Interim Results

Celtic PLC 21 February 2006 21 February 2006 Celtic plc INTERIM RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2005 SUMMARY OF THE RESULTS OPERATIONAL HIGHLIGHTS • Lead the Bank of Scotland Scottish Premierleague by 13 points. • Success in reaching the final of the CIS Insurance Cup. • 15 home matches played at Celtic Park in the period (2004:16). • Training academy project progressing with outline planning permission obtained in respect of the Lennoxtown site. • Successful launch of new playing kits following the commencement of the new kit agreement with NIKE on 1 July 2005. • Extension of Carling shirt sponsorship contract until 2010. FINANCIAL HIGHLIGHTS • Successful issue of 50m 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 FRS 25, requiring the restatement of prior period comparatives. • Group turnover decreased by 15.2% to £33.04m (2004: £38.98m). • Operating expenses reduced by 4.2% to £29.54m. • Profit from operations of £3.50m (2004: £8.15m). • Loss before taxation of £0.96m (2004: profit of £1.55m). • Period end bank debt of £8.74m (2004: £17.38m). • Investment of £6.55m (2004: £1.99m) in 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 Alex Barr, Big Partnership Tel: 0141 333 9585 CHAIRMAN'S STATEMENT The financial results for the half-year ending on 31 December 2005 were significantly affected by three factors: the adoption of new accounting standard FRS 25, whereby the reporting of our capital structure and dividends was altered in the group accounts, the Club's early departure from European football competition and the share issue completed in December. 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 £4.8m lower, net debt £4.6m higher and interest charges £374,000 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. It is very difficult to make an accurate estimate of the effect of our exit from European competition at the first hurdle. Nevertheless it clearly had a big impact on income from ticket sales, down by £3.9m (21%), and revenues from multimedia and communications, which were lower by £5.5m (49%), as compared with the same period a year ago. Total turnover for the period, of £33.04m, was £5.9m lower (15%). Despite the overall drop in total revenues, income from merchandising grew by a remarkable 48% to £9.6m, reflecting the move to NIKE as supplier of Celtic kit. Future orders appear to suggest that this early success will be maintained in what continues to be a very competitive sector. Operating costs were 4.2% lower than last year, principally in the form of lower wages and salaries in the football division, which fell by over £3m. This is explained not only by the departure of several of the more highly paid players last summer, but also by a conscious effort by management of the group to bring the cost of the first team to a sustainable level. We believe we are well on the way to that position now. The summer departures also largely resulted in a 34% reduction in the amortisation charge. For a number of years we have carried significant costs on this item and, with the change in the football market and player policy, we are hopeful that the bulk of this element of expenditure is now behind us. Whereas in the comparable period last year the group recorded an operating profit of £2.9m and an (adjusted) pre-tax profit of £1.5m, the corresponding figures for the half-year ending 31 December 2005 were an operating profit of £74,000 and a pre-tax loss of £961,000. Profit from operations, which excludes amortisation charges, amounted to £3.5m, compared to £8.1m a year ago. Gordon Strachan is performing exceptionally well in his first season as Celtic Manager. The magnitude of the task awaiting him when he arrived last summer has, in my view, been greatly underappreciated. He succeeded a very successful, charismatic leader. He faced the need to rebuild one of Celtic's best-ever squads as many of the players, for various reasons, left Celtic Park. He set out to fill the vacancies with younger, often locally developed players. He was obliged to work within a budget significantly more restricted than his predecessor. And he was expected to do all these things while continuing to win trophies at home and to perform well in Europe. Almost one third of the first team squad had to be replaced before the season began. It is hard to imagine that any sport or business, having this proportion of turnover in its staff, could do more than tread water for a time. Our early exit from Europe clearly illustrated the point that time is needed to recruit and weld together a new football squad. To his great credit, Gordon did not lose heart, but got on with the job and has led the team to a healthy lead in the SPL and to the CIS Cup Final. The encouragement he gets from the Celtic support is an important factor in this success and I urge all our fans to show their backing, game by game, for his efforts. Further steps were taken during the January transfer window to strengthen the team. Roy Keane joined us on a free transfer and adds top-level experience and class to the squad. Mark Wilson and Dion Dublin were also signed, the former on a longer-term contract, the latter as cover in both attack and defence. With the arrival of Kenny Miller and Gary Caldwell secured for the end of the season and other possibilities in the summer, the objective of rebuilding the team is well on the way to being accomplished. We believe this strengthening has been achieved through foresight and planning rather than by the scramble that the transfer windows have become. Whatever the original motives behind this restriction on clubs' freedom of action, the frenzy of buying and selling- particularly in the closing days of the windows - cannot deliver an orderly market, where transfer fees and wages reflect true values. The football authorities should ask themselves whether good management and financial common sense are being delivered by the transfer windows; and who benefits most from them - clubs, players or agents. Our scouting and youth development arrangements continue to expand. The new scouting team established by Ray Clarke will yield dividends in the form of new players from the UK and abroad. Several members of our reserve and under-19 teams have stepped up to the senior squad and, despite this, these teams continue to carry all before them. Gordon Strachan keeps a close eye on our younger players and has shown himself ready to give them their chance in the first team squad. We continue to make steady progress to improve our training and development facilities. Outline planning permission to establish new training grounds at Lennoxtown has been granted, and the definition of the scope and nature of the facilities has now moved to the level of detail. We believe the arguments for such a facility are virtually self-evident. First, a club of Celtic's size and stature should expect to provide its players and support staff with high-quality facilities. Top businesses do not hesitate to place their staff in modern, well-equipped buildings, with up-to-date technology. Otherwise they would handicap themselves in recruiting and retaining the staff they need to maintain their competitive position. Secondly, the new facilities should be designed to be cost-effective. The job of doing the relevant calculations may be more difficult in football, but it must be done, however approximately, if scarce resources are not to be squandered. In December, with the overwhelming support of our shareholders, we moved our stock exchange listing from the full list to AIM and completed a new share issue with the object of enabling us to carry forward the improvements in infrastructure mentioned above. The offer for subscription was over-subscribed by 30% and the total issue raised some £15m, two thirds of which will be used for football development and one third to retire debt. Over one thousand new shareholders were added to the share register and we now have almost 24,000 ordinary shareholder accounts, with over 20,000 having 1,000 shares or less. Celtic therefore continues to enjoy the financial backing of its full supporter base. The introduction of FRS 25 this year, the effects of which are explained above, makes the timing of the share issue especially apposite. Despite the reclassification of a significant amount of capital as debt rather than as shareholders' funds, our net debt was reduced from an equivalent £22.5m at end - 2004 to £13.3m at end - 2005. Of this, bank debt was £8.74m (2004: £17.38m). Our financial position is strong. In my Chairman's Statement in the summer of 2004, I suggested that corrective action by SPL clubs in the face of severe financial pressures could bring about improvements over time in the general quality of the game in Scotland. There are some indications that this is beginning to happen. The dominance enjoyed by Celtic and Rangers is under weekly challenge. We welcome this change, recognising that Celtic has no natural right to prevail over other SPL teams. We accept that they will believe they can win any game, making for better entertainment and greater excitement. It also means that they will feel better able to adopt an attacking approach when they visit Celtic Park; and will no longer see games against only Celtic and Rangers as occasions when a special effort is made. A levelling up of standards, rather than a levelling down, particularly when delivered by younger, locally developed players, augurs well for Scottish football. At present Celtic is in a financially strong position and doing well in domestic football. Although we have suffered setbacks in the last six months, we should remember that only the mediocre are always at their best. We have strengthened the balance sheet and have the means to finance the capital and development expenditure which we believe is needed to extend the successes of recent years. Our objective of running the Club on a basis that is capable of being sustained is, I believe, within reach. We are rebuilding the squad and relying increasingly on younger, locally trained footballers. Our Manager is demonstrating the benefits of careful study of football strategy and tactics during his 'sabbatical', prior to joining us. Should he need additional time to pursue his ideas, he will get it. Our supporters value competitive success combined with high quality football. I am confident our Board, management and football staff can deliver this result while keeping the Club in a healthy and sustainable position. Brian Quinn CBE 21 February 2006 INDEPENDENT REVIEW REPORT 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 2005, which comprises the Group Profit and Loss Account, the Group Balance Sheet, the 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. This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 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 AIM Rules of the London Stock Exchange which require that it must be prepared in a form consistent with that which will be adopted in the next annual accounts having regard to the accounting standards applicable to such annual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin1999/4 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 International Standards on Auditing (UK and Ireland) 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 2005. PKF(UK) LLP Registered Auditors Glasgow, UK 21 February 2006 GROUP PROFIT AND LOSS ACCOUNT 6 months 6 months 6months 6months 12 months to 31 to 31 to to to 30 December December 31 31 June 2005 2005 2005 December December Restated Unaudited Unaudited 2005 2004 Audited Unaudited Restated Unaudited Operations excluding player Player trading Trading Total Total Total £000 £000 £000 £000 £000 Notes TURNOVER - GROUP AND SHARE 33,351 - 33,351 39,226 62,636 OF JOINT VENTURE LESS SHARE OF JOINT VENTURE (312) - (312) (245) (468) GROUP TURNOVER 2 33,039 - 33,039 38,981 62,168 OPERATING EXPENSES (29,535) - (29,535) (30,835) (58,068) PROFIT FROM OPERATIONS 3,504 - 3,504 8,146 4,100 AMORTISATION OF - (3,430) (3,430) (5,229) (7,340) INTANGIBLE FIXED ASSETS EXCEPTIONAL OPERATING - - - - (2,957) EXPENSES OPERATING PROFIT / (LOSS) 3,504 (3,430) 74 2,917 (6,197) SHARE OF OPERATING LOSS IN - - - (262) - JOINT VENTURE TOTAL OPERATING PROFIT / 3,504 (3,430) 74 2,655 (6,197) (LOSS) LOSS ON DISPOSAL OF - - - (47) (139) INTANGIBLE FIXED ASSESTS LOSS ON DISPOSAL OF TANGIBLE - - - - (103) FIXED ASSETS PROFIT / (LOSS) BEFORE INTEREST AND TAXATION 3,504 (3,430) 74 2,608 (6,439) NET INTEREST PAYABLE: 3 BANK LOANS AND OVERDRAFT (661) (570) (1,294) NON EQUITY DIVIDENDS (374) (492) (973) (LOSS) / PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (961) 1,546 (8,706) TAX CHARGE ON ORDINARY 4 ACTIVITIES - - - (LOSS) / PROFIT FOR THE (961) 1,546 (8,706) PERIOD RETAINED (LOSS) / PROFIT FOR (961) 1,546 (8,706) THE PERIOD (LOSS) / EARNINGS PER 5 (2.85p) 5.02p (28.27p) ORDINARY SHARE DILUTED (LOSS) / EARNINGS (2.85p) 2.68p (28.27p) PER SHARE 5 All amounts relate to continuing operations. There were no gains or losses recognised in any of the above results other than the loss for the period. GROUP BALANCE SHEET 31 December 31 December 30 June 2005 2004 2005 Restated Restated Unaudited Unaudited Audited Notes £000 £000 £000 FIXED ASSETS Tangible assets 49,082 49,251 48,983 Intangible assets 6 8,124 8,757 5,253 57,206 58,008 54,236 Share of net liabilities in joint - (262) - venture Stocks 2,187 2,404 1,987 Debtors 7 4,570 8,146 4,633 Cash at bank and in hand 3,429 797 171 10,186 11,347 6,791 CREDITORS Amounts falling due within one year (13,431) (15,031) (14,078) Income deferred less than one year (11,301) (9,804) (11,234) NET CURRENT LIABILITIES (14,546) (13,488) (18,521) TOTAL ASSETS LESS CURRENT LIABILITIES 42,660 44,258 35,715 CREDITORS Amounts falling due after more than 8 (17,303) (22,274) (23,987) one year NET ASSETS 25,357 21,984 11,728 CAPITAL AND RESERVES Called up share capital 9 23,449 22,948 22,948 Other reserve 21,222 21,222 21,222 Share premium 14,089 - - Capital redemption reserve 1,857 1,274 1,068 Profit and loss account (35,260) (23,460) (33,510) SHAREHOLDERS' FUNDS 25,357 21,984 11,728 Approved by the Board on 21 February 2006 GROUP CASH FLOW STATEMENT 6 months to 6 months to 12 months to 31 December 31 December 30 June 2005 2004 2005 Restated Restated Unaudited Unaudited Audited £000 £000 £000 RECONCILIATION OF OPERATING PROFIT / (LOSS) TO NET CASH INFLOW FROM OPERATING ACTIVITIES Operating profit / (loss) 74 2,655 (6,197) Depreciation 852 788 1,627 Amortisation 3,430 5,229 7,340 Provision for impairment of intangible fixed - - 1,402 assets Increase in stocks (200) (641) (224) (Increase) / decrease in debtors (12) (2,927) 584 (Decrease) / increase in creditors (608) 240 669 Net cash inflow from operating activities 3,536 5,344 5,201 CASH FLOW STATEMENT Net cash inflow from operating 3,536 5,344 5,201 activities Returns on investments and servicing of (1,206) (1,124) (1,848) finance Capital expenditure and financial (5,215) (3,248) (4,507) investment Cash (outflow) / inflow before use of liquid (2,885) 972 (1,154) resources and financing Financing (8,407) (546) 954 Net proceeds of issued equity share 14,550 - - capital Increase / (decrease) in cash 3,258 426 (200) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Increase / (decrease) in cash in the period 3,258 426 (200) Cash (inflow) / outflow from movement in 8,407 546 (954) debt Non cash movement in debt (113) (160) (373) Movement in net debt in the period 11,552 812 (1,527) Net debt at 1 July (24,891) (23,364) (23,364) Net debt at period end 10 (13,339) (22,552) (24,891) NOTES TO THE FINANCIAL STATEMENTS 1. The interim results for the 6 months to 31 December 2005, 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 which will be used in the preparation of the annual accounts to 30 June 2006. These are consistent with those used in the preparation of the last annual accounts to 30 June 2005 except as noted below. The interim results do not constitute the statutory accounts within the meaning of s240 of the Companies Act 1985. The financial information in this report for the six months to 31 December 2005 has not been audited. The results for the year ended 30 June 2005 are extracted from the accounts filed with the Registrar of Companies, which contained an unqualified audit report. The Group has implemented the presentational aspects of FRS 25 ('Financial Instruments: disclosure and presentation') in the preparation of these interim 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 31 December 2005 are reported £4.86m 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 six months to 31 December 2004 and the twelve months to 30 June 2005 have been restated to reflect the requirements of FRS 25 and the Companies Act. 2. TURNOVER 6 months to 6 months to 12 months 31 December 31 December to 30 June 2005 2004 2005 Unaudited Unaudited Audited £000 £000 £000 Turnover comprised: Professional football 15,213 19,147 31,432 Multimedia & communications 5,801 11,303 16,604 Merchandising 9,629 6,499 10,060 Stadium enterprises 1,528 1,274 2,536 Youth development 868 758 1,536 33,039 38,981 62,168 Number of home games 15 16 28 3. NET INTEREST PAYABLE 6 months to 6 months to 12 months 31 December 31 December to 30 June 2005 2004 2005 Payable as follows on: Restated Restated Unaudited Unaudited Audited £000 £000 £000 Bank Loans and Overdraft 661 570 1,294 Preference Shares 261 278 545 Convertible Preferred Ordinary Shares 113 214 428 Total 1,035 1,062 2,267 4. 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. 5. (Loss) / earnings per share has been calculated by dividing the (loss) / earnings for the period by the weighted average number of Ordinary Shares in issue 33,724,872 (2004: 30,797,810). Diluted earnings per share as at 31 December 2004 has been calculated by dividing the earnings for the period by the weighted average number of Ordinary Shares, Preference Shares and Convertible Preferred Ordinary Shares in issue, assuming conversion at the balance sheet date, and the full exercise of outstanding share purchase options in accordance with FRS 22. As at December 2005 and June 2005 no account was taken of potential conversion or share purchase options, as these potential ordinary shares were not considered to be dilutive under the definitions of the applicable accounting standards. 6. INTANGIBLE ASSETS 6 months to 6 months to 12 months 31 December 31 December to 30 June 2005 2004 2005 Unaudited Unaudited Audited Cost £000 £000 £000 At 1 July 38,445 48,561 48,561 Additions 6,552 1,990 2,340 Disposals (10,048) (6,464) (12,456) At period end 34,949 44,087 38,445 Amortisation At 1 July 33,192 36,529 36,529 Charge for the period 3,430 5,229 7,340 Provision for impairment - - 1,402 Disposals (9,797) (6,428) (12,079) At period end 26,825 35,330 33,192 Net Book Value at period end 8,124 8,757 5,253 7.DEBTORS The reduction in the level of debtors from 31 December 2004 of £3.58m is primarily a result of a reduction in amounts receivable in respect of TV and other trading revenues as a result of Celtic not being involved in Champions League European football this season. 8. CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 31 December 31 December 30 June 2005 2004 2005 £'000 Restated Restated £'000 £'000 Co-operative Bank Loan 12,000 18,000 19,500 Non - equity share capital reclassified as debt under FRS 25 due after more than 3,699 4,274 4,487 one year Deferred Income 1,604 - - 17,303 22,274 23,987 Creditors due after more than one year reflect long-term bank loans of £12.0m (2004: £18.0m) drawn down at the end of the period as part of the Company's bank facility of £36.0m and £3.70m (2004: £4.27m as restated) as a result of the reallocation of non-equity share capital from equity to debt following the introduction of the presentational aspects of FRS 25 and £1.60m (2004: £nil) of deferred income. 9. SHARE CAPITAL Authorised Allotted, called up and fully paid 31 December 31 December 2005 2004 2005 2005 2004 2004 Group and Company No 000 No 000 No 000 £000 No 000 £000 Equity Ordinary Shares of 1p 211,699 36,699 81,015 810 30,949 309 each Deferred Shares of 1p 100,244 100,244 100,244 1,002 100,244 1,002 each Non-equity Convertible Preferred Ordinary Shares of £1 20,000 20,000 18,012 18,012 18,012 18,012 each Convertible Cumulative Preference Shares of 60p 19,301 19,301 16,801 10,082 16,801 10,082 each Less reallocated to debt under FRS 25 - - - (6,457) - (6,457) 351,244 176,244 216,072 23,449 166,006 22,948 Following an Extraordinary General Meeting and separate Class Meetings on 23 November 2005, the authorised share capital was increased to £34.70m by the creation of 175m new Ordinary Shares. On 22 December 2005, Celtic plc issued 50m New Ordinary Shares pursuant to its Open Offer and Offer for Subscription at an issue price of 30p per share raising gross proceeds of £15.0m. Following the adoption of the presentational aspects of FRS 25, elements of the Convertible Cumulative Preference Shares and the Convertible Preferred Ordinary Shares were reclassified as debt as noted above. 10. ANALYSIS OF NET DEBT UNDER FRS 25 The impact on the debt position of the Company following the implementation of the presentational aspects of FRS 25 is as follows: 31 December 31 December 30 June 2005 2004 2005 £000 £000 £000 Net debt prior to the implementation of 8,739 17,377 19,503 FRS 25 Balance of non-equity share capital 4,600 5,175 5,388 reallocated under FRS 25 Revised net debt at period end 13,339 22,552 24,891 11. 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. As at 31 December 2005 amounts in respect of such contracts could result in an amount payable of £0.77m of which £0.40m could arise within one year, and amounts receivable of £0.10m of which all could arise within one year. 12. POST BALANCE SHEET EVENTS On 5 January 2006 the registration of Chris Sutton was transferred to Birmingham City FC and on 15 January the loan registration of the Chinese internationalist Du Wei came to an end. Celtic acquired the registration of Scottish under-21 internationalist Mark Wilson on 17 January and signed pre-contract agreements with Scottish internationalists Gary Caldwell and Kenny Miller on 19 and 20 January respectively. On 27 January Celtic extended the contract of Bulgarian international captain Stilian Petrov until at least May 2009, on 30 January the registration of Dion Dublin was acquired until 14 June 2006 and on 31 January Didier Agathe's contract with Celtic was terminated by mutual consent. Celtic plc Directors Brian Quinn CBE (Chairman)* Peter T Lawwell (Chief Executive) Eric J Riley (Financial) Tom E Allison * Dermot F Desmond* Eric Hagman CBE* Brian J McBride* Brian D H Wilson * Secretary Robert M Howat Directors of the Celtic Football and Athletic Company Limited Peter T Lawwell Eric J Riley Kevin Sweeney* John S Keane* Michael A McDonald* * Independent Non-Executive Director Secretary Robert M Howat Football Manager Gordon Strachan This information is provided by RNS The company news service from the London Stock Exchange

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