Celtic Regulatory News (CCP)

16 Aug 2006 12:17

Celtic PLC16 August 2006 CELTIC plc Preliminary Results for the year ended 30 June 2006 SUMMARY OF THE RESULTS Operational Highlights - Winners of the Bank of Scotland Premierleague by 17 points - Winners of the CIS Insurance Cup - 24 home matches played at Celtic Park in the year (2005 - 27) - Contract extensions awarded to Stilian Petrov, Stephen McManus,Stanislav Varga, Neil Lennon and Shunsuke Nakamura - Successful launch of new playing kits under the new kit agreement with NIKE - Extension of Carling shirt sponsorship contract until 2010 - Construction of the training academy at Lennoxtown commenced Financial Highlights - Successful issue of 50 million new Ordinary Shares raising £14.55m net of expenses - Significant changes to the reporting of non equity share capital,debt and non equity dividends following the implementation of FRS25 requiringthe restatement of prior period comparatives - Group turnover decreased by 7.7% to £57.41m (2005 - £62.17m) - Operating expenses reduced by 7.6% to £53.67m (2005 - £58.07m) - Profit from operations of £3.74m (2005 - £4.10m) - Loss before taxation of £4.22m (2005 - £8.71m as restated) - Year end bank debt of £9.09m (2005 - £19.33m) - Investment of £8.84m (2005 - £2.34m) in the acquisition of intangible fixed assets For further information contact: Brian Quinn, Celtic plc Tel: 0141 551 4235Peter Lawwell, Celtic plc Tel: 0141 551 4235Iain Jamieson, Celtic plc Tel: 0141 551 4235 CHAIRMAN'S STATEMENT 2005/2006 was, on the whole, a good year for Celtic plc and for Celtic FootballClub. Although our early departure from European competition and from theTennent's Scottish Cup were disappointing, with substantial adverse effects onincome, we fought back in a manner that is typical of this Club and finished theyear on a strongly positive note. We also strengthened our financial position and began the process of creating amodern purpose-built training facility at Lennoxtown. The football team is beingrebuilt, as it has to if the successes of recent seasons are to be maintained.In the week-to-week excitement and uncertainty that characterise football, Ibelieve it is crucial to have a clear idea of longer-term objectives and a senseof direction that goes beyond the febrile environment of the modern game. Turnover of the group fell by 7.7%, very largely reflecting the loss of gatereceipts and TV income from European competition. Celtic played 3 fewer homegames last season and ticket sales were 15% lower as a result. Multimedia andcommunications were 28% lower. Despite this, with operating expenses down by7.6% - primarily wages and salaries for football staff - and merchandise saleshigher by a remarkable 42.5%, the company recorded a profit from operations of£3.74m. The loss before tax, at £4.22m, was less than half the level of thepreceding year. The successful £15m share issue in December 2005 rebuilt the balance sheet,reducing bank debt at year end from £19.3m to £9.1m and almost doubling netassets. We also increased investment in the acquisition of players from £2.3m to£8.8m. UK Accounting Standards have begun to converge with International AccountingStandards. As part of this process Celtic has adopted paragraphs 1 to 50 ofFRS25 the impact of which is to reclassify certain financial instruments fromequity to debt. Under FRS 25 the group's Preference Shares and Convertible Preferred OrdinaryShares, previously defined as equity, were reclassified as a combination of debtand equity; and non-equity dividends were in essence re-classified as interest.As a result, net assets were £3.8m lower, net debt £4.7m higher and interestcharges £771,000 higher than would have been reported prior to theimplementation of FRS 25. In our accounts we have adjusted the prior periods'figures for these differences in treatment to allow a meaningful comparison tobe made. The football squad showed great resilience after a difficult start to theseason. Two long unbeaten runs in the Scottish Premier League from late Augustuntil late November, and from then until early April, returned the championshiptitle to Celtic Park with the loss of only two games. No club has won the SPLtitle earlier in the season, nor with a bigger margin over its nearestcompetitor. The Club also won the CIS Insurance Cup for the 13th time to add toits 40th league championship. A very special note of thanks goes to GordonStrachan, Garry Pendrey and Tommy Burns whose contribution has involvedcombining success on the field with assembling and managing what is largely anew first team squad. I also congratulate our first team for being commendedagain this year by the SFA for achieving high standards of on-field discipline. The under-19 and reserve teams won their leagues for the fourth and fifthconsecutive times, respectively. Celtic's under-19 team also won the ScottishYouth Cup and an international tournament in Italy. These successes not onlycontain signs of promise for the future but also testify to the work done by themanagers and support staff of the squads. Squad restructuring is an especially challenging task in today's transfermarket. The reduction in transfer fees evident several seasons ago, as clubs inthe UK reordered their finances, has been replaced with a market that in anyother business sector would be considered overheated. Likewise, salary packagesfor footballers are probably unprecedentedly high, not just for those of thehighest calibre, but also for many outside the elite category. The main driverseems to be the substantially larger sums available to FA Premier League clubsfrom the recently agreed television contract. Many clubs are spending money nowthat will not be available for another year, creating echoes of the last boomand bust in football. Clubs are, however, better run today throughout the UK and should avoid a repeatof the financial problems that arose a few years ago. But what is clear is that,despite the welcome increase in the value of the Bank of Scotland PremierleagueTV contract, Celtic and other clubs in Scotland endeavouring to compete inEuropean competition find themselves at a serious disadvantage. This iscompounded by the distribution model for UEFA Champions League revenues whichfavours the larger nations. This gives additional force to our policy ofdeveloping our own young players. I believe the new training ground at Lennoxtown will be an important factor inthis regard. We have secured the site and work in building the pitches,accommodation and administration facilities has begun and is proceedingaccording to plan. We hope the training complex will be completed and availablefor use at the beginning of next season. Evidence of the revival in Scottish football to which I looked forward two yearsago grew during the season just ended. For the first time in many years, thefirst two positions in the SPL were not occupied by the Old Firm; and theTennent's Scottish Cup Final was contested by Hearts and Gretna, a team from theScottish Division II. As I said in my statement accompanying our 2005 InterimReport, we see this as a healthy and welcome development. We do not expect tolose domestic competitions and certainly do not like it when we do, butexcitement and interest in the game is created when the established order ischallenged. I also welcome the signs of revival in the Scottish national sidewhich has arrested the slide in performances and has begun the job of recoveringthe team's historic reputation for good, winning football. Our efforts to promote the Celtic brand continue. The squad made training tripsto Poland and the United States and played friendly matches in Japan and England. The response by Celtic supporters, actual and potential, has beenremarkable and provides hard evidence that this policy is appreciated by ourfans everywhere. Of course these events also raise additional income for us,which seems sensible in the light of what is happening in the television andtransfer markets; we have to explore all means of maintaining the quality of theplaying and coaching staff. Allegations of greed or short-termism miss thepoint: any money generated by these games is made available to the manager forplayers. All the benefits of our policy to spread the brand accrue to thefootball division, no-one else. As for exhausting the players, they areprofessional athletes, and the coaching staff are best placed to judge what isacceptable in their management of resources. We have also continued our work to eradicate objectionable behaviour at CelticPark and, so far as it is in our power to do so, at other football grounds whereCeltic play. I believe that the scope of our activities is not appreciatedfully; and that this work is proving effective. Sectarian and other offensivesongs and chants have all but disappeared at home matches, and we have madeproposals to the Scottish Premier League, to other SPL teams and to policeforces to try to eradicate such behaviour at away games. We have always beenserious about this. It costs Celtic a substantial amount of money to monitorcrowd behaviour in the form of additional stewarding, policing and CCTV cameras;but we consider it our duty to do so and will continue these activities in a waythat eliminates discriminatory behaviour, without removing the passion andexcitement that comes from following Celtic Football Club. Our support is amongst the best in the world and I have no hesitation in sayingso every year. Average home attendance in our league games last season was over58,000, the second highest in the UK. Season ticket sales of all kind exceeded53,000, a level we expect to be maintained this season. Celtic supporters alsoaccount for over half of total attendance at many of our SPL away matches. OurClub is always in demand for friendly and testimonial matches because of thenumbers we bring. The Celtic diaspora has expanded as we have re-establishedourselves in European football in recent years. Participation in the UEFAChampions League group stage this season will, I trust, add to the reputation ofour Club. It will, obviously, also add to our revenues and should therefore contribute toour financial performance generally. We begin the football year with a strongfinancial position, an experienced and well-qualified Board of Directors andexcellent management and staff. The rebuilding of the first team squad is welladvanced and our youth development programme is delivering positive results. Ifeel confident that the success story of recent years will be further extended. Brian Quinn CBEChairman 16 August 2006 CHIEF EXECUTIVE'S REVIEW There's never a dull moment at Celtic and this past 12 months have been moreexciting and eventful than most. We regained the Bank of Scotland Premierleaguetitle by a huge margin, sealing the Championship against our closest rivalsHearts several weeks before the end of the season. We also won the CIS InsuranceCup, defeating Dunfermline in convincing style at Hampden. To counterbalance the highs there were some disappointing lows too, falling atthe first hurdle in the UEFA Champions League qualifying stages even before thedomestic season had got underway and being knocked out of the Tennent's ScottishCup by an impressive young Clyde team. Following the disappointment of our European defeat at the hands of ArtmediaBratislava, Gordon Strachan and his new management team bounced back to achievedomestic success with a developing and transitioning squad. Garry Pendrey andJim Blyth, who had worked with Gordon previously, together with Tommy Burnsbrought their considerable wealth of coaching experience to Celtic. The passing of Celtic's Greatest Ever Player Jimmy Johnstone in March saddenedeverybody associated with the Club. His funeral and the tributes which followedwere extremely moving. They demonstrated the enormous respect and affectionJimmy enjoyed and that this magnificent institution of Celtic is far more than afootball club. FINANCIAL PERFORMANCE The Club's reported retained loss of £4.22m re-emphasises the ongoing challengewe face in matching football success with financial stability. Nevertheless, itrepresents a significant improvement on 2005 and represents a most encouragingperformance, particularly in view of the lack of European football and our earlyexit from the Tennent's Scottish Cup. Group turnover has reduced by £4.76m, 7.7% to £57.41m from 2005, largely as aresult of playing three fewer home games due to our early exit from Europe. Inthe current year, turnover continued to benefit from the healthy take-up ofstandard season tickets, together with the opening of new retail stores. Operating expenses, excluding exceptional operating costs, have reduced by£4.39m, 7.6% to £53.67m, predominantly due to prudent cost control throughoutthe business. Exceptional operating expenses at £0.58m are mainly a result of accelerateddepreciation on player values, whereas last year's figure of £2.96m reflectedthe costs incurred in the early termination of certain players' contracts.The amortisation charge of £5.10m is down by 31% on last year, demonstrating thereduced carrying value of the first team squad and continued decline in thevalue of transfer fees paid in recent years. FOOTBALL INVESTMENT The highest profile player arriving at the Club over the last 12 months was RoyKeane, himself a big Celtic fan and one of the true greats of the game, whojoined from Manchester United in January. Unfortunately Roy was only with us forsix months before long-term injury curtailed his playing career, but he madequite an impression during his short stay. Other new signings during the year included Maciej Zurawski, Artur Boruc, AdamVirgo, Shunsuke Nakamura, Paul Telfer, Mo Camara and Mark Wilson. Since the endof the season Derek Riordan, Kenny Miller, Jiri Jarosik, Gary Caldwell andEvander Sno have been recruited. Jeremie Aliadiere and Du Wei had short spells on loan at the Club during the2005/6 season, whilst Dion Dublin joined on a short-term contract, which came toan end in June. Contracts were extended for a number of first team players including StilianPetrov, Neil Lennon, Stanislav Varga, Paul Lawson, Stephen McManus and ShunsukeNakamura. High profile player departures this year have included Chris Sutton and JohnHartson, who had been great servants for Celtic. During the summer of 2005 PaulLambert, Rab Douglas, Jackie McNamara, Ulrik Laursen, Magnus Hedman, DavidFernandez and Joos Valgaeren left the Club as did Didier Agathe in January. The intent of the Celtic Board is to achieve a managed ratio between turnoverand labour costs. Ongoing financial controls are in place to ensure that labourcosts are maintained at a manageable level, particularly in relation toturnover. It is acknowledged that the football sector remains financiallydifficult, although there is a desire to assist in delivering on-field success.The ability to field a competitive side and retain control on costs remains achallenge. The player trading activity completed during the last year hasreflected such a balanced approach and this will be continued as theorganisation moves forward. During this time, employment contracts have includeda greater element of performance related pay. It is planned that this policy beextended and that a greater proportion of remuneration be based on footballsuccess. The biggest challenge facing your Board remains the management ofsalary and transfer costs, whilst achieving playing success in order to yieldsatisfactory financial return. The decision to appoint Ray Clarke as our Head of International Scouting stemmedfrom a desire to expand the search for new footballing talent overseas. Elevennew scouts were taken on during the last financial year, both in England and onthe Continent, and their efforts are already showing encouraging signs. Overall, the realignment of the first team squad over the last year has resultedin a meaningful reduction in labour costs. FOOTBALL OPERATIONS In winning the SPL Championship and CIS Insurance Cup, Celtic played 45competitive matches in total during the 2005/6 season, winning 33 and losingjust 5, with 7 matches drawn. It is also pleasing to see our first teamcommended again this year by the SFA for its conduct on the field, finishing infirst place for the second successive year in the SFA's annual disciplinaryanalysis. Celtic's reserve side won the SPL Reserve Championship for the fifth year insuccession, playing 22 matches and losing just 3. In another highly successful year, Celtic's Under 19 side won their championshipfor the fourth year in a row, retained the SFA Youth Cup, won the ArcobalenoYouth Tournament in Italy and had 6 of the 22 Scotland Under 19 squad members atthe recent European Championships where Scotland reached the final. The 6 wereRyan Conroy, Scott Cuthbert, Simon Ferry, Scott Fox, Charles Grant and MichaelMcGlinchey. In advance of the start of the new season, the first team for the third time inrecent years undertook a pre-season tour to North America, playing threematches. This and our pre-season visit to Poland assists in expansion of theClub and brand on a global basis. In addition, a further match against YokohamaF. Marinos was played in Japan on 3 August, increasing the Club's profile inJapan following the signing of Shunsuke Nakamura last year. TICKET SALES Standard Season Ticket sales reached a record 50,595 for the year, generatingincome of £17.06m. In addition 100,506 tickets were sold for home SPL matches ata net value of £1.93m. All SPL matches at Celtic Park were virtually sold out, with a total of over 1.1million spectators attending SPL fixtures here during the season, an averageattendance of 58,193. Supporters are now able to purchase tickets from a varietyof sources including a 24 hour telephone line, on-line through the website aswell as directly from the Ticket Office. Following a successful pilot in the North West Lower corner stand, the SkidataSMART Card System has been introduced to the stadium's 105 turnstiles. For thenew season all season ticket holders have been issued with a SMART card. Thissignificant financial investment by the Club will deliver a major safetymanagement improvement, which will benefit all spectators visiting Celtic Park. YOUTH DEVELOPMENT Over 2.5 million lottery chances were sold under the various schemes operated byCeltic Development Pools during the period, with donations of over £1m made tothe Club for the purposes of youth development. A similar sum was paid out inprize money to Celtic supporters from all over the country, an impressiveachievement in light of the challenging times facing small lotteries operated inthe UK. The Paradise Windfall matchday draw, with a top prize of £7,000, enjoyed strongaverage sales during the year despite there being fewer matches as a consequenceof our early exit from Europe and the Scottish Cup. Next season will see the topprize rise to £7,500. 2005 also saw the launch of Celtic World Lotto, a new on-line marketing referralsyndicate scheme based on the National Lottery and Euromillions lottery. Itallows supporters from around the world, who cannot participate in Celtic Poolsdomestic lotteries, the opportunity to support Celtic Youth Development. In May, work commenced on the new state of the art Celtic Sports Academy andTraining Centre in Lennoxtown, which is scheduled to be operational for the 2007/8 season. It is envisaged that this will result in an increase in homegrowntalent, building on the tremendous success our youth teams have enjoyed overrecent years. CELTIC FOUNDATION During the year, the Club decided to consolidate its community work under thenew title of the Celtic Foundation. This important step will enable Celtic'srange of community-related activities to receive greater focus and improvedco-ordination. The Foundation will incorporate football in the community and community coachingprogrammes across both domestic and international markets, anti-bigotryinitiatives, including anti-racism and anti-sectarianism, Celtic Charity Fund,Celtic Learning Programmes and the Learning Centre, the Old Firm AllianceProject, Celtic Against Drugs and the Support Employment initiative. The new structure is indicative of the importance Celtic attaches to its role inthe community. The Foundation will be working alongside key partners to deliveron policy direction set by the Scottish Executive CELTIC IN THE COMMUNITY Celtic In The Community has developed into one of the leading community footballservices in the UK since its inception in June 2003. It provides a coaching anddevelopment programme to meet the needs of children, teenagers and adults. Therange of products and services has grown considerably during this time,providing greater opportunities for all sectors of the community. The Celtic inthe Community Programme has to date attracted over half a million young peopleand adults from across some of Scotland's most deprived areas. Celtic remainscommitted to the Programme and has invested significantly in recruiting anddeveloping over 100 community coaches. The Celtic In The Community Programme also provides a potential pathway into ourYouth Academy, with over 200 youngsters invited into the Development CentreProgramme, five of whom have already graduated to the elite Academy itself. InIreland the Community Programme has become firmly established in partnershipwith Topflight Soccer with over 2,000 youngsters attending courses. Internationally, Celtic In The Community has delivered courses in Canada,Germany and Cyprus and has organised coaching clinics in Boston, Seattle,Michigan, Alabama and Melbourne. The reputation of the Club and its supportersprovides real potential to offer new programmes in a variety of languagesthroughout a number of international locations, a challenge the CelticFoundation will be embracing with relish. The Programme's track record isoutstanding with buy-in from the private, public and voluntary sectors. The Community Department has been instrumental in securing grant funding tosupport a number of meaningful projects tackling health issues, unemployment,education, antisocial behaviour and social inclusion. MERCHANDISING This year was the first of the new NIKE contract and saw the successful launchof a new home kit in July 2005 and record sales of NIKE training product. Ourretail store at Glasgow International Airport generated record income per squarefoot sales at the kit launch. Merchandise turnover for the year reached £14.34m, around 42.5% up on lastyear's figure of £10.06m, despite playing fewer home games. This year saw the Celtic home shopping business transfer to Kitbag Limited, whooperate equivalent services for Manchester United, Chelsea and Barcelona.Despite some teething troubles, we are confident this arrangement will give usthe capacity to cope far better with demand going forward and offer a betterservice to our customers. We opened new Celtic retail stores in Coatbridge, Clydebank and Stirling,bringing the total number to 14 across Scotland and Ireland. In addition weoperate concessions within Debenhams department stores in Glasgow, Inverness andAyr, and a further concession recently opened in Debenhams in Newry. The flagship Celtic Superstore has undergone a major refit and re-opened in midJuly with the latest NIKE concept store look, whilst the new international whiteaway kit enjoyed a successful launch in July 2006. MULTIMEDIA Season 2005/06 saw a change of publisher, with CRE8 now working with the Club onproducing the Celtic View and the matchday programme. Both publicationsincreased in pagination - the Celtic View to 72 pages and the matchday programmeto 64 pages. In August 2005, the Celtic View celebrated its 40th anniversary, confirming itsposition as the oldest weekly club publication in football. The high standard ofdesign and production was maintained and enhanced further by our new publishersas we chronicled another successful season, and the Celtic View maintained itsposition as the best-selling weekly club magazine in British football. We have developed our Celtic TV relationship with Setanta and moved from jointventure to a licensed agreement, over which Celtic has retained editorialcontrol. Overseas subscriptions to Celtic's Channel 67 Online+ service rose to over 2,000per month, whilst the UK and Ireland service, Channel 67, held up well despitethe further advance of Celtic TV. The Multimedia team produced several successful official events including theNeil Lennon Dinner, John Clark Dinner, Player of the Year Dinners in Glasgow andin Dublin, and the AGM. We have also produced DVDs for News International as part of a sponsorship deal,as well as end of season DVDs for the domestic and Japanese markets amongstothers. PUBLIC RELATIONS During the period, media coverage of Celtic-related issues has generally beenpositive. Major media highlights of the season included the SPL Championshipvictory and associated coverage, the sad passing of Jimmy Johnstone and thesigning of Roy Keane. Clearly, on the negative side, failure to make the UEFA Champions League groupstage was a major media issue and the Club received substantial criticism in thepress. The coverage achieved by Celtic's Public Relations department for events such askit launches, new merchandise, retail outlet openings, sponsorship announcementsand a range of Club initiatives has been excellent. The passing of Jimmy Johnstone, as well as being a very sad event for everyoneconnected to Jimmy, his family and the Club, also developed into one of thelargest media events which Celtic has ever known. PARTNER PROGRAMME NIKE's first year as exclusive Club kit manufacturer has been a success, helpinggrow the global brand awareness of the Club. Other positive partnershipdevelopments during the year included the extension of our contract withT-Mobile as well as the retention of key long-standing partners Carling, MBNA,Ladbrokes and Phoenix. The announcement of Thomas Cook as the Official Travel Partner of CelticFootball Club will give fans improved access to matchday breaks as well asconsolidating responsibility for all international travel for the team andofficials. Largely as a consequence of signing Shunsuke Nakamura, our focus on the Japanesemarket has enabled us to secure a number of productive new business deals. Thesehave included services such as broadband, 3G and DVD, as well as yielding manysponsorship opportunities. This remains an important focus of attention for 2006/07. New online partners and international sponsors will help secure our incomestreams during the season ahead. STADIUM During the course of the year, Celtic worked in close liaison with the GlasgowCity Council Safety Team for Sports Grounds to enhance the management of safetywithin the stadium. The Club views this partnership approach as key to spectatorsafety. A total smoking ban was introduced at the stadium on 26 March to comply withnational legislation. The SMART Card System is designed to improve ease of access to the stadium whileproviding those responsible for public safety duties with the latest technologyavailable in monitoring spectator movement. The Club will continue to place spectator safety as its highest priority. FACILITIES A number of customer hospitality areas were refurbished and upgraded during theyear, including the South Stand boxes and Kerrydale reception and functionsuite. A new wireless hearing system was installed for the visually impairedsupporters group. In terms of Health and Safety, audits were carried out in respect of fireassessment and the Disability Discrimination Act and a programme of actionsimplemented. CATERING AND CORPORATE HOSPITALITY The partnership with Lindley, who provide our concourse catering, continues towork well. Seasonal hospitality sales remained encouraging despite the shortfall inEuropean and Scottish Cup home games, whilst Conference and Banqueting andNumber 7 Restaurant sales were ahead of last year. Number 7 was particularlysuccessful for special events, including St Valentine's Day, Mothering Sundayand Father's Day, while the newly refurbished Kerrydale Suite hosted a string ofsuccessful conferences, events and dinners. The number of visitors to the Visitor Centre was well ahead of the previous yearat just under 20,000, generating additional revenue for the Club. SUPPORTER RELATIONS A new Customer Relationship Management (CRM) database is under construction,which will record all supporter, partner and customer transactions with theClub. This will enable us to provide an improved service to supporters andreward those who contribute most to the Club. WORK WITHIN THE LOCAL COMMUNITY Celtic was delighted to launch the new Celtic Learning Centre at Celtic Park inMay 2006. Built in association with Glasgow City Council, the Centre willprovide invaluable support to improve the education of young people throughoutthe region. 1,175 local school children benefited from participating in Celtic EducationProgrammes during the year, with a success rate of 83% on the reason forreferral. This brings the total to a remarkable 2,794 since the Programmes werelaunched back in April 2004. In addition, 50 primary school pupils took part inCeltic Learning's literacy support classes this year and 48 secondary pupilstook part in our web design lessons. CELTIC CHARITY FUND Celtic Charity Fund, the Club's charitable arm, again enjoyed a highlysuccessful year, raising thousands of pounds for a range of worthy causes. Thehighlight of the year was the Celtic Charity Fund Sporting Dinner, held atCeltic Park. Attended by the football management team, Directors and first teamplayers, the event was a tremendous success. The SOS Children's VillagesCampaign was the principal beneficiary but numerous other organisationsbenefited from support during the course of the year. HUMAN RESOURCES Celtic was awarded the "Positive About Disabled People" symbol by Job CentrePlus during the year in recognition of working towards fulfilling itscommitments to colleagues and job applicants with a disability. Over 90 pupils from local schools enjoyed a week of structured work experienceat Celtic Park during the year. The hard work and contribution of all colleagues in another challenging butsuccessful year is once again greatly appreciated. SUMMARY AND OUTLOOK Much progress was achieved in the current year in improving the financialposition of Celtic. A year on year reduction in the retained loss of £4.48mrepresents a real step in the right direction. Equally, it is acknowledged thatthe football sector remains financially difficult. However, trading at thebeginning of the new financial year has been encouraging. Seasonal sales ofstandard, premium and corporate tickets are at levels comparable with last yearand the launch of the new international kit has been very successful. Additionalrevenue streams and new commercial contracts have boosted income and a moreacceptable cost structure has given us the basis of a sustainable business modelgoing forward. Celtic continues to enjoy relationships with a number ofinternational companies, including NIKE, Carling, T-Mobile, MBNA, Thomas Cookand Kitbag, which together with the revenues generated from our partnerprogramme secure a sizeable proportion of our income streams going forward. Inaddition, a new 4 year domestic television contract has been secured by the SPL,which will provide year on year incremental revenue. In the short term we can look forward with optimism to reaping the rewards oflast season's domestic success though our guaranteed participation in thelucrative group stage of the UEFA Champions League. This participation allows usto compete with the best teams in Europe, but also provides revenues which allowmuch greater flexibility in the transfer market. The playing squad has beenstrengthened during the close season and further recruitment is planned. Further forward, implementation of the new scouting network has given Celticbetter coverage than ever before throughout Europe. Our Academy continues to produce quality players and, together with ourstrenuous efforts to retain and recruit the best, we plan to have a strong,balanced team capable of competing domestically and in Europe. In addition, itis planned to continue the success achieved in recent years with a number of theinternally generated youth players establishing themselves in the first team.The completion of the new training academy at Lennoxtown should augment thisprocess in future years. These initiatives, together with the reduction alreadyachieved in football labour costs and the continued planned reduction inamortisation costs will result in a cost base and financial position that issustainable. Our objectives are to secure domestic football success and to ensure UEFAChampions' League football at Celtic Park on an annual basis. Peter T Lawwell 16 August 2006Chief Executive GROUP PROFIT & LOSS ACCOUNT 2006 2005 As restated Operations Player Total excluding player trading trading £000 £000 £000 £000 Notes TURNOVER -group andshare of jointventure 57,859 - 57,859 62,636 LESS SHARE OFJOINT VENTURE (448) - (448) (468) ------- ------- ------- -------- GROUP TURNOVER 2 57,411 - 57,411 62,168 OPERATINGEXPENSES (53,674) - (53,674) (58,068) ------- ------- ------- -------- PROFIT FROMOPERATIONS 3,737 - 3,737 4,100 EXCEPTIONALOPERATINGEXPENSES 3 (179) (400) (579) (2,957) AMORTISATIONOF INTANGIBLEFIXED ASSETS - (5,095) (5,095) (7,340) ------- ------- ------- -------- GROUPOPERATINGPROFIT/(LOSS) 3,558 (5,495) (1,937) (6,197)LESS SHARE OF - - - -OPERATING PROFIT IN ------- ------- ------- --------JOINT VENTURE TOTALOPERATINGPROFIT/(LOSS) 3,558 (5,495) (1,937) (6,197) LOSS ONDISPOSAL OFINTANGIBLEFIXED ASSETS - (265) (265) (139) LOSS ONDISPOSAL OFTANGIBLE FIXEDASSETS (250) - (250) (103) ------- ------- ------- -------- PROFIT/(LOSS)BEFOREINTEREST ANDTAXATION 3,308 (5,760) (2,452) (6,439) ======= ======= INTEREST PAYABLEBANK LOANS ANDOVERDRAFTS (999) (1,294)NON EQUITYSHARES 4 (771) (973) ------- -------- LOSS ONORDINARYACTIVITIESBEFORETAXATION (4,222) (8,706) TAXATION ONLOSS ONORDINARYACTIVITIES 5 - - ------- -------- LOSS FOR THEYEAR (4,222) (8,706) ------- -------- RETAINED LOSSFOR THE YEAR (4,222) (8,706) ------- -------- LOSS PERORDINARY SHARE 6 (7.19p) (28.27p) DILUTED LOSSPER SHARE 6 (7.19p) (28.27p) All amounts relate to continuing operations. There were no gains or losses recognised in 2006 or 2005 other than the loss forthe year. GROUP BALANCE SHEET 2006 2005 As restated Notes £000 £000 £000 £000FIXED ASSETSTangible assets 49,924 48,983Intangible assets 7,593 5,253Investment in joint venture: ------- ------Share of gross assets in - 487joint ventureShare of gross liabilitiesin joint - (487)venture ------- ------Share of net assets - - ------- ------ 57,517 54,236 CURRENT ASSETSStocks 1,901 1,987Debtors 5,029 4,633Cash at bank and in hand 2,914 171 ------- ------ 9,844 6,791 ======= ======CREDITORS - Amountsfallingdue within one year (15,481) (14,078) Income deferred lessthan one year (12,589) (11,234) ------- ------ (28,070) (25,312) ======= ====== NET CURRENT LIABILITIES (18,226) (18,521) ------- ------ TOTAL ASSETS LESSCURRENT LIABILITIES 39,291 35,715 CREDITORS - Amounts fallingdueafter more than one year (17,194) (23,987) ------- ------ NET ASSETS 22,097 11,728 ======= ====== CAPITAL AND RESERVESCalled up share capital(includes 23,450 22,948non-equity)Other reserve 21,222 21,222Share premium account 14,089 -Capital redemption reserve 1,739 1,068Profit and loss account (38,403) (33,510) ------- ------ SHAREHOLDERS' FUNDS 7 22,097 11,728 ======= ====== Approved by the Board on 16 August 2006 GROUP CASH FLOW STATEMENT 2006 2005 £000 As restated £000RECONCILIATION OF OPERATING LOSS TO NETCASH INFLOW FROM OPERATING ACTIVITIES Operating loss (1,937) (6,197)Depreciation 1,798 1,627Amortisation of intangible fixed assets 5,095 7,340Provision for impairment of intangible fixed assets 400 1,402Decrease / (increase) in stocks 86 (224)(Increase) / decrease in debtors (308) 584(Decrease) / increase in creditors and deferred income (159) 669 ---------- ---------- Net cash inflow from operating activities 4,975 5,201 ========== ========== CASH FLOW STATEMENT Net cash inflow from operating activities 4,975 5,201Returns on investments and servicing of finance (Note (1,520) (1,848)9)Capital expenditure and financial investment (Note 9) (6,869) (4,507) ---------- ---------- Cash outflow before use of liquid resources andfinancing (3,414) (1,154) Financing (Note 9) (8,393) 954Net proceeds of equity share capital 14,550 - ---------- ---------- Increase / (decrease) in cash 2,743 (200) ========== ========== RECONCILIATION OF NET CASH FLOW TOMOVEMENT IN NET DEBT (Note 8) Increase / (decrease) in cash in the year 2,743 (200)Cash (inflow) / outflow from movement in debt 8,393 (954) ---------- ---------- Change in net debt resulting from cash flows 11,136 (1,154)Non cash movement in debt (210) (373) ---------- ----------Movement in net debt in the year 10,926 (1,527) Net debt at 1 July (24,891) (23,364) ---------- ---------- Net debt at 30 June (13,965) (24,891) ========== ========== NOTES TO THE ACCOUNTS 1. ACCOUNTING POLICIES The Financial Statements are prepared under the historical cost convention andcomply with applicable accounting standards. The Financial Statements have been prepared on the same basis and using the sameaccounting policies as those used in the Financial Statements for the year ended30 June 2005 save for the implementation of the presentational aspects of FRS 25("Financial Instruments: disclosure and presentation") in the preparation ofthese annual results. Under FRS 25 the Group's Preference Shares and ConvertiblePreferred Ordinary Shares, as compound financial instruments, have beenreclassified as a combination of debt and equity and non-equity dividendsreclassified as interest with a resultant reduction in Shareholders' Funds.Consequently, net assets of the Group at 30 June 2006 are reported £3.81m belowthat which would have been reported prior to the implementation of FRS 25. As aresult of the differing accounting treatment of the Convertible PreferredOrdinary Share dividends under FRS 25, there is a requirement under the capitalmaintenance provisions of the Companies Act 1985 to transfer an element ofdistributable reserves into a capital redemption reserve. The comparatives forthe twelve months to 30 June 2005 have been restated to reflect the requirementsof FRS 25 and the Companies Act 1985. The Group's Profit and Loss Account follows the Financial Reporting Guidance forFootball Clubs issued in February 2003 by The Football League, The FA PremierLeague and the FA, although the turnover within Note 2 continues to be analysedin accordance within the headings of the business operations of the Group. 2. TURNOVER Turnover in respect of the five business operationscomprised: 2006 2005 £000 £000 Professional football 26,659 31,432Multimedia and communications 11,889 16,604Merchandising 14,337 10,060Stadium enterprises 2,779 2,536Youth development 1,747 1,536 ---------- ---------- 57,411 62,168 ---------- ----------3. EXCEPTIONAL OPERATING EXPENSES The exceptional operating expenses of £0.58m (2005: £2.96m) incorporated in theProfit and Loss account reflect £0.18m in respect of labour costs largelyarising as a result of the early termination of certain player contracts and£0.40m in respect of a provision for impairment of intangible fixed assets. Lastyear's costs of £2.96m reflected £1.56m of labour costs and other ancillaryexpenses and £1.40m in respect of a provision for impairment of intangible fixedassets, largely arising as a result of the early termination of certain playercontracts 4. DIVIDENDSA 6% (before tax credit deduction) non-equity dividend of £544,000 is payable on31 August 2006 to those holders of Convertible Cumulative Preference Shares onthe share register at 4 August 2006, together with the amount due in respect ofthe Convertible Preferred Ordinary Shares fixed dividend of 4% of £900,622(2005: £900,622) to those holders on the share register at 30 June 2006. Anumber of shareholders have elected to participate in the Company's scripdividend reinvestment scheme for this financial year. Those shareholders willreceive new Ordinary Shares in lieu of cash. Following the implementation of thepresentational aspects of FRS 25 ("Financial Instruments: disclosure andpresentation") in the preparation of these annual results the Group's PreferenceShares and Convertible Preferred Ordinary Shares, as compound financialinstruments, have been reclassified as a combination of debt and equity and theattributable non-equity dividends reclassified as interest. 5. TAXATION No provision for corporation tax or deferred tax is required in respect of theyear ended 30 June 2006. Estimated tax losses available for set-off againstfuture trading profits amount to approximately £44m (2005: £42m). This estimateis subject to the agreement of the current and prior years' corporation taxcomputations with the HM Revenue and Customs. 6. LOSS PER SHARE The loss per share has been calculated by dividing the loss for the period of£4.22m (2005: £8.71m as restated) by the weighted average number of OrdinaryShares of 58.76 million (2005: 30.80 million) in issue during the year. Thediluted loss per share has been calculated using the same figures as the basiccalculation. No account has been taken of share purchase options, as thesepotential ordinary shares are not considered to be dilutive under thedefinitions of the applicable accounting standards. 7. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group 2006 2005 £000 As restated £000 At 1 July 11,728 20,434 Movements in year:Issue of ordinary share capital 14,591 -Retained loss for the year (4,222) (8,706)) ---------- ---------- At 30 June 22,097 11,728 ---------- ---------- At 30 June 2006 Non-Equity Shareholders' Funds, defined in accordance with FRS4,amounted to £23.08m (2005: £23.08m). This relates to the Convertible PreferredOrdinary Shares, the Convertible Cumulative Preference Shares and the associatedaccrued dividends. 8. ANALYSIS OF NET DEBT At Cash Non-cash Movement At 1 July 2005 Flow in Debt 30 June 2006 £000 £000 £000 £000 Cash at bank and in 171 2,743 - 2,914hand -------- -------- -------- ---------- 171 2,743 - 2,914 -------- -------- -------- ---------- Debt due within 1 (1,075) 10 (1,065)yearDebt due after 1 year (23,987) 8,383 (210) (15,814) -------- -------- -------- ---------- (25,062) 8,393 (210) (16,879) -------- -------- -------- ---------- Net debt (24,891) 11,136 (210) (13,965) -------- -------- -------- ---------- 9. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT 2005 2006 As restated £000 £000 Returns on investments and servicing of financeDividends paid (521) (554)Interest paid (999) (1,278)Interest element of hire purchase payments - (16) ---------- ---------- Net cash outflow from returns on investments and (1,520) (1,848)servicing of finance ---------- ----------Capital expenditure and financial investmentPayments to acquire tangible fixed assets (3,035) (1,966)Payments to acquire intangible fixed assets (4,477) (2,891)Proceeds from sales of intangible fixed assets 643 350 ---------- ---------- Net cash outflow from capital expenditure and (6,869) (4,507)financial investment ---------- ----------FinancingLoans (paid) / received (8,383) 956Loan instalments paid (10) (2) ---------- ---------- Net cash (outflow) / inflow from financing (8,393) 954 ---------- ---------- 10. ANNUAL REPORT & ACCOUNTS Copies of the annual report & accounts together with the notice and notes of the2006 AGM are expected to be issued to all shareholders during September. The financial information set out above was approved by the directors on 16August 2006 and does not constitute the Company's statutory accounts for theyears ended 30 June 2006 or 30 June 2005. The auditors' opinion on the 2006statutory accounts is unmodified and does not include a statement under Section237 (2) or (3) of the Companies Act 1985. The statutory accounts for 2005 havebeen filed and those for 2006 will be delivered to the Registrar of Companies indue course. This information is provided by RNS The company news service from the London Stock Exchange