Celtic Regulatory News (CCP)

20 Aug 2007 12:15

Celtic PLC20 August 2007 CELTIC plc Preliminary Results for the year ended 30 June 2007 SUMMARY OF THE RESULTS Operational Highlights • Winners of the Bank of Scotland Premierleague by 12 points • Winners of the Tennent's Scottish Cup • Progression to the last sixteen of the UEFA Champions League, playing four home European fixtures (2006: 1) • 28 home matches played at Celtic Park in the year (2006: 24) • Successful pre-season friendly trips to Japan, Poland and North America • Contract extensions awarded to Aiden McGeady and Darren O'Dea • Successful launch of the Lisbon Lions' 40th anniversary home kit together with new away and international kits under the agreement with NIKE • Season ticket sales continued to be in excess of 53,000 Financial Highlights • Group turnover increased by 31.0% to £75.24m (2006: £57.41m) • Operating expenses increased by 10.4% to £59.28m (2006: £53.67m) • Profit from operations of £15.95m (2006: £3.74m) • Exceptional operating expenses of £2.88m (2006: £0.58m) • Gain on disposal of intangible fixed assets of £9.40m (2006: £0.26m loss) • Profit before taxation of £15.04m (2006: £4.22m loss) • Year end bank debt of £4.99m (2006: £9.09m) net of cash • Investment of £14.44m (2006: £8.84m) 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 In terms of both football success and financial results, 2006/2007 was anoutstanding year for Celtic Football Club and Celtic plc; indeed it was arguablyamong the best ever. Winners of the Bank of Scotland Scottishpremier League andthe Tennent's Scottish FA Cup for the 41st and 34th time, respectively, the Clubalso reached the final 16 of the UEFA Champions League for the first time andwere defeated only by the eventual winners, AC Milan, by a single goal afterextra time. A Celtic player, Shunsuke Nakamura, was voted Scottish Player of the Year;Gordon Strachan took the award of Manager of the Year; and Celtic Reserves wonthe Reserves Championship for the 6th consecutive season. All in all, this was avery successful year for the Club on the field. Off the field, and after a number of years in which the Company made losses atthe pre-tax level, Celtic plc recorded a profit of over £15m. Group turnoverrose by 31%. Encouragingly, having invested heavily in strengthening the playingsquad and developing the training facility at Lennoxtown, bank debt at the yearend amounted to just under £5m, compared with over £9m a year previously; andtotal net debt stood at around £9m, against a figure of almost £14m a yearearlier. Net assets rose from £22m to around £37m. By the standards of previous years and, indeed, those of most other footballcompanies, these are exceptionally good results. However, it is important torecognise that a number of factors came together, all of which cast a favourablelight on our performance and which cannot reasonably be expected to recur, atleast to the same degree. Foremost among these was our successful UEFA Champions League campaign. Thiscompetition far outstrips any other in which we are involved in terms of gatereceipts, television revenues and, indirectly, other revenue sources. Lastseason we had the bonus of being the only Scottish representative to reach thegroup stage. Taking account of the additional costs involved, notably bonuspayments to players, management and support staff, the net contribution toprofit was of the order of £11-12m. The contribution from European football inthe previous year was approximately £0.75m. It also gives the Club greaterexposure to a much wider television audience, reinforcing the reputation of theClub as one of Europe's re-emerging forces. The other principal factor affecting the year's financial performance was thevolume of transfer activity. On the back of a particularly buoyant market inEngland, Celtic sold a number of players to clubs South of the border to a totalprofit of £9.4m. At a time when it is customary - and valid - to note thedisadvantages suffered by Scottish clubs arising from the new FAPL televisioncontract, it would also be correct to note that Scottish clubs derive benefitsfrom sales of players into that market. Nevertheless, the gap between the twomarkets has grown enormously in the last two years, with the result that themovement of talent from North to South has become much more pronounced, andScottish clubs are even less able than in the past to bid for players on anequal basis with English clubs, even at the level of the Coca Cola FootballLeague Championship. Notwithstanding this trend, Celtic used its improved financial position lastyear to strengthen further our first-team playing staff, spending some £14.4m onnew players, and taking forward the establishment of our new training facilitiesat Lennoxtown. Maintaining the quality of the squad is a continuous task whichhas to be approached in the short-term by activity in the transfer market, andin the longer-term by finding and developing younger players. Getting thebalance right is a challenge year by year and cannot be guaranteed. Accidentscan and do happen; so it is especially pleasing that John Kennedy has returnedto first-team action after three years of rehabilitation from serious injury. Total operating expenses rose by 10.4%, primarily higher player costs in theform of salaries and bonuses, and other costs such as travel and stadiumexpenses associated with our European games. No increase in costs at footballclubs is actually welcomed, but when they are a direct result of success incompetition, and are therefore more than compensated by additional revenues,they can be cheerfully absorbed. Our ratio of total labour costs to turnover, which already stood at a creditable56.6% last season, fell to 48.4% in the year just ended. Like many of thisyear's figures, this percentage is relatively low and given the need topre-qualify for the UEFA Champions League and the spill-over effect of theEnglish football market into Scotland, may well rise next year. However we aredetermined to abide by our policy of year-by-year sustainability in which playercosts play a crucial role. Income from television, radio and publications almost doubled to £23.2m, thanksto our participation in the UEFA Champions League - the benefits of beinginvolved in this competition being nowhere more evident. Income from merchandisesales fell by about £1m, although comparisons between years are complicated bythe number and nature of replica strip launches. Footballing merchandise is tosome extent a fashion market and therefore difficult at present, and ourmarketing and sales staff have done well to maintain the Company's position asone of the leading retailers of quality football and leisure wear. On the football field, as I have already stated, we reached new heights. Ourrunaway SPL Championship success extended our run in that competition to fivetitles in the last seven years. Victory in the Tennent's Scottish FA Cup broughta domestic double, our 14th. The victory over Manchester United at Celtic Parkin the UEFA Champions League secured a place in the last 16 of that competitionand provided a memorable occasion for our supporters. The excitement and fervourat Celtic Park on these European occasions probably has no equal in worldfootball. Our supporters on these occasions are a virtual 12th man. That these successes were achieved in the context of significant numbers of newarrivals and departures among the playing staff is compelling evidence of theexcellent management team headed by Gordon Strachan. In the two years sinceGordon joined us he has won the Bank of Scotland Scottish Premierleague byimpressive margins, as well as two other domestic trophies and achieved progressin Europe. Managing Celtic ranks among the most demanding jobs in football andGordon's resilience and professionalism are truly admirable. Despite some early delays caused mainly by adverse weather, our new trainingcomplex at Lennoxtown is expected to be available for use towards the end ofSeptember 2007. We are excited by the location and the quality of thefacilities. Virtually all of the pieces are in place and, all going well, ourprofessional football squads will be training at the new complex soon. Thereremains the question of what is done with our existing training area atBarrowfield. We are working with Glasgow City Council as part of a master planto regenerate the East End of the city and the area around Celtic Park. Thisplan would allow us to improve significantly the coach parking and transportinfrastructure for our supporters and those of visiting teams. We believe thisis long overdue and hope to see it move forward in the coming year. Spreading the Celtic brand name continues to be a high business priority. Thenew TV contract in England makes it even less likely that change will take placein the structure of football there; and the fact that all but the top half-dozenFAPL sides may find themselves facing the possibility of relegation in any givenyear, with all that that entails in terms of foregone revenue, means that thegreat majority of teams in the FAPL would oppose, even more than previously, anymove to admit Scottish teams. We believe that it is our responsibility toexplore whether such a change is possible, but we accept the position as we nowfind it and have turned our attention increasingly to other options in lookingto the longer term. We continue to believe that North America represents a good opportunity in thatconnection and have completed another successful tour to the United States thissummer. Our "soccer schools" in seven States are flourishing and are spreadingthe Celtic name to a younger generation. We also carried out short tours toEngland, Switzerland and Ireland and will look for further opportunities tobuild our reputation abroad. It has long been my belief that eradicating sectarian and other offensivebehaviour from the Scottish football environment is a longer term task. Successis properly measured over years, if not decades. But progress towards thatobjective can be achieved on a shorter time-scale and we can point to clearsigns of such progress year by year. This takes the form not only of dwindlingnumbers of people who sing offensive songs and chants at away games followingthe initiatives that I mentioned in last year's Annual Report, but also ofpositive action to improve the behaviour of people who might otherwise keepancient rivalries alive by unacceptable means. Our work in education and with the unemployed and other disadvantaged groupsdoes not always get the recognition it deserves. It is, of course, worth doingfor its own sake; but greater encouragement from the press and media canmultiply its positive effects. The consolidation of our charity and communityactivities under the banner of the Celtic Foundation and of the attendance ofreligious leaders to the Old Firm game in March, with the positive reception ofthis initiative by the press and media, are examples of what can be done. A historic milestone was reached in May with the 40th Anniversary of the LisbonLions' victory in the European Cup. It is a poor club that cannot celebrate afamous event 40 years on, and the Lions never showed greater resolution andstamina than when carrying out a programme of visits, at home and abroad, thatwould have exhausted Olympic athletes. They remain a family within a family andbrought out all that is best in the Celtic support. As I have remarked before, success in football is seldom marked by unbroken,continuous advances. The nature of modern competitive sport prevents that. Lastyear was a very good year for our club and for Celtic plc, and it will be amonumental challenge to surpass it next year. That does not, of course, meanthat we will not be trying hard to do so. We owe it to our shareholders andsupporters to do that, and you may be sure that your Board, management andfootball team will be pulling together to that end. Brian Quinn CBEChairman 20 August 2007 CHIEF EXECUTIVE'S REVIEW INTRODUCTION I am delighted to report on another eventful and successful year. In May 2006 Celtic's participation in the group stage of the UEFA Champions'League for season 2006/7 was confirmed. This enabled the Club to plan with muchgreater certainty both financially and operationally. As with last year, anumber of the established players left Celtic Park for a variety of reasons. Thefunds achieved from the sale of these players, together with the incrementalcontribution arising from participation in the UEFA Champions' League, enabledus to buy several new players. These included a number of experiencedindividuals as well as younger, often locally developed, players Celtic retained the Bank of Scotland Premierleague title for 2006/7 by asignificant margin, sealing the Championship in dramatic fashion at Kilmarnockseveral weeks before the end of the season. This success in winning the Leaguetitle has provided Celtic with entry to the final qualifying round of the UEFAChampions' League for Season 2007/08. We also won the Scottish FA Cup again,defeating Dunfermline at Hampden Park in Neil Lennon's final appearance for theClub. Celtic achieved new highs in Europe this year, qualifying for the last 16 of theUEFA Champions League for the first time since the competition adopted itscurrent format. Along the way there were unforgettable moments against the mightof Benfica and Manchester United. Celtic also pushed the eventual winners ACMilan every inch of the way over the two legs of that last 16 tie, beforefinally succumbing to a goal in extra-time. The 25th of May saw the fortieth anniversary of that historic day in Lisbon,when Celtic became the first British Club to lift the European Cup. The eventwas celebrated at Celtic Park with a gala dinner in a grand marquee on thehallowed turf attended by over a thousand guests. All the victorious Lions wererepresented and a memorable night was had by all. FINANCIAL PERFORMANCE Celtic's trading results for the year to 30 June 2007 are exceptional,benefiting dramatically from participation in the UEFA Champions League and fromplayer trading. The Club's reported profit of £15.04m represents a massiveimprovement in financial performance on 2005/06 in what continues to be a highlychallenging football environment in Scotland.Group turnover has increased by £17.83m, 31.0%, to £75.24m from last year,largely as a result of playing four more home games due to our progression inthe UEFA Champions' League. The uplift in turnover benefited from the continuedhigh take-up of season tickets, together with the incremental revenue generatedfrom pre-season friendlies in Poland, America, England and Japan. Operating expenses, excluding exceptional operating costs, have increased by£5.61m, 10.4%, to £59.28m, predominantly due to increased labour and uplifts inother overheads related to increased trading activity. The amortisation chargeof £5.86m is up by 15.1% on last year, demonstrating the increased investment inthe first team squad. Exceptional costs of £2.88m largely reflect an impairmentprovision in respect of intangible fixed assets and compare to £0.58m last year.The financial performance also benefited from a gain on disposal of intangiblefixed assets of £9.40m mainly represented by the sale of Petrov, Maloney,Pearson, Varga and Wallace in addition to a lower interest charge in the year. FOOTBALL INVESTMENT The Company wishes to build on the success achieved in recent years. It isimperative that we achieve domestic success and continue the process ofrestoring Celtic as a credible force in Europe. We will continue to try tostrengthen the first team squad whilst managing our financial resourcescarefully and responsibly. The investment made last year and this, both on newplayers and on contract extensions, should continue to yield benefits in thiscurrent season. In the year to 30 June 2007 £14.4m (2006: £8.84m) was invested in the playingsquad. New signings have included Gary Caldwell, Thomas Gravesen, Lee Naylor,Kenny Miller, Paul Hartley, Stephen Pressley, Mark Brown and Jan Vennegoor ofHesselink during the football season and Scott Brown, Massimo Donati, ChrisKillen and Scott Macdonald following the end of the season. Contracts were extended for a number of first team players, including AidenMcGeady and Darren O'Dea. Roy Keane, Mo Camara, Stilian Petrov, Stan Varga and Ross Wallace all left inthe 2006 summer transfer window with Stephen Pearson, Alan Thompson and ShaunMaloney all leaving in January 2007. Neil Lennon, David Marshall and CraigBeattie have departed following the end of the season. Gordon Strachan and his assistants Garry Pendrey and Tommy Burns continue toplan for further progression. The backroom team has been augmented with theappointment of John Park as Football Development Manager, which demonstrates theimportance attached by the Club to identifying and developing young talentedplayers at home and overseas. We now have a revised football operations plan forseason 2007/08 and beyond. Behind the scenes we have also been delighted to secure the services of GregoryDupont as Head of Sport Science. Gregory joined us in the closed season fromLille and brings a wealth of senior level experience to the medical team,reporting to Dr Derek McCormack. Planned trading of players and the development of younger players are integralparts of our longer-term measures to control costs. As in season 2006/07 any newsignings and/or contract extensions are planned to be at a financially viablelevel or, alternatively, funded from profits. Our new scouting and youth development arrangements will help this process. Webelieve that the scouting team established in the last year or so should yielddividends in the form of new players from the UK and abroad. Several members ofour reserve and Under 19 teams have already stepped up to the senior squad andwe intend to maintain that policy. A new football bonus scheme was introduced during the year, which is based moreon rewarding players and management for the on field success. The construction of the new purpose-built training facility and football academyat Lennoxtown is progressing well and it should be available during September2007. The benefits of such a facility are self-evident and ultimately willensure that players are recruited, developed and traded in the most efficientand cost effective way possible. FOOTBALL OPERATIONS In progressing in Europe and winning the domestic double of SPL Championship andScottish Cup, Celtic played a total of 53 competitive matches during the 2006/07season, winning 35 and losing 11, with 7 matches drawn. It was a tremendousrecord and all concerned deserve enormous credit. Celtic's reserve side won the SPL Reserve Championship for the sixth year insuccession, playing 22 matches and winning 19 of them, a quite phenomenalrecord. Gordon Strachan and Shunsuke Nakamura respectively won the Bank of ScotlandManager of the Year and Player of the Year awards, with Naka also picking up theSPFA Player of the Year prize. TICKET SALES Progression into the last 16 of the UEFA Champions League saw a significantincrease in sales of standard match tickets against the previous season. Thetotal number sold in season 2006/07 was just under 400,000, generating salesrevenue of over £8m. Champions League ticket sales accounted for nearly 220,000tickets at a value of £5.4m, whilst SPL ticket sales totalled over 100,000 atjust under £2m. Standard season ticket sales were once again very strong with a total in excessof 50,000 books sold, worth more than £17m. Taking into account Corporate andPremium ticket sales the total reached 53,000, which is amongst the highest inthe UK. YOUTH DEVELOPMENT Nearly 2.6 million lottery chances were sold under the various schemes operatedby Celtic Development Pools Limited during the period from July 2006 to June2007. Donations of approximately £1m were provided to the Club's DevelopmentDivision for the purposes of youth development, whilst a similar sum in prizemoney was paid out to Celtic supporters nationwide. In light of the challengingtimes facing all small lotteries operating in the UK, this represents acommendable achievement for Celtic Development Pools. The matchday draw operated at Celtic Park was once again a major success story.This lottery product remained very popular with supporters as witnessed by thestrong sales conversion rate. With a top prize of £7,500 on offer, many triedtheir luck at winning. Prize money of approximately £1.4m has now been paid outto Celtic supporters on the pitch at Celtic Park since the start of the Windfallin 1995 and the top prize this season will be £8,000, the biggest cash prize inUK football CELTIC FOUNDATION The Celtic Foundation continues to support the Club's social dimension,reflecting the very reasons why Brother Walfrid founded Celtic back in 1888. The Celtic Foundation integrates a number of very successful project areas: • Football in the Community and community coaching programmes across both domestic and international markets, including the newly developed Celtic Women's and Girls Academy and Boys Community Academy; • Anti-bigotry, anti-racism and anti-sectarianism initiatives; • Celtic Charity Fund; • Celtic Learning Programmes and the Learning Centre; • The Old Firm Alliance Project; • Celtic Against Drugs; • Support Employment Project; and • Services to Schools. The creation of the Foundation is indicative of the importance Celtic attachesto its role in the community, with the Club involved in more educational,charitable and community initiatives than at any time in its history. Celtic in the Community continues to be the leading premier community club inScotland and arguably the UK. It provides a coaching and development programmetailored to meet the needs of children, teenagers and adults. The range ofproducts and services has grown considerably during the past year providingopportunities for all sectors of the community, with over 4,500 young people andadults participating in a variety of courses and programmes on a weekly basis. Celtic remains totally committed to the Programme and to date has investedsignificantly in recruiting around 100 Community Coaches and the necessarysupporting infrastructure. The programme also provides a pathway into our YouthAcademy with over 350 youngsters identified and invited into the DevelopmentCentre Programme, 7 having already graduated to the Academy itself. The introduction of the Women's and Girls Academy and Boys Community Academywill provide a more structured programme and clear, progressive pathway fortalented players. The Club is delighted that Elaine C. Smith has agreed tobecome a patron for the Women's and Girls Academy. The Community Programme has firmly established itself in Ireland too with over1,000 youngsters attending a variety of courses each year. Internationally, Celtic in the Community delivered a social inclusion programmeto thousands of youngsters from some of North America and Canada's most deprivedcities. The Community Programme also delivered a summer programme in Cyprus. The reputation of the Club and indeed its supporters provide real potential tooffer new programmes internationally. It is our intention to visit Japan andAustralia during 2007/08 in addition to consolidating and rolling out ourCommunity Programme in North America and Canada. The Celtic Foundation has been instrumental in securing grant funding to supportseveral meaningful projects in the areas of health, education, employment,anti-social behaviour and social inclusion. Considerable progress has been achieved this year in furthering the Club'santi-sectarianism initiatives. In March we welcomed then First Minister JackMcConnell and Scotland's religious leaders to the Old Firm match at Celtic Parkas our guests, promoting our message of inclusion. This enabled them to observesome of the Club's work against sectarianism through workshops with localchildren, which take place at the stadium on a matchday. The Old Firm Alliance made great progress during the year in helping to educateyoung people on the benefits of a healthier lifestyle while providing them withpositive role models to challenge racism and sectarianism. A competition run inconjunction with Glasgow Community Planning Partnership to find 'Firm Friends',one a Celtic fan, the other who supported Rangers, attracted a great responseand helped promote our joint efforts in this very important area. Following areport and recommendations by the Scottish Executive, a press release inNovember 2006 highlighted the efforts of both Celtic and Rangers in combatingbigotry and sectarianism and reaffirmed the Clubs' commitment to work togetherto promote togetherness, tolerance and social inclusion. Celtic was delighted to launch the new Celtic Learning Centre at Celtic Park inMay 2006. Built in association with Glasgow City Council, the Centre nowprovides invaluable support to improve the education of young people throughoutthe region. 1,575 local school children benefited from participating in Celtic LearningSports Programmes during the year, with a success rate of 83% on the reason forreferral. This brings total participants to 4,369 since the Programme waslaunched in 2004. The Centre was visited by approximately 8,000 school pupils participating inCeltic Learning's various support classes this year. These included Literacy andNumeracy Courses, Web Design Classes in partnership with Stow College, VideoEditing and Broadcasting, French Language support, English Language supportclasses for Asylum Seekers, Refugees and children of Economic Migrants, ArtClasses, Anti-Sectarian workshops and Japanese Fun classes. In addition AdultCommunity groups participated in Evening computing classes in association withGlasgow Metropolitan College. We would like to express our appreciation to all our strategic partners andparticipants for supporting the Celtic Foundation during 2006/07. Without theirsupport the progress and achievements of the Celtic Foundation would not havebeen possible. MERCHANDISING This was the second year of our contract with NIKE and saw the launch of a newinternational kit and a new away kit, whilst 25th May 2007 saw the successfullaunch of the 40th anniversary Lisbon Lions home strip. Turnover for the year reached £13.37m, which is down on the previous year'sincome, although this had included a full year of new home kit sales. 2006/07 saw the first full year of trading for the Coatbridge, Clydebank andStirling retail stores and a temporary unit opened in Greenock, which has nowbeen retained on a permanent basis. The number of Celtic retail concessionswithin Debenhams stores has been increased to four with the addition of Newryand Cork to the existing operations in Glasgow and Inverness. Wholesale income continues to grow through established accounts with LifestyleSports, KitBag, JJB Sports, Heatons and Ireland's largest retailer, DunnesStores. In terms of merchandise, the Lisbon Lions 40th anniversary saw the successfulrelease of several limited edition ranges. MULTI MEDIA Channel 67 Online and Channel 67 Online Plus subscription levels have continuedto climb. Celtic has also launched a DVD-quality streaming video service,Channel 67 Premium, which is forecast to grow subscribers during the course ofthe new season. TV revenues reported strong growth as a result of the Club being the soleScottish participant in the UEFA Champions' League together with the revenuesgenerated from pre-season friendlies and the domestic success of the team. . The Club's official website, www.celticfc.net, has been re-designed with anincreased emphasis on security and greater functionality. Traffic has grown by40% since the site's re-launch in April, whilst the Japanese language site,www.celticfc.jp, is currently undergoing similar redevelopment. Celtic's Multi Media team successfully produced and presented a number ofhigh-profile events over the last 12 months, including the Tommy BurnsTestimonial Dinner, Player of the Year and the Lisbon Lions 40th AnniversaryBanquet. In addition, the Multi Media team have contributed significantly to theforthcoming 'Celtic Opus' in terms of content, style and editorial, inconjunction with the Kraken Group. DVD titles produced during the year included the end of season review -'Untouchable' - and the hugely successful 'A Bhoy's Life' (the Jimmy Johnstonestory). The epic Official History of Celtic Football Club is due for completionin mid October following an 18 month production period. This year, Multi Media has provided considerable support to the footballdepartment by analysing, filming and editing matches and training sessions, aswell as providing automated analysis of the opposition with the installation ofthe Amisco tracking system. PUBLIC RELATIONS The level of media interest and activity around the Club was again extremelyhigh during the year, particularly as a consequence the Club's progression tothe last 16 of the UEFA Champions League as well as continued domestic success. The PR Department ensured substantial positive media coverage for a range ofClub activities at a national level, including commercial, charitable andcommunity events. In addition, the Department plays an important role ineffectively dealing with supporter enquiries, working closely with supporterorganisations and liaising directly with Glasgow City Council and other bodiesto ensure the Club maintains its important social dimension. BRAND PROTECTION Celtic continued to guard its intellectual property rights throughout the yearto ensure that the Celtic brand remains adequately protected from misuse bythird parties. The Club worked closely with the enforcement authorities,including the police, customs and trading standards, along with other trademarkholders and trade bodies. Action was taken against those found to be in breach.Counterfeit goods to the value of approximately £270,000 were removed from theUK marketplace. PARTNER PROGRAMME Our Platinum partnerships with Nike and Carling continue to be successful forboth the Club and the sponsors. The retention of such high profile businesses,complemented by our long-standing relationships with Phoenix, T-Mobile, RadioClyde and Ladbrokes, has helped attract new partners. Thomas Cook's first year as Official Travel Partner was very successful,enhancing supporters' travel arrangements to European matches as well asorganising all international travel for the team and officials. Due to the success of the Celtic FC Credit Card through MBNA, our partnershipsin the financial sector increased. These now include bank accounts available through Soccer Savings and financial advice with Celtic FC Money, which is operatedby Dutch company AEGON. New overseas partners, including Polish airline Centralwings, Spanish propertypartners The Village and betting partners Bluechip, are helping to grow thebrand internationally and complement our work in Japan and North America. Thefocus in 2007/08 will be to secure more UK and overseas sponsors. STADIUM In addition to several high-profile Champions League ties, in September 2006Celtic Park hosted the Scotland international fixture against the Faroe Islands,enhancing the stadium's reputation as one of the top venues in the country. During the course of the year Celtic continued to work closely with Glasgow CityCouncil's Safety Team for Sports Grounds, placing spectator safety as ourhighest priority. The Club views this partnership approach as key. Fullyendorsed by the Safety Team was the installation of a new card access system tothe stadium's 105 turnstiles. After a settling in period, the system is nowoperating effectively at full capacity. The system is designed to improvespectator access while providing the latest technology in event safetymanagement. During the course of the season, Celtic extended the stewarding arrangementsadopted for European matches to SPL away fixtures. The Celtic stewards whoaccompany our fans assist local operations to ensure the safety and well beingof Celtic supporters. During the year, Celtic's Head Groundsman, John Hayes, received the prestigiousaccolade of UK Groundsman of the Year for season 2005/06 from the Institute ofGroundsmanship, whilst Celtic's groundstaff team received the Scottish PremierLeague Pitch of the Year award. John also received the Scottish ProfessionalGroundsman of the Year award, which represents tremendous recognition from hispeers. FACILITIES A number of corporate and customer hospitality areas have recently beenrefurbished and upgraded, including the Jock Stein lounge and Walfridrestaurant. In addition, the press area was upgraded and concourse redecorated. Behind the scenes there has been significant investment in upgrading businesscritical IT networks, software, printing, copying and telecommunicationssystems. Considerable savings have also been achieved by introducing water andenergy conservation and leak detection devices. CATERING AND CORPORATE HOSPITALITY The performance of our seasonal hospitality packages remained strong in allareas. All four UEFA Champions League matches were sold out and were packagedwith SPL fixtures, generating extra income. The AC Milan and Manchester Unitedmatches also generated significant income from off-site packages. Conference and Banqueting continued to perform well with a number of successfulevents, the greatest success this season being the 40th anniversary dinner forthe Lisbon Lions. Our Number 7 Restaurant successfully launched a new organic menu for children inconjunction with the Soil Association's "Food for Life" campaign, which gainedsome very positive publicity. The partnership with Lindley Catering, who provide our concourse cateringservice on matchdays, continues to work well. In terms of the Visitor Centre, numbers remained encouraging despite a smallshortfall in visitors this season compared to last. SUPPORTER RELATIONS The Club continued the practice of consulting with Supporters' Groups throughoutthe season. Quarterly meetings have been maintained with representatives of theCeltic Supporters Association, The Affiliation of Celtic Supporters Clubs, TheAssociation of Irish Celtic Supporters Clubs as well as the Donegal and SouthWales and Bristol Associations. The content of the meetings has varied to covera wide range of issues including European travel, sectarian singing and itspossible implications as well as away supporter behaviour in general. Thesemeetings have been very positive and are planned to continue. In addition openforums have been held with supporters to discuss concerns on topics such as seatrelocation. In all cases the views and opinions of our supporters are highlyvalued and we will continue to provide a platform for these to be aired. Introduction of the new access control system throughout the stadium means thatseason ticket holders now enter with their smartcards, with match ticket holdersusing bar-coded tickets. One of the security benefits of the new system has beeneasier identification of forged tickets at high-profile matches. Furthermore,the majority of renewing season ticket holders have had their smartcardsre-activated for use in season 2007/8, saving the cost of voucher books andpostage. Development continues on our Customer Relationship Management (CRM) database,which integrates supporter data from across the Club. This allows us to useinformation more effectively to reduce marketing costs, drive revenues, improvecustomer service and provide additional value to Club sponsors and partners. Thecoming season will see changes in the way the Club communicates to itssupporters by e-mail, with the CRM system being used to send personalisedmessages and offers appropriate to the recipient based on their databaseprofile. In line with the excellent work undertaken by the Celtic Foundation in tacklingbigotry and sectarianism, the Club has pro-actively engaged with supportergroups to ensure that supporters following Celtic at home and away continue touphold the standards of behaviour we expect and to rigorously combatunacceptable conduct in whatever form it may arise. 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. Fundraising activities included a legends match against Liverpool, a charitybadge day at Celtic Park and our Annual Sporting Dinner in the Kerrydale Suite,which was attended by football management, Directors and first team players.DebRA was the principal beneficiary and a host of other organisations alsobenefited from support during the course of the year, totalling around £170,000.The Fund continues to be one of the most successful and high profile charityoperations within football. The appointment of a Community Relations Manager in September 2006 highlightedthe Club's commitment to supporting worthy causes. Having now put in place arevised application process, we will look to increase the fundraising impetusfor 2007/08. HUMAN RESOURCES Celtic was re-awarded the "Positive About Disabled People" symbol by Job CentrePlus during the year in recognition of working towards fulfilling ourcommitments to colleagues and job applicants with a disability. Furthermore, the Club made a formal commitment to work towards attaining"Investors In People" status, seeking to further improve its people-managementand development policies and practices in line with nationally recognisedstandards. Over 80 pupils from local schools enjoyed a week of structured work experienceat Celtic Park during the year, part of a highly regarded and successful ongoingprogramme. The hard work and contribution of all colleagues in a very busy but highlysuccessful year is once again greatly appreciated. SUMMARY AND OUTLOOK Season 2006/07 was an extremely successful year for Celtic. Gordon Strachandeserves much credit for the football success he has achieved. Celtic progressedto the last 16 of the UEFA Champions' League for the first time, anddomestically the Tennent's Scottish Cup was secured in addition to winning theBank of Scotland Premierleague. This football success has greatly assistedtrading performance which in addition to the gains reported from playertransactions has resulted in record financial results for the year to 30 June2007, and in the year end bank debt being reduced to £4.99m. This performancehas provided an ideal platform to ensure further progress is achieved. Equallyit is recognised that the football sector remains financially difficult with therevenues generated by progress in European competitions highly significant. Trading at the beginning of the new financial year has been relativelyencouraging. Seasonal sales of standard, premium and corporate tickets are atlevels comparable with last year and a new away football kit has been launchedin a competitive merchandise market. Like last year, additional revenue streamscontinue to be sought and new commercial agreements, including new SPLtelevision and radio contracts, albeit at levels far below those of the FAPremier League, should boost such income. Celtic continues to enjoy partnershipswith a number of international companies, which provide the foundation of ourincome streams going forward. The expected completion of the new training academy at Lennoxtown in the autumnshould enhance the number of internally generated youth players establishingthemselves in the first team. These initiatives together with the control offootball labour costs should result in a cost base and financial model that issustainable. Success in qualifying for the group stage of the UEFA ChampionsLeague will assist greatly in this process. The ability to field a competitive side and retain control on costs remains achallenge. The player trading activity completed in the last 24 months hasreflected such a balanced approach and this will be continued as theorganisation moves forward. The biggest challenge facing your Board is themanagement of salary and transfer costs whilst achieving playing success inorder to yield satisfactory financial results. Our objectives are to secure domestic football success and to ensure UEFAChampions' League football at Celtic Park on an annual basis. Peter T Lawwell 20 August 2007Chief Executive GROUP PROFIT & LOSS ACCOUNT 2007 2006 Operations Player Total £000 excluding trading £000 player £000 trading £000 Notes TURNOVER -group andshare of jointventure 75,237 - 75,237 57,859 LESS SHARE OFJOINT VENTURE - - - (448) -------- -------- -------- -------- GROUP TURNOVER 2 75,237 - 75,237 57,411 OPERATINGEXPENSES 3 (59,283) - (59,283) (53,674) -------- -------- -------- -------- PROFIT FROMOPERATIONS 15,954 - 15,954 3,737 EXCEPTIONALOPERATINGEXPENSES 3, 4 (216) (2,663) (2,879) (579) AMORTISATIONOF INTANGIBLEFIXED ASSETS 3, 13 - (5,865) (5,865) (5,095) -------- -------- -------- -------- GROUPOPERATINGPROFIT/(LOSS) 15,738 (8,528) 7,210 (1,937)LESS SHARE OF OPERATING PROFIT - - - -IN JOINT VENTURE -------- -------- -------- -------- TOTALOPERATINGPROFIT/(LOSS) 15,738 (8,528) 7,210 (1,937) PROFIT /(LOSS) ONDISPOSAL OFINTANGIBLEFIXED ASSETS - 9,397 9,397 (265) LOSS ONDISPOSAL OFTANGIBLE FIXEDASSETS (339) - (339) (250) -------- -------- -------- -------- PROFIT/(LOSS)BEFOREINTEREST ANDTAXATION 15,399 869 16,268 (2,452) ======== ======== INTERESTPAYABLE: 8BANK LOANS ANDOVERDRAFTS (484) (999)NON EQUITYSHARES (744) (771) -------- -------- PROFIT/(LOSS)ON ORDINARYACTIVITIESBEFORETAXATION 15,040 (4,222) TAXATION ONPROFIT/(LOSS)ON ORDINARYACTIVITIES 9 - - -------- -------- PROFIT/(LOSS)FOR THE YEAR 22 15,040 (4,222) -------- -------- EARNINGS /(LOSS) PERORDINARY SHARE 11 18.53p (7.19p) DILUTEDEARNINGS /(LOSS) PERSHARE 11 11.48p (7.19p) All amounts relate to continuing operations. There were no gains or losses recognised in 2007 or 2006 other than the profitor loss for the year. GROUP BALANCE SHEET 2007 2006 Notes £000 £000 £000 £000 FIXED ASSETSTangible assets 12 55,861 49,924Intangible assets 13 12,990 7,593 -------- -------- 68,851 57,517 CURRENT ASSETSStocks 15 3,383 1,901Debtors 17 7,997 5,029Cash at bank and in hand 7,006 2,914 -------- -------- 18,386 9,844 ======== ========CREDITORS - Amounts fallingdue within one year 18 (20,922) (15,481) Income deferred lessthan one year 19 (13,244) (12,589) -------- -------- (34,166) (28,070) ======== ======== NET CURRENT LIABILITIES (15,780) (18,226) -------- -------- TOTAL ASSETS LESSCURRENT LIABILITIES 53,071 39,291 CREDITORS - Amounts fallingdueafter more than one year 20 (16,342) (17,194) -------- -------- NET ASSETS 36,729 22,097 ======== ======== CAPITAL AND RESERVESCalled up share capital 21 23,452 23,450Other reserve 22 21,222 21,222Share premium account 22 14,129 14,089Capital redemption reserve 22 2,440 1,739Profit and loss account 22 (24,514) (38,403) -------- -------- SHAREHOLDERS' FUNDS 23 36,729 22,097 ======== ======== Approved by the Board on 20 August 2007 GROUP CASH FLOW STATEMENT 2007 2006 £000 £000 RECONCILIATION OF OPERATING PROFIT / (LOSS) TO NETCASH INFLOW FROM OPERATING ACTIVITIES Operating profit / (loss) 7,210 (1,937)Depreciation 1,708 1,798Amortisation of intangible fixed assets 5,865 5,095Provision for impairment of intangible fixed assets 2,663 400(Increase) / decrease in stocks (1,482) 86Decrease / (increase) in debtors 987 (308)Increase / (decrease) in creditors and deferred income 1,089 (159) --------- --------- Net cash inflow from operating activities 18,040 4,975 ========= ========= CASH FLOW STATEMENT Net cash inflow from operating activities 18,040 4,975Returns on investments and servicing of finance (Note 24) (1,005) (1,520)Capital expenditure and financial investment (Note 24) (12,054) (6,869) --------- --------- Cash inflow / (outflow) before use of liquid resourcesand financing 4,981 (3,414) Financing (Note 24) (889) (8,393)Net proceeds of equity share capital - 14,550 --------- --------- Increase in cash 4,092 2,743 ========= ========= RECONCILIATION OF NET CASH FLOW TOMOVEMENT IN NET DEBT (Note 25) Increase in cash in the year 4,092 2,743Cash outflow from movement in debt 889 8,393 --------- --------- Change in net debt resulting from cash flows 4,981 11,136Non cash movement in debt (181) (210) --------- ---------Movement in net debt in the year 4,800 10,926 Net debt at 1 July (13,965) (24,891) --------- --------- Net debt at 30 June (9,165) (13,965) ========= ========= 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 2006 which included implementation of the presentational aspects of FRS25 ("Financial Instruments: disclosure and presentation") for the first time.Under FRS 25 the Group's Preference Shares and Convertible Preferred OrdinaryShares, 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 30 June 2007 are reported £3.11m (2006: £3.81m) below that whichwould have been reported prior to the implementation of FRS 25. As a result ofthe accounting treatment of the Convertible Preferred Ordinary Share dividendsunder FRS 25, there is a requirement under the capital maintenance provisions ofthe Companies Act 1985 to transfer an element of distributable reserves into acapital redemption reserve. 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 operations, all of 2007 2006which arises in the UK, comprised: £000 £000 Professional football 34,345 26,659Multimedia and communications 23,199 11,889Merchandising 13,367 14,337Stadium enterprises 2,679 2,779Youth development 1,647 1,747 --------- --------- 75,237 57,411 --------- --------- 3. EXCEPTIONAL OPERATING EXPENSES The exceptional operating expenses of £2.88m (2006: £0.58m) reflect £0.22m(2006: £0.18m) in respect of labour costs largely arising as a result of theearly termination of certain employment contracts and £2.66m (2006: £0.40m) inrespect of a provision for impairment of intangible fixed assets. 4. DIVIDENDS A 6% (before tax credit deduction) non-equity dividend of £0.54m is payable on31 August 2007 to those holders of Convertible Cumulative Preference Shares onthe share register at 3 August 2007, together with the amount due in respect ofthe Convertible Preferred Ordinary Shares fixed dividend of 4% of £0.9m (2006:£0.9m) plus the participating dividend of 2%, £0.45m (2006: £nil) as a result ofreaching the knockout stage of the UEFA Champions League. A number ofshareholders have elected to participate in the Company's scrip dividendreinvestment scheme for this financial year. Those shareholders will receive newOrdinary Shares in lieu of cash. The implementation of the presentationalaspects of FRS 25 ("Financial Instruments: disclosure and presentation") in thepreparation of the annual results, requires that the Group's Preference Sharesand Convertible Preferred Ordinary Shares, as compound financial instruments,are classified as a combination of debt and equity and the attributablenon-equity dividends are classified as interest. 5. TAXATION No provision for corporation tax or deferred tax is required in respect of theyear ended 30 June 2007. Estimated tax losses available for set-off againstfuture trading profits amount to approximately £30m (2006: £44m). This estimateis subject to the agreement of the current and prior years' corporation taxcomputations with HM Revenue and Customs. 6. EARNINGS PER SHARE Earnings per share has been calculated by dividing the profit for the period of£15.04m (2006: £4.22m loss) by the weighted average number of Ordinary Shares of81.15 million (2006: 58.76 million) in issue during the year. Diluted earningsper share as at 30 June 2007 has been calculated by dividing the earnings forthe period by the weighted average number of Ordinary Shares, Preference Sharesand Convertible Preferred Ordinary Shares in issue, assuming conversion at thebalance sheet date, and the full exercise of outstanding share purchase options,if dilutive, in accordance with FRS 22 Earnings Per Share. The result of thiscalculation was 135.8 million shares (2006: 58.76 million). As at June 2006 andJune 2007 no account was taken of potential share purchase options, as thesepotential ordinary shares were not considered to be dilutive under thedefinitions of the applicable accounting standards. 7. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group 2007 2006 £000 £000 At 1 July 22,097 11,728 Movements in year:Issue of ordinary share capital 42 14,591Participating dividend payable on the ConvertiblePreferred Ordinary Shares (450) -Profit / (loss) for the year 15,040 (4,222) --------- --------- At 30 June 36,729 22,097 --------- --------- 8. ANALYSIS OF NET DEBT At Cash Flow Non-cash At 1 July 2006 £000 Movement 30 June 2007 £000 in Debt £000 £000 Cash at bankand in hand 2,914 4,092 - 7,006 --------- --------- --------- --------- 2,914 4,092 - 7,006 --------- --------- --------- --------- Debt duewithin 1 year (1,065) 6 - (1,059)Debt due after1 year (15,814) 883 (181) (15,112) --------- --------- --------- --------- (16,879) 889 (181) (16,171) --------- --------- --------- --------- Net debt (13,965) 4,981 (181) (9,165) --------- --------- --------- --------- 9. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT 2007 2006 £000 £000 Returns on investments and servicing of financeDividends paid (521) (521)Interest paid (484) (999) --------- --------- Net cash outflow from returns on investments andservicing of finance (1,005) (1,520) --------- --------- Capital expenditure and financial investmentPayments to acquire tangible fixed assets (7,069) (3,035)Payments to acquire intangible fixed assets (10,959) (4,477)Proceeds from sales of intangible fixed assets 5,974 643 --------- --------- Net cash outflow from capital expenditure and financialinvestment (12,054) (6,869) --------- ---------FinancingLoans paid (883) (8,383)Loan instalments paid (6) (10) --------- --------- Net cash outflow from financing (889) (8,393) --------- --------- 10. ANNUAL REPORT & ACCOUNTS Copies of the annual report & accounts together with the notice and notes of the2007 AGM are expected to be issued to all shareholders in due course. The financial information set out above was approved by the directors on 20August 2007 and does not constitute the Company's statutory accounts for theyears ended 30 June 2007 or 30 June 2006. The auditors' opinion on the 2007statutory accounts is unmodified and does not include a statement under Section237 (2) or (3) of the Companies Act 1985. The statutory accounts for 2006 havebeen filed and those for 2007 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