Hearts Finances 2021 – Donated Profits

Hearts finances remained strong as it recorded its sixth successive profit despite relegation as the fan-owned club received £6.4m in donations from members...
  • Hearts Finances 2021 - Revenue Chart
  • Hearts Finances 2021 - Wages Chart
  • Hearts Finances 2021 - Net Transfer Spend Chart
  • Hearts Finances 2021 - Profit Chart
  • Hearts Finances 2021 - Net Debt Chart

This article analyses Hearts finances in respect of the 2020/21 season.

Season review

Hearts played the 2020/21 season in the Scottish Championship after relegation in 2020. The club quickly bounced back, winning a shortened Scottish Championship season. Promotion was the major goal of the season with domestic cup performance a distant second priority.

Hearts finances unsurprisingly took a hit following relegation and games being played behind closed doors.

Despite this, Hearts recorded a profit of £2.0m, as the fan-owned club received £6.4m in donations from its benefactors. Hearts is one of the largest fan-owned clubs in world football and once again showcased its togetherness.

Hearts Finances – Revenue

Hearts Finances 2021 - Revenue Chart

Revenue nearly halved, falling from £11.2m to £6.2m (45%) as matchday revenue plummeted. To help offset this, club members donated £6.4m (2020: £3.7m) which has been recorded as other income. This was added to by £1.2m in government grants. Hearts hence recorded total income of £14.1m, only a 12% decline on 2020 (£16.0m).

Matchday

Matchday revenue fell from £5.1m to £1.8m (64%) due to the season being played behind closed doors. The return of fans in 2021/22 will see a strong recovery in matchday revenue.

Broadcast

Broadcast revenue remained stable at £2.0m despite relegation as the club received some funding from the SPFL in relation to the financial impact of the pandemic.

Following promotion and a strong start to the season, broadcast revenue should increase in 2022.

Commercial

Commercial revenue decreased from £4.0m to £2.3m (42%) due to the season being played behind closed doors, reducing sponsorship opportunities and relegation from the Scottish Premiership. This should largely recover following promotion, supported by a deal with Dell Technologies which will see another charity (MND Scotland) feature on the shirt of the club.

Hearts Finances – Revenue summary

Hearts’ revenue unsurprisingly was hit hard by no fans and relegation. A return of fans and to the Scottish Premiership should largely reverse this. Hearts has started the season strongly and will be targeting European qualification to increase revenue further.

Hearts Finances – Operating costs 

Operating costs fell from £15.7m to £12.9m (18%), a much lower rate than revenue, hurting underlying profitability. However, as mentioned above the decline in total income of only 12% means profitability in fact improved.

Wages

Hearts Finances 2021 - Wages Chart

Hearts’ wage bill fell from £8.8m to £7.5m (15%) as the club’s relegation triggered relegation wage drop clauses and some high earners departed. The wages to revenue ratio increased from 79% to 121% following the drop in revenue. A maximum ratio of 70% is recommended by UEFA, so Hearts exceeded this significantly in 2021. Revenue should increase in 2022 which should bring this ratio back down.

Other costs

Other operating costs fell from £6.9m to £5.4m as the club saved matchday costs. 2020 also included £0.6m of exceptional legal costs following its dispute with the SPFL of its enforced relegation in 2020 due to the curtailment of the season.

Hearts Finances – Operating costs summary

Hearts managed to reduce its operating costs in line with its total income. Revenue growth in 2022 should exceed any cost growth which should improve underlying profitability (excluding donations). 

Hearts Finances – Transfers

Hearts Finances 2021 - Net Transfer Spend Chart

Hearts spent very little as it plotted its immediate path back to the Scottish Premiership. The only signing for a transfer fee was McEneff for £0.2m. Likewise, the only significant departure was Hickey for £1.5m. This resulted in Hearts generating net transfer income of £1.4m (rounding).

Amortisation

Player amortisation charges fell from £0.4m to £0.3m (28%) due to minimal investment. No signings for a transfer fee so far in 2021/22 mean this is likely to fall again.

Profit on player sales

Hearts generated a profit on player sales of £0.9m. This compares to a profit of only £0.3m in 2020. The sale of Hickey hence contributed significantly to the financial results of Hearts. No such sales have occurred so far in 2021/22, leaving a financial hole in Hearts finances.

Hearts Finances – Transfers summary

Hearts is a club that regularly relies on free transfers and loans for talent recruitment. The occasional significant sale can be a sizeable financial boost; however, it does not seem this will be the case in 2022.

Hearts Finances – Profitability

Hearts has recorded a profit for six consecutive seasons. However, this was due to significant donations from benefactors.

Hearts were profitable

Operating profit / loss before player trading

Before player trading, operating profits rose from £0.3m to £1.2m (250%). This was due to a £2.7m increase in donations, helping absorb the fall in matchday revenue. Benefactors will be hoping that the return of fans and Premiership football will reduce donation sizes, with their support unlikely to continue into perpetuity.

Excluding donations, Hearts recorded an operating loss (before player trading) of £4.4m.

Operating profit / loss after player trading

After player trading, the sale of Hickey contributed to a £2.2m operating profit. This was £1.7m higher than in 2020 where player sales were lower.

Lower player sales in 2021/22 will see player trading have a much smaller impact on profitability.

Profit / loss before tax

Hearts Finances 2021 - Profit Chart

Minimal net finance costs saw Hearts record a profit after tax of £2.0m, up from £0.4m in 2020.

Hearts Finances – Profitability summary

Hearts on the face of it has consistently been profitable over the past few years. However, this is due to donations from its benefactors with the club loss-making without this. As one of the biggest fan-owned clubs in the world, it showcases an interest business model which deserves plaudits. Benefactors will however be hoping to reduce the level of donations required for the club to operate in the future.

Hearts Finances – Assets / Liabilities

Hearts as a fan-owned club rely on donations from its benefactors with most of this not being repayable. The club does operate with some debt funding from its directors too.

Cash flow 

Hearts’ cash reserves increased slightly from £2.4m to £2.6m. This was driven by cash inflows from operations of £0.5m. The club saw cash outflows of £0.2m on capital expenditure and minor outflows from both player transfers and financing too.

Next season, the club should receive its cash from the Hickey sale which will help with cash flow.

Debt 

Hearts’ debt levels remained relatively stable, rising from £5.7m to £5.8m. This increase relates to a small £0.2m loan from the Government’s business interruption scheme. The amount is repayable over five years. Hearts also has £0.1m in finance leases.

The remaining debt of £5.5m relates to loans from related parties. These loans were consolidated in 2021 accruing market rate interest which may increase finance costs in 2022.

Net debt

Hearts Finances 2021 - Net Debt Chart

Due to all the above net debt fell from £3.3m to £3.2m.

Hearts Finances – Final Remarks

Hearts is flying the flag for fan ownership, which has grown in interest given recent events around the European Super League. For a typically loss-making club such as Hearts, it still does come with the same financial challenges as any other club, with sizeable funding required each year. Hearts rely on donations to generate a profit each year, something which will need to change in the long run if/when donations begin to dry up. However, a return to the Premiership and of fans to Tynecastle promise to provide a much-needed financial boost.

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