Rugger Guy looks at the Celtic interims 2021

I’m hugely grateful that my egg-chasing buddy took a quick break from that Six Nations thingy to look over the Celtic interim results.

As ever with these posts I’m merely the publisher.

What follows now is way above my paygrade.

See you on the other side:

 

Phil, I have carried out a financial review of the interim results of Celtic plc, “Celtic” for the six months to 31 December 2020.

The interim results are a 16-page report which compares with 50 pages plus when the full-year results are published.

Consequently, the results do not have a full set of notes and balance sheet details,   so there is not sufficiently detailed information to do as thorough a  review as is the case with year-end results. However, unsurprisingly there is an unqualified audit report and no issues regarding “going concern “ given the strength of the balance sheet and strong liquidity base of Celtic.

In order to comment on the results, I will split out the commentary into the following sections.

 

1. Putting the interims in context.
2. A comparison with the full-year results and last year’s interims,  both on the profit and loss account and liquidity and cash flow.

3 Outlook and commentary on challenges facing Celtic.

 

Putting the interims in context.

 

When I carried out a  review of the full-year results of Celtic for the year to 30 June 2020, the football club had cash net of borrowings of almost £29m ,  made a profit on player trading of over £24m, had an operating loss of £300k and a cash outflow in the year of £12m. These results included the effect of Covid for 3.5 months. In my summary I suggested that the club may be forced into player sales in the current year to offset likely trading losses and that Covid may depress the realisable value of players should the next European campaign prove to be a failure and yield substantially lower revenues. Downsizing or accelerating the number and value of player sales may be required to balance the books.

The interim sales did not reflect any player sales or significant downsizing in the period to 31 December by the club, although subsequent to this, one sale and one loan of first-team squad has taken place. I suspect there will be more sales activity to follow.

 

 Comparison with full-year and last year’s interims.

 

Revenue was down 23.7% at £40.7m, I will look at the revenue mix shortly.

Losses from trading was £300k which compares with a profit of £7.1m in last year interims.

Profit on player trading was £1.0m vs £23m last year.

Overall loss before tax in the 6 months to  31 December was £5.9m versus a profit of £24.4m last year.

On liquidity,  net cash at bank was £19.7m vs £32.9m last year. Net cash at the end of full years trading at 30  June last year was £28.6m, so it is normally the case that cash outflows are a  feature of the second half, primarily because of less European revenue and normally fewer games. Player trading can alter cash balances depending on the timing of receipts. It should be noted that in the full-year results last year, Celtic also had an operating loss of £0.3m  which compared with an operating profit of £11.5m in the previous year. Cash balances were reduced further by £12m. The trend is normally your friend and given that we will have  full-year impact of  Covid versus 3.5 months last year, we will see a  further deterioration in cash balances and operating losses before player trading.

 

A more detailed breakdown of revenues shows where the challenges lie.

 

Football and stadium revenues £12.6m vs £27m.

Multimedia and commercial      £13m vs £15.1m

Merchandising revenues          £15.1m vs £11.2m

Total interim revenues              £40.7m vs £53.3m

 

The shortfall is clearly down to lack of fans in the ground and European failure but the merchandising contribution is a very nice positive with strong supporter assistance.

The liquidity of Celtic still remains strong, £19.7 net cash plus unused facilities of £13m, so there are no immediate cash flow worries. Working capital is deficient by £4.4m vs a surplus of £18m last year but Celtic are in a net receivables position from player trading. I am informed also that Frimpong was sold for some £11m post the interims date and there may also be a fee of around £6m for Ntcham if his loan is converted to a sale.

 

Outlook and challenges facing Celtic.

 

I am conscious that I have quoted interim results comparisons together with full year numbers and apologise if you are overwhelmed by the numbers that I have quoted.

However, there are a number of key points arising and some serious challenges facing Celtic.

 

– Covid has clearly impacted the football club on a  number of fronts. The chairman has conceded correctly that there has been a prolonged value destructive impact. The football club cannot give any guidance on full-year numbers.

– In my opinion, there will be increased trading losses in the second half before player trading, because revenue shortfalls although mitigated to some extent by furlough relief will persist.

– Season ticket sales are critical to the club, otherwise, there will be substantial downsizing coupled with more aggressive player trading. An offset could possibly be financial assistance from the chairman.

– The model of being a self-sustaining club will be seriously challenged by the lack of on-field success and the possibility of a downturn in season ticket renewals.

– Celtic spent a  further £13m on player registrations in the 6 months to December, which compares with previous years, but as a result of Covid, I think that the value of squad is likely to have been materially negatively impacted. Football clubs across the board have all had their financial positions seriously weakened, consequently transfer market values will inevitably be lower.

– Celtic have almost £20m in net cash and also £13m of unused facilities available, so short term there are no liquidity issues, but the incoming CEO has a very big job in his hands.

 

Ok, there you have it.

The man clearly knows his stuff.

It has never been seriously contested that Celtic are a financially well-run outfit.

What IS an issue is that the club’s unofficial director of football could not see beyond the Old Firm brand.