Final Results

Celtic PLC 16 August 2006 CELTIC plc Preliminary Results for the year ended 30 June 2006 SUMMARY OF THE RESULTS Operational Highlights - Winners of the Bank of Scotland Premierleague by 17 points - Winners of the CIS Insurance Cup - 24 home matches played at Celtic Park in the year (2005 - 27) - Contract extensions awarded to Stilian Petrov, Stephen McManus, Stanislav Varga, Neil Lennon and Shunsuke Nakamura - Successful launch of new playing kits under the new kit agreement with NIKE - Extension of Carling shirt sponsorship contract until 2010 - Construction of the training academy at Lennoxtown commenced Financial Highlights - Successful issue of 50 million new Ordinary Shares raising £14.55m net of expenses - Significant changes to the reporting of non equity share capital, debt and non equity dividends following the implementation of FRS25 requiring the restatement of prior period comparatives - Group turnover decreased by 7.7% to £57.41m (2005 - £62.17m) - Operating expenses reduced by 7.6% to £53.67m (2005 - £58.07m) - Profit from operations of £3.74m (2005 - £4.10m) - Loss before taxation of £4.22m (2005 - £8.71m as restated) - Year end bank debt of £9.09m (2005 - £19.33m) - Investment of £8.84m (2005 - £2.34m) in the acquisition of intangible fixed assets For further information contact: Brian Quinn, Celtic plc Tel: 0141 551 4235 Peter Lawwell, Celtic plc Tel: 0141 551 4235 Iain Jamieson, Celtic plc Tel: 0141 551 4235 CHAIRMAN'S STATEMENT 2005/2006 was, on the whole, a good year for Celtic plc and for Celtic Football Club. Although our early departure from European competition and from the Tennent's Scottish Cup were disappointing, with substantial adverse effects on income, we fought back in a manner that is typical of this Club and finished the year on a strongly positive note. We also strengthened our financial position and began the process of creating a modern purpose-built training facility at Lennoxtown. The football team is being rebuilt, as it has to if the successes of recent seasons are to be maintained. In the week-to-week excitement and uncertainty that characterise football, I believe it is crucial to have a clear idea of longer-term objectives and a sense of direction that goes beyond the febrile environment of the modern game. Turnover of the group fell by 7.7%, very largely reflecting the loss of gate receipts and TV income from European competition. Celtic played 3 fewer home games last season and ticket sales were 15% lower as a result. Multimedia and communications were 28% lower. Despite this, with operating expenses down by 7.6% - primarily wages and salaries for football staff - and merchandise sales higher by a remarkable 42.5%, the company recorded a profit from operations of £3.74m. The loss before tax, at £4.22m, was less than half the level of the preceding year. The successful £15m share issue in December 2005 rebuilt the balance sheet, reducing bank debt at year end from £19.3m to £9.1m and almost doubling net assets. We also increased investment in the acquisition of players from £2.3m to £8.8m. UK Accounting Standards have begun to converge with International Accounting Standards. As part of this process Celtic has adopted paragraphs 1 to 50 of FRS25 the impact of which is to reclassify certain financial instruments from equity to debt. Under FRS 25 the group's Preference Shares and Convertible Preferred Ordinary Shares, previously defined as equity, were reclassified as a combination of debt and equity; and non-equity dividends were in essence re-classified as interest. As a result, net assets were £3.8m lower, net debt £4.7m higher and interest charges £771,000 higher than would have been reported prior to the implementation of FRS 25. In our accounts we have adjusted the prior periods' figures for these differences in treatment to allow a meaningful comparison to be made. The football squad showed great resilience after a difficult start to the season. Two long unbeaten runs in the Scottish Premier League from late August until late November, and from then until early April, returned the championship title to Celtic Park with the loss of only two games. No club has won the SPL title earlier in the season, nor with a bigger margin over its nearest competitor. The Club also won the CIS Insurance Cup for the 13th time to add to its 40th league championship. A very special note of thanks goes to Gordon Strachan, Garry Pendrey and Tommy Burns whose contribution has involved combining success on the field with assembling and managing what is largely a new first team squad. I also congratulate our first team for being commended again this year by the SFA for achieving high standards of on-field discipline. The under-19 and reserve teams won their leagues for the fourth and fifth consecutive times, respectively. Celtic's under-19 team also won the Scottish Youth Cup and an international tournament in Italy. These successes not only contain signs of promise for the future but also testify to the work done by the managers and support staff of the squads. Squad restructuring is an especially challenging task in today's transfer market. The reduction in transfer fees evident several seasons ago, as clubs in the UK reordered their finances, has been replaced with a market that in any other business sector would be considered overheated. Likewise, salary packages for footballers are probably unprecedentedly high, not just for those of the highest calibre, but also for many outside the elite category. The main driver seems to be the substantially larger sums available to FA Premier League clubs from the recently agreed television contract. Many clubs are spending money now that will not be available for another year, creating echoes of the last boom and bust in football. Clubs are, however, better run today throughout the UK and should avoid a repeat of the financial problems that arose a few years ago. But what is clear is that, despite the welcome increase in the value of the Bank of Scotland Premierleague TV contract, Celtic and other clubs in Scotland endeavouring to compete in European competition find themselves at a serious disadvantage. This is compounded by the distribution model for UEFA Champions League revenues which favours the larger nations. This gives additional force to our policy of developing our own young players. I believe the new training ground at Lennoxtown will be an important factor in this regard. We have secured the site and work in building the pitches, accommodation and administration facilities has begun and is proceeding according to plan. We hope the training complex will be completed and available for use at the beginning of next season. Evidence of the revival in Scottish football to which I looked forward two years ago grew during the season just ended. For the first time in many years, the first two positions in the SPL were not occupied by the Old Firm; and the Tennent's Scottish Cup Final was contested by Hearts and Gretna, a team from the Scottish Division II. As I said in my statement accompanying our 2005 Interim Report, we see this as a healthy and welcome development. We do not expect to lose domestic competitions and certainly do not like it when we do, but excitement and interest in the game is created when the established order is challenged. I also welcome the signs of revival in the Scottish national side which has arrested the slide in performances and has begun the job of recovering the team's historic reputation for good, winning football. Our efforts to promote the Celtic brand continue. The squad made training trips to Poland and the United States and played friendly matches in Japan and England. The response by Celtic supporters, actual and potential, has been remarkable and provides hard evidence that this policy is appreciated by our fans everywhere. Of course these events also raise additional income for us, which seems sensible in the light of what is happening in the television and transfer markets; we have to explore all means of maintaining the quality of the playing and coaching staff. Allegations of greed or short-termism miss the point: any money generated by these games is made available to the manager for players. All the benefits of our policy to spread the brand accrue to the football division, no-one else. As for exhausting the players, they are professional athletes, and the coaching staff are best placed to judge what is acceptable in their management of resources. We have also continued our work to eradicate objectionable behaviour at Celtic Park and, so far as it is in our power to do so, at other football grounds where Celtic play. I believe that the scope of our activities is not appreciated fully; and that this work is proving effective. Sectarian and other offensive songs and chants have all but disappeared at home matches, and we have made proposals to the Scottish Premier League, to other SPL teams and to police forces to try to eradicate such behaviour at away games. We have always been serious about this. It costs Celtic a substantial amount of money to monitor crowd behaviour in the form of additional stewarding, policing and CCTV cameras; but we consider it our duty to do so and will continue these activities in a way that eliminates discriminatory behaviour, without removing the passion and excitement that comes from following Celtic Football Club. Our support is amongst the best in the world and I have no hesitation in saying so every year. Average home attendance in our league games last season was over 58,000, the second highest in the UK. Season ticket sales of all kind exceeded 53,000, a level we expect to be maintained this season. Celtic supporters also account for over half of total attendance at many of our SPL away matches. Our Club is always in demand for friendly and testimonial matches because of the numbers we bring. The Celtic diaspora has expanded as we have re-established ourselves in European football in recent years. Participation in the UEFA Champions League group stage this season will, I trust, add to the reputation of our Club. It will, obviously, also add to our revenues and should therefore contribute to our financial performance generally. We begin the football year with a strong financial position, an experienced and well-qualified Board of Directors and excellent management and staff. The rebuilding of the first team squad is well advanced and our youth development programme is delivering positive results. I feel confident that the success story of recent years will be further extended. Brian Quinn CBE Chairman 16 August 2006 CHIEF EXECUTIVE'S REVIEW There's never a dull moment at Celtic and this past 12 months have been more exciting and eventful than most. We regained the Bank of Scotland Premierleague title by a huge margin, sealing the Championship against our closest rivals Hearts several weeks before the end of the season. We also won the CIS Insurance Cup, defeating Dunfermline in convincing style at Hampden. To counterbalance the highs there were some disappointing lows too, falling at the first hurdle in the UEFA Champions League qualifying stages even before the domestic season had got underway and being knocked out of the Tennent's Scottish Cup by an impressive young Clyde team. Following the disappointment of our European defeat at the hands of Artmedia Bratislava, Gordon Strachan and his new management team bounced back to achieve domestic success with a developing and transitioning squad. Garry Pendrey and Jim Blyth, who had worked with Gordon previously, together with Tommy Burns brought their considerable wealth of coaching experience to Celtic. The passing of Celtic's Greatest Ever Player Jimmy Johnstone in March saddened everybody associated with the Club. His funeral and the tributes which followed were extremely moving. They demonstrated the enormous respect and affection Jimmy enjoyed and that this magnificent institution of Celtic is far more than a football club. FINANCIAL PERFORMANCE The Club's reported retained loss of £4.22m re-emphasises the ongoing challenge we face in matching football success with financial stability. Nevertheless, it represents a significant improvement on 2005 and represents a most encouraging performance, particularly in view of the lack of European football and our early exit from the Tennent's Scottish Cup. Group turnover has reduced by £4.76m, 7.7% to £57.41m from 2005, largely as a result of playing three fewer home games due to our early exit from Europe. In the current year, turnover continued to benefit from the healthy take-up of standard season tickets, together with the opening of new retail stores. Operating expenses, excluding exceptional operating costs, have reduced by £4.39m, 7.6% to £53.67m, predominantly due to prudent cost control throughout the business. Exceptional operating expenses at £0.58m are mainly a result of accelerated depreciation on player values, whereas last year's figure of £2.96m reflected the costs incurred in the early termination of certain players' contracts. The amortisation charge of £5.10m is down by 31% on last year, demonstrating the reduced carrying value of the first team squad and continued decline in the value of transfer fees paid in recent years. FOOTBALL INVESTMENT The highest profile player arriving at the Club over the last 12 months was Roy Keane, himself a big Celtic fan and one of the true greats of the game, who joined from Manchester United in January. Unfortunately Roy was only with us for six months before long-term injury curtailed his playing career, but he made quite an impression during his short stay. Other new signings during the year included Maciej Zurawski, Artur Boruc, Adam Virgo, Shunsuke Nakamura, Paul Telfer, Mo Camara and Mark Wilson. Since the end of the season Derek Riordan, Kenny Miller, Jiri Jarosik, Gary Caldwell and Evander Sno have been recruited. Jeremie Aliadiere and Du Wei had short spells on loan at the Club during the 2005/6 season, whilst Dion Dublin joined on a short-term contract, which came to an end in June. Contracts were extended for a number of first team players including Stilian Petrov, Neil Lennon, Stanislav Varga, Paul Lawson, Stephen McManus and Shunsuke Nakamura. High profile player departures this year have included Chris Sutton and John Hartson, who had been great servants for Celtic. During the summer of 2005 Paul Lambert, Rab Douglas, Jackie McNamara, Ulrik Laursen, Magnus Hedman, David Fernandez and Joos Valgaeren left the Club as did Didier Agathe in January. The intent of the Celtic Board is to achieve a managed ratio between turnover and labour costs. Ongoing financial controls are in place to ensure that labour costs are maintained at a manageable level, particularly in relation to turnover. It is acknowledged that the football sector remains financially difficult, although there is a desire to assist in delivering on-field success. The ability to field a competitive side and retain control on costs remains a challenge. The player trading activity completed during the last year has reflected such a balanced approach and this will be continued as the organisation moves forward. During this time, employment contracts have included a greater element of performance related pay. It is planned that this policy be extended and that a greater proportion of remuneration be based on football success. The biggest challenge facing your Board remains the management of salary and transfer costs, whilst achieving playing success in order to yield satisfactory financial return. The decision to appoint Ray Clarke as our Head of International Scouting stemmed from a desire to expand the search for new footballing talent overseas. Eleven new scouts were taken on during the last financial year, both in England and on the Continent, and their efforts are already showing encouraging signs. Overall, the realignment of the first team squad over the last year has resulted in a meaningful reduction in labour costs. FOOTBALL OPERATIONS In winning the SPL Championship and CIS Insurance Cup, Celtic played 45 competitive matches in total during the 2005/6 season, winning 33 and losing just 5, with 7 matches drawn. It is also pleasing to see our first team commended again this year by the SFA for its conduct on the field, finishing in first place for the second successive year in the SFA's annual disciplinary analysis. Celtic's reserve side won the SPL Reserve Championship for the fifth year in succession, playing 22 matches and losing just 3. In another highly successful year, Celtic's Under 19 side won their championship for the fourth year in a row, retained the SFA Youth Cup, won the Arcobaleno Youth Tournament in Italy and had 6 of the 22 Scotland Under 19 squad members at the recent European Championships where Scotland reached the final. The 6 were Ryan Conroy, Scott Cuthbert, Simon Ferry, Scott Fox, Charles Grant and Michael McGlinchey. In advance of the start of the new season, the first team for the third time in recent years undertook a pre-season tour to North America, playing three matches. This and our pre-season visit to Poland assists in expansion of the Club and brand on a global basis. In addition, a further match against Yokohama F. Marinos was played in Japan on 3 August, increasing the Club's profile in Japan following the signing of Shunsuke Nakamura last year. TICKET SALES Standard Season Ticket sales reached a record 50,595 for the year, generating income of £17.06m. In addition 100,506 tickets were sold for home SPL matches at a net value of £1.93m. All SPL matches at Celtic Park were virtually sold out, with a total of over 1.1 million spectators attending SPL fixtures here during the season, an average attendance of 58,193. Supporters are now able to purchase tickets from a variety of sources including a 24 hour telephone line, on-line through the website as well as directly from the Ticket Office. Following a successful pilot in the North West Lower corner stand, the Skidata SMART Card System has been introduced to the stadium's 105 turnstiles. For the new season all season ticket holders have been issued with a SMART card. This significant financial investment by the Club will deliver a major safety management improvement, which will benefit all spectators visiting Celtic Park. YOUTH DEVELOPMENT Over 2.5 million lottery chances were sold under the various schemes operated by Celtic Development Pools during the period, with donations of over £1m made to the Club for the purposes of youth development. A similar sum was paid out in prize money to Celtic supporters from all over the country, an impressive achievement in light of the challenging times facing small lotteries operated in the UK. The Paradise Windfall matchday draw, with a top prize of £7,000, enjoyed strong average sales during the year despite there being fewer matches as a consequence of our early exit from Europe and the Scottish Cup. Next season will see the top prize rise to £7,500. 2005 also saw the launch of Celtic World Lotto, a new on-line marketing referral syndicate scheme based on the National Lottery and Euromillions lottery. It allows supporters from around the world, who cannot participate in Celtic Pools domestic lotteries, the opportunity to support Celtic Youth Development. In May, work commenced on the new state of the art Celtic Sports Academy and Training Centre in Lennoxtown, which is scheduled to be operational for the 2007/8 season. It is envisaged that this will result in an increase in homegrown talent, building on the tremendous success our youth teams have enjoyed over recent years. CELTIC FOUNDATION During the year, the Club decided to consolidate its community work under the new title of the Celtic Foundation. This important step will enable Celtic's range of community-related activities to receive greater focus and improved co-ordination. The Foundation will incorporate football in the community and community coaching programmes across both domestic and international markets, anti-bigotry initiatives, including anti-racism and anti-sectarianism, Celtic Charity Fund, Celtic Learning Programmes and the Learning Centre, the Old Firm Alliance Project, Celtic Against Drugs and the Support Employment initiative. The new structure is indicative of the importance Celtic attaches to its role in the community. The Foundation will be working alongside key partners to deliver on policy direction set by the Scottish Executive CELTIC IN THE COMMUNITY Celtic In The Community has developed into one of the leading community football services in the UK since its inception in June 2003. It provides a coaching and development programme to meet the needs of children, teenagers and adults. The range of products and services has grown considerably during this time, providing greater opportunities for all sectors of the community. The Celtic in the Community Programme has to date attracted over half a million young people and adults from across some of Scotland's most deprived areas. Celtic remains committed to the Programme and has invested significantly in recruiting and developing over 100 community coaches. The Celtic In The Community Programme also provides a potential pathway into our Youth Academy, with over 200 youngsters invited into the Development Centre Programme, five of whom have already graduated to the elite Academy itself. In Ireland the Community Programme has become firmly established in partnership with Topflight Soccer with over 2,000 youngsters attending courses. Internationally, Celtic In The Community has delivered courses in Canada, Germany and Cyprus and has organised coaching clinics in Boston, Seattle, Michigan, Alabama and Melbourne. The reputation of the Club and its supporters provides real potential to offer new programmes in a variety of languages throughout a number of international locations, a challenge the Celtic Foundation will be embracing with relish. The Programme's track record is outstanding with buy-in from the private, public and voluntary sectors. The Community Department has been instrumental in securing grant funding to support a number of meaningful projects tackling health issues, unemployment, education, antisocial behaviour and social inclusion. MERCHANDISING This year was the first of the new NIKE contract and saw the successful launch of a new home kit in July 2005 and record sales of NIKE training product. Our retail store at Glasgow International Airport generated record income per square foot sales at the kit launch. Merchandise turnover for the year reached £14.34m, around 42.5% up on last year's figure of £10.06m, despite playing fewer home games. This year saw the Celtic home shopping business transfer to Kitbag Limited, who operate equivalent services for Manchester United, Chelsea and Barcelona. Despite some teething troubles, we are confident this arrangement will give us the capacity to cope far better with demand going forward and offer a better service to our customers. We opened new Celtic retail stores in Coatbridge, Clydebank and Stirling, bringing the total number to 14 across Scotland and Ireland. In addition we operate concessions within Debenhams department stores in Glasgow, Inverness and Ayr, and a further concession recently opened in Debenhams in Newry. The flagship Celtic Superstore has undergone a major refit and re-opened in mid July with the latest NIKE concept store look, whilst the new international white away kit enjoyed a successful launch in July 2006. MULTIMEDIA Season 2005/06 saw a change of publisher, with CRE8 now working with the Club on producing the Celtic View and the matchday programme. Both publications increased in pagination - the Celtic View to 72 pages and the matchday programme to 64 pages. In August 2005, the Celtic View celebrated its 40th anniversary, confirming its position as the oldest weekly club publication in football. The high standard of design and production was maintained and enhanced further by our new publishers as we chronicled another successful season, and the Celtic View maintained its position as the best-selling weekly club magazine in British football. We have developed our Celtic TV relationship with Setanta and moved from joint venture to a licensed agreement, over which Celtic has retained editorial control. Overseas subscriptions to Celtic's Channel 67 Online+ service rose to over 2,000 per month, whilst the UK and Ireland service, Channel 67, held up well despite the further advance of Celtic TV. The Multimedia team produced several successful official events including the Neil Lennon Dinner, John Clark Dinner, Player of the Year Dinners in Glasgow and in Dublin, and the AGM. We have also produced DVDs for News International as part of a sponsorship deal, as well as end of season DVDs for the domestic and Japanese markets amongst others. PUBLIC RELATIONS During the period, media coverage of Celtic-related issues has generally been positive. Major media highlights of the season included the SPL Championship victory and associated coverage, the sad passing of Jimmy Johnstone and the signing of Roy Keane. Clearly, on the negative side, failure to make the UEFA Champions League group stage was a major media issue and the Club received substantial criticism in the press. The coverage achieved by Celtic's Public Relations department for events such as kit launches, new merchandise, retail outlet openings, sponsorship announcements and a range of Club initiatives has been excellent. The passing of Jimmy Johnstone, as well as being a very sad event for everyone connected to Jimmy, his family and the Club, also developed into one of the largest media events which Celtic has ever known. PARTNER PROGRAMME NIKE's first year as exclusive Club kit manufacturer has been a success, helping grow the global brand awareness of the Club. Other positive partnership developments during the year included the extension of our contract with T-Mobile as well as the retention of key long-standing partners Carling, MBNA, Ladbrokes and Phoenix. The announcement of Thomas Cook as the Official Travel Partner of Celtic Football Club will give fans improved access to matchday breaks as well as consolidating responsibility for all international travel for the team and officials. Largely as a consequence of signing Shunsuke Nakamura, our focus on the Japanese market has enabled us to secure a number of productive new business deals. These have included services such as broadband, 3G and DVD, as well as yielding many sponsorship opportunities. This remains an important focus of attention for 2006 /07. New online partners and international sponsors will help secure our income streams during the season ahead. STADIUM During the course of the year, Celtic worked in close liaison with the Glasgow City Council Safety Team for Sports Grounds to enhance the management of safety within the stadium. The Club views this partnership approach as key to spectator safety. A total smoking ban was introduced at the stadium on 26 March to comply with national legislation. The SMART Card System is designed to improve ease of access to the stadium while providing those responsible for public safety duties with the latest technology available in monitoring spectator movement. The Club will continue to place spectator safety as its highest priority. FACILITIES A number of customer hospitality areas were refurbished and upgraded during the year, including the South Stand boxes and Kerrydale reception and function suite. A new wireless hearing system was installed for the visually impaired supporters group. In terms of Health and Safety, audits were carried out in respect of fire assessment and the Disability Discrimination Act and a programme of actions implemented. CATERING AND CORPORATE HOSPITALITY The partnership with Lindley, who provide our concourse catering, continues to work well. Seasonal hospitality sales remained encouraging despite the shortfall in European and Scottish Cup home games, whilst Conference and Banqueting and Number 7 Restaurant sales were ahead of last year. Number 7 was particularly successful for special events, including St Valentine's Day, Mothering Sunday and Father's Day, while the newly refurbished Kerrydale Suite hosted a string of successful conferences, events and dinners. The number of visitors to the Visitor Centre was well ahead of the previous year at just under 20,000, generating additional revenue for the Club. SUPPORTER RELATIONS A new Customer Relationship Management (CRM) database is under construction, which will record all supporter, partner and customer transactions with the Club. This will enable us to provide an improved service to supporters and reward those who contribute most to the Club. WORK WITHIN THE LOCAL COMMUNITY Celtic was delighted to launch the new Celtic Learning Centre at Celtic Park in May 2006. Built in association with Glasgow City Council, the Centre will provide invaluable support to improve the education of young people throughout the region. 1,175 local school children benefited from participating in Celtic Education Programmes during the year, with a success rate of 83% on the reason for referral. This brings the total to a remarkable 2,794 since the Programmes were launched back in April 2004. In addition, 50 primary school pupils took part in Celtic Learning's literacy support classes this year and 48 secondary pupils took part in our web design lessons. CELTIC CHARITY FUND Celtic Charity Fund, the Club's charitable arm, again enjoyed a highly successful year, raising thousands of pounds for a range of worthy causes. The highlight of the year was the Celtic Charity Fund Sporting Dinner, held at Celtic Park. Attended by the football management team, Directors and first team players, the event was a tremendous success. The SOS Children's Villages Campaign was the principal beneficiary but numerous other organisations benefited from support during the course of the year. HUMAN RESOURCES Celtic was awarded the 'Positive About Disabled People' symbol by Job Centre Plus during the year in recognition of working towards fulfilling its commitments to colleagues and job applicants with a disability. Over 90 pupils from local schools enjoyed a week of structured work experience at Celtic Park during the year. The hard work and contribution of all colleagues in another challenging but successful year is once again greatly appreciated. SUMMARY AND OUTLOOK Much progress was achieved in the current year in improving the financial position of Celtic. A year on year reduction in the retained loss of £4.48m represents a real step in the right direction. Equally, it is acknowledged that the football sector remains financially difficult. However, 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 the launch of the new international kit has been very successful. Additional revenue streams and new commercial contracts have boosted income and a more acceptable cost structure has given us the basis of a sustainable business model going forward. Celtic continues to enjoy relationships with a number of international companies, including NIKE, Carling, T-Mobile, MBNA, Thomas Cook and Kitbag, which together with the revenues generated from our partner programme secure a sizeable proportion of our income streams going forward. In addition, a new 4 year domestic television contract has been secured by the SPL, which will provide year on year incremental revenue. In the short term we can look forward with optimism to reaping the rewards of last season's domestic success though our guaranteed participation in the lucrative group stage of the UEFA Champions League. This participation allows us to compete with the best teams in Europe, but also provides revenues which allow much greater flexibility in the transfer market. The playing squad has been strengthened during the close season and further recruitment is planned. Further forward, implementation of the new scouting network has given Celtic better coverage than ever before throughout Europe. Our Academy continues to produce quality players and, together with our strenuous efforts to retain and recruit the best, we plan to have a strong, balanced team capable of competing domestically and in Europe. In addition, it is planned to continue the success achieved in recent years with a number of the internally generated youth players establishing themselves in the first team. The completion of the new training academy at Lennoxtown should augment this process in future years. These initiatives, together with the reduction already achieved in football labour costs and the continued planned reduction in amortisation costs will result in a cost base and financial position that is sustainable. Our objectives are to secure domestic football success and to ensure UEFA Champions' League football at Celtic Park on an annual basis. Peter T Lawwell 16 August 2006 Chief Executive GROUP PROFIT & LOSS ACCOUNT 2006 2005 As restated Operations Player Total excluding player trading trading £000 £000 £000 £000 Notes TURNOVER - group and share of joint venture 57,859 - 57,859 62,636 LESS SHARE OF JOINT VENTURE (448) - (448) (468) ------- ------- ------- -------- GROUP TURNOVER 2 57,411 - 57,411 62,168 OPERATING EXPENSES (53,674) - (53,674) (58,068) ------- ------- ------- -------- PROFIT FROM OPERATIONS 3,737 - 3,737 4,100 EXCEPTIONAL OPERATING EXPENSES 3 (179) (400) (579) (2,957) AMORTISATION OF INTANGIBLE FIXED ASSETS - (5,095) (5,095) (7,340) ------- ------- ------- -------- GROUP OPERATING PROFIT/(LOSS) 3,558 (5,495) (1,937) (6,197) LESS SHARE OF - - - - OPERATING PROFIT IN ------- ------- ------- -------- JOINT VENTURE TOTAL OPERATING PROFIT/(LOSS) 3,558 (5,495) (1,937) (6,197) LOSS ON DISPOSAL OF INTANGIBLE FIXED ASSETS - (265) (265) (139) LOSS ON DISPOSAL OF TANGIBLE FIXED ASSETS (250) - (250) (103) ------- ------- ------- -------- PROFIT/(LOSS) BEFORE INTEREST AND TAXATION 3,308 (5,760) (2,452) (6,439) ======= ======= INTEREST PAYABLE BANK LOANS AND OVERDRAFTS (999) (1,294) NON EQUITY SHARES 4 (771) (973) ------- -------- LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (4,222) (8,706) TAXATION ON LOSS ON ORDINARY ACTIVITIES 5 - - ------- -------- LOSS FOR THE YEAR (4,222) (8,706) ------- -------- RETAINED LOSS FOR THE YEAR (4,222) (8,706) ------- -------- LOSS PER ORDINARY SHARE 6 (7.19p) (28.27p) DILUTED LOSS PER SHARE 6 (7.19p) (28.27p) All amounts relate to continuing operations. There were no gains or losses recognised in 2006 or 2005 other than the loss for the year. GROUP BALANCE SHEET 2006 2005 As restated Notes £000 £000 £000 £000 FIXED ASSETS Tangible assets 49,924 48,983 Intangible assets 7,593 5,253 Investment in joint venture: ------- ------ Share of gross assets in - 487 joint venture Share of gross liabilities in joint - (487) venture ------- ------ Share of net assets - - ------- ------ 57,517 54,236 CURRENT ASSETS Stocks 1,901 1,987 Debtors 5,029 4,633 Cash at bank and in hand 2,914 171 ------- ------ 9,844 6,791 ======= ====== CREDITORS - Amounts falling due within one year (15,481) (14,078) Income deferred less than one year (12,589) (11,234) ------- ------ (28,070) (25,312) ======= ====== NET CURRENT LIABILITIES (18,226) (18,521) ------- ------ TOTAL ASSETS LESS CURRENT LIABILITIES 39,291 35,715 CREDITORS - Amounts falling due after more than one year (17,194) (23,987) ------- ------ NET ASSETS 22,097 11,728 ======= ====== CAPITAL AND RESERVES Called up share capital (includes 23,450 22,948 non-equity) Other reserve 21,222 21,222 Share premium account 14,089 - Capital redemption reserve 1,739 1,068 Profit and loss account (38,403) (33,510) ------- ------ SHAREHOLDERS' FUNDS 7 22,097 11,728 ======= ====== Approved by the Board on 16 August 2006 GROUP CASH FLOW STATEMENT 2006 2005 £000 As restated £000 RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW FROM OPERATING ACTIVITIES Operating loss (1,937) (6,197) Depreciation 1,798 1,627 Amortisation of intangible fixed assets 5,095 7,340 Provision for impairment of intangible fixed assets 400 1,402 Decrease / (increase) in stocks 86 (224) (Increase) / decrease in debtors (308) 584 (Decrease) / increase in creditors and deferred income (159) 669 ---------- ---------- Net cash inflow from operating activities 4,975 5,201 ========== ========== CASH FLOW STATEMENT Net cash inflow from operating activities 4,975 5,201 Returns on investments and servicing of finance (Note (1,520) (1,848) 9) Capital expenditure and financial investment (Note 9) (6,869) (4,507) ---------- ---------- Cash outflow before use of liquid resources and financing (3,414) (1,154) Financing (Note 9) (8,393) 954 Net proceeds of equity share capital 14,550 - ---------- ---------- Increase / (decrease) in cash 2,743 (200) ========== ========== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT (Note 8) Increase / (decrease) in cash in the year 2,743 (200) Cash (inflow) / outflow from movement in debt 8,393 (954) ---------- ---------- Change in net debt resulting from cash flows 11,136 (1,154) Non cash movement in debt (210) (373) ---------- ---------- Movement in net debt in the year 10,926 (1,527) Net debt at 1 July (24,891) (23,364) ---------- ---------- Net debt at 30 June (13,965) (24,891) ========== ========== NOTES TO THE ACCOUNTS 1. ACCOUNTING POLICIES The Financial Statements are prepared under the historical cost convention and comply with applicable accounting standards. The Financial Statements have been prepared on the same basis and using the same accounting policies as those used in the Financial Statements for the year ended 30 June 2005 save for the implementation of the presentational aspects of FRS 25 ('Financial Instruments: disclosure and presentation') in the preparation of these annual results. Under FRS 25 the Group's Preference Shares and Convertible Preferred Ordinary Shares, as compound financial instruments, have been reclassified as a combination of debt and equity and non-equity dividends reclassified as interest with a resultant reduction in Shareholders' Funds. Consequently, net assets of the Group at 30 June 2006 are reported £3.81m below that which would have been reported prior to the implementation of FRS 25. As a result of the differing accounting treatment of the Convertible Preferred Ordinary Share dividends under FRS 25, there is a requirement under the capital maintenance provisions of the Companies Act 1985 to transfer an element of distributable reserves into a capital redemption reserve. The comparatives for the twelve months to 30 June 2005 have been restated to reflect the requirements of FRS 25 and the Companies Act 1985. 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. 2. TURNOVER Turnover in respect of the five business operations comprised: 2006 2005 £000 £000 Professional football 26,659 31,432 Multimedia and communications 11,889 16,604 Merchandising 14,337 10,060 Stadium enterprises 2,779 2,536 Youth development 1,747 1,536 ---------- ---------- 57,411 62,168 ---------- ---------- 3. EXCEPTIONAL OPERATING EXPENSES The exceptional operating expenses of £0.58m (2005: £2.96m) incorporated in the Profit and Loss account reflect £0.18m in respect of labour costs largely arising as a result of the early termination of certain player contracts and £0.40m in respect of a provision for impairment of intangible fixed assets. Last year's costs of £2.96m reflected £1.56m of labour costs and other ancillary expenses and £1.40m in respect of a provision for impairment of intangible fixed assets, largely arising as a result of the early termination of certain player contracts 4. DIVIDENDS A 6% (before tax credit deduction) non-equity dividend of £544,000 is payable on 31 August 2006 to those holders of Convertible Cumulative Preference Shares on the share register at 4 August 2006, together with the amount due in respect of the Convertible Preferred Ordinary Shares fixed dividend of 4% of £900,622 (2005: £900,622) to those holders on the share register at 30 June 2006. 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. Following the implementation of the presentational aspects of FRS 25 ('Financial Instruments: disclosure and presentation') in the preparation of these annual results the Group's Preference Shares and Convertible Preferred Ordinary Shares, as compound financial instruments, have been reclassified as a combination of debt and equity and the attributable non-equity dividends reclassified as interest. 5. TAXATION No provision for corporation tax or deferred tax is required in respect of the year ended 30 June 2006. Estimated tax losses available for set-off against future trading profits amount to approximately £44m (2005: £42m). This estimate is subject to the agreement of the current and prior years' corporation tax computations with the HM Revenue and Customs. 6. LOSS PER SHARE The loss per share has been calculated by dividing the loss for the period of £4.22m (2005: £8.71m as restated) by the weighted average number of Ordinary Shares of 58.76 million (2005: 30.80 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 2006 2005 £000 As restated £000 At 1 July 11,728 20,434 Movements in year: Issue of ordinary share capital 14,591 - Retained loss for the year (4,222) (8,706)) ---------- ---------- At 30 June 22,097 11,728 ---------- ---------- At 30 June 2006 Non-Equity Shareholders' Funds, defined in accordance with FRS4, amounted to £23.08m (2005: £23.08m). This relates to the Convertible Preferred Ordinary Shares, the Convertible Cumulative Preference Shares and the associated accrued dividends. 8. ANALYSIS OF NET DEBT At Cash Non-cash Movement At 1 July 2005 Flow in Debt 30 June 2006 £000 £000 £000 £000 Cash at bank and in 171 2,743 - 2,914 hand -------- -------- -------- ---------- 171 2,743 - 2,914 -------- -------- -------- ---------- Debt due within 1 (1,075) 10 (1,065) year Debt due after 1 year (23,987) 8,383 (210) (15,814) -------- -------- -------- ---------- (25,062) 8,393 (210) (16,879) -------- -------- -------- ---------- Net debt (24,891) 11,136 (210) (13,965) -------- -------- -------- ---------- 9. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT 2005 2006 As restated £000 £000 Returns on investments and servicing of finance Dividends paid (521) (554) Interest paid (999) (1,278) Interest element of hire purchase payments - (16) ---------- ---------- Net cash outflow from returns on investments and (1,520) (1,848) servicing of finance ---------- ---------- Capital expenditure and financial investment Payments to acquire tangible fixed assets (3,035) (1,966) Payments to acquire intangible fixed assets (4,477) (2,891) Proceeds from sales of intangible fixed assets 643 350 ---------- ---------- Net cash outflow from capital expenditure and (6,869) (4,507) financial investment ---------- ---------- Financing Loans (paid) / received (8,383) 956 Loan instalments paid (10) (2) ---------- ---------- Net cash (outflow) / inflow from financing (8,393) 954 ---------- ---------- 10. ANNUAL REPORT & ACCOUNTS Copies of the annual report & accounts together with the notice and notes of the 2006 AGM are expected to be issued to all shareholders during September. The financial information set out above was approved by the directors on 16 August 2006 and does not constitute the Company's statutory accounts for the years ended 30 June 2006 or 30 June 2005. The auditors' opinion on the 2006 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 2005 have been filed and those for 2006 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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