Bounce meets the board

[SkyeHibs]

The Hibees Bounce recently attended a meeting hosted by Colin McNeill, Tim Gardiner and David Forsyth of Hibernian to update the bounce and other websites on developments at the club.

With Hibernian’s financial year-end being 31^st July and our figures for the past year due to be published in a mater of weeks, financial matters were high on the agenda. It was confirmed that in-line with the financial plan announced as part of the “We are staying at Easter Road campaign” it was confirmed that operational break even had been achieved in the year ending July 31^st 2005. There remains the possibility that the club may even have achieved a positive net profit as well as an operating profit for the last year. (Operating profits are struck before interest and tax, net profits after these items). With the club carrying a £10 million debt, this out-turn would be no mean achievement.



Much has been made of a desire to see costs fall to improve the much talked about wages to income ratio. Our wage bill peaked at £5.7 million in the early years of this decade and fell to £3.3 million in the last published accounts to July 2004 while income was £5.8 million in that year. The wages to income ratio to put it another way was 57% in the year to July 2004, with the club having a target of reducing this to 50% of income.



I would estimate that turnover in the year to July 2005 was £6.5 million, with wage costs being broadly unchanged at £3.3 million. This would imply that the wages to income ration has already fallen to the 50% the club were targeting.


What does this mean for the fans, the manager and the club? In the first instance it means that any increase in revenue last year did not find its way into a higher budget for Tony Mowbray but has helped the club reach breakeven. I for one can understand the desire to break even, that is fair enough as I am sure we all know that the club cannot sustain losses on an ongoing basis.

For the fans there is a degree of disquiet as can be noted from the Hibees Bounce forum. There is a reasonable point of view that income has increased, the club are in Europe, other club’s are investing and the manager needs to be backed.

Who knows where our income could end up this year, cup runs and perhaps from a financial point of view, a European run could make a considerable impact. It is claimed that Hearts gained £2m in additional revenue last year through qualification for the group stages of the UEFA cup. Perhaps it is not unreasonable to expect Hibs to benefit from such a windfall if we can make it to this stage. From a planning point of view this presents a problem. An additional £2m represents not far off 30% of our current income. You could not include such a possibility in your forecasts unless there was a high degree of probability that such an income could be generated every year.


On the one hand, a slavish adoption of the 50% maximum may hinder our ability to achieve success, while if we up the anti on spending we could return to the situation of heavy losses of the last few years? I would suggest that a modest raising of the cap based on an assumption of non qualification for the second round to say 55% of income in theory would still release an additional £165,000 for Tony Mowbray to invest in the playing squad. That is enough to pay a decent player on Hibs terms or perhaps even two modest players. It should allow enough flexibility to make reasonable offers to players who are entering the final stages of their contracts as well.



As well as a discussion on the playing budget, the issue of debt repayments on the existing debts was discussed. The football club will shortly commence repayment of the capital on both the mortgage debt and the loan to the parent company. The mortgage debt is in two parts, one of £4million and one of £2.5 million. The repayments of the first begin in October 2005 spread over ten years, the second in 2006 over eighteen years. The parent company loan of £1.4 million is repayable over eighteen years from 2006. In essence this means that as of 2006, Hibernian have annual debt repayments of over £600,000 to meet.



The Hibees Bounce raised the question as to how this would be funded and whether debt rescheduling could be looked at? As yet we were told nothing has been put in place but this could be looked at.


I look on this as a significant issue. If I broadly support the reduction of wages as a % of revenue as a desire to balance the books, I would be unhappy if the increase in revenue then went to pay off our debt to the detriment of the playing side. I for one would be happy to see the debt remain at current levels or to be reduced through an injection of capital however that can be achieved.



The club did indicate a desire to continue dialogue on these matters and suggested an opportunity to have an update post the publication of our figures for the year to end July.

One of the successes of the recent past has been the shop and the club did confirm that work to double the size of the shop would begin this week. Income from the shop has now surpassed the £1million mark. The ticket office was also discussed at some length with the club conceding that increasing demand had led to the office creaking at the seems and customer service suffering as a result.



The club have decided to close the office for one day this week in order to examine the issues with the staff and plan for the future. One of the difficulties the club face in improving matters are the limitations with the current database that needs investment if the club are to improve their offering for the fans.



Allocation of tickets for away games was an issue that the club accepted needs further work on and that lessons will be learnt from this season.

The much talked about lack of dedicated training facilities was raised, with the club saying this is one of the top two priorities for the board. We also raised the hypothetical situation as to what would happen to any proceeds from player sales given the cap that is placed on player wages. It was suggested that there is no firm rule in place and talks would take place with the manager on use of proceeds. It could well be used to fund projects such as a new training academy. It was confirmed that a plastic pitch for Easter Road is now off the agenda!