Financial accounts for Celtic PLC to June 2007

Published on Tuesday 31st July, 2007 by Celtic Trust

Celtic Plc Preliminary Results 30th June 2007

Celtic Plc, the AIM Stock Exchange-quoted company that owns Celtic football club, released its financial results for 2006/2007 on the 20th August. Below is a summary of the key points; a more detailed analysis of the results will follow shortly.

 

Headline Figures

The figures are the best since the McCann era with the following highlights: Group turnover increased by 31% to £75.24m (2006 - £57.41m) Gain from player transfers was £9.4m (2006 - £0.26m loss) Expenditure on transfers was £14.4m (2006 - £8.84m) Year end debt was £4.99m (2006 - £9.09m) Profit before taxation was £15.04m (2006 - -£4.22m loss)

 

Increased Turnover & Profit

Celtic recorded a profit in 2006/2007 for the first time in many years on the back of the club's highest ever financial turnover. Since the end of the Fergus McCann era, which itself began with a significant share issue take up by over 20,000 Celtic fans, Celtic have raised £37m in two further share issues in 2001 and 2005. It is the investment from these share issues which have covered Celtic's operating losses throughout the 1999-2006 period - Celtic carries an historically accumulated tax loss of £30m on its balance sheet available to set against future trading profits. Last year's profit represents a welcome break from this loss-making trend and one which all Celtic supporters will hope can be maintained. If it cannot then another share issue will be inevitable if the quality of the playing squad and the competitiveness of the team is to be maintained. This underlines the critical importance of Celtic's wider shareholder base and their willingness to invest in the club as an insurance against future financial underperformance of the club. The 2006/2007 profit can almost entirely be explained by the success of Celtic in reaching the qualifying stages of the Champions League with £11-£12m of the £15.04m pre-tax profit being attributed to Champions League income. It is clear that now more than ever qualification for at least the group stages of the Champions League is essential for Celtic to avoid going into debt. Celtic sold over 53,000 season tickets in 2006/2007, the highest such figure in the UK, and nearly two thirds of revenue is generated by ticket sales and matchday income and merchandising - that is income directly from the Celtic support. This is a much greater proportion than for the English Premiership clubs who derive a much higher percentage from TV broadcasting income. This underlines the fact that Celtic is much more dependent than its peers in the English Premiership on the exceptional loyalty and spending power of the Celtic support to generate income directly. Perhaps surprisingly income from merchandise fell by £1m in 2006/2007 though this may reflect the cycle of replica strip launches. Though Celtic observe that “football merchandising is to some extent a fashion market and therefore difficult at present”.

 

Labour Costs

Celtic also had an exceptional year in the transfer market - to which some thanks ought to go to Martin O'Neill for buying Stilian Petrov and Sean Maloney! - generating a gain of £9.4m. This enabled re-investment in the squad of £14.4m. Gordon Strachan has proved a canny operator in the transfer market for which he deserves some credit. However clearly these talent spotting skills are something that he is going to have to continue to deploy given that Celtic would now appear to be in situation where transfer outgoings must in large part be balanced by incomings from sales; the free-spending days of Martin are well and truly over. In this regard the off-loading of Craig Beattie to West Brom seems like a very shrewd piece of business. A particular impressive statistic is that Celtic has reduced the total labour costs (largely players' wages) to turnover ratio to 48.4% from 56.6%. Given that the football industry consultants Deloitte recommend that English Premier League clubs have a ratio of no more than 60% Celtic's discipline in regard to wages expenditure is very impressive, albeit the Chairman has expressed some caution by saying that these costs may rise next year. Interestingly Celtic has also appointed a Head of Sports Science, Gregory Dupont who came from Lille.

 

Dividends

On the 31st August Celtic will pay out a total of £1.89m in dividends to shareholders. £0.54m will be paid out to holders of 6% Convertible Cumulative Preference Shares (those who invested in 1995); £0.9m will be paid out to those holding 4% Convertible Preferred Ordinary Shares (those who invested in 2001) - these shareholders will also receive an additional £0.45m as a result of Celtic reaching the last 16 of the Champions League; the 2001 share issue offered a bonus dividend related to progression in the Champions League. Thanks to the efforts of the Celtic Trust, and following the Trust's resolution to the 2004 Celtic Plc AGM, shareholders now have the opportunity to take their dividend in shares thus keeping this income in the club for the benefit of the team. The Trust would urge those shareholders who have not already done so to sign up for the dividend re-investment scheme, details of which should be included with their Annual Report.

 

New Training Facility at Lennoxtown

Celtic are predicting that the new Lennoxtown training facility will open for business in September. They are in talks with Glasgow City Council regarding the future of Barrowfield as part of which they envisage significant improvements to the coach park and general transport infrastructure.

 

Celtic Charity

Celtic has now amalgamated all its charitable and community activities under the banner of the Celtic Foundation. Celtic can justifiably now claim to be one of the leading clubs in Britain in terms of its charitable fund-raising. Last year saw Celtic hold a charity football match, as called for by the Celtic Trust in a resolution to the 2005 Celtic Plc AGM. The Trust would hope that this initiative will be repeated in the coming year with members of the first team taking part.

 

Summary

These are an excellent set of results which all Celtic supporters should welcome. In particular Gordon Strachan deserves great credit for putting such a competitive team in the park at a time when a much more disciplined approach to player salaries and transfer fees is, justifiably, being imposed. However, the results again demonstrate that the key driver which allows Celtic to compensate for the very poor TV revenue derived from playing in the Scottish Premier League is the extraordinary loyalty and spending power of the Celtic support from whom the bulk of the club's revenue is derived.

 
Tags: Finance
 

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