Hibs make profit again, but wages worry Rod Petrie

HIBERNIAN have announced a profit for the sixth successive year, but chief executive Rod Petrie warned yesterday that wage costs are still too high as a percentage of turnover.

• Hibernian's chief executive Rod Petrie

The net profit for the year ending 31 July 2010 was a modest 100,000, but was achieved in a period which saw turnover fall by eight per cent - in part because of the closure and subsequent demolition of the East Terrace. Staff costs increased by 100,000, to 4.8million, as manager John Hughes was given the resources to add to his playing squad. The net debt is 4.1m.

With the new East Stand now in place, Hibs have the opportunity to increase their turnover substantially thanks to the higher capacity of Easter Road. If at the same time they hold wage costs at present levels, that would go some way towards Petrie's target of reducing the salaries-to-turnover ratio from its current 68 per cent (up from 61 per cent in the previous year) to 60 per cent. If not, a reduction in the playing staff would appear necessary.

But, even if such strictures prove necessary, Hibs would still continue to enjoy an enviable financial position, and Petrie understandably reacted with pleasure to the results. "To have achieved a profit for six consecutive years is a truly outstanding achievement within football, let alone football within Scotland," he said.

"Being in profit means that the club is self sufficient and in control of its own destiny. It also means any surplus income is retained within the club and re-invested for the future. The club's financial position is the envy of many other clubs.

"A combination of the difficult economic conditions for supporters and commercial partners, the reduction in season ticket prices, and the closure of the old East Terrace in February resulted in turnover dropping 8 per cent year on year."

Although Hibs' debt is smaller than that of many of their rivals in the SPL, Petrie appears determined to keep nudging it down, and he made it clear that one measure of the club's success in doing so would be a reduction in the wages-to-turnover ratio.

"At a time when many football clubs were reducing playing budgets, the board sought to support our new manager John Hughes and sanctioned a further increase in staff costs from 4.7m to 4.8m in the year," he explained.

"This increase, together with the significant reduction in turnover, led to a rise in the wages-to-turnover ratio to 68 per cent. There is work to be done to bring this important ratio back below 60 per cent."

The capacity of the ground is now more than 20,000, up from a figure of 17,500 when the East Terrace was in place. In the present economic climate, attracting anything like a full house will prove extremely difficult, and even when the team have been performing very well in recent years Easter Road has only occasionally been full.

Nonetheless, chief executive Scott Lindsay said that building the new stand and thus completing the stadium was an essential part of the club's development. "The opportunity to construct the new East Stand at a cost of around 500 per seat was one that could not be overlooked," he said.

"The completion of the stadium provides the scope for additional revenue from home matches in the future as well as allowing Easter Road to be utilised for other matches such as cup semi-finals and Scotland Under-21 internationals.

"We will now turn our efforts towards widening the Hibernian family, working the completed stadium hard and increasing both attendances and turnover, to allow us to continue to maximise our investment into the product on the pitch. Our commitment to the manager and the team, and our ambition to compete at the very top of Scottish football is unwavering. Ultimately our focus remains on sporting performance, the single most important factor in generating revenue.

"The commitment of our supporters over the past season, and in renewing seasonal memberships for the current season, has been tremendous.

"Their support is the cornerstone upon which future success will be built, and we thank them for their support and confidence, especially given the ongoing financial circumstances that we all face."

Profit: 0.1m (2009: 0.7m)

Turnover: 7.1m (7.7m)

Staff costs: 4.8m (4.7m)

Staff costs to turnover ratio: 68% (61%)

Operating charges: 3.3m (3.5m)

Gain on disposal of intangible assets: 2.3m (2.4m)

Net assets at 31 July 2010: 15.0m (15.0m)

Cash balances at 31 July 2010: 2.2m (2.9m)