Daniel Levy has enjoyed a heady April, arguably the best period in his Spurs chairmanship.

The Tottenham Hotspur Stadium has finally opened, and proven every bit as special a venue as he promised fans. Not one to seek the limelight, nonetheless it was clear on the opening night against Crystal Palace that this was his vision that had come to life.

Meanwhile, the accounts for Financial Year 2018 showed record revenues and tight control on costs, plus there was the small matter of reaching a Champions League semi-final.

After the win against Palace, Mauricio Pochettino dedicated the result to his boss — and in his detailed and heartfelt message to fans to mark the stadium opening, Levy thanked Pochettino for his work through the challenges of construction. When the history of this period of the club is written, the strong relationship between Levy and Pochettino will be seen as pivotal.

If anything, however, looking at the club’s financial performance, spiralling stadium costs and on-field success despite limited resources, Pochettino’s role in the successful navigation of the stadium construction becomes even more important. This may be Levy’s project, but how differently would it have gone without Pochettino?

FINAL COST OF THE STADIUM

First of all, how much is this stadium actually costing? Back in more innocent times, Levy spoke of an estimated cost of around £500m. Since then, with stadium construction starting and costs spiking, Levy has refused to put a number on it despite being asked on a number of occasions at meetings with the Supporters’ Trust.

The accounts don’t give a precise figure, but tracking the tangible asset growth (intangible assets are the players) you can get an idea. Since Financial Year 2007, when the the Northumberland Development Project first started to appear on the balance sheet, tangible assets have grown from around £71m to £1.025bn. In the past financial year alone, just over half a billion quid of assets have been added to the balance sheet.

Since FY07, the club has added £945m of assets to the balance sheet. Much of this has come from borrowing — with a £25m loan for the training ground, and £537m loan for the stadium (this will increase to £637m in the next accounts). There is also a £25m working capital facility with HSBC that hasn’t been touched, and a £50m contingency fund from Tavistock Group (it’s not clear if this is drawn or not).

Of the £537m loan, £445m has been drawn — so added to the training ground loan, that is borrowing of £470m. Therefore, of £945m in new tangible assets, £475m has come from current revenue — that’s an average of about £40m per year in the 12-year NDP period. Quite a financial handicap at a time when oligarchs have been pouring in unprecedented amounts into rival clubs.

TRACKING “FOOTBALL” SPENDING

A simple way of looking at how much a club is spending on “football” is combining wages and amortisation (how transfers are treated in accounts, where the cost is spread over the length of the contract). If you compare this to revenue, you can see whether a club is controlling it’s football spending, or living wildly beyond its means.

For Spurs, the chart tells a story — you can see, for many years, revenue and Wages+Amortisation tracked each other like a mirror, Levy’s tight cost controls clearly on display. But then, it diverged — with revenue climbing far faster than football spending increased. This divergence coincided with the arrival of Pochettino and the start of the stadium construction.

Pochettino has defied footballing gravity — delivering three years of Champions League football on a budget far closer to the the PL’s middle rankers than the rest of the “big six”. This has brought in tens of millions in additional revenue each year from the Champions League TV deal, plus uplift to matchday and commercial revenue.

Thanks to Pochettino’s excellent work, revenue has grown far faster than football spending. At the most important moment, with stadium costs rising due to delays and increased specifications (think of all those stories of Levy’s obsession to find the perfect lifts, the perfect glass, the perfect pints), Pochettino has helped to create a sizeable financial cushion.

The club reported profit of £113m in FY 2018, up from £36m in FY 2017. With no dividend payment, this money is ultimately being ploughed back into the club (and therefore, the stadium).

This chart shows Wages+Amortisation as a percentage of revenue, and also the gap between revenue and Wages+Amortisation.

Wages+Amortisation as a percentage of revenue has dipped sharply — from the 70–90% range prior to Pochettino, to a 50–70% range under Pochettino. In FY 2018, just 53.8 percent of revenue was spent on Wages+Amortisation — that’s a lower percentage than everyone bar Manchester United, Manchester City (yeah right) and Huddersfield spent on wages alone.

THE MAGIC OF POCH

So what does this mean? Essentially, the success under Pochettino, combined with Levy’s tight grip on costs, have enabled Spurs to build a financial cushion through the stadium construction phase. This has allowed the club to absorb the greater costs that have come from delays and push the boat out on specification.

Prior to Pochettino’s arrival, the gap between revenue and football spending ranged somewhere between £10m and £30m each year. In the past four years this has spiked — £58m, then £78.3m, then £136.5m, and now £175.6m. Non-footballing operating costs must be stripped out, but before that adjustment that’s nearly £450m — you can see how Spurs have been able to absorb that £475m in asset growth that could not be financed through borrowing.

(Adding after original publishing: As Twitter use Haofai notes, the huge rise in TV income is a major portion of revenue increase. However, the success under Pochettino has allowed Spurs to get a bigger scoop of it — more facility fees, more prize money, more CL revenue, etc..)

We’ll know more about the financial damage from the additional year at Wembley and the stadium delays in the next set of accounts, and a top four finish remains unconfirmed this season, but nonetheless Spurs look well-positioned — surely far healthier than the club may have feared when contingency planning for the stadium.

Heading towards the end of the season, this raises the question of whether Levy will finally be able to loosen the purse strings and allow Pochettino to compete for top-calibre players. I plan on looking at this in a future post in the next couple of weeks. TL/DR teaser: probably not as much as we hope.

While Daniel Levy earns deservedly earns plaudits for succeeding in building a world class stadium against the greatest of odds, the role of Pochettino shouldn’t be undersold. The Argentine’s incredible work will help the club emerge from the tricky period in a position far stronger than the club would have modeled when the plans were being hatched. He’s magic, you know.

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