Tottenham overtake Manchester United with highest level of invested capital in Premier League

2 April 2020

Spurs
Photo: PA Images With the Tottenham Hotspur Stadium completed late last season, the club have increased the total value of their assets to a staggering £1.7 billion. 

With the ultra-modern Tottenham Hotspur Stadium finally open, Spurs find themselves at the top of the Premier League in terms of the level of capital invested in the club.

But with a final stadium bill almost 60 per cent higher than expected in 2017, Tottenham found themselves in want of cash, and thus had to further increase their debt level in 2018/19. 

With the ongoing Covid-19 pandemic and its crippling impact on football, Tottenham might have to face still more unexpected difficulties resulting from their huge debt level.

Mads Christian Fogt Jensen, analyst mj@offthepitch.com

Tottenham's recently published annual report of 2019 reveals that Spurs have now overtaken Manchester United to become the club with the highest level of invested capital in the Premier League. With the Tottenham Hotspur Stadium (THS) completed late last season, the club have increased the total value of their assets by 30 per cent - to a staggering £1.7 billion. 

That is 13 per cent more than Manchester United and 268 per cent more than the Premier League average of 2017/18. 

The financial report further reveals that during the financial year of 2019, an additional £408 million was invested in the stadium, which in 2017 was forecasted to cost the club a total of £750 million. 

With the financial report disclosing a final bill of £1.2 billion, THS has become the most expensive stadium ever built in Europe, 47 per cent more expensive than London Stadium in second place.

Return on assets equals just 5.2 per cent

Despite the new stadium officially marking Spurs as a top club in England, the large amount of invested capital also obliges the club to make larger profits on their business operations in order to see reasonable returns on their assets. 

Tottenham's 2019 pre-tax profit of £87 million is the highest recorded among the Premier League clubs who have published their results thus far, yet with assets of £1.7 billion, the pre-tax return on assets equals just 5.2 per cent. 

Put in perspective, Watford, who made a much smaller pre-tax profit of £10 million, were able to generate the same return on their assets, as their business is run with only slightly more than a tenth of Tottenham's asset level.  

Massive cash flows ending in a net inflow of £23 million 

In terms of cash, Tottenham enjoyed a huge inflow of £278 million from their operating activities in 2019 and the club were able to generate the highest operating profit in Premier League history: £102 million. This was primarily due to increased revenue of £80 million, which placed Spurs ahead of Arsenal and Chelsea in terms of total revenue. 

Moreover, this operating cash inflow was heavily affected by an increase in advance payments of £76 million from season tickets and commercial sponsors. 
However, the opening of THS resulted in a net cash outlay of £413 million on capital expenditures.

With cash flows from player sales and acquisitions roughly offsetting each other, the net cash outflow from investing activities amounted to £450 million, meaning the operating cash inflows were short more than £170 million. Consequently, £195 million was raised through interest-bearing loans during the year, bringing Tottenham's total interest-bearing debt to £657 million, of which 97 per cent is stadium-related debt. 

With these new debt obligations, an additional £23 million of cash was raised during the year, bringing Tottenham's ending cash balance to £123 million. 

Stadium debt refinancing to lower interest expenses

The stadium debt of £637 million was initially due in May 2022, but subsequent to the financial year of 2018/19, Tottenham refinanced the debt into a mix of long-term bonds issued to US investors, and a £112 million loan from Bank of America Merrill Lynch.

On top of that, due to the relatively early knock-out from the Champions League this season, Tottenham look to receive approximately £32 million less in revenue from UEFA this season compared to 2018/19

This refinancing package has an average maturity of 23 years and a weighted average interest rate of 2.66 per cent. 

Compared to the previous scenario's interest rate of 3.5 per cent, this refinancing has saved Spurs in the region of £5 million a year on interest payments. Yet, the club will still have to pay off around £44 million a year when including the repayments on the 23-year loan. 

Lockdown and heavy debt don't go well together 

Turning to the current suspension of football due to the prevailing coronavirus pandemic, Tottenham, like everyone else, find themselves in a tough financial situation. 

In an attempt to keep costs down, Spurs announced yesterday that wages are to be cut by 20 per cent for the non-playing staff, who are thus eligible for the government's furlough scheme. The club's sizeable debt, and no opportunity to capture the rents from their new ultra-modern stadium, will surely combine into a heavy blow. 

Besides the stadium debt, Tottenham also have debt commitments of £88 million in relation to player acquisitions, while they look to receive only £4.5 million in return from player sales. Out of the net debt of £83 million, £28 million falls due in the 2019/20 season, which can in turn be added to the £44 million stadium repayment. 

On top of that, due to the relatively early knock-out from the Champions League this season, Tottenham look to receive approximately £32 million less in revenue from UEFA this season compared to 2018/19. 

What the future holds for Tottenham and the rest of football clubs remains uncertain. Tottenham’s management surely didn’t expect to start paying off their rocket-high debt in times of decreasing prize money and very limited chances of playing the rest of this season’s matches in front of their audience, should they happen to be played at all.