Celtic plc interim results
INTERIM RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2006
SUMMARY OF THE RESULTS
• Lead the Bank of Scotland Premierleague by 19 points
• Qualification for the last 16 of the UEFA Champions League
• Continued participation in the Tennents Scottish Cup
• 18 home matches played at Celtic Park in the period (2005: 15)
• Successful launch of international and domestic away kits
• Construction of the training academy at Lennoxtown progressing well
• Group turnover increased by 41.6% to £46.80m.
• Operating expenses increased by 8.5% to £32.04m.
• Profit from operations of £14.76m (2005: £3.50m).
• Gain on sale of intangible fixed assets £7.12m (2005: £nil)
• Profit before taxation of £17.94m (2005: Loss of £0.96m).
• Period end bank debt of £10.94m (2005: £8.57m).
• Investment in players of £6.32m (2005: £6.55m).
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Thanks partly to the coincidence of a number of favourable factors, Celtic’s financial performance during the half-year ending December 31 2006 has been exceptionally good. Participation as Scotland’s sole representative in the European Champions League has had a transforming effect on our interim results when compared with a year ago; and we have also benefited significantly from transfer activities during the period.
By most measures our football results have also been the best for many years. It is, however, part of the Chairman’s job to bring perspective to the Company’s performance and we cannot reasonably expect to repeat the outstanding features of the first half in the remaining months of the year. That said, we are currently enjoying one of the best periods in the Club’s history.
Group turnover rose by 41.6% over the corresponding period a year ago. Celtic played 3 more home games, 2 of which were European ties and 1 SPL game. As a result, revenues from ticket sales increased by 42% to £21.6 million; and income from multimedia was up by 144% to £14.1 million. Merchandise sales were down by some 10%, largely because there were 2 kit launches in the period, one fewer than in the corresponding period a year ago. However retail gross margins showed a clear improvement over the period, reflecting careful management of costs and pricing of our merchandise products.
Operating costs as a whole rose by 8.5%, unsurprising in the light of the increased activity for the Company on almost all fronts. The bulk of the increase occurred in payments to the playing and football management teams as bonuses for domestic and European competitions earned under a new remuneration scheme took effect. We believe this new scheme will establish a better relationship for both players and Club between pay and performance, enabling us to control costs more effectively and rewarding players for the success on the field. The ratio of labour costs (total and football) to turnover was 40.7% and 31.6% (respectively), compared with 51.9% and 40.1% a year ago; and 56.6% and 44.5% at the end of June last year. Amortisation costs fell by some 16% over the period as several members of the previous squad left the Club to pursue their careers elsewhere.
It is in the measures of profitability that Celtic showed the most striking improvement compared with last year. Operating profit rose from £74,000 to £11.9 million; and after taking account of gains on player transfers of £7.1 million, profit after interest and taxation amounted to £17.9 million. The corresponding figure a year ago was a loss of £1.0 million. This turnaround in our financial performance demonstrates in the most vivid way the importance of European football to clubs playing outside the leading five European countries; but it is also a testament to the professionalism of our executive team.
Gordon Strachan’s football squad also continues to excel. At present the first team leads the Scottish Premier League by 19 points, has progressed to the quarter final of the Tennents SFA Cup and, for the first time, the Club has qualified for the final 16 in the UEFA Champions League. On the face of it, and given the quality of the opposition, our involvement in that competition is expected by many to terminate at that point.
However the squad have already shown on several occasions this season that they will not accept defeat until the game ends and I am confident they will extend Celtic’s growing reputation in Europe, whatever the final result in the next round.
The emphasis on careful and patient use of our financial resources will continue to characterise our efforts to strengthen the first team squad; and we will also continue to find and develop players of quality from our youth and reserve squads. Our reserve and under-19 teams lead their respective divisions and we aim to contribute to our younger players’ development by making them available on loan to gain regular playing experience at a higher level.
We recently secured the services of John Park as Football Development Manager. Our scouting network now covers 16 countries and, taking account of our youth development programme, there was a need for a person of proven experience for that task. John presided over these activities with great success at his previous club, Hibernian and we have now re-structured our Sports Science and Fitness function by recruiting two new highly regarded sports scientists.
In a separate initiative we have recruited a new fitness coach from Australian Rules Football, a sport in a country in the forefront of sports science and fitness. I now believe strong foundations have been put in place to find, develop and train future generations of footballers for the Club. The construction of the new training ground and academy at Lennoxtown is progressing well and is expected to be available for next season.
I am greatly encouraged by our progress on these fronts. As I mentioned in our Annual Report last year, the very substantial additional amounts of money going into football in England from new television contracts have created a wide gulf between what Scottish clubs and their English counterparts can bring to the transfer market. In some cases transfer fees and wage deals for players in the Championship south of the Border are beyond the reach of even the top Scottish clubs.
To a much greater degree than ever before, there are two separate markets with traffic between them largely moving in one direction in terms of evolving talent. There is no point complaining about this. The only remedy is to work hard to compensate by strengthening our capacity to identify, attract and develop our own players.
Celtic’s appeal outside the UK continues to grow. We have an opportunity to visit Japan and the United States – where we will meet the MLS All Stars in July –when the current season ends; and we have received other enquiries from other countries to play there. I cannot recall a period when interest in the Club has been higher.
Of course popularity is, as a famous US Presidential Candidate once said of flattery, “Fine so long as you don’t inhale”. We will look positively at further possibilities of spreading the Celtic brand, but not to the extent that we damage it through excess.
Off the field, things are also going well. We have consolidated our charitable and community operations under the Celtic Foundation. This will bring greater cohesion to all of our social and charity activities and increase the financial contributions and other tangible support we make to Scottish life. This, of course, is our heritage and we will continue to make every effort to live up to it.
We continue to push ahead with our anti-sectarian activities and have fully supported the initiative of the Scottish Executive to remove the blight of religious bigotry from football. Our supporters have responded magnificently to our appeals in this regard and I believe we are well on the way to disassociating the Club completely from offensive behaviour in this aspect of Scottish life.
In October Eric Hagman retired from the Board of Directors of Celtic plc and I would like to thank him for three excellent years of service to the Company. Kenny McDowall also left us to pursue his career elsewhere after 10 very successful years in charge of our reserve team. We wish him well – relatively speaking – in his new job.
The last few weeks have seen the departure of Alan Thompson, Stephen Pearson and Shaun Maloney and we wish them luck at their new clubs; while welcoming Stephen Pressley, Mark Brown, Jean-Joel Perrier Doumbé and Paul Hartley to the Club.
These are exciting times at Celtic. It may be difficult not to be carried away by our successes on and off the field these last six months. Both our shareholders and our supporters certainly deserve the rewards we are currently enjoying. But what is more important is that there are signs that our efforts over several years to establish lasting improvements in our infrastructure, both as a football club and as a company, are now delivering a measure of success.
Our management team, led by Peter Lawwell, is showing great energy and initiative on all fronts. Gordon Strachan and his support staff are delivering outstanding consistency and resolve. And our supporters, as always, are our ultimate strength. I thank them for their dedication and commitment.
Brian Quinn CBE
14 February 2007