A lucrative F.A. Cup run last season and continued reduction in all-round costs, meant that the club's financial deficit, shown in the latest accounting figures, was eased.

But the recently-audited accounts for the year ended May 31, 2007 still show that the club continues to operate at a significant loss.

Our annual turnover last season was £9.2m, which represented an increase of £1.3m over the previous year.

Gate receipts, which include season ticket income, increased from £4.6m to £5.6m and this is where the effect of the Cup matches against Charlton Athletic and Chelsea is particularly seen.

Commercial income also increased by £300k - largely because of the income received from the televised F.A. Cup ties - to £3.6m. .

Other categories of commercial income witnessed mixed results. Match-day hospitality, events and catering income remained static at £1.1m. Income from sponsorship, royalties and advertising also remained similar at £600k. Merchandising income increased from £700k to nearly £900k. Sales of merchandise through the club shop and via mail order and the internet increased on the back of last season being a year in which our home kit was refreshed and also benefited from the extension of our season into the play-off semi-final.

Sales of both tickets and merchandising via our website are becoming more significant as a percentage of the total income for these categories as the years go by.

The full costs of staff, which includes all the wages, bonuses, signing-on fees and national insurance contributions totalled £8.3m last season compared to £9.5m in the previous year.

This represents a return to the level of staff costs seen in season 2003-04 and mainly reflects the loss of several players who were with the club when we were relegated from the Championship. Paul Gerrard and Gareth Taylor left at the end of the 2005-06 season and players like David Johnson, Neil Harris and Alan Rogers left during the last season. Replacements have been recruited generally on wages that reflect the club's status in League One and with contracts that will reward promotion back to the Championship once that is achieved.

Staff costs remain at 90 per cent of turnover. The Football League's benchmark for clubs in League One and League Two is 75 per cent. The club's ability to maintain staff costs at above this guideline is only possible through the Chairman's continuing financial support and reflects the Board's commitment to supporting the manager in the team's push for promotion.

Other trading costs were reduced by 16 per cent in line with the reduction effected in staff costs. The Board continues to ensure that the club is run at a level of operations considerably in excess of those operated by other clubs in our division. Our commitment to the Academy in particular is more in line with the commitment seen in Championship clubs and the costs of this operation at almost £1m per year, far exceeds the grant support income of £130k received from the Premier League and the FA.

With talent such as Lewis McGugan and Brendan Moloney emerging into our first team last season, to be followed this season by Matt Thornhill, Dale Roberts and Emile Sinclair joining the first team squad, we can continue to see the tangible results of the labours of Nick Marshall and his Academy staff. These players join established Academy graduates James Perch and Wes Morgan for first team consideration and reinforce the club's philosophy of combining quality signed players with home grown talent.

In total, last season our trading costs exceeded our revenues by £2.6m. In addition to this burden was the cost of new players and fixed assets of £1m. The main player purchase last season was Junior Agogo with debts outstanding on previous player purchases also needing to be financed.

We paid £100k of interest in the year on our sole remaining source of external debt - our loan from Nottingham City Council. By May 31 2007 this loan had been reduced by a further £500k to £3.3m.

Once all these outgoings are taken account of the total cash deficit for last year was £4.2m. This was funded by £1.2m raised from the disposal of players and a further £3m cash loan advanced by the Chairman.

The income from player transfers was principally received by the club from Tottenham following pre-defined numbers of appearances by Michael Dawson. Despite Andy Reid being sold on in the year by Spurs to Charlton, the fee was such that we did not receive any further transfer receipts from the sell-on clause that we had inserted into the our original transfer contract with Spurs. This contrasts with the situation with Marlon Harewood where, in the early part of 2007-08, the club has received just under £500k so far from the sell-on clause in his transfer contract with West Ham.

It remains the club's policy to insert such clauses into transfer contracts where young players move on and the outcomes of these clauses are only accounted for once the further sell-on generates additional funding for the club.

The final element of the club's funding for last season was the further £3m of cash advanced by the Chairman. The main benefit to the club of being financed through these loans from the Chairman as opposed to loans from financial institutions is that interest does not need to be paid on an annual basis on these advances. The terms of the loan are such that annual repayments on capital are also not expected with the loan and interest repayable in May 2010.

Following the disappointing failure to achieve last year's objective of promotion, the Board took the decision to reduce season ticket prices for the current season. It was hoped that this would be accepted as a gesture to acknowledge the continuing passion of our most loyal fans. With season ticket sales of 10,400 for the current season, season ticket sales have indeed been maintained at the same level as we witnessed in 2006-07.

Further funding was made available to manager Colin Calderwood to strengthen the squad over the summer following the release of further players. The Board recognise that all fans dearly hope that this strengthened squad now assembled will be able to return the club to the Championship as soon as possible.

Revenues in our last season in the Championship were £12.2m and, with the Premier League having further enhanced the central distributions made available by The Football League to clubs in the Championship, being outside of that League now costs us in the region of £4m to £5m of revenue per annum. The measures that we have taken in terms of refinancing and cutting the cost base of the club mean that the financial prospects for the club would be strong if and when we return to that level in the league.

Review of 06/07 Accounts