss the previous year. This statement detailed the increase in turnover, revenues and operating expenses all of which appear to be a result of the club’s participation in the Champions League, which generated £37.1m from gate receipts and prize money. A good run in the Europa League may only generate circa £10m and will adversely affect next year’s results considering the increase in expenses comes mainly from the squad size needed to participate domestically and in Europe and the subsequent wage bill. [A benefit of playing youngsters in Europe is that this may be kept partially lower].

A new stadium is needed, as identified by Levy; “Increased capacity is a necessity to generate additional revenue through which the investment made in the First Team squad over the past few years can be maintained.” Spurs need regular Champions League football. The difficulty, in challenging but failing to achieve this, brings an increase cost without the increased revenue. The new stadium should bring the needed revenue [via naming rights and gate receipts] to keep and attract class players to maintain the challenge for a top four place. A self-fulfilling circle?

Hence the second announcement regarding the de-listing of Spurs from the AIM stock exchange. With the Olympic Stadium no longer an option, the focus returns to the Northumberland Development Project [NDP]. The cost of the project is estimated at between £400-460m. In the current climate it is arguably difficult to raise capital on the AIM, especially when the City Code of conduct requires any major stakes requires transparency – perhaps not the most popular word in football. Levy states that Spurs must be back in private hands to obtain investment. This should be complete mid-January 2012 as ENIC own 85.01% of Spurs. The remainder is owned mainly by fans with no other holding greater than three percent.

The NDP has been further boosted by a combined funding offer from the Mayor, Boris Johnson and the Harringey Council, of £17m. This covers improved transport links, infrastructure and planning costs. This should leave the decision to pursue the NDP option by ENIC a purely commercial one. Is this where ENIC’s real interest lies? Billionaire Joe Lewis owns 71% of ENIC with Daniel Levy owning the rest. Both are arguably businessmen first and foremost.

If the NDP project completes, the value of Spurs would be considerably higher than the £75m as at 16th November. With the potential of continually challenging for the Champions League, a recent history of financial stability plus a new stadium and hotel in a regenerated area, Spurs would be an attractive proposition. Both Lewis and Levy should recognize the potential increase in value that must follow investment. Levy has already refuted rumours about buyers from Eastern Europe and the UAE though these may well resurface at a later date.

Ultimately, whether ENIC sell or not, the future for Spurs may be bright. The current squad looks capable of challenging for honours and a top four place over the next few seasons. The NDP project should guarantee the increased revenues for the club to continue to do so.

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