CELTIC plc
Preliminary Results for the year ended 30 June 2007
SUMMARY OF THE RESULTS
Operational Highlights
-
Winners of the Bank of Scotland Premierleague by 12 points
-
Winners of the Tennent’s Scottish Cup
-
Progression to the last sixteen of the UEFA Champions League,
playing four home European fixtures (2006: 1) -
28 home matches played at Celtic Park in the year (2006: 24)
-
Successful pre-season friendly trips to Japan, Poland and North
America -
Contract extensions awarded to Aiden McGeady and Darren O’Dea
-
Successful launch of the Lisbon Lions’ 40th anniversary home kit
together with new away and international kits under the agreement with NIKE -
Season ticket sales continued to be in excess of 53,000
Financial Highlights
-
Group turnover increased by 31.0% to 75.24m (2006: 57.41m)
-
Operating expenses increased by 10.4% to 59.28m (2006: 53.67m)
-
Profit from operations of 15.95m (2006: 3.74m)
-
Exceptional operating expenses of 2.88m (2006: 0.58m)
-
Gain on disposal of intangible fixed assets of 9.40m (2006:
0.26m loss) -
Profit before taxation of 15.04m (2006: 4.22m loss)
-
Year end bank debt of 4.99m (2006: 9.09m) net of cash
-
Investment of 14.44m (2006: 8.84m) in the acquisition of
intangible fixed assets
For further information contact:
Brian Quinn, Celtic plc Tel: 0141 551 4235
Peter Lawwell, Celtic plc Tel: 0141 551 4235
Iain Jamieson, Celtic plc Tel: 0141 551 4235
CHAIRMAN’S STATEMENT
In terms of both football success and financial results, 2006/2007 was an
outstanding year for Celtic Football Club and Celtic plc; indeed it was arguably
among the best ever. Winners of the Bank of Scotland Scottishpremier League and
the Tennent’s Scottish FA Cup for the 41st and 34th time, respectively, the Club
also reached the final 16 of the UEFA Champions League for the first time and
were defeated only by the eventual winners, AC Milan, by a single goal after
extra time.
A Celtic player, Shunsuke Nakamura, was voted Scottish Player of the Year;
Gordon Strachan took the award of Manager of the Year; and Celtic Reserves won
the Reserves Championship for the 6th consecutive season. All in all, this was a
very successful year for the Club on the field.
Off the field, and after a number of years in which the Company made losses at
the pre-tax level, Celtic plc recorded a profit of over 15m. Group turnover
rose by 31%. Encouragingly, having invested heavily in strengthening the playing
squad and developing the training facility at Lennoxtown, bank debt at the year
end amounted to just under 5m, compared with over 9m a year previously; and
total net debt stood at around 9m, against a figure of almost 14m a year
earlier. Net assets rose from 22m to around 37m.
By the standards of previous years and, indeed, those of most other football
companies, these are exceptionally good results. However, it is important to
recognise that a number of factors came together, all of which cast a favourable
light on our performance and which cannot reasonably be expected to recur, at
least to the same degree.
Foremost among these was our successful UEFA Champions League campaign. This
competition far outstrips any other in which we are involved in terms of gate
receipts, television revenues and, indirectly, other revenue sources. Last
season we had the bonus of being the only Scottish representative to reach the
group stage. Taking account of the additional costs involved, notably bonus
payments to players, management and support staff, the net contribution to
profit was of the order of 11-12m. The contribution from European football in
the previous year was approximately 0.75m. It also gives the Club greater
exposure to a much wider television audience, reinforcing the reputation of the
Club as one of Europe’s re-emerging forces.
The other principal factor affecting the year’s financial performance was the
volume of transfer activity. On the back of a particularly buoyant market in
England, Celtic sold a number of players to clubs South of the border to a total
profit of 9.4m. At a time when it is customary - and valid - to note the
disadvantages suffered by Scottish clubs arising from the new FAPL television
contract, it would also be correct to note that Scottish clubs derive benefits
from sales of players into that market. Nevertheless, the gap between the two
markets has grown enormously in the last two years, with the result that the
movement of talent from North to South has become much more pronounced, and
Scottish clubs are even less able than in the past to bid for players on an
equal basis with English clubs, even at the level of the Coca Cola Football
League Championship.
Notwithstanding this trend, Celtic used its improved financial position last
year to strengthen further our first-team playing staff, spending some 14.4m on
new players, and taking forward the establishment of our new training facilities
at Lennoxtown. Maintaining the quality of the squad is a continuous task which
has to be approached in the short-term by activity in the transfer market, and
in the longer-term by finding and developing younger players. Getting the
balance right is a challenge year by year and cannot be guaranteed. Accidents
can and do happen; so it is especially pleasing that John Kennedy has returned
to first-team action after three years of rehabilitation from serious injury.
Total operating expenses rose by 10.4%, primarily higher player costs in the
form of salaries and bonuses, and other costs such as travel and stadium
expenses associated with our European games. No increase in costs at football
clubs is actually welcomed, but when they are a direct result of success in
competition, and are therefore more than compensated by additional revenues,
they can be cheerfully absorbed.
Our ratio of total labour costs to turnover, which already stood at a creditable
56.6% last season, fell to 48.4% in the year just ended. Like many of this
year’s figures, this percentage is relatively low and given the need to
pre-qualify for the UEFA Champions League and the spill-over effect of the
English football market into Scotland, may well rise next year. However we are
determined to abide by our policy of year-by-year sustainability in which player
costs play a crucial role.
Income from television, radio and publications almost doubled to 23.2m, thanks
to our participation in the UEFA Champions League - the benefits of being
involved in this competition being nowhere more evident. Income from merchandise
sales fell by about 1m, although comparisons between years are complicated by
the number and nature of replica strip launches. Footballing merchandise is to
some extent a fashion market and therefore difficult at present, and our
marketing and sales staff have done well to maintain the Company’s position as
one of the leading retailers of quality football and leisure wear.
On the football field, as I have already stated, we reached new heights. Our
runaway SPL Championship success extended our run in that competition to five
titles in the last seven years. Victory in the Tennent’s Scottish FA Cup brought
a domestic double, our 14th. The victory over Manchester United at Celtic Park
in the UEFA Champions League secured a place in the last 16 of that competition
and provided a memorable occasion for our supporters. The excitement and fervour
at Celtic Park on these European occasions probably has no equal in world
football. Our supporters on these occasions are a virtual 12th man.
That these successes were achieved in the context of significant numbers of new
arrivals and departures among the playing staff is compelling evidence of the
excellent management team headed by Gordon Strachan. In the two years since
Gordon joined us he has won the Bank of Scotland Scottish Premierleague by
impressive margins, as well as two other domestic trophies and achieved progress
in Europe. Managing Celtic ranks among the most demanding jobs in football and
Gordon’s resilience and professionalism are truly admirable.
Despite some early delays caused mainly by adverse weather, our new training
complex at Lennoxtown is expected to be available for use towards the end of
September 2007. We are excited by the location and the quality of the
facilities. Virtually all of the pieces are in place and, all going well, our
professional football squads will be training at the new complex soon. There
remains the question of what is done with our existing training area at
Barrowfield. We are working with Glasgow City Council as part of a master plan
to regenerate the East End of the city and the area around Celtic Park. This
plan would allow us to improve significantly the coach parking and transport
infrastructure for our supporters and those of visiting teams. We believe this
is long overdue and hope to see it move forward in the coming year.
Spreading the Celtic brand name continues to be a high business priority. The
new TV contract in England makes it even less likely that change will take place
in the structure of football there; and the fact that all but the top half-dozen
FAPL sides may find themselves facing the possibility of relegation in any given
year, with all that that entails in terms of foregone revenue, means that the
great majority of teams in the FAPL would oppose, even more than previously, any
move to admit Scottish teams. We believe that it is our responsibility to
explore whether such a change is possible, but we accept the position as we now
find it and have turned our attention increasingly to other options in looking
to the longer term.
We continue to believe that North America represents a good opportunity in that
connection and have completed another successful tour to the United States this
summer. Our ‘soccer schools’ in seven States are flourishing and are spreading
the Celtic name to a younger generation. We also carried out short tours to
England, Switzerland and Ireland and will look for further opportunities to
build our reputation abroad.
It has long been my belief that eradicating sectarian and other offensive
behaviour from the Scottish football environment is a longer term task. Success
is properly measured over years, if not decades. But progress towards that
objective can be achieved on a shorter time-scale and we can point to clear
signs of such progress year by year. This takes the form not only of dwindling
numbers of people who sing offensive songs and chants at away games following
the initiatives that I mentioned in last year’s Annual Report, but also of
positive action to improve the behaviour of people who might otherwise keep
ancient rivalries alive by unacceptable means.
Our work in education and with the unemployed and other disadvantaged groups
does not always get the recognition it deserves. It is, of course, worth doing
for its own sake; but greater encouragement from the press and media can
multiply its positive effects. The consolidation of our charity and community
activities under the banner of the Celtic Foundation and of the attendance of
religious leaders to the Old Firm game in March, with the positive reception of
this initiative by the press and media, are examples of what can be done.
A historic milestone was reached in May with the 40th Anniversary of the Lisbon
Lions’ victory in the European Cup. It is a poor club that cannot celebrate a
famous event 40 years on, and the Lions never showed greater resolution and
stamina than when carrying out a programme of visits, at home and abroad, that
would have exhausted Olympic athletes. They remain a family within a family and
brought out all that is best in the Celtic support.
As I have remarked before, success in football is seldom marked by unbroken,
continuous advances. The nature of modern competitive sport prevents that. Last
year was a very good year for our club and for Celtic plc, and it will be a
monumental challenge to surpass it next year. That does not, of course, mean
that we will not be trying hard to do so. We owe it to our shareholders and
supporters to do that, and you may be sure that your Board, management and
football team will be pulling together to that end.
Brian Quinn CBE
Chairman 20 August 2007
CHIEF EXECUTIVE’S REVIEW
INTRODUCTION
I am delighted to report on another eventful and successful year.
In May 2006 Celtic’s participation in the group stage of the UEFA Champions’
League for season 2006/7 was confirmed. This enabled the Club to plan with much
greater certainty both financially and operationally. As with last year, a
number of the established players left Celtic Park for a variety of reasons. The
funds achieved from the sale of these players, together with the incremental
contribution arising from participation in the UEFA Champions’ League, enabled
us to buy several new players. These included a number of experienced
individuals as well as younger, often locally developed, players
Celtic retained the Bank of Scotland Premierleague title for 2006/7 by a
significant margin, sealing the Championship in dramatic fashion at Kilmarnock
several weeks before the end of the season. This success in winning the League
title has provided Celtic with entry to the final qualifying round of the UEFA
Champions’ League for Season 2007/08. We also won the Scottish FA Cup again,
defeating Dunfermline at Hampden Park in Neil Lennon’s final appearance for the
Club.
Celtic achieved new highs in Europe this year, qualifying for the last 16 of the
UEFA Champions League for the first time since the competition adopted its
current format. Along the way there were unforgettable moments against the might
of Benfica and Manchester United. Celtic also pushed the eventual winners AC
Milan every inch of the way over the two legs of that last 16 tie, before
finally succumbing to a goal in extra-time.
The 25th of May saw the fortieth anniversary of that historic day in Lisbon,
when Celtic became the first British Club to lift the European Cup. The event
was celebrated at Celtic Park with a gala dinner in a grand marquee on the
hallowed turf attended by over a thousand guests. All the victorious Lions were
represented and a memorable night was had by all.
FINANCIAL PERFORMANCE
Celtic’s trading results for the year to 30 June 2007 are exceptional,
benefiting dramatically from participation in the UEFA Champions League and from
player trading. The Club’s reported profit of 15.04m represents a massive
improvement in financial performance on 2005/06 in what continues to be a highly
challenging football environment in Scotland.
Group turnover has increased by 17.83m, 31.0%, to 75.24m from last year,
largely as a result of playing four more home games due to our progression in
the UEFA Champions’ League. The uplift in turnover benefited from the continued
high take-up of season tickets, together with the incremental revenue generated
from pre-season friendlies in Poland, America, England and Japan.
Operating expenses, excluding exceptional operating costs, have increased by
5.61m, 10.4%, to 59.28m, predominantly due to increased labour and uplifts in
other overheads related to increased trading activity. The amortisation charge
of 5.86m is up by 15.1% on last year, demonstrating the increased investment in
the first team squad. Exceptional costs of 2.88m largely reflect an impairment
provision in respect of intangible fixed assets and compare to 0.58m last year.
The financial performance also benefited from a gain on disposal of intangible
fixed assets of 9.40m mainly represented by the sale of Petrov, Maloney,
Pearson, Varga and Wallace in addition to a lower interest charge in the year.