Financial Review: Hibernian F.C. 2004

[Gunnerhibby]

The last few weeks have seen most Hibees fans more than happy with the improvement on the park as Tony Mowbray’s team entertain us in a style that has been missing for a while.


Whilst we are excited by a better future, the release of the accounts to the year ended 31^st July show there are many challenges in front of us.

To students of Hibernian and football finance, there was little surprise that Hibernian football club posted a net loss of £1.9 million.

Indeed the club had warned of an operating loss of £900,000 for the year at the AGM last year, so in the end the loss was not greatly different from expectations, with the out-turn being a loss of £850,000 at the operating level.

At the AGM last year, the club unveiled a three year business plan, which envisaged break-even in the current season (2004-5) and an operating profit in the following season.

Many had hoped that our run to the league cup final would have made a difference to our financial position for the year, sadly, this was negated by a substantial drop in attendances at Easter Road.

Love him or loathe him, it is clear that the fans in the latter months were not responding positively to the manager Bobby Williamson by turning up in sufficiently large numbers.

That we are a relatively small business is evidenced by a turnover for the year of £5.8 million.

Yet there is hope.

The fans have warmed to Tony Mowbray and the message he is delivering. Even in defeat at Tynecastle, the general mood seemed to be one of support and patience for the manager and the team.

The size of the travelling support at Dunfermline gives an indication of the kind of potential there is in the number of fans that Hibs can attract.

I have long believed that a team that seeks to entertain and has an ambition to succeed gives hope that Hibernian can grow as a business and deliver the revenues we need to allow the manager to build a team that we can be proud of.

Success on the park will grow gate receipts, commercial revenues and TV income.

Regular participation in the later stages of domestic cup competitions and qualification for Europe on a regular basis are necessary goals if we are to grow our income.

The significant financial transaction in the year to 31^st July 2004 was the disposal of the car park by the holding company which according to our information, was sold for £9.6 million.

The football club accounts show that the holding company has agreed to a partial waiver of the debt owed by the football club amounting to £5.76 million, leaving an amount outstanding to the holding company of £1.44 million. We can only assume that this decision to waive this sum of money is a consequence of the holding company benefiting from the car park sale, and I am sure that all supporters of Hibernian are grateful for that.

The question has to be put however, what purpose does the holding company now fulfil?

Secondly, was any consideration given to combining the two companies back into one?

In addition, what happened to the balance of funds received by the holding company from the car park sale?

The holding company is not answerable to the supporters, but a spirit of openness and transparency would clearly help the relationship between the club and the fans.

To put it another way, there is nothing to lose from the holding company seeking to share this information with the fans.

The net effect of the loss for the year and the effective write off of monies owed to the holding company meant that Hibernian finished the year with a net debt of £10.2 million.

The components of the debt are as follows:



Stadium mortgage 6,500,000

Parent company 1,440,000

Bank loan 845,000

Bank overdraft 1,341,115

Other 61,011

Total 10,187,126

The repayments of the bank loan, the parent company loan, and the mortgage are going to have a significant impact on Hibernian.

The mortgage is in two blocks. One for £2.5 million, with repayments spread over sixteen years beginning in 2006. The remaining £4 million is repayable over ten years beginning in October 2005.

The parent company loan is payable over eighteen years commencing in 2006.

The bank loan is repayable over four years.

It is clear from all of his that Hibs are facing substantial capital repayments over the next few years. As the accounts themselves show, Hibernian have to fund capital repayments of £2.4 million between 2006-2009 i.e. Hibs will have to meet commitments of over £800,000 in each of these years.

This is a considerable commitment for Hibernian, and the question has to be asked, how can the club fund this?

Will debt repayment be funded out of existing revenues, implying that expenditure on players and other operating expenses will have to remain very tight, or will this be funded through other sources?

It does beg the question whether player sales will be necessary to assist the club in meeting their financial obligations?

We the fans recognise that the club must trade profitably. We cannot go on sustaining the losses we have over the last few years. The following table shows the recent financial performance of Hibernian:

Hibernian football club
£	2001	2002	2003E	2004E
Gate receipts	2400000	2600000	2548159	2718396
Commercial	3100000	2850000	1938815	2100000
TV and Media	2053452	1804669	1052500	1000000
Turnover	7553452	7254669	5539474	5818396
staff costs	5745968	5691436	3978358	3342004
Staff costs as % turnover	76.1	78.5	71.8	57.4
other operating charges	2821808	3727909	2079900	2604857
total costs	8567776	9419345	6058258	5946861
EBITDA	-1014324	-2164676	-518784	-128465
Depreciation	293300	343657	339849	342033
Amortisation	350291	653802	410438	379491
Operating profit/loss	-1657915	-3162135	-1269071	-849989
Gain on sale of intangibles	60000	1005000	1721415	-255024
Interest cost/income	-391867	-673942	-730278	-820307
Pre tax Profits	-1989782	-2831077	-277934	-1925320

The above figures show that Hibernian have accumulated losses of over £7 million over the last four years.

There is considerable improvement in the ratio of staff costs as a percentage of turnover which have fallen below the targeted level of 60%, with staff costs having fallen from £5.7 million three years ago, to £3.3 million in the year just ended.

Where the club give very little information is on the breakdown of other operating charges which rose by 25% against the prior year to £2.6 million. As the above table shows, these costs have varied tremendously year to year.

So where do we go from here?

There is no doubt that there is an air of recovery at Easter Road. To coin a phrase there are green shoots of recovery.

We all want to see our club prosper and fulfil the potential that we all recognise there is at Easter Road.

The last few months have seen much attention being focussed on our near neighbours and the long running soap opera that has been the story of how they deal with their financial issues.

Unlike Hearts, we do not face a financial crisis today. We do however face challenges.

On the one hand, we must move from a loss making situation to one of at least break even.

The legacy of the losses of the last few years, and the costs of stadium development do raise their own challenges for Hibernian.

[Gunnerhibby]

I thought I was quick enough tae ya smert cant lol.

It would have been interesting to hear the clubs views of the financial review and of your summary. I would ask given they have been contacted for comment and declined do they have something to hide.

Surely cloak and dagger tactics from the club regarding the financial affairs of the club can only lead to mistrust in the board from the people who support the club.


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