Last checked at 15 Aug 2008 13:31
CELTIC plc
Preliminary Results for the year ended 30 June 2008
SUMMARY OF THE RESULTS
Operational Highlights
Winners of the Clydesdale Bank Premier League
Progression to the last sixteen of the UEFA Champions League, playing five home European fixtures (2007: 4)
Season ticket sales continued to be in excess of 53,000
28 home matches played at Celtic Park in the year (2007: 28)
Opening of new training academy at Lennoxtown
Contract extensions awarded to Artur Boruc, Scott McDonald, Shunsuke Nakamura and Jean-Joel Perrier-Doumbe
Financial Highlights
Group revenue reduced by 3 % to £72.95 m (2007: £75.24m)
Operating expenses increased by 8.1% to £ 64.09m (2007: £59.28m)
Profit from trading before asset transactions and exceptional operating expenses of £8.86 m (2007: £15.95m)
Exceptional operating expenses of £3.19m (2007: £2.88m)
Gain on disposal of intangible assets of £5.70m (2007: £9.40m)
Profit before taxation of £4.44m (2007: £15.04m)
Year end bank debt of £3.52m (2007: £4.99m) net of cash
Investment of £5.11m (2007: £14.44m) in the acquisition of intangible assets
For further information contact:
| Dr John Reid, Celtic plc | Tel: 0141 551 4235 |
| Peter Lawwell, Celtic plc | Tel: 0141 551 4235 |
| Iain Jamieson, Celtic plc | Tel: 0141 551 4235 |
In my first Annual Report as Chairman I am pleased that I can report that we continue to build on our recent track record of success. Our results for the year to 30 June 2008 demonstrate strong underlying performance on and off the pitch, and the resilience that is needed to deliver continuing success in domestic and European football.
Last year's outstanding financial and football performance was always going to be a hard act to follow. Record turnover, income and profit, a second successive Premier League title and progress beyond the group stages in Europe set a challenging precedent.
Despite all of that I'm delighted to report that Celtic rose to the challenge. We had our disappointments and our tragedies but we performed sufficiently creditably on all fronts this year to allow me to report a satisfactory year for shareholders and supporters. We have returned a profit for the second successive year and a Championship title for a third. Achievements off the field reflect great credit on our staff and management. Those in the football arena equally so.
And the manner in which football success was achieved perhaps surpassed even the height of the achievement itself; certainly in terms of drama. Season 2007/2008 truly was a remarkable season, marked by courage, character and determination. "Over and Over" in the words of the old song, we did indeed see it through, to ultimate success. Gordon Strachan's team won the Clydesdale Bank Premier League for the third consecutive year, after a long and tiring campaign resolved by a narrow margin at the very last match, and again reached the last 16 in the UEFA Champions League. Our success in these two competitions more than compensated for the disappointment of an early exit from the CIS Cup and defeat in the Scottish Cup.
As ever, football performance continues to drive our finances. At £72.95m our turnover came close to but did not match last year's exceptional figure of £75.24m. The decrease of 3% was almost entirely due to a reduction in merchandising sales in a year when there was only one strip launch, as opposed to two the year before. More challenging conditions in the high street undoubtedly played a part. Despite the UEFA Champions League television market pool being shared, our multimedia revenues remained virtually the same, increasing by £0.08m due mostly to improved partner and sponsorship income.
Operating expenses increased by 8.1% to £64.09m (2007:£59.28m) mainly from increased labour costs, travel and accommodation for our overseas games and costs from new facilities, in particular the Lennoxtown Training Centre. Overall, our total labour cost to turnover ratio, while up on last year, stood at a creditable and manageable 53.4% with a healthy profit from trading before asset transactions and exceptional items of £8.86m. Although well down on last year's record of £15.95m, this reflects the impact of the decease in turnover and the investment in players, staff and facilities as part of our longer term strategy.
In the current football player market it is increasingly clear that our ability to compete on transfer fees and wages with clubs from the five main footballing nations, and particularly in England, is limited. In consequence, we look to gain advantage through improved scouting, player development and coaching and the use of sports science and performance analysis. We will continue to invest in these areas, as well as in maintaining and improving the quality of the first team squad. Hinkel, Robson, Mizuno and Hutchison were acquired during the season, with extensions to the contracts of Boruc, McDonald, Nakamura and Doumbe. More recently, the extension for Aiden McGeady and the acquisition of Samaras and Crosas should contribute to our football capability. At the time of writing, prior to the close of the transfer window, we continue to look for opportunities to strengthen our squad.
Our profit before tax of £4.44m (2007: £15.04m) also reflects exceptional operating expenses of £3.19m that we have decided to take this year for the early termination of certain employment contracts and a decrease of £3.70m in profit from player trading this year compared to last. Net year-end bank debt has improved, at £3.52m (2007: £4.99m) mainly due to strong trading performance.
Our business model is starting to deliver profits each year, although we have seen in the last two years the difference that participation in European competition makes. Credit is again due to Gordon Strachan, his backroom staff and the players for delivering on the pitch, and to Peter Lawwell and the management team for maintaining a high level of trading performance in an increasingly difficult economic environment. I would like to express my appreciation to my fellow directors and my predecessor Brian Quinn for the advice and support they have given to me over the past year. Our international aspirations continue, with new relationships formed in the United States, the Far East and Australia and the appointment of a new Director of International Development specifically tasked with identifying and exploiting new business opportunities overseas.
Scottish football, with the notable exception of Gretna, has proved to be more robust, with the SPL becoming more competitive and the hard work and difficult decisions made in earlier years now creating a more sustainable financial position overall. The improvement in broadcasting revenues from an extended contract with Setanta is also welcome. But without our supporters, none of this would be possible and so to you, I extend our thanks and appreciation for your backing throughout the year.
But satisfying though our success this year has been, it was ultimately overshadowed by more personal events. The sadness that was felt from the deaths of former colleagues, including John Cushley and Phil O'Donnell deepened on the death of Tommy Burns. There are few people who command such affection that ten of thousands from all walks of life and communities turn out to pay their respects. Celtic is a special club, and Tommy was a very special man. He embodied what we would all regard as the best qualities of Celtic People.
It was fitting, therefore, that this year we introduced the idea of using the Championship flag unfurling ceremony as a means of recognising those who have served this club, in whatever capacity. I hope we have thereby established a continuing tradition. This year there could not have been a more fitting Guest of Honour than Rosemary Burns, representing not only Tommy's memory, but our wider appreciation of all those involved in the Celtic Family.
It is a reminder that Celtic is about people. Whatever the results and the resources, however grand the surroundings or the spectacles, it is ultimately Celtic people - management, coaches, players, staff, shareholders and supporters - who make the difference. We are a great football club and a thriving company. But we are more than that. Whatever role we play in association with Celtic, we have a sense of community, of heritage, of purpose, of reaching out and of belonging to a wider Celtic family. I am pleased to report that that sense too remains as strong as ever. Celtic Charity Fund continued its marvellous work with distributions made to 69 good causes during the year. More than £400,000 was raised in addition to in-kind contributions from the Club through tickets, memorabilia and other donations reaching an estimated value of £127,000. The Charity Fund played a key role in the organisation of the Phil O'Donnell Tribute game in May, with a capacity crowd displaying the spirit and generosity that make this Club unique.
Our people are our future. Looking ahead, we are not immune to external pressures. With rising food, fuel and energy costs, our supporters face greater financial challenges than for many years. We must compete effectively, manage costs well and provide good value for money if we are to maintain our position. I am pleased that supporters are sharing in our recent financial success; standard season ticket prices have been frozen for this season and new concessionary rates have been introduced to encourage more children and younger people to attend.
This new generation of Celtic supporters will see European competition again at Celtic Park this season, with direct entry this year coming from our SPL success. An exciting season awaits; the new UEFA Champions League structure means that the winners of the Scottish Premier League in 2008/2009 will again earn direct entry. That is our objective - we aim to succeed.
Dr John Reid 15 August 2008
Chairman
INTRODUCTION
I am delighted to report on another busy and successful year. However, a year which saw the tremendous achievement of a third successive SPL title will also be remembered for the passing of one of Celtic's greatest sons, Tommy Burns. St Mary's Church in Calton was a fitting venue for the funeral of the East End Bhoy who had devoted so much of his life to Celtic Football Club. Tributes received and attendees at the moving service demonstrated how Tommy transcended the football world and the divide in Glasgow. It was a privilege to work alongside him and he is hugely missed by us all. Sadly, the last twelve months have also witnessed the loss of former Celts John Cushley, who had latterly been the Club's Education and Welfare Officer, and of Motherwell club captain Phil O'Donnell, who died tragically during a match. They will never be forgotten and our thoughts and prayers are with their families and friends.
On the field, Celtic came from a near-impossible position with a fantastic late season surge to retain the Clydesdale Bank Premier League title for 2007/8 for the third year in a row. Gordon Strachan thus became the first Celtic manager to guide his team to this magnificent feat since the days of Jock Stein. The team promptly dedicated their achievement to the memory of Tommy Burns. Since the turn of the millennium, Celtic has won the title six years out of eight, missing out by just a hair's breadth on the other two occasions. It has been a truly dominant period for the Hoops and long may it continue.
This success in winning the League title has provided us with automatic entry to the UEFA Champions League Group Stage for Season 2008/09.
Celtic again proved a formidable force in Europe in 2007/08, particularly at Celtic Park. Facing a strong Spartak Moskow side in the third qualifying round for the Champions League, we drew away and at home before eventually winning on penalties in a nail-biting tie, which enabled us to progress to the Group Stage of the competition. There we played against Shakhtar Donetsk, Benfica and AC Milan, scoring memorable home victories against all three. This enabled us to once again progress to the last 16, where we were ultimately defeated by Barcelona.
FINANCIAL PERFORMANCE
Celtic's trading results for the year to 30 June 2008 are very strong, emphasising the significant benefits from participation in the UEFA Champions League. The Club's reported profit of £4.44m is again a most pleasing result in a financially demanding football sector, although some way short of the previous year's exceptional profit performance, due largely to a reduced contribution from player trading and higher costs, including football salaries, resulting from additions to the squad which will enable us to compete more successfully in the Champions League.
Group turnover has reduced by £2.28m, 3.0%, to £72.95m from last year, largely as a result of a reduction in merchandising sales, having not launched a new home kit in 2007. We played 28 home matches, the same as last year.
Operating expenses, excluding exceptional operating costs and asset transactions, have increased by £4.81m, 8.1%, to £64.09m, predominantly due to increased labour and uplifts in other overheads, such as rent, rates, depreciation and travel, offset by lower cost of sales. The amortisation charge of £5.60m compares with £5.86m last year reflecting a continued investment in the playing squad. Exceptional costs of £3.19m represent charges associated with the early termination of employment contracts and an impairment provision in respect of intangible assets and compare to £2.88m last year. The financial performance also benefited from a gain on disposal of intangible assets of £5.70m mainly represented by the sale of Beattie, Marshall, Bjarnasson, Jarosik and Miller. The financial performance has resulted in year end net bank debt being reduced to £3.52m from £4.99m last year.
FOOTBALL INVESTMENT
The Club plans to build on the success achieved in recent years. We will continue to try to strengthen the first team squad whilst managing our financial resources carefully and responsibly. The investment made last year and this, both on new players and on contract extensions, should continue to yield benefits in the coming season and beyond.
For the 2007/08 season significant sums were invested to strengthen the playing squad, with new signings including Scott McDonald from Motherwell, Andreas Hinkel from Seville, Ben Hutchinson from Middlesbrough, Koki Mizuno from JEF United in Japan and Barry Robson from Dundee United. We also recruited Georgios Samaras from Manchester City on loan and have since secured the player on a permanent contract.
Important contract extensions were also secured for Artur Boruc, Jean-Joel Perrier-Doumbe, Scott McDonald and Shunsuke Nakamura.
Of the senior players, David Marshall, Craig Beattie and Kenny Miller all left the club in summer 2007, whilst Maciej Zurawski and Jiri Jarosik departed in the January transfer window. Players loaned out during the year included Thomas Gravesen and Adam Virgo, whilst Stephen Pressley's contract expired at the end of May. Stephen in particular has had a very positive influence at the Club, especially on many of the younger players.
During the season, no less than fifteen Celtic players were called up for senior international duty, including five with Scotland.
Gordon Strachan and his assistant Garry Pendrey continue to plan for further progression. The coaching team has been strengthened with the return of Neil Lennon to the Club, whilst the backroom team has been augmented with the appointment of Chris McCart as Head of Academy and Youth.
Behind the scenes we have secured the services of Ben Mackenzie as Strength and Conditioning Coach. Ben reports to Gregory Dupont, Head of Sport Science. Physiotherapist Graham Parsons has also returned to Celtic as part of Dr Derek McCormack's medical team.
Planned trading of players and the development of younger players continue to be integral parts of our longer-term strategy to manage costs effectively. As in season 2007/08 any new signings and/or contract extensions must be at a financially viable level or, alternatively, funded from incremental profits. Our new youth scouting and development arrangements will help this process, under the stewardship of Chris McCart. We plan to continue to invest heavily in sports science, scouting, youth development and performance analysis.
The benefits of the new purpose-built training facility and football academy, which opened at Lennoxtown last autumn, will be self-evident and ultimately will help ensure that players are recruited, developed and traded in the most efficient and cost effective way possible.
FOOTBALL OPERATIONS
In progressing in Europe and retaining the domestic title, Celtic played a total of 54 competitive matches during the 2007/08 season, winning 35 and losing 12, with 7 matches drawn. All concerned once again deserve great credit.
Aiden McGeady deservedly won the SPFA Player and Young Player of the Year awards following an outstanding season.
Celtic's reserve side under Willie McStay and Danny McGrain won the SPL Reserve Championship for an astonishing seventh year in succession, winning 14, drawing 4 and losing only 3 matches, whilst scoring 56 goals and conceding just 18 in the process. It is planned that the majority of reserve home SPL fixtures for 2008/09 will again be played at the Excelsior Stadium in Airdrie.
The Under 19s, managed by John McLaughlan, finished second in their championship and reached the final of the youth cup, whilst the Glasgow Cup was resurrected in August 2008 with an impressive victory for a Celtic Under 18 side against Rangers at Clyde's Broadwood Stadium.
TICKET SALES
Season 2007/08 was another successful year. Standard season ticket sales again exceeded 50,000 with a value of more than £17m.
Overall match ticket sales of just over 400,000 generated revenue in excess of £8m. A qualifying match and progression into the last 16 of the UEFA Champions League for the second successive year accounted for nearly 272,500 of the total ticket sales, at a value of £6.4 m.
YOUTH DEVELOPMENT
Around 2.5 million lottery chances were sold under the various schemes operated by Celtic Development Pools Limited during the period from July 2007 to June 2008. Nearly £1m was donated to Celtic Football Club's Development Division for the purposes of youth development, whilst a similar sum was paid out in prize money to supporters from all over the country. Celtic Development Pools Limited remains the most successful football club lottery operation in Britain and one of the most successful in the charitable lotteries sector through its Weekly Pool and Paradise Windfall products.
The weekly Celtic Pool lottery has performed better than most football club and charitable lottery products in a challenging marketplace, due largely to successful new branding and marketing initiatives.
The Paradise Windfall match day draw operated at Celtic Park was again a major success story for Celtic Development Pools with a top prize of £8,000 on offer, the biggest cash prize in UK football. Prize money of approximately £1.7 million has now been paid out to Celtic supporters on the pitch at Celtic Park since the start of the Windfall in 1995 and the top prize this season will be £8,500.
CELTIC FOUNDATION
The Celtic Foundation continues to support the Club's social dimension reflecting the reasons Brother Walfrid founded Celtic back in the 1880s. The Foundation also continues to work closely with key partners to deliver on policy direction set by local and central government in the following areas:
Health and Well-being
Education
Employment
Anti-bigotry Campaigns
Anti-social behaviour
Youth Disorder / Crime
Social Inclusion Projects
The Celtic Foundation structure is indicative of the importance Celtic attaches to its role in the community with the Club involved in more educational, charitable and community initiatives than at any time in its history. We are also delighted that Billy Connolly has agreed to become the Patron of the Celtic Foundation.
The Foundation integrates a number of very successful established project areas with new business ventures, such as:
Celtic Charity Fund, which enjoyed a record year, raising over £400,000 for good causes
Celtic Learning Programmes and the Learning Centre
Football in the Community and community coaching programmes across both domestic and international markets
The Celtic Girls Community / Youth Academy and the Celtic Ladies FC
Anti-bigotry initiatives, including anti-racism and anti-sectarianism
Old Firm Alliance Project
Celtic Against Drugs
Support Employment
Services to Schools
Celtic in the Community is the leading Premier Community Club in Scotland and arguably the UK. It provides a coaching and development service tailored to meet the needs of children, teenagers and adults. The range of products and services has grown considerably during the past year providing opportunities for all sectors of the community. Over one million young people and adults have experienced a variety of programmes or courses since the inception of the Community Programme back in 2003 and over 4,500 young people take part in programmes on a weekly basis.
The Community programme also provides a pathway into the Celtic Youth Academy. Over 400 youngsters have been identified and invited into the Development Centre Programme and 11 have made their way into the Academy itself.
The introduction of the Girls Community / Youth Academy, Celtic Ladies Reserves and First Team this season has proved to be a huge success. All our squads have performed well as the following record shows:
U11s (Developmental League - undefeated)
U13s (Winners of the treble)
U15s (League Championship and League Cup Winners)
U17s (3rd in the League & League Cup Winners)
Reserves (League Championship Winners)
First Team (3rd in the League & Scottish Cup Finalists)
The Club is also delighted that Elaine C. Smith has agreed to become a Patron for the Girls Youth Academy and Senior Women's Teams.
The introduction of the 'Play for Celtic' programme has been another fantastic success. The programme provides opportunities for youngsters to represent Celtic and wear the famous hoops in local leagues. Currently 16 Community Academy teams operate across the country, with the aim of establishing a further 20 teams during season 2008/09.
The Community Programme has firmly established itself in Ireland in partnership with Topflight Soccer with over 3,000 youngsters attending a variety of courses.
Internationally, Celtic in the Community delivered free courses to thousands of youngsters from some of America and Canada's most deprived cities. Our community coaches also visited Japan to deliver team camps and coach education to a number of prominent clubs in association with TotalFootball.
We would like to thank all our strategic partners, participants and staff for their support during 2007/08. Without their help the progress and achievements of the Celtic Foundation would not have been possible.
MERCHANDISING
Merchandising revenue for the year reached £16.09m. This was down by £2.27m on the previous year, due in part to the timing of kit launches, with no new home kit having been released in 2007/08. A new dark green away kit was launched in July 2007, but sales proved to be disappointing. However, a new gold away kit was launched in early July 2008 and has been very well received. A new home kit is planned for August.
In terms of our retail outlets this year saw the opening of a temporary unit in Livingston for the Christmas trading period and a permanent store was opened in Inverness in June 2008. The Club's first franchise operation was opened in Dundee in November 2007. Concessions within Debenhams traded in three locations: Glasgow City Centre, Silverburn and Inverness. Major refurbishment of the Argyle Street store is planned for the autumn of 2008.
A range of signed merchandise and limited editions was introduced at the Superstore this year and this will be rolled out to further stores in the coming months. The Official History of Celtic DVD box set is due for release in the autumn.
This year saw the launch of TeamCard across the stores. This is a loyalty card, which allows customers to collect reward points on purchases and to redeem these points against merchandise and season tickets.
MULTI MEDIA
The Celtic View remains the oldest weekly club publication in football and celebrated its 43rd year by reporting on Celtic's successful league campaign. The magazine, now a 72-page, A4 production, continues to bring supporters exclusive interviews with the manager and the first-team squad, as well as features on Celtic's history and articles about fans throughout the world. Last Christmas a book celebrating the 100 best Celtic View covers since the magazine began in 1965 was published by Headline to great success.
The publications team also produce a match programme for every home fixture.
In the past financial year Channel 67, which is now in its 10th year, has offered a new service to overseas subscribers called 'Premium', which has been very well received and has exceeded forecasts. This service offers subscribers with higher bandwidth capability the chance to view each live game in a much higher resolution, consistent with the type of quality associated with TV or DVD.
The department continues to offer a support service across the business, which has included DVD production, event production and management. It has also supported the Football Department with analysis of Celtic's performance on the pitch and that of opposing teams.
The Multi Media team offer video production for internal and sales purposes as well as adapting the official Celtic website (www.celticfc.net) to meet the requirements of other departments at the Club. Multi Media successfully designed a website for the Phil O'Donnell Tribute and played a part in organising and managing the match event itself. It also assisted with the production and presentation of the George McCluskey Testimonial Dinner, the Club's Annual Charity Dinner and the AGM.
Other successful official events included the annual Player of the Year Awards, the opening ceremony for the Training Centre at Lennoxtown and the Centenary Dinner. The team also worked closely with the Burns family, Celtic's Operations department and external agencies to ensure that Tommy's funeral was covered comprehensively and sensitively.
The long-awaited 'Official History of Celtic Football Club' DVDs (a four-disc, 400-minute box set) was completed in 2008 and is a chronological account of 120 years of Celtic Football Club. Presented by Celtic director Brian Wilson, the History features nearly a hundred interviews filmed specifically for the purpose as well as Celtic footage that has never previously been seen.
Other DVDs produced internally in the past year included 'Humbled by the Hoops' - a collection of great Celtic goals against Rangers - and a season review entitled 'Twists and Turns'. This DVD tells the story of the 2007/08 championship-winning campaign and is dedicated to Tommy Burns.
Multi Media continued to develop the Setanta relationship with Celtic TV, with the Club retaining editorial control. We are continuing to develop the matchday experience and have managed events at Celtic Park, at Tannadice on the last day of season 2007/8 and at the 'Fan Zone' in Barcelona earlier this year.
PUBLIC RELATIONS
The level of media interest and activity around the Club was again extremely high during the year, particularly as a consequence the Club's progression to the last 16 of the UEFA Champions League and continued domestic success in winning our third successive SPL Championship.
The PR Department manages a substantial level of media coverage for a range of Club activities at a national level, including commercial, charitable and community events. In addition, the Department plays an important role in dealing with supporter enquiries, working closely with supporter organisations and liaising directly with Glasgow City Council and other bodies to ensure the Club maintains its important social dimension.
BRAND PROTECTION
Celtic protects its intellectual property rights throughout the year, by stopping those not authorised to do so from using the Celtic brand. This ensures that the Celtic brand remains a valuable asset of the Club and that we are able to work towards making Celtic one of football's biggest global brands.
The Club has once again worked closely with the enforcement authorities, including the police, customs and trading standards, along with other trade mark holders and trade bodies to enforce its rights. Counterfeit goods to the value of approximately £250,000 were removed from the marketplace.
Celtic will continue to maintain and enforce its intellectual property rights where necessary to ensure that the Celtic brand remains adequately protected from misuse by third parties in order to maximise worldwide opportunities.
PARTNER PROGRAMME
Our success in gaining new partners and the retention of key existing partners led to the Season 2007/08 budget being achieved. The backdrop of the existing Nike and Carling deals, both of which run until 2010, gave focus to key renewals such as MBNA. The value of this five year contract alone has increased nearly threefold. This,complemented by new partners such as Seat Exchange, BT, News Group, Sports Revolution and Sanyo, has increased both profile and revenue from the UK and overseas.
The installation of LED Perimeter advertising boards at Celtic Park for Season 2008/09, as well as being a significant cash investment, lifts the Club to another level and has already offered Celtic opportunities to secure new partners. The appointment of a new Director of International Development will assist us in identifying and exploiting new revenue streams overseas as well as a strategic approach to market in conjunction with other Club departments.
STADIUM
During the course of the year Celtic Football Club continued to promote the valuable partnership and close liaison with Glasgow City Council Safety Team for Sports Grounds, placing spectator safety as our highest priority.
Training of colleagues responsible for public safety duties continued to be enhanced. The Club fully participated in the Event and Matchday Safety Course delivered in Scotland for the first time. In addition, the Club was delighted to provide input to the Match Commander's training programme, held at the Scottish Police College. Safety steward training was also further developed with the introduction of a new programme for supervisors and stewards.
The success of the current travel stewards' arrangements continued with Celtic stewards accompanying our fans to assist with local operations, ensuring the safety and wellbeing of Celtic supporters. The Champions League away fixture in Barcelona involved close partnership working with the local police service and city authorities with over 40 travel stewards in attendance. Celtic supporters took full advantage of the amenities provided, attracting widespread local praise for their friendly and positive behaviour.
FACILITIES
The Institute of Groundsmanship (I.O.G.) recognised the quality of the playing surface at Celtic Park by short listing Celtic once again for the annual Groundsman of the Year Award.
One of the biggest projects undertaken by the Celtic Facilities team was the completion, fitting out and opening of the new Training Centre at Lennoxtown, resulting in the successful transition of the Football Department from Celtic Park.
Champions League participation at the group stage hastened refurbishment of the press area. Other improvement works included redecoration of the South Stand corporate boxes and upgrade of the lifts, whilst roof repairs were effected to the South West and South East corners to prevent leaks.
In terms of information technology the Club has continued to invest in upgrading its communications and systems infrastructure to improve security and increase functionality.
Finally, we improved our 'green' credentials through initiatives related to the reduction of energy and water usage, which have reduced consumption and the Club's overall carbon footprint and realised a significant annual saving. Recycling of shredded and waste paper continues and further energy saving initiatives will be pursued in the coming year.
CATERING AND CORPORATE HOSPITALITY
In the Number 7 Restaurant Sunday lunches and special events such as Fathers Day and Mothers Day remained very popular with many sittings fully booked weeks in advance. However, the restaurant experienced a difficult season with a drop in numbers attending 'night-before' packages. Meanwhile, dinner dances in the Kerrydale Suite continued to be well attended. It was also a very successful year for weddings, with receptions for ethnic communities particularly popular.
Our Conference and Banqueting business continues to grow, with solid partnerships established with NHS Scotland, Glasgow City Council and the Asian community.
The Celtic Park Visitor Centre enjoyed a successful season, despite the first team being relocated to Lennoxtown. The new training facility itself was opened for a four week period during June for conducted tours.
All four home Champions League matches were sold out and packaged with SPL fixtures, generating a high income for the Club. The AC Milan and Barcelona matches proved to be very successful with an offsite package in a City Centre venue.
Corporate seasonal sales were strong in all areas and SPL matches were well attended especially in Number 7, where a high number of the matches were sold out.
SUPPORTER RELATIONS
Use of our Customer Relationship Management (CRM) database, installed in 2006/07, has allowed us to use supporter data gathered from across the Club more effectively, reducing marketing costs and driving revenues for both the Club and our partners and sponsors. Ongoing development continues to enhance the integration between the CRM database and the many transactional systems used by the Club and our partners. This and the increased use of lower cost communication channels such as e-mail and SMS messaging will further improve communication between the Club and our supporters and further reduce costs and drive revenues.
CELTIC CHARITY FUND
Celtic Charity Fund, the Club's charitable arm, enjoyed a record-breaking year, raising over £400,000 for a range of worthy causes. Fundraising activities included The Phil O'Donnell Tribute Match, a charity badge day at Celtic Park, the Hoops 'n Halos Christmas Campaign and our Annual Sporting Dinner in the Kerrydale Suite which was attended by football management, Directors and first team players. The Big Build - a new Marie Curie Hospice for Glasgow - was the principal beneficiary and a host of other organisations also benefited from significant financial support during the course of the year.
The Club's commitment to supporting worthy causes will continue in 2008/09 as we look to increase the fundraising impetus and, in turn, our donations to registered charities in Scotland, Ireland and across the globe.
HUMAN RESOURCES
In December Celtic became the first SPL club to receive the prestigious "Investors in People" (IiP) award, which recognised our progress in attaining the national standard for people management and development. The IiP assessment has also helped us to identify priorities for the development of Celtic colleagues going forward, which we remain committed to pursuing as we strive to become an Employer of Choice.
In January Celtic was awarded the "Positive about Disabled People" symbol by Job Centre Plus for the third successive year in recognition of us meeting our commitments to colleagues and job applicants with a disability.
Latterly, in May Celtic was awarded "Tommy's" accreditation, which is recognition of the Company's good-practice policies in respect of pregnant employees.
About 50 pupils from local schools enjoyed a week of structured work experience at Celtic Park during the year. This is a highly successful ongoing programme open to all, which has received plaudits from pupils, parents and the education authorities.
The hard work and contribution of all colleagues in another busy but successful year is greatly appreciated.
SUMMARY AND OUTLOOK
Season 2007/08 was another very successful year for Celtic, with Gordon Strachan and his team deserving tremendous credit for their achievements. We progressed to the last 16 of the UEFA Champions League for the second successive season and domestically the Club secured the Clydesdale Bank Premier League title for the third year in a row.
Football success continues to greatly assist trading performance which, in addition to the gains reported from player trading, has resulted in strong financial results for the year to 30 June 2008. Equally it is recognised that the football sector remains financially difficult, particularly given current wage inflation. As such the revenues generated by progress in European competitions are of major significance and provide greater flexibility regarding player investment. Winning the SPL title has provided Celtic with direct entry to the group stage of the UEFA Champions League for season 2008/09, which has allowed the Club to plan with more certainty both financially and operationally.
The Club's highly significant strategy of major capital investment in the new training academy at Lennoxtown is designed to increase the number of internally generated youth players establishing themselves in the first team. Lennoxtown represents a Centre of Excellence for creating and developing Champions League quality players. Furthermore, considerable additional investment in coaching, scouting and sports science facilities will enable the Club to identify, recruit and develop the cream of footballing talent on a global scale.
There has also been investment in systems and resource to provide a comprehensive database and state of the art performance analysis of existing players and recruitment targets. These initiatives, together with ongoing realistic management of football labour costs, should result in a cost base and financial model that is sustainable.
Trading at the beginning of the new financial year has been encouraging. Seasonal sales of standard, premium and corporate tickets are at levels comparable with last year and a new away football kit has been successfully launched in a competitive merchandise market. Like last year, additional revenue streams continue to be sought and enhanced commercial agreements, including the new SPL television contract, should boost income. Celtic enjoys partnerships with several international companies, which continues to provide the foundation of our income streams going forward.
David Thomson, our Commercial Director, is leaving us this summer. We are grateful for his contribution to our commercial success in recent years and wish him well in his future career. The appointment of a direct replacement and the progressive decision to recruit a new Director of International Development reflect the Club's strategy to maximise revenue generation and to enhance the value of the Celtic brand both domestically and overseas.
The Club now wishes to build on the success achieved in recent years. It is imperative that we attain domestic success and continue the process of restoring Celtic as a credible force in Europe. It is essential that we maintain a team that can compete successfully, particularly in the Clydesdale Bank Premier League. This season the winners will gain direct entry to the group stage of the 2009/10 UEFA Champions League.
The emphasis on careful and patient use of our financial resources will characterise our efforts to strengthen the first team squad and a number of player trading initiatives continue to be progressed.
Overall the key Company objective remains football success, as this will greatly assist revenue generation. However, the funding of that success must clearly recognise the financial constraints applicable to the organisation, particularly as Celtic continues to play in the Scottish football environment.
Once again, the biggest challenge facing your Board is the management of salary and transfer costs whilst achieving playing success in order to yield satisfactory financial results.
Peter T Lawwell 15 August 2008
Chief Executive
CONSOLIDATED INCOME STATEMENT
| 2008 | 2007 | |||||||
| Operations excluding player trading£000 | Player trading£000 |
Total£000 |
Total £000 | |||||
| Continuing operations: | ||||||||
| Revenue | 2 | 72,953 | - | 72,953 | 75,237 | |||
| Operating expenses | (64,095) | - | (64,095) | (59,283) | ||||
| Profit from trading before asset transactions and exceptional items | 8,858 | - | 8,858 | 15,954 | ||||
| Exceptional operating expenses | 3 | (2,836) | (353) | (3,189) | (2,879) | |||
| Amortisation of intangible assets | - | (5,598) | (5,598) | (5,865) | ||||
| Profit on disposal of intangible assets | - | 5,695 | 5,695 | 9,397 | ||||
| Loss on disposal of property plant and equipment | (268) | - | (268) | (339) | ||||
| Profit/(Loss) before finance costs and tax | 5,754 | (256) | 5,498 | 16,268 | ||||
| Finance costs: | ||||||||
| Bank loans and overdrafts | (519) | (484) | ||||||
| Convertible preference shares | 4 | (544) | (744) | |||||
| Profit before tax | 4,435 | 15,040 | ||||||
| Taxation | 5 | - | - | |||||
| Profit for the year from continuing operations | 4,435 | 15,040 | ||||||
| Profit for the year attributable to equity holders of the parent | 4,435 | 15,040 | ||||||
| Basic earnings per ordinary share | 6 | 5.09p | 18.53p | |||||
| Diluted earnings per share | 6 | 3.70p | 11.48p | |||||
CONSOLIDATED BALANCE SHEET
| 2008 | 2007 | |||
| £000 | £000 | |||
| Assets | ||||
| Non-current assets | ||||
| Property, plant and equipment | 56,315 | 55,861 | ||
| Intangible assets | 11,862 | 12,990 | ||
| 68,177 | 68,851 | |||
| Current assets | ||||
| Inventories | 2,410 | 3,383 | ||
| Trade and other receivables | 6,063 | 7,997 | ||
| Cash and cash equivalents | 8,475 | 7,006 | ||
| 16,948 | 18,386 | |||
| Total assets | 85,125 | 87,237 | ||
| Equity | ||||
| Issued share capital | 24,122 | 23,452 | ||
| Share premium | 14,205 | 14,129 | ||
| Other reserve | 21,222 | 21,222 | ||
| Capital redemption reserve | 2,766 | 2,440 | ||
| Retained earnings | (21,074) | (24,514) | ||
| Total equity | 41,241 | 36,729 | ||
| Non-current liabilities | ||||
| Interest-bearing liabilities/bank loan | 12,000 | 12,000 | ||
| Debt element of convertible preference shares | 3,027 | 3,112 | ||
| Deferred income | 820 | 1,230 | ||
| 15,847 | 16,342 | |||
| Current liabilities | ||||
| Trade and other payables | 16,224 | 20,764 | ||
| Current borrowings | 154 | 158 | ||
| Deferred income | 11,659 | 13,244 | ||
| 28,037 | 34,166 | |||
| Total Liabilities | 43,884 | 50,508 | ||
| Total equity and liabilities | 85,125 | 87,237 |
Approved by the Board on 15 August 2008
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| Share capital | Share premium | Other reserve | Capital redemption reserve | Retained earnings | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Equity shareholders' funds as at 1 July 2006 | 23,450 | 14,089 | 21,222 | 1,739 | (38,403) | 22,097 |
| Share capital issued | 2 | 40 | - | - | - | 42 |
| Convertible Preferred Ordinary Share Participating Dividend | - | - | - | - | (450) | (450) |
| Transfer to Capital Redemption Reserve | - | - | - | 701 | (701) | - |
| Profit for the period | - | - | - | - | 15,040 | 15,040 |
| Equity shareholders' funds as at 30 June 2007 | 23,452 | 14,129 | 21,222 | 2,440 | (24,514) | 36,729 |
| Share capital issued |
1 | 76 | - | - | - | 77 |
| Transfer to Capital Redemption Reserve | 669 | - | - | 326 | (995) | - |
| Profit for the period | - | - | - | - | 4,435 | 4,435 |
| Equity shareholders' funds as at 30 June 2008 | 24,122 | 14,205 | 21,222 | 2,766 | (21,074) | 41,241 |
CONSOLIDATED CASH FLOW STATEMENT
| 2008 | 2007 | |||
| £000 | £000 | |||
| Cash flows from operating activities | ||||
| Profit for the year | 4,435 | 15,040 | ||
| Depreciation | 1,925 | 1,708 | ||
| Amortisation of intangible assets | 5,598 | 5,865 | ||
| Impairment of intangible assets | 353 | 2,663 | ||
| Profit on disposal of intangible assets | (5,695) | (9,397) | ||
| Loss on disposal of property, plant and equipment | 268 | 339 | ||
| Finance costs | 1,063 | 1,228 | ||
| Sub total | 7,947 | 17,446 | ||
| Decrease / (increase) in inventories | 973 | (1,482) | ||
| (Increase)/decrease in receivables | (123) | 987 | ||
| Increase in payables and deferred income | 2,824 | 1,089 | ||
| Cash generated from operations | 11,621 | 18,040 | ||
| Interest paid | (519) | (484) | ||
| Net cash flow from operating activities - A | 11,102 | 17,556 | ||
| Cash flows from investing activities | ||||
| Purchase of property, plant and equipment | (3,605) | (7,069) | ||
| Purchase of intangible assets | (12,254) | (10,959) | ||
| Proceeds from sale of intangible assets | 8,048 | 5,974 | ||
| Net cash used in investing activities - B | (7,811) | (12,054) | ||
| Cash flows from financing activities | ||||
| Repayment of debt | (887) | (889) | ||
| Dividends paid | (935) | (521) | ||
| Net cash used in financing activities - C | (1,822) | (1,410) | ||
| Net increase in cash equivalents A+B+C | 1,469 | 4,092 | ||
| Cash and cash equivalents at 1 July | 7,006 | 2,914 | ||
| Cash and cash equivalents at 30 June | 8,475 | 7,006 |
NOTES TO THE ACCOUNTS
BASIS OF PREPARATION AND ACCOUNTING POLICIES
These Financial Statements have been prepared for the first time in accordance with IFRS as adopted by the European Union, and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. Accordingly, the Group has reviewed its accounting policies, procedures, measurement techniques and disclosures in full and has made the changes (most notably in financial statements disclosures) required by IFRS.
Save for the changes prompted by the adoption of IFRS the accounting policies have been consistently applied to both years presented, and in preparing the opening IFRS balance sheet.
The Group's Profit and Loss Account follows the Financial Reporting Guidance for Football Clubs issued in February 2003 by The Football League, The FA Premier League and the FA, although the turnover within Note 2 continues to be analysed in accordance within the headings of the business operations of the Group.
| The Group's revenue comprises: | 2007 £000 | 2006 £000 | |
| Football and stadium operations | 38,580 | 38,671 | |
| Merchandising | 16,092 | 18,367 | |
| Multimedia and other commercial activities | 18,281 | 18,199 | |
| 72,953 | 75,237 |
The exceptional operating expenses of £3.19m (2007: £2.88m) reflect £2.84m (2007: £0.22m) in respect of labour and other ancillary costs largely arising as a result of the early termination of certain employment contracts and £0.35m (2007: £2.66m) in respect of a provision for impairment of intangible assets.
4. DIVIDENDS
A 6% (before tax credit deduction) non-equity dividend of £0.54m (2007: £0.54m) is payable on 31 August 2008 to those holders of Convertible Cumulative Preference Shares on the share register at 1 August 2008. Until 30 June 2007 holders of Convertible Preferred Ordinary Shares were entitled to a fixed dividend of 4% plus a participating dividend of up to 6%, depending upon the progress of the first team in the UEFA Champions League beyond the group stage. The Convertible Preferred Ordinary Share dividend in 2007 was £1.35m represented by a fixed dividend of 4% of £0.90m plus a participating dividend of 2%, £0.45m as a result of reaching the knockout stage of the UEFA Champions League. A number of shareholders have elected to participate in the Company's scrip dividend reinvestment scheme for this financial year. Those shareholders will receive new Ordinary Shares in lieu of cash. The implementation of the presentational aspects of IFRS7 ("Financial Instruments: disclosure") in the preparation of the annual results, requires that the Group's Preference Shares and Convertible Preferred Ordinary Shares, as compound financial instruments, are classified as a combination of debt and equity and the attributable non-equity dividends are classified as finance costs. No dividends were payable or proposed to be payable on the Company's Ordinary Shares.
No provision for corporation tax or deferred tax is required in respect of the year ended 30 June 2008. Estimated tax losses available for set-off against future trading profits amount to approximately £27m (2007: £30m). This estimate is subject to the agreement of the current and prior years' corporation tax computations with H M Revenue and Customs.
| 2008 | 2007 | ||
| £000 | £000 | ||
| Reconciliation of net profit to basic earnings: | |||
| Net profit attributable to equity holders of the parent | 4,435 | 15,040 | |
| Basic earnings | 4,435 | 15,040 | |
| Reconciliation of basic earnings to diluted earnings: | |||
| Basic earnings | 4,435 | 15,040 | |
| Non-equity share dividend | 544 | 544 | |
| 4,979 | 15,584 | ||
| No.'000 | No.'000 | ||
| Reconciliation of basic weighted average number of ordinary shares to diluted weighted average number of ordinary shares: | |||
| Basic weighted average number of ordinary shares | 87,171 | 81,153 | |
| Dilutive effect of share options | - | - | |
| Dilutive effect of convertible shares | 47,252 | 54,625 | |
| Diluted weighted average number of ordinary shares | 134,423 | 135,778 |
Earnings per share has been calculated by dividing the profit for the period of £4.44m (2006: £15.04m) by the weighted average number of Ordinary Shares of 87.17m (2007: 81.15 m) in issue during the year. Diluted earnings per share as at 30 June 2008 has been calculated by dividing the earnings for the period by the weighted average number of Ordinary Shares, Preference Shares and Convertible Preferred Ordinary Shares in issue, assuming conversion at the balance sheet date, and the full exercise of outstanding share purchase options, if dilutive, in accordance with IAS33 Earnings Per Share. As at June 2008 and June 2007 no account was taken of potential share purchase options, as these potential Ordinary Shares were not considered to be dilutive under the definitions of the applicable accounting standards.
7 ANNUAL REPORT & ACCOUNTS
Copies of the Annual Report & Accounts together with the notice and notes of the 2008 AGM are expected to be issued to all shareholders in due course.
The financial information set out above was approved by the Directors on 15 August 2008 and does not constitute the Company's statutory accounts for the years ended 30 June 2008 or 30 June 2007. The auditors' opinion on the 2008 statutory accounts is unmodified and does not include a statement under Section 237 (2) or (3) of the Companies Act 1985. The statutory accounts for 2007 have been filed and those for 2008 will be delivered to the Registrar of Companies in due course.