Sixteen
Million reasons to be grateful
Farmer millions are keeping
Hibernian afloat - STUART CROWTHER
DURING SOME OF THE
DARKEST HOURS ever faced by Hibernian, Sir Tom Farmer was under
constant attack with calls for him to either invest in Hibernian or sell
the club. A report today however reveals just the extent to which
the Kwik-Fit founder props up Hibernian F.C., with the club debt now
topping a frightening £16m.
Only the personal
fortune and reputation of the Leith-born businessman has kept Hibernian in
business, and while few can even begin to understand the financial
complexities that now surround the club there can be no doubt just what,
or more to the point who, is keeping Hibs alive. The BusinessAM
report highlights what many Hibs fans already knew, that while the club
itself had been separated from its parent company, the two remained firmly
intertwined with the fortunes of one very much dependent on the
other. While the report highlights plenty of reasons for concern for
Hibs fans, that concern is greatly reduced by the knowledge that Farmer
has made it clear he would do the football club no harm. Indeed the
figures appear to reveal that he has done the club a great deal of good.
Hibernian came close
to serious problems on the back of relegation to the first division, with
massive losses resulting in that demotion being reflected on Hibs return
to the top division. That season two key factors kept the club in
operation, as cash-flow reached crisis proportions. The opportune
sale of Kenny Miller to Rangers for £2m alongside a personal loan from
Sir Tom Farmer of the same sum, described as a 'soft loan' with no
pay-back deadlines, kept Hibernian in operation. It is that
under-publicised £2m payment by the Hibs owner that will send out a clear
statement of intent to those who still believe him to be bad for
Hibernian; the echoes of these calls to invest or sell sounding hollow in
the face of what can only be seen as a direct investment in the club.
On a slippery slope? Time alone will tell (hibs.net)
There remains however
the future of the club in the face of a total debt of £16m. While
both Rangers and Celtic have reported greater indebtedness, the Old Firm
are in a far better position to service such debt in the long term.
Hibernian face £10.6m that is due for repayment in the next year; the likelihood
is most or all of that will be further converted into long-term debt,
joining the £5.7m already marked in that manner. Indeed the club
accountants would likely be quick to point out that while repayment of
£10.6m within a year might appear to herald the end for the club, that is
not quite the case.
Of the £10.6m quoted
in the accounts, £5.5m is in the form of an overdraft for the new stand
for which Hibs.net understands agreement has been reached to
convert to a 25-year mortgage, while another £3.5m is described as
'accrual of income' - money gathered by the club in the current financial
year but which is not yet applicable. With a further £500,000 of
loan stock, and the remaining £1m deemed to be the normal annual running
costs of the football club, then the picture is perhaps not as bleak as it
might first appear. And all of this has to be seen against the valuation placed on
Easter Road itself of £13.5m (what is not clear is if this valuation
includes the much-publicised adjoining land that the parent company hoped
to develop alongside the Lochend Butterfly).
As far as the day to
day running of Hibernian is required, managing director Rod Petrie has
often been at pains to point out that Hibernian are being run in a sound
financial manner, and remains at pains to point out that the Hibs board
see no need nor are under any pressure to sell players to meet
debts. Certainly, few can argue this is the case, as the Miller sale
apart (and that was very much at the players behest) Hibs have been seen
to remain more active in the transfer market than most.
Quite where all this
would fit into a Scottish Football set-up minus the Old Firm is anyone's
guess. The expected drop in revenue that would likely come, at least
in the short term, from a defection by the Old Firm from the nation of
their birth would bring serious enough problems for most clubs in
Scotland, but for those such as Hibs and Hearts who put so much into
stadium redevelopment it could be catastrophic. From around the time
that the Old Firm are being touted to leave the SPL, Hibs are required to
service a £2m mortgage for a new West Stand that by then might be seen as
one stand too many. The promise of further riches via a successful
Scottish bid for the 2008 European Championships could well merely prove
the final nail in the coffin for Hibs, as even if it does come to pass it
would still carry a requirement for further investment in the club.
Sir Tom Farmer
The Hibs board, which
incidentally and very quietly lost a hard-working member on Monday when
Erik Davidson resigned, remain confident that they have in place
sufficient financial safeguards for the future. They say that the
measures they have in place will allow the financial long-term stability
of the club. That may well be so, but looking at the numbers in as dispassionate
a manner as possible, it will not take long for anyone interested in the
club to realise that such long-term stability is only there by the grace
of one man. We can but hope that he is given no reason to change his
ways!
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