E20 STADIUM LLP
Business
Plan and 2017-18 Budget
DRAFT Version 6 (Circulated to officer representatives of Members, 27 March
2017)
Version
Date
Main Revisions Made
1
02/03/2017
Alan Skewis draft from 2016 base document
2
10/3/2017
Review of draft financial forecasts by LBN
and LLDC
3
16/03/2017
Martin Gaunt draft
4
16/03/2017
Alan Skewis initial review
5
17/03/2017
Draft to E20 Finance & Audit Committee
6
27/03/2017
Martin Gaunt updated draft based on
Finance & Audit Committee feedback
Final Approvals
Signature
Date
Author
E20 Director Review
External Review (LLDC)
External Review (NLI)
Page 1 of 54
17-030 IR Annex A
Contents
1. Full Financial Summary ................................................................................................................... 4
2017-18 Budget ................................................................................................................................... 4
10 Year Business Plan Income and Expenditure Projections .............................................................. 5
2. Director’s Foreword ........................................................................................................................ 6
Radical options .................................................................................................................................... 7
3.
Bac
kground Information ................................................................................................................. 9
E20 Stadium LLP .................................................................................................................................. 9
Business Plan Structure ..................................................................................................................... 10
4.
Ope
rator ........................................................................................................................................ 12
Introduction ...................................................................................................................................... 12
Operator Agreement Financial Model .............................................................................................. 13
LS185 Business Plan .......................................................................................................................... 14
LS185 Fixed costs .............................................................................................................................. 14
Other payments to LS185 (contract changes) .................................................................................. 16
Net Commercial Revenues ................................................................................................................ 17
Financial Summary ............................................................................................................................ 21
5.
Nam
ing Rights ............................................................................................................................... 22
Approach ........................................................................................................................................... 22
Income .............................................................................................................................................. 22
Costs and financial appraisal ............................................................................................................. 23
Financial Summary ............................................................................................................................ 24
6.
Oth
er Operating Income and Costs .............................................................................................. 25
Fanstallation ...................................................................................................................................... 25
Asset Disposal (“Own the Track”) ..................................................................................................... 25
Wes
t Ham performance payments / relegation ............................................................................... 26
West Ham share of catering revenues .............................................................................................. 26
Minor South Park Events .................................................................................................................. 26
Matchday costs (non LS185) ............................................................................................................. 27
“Clean Stadium” requirements ......................................................................................................... 27
Sale of West Ham United .................................................................................................................. 27
Financial Summary ............................................................................................................................ 28
7.
Staffin
g .......................................................................................................................................... 29
Financial Summary ............................................................................................................................ 30
Page 2 of 54
17-030 IR Annex A
8. Overheads ..................................................................................................................................... 31
Business Rates ................................................................................................................................... 31
Insurance ........................................................................................................................................... 32
Legal Advice ...................................................................................................................................... 33
Other Professional Advice ................................................................................................................. 34
Member Services .............................................................................................................................. 35
Estate Charges................................................................................................................................... 36
Event Tickets ..................................................................................................................................... 36
Financial Summary ............................................................................................................................ 36
9. Relocatable Seats .......................................................................................................................... 38
Financial Summary ............................................................................................................................ 40
10.
Lifec
ycle Investment ................................................................................................................. 41
Financial Summary ............................................................................................................................ 42
11.
Disc
retionary funding for capital works .................................................................................... 43
Discretionary Funding ....................................................................................................................... 43
12. Community and Economic Benefits .......................................................................................... 44
Queen Elizabeth Olympic Park .......................................................................................................... 44
Local Community .............................................................................................................................. 45
Education .......................................................................................................................................... 45
National ............................................................................................................................................. 45
13.
Work
ing Capital Requirement................................................................................................... 46
14. Summary of annual payments to/from West Ham United ....................................................... 47
15.
Gov
ernance ............................................................................................................................... 49
Board ................................................................................................................................................. 49
G
overnance Structure ....................................................................................................................... 50
Map of Stadium site .......................................................................................................................... 51
Appendices ............................................................................................................................................ 52
Page 3 of 54
17-030 IR Annex A
1. Full Financial Summary
2017-18 Budget
The budget indicates that E20 is forecasting a net loss of £19.532m in 2017-18. This is the sum the
E20 Board is asked to consider and approve.
Lifecycle investment remains under consideration, and could require additional funds, subject to a
future Board decision. is shown in the table above, based on E20’s assessment
of LS185’s initial lifecycle review findings. If subsequently approved at that level, that would increase
the net loss to £20.182m.
Risks and opportunities sit outside the £20.182m figure. Risks include (but are not limited to) LS185
underperformance against their business plan, further seat move costs, LS185’s asset survey
resulting in further facility management costs, and potential payment of London Living Wage.
Opportunities include (but are not limited to) , and successful business
rates appeal.
Income and Expenditure Summary: 2017-18 budget
£000s
2016-17 forecast (prior year
comparator)
2017-18 budget
Income
Operator 0 3,574
Naming Rights 0 750
O
ther Ope
rating Income 207 70
Total Income 207 4,394
Expenditure
Operator (7,323) (8,329)
Naming Rights
Other Operating costs (308) (157)
Staffing (343) (339)
Overheads (3,163) (3,798)
Seating (300) (10,000)
Total Expenditure (11,590) (23,926)
E20 net position before lifecycle, risks and
opportunities
(11,383) (19,532)
Lifecycle investment 0 (650)
E20 net position including lifecycle, before risks
and opportunities
(11,383) (20,182)
Risks (450) (6,606)
Opportunities 0 1,
050
E20 ne
t position after opportunities, before risks (11,383) (19,132)
E20 net position, after risks, before opportunities (11,833) (26,788)
Page 4 of 54
17-030 IR Annex A
If opportunities are realised in full, and risks are not realised at all, the forecast would reduce to
£19.132m. If risks are realised in full, but opportunities are not realised at all, the forecast would
increase to £26.788m.
10 Year Business Plan Income and Expenditure Projections
The business plan indicates a base net loss of between £11m and £13m per annum between 2018-
19 and 2026-27. There are potential lifecycle costs beyond this sum, as well as risks and
opportunities. With lifecycle, risks and opportunities factored in, the forecast range is
This fluctuates slightly and gradually grows with inflation in
subsequent years, to a forecast range of
£000s
2016-17 forecast
(prior year
comparat
or)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
10 year total (2017-18
to 2025-26)
E20 net position before lifecycle, risks and opportunities
(11,383) (19,532) (13,443) (10,834) (11,362) (11,512) (11,268) (11,750) (12,028) (12,314) (12,842) (126,887)
E20 net position including lifecycle, before risks and
oppor
tunities
(11,383) (20,182)
Total risks (450) (6,606)
Total opportunities 0 1,050
E20 net position after opportunities, before risks (11,383) (
19,132)
E20 net position, after risks, before opportunities (11,833) (
26,788)
Page 5 of 54
17-030 IR Annex A
2. Director’s Foreword
In the last year the stadium has been handed over in its permanent form. It is now in its long term
configuration, and has started its life as a multi-use venue.
The Stadium has already hosted well over a million spectators since June 2016, and employs over
60% of the workforce from the local population. The first concert has been held; our major tenant
has moved in and played its first domestic and Europa League games. We have installed Europe’s
largest digital screen, and a secondary school that will teach over 1,000 local children has started
construction on site.
The stadium is preparing to stage the 2017 World Athletics Championships and ParaAthletics
Championships this summer.
These successes have required E20 to adopt a pragmatic approach in many of its dealings. While
this has been helpful in securing a safe, licenced venue it has required
The success is also in contrast to the financial performance of the stadium, which has been
unsustainable and failed to meet the forecasts set in March 2016.
This cannot continue.
E20’s primary role is to maximise the financial return for our members, driving our contractors to
deliver income targets, minimise costs and honour (but not over provide) our contractual
commitments.
E20 must make changes in 2017-18 that improve the position, and set us on a path towards an
overriding objective of having a stadium that vastly improves its financial performance.
The business plan reflects six priority areas for our work that support this overriding objective:
1. Making financial efficiencies – Maximum working capital of £19.5m in 2017-18,
2. Holding LS185 accountable for delivery of the stadium operating contract,
3. Securing naming rights gross income of at least for a minimum of ;
4. Closing out stadium transformation issues before August 2017;
5. Moving the relocatable seats in time and within a £10m budget in 2017-18, and securing a
cost of less than for 2018-19;
Page 6 of 54
17-030 IR Annex A
6. Secure contracted local community and economic benefits, including the 75% local
employment target.
In everything we do:
• We will focus on our core business of driving down the working capital needs of the stadium
and providing a platform for a profitable stadium;
• We will not tolerate excuses for under performance in the now transformed stadium;
• We will meet our contractual obligations, but only agree expenditure for what we are legally
obliged to do;
• We will simplify, rather than accept, the interdependencies between different work streams
that have fuelled delays in decision making.
The disadvantage of the 2016-17 pragmatic approach was that it diverted E20 into areas which are
outside its direct responsibility and remit. In 2017-18 we will no longer:
•
•
Radical options
Under the direction of its Members, this Business Plan focuses on driving the best possible
performance for E20 within its existing contractual and physical constraints. It assumes the
following:
• The existing relocatable seating system – which is expensive to operate, and does not
deliver a full transition of the stands within the 7 day target – is retained for the 10 year
business plan period;
• The Concession Agreement with West Ham United is honoured, providing priority use for
the club for a fixed payment of £1.25m-2.5m per annum;
•
• LS185 continue to operate the stadium as per the Operator Agreement;
• E20 continues to own and manage the stadium on behalf of its two Members.
This business plan demonstrates that, within these assumptions, E20 is unlikely to reach a point
where it can meet its objective to deliver a financial return to its Members. As a result, there is
ongoing work on more radical options to address the stadium’s fundamental challenges. This is
largely being led by E20’s Members (with E20 leading or inputting on some items). It includes:
Page 7 of 54
17-030 IR Annex A
• Revi
ewing E20 ownership;
•
•
• The liability for relocatable seating transition costs (which is disputed between LLDC and
NLI);
• An engineering study into whether it is feasible to install a new lower bowl seating system
that would deliver a dramatic improvement in the transition time and cost;
• A Mayoral Review into the stadium, reviewing earlier decisions on the legacy plans, and the
future financial viability of the stadium.
E20 will support work on these more radical workstreams, but not allow them to divert from E20’s
six priorities for 2017-18.
Page 8 of 54
17-030 IR Annex A
3. Background Information
This business plan sets out a summary of the business of E20 Stadium LLP, including financial
projections and key risks and opportunities. The full financial summary provides the detailed income
and expenditure projections for the ten year period from 2017-18 to 2026-27.
This business plan for E20 Stadium LLP is the third full business plan for the stadium in legacy mode.
It draws from the experience of the past year. However, the significant in year changes means that
the 2017-18 plan has been based on a full bottom-up review of all income and expenditure
projections.
E20 Stadium LLP
E20 is a limited liability partnership incorporated on 6 July 2012 under the Limited Liability
Partnerships Act 2000. E20’s Members are the London Legacy Development Corporation (LLDC) and
Newham Legacy Investments Limited (NLI). LLDC is the freeholder of Queen Elizabeth Olympic Park
(QEOP) including the Stadium Island and South Park. NLI is a wholly owned subsidiary of the London
Borough of Newham (LBN). E20 was dormant in 2012-13, with its first year of trading in 2013-14.
E20 was established as the vehicle to deliver the post-Games transformation of the stadium, and
then its ongoing management. The first of these has now been largely been completed by E20’s
nominated agent for the work – the LLDC transformation team.
The E20 Membership Agreement sets out the objectives of the partnership, with the overarching
aim of the LLP being to deliver a programme of sport, community, cultural and commercial events as
well as the following legacy benefits:
• Contributing to the regeneration of the QEOP area, with the Stadium as the centrepiece of a
vibrant Park that delivers growth to East London;
• Local resident access to training and jobs at the Stadium provided by the LLP and the
operator;
• Educational provision within the Stadium; and
• Access to the community track and wider Stadium facilities and events for Newham
residents.
However, most critically, E20 has been set up with the aim of delivering a long-term financial return
to its Members, and ensure that the stadium is not an ongoing burden on taxpayer funding. As set
out in the Director’s Foreword, under current assumptions (i.e. without radical changes), this
business plan demonstrates that E20 will not achieve this objective.
Page 9 of 54
17-030 IR Annex A
Business Plan Structure
The E20 business has not yet reached a mature, steady state, and significant uncertainty and risk
remains. E20’s Members wish to understand the existing financial forecasts for the business, which
will form the budgets to be considered and ultimately approved by the Board.
Members also wish to understand the known risks faced by the business that, if realised, could
create pressures in the business plan and result in a worse financial position.
Finally, Members wish to understand the opportunities potentially open to E20 to exploit, that could
deliver improvements in the financial position.
In order to address these requirements, this business plan presents:
• The “base business plan” forecasts for approval;
• Major (known) risks (quantified) faced by E20 that sit beyond the base forecasts;
• Major opportunities (quantified) open to E20 that sit beyond the base forecasts.
Each of the financial chapters of the business plan consider the primary areas of the business:
• Operator;
• Naming Rights;
• Other Operating Income and Costs;
• Staffing;
• Overheads;
• Relocatable Seats;
• Lifecycle Investment.
Under each chapter, the base business plan is presented, together with the main risks and
opportunities. Commentary is provided primarily to justify the quantifications given, but also to set
out how E20 is managing the risks and driving delivery of the opportunities. Ten year projections are
provided, although typically the figures in latter years simply represent the earlier projections
adjusted for inflation.
1
Other chapters follow at the end of the document, covering management of
E20’s £14.286m discretionary (capital) budget, and the delivery of community benefits.
The business plan does not make any provision or contingency for unknown risks. The Stadium is
now more established, so “unknown unknowns” should no longer emerge on the same level as they
did in the stadium’s opening year. However, the contractual and other challenges faced by E20 do
leave it potentially exposed to other cost pressures emerging that are not currently anticipated or
quantified. Similarly, as the business beds down and LS185 become more established, new and
significant income streams may emerge. Again, by definition these are unknown, so no income is
assumed.
1
Note that inflation is generally assumed across the whole business plan at 3% per annum. This is based on the
average annual RPI experienced in the previous 10 year period, 2007-2016 (Office for National Statistics).
Page 10 of 54
17-030 IR Annex A
E20 updates its business plan annually, so the evolution of the business will be reflected in updated
plans. Members have indicated that, for budgeting purposes, the timetable for E20’s next business
plan should be brought forward, so that it is considered and agreed by the Board in December 2017.
Page 11 of 54
17-030 IR Annex A
4. Operator
The relevant Key E20 Priority is:
Making financial efficiencies – Maximum working capital of £19.5m in 2017-18,
and
Holding LS185 accountable for delivery of the stadium operating contract,
.
The business plan indicates before risks or opportunities, in this area of
the business in 2017-18.
The Board will receive information on:
• Budget vs Actual Forecast LS185 Net return to E20 (Quarterly)
• Match days costs against LS185 business plan and E20 target (monthly)
• Budget vs Actual Fixed Costs (quarterly)
• 2017 Net Concert Revenues (August)
• Health and Safety (Monthly)
• Number of non-event day uses of the stadium (Conferences, banqueting, etc) (Quarterly)
Introduction
The vast majority of the day-to-day operations of the stadium, event sourcing and delivery, and
commercial activity, is contracted by E20 to its operator LS185. The relationship is governed by the
Operator Agreement, established in early 2015.
Managing LS185’s contract forms a major part of E20’s day-to-day business, and is critical to E20’s
financial success. If LS185 fail to deliver it has a very significant impact on:
• The financial performance of E20: is paid to LS185 per annum in fixed costs, with
LS185 expected to deliver significant net commercial revenues in return (see further details
below);
• The stadium’s relationship with primary tenants and other partners, including potential legal
challenge;
• The broader community and economic benefits that the stadium delivers.
Page 12 of 54
17-030 IR Annex A
investment is likely to be required. This is therefore identified as a potential call on the £14.286m
discretionary fund (see chapter 11).
At the time of writing, E20 is in the process of handing over responsibility for utilities to LS185. In
turn, LS185 are establishing contracts with utilities suppliers. The per unit utility rates assumed in
the business plan, in particular for electricity, have been offered but not yet contracted.
Facility management costs
Around of the contracted annual fixed cost payment to LS185 is for facility
management. This is subcontracted by LS185 to VINCI Facilities. The Operator Agreement provides
that LS185 must undertake an asset survey upon taking ownership of the stadium, an exercise now
underway. This survey compares the stadium assets as built, to the specification detailed at the time
of the operator bid.
The annual payment by E20 for facility management is subject to adjustment in accordance with the
outcomes of the asset survey (once challenged and agreed by E20).
Draft high level findings from LS185’s asset survey were presented to E20 and its members on 22
March.
•
•
•
•
E20 has yet to substantiate these (and other) assertions. The draft asset survey report will be
submitted to E20 w/c 27 March, and a detailed period of review and challenge will commence.
5
E20
is already prioritising rapid resolution of any matters relating to statutory records, certification, or
anything that relates to the safety of the stadium.
5
E20 intends to appoint expert consultants to advise and protect E20’s interests. This advice is referenced, and
budgeted for, in the Overheads chapter of the business plan.
Page 15 of 54
17-030 IR Annex A
Notably, LS185’s asset survey is not yet complete. These figures do not yet include the maintenance
of significant items such as the external digital screen, in bowl LEDs, Internet Protocol Television,
some ICT equipment and some furniture, fixtures and equipment (FF&E). E20 has requested a full
assessment of all stadium assets. Once included, these items will increase LS185’s proposal for the
annual cost of facility management.
Other payments to LS185 (contract changes)
E20 and LS185 are working through contract changes that formalise additional scope that the
operator has taken on. This includes the installation and operation of a temporary wifi system (until
the permanent solution is in place), transport modelling to discharge Section 106 Planning
requirements, and the operation of the digital wrap (after contributions from other parties, including
West Ham). The forecast costs associated with these activities are summarised in the table below.
Page 16 of 54
17-030 IR Annex A
Net C
ommercial Revenues
The LS185 business plan forecasts net commercial revenues,
Year LS185 Net Commercial Revenues Forecast
(£m)
2015-16 (part year operation) 0.94 (actual)
2016-17 (part year operation) (0.46)
2017-18 3.57
2018-19 3.66
2019-20 onwards (“steady state”) 5.12
LS185 are projecting future net commercial revenues jumping to positive £3.6m in 2017-18, and
then growing to just over £5m in steady state.
£ 2016-17 2017-18 2018-19 and steady state
Temporary wifi
Transport modelling
Wrap operation
Total
Page 17 of 54
17-030 IR Annex A
Other Operator Risks
The E20 assessment of LS185 underperformance risk does not factor in three further specific risks
(which to a large degree are beyond LS185’s control):
• London Living Wage: A potential adjustment to E20 policy to pay London Living Wage (LLW)
to all event day staff. This is a future decision for the E20 Board, and must be made in the
context of the Mayor of London’s recent public statement that the stadium must now pay
LLW. Current LS185 and E20 forecasts do not assume payment of LLW to all subcontractors –
the majority of event day stewards, catering staff and cleaners are paid below LLW. E20 is
awaiting information requested from LS185 detailing the potential financial impact of paying
LLW.
However, there is likely to be a significant net cost if E20 instructs LS185
(via a change request under the Operator Agreement) to pay LLW. Whilst E20 awaits the
comprehensive information to inform a decision, LS185 have indicated that the net impact
would be in the region of
• “Ipswich ruling” Police costs: There was a recent High Court ruling in respect of policing at
Ipswich Town Football Club. In summary, the High Court found that the football club, not the
Police, is responsible for funding the cost of event-related Policing in the area surrounding
the Portman Road ground. There is the potential for the Metropolitan Police to apply this
ruling to the London Stadium, thereby increasing the extent of the geographic area the
Police can recover costs for.
Net revenues concerts
Net revenues South Park
Net revenues Winter Sports
Net revenues Summer Sports
Net revenues International Sports
Net reveues Special events / filming
Net revenues Partnership
WH Catering
UKA Cate ring
Meeting & events, stadium tours, South Park kiosks
Net revenues WH events
Net revenues Others
Recouped out-of-scope works
Justifications for probability factors and adjustments
Page 19 of 54
17-030 IR Annex A
• Cos
t of capacity increase for West Ham matches: There is an ongoing legal dispute between
E20 and West Ham around responsibility for meeting the costs, and sharing the revenues,
from the increase in the stadium capacity beyond the 53,500 detailed in the Concession
Agreement.
Other Operator Opportunities
There remains the opportunity for a stadium groundshare with another football club. This is
permitted under the terms of the Concession Agreement, although in effect West Ham would be
due a significant slice of the commercial benefit.
Long term, there is undoubtedly scope for vastly improved operator performance, and perhaps net
commercial revenues of the level anticipated during the operator procurement. However,
considerable progress will be necessary over the next three years just to achieve LS185’s business
plan. Therefore, the opportunity beyond that is not currently quantified.
Page 20 of 54
17-030 IR Annex A
Financial Summary
Base business plan section:
Risks:
Opportunities:
£000s
2016-17 forecast
(prior year
comparator)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
10 year total (2017-18
to 2025-26)
Operator (LS185)
Fixed costs (
base
) (5,080) (
6,
049)
(
1,248)
(1,090)
(250) (1,000)
Other payments to LS185 (contract changes) (284) (
190)
Net Commercial Revenues after Operator share, as
forecast in LS185 business
plan
(461) 3,574
Total LS185 before risks or opportunities (7,323) (4,755)
£000s
2016-17 forecast
(prior year
compar
ator)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
10 year total (2017-18
to 2025-26)
Risks
(250) (1,000)
(200) (206)
LS185 underperformance against their business plan 0 (2,508)
Payment of London Living Wage 0 (800)
"Ipswich Ruling" Policing costs 0 (525)
0 (500)
£000s
2016-17 forecast
(prior year
comparator)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
10 year total (2017-18
to 2025-26)
Opportunities
Groundshare with another football club
Utilities savings from improved efficiency
0 200
0 450
Not modelled as highly uncertain, and E20 has limited control
Page 21 of 54
17-030 IR Annex A
5. Naming Rights
The relevant Key E20 Priority is:
Securing naming rights gross income of at least
The business plan indicates a net cost of before risks or opportunities, in this area of the
business in 2017-18.
The Board will receive reports for decision on:
• Naming rights contract (April 2017)
Approach
The potential income from a naming rights partnership would be due directly to E20 – unlike most
other revenues which flow through the operator. The potential value of the naming rights
partnership is such that it is highly significant to E20’s overall financial position. E20 has appointed
an agency (ESP Global) to target, source and deliver a naming rights partner.
E20 is in advanced negotiations with Vodafone as the potential naming rights partner. Vodafone
have indicated in principle that they intend to proceed with a partnership. The precise terms,
notably the inventory rights and responsibility for activation costs, are subject to ongoing
negotiation. The partnership is expected to be successfully secured imminently, in order for it to
commence with the London 2017 Championships in July.
The base business plan
assumes the deal is concluded on the terms under discussion (as circulated to the Board on 16
March). The business plan then makes a risk provision for this deal – or any deal – not proceeding.
This risk is quantified so that it effectively cancels out the net income forecast.
Income
The proposed partnership under discussion with Vodafone
Page 22 of 54
17-030 IR Annex A
Costs and financial appraisal
If the deal is successfully secured, there are a number of costs that may need to be deducted from
the income received, in order to reach the net position. These are not yet finalised and remain
uncertain. At the time of writing, they are assessed as follows:
On current assumptions, the naming rights deal would generate net revenue to E20
Note that
When profiled by financial year, the assessment is potentially slightly different, given the anticipated
1 July 2017 commencement date:
Naming rights financial assessment
By year of deal:
Page 23 of 54
17-030 IR Annex A
Beyond year 5, the business plan assumes that the Vodafone deal (or an equivalent deal with an
alternative partner) continues, with the gross fee and associated costs both growing with inflation.
Financial Summary
Base business plan section:
Risks:
Naming Rights financial assessment
By financial year (assuming 1 July 2017 commencement date):
£000s
2016-17 forecast
(prior year
comparator)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
10 year total (2017-18
to 2025-26)
Naming Rights
Gross naming rights income 0 750 2,875 4,250 4,500 4,500 4,635 4,774 4,917 5,065 5,217 41,483
Associated costs (excluding capital items) (153) (1,303) (518) (701) (1,205) (1,209) (730) (752) (775) (798) (822) (8,812)
Total Naming Rights before risks or opportunities (153) (553) 2,358 3,549 3,295 3,291 3,905 4,022 4,143 4,267 4,395 32,671
£000s
2016-17 forecast
(prior year
comparator)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
10 year total (2017-18
to 2025-26)
Risks
No naming rights 0 553 (2,358) (3,549) (3,295) (3,291) (3,905) (4,022) (4,143) (4,267) (4,395) (32,671)
Page 24 of 54
17-030 IR Annex A
6. Other Operating Income and Costs
The relevant Key E20 Priority is:
Making financial efficiencies – Maximum working capital of £19.5m in 2017-18,
The business plan indicates net expenditure of , before risks or opportunities, in this area of
the business in 2017-18.
The Board will receive information on:
• Other Operating Income and Costs (quarterly)
There are various operating income streams or costs that sit outside the Operator Agreement. These
are each described in turn.
Fanstallation
The fanstallation is an area of personalised paving stones in the Champions Place landscaped area to
the north of the stadium. West Ham United have sold, and continue to sell, stones to their fans – to
date they have sold in excess of 17,000, at an average retail price of c£80 (before VAT). A lease was
issued to West Ham in summer 2016, to formalise their use of the site, for a minimum rent of
£20k/annum (more depending on the number of stones sold). Despite already enjoying the access,
and commercial benefits, West Ham are refusing to sign the lease, as they do not accept the
commercial terms. They have refused to engage, citing the need for the bigger issue of “look and
feel” rights to be resolved first. E20 does not accept this position, and is considering its options –
bo
th legally and practically – in response to West Ham’s refusal to sign the lease. The business plan
assumes this issue is resolved and delivers income to E20 of £20k per annum, with the first payment
(backdated) to March 2017.
Asset Disposal (“Own the Track”)
E20’s project to sell sections of the former London 2017 athletics track as commemorative consumer
products has proved successful – to date it has delivered gross sales in excess of £300,000, with
profit to E20 exceeding £60,000, plus significant reputational benefits for E20 and its Members. E20
will continue the project in 2017-18, with its delivery partner Your Tribute (which is responsible for
the bulk of the work). Two priorities are being pursued in order to generate further significant
profits:
o Ongoing partnership with UKA, with the aim to extend to include promotion and sale of
the products at London 2017.
Page 25 of 54
17-030 IR Annex A
o Focus on corporate partnerships, targeting the “top 100” companies associated with
London 2012 and/or the Stadium, with the view to bulk or premium orders.
The base business plan forecasts net profits to E20 of £40k in 2017-18.
West Ham performance payments / relegation
Under the terms of the Concession Agreement, West Ham are due to pay an additional fee to E20 if
the club achieves certain performances (relating to league position, winning cup competitions, or
qualifying for European competitions). These apply from a 10
th
placed Premier League finish (worth
£25k) upwards. At the time of writing, West Ham are outside the top 10. No performance payments
are assumed in the base business plan.
Potential income of £190k, every other year, is shown as an opportunity. This equates to a realistic
upside performance, with West Ham finishing 7
th
in the league every other season, with no cup
wins.
6
The base business plan also does not allow for the corresponding risk that West Ham are relegated,
which triggers a 50% reduction in their £2.5m annual usage fee. This is shown as a risk item,
quantified at £1.25m (indexed), modelled as occurring twice within the 10 year business plan
period.
7
West Ham share of catering revenues
Under the terms of the Concession Agreement, E20 is due to share 30% of the annual catering
revenues from West Ham games above £500k with the club. This is not reflected in the Operator
Agreement and must be paid by E20 rather than LS185. Based on LS185’s business plan, catering
revenues from West Ham’s games are projected at in 2017-18. On this basis, E20 would be
due to pay West Ham
Minor South Park Events
LS185 are responsible for sourcing and delivering large, commercial events on the South Park.
However, the LLDC Events team continue to deliver a steady stream of smaller events to generate
additional revenues for E20. This will drop off in 2017-18 as LLDC take back the land ahead of
development.
6
This was West Ham’s performance in the 2015-16 season (sadly coming too soon for E20 to benefit).
7
This roughly reflects West Ham’s performance in the Premier League era, where they have spent 3 of the
past 23 seasons outside the top flight.
Page 26 of 54
17-030 IR Annex A
Matchday costs (non LS185)
This item comprises costs for E20 on event days that are specifically excluded from the responsibility
of LS185 (and as such are not factored into their net commercial revenues).
New
egress arrangements are expected to be introduced imminently. If successful, this will reduce E20’s
liability to
a
lthough the extent of the impact is not yet agreed.
E20 also made some initial one-off contributions towards and extra staffing at West
Ham station in 2016-17.
A provision of per annum has been made for non-LS185 matchday costs in the base business
plan. This represents a significant saving compared to 2016-17, but still allows for some residual
costs – prudent given that future egress arrangements are not settled, nor funding responsibility
agreed.
“Clean Stadium” requirements
E20 has a contractual obligation to UK Athletics to provide the stadium on a “clean” basis for London
2017 – i.e. with no branding or sponsorship visible. E20 is continuing to work through the practical
implications, and is seeking to minimise any changes to the stadium appearance.
The base business plan makes no provision for clean stadium
costs, but quantifies the risk at (one-off in 2017-18).
Sale of West Ham United
If West Ham United are sold by their current owners in the near future, a proportion of the sale is
payable to E20. The amount payable to E20 is dependent on the timing of the sale, the value of the
sale, and who the club is sold to (E20 do not get a windfall if it is passed on to family members of the
existing owners). Although very significant to E20 in terms of the potential windfall, E20 of course
has no control over this eventuality. As such, it is acknowledged in the business plan as an
opportunity, but is not quantified.
Page 27 of 54
17-030 IR Annex A
7. Staffing
The relevant Key E20 Priority is:
Making financial efficiencies – Maximum working capital of £19.5m in 2017-18,
The business plan indicates net expenditure of before risks or opportunities, in this area of
the business in 2017-18.
The Board will receive information on:
• Appointment of Deputy Director (May 2017)
• E20 Staff recruitment and performance (quarterly)
The current E20 team comprises:
• A Director (Alan Skewis), with overall responsibility for E20 Stadium LLP. This is a permanent
position.
• A Business Manager (Martin Gaunt), who leads on financial strategy, governance, contract
management and certain projects. The role is filled on a secondment from HM Treasury, and is
due to expire at end September 2017.
• An Assistant Business Manager ( ), who supports the Business Manager on
certain projects, with a particular focus on seating transitions, London 2017, “look & feel”
arrangements with West Ham, and residual matters relating to the external wrap. This role is
filled on a fixed term basis, expiring at end August 2017.
• An E20 Capital Adviser ( ), who represents E20’s interests in the transformation
works. This role is filled on a part-time, fixed term basis on a fixed fee through to August 2016.
• A PA and Team Administrator ( ), who provides administrative support plus the
Board secretariat function. This role is filled on a permanent basis.
A number of consultants / project managers are also employed:
• Chris Allison, E20 Security Adviser. Chris’ role should end by May 2017. There is provision for
his costs in the technical advice section (Overheads chapter).
• Mace as Project Managers for the relocatable seating system (covered in seating costs
section).
• on handover issues. There is provision for his costs in the technical advice section
(Overheads chapter).
E20 staffing evolves as required by the task in hand. The theme running through the business plan
of moving from transformation and stadium opening to a focus on contract management is reflected
in proposed changes to the team in 2017-18.
Key changes in the year will be:
Page 29 of 54
17-030 IR Annex A
• App
ointment of a Deputy Director (interviews in May 2017, forecast start date of July 2017);
• Discontinuation of the Business Manager Post (by end September 2017);
• Discontinuation of the fixed term Assistant Business Manager post, currently focused on seat
moves and London 2017 (end August 2017);
• Completion of the secondment of the E20 Capital Adviser (by August 2017).
These changes make the E20 team smaller, and necessitate the withdrawal from non-core activity.
The business plan reflects these staffing structures and the salaries agreed (or, in the case of the
new role, proposed).
“On costs” are allowed for at 20% of salaries. This comprises 13.8% National Insurance and a 6%
employer pension contribution. Subject to satisfactory performance, staff are being awarded a 1%
pay rise in April 2017, below the level of inflation.
Financial Summary
Base business plan section:
£000s
2016-17 forecast
(prior year
comparator)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
10 year total (2017-18
to 2025-26)
Staffing
Total Staffing before risks or opportunities (343) (339)
Page 30 of 54
17-030 IR Annex A
8. Overheads
The relevant Key E20 Priority is:
Making financial efficiencies – Maximum working capital of £19.5m in 2017-18,
The business plan indicates net expenditure of , before risks or opportunities, in this area of
the business in 2017-18.
The Board will receive information on:
• Business Rates Appeal (July 2017)
• Actual vs Budgeted Legal Advice (Monthly)
• Quarterly Update on achievement of targeted savings (quarterly)
Overheads represent a significant portion of E20’s annual costs (forecast at in 2017-18). It
is worth noting that over £1.5m of these overheads are paid to its two Members and Central
Government. LLDC receive £400k (20% of the business rates), a £300k estate charge and £138k for
services (although with obligations to match). Newham receives £600,000 (30% of business rates).
Business Rates
The business rates payable by E20 are determined by the rateable value of the stadium, as set by the
Valuation Office Agency (VOA). The rates are collected by LB Newham. Government policy dictates
that the actual rates payable are set at c50% of the rateable value.
The rateable value of the stadium is £4m until April 2017, when it will increase to £4.6m as a result
of the na
tionwide revaluation exercise. The increase for the stadium is more modest than many
other properties in London have experienced, but nevertheless still equates to a very significant
rates bill of £2.3m/annum.
The VOA’s assessment of the current and future rateable value is based upon forecast gross
revenues in an earlier version of E20’s business plan, prior to subsequent major revisions in E20’s
forecast profitability. This provides justifiable grounds for an appeal, with the aim of securing a
substantial, backdated, reduction. E20 formally lodged an appeal in November 2016 via its retained
business rates adviser, GeraldEve. The appeal system appears log-jammed (LLDC’s appeal on the
Aquatics Centre took three years’, but has just been successful), but E20 is pushing for priority
consideration. GeraldEve have advised that substantive progress on the appeal can be expected in
the summer, with a likely outcome in late 2017 or early 2018. They are cautious on the prospects of
success. They suggest that any improvement could be a c10% reduction, whereas the Aquatics
Centre appeal achieved over 40%. The base business plan makes no provision for a reduction, but
records a saving opportunity of up to £400k
(equating to a c20% reduction on the current net rates
bill of £
2.1m (after West Ham’s assumed contribution – see below).
Page 31 of 54
17-030 IR Annex A
This represents a major saving against the projections made in the last E20 business plan. The
property insurance is based on a reinstatement valuation of the stadium of (ie. the cost to
rebuild the
stadium from scratch).
E20’s futu
re premiums are likely to increase with inflation. There is a risk – not quantified in this
business plan – that a major safety or other incident could lead to a significant upwards adjustment
in E20’s premiums.
E20 has identified the following potential opportunities to deliver long-term savings of £50k-£100k
per annum on existing insurance costs:
•
•
•
•
Leg
al Advice
The volume of legal issues E20 have dealt with in 2016-17 far exceeded the scale anticipated. This
has been driven by:
• The West Ham Concession Agreement having scope for interpretation on a significant
number of matters;
• West Ham taking a litigious approach;
• A number of LS185-E20 d
isputes generated by the h
andover of the transformation works
and interpretation of the Operator Agreement;
• Challenges relating to the relocatable seating system.
Page 33 of 54
17-030 IR Annex A
The level and scale of disputes are unlikely to quickly abate in 2017-18, with current disputes as
follows:
Dispute
Value of Dispute
Anticipated
Legal Spend
2017-18
Options to Mitigate
A bu
dget of is therefore allocated in the base business plan, to cover both TfL Legal and
Gowlings fees.
Given the volume of legal disputes, and the current reliance on Gowlings to provide advice,
consideration could be given to either:
• Allocating a TfL lawyer dedicated to E20 business. This would allow greater retained
knowledge “in house”, reducing the need to resort to Gowlings so often;
• E20 seconding a lawyer in from outside to be the day-to-day conduit for legal matters, and
able to collate, summarise and minimise external lawyer time.
A decision on this will be made on the basis of saving legal fees, and time spent dealing with legal
issues.
Oth
er Professional Advice
E20 seeks to limit its use of consultancy advice, but makes provision for the following necessary
services.
Page 34 of 54
17-030 IR Annex A
• Acc
ounting advice, assumed at £39k in 2017-18. This covers KPMG’s work to provide 12
monthly VAT returns and Construction Industry Scheme (CIS) returns, tax advice and a
limited number of ad hoc queries as required. These requirements are anticipated to be
taken on by LLDC Finance (via its service into E20) sometime in 2018-19.
• External Audit fees for EY. Their fee estimate for the audit of the 2016-17 accounts is £26k
(incurred during 2017-18). The business plan assumes that this fee is reduced to £21k from
the following year, once the stadium is in more of a steady state and there are very fewer
transactions to audit.
• Technical advice, assumed at £100k in 2017-18, and diminishing thereafter.
The business plan makes
no provision for any feasibility or design costs associated with a potential new seating
system.
Member Services
E20 is a small organisation that relies upon services from its members in order to deliver all its
necessary functions. This approach allows E20 to retain a slim staffing structure, and for its members
to be integrated into its day to day operations. LLDC currently provides services to E20 in accordance
with the Services Agreement. The services include:
• Stadium transformation – residual staff costs are contained within the transformation
budget.
• Finance and procurement – including transaction services, statutory accounts, management
of external audit, FoI management, and procurement advice as required. The cost of these
services in 2017-18 is budgeted at £93,500 (an increase from £80,000 in 2016-17 due to
increased complexity around accounting issues). Procurement management services such as
those provided for the stadium wrap represent an additional capital cost charged to the
project.
• Human Resources and Facilities – including office space, recruitment, payroll management,
and ad hoc personnel issues as they arise. A fee of £5,100 per annum is budgeted for HR
services. Facilities costs, assuming E20’s use of an average of four desks over the course of
2017-18, are £24,100. Total HR and facilities charges for 2016-17 are therefore £29,200 (up
from £28,600 in 2016-17 due to inflation).
• Communications – including strategic communications and press relations. This service is
provided free by LLDC in recognition of the importance of the stadium in the overall
communications strategy for the Park.
• Information Technology – this service is provided for an annual fee of £15,300 (up from
£15,000 in 2016-17 due to inflation). Non-standard equipment or software requirements are
chargeable on a pass through cost basis.
The total budget for LLDC member services for 2017-18 therefore stands at £138k. This is a fixed
liability for E20, unless there happen to be very significant changes in requirements which warrant
Page 35 of 54
17-030 IR Annex A
reconsideration. For future years this figure is subject to inflation, and annual review by the LLDC
Deputy Chief Executive and E20. A small net saving is forecast from 2018-19, due to an expected
reduction in necessary services, partially offset by LLDC potentially bringing accounting advice
(currently provided by KPMG) in house. Over the course of 2017-18, E20 will also review the most
appropriate and cost effective provider of these services. One option could include establishing joint
arrangements with LS185 or other small businesses (e.g. activeNewham)
Estate Charges
E20 is contractually obliged (via its lease with LLDC) to pay an estate charge of £300k/annum, subject
to inflation.
In future this w
ill be partially offset by an estate charge payable to E20 from the Bobby Moore
Academy, commencing when the school opens in September 2018 and growing from c£60k up to
c£14
0k per annum thereafter.
Event Tickets
E20 purchases tickets on behalf of its members. This enables key decision makers and other
sta
keholders to be invited to events, in order to support the strategic objectives of LLDC and
Newham. Approximately £100k was spent on event tickets in 2016-17. The same budget is set for
2017-18. The
majority of the cost is for hospitality tickets for West Ham matches – E20 is tied into
three year commitments for these tickets. There is a small remaining provision for other events. E20
seek
s to minimise costs as far as possible by securing free tickets to stadium events.
Financial Summary
Base business plan section:
£000s
2016-17 forecast
(prior year
comparat
or)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
10 year total (2017-18
to 2025-26)
Overheads
LLDC Member Services (124) (138)
E
state charge payable to LLDC (228) (325)
Estate charge payable by school to E20 0 0
Business rates (1,517) (2,100)
Insurance (518) (620)
Brand and marketing (35) 0
Legal advice (392) (350)
Accounting advice (63) (39)
External audit fees (26) (26)
Transport advice (59) 0
Technical advice (102) (100)
Event tickets (100) (100)
Total Overheads before risks or opportunities (3,163) (3,798)
Page 36 of 54
17-030 IR Annex A
Opportunities:
£000s
2016-17 (prior ye ar
comparator)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
10 year total (2017-18
to 2025-26)
Opportunities
Business rates saving secured via appeal 0 400 412 424 437 450 464 478 492 507 522 4586
Insurance
premium savings 0
Page 37 of 54
17-030 IR Annex A
10. Lifecycle Investment
The relevant Key E20 Priority is:
Making financial efficiencies (although lifecycle investment is not included in E20’s base budget, so
would be subject to further consideration by the Board).
The business plan indicates net expenditure of , before risks or opportunities, in this area of
the business in 2017-18.
The Board will receive reports for decision on:
• E20 Lifecycle Plan (June 2017)
The Board will then receive information on:
• Lifecycle Budget vs Actual Spend (Quarterly)
Under the terms of the Operator Agreement, investment in stadium lifecycle costs is an E20
responsibility for individual assets over in value. LS185 must submit an Annual Lifecycle
Replacement Plan each year. E20 may then instruct LS185 (more specifically, LS185’s subcontractor
VINCI Facilities), or another contractor, to undertake the works of E20’s choosing. Lifecycle
investment clearly creates an upfront cost for E20, whereas choosing not to invest is likely to
increase maintenance costs and/or increase the necessary lifecycle investment in subsequent years.
E20 will need to make a balanced judgement of when and how to invest.
LS185 and VINCI Facilities presented its first draft high level summary of asset lifecycle to E20 and its
members on 22 March 2017. It follows a comprehensive review of stadium assets, all of which is to
be set out in considerable detail in a draft report to E20 w/c 27 March. E20 will then commence a
period of review and challenge. E20 is in the process of procuring specialist consultancy support for
this work (as budgeted in Overheads chapter of business plan). E20 will present a summary to the
Board, with a recommendation on necessary lifecycle investment.
Prior to that period of review and challenge, LS185’s assessment indicates that lifecycle investment
of may be required over the next 25 years (the term of the Operator Agreement). Over the
first five years, LS185’s assessment is as follows:
Year
2017-18
2018-19
2019-20
2020-21
2021-22
Page 41 of 54
17-030 IR Annex A
Pending further details to be issued by LS185, the equivalent figures for the subsequent five years
(i.e. 2022-23 to 2026-27 – the remainder of E20’s business plan period) may be considered to be an
average of per annum (ignoring peaks and troughs).
The above figures presented by LS185 cover all assets regardless of value, but with some notable
exceptions.
11
LS185 can and will present a subset, which only covers assets over in value, in
accordance with the Operator Agreement.
Under the Operator Agreement, E20’s current fixed costs payment to LS185 includes per
annum (subject to inflation) for the maintenance of assets lower than in value. In order to
provide a figure for E20’s base business plan for lifecycle investment, this cost is stripped out of the
figures presented by LS185.
Financial Summary
Base business plan section:
Risks:
11
The external digital screen, in bowl LEDs, IPTV, some ICT equipment and some FF&E items are all currently
excluded. E20 has requested a full assessment of the necessary lifecycle investment for all stadium assets.
£000s
2016-17 forecast
(prior year
comp
arator)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
10 year total (2017-18
to 2025-26)
Lifecycle 0
Lifecycle investment
Total Lifecycle before risks or opportunities
£000s
2016-17 forecast
(prior year
comparator)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
10 year total (2017-18
to 2025-26)
Risks
Additional lifecycle investment
Page 42 of 54
17-030 IR Annex A
11. Discretionary funding for capital works
Discretionary Funding
E20's members have agreed a provision of £14.286m for additional stadium works, funded 65%
(£9.286m) by LLDC and 35% (£5m) by Newham Legacy Investments. These are finite funds available
for E20 to apply to a number of risks and aspirations.
The fund is all but exhausted by already committed spends and contingent liabilities. A list of up to
£2.8m potential future capital liabilities or “spend to save” proposals was identified to the Board in
January 2017. If a prioritised set of projects cannot be contained within the £14.2m available they
will either need to be rejected or funded from working capital.
An updated summary of commitments, contingent liabilities, and future potential investments will
be circulated to Members shortly.
Page 43 of 54
17-030 IR Annex A
12. Community and Economic Benefits
The relevant Key E20 Priority is:
Secure contracted local community and economic benefits;
and
Holding LS185 accountable for delivery of the stadium operating contract.
The business plan includes no specific net income or expenditure in this area of the business; it is
absorbed into broader E20 and LS185 activity.
The Board will receive information on:
• Local employment (quarterly)
• Use of Stadium by Local Groups
• Education Use: School, Learning Zone
The main focus of this business plan is on managing the opportunities and challenges associated
with financial performance of the Stadium.
However, the venue delivers community and economic benefits beyond the Stadium Island, making
a significant contribution to local, regional and national life.
E20 will hold contactors to employment targets, generate local opportunities to watch elite sport,
and ensure LS185 open the community track with a full programme of local clubs and sports groups.
As a world-class, multi-use venue, the Stadium is the centrepiece of the area’s sporting offer. It
creates jobs, provides local opportunities to watch elite sport, and boosts the economic
regeneration of East London.
Community and economic benefits include:
Queen Elizabeth Olympic Park
• A focus for promoting the Park as the new, dynamic heart of East London. An estimated 4.4
billion people watch the English Premier League worldwide annually; 153 million watched West
Ham United last season on television.
• An estimated 1.5 million event visits to the Park every year, spending time in the Park as well as
injecting money into the local economy.
• A world-class, multi-use entertainment venue for the Park, adding to the vibrancy of the area
through hosting elite sport, concerts and community events.
• A catalyst for development of a mixed use residential development on the nearby Rick Roberts
Way site, providing much needed homes for Londoners.
• Thousands of Stadium spectators will drive footfall to the new education and cultural quarter.
Page 44 of 54
17-030 IR Annex A
Local Community
• Almost 1,000 local people worked on the stadium transformation.
• LS185 have a target for 75% of all stadium employees to come from local Boroughs, in particular
LB Newham. As things stand, 62.8% of employees are from local Boroughs (including 22.6% from
Newham).
• 100,000 Newham residents will be given the opportunity to watch Premier League Football
every year.
• 10 Community Event days available each year for local people to use the Stadium for celebratory
events. For example, the Great Newham London Run gives up to 50,000 people the chance to
run on the Stadium track every year, including more than 10,000 school children from the local
area.
• A Community Track, with a minimum of 250 access days for local people, will be the new home
of the Newham and Essex Beagles AC from September 2017. The Beagles are a club with strong
roots in the local community, as well as a strong record in the British League.
• The redevelopment of West Ham United’s Boleyn ground as “Upton Gardens”, a mixed use
development, contributing housing, jobs and community facilities in the heart of Newham as
well as the wider regeneration of the Upton Park area, estimated to have a regeneration value
worth over £50m.
Education
• A state-of-the-art Learning Zone within the Stadium available to more than 50,000 young people
in Newham and east London each year.
• The location for a new Secondary School on Stadium Island. The Bobby Moore Academy will
open in 2018 and offer places to more than 1,000 local young people, who will also have access
to the Community Track.
National
• The eyes of the world will be on the Stadium again when it hosts the IPC and IAAF World
Athletics Championships in August 2017, creating more great sporting moments.
• For the first time the IPC World Athletics Championships will be held in the same venue as the
IAAF World Athletics Championships, cementing the venue and London as an inclusive city with
an integrated approach to sport. The Stadium will become the national competition centre for
UK Athletics, and the only venue in the country capable of hosting both athletics and football.
Page 45 of 54
17-030 IR Annex A
13. Working Capital Requirement
Based on the 2017-18 base budget of £19.532m, E20 has modelled forecast cash inflows and
outflows, each month. The detailed monthly cashflow projection has been shared with Members. It
takes account of E20’s forecast opening cash balance as at 31 March 2017 (£2.345m), and
outstanding income and expenditure from 2016-17. It models the timing of forecast income and
expenditure over the course of the year on a cash basis. Notably, LS185’s payment of 2017 net
commercial revenues is expected in April 2018, so is not due to be received in cash within the 2017-
18 financial year. This is the primary reason why E20’s working capital requirement, forecast at
£21.762m, is slightly higher than the base budget forecast.
E20’s working capital requirements are summarised in the table below.
£000s
Quarter
1
Quarter
2
Quarter
3
Quarter
4
Total
LLDC
5,479
4,633
1,999
2,034
14,145
NLI
2,950
2,495
1,076
1,095
7,617
Total
8,429
7,128
3,075
3,130
21,762
The working capital requirement is front loaded in the year due to a number of significant outgoings,
most notably seating costs, scheduled for the first half of the year. E20 will continue to manage its
cashflow to secure income in a timely fashion and delay payments where possible.
The working capital requirement is based on the base business plan – it is before any investment in
lifecycle, and before any risks or opportunities. These have the potential to improve or worsen the
working capital requirement.
Subject to Member’s review, E20 will invoice LLDC and NLI for the required funds shortly in advance
of the quarter. As such, E20 intends to invoice LLDC for £5.479m, and NLI for £2.950m, by 31 March
2017. The working capital requirement for quarter 2 will be confirmed in June 2017, in E20’s
quarterly financial update. The working capital requirement for quarter 3 will be confirmed in
September 2017, and quarter 4 in December 2017.
Page 46 of 54
17-030 IR Annex A
14. Summary of annual payments to/from West Ham United
There are several annual transactions with West Ham United contained within this business plan.
These are summarised in the table below, in order to give an approximate (not precise) indication of
the net position. Prices are the base figures largely derived from either the Concession Agreement or
the latest LS185 business plan. Inflation would apply to all annual payments, and precise figures will
vary year on year. The table adopts the base business plan assumptions. Opportunities and risks
have the potential to improve or worsen the position.
E20 income /
(expenditure) from
West Ham tenancy
(£’000s)
Notes
Annual usage fee
2,500
50% reduction applies for any season West Ham
are outside the Premier League.
Annual estimated
catering income from
West Ham matches
LS185 business plan estimate.
Annual estimated West
Ham share of catering
revenues
West Ham are due 30% of the annual catering
revenues from West Ham games above £500k.
Estimate assumes annual catering revenues
as above.
Annual estimated
operating costs for
West Ham games
(5,060),
LS185 business plan estimate, assuming 23
matches per season, with operating costs of
per match in 2017-18, dropping to
per match in 2018-19 (plus other minor costs
spread across the season). This does not include
the cost of moving the seats, as in this context this
is not considered a “West Ham cost”.
Annual estimated West
Ham performance
payments
0
Different levels of performance trigger difference
payments (from 10
th
place Premier League finish
upwards). Not considered in base business plan
assumptions, but opportunity modelled at £190k
income every other year.
Annual share of
revenues from West
Ham fanstallation
20
Commercial arrangements to be agreed between
West Ham and E20.
Annual additional
income or costs from
increase in stadium
capacity
Total
See important caveats below
Page 47 of 54
17-030 IR Annex A
This analysis To note that West Ham also
made a one-off payment to E20 of £15m during 2016-17 as their agreed contribution to the costs of
transforming the stadium.
The table also does not factor in indirect financial benefits for E20 from West Ham’s tenancy.
West Ham’s presence generates vastly increased exposure for the stadium, with indirect financial
benefits as follows:
• Enhanced naming rights income;
• Enhanced income from marketing rights;
• Enhanced ability to secure additional high profile events in the stadium;
• An estimated 1.5m visits to the local area and Queen Elizabeth Olympic Park;
• “Look and Feel” investment.
Naming rights is potentially very significant. E20 benefits from the first £4m in annual naming rights
revenue, with a 50% share with West Ham applying beyond that threshold. Based on the current
forecast of naming rights income reaching annum in steady state, E20 would be liable to pay
to West Ham. However, it would be reasonable to assume that the enormous exposure that
West Ham’s tenancy generates (and more specifically, the global attraction of the Premier League),
forms a major component of E20’s naming rights offer.
Page 48 of 54
17-030 IR Annex A
15. Governance
Board
E20’s Board meets on at least a quarterly basis (currently monthly) and is comprised of no more than
five members and an independent chairperson. LLDC is entitled to nominate up to three and NLI up
to two Board members, with the independent Chairperson being appointed through a unanimous
vote on an initial three-year term. All Board members (including the Chairperson) have a vote. In
addition, the Chief Executives of LLDC and LBN are ex-officio members of the Board with no voting
rights.
During the year David Edmonds resigned as LLDC Chair, and in turn as E20 Chair. The Members have
retained agreement that there is currently not a need for an independent Chairperson, and
nominated Nicky Dunn (LLDC Board Member) to serve as Chairperson.
Resolutions of the Board require a majority of all votes cast. LLDC has three votes, with NLI granted
two votes; this reflects the principle of the current 65:35 shareholding in E20. However, the
Members Agreement sets out a number of reserved matters that require the approval of both
Members.
E20 has also established a Finance & Audit Committee – effectively a slimmed down version of the
Board that meets around three times per year on financial and audit matters.
Page 49 of 54
17-030 IR Annex A
Map of Stadium site
Page 51 of 54
17-030 IR Annex A
Appendices
The pages that follow show:
• Detailed E20 10 year business plan forecast (as circulated to Members 27 March 2017);
• E20 2017-18 cashflow forecast (as tabled at 30 March 2017 Board meeting, based on very
latest cash position – slightly different from business plan);
• LS185 Business Plan. This was considered by the E20 Board at its meeting on 28 February
2017, but not approved.
Page 52 of 54
17-030 IR Annex A
COMMERCIALLY SENSITIVE
£000s Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Total
Operator (LS185)
Fixed costs (base)
(1,512) - - (1,512) - - (1,512) - - (1,512) - - (6,049)
Adjustment to fixed costs for higher utilities costs
(1,721) - - (273) - - (73) - - (273) - - (2,339)
Other payments to LS185 (contract changes)
(332) - - (48) - - (48) - - (48) - - (475)
LS185 Net Commercial Revenues
94 - - - - - - - - 0 - - 94
Matchday costs LS185 Contribution 42 - - - - - - - - 0 - - 42
Net Commercial Revenues after Operator share
- - - - 675 - - - - 0 - - 675
Total LS185
Naming Rights
Gross naming rights income
- - - - - - - - - - -
Associated costs (excluding capital items)
- - - - - - - - - - -
Total Naming Rights - - - - - - - - - - -
Other operating income and costs
Fanstallation - - 20 - - - - - - - - - 20
Asset disposal 1 1 1 1 16 20 - - - - - - 40
South Park Event Income - - 5 - - 5 - - - - - - 10
South Park Event Costs (151) - - - - - - - - - - - (151)
West Ham share of catering revenues - - - (57) - - - - - - - - (57)
Matchday costs (non LS185)
Total Other operating income and costs
Staffing
Total Staffing (84) (27) (27) (27) (27) (27) (27) (27) (27) (27) (27) (46) (396)
Overheads
LLDC Member Services (31) - - (35) - - (35) - - (35) - - (135)
Estate charge payable to LLDC - - - - - - - - - (325) - - (325)
Business rates (230) (230) (230) (230) (230) (230) (230) (230) (230) (230) - - (2,300)
Business Rates (West Ham contributions) - - - 200 19 19 19 19 19 19 19 19 352
Insurance (45) (620) - - - - - - - - - - (665)
Legal advice (112) (29) (29) (29) (29) (29) (29) (29) (29) (29) (29) (29) (433)
Accounting advice (11) - (10) - - (10) - - (10) - - - (40)
External audit fees - - - (26) - - - - - - - - (26)
Technical advice - - (25) - - (25) - - (25) - - - (75)
Event tickets (14) (81) - (80) - - (10) - - (10) - - (195)
Total Overheads (443) (960) (294) (200) (240) (275) (285) (240) (275) (610) (10) (10) (3,842)
Seating (liability not agreed between members)
Retractable seating movement (806) (2,876) (1,583) (213) (3,787) (106) (184) (52) (52) (52) (52) (236) (10,000)
Total Seating before risks or opportunities
(806) (2,876) (1,583) (213) (3,787) (106) (184) (52) (52) (52) (52) (236) (10,000)
Total E20 net cash position
(4,967) (3,925) (1,903) (3,380) (3,362) (408) (2,378) (319) (379) (2,771) (89) (317) (24,198)
Cash Balance at 30 March 2017 2,476 (21,722)
Members Funding Requirement
LLDC (65%) (1,619) (2,551) (1,237) (2,197) (2,186) (265) (1,546) (207) (246) (1,801) (58) (206) (14,119)
NLI (35%) (872) (1,374) (666) (1,183) (1,177) (143) (832) (112) (133) (970) (31) (111) (7,603)
Total (2,491) (3,925) (1,903) (3,380) (3,362) (408) (2,378) (319) (379) (2,771) (89) (317) (21,722)
Cumulative total (2,491) (6,416) (8,319) (11,699) (15,061) (15,469) (17,847) (18,166) (18,545) (21,316) (21,405) (21,722) (21,722)
Q1 Q2 Q3 Q4
Quarterly working capital injections (total) (8,319) (7,150) (3,076) (3,177)
E20 2017-18 Operational Cashflow, as tabled at E20 Board 30 March 2017 (position as at 30 March 2017)
Forecast cashflows based on E20 base budget for 2017-18 before lifecycle, risks or opportunities (£19.532m loss)
Page 54 of 54
17-030 IR Annex A
