Cup exits and chasing Euro dream cost Hibs dearly as club post £3.9m loss
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Hibs have posted a loss of £3.9m as Easter Road chiefs hold out hope for 'record breaking' revenue.
The Premiership side made the loss despite a turnover of £12.4m, which is up 4%. Hibs have an operating loss of £6.9m and wage-to-turnover ratio is now 81%.
Losses have been blamed on two key factors - failing to progress in the cup competitions and allowing Lee Johnson to spend heavily in pursuit of European football. In a normal season, Hibs would expect to reach the quarter-finals of both the League Cup and Scottish Cup; failing to clear the first hurdle in either competition last season is estimated to have cost them around £2 million.
Significant recruitment in January of 2023, with CJ Egan-Riley and Jimmy Jeggo among the arrivals, also had an impact on the accounts. Although this investment paid off with qualification for Europe, the cut-off date for the accounting period means the figures don't include revenue from three rounds of Europa Conference League football.
A notice has been sent by the club to shareholders ahead of the Hibs AGM on February 27th and they have made a number of key financial statements ahead of it.
It comes as Bournemouth Bill Foley is cleared to take a minority investment at Easter Road. The SFA's approval is subject to Foley's shareholding not exceeding 29.99% and that it won't preclude Hibs from featuring in UEFA action.
The statement conceded that Hibs' financial results fall 'short' of goals and show the impact of lack of sporting success in cups and no European football. Having reached the European Conference League play-off round and the Viaplay Cup semi-final, with further growth from a commercial perspective anticipated, Hibs 'expects' record breaking revenue for the year ending 30 June 2024.
The key financial statements read: "Turnover increased by 4% from the previous year to £12.4m (PY). This increase was primarily due to performance off the pitch, as the prior year included three matches at Hampden as part of deep runs into the cups as well as European matches held at Easter Road.
"The club continued to grow its commercial revenue, through new partnership deals as well as upscaling existing sponsorship agreements. "Overall the staff costs increased by £1.6m compared to the previous year. The important wage to turnover ratio increased by 10%, from 71% in the prior year, to 81% in the current year.
"The increase in staff costs came on the back of an 8th place finish in the 2021/2022 season, the worst finish from the club since 2013/14, the club board and ownership took the decision to increase spending in order to bolster sporting performance. This investment focused on improving the squad as well as further investment in people and infrastructure at the training centre.
"Other operating costs increased by £3.6m compared to the prior year. This is partially explained due to the increase in Amortisation and Depreciation of £0.8m and £0.4m, respectively, driven by further investment in the playing squad as well as capital expenditures.
"Additionally, the Club has continued to be impacted by rising energy costs, increased matchday costs from the greatly expanded hospitality offering, removal of the rates relief, as well as incremental costs from the increased playing squad size.
"Player trading resulted in a gain of £3.2m for the year compared to a gain of £2.1m achieved in the previous year. The current year gain is primarily related to Josh Doig and Kevin Nisbet.
"At the end of 30 June 2023, approximately £2.5m of this amount was outstanding. The Club continues to hold significant sell-on clauses for these sales, as well as Scotland International Ryan Porteous, and therefore feels strong regarding the performance of player trading during the year.
"The net performance for the year resulted in a loss of £3.9m. Increases in loans from Bydand Sports, the Club’s majority shareholder, supplemented the cash flow of the Club in order to offset these losses. The entirety of loans from Bydand Sports, totalling £5m will be converted into equity after the AGM."