Rugger Guy looks at the Celtic accounts 2022

As promised, Rugger Guy came through with his expert analysis of the accounts from Celtic.

The usual caveats are in place, these are his words, and  I am merely the grateful publisher.

See you on the other side.

Phil

As per your request to review the accounts of Celtic plc “Celtic”, I will summarise the main positive and negative trends and discuss the prospects and challenges for Celtic.

Once more, the published summary of results does not constitute full-year accounts. This year, in particular, there are no extensive notes to the accounts, no post balance sheet events section, nor is there any commentary on any potential contingency items should they exist. In order to carry out the most comprehensive analysis, these items need to be read in full.

However, as has been the case for several years, the audit report is unqualified, nor does it draw any attention to any matters of emphasis. In layman’s terms, yet another clean bill of health.

In the report this year, the chairman refers to almost a full year of trading free of Covid (only 5 matches affected), therefor as well as considering the year in review, it may also be worth considering the 2019 accounts briefly for comparative purpose, interestingly the comparison shows that the results are very similar in many respects.

Trading review

In the year ended 30 June 2022, the main highlights  were as follows:

Group revenues increased 45% to £88.2m

Operating expenses increased 23% to £91.7m

Gains on player sales were £29m versus £9.4m last year.

Profit before tax of £6.1m versus a loss of £11.5m last year.

The net cash balance was £30.2m versus £16.6m last year.

Within these numbers, there are a few things to highlight.

Celtic incurred a  charge of almost £6m for impairment costs. This is essentially a charge that the directors, in conjunction with the football manager, have decided is necessary to write down the true value of some players in which their worth is considered to be lower than that shown in the balance sheet. Very prudent, in my opinion, as you very rarely see this in most football accounts.

Operating costs once more continue to be greater than revenues. Celtic, as commented on by the chief executive, have invested once more in the infrastructure. As well as players which will be dealt with separately, the football club has invested further in medical, sports science, the academy and the training centre in Lennoxtown.

The big positive, as has historically happened, is that the gain on player sales of £29m versus £9m last year is the catalyst and backbone of such investment. Either player trading or European success is necessary to break even and provide the necessary resource to grow the club further. Celtic spent £38.4m in player acquisitions this year versus £13.5m last year. It appears that the board has backed the manager in the quest for domestic and European progress and also in the prospect of further positive player trading.

Revenues in all divisions, football and stadium operations of £42.8m versus £20.8m, merchandising £24.9m versus £22.6m and multimedia of £20.5m versus £17.3m, show the continuing improvement in driving the revenue base. However, the football and stadium operations increase clearly shows the covid effect.

That is why I think it is useful to look at the results of Celtic for 2019 to have a more meaningful comparison.

Revenues in 2019 were £83.4m , now are £88.2m.

Operating expenses were £86.9m  now are £91.7m

Gains on player sales were £17.7m  now are £29m

Acquisition costs of players were £6.2m now £38.4m

Profit before tax was £11.3m, now £6.1m

Year-end net cash was £28.6m now is £30.2m

 

You can see that the pre covid results of 2019 are in many respects very similar.

Profitable, dependent on player trading and very healthy bank positions.

 

Cash flow

The cash flow of Celtic remains very strong. In the current year, gross cash balances grew by £12.4m, and the year-end balance was £31.8m. However, as accepted and highlighted by the chairman, the closing balance was helped by the release of season tickets issued later in the summer. The increase in payables and deferred income(season tickets) contributed £12.3m. Nevertheless, it is very clear that the current cash balance is very healthy.

 

Balance sheet.

Total assets of £178m grew by £33m in the year.

Celtic made further investment in players of more than £38m during the year and made four further additions post-year end, two loan deals and two outright. Celtic also prudently wrote down the value of the squad by about £6m to reflect the fact that certain players have underperformed relative to their current expected value. Working capital (current assets less current liabilities) shows a deficiency similar to last year of some £5m. The carrying value of players in the balance sheet has doubled to £35m, and given the apparent perceived success in player purchases, this puts the football club in a potentially strong position for future player development and trading. There remain large balances to be received and paid for football players but the management track record in player trading is excellent.

 

Prospects.

In all the many years that I have carried out a review on the financial results of Celtic, a number of things stand out.

The influence of European football revenue remains the critical lever in deciding whether Celtic need to be active in player trading in order to balance the books and sustain squad development. Historically, when European revenues are low, player trading becomes a more prominent and important lever. In the current year, the chief executive draws attention to a changing European landscape. Celtic qualified for the champions league in the current year. Consequently, revenues should be bolstered significantly. The directors have authorised investment probably in excess of £40m as a result of this and hoping to improve the squad. In 2024, both the champions league and Europa league will have a minimum of 8 games rather than 6 and media rights will grow significantly. It appears squad value is in a very healthy state, aided enormously by the current football manager Mr Postecoglou.

Also, the financial strength of football clubs participating in European competitions is being monitored more closely by UEFA. Celtic continues to remain one of the strongest financial football clubs.

In summary, the outlook remains good. Clearly, the investment in squad and infrastructure has increased the operating costs of Celtic, but player trading and success in Europe remain the key challenges to sustaining progress.

 

Ok, there you go. Take that on board as you see fit.

One item of Rugger Guy news is that this might be his last, certainly his penultimate offering.

A new work project means that the time that he has given to us so freely just will not be available to him anymore.