A £22.9 million plunge in profits at Celtic is undoubtedly eye-catching, in a financial year during which the club won the Scottish Premiership and Scottish Cup and enjoyed greater participation fees from the UEFA Champions League.
The Glasgow football club, in its latest accounts published this week, underlines inflationary pressures – which are reflected in a big rise in the operating expenses line. This increase in Celtic’s costs in the year to June 30 reflects in part higher salaries for the playing squad as well as the effect of the broader UK inflationary environment on overheads.
Celtic also flags challenges posed by the fact that “domestic media rights have been unable to keep pace with the media rights environment of…competitor markets and football industry inflation in general over recent years”. This is by no means a new phenomenon – it has been a major issue for big Scottish clubs for decades and was talked about much going back to the 1990s – but this does not make it any less of a challenge.
In spite of a rise in revenue to £124.58 million in the year to June 30, from £119.851m in the prior 12 months, Celtic’s pre-tax profits dropped sharply to £17.825m from £40.697m.
Nevertheless, with exceptional items playing a major part in this fall, this represents a very solid and most resilient performance amid the various challenges and pressures underlined by Celtic, which highlighted the fruits of its financial strategy.
The biggest single factor in the drop in profits is the absence of £13.5m of non-recurring “other income” which had been received in the year to June 30, 2023.
Celtic’s annual report for the 12 months to June 2023 shows this “other income” came from “a combination of compensation received following the departure of [former manager] Ange Postecoglou and a business interruption insurance recovery in relation to Covid-19, with the two items mentioned being one-off in nature and typically non-recurring”.
There was also a significantly lower profit from player transfers in the year to June 2024 than in the prior 12 months.
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The latest accounts show that the “profit on disposal of intangible assets”, the line in the accounts detailing the overall financial impact of such transfers, was £6.637m in the year to June 30, 2024. In the prior 12 months, the profit on disposal of tangible assets was £14.441m.
This represented a fall of £7.804m in such profits between the two financial years, feeding straight through to the bottom line.
And Celtic’s operating expenses jumped to £105.394m in the 12 months to June 30, from £95.432m in the prior financial year. The £9.962m increase in this cost line is the second-biggest individual factor in the decline in Celtic’s pre-tax profits in the year to June 30, eclipsed only by the absence of “other income” as a driver and having a greater effect than the decline in profits from player transfers.
(Figures above in £000s)
Detailing the rise in expenses, chairman Peter Lawwell says in his statement on the accounts: “We also invested higher sums into the men's team compared to the prior year in the form of salaries. In addition, we have experienced a rise in overhead costs driven by the high inflationary environment in which the business has operated over the last year.”
It is important to bear in mind when looking at the decline in Celtic’s profits for the year to June 30 that, as the club outlined in a statement to the London Stock Exchange on August 6, earnings were “significantly higher than previous expectations”, partly on the back of winning the domestic double.
The club said on August 6: “Celtic has enjoyed a strong on-pitch performance in the 2023/24 football season, having won the domestic double. In addition, it has enjoyed a successful year in generating gains from player trading. As a result of such gains and a strong end to the season from a footballing perspective, Celtic now expects earnings for the year ended 30 June 2024 will be significantly higher than previous expectations, which were formed before the conclusion of the season and prior to certain player disposals.”
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The increase in revenue at Celtic reflects “several factors”, Mr Lawwell notes in his statement on the accounts, “including higher participation fees in the UEFA Champions League in season 2023/24, when compared to the previous season, alongside stronger retail performance in the year”.
Celtic progressed to the group stages of the UEFA Champions League in the 2023/24 season, achieving four points.
The increase in the club’s overall revenue was achieved even though the number of home matches played at Celtic Park in the year to June 30, at 24, was down from 26 in the prior 12 months.
The club booked £269,000, under “exceptional operating income”, in the form of “compensation for player salaries”, with this item detailed as “recovery of labour costs as a result of players being injured while on international duty”.
This income is relatively small, however, in the context of the overall movement in profits.
Celtic highlights how much it has spent on players over the three years to June 30, and up to the end of this summer’s transfer window.
Mr Lawwell declares that “as a result of this period of sustained investment”, Celtic’s “current squad carries the highest value…in the club's history, by a considerable margin”.
He notes that, further to the investment in player registrations of £13m in the prior financial year ending June 30, 2023, the club “made significant investment by committing an additional £16.6m in the year under review”.
Mr Lawwell observes that this took Celtic’s total spend over the three financial years to June 30, 2024, to £68m.
He adds: “Since the year-end, and up to the closure of the transfer window on 30 August 2024, we have invested a further £31.2m into player registrations, including transaction costs.”
And Mr Lawwell observes in this context that, over the summer transfer window, Celtic “twice broke the club's previous record transfer”.
The chairman highlights his belief in the accounts that, “notwithstanding the domestic success we have enjoyed and the establishment of Celtic as a regular European football participant, it is important that we do not deviate from our strategy, which has been successful over many years, based on maintaining a self-sustaining financial model”.
He observes that this involves targeting Champions League qualification each year along with introducing young players into the team, either from the academy or through recruitment, “with a view to developing them and helping them to progress their careers”.
However, in this context, he highlights the challenges arising from the media rights environment in Scotland, declaring: “This is not without its challenges as domestic media rights have been unable to keep pace with the media rights environment of our competitor markets and football industry inflation in general over recent years. This means that securing the best players is more challenging and we must work harder than ever to bring success. Our strategy has been crucial to the domestic success of recent years, and it is one your board intends to maintain.”
Noting a raft of activity in the summer 2024 transfer window, Mr Lawwell said: “We have acquired the permanent registrations of Kasper Schmeichel, Viljami Sinisalo, Paulo Bernardo, Adam Idah, Arne Engels, Auston Trusty and Luke McCowan and the temporary registration of Alex Valle. We permanently transferred out the registrations of Hyeon-gyu Oh, Sead Haksabanovic, Matt O'Riley, Michael Johnston, Yuki Kobayashi, Ben Siegrist and Tomoki Iwata. We also temporarily transferred out the registrations of Gustaf Lagerbielke and Hyeokkyu Kwon.”
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Chief executive Michael Nicholson, for his part, notes in the accounts: “Player trading is a key aspect of our strategy both for performance and financial sustainability.”
He declares that the year ended June 30 was “successful on and off the field of play”.
Celtic’s revenue from “football and stadium operations” dipped to £49.971m in the year to June 30, from £51.483m in the prior 12 months.
Its revenue from merchandising rose to £30.089m in the 12 months to June, from £29.072m in the prior year.
And its revenue from multimedia and “other commercial activities” rose from £39.296m to £44.52m.
Celtic had cash of £77.2m at its June 30 financial year-end, up from £72.3m 12 months earlier.
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