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Tottenham hotspur Plc
Harvard Business School Case No. 209-059
Courseware No. 222-708
REV: April 18, 2022
This courseware was prepared solely as the basis for class discussion. Copyright © 2022 President and
Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to
www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise
reproduced, posted, or transmitted, without the permission of Harvard Business School.
Table A Valuation Data
20-Year Risk Free Rate
4.60%
Tottenham Equity Beta, 2004-2007
1.3
Tottenham Debt Beta
0.2
Company Tax Rate
35%
Historic Leverage Ratio, 2004-2007
20%
Source: Casewriter estimates
Exhibit 1 Team Valuations, Revenues, and Records (December 31, 2007)
Value
(EV)a
Revenue
Operating Income
Avg. Points (19982007)
Avg. Net Goals
(1998-2007)
Manchester United
934
169
50
82
42.7
Arsenal
588
134
11
77
38.1
Chelsea
345
154
-20
74
33.9
Liverpool
291
123
20
67
24.6
53
2.3
Team
Enterprise
Newcastle United
167
87
6
Everton
106
58
-8
49
-4.9
Aston Villa
90
50
-11
51
0
75
5
51
-1.9
Tottenham
a Enterprise Value = Equity + Debt – Excess Cash.
Source: Compiled from Forbes.com, “Soccer Team Valuations,” http://www.forbes.com/lists/2007/34/biz_07soccer_Soccer-Team-Valuations_Rank.html, accessed August 20
am-Valuations_Rank.html, accessed August 2008.
Exhibit 2 Tottenham Balance Sheet (millions of pounds), 2007
Assets
Current assets:
Cash and equivalents
26.3
Investments, available for sale
0.6
Inventory – Merchandise
1.2
Accounts Receivable
20
Total current assets
48.1
Property and equipment, net
55.8
Intangible assets, net
49.4
Total assets
153.2
Liabilities and Stockholder Equity
Current liabilities:
Accounts payable
64.4
Total current liabilities
64.4
Long-term debt and deferred interest, net of current portion
43.1
Total liabilities
107.5
Total stockholders’ (deficit) equity
45.7
Total liabilities and stockholders’ equity
153.2
Market Data
Share Price
Shares Outstanding (millions of shares)
Market Capitalization
Source: Company Reports
£13.78
9.3
128.2
Exhibit 3 Tottenham Pro Forma Income Statement (millions of pounds)
Current
Forecast Year
Year
Forecast
0
1
2
3
4
5
6
2007
2008
2009
2010
2011
2012
2013
Revenue
Attendance
17.4
19
20.7
22.5
24.6
26.8
29.2
Sponsorship
15.7
17.1
18.7
20.3
22.2
24.2
26.3
Broadcast
28.7
31.3
34.1
37.2
40.5
44.2
48.1
Merchandise
5.2
5.7
6.2
6.7
7.3
8
8.7
Other
7.1
7.7
8.4
9.2
10
10.9
11.9
Total
74.1
80.8
88
96
104.6
114
124.3
Payroll
50.9
56
61.6
67.8
74.6
82
90.2
Stadium Operating Expenses
16.4
17
17.7
18.4
19.2
19.9
20.7
Other
1.8
1.9
2
2
2.1
2.2
2.3
Total
69.1
74.9
81.3
88.2
95.8
104.1
113.2
5
5.9
6.8
7.7
8.8
9.9
11.1
Depreciation
2.2
2.3
2.4
2.5
2.6
2.7
2.8
EBIT
2.8
3.6
4.4
5.3
6.2
7.2
8.3
Operating Costs
EBITDA
Source: Compiled from company annual report 2007, http://admin.tottenhamhotspur.com/uploads/assets/docstore/old/tottenham_ar07.pdf, accessed August 2008, as
7
8
9
10
11
12
13
2014
2015
2016
2017
2018
2019
2020
31.8
34.7
37.8
41.2
44.9
48.9
50.9
28.7
31.3
34.1
37.2
40.5
44.2
45.9
52.5
57.2
62.3
67.9
74.1
80.7
84
9.5
10.4
11.3
12.3
13.4
14.6
15.2
13
14.2
15.4
16.8
18.3
20
20.8
135.5
147.7
160.9
175.4
191.2
208.4
216.8
99.2
109.2
120.1
132.1
145.3
159.8
166.2
21.6
22.4
23.3
24.3
25.2
26.2
27.3
2.4
2.5
2.6
2.7
2.8
2.9
3
123.2
134
146
159
173.3
188.9
196.5
12.3
13.6
15
16.4
17.9
19.5
20.3
2.9
3
3.1
3.3
3.4
3.5
3.7
9.4
10.6
11.9
13.2
14.6
16
16.6
_ar07.pdf, accessed August 2008, as well as internal company reports.
Exhibit 4 Tottenham Games and Stock Market Reaction
Game Date
1/31/2004
2/7/2004
2/11/2004
2/22/2004
3/9/2004
3/14/2004
3/20/2004
3/27/2004
4/3/2004
4/9/2004
4/12/2004
4/17/2004
4/25/2004
5/2/2004
5/8/2004
5/15/2004
8/14/2004
8/21/2004
8/25/2004
8/28/2004
9/12/2004
9/19/2004
9/25/2004
10/2/2004
10/18/2004
10/23/2004
10/30/2004
11/6/2004
11/13/2004
11/22/2004
11/28/2004
12/4/2004
12/11/2004
12/18/2004
12/26/2004
12/28/2004
1/1/2005
1/4/2005
1/15/2005
1/22/2005
2/1/2005
2/5/2005
2/26/2005
3/5/2005
Win
Loss
0
1
1
0
0
1
0
0
0
0
0
0
0
0
1
1
0
1
0
1
0
0
0
1
0
0
0
0
0
0
1
1
1
1
1
0
1
0
0
0
0
1
1
0
Draw
1
0
0
0
1
0
1
1
1
1
0
1
0
1
0
0
0
0
0
0
0
0
1
0
1
1
1
1
1
1
0
0
0
0
0
0
0
0
1
1
1
0
0
1
Points
0
0
0
1
0
0
0
0
0
0
1
0
1
0
0
0
1
0
1
0
1
1
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
1
0
0
0
0
0
0
Tottenham
0
0%
3
0%
3
12%
1
0%
0
0%
3
10%
0
0%
0
-3%
0
0%
0
0%
1
9%
0
9%
1
-3%
0
0%
3
8%
3
0%
1
-4%
3
0%
1
2%
3
0%
1
0%
1
0%
0
0%
3
-4%
0
3%
0
0%
0
2%
0
0%
0
0%
0
-3%
3
0%
3
-4%
3
4%
3
5%
3
0%
1
4%
3
0%
1
7%
0
5%
0
-3%
0
0%
3
13%
3
5%
0
0%
FTSEa
0%
1%
0%
0%
0%
-1%
-2%
1%
0%
0%
1%
0%
0%
-1%
-2%
-1%
1%
1%
1%
1%
0%
0%
-1%
0%
1%
-1%
1%
0%
0%
0%
0%
-1%
1%
1%
0%
0%
0%
-1%
1%
0%
0%
1%
-1%
0%
3/16/2005
3/19/2005
4/2/2005
4/10/2005
4/16/2005
4/20/2005
4/25/2005
5/1/2005
5/7/2005
5/15/2005
8/13/2005
8/20/2005
8/24/2005
8/27/2005
9/10/2005
9/17/2005
9/26/2005
10/1/2005
10/15/2005
10/22/2005
10/29/2005
11/7/2005
11/20/2005
11/26/2005
12/3/2005
12/12/2005
12/18/2005
12/26/2005
12/28/2005
12/31/2005
1/4/2006
1/14/2006
1/21/2006
1/31/2006
2/5/2006
2/12/2006
2/19/2006
3/5/2006
3/11/2006
3/18/2006
3/27/2006
4/1/2006
4/8/2006
4/15/2006
4/17/2006
4/22/2006
4/30/2006
0
1
0
1
0
0
0
1
0
0
1
1
0
0
0
0
1
1
1
0
0
0
0
1
1
1
0
1
0
1
1
0
0
0
1
0
0
1
0
1
1
0
1
1
0
0
1
1
0
0
0
0
0
1
0
1
0
0
0
0
1
0
0
0
0
0
0
0
1
0
0
0
0
0
0
1
0
0
1
0
1
0
0
0
0
1
0
0
1
0
0
1
0
0
0
0
1
0
1
1
0
0
0
1
0
0
1
0
1
1
0
0
0
1
1
0
1
0
0
0
1
0
0
0
0
0
1
0
0
1
1
0
0
0
0
0
0
0
0
1
0
0
3
1
3
1
1
0
3
0
1
3
3
1
0
1
1
3
3
3
1
1
0
1
3
3
3
1
3
0
3
3
0
1
0
3
1
1
3
0
3
3
0
3
3
0
1
3
1%
0%
-5%
-5%
6%
-4%
-8%
0%
1%
1%
0%
5%
0%
0%
-1%
0%
-1%
0%
0%
0%
0%
8%
-2%
0%
0%
-4%
-5%
0%
-1%
0%
3%
-3%
-2%
1%
1%
1%
5%
0%
3%
-2%
3%
-5%
0%
0%
-1%
2%
0%
0%
0%
0%
0%
-1%
0%
0%
0%
0%
0%
0%
0%
0%
-1%
0%
0%
0%
0%
0%
1%
2%
0%
0%
-1%
0%
0%
0%
0%
0%
0%
0%
1%
0%
1%
0%
1%
0%
1%
1%
0%
-1%
1%
1%
0%
0%
-1%
-1%
5/7/2006
9/9/2006
9/17/2006
9/19/2006
9/23/2006
9/26/2006
10/1/2006
10/14/2006
10/22/2006
10/28/2006
11/5/2006
11/12/2006
11/19/2006
11/26/2006
12/2/2006
12/5/2006
12/9/2006
12/17/2006
12/26/2006
1/1/2007
1/14/2007
1/20/2007
2/4/2007
2/10/2007
2/21/2007
2/25/2007
3/4/2007
3/17/2007
4/1/2007
4/7/2007
4/15/2007
4/21/2007
4/28/2007
5/7/2007
5/10/2007
5/13/2007
a
0
0
0
0
0
0
1
0
1
0
1
0
0
1
0
1
1
1
1
0
0
0
0
0
1
1
1
1
1
0
0
0
1
1
0
1
1
1
0
1
1
1
0
0
0
0
0
1
0
0
1
0
0
0
0
0
1
0
1
1
0
0
0
0
0
1
0
0
0
0
0
0
The FTSE is the UK equivalent of the S&P 500.
0
0
1
0
0
0
0
1
0
1
0
0
1
0
0
0
0
0
0
1
0
1
0
0
0
0
0
0
0
0
1
1
0
0
1
0
0
0
1
0
0
0
3
1
3
1
3
0
1
3
0
3
3
3
3
1
0
1
0
0
3
3
3
3
3
0
1
1
3
3
1
3
-4%
0%
0%
-1%
8%
-3%
0%
0%
0%
2%
4%
0%
-1%
2%
-1%
4%
-1%
7%
0%
-1%
0%
-2%
-2%
-1%
0%
-1%
0%
-1%
0%
-1%
0%
9%
8%
-4%
6%
3%
0%
0%
0%
1%
0%
1%
0%
0%
0%
-1%
1%
0%
0%
-1%
0%
0%
0%
0%
1%
1%
0%
0%
0%
0%
0%
1%
-1%
1%
0%
0%
1%
0%
0%
-1%
1%
0%
Tottenham Hotspur Case
Question 1
Scenario II – Building a new stadium – in this section, you are to introduce the scenario,
talk about the assumptions, and mostly important the impact of the capital expenditure on the
initial cash flows and the growth rate of the cash flows
Question 2
Scenario III – Buying a new player – in this section, you will introduce the scenario, talk
about the assumptions, the transfer fees and salary of the player. You will have to discuss
the free cash flow and the impact of the incremental revenue and expenses and the impact
on the cash flow
Tottenham hotspur Plc
Harvard Business School Case No. 209-059
Courseware No. 222-708
REV: April 18, 2022
This courseware was prepared solely as the basis for class discussion. Copyright © 2022 President and
Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to
www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise
reproduced, posted, or transmitted, without the permission of Harvard Business School.
Table A Valuation Data
20-Year Risk Free Rate
4.60%
Tottenham Equity Beta, 2004-2007
1.3
Tottenham Debt Beta
0.2
Company Tax Rate
35%
Historic Leverage Ratio, 2004-2007
20%
Market Risk Premium
5%
Source: Casewriter estimates
CAPM = Rf + beta x Market Risk Premium
Cost of Equity
11.10%
Exhibit 1 Team Valuations, Revenues, and Records (December 31, 2007)
Value
(EV)a
Revenue
Multiple
Operating Income
Avg. Points (19982007)
Avg. Net Goals
(1998-2007)
Manchester United
934
169
5.53
50
82
42.7
Arsenal
588
134
4.39
11
77
38.1
Chelsea
345
154
2.24
-20
74
33.9
Liverpool
291
123
2.37
20
67
24.6
53
2.3
Team
Enterprise
Newcastle United
167
87
1.92
6
Everton
106
58
1.83
-8
49
-4.9
Aston Villa
90
50
1.80
-11
51
0
75
2.87
5
51
-1.9
Tottenham
215.0135
6.66
499.5
a Enterprise Value = Equity + Debt – Excess Cash.
Source: Compiled from Forbes.com, “Soccer Team Valuations,” http://www.forbes.com/lists/2007/34/biz_07soccer_Soccer-Team-Valuations_Rank.html, accessed August 20
Avg. Net Goals
(1998-2007)
42.7
38.1
33.9
24.6
2.3
-4.9
0
-1.9
ons_Rank.html, accessed August 2008.
Exhibit 2 Tottenham Balance Sheet (millions of pounds), 2007
Assets
Current assets:
Cash and equivalents
26.3
Investments, available for sale
0.6
Inventory – Merchandise
1.2
Accounts Receivable
20
Total current assets
48.1
Property and equipment, net
55.8
Intangible assets, net
49.4
Total assets
153.2
21.2
Liabilities and Stockholder Equity
Current liabilities:
Accounts payable
64.4
Total current liabilities
64.4
Long-term debt and deferred interest, net of current portion
43.1
Total liabilities
107.5
Total stockholders’ (deficit) equity
45.7
Total liabilities and stockholders’ equity
153.2
Market Data
Share Price
Shares Outstanding (millions of shares)
Market Capitalization
Source: Company Reports
£13.78
9.3
128.2
64.4
Assumptions
Revenue Growth 1-12
Revenue Growth 13
Stadium OPEX
other exp
Depreciation Growth
CAPEX Growth
Tax Rate
Player Salaries 1-12
Player Salaries 13
Interest Expenses
9%
4%
4%
4%
4%
4%
35%
10%
4%
6%
Exhibit 3 Tottenham Pro Forma Income Statement (millions of pounds)
Current
0
2007
Forecast
1
2008
2
2009
3
2010
4
2011
5
2012
6
2013
17.40
15.70
28.70
5.20
7.10
74.10
18.97
17.11
31.28
5.67
7.74
80.77
20.67
18.65
34.10
6.18
8.44
88.04
22.53
20.33
37.17
6.73
9.19
95.96
24.56
22.16
40.51
7.34
10.02
104.60
26.77
24.16
44.16
8.00
10.92
114.01
29.18
26.33
48.13
8.72
11.91
124.27
Operating Costs
Payroll
Stadium Operating Expenses
Other
Total Expenses
50.90
16.40
1.80
69.10
55.99
17.06
1.87
74.92
61.59
17.74
1.95
81.27
67.75
18.45
2.02
88.22
74.52
19.19
2.11
95.81
81.97
19.95
2.19
104.12
90.17
20.75
2.28
113.20
EBITDA
Depreciation
EBIT
Interest Expense
Taxable Income – EBT
Tax Expenses
Net Income
5.00
2.20
2.80
2.59
0.21
0.07
0.14
5.85
2.29
3.56
2.69
0.87
0.31
0.57
6.76
2.38
4.38
2.80
1.59
0.56
1.03
7.74
2.47
5.27
2.91
2.36
0.83
1.53
8.78
2.57
6.21
3.03
3.19
1.11
2.07
9.89
2.68
7.22
3.15
4.07
1.42
2.65
11.07
2.78
8.29
3.27
5.02
1.76
3.26
3.30
(43.20)
3.43
(47.09)
(3.89)
3.57
(51.33)
(4.24)
3.71
(55.95)
(4.62)
3.86
(60.98)
(5.04)
4.01
(66.47)
(5.49)
4.18
(72.45)
(5.98)
5.06
5.90
6.81
7.78
8.84
9.98
4.55
4.78
4.96
5.11
5.22
5.31
4.55
4.78
4.96
5.11
5.22
5.31
Forecast Year
Year
Revenue
Attendance
Sponsorship
Broadcast
Merchandise
Other
Total Revenue
Capex
Net Working Capital (NWC)
Change in NWC
Free Cash Flow (FCF)
Terminal value (Multiple X
last year’s Revenue)
Discount Rate – Cost of
Equity (CAPM)
PV of all Future FCF
PV of TV
Sum of all FCF
Enterprise Value
Net Debt
Market Value of Equity
Price/Share
11.10%
120.32
-16.2
104.12
£ 11.20 Base Case
7
2014
8
2015
9
2016
10
2017
11
2018
12
2019
13
2020
31.81
28.70
52.46
9.51
12.98
135.46
34.67
31.28
57.19
10.36
14.15
147.65
37.79
34.10
62.33
11.29
15.42
160.94
41.19
37.17
67.94
12.31
16.81
175.42
44.90
40.51
74.06
13.42
18.32
191.21
48.94
44.16
80.72
14.63
19.97
208.42
50.90
45.93
83.95
15.21
20.77
216.76
99.19
21.58
2.37
123.14
109.11
22.44
2.46
134.02
120.02
23.34
2.56
145.92
132.02
24.28
2.66
158.96
145.22
25.25
2.77
173.24
159.75
26.26
2.88
188.88
166.14
27.31
3.00
196.44
12.32
2.90
9.42
3.40
6.02
2.11
3.91
13.63
3.01
10.62
3.54
7.08
2.48
4.60
15.01
3.13
11.88
3.68
8.20
2.87
5.33
16.46
3.26
13.20
3.83
9.38
3.28
6.09
17.97
3.39
14.58
3.98
10.60
3.71
6.89
19.53
3.52
16.01
4.14
11.87
4.15
7.72
20.32
3.66
16.65
4.31
12.35
4.32
8.02
4.34
(78.97)
(6.52)
4.52
(86.08)
(7.11)
4.70
(93.83)
(7.75)
4.88
(102.27)
(8.44)
5.08
(111.47)
(9.20)
5.28
(121.51)
(10.03)
5.49
(126.37)
(4.86)
11.20
12.51
13.90
15.40
16.99
18.68
13.85
215.0135
5.36
5.39
5.39
5.37
5.34
5.28
5.36
5.39
5.39
5.37
5.34
5.28
3.53
54.72
58.25
Assumptions
Revenue Growth 1-12
Revenue Growth 13
Stadium OPEX
other exp
Depreciation Growth
CAPEX Growth
Tax Rate
Player Salaries 1-12
Player Salaries 13
Interest Expenses
New Stadium Assumptions
Attendance growth
Sponsorship growth
Stadium Cost
Stadium OPEX
Depreciation ( in years)
Working Capital Growth
EBITDA Multiple
9%
4%
4%
4%
4%
4%
35%
10%
4%
6%
40%
20%
250
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