Rugger Guy looks at Celtic’s year end accounts for 2021

I knew that my oval ball chasing buddy would not let me down. Despite him having a very demanding week at work late last night an email dropped into my inbox.

The usual caveats are in place, what is in italics is not my work or analysis.

I’m hugely grateful to Rugger Guy for taking the time out from a busy schedule to give so freely of his time and expertise.

Ok here we go:

 

Phil

As per your request to review the accounts of Celtic plc “Celtic”, I will summarise the main findings, discuss the main positives and negatives and summarise  the financial challenges facing Celtic. It feels a little like Groundhog Day and before I  review the details of the accounts for the current year to 30 June 2021, it is perhaps useful to revisit my summary relating to last year’s numbers.

 

“I  think that the football club will be forced into player sales in the current year  to 30 June 2021 to offset operating losses, because of high cost base and given the Covid effect this may depress the realisable value of players. Should European competition prove to be a failure and yield lower revenues, this will place more pressure in the need to sell players, notwithstanding the £30m leeway that the club has.”

 

The first key thing to report is that the published numbers of Celtic are 12 pages long and not the usual 50 pages plus report which will be filed at companies house in due course. Same as last year. Also the audit report once more is clean and indicates that no matters need to be brought to the attention of shareholders.

Regarding the results for Celtic for the year to 30 June 2021 the main highlight are as follows. 

Group revenues were down 13.4% to £60.8m

Operating losses before player trading and exceptional items were £13.6 m vs £10.3m last year.

Profit on player sales in the year was £9.4m compared to £24.2m in the previous year.

Year-end cash balances net of borrowings was £16.6m  vs £18.2m last year.

One further point worthy of highlighting is that the results are enhanced by inclusion of  £5m other income.   I do not know the makeup of this as there are not many supporting notes to accompany the results.

 

Within the operating results, there are a few items worth highlighting.

Although revenues reduced from £70.2m to £60.8m  merchandising revenue increased substantially from £15m to £22.6m, the supporters in conjunction with Adidas offering have supported the club in a big way. Also, the multimedia and other commercial revenues showed a small reduction of £2m to £17.3m one more very commendable. The big shortfall is Covid related and European failure. Notwithstanding season ticket receipts despite an empty stadium, revenues fell by £15m to £20.8m. There should be a substantial pick up in this area in the current season.

Exceptional costs of £630,000 were incurred in the termination of players contracts.

Looking at cash flow,  one of the key metrics is cash used in the operations of club and once more the outflow was large at £11.5m a continuing trend because if you look at cash and cash equivalent for the last three years, they are as follows:

30 June 2019 £34m

30 JUNE 2020 £22.4m

30 June 2021 £19.5m

Borrowings were only £2.8m at the year-end and the balance sheet remains very healthy,

Working capital, in general, remains healthy, and in particular at 30 June 2021, there are net receivables from player trading, that is money is due from player sales less player costs. The club also continues to have an unused credit facility of £13m from the cooperative bank.

 

Post balance sheet events.

Although there are limited notes to the accounts, one of the key areas affecting cashflow and operating costs is the player trading that took place after the year-end.

Phil kindly sent me a summary of the activity and this makes for interesting reading.

Celtic signed 12 players and they cost in the region of £19m. Celtic sold 5 players for £35m, in addition, 3 players in which the loan ended and returned to home clubs.8 other players were either released or sent out on loan. So in conclusion, not only have Celtic bolstered their balance sheet, I suspect that the football operating costs will see a net reduction based on the composition of the squad as I am informed highly paid players have left the club. 

So trying to put the overall financial results in context.

The main positives are as follows.

The revenues have held up well giving the Covid challenging environment. Merchandising and the other commercial activities have performed exceedingly well and revenues should increase substantially as long as European revenues are no worse than last year.

The balance sheet is strong, bolstered by the retention of credit facility.

Suspect that the operating cost base will continue to be trimmed and should the Covid situation not deteriorate again, I suspect that Celtic may be able to make an operating profit. Also the football club is likely to make a large profit from player trading unless major changes take place in the January transfer window.

The main negatives from a financial perspective are as follows.

Cash outflows continue and although the football club remains in a very healthy position, flexibility in the squad and other club investment will continue to be challenging and bad player investments could prove costly.

Operating expenditure remains high and the club at present need to rely on player trading to bolster the coffers, I suspect the board will actively try and reduce the costs in this area. 

Overall conclusion.

I think the results were actually not too bad in the context of a very challenging Covid year and poor yield in European competition. I suspect that when other clubs report, Celtic’s financial performance albeit boosted by £5m other income will compare favourably. I am not qualified to pass comment on whether the quality of the football squad has improved but the balance sheet is strong and has been enhanced by player trading post the year-end.

 

Ok, I hope that you got something out of that.