This is a fascinating time in Celtic's history.
Our tribulations in the 1990s, when the club went five years without reaching a cup final, six without winning a trophy and ten years, ten years, without winning the league, ended with spectacular success after the turn of new millennium, but the subsequent success had a worrying undercurrent. Celtic were losing money, cumulative losses of £48m in seven years was not a sustainable strategy.
The financial plan changed resulting in a £15m profit being reported last month, the largest in the club's history.
Celtic now threaten to do what only a few years ago seemed impossible; produce impressive results on and off the park. But this may bring new challenges and dangers to the club. Profit attracts profiteers.
Will we see profits retained for the development of the club, or will dividends absorb the spare cash? Will Celtic remain in the hands of Celtic fans? Can the club retain its distinctive identity, compete for talent and points against massively wealthy clubs from England and Europe, and do all this while attracting close to 60,000 people to watch them play against teams working on a budget only 5% of Celtic's?
After congratulating him on producing an excellent set of accounts, I asked chairman Brian Quinn how the clubs strategy will change now that it has returned a profit.
"Thank you for your comments on our financial results," said Quinn.
"We are delighted with them, not least because we have been able to combine a record profit with some £20 million of investment in players and infrastructure.
"As I said in my statement accompanying the results, a number of factors went in our favour last year, but you have to take advantage of these circumstances when they arise, and I believe we have done so.
"Rather than these results providing the basis for a change of strategy, they reflect the benefits of a change in strategy adopted three years ago.
"After several years of losses we decided that we could not continue along this path, living beyond our means and going back to shareholders to meet the ongoing expenses of running the club time after time.
"So we devised and adopted a new business plan based on the concept of sustainability - building a financial and physical infrastructure that would deliver players, supporting staff and facilities which would allow us to continue to compete domestically and in Europe, while retaining our financial integrity.
"This strategy was reflected in a five-year business plan, with rolling annual budgets to render the plan operational.
"This allowed the manager to formulate and carry out his own plans for the squad and for the football operations as a whole.
"The budgets are conservative in the assumptions they make about success in European competition, so that if we do not make progress in those competitions it does not have difficult and dangerous implications for us going forward.
"This does not mean that we do not aspire to success, just that we have learned not to build it into our plans.
"So, taking both football and financial results together, the current strategy is working well. We see no reason to abandon it."
When I asked Brian what impact the £15m profit would have on Celtic and specifically the football team he said: "From my previous answer you will understand that we do not run the Club by spending all that we have earned in a given year - or cut back that amount if we make losses.
"We have to look beyond a single year, taking into account commitments that will arise from previous years, the manageable level of debt, intentions to build the facilities and staff needed to keep Celtic healthy off the field and competitive on it.
"Of course, healthy finances give us more freedom to maintain a strong football squad over time and we will do that when the right people become available at the right price - and that includes salaries as well as transfer fees.
"Some players work out better than others and this can alter your budgeting during a season.
"So you have to stay alert and agile during the year to keep things on track - not simply empty your pockets when they have something in them."
As we have discussed on Celtic Quick News many times, the club have been in debt for many years, a condition I would like to see change.
On this, Brian said: "We have no plans to become debt-free at present.
The level of current debt is comfortable.
"Companies of the highest rank commonly manage their affairs by using their bank facilities.
"What you must avoid is slipping into a level of debt that places a real burden on your finances through interest payments and repayment obligations, and therefore limits your freedom of action.
"We have found ourselves in that position before and it is pretty uncomfortable. It is not good business to have to go to your shareholders continuously to meet debt obligations. That is why we have adopted our current strategy."
With the money floating around English football these days, wage inflation is inevitable, I wanted to know how Celtic would respond to this challenge with an SPL budget?
"By looking in a number of ways to compensate for this disadvantage,"
added Quinn.
"By restructuring our scouting set-up; by hiring top fitness coaches; by adopting the innovations in sports science; by focussing the efforts of our reserve squad on graduating to the first team squad, rather than always winning the reserve league - although we have managed to do that too; by providing a top quality training facility at Lennoxtown; and by giving our up-and-coming younger players an opportunity to feature in the first team while still relatively young."
I am not exactly the most frustrated Celtic fan out there, but I do hear from and speak to many, and I wanted to know if Brian and the board knew that fans had expectations of what the club will do with their hard earned season ticket money and some become very frustrated when those expectations are not met, leading to a feeling of disenfranchisement.
"We are fully aware of the feelings of our supporters - we face around 60,000 of them every two weeks, to say nothing about websites, phone-ins and e-mails.
"I find that while they are always looking for improvement, they also recognise that football is a very unpredictable business and unforeseen developments can throw you off track in any given year.
"The important thing is to monitor the trend of the Club.
"We have won five Premier League titles, seven domestic cups and have progressed in Europe in both the Champions League and the UEFA Cup in the last seven years, as well as putting the Club in a healthy condition financially.
"If you stand back for a moment, this is good progress by any standard, and I hope our supporters recognise that."
Empty seats at many games suggest Celtic's SPL-based business model may be fragile.
I have been encouraged by moves in the Balkans to create a regional league and asked if Celtic have an active strategy to explore options for a move to larger league.
"We continue to monitor developments on the subject of the structure of football," said Quinn.
"Noting that a new regime has taken over at UEFA recently.
"At present I see little appetite to make any radical change except, perhaps, in respect of the format for the UEFA Champions League - and we are conscious of the need to keep an eye on our interests there.
"Therefore our current strategy assumes that no significant change to the regular league structure takes place.
"As I have said in the past, we are where we are, and we will continue to make the best of that, which means looking at other opportunities to expand the income base of Celtic, including overseas tours and friendly games."
One of my fears for the club is that becoming profitable attracts a commercial investor, more interested in financial than football objectives.
I asked Brian what the board feel about this prospect.
Quinn said: "Your question makes a false distinction between commercial success and football objectives They go together rather than being in opposition - that is surely the story of the last few years at Celtic Football Club.
"There is no intention whatever of welcoming a bidder for Celtic.
"We have a strong and committed investor base and an excellent management team, headed by Peter Lawwell, which has grown the business of the Club and delivered an excellent financial performance to support the football team.
"Without being in any degree complacent, the board is confident that the business model that we operate is robust."
The new training centre at Lennoxtown, which is due to open towards the end of next month, has clearly been a satisfying project for Brian.
"It will be very close to budget, any overrun being attributable to delays caused by the awful weather we have had this summer.
"The running costs are a matter of commercial confidentiality; but they are very manageable and taken account of in the five-year plan."
I wondered how to ask about dividends, in fact, I wondered if I should ask about dividends.
Most shareholders I meet have no interest in receiving a dividend, but after so many fallow years, a £15m profit might prove tempting?
"The Board decided that our dividend policy should not change despite the return to profitability last year.
"Any retained profit will be added to reserves and made available to continue building the club.
"As investors will know, the 6% Convertible Preference Shares will convert to Ordinary Shares at the end of this month, meaning that the dividend previously paid on these shares will cease, releasing these amounts for the club to use in other ways."
Having questioned Brian on much of the detail of the board's strategy for the club I wondered what their vision was the same as mine.
"Our Board members are experienced business and financial leaders and do not lack in vision for the Club," said Brian.
"It is one of the Key Objectives to compete effectively in Europe each year and, like all other Celtic supporters, we aim to return the Club to a prominent position in that arena.
"At the same time we have to be realistic; the major European leagues command much greater resources than Scottish football can hope to achieve and they can outbid us for the scarce talent available.
"But we intend to keep trying to offset this disadvantage by other means and to continue the process - already well under way - of making Celtic a force in European football."
Running a football club like Celtic, with a need to satisfy shareholders large and small, supporters with disparate views, the manager, sponsors, the league and Uefa, and to do so while being expected to win the league year after year is close to impossible, and is a frequently thankless task.
From speaking to him, it remains very clear that our chairman remains a fanatical Celtic supporter, with the same type of private views on players and forthcoming fixtures as the rest of us – which means they are practically all un-publishable.
I would like to thank Brian for going into so much detail about the board’s plans for Celtic here on Celtic Quick News, and wish him every success in achieving his Key Objectives for the club.
Labels: Finance
