AFTER revealing a record debt of £36.25 million yesterday in the year ending 31 July 2007, up nearly £8m from the previous year's loss, Hearts have vowed to trim their billowing employment costs and, in a bid to reduce debt, will expect their next manager to run a tighter ship.
Although Hearts achieved a record turnover of £10.32m, the club spent £12.49m on wages. Most viable businesses run a salary to turnover ratio of between 60 and 70 per cent. Hearts ratio is double that and the club say they will bring spending on wa
ges down.
Seven players have left the club this year and the focus in future will be on Scots and young footballers.
In a statement, Hearts explained: "Expenditure on the playing squad is unlikely to rise any further and the board is working towards a more appropriate salary to turnover ratio with the full effect of the departure of some of the club's top-earning players not being felt until the next set of financial results."
Even by the end of the next financial year, however, the salary to turnover ratio won't be halved. The club must fulfil existing contracts and the process of trimming wages will take place over a period of time.
In another significant move designed to alleviate a crippling level of debt, the club's parent company, UBIG, say they will convert some loans into shares. It's a method of trimming losses which, for example, David Murray has used to reduce the debt at Rangers. It's not yet clear how much of Hearts' debt will be converted into shares or how this process might work.
But the statement confirms: "Parent company UAB Ukio Investicine Grupe (UBIG) provided funding by way of short term debt facilities with the plan to convert it to shares at a later stage. The club does however remain focused on increasing efficiency by lowering costs and improving results on the field and financial results off field."
Of course, the key to improving results on and off the field rests largely with the appointment of a capable manager who can work the trick of securing more success on a smaller budget.
The reason Vladimir Romanov is prepared to offer the next manager of Hearts the freedom to run the football side of the operation which was denied to any of his predecessors can now be seen as financially motivated. Hearts need to get the wage bill down and operate with the same economy of scale demonstrated by rivals such as Hibs, Aberdeen and Dundee United.
Although Romanov announced in January that he wanted to recruit a British style manager, no approach has yet been made to any candidate. Tynecastle insiders say this is because the appointment is arguably the most important in Hearts' history and the club cannot afford to choose the wrong man. However, Romanov has not changed his mind about delegating responsibility and yesterday's statement insisted: "The Board also confirmed its intention to improve the football management structure and appoint a manager whose responsibility will be to deliver on field success."
Player sales profits were £1.12m, largely due to the £1.1m sale of Paul Hartley to Celtic in January 2007.
The figures for 2007 did not include the sale of Craig Gordon to Sunderland or the imminent permanent transfer of Roman Bednar to West Brom. While player sales in 2008 will likely exceed £10m, turnover may dip next time because of the lack of European football.
While Hearts say they hope to break even in the mid to long term, the increase in debt of £8m can be explained by the payment of interest to creditors and the cost of planning for the re- development of the main stand at Tynecastle. Hearts say Romanov remains committed to the club and the debt would only be a problem if there was a demand to pay it off. The difference between the situation facing Hearts today and the one under Chris Robinson, the previous chairman, is that Romanov's company owns both the club and the bank.
Not seen in Edinburgh since November when the Lithuanian businessman watched Hearts defeat Aberdeen 4-1, Romanov was back at Tynecastle as the club announced its latest financial results. He spoke to the players at the ground yesterday afternoon and urged them to do their best to ensure Hearts finish as high up the table as possible. It was not a confrontational session – Romanov once threatened to put up everyone for sale if they didn't beat Dunfermline – but a rallying call.
Stevie Frail, Hearts' interim manager, said: "It's always nice to catch up with him. I speak to him quite regularly, so it was good to touch base. It was just a general chat. He wanted to say 'hello' to the players. The players went to see him and we don't think there's anything more in it than that."
Asked about future developments, Frail added: "It's not a case of me wanting to speak to him. I'll wait until Mr Romanov decides what he wants to do. I'm not expecting to hear anything. It's just a general chat and we're focusing on the game against Dundee United."
Craig Levein has been widely rumoured to be a favoured candidate for the vacant Hearts post and Romanov's presence at a match where the Dundee United manager is in the opposition dug-out poured oil on the bonfire of speculation. "People put two and two together and come up with whatever," observed Frail.
Hearts' key figures£36.25 million
Debt in year ending 31 July 2007, up nearly £8m
£10.32m
Club's record turnover
£12.49m
Wage bill at Tynecastle
£1.1m
Profits from player sales
The full article contains 966 words and appears in The Scotsman newspaper.
