Hearts do better off the pitch than on it

The 2023/24 Hearts' financial results were adversely impacted by failing to get beyond the play off round of the Europa Conference, where they were eliminated by Greek team PAOK.   Hearts’ loss last season was their first for nine years, when they won the Championship (Scotland’s second tier). So they have been profitable in eight of the last ten seasons, which is pretty good going in the cutthroat world of football.

Looking at Scotland’s leading clubs over the last five years, we can see that Hearts have broken even, which places them between Celtic, who made £53m profit, and Rangers, who posted £65m losses. Aberdeen, who are arguably Hearts’ closest equivalent, had £7m of losses in this period.

Hearts figures have “benefited enormously” from exceptional items, including £5.5m of donations in 2023/24, split between benefactors £4.0m and the Foundation of Hearts (FOH) £1.5m. In stark contrast, Rangers booked £3.4m of charges, covering legal costs and contractual settlements.

Since its inception, the FOH has contributed over £17m of funding. The club said that without this “unwavering support” and that of its major benefactors, it would have had to slow down investment in players and infrastructure improvements.  It’s worth noting that the lion’s share of donations still comes from individual benefactors, including Edinburgh philanthropist James Anderson, who was appointed to the Hearts board in July 2021.

In contrast to their good performances last year, Hearts have had a difficult start to this season, so they took the decision to dismiss Naismith after losing five of the first six games in the league, replacing him last month with former Blackpool manager Neil Critchley.

Hearts have come a long way since the club was placed into administration in 2013, deducted 15 points and then relegated to the Scottish Championship. Much of the credit is due to Ann Budge, who took ownership in June 2014 in partnership with the Foundation of Hearts, following the misguided Romanov regime.

In August 2021 Budge signed over 75% of her shareholding to the Foundation, making Hearts the largest fan-owned club in the UK. The club wonderfully described this as “Heart & Soul Day”. This approach has served the club well, though the model going forward is likely to still require the support of benefactors.

Hearts posted a pre-tax loss of £4.4m in 2023/24, compared to a £0.3m profit in the previous year. This was the first time that the club had lost money since 2014/15.  Revenue fell £0.5m (3%) from the club record £20.8m to £20.3m, while profit from player sales dropped from £0.4m to just £5k. In addition, donations from benefactors and the Foundation of Hearts were down £0.7m (11%) from £6.2m to £5.5m. Despite the lower revenue, there was still £3.2m (12%) growth in operating expenses to £30.1m.

Revenue

Hearts noted that “the absence of European football limited our revenue growth”, leading to reductions in both broadcasting, down £2.2m (28%) from £7.8m to £5.6m, and match day, down £0.3m (4%) from £6.2m to £5.9m.  This was partly offset by commercial, which rose £1.9m (29%) from £6.8m to £8.7m. Player loans also increased from £0.1m to £0.2m.  

Despite last season’s fall, Hearts emphasised that they had generated turnover in excess of £20m for the second year in a row, adding that the underlying year-on-year growth was “significant”, given the absence of group stage European football.

Hearts’ £20.3m revenue is now the fourth highest in Scotland, though the magnitude of their challenge is illustrated by the substantial gap to the big two Glasgow clubs. In fact, they are over £100m below Celtic’s £125m, while Rangers’ £88m is more than four times as much as them.

Nevertheless, Hearts continued its investment in the playing squad and support staff, so the wage bill rose £1.1m (7%) from £15.4m to £16.5m, while player amortisation was up £0.2m (23%) to £1.3m. Other expenses increased £1.5m (17%) from £9.1m to £10.6m and depreciation rose 17% from £1.4m to £1.6m.

Not all clubs have published accounts for 2023/24, but Hearts’ £4.4m loss is the second worst financial result in Scotland to date, albeit a lot better than Rangers’ awful £17.3m deficit. That said, theirs would also have been a double digits loss without the “very generous” donations of £5.5m.  As a rule, Scottish clubs run a tight ship, so every other club’s losses were limited to £4m or less, while Celtic posted a £17.8m profit

Player sales

Hearts’ profit from player sales decreased from £0.4m to just £5k, as there were no major sales with almost all of the departures being either on free transfers or loan deals. 

In fact, this is comfortably the lowest gain reported to date in the Scottish Premiership in 2023/24, far below Celtic £6.6m and Rangers £5.6m. In fairness, apart from the Glasgow giants, few clubs in Scotland make big money from player trading.

Hearts have made very little money from player sales with only £2.1m profit from this activity in the last five years. In the last decade they only had one season where their profit was above £1.0m (just) in 2015/16.

In the last five years, Celtic and Rangers had respectively £84m and £43m profit from player trading, which shows what can be achieved in Scotland. Although some might consider that to be a somewhat unrealistic comparison, Aberdeen’s profit of £12.5m was six times as much as Hearts’ £2.1m.

European money

Based on Swiss data, Hearts received an estimated €1.0m UEFA TV money last season from the Europa Conference, as prize money after being eliminated in the play-offs by eventual Greek champions PAOK. It might have been a little higher if they got any money from the TV pool, even though they did not reach the group stage.   This was a lot less than the €5.6m they received in the previous season, when they did get to the Europa Conference group stage. That was worth €4.8m, but they also had €750k after losing the Europa League play-off.

Hearts are playing in the new league stage of the Europa Conference this season.  They immediately receive a €3.17m participation fee plus €400k for a win and €133k for a draw. As they have already beaten Dinamo Minsk and Omonia Nicosia, they will put at least €4m in their sporrans.  There is additional prize money if they go any further, while they will also receive a distribution from the new value pillar (replacing the old UEFA coefficient and TV pool).

Hearts’ stadium development in recent years has cost well over £25m, increasing Tynecastle Park’s capacity to around 20,000 and improving other facilities (hybrid pitch, undersoil heating and supporters bar). The fit-out of the Main Stand was completed in 2023/24. Budge says that this should help generate an additional £3m in a normal season.

Commercial income also benefited from its new Tynecastle Park Hotel, which opened in February. This features 25 bedrooms within the main stand on the second floor of Tynecastle stadium, while also offering a club lounge, six meeting rooms and new conference and event spaces.

Hearts’ wage bill rose £1.1m (7%) from £15.4m to £16.5m, yet another club record, which means that wages have more than doubled from £7.5m since promotion from the Scottish Championship in 2021.   Despite the increase, Hearts’ £16.5m wage bill is still only around a quarter of Celtic £65.6m and Rangers £61.2m. However, they were well ahead of Aberdeen £12.7m, even though they weren’t competing in the European group stage.

Hearts’ third highest wages in Scotland would be the third lowest in England’s Championship, only above Blackpool and Rotherham United in 2022/23.

Despite last season’s increase, Hearts £4.5m debt is only the fifth highest in Scotland, a long way behind Rangers £27.8m and Dundee United £11.5m (including £10.1m owned to owner Mark Ogren).  This is also less than Aberdeen £5.3m and Hibernian £5.2m, though Celtic had one of the smallest debts in the Scottish Premiership with just £1.1m.

Conclusions

Hearts posted a loss last season for the first time since 2014/15, but playing in the Europa Conference league stage should help them return to profitability this season.

Going forward, the club should also benefit from the significant investment in recent years, while the tie-up with Jamestown Analytics could also make a big difference, though this partnership is likely to take some time to work its magic.

In the meantime, Hearts fans will probably be much more concerned about this season’s results in the league, which have left them languishing in the relegation zone. Chief Executive Andrew McKinlay said, “we will hopefully just look back on this period as a blip”, but nine defeats in the first 14 league games has to be of some concern.