Year Ended 30 June 2004 Celtic Plc Annual Report
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Celtic plc Annual Report Year Ended 30 June 2004 CONTENTS Chairman’s Statement 1 Directors’ Report 13 Highlights of the Results 2 Corporate Governance 17 Operating Review 3 Remuneration Report 19 Financial Review 7 Statement of Directors’ Responsibilities 23 Five Year Record 23 Group Balance Sheet 28 Notice and Notes 45 Independent Auditors’ Report Company Balance Sheet 29 Explanatory Notes 46 to the Members 24 Group Cash Flow Statement 30 Directors, Officers Celtic Charity Fund 25 and Advisers 48 Notes to the Financial Group Profit and Loss Account 27 Statements 31 Chairman’s Statement Brian Quinn CBE In these circumstances Celtic has League and the UEFA Cup. Narrow worked hard to remain on course to defeats away from home in Munich achieve a sustainable balance between and Lyon meant that the team did not football progress and financial stability. go on to the knockout stage of the ...further progress Let me emphasise how difficult it can UEFA Champions’ League; but it did be to achieve those objectives. Success reach the quarter-final of the UEFA in building the may or may not generate further Cup after a memorable victory over success in football; but it certainly Barcelona. Deprived through injury of ‘‘ feeds expectations among supporters 3 of our 4 recognised strikers, Celtic Celtic brand and demands by the media. Those went out to Villarreal. Once again expectations and demands have to be Martin O’Neill, supported by his very and the business. managed in a climate in which public able staff, has given the team great focus on finances becomes important leadership and drive. He has also only when serious problems arise. introduced several members of our Many are guilty of assuming that these Youth Team to the first team squad. problems only happen to others. Celtic's under 19 and under 21 squads The last twelve months at Celtic were both won their league championships marked by outstanding success on That said, Celtic supporters have again last season, a very important the football field and further progress shown themselves to be quite development looking ahead to our in building the Celtic brand and the extraordinary in their loyalty and fortunes on and off the field. business. Participation in European commitment. During the year the The departure of Henrik Larsson after competition’’ was essential to our Presidents of both FIFA and UEFA came 7 marvellous seasons at Celtic cannot, financial performance. Endeavouring to Celtic Park to present awards to our of course, be seen as anything other to sustain our footballing success supporters, a unique accomplishment. than a matter of great regret. We will without running excessive risks with It is a matter of great pride that our miss him, no doubt, and wish him our finances remains the principal supporters have drawn attention to every success at Barcelona. challenge looking ahead. themselves in a wholly positive way. At a time when attendances in Total turnover rose for the 10th Conditions for Scottish football clubs Scotland have been falling, our sales of successive year to £69.02m, an remained very difficult and, indeed, season tickets have been maintained at increase of 14%. Revenues from several SPL clubs either went into the highest level in the UK. The average football also rose by some 14%, while administration or came close to doing paid league attendance at Celtic Park merchandising again grew strongly, so. The measures taken to deal with this last season rose to 58,420 with over recording a 17% increase to £13.42m. situation were severe, and in some cases 1.75 million supporters attending the Indeed revenues rose in almost all drastic, involving the reduction of 31 home matches played. areas of the Company's business playing squads, outward transfers of including this year’s European players and reductions and delays in On the field, Celtic recorded a number campaign, which generated a players' wages. It is too early to say what of achievements. The Bank of Scotland contribution to operating profit of the effects of this crisis management Premierleague was won by a margin of £11.50m in comparison to £10.23m will have on the longer-term quality of 17 points and the title secured in mid last year. Scottish football. But clubs have faced April while the team was still unbeaten. up to the need to take these difficult All four league games against our The higher level of activity during the decisions which, over time, should go a closest and oldest rivals were won; year had its effect on operating considerable way to restoring and victories were posted in 25 expenditures, which rose by over equilibrium and, one hopes, greater consecutive games, breaking a Scottish 19% to £64.15m, with increases in competitiveness to the domestic game. record of some 40 years standing. the cost of sales, labour costs and The current imbalance in Scottish Celtic also won the Tennents’ Scottish other overheads. The increase in football competition may work to Cup for the 39th time; making it the professional and youth football costs, Celtic's short-term advantage, but has 13th time we have won the double. at 20%, reflected primarily reduced the economic value of the local contractual salary payments and football product, with predictable effects In Europe, Celtic was again unbeaten bonuses payable in respect of football on all sources of income. at home in both the UEFA Champions’ success domestically and in Europe. 1 As a consequence, profit from reward success in domestic and operations declined from £6.73m to European football, have pushed up £4.87m and, taking account of football costs this year by an amount amortisation and other operating that cannot be sustained without expenses, pre-tax losses increased from Highlights additional revenues. Total labour costs, £5.79 m to £7.47m. at 58.7% of turnover have moved up by over 4%. As players' contracts expire There was no tax charge this year. of the and the current deceleration in Interest payments on debt rose from contracts feeds into our cost base, we £1.21m to £1.33m as interest rates rose results should be able to look forward to steadily during the year. However, with recovering lost ground; but in the total debt falling to £15.80m, compared meantime we will have to continue to to £17.78m a year ago, these costs were • Winners of the Bank of seek economies in this crucial area of lower than would otherwise have been Scotland Premierleague, the the business. the case. Tennents’ Scottish Cup and UEFA Cup Quarter Finalists. The arrival of Peter Lawwell at the end Looking ahead, there are some other of October of last year as Executive significant positive points to make. We Director, Head of Operations is already Turnover increased by have taken steps to improve our • showing welcome and positive results. infrastructure, with the quality of the 14.0% to £69.02m. He has tackled the issues facing us with players' facilities at Celtic Park materially vigour and sensitivity. He and Martin enhanced and further improvements in • Operating expenses O’Neill have worked closely together entertainment and corporate facilities increased by 19.2% to during the year to manage our affairs under way. A rationalisation programme £64.15m. on and off the field. to reduce non-football costs will yield further savings going forward. Pressure • Profit from operations of The Celtic name and the Celtic brand, on retail merchandise margins, which is £4.87m (2003: £6.73m). our reputation for good football and general in football, should be offset by careful management of our business, the modernisation of the Celtic and our standing in European and global Loss after taxation of Superstore and the opening of new • football have, I believe, been enhanced in stores. Equally, the decision to retain £7.47m (2003: £11.66m). the last twelve months. It is no the conference and banqueting business exaggeration to state that this is a in-house should bring additional • Year end debt of £15.80m continuing struggle, given the issues financial benefits. (2003: £17.78m). confronting football clubs in Scotland and abroad. Your Board and The biggest test is to control football • Extended contracts have management give their time and costs, while meeting our objective of been awarded to Chris energies tirelessly to keeping Celtic maintaining the quality of the football Sutton, Alan Thompson, moving forward. We look for your squad. In the short term this is proving Jackie McNamara, Stanislav continuing support in the year ahead. a taxing challenge to the Company. As I Varga and a number of the pointed out in previous Annual Reports, Brian Quinn CBE younger first team players. contractual commitments entered into Chairman when conditions were quite different, together with the bonuses necessary to 16 August 2004 2 Operating Review Executive Director, Peter T Lawwell INTRODUCTION FINANCIAL PERFORMANCE In previous years Celtic incurred The last 12 months have seen Celtic For the tenth consecutive year, the significant levels of investment in record a series of notable on-field Group has recorded increased turnover, transfer fees. This investment has successes, including reclaiming the Bank up by £8.45m, 14%, to £69.02m. This is resulted in an amortisation charge in of Scotland Premierleague title, winning particularly encouraging as the team the current year of £10.77m. the Tennents’ Scottish Cup and, for the played 31 home games in the year, in As player contracts terminate and second year in succession, delivering a comparison with 32 home games and a the value of transfer fees decline the very strong run in the UEFA Cup after UEFA Cup final the previous year.