Interims, execution variables and ‘Let me put this clear’ Sturgeon

Celtic’s interims for the 6 months to 31 December 2020 reveal revenue down 23.7% while operating costs dropped 12% on the corresponding period a year earlier. This resulted in a small operating loss of £278k (2019: £7.061m profit).

The amortisation charge (newbies: it’s how player transfer fees are recorded in accounts) was up marginally to £6.583m (2019: £5.874m), but the biggest change anywhere on the accounts was in player sales: this season at £993k against £23.021m a year earlier.

A drop in revenue of only £12.647m reflects the high level of season ticket sales and long-term commercial deals the club has with its partner organisations. Even if ticket sales soften next season (they may or may not), the most valuable commercial contracts will continue to perform.

The £23m gain on player sales from a year earlier was overwhelmingly made up from the sale of Kieran Tierney to Arsenal. This season, Celtic chose not to transform Odsonne Edouard or several others, into gold, while pursuing a tenth successive title. This plan will not deliver, but even looking back through the prism of these accounts, the alternatives were less attractive. Odsonne and the other principle saleable assets remain under contract at the end of this season and we can expect one or more to leave.

Cash balance on 31 December was £19.7m; down from £32.9m (and helped by money coming in for Tierney) but not for 25 years has it been more important to have money in the bank than now.

My ready reckoner puts the operating loss for the entire season at close to £23m. This level of losses (close to where Newco are in normal times) is not sustainable, but I am not going to extrapolate as this season has too many unique factors.

The January sale of Jeremie Frimpong (£11m minus Man City cut) will begin to offset our losses but after amortisation and other non-operating expenses are taken into account, I still expect a comprehensive loss for the year in excess of £20m.

Cash balance will be nearly wiped in the months ahead, but notes with the interims forecast we will remain in the black, a surprise for me. Working on the very strong assumption that Odsonne will not extend his contract, his likely sale in the summer will hopefully generating substantial working capital.

When football clubs start getting things wrong they have a tendency to compound their problems with dangerous over-corrections. David Murray is the morality tale for this after reacting to Rangers run of successive titles stopping at 9, with a recruitment drive that saw annual losses of £35m and a regard for tax affairs that ultimately led to liquidation.

The appetite for corrections, both from the outgoing chief exec Peter Lawwell, and the incoming Dominic McKay, will be significant. Neither will want another season like this. There are many ways of getting it wrong; getting it right will take the judgement of Solomon across the handover period.

Although the finances have taken a hit, we have strong fundamentals to work with: impressive commercial contracts, a huge fan base, a reliable credit history and stable ownership. Everything else is just about execution variables.

Red card.

When Boli Bolingoli broke lockdown rules in August, Nicola Sturgeon postponed Celtic’s (and Aberdeen’s!) forthcoming games. She laid it on the line for football, “Let me put this as clearly as I can in language that the football world will understand: consider today to be the yellow card.  The next time it will be the red card, because you will leave us with absolutely no choice.”

Since then she declined to comment when Newco players broke the same rules, although permitted her PR to issue a statement congratulating the club on a swift response (no swifter than Celtic’s). She subsequently grabbed the limelight and used innuendo to grandstand against Celtic when her Government had already approved the club’s plans.

“Let me put this as clearly as I can”, Nicola Sturgeon has no intention of treating Celtic and Newco equally. She will keep her red card in her pocket in reaction to Newco’s latest infringement, like the Ayrshire official she is.