In this series, we provide updates on the club's financial status, including our latest estimates for the season 2023/24.
Note: this analysis is primarily based on current estimates and should be used as a guide to the expected financial outcomes of the club for the 2023/24 season.
For the first time in 14 seasons, Tottenham did not participate in European competition during the 2023/24 season, which was disappointing for both fans and finances. Ange Postecoglou's inaugural season began well, with the team going unbeaten in their first 10 matches and sitting top of the league. However, inconsistent performance led to a 5th-place finish in the Premier League, narrowly missing out on Champions League qualification. In the 2024/25 season, they will compete in the Europa League, Europe’s second-tier tournament.
Since moving to the Tottenham Stadium in 2019, the club has reported financial losses, with the most recent accounts for the 2022/23 season showing a loss of £95 million. This is largely attributed to high interest costs on the debt incurred from the stadium construction and the depreciation of those costs. While the financial results for the 2023/24 season won’t be released until early 2025, we anticipate a similar outcome with another substantial loss, even after the sale of Harry Kane. Our predictions for the 2023/24 season are as follows:
Revenues to fall due to no European competition.
New stadium continues to drive strong commercial revenue growth.
Staff costs remain the lowest of the big 6, although the gap is closing.
The sale of Harry Kane expected to generate £80 million in profit.
Predicted loss of around £75 million due to high depreciation of the new stadium and high interest charges.
Debt levels to remain one of the highest in the league but this is backed by the Tottenham Stadium.
Strong net asset position. the second highest in the league.
Turnover
We estimate turnover to fall around £50 million from the previous season to around £500 million, the fifth highest in the league.
This decline is mainly due to the absence of European competition, which had previously generated around £56 million from the Champions League. However, this drop will be partially offset by an improved league finish of 5th place (up from 8th), which is expected to increase Premier League distributions by approximately £10 million. As a result, we anticipate that broadcast revenue will drop to about £163 million, down from £204 million in the 2022/23 season.
No Europe also resulted in fewer home games, with four fewer in the 2023/24 season. Tottenham boasts one of the highest matchday revenues, generating around £11 million per game, with overall matchday revenue in the 2022/23 season second only to Manchester United. Consequently, this reduction in matches will have a significant impact, and we expect matchday revenue to decline to approximately £105 million, down from £111 million the previous season.
A positive aspect has been the growth in commercial revenue, which includes sponsorship, retail, merchandising, and other activities, increasing by 20% each season since the club moved into the new stadium. In the 2022/23 season, commercial revenue reached £227 million, making it the fourth highest in the league and significantly above North London rival Arsenal. The Tottenham Stadium is frequently recognized as one of the best venues in the league, which has undoubtedly contributed to this commercial success. However, the lack of European participation is likely to limit growth in 2023/24. While it’s difficult to predict precisely, we anticipate a modest increase in commercial revenue to around £236 million.
Staff Costs
Excluding profits from player sales, Tottenham have historically the lowest staff costs among the big six clubs, and we expect this trend to continue in 2023/24, although they are narrowing the gap with Arsenal. Over the past three seasons, Tottenham has been very active in the transfer market, which will lead to increased player amortization costs. While salaries saw a significant rise in the 2022/23 season, we anticipate that, due to the absence of European competition and failing to qualify for the Champions League again, salary levels will remain consistent with those of the previous season.
Historically, profits from player sales have been relatively minor for Spurs, but this changed in 2023/24 with the sale of Harry Kane, which added approximately £80 million to their bottom line. They also invested heavily in the squad, with a record spend of around £230 million. The effects of this investment will be felt in future seasons as the costs are amortized.
Profit and Loss
With relatively high turnover, the lowest staff costs among the big six, and a substantial profit from the sale of Harry Kane, why does Tottenham still face significant losses?
The key difference lies in their depreciation and interest charges, both connected to the investment in the Tottenham Stadium. With depreciation around £70 million, Tottenham’s figure is approximately 3.5 times that of the next highest club. Additionally, their interest payments of £46 million have been the highest in the league, although Manchester United is expected to surpass this in the 2023/24 season.
A useful comparison is to examine Tottenham’s earnings before interest, tax, depreciation, and amortization (EBITDA) alongside their reported profit before tax. In their most recent accounts, Tottenham's EBITDA was an impressive £126 million, placing them second only to Manchester United. It’s important to note that this figure excludes exceptional items, such as profits from player sales. However, when we consider profit before tax, Tottenham recorded a loss of £95 million, with only Aston Villa posting a worse result.
We can see this in the chart below with Tottenham having the biggest drop between EBITDA and Profit before tax again due to their high depreciation and interest charges.
Why is this important? There are two main reasons:
Cash Flow: EBITDA is closely related to cash flow, indicating that Spurs are generating healthy cash flows. Since depreciation reflects the write-off of previously spent money, it doesn’t affect cash directly. As long as EBITDA exceeds their interest payments, cash flows remain positive (before considering investment decisions).
Profit and Sustainability Rules (PSR): We expect that stadium-related investment costs will be added back in PSR calculations, and both depreciation and interest charges are largely tied to the stadium. Therefore, although the profit before tax figure may seem unfavorable, the club is not at risk of PSR penalties.
Keeping this in mind, we are projecting a loss of approximately £75 million for the 2023/24 season. This represents an improvement over the 2022/23 season, primarily due to the sale of Harry Kane, though it will be somewhat offset by lower turnover.
Player Trading
Tottenham has made significant investments in their squad over the past three seasons, acquiring players like Richarlison, Johnson, Romero, Maddison, Van de Ven, and Porro, each costing over £30 million. Their total expenditure in the last three seasons reached £539 million, making it the fifth highest in the league. During this same period, the only notable player sales were Harry Kane for £80 million and Steven Bergwijn for £27 million, resulting in a net transfer spend of £385 million, which is also the fifth highest in the league.
This latest summer window saw continued investment, although at lower levels than the previous three seasons.
Debt and Interest Payments
The stadium construction, which is reported to have cost £1.2 billion, was financed through long-term debt, most of which has since been converted into long-term bonds at a favorable commercial rate of approximately 3% (no soft shareholder loans for Spurs). The total debt currently stands at around £880 million, leading to annual interest payments of about £25 million. The bonds have a maturity period of up to 20 years.
These figures are substantial, but they are supported by the asset of the Tottenham Stadium, which was revalued at £1.5 billion in the 2023 published accounts. As a result, Tottenham is in a very strong net asset position. They have the highest asset book value in the league and a net asset value (assets minus liabilities) that is second only to Manchester City.
Cash Flow
As mentioned earlier, Tottenham generates strong operating cash flows. This is from their ordinary activities before investments (in players and facilities), and before financing activities like new debt or share issues.
While operating cash flow can fluctuate year by year due to the payment terms of short-term debts, over the three years leading up to the 2022/23 season, Spurs generated a healthy £173 million in cash, the fifth highest in the league. However, they also invested a net £231 million in players and an additional £111 million in facilities. This resulted in a net cash outflow of £169 million, funded partly by current cash reserves and £98 million from 'A' Ordinary shares (a form of debt convertible to equity at a later date).
Predicting cash flows for the 2023/24 season is challenging, as for example the payment terms for the sale of Harry Kane have not been disclosed. However, we anticipate a significant cash outflow as the club addresses high debts from recent player acquisitions. At the end of the 2022/23 season, they had a healthy cash balance of £174 million, which we assume will be used to cover these debts.
Outlook and Season 2024/25
On the pitch, the 2024/25 season has continued much like the previous season, with strong performances followed by some disappointing results. This season is expected to see revenue growth with the return to European competition, but staff costs will likely increase again due to new player acquisitions. And with no repeat of Kane’s sale, Spurs are unlikely to be returning to profit any time soon.