A moment in time

[SkyeHibs]

Hibernian’s financial accounts for the year to the 31^st July paint a picture of a club which has seen very strong momentum. Revenues were up by 27% and the club reported a profit for the first time in many a long year.

There is no doubt that the decision to appoint Tony Mowbray and Mark Venus proved to be a watershed for Hibernian. The old club has made more than a few pundits sit up and take notice, but more importantly the fans have been returning and they like what they see. The average attendance at SPL games last season was 12,400 a massive 36% improvement on the prior year, Bobby Williamson’s last when the average gate was 9,100.

As a result the club are considerably ahead of schedule on the three-year business plan that was presented post the “Straiton talks”.

Not only have the fans being putting bums on seats, they have been patronising the club shop. Sale of merchandise through the club shop grew by 39% with I would estimate income in excess of £1 million being generated from this source.

The impact of Hibernian becoming a force in the land again, finishing third in the league has resulted in our revenues increasing to over £7 million. We have only twice in the past achieved in excess of over £7 million, in 2001 and 2002 at a time when TV income was a much more significant influence than it is today.

Finishing third in the league meant that we had a greater income from the SPL where put simply places mean revenue. Revenues from reaching the semi-final of the Scottish Cup and the quarter-final of the league cup broadly matched cup receipts from the previous season.

Hibernian had a desire to control costs with the intention of achieving an operating break-even. This has been achieved to a degree few would have thought possible. The club has reported an operating profit of over £600,000 for the last year and seen staff costs as a percentage of turnover fall to 46%.

Even deducting interest expenses, we were left with a modest net profit of more than £60,000. The key financial figures are shown in the following table:

Hibernian football club
£	2001	2002	2003E	2004E	2005E
Gate receipts	2400000	2600000	2548159	2718396	3500000
Commercial	3100000	2850000	1938815	2100000	2350000
TV and Media	2053452	1804669	1052500	1000000	1374603
Turnover	7553452	7254669	5539474	5818396	7224603
staff costs	5745968	5691436	3978358	3342004	3326243
Staff costs as % turnover	76.1	78.5	71.8	57.4	46.0
other operating charges	2821808	3727909	2079900	2604857	2887810
total costs	8567776	9419345	6058258	5946861	6214053
EBITDA	-1014324	-2164676	-518784	-128465	1010550
Depreciation	293300	343657	339849	342033	337539
Amortisation	350291	653802	410438	379491	59660
Operating profit/loss	-1657915	-3162135	-1269071	-849989	613351
Gain on sale of intangibles	60000	1005000	1721415	-255024	61626
Interest cost/income	-391867	-673942	-730278	-820307	-609983
Pre tax Profits	-1989782	-2831077	-277934	-1925320	64994

All the above figures are taken from the Hibernian accounts with the exception of the breakdown of sources of revenue. The figures for 2001 and 2002 are actual. Hibernian will not give a breakdown for the years since then and I have estimated those.

Do the fans care about the figures? Well perhaps to a degree but any interest is secondary to a desire to see a team on the park playing attractive and winning football. There is though a broad understanding that the club had to get to at least an operating break-even. Most of us do not expect the shareholders to have to put their hands in their pockets however altruistic they might be!

Staff costs as a percentage of turnover is something that is commented on with a general acceptance that for a club to be in a healthy position that those costs should be no more than 60% of revenues but also perhaps no less than 50%

I would venture that not many of us would have ventured that the last year would prove to be as successful as it turned out to be from a financial point of view an I am not critical that we have gone below the 50% figure.

I would however question where we go from here.

I would estimate that the budget for the playing staff at Easter Road is something around the £2.1 million level and it would appear from my own questions and statements coming out of Easter Road that the playing budget is more or less unchanged this year.

Whilst recognising the desire to achieve at least operating break-even over let’s say a five year cycle, I also believe that Tony Mowbray deserves to be rewarded for his efforts with at least some of the additional revenues that he has been instrumental in delivering.

Last year saw our team compete and mount a challenge that succeeded in taking us into Europe. Something that has happened far too infrequently over the last twenty years or so. There is clearly momentum at the club. As I write we are in third place not too many points behind the league leaders and ahead of one half of the old firm.

Where though do we go from here?

Tony Mowbray has done well to bring us to where we are. Yet we must examine the landscape we look upon. The old firm have spending way power way in excess of our own (perhaps though not currently matched by substantially greater talent). Our Edinburgh neighbours have invested reasonable, but not large amounts of money and are currently setting the pace. The downturn in TV income has had an impact on all clubs with even the old firm not engaging of the kind of expenditure witnessed several years ago. Perhaps the cost of success and the gap to the “big two” is not as great today as was the case in the recent past.

Can Tony Mowbray continue to compete and take the club forward? I hope he can but he needs to be given help. He needs the tools to compete and that means money.

The end of last season saw us lose Ian Murray for nothing and time will tell if the same fate will occur with Derek Riordan.

We all know that Hibernian have always been a selling club, my first memory as a young boy of our stars departing was the transfer of Colin Stein. Many fine players have gone the same way. My concern is how we establish a platform that will see many of our exciting young players stay with us until they are fully developed and see the player and the club benefit.

Whether it is Riordan or anyone else, we must be able to compete in the financial marketplace. We have to develop our players to the extent that they will command significant transfer fees at the right time. Just look at how Hearts are managing Craig Gordon for example. He is not going to be allowed to go for a knock-down fee. They will not prove to be easy meat for any acquiring club.

Many of our young stars have developed fantastically over the last couple of seasons. They must be rewarded at the market rate and Tony must be allowed to carry on his work knowing he can continue to drive the club forward.

We can do this and I hope the club will address this with the manager before the transfer window opens.

Failure to do so will bring its consequences. Momentum will be lost and over time one would have to question whether the management team would have the motivation to continue.

I have called this financial report a moment in time because I do believe we are at a tipping point. Make the right decisions and we will continue to move ahead. Make the wrong decisions and we will be back to a situation that is all too familiar and the break up of another promising team.

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From Skye to Leith, the home of the Hibees