Relegation will cost Hibs ‘hundreds of thousands of pounds’

PAYING THE PENALTY: Hibs will have to reassess their finances
PAYING THE PENALTY: Hibs will have to reassess their finances
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Hibs were today left counting the cost of relegation with one financial expert predicting dropping into the Championship will cost the Easter Road club “many hundreds of thousands of pounds.”

The Edinburgh outfit were already expected to be heavily in the red at the end of a dismal season which started with Pat Fenlon in charge only for the Irishman to quit and be replaced by Terry Butcher. But while fans contemplate life outside the top flight after Sunday’s dramatic penalty shoot-out which saw Hamilton Accies take their place in the Scottish Prremiership, the Lanarkshire side having fought back from being two goals down following the first leg of the play-off final, chairman Rod Petrie now faces a grim financial outlook.

Petrie has already apologised to supporters but at the same time he called on them to continue backing a club which has finished in the bottom three of the league three times in the last four seasons.

However, accordimg to Neil Patey of global finance firm EY, Hibs will be forced to drive down expenditure while, at the same time, attempting to make an immediate return to the top flight from a league which next season will also contain Rangers and Capital rivals Hearts, with only one team guaranteed automatic promotion.

He believes the unexpected nature of Hibs’ demise will complicate matters although he believes Petrie will have already run through some “what if” scenarios as the club’s plight has worsened in recent months. Season-ticket sales are certain to have been killed stone dead just at a time when Butcher requires funds for the “massive restructuring” he has embarked upon with a rash of out-of-contract players immediately released, while Hibs can anticipate a drop in a string of other revenue streams which will leave them well adrift of their goal of breaking even in each financial year.

He said: “A big club like Hibs has a certain cost base which makes it more difficult for them to adapt to life than teams used to being there with a smaller ground and lower overheads. It’s difficult to break even because they are a big club in the wrong league.”

A further difficulty for Hibs is the fact that Hearts have been planning for life in the Championship for the best part of a year having been hit by a 15-point deduction and a transfer embargo which made Premiership survival all but impossible, while, coming the other way, Rangers, as troubled as they continue to be by off-field distractions, have the financial muscle provided by 40,000 plus crowds.

Although Hibs can anticipate a tough economic background, it’s virtually impossible to say with any certainty just what the implications will be given the number of imponderables involved such as gates, television revenue, sponsorship, corporate hospitality, merchandising and so on. However, Patey explained that they are certain to take a hit in all areas of income.

Wages, as always, are the biggest expenditure for any club, although Hibs acted to address that within 24 hours of being relegated when Ben Williams, James McPake, Alan Maybury, Kevin Thomson, Sean Murdoch, Paul Cairney and Tom Taiwo, along with a string of younger players, were all told they won’t be having their contracts renewed for next season.

However, to hope to continue attracting the fans they need through the gates, Butcher will also have to rebuild a squad competitive enough to challenge at the right end of the table, again a task made all the more difficult after being relegated. Patey said: “Hibs could well have been talking to players interested in coming to Easter Road but based on them being a Premiership club. They may have second thoughts and be reluctant to sign on now.

“On the other hand there could be Championship players who see themselves playing for Hibs with the potential of being promoted. Rangers’ financial muscle, given their attendances despite being in trouble, will make them favourites which is likely to leave Hibs scrapping away with Hearts. Based on the results of the derbies in the season just ended, Hearts fans will no doubt already be counting on those 12 points but the fact of the matter is they’ll be taking points off each other which they both badly need.”

Hibs will receive a parachute payment of £500,000 from the SPFL to help them survive their slip out of the top flight, while they will receive a further £250,000 in the event that they remain down for another year.

Fighting their way back is, unlike 15 years ago when Hibs romped away with the old First Division title, going to be highly problematic, with Rangers, Hearts and a host of other vibrant Championship sides ensuring they face a formidable battle to come back up at the first attempt.

Patey said, failure to do so could bring further problems on the cash front. He said: “The decision most relegated clubs make is not to cut costs to break even, but to run a stronger squad. But if you don’t bounce back do you cut for the second season or the third?

“If you don’t cut sooner rather than later and don’t get promoted then debt mounts up and that’s when you get into trouble. But Rod Petrie is a wise old head. There’s going to be something of a cost next season, what level does he target?”

Edinburgh derbies and two visits from Rangers will compensate slightly and help attract or retain sponsors, but the other side of the coin is that Hibs can’t expect clubs such as Dumbarton and Cowdenbeath to bring as many fans as, say, Aberdeen and Dundee United.

The gulf between “merit” payments from the SPFL’s television deals isn’t as big as it once was although, according to Patey, that could still see somewhere in the region of £500,000 lost to club coffers.

New chief executive Leeann Dempster will be behind her desk next week and will have to conduct a root-and-branch review of all the club’s operations, identifying areas in which money can be saved while finding the funds to back Butcher. It won’t be a straightforward balancing act but, according to Patey, Hibs’ youth academy should, if at all possible, be left alone, with development of young players at a time like this becoming all the more important given the player budget is certain to come under strain.

One problem Hibs could face, claimed Patey, is the current mood among Hibs fans, with the demonstration which followed defeat by Hamilton a reflection of the disenchantment. He said: “They aren’t happy and that doesn’t bode well, it could be an issue for Hibs, at least in the short term.”

Asked if he had a “ball park” figure he could put on anticipated losses, Patey said: “There are a number of factors which make it very difficult to say but I believe it could run into many hundreds of thousands of pounds.”