The Finances of Team Tinkoff

Tuesday, 26 July 2016

Tinkoff are one of the sport’s galactic teams with several star riders. How much does it cost to run a team like this?

The team’s annual report and accounts were published online recently at the CVR, Denmark’s register of companies. Let’s take a closer look at the team’s budget, its ownership and operational structures and more.

The team has several star riders in Peter Sagan, Alberto Contador, Rafał Majka and… well next there’s Roman Kreuziger, Michael Valgren and Oscar Gatto among others. For all the stellar attraction this is a top heavy squad with some big names and then fewer lieutenants when compared to Team Sky (Thomas, Landa, Kwiatkowski etc) or Astana (Fuglsang, Boom, Scarponi), the kind of riders who are regularly visible and influential in the final phase of a mountain stage or a spring classic. How much does this cost?

Here’s the headline budget number €22,837,869 million for the year ending December 2015. This was an increase in over 50% from the previous year and largely thanks to signing Peter Sagan and his entourage. Here is the evolution of the budget since 2011:

Wage inflation has been a theme in cycling in recent times and just as Team Sky’s budget has grown by 10% a year on average the chart above shows an average increase of 16% per annum although obviously the story above is not one of gradual increases but lumpy changes. 2012 was when Oleg Tinkov first came onboard with his Tinkoff brand as a sponsor in the Tour de France and behind the scenes this allowed Bjarne Riis to recruit and retain using this money which flowed into the business for 2013. At the end of 2013 Tinkov bought the team outright.

The signing of Peter Sagan from Liquigas hasn’t just hit the Tinkoff budget, it raised the bar across the transfer market. Not only is Sagan victorious, charismatic and marketable, he was signed just at the time the Alonso team was interested in him so the price tension was considerable. It lead to plenty of other riders saying “if Sagan is worth €X million then I’m worth €Y million” and wage increases all around, for example Nacer Bouhanni is now a millionaire thanks to a contract inked while Tinkov and Alonso, although of course his stack of Giro stage wins counted for plenty in the first place.

Where did the Tinkoff money go? Here’s the wage bill for 2015 and 2014:

You can see the team has a staff of 97 which presumably includes part-timers like mechanics and soigneurs who might cover for a few races as year as well as the core roster of riders, managers and support staff. The wage bill for 2015 was €21.8 million which accounts for 95% of the team budget of €22.8 million. It’s a lot and in fact it’s odd because of all the other expenses you’d expect a team to incur in the year from travel, accommodation, fuel and other things like registration fees, admin and legal services. It’s not clear where this is accounted for.

Danish? Russian? In fact the team is a chain of legal entities. There’s Tinkoff Sport A/S as the Danish structure which owns PCD Luxembourg SARL, a Luxembourg registered entity. This is not explained but for some time several teams have had their legal entities in places like Luxembourg (Astana) or Switzerland (Katusha, Lampre) – all visible on the UCI website – and typically for tax reasons so the flag they fly under is not always the actual country they spend their money in.

In addition a footnote to the account mentions Holbird Group Ltd and reverting to the Danish company website this is listed as the ejere or “owner” of Tinkoff Team. A quick internet search reveals Holbird is a company registered in the British Virgin Islands, the kind of place where you’d expect a Russian billionaire to squirrel away their money. There are two rules in business in Russia: make money quickly and move the money quickly out of Russia.

Another small line in the accounts is that €5.8 million are deposited, ie tied up in other words, in a bank guarantee to cover rider wages under the UCI rules. The UCI requires all World Tour and Pro Continental teams to have a bank guarantee to protect riders in the event of the team folding during the course of a season so that their wages can be paid. A bank promises to meet these liabilities in the event of the team going bankrupt and obviously this guarantee is very expensive. Indeed it’s a headache for all teams especially the smaller ones who must front up a large share of their wage bill before so much as turning a pedal for the year and the cost can be prohibitive. When the team stops at the end of the year and wages are paid in full then the guarantee will be paid to the team’s owners.

Conclusion
We get the headline audited budget number which is helpful but the rest of the report is not as detailed as Team Sky’s set of accounts. It’s a a headscratcher: does the team really spend 95% of its budget on wages? Certainly wages comprise the biggest item for all teams but this ratio is so high you wonder if all the other costs associated with running the team like travel, accomodation and more are accounted for. They don’t have to be, it could be that a vehicle sponsor covers the fuel and travel and accommodation costs are slapped on a Tinkoff credit card. All this makes comparisons by teams awkward. Still the accounts are helpful and illustrate other things such as issues of jurisdiction and the weight of the UCI’s bank guarantee on team finances.

Part I – The Finances of Team Sky

IanP July 26, 2016 at 12:05 pm

I was just thinking about emailing INRNG asking where the daily update was… after being used to the TDF coverage… then i thought.. no, its downtime, let them enjoy a few days off, and then you go and post this up.

Have a leffe or a few, followed by some Trappist and washed down with some wine.. you need a break.

Hardest working blogger.

Oh.. and thanks for the Tinkoff summary.. I was just thinking, surely somethings missing here, the numbers don’t add up, but i guess you covered that will asking about credit card purchases etc, not attributed to the team directly.

The Inner Ring July 26, 2016 at 2:02 pm

Ha, luckily these accounts are not packed with info so the write-up above only takes a few minutes.

betabug July 26, 2016 at 3:16 pm

It’s sorta like an after-Tour criterium for our star blogger. Just doing a few quick rounds of the Tinkoff team budget in his blogging maillot jaune… thank you for the show!

Ecky Thump July 26, 2016 at 12:16 pm

Staff costs not so different from Sky and, assuming that the other associated costs (that are not mentioned) are similar, an overall budget in the same ball park too?

Where would this leave the wage cap idea that has been bandied about so much recently?
And what is wage cap – a total arbitrary figure, a percentage of overall budget, does it exclude third party sponsorship contribution, value-in-kind sponsorship, image rights income, criterium appearances etc etc?

There was no mention of Sagan during the wage cap discussion – he was my rider of the Tour, by the way – but any such restriction would obviously affect him / his team too.
Just great, the best World Champion for many a year – but who could afford him?

BenW July 26, 2016 at 1:53 pm

Bora Argon 18, if rumours are to be believed. We’ll find out in a few days.

The Inner Ring July 26, 2016 at 2:03 pm

German plumbing company Hansgrohe will be co-sponsor and Specialized will supply the bikes and a lot of cash or at least that’s the plan. Tinkov told Russian Eurosport during the Tour de France and said he’d liberated him from the contract that theoretically kept him with Tinkoff until end of 2017.

BenW July 26, 2016 at 3:06 pm

Blimey, big time stuff then. Will this become the Specialized “works” effort due to the investment?

Vitus July 26, 2016 at 3:10 pm

“Plumbing company” sounds a bit misleading. HansGrohe is a sanitary fittings manufacturer, and there one of world leaders.
Joe the Plumber barely couldn’t afford to sponsor a team.

The Inner Ring July 26, 2016 at 3:16 pm

Ha, it’s not someone in a van but they do sell bathroom and kitchen taps as you say. People might be familiar with them already as a sponsor of Belgian cyclocross.

Tovarisch July 27, 2016 at 10:16 am

Why do I get this picture of a future Specialzed made of soldered copper tubing?

Brian July 27, 2016 at 3:27 pm

Tinkov also implied that Bora offered Sagan more money than he was paying him. (More inflated wages?)

So, will Bora be making the leap into one of the vacant spots in the Pro/World Tour?

Ecky Thump July 26, 2016 at 2:08 pm

According to the L’Equipe list of team budgets that was out recently, Bora’s entire budget was only €4.5m!

Ecky Thump July 26, 2016 at 1:08 pm

The larger picture, Tinkoff aside though it demonstrates perfectly the problem, is how opaque the finances of pro cycling teams are.
It’s a mix of rich benefactor/s personal wealth (and, let’s be honest, one can assume that their wealth is bomb-proofed in property assets, gold, art, whatever..so that the contribution to running a cycling team could just be a balance sheet tax write-off on other assets?), sponsorship from private companies and from the cycling industry.
How *someone* (who exactly is not clear) could even begin to start regulating a salary cap is nigh on impossible?

It’s an odd financial model but, in a way, it regulates itself. Teams don’t tend to stick around in the long-term. Tinkoff are packing up, will there even be a Team Sky in ten years time?

Anonymous July 26, 2016 at 1:36 pm

At the rate they’re going, and after froome wins two golds in Rio, Sky will own the UCI and the sport in ten years.

The Inner Ring July 26, 2016 at 2:06 pm

Lots of teams stick around. FDJ, Cofidis, Lampre and Ag2r have been sponsoring the same team for almost 20 years now and many teams in the peloton have been going on for longer but have just changed names along the way eg Reynolds > Banesto > Iles Baleares > Caisse d’Epargne and now Movistar.

Ecky Thump July 26, 2016 at 2:41 pm

This is the point though Inrng.
There can be a lineage of staff and riders, but the team names and funding streams change regularly.
If people want to punish or limit Sky or Tinkoff for investing private money, they’re not.
They’ re punishing the people who make a living out of the sport.

Adam Bowie July 26, 2016 at 6:07 pm

Worth noting that Team Sky is owned by BSkyB and 20th Century Fox which are both public companies, not private. That’s a very different set-up to Tinkoff.

I would imagine that Sky will continue to invest in the cycling team while it delivers return on investment. The success of the team drives a lot of positive reinforcement for the business. As Inrng has noted previously, the annual cost of the cycling team is effectively a tiny fraction of the £1bn+ that is spent by Sky on marketing in the UK alone.

Tovarisch July 27, 2016 at 10:21 am

Tinkoff Bank is a public company. Quoted at $5.35 per share an hour ago.

jollygoodvelo July 27, 2016 at 5:53 pm

Tinkoff Credit Systems is indeed a listed company – but as above, that entity does not directly own the team.

It may be the ultimate beneficiary of the Virgin Islands vehicle, but that would require some digging.

The Inner Ring July 27, 2016 at 5:54 pm

TCS is run via Cyrpus and probably other places but the registered address is in Limassol, a haven for a lot of Russian offshore finance.

Anonymous July 26, 2016 at 1:32 pm

Maybe travel is a cost to the employee?

One new UCI rule that would be helpful, especially considering that accounting investigation is efficient doping investigation, would be a standard budget reporting format for all teams. This would be the easiest way to help curtail financial shenanigans.

Gareth July 26, 2016 at 1:49 pm

I’m not sure standardised reporting would work though unless you had a team of investigators with the power to trawl through company and personal records including bank accounts, especially in a global sport like cycling. It would be very easy to pay a rider part of a salary through the cycling business abd have sign a separate contract with a company far removed which paid him for other services like appearing at the odd corporate do.

Teams who play by the rules would be penalised and teams who don’t won’t.

Anyway unless there is some sort of salary cap which I don’t see happening theb it’s immaterial anyway.

Bilmo July 26, 2016 at 2:06 pm

This kind of ‘creative’ accounting is prevalent in UK football where they have introduced caps on spending relative to income for lower league teams. Suddenly the owners charge exorbitant naming rites for the stadium, logo on shirts etc and this is covered by a company that happens to also be owned by the club owner (Leicester City we are looking at you!).

There is also evidence in both France and English top flight rugby of teams finding ways to circumvent salary caps.

The Inner Ring July 26, 2016 at 2:09 pm

I’ll explore the salary cap in an upcoming piece but as Bilmo points out no sooner is it in place than do the wealthy teams start trying to game it. Also a salary cap is not a yes/no thing, do you set a ceiling for individual wages, do you cap the wage bill of the whole team? If you set a salary limit, can someone earn bonuses and image rights on top? Can they do endorsements for cornflakes and carbon frames? The point is that it quickly invokes a lot of definitions, terms, scopes etc and the more complicated it gets the more loopholes and back channels appear.

Netraam July 26, 2016 at 3:32 pm

During the 50’s Dutch football/soccer was strictly for amateurs only. Sometimes transfer sums got paid by commodities, for instance Faas Wilkes and his brother Leen Wilkes almost moved clubs for 2 vans.

Steve July 26, 2016 at 9:33 pm

Van Basten? Van Nistlerooy? Van der Vaart? Sounds like a good deal

Nick July 27, 2016 at 1:17 pm

Does any sport cap individual salaries? All those I can think of focus on the team, rather than individuals.

Ben July 28, 2016 at 4:08 am

The NBA caps individual salaries at a set fraction of the team budget. There’s a long list of special cases where the fraction can be increased by a small but significant amount.

This results in superstar players being typically underpaid (relative to wins) by the team, which leads other players to make more money in salary. Generally, the superstars more than make it up in endorsements (sneaker deals, etc). Not sure there’s so much sponsorship of individual competitors in cycling, but it would result in flatter salaries across a team.

Nick July 28, 2016 at 1:00 pm

Thanks, Ben. That’s quite a surprise given how much the top NBA stars make!

Joe Saroni July 26, 2016 at 2:44 pm

Inring, could comment on why a businessman like Tinkoff would purchase an asset and shut it down in a only a few years. If Hansgrohe is interested in joining a Bora, a deal with Tinkov a could not be brokered? As you illustrate with Movistar, it’s sad to see the old CSC squad fold. Tinkoff squad would be the perfect takeover for a deep pocket new sponsor to enter the sport with a proven roster.

The Inner Ring July 26, 2016 at 3:00 pm

Tinkov is a businessman when it comes to selling credit, beer or dumplings. He’s a passionate fan when it comes to cycling. He paid a huge sum to buy the team from Riis in the same way a fan would buy a ticket for a premium outside a sports stadium or rock concert just to get in and see the show.

Gareth July 26, 2016 at 3:01 pm

If Bora took over Tinkoff they would find themselves with assets and liabilities they don’t want. They might discover quite a few of the 97 employees have ongoing contracts and it would be expensive to get rid of them.

As the team is closing anyway better to cherrypick the bits you want and leave the bits you don’t. besides which I don’t think there is much goodwill in a cycling team as the brand is often associated with a sponsor, and anyway they haven’t been without their controversy.

I’m intrigued by Sagan’s salary. I wonder if Tinkov himself will still be paying some next year if he had him signed till 2017 – maybe why he will be affordable to Bora if they’ve agreed to take some of the cost and Tinkoff is paying the rest. Or maybe Sagan has just had a bit of a windfall being paid off. It’s interesting that he has claimed to have liberated Sagan from his contract as if it was a one way deal, I would have thought Sagan might have something to say about it unless his earnings were coming from elsewhere.

wetroad July 26, 2016 at 3:19 pm

Sagan forgoes the income due in exchange for having somewhere to race next year. He will be getting millions anyway but just from someone else.

The Inner Ring July 27, 2016 at 9:50 am

There can be negotiations where the departing sponsor/employer pays in part for the rider when they move teams but the word is this time that Tinkov freed Sagan from his contract to move to Bora in full but it’s just talk and none of the legal documents go public.

Ken July 26, 2016 at 2:53 pm

There are financial manipulations with any sports team, and especially with teams dependent on sponsorship. Does Sky, for example, give its big TV advertising execs VIP access to the TdF? If so, how do they account for this? Who pays for a team’s bikes? How does Tinkoff account for Peter Sagan’s endorsement income, which I assume is big? Accounting reports give us only a very selective glimpse of a team’s finances. Perhaps the biggest indicator of truly financially viable team is it keeps going from year to year.

The Inner Ring July 27, 2016 at 9:51 am

VIP access is a big thing for some sponsors, I’m sure Hansgrohe will use it so that the top sales staff or important clients get to visit the Tour for a day, go for rides if they like cycling etc. Part of Bjarne Riis’s / Lars Seier’s project is to make this a big paying element of team sponsorship.

Looking over my shoulder July 26, 2016 at 3:02 pm

I suspect the other costs are netted off from the top line (which is gross profit in the image above).

Total income would be a bit higher less the direct costs (travel, revenue cost of equipment etc) giving gross profit to be disclosed in the accounts. I’m not entirely familiar with the Danish corporate reporting requirements but that may well explain some of the variances in presentation between (eg) the Tour Racing Limited (Team Sky) accounts.

The Inner Ring July 26, 2016 at 3:14 pm

The budget figure is the top line in the report. There could be other arrangements between Tinkoff and PCD too.

If any Danish accounting experts want to help, it’s all on virk.dk but I suspect they’d know that already.

CA July 26, 2016 at 4:55 pm

Inrng: “It’s a a headscratcher: does the team really spend 95% of its budget on wages?”

I agree with your likely conclusion, these items are likely sponsored, therefore they aren’t expenses for Tinkov. The other option is that these expenses are:

a) offset against race start fees
b) expensed through another entity and therefore not part of this operating company – this would be advantageous to Oleg for his companies that do have to pay taxes to reduce their taxable income.

CA July 26, 2016 at 4:56 pm

I meant by “other items” the travel and other expenses you thought were missing from these books.

The Inner Ring July 27, 2016 at 9:53 am

b) sounds interesting. Some teams are like mid-sized businesses but the extent to which several exploit accounting, offshore locations etc is surprising.

CA July 27, 2016 at 6:15 pm

Exactly – as an accountant I’m not surprised at all with the shell games being played. As well, these games are not very aggressive at all compared to the types of companies/taxpayers that government tax departments investigate.

Don’t forget, these teams make very little money, relatively to the types of companies that really exploit tax laws and accounting rules, so a government oversight body would rarely make an issue of it. Unless of course your main sponsor is a large postal service from a rich Western country and it turns out that you were doped to the gills when you took that sponsorship money…. then, well you know the story. But of course, he is being investigated for fraud, not tax violations, so I’m still right, haha. Although Lance would definitely rather be investigated for unpaid taxes than fraud at this point!

Larz July 27, 2016 at 9:15 pm

Shouldn’t benefits received from sponsorships (whether monetary or non-monetary) be accounted for somehow?

Seems like a giant loophole in terms of transparency if you can do deals like that which doesn’t involve explicitly exchanging money between entities. Remembering back, I also think accounting principles prohibits something like offsetting costs between entities.

CA July 27, 2016 at 9:24 pm

They do – that is, benefits received from sponsorship (monetary or non-monetary) ARE accounted for. All of the money that bike teams receive as sponsorship money they have to include as income, and any equipment they receive they have to include as income.

I’m not sure what you mean by “accounting principles prohibits something like offsetting costs between entities.”

At the end of the day, most of these entities net profits are very low (if not nil or negative) so they pay very little (or none) taxes.

Othersteve July 26, 2016 at 10:07 pm

Had to chuckle ” make money quickly and move the money quickly out of Russia. Although not unusual for other then Russian companies and other entities do off shore large bags of money in Caymans, Switzerland etc.

Seems Russian cycling team owners prefer their banks off shore, yet their test labs in country!

The Inner Ring July 27, 2016 at 9:55 am

It’s all from a long time ago but the old Roslotto team was the most extreme example of this, a front for the Russian mafia so it could move money out of Russia and into Italy and a grim tale of politics, assassination and more.

A blog post on the subject at http://inrng.com/2010/04/money-laundering-mafia-pro-cycling/

CA July 27, 2016 at 5:27 pm

Inrng – responding to your post about Germany’s ARD questioning it’s TV deal:

The article says the ratings were approx. 1.17M (9-10% market share) for each stage at total cost of 2.5M Euros. My question is, isn’t ARD getting a great deal on this?

I’m not a TV executive, but if someone understands the math on this. 21 stages at 1.17M viewers for 2.5M Euros seems very cheap to me! Please give us some insight someone!

CA July 27, 2016 at 5:29 pm

I’m sorry if my comment appears not to be relevant, but this roughly discusses the question at hand – the finances of Team Tinkoff – which Oleg discussed on cyclingnews yesterday. He said that if ASO stops showing the Tour for free and negotiates a real TV deal, and split it with the teams, he’d be extremely interested.

What Oleg said made a lot of sense to me, that is, as I mentioned earlier when Inrng posted his article on TV at the Tour, the TdF is grossly undervalued in its TV deal.

The Inner Ring July 27, 2016 at 5:33 pm

The TV rights were almost given away as a way to rebuild the audience in Germany. It is cheap but it’s valuable too, a lot of sponsors in and around the sport need to be seen in Germany.

As for Tinkov he’s often big on talk, short on detail. Loyal readers here will recall that the Tour de France is a protected event under French, Italian, Belgium law that has to be shown free on public TV so it cannot be sold to the highest bidder:
http://inrng.com/2015/02/the-tour-de-frances-tv-guarantee/

CA July 27, 2016 at 5:52 pm

Ah, oh my. I didn’t realise the free TV rights were protected by law – I have only been reading your blog since the fall of 2015.

Thanks for the information.

Sam July 27, 2016 at 7:40 pm

Every day’s a school day here in INRNG blog land!

Othersteve July 27, 2016 at 7:48 pm

Sorry for the transgression, your description of Tinkov makes me think of the US Republican candidate ” big on talk and short on details” and they do share a proclivity to die their hair! http://www.cyclingnews.com/news/tinkov-if-contador-wins-the-tour-de-france-he-should-target-the-vuelta/

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