CELTIC PLC — Earnings Release 2018

Sep 19, 2018

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RNS Number : 3111B

Celtic PLC

19 September 2018

Celtic PLC

Results for the year ended 30 June 2018

SUMMARY OF THE RESULTS

Operational Highlights

·    Winner of the Scottish Domestic "Double Treble" and our seventh consecutive SPFL Premiership title

·    Qualified for the UEFA Champions League group stages for the second consecutive season

·    Finished third in the UEFA Champions League group stage, qualifying for the round of 32 of the Europa League

·    32 home matches (including the Scott Brown Testimonial) played at Celtic Park (2017: 31)

Financial Highlights

·    Group revenue increased by 12.1% to £101.6m (2017: £90.6m)

·    Operating expenses including labour increased by 14.1% to £87.1m (2017: £76.3m)

·    Gain on sale of player registrations of £16.5m (2017: £2.3m)

·    Acquisition of player registrations of £16.6m (2017: £13.8m)

·    Profit before taxation of £17.3m (2017: £6.9m)

·    Year-end cash net of bank borrowings of £36.1m (2017: £17.9m)

·    Year-end net cash, net of debt and debt like items, of £27.0m (2017: £13.4m)1

1net cash, net of debt like items, is represented by cash net of bank borrowings of £36.1m (2017: £17.9m) further adjusted for other debt like items, namely the net player trading balance, other loans and remuneration balances owed to certain personnel at the balance sheet date.

For further information contact:

Celtic plc
Ian Bankier, Celtic plc	Tel: 0141 551 4235
Peter Lawwell, Celtic plc
Iain Jamieson, Celtic plc

Canaccord Genuity Limited, Nominated Adviser
Simon Bridges	Tel: 0207 523 8000

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

CHAIRMAN'S STATEMENT

These results, which declare record sales revenue of £101.6m (2017: £90.6m) and a profit before taxation of £17.3m (2017: £6.9m), reflect a financial year in which everything went well. 

On behalf of the Board I congratulate Brendan Rodgers, his staff and the players on making history for a second successive year, achieving a historic "Double Treble", a seventh consecutive League Championship and consecutive qualifications for the group stages of the UEFA Champions League.   Everything that happens on the pitch is supported across the Club and I also congratulate the executive management team and all the staff at the Club. 

The Board considers that the Group's proven strategy of investment in football operations, whilst maintaining a self-sustaining financial model, has provided a stable platform for the success enjoyed in the year under review.  This approach remains entirely appropriate for us, as we seek to continue to deliver football success and, in turn, shareholder value. 

The year-end cash net of bank borrowings was £36.1m (2017: £17.9m), which equates to a net funding position of £27.0m (2017: £13.4m) when adjusted for debt and debt like items (as defined in the Summary of the Results). This allows the Board to plan for the unexpected and manage the immediate disappointment of failing to qualify for the Group Stages of the Champions League. 

In my last annual report I referred to our vulnerability to the growing financial power of a number of key constituencies within the European Game.  These circumstances are unchanged and we remain watchful of events that unfold. Through Peter Lawwell's continued involvement in the Board of the European Club Association, the Club Competitions Committee at UEFA and the Professional Football Strategy Council of UEFA, the Club and the game in Scotland are well represented in this very important arena. 

During the year, we made prudent and considered investments in our infrastructure at Celtic Park, including the completion of a new playing surface to suit the manager's desired style of play, new LED floodlighting to comply with the UEFA elite requirements and an updated sound system. Celtic Park's reputation as one of the foremost football arenas in the world, with our supporters recognised as the best in the world by FIFA, is something we can all be proud of. 

The Club continues to support the important work of Celtic FC Foundation and we all share the same sense of pride in the generosity of Celtic supporters, which the Foundation harnesses to help so many people at home and abroad.  It is often said that Celtic is a club like no other and the efforts of Celtic supporters and the Foundation is the best example of that.

I thank all of our supporters, shareholders, sponsors, partners and colleagues for their contribution to another successful year for the Club.  We will continue to work together to develop our club for the long term.

Ian P Bankier                                                                                                                                                 

19 September 2018

Chairman

CHIEF EXECUTIVE'S REVIEW

Each year, our key football objective is success in all three domestic competitions and in the UEFA Champions League.  Building on the remarkable Invincible season last year, the Club made history again this year by winning the "Double Treble" for the first time in Scottish football history.  Added to that, the team qualified for and performed well in the group stages of the UEFA Champions League, competing with two of the strongest teams in the world and qualifying for the last 32 of the UEFA Europa League.  I congratulate Brendan, his staff, the players and everyone at the Club for these remarkable achievements. 

The Club recognises that success on the pitch leads to success off the pitch, which is why the Board is committed to investing in our football operations.  Our ambition remains to create a world class football club.   Our success on the pitch this year has allowed us to commit, not only to fees for the transfer of player registrations (£16.6m, rising from £13.8m in 2017), but also to player, football management, coaching, recruitment, medical, performance, sports science and the youth academy costs.  Total labour costs in 2018 increased by £7.1m, from £52.2m in 2017 to £59.3m (14%), largely due to increases in the football department.  This has allowed the Club to retain key football personnel including Kristoffer Ajer, Kieran Tierney, Calum McGregor, Tom Rogic and Leigh Griffiths on long term contracts.

We continue to search the world for talented players to play the Celtic way, such as Odsonne Edouard who joined the Club for a Club record transfer fee.  Player recruitment and development continues to be fundamental to the Club.  Our objective is always to bring players to the Club who will improve the squad.  Given the quality of our existing squad that is a challenging task, made more difficult by hyper-inflation in transfer fees and player salaries in the market.  Nevertheless, our objective is to invest everything that we can into the football operation without putting the Club at risk.

For season 2018/19, everyone at the Club was disappointed not to qualify for the Group Stages of the Champions League.  As we shared the successes of the last two seasons, we share in that disappointment, but given the Club's strategy over many years we have financial reserves to rely upon as we continue to look to the future with ambition and optimism.

Our long term strategy enables us to continue to invest in player retention, player recruitment, stadium infrastructure and everything that is needed to develop the Club for future generations and to continue to deliver success.  We have an excellent first team squad and in the Youth Academy we have the next generation of exciting young players such as Mikey Johnston, Karamoko Dembele and many others, all of whom are eager to follow in the footsteps of Kieran Tierney, James Forrest and Calum McGregor in becoming Champions League players for Celtic Football Club. 

In closing I would like to record my continued appreciation for our Club captain, Scott Brown, who celebrated his Testimonial Season during the year.  Scott has served Celtic brilliantly over the past decade. He has been a fantastic Celtic captain, doing so much for the Club on and off the pitch in this role. Scott's dedication and commitment is an inspiration to everyone at the Club as we work to deliver success for the Celtic support.

Peter Lawwell                                                                                                                                                             

19 September 2018

Chief Executive   

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Note	2018 £000		2017 £000
CONTINUING OPERATIONS:
Revenue	2	101,573		90,639
Operating expenses (before intangible asset transactions and exceptional items)	2	(87,083)		(76,329)
Profit from trading before intangible asset transactions and exceptional items		14,490		14,310
Exceptional operating expenses	3	(4,141)		(1,526)
Amortisation of intangible assets		(8,768)		(7,546)
Profit on disposal of intangible assets		16,454		2,279
Operating profit		18,035		7,517
Finance income		216		204
Finance expense		(980)		(824)
Profit before tax		17,271		6,897
Income tax expense	5	(1,848)		-
Profit and total comprehensive income for the year		15,423		6,897
Basic earnings per Ordinary Share for the year	6	16.47p		7.38p
Diluted earnings per Share for the year	6	11.72p		5.46p

CONSOLIDATED BALANCE SHEET

		2018		2017
		£000		£000
Assets
Non-current assets
Property, plant and equipment		58,265		56,332
Intangible assets		20,963		13,927
Trade receivables		4,397		-
		83,625		70,259
### Current assets
Inventories		2,407		2,414
Trade and other receivables		21,261		12,284
Cash and cash equivalents		42,563		24,505
		66,231		39,203
Total assets		149,856		109,462
Equity
Issued share capital		27,132		27,107
Share premium		14,720		14,657
Other reserve		21,222		21,222
Accumulated profits/ (losses)		9,860		(5,563)
Total equity		72,934		57,423
Non-current liabilities
Borrowings		6,250		6,450
Debt element of Convertible Cumulative Preference Shares		4,208		4,232
Trade and other payables		10,302		5,940
Provisions		2,309		1,543
Deferred income		86		115
		23,155		18,280
Current liabilities
Trade and other payables		27,005		10,435
Current borrowings		300		304
Provisions		2,442		658
Deferred income		24,020		22,362
		53,767		33,759
Total liabilities		76,922		52,039
Total equity and liabilities		149,856		109,462

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital	Share premium	Other reserve	Capital reserve	Retained earnings	Total
	£000	£000	£000	£000	£000	£000
Equity shareholders' funds as at 1 July 2016	24,316	14,611	21,222	2,781	(12,460)	50,470
Share capital issued	1	46	-	-	-	47
Reduction in debt element of convertible cumulative preference shares following conversion	9	-	-	-	-	9
Transfer from capital reserve	2,781	-	-	(2,781)	-	-
Profit and total comprehensive income for the year	-	-	-	-	6,897	6,897
Equity shareholders' funds as at 30 June 2017	27,107	14,657	21,222	-	(5,563)	57,423
Share capital issued	1	63	-	-	-	64
Reduction in debt element of convertible cumulative preference shares following conversion	24	-	-	-	-	24
Profit and total comprehensive income for  the year	-	-	-	-	15,423	15,423
Equity shareholders' funds as at 30 June 2018	27,132	14,720	21,222	-	9,860	72,934

CONSOLIDATED CASH FLOW STATEMENT

		2018		2017
	Note	£000		£000
Cash flows from operating activities
Profit for the year		15,423		6,897
Income tax expense	5	1,848		-
Depreciation		1,977		1,664
Amortisation of intangible assets		8,768		7,546
Impairment of intangible assets		214		287
Reversal of prior period impairment charge		-		(64)
Profit on disposal of intangible assets		(16,454)		(2,279)
Loss on disposal of property, plant and equipment		-		198
Net Finance costs		764		620
		12,540		14,869
(Increase) / decrease in inventories		7		(525)
(Increase) in receivables		(6,142)		(687)
Increase in payables and deferred income		17,378		2,435
Cash generated from operations		23,783		16,092
Tax paid		(707)		-
Net Interest paid		(47)		(95)
Net cash flow from operating activities		23,029		15,997
Cash flows from investing activities
Purchase of property, plant and equipment		(3,461)		(2,737)
Purchase of intangible assets		(10,645)		(9,889)
Proceeds from sale of intangible assets		9,821		11,382
Net cash used in investing activities		(4,285)		(1,244)
Cash flows from financing activities
Repayment of debt		(200)		(200)
Dividend on Convertible Cumulative Preference Shares		(486)		(498)
Net cash used in financing activities		(686)		(698)
Net increase in cash equivalents		18,058		14,055
Cash and cash equivalents at 1 July 2017		24,505		10,450
Cash and cash equivalents at 30 June 2018		42,563		24,505

NOTES TO THE FINANCIAL STATEMENTS

1.         BASIS OF PREPARATION

The financial information in this preliminary announcement has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards as adopted for use in the EU (IFRSs) but does not include all of the disclosures that would be required under IFRSs. The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 30 June 2017 and are those which will form the basis of the 2018 financial statements.

2.         REVENUE

		2018 £000		2017 £000
The Group's revenue comprised:
Football and Stadium Operations		43,587		37,571
Merchandising		17,717		16,479
Multimedia and Other Commercial Activities		40,269		36,589
		101,573		90,639

3.         EXCEPTIONAL OPERATING EXPENSES

The exceptional operating expenses of £4.14m (2017: £1.53m) can be analysed as follows:

Exceptional operating expenses comprised	2018 £000		2017 £000
Impairment of intangible assets and other prepaid costs	511		287
Reversal of prior period impairment charges	-		(64)
Onerous employment contracts	3,549		1,004
Compromise payments on contract termination	81		299
	4,141		1,526

The impairment of intangible assets, and the reversal of impairment charges, relate to adjustments required as a result of management's assessment of the carrying value of certain player registrations relative to their current market value.

Onerous employment contact costs result from a situation where the committed costs under that contract are assessed as exceeding the economic benefits expected to be received by the Group over the term of the contract.

Settlement agreements on contract termination are costs in relation to exiting certain employment contracts.

4.         DIVIDEND ON CONVERTIBLE CUMULATIVE PREFERENCE SHARES

A 6% non-equity dividend of £0.51m (2017: £0.51m), was paid on 31 August 2018 to those holders of Convertible Cumulative Preference Shares on the share register at 28 July 2018. A number of shareholders elected to participate in the Company's scrip dividend reinvestment scheme for the financial year to 30 June 2018.  Those shareholders have received new Ordinary Shares in lieu of cash.  No dividends were payable or proposed to be payable on the Company's Ordinary Shares.

During the year, the Company reclaimed £nil (2017: £0.02m) in respect of statute barred preference dividends in accordance with the Company's Articles of Association.

5.         TAX ON ORDINARY ACTIVITIES

The provision for corporation tax as at 30 June 2018 is £1.14m (2017: nil) which reflects a tax charge of £1.85m with payments of £0.70m made in the year. There are no tax losses carried forward (2017: £7.64m) and the available capital allowances pool is approximately £10.50m (2017: £9.52m). These estimates are subject to the agreement of the current and prior years' corporation tax computations with H M Revenue and Customs. 

6.         EARNINGS PER SHARE

	2018		2017
	£000		£000
Reconciliation of earnings to basic earnings:
Net earnings attributable to equity holders of the parent	15,423		6,897
Basic earnings	15,423		6,897
Reconciliation of basic earnings to diluted  earnings:
Basic earnings	15,423		6,897
Non-equity share dividend	573		577
Reclaim of statute barred non-equity share dividends	-		(19)
Diluted earnings	15,996		7,455
	No.'000		No.'000
Reconciliation of basic weighted average number of ordinary shares to diluted weighted average number of ordinary shares:
Basic weighted average number of ordinary shares	93,663		93,403
Dilutive effect of convertible shares	42,803		43,041
Diluted weighted average number of ordinary shares	136,466		136,444

Earnings per share of 16.47p (2017: 7.38p) has been calculated by dividing the profit for the period of £15.4m (2017: £6.90m) by the weighted average number of Ordinary Shares of 93.7m (2017: 93.4m) in issue during the year.  Diluted earnings per share of 11.72p (2017: 5.46p) as at 30 June 2018 has been calculated by dividing the profit for the period by the weighted average number of Ordinary Shares, Convertible Cumulative Preference Shares and Convertible Preferred Ordinary Shares in issue, assuming conversion at the balance sheet date, if dilutive.

7.         ANNUAL REPORT & FINANCIAL STATEMENTS

Copies of the Annual Report & Financial Statements together with the Notice and Notes of the 2018 AGM will be issued to all shareholders in due course.

The financial information set out above does not constitute the Company's statutory financial statements for the years ended 30 June 2018 or 30 June 2017. The Independent Auditor's Reports on the statutory financial statements for 2018 and 2017 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The statutory financial statements for 2017 have been filed with the Registrar of Companies and those for 2018 will be delivered to the Registrar of Companies in due course.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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