2002 AGM Trust Report

Published on Thursday 31st October, 2002 by Celtic Trust

The Celtic Trust gives its interpretation of the AGM events

Video Presentation

The AGM began with a video presentation. While the atmosphere of the whole meeting was understandably shrouded in the collective disappointment at the failure to qualify for the Champions League, the video began on an upbeat note with footage of the unfurling of the League Flag with a recorded interview voiceover with PLC chairman Brian Quinn in which he explained that there would be no hysterical response to the consequent loss of revenue (roughly in the area of £8-10 million according to most media reports). He hoped that a good run in the UEFA Cup might go some way in making up the loss, although he emphasised that over the last twelve months the financial climate had become much more hostile for all football clubs, a conclusion which is clearly indisputable. Ian MacLeod, Celtic PLCs Chief Executive, then appeared on screen. After briefly summarising what were a strong set of financial results for 2001/2002 (for which it probably ought to be acknowledged the Chief Executive deserves a little bit of credit, though probably not as much as Martin ONeill, Henrik and the rest of the lads!), he then spent some time explaining the various twists and turns in the SPL TV contract saga following the SPLs rejection of Skys offer last January (in answer to a later question by a shareholder he indicated that the decision to reject Sky had been taken at a time when the SPL clubs had felt they could do better but since then the market for TV rights had dramatically declined) He stated that he believed that it was right for the SPL to assess the feasibility of launching a SPL-owned channel, an option favoured by the group of 10 clubs. However, Celtic ultimately came to the view that the channel was too high risk a venture, and so combined with Rangers to block the move and subsequently seek to re-open negotiations with an established broadcaster. The current deal with BBC Scotland lasts for two seasons and is worth £18m (as opposed to Skys original £45m over four years offer). He pointed to a particular opportunity in this deal through enhanced media revenues arising from the reversion of archive rights to the clubs. However, he stressed the fundamental economic problem is that Celtic, like all big clubs in small countries, operates at a huge financial disadvantage compared to their counterparts in large countries; the bigger the country the bigger TV audience, the bigger the domestic TV deal. (Even in the Champions League clubs from countries with bigger TV audiences receive more money: so Olympique Lyonnais earned triple the amount of money from the Champions League TV Pool despite achieving the same number of points on the field of play because France is a bigger TV market see page 8 of the Annual Report). McLeod concluded that he therefore believed there is a need for structural change in Scottish football, and that is why the Plc Board was receptive to discussions instigated by the Nationwide League about a possible move by Celtic to the English league. However, he emphasised that no invitation to join the Nationwide League had been received, and even if one was forthcoming in the future there would be significant regulatory hurdles to Celtics participation. The idea of an Atlantic League remained alive, and was being pursued by the Belgian football authorities. One motivation seems to be to keep European football alive in small countries after Christmas. However, there was (unsurprisingly) little chance of the competition being in place for 2003. There then followed a presentation from John Stephenson, formerly Head of Youth Development at Preston North End, who has been appointed to support Tommy Burns in improving Celtics scouting and coaching network. He outlined the clubs youth policy, detailing the lengthy process from scouting for talent through to the signing of a professional contract at 16 to breaking through into the first team. There is a huge attrition rate indicated by the fact that there are 560 players in the system of whom only 36 are professionals. The club has been developing the youth policy and scouting now takes place in Scotland, England, Northern Ireland and Ireland. Finally, Martin ONeill appeared on screen. He expressed support for structural change in football. He noted how quickly the environment had deteriorated in small countries over recent years, having been happy with the SPL when he arrived at the club two years ago. The bottom line is that English Premier league clubs receive ten times as much domestic TV revenue as in Scotland. Turning to his future, he said that he expected discussions with the Board concerning contract renewal to begin in days rather than weeks and certainly weeks rather than months a comment that attracted warm applause.


Formal Business

The formal business of the meeting began with the approval of the Report and Accounts. This was followed by the re-election of three members of the Board: Brian Quinn (the Chairman), Eric Riley and Patrick Sheehy. As expected they romped home with the support of some 22 million proxy votes, essentially those votes controlled by the Board. The share of the vote for each candidate was announced to two decimal places, with each receiving over 99 per cent of the votes cast. The auditors were re-appointed with similar support. A cursory view of this result might lead one to the conclusion that the Board have the overwhelming support of all Celtic shareholders. However, it is worth bearing in mind that there are actually a total of 30,539 ordinary shares and 18,011 convertible preferred ordinary shares issued at Celtic making a total of 48,550, all of which have voting rights. In other words nearly 55% of the shares were not cast. Once again this underlines a much overlooked reality there is potential for a competitive election at Celtic Plc on any resolution, but the shares which dont use their voting rights are overwhelming belonging to small shareholder-supporters, need to be organised. And it wont surprise Not The View readers to hear that the Celtic Trust believes that it can be the vehicle to achieve this though it will be a major challenge. On the votes on the Trusts four resolutions at last years Plc AGM the Trust achieved an average vote of 677,000, representing combined proxies of around 700-800 shareholders (see our website celtictrust.com, Newsletter 4, for fuller details). While the Trust did not submit an independent resolution this year we do intend to do so at future AGMs and we believe we can improve on this vote.


Resolution to Cancel the Share Premium Account

There are currently three classes of shares at Celtic: ordinary shares which hold full voting rights on all issues; preference ordinary shares which have no voting rights on most issues but which pay a dividend; convertible preference ordinary shares (the 2001 issue) which have full voting rights on all issues and which have priority for dividend payments over ordinary shares from 2004. For legal reasons three separate AGMs for each class of shareholder had to be convened to seek approval for the cancellation of the share premium account a sum of some £22.2 million. The sum arises from the premium associated with previous share issues, where the share price at issue was in excess of the nominal value of the shares. The resolution, again passed with more than 99 per cent of the votes, allows the money to be distributed in dividends. Essentially, this resolution was preparatory to Celtic beginning to pay dividends to the holders of the convertible preferred ordinary shares (those issued in September 2001). The key implication of this decision, a logical consequence of the new share issue in 2001, is that Celtic Plc are going to have to address the expectation of convertible preference ordinary shareholders that a dividend will be paid from 2004 onward. Where the money is going to come from is currently unclear. As the song says.There may be trouble ahead.


Question and Answers

Then came the question and answer session. First to the microphone was the Trusts own Vice-Chair Jeanette Findlay. Speaking on behalf of the Trust she praised aspects of the Boards policies over the past year. Notably there has been a significant increase in the level of charitable giving by Celtic in the last year, an issue on which the Trust has lobbied Celtic in its recent quarterly meetings. The Celtic Trust believes that a key element of the Celtic mission should be to stay true to the charitable roots laid down by founder Brother Walfrid. The amount donated directly by Celtic has increased fourfold to £37,077. When added to the £100,000 raised by Celtic from supporters over the year, and the range of other in-kind contributions detailed in the Annual Report, this is a significant contribution which marks Celtic as a best practice leader among football clubs in Scotland and England, a fact which will be a source of pride to all Celtic supporters and shareholders. She then went on to repeat the Trusts objective of securing the principle of a fans representative on the Board, a practice already adopted by Aberdeen. She asked Brian Quinn to specify the criteria that the Board believed to be necessary for someone to serve on the Board. Brian Quinn, responded by praising the Celtic Trusts constructive and sensible approach at meetings now held regularly with the Chief Executive, and emphasised that the Board felt no animosity towards the Celtic Trust. (Though it has to be said a ban on Trust adverts in The View remains in place. Brian Quinn has stated that the ban is due to the Trusts support for a supporter-elected director at Celtic, a proposition which the Celtic Board disagrees with in principle. The Trust hopes that in time this advert ban will be lifted). Brian re-stated the Boards opposition to the idea of a fans representative serving as a non-executive director on the grounds that members of the board do not represent any particular interest but all shareholders equally. The Trusts view is that this is a very, very purist view particularly in the light of the fact that any large company where there are significant minority interests it is completely the norm for these interests to have a seat at the board, as is the case with Dermot Desmond with his roughly 29% holding in Celtic. Why then should the 30% odd of the share capital held by the approximately 18,000 small supporter-shareholders at Celtic not also be entitled to a seat at the top table? As is already the case at Aberdeen! Brian also refused to be drawn into specifics on the eligibility criteria for candidature for non-executive directorships, stating only that the Board as a whole should reflect a mix of qualities; and that it is helpful for candidates to have Plc experience. Though intriguingly he did say that the Plcs director nominations committee would consider any proposals it received for fresh candidates in the future. Now theres an idea. Martin ONeill was again asked about his future. In response to the question Do you want to stay and what would make you not want to stay? he gave a very long and meandering response. The questioner quipped I take it thats a yes! and ONeill acknowledged that his answer had been longwinded by vowing to answer questions a bit more succinctly in future. Clearly contract negotiations are ongoing but there are still some issues to be resolved. To be fair to Martin he appeared to be carrying the burden of the Basel result very heavily on his shoulders, the disappointment in his body language clearly evident. So if we ever needed to be reminded, this man clearly cares about winning. Brian Quinn agreed to a Canadian shareholders request for share prices to be published on the Celtic Web site and in Celtic View to facilitate the completion of income tax returns. The same shareholder asked whether executive share options were treated as an expense in the accounts; while not compulsory to do this it is increasingly regarded as good accounting practice (options are essentially a promise to executives to sell them shares in the company at discounted prices if they meet certain performance targets by effectively issuing new share capital this can have the effect of depressing share prices) though it does have the effect of presenting a more cautious (and some would say more realistic) view of financial strength. Brian had to acknowledge that Celtic (like most companies) dont do this. Eddie Toner of the Celtic Supporters Association explained that the BBC Scotland TV deal meant that there was an absence of televised Celtic SPL matches in England and Ireland, and this was hindering the development of supporters clubs in these places. Ian MacLeod explained that the smaller SPL clubs had rejected an offer for broadcasting games in Ireland and England. Brian Quinn stated emphatically that the Youth and Training facilities would take priority to the expansion of the South Stand. Ian MacLeod addressed a shareholders complaint concerning the pricing of season tickets for his 16 year old son. It would appear that 16 year olds are charged the student rate. The shareholder complained that season ticket price hikes were pricing future supporters out of Celtic Park. Asked whether Fergus McCann had taken too much money out of the club, Brian Quinn stated that: You will never get me to criticise Fergus McCann. Jim Divers of the Celtic Trust and the Celtic Supporters Association suggested that the club should run a pilot scheme in North America as a means of gaining a new source of revenue. Brian Quinns response was somewhat disappointing, as he simply said that the Board would be pleased to consider new ideas. As Jim pointed out, it is the club that has the resources to conduct the necessary market research. Though Ian McLeod did outline that he had attended the North American Celtic Supporters Association Las Vegas convention and that some market research was being undertaken on the back of this. Jim Divers also asked why the Board had chosen Setanta to broadcast pay-to-view games when many supporters had bought NTL cable subscriptions because it was the clubs sponsor. Ian MacLeod explained that the Boards choice of Setanta was based on the greater penetration of Sky satellite service, through which Setanta broadcast the Basel game, in Scotland.


Something Stirs. Dermot Speaks.

Asked whether it was a gamble not to have strengthened the team before the Basel game, Brian Quinn stated that football was littered with clubs that had spent recklessly in search of success, but had nonetheless failed. At this point there came perhaps the most significant event of the day. In response to a similar question from the Celtic Supporters Associations Brendan Sweeney suggesting that the Board must speculate to accumulate, a visibly agitated Dermot Desmond requested the microphone from Brian Quinn and forcibly re-iterated that the Board would speculate and accumulate with caution as any money spent on players had to come from increased turnover or new shareholder funds (essentially the money doesnt go on trees argument, though its a pity nobody on the Board with all their combined Plc experience told Kenny D. and John Barnes this when they signed Scheidt and Berkovic for a combined £11m). But encouragingly he also said: We will go forward. It is worth making a couple of observations about Dermot Desmond's contribution. Firstly, after eight years involvement at Celtic it was good to hear him speak at last the sphinx-like silence was not healthy. Celtics supporters and shareholders are entitled to know what the most influential man on the Board is thinking. He also did display a bit of passion, which is no bad thing. Secondly, however, Dermots intervention did betray, in the view of at least one Celtic Trust Committee member, a certain sense that he was the man whose money it was being proposed should speculate. But of course the reality is that, while Dermot has indeed put his money where is mouth is, and fair play to him for doing so, so have 18,000 other Celtic supporter-shareholders, 53,000 season ticket holders, and all the other thousands of less regular visitors to Celtic Park throughout Scotland, Ireland, Scotland and Wales, North America, Australia and beyond. Indeed if the Board had not rushed through last years share issue in July, a month when many supporters are on holiday, who is to say that a greater sum might not have been raised from the wider supporter base for that share issue. Maybe its the old Celtic supporter paranoia but one cant help feeling that sometimes the Board, and in this case Dermot Desmond, dont always have this reality at the forefront of their minds. They need to be reminded of it. Ordinary Celtic supporters were key partners in the Fergus McCann-led consortium that saved the club in 1994 and they continue to provide the financial lifeblood that sustains it now. Giving this reminder would be a key role for any prospective supporter-director. Ironically in the light of Dermot Desmond's contribution, the final speaker pointed out that Celtic was not like other business because the customers couldn't go elsewhere. This viewpoint was supported by the total absence of irate shareholders complaining about the abysmal financial performance of their shares!



It is fashionable in many quarters to dismiss the Plc AGM as a bit of a formality where little of real consequence to ordinary supporters takes place. Nothing could be further from the truth. The reality is that it is in fact the only time in the annual calendar when the Board are required to publicly report to Celtic supporters and shareholders the financial progress of the club. It thus offers a rare opportunity to hold the Board to account. And nobody understands that better than the Board members. The collective alertness, wariness even, as the Board take the stage at each successive AGM is tangible. Nobody no knows better than them the potential influence of a strong small shareholder-supporter organisation at Celtic if it could get its act together. It is absolutely crystal clear what without an effective mechanism to mobilise the voting proxies of the 18,000-odd small supporter-shareholders in Celtic it is difficult to maximise the potential offered by the AGM structure to influence the Board on issues or most concern to supporters. However, it will not surprise Not the View readers to hear that we at the Celtic Trust think such a mobilisation can be achieved, and that the Trust structure, incorporating as it does a mechanism through which the existing supporters associations can have representation on the Trust Committee, offers a way to start mobilising that potential effectively by combining the historic strengths of the associations with the potential shareholder influence represented by the Trust. So we wont beat around the bush, this is a blatant plug - we would urge you to make your voice heard by joining the Trust using the application form printed elsewhere in NTV. At the end of the day the small supporter-shareholders in Celtic can have influence, but only if they combine under one banner. Its a case of United We Stand, Divided We Fall. It can be done. If they can get a supporter on the board at Board at Aberdeen why can't we? It's our club. The Celtic Trust


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