Hibernian fans looking for some relief from watching their side on the park this week were shown no mercy by the revelation of distressing details of the club’s finances.
An imminent £6 million investment into Hibs by Bournemouth owner Bill Foley’s Black Knight group may have given Hibees something to hold onto during a bleak mid-winter at Easter Road.
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But they lost nearly two-thirds of that sum last season alone as some of the pitfalls of Scottish football’s fragile financial environment were laid bare.
A £3.9m loss - up from a £1.5m loss in 2021/22 - is the second biggest of any Scottish Premiership side to publish their accounts for the 2022/23 season and only marginally behind Rangers’ £4.1m.
“The financial results for the previous year fall short of our goals and show the impact of the lack of sporting success in cups and no European football,” Hibs conceded in publishing the figures.
For Scotland’s big-city clubs that can rely on a regular core base of season-ticket holders, there are four major factors which affect their financial year: European football; domestic cup runs; wages and player trading.
READ MORE - Hibernian announce £3.9m loss amid extensive salary costs
Three of these were the driving force behind Hibs’ sorry results as worryingly even an increase of profit on player sales to £3.2m, thanks largely to the departures of Josh Doig, Ryan Porteous and Kevin Nisbet, failed to erase their losses.
European bounty creates a bubble
Scotland’s rise up the coefficient table in recent seasons, allied with the creation of the Europa Conference League, has provided a carrot for non-Old Firm clubs to secure the bounty of guaranteed European group-stage football by finishing third in the league.
In Hibs’ strategic report last year, the club noted spending was 'in line with our peers, with player budgets throughout the league increasing due to the potential of securing group stage European football and the related revenue'.
Most gallingly for Hibs, they need only look across the capital to see the impact that even Conference League group-stage football can have.
Hearts posted a record turnover of £20.8m in 2022/23, up from £14.7m the year before, almost entirely thanks to their foray into the Conference League. UEFA prize money and solidarity payments were worth £7.4m alone, with broadcast revenue more than doubling to £7.8m and an extra £1m added in gate receipts.
Having finished eighth the previous season and sacked two managers, Jack Ross and Shaun Maloney, along the way, the Hibs board took the approach fans normally love to see and got the chequebook out.
"The increase in staff costs came on the back of an eighth-place finish in the 2021/2022 season - the worst finish from the club since 2013/14 - and the club board and ownership took the decision to increase spending in order to bolster sporting performance. This investment focused on improving the squad as well as further investment in people and infrastructure at the training centre,” added the club’s report.
Ultimately, though, they did not get the most important bit right in making sure the money was spent wisely. Lee Johnson was backed with a wage bill that exceeded £10m (2022: £8.5m), taking the wage-to-turnover ratio to a dangerous 81% - well above the club’s stated target of 60% - in the pursuit of European football.
Money spent on transfer fees, loan fees and wages for the likes of Aiden McGeady, Jair Tavares, Marijan Čabraja, CJ Egan-Riley, Harry McKirdy, and Matthew Hoppe did not deliver on expectations. Johnson could argue he delivered on his primary target of returning Hibs to Europe, thanks to a fifth-placed finish in the league.
Progress to the playoff rounds of the Conference League this season will bring in around €750,000 in prize money alone with the club stating they were in the black for this season with wages/revenue ratio reduced to 65% by the end of December.
Despite the increased spending, Hibs also finished where they should have based on the wage bills of Premiership clubs last season. Hearts’ record revenue yielded profits of just £0.3m, only courtesy of £6m of fans’ donations, as their own wage bill shot up to £15.4m.
Aberdeen’s £1.1m of profit came only due to an exceptional year of player sales as Calvin Ramsey and Lewis Ferguson’s departures to Liverpool and Bologna respectively brought in £7.5m.
However, the Easter Road hierarchy must surely rue a huge missed opportunity during a season in which both the Dons and Hearts sacked their managers and left the door open to Hibs to take third place.
The importance of European football also lays bare the crisis currently facing Hibs. Hearts have disappeared over the horizon and look certain to finish third, with their Edinburgh rivals scrambling just for the consolation of reaching the top six and hoping to reel in Kilmarnock and St Mirren for the European places.
The bumper increases in distribution money for European football have also helped to stamp out any dying embers of hope for a non-Glasgow club’s chances of winning the league title for the first time in four decades. Celtic’s revenue was ten times that of Hibs last year, highlighting the need to make the most of a shot at glory in the cups.
Where Johnson’s record proved disastrous on and off the pitch was his performances in the domestic cups. An embarrassing exit at the group stage of the League Cup followed by a fourth-round Scottish Cup defeat at the hands of Hearts cost the club an estimated £2m in prize money and gate receipts last season.
Player trading
The cornerstone of success for a modern football club with Hibs' budget lies with recruiting smartly to produce results on the field and increase the value of players as sellable assets.
Doig, Porteous and Nisbet are examples of that model working. The success of the former two shows the pathway from the club’s academy to the first team and onto more lucrative leagues. Nisbet, meanwhile, is a reminder to Premiership clubs of the talent that still lurks in the Scottish pyramid rather than continuously fishing in the lower leagues in England.
Although they took place over two different summers, the fees for Doig and Nisbet are both included in this year’s figures as the transfers took place between June 30, 2022 and 2023.
Those moves provided the bulk of the £3.2m player trading gain, while Porteous departed for a cut-price fee to Watford as the Scottish internationalist only had six months remaining on his contract last January.
Hibs are keen to stress that they retain a sell-on clause for all three, which in the case of Doig has already been activated after his January move from Verona to Sassuolo. That should swell Hibs’ coffers for this year by about £500,000 but there may be some disappointment that the £5m fee paid for the 21-year-old was not higher given his impressive start to life in Serie A.
The concern going forward is: who are Hibs' most sellable assets right now? Big transfer fees were spent at the start of this season on Dylan Vente, Élie Youan and Dylan Levitt - none of whom have delivered consistently to either fire Hibs up the table or attract suitors come the end of the season.
Hibs retain the fourth-highest squad value in the league according to Transfermarkt. However, given Hearts and Aberdeen are the likely competition for third place again next season, they do not have a Lawrence Shankland or Bojan Miovski to command a transfer fee that could enable a summer rebuild of the squad.
Black Knights in shining armour?
Despite the stark numbers, overall Hibs are not in as perilous a financial position as it may seem. The conversion of £5m worth of debt owed to the Gordon family into equity will significantly improve the balance sheet.
Partly prompted by the sad passing of Ron Gordon last year, the club have moved to bolster their cash reserves by striking a deal with the Black Knights, which is set to be voted on by shareholders at the end of the month.
The cost will be the watering down of what currently amounts to practically a 25% stake in the club from fans between Hibernian Supporters Limited’s (HSL) and Leslie Robb’s 10% - a move HSL have described as “heartbreaking.”
Fans are quite rightly asking questions of a board that has overseen consistent poor recruitment of managers and players, only to then reduce the fans’ share of the club to cover the costs.
CEO Ben Kensell has hailed Foley’s proposed investment as “game-changing” for the club. By going down the route of becoming part of a multi-club model, Hibs are targeting the knowledge and network that will come from being under the umbrella of Foley’s growing portfolio of clubs that also includes Ligue 1 side Lorient.
“Ultimately we will benefit from that multi-club network,” Kensell told Sky. “I’d like to think we’d spend that money wisely.”
That claim will sound very dubious to Hibs fans who have seen consistent failure in the recruitment of players and managers since Kensell, who the accounts show to be on a salary over £300,000, arrived at the club in the summer of 2021.
Three managers have already come and gone under his watch and questions remain over Nick Montgomery's future, with the former Central Coast Mariners head coach on a seven-game winless run in the Premiership.
That run could be disastrous off the field too, should Hibs miss out on the top six and European football next season.
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