Q1. You were quoted after the FOH AGM as saying that without the £1.4m pa FOH contribution Hearts would be loss-making. A back of the envelope sum suggests that on the basis of ST sales and walk ups, forecast revenue must be at least £1.4m ahead of "worst case" budget assumptions. So why in the absence of the FoH contribution would we be loss making? At the FoH AGM reference was made to stadium costs and Academy costs. On the former can you give a feel for the nature and scale of unforecast or unbudgeted costs? On the latter aren't Academy costs ongoing revenue costs rather than one-off costs and shouldn't they be covered by "normal" revenue streams?
A1. Ticket income is currently expected to be £550k (net of VAT) above target for the year. We budgeted 10,000 season tickets and 3,000 walk-ups. We sold 12,500 season tickets and are currently forecasting an average of 3,000 walk-ups, as per the budget.
With regard to unforecast or unbudgeted costs, it was explained (by ACB) that the costs associated with professional fees and footballing debt forecast at £1m, came in at approximately £1.125m and costs of winding up the administration process and sorting out the 2012 share issue produced circa. £250k of unforecasted costs. Spend on facilities improvements and essential maintenance is currently forecast to end the year £150k over budget.
Yes…Academy costs are revenue costs and not one-off costs.
Q2. I have a couple of questions thanks:
1) What will be total cost to FOH to finally purchase Hearts?
2) Will FOH still be paying the club £1.4m in years 3 through to 5?
A2. The objective is that FOH will build its contributions year-on-year and FOH will continue to contribute 95% of all monies collected to the Club. In years 3-5, payments received will be applied initially to repaying the loan, with any excess (over the minimum contracted repayment amount) being utilised either to repay the loan more quickly or, by agreement, to provide additional working capital to the Club or to build up Club reserves.
Q3. Is the club "speculating to accumulate" by using funds from FOH as working capital? There is only one guaranteed promotion position at the end of this season. If all 10 clubs in the division adopted the same approach, then 9 of them could be in financial difficulties by the end of the season. The club is almost certainly benefiting from higher than budgeted income streams from Season Tickets and other match day income. Why does it still need the extra funds from FOH, which could otherwise be used to pay down the debt to Bidco and reduce the interest bill accordingly?
A3. The figures presented at the AGM and some of the explanations given above, should hopefully demonstrate that there is no “speculation” going on and the FOH income is being spent carefully to meet the objective of rebuilding a financially stable Club.
BIDCO could have insisted that all monies collected went immediately to repay the debt. This would have significantly reduced the financial risk to BIDCO. The reason for not doing so was to ensure the objectives of financial stability for the Club; to give the Club 2 years to get its finances in order and to begin the revival.
For the avoidance of doubt, BIDCO is losing money by providing the loan so paying down the debt early would be beneficial to BIDCO. It would not, however, be beneficial to the Club.
Q4. Does the club have a Plan B in the event that promotion is not achieved within two seasons? Austerity? I believe that the structure and time scales of the Bidco/HMFC/FOH deal unnecessarily risks the transfer to fan ownership, particularly if fan contributions drop in the event that success on the field is below expectations.
A4. The Club will continue to run its business in a sensible business-like manner in accordance with the means at its disposal.
If fan contributions drop, for whatever reason, then fan ownership will potentially be at risk, with the biggest risk being to BIDCO. Using funds to pay BIDCO back more quickly would limit the risk to BIDCO and could see supporters ownership happen more quickly. If contributions then dropped, the Club would once again be at risk.
Q5. The agreement between HMFC and FOH requires that quarterly presentations are provided to the FOH Board on progress against the business plan. Is there any of this information that can be shared with the wider FOH membership, or does the HMFC Board insist on full confidentiality?
A5. Plans will be shared with the FOH membership on a continuous basis, subject to constraints imposed by commercial confidentiality.
Q6. I've yet to see any reasoning why "fan ownership" was not deliverable from day 1, i.e. handing over the UBIC/Ukio shareholdings to FOH in May 2014, even as a symbolic gesture.
With the securities in place to protect Bidco's loan investment, the same arrangements regarding board appointments, length of tenure, repayment of debt, working capital etc, could all still have been implemented as they are.
Why was it deemed necessary for Bidco to hold onto the shares for 5 years?
A6. Fan ownership was not delivered on day 1, because the fans did not have the funds to do the deal. Ann Budge is both a supporter and a business woman. Agreeing to run the Club, on a totally unpaid basis, for a minimum of 3 years might reasonably be seen as rather more than a “symbolic gesture”.
To attract the calibre of management we have in place her clear-cut authority was essential.
As frequently stated, the journey towards majority fan ownership is underway. BIDCO does not have to hold the shares for 5 years; transfer of ownership can take place any time after 3 years.
Q7. Ann advised in a Q&A session with Jambos Kickback that following the transfer of 75.1% of shares to FOH, she would retain the remaining shares obtained through the share offer for "sentimental" reasons, just like any other shareholder. Does Ann consider that retaining a personal shareholding 22M shares (or 13% of the club), obtained for an outlay of approx. £20,000 to be in keeping with the aims of FOH, given her personal involvement and support of the cause.
A7. Ann believes it is perfectly reasonable that, should she wish to do so, for sentimental reasons – not for reasons of personal gain – there is absolutely no reason why she should not retain a minority shareholding. This will in no way impact supporters ownership.
For the avoidance of doubt, at the time of doing the deal, there was no clarity over what shareholding BIDCO would end up with, pending the Open Offer and further dilution following the 2012 share issue. BIDCO could not legally undertake to pass over what she might not have.
Ann has bought the shareholding at 0.08p per share – the same price as the supporters will pay for their 75.1%
Q8. I have been tracking the major shareholdings in the club over a number of years. Can someone tell me what happened to the 6.5M (4.2% of current shares issued) shares formerly held by HOM 2005 (Romanov's purchase vehicle for the club in 2005), which is now dissolved? The shareholding was last listed separately at the time of the debt for equity swap in November 2010, but does not appear to have been included in any shareholding held by UBIG or Ukio since then. Were they sold onto a third party?
A8. These are now BONA VACANTIA shares. Assets of dissolved companies fall to the QLTR (Queens and Lords Treasurers Remembrance).
Q9. It is quite fitting this season that we do not have a shirt sponsor as the current strip has so much historical and emotional value to the fans. However as well as the progress on the pitch I have noticed that we are making progress too with our reputation within football and the community. Could we not take the opportunity to give some worthy cause or charity some free exposure by wearing their logo on our chest for the remainder of the season? I know this has been done before in football, notably with Barcelona wearing the UNICEF logo. I understand the logistics would be tough to get around however I feel it would further enhance our reputation and bring some more good publicity to the club that we love, yours in Hearts, Allan Menzies
A9. While this is a commendable idea, it is not possible. All strips have to be registered with the SPFL before the start of the season, and this includes sponsorship logos.
Q10. Myself and my son are season ticket holders. We have done at least our fair share of supporting the club over the last 5 years or so. This includes paying a standing order to FoH since the first month it was requested – and we continue to do so to date. My questions are as follows:
1. I see boards of people being set up and ownership being allocated this year. Where does FoH, and therefore our contribution fit in to the overall scheme, that is, where does the money go in terms of running the club and the ownership issue?
2. In light of the answer to the issue above, how long is it reasonable to expect to be paying these voluntary contributions going forward, given the recently reported healthy financial state of the club?
3. What happened to the cash raised from auctions, fund raising drives etc just prior to your intervention? Is this money all lost? I bought Ryan McGowans cup final shirt in a blind bid for example; this money was meant to go to HYDC; can we tell if it went there?
A10. Points 1 and 2 have been answered elsewhere in the responses. Regarding point 3, you can be assured that all such funds were retained in a special account and attributed to the appropriate fund-raiser – in your case HYDC.