By Paul Nicholson
May 6 – Scottish Premier League club Heart of Midlothian announced financial results to 30 June 2012 showing an increased turnover to £8.68m but a loss for the full year of £1.65m, mainly due to the settlement of an HMRC tax investigation of £1.56m.
Hearts have been struggling since Lithuanian owner Vladimir Romanov had the operations of his Ukio Bankas bank suspended and put under temporary administration by Lithuania’s central bank. Hearts has debt of about £24.7 million ($39 million) and Romanov’s cash to fund the club dried up as the problems at the bank increased.
But the club has reacted positively in day to day trading to put the excesses of the past behind it (predominantly high player wages for international players), and bring operations on to a sounder financial footing.
The revenue boost cam primarily from the club’s participation in the qualifying and play-off rounds of the 2011/12 UEFA Europa League. It also won the Scottish Cup campaign against city rivals Hibernian at Hampden Park in May 2012.
The Youth Academy chipped in with a net gain of £1.96m, mainly from the transfer of two of the club’s Academy graduates – Scotland international defender Lee Wallace moved to Rangers and Icelandic international midfielder Eggert Jonsson to Wolverhampton Wanderers.
Operating expenses and staff costs were reduced resulting in only a small increase in net debt to £24.7m.
The Hearts board is confident that its financial position now provides the foundation stone for it to achieve the Financial Fair Play requirements of UEFA in time for its full introduction in season 2013/14.
Hearts is pinning is future on three key strategies: developing the best young footballers in Scotland, building a new stadium (either at Tynecastle or somewhere else in Edinburgh) and expanding the supporter base. Youth development is vital not just because of the financial benefits from player trading, but also to provide “entertaining and successful football in domestic and European competitions”.
The huge cloud that will continue to loom over the club is the £24.7m debt. Before any new owner can take over from Romanov, that debt will have to be dealt with. A major part of it is the £15m owed to Lithuanian bank Ukio Bankas, who are headed for bankruptcy.
The Ukio administrator would be unable recoup that money from Hearts immediately, but it could be a painful process for the club agreeing terms for the debt repayment. A process that could also cast a shadow of doubt for any new investors looking to put their money in.
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