Gillingham Football Club has announced a small annual operating profit, despite being relegated.

Income soared and costs were cut, according to figures just released for the year ending May 2008.

The accounts show that sales were boosted by more than £800,000 to £4.9m (2007 - £4.1m) on the previous year. The club says this resulted in an operation profit of almost £400,000 before depreciation and other costs relating to players’ contracts. Those factors reduced the operating profit to £8,652.

The club suffered an over-all pre-tax loss of £1.6 million. Our business editor, Trevor Sturgess, says this was due to a one-off cost resulting from the transfer of Priestfield Stadium to an associated company earlier this year.

However, the deal meant the Gills’ £12.5 million overdraft was slashed to £3.5 million.

Mr Sturgess said: "Removing that massive debt has allowed the club to concentrate on operational issues and the results so far are encouraging."

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The club says the new structure will "allow the club to continue its trading improvements without the same burden of bank debts".

The accounts pre-date the start of the 2008/2009 season in League Two and the club faces the challenge of maintaining and improving revenue in a lower division, with a potential drop in attendances and television revenue.

Chairman Mr Paul Scally said: "I am delighted that all the efforts made by the staff over the past financial year have shown to be fruitful and whilst relegation was disappointing and unexpected, we continue to make every effort to trade successfully in what are proving to be very challenging times."