Annual Report and Accounts
Published: 16/11/2005, 07:00
Charlton Athletic PLC 16 November 2005 16 NOVEMBER 2005 CHARLTON ATHLETIC PLC (the "Company") ANNUAL REPORT 2005 CHAIRMAN'S STATEMENT On behalf of the board of Charlton Athletic plc, I present the Annual Report for the year ended 30thJune 2005. The 2004/5 season was the football club's centenary season and we celebrated it with the team competing at the top of English football. On the football field it was very much a season of highs and lows. At no time during the season was the club's Premiership status under any threat but for the second consecutive year the form of the team dipped in the last third of the season at a time when, once again, qualification for European competition seemed a realistic possibility. The team eventually finished in 11th position with 46 points. Despite the disappointing end to the season, we can again be pleased with the team's overall performance and the achievements of Alan Curbishley and his staff. Since gaining promotion to the FA Premier League in 2000, the club has not finished lower than 14th position and is now widely recognised as an established Premiership club. FINANCIAL SUMMARY In this financial year the Company recorded a turnover of £40.7m that produced an operating profit of £0.2m after interest but excluding income from player sales. Profit from the sale of players contributed £1.1m giving a net profit for the period of £1.3m. This turnover was lower than that achieved in the previous financial year due mainly to lower broadcast revenues received. During this financial period the Company invested £10.6m in the cost of acquiring players and a further £1m on capital expenditure on developments at The Valley and other infrastructure improvements. Financial highlights 2005 2004 £m £m Turnover 40.7 42.6 Operating profit before amortisation of player registrations 4.7 4.6 Operating profit/(loss) after amortisation and interest 0.2 (0.5) Profit from player sales 1.1 11.6 Net Profit 1.3 11.1 This financial year was the first in the new three year contract with BSkyB for the sale of the broadcast rights in the United Kingdom. The value of these rights has fallen in real terms compensated, to some extent, by an increase in the revenues received from the sale of the overseas rights. This reduction when combined with a lower finishing position in the League than achieved last year contributed to a fall in overall broadcast income of 10% to £23.5m. The club featured in eleven live matches compared with five in season 2003/4, however the new method of allocating revenues to these matches resulted in these revenues being broadly the same. Broadcast income now accounts for 58% of the Company's total turnover, which demonstrates how important this source of revenue is to the Company's ongoing financial performance. Match day revenues increased by 12% to £11m as a result of an increase in season ticket prices and higher attendance figures supplemented by income from three FA Cup home fixtures. I am pleased to report that our other match day commercial activities continued to improve and develop, in particular the performance of our stadium bars and food outlets and sales of our match programme. The overall increase is particularly pleasing as our ticketing revenues remain one of the lowest in the FA Premier League. The average attendance for home matches at The Valley was 26,378 which represents 97% of the available capacity and a small improvement on the previous season. The club launched a centenary shirt designed by our kit sponsors, Joma, and this shirt was worn at our home match against Newcastle United in October 2004. We achieved record sales for this shirt during the year and it has become very popular with our supporters. The home and away shirts for the season were launched in the 2003/4 financial year and so these additional sales were welcome and helped to maintain our retail revenues at similar levels to the previous year. Our conference and banqueting non-match day business consolidated its revenues this year through the hire of our facilities in the north and west stands at The Valley for conferences, weddings and parties. Our reputation for high levels of service and customer care is generating significant levels of repeat business and we once again hosted a public enquiry, this time related to the proposed Thames Gateway Bridge linking Beckton to Thamesmead. I am confident we will see growth in this area of our business in the coming year. Our reported overhead costs excluding player amortisation were £38.7m and did not materially change this year, however when the effect of one-off costs in 2003/4 is adjusted for there was an overall increase in overheads of 8%. The Company made a very significant investment in the playing squad in order to develop a first team squad capable of competing successfully in the Premiership. We secured the services of Stephan Andersen, Talal El Karkouri, Bryan Hughes, Francis Jeffers, Danny Murphy and Dennis Rommedahl. The total reported in the financial statements of £10.6m also includes the costs of acquiring Darren Bent from Ipswich in June 2005 just before the end of this financial year. The profits recorded for the sale of players was earned mainly from the sale of Claus Jensen to Fulham and also income related to appearances under earlier player transfer agreements. Our club sponsors, all:sports, completed their third year of sponsorship in this financial period, but unfortunately having entered this the final year of the agreement they went into administration in September 2005. We continue to work with the administrators who have now announced that the majority of the business will be sold to JD Sports, a competitor of all:sports. There are a number of options open to us which we continue to review. I must thank Joma who, in addition to producing the popular centenary shirt, have now produced two excellent new playing strips for this season, as well as incorporating further design and fabric improvements to the training kit following discussion with the team management and the players. Greenwich Council is not only a sponsor of the club but also an active partner, co-operating with us in a number of other areas, including our community activities. I must stress how important this relationship is to the continuing development of the football club both in terms of our capital developments at The Valley and the training ground and through our community, health and education initiatives. I will also thank Axis Europe plc, Gallions Housing Association, Greenwich Community College, Greenwich Leisure Limited, Ladbrokes, London Leisure College, Paddy Power and T Mobile, all of whom provide their support financially and through a range of community based projects. We continue to receive support from many other companies and individuals too numerous to mention individually through sponsorship, advertising and patronage of the various hospitality suites on a match day and they too are deserving of our thanks. Our sponsors and all of our commercial partners remain important contributors to this football club. FOOTBALL REPORT I will again highlight the creditable finishing position of the team in 11th place, a real achievement in comparison to other clubs with superior resources who finished below us in the Premiership last season. The team recorded a total of 12 wins, 10 draws and 16 defeats. This achievement demonstrated once again the tactical and motivational abilities of Alan Curbishley and we continue to enjoy a working relationship that is the envy of many other Premiership chairmen. I would also like to acknowledge the valuable contribution and support given to Alan by Mervyn Day, Keith Peacock and Glynn Snodin, his coaching staff, and in addition Wayne Diesel and his medical team. We should not forget the backroom staff at the training ground and at The Valley who provide support for all aspects of our football activity. As I have reported, during the summer of 2004 there were significant additions to the first team squad with the signings of Stephan Andersen, Talal El Karkouri, Bryan Hughes, Francis Jeffers, Danny Murphy and Dennis Rommedahl and it undoubtedly took some time for these new players to settle into the football club. In every football season there are matches that remain in the memory. For me, our home and away victories over Tottenham Hotspur stand out, particularly the dramatic 3-2 win at White Hart Lane. Equally outstanding were two victories against Everton, a team that eventually qualified for the Champions League and was enjoying their most successful season for many years. There is no doubt in my mind that our most dramatic match was left to the final day of the season. Any of the four teams facing relegation to the Championship had the opportunity to avoid this fate on this last day. Our late equaliser in a 2-2 draw against local rivals Crystal Palace in front of a capacity crowd at The Valley meant that they were relegated with Southampton and Norwich City to the Championship and West Bromwich Albion survived. Our reserve team won the FA Premier Reserve League South for the fourth time in eight seasons and for the second consecutive year. The team then participated in the first play-off final implemented that season between the southern and northern league champions and a crowd of 7,102 saw a strong Manchester United team win 4-2 at The Valley to collect the inaugural trophy. Under the leadership of our former player and joint manager, Steve Gritt, our youth academy is continuing to develop talented players for the first team squad. Lloyd Sam emerged as a regular member of the first team squad, joining Kevin Lisbie, Jonathan Fortune, Osei Sankofa and Barry Fuller, who are all products of our youth system. Lloyd Sam made his first team debut in that final home match against Crystal Palace and Alan could not have chosen a more drama filled occasion to introduce a young player into the Premiership. Our Under 18 team finished runners up in the FA Premier Academy League for the second consecutive season and four players from that team have subsequently signed professional contracts - Nathan Ashton, Rob Elliott, Darren Randolph and James Walker. A number of academy scholars broke into the reserve team and established themselves as key figures but perhaps the highlight of the Under 18 season was their success in winning the prestigious Nerja Cup in southern Spain. This took place in December 2004 and to indicate the quality of the tournament there were teams from Barcelona and Real Madrid participating. The women's section had another memorable season under the astute management of Keith Boanas. The first team followed up their Community Shield success in August 2004 by capturing perhaps the most prestigious piece of silverware in the women's game - the FA Cup. Eniola Aluko's decisive strike against Everton at Upton Park saw the club claim the trophy for the first time in the club's history. The team were also beaten finalists in the Premier League Cup and runners up in the Women's Premier League. During the season, our annual disappointment in the two principal cup competitions continued as we exited the Carling Cup in the third round, losing 2-1 at home to Crystal Palace. We did reach the fifth round of the FA Cup after wins against Rochdale and Yeovil respectively but then in the major upset of that round, Championship side Leicester City secured a 2-1 win at The Valley. When you consider the priorities of the clubs at the top of the Premiership, the domestic cup competitions continue to offer us the most realistic opportunity for success. At the end of the season Paul Konchesky and Simon Royce left the club and our former player Graham Stuart, who contributed much to the club during his time with us, retired from professional football. I would like to thank all three players for their contribution to our club's success during their playing careers here. Ten players joined the club in summer 2005 and I welcome Darren Ambrose, Darren Bent, Jay Bothroyd, Goncalo Brandao, Thomas Mhyre, Alexei Smertin, Gonzalo Sorondo, Jonathon Spector and Kelly Youga and hope that they will all contribute to future success at our club. In addition we welcome back Chris Powell who spent five years with the club before moving for a brief spell to West Ham United. The club benefits from a strong relationship with its supporters and to continue to have more than 26,000 supporters regularly attending The Valley for our home matches is an endorsement of what we are trying to achieve at the club. Our supporters remain a key element of our current success and remain among the best behaved in English football. The Valley Express initiative, launched during the season, provides a dedicated coach service to home matches from across the south east of England, opening up opportunities for both existing and new supporters to attend matches easily at The Valley and for some matches in this current season up to 2,000 people used the service. There is significant planned investment in new housing and infrastructure improvements across the south east of England and this will be a key element of our marketing strategy for the continuing growth of our supporter base in the next few years. INDUSTRY PROSPECTS I can only see the Premiership continuing to be dominated by those clubs with the largest financial resources and it may well be that with the apparent resources at the disposal of Chelsea, they are likely to be the dominant force in Premiership football for many years to come unless a similar level of investment is made in other Premiership clubs. It is not in the interest of any club in the top flight that the competition becomes predictable because that will in time have an effect both on the level of supporter and corporate interest in the League. The lack of widespread competition for the Premiership title and the spread of matches across three days with a variety of kick off times is something we must debate now as this could have an adverse effect on future attendance figures. The consequences may have a significant effect on future commercial development at the majority of the Premier League clubs. At our club we have seen a reduction of some 1,500 season ticket holders during the summer of 2005 and similar situations exist at other clubs. No business can afford to ignore its customers and that is something that football must heed if it is to avoid a sharp wake up call. We have already seen a number of matches televised live this season where there were large gaps around the stadia and if this pattern continues there is a genuine risk that there will be an effect on the broadcasting revenues that all clubs receive. The European Commission continues to involve itself in the affairs of the FA Premier League in a very public and high profile manner. The League tenders the collective broadcasting rights of the twenty Premiership clubs in a fair and transparent manner. The process has the consent and support of all clubs and no broadcaster is precluded from tendering. It cannot be right that the Commission should seek to challenge our right to enter into genuine commercial agreements for the sale of our broadcast rights because they do not like the outcome. We must use every means at our disposal to protect the game in this country from such outside interference. I have often written of the need for a redistribution of finances within football on a more equal basis and my view on this remains unchanged. I am encouraged by the fact the FA Premier League has established an Attendance Working Group, on which Peter Varney has been invited to sit, which will consider this and other issues which impact upon attendances. CONCLUSION Our Company is heavily reliant on broadcasting revenues to maintain its commercial performance, as is the case for the majority of Premiership clubs. Particularly relevant in this is the finishing position of the team and the number of live televised matches we are featured in during the season. It remains vital therefore that we continue to focus on being successful in the Premiership and to develop and increase our match day revenues. Our football club has one of the smaller stadium capacities when compared to our competitors. Your board took the decision to increase season ticket prices for the 2005/6 season and at the same time maintain a discounted pricing structure for existing season ticket holders. It was disappointing to see a 1,500 reduction in season ticket holders for the current season but we have to date significantly increased the number of tickets sold on a match to match basis which is encouraging. The regeneration of our local area and the south-east region provide us with a unique opportunity to expand our support and commercial operations. There are 500,000 homes being built in the Thames Gateway region, plans are now in place for the development of the Greenwich Peninsular and the Millennium Dome, and the construction of a new bridge connecting the east and south of London has been approved by central government and is now the subject of public consultation. The plans for the expansion of The Valley stadium continue. We have now received a planning consent from Greenwich Council to develop the east stand and south east quadrant and to raise the capacity from 27,000 to 31,000. We have also made it clear that it is our ultimate intention to develop the south stand and south west quadrant to provide us with a completed modern stadium complex with a capacity of 40,000. The success of our Valley Express initiative and the continued expansion of our community schemes throughout Kent and the surrounding areas have given your board optimism that the expansion of the stadium will be justified. However, we shall not proceed with the east stand development until it is financially prudent to do so. In July 2005 the Company raised £5.5m though the issue of 9.2m ordinary shares to both existing shareholders and a new investor. Commitments to purchase these were received before the year end at 60 pence per share. One of the most significant investors, Derek Chappell, subsequently accepted an invitation to become a member of both the Company and the football subsidiary boards. Derek is a long standing supporter of Charlton Athletic football club and a season ticket holder since the late 1960s. His business acumen and experience will make him a valuable addition to the board. I will also place on record my sincere appreciation for the ongoing financial support provided by Gideon Franklin, Sir Maurice Hatter, John Humphreys, David Sumners, Steven Ward and Bob Whitehand. Football businesses are not easy to manage and we are fortunate that we have staff at all levels whose commitment and hard work is a tribute to them and which is essential as we continue to develop the club. I would like to thank our chief executive, Peter Varney, and the deputy chief executive, Nigel Capelin, both directors of the football club, for their contribution, as well as all the staff that operate at The Valley, the training-ground complex, the offices in Bexleyheath and elsewhere. Many other people give their time and effort to support the operations of the club and the organisations associated with it and to them we also extend our gratitude. In this we must not forget those individuals involved in running the many supporters branches, so important to the football club, and in particular Sue Townsend, our Supporters' Representative, who continues to represent the views of our supporters at board level. In our centenary year I think it is wholly appropriate that I pay tribute to the valued support, advice and wise counsel of all the directors who serve on the Company board, the football subsidiary board and the executive committee and without whom our club would not be enjoying the status that it currently does. I particularly thank Martin Simons, David Sumners and Robert Whitehand who serve on the executive committee and who give their expertise and time to the management of our business. In addition to those I have already mentioned I thank Roger Alwen, Greg Bone, Richard Collins, Michael Grade, David Hughes, Michael Stevens, Derek Ufton and David White. Your board remains determined to maintain the excellent image we have earned in the wider football and business community and whilst we want to bring continued success to the club we will not compromise on our basic principles and core values. We want to be a club that stands for those things that are good in our national sport, and to serve and be a credit to those communities from which we draw our support. Richard Murray Chairman CHARLTON ATHLETIC PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT 12 months to 30th June 2005 Operations Excluding player Player 12 months to amortisation amortisation 30th June and trading and trading Total 2004 £'000 £'000 £'000 £'000 Notes TURNOVER 2 40,714 0 40,714 42,606 Operating expenses 3 (38,771) (4,135) (42,906) (42,605) Exceptional items 5 2,763 0 2,763 (40) Operating profit/(loss) 4,706 (4,135) 571 (39) Profit on disposal of players 0 1,137 1,137 11,659 Profit/(loss) before interest and taxation 4,706 (2,998) 1,708 11,620 Net interest payable (348) (502) Profit on ordinary activities 1,360 11,118 before taxation Taxation charge 0 0 Profit for the year 1,360 11,118 Earnings per share 9 2.5 pence 20.2 pence All amounts derive from continuing operations. CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES 2005 2004 £'000 £'000 Profit for year 1,360 11,118 Unrealised gains on revaluation of freehold 2,571 0 property Total recognised gains for the year 3,931 11,118 CHARLTON ATHLETIC PLC CONSOLIDATED BALANCE SHEET At 30th June At 30th June 2005 2004 £'000 £'000 Notes Fixed Assets Tangible fixed assets 6 37,545 35,309 Intangible assets 10,863 4,685 48,408 39,994 Current Assets Stocks 98 152 Debtors 5,588 7,580 Cash at bank and in hand 13,253 10,488 18,939 18,220 Current liabilities Creditors falling due within one 7 (23,324) (15,655) year and deferred income Total assets less current liabilities 44,023 42,559 Creditors falling due after one year (6,777) (8,774) Grants and deferred income (5,470) (5,940) 31,776 27,845 £'000 £'000 Capital and reserves Called up share capital 27,485 27,485 Share premium account 2,019 2,019 Revaluation reserve 9,093 6,547 Profit and loss account (6,821) (8,206) 31,776 27,845 CHARLTON ATHLETIC PLC CONSOLIDATED CASH FLOW STATEMENT 12 months to 12 months to 30th June 2005 30th June 2004 £'000 £'000 £'000 £'000 Cash flow from operations Operating profit/(loss) 571 (39) Depreciation 1,306 1,260 Amortisation of player registration costs 4,135 4,677 (Profit) on sale of fixed assets (0) (8) Release of deferred income (468) (470) Decrease/(increase) in stocks 54 (62) Decrease/(increase) in debtors 1,992 (5,255) Increase/(decrease) in creditors 2,268 2,586 Net cash inflow from operations 9,858 2,689 Returns on investment and servicing of finance Interest received 296 173 Interest paid (641) (733) Interest element of finance lease payments (3) (3) Net cash outflow (348) (563) Capital expenditure and financial investments Payments to acquire players' (10,632) (913) registrations Proceeds on sale of players' 1,456 11,718 registrations Payments to acquire tangible fixed (951) (755) assets Refund of long term season tickets (2) 0 Proceeds on sale of tangible fixed assets 0 8 Net cash outflow (10,129) 10,058 Net cash (outflow)/inflow before (619) 12,184 financing Financing activities Cash received for future share issue 5,525 0 Loan repayments (2,116) (2,024) Capital element of finance lease payments (25) (19) Net cash inflow/(outflow) from financing 3,384 (2,043) Increase in cash 2,765 10,141 NOTES 1. The financial information relating to the Company does not constitute statutory accounts within the meaning of Section 240 (5) of the Companies Act 1985 (as amended). Statutory accounts in respect of the year ended 30 June 2005, which received an unqualified audit opinion, will be filed with the Registrar of Companies in England and Wales. 2. Analysis of turnover: Year ended Year ended 30 June 2005 30 June 2004 £'000 £'000 Television and broadcast 23,481 26,204 Ticketing and match day activities 11,008 9,844 Marketing and sponsorship 3,944 4,267 Retail and other 1,227 1,183 Conference and banqueting 1,054 1,108 40,714 42,606 3. Analysis of operating expenses: £'000 £'000 Staff costs 28,888 29,913 Depreciation 1,306 1,260 Amortisation 4,135 3,637 Hire of plant and machinery 166 173 Other operating lease rentals 198 244 Grants released (109) (109) Auditors remuneration :audit 31 31 :non audit 24 17 Other operating charges 8,267 7,439 42,906 42,605 4. Analysis of staff costs: £'000 £'000 Wages and salaries 25,739 26,793 Social security costs 2,981 2,959 Other pension costs 168 161 28,888 29,913 5. Exceptional item: The exceptional item relates to gross amounts receivable from insurance claims for retired injured players. 6. Tangible fixed assets: Freehold properties were valued as at 30th June 2005 by Latham Yeomans, Chartered Surveyors, on the basis of existing use using the depreciated cost method of valuation in the case of The Valley stadium and existing use value in the case of other properties. This resulted in a revaluation surplus of £2,571,000. The original cost of freehold land and buildings amounts to £31,354,942. Freehold land of £6,138,186 has not been depreciated. 7. Other creditors: Other creditors includes £5,525,000 received in respect of irrevocable undertakings for the issue of ordinary shares completed on 8th July 2005 8. The board does not recommend the payment of a dividend. 9. Earnings per ordinary share have been calculated by dividing the profit for the year by the weighted number of ordinary shares in issue for the year. Year ended Year ended 30 June 2005 30 June 2004 £'000 £'000 Profit for the year 1,360 11,118 Weighted number of shares in issue 54,969,293 54,969,293 Earnings per share 2.5 pence 20.2 pence 10. The Annual Report and Accounts for the year ended 30 June 2005 will be sent to shareholders during December 2005. From that time further copies will be available from the company's Nominated Advisor and Broker, Teather & Greenwood Limited, Beaufort House, 15 St Botolph Street, London, EC3A 7QR. This information is provided by RNS The company news service from the London Stock Exchange