Highest Profit ever from an English Football Club

[Francis Gibbs]

This is definitely not how you grow a business!

it is, if you use that as investment in your core product which will then exponentially increase future profits

 

[TottenhamLegend]

Did we receive the Bale money in one financial year and then spend it in the next financial year ? If so these figures are very misleading as we need to net off the two financial years to see a true position.

Not as straight forward as that, but it will still be misleading to an extent.

I've never worked for a football club obviously, so this is all a bit of guesswork, but:

Players value will depreciate over the course of their contract, from a starting value at the point they sign that contract. Bale's value in our books at the point he was sold would have been much less than the £80m we got for him. Therefore, when we sold him, our P&L took a big positive hit. That full hit would have been in the year he was sold.

When you sign a player the cost would be capitalised, and released over the course of their contract. In other words, although we signed Lamela for £30m, if he is on a 5 year contract, our P&L would only have been hit with £6m this year. Looking at all 7 of the players we bought last year, I doubt our P&L was hit with more than £20m.

Put simply, if you sell 1 player for £30m and buy 1 player for £30m, and those 2 transactions in isolation would almost certainly cause a profit in accounting terms. Doesn't seem logical, but it's how it works.

But it needs to be considered that every football club will use these same accounting methods, so that fact we've recorded the largest profit ever by an English football club is still very significant.

 

[jurgen]

 

[Indacupfortottenham]

What I don't get is if we are 80 mil up, why is there only 3mil in the bank?
or is that now 83 million?

 

[dagraham]

What I don't get is if we are 80 mil up, why is there only 3mil in the bank?
or is that now 83 million?

Levy got drunk and invested in a pyramid scheme.

 

[Francis Gibbs]

Not as straight forward as that, but it will still be misleading to an extent.

I've never worked for a football club obviously, so this is all a bit of guesswork, but:

Players value will depreciate over the course of their contract, from a starting value at the point they sign that contract. Bale's value in our books at the point he was sold would have been much less than the £80m we got for him. Therefore, when we sold him, our P&L took a big positive hit. That full hit would have been in the year he was sold.

When you sign a player the cost would be capitalised, and released over the course of their contract. In other words, although we signed Lamela for £30m, if he is on a 5 year contract, our P&L would only have been hit with £6m this year. Looking at all 7 of the players we bought last year, I doubt our P&L was hit with more than £20m.

Put simply, if you sell 1 player for £30m and buy 1 player for £30m, and those 2 transactions in isolation would almost certainly cause a profit in accounting terms. Doesn't seem logical, but it's how it works.

But it needs to be considered that every football club will use these same accounting methods, so that fact we've recorded the largest profit ever by an English football club is still very significant.

not sure that's correct, the players cost will be depreciated over the life of his contract, his value is a different thing and will be regularly assessed/reviewed as they represent an asset to the club.
Typically its normal for players value to depreciate as they get older but with players like Bale for instance that wouldn't have been the case, his value increased dramatically whilst with us

 

[Metalhead]

The £80 mill profit is complete BS. If we exclude player trading, the profit would decrease sharply. Quite possibly all the way down to zero.

Bale's book value in the accounts was much smaller than the eventual selling price, which creates the perception of a "profit". This problem will be compounded by the club's utter failure to re-invest the money properly in 2013. The 14/15 accounts will paint a post-Bale picture with a large wage bill, increasing player amortisation, and nothing else to show for it

Were you as red-faced and angry as your emoticon whilst you were typing out the post?

 

[DaSpurs]

Get in, Daniel

 

[dagraham]

not sure that's correct, the players cost will be depreciated over the life of his contract, his value is a different thing and will be regularly assessed/reviewed as they represent an asset to the club.
Typically its normal for players value to depreciate as they get older but with players like Bale for instance that wouldn't have been the case, his value increased dramatically whilst with us

Players value will stay at book value (i.e. cost less accumulated depreciation). You're right that this won't reflect their market value, but clubs and indeed most companies do not choose to revalue large assets to market value as that will just lead to much larger depreciation charges, which will immediately decrease profits.

That's the reason why Bale's transfer generated such huge accounting profit as his book value would have been pretty low.

 

[sweetness]

What I don't get is if we are 80 mil up, why is there only 3mil in the bank?
or is that now 83 million?

What you're really thinking about is cash flow. For the most part, accounting and cash flow give very different outcomes. Accounting is the abstract conceptualisation of economic activity between two distinct points in time, whereas cash flow is money in - money out.

E. g. the Bale money hasn't reached the Spurs coffers yet, despite the fact that Bale has already been sold. This means that the cash flow is unchanged. In accounting terms however, we would like to ascribe a value to the future Bale money, even though the money hasn't arrived yet. Herein lies the difference.

Could mention about 200 additional things to complicate matters, but let's avoid that for now

 

[sweetness]

Were you as red-faced and angry as your emoticon whilst you were typing out the post?

Almost. Got a pink skin-tone atm due to sun exposure. Anything else guv?

 

[Ribble]

What I don't get is if we are 80 mil up, why is there only 3mil in the bank?
or is that now 83 million?

Think we paid off all the debt we had with it.

 

[Blake Griffin]

well your post was saying 6th is our benchmark and it would be reasonable to finish 6th this for me maybe a benchmark but its not reasonable - you benchmark solely to improve.
Levy wants to/believes we should be completing for CL places and he is right maintaining the status quo will only lack eventually to regression. A football club is no different to every other business in that respect.
Where Levy is wrong is by not freeing up cash to invest to assist in achieving those aims from a playing perspective. Its a false economy he is working to because with the right level of investment (doesn't have to be mega bucks) the right manager and the right recruitment CL football is achievable and the return provided in getting it will vastly outweigh the investment if you get your decisions right. This is the only way the club will grow not by having a new training ground, or stadium or commercial ventures as each are a by product of success on the pitch. There is no point having a 60k stadium that you cant fill and commercial opportunities will only go to growing successful clubs.
You can have the best infrastructure money can buy but if your product is poor ............

Obviously it can be a bit of a chicken and egg situation but Levy is paid exceptionally well, as we can see, to get this right and imo he isnt.

you want us to be good now, the club wants us to be better later.

 

[Francis Gibbs]

you want us to be good now, the club wants us to be better later.

sort of ..... want us to be good now so we can be even better later

 

[Sp3akerboxxx]

it is, if you use that as investment in your core product which will then exponentially increase future profits

Only if it adds value to the product in the eyes of customers, which investment is no guarantee of.

 

[Blake Griffin]

sort of ..... want us to be good now so we can be even better later

i just think you underestimate how tough an ask it is for spurs to compete when five of the 10 richest clubs in the world also happen to play in the same league as us ... and we need to finish ahead of at least two of them. you say all we need is the right investment, right manager and right recruiting, that's a lot of things we need to get spot on just to have any kind of chance, realistically we need a massive slice of luck as well along with those three things and that's just to qualify once, it's not a sustainable model. the things you dismiss such as the new stadium and new training ground are vital to the club's long term success, no we don't get a cl place because we have a big stadium or a plush place to train but it gives us a better platform to do so in the future.

 

[tototoner]

There is certainly space in our trophy cabinet for those financial results

 

[makeveli]

I think his making the books look good for the next 2-3 years , preparing us for a sale, doubt they stay after the build

 

[225]

my criticisms of Levy are to do with changing strategy all the time, changing coaches to often, poor transfer strategy and unrealistic expectations of what he expects from his head coaches.

I've never really seen this. Same as the "itchy trigger finger" crap.

Sherwood was nothing but short term - despite his demand for a contract that everyone knew outlasted his term.
AVB walked (something he's eluded to) after turning into a bit of a melt. The real-life equivalent of rage-quitting a game.
Redknapp took the piss out of the club
Ramos had us at the bottom of the table.
Jol was perhaps the only real example of a strange decision, but we won a trophy because of it.
Santini went AWOL
Hoddle was similar to Ramos in that respect
Graham was more down to Buchler

I don't think there's much evidence that he's sacked a manager for not meeting unrealistic targets. Hoddle and Ramos could have gotten us relegated (yes, maybe under extenuating circumstances), but in theory we have seen an improvement with each change, it just takes a little patience to cash in on it.

Glad we're clear of debt (minus the stadium) though - means we'll still have a club to support if TV deals/economy go south, which is not something every supporter can say about their club!

 

[Rout-Ledge]

The stadium is the key to the future of the club. If we have to suffer a few lean years to get it paid for, so be it.

As for Levy's salary, it's probably lower than Freidel's. Who doesire important work for the club?

Not in a million years is Friedel on over 40k per week, but your point still stands. It's more Harry Kane money.