Preliminary results
HEART OF MIDLOTHIAN PLC
ANNOUNCEMENT OF PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2005
Financial results
During the year ended 31 July 2005, the Company incurred a loss on ordinary activities before taxation of £2,728,000, equivalent to a loss per share of
21.6p (2004 - loss of £2,424,000 or 19.2p per share).
Turnover for the year showed an increase of £1,266,000, which reflected increased season ticket monies, the benefits from reaching the Semi-Finals of
both Cups and, most importantly, increased income in the areas of gate receipts and TV income through reaching and participating in the group stage of the UEFA Cup.
Staff costs were £503,000 lower than last year, reflecting the continued reduction in player costs. Due to this reduction, combined with increased
turnover as described above, the ratio of staff costs to turnover was 53.9%, an improvement of 16.5% on last year.
Other operating charges were £4,442,000, which was £1,396,000 higher than last year. This was due to the combination of increased costs for staging our European games at Murrayfield, the operating costs of a full year at the Youth Academy and increased sales and marketing costs relating to future income streams for the new season.
The exceptional item of expenditure of £351,000, relates to the final abortive costs incurred in the potential sale of Tynecastle Stadium.
The year in review
It has been a dramatic 12 months, but I feel that Hearts will come out of recent turbulent times in a much stronger position.
We have made some notable progress, not least of which is securing the future of football at Tynecastle following the result of the EGM in January. Additionally, our ability to attract and retain the services of top international players has helped create a team which has been a breath of fresh air in this season's SPL.
Looking back to last season, we were not successful on the field as the Club endured defeat in the semi finals of both domestic cup competitions and finished in only 5th place in the Bank of Scotland SPL. This in turn affects the Company financially with reduced revenues due to a lower league placing than the previous two seasons, which has been offset by the positive impact of revenues from our participation in the UEFA Cup referred to above. During this time, the Club parted company with two managers - Craig Levein and John Robertson - and we continue to wish them well for the future.
The knock-on effect of our lack of on-field success last season is that the club will miss out on the potentially lucrative revenue streams that come from
European competition. In this financial year we will also suffer reduced revenues due to our early exit to Livingston in the CIS Cup.
However, there can be no doubt that the last financial year saw the first stages of the Club going through a much needed transition period which is designed to deliver real on and off field success for Heart of Midlothian plc. The Board's view is that while there is still much work to be done in achieving our ultimate aims of delivering regular domestic success and European competition participation, the Club is in a much better position now than it was some 12 months ago.
Events since the year end
At present a recommended cash offer has been made by British Linen Advisers Limited on behalf of Heart of Midlothian 2005 Limited to acquire the whole of the issued and to be issued share capital of Heart of Midlothian plc, not already owned or controlled by UAB Ukio Banko Investicine Grupe. The offer document was sent to shareholders in mid November and provides full details of the offer, which has been recommended in the best interests of Hearts and its shareholders.
In addition to the above, the Board is continuing to consider opportunities to strengthen the balance sheet of the Club and is currently in the process of negotiating a potential change of status for the Company.
On operational matters, there has however been a noticeable increase in season ticket sales due largely to the successful start to the season made by the team.
The players have adapted well in every instance to the changes that have taken place off-field this season, which have included the departures of former manager George Burley, Chief Executive Phil Anderton and Chairman George Foulkes, and then most recently the arrival of new first team coach Graham Rix.
Neither I nor any of my fellow Board members take any pleasure in some of the decisions that have had to be taken recently, however, everything that the Board is currently working on is designed to improve the long term standing of the Club both financially and in a playing sense.
We are working on a number of levels to lift the restrictions within which we must currently work. First and foremost we are building a team at Hearts that can compete at the highest levels of domestic competition and thereby secure regular European football. This team building process will continue with further investment planned for the January transfer window and also thereafter in the summer next year.
Secondly we are progressing discussions with Edinburgh City Council and other relevant authorities on the redevelopment of the main stand at Tynecastle. We are hopeful that our proposals will demonstrate the economic value to the city and in turn provide us with a much better opportunity to accommodate more Hearts fans at Tynecastle.
Finally the imminent move to private ownership through the offer document that has been circulated to shareholders would provide the opportunity for the Board to act quickly and effectively in order to realise the vision that it has for the Club.
A note of thanks
I would like to add a note of thanks. As I have mentioned we have witnessed a period of rapid change at the Club and I feel that the players and staff must be acknowledged for their professionalism and commitment to Hearts. I would also want to place on the record the Board's appreciation of the backing that the fans have given the team throughout the season. Tynecastle has seen a capacity home crowd for every game so far this season and this gives the Board confidence that we should do everything we can to deliver new modern facilities at the stadium as quickly as allowable.
R Romanov
Chairman and Acting Chief Executive
28 November 2005
