Interim Results

Celtic PLC 7 February 2002 7 February 2002 CELTIC PLC INTERIM RESULTS FOR THE YEAR ENDED 31 DECEMBER 2001 HIGHLIGHTS OF THE RESULTS • Turnover increased in the period by 59% to £36.36m (2000: £22.83m). • Significant increase in professional football revenues of 37% to £17.44m (2000: £12.72m). • Revenues from multimedia and communications more than doubled to £10.49m (2000:£4.64m). • Merchandising revenue increased by over 70% to £6.95m (2000: £4.07). • Operating expenses increased by over 43% to £29.50m (2000: £20.61m). • Profit from operations increased to £6.86m (2000: £2.23m). • An additional net investment of £7.2m in the first team squad. • Enhanced extended contracts awarded to key players. • The team is currently top of the Scottish Premier League and in contention in the Scottish Cup competition. For further information contact: Ian McLeod, Celtic plc Tel: 0141 551 4276 Eric Riley, Celtic plc Tel: 0141 551 4276 Kate Cunningham, Celtic plc Tel: 0141 551 4276 Keith Brookbank, Gavin Anderson & Company Tel: 020 7457 2345 Lindsey Harrison, Gavin Anderson & Company Tel: 020 7457 2345 Celtic plc CHAIRMAN'S STATEMENT During the first half of this financial year both the football team and the Company have made good progress. Participation in Europe and a strong performance in domestic competitions have given revenues a significant boost, with benefits reflected both in profitability and the balance sheet. In the Scottish Premier League the team is well positioned to retain the title, a feat last achieved by a Celtic team 20 years ago and we also remain in contention in the Scottish Cup. In Europe this season, Celtic qualified for the first stage of the UEFA Champions' League for the first time, and failed to move on to the next stage by the narrowest of margins. Our draw for the third round of the UEFA Cup, against Valencia, could not have been more difficult and we went out of the competition on a penalty shoot-out. The consistently high standard achieved by the team demonstrates the improvement in quality of the football squad and the inspired leadership of Martin O'Neill and his coaching team. The squad has been strengthened by an additional net investment of £7.2 million in players. More important but less well publicised, we have pursued a policy of giving priority in the use of financial resources to remunerating players, particularly in respect of performance on the field. Research indicates that success on the field is more closely related to players' contracts than to transfer fees. That said, we have continued to control our costs carefully. Financial performance in the half-year has been strong. The Company's management team and staff are to be congratulated for their contribution to our progress. Turnover rose by 59%, with increases in all categories. Merchandising showed growth of over 70%, reflecting partly the trade of two new stores and income from multi-media and communications more than doubled with the TV revenues from European matches. Operating expenses have risen by over 43% against the same period last year. The greatest contributory factor was labour costs (largely driven by football), which were up by £5.8m, an increase of just over 46%. Despite this increase, labour costs have still been held at approximately 50% of turnover, which is well within levels considered to be industry best practice. Profit from operations, at £6.9 million, has more than tripled compared to the same period last year. Operating profit (i.e. after taking into account amortisation and net gain on player transfers) amounted to £3.6 million, compared to £1.3 million at this time last year; and profit before tax stood at £3.1 million, as against £0.6 million a year ago. Net assets, reinforced by the successful issue of Convertible Preferred Ordinary Shares in the summer, rose from £30.1 million at 30 June 2001 to £54.9 million. In the prospectus accompanying that issue we stated how we intended to apply the proceeds of the issue. We undertook to give top priority to strengthening the football squad. This has happened. More than half of the sums raised has been incurred on and committed to buying and paying new players and securing the extended commitment of high quality members of the squad through enhanced contracts. Plans to improve the scouting, training and coaching of young players are now being implemented. Although these activities do not attract the attention they deserve, we believe they are crucial to our youth development plans. Additions and improvements to the current training pitches are also proceeding. The importance we attach to developing further a high-quality training facility remains unchanged, although it will take longer than originally envisaged to develop a suitable site. A new restaurant has also been opened in the Jock Stein Stand, with every prospect of proving a profitable investment. Outlook Revenue generated from our run in Europe has assisted in reducing our debt from £29.6 million at June 30th 2001 to £11.5million as at 31 December 2001. However, as a result of significant instalment payments in respect of player acquisitions and reduced trading activity we do not believe this position will be maintained for the rest of the financial year. As in previous years, the majority of our home games have been played in the first half of the season and in addition, we will not have the benefits of European matches to sustain revenue growth through the remainder of the year. Trading performance in the second six months will therefore be well down on the first. Overall, our ability to generate any profit for the year as a whole will be heavily dependent on the level of progress domestically and the impact of any player trading, should it arise. An internal re-organisation is being concluded to assist us in ensuring that the commitments entered into in pursuance of the strategy and policies communicated in the prospectus last summer can continue to be met, with the additional benefit of achieving effective use of the Company's assets. We continue to believe that change in the structure of European professional football will come and welcome the indications from the football authorities of possible changes to the UEFA Cup format. In the meantime, discussions are under way in Scotland to replace the SPL television contract that expires at the end of this season. Celtic is playing an active and positive part in these discussions. On behalf of the Board, I thank you for your continued support. Brian Quinn CBE 7 February 2002 Chairman INDEPENDENT REVIEW REPORT TO CELTIC plc Introduction We have been instructed by the Company to review the financial information for the six months ended 31 December 2001, which comprises the Group Profit and Loss Account, Group Balance Sheet, Group Cash Flow Statement and the related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' Responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review Work Performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review Conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 December 2001. PKF Registered Auditors Glasgow, UK 7 February 2002 Celtic plc GROUP PROFIT AND LOSS ACCOUNT 6 months to 12 months 31 December to 30 June Notes 2001 2000 2001 Unaudited Unaudited Audited £'000 £'000 £'000 TURNOVER 3 36,360 22,833 42,007 OPERATING EXPENSES (29,498) (20,605) (41,136) PROFIT FROM OPERATIONS 6,862 2,228 871 AMORTISATION OF INTANGIBLE FIXED ASSETS (4,251) (4,466) (9,604) IMPAIRMENT OF INTANGIBLE FIXED ASSETS - - (4,892) NET GAIN ON SALE OF INTANGIBLE FIXED ASSETS 4 943 3,584 4,260 OPERATING PROFIT/(LOSS) 3,554 1,346 (9,365) INTEREST PAYABLE AND SIMILAR CHARGES (464) (746) (1,825) PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 3,090 600 (11,190) TAX ON ORDINARY ACTIVITIES 5 - - 3,067 PROFIT/(LOSS) FOR THE PERIOD 3,090 600 (8,123) PREFERENCE DIVIDEND 6 - - (599) RETAINED PROFIT/(LOSS) FOR THE PERIOD 3,090 600 (8,722) EARNINGS/(LOSS) PER ORDINARY SHARE 7 8.03p 1.03p (29.82p) DILUTED EARNINGS/(LOSS) PER SHARE 7 4.95p 1.26p (17.04p) All amounts relate to continuing operations. There were no gains or losses recognised in any of the above results other than the profit/(loss) for the period. Celtic plc GROUP BALANCE SHEET 31 December 2001 2000 30 June Unaudited Unaudited 2001 £'000 £'000 Audited (As restated) £'000 Notes FIXED ASSETS Tangible assets 47,055 46,735 46,664 Intangible assets 8 28,197 33,605 24,106 75,252 80,340 70,770 CURRENT ASSETS Stocks 1,160 955 1,228 Deferred tax asset 5,680 2,613 5,680 Debtors 6,273 6,628 4,579 Cash at bank and in hand 1,691 197 87 14,804 10,393 11,574 CREDITORS - Amounts falling due within one year 9 (13,794) (22,701) (20,066) Income deferred less than one year (8,755) (6,600) (10,447) NET CURRENT LIABILITIES (7,745) (18,908) (18,939) TOTAL ASSETS LESS CURRENT LIABILITIES 67,507 61,432 51,831 CREDITORS - Amounts falling due after more than one year 10 (12,642) (22,051) (21,772) NET ASSETS 54,865 39,381 30,059 CAPITAL AND RESERVES Called up share capital (includes non-equity) 11 29,405 11,392 11,392 Share premium 21,222 17,519 17,519 Profit and loss account 4,238 10,470 1,148 SHAREHOLDERS' FUNDS 54,865 39,381 30,059 Approved by the Board on 7 February 2002 Celtic plc GROUP CASH FLOW STATEMENT 6 months to 12 months to 31 December 30 June 2001 2000 2001 Unaudited Unaudited Audited £'000 £'000 £'000 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES Operating profit/(loss) 3,554 1,346 (9,365) Depreciation 515 551 1,128 Amortisation 4,251 4,466 9,604 Impairment of intangible fixed assets - - 4,892 Net gain on sale of intangible fixed assets (943) (3,584) (4,260) Grants release - - (1) Decrease/(increase) in stocks 68 1 (272) Increase in debtors (145) (520) (809) Increase/(decrease) in creditors 1,054 (1,062) 1,385 Net cash inflow from operating activities 8,354 1,198 2,302 CASH FLOW STATEMENT Net cash inflow from operating activities 8,354 1,198 2,302 Returns on investments and servicing of finance (1,063) (1,345) (2,424) Capital expenditure and financial investment (10,889) (11,844) (14,998) Cash outflow before use of liquid resources and financing (3,598) (11,991) (15,120) Financing 12,526 6,896 6,709 Increase/(decrease) in cash 8,928 (5,095) (8,411) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Increase/(decrease) in cash in the period 8,928 (5,095) (8,411) Cash inflow/(outflow) from movement in debt 9,190 (6,896) (6,709) Movement in net debt in the period 18,118 (11,991) (15,120) Net debt at 1 July (29,625) (14,505) (14,505) Net debt at period end (11,507) (26,496) (29,625) All amounts relate to continuing operations. There were no gains or losses recognised in any of the above results other than the profit/(loss) for the period. Celtic plc NOTES TO THE FINANCIAL STATEMENTS 1. The results for the year ended 30 June 2001 are extracted from the accounts filed with the Registrar of Companies, which contained an unqualified audit report. 2. The interim results for the 6 months to 31 December 2001, which comprise the Group Profit and Loss Account, Group Balance Sheet, Group Cash Flow Statement and the related notes, have been prepared on the same basis and using the same accounting policies as those used in the preparation of the last full year's accounts to 30 June 2001. Following the adoption of FRS19 - Deferred Tax in the year to 30 June 2001, the balance sheet for the period to 31 December 2000 has been restated to incorporate this accounting policy change. 3. TURNOVER 6 months to 12 months 31 December to 30 June 2001 2000 2001 £'000 £'000 £'000 Turnover comprised 17,436 12,718 21,681 Professional football 10,488 4,640 9,904 Multimedia & communications 6,946 4,070 7,718 Merchandising 846 780 1,478 Stadium enterprises 644 625 1,226 Youth development 36,360 22,833 42,007 Number of home games 18 17 27 4. NET GAIN ON SALE OF INTANGIBLE FIXED ASSETS In the current period the net gain on sale was represented principally by the disposal of Mark Burchill and Stewart Kerr (2000: Mark Viduka). 5. After taking account of unutilised tax losses brought forward, together with the projected performance for the next six months, no provision for taxation is required. 6. As in previous years no provision has been made in respect of the 6% dividend that is payable on the Preference Shares on 31 August 2002 nor for the 4% dividend that is payable on the Convertible Preferred Ordinary Shares on 31 August 2004 in respect of the year ending 30 June 2002. 7. Earnings per share has been calculated by dividing the profit for the period by the weighted average number of Ordinary Shares in issue 30,324,188 (2000: 29,250,000), after taking account of one half of the net dividends in note 6 above. Diluted earnings per share has been calculated by dividing the profit for the period by the weighted average number of Ordinary, Convertible Preferred Ordinary and Preference Shares in issue in the period to 31 December 2001, and the exercise of outstanding share purchase options in accordance with FRS14. Certain options have been excluded from the calculation, as the conditions attached to these had not been achieved in the period under review. 8. INTANGIBLE ASSETS 31 December 30 June 2001 2000 2001 £'000 £'000 £'000 Cost At 1 July 50,082 34,053 34,053 Additions 9,456 20,848 21,890 Disposals (12,949) (4,475) (5,861) At period end 46,589 50,426 50,082 Amortisation At 1 July 25,976 15,014 15,014 Charge for the period 4,251 4,466 9,604 Provision for impairment - - 4,892 Disposals (11,835) (2,659) (3,534) At period end 18,392 16,821 25,976 Net Book Value at period end 28,197 33,605 24,106 The £7.2m additional net investment in players in the period referred to in the Chairman's Statement reflects additions of £9.4m less the proceeds of £2.2m achieved in respect of player disposals which had a net book value of £1.1m at the date of disposal as noted above. In March 2001 FIFA reached agreement with the European Commission on the main amendments to FIFA rules governing player transfers. These new regulations came into force in September 2001 and it is likely that the domestic arrangements will align themselves with these in due course. Fundamentally, however the movement of players between clubs within a regulated transfer system will continue. While this remains the case the costs associated with the acquisition and ongoing retention of football personnel will be amortised over the period of their contracts on the basis of nil residual values. 9. CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR The amounts payable in agreed instalments in respect of the transfer of player registrations at 31 December 2001 and included in creditors amounted to £3,430,000 (2000: £10,517,000). 10. CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR The reduction in creditors due after more than one year reflects the reduction in loans drawn down at the end of the period. As at 31 December 2001 £12.0m of a £24.0m 20-year loan facility was drawn. This compares with loans of £21m drawn at 30 June 2001 and 31 December 2000 respectively. The Company's bank facility of £36.0m comprises an overdraft of £12.0m and term loans of £24.0m of which £7.3m is repayable in equal quarterly instalments from October 2009 until April 2019, and £16.7m is repayable in July 2019. The Company has the option to repay the loans earlier than these dates without penalty. 11. SHARE CAPITAL Authorised Allotted, called up and fully paid 31 December 31 December Group and Company 2001 2000 2001 2001 2000 2000 No.'000 No.'000 No.'000 £000 No.'000 £000 Equity Ordinary shares of 1p each 36,289 35,000 30,539 305 29,250 292 Non-equity Convertible Preferred Ordinary 20,000 - 18,012 18,012 - - Shares of £1 each Convertible Cumulative 19,711 21,000 17,211 10,327 18,500 11,100 Preference Shares of 60p each Deferred shares of 1p each 76,052 - 76,052 761 - - 152,052 56,000 141,814 29,405 47,750 11,392 During the six month period to 31 December 2001 1,289,024 Preference Shares of 60p each were converted into 1,289,024 Ordinary Shares of 1p each and 76,052,416 Deferred Shares of 1p each in accordance with Article 4C(1) of the Company's Articles of Association. The above split of share capital between equity and non-equity is disclosed in accordance with FRS4. 12. TRANSFER FEES PAYABLE/RECEIVABLE Under the terms of certain contracts in respect of the transfer of player registrations, additional amounts will be payable/receivable by the Company if specific future conditions are met. Amounts in respect of such contracts could result in an amount payable of £2,055,000 of which £1,935,000 could arise within one year, and amounts receivable of £400,000 of which all could arise within one year. Directors Brian Quinn CBE (Chairman)* Ian J W McLeod (Chief Executive) Eric J Riley (Financial) Kevin Sweeney* Dermot F Desmond* Tom Allison * Sir Patrick Sheehy (Senior Independent Director)* Secretary Robert M Howat Directors of the Celtic Football and Athletic Company Limited and Celtic Football Club Ian J W McLeod (Chief Executive) Eric J Riley (Financial) Jim Hone (Business Operations and Resources) Kevin Sweeney* John S Keane* Michael A McDonald* * Independent Non-Executive Director Secretary Robert M Howat Football Manager Martin O'Neill This information is provided by RNS The company news service from the London Stock Exchange

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