Hull FC memorabilia: Stadium Management Company's statement in full
A decision to begin charging Hull FC to display memorabilia at the KC Stadium has been widely criticised by fans. Today, the Stadium Management Company (SMC Limited) has released a statement which we publish here in full.
The SMC wishes to make the following comments with regard to issues raised in the local media.
1. SMC has a duty of care to Hull City Council, local ratepayers and its shareholders to manage and operate the KC Stadium and the Sports Arena as
commercially sustainable facilities.
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2. Over recent years, the SMC has made substantial annual losses as a result of a number of key factors which include:
(a) The lack of provisions made prior to 2010 in terms of funding for major repairs and maintenance which have to be undertaken on an annual basis.
(b) Increases in the rateable value of both the stadium and the Sports Arena. The SMC currently contributes £346,000 per year in business rate contributions for the KC Stadium and the Sports Arena.
(c) The failure of Hull City Council to provide copies of various warranties to the SMC in accordance with the terms of the original stadium lease agreement. This has meant that the SMC is currently having to pursue claims for an estimated £500,000 plus of costs for exceptional repairs. These exceptional repairs have had to be undertaken to ensure continuing compliance with the requirements of the Stadium Safety Certificate.
(d) The burden of meeting financial payments stemming from an outstanding £3.5 million mortgage commitment taken out in 2008-2009 which had to be honoured on the purchase of the businesses in 2010.
(e)The escalating costs of major items of annual expenditure, most notably the costs of utilities.
(f) The adoption of new accounting procedures since 2010 has provided much greater transparency which has revealed a truer reflection of the company’s financial position.
3. In addition, and contrary to popular perceptions, there has also been a fundamental lack of fairness in the operation of the financial terms and conditions of the respective commercial agreements between the SMC and Hull City AFC and Hull FC since the stadium opened. The terms of the commercial agreement with Hull City AFC have remained unchanged, whereas those for the agreement with Hull FC have been amended twice, in 2005 and 2006, both in favour of the rugby league club.
Over the financial year 2011-2012 the SMC had an overall turnover of c. £4.6 million with net losses of £409,000. The overall contribution received from Hull FC in the 2011-2012 financial year towards rugby related costs resulted in a net loss of £280,000 to SMC.
SMC will continue to incur further financial losses in the immediate future due to the increasing revenue costs of repairs and maintenance as the stadium becomes older, and also as a result of specific major items of capital expenditure such as the total replacement of the stadium pitches scheduled for 2014 at a total cost of approximately £1.5million. In addition the impact of decision by the UK Valuation Office to increase the Rateable Value of the stadium substantially for the 2010-2015 period will increase the level of Business Rate charges significantly as the levels of transitional relief are progressively reduced over the next two years.
4. The worsening financial position of SMC has created a genuine and urgent need for the implementation of a new commercial strategy. This means that the SMC is no longer able to offer its tenants additional benefits which fall outside their existing tenancy or commercial agreements on a "free of charge" basis. The new commercial strategy has of necessity to focus upon maximising the additional commercial opportunities available to the company.
5. In mid 2012 therefore, the SMC drew up a list of sites within the stadium that were available to be purchased on an annual basis. These sites included for example the façade of the west stand reception, the interior of west stand reception plus other display sites within the public areas of the stadium. The "rate cards" offered for the various display sites had been benchmarked against those for other stadia used for both football and rugby.
6. Hull FC was offered first refusal on the sites within the stadium that were available for purchase and declined. Hull City AFC was subsequently offered the same list of display sites, agreed to purchase them and installed the "Tiger's Eyes" display in the west stand reception area. Thus Hull FC had first refusal on numerous opportunities to display its branding and memorabilia within the stadium but declined to exercise its option.
7. It must also be emphasised that the displays of both Hull FC and Hull City memorabilia within the stadium building were replaced or enhanced in 2009 following Hull City’s promotion to the Premier League. The costs for these replacements and enhancements of the memorabilia of both clubs were met entirely by Hull City AFC.
8. The "benchmarked" rate card that was offered in 2012 to both Hull FC and Hull City specifically for the display of their club memorabilia at numerous sites within the public areas of the stadium was £300 per site per year. For Hull FC this would have involved a total cost of just over £10,000.
The SMC's principal responsibility is to remain neutral and to support all sporting, educational and community opportunities at the KC Stadium and the Sports Arena. It is totally committed to fulfilling its obligations under the terms of the lease granted by Hull City Council, including the requirement to maintain the business on a commercially sustainable footing.