Celtic’s interim accounts for the six months to 31 December 2018 were published yesterday. Income was down £21m on the corresponding period last season, to £50.015m, largely as a consequence of not qualifying for the Champions League group stage.
There was a corresponding fall in operating expenses, down £4m to £43.823m, as Champions League bonuses were not earned. The relationship between operating expenses and income is important for any business. For the period, Celtic were able to pay current level of wages and still produce a £6m operating surplus. This figure will be negative for the second half of the season, but operating expenses and income will not be hugely misaligned by the end of the season.
This six-month turnover of £50m is just £2m shy of the 12 month figure the last time we failed to reach the Champions League group stage, in season 2015-16. While Champions League revenue remains hugely important to the club, the reality is that increased revenue from season ticket sales, and significant increases in merchandising, commercial and multimedia activities, allows Celtic to carry its significantly higher wage bill without jeopardising the club.
The final six months of last season, which saw one Europa League tie and a run to the Scottish Cup Final, contributed £30m revenue. A comparable trading period this season will see annual revenue reach £80m.
For some perspective, that is higher than revenue in any Champions League season before Brendan Rodgers’ arrival, and only £10m short of the £90m revenue in Brendan’s first treble winning season. Without Champions League income, this figure would be a fantasy as recently as 18 months ago. There has been a transformational change in the robustness of the Celtic business model in that period.
The Dembele transfer to Lyon pushed the player sales revenue to £17.563m, all of which dropped to operating profit, which was £18.968m. Profit after tax was £15.233m and money in the bank (net of any loans etc.) was a very healthy £37.7m.
Since I started financial analysis on CQN in 2004 I said that Celtic spend all monies received over any business cycle you care to mention – usually taken to task on this point in seasons of surplus, then forgotten about in seasons of loss, but it has always held true. Always.
What does this mean for a club with £37.7m in the bank, which can increase its annual revenue by 30% with Champions League qualification? It means we have the money to buy central defenders and a right back in the summer, while maintaining current wage levels and not selling key players. This does not guarantee we will get the right players in, or that any of them will earn a Champions League bonus. These are the challenges.
Challenges they may be, but such problems are the fantasies of every pretender to our domination of Scottish football. Celtic have more money in the bank than any other surviving football club have turned over in a year in their history (by £5m). If others try to keep up with Celtic they will reach a familiar end. This is the established normal and it is not going to change.