As Hearts overcome the first major hurdle in their financial crisis, further obstacles still lie ahead
HER Majesty’s Revenue and Customs has shown a degree of leniency. The next critical date on Hearts’ survival timeline is Wednesday, December 19, when the club’s share offer ends. With a payment plan agreed for the £450,000 tax bill, the amount of money raised through shares will have a knock-on effect on the rest of their season. Tynecastle officials are quick to point out that they are not yet out of the woods.
The need for supporters to invest in shares, buy tickets and donate in any way possible has not diminished. Hearts will pay off the tax bill in instalments between now and December 3, meaning focus now turns to the date six days before Christmas when the share offer finishes and all proceeds are known. The aim is to raise £1.79million by selling ten per cent of majority shareholder Vladimir Romanov’s stake back to the fans.
The total amount gathered will form a fair portion of the club’s working capital for the rest of the season as it is needed to bridge a near £2m shortfall in income over the year. That, in turn, will determine whether certain players need to move during the January transfer window to reduce the wage bill, which in turn will ordain which of those out of contract next June can be offered a new deal.
In the background is a £1.75m tax case due to begin this week at HMRC’s Edinburgh Tribunal Centre in George Street, although that could potentially run for months. Ultimately, should Hearts lose and be deemed liable for tax due for players loaned from Lithuania between 2005 and 2010, the final bill could be over £3m including penalties and costs.
So the need to maintain income streams via the loyal Tynecastle support is clear. “We are pleased with the new agreement with HMRC,” said a Hearts spokesperson. “The fans’ amazing fund-raising efforts were key to us being able to agree this new payment plan. The players, too, were an integral part of the situation which allowed us to have this reprieve.
“The supporters and players have demonstrated through their sacrifices that they are all in this together and if we continue to work hard for each other, then we hope to continue to make progress, starting with Saturday’s league against St Mirren in front of what promises to be a big home crowd.
“It is important for the fans to realise that this is only a reprieve and that the share issue, which runs until December 19, remains a key vehicle for raising funds. Donations can also be made to our dedicated phone line – 0131 200 7280 – while tickets for our upcoming home games are also on sale. There has been a phenomenal amount of work put in already but it is vitally important this commitment continues.”
There will be a limit to how much can be squeezed out of the paying public in these austere times. Fans rallied to astonishing effect after a club statement claimed Hearts could be just days from liquidation. That threat lifted when the payment plan was agreed, but financial concerns remain prominent in the minds of staff.
Crucially, players have offered to defer November’s wages, which were due to arrive in their bank accounts tomorrow. This was described to the Evening News as being not only a select few high earners but “the majority of the first-team squad”, further underlining the unity that exists around the club’s Riccarton training base. Many players and coaches have also purchased shares themselves in an effort to plough in extra cash, help Hearts survive and safeguard their own jobs in the process.
Agreeing to wait for wages, provided an official document is signed and submitted to Hampden Park, will ensure there are no further sanctions against Hearts from the Scottish Premier League. A transfer embargo is currently in place until December 23 following late payment of players’ salaries in both September and October this year. A longer ban would prevent the possibility of any new faces arriving in January. Director of football John Murray and manager John McGlynn are already planning ahead, scouting players in case they are faced with several enforced exits and therefore need to replenish the squad.
Marius Zaliukas, the club captain who is one of the highest earners and out of contract at the end of the season, is a prime candidate to be moved on. That, of course, depends on a club being willing to take him. Sheffield United were interested at the end of last season and would be again if they can secure promotion from League One to the English Championship. The Lithuanian would be interested in moving south of the border following six-and-a-half years in Edinburgh but is in no immediate rush to leave.
Andy Driver is likely to depart next summer when his contract expires, if not before. Andy Webster also becomes a free agent at the end of the season. It is unclear whether the Scotland defender will be offered a new deal. As ever, much will depend on finances, although many on the Hearts coaching staff feel that keeping one of Webster or Zaliukas is essential to retain defensive experience. Zaliukas, Driver and Webster combined earn in excess of £20,000 per week.
Waiting in the wings are promising young players such as Jason Holt, Denis Prychynenko, Jamie Walker and Dylan McGowan, the younger brother of Ryan. All are eager for more first-team exposure. Under-20 centre-back Brad Mckay joined Stenhousemuir on loan last week in order to gain vital first-team experience in case he is needed during the second half of the campaign.
Costs will continue to be cut as Hearts aim for self-sustainability in time for next season. Their current wage bill sits around the £5m mark having been dramatically reduced from the £8m noted in the last set of financial accounts released earlier this year. Directors aim to operate with a salary budget of £3.5m for next season. Ukio Bankas Investment Group remain Hearts’ parent company but are no longer providing funding. They shoulder the club’s debt, which stood at £24m according to the latest accounts but has been reduced to around £22m since.
Those at Tynecastle are attempting to go it alone and guide the maroon ship through to next summer. First, they face a crucial couple of months over the winter.
With continual aid from fans, allied to reducing wages to a more manageable level, they should be able to weather any storms and steer safely through to calmer waters for season 2013/14.