Final Results

Celtic PLC 13 August 2003 13 August 2003 CELTIC plc Preliminary Results for the year ended 30 June 2003 HIGHLIGHTS OF THE RESULTS • UEFA Cup Finalists. • Turnover increased by 6.5% to £60.57m. • Profit from operations up 25.3% to £6.73m from £5.37m. • Write off of deferred tax and advance corporation tax of £5.86m. • Loss after tax £11.66m (2002: £3.04m). • Year-end debt £17.78m (2002: £16.47m). • Gross investment of £5.43m in intangible fixed assets, including the signing of four new players. For further information contact: Brian Quinn, Celtic plc Tel: 0141 551 4276 Eric Riley, Celtic plc Tel: 0141 551 4276 Alex Barr, The Big Partnership Tel: 0141 333 9585 CHAIRMAN'S STATEMENT For Celtic the last twelve months have illustrated vividly the volatility of football as both a sport and a business. Early exit from the UEFA Champions' League threatened to depress our sporting and commercial performance; but our progress to the UEFA Cup Final, together with our efforts to retain the Scottish Premier League (SPL) Championship, while ultimately unsuccessful, brought the season to an exciting climax. On the whole, this will go down as one of the most memorable years in Celtic's history. Far from abating, the financial pressures on football clubs in Scotland have intensified during the last year. Costs, particularly the costs of running a successful football team have remained stubbornly high. Efforts to contain and reverse these costs take time. The majority of contracts have a residual life of more than one year and the effects on the wage bill and on amortisation - a significant but under-publicised expense - can persist for some years. Certain sources of revenue, such as ticket receipts and merchandise sales, can be sustained by judicious pricing and imaginative marketing; and we have been successful in these aspects this year. But they depend ultimately on football success which cannot, of course, be guaranteed. For Scottish Premier League clubs, income from television and radio in respect of domestic competition fell substantially, as expected. Partly as a consequence, many of these clubs have reduced the strength of their playing squads, in some cases quite severely. The effects on the quality of the SPL remains to be seen and it does not necessarily follow that smaller squads, with greater reliance on home-grown players, will result in a deterioration in playing standards. Tighter controls on costs and, more importantly, a change in attitude in the direction of more efficient use of resources, have worked well enough in other troubled industries. Football need not be an exception, especially over the medium-term. It is also encouraging that serious consideration is being given to the structure and functioning of the SPL; such factors could be as important as finance in producing a more competitive and attractive domestic league. It would therefore be pessimistic to take too gloomy a view of the outlook for Scottish football. Last year's Scottish Premier League Championship was probably the closest-ever. Celtic's chances of retaining the title were virtually written off following one or two indifferent results in April. However the team came storming back with a succession of convincing victories and relinquished the title on the last day of the season by a single goal. In the UEFA Cup the team went from success to success, beating high quality sides from Spain, Germany, Portugal and England. The final itself was memorable, both for the quality of the football and fighting spirit of a Celtic side marked out as underdogs; and for the quite magnificent support from our fans in Seville, estimated at 80,000 - unprecedented for a travelling support in any European club competition. The UEFA Cup run also had a major influence on our financial performance during the year. The contribution to profits from all sources is estimated at £10.20m, more or less equivalent to our European campaign the previous year. Total turnover for the year exceeded £60m, an uplift of 6.5%. Sales of merchandise rose by 14.6% to £11.46 million and ticket revenues also grew, by 10.0%. However multimedia income was almost 4% lower, notwithstanding our progress in the UEFA Cup. Profit from operations of £6.73m was up by £1.36m on the previous year. Despite this a pre-tax loss of £5.79m, up by £2.82m over the year, was recorded. Deferred tax assets of £5.86m were written off, giving a loss after tax of £11.66m. Debt at the end of the year amounted to £17.78m, an increase of £1.31m over the year as a whole. Many fans and commentators may find difficulty in understanding how the club could reach the UEFA Cup final and still show an increased pre-tax loss for the year. Operating expenses were £2.32m higher than the previous year at £53.84m. In addition to lower multimedia income, a higher amortisation charge and a net loss on player sales, each of the order of a £1.5m movement from the previous year, also go a substantial way in explaining the outcome. In brief, running a football squad that can compete both domestically and in Europe is an expensive business and one that is capable of improvement in a difficult business environment only over a period of time. In the meantime, serious efforts continue to improve the cost profile of the company recognising, of course, that excessive cost cutting can prove counter-productive. Some degree of sanity is returning to the game after a period of over-exuberance. Though it may sometimes seem tempting to go against this trend and speculate on future success, Celtic will not be doing so, while maintaining our drive to be successful in domestic and European competition. The Board will seek to continue to strike the balance judiciously. I should like to thank Martin O'Neill, his staff and the players for a memorable season. We are particularly pleased that Martin has signed a one year rolling contract. Success is measured not only by trophies won. Celtic has made significant progress in the last two years in becoming a force in European football once again. Our supporters also distinguished themselves by their commitment and behaviour. Celtic's reputation for good football and phenomenal support, in Europe and home, has been further enhanced. Your Board will seek to maintain this success in the years ahead. We announced in May 2003 that Kevin Sweeney would not be standing for re-election at this year's Annual General Meeting. Sir Patrick Sheehy, who was also due to retire by rotation at that time, has also decided not to stand for re-election and has chosen instead to resign now. I should like to thank both Sir Patrick and Kevin Sweeney for their excellent contributions over recent years. Celtic, as a club, and I personally have benefited enormously from their experience and wise counsel. Brian Quinn, CBE Chairman OPERATING REVIEW INTRODUCTION The past 12 months have provided many glorious highlights, particularly on the European stage. A most memorable year saw Celtic once again take its place at the forefront of European football in reaching our first European final in more than 30 years. Celtic's appearance in the UEFA Cup Final in Seville was the pinnacle of a season, which underlined not only the quality and resilience of the playing squad, but also demonstrated again the tremendous passion which Celtic fans worldwide have for the Club. The team's heartbreaking defeat was offset by the astonishing spectacle of an estimated 80,000 Celtic supporters, believed to be the biggest away support at any football match in history, travelling to Seville. The extent of the accomplishment of the team is further reinforced by the fact that, in progressing to the UEFA Cup Final, Celtic defeated Blackburn, Celta Vigo, Stuttgart, Liverpool and Boavista representing some of the best leagues in the world. This achievement was all the more remarkable given that the team also kept alive a hugely spirited defence of its Bank of Scotland Premier League title until the last minutes of the season's final fixture. The team also reached the final of the CIS Insurance Cup and the quarter-final of the Tennents Scottish Cup. However, the disappointment in not retaining the league title was tempered by the knowledge that Scotland will have two representatives in the qualifying stages of the 2003/04 UEFA Champions' League, giving Celtic an excellent opportunity for further European football. Undoubtedly a great deal of the success of the team is attributable to Martin O'Neill and his two assistants, John Robertson and Steve Walford, ably supported by the backroom staff. In his time at Celtic, Martin has transformed the playing fortunes of the Club and we are delighted that he has signed a one year rolling contract. FOOTBALL INVESTMENT Celtic continued to invest in the playing squad at a time when a number of clubs were cutting back in an extremely difficult football sector, although at a reduced level from last year. The acquisition of Fernandez at the end of last season together with the investment in new players during the season, namely Hedman, Laursen, Broto and Varga proved important with additional games being played, particularly in European competition, during the season. The gross investment cost this year in player acquisition equates to £5.43m (2002: £12.11m). In addition a further £1.4m was paid in follow-up capital payments due against players acquired in previous years. Two of the Club's most promising players, Petrov and Maloney, also signed contract extensions during the year, in keeping with the Club's policy, following the Bosman ruling, to re-negotiate and extend the contracts of key players. Since the year end, Varga and Under 21 prospect Craig Beattie have both signed extended contracts. YOUTH DEVELOPMENT The benefits of investment in this key area were underlined last year not only by the progression of young players such as Shaun Maloney, Jamie Smith and goalkeeper David Marshall, but also by the successful performances which saw both Celtic's Under 21 and Under 18 teams win their respective SPL leagues, with the Under 18's also securing victory in the Scottish Youth Cup. In order to build on this high level of achievement, the enhancement of our youth development programme continues. We have significantly expanded and strengthened our scouting and coaching systems and now have 40 scouts operating in networks established throughout the whole of the UK and Ireland. This has resulted in a number of English Schoolboy and Irish Youth International players signing professional contracts with the Club. In addition, the number of development centres throughout Scotland has more than doubled from 6 to 13 in less than 9 months. This means that along with the elite squads in the academy, we have over 400 young players currently undergoing development and assessment. The Youth Development Department has been restructured to align with best practice in Europe. Additional age group teams have been introduced together with revised technical and tactical coaching programmes and greater emphasis has been placed on education, welfare and sports science initiatives. The ongoing provision and enhancement of the youth development infrastructure, as noted above, requires investment. Much of this funding comes from donations from Celtic Development Pools. Total development income increased from last year by 8.9% to £1.39m reflecting revenue from additional matchday lotteries. This is a record year, which is particularly satisfying in such a mature market. The weekly pool, with over 1,000 agents collecting weekly contributions from 38,000 supporters and the half-time draw, continue to be the most successful football lottery schemes of their kind throughout Great Britain. TICKET OPERATIONS Season ticket sales of 53,464 were in line with previous year despite an uplift of approximately 10% in standard season ticket prices. We are grateful for this continued support, which assisted Celtic in continuing investment in the playing squad as noted above. Total ticket income in the year of £30.48m was up on the previous year by £2.76m largely as a result of the increased number of home European matches played in the current year of 7 plus a UEFA Cup Final against 5 the previous year. In addition, corporate ticket income was up on the previous year following the upgrade in certain facilities together with the increased number of home European games. At the beginning of the year an enhanced computerised ticketing system was installed and proved invaluable during the season when the team's progression through each round of the UEFA Cup led to tighter turnaround times. This was demonstrated during March when almost 100,000 tickets were sold for the UEFA Cup match against Liverpool and the CIS Cup Final against Rangers three days later. Whilst March proved to be an extremely hectic and busy period it was eclipsed when the team qualified for the UEFA Cup Final in May. The demand for tickets for the match was unprecedented and the lead up to the final saw the Ticket Office swamped with requests and enquiries from all round the world. The allocation of tickets from UEFA was never going to satisfy the demand. After a great deal of consideration, the Club elected to make tickets available to those supporters who were members of the European Away Ticket Registration Scheme and whom we had recorded as travelling to matches in the earlier rounds. MERCHANDISING Merchandising revenues increased by 14.6% to £11.46m following Celtic's most successful ever home kit launch. Like-for-like sales increased by almost 5.4% in a difficult retail market. The installation of a new EPOS system in June 2002 brought additional benefits in stock control and product analysis during the year. The opening of the new retail store in Glasgow's Sauchiehall Street in July 2002 increased the number of Celtic merchandise stores to nine. New wholesale partnerships were formed with Woolworths and Big W, and a retail Celtic concession unit was opened in Debenhams, Glasgow. Turnover also benefited from the operation of the Edinburgh store for the entire year and from Seville specific merchandise. The launch of the new '100 Years of the Hoops' home top was the most successful ever. The previous home top had sold over 65,000 units in 27 months. The new home top surpassed this figure in just one month. The new home top continues to sell well and a new away strip will be launched in August 2003. MULTI MEDIA Multi media revenues at £15.60m are 3.8% behind the levels achieved last year. The exit to Basle in the Champions' League qualifying round in August 2002 was a major blow to Celtic's ability to count on generating broadcasting and media income from European competition comparable with last year. However, home ties against opposition from Spain, Germany, Portugal and England (twice) generated gross media revenues of approximately £5.90m with TV audiences for the Liverpool v Celtic match peaking at six million viewers. The broadcast rights market has been relatively difficult for a period of time. Ultimately the SPL concluded two year agreements with BBC (terrestrial), Setanta (pay per view), Octagon (overseas) and radio. As a result, the income received from centrally sold domestic television rights has declined from last year by approximately £1m. The Club launched Celtic Replay in December 2002, an online premium content channel, which delivers to monthly subscribers highlights of matches, live audio, video programmes and other exclusively streamed content. Within the first six months, Celtic Replay has exceeded expectations. The Celtic Replay product has been further developed in the pre-season tours to Sweden and North America and will continue to be monitored as the year progresses. In addition, Celtic TV was developed further during the year. We continue to experiment with live game production and transmission both on a pay per view basis and on the Celtic website including the Road to Seville programme which was broadcast live on digital satellite. Our text messaging service has been maintained and we continue with daily internet transmission to supporters from our website, which was also redeveloped during the year and has assisted as a key driver in building and maintaining an active supporter base. In total, Celtic now has over 270,000 registered users in over 200 countries worldwide, underlining the growing importance of this global audience. Further research will be completed this year to assess the ongoing potential of the various media products more closely. Celtic publishing continued to progress with income from Celtic View, matchday programmes and other publications up on the previous year by 8.5%. A Junior View was introduced and a competition to identify the Young Reporter of the Year was successfully launched in January. During the year, the Club also published two further books being 'Hoopy Comes to Paradise' and the official UEFA Cup hardback. Sales and pre-orders have exceeded expectations. CELTIC PARTNERS 2002/03 also saw the establishment of the Celtic Partner Programme. Our close and successful relationship with our kit supplier, Umbro, continued and both parties benefited from European success and the launch of the new home kit. An attractive three year shirt sponsorship agreement with Coors Brewing Limited (Carling) replaced ntl who had been our previous partner for four years. Carling, the UK's No.1 lager brand, has much experience in the sponsorship of football, particularly in England. Carling will partner Celtic over the next three years with a proactive and exciting programme that is already underway to generate brand awareness and create much more interaction with Celtic supporters nationwide. In addition, the Company has also agreed a five year deal with MBNA for a new Celtic credit card. For the first time a Celtic credit card will also be available through MBNA in the USA and Canada to support the existing agreement already in place domestically and in Ireland. Phoenix Honda remained our principal vehicle sponsor for the ninth consecutive year. A new three year partnership commenced on 1 August 2003 with T-Mobile, part of Deutsche Telekom who are the second largest mobile telephone company in the world. I take this opportunity to thank all our key sponsorship partners and look forward to working closely with them in the coming year when it is intended to conclude negotiations with further Celtic sponsors. MARKETING The Club's official membership scheme, the Celtic World Huddle, was launched in April 2002 and in its first season over 65,000 members joined. The scheme provides a strong communications platform between supporters and the Club and brings many benefits and privileges to members throughout the season. Celtic In The Community was launched towards the end of last season with the emphasis behind the project to bring Celtic Football Club to everyone. The first project launched was Soccer Schools 2003 in Scotland for 5-12 year olds. 2002/03 marked the inaugural Celtic Player of the Year Awards Ceremony. Over 40,000 nominations were received from supporters through online, text and telephone voting. The second official training day took place at Celtic Park in April with over 12,000 fans, many of them children, attending. STADIUM Stadium revenues at £1.64m are 2.4% behind 2002 mainly as a result of a decline in the external security and stewarding contracts secured by Protectevent Limited with catering income increasing. The extensive refurbishment programme completed within a number of existing corporate facilities in July 2002 together with certain service improvements and Sodexho's franchise contract assisted in ensuring that catering income was 4.3% up on the previous year. However, Sodexho decided to prematurely terminate the catering contract and legal advice is being taken. At the beginning of June, Celtic reverted to an in-house catering operation. A focus will be maintained on quality of catering, value for money and standards of service in respect of all concourse, corporate and non-matchday activities. STADIUM INVESTMENT The additions to the tangible fixed assets in the year of £1.75m include the upgrade of the North Stand Lounges, conversion of the Celtic Suite, renovation of the Walfrid Restaurant and Jock Stein Lounge and completion of the Training Ground works at Westthorn, including the creation of 2 new artificial pitches. In addition, a new retail unit was opened in Sauchiehall Street, Glasgow and improved information technology systems, including new ticketing and EPOS systems, were implemented. In keeping with the ongoing programme of investment in Celtic Park, work commenced following the last match of season 2002/03 to radically improve the dressing rooms, players' facilities and on-site medical treatment areas. This work will progress the Club's aim of achieving UEFA's coveted five-star stadium status, making it eligible to host European finals. SCOTTISH PREMIER LEAGUE The dispute that threatened the future of the Scottish Premier League has now been resolved. A revised set of rules and Articles of Association have been agreed with effect from 1 July 2003. This now provides a stable basis on which to take the domestic game forward. SUMMARY Following the outstanding European football performance Celtic managed to contain the increase in its funding requirements. In addition, partly as a result of Celtic's progression in the UEFA Cup last season has assisted Scotland's UEFA coefficient and thus the winner of the 2003/04 Scottish Premier League will gain direct access to the UEFA Champions' League group stage in season 2004/05. The football sector is going through a period of severe financial pressure. Player pay has seen substantial growth resulting in wage inflation well in excess of reasonably expected revenues. This trend has been exacerbated as media markets continue to harden. Football clubs generally are beginning to tackle their cost base and are much less likely to spend substantial sums in anticipation of buying success or avoiding failure. Celtic is no different, facing a rising cost base largely as a result of existing player contracts and reduced domestic media revenues. A substantial effort will be required to ensure costs are maintained within forecast revenues. Existing player contracts may dictate the pace at which this can be achieved, as will progression in European competition. The key challenge facing your Board continues to be the management of salary and transfer costs whilst achieving on-field success in order to yield satisfactory financial return. The Celtic Team We have an excellent team here at Celtic, both on and off the field. Colleagues have continued to perform above and beyond the call of duty and in return we have made considerable progress towards making Celtic an employer of choice. Following the 2002 Colleagues' Opinions Survey we launched a new culture change initiative called 'The Celtic Way', which has assisted us in a number of key areas including performance management, training and development and the introduction of improved information technology systems. Celtic has made a formal commitment to achieving the prestigious Investors In People Standard, which seeks to ensure that the development of our people is aligned to Group aims and objectives and we will continue to focus on identifying and adopting best practice in order to become an employer of choice. In May we were pleased to extend an invitation for colleagues to attend the UEFA Cup Final in Seville to express our appreciation for their hard work throughout a challenging year. The commitment shown by all members of the Celtic team has been outstanding and I thank everyone for their contribution and achievements during the year. GROUP PROFIT & LOSS ACCOUNT 2003 2002 Operations excluding player Player trading trading Total £000 £000 £000 £000 Notes TURNOVER 2 60,569 - 60,569 6,892 OPERATING (53,839) - (53,839) (51,522) EXPENSES ------- ------- ------- -------- PROFIT FROM 6,730 - 6,730 5,370 OPERATIONS EXCEPTIONAL 3 (397) (475) (872) - OPERATING EXPENSES AMORTISATION OF - (10,332) (10,332) (8,814) INTANGIBLE FIXED ASSETS ------- ------- ------- -------- OPERATING 6,333 (10,807) (4,474) (3,444) PROFIT/(LOSS) (LOSS)/PROFIT ON - (70) (70) 1,474 DISPOSAL OF INTANGIBLE FIXED ASSETS LOSS ON DISPOSAL OF (41) - (41) (107) TANGIBLE FIXED ASSETS ------- ------- ------- -------- PROFIT/(LOSS) 6,292 (10,877) (4,585) (2,077) BEFORE INTEREST AND TAXATION ------- ------- ------- -------- NET INTEREST PAYABLE (1,209) (897) ------- -------- LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (5,794) (2,974) TAX CHARGE ON LOSS ON 4 (5,865) (65) ORDINARY ACTIVITIES ------- ------- LOSS FOR THE YEAR (11,659) (3,039) DIVIDENDS - non equity 5 (1,457) (1,301) ------- ------- RETAINED LOSS FOR THE YEAR (13,116) (4,340) ------- ------- LOSS PER ORDINARY SHARE 6 (42.91p) (14.26p) DILUTED LOSS PER SHARE 6 (42.91p) (14.26p) All amounts relate to continuing operations. There were no gains or losses recognised in 2003 other than the loss for the year. GROUP BALANCE SHEET 2003 2002 Notes £000 £000 £000 £000 FIXED ASSETS Tangible assets 48,564 48,266 Intangible assets 20,513 25,895 ------- ------ 69,077 74,161 CURRENT ASSETS Stocks 2,059 1,258 Deferred tax asset - 5,615 Debtors 4,660 4,532 Cash at bank and in hand 753 533 ------- ------ 7,472 11,938 ======= ====== CREDITORS - Amounts falling due within one year (11,760) (12,607) Income deferred less than one year (10,826) (8,682) ------- ------ (22,586) (21,289) ======= ====== NET CURRENT LIABILITIES (15,114) (9,351) ------- ------ TOTAL ASSETS LESS CURRENT LIABILITIES 53,963 64,810 CREDITORS - Amounts falling due after more than one year (19,644) (17,375) ------- ------ NET ASSETS 34,319 47,435 ------- ------ CAPITAL AND RESERVES Called up share capital 29,405 29,405 (includes non-equity) Share premium - 21,222 Other reserve 21,222 - Profit and loss account (16,308) (3,192) ------- ------ SHAREHOLDERS' FUNDS 7 34,319 47,435 ------- ------ Approved by the Board on 13 August 2003 GROUP CASH FLOW STATEMENT 2003 2002 £000 £000 RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW FROM OPERATING ACTIVITIES Operating loss (4,474) (3,444) Depreciation 1,405 1,051 Amortisation of intangible fixed assets 10,332 8,814 Provision for impairment of intangible fixed assets 475 - Grants release (1) (1) Increase in stocks (801) (30) (Increase)/decrease in debtors (1,853) 774 Increase in creditors 1,611 359 -------- -------- Net cash inflow from operating activities 6,694 7,523 ======== ======== CASH FLOW STATEMENT Net cash inflow from operating activities 6,694 7,523 Returns on investments and servicing of finance (Note 9) (1,767) (2,296) Capital expenditure and financial investment (Note 9) (6,236) (14,591) -------- -------- Cash outflow before financing (1,309) (9,364) Financing (Note 9) 1,529 17,133 -------- -------- Increase in cash 220 7,769 ======== ======== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT (Note 8) Increase in cash in the period 220 7,769 Cash (inflow)/outflow from (increase)/decrease in debt (1,529) 5,383 -------- -------- Change in net debt resulting from cash flows (1,309) 13,152 -------- -------- Movement in net debt in the period (1,309) 13,152 Net debt at 1 July (16,473) (29,625) -------- -------- Net debt at 30 June (17,782) (16,473) ======== ======== NOTES TO THE ACCOUNTS 1. ACCOUNTING POLICIES Details of the main accounting policies adopted by the Group are consistent with last year. During the year the Group adopted the Financial Reporting Guidance for Football Clubs issued in February 2003 by The Football League, The FA Premier League and the FA, although turnover within Note 2 continues to be analysed in accordance within the headings of the business operations of the Group. The implementation of this guidance has resulted in a change in the presentation within the Group Profit and Loss Account to show the income and expenditure relating to player trading separately from other operations. The comparative figures within the Group Profit and Loss Account have been amended accordingly. 2. TURNOVER Turnover in respect of the five business operations 2003 2002 comprised: £000 £000 Professional football 30,480 27,715 Multimedia and communications 15,600 16,216 Merchandising 11,456 10,001 Stadium enterprises 1,644 1,684 Youth development 1,389 1,276 ---------- ---------- 60,569 56,892 ---------- ---------- 3. EXCEPTIONAL OPERATING EXPENSES The exceptional operating expenses of £872,000 incorporated in the Group Profit and Loss Account reflect £397,000 of operating costs and £475,000 of an impairment provision to intangible fixed assets. The majority of these costs reflect the early termination of Rafael Scheidt's contract and registration. (2002 : £Nil). 4. TAXATION The Group continues to follow the accounting treatment for deferred taxation as prescribed in FRS19. Given the financial difficulties currently being experienced by the football sector and the uncertainty over the timing and extent of any future taxable profits, it has been decided to write off the deferred tax and advance corporation tax assets, which provides a tax charge of £5.86m (2002: £65,000). 5. DIVIDENDS The non-equity dividend of £1,456,588 (2002: £1,300,645) comprises the dividend of 6% of £555,966 (2002: £557,632) payable on 31 August 2003 to those holders of Convertible Cumulative Preference Shares on the share register at 8 August 2003, together with the amount due in respect of the Convertible Preferred Ordinary Shares fixed dividend of 4% of £900,622 (2002: £743,013) which is payable on 31 August 2004. 6. LOSS PER SHARE The loss per share has been calculated by dividing the loss for the period of £13.12m (2002: £4.34m) by the weighted average number of Ordinary Shares of 30.56 million (2002: 30.43 million) in issue during the year. The diluted loss per share has been calculated using the same figures as the basic calculation. No account has been taken of share purchase options, as these potential ordinary shares are not considered to be dilutive under the definitions of the applicable accounting standards. 7. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group 2003 2002 £000 £000 At 1 July 47,435 30,059 Movements in year: Retained loss for the year (13,116) (4,340) Share capital issued in the year - 18,013 Share premium arising in the year - 3,703 ---------- ---------- (13,116) 17,376 ---------- ---------- At 30 June 34,319 47,435 ---------- ---------- At 30 June 2003 Non-Equity Shareholders' Funds, defined in accordance with FRS4, amounted to £31.30m (2002: £30.40m). This relates to the Convertible Preferred Ordinary Shares, the Convertible Cumulative Preference Shares, the Deferred Shares and the associated accrued dividends. 8. ANALYSIS OF NET DEBT Other At Non-Cash At 1 July 2002 Cash Flow Movements 30 June 2003 £000 £000 £000 £000 Cash at bank and in 533 220 - 753 hand -------- -------- -------- --------- 533 220 - 753 -------- -------- -------- --------- Debt due within 1 year (209) 29 (2) (182) Debt due after 1 year 16,002) (2,000) 2 (18,000) Hire purchase (795) 442 - (353) creditor -------- -------- -------- --------- (17,006) (1,529) - (18,535) -------- -------- -------- --------- Net debt (16,473) (1,309) - (17,782) -------- -------- -------- --------- 9. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT 2003 2002 £000 £000 Returns on investments and servicing of finance Preference dividend paid (558) (599) Interest paid (1,143) (831) Interest element of hire purchase payments (66) (66) Issue costs of non-equity shares - (800) ---------- ---------- Net cash outflow from returns on investments and (1,767) (2,296) servicing of finance ---------- ---------- Capital expenditure and financial investment Payments to acquire tangible fixed assets (2,113) (2,229) Payments to acquire intangible fixed assets (5,738) (14,615) Proceeds from sales of tangible fixed assets 10 - Proceeds from sales of intangible fixed assets 1,605 2,253 ---------- ---------- Net cash outflow from capital expenditure and (6,236) (14,591) financial investment ---------- ---------- Financing Loans received 2,000 - Loan instalments paid (29) (5,027) Capital element of hire purchase payments (442) (356) Issue of share capital - 22,516 ---------- ---------- Net cash inflow from financing 1,529 17,133 ---------- ---------- 10. ANNUAL REPORT & ACCOUNTS Copies of the Annual Report & Accounts will be sent to all shareholders in due course. The financial information set out above was approved by the directors on 13 August 2003 and does not constitute the Company's statutory accounts for the years ended 30 June 2003 or 30 June 2002. The auditors' opinion on the 2002 statutory accounts is unqualified and does not include a statement under Section 237 (2) or (3) of the Companies Act 1985. The statutory accounts for 2002 have been filed and those for 2003 will be delivered to the Registrar of Companies in due course. This information is provided by RNS The company news service from the London Stock Exchange

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