I am grateful to Rugger Guy for casting his expert over the accounts of Hearts.
For the avoidance of doubt, my egg chasing mate wouldn’t know Ian Cathro from John Wilson.
However, he does know numbers.
Consequently, I asked him to look at the state of the financial play at the Edinburgh club.
This is what he sent me:
Phil, as per your request I have carried out a brief review of the 35-page annual accounts of Heart of Midlothian “Hearts” for the year ended 30 June 2017.
What comes through loud and clear is that this appears to be a well-run small company who is dependent on the financial assistance of the hearts foundation “supporters” and also a generous donation from an unnamed benefactor. I say that this is a small company, let’s put this in a football context. The turnover of Hearts is slightly more than a third of Rangers International Football Club (RIFC), and about one-eighth of Celtic.
The accounts are highlighted as being year 2 of a 3-year development of Tynecastle stadium. So far, Hearts have spent about £6m on the development of the stadium, and the supporters’ contributions to date are £5.8m. A further £6m has been contracted to be spent in further development.
In the current year, Hearts made small operating profit and generated a small cash flow surplus, however from a cash perspective, a donation of £2.5m was received from a benefactor. The name of the donor is not disclosed, which is common with philanthropists.
The audit report is clean, there are no qualifications, and once again Hearts meet the conditions of financial fair play by UEFA. The financial support of the supporters will be converted to equity so there is no dubiety here.
In addition, Ann Budge has provided an interest-free loan to 2018, which is secured against the assets of Hearts.
Looking at the key assumptions regarding going concern, hearts have created additional loan facility of £1.75m and will receive £1.5m from the supporters in the current year, against a contracted spend of £6m on the stadium, but interestingly state that the going concern is not dependant on supporters finance.
The contrast with RIFC could not be starker, RIFC has accounts qualified as a going concern, a further £7.2m is required to keep the lights on, and assumptions regarding going concern are optimistic if I was being generous.
There is no direct financial support by the rangers supported in providing working capital, the only contributor going forward as per the account is NOAL.
So in summary, hearts is a well-run club who live within their means and is exceedingly well assisted by the Hearts supporters’ contributions, and generous benefactor.
Well, there you have it.
My rugby fixated mate couldn’t’ give a flying frisbee for the denizens of Planet Fitba.
However, analysing accounts is an important part of what he does in his day job in the Square Mile.
I think even Hibbees would have to admit that their city rivals run a financially stable operation.
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I guess the laugh is on me then.
After reading rugger guys analysis i dont think he will be trusted to work on anything of substance within the square mile for some time to come.
Or rather should i say, Phil you will never get job in finance.
Like you, my egg chasing buddy prefers to remain anonymous.
He will be amused that you (whoever you are) think that he and I are one in the same.
This is what it’s like to be sevco, ‘also rans’ again as you know, Graeme Murty is here for 3 in a row, three in a row……………..
Hopefully Whyte sits down with Sky and we get something like ‘the Banter Years-a Christmas special,the journey so far’.It would be something all the family could sit down together and enjoy.
Strange how Hibs supporters go on about penny in the pound deals but conveniently turn a blind eye to the deal negotiated by Farmer to stiff a government backed institution .
For those who don’t know. He negotiated the 8 million plus you were due and the bank accepted just over 5 million. They knew you could have went into admin and got back a lot less. Your now paying farmer over 500k a year for 10 years.
Yep, the Bank of Scotland wanted out of football, but they had signed up to a loan agreement with Hibs and wanted to end the facility.
Naturally they had to offer Hibs something for them to make them accept the early termination.
That is what’s called a business agreement between two companies.
Hearts on the other hand dived for administration as soon as the football season ended.
Shafting the tax payer for £ 2.6 million in unpaid tax and vat , and Edinburgh Council , Red Cross, and small businesses for £ 100,000’s more.
A creditor list of shame with about 300 names on it.
You are not comparing anything remotely close to like for like.
Admin was not a possibility in that Hibs bank settlement deal. That is just a fabrication.
Debt with large financial institutions by way of loan or overdraft can always be renegotiated in full and final settlement when it is beneficial to both parties, as it was on this occasion.
Hibs had been paying interest for years to the bank – at one point the club was £17m in debt and they sold the car park to pay a significant chunk off. They never hid from their responsibility.
A settlement figure was agreed, Farmer effectively loaned it to the club and the debt was cleared – not written off or waived – cleared.
Farmer saw an opportunity in the wake of the Rangers liquidation. Banks were not keen on Football club debt so he waved hard cash in their face to close the book. The bank would have capital sums repaid in one lump sum and Hibs would pay less over time as interest would stop from the moment the settlement figure was paid. Everyone was a winner – including the financial institution.
Now what happened with Hearts again?
Phil
I normally like your stories; but all this nonsense of ‘Rugger Guy’ is becoming irritating. It is obviously you who writes these so-called financial audits from your guy in ‘square mile’.
Your writing style is easily identifiable. You try to disguise it, but are unable to.
Please stop. Please
There is no such person as ‘Rugger Guy’.
Here’s an excellent Idea:
Bayern Munich, Celtic and Anderlecht all complain to uefa that they have been beaten by an illegal FFP breaking cheating team PSG. Sporting Integrity is trashed. Neymar and others are illegally registered players.
PSG get booted out after group stage. Munich and Celtic continue in CL and Anderlecht get the Europa League.
This is honestly how it should be.
FFP is a UEFA sop. If they ever truly enforced it on the big cheats, they’d break away to form their own league, leaving UEFA less cash flush. UEFA not prone to cutting their own purse strings.
This is what it’s like to be sevco
Shiteyer than Dundee you must know
Graeme Murty’s going for three in a row
Three in a row
Nice One !!!
Haha that’s good 🙂
There’s supposed to be openness and scrutiny in sport, to enable sporting integrity.
Was the £2.5m mysteriously generated by the Edinburgh Scottish Government?
Who gives £2.5m away for no shares? Total bollocks. In Association football the donor must be named. The funds must be clean, tax must always be paid on a gift. Was gift tax paid?
Is anonymous donations allowed under uefa rules? I suppose Neymar was bought on a donation then?
Makes a mockery of ffp.
I thought their stand was £17m? So guess there’s £12m debt there at least.
How can a £10m turnover per annum outfit, loss making without mysterious donor, buy a £17 million stand?
I was under the impression that the stand cost £6.7m. The figure stuck in my mind because it was the same as the sevco losses.
Mighty Murty now a stick on to do three in a row, and likely several more.
Spike makes some good points. But I think I’m right in saying after paying out for the rescue of the club and ground improvements the ownership Hearts will pass to the fans. What you get at Celtic is for for billionaires and in the old days for the millionaires to fleece youse.
Plus ca change as they say down the Gallowgate chippy
I’m already looking forward to your next piece about the excellent Graeme Stuart Murty
The loan from AB’s company is not interest-free. Up until May 2016, she was charging Hearts 6% (not a bad return…). She then waived the interest until, as you say, May 2018. What she does after that remains to be seen.
The Going Concern assumption assumes a few things, among them:-
1. further loan facilities of £1.25m being made available last month. No mention of the terms.
2. increased income from the corporate facilities in the new stand. According to latest evidence, they won’t be ready until next summer.
Not so sure I agree with the conclusion that they are “well-run”.
I think Rugger Guy means that Hearts are “well run” in that they have a strategy in place every, unlike another club whose, ahem, “strategy” is to get a good run going in the Europa League.
Why do Hearts always get a pass? Tell this to the Ambulance Service, Police Scotland, charities, SME’s who got shafted by them just so they could dominate Hibs. They are propped up by a mystery person and fan subscriptions which could well drop away due to the eye watering football. It’s funny when they attempt to live within their means they can’t live with Hibs.! Look at Hibs accounts over the last 10 years if you want to compare a well run club owned by more than 30% of the fans which you never hear about. Why? Media loves Edinburgh’s darling establishment club.
As I Hibee I will admit how much easier things appear to be when you get to pay pennies in the pound to see off your debt after years of gloating when playing with a team you can’t afford. Hearts are only slightly better than Sevco in the cheating stakes in my opinion although the way the fans rallied to save their club was impressive.
I know you like to use Hearts as a stick to beat the Rangers fans with but perhaps you could use an example of a club that has been a ‘financially stable operation’ for a bit more than five bloody minutes. £28.5 m (at least) worth of creditors will be choking on their cornflakes reading this fanciful narrative.
Already we have a club relying on mysterious benefactors and loans to claim a profit in their accounts. With the stand building delays, overspend and team not performing particularly well on the park it will be interesting to see next years accounts if the unnamed benefactor doesn’t stump up again or if supporters get fed up putting their hands in their pockets to pay more than other supporters for substandard product on the park.
Surely there are other Premier league clubs that do genuinely live within their means such as St Johnstone who have consistently acheived top 4 finishes without shafting all and sundry that might be better examples Phil.
i agree totally Spike and was going to suggest perhaps Aberdeen or Hibs….
with Stewart Milne and Rod Petrie joining Ann Budge in the ‘time to move on’ brigade then perhaps both these clubs will also have an unnamed mysterious benefactor..?
This. With bells on. In 50 foot high letters, flashing in neon. Bloody this.
I visited Companies House to have a wee look for myself.
Rugger Chap is spot on.
They made a profit BEFORE THE DONATION.
Clearly the donation is from Dr Budge or a pal. And is for the stadium project.
The creditors are covered by cash in the bank-£5m! So no cause for concern.
Team performances come and go.
Keep the faith Jambos. We did.
Edinburgh City Council donate?
Cheap Council charge too?
Surely as the value of their stadium goes up the council charge goes up?
Well put and spot on Glesgha Steve.
Hearts may not be performing on the pitch (at the moment) but they certainly are off it.
All the accusations about charities and ambulance services being out of pocket are baseless. They were all paid in full by the FoH and Budge. First thing they did. The only creditors that got a penny in the pound deal were the Lithuanian Bank and UKIO who were both formerly owned by Romanov.
Again complaints about Hearts living out-with their means whilst winning cups are again baseless.
During that time they owed money ONLY to Romanovs companies and his bank. Not HMRC, not any other football club, not any UK based bank. Payments to players may have been late but were all paid in full.
If the issue is that they were in debt whilst winning trophies the same could be said of Aberdeen, Hibs and indeed every club outside Celtic.
Hibs won the Scottish cup in 2015 whilst in debt and made a loss that year. Does that mean they cheated? I dont think so.
Too much tribalism in Scottish football support prevents impartial and objective views.
Sorry, no Hearts didn’t make a profit before the £2.5 million ” gift “.
Profit for the year was £ 2.321 million. With the gift it would be a loss of £ 179,000.
As for cash at bank, that was £5.5 million. Creditors are £ 7.6 million.
Their latest accounts include £ 6 million spent on the stand, £ 7-8 million to find.
November’s a bit of a tighten-yr-belts month in my business calendar – which goes double for certain football-related concerns we could name. All the same, have just sent a modest PayPal donation to help keep the lights on at Lambfree Park.
It was in Dublin in 1952 that the concept of the Multiverse was first introduced to the world – via a lecture given there by Erwin Schrödinger. If we accept the mathematically persuasive all-possible-universes scenario, it follows that there exists a universe – indeed a non-finite set of universes – where one of the main annual events for the Scottish sports media is the day when they get to submit the accounts of the largest clubs, in the most popular sport, to rigorous forensic analysis. After all, the financial aspect of the sport in the 21st century seems the major factor governing success on the park.
I wonder if the inhabitants of these well-ordered timelines can even conceive of a universe where that does not take place, and it’s left to independent journalists to remedy the information deficit?
Hmm… might be novel in there somewhere…
But for the benefactor, Hearts would have made a near £2.5m loss. Since the redevelopment costs were covered almost entirely by the support (well done to them) that loss must be caused by the club spending far more than the revenues being generated in it’s day-to-day costs. Unless the benefactor has pledged to support future losses I don’t see how these accounts can be seen as healthy or sustainable. A lot of Hearts problems are similar to those at Rangers. They spend what they don’t naturally generate in order to beat their city rivals on the field of play.
Erm no, Hearts announced a 2.3M profit so there was an operating loss (without the donation) of 200k. They probably lost out on c. 1M for Paterson and 300-400k league prize money as they fell down the league during Cathro’s reign (indeed, throw in lost cup revenue and lost Europa League revenue and Cathro/Paterson probably cost Hearts c. 2.5M – hence the donation from, I assume, Mrs Budge?). With half the stand to be paid for in the next set of accounts, I can’t see Levein signing Gareth Bale any time soon, but it’s not bad. Another tough year lies ahead, on and off the pitch, but we do have a line of credit at the bank….
Fair enough, I stand corrected. The way the article was written lead me to believe they made a modest profit *before* the donation.
Was the £ 2.5 million donation not announced at the outset of the stand funding plan.
Why would Budge consider putting in money before all the mishaps you list ?
I think the benefactor’s donation is part of the funding package for the new stand. If you assume that Hearts wouldn’t have gone ahead with the stand build without having the finance in place, then it is very unlikely that a future large donation would be needed to balance the books assuming that non-stand related income and expenditure remains relatively stable.
Delusion! ?
Since the annual profit was £2.3m, the club would have made a loss of around 200k without the benefactor’s contribution.
Yep, there’s absolutely no doubt about it. The 143 year old company that operates the 143 year old club is very well run