Celtic Regulatory News (CCP)

21 Feb 2006 17:37

Celtic PLC21 February 2006 21 February 2006 Celtic plc INTERIM RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2005 SUMMARY OF THE RESULTS OPERATIONAL HIGHLIGHTS • Lead the Bank of Scotland Scottish Premierleague by 13 points. • Success in reaching the final of the CIS Insurance Cup. • 15 home matches played at Celtic Park in the period (2004:16). • Training academy project progressing with outline planning permission obtained in respect of the Lennoxtown site. • Successful launch of new playing kits following the commencement of the new kit agreement with NIKE on 1 July 2005. • Extension of Carling shirt sponsorship contract until 2010. FINANCIAL HIGHLIGHTS • Successful issue of 50m 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 FRS 25, requiring the restatement of prior period comparatives. • Group turnover decreased by 15.2% to £33.04m (2004: £38.98m). • Operating expenses reduced by 4.2% to £29.54m. • Profit from operations of £3.50m (2004: £8.15m). • Loss before taxation of £0.96m (2004: profit of £1.55m). • Period end bank debt of £8.74m (2004: £17.38m). • Investment of £6.55m (2004: £1.99m) in acquisition of intangible fixed assets. For further information contact: Brian Quinn, Celtic plc Tel: 0141 551 4235Peter Lawwell, Celtic plc Tel: 0141 551 4235Alex Barr, Big Partnership Tel: 0141 333 9585 CHAIRMAN'S STATEMENT The financial results for the half-year ending on 31 December 2005 weresignificantly affected by three factors: the adoption of new accounting standardFRS 25, whereby the reporting of our capital structure and dividends was alteredin the group accounts, the Club's early departure from European footballcompetition and the share issue completed in December. 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 £4.8m lower, net debt £4.6m higher and interestcharges £374,000 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. It is very difficult to make an accurate estimate of the effect of our exit fromEuropean competition at the first hurdle. Nevertheless it clearly had a bigimpact on income from ticket sales, down by £3.9m (21%), and revenues frommultimedia and communications, which were lower by £5.5m (49%), as compared withthe same period a year ago. Total turnover for the period, of £33.04m, was £5.9mlower (15%). Despite the overall drop in total revenues, income from merchandising grew by aremarkable 48% to £9.6m, reflecting the move to NIKE as supplier of Celtic kit.Future orders appear to suggest that this early success will be maintained inwhat continues to be a very competitive sector. Operating costs were 4.2% lower than last year, principally in the form of lowerwages and salaries in the football division, which fell by over £3m. This isexplained not only by the departure of several of the more highly paid playerslast summer, but also by a conscious effort by management of the group to bringthe cost of the first team to a sustainable level. We believe we are well on theway to that position now. The summer departures also largely resulted in a 34%reduction in the amortisation charge. For a number of years we have carriedsignificant costs on this item and, with the change in the football market andplayer policy, we are hopeful that the bulk of this element of expenditure isnow behind us. Whereas in the comparable period last year the group recorded an operatingprofit of £2.9m and an (adjusted) pre-tax profit of £1.5m, the correspondingfigures for the half-year ending 31 December 2005 were an operating profit of£74,000 and a pre-tax loss of £961,000. Profit from operations, which excludesamortisation charges, amounted to £3.5m, compared to £8.1m a year ago. Gordon Strachan is performing exceptionally well in his first season as CelticManager. The magnitude of the task awaiting him when he arrived last summer has,in my view, been greatly underappreciated. He succeeded a very successful,charismatic leader. He faced the need to rebuild one of Celtic's best-eversquads as many of the players, for various reasons, left Celtic Park. He set outto fill the vacancies with younger, often locally developed players. He wasobliged to work within a budget significantly more restricted than hispredecessor. And he was expected to do all these things while continuing to wintrophies at home and to perform well in Europe. Almost one third of the first team squad had to be replaced before the seasonbegan. It is hard to imagine that any sport or business, having this proportionof turnover in its staff, could do more than tread water for a time. Our earlyexit from Europe clearly illustrated the point that time is needed to recruitand weld together a new football squad. To his great credit, Gordon did not loseheart, but got on with the job and has led the team to a healthy lead in the SPLand to the CIS Cup Final. The encouragement he gets from the Celtic support isan important factor in this success and I urge all our fans to show theirbacking, game by game, for his efforts. Further steps were taken during the January transfer window to strengthen theteam. Roy Keane joined us on a free transfer and adds top-level experience andclass to the squad. Mark Wilson and Dion Dublin were also signed, the former ona longer-term contract, the latter as cover in both attack and defence. With thearrival of Kenny Miller and Gary Caldwell secured for the end of the season andother possibilities in the summer, the objective of rebuilding the team is wellon the way to being accomplished. We believe this strengthening has been achieved through foresight and planningrather than by the scramble that the transfer windows have become. Whatever theoriginal motives behind this restriction on clubs' freedom of action, the frenzyof buying and selling- particularly in the closing days of the windows - cannotdeliver an orderly market, where transfer fees and wages reflect true values.The football authorities should ask themselves whether good management andfinancial common sense are being delivered by the transfer windows; and whobenefits most from them - clubs, players or agents. Our scouting and youth development arrangements continue to expand. The newscouting team established by Ray Clarke will yield dividends in the form of newplayers from the UK and abroad. Several members of our reserve and under-19teams have stepped up to the senior squad and, despite this, these teamscontinue to carry all before them. Gordon Strachan keeps a close eye on ouryounger players and has shown himself ready to give them their chance in thefirst team squad. We continue to make steady progress to improve our training and developmentfacilities. Outline planning permission to establish new training grounds atLennoxtown has been granted, and the definition of the scope and nature of thefacilities has now moved to the level of detail. We believe the arguments for such a facility are virtually self-evident. First,a club of Celtic's size and stature should expect to provide its players andsupport staff with high-quality facilities. Top businesses do not hesitate toplace their staff in modern, well-equipped buildings, with up-to-datetechnology. Otherwise they would handicap themselves in recruiting and retainingthe staff they need to maintain their competitive position. Secondly, the newfacilities should be designed to be cost-effective. The job of doing therelevant calculations may be more difficult in football, but it must be done,however approximately, if scarce resources are not to be squandered. In December, with the overwhelming support of our shareholders, we moved ourstock exchange listing from the full list to AIM and completed a new share issuewith the object of enabling us to carry forward the improvements ininfrastructure mentioned above. The offer for subscription was over-subscribedby 30% and the total issue raised some £15m, two thirds of which will be usedfor football development and one third to retire debt. Over one thousand newshareholders were added to the share register and we now have almost 24,000ordinary shareholder accounts, with over 20,000 having 1,000 shares or less.Celtic therefore continues to enjoy the financial backing of its full supporterbase. The introduction of FRS 25 this year, the effects of which are explained above,makes the timing of the share issue especially apposite. Despite thereclassification of a significant amount of capital as debt rather than asshareholders' funds, our net debt was reduced from an equivalent £22.5m at end -2004 to £13.3m at end - 2005. Of this, bank debt was £8.74m (2004: £17.38m). Ourfinancial position is strong. In my Chairman's Statement in the summer of 2004, I suggested that correctiveaction by SPL clubs in the face of severe financial pressures could bring aboutimprovements over time in the general quality of the game in Scotland. There aresome indications that this is beginning to happen. The dominance enjoyed byCeltic and Rangers is under weekly challenge. We welcome this change,recognising that Celtic has no natural right to prevail over other SPL teams. Weaccept that they will believe they can win any game, making for betterentertainment and greater excitement. It also means that they will feel betterable to adopt an attacking approach when they visit Celtic Park; and will nolonger see games against only Celtic and Rangers as occasions when a specialeffort is made. A levelling up of standards, rather than a levelling down,particularly when delivered by younger, locally developed players, augurs wellfor Scottish football. At present Celtic is in a financially strong position and doing well in domesticfootball. Although we have suffered setbacks in the last six months, we shouldremember that only the mediocre are always at their best. We have strengthenedthe balance sheet and have the means to finance the capital and developmentexpenditure which we believe is needed to extend the successes of recent years.Our objective of running the Club on a basis that is capable of being sustainedis, I believe, within reach. We are rebuilding the squad and relyingincreasingly on younger, locally trained footballers. Our Manager isdemonstrating the benefits of careful study of football strategy and tacticsduring his "sabbatical", prior to joining us. Should he need additional time topursue his ideas, he will get it. Our supporters value competitive successcombined with high quality football. I am confident our Board, management andfootball staff can deliver this result while keeping the Club in a healthy andsustainable position. Brian Quinn CBE 21 February 2006 INDEPENDENT REVIEW REPORT INDEPENDENT REVIEW REPORT TO CELTIC plc IntroductionWe have been instructed by the company to review the financial information forthe six months ended 31 December 2005, which comprises the Group Profit and LossAccount, the Group Balance Sheet, the Group Cash Flow Statement and the relatednotes. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with the terms of ourengagement. Our review has been undertaken so that we might state to the companythose matters we are required to state to it in this report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company for our review work, for thisreport, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the AIMRules of the London Stock Exchange which require that it must be prepared in aform consistent with that which will be adopted in the next annual accountshaving regard to the accounting standards applicable to such annual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 December 2005. PKF(UK) LLPRegistered AuditorsGlasgow, UK21 February 2006 GROUP PROFIT AND LOSS ACCOUNT 6 months 6 months 6months 6months 12 months to 31 to 31 to to to 30 December December 31 31 June 2005 2005 2005 December December Restated Unaudited Unaudited 2005 2004 Audited Unaudited Restated Unaudited Operations excluding player Player trading Trading Total Total Total £000 £000 £000 £000 £000 NotesTURNOVER - GROUP AND SHARE 33,351 - 33,351 39,226 62,636OF JOINT VENTURELESS SHARE OF JOINT VENTURE (312) - (312) (245) (468)GROUP TURNOVER 2 33,039 - 33,039 38,981 62,168OPERATING EXPENSES (29,535) - (29,535) (30,835) (58,068)PROFIT FROM OPERATIONS 3,504 - 3,504 8,146 4,100AMORTISATION OF - (3,430) (3,430) (5,229) (7,340)INTANGIBLE FIXED ASSETSEXCEPTIONAL OPERATING - - - - (2,957)EXPENSESOPERATING PROFIT / (LOSS) 3,504 (3,430) 74 2,917 (6,197)SHARE OF OPERATING LOSS IN - - - (262) -JOINT VENTURETOTAL OPERATING PROFIT / 3,504 (3,430) 74 2,655 (6,197)(LOSS)LOSS ON DISPOSAL OF - - - (47) (139)INTANGIBLE FIXED ASSESTSLOSS ON DISPOSAL OF TANGIBLE - - - - (103)FIXED ASSETSPROFIT / (LOSS) BEFOREINTEREST AND TAXATION 3,504 (3,430) 74 2,608 (6,439) NET INTEREST PAYABLE: 3BANK LOANS AND OVERDRAFT (661) (570) (1,294)NON EQUITY DIVIDENDS (374) (492) (973)(LOSS) / PROFIT ON ORDINARYACTIVITIES BEFORE TAXATION (961) 1,546 (8,706)TAX CHARGE ON ORDINARY 4ACTIVITIES - - -(LOSS) / PROFIT FOR THE (961) 1,546 (8,706)PERIOD RETAINED (LOSS) / PROFIT FOR (961) 1,546 (8,706)THE PERIOD(LOSS) / EARNINGS PER 5 (2.85p) 5.02p (28.27p)ORDINARY SHAREDILUTED (LOSS) / EARNINGS (2.85p) 2.68p (28.27p)PER SHARE 5 All amounts relate to continuing operations.There were no gains or losses recognised in any of the above results other thanthe loss for the period. GROUP BALANCE SHEET 31 December 31 December 30 June 2005 2004 2005 Restated Restated Unaudited Unaudited Audited Notes £000 £000 £000FIXED ASSETSTangible assets 49,082 49,251 48,983Intangible assets 6 8,124 8,757 5,253 57,206 58,008 54,236 Share of net liabilities in joint - (262) -venture Stocks 2,187 2,404 1,987Debtors 7 4,570 8,146 4,633Cash at bank and in hand 3,429 797 171 10,186 11,347 6,791 CREDITORSAmounts falling due within one year (13,431) (15,031) (14,078)Income deferred less than one year (11,301) (9,804) (11,234) NET CURRENT LIABILITIES (14,546) (13,488) (18,521) TOTAL ASSETS LESS CURRENT LIABILITIES 42,660 44,258 35,715 CREDITORSAmounts falling due after more than 8 (17,303) (22,274) (23,987)one year NET ASSETS 25,357 21,984 11,728 CAPITAL AND RESERVESCalled up share capital 9 23,449 22,948 22,948Other reserve 21,222 21,222 21,222Share premium 14,089 - -Capital redemption reserve 1,857 1,274 1,068Profit and loss account (35,260) (23,460) (33,510)SHAREHOLDERS' FUNDS 25,357 21,984 11,728Approved by the Board on 21 February 2006 GROUP CASH FLOW STATEMENT 6 months to 6 months to 12 months to 31 December 31 December 30 June 2005 2004 2005 Restated Restated Unaudited Unaudited Audited £000 £000 £000RECONCILIATION OF OPERATING PROFIT / (LOSS) TO NETCASH INFLOW FROM OPERATING ACTIVITIESOperating profit / (loss) 74 2,655 (6,197)Depreciation 852 788 1,627Amortisation 3,430 5,229 7,340Provision for impairment of intangible fixed - - 1,402assetsIncrease in stocks (200) (641) (224)(Increase) / decrease in debtors (12) (2,927) 584(Decrease) / increase in creditors (608) 240 669Net cash inflow from operating activities 3,536 5,344 5,201 CASH FLOW STATEMENTNet cash inflow from operating 3,536 5,344 5,201activitiesReturns on investments and servicing of (1,206) (1,124) (1,848)financeCapital expenditure and financial (5,215) (3,248) (4,507)investmentCash (outflow) / inflow before use of liquid (2,885) 972 (1,154)resources and financingFinancing (8,407) (546) 954Net proceeds of issued equity share 14,550 - -capitalIncrease / (decrease) in cash 3,258 426 (200) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NETDEBTIncrease / (decrease) in cash in the period 3,258 426 (200)Cash (inflow) / outflow from movement in 8,407 546 (954)debtNon cash movement in debt (113) (160) (373)Movement in net debt in the period 11,552 812 (1,527)Net debt at 1 July (24,891) (23,364) (23,364)Net debt at period end 10 (13,339) (22,552) (24,891) NOTES TO THE FINANCIAL STATEMENTS 1. The interim results for the 6 months to 31 December 2005, whichcomprise the Group Profit and Loss Account, Group Balance Sheet, Group Cash FlowStatement and the related notes, have been prepared on the same basis and usingthe same accounting policies as those which will be used in the preparation ofthe annual accounts to 30 June 2006. These are consistent with those used in thepreparation of the last annual accounts to 30 June 2005 except as noted below.The interim results do not constitute the statutory accounts within the meaningof s240 of the Companies Act 1985. The financial information in this report forthe six months to 31 December 2005 has not been audited. The results for theyear ended 30 June 2005 are extracted from the accounts filed with the Registrarof Companies, which contained an unqualified audit report. The Group has implemented the presentational aspects of FRS 25 ("FinancialInstruments: disclosure and presentation") in the preparation of these interimresults. Under FRS 25 the Group's Preference Shares and Convertible PreferredOrdinary Shares, as compound financial instruments, have been reclassified as acombination of debt and equity and non-equity dividends reclassified as interestwith a resultant reduction in Shareholders' Funds. Consequently, net assets ofthe Group at 31 December 2005 are reported £4.86m below that which would havebeen reported prior to the implementation of FRS 25. As a result of thediffering accounting treatment of the Convertible Preferred Ordinary Sharedividends under FRS 25, there is a requirement under the capital maintenanceprovisions of the Companies Act 1985 to transfer an element of distributablereserves into a capital redemption reserve. The comparatives for the six monthsto 31 December 2004 and the twelve months to 30 June 2005 have been restated toreflect the requirements of FRS 25 and the Companies Act. 2. TURNOVER 6 months to 6 months to 12 months 31 December 31 December to 30 June 2005 2004 2005 Unaudited Unaudited Audited £000 £000 £000Turnover comprised: Professional football 15,213 19,147 31,432Multimedia & communications 5,801 11,303 16,604Merchandising 9,629 6,499 10,060Stadium enterprises 1,528 1,274 2,536Youth development 868 758 1,536 33,039 38,981 62,168 Number of home games 15 16 28 3. NET INTEREST PAYABLE 6 months to 6 months to 12 months 31 December 31 December to 30 June 2005 2004 2005Payable as follows on: Restated Restated Unaudited Unaudited Audited £000 £000 £000Bank Loans and Overdraft 661 570 1,294Preference Shares 261 278 545Convertible Preferred Ordinary Shares 113 214 428 Total 1,035 1,062 2,267 4. After taking account of unutilised tax losses brought forward,together with the projected performance for the next six months, no provisionfor taxation is required. 5. (Loss) / earnings per share has been calculated by dividing the (loss) /earnings for the period by the weighted average number of Ordinary Shares inissue 33,724,872 (2004: 30,797,810). Diluted earnings per share as at 31December 2004 has been calculated by dividing the earnings for the period by theweighted average number of Ordinary Shares, Preference Shares and ConvertiblePreferred Ordinary Shares in issue, assuming conversion at the balance sheetdate, and the full exercise of outstanding share purchase options in accordancewith FRS 22. As at December 2005 and June 2005 no account was taken of potentialconversion or share purchase options, as these potential ordinary shares werenot considered to be dilutive under the definitions of the applicable accountingstandards. 6. INTANGIBLE ASSETS 6 months to 6 months to 12 months 31 December 31 December to 30 June 2005 2004 2005 Unaudited Unaudited Audited Cost £000 £000 £000 At 1 July 38,445 48,561 48,561 Additions 6,552 1,990 2,340 Disposals (10,048) (6,464) (12,456) At period end 34,949 44,087 38,445 Amortisation At 1 July 33,192 36,529 36,529 Charge for the period 3,430 5,229 7,340 Provision for impairment - - 1,402 Disposals (9,797) (6,428) (12,079) At period end 26,825 35,330 33,192 Net Book Value at period end 8,124 8,757 5,253 7.DEBTORS The reduction in the level of debtors from 31 December 2004 of £3.58m isprimarily a result of a reduction in amounts receivable in respect of TV andother trading revenues as a result of Celtic not being involved in ChampionsLeague European football this season. 8. CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 31 December 31 December 30 June 2005 2004 2005 £'000 Restated Restated £'000 £'000Co-operative Bank Loan 12,000 18,000 19,500Non - equity share capital reclassifiedas debt under FRS 25 due after more than 3,699 4,274 4,487one yearDeferred Income 1,604 - - 17,303 22,274 23,987 Creditors due after more than one year reflect long-term bank loans of £12.0m(2004: £18.0m) drawn down at the end of the period as part of the Company's bankfacility of £36.0m and £3.70m (2004: £4.27m as restated) as a result of thereallocation of non-equity share capital from equity to debt following theintroduction of the presentational aspects of FRS 25 and £1.60m (2004: £nil) ofdeferred income. 9. SHARE CAPITAL Authorised Allotted, called up and fully paid 31 December 31 December 2005 2004 2005 2005 2004 2004 Group and Company No 000 No 000 No 000 £000 No 000 £000 Equity Ordinary Shares of 1p 211,699 36,699 81,015 810 30,949 309 each Deferred Shares of 1p 100,244 100,244 100,244 1,002 100,244 1,002 each Non-equity Convertible Preferred Ordinary Shares of £1 20,000 20,000 18,012 18,012 18,012 18,012 each Convertible CumulativePreference Shares of 60p 19,301 19,301 16,801 10,082 16,801 10,082 eachLess reallocated to debt under FRS 25 - - - (6,457) - (6,457) 351,244 176,244 216,072 23,449 166,006 22,948 Following an Extraordinary General Meeting and separate Class Meetings on 23November 2005, the authorised share capital was increased to £34.70m by thecreation of 175m new Ordinary Shares. On 22 December 2005, Celtic plc issued 50mNew Ordinary Shares pursuant to its Open Offer and Offer for Subscription at anissue price of 30p per share raising gross proceeds of £15.0m. Following the adoption of the presentational aspects of FRS 25, elements of theConvertible Cumulative Preference Shares and the Convertible Preferred OrdinaryShares were reclassified as debt as noted above. 10. ANALYSIS OF NET DEBT UNDER FRS 25 The impact on the debt position of the Company following the implementation ofthe presentational aspects of FRS 25 is as follows: 31 December 31 December 30 June 2005 2004 2005 £000 £000 £000Net debt prior to the implementation of 8,739 17,377 19,503FRS 25 Balance of non-equity share capital 4,600 5,175 5,388reallocated under FRS 25 Revised net debt at period end 13,339 22,552 24,891 11. TRANSFER FEES PAYABLE / RECEIVABLE Under the terms of certain contracts in respect of the transfer of playerregistrations, additional amounts will be payable/receivable by the Company ifspecific future conditions are met. As at 31 December 2005 amounts in respect ofsuch contracts could result in an amount payable of £0.77m of which £0.40m couldarise within one year, and amounts receivable of £0.10m of which all could arisewithin one year. 12. POST BALANCE SHEET EVENTS On 5 January 2006 the registration of Chris Sutton was transferred to BirminghamCity FC and on 15 January the loan registration of the Chinese internationalistDu Wei came to an end. Celtic acquired the registration of Scottish under-21internationalist Mark Wilson on 17 January and signed pre-contract agreementswith Scottish internationalists Gary Caldwell and Kenny Miller on 19 and 20January respectively. On 27 January Celtic extended the contract of Bulgarianinternational captain Stilian Petrov until at least May 2009, on 30 January theregistration of Dion Dublin was acquired until 14 June 2006 and on 31 JanuaryDidier Agathe's contract with Celtic was terminated by mutual consent. Celtic plc Directors Brian Quinn CBE (Chairman)*Peter T Lawwell (Chief Executive)Eric J Riley (Financial)Tom E Allison *Dermot F Desmond*Eric Hagman CBE*Brian J McBride*Brian D H Wilson * Secretary Robert M Howat Directors of the Celtic Football and AthleticCompany Limited Peter T LawwellEric J RileyKevin Sweeney*John S Keane*Michael A McDonald* * Independent Non-Executive Director Secretary Robert M Howat Football Manager Gordon Strachan This information is provided by RNS The company news service from the London Stock Exchange