BURNLEY Football Club was close to balancing its books in the last financial year as losses were cut to £159,000 compared to £2.1million in the previous year.

That was thanks to a record turnover of £11.1 million, announced in the annual report published this morning.

But having got close to its break-even target, the club stresses that the next two years will be "very difficult" following the collapse of ITV Digital and loss of promised revenue.

The club's strategy has allowed it to resist selling players, which most clubs in the Nationwide have to do, but that may well have to change, according to chairman Barry Kilby.

"The report shows that everything was going well and then we had a hand-grenade thrown in our lap by the collapse of ITV Digital," he said.

"We have been knocked off the ladder but now we just have to get back on and start climbing again.

"We have been team building but if any serious offer comes along that is halfway decent we have to look at it as we have a deficit to make up."

By far the biggest costs are the wages paid out, with staff costs up 23 per cent to £7.5million, 67 per cent of turnover.

Burnley's financial accounts for the year ending May 31, 2002, show that the push for the play-offs last season helped to increase turnover up to that record level of £11.1million, a 54 per cent rise.

Income from football grew by 95 per cent to £7.6million including league, season tickets, cup games, friendlies income and the club's share of the Football League pool, including TV revenue.

All the monies received from ITV Digital (including the £1.1 million prepayment received in September 2000) have been credited to turnover in the year ended 31 May 2002.

Commercial revenue again grew strongly, by 16 per cent to £3.56million but the club is aware of an even greater need to continue growth from all commercial activities, which will take on a greater importance in 02/03 with the loss of £2.5million of TV cash.

Turnover was made up of 68 per cent football related activities (54 per cent in 00/01) and 32 per cent commercial related income. This picture will change dramatically in 02/03, with the collapse of ITV Digital, when commercial income is expected to make up around 48 per cent of revenue.

The annual report states: "The club's key goal for 2002/03 is to first and foremost cement its place in Division One and remain a top 30 English football club.

"For the last two years, the club announced the need to 'head towards a break even situation' which was practically achieved.

"The current year will be a difficult one with a loss now expected due to the loss of £2.5m of TV revenue and much of the cost base still in place.

"The goal is to head towards break even again in 03/04, with the action plan put in place in 02/03. This is particularly the case with the £6million cash investment between 1998-2000 principally by the Chairman and Directors, having been spent."

The report adds that the club has been a 'net spender' on transfer fees of £4.8 million in the last four years with £5.5m being spent and only £700,000 received.