Interim Results

Celtic PLC 14 February 2003 14 February 2003 Celtic plc INTERIM RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2002 HIGHLIGHTS OF THE RESULTS • Celtic remain involved in four football competitions, including the UEFA Cup. • Turnover reduced to £30.01m largely as a result of not progressing to UEFA Champions' League first group stage. • Profit from operations of £0.20m. • Loss before taxation of £5.64m. • £4.82m invested in intangible fixed assets including signing 2 new players. Commenting on the results, Brian Quinn, Chairman said: 'The Company's performance during the first half of this financial year, both on and off the field, has been heavily influenced by European competition. In addition, we have been operating in a more challenging business environment, from which Celtic has not been immune. Nevertheless, and looking ahead to the second half of the Company's year, there are some signs from which we can take encouragement. Since the half year-end, we have announced an attractive three year shirt sponsorship deal with Carling. We are still involved in 4 competitions, including the UEFA Cup and our Manager has agreed to a new contract and is now devoting all his attention and energies to delivering success in these competitions.' For further information contact: Iain Jamieson, Celtic plc Tel: 0141 551 4276 Lindsey Harrison, Gavin Anderson & Company Tel: 020 7554 1400 Keith Brookbank, Gavin Anderson & Company Tel: 020 7554 1400 CHAIRMAN'S STATEMENT The Company's performance during the first half of this financial year, both on and off the field, has been heavily influenced by European competition. In addition, we have been operating in a more challenging business environment for football clubs, from which Celtic has not been immune. Nevertheless, and looking ahead to the second half of the Company's year, there are some signs from which we can take encouragement. This season we did not qualify to compete in the UEFA Champions' League, going out to Basle F.C. in the qualifying round. This had a very significant effect on revenues from football match-day tickets, from television and other multi-media and in our retail and catering operations. Income from ticket sales would have been lower but for the 10% increase in standard season ticket prices. Some of the revenue shortfall was offset by our success to date in the UEFA Cup. Following victory over Suduva from Lithuania, Celtic beat Blackburn Rovers of the F.A. Premier League and Celta Vigo of the Spanish Primera Liga. These results against high quality opposition have enabled us to progress to a 4th round tie against Stuttgart of the Bundesliga later in February. At home, Celtic is still very much in contention for the Scottish Premier League title, with a good prospect of competing successfully for our third successive championship; and we have progressed to the final and fourth round of the C.I.S. League Cup and Scottish F.A. Cup, respectively. In brief the team, strengthened by new signings, continues to perform well. Since the end of the reporting period Martin O'Neill, who manages the team with great distinction, has agreed to a new one-year rolling contract. This is a most welcome development. I said in my Chairman's Statement for last year that we would make every effort to retain Martin, and the Board is pleased that we have been able to do so. Financial performance in the half year has been mixed. Turnover fell to £30 million compared to £36 million a year ago, largely reflecting the loss of revenues from participation in the UEFA Champions' League. The great bulk of this reflected lower income from multi-media and communications and from match day tickets, but was to some extent recouped from UEFA Cup ties. Positive contributions from new stores in Edinburgh and Glasgow helped mitigate a fall in turnover of 16% in our merchandising operations in a very difficult trading environment. Operating expenses were broadly unchanged compared to last year. The ability of football clubs to bring costs into line with falling revenues is constrained in the current climate by the medium term nature of many players' contracts negotiated in earlier periods, which effectively locks in players' remuneration at a high level and indeed, in some cases at increasing levels. The weakness of the transfer market therefore, paradoxically, makes it very hard to reduce football costs in the short term. Nevertheless, the increase in Celtic's professional football player costs, which stand at 53.8% of turnover for the period, was negligible. The enhancement of our youth development programme continues. We have significantly expanded and strengthened our scouting and coaching systems: the number of scouts has increased from 10 to 40, covering the whole of the U.K. and Ireland; and the number of development centres in Scotland has more than doubled, from 6 to 13, in less than 9 months. We are already seeing the results in the form of attracting and retaining young footballers of great promise. We continue to pursue our objective of moving to fully equipped, purpose - built training facilities and are actively looking at options. Planning and financing such facilities takes time and money. We propose to choose carefully and wisely, while acknowledging that we have not been able to move as quickly as at one time we had hoped. Profit from operations effectively broke even and was some £6.6 million lower than last year. Amortisation costs rose because of acquisitions of new players, producing an operating loss of just over £5 million and a pre-tax loss of £5.6 million - i.e. more than accounted for by the net revenue loss from involvement in European competition. Net assets amounted at the end of the period to £41.8 million, compared with £54.9 million a year ago. Total net debt rose from £16.5 million at 30th June last year to £24.2 million, almost all of it medium - term in nature. The increase arises from trading losses, instalments on player acquisitions and capital expenditure. Outlook Although the football sector is going through a period of financial pressures, the adjustment to which I referred in my last Chairman's Statement is now under way. Clubs are beginning to tackle their cost base and are no longer spending substantial sums in anticipation of buying success or avoiding failure. Celtic's position is no different and we will have to make a sustained effort to bring our costs down. Like every other club, the pace at which we can generate savings in the immediate future may be constrained, as mentioned above, but the trend is clear. The dispute that threatened the future of the Scottish Premier League is now all but settled and this provides a stable basis on which to take the game at home forward. Since the half - year end, we have announced an attractive three year shirt sponsorship deal with Carling. We are still involved in 4 competitions, including the UEFA Cup. Our Manager has agreed to a new contract and is now devoting all his attention and energies to delivering success in these competitions. Financial performance in the second half of this financial year will depend primarily on progress in the 4 competitions in which we are still involved. The established pattern of a stronger first half result may persist, although further progress in the UEFA Cup could conceivably alter that. It is estimated that we would have to go to the semi-final of that competition to compensate for failure to reach the first stage of the Champions' League. However, we are unlikely to recoup the losses of revenue from other sources. We retain a huge, faithful support, which, as ever, is the lifeblood of our club. As a Board we shall continue to work to achieve our own 'double': football success and financial stability. 14 February 2003 Brian Quinn CBE 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 2002, 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 2002. PKF Registered Auditors Glasgow, UK 14 February 2003 GROUP PROFIT AND LOSS ACCOUNT 6 months to 12 months 31 December to 30 June 2002 2001 2002 Unaudited Unaudited Audited Notes £'000 £'000 £'000 TURNOVER 3 30,009 36,360 56,892 OPERATING EXPENSES (29,807) (29,498) (51,522) -------- -------- --------- PROFIT FROM OPERATIONS 202 6,862 5,370 AMORTISATION OF INTANGIBLE FIXED ASSETS (5,292) (4,251) (8,814) NET GAIN ON SALE OF INTANGIBLE FIXED ASSETS 4 - 943 1,474 -------- --------- -------- OPERATING (LOSS) / PROFIT (5,090) 3,554 (1,970) LOSS ON DISPOSAL OF TANGIBLE FIXED ASSETS - - (107) INTEREST PAYABLE AND SIMILAR CHARGES (553) (464) (897) ------ ------- ------- (LOSS) / PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (5,643) 3,090 (2,974) TAX ON ORDINARY ACTIVITIES 5 - - (65) -------- --------- -------- (LOSS) / PROFIT FOR THE PERIOD (5,643) 3,090 (3,039) DIVIDENDS 6 - - (1,301) -------- --------- -------- RETAINED (LOSS) / PROFIT FOR THE PERIOD (5,643) 3,090 (4,340) ===== ==== ===== (LOSS) / EARNINGS PER ORDINARY SHARE 7 (20.84p) 8.03p (14.26p) ===== ==== ===== DILUTED (LOSS) / EARNINGS PER SHARE 7 (20.84p) 4.95p (14.26p) ===== ==== ===== All amounts relate to continuing operations. There were no gains or losses recognised in any of the above results other than the (loss) / profit for the period. GROUP BALANCE SHEET 31 December 30 June 2002 2001 2002 Unaudited Unaudited Audited Notes £'000 £'000 £'000 FIXED ASSETS Tangible assets 48,896 47,055 48,266 Intangible assets 8 25,419 28,197 25,895 -------- -------- -------- 74,315 75,252 74,161 CURRENT ASSETS Stocks 1,574 1,160 1,258 Deferred tax asset 5,615 5,680 5,615 Debtors 4,998 6,273 4,532 Cash at bank and in hand 249 1,691 533 -------- -------- -------- 12,436 14,804 11,938 CREDITORS - Amounts falling due within one year 9 (13,568) (13,794) (12,607) Income deferred less than one year (6,883) (8,755) (8,682) -------- -------- -------- NET CURRENT LIABILITIES (8,015) (7,745) (9,351) -------- -------- -------- TOTAL ASSETS LESS CURRENT LIABILITIES 66,300 67,507 64,810 CREDITORS - Amounts falling due after more than one year 10 (24,508) (12,642) (17,375) -------- -------- -------- NET ASSETS 41,792 54,865 47,435 ===== ===== ===== CAPITAL AND RESERVES Called up share capital (includes non-equity) 11 29,405 29,405 29,405 Share premium 21,222 21,222 21,222 Profit and loss account (8,835) 4,238 (3,192) -------- -------- -------- SHAREHOLDERS' FUNDS 41,792 54,865 47,435 ===== ===== ===== Approved by the Board on 14 February 2003 GROUP CASH FLOW STATEMENT 6 months to 12 months to 31 December 30 June 2002 2001 2002 Unaudited Unaudited Audited £'000 £'000 £'000 RECONCILIATION OF OPERATING ( LOSS) / PROFIT TO NET CASH (OUTFLOW) / INFLOW FROM OPERATING ACTIVITIES Operating (loss) / profit (5,090) 3,554 (1,970) Depreciation 681 515 1,051 Amortisation 5,292 4,251 8,814 Net gain on sale of intangible fixed assets - (943) (1,474) Grants release - - (1) (Increase) / decrease in stocks (316) 68 (30) (Increase) / decrease in debtors (1,741) (145) 774 (Decrease) / increase in creditors (109) 1,054 359 ------ ------- ----- Net cash (outflow) / inflow from operating activities (1,283) 8,354 7,523 ------ ------- ----- CASH FLOW STATEMENT Net cash (outflow) / inflow from operating activities (1,283) 8,354 7,523 Returns on investments and servicing of finance (1,111) (1,063) (2,296) Capital expenditure and financial investment (5,324) (10,889) (14,591) ------ ------- ----- Cash outflow before use of liquid resources and financing (7,718) (3,598) (9,364) Financing 7,308 12,526 17,133 ------ ------- ----- (Decrease) / increase in cash (410) 8,928 7,769 ==== ===== ===== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT (Decrease) / increase in cash in the period (410) 8,928 7,769 Cash (outflow) / inflow from movement in debt (7,308) 9,190 5,383 ------ ------- ----- Movement in net debt in the period (7,718) 18,118 13,152 Net debt at 1 July (16,473) (29,625) (29,625) ------ ------- ----- Net debt at period end (24,191) (11,507) (16,473) ====== ====== ====== NOTES TO THE FINANCIAL STATEMENTS 1. The results for the year ended 30 June 2002 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 2002, 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 2002. 3. TURNOVER 6 months to 12 months 31 December to 30 June 2002 2001 2002 Turnover comprised: £'000 £'000 £'000 Professional football 17,885 17,436 27,715 Multimedia & communications 4,684 10,488 16,216 Merchandising 5,820 6,946 10,001 Stadium enterprises 911 846 1,684 Youth development 709 644 1,276 ------ ------ ------ 30,009 36,360 56,892 === === === Number of home games 20 18 27 === === === 4. NET GAIN ON SALE OF INTANGIBLE FIXED ASSETS No net gain on sale is reported in the current period. The gain last year was represented principally by the disposals of Mark Burchill and Stewart Kerr. 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 of £556,000 that is payable on the Preference Shares on 31 August 2003 nor for the 4% dividend of £900,000 that is payable on the Convertible Preferred Ordinary Shares on 31 August 2004 in respect of the year ending 30 June 2003. 7. Loss / earnings per share has been calculated by dividing the profit for the period by the weighted average number of Ordinary Shares in issue 30,564,593 (2001: 30,324,188), after taking account of one half of the net dividends in note 6 above. Diluted loss / earnings 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. 8. INTANGIBLE ASSETS 31 December 30 June 2002 2001 2002 £'000 £'000 £'000 Cost At 1 July 47,915 50,082 50,082 Additions 4,816 9,456 12,107 Disposals (940) (12,949) (14,274) ------- --------- --------- At period end 51,791 46,589 47,915 ------- --------- --------- Amortisation At 1 July 22,020 25,976 25,976 Charge for the period 5,292 4,251 8,814 Disposals (940) (11,835) (12,770) ------- --------- --------- At period end 26,372 18,392 22,020 ------- --------- --------- Net Book Value at period end 25,419 28,197 25,895 ===== ===== ===== 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 2002 and included in creditors amounted to £3,075,000 (2001: £3,430,000). 10. CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR The increase in creditors due after more than one year reflects the increase in loans drawn down at the end of the period. As at 31 December 2002 £23.5m of a £24.0m 20-year loan facility was drawn. This compares with loans of £16.0m drawn at 30 June 2002 and £12.0m at 31 December 2001. The Company's bank facility of £36.0m comprises an overdraft facility of £12.0m, of which £11.87m remains unutilised at 31 December 2002, 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 2002 2001 2002 2002 2001 2001 No.'000 No.'000 No.'000 £000 No.'000 £000 Equity Ordinary Shares of 1p each 36,339 36,289 30,590 306 30,539 305 Non-equity Convertible Preferred Ordinary Shares of £1 each 20,000 20,000 18,012 18,012 18,012 18,012 Convertible Cumulative Preference Shares of 60p each 19,661 19,711 17,160 10,297 17,211 10,327 Deferred Shares of 1p each 78,998 76,052 79,034 790 76,052 761 -------- -------- -------- ------ -------- ------ 154,998 152,052 144,796 29,405 141,814 29,405 ===== ===== ===== ===== ===== ==== During the six month period to 31 December 2002 49,939 Convertible Cumulative Preference Shares of 60p each were converted into 49,939 Ordinary Shares of 1p each and 2,946,401 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 £1,320,000 of which £1,110,000 could arise within one year, and amounts receivable of £750,000 of which £550,000 could arise within one year. 13 POST BALANCE SHEET EVENTS On 7 January Simon Lynch was transferred to Preston North End Football Club and on 10 January Jonathan Gould was also transferred to Preston North End. On 24 January Javier Sanchez Broto was signed from Livingston Football Club and on 13 February Slovakian international defender Stanislav Varga was signed subject to the football authorities confirming that the player is eligible for registration. On 3 January 2003 Celtic announced its intention to enter into a new three year shirt sponsorship agreement with Coors Brewing Limited (Carling) when the existing sponsorship agreement with NTL expires in June 2003 and on 22 January the football manager Martin O'Neill agreed to enter into a new one year rolling contract with Celtic replacing his existing contract which was due to expire on 30 June 2003. 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 Eric J Riley Jim Hone 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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