The 18th annual

financial review of
Scottish football*
Season 2005/06

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Table of contents

An introduction by David Glen 1

Part one 3
Profit and loss

Part two 15
Balance sheet

Part three 21
Cash flow

Part four 25
Club 5 year overview

Part five 33
Post balance sheet events

Appendix one 35
The season that was 2005/2006

Appendix two 39
What Chairmen and Chief Executives thought

Appendix three 43
Significant transfer activity
An introduction
by David Glen

Welcome to the 18th annual financial review of the Scottish

football premier league, covering the season 2005/06.

The road to financial stability continues

Despite collectively producing a loss for the year of £9 million,

it is clear that the premier league clubs are continuing to
make strides towards financial stability. The loss of £1m
recorded last year was after taking account of exceptional
gains of £19m arising from the write-off of debt. There has
therefore been a clear improvement in the underlying financial
performance of the league.

Of particular note is the fact that of the 12 clubs, 6 have

reported a profit for the year which is a significant turnaround
from the days when substantial losses were being reported
across all the clubs. Falkirk, Hibs, Inverness, Kilmarnock,
Motherwell and Rangers are all to be congratulated for having
achieved this.

The total wage bill has remained stable at £93m although

9 of the clubs are now showing a wage to turnover ratio of
less than 60% and of them, 6 are less than 50%. Only Hearts
significantly buck the trend with their wage bill more than
doubling to £10m, representing a ratio of 97%.

Net debt has fallen yet again, this year by £23m, and now
sits at £94m. The principal reductions arose at Celtic ( £11m,
as a result of a share issue) and Rangers ( £17m, as a result
of the injection of funds from the JJB licensing arrangement).
Again, the one club to buck the trend was Hearts,
where the net debt rose by nearly £7m to £28m (although this
may now be alleviated somewhat by the sale of Craig Gordon
to Sunderland).

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The road remains rocky

Whilst comfort can be taken from these figures, the financial situation in Scottish
“premier league
football remains fragile and we are not going to see a return to the free spending clubs are
days that marked the early part of this decade. continuing to make
Take Rangers as a case in point. In the 2005/06 season their turnover drove beyond strides towards
the £60m mark, the business generated an operating profit of £4.4m and the net
debt was reduced to under £6m – thanks to a successful run in the Champions
financial stability”
League and the JJB licensing arrangement.

Move forward just 12 months to season 2006/07, the financial results for which
have just been published, and an operating loss of £5.1m arose whilst net increased
to £16.5m. What a difference a season makes, and principally as a consequence of
no Champions League participation.

Similar issues will arise at other clubs, albeit on a different scale, but the above
situation demonstrates the direct impact that success (or lack of it) on the park can
have on a club’s financial situation – the further the progress that is made in cup
competitions, the higher up the league you can climb, the more income you are
going to generate.

Given the uncertainty of success, a financial balancing act has got to be achieved
of establishing a cost base for the club that is low enough to sustain failure but also
high enough to attain success.

5 year overview

I have included a new section this year which plots for each club the key financial
measures of Turnover, Wages, Profit Before Tax and Debt over the past 5 years,
which I think makes for interesting reading.

David Glen
August 2007

The 18th annual financial review of Scottish football August 2007

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Part one
Profit and loss
Profit and loss
Overview

The SPL generated a loss of £9.4m in season 2005/06. In the prior year, a loss of
£1.3m was generated, however this was inflated by debt write-offs totalling £19m
as a result of various clubs exiting administration proceedings.

 The SPL Clubs’ Combined Profit and Loss Account 2006 2005 Movement
  £’mill £’mill %
Turnover 172 168 3%
Wages (93) (94) -1%
Other operating expenses (78) (76) 2%
   
Operating loss before player registrations 1 (3) -128%
Amortisation of player registrations (8) (14) -39%
Impairment on player registrations (0) (1) -71%
Net gain/(loss) on player registrations 4 8 -53%
   
Operating loss (4) (10) -58%
Exceptional debt write-offs 2 19 -89%
Net interest cost (7) (9) -25%
   
(Loss) before and after tax (9) 1 -633%
Source: Statutory Accounts      

The financial results of the SPL clubs have been obtained from their Statutory
Accounts for the year ended 2006.

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The key financial highlights of season 2005/06
are as follows:

• Turnover increased by 3% to £172m (2005: £168m). The Old Firm had mixed
results with Celtic’s turnover falling by 8%, while Rangers broke through the
£60m turnover barrier. Further success was noted at Hearts and Hibernian
whose combined turnover increased by £3.3m

• Total wages decreased by 1% to £93m (2005: £94m).

• Amortisation cost of player registrations decreased by £6m to £8m, with £6.9m

of this cost assigned to the Old Firm (2005: £13m).

• The gain on sale of player registrations related to both Hearts and Hibernian
over the sales of Rudi Skacel and Garry O’Connor respectively. The prior
year gain was attributed to Rangers and arose from the sale of Jean-Alain
Boumsong to Newcastle.

• The exceptional debt write-off of £2m related to the write-off of parent company
debt at Hearts. The prior year balances included an accounting gain of £15m
at Rangers and a £3.5m debt write-off at Dunfermline.

• Total net interest costs reduced by £2m to £7m, which is largely attributed to
the fall in debt levels at Rangers.

Historic Profit/(Loss) Analysis £000’s

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
10000

-10000

-20000

-30000

-40000

-50000

-60000

-70000 Old firm profits/(losses) Other profits/(losses) Total SPL profits/(losses)

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Profit and loss
Turnover

The total turnover of the SPL increased by 3% to £171.9m in season 2005/06 (2005: £167.7m). Over half of all clubs
experienced an increase in turnover during the season, as a result of improved European or domestic runs.

Turnover By Club 2006 2005 2006 2005

£’000 £’000 Increase Increase
Aberdeen 6,772 7,178 -6% 1%
Celtic 57,411 62,168 -8% -10%
Falkirk 3,303 2,008 64% 41%
Dundee United 4,151 5,374 -23% 41%
Dunfermline Athletic 2,905 3,285 -12% -21%
Heart of Midlothian 10,277 8,428 22% 18%
Hibernian 8,706 7,225 20% 24%
Inverness CT 2,742 2,742 0% 106%
Kilmarnock 7,395 6,137 20% 0%
Livingston 3,487 3,953 -12% 8%
Motherwell 3,622 4,043 -10% 36%
Rangers 61,165 55,134 11% -3%

Total 171,936 167,675 3% 21%

Source: Statutory Accounts
Average 14,328 13,973 6% 21%
Average exl/Old Firm 5,336 5,037 1% 21%

Aberdeen Dundee United

Despite their second successive finish in the top half of the
SPL since the split was introduced, Aberdeen’s turnover fell
by 6% to £6.8m (2005: £7.2m). This was largely due to a fall
in average attendance figures across the season and no home
cup draws, which affected broadcasting and ticketing income.
Dundee United’s turnover decreased by £1.2m to £4.2m as
no additional revenue was generated from domestic Cup
competitions as they were knocked out in the early rounds.
In the prior year, Dundee United reached the semi-final of the
CIS Cup and the final of the Scottish Cup.

Celtic  Dunfermline 

Following on from last season, Celtic’s turnover fell once
again by 8% to £57.4m (2005: £62.2m). Despite winning
the SPL and the CIS Cup, Celtic’s failure to progress into the
Group Stages of the Champions League or the UEFA Cup,
after crashing out of the third round qualifiers to Artmedia
Bratislava, significantly impacted turnover.
Falkirk
 
In their first season in the SPL, Falkirk’s turnover increased by
£1.3m to £3.3m due to the additional revenue generated from
broadcasting and ticket sales.
Dunfermline’s turnover reduced for the third consecutive
year to £2.9m. The Pars finished the season once again in
11th spot in the SPL and exited both Cup competitions in
the early rounds thus offering little scope to generate
additional revenue.
Hearts 
 
Despite the lack of European football in the current year,
Hearts increased revenue by £1.9m to £10.3m in 2006.
This can be attributed to improved domestic performances,
finishing 2nd in the SPL and winning the Scottish Cup. This is
the first time the club has broken through the £10m revenue
barrier and with guaranteed European football next year, this
level should be maintained.

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Profit and loss
Turnover
Hibernian  Motherwell
Hibernian’s turnover increased by
20% in the year to £8.7m, due to a
combination of higher attendances,
participation in the first round of the
UEFA Cup and a good run in the
Scottish Cup through to the semi-final.
Inverness Caledonian Thistle
As Inverness Caledonian Thistle filed
abbreviated accounts in the current
year, no information in regard to
turnover was available.
Kilmarnock
 
Improved SPL performances helped
increase turnover at Kilmarnock by
£1.3m to £7.4m after finishing 5th in the
SPL, compared to a bottom half finish in
the prior year (2005: £6.1m).
Livingston
 
Livingston’s turnover decreased to
£3.5m in the season, from £4m in the
prior year. The club was relegated at
the end of the season after posting a
record low points tally of 18.
The 18th annual financial review of Scottish football August 2007
PricewaterhouseCoopers 7
Motherwell’s turnover decreased
by 10% to £3.6m as a result of the
failure to match the run in the CIS Cup
exhibited in the prior year. The club
once again finished in the bottom half of
the SPL.
Rangers 
The progression through to the last
sixteen of the UEFA Champions League
increased Rangers’ turnover by £6m to
£61.2m. In addition, this was the first
year of impact of the JJB licensing deal
entered into in March 2006. JJB paid an
initial consideration of £18m to Rangers
in June, with a guaranteed minimum
annual royalty of £3m in each year of
the license which will last for 10 years.
Additional payments may also be made
to the club if certain turnover thresholds
are achieved. Of the initial consideration
received, £3.5m has been recognised in
the current year.
Profit and loss
Attendance level

The SPL attracted higher crowds Average Attendance   Average Average Utilisation Utilisation
during the 2005/6 season with average by Club Attendance Attendance 2005/06 2004/05
attendance figures up by 5% from the 2006 2005
2004/05 season. The total average
attendance for the season was 193,995 Aberdeen 12,727 13,576 57% 63%
compared to 185,026 in the prior year. Celtic 58,149 57,958 96% 96%
Both Hearts and Hibernian experienced
a significant increase in attendance Falkirk 5,515 3,935 69% 49%
levels rising by 37% and 17% Dundee United 8,197 8,210 58% 58%
respectively, largely as a result of better
Dunfermline 6,260 6,192 50% 52%
on field performances.
Heart of Midlothian 16,767 12,219 93% 69%
The biggest crowd of the season was at
Celtic Park on 15 October 2005, where Hibernian 13,816 11,830 79% 68%
a crowd of 60,100 watched Hearts Inverness CT 5,061 4,067 67% 56%
battle out a 2-2 draw. The smallest
crowd was 2,278 at Almondvale on the Kilmarnock 7,070 5,930 39% 33%
29th April 2006 were Livingston took on Livingston 4,938 5,157 49% 52%
Inverness Caledonian Thistle and were
beaten 1-0. Motherwell 6,250 6,960 45% 51%
Rangers 49,245 48,992 98% 97%
Stadium utilisation also increased
during the year but a third of SPL Totals 193,995 185,026 73% 71%
stadiums remain half empty. Note that Source: Scotprem.com
utilisation figures are based on average
attendance/stadium capacity.

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Profit and loss
Employee costs

Wages to Turnover Ratio Total Wages Total Turnover Wages/Turnover Ratio

  2006 2005 Movement 2006 2005 2006 2005
  £’000 £’000 % £’000 £’000 % %
Aberdeen 4,312 4,636 -7% 7,320 7,678 59% 60%
Celtic 32,490 37,394 -13% 57,411 62,168 57% 60%
Falkirk 1,651 1,365 21% 3,303 2,008 50% 68%
Dundee United 2,825 3,492 -19% 4,151 5,374 68% 65%
Dunfermline Athletic 1,708 2,569 -34% 2,905 3,285 59% 78%
Heart of Midlothian 10,013 4,541 121% 10,277 8,428 97% 54%
Hibernian 3,678 3,326 11% 8,706 7,225 42% 46%
Inverness Caledonian Thistle 1,310 1,310 0% 2,742 2,742 48% 48%
Kilmarnock 3,329 3,512 -5% 7,395 6,137 45% 57%
Livingston 1,230 2,270 -46% 3,487 3,953 35% 57%
Motherwell 2,449 2,404 2% 3,622 4,043 68% 59%
Rangers 27,989 27,303 3% 61,165 55,134 46% 50%
   
Total 92,984 94,122 -1% 172,484 169,348 54% 56%
Source: Statutory Accounts              

Aberdeen Falkirk 

Total wage costs at Aberdeen decreased by 7% to £4.3m
which has resulted in an improvement in their wage to
turnover ratio. The turnover balance used in the computation
of this ratio has been altered to take into account the effects
of the merchandising deal which Aberdeen operates with Just
Sports Pro Club Ltd.
Celtic
Celtic shaved nearly £5m off wage costs during the year
reducing from £37.4m to £32.5m. This was due to a change in
the football management team as the O’Neill era ended with
Gordon Strachan taking the reins. Celtic continue to have the
highest wage bill in the SPL, but given the level of turnover
generated by the club, the wage to turnover ratio remains
manageable at 57%.
As a new entrant to the SPL, Falkirk has one of the lowest
wage bills in the league, however this has increased by 21%
from the prior year to £1.7m. The rise in turnover has negated
this effect as the wage to turnover ratio has reduced from
68% to 50%.
Dundee United
Due to the disposal of higher earning players at Dundee
United, wage costs decreased to £2.8m, a significant
reduction of £0.7m. Despite the improvement in wage costs,
the wage to turnover ratio increased in the year to 68%, due
to the fall in turnover.

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Dunfermline
Due to further reductions in wage costs,
Dunfermline’s wage to turnover ratio
reduced from 78% to 59%. Given the
reduction in turnover this year, the Pars
have done well to shave off a further
£0.9m from costs, which has brought
their wage to turnover ratio in line with
the industry recommended level.
Hearts
Hearts’ wage costs more than doubled
this year from £4.5m to £10m due to
additions made to the playing squad
during the January transfer window
and an improvement in terms offered
to existing players. As a result of
the significant increase in costs, the
wage to turnover ratio has increased
substantially from 54% to 97%. Hearts
now have the highest wage to turnover
ratio in the SPL and without European
progression and continued funding by
Mr Romanov, this is not sustainable.
Hibernian
Despite an 11% increase in wage costs,
Hibernian continues to operate with
the lowest wage to turnover ratio in
the SPL. The 20% increase in turnover
in the year has more than covered
the increase in costs, as the wage to
turnover ratio reduced from 46% to
42% in the year.
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PricewaterhouseCoopers 10
Inverness Caledonian Thistle
As Inverness Caledonian Thistle filed
abbreviated accounts in the current year
no information in regard to wage costs
was available.
Kilmarnock 
 
Kilmarnock reduced wages by 5% in
the year to £3.3m and combined with
the 20% increase in turnover, their
wage to turnover ratio improved from
57% to 45%.
Livingston 
The significant decrease in wage costs
at Livingston has reduced their wage to
turnover ratio to 35% from 57% in the
prior year.
Motherwell
Motherwell’s wage to turnover ratio was
adversely affected in the year due to
the combination of a 10% decrease in
turnover and a 2% increase in wages.
The current year ratio of 68% is up from
59% in the prior year.
Rangers
Rangers’ wage costs remained relatively
stable at £28m (2005:£27.3m). Due to
the increase in turnover during the year,
the wage to turnover ratio improved
from 50% in the prior year to 46%.
Profit and loss
Player registration fees
Exceptional items

Player registration fees

The costs associated with the amortisation of player transfer fees has reduced
during the year to £8m (2005:£14m).

Celtic’s amortisation charge decreased by £2m to £5m as a result of contract

extensions to existing players, offset by charges in respect of new players signed
during the season. The total investment in player registration fees was £8m, with
the most notable additions of Zurawsk (£2m), Nakamura (£2.5m) and Virgo (£1.5m).
Rangers’ amortisation charge also decreased from £5.6m to £1.8m, and £3.9m
worth of additions were made in the year, largely made up £1m spent on Rodriguez
from Monaco and £1.5m on Filip Sebo from Austria Vienna.

Hearts’ charge for the year more than tripled to £0.7m due to the significant transfer
activity in the year.

The gain on the sale of player transfers fell to £4m from £8m in the prior year. This
is made up of small gains recognised by several clubs and a £1m gain recognised
at Hearts due to the sale of Rudi Skacel to Southampton for £1.2m and a £1.5m
gain at Hibernian, largely due to the sale of Garry O’Connor to Lokomotiv Moscow.
The prior year gain was incurred almost entirely at Rangers on the departure of
Jean-Alain Boumsong to Newcastle.

Exceptional items

The £2m exceptional item relates to the forgiveness of loan stock held by Hearts to
UAB Ukio Banko Investicine Grupe. The stock was previously issued to SMG but
transferred to UAB during the year. The prior year exceptional relates to a £15m
gain incurred by Rangers on the release of negative goodwill and a £3.5m loan
write-off by Wood Investment (Scotland) Ltd by Dunfermline.

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Profit and loss
Profit/loss before tax

Net (loss)/profit before tax by club

£’000 2006 2005 Movement
Aberdeen (1,500) (987) 52%
Celtic (4,222) (8,706) -52%
Falkirk 479 (527) -191%
Dundee United (786) (1,177) -33%
Dunfermline Athletic (359) 1,885 -119%
Heart of Midlothian (5,282) (2,728) 94%
Hibernian 2,222 65 3318%
Inverness Caledonian Thistle 219 (102) -315%
Kilmarnock 127 (1,300) -110%
Livingston (468) (413) 13%
Motherwell 123 303 -59%
Rangers 92 12,410 -99%

Total (9,355) (1,277) 633%

Source: Statutory Accounts

The SPL generated a loss after tax of £9.4m, with the main
contributors to the loss being Celtic and Hearts. Half of the
SPL clubs generated a net profit in the year.
Aberdeen
Due to the 6% fall in turnover and relatively stable operating
costs, Aberdeen’s operating losses increased year-on-year.
The total loss for the financial year was £1.5m, which was
up £0.5m from the prior year and included a further £0.1m of
interest charges for additional debt amortisation costs.
Celtic
For the second successive season, Celtic generated an
operating profit despite a reduction in turnover. Total loss
for the year was £4.2m, down by £4.5m from the prior year.
The fall is due to a reduction of £2.2m in the amortisation
charge for player registration fees and reduction of £2.4m in
termination fees for player contracts. Interest payable also
reduced from £2.3m to £1.8m due to reduction in overall
debt levels.
Falkirk
The effects of promotion to the SPL of Falkirk have resulted
in a significant improvement in their financial results as a loss
of £0.5m in the prior year has been replaced by a £0.5m profit
in the current year. The 64% rise in turnover has dwarfed a
slight increase in costs resulting in an overall profit.
Dundee United
Dundee United continued to reduce their overall loss despite
a reduction in turnover in the year. Costs of sales have
decreased by £0.9m largely due to a fall in wage costs, and
financial results have benefited from a £0.4m gain on the
disposal of fixed assets compared to a £0.2m loss in the prior
period. Total loss was £0.8m compared to £1.2m last year.
Dunfermline
Dunfermline generated a loss of £0.4m in the year compared
to a £1.9m profit in the prior year. The prior year’s results
however were boosted by a £3.3m write back of debt. On a
like-for-like basis, operating costs have decreased by £1.4m,
largely due to a reduction in wage costs and further savings
made on interest costs.

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PricewaterhouseCoopers 12
Profit and loss
Profit/loss before tax
Hearts
Hearts generated a loss of £5.3m in the current year; an
increase of £2.6m from the prior year. Despite generating
additional revenue in the year, a gain on sale of player
registration of £1m and a write-back of debt of £2m, the
significant increase in wage costs negated this impact and an
overall loss was recognised.
Hibernian
Hibernian continued to produce a good set of financial figures
and recognised an overall profit for the second year running.
The results for the year were benefited by a £1.5m gain on the
sale of player registrations and a 20% increase in revenue,
resulting in a profit of £2.2m for the financial year.
Inverness Caledonian Thistle
In their second season in the SPL, Inverness Caledonian
Thistle generated a profit of £0.2m in comparison to a £0.1m
loss generated in the prior period.
Kilmarnock
Kilmarnock generated a profit of £0.1m in the current year, the
first positive financial results since 1999. The profit is largely
driven by the increase in turnover generated in the year as
costs have slightly decreased by £0.2m.
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PricewaterhouseCoopers 13
Livingston
In the first year after exiting administration, Livingston posted
a loss of £0.5m. Excluded from the analysis above is a £4.8m
gain recognised in the prior year due to the various debt
write-offs as result of the CVA proceedings. Despite reducing
wage costs by over £1m, the decrease in turnover has caused
the net loss to increase slightly year on year.
Motherwell
For the third consecutive year Motherwell generated a profit,
which was down by more than half from the prior year, of
£0.1m. The reduction in profit is due to the combined effects
of reduced turnover and an increase in costs. Further, the
club received one-off income of £0.4m in relation to the lease
premium relating to the lease of a site for the use of mobile
phone communications.
Rangers
Rangers generated a modest profit of £0.1m due to
the combined effects of increased turnover and lower
amortisation and interest costs. Included in the annual
results was a loss of £3.8m in relation to the discontinued
retail operations, however this was offset by the £3.5m
income recognised on the JJB license agreement. The prior
year profit was affected by the £15m exceptional release of
negative goodwill and £8m gain on player transfers, neither of
which were repeated in the current year.
Part two
Balance sheet

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Balance sheet
Overview

The total net assets of the SPL at the The SPL Clubs’ Combined Balance Sheet Total Total Movement
end of the 2005/06 season was £87.8m,
up by 9% from the prior year (2005: 2006 2005
£80.7m). The current year increase is £’000 £’000 %
principally due to the £15m equity issue FIXED ASSETS
by Celtic in December.
Investments 2,869 2,873 0%
Intangible Assets 19,828 12,969 53%
Tangible Assets 249,894 249,244 0%
TOTAL FIXED ASSETS 272,591 265,086 3%

CURRENT ASSETS
Stocks 3,028 4,994 -39%
Debtors 21,192 16,924 25%
Cash at bank and in hand 31,209 8,316 275%
TOTAL CURRENT ASSETS 55,429 30,234 83%

Creditors: due with one year. (110,436) (89,300) 24%

Net current assets (55,007) (59,066) -7%

TOTAL ASSETS LESS CURRENT LIABILITIES 217,584 206,020 6%

Creditors: due > 1year. (129,818) (125,362) 4%

NET ASSETS 87,766 80,658 9%

Capital and reserves

Called up share capital 45,832 45,004 2%
Share premium account 148,115 132,392 12%
Rangers Bond 7,736 8,512 -9%
Revaluation reserve 87,362 87,551 0%
Capital redemption reserve 1,739 1,068 63%
Other reserves 30,827 30,829 0%
Profit and loss account (233,845) (224,698) 4%
TOTAL 87,766 80,658 9%

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PricewaterhouseCoopers 16
Balance sheet
Net debt

Key balance sheet highlights are noted as follows: Net Assets/  2006 2005
Movement %
Liabilities per Club £000’s £000’s
• Intangible assets increased by £6.9m in the year due
to additional player investment by Celtic, Rangers Aberdeen (235) 740 -132%
and Hearts. Celtic 22,097 11,728 88%

• Cash at bank increased by £23m to £31m, with Rangers Falkirk 3,324 2,804 19%
contributing £23m to the total SPL cash after receiving Dundee United (4,003) (3,730) 7%
an upfront cash payment on the JJB sponsorship
deal. Over half of the SPL clubs now operate with Dunfermline Athletic (8,215) (9,026) -9%
net cash positions.
Heart of Midlothian (11,959) (6,677) 79%

• Eight clubs in the SPL improved their net asset position in Hibernian 4,758 2,369 101%
the year, with the most significant increase noted at Celtic
as a result of the fresh issue of equity. Inverness CT 862 418 106%

Kilmarnock 2,595 2,467 5%

• Net debt decreased by 20% to £93.8m (2005:£116.7m).
The Old Firm contributed to the majority of this decrease Livingston (918) (452) 103%
with Celtic reducing net debt levels by £10.1m and Motherwell 1,305 1,178 11%
Rangers by £17.3m. Hearts, Aberdeen and Livingston
experienced an increase in net debt levels, with Hearts’ Rangers 78,155 78,839 -1%
net debt rising by £6.9m, Aberdeen’s by £1.5m and
Total 87,766 80,658 9%
Livingston’s by £0.5m.

2006% 2005
Analysis of combined SPL Net debt  2006 £’000 2005 £’000 Movement %
of total debt % of total debt
Cash at bank and in hand 31,210 8,316 275%  

Bank Overdraft (17,911) (18,004) -1%  

Net cash/(overdraft) 13,299 (9,688) -237% -14% 8%

Borrowings due within one year (12,512) (3,259) 284% 13% 3%

Borrowings due in more than one year (89,480) (98,364) -9% 95% 84%

Amounts owed under hire purchase (5,110) (5,398) -5% 5% 5%

Net debt (93,803) (116,709) -20% 100% 100%

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 17
Balance sheet
Net debt

Historic debt vs. loss

200,000

150,000

100,000

Net debt £’000’s

50,000

Total SPL profits/losses

-50,000

-100,000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Source of Borrowings                
£’000 Borrowings due < 1 year Borrowings due > 1 year  
HP/
Total Cash
Club External Connected External Connected Finance Net Debt
Borrowing balance
Leases
Aberdeen - - (5,068) (300) (92) (5,460) (5,416) (10,876)
Celtic (901) (164) (15,814) - - (16,879) 2,914 (13,965)
Falkirk 0 - - - - - 926 926
Dundee United - (828) (6,000) (34) - (6,862) (772) (7,634)
Dunfermline Athletic - - (1,000) (3,649) (3) (4,652) (3,151) (7,803)
Heart of Midlothian (9,868) (14,609) (1,155) - (25,632) (2,773) (28,405)
Hibernian (593) (80) (6,587) (1,360) (41) (8,661) 1,827 (6,834)
Inverness Caledonian Thistle - - - (20) - (20) 199 179
Kilmarnock (78) - (8,741) - (88) (8,907) (3,537) (12,444)
Livingston - - - (631) (180) (811) 135 (676)
Motherwell - - - (1,239) (11) (1,250) 862 (388)
Rangers - - (23,273) - (4,695) (27,968) 22,085 (5,883)

Total (1,572) (10,940) (81,092) (8,388) (5,110) (107,102) 13,299 (93,803)

2006% 2% 12% 86% 9% 5% - -14% 100%
2005% 1% 2% 75% 9% 5% - 8% 100%
Source: Statutory Accounts                

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 18
Balance sheet
Net debt

Debt Movement by Club 2006 Net Debt £’000 2005 Net Debt £’000 Movement £’000 Movement %
Aberdeen (10,876) (9,374) (1,502) 16%
Celtic (13,965) (24,891) 10,926 -44%
Falkirk 926 546 380 70%
Dundee United (7,634) (7,354) (280) 4%
Dunfermline Athletic (7,803) (7,933) 130 -2%
Heart of Midlothian (28,405) (21,526) (6,879) 32%
Hibernian (6,834) (9,295) 2,461 -26%
Inverness Caledonian Thistle 179 134 45 34%
Kilmarnock (12,444) (13,025) 581 -4%
Livingston (676) (208) (468) 225%
Motherwell (388) (635) 247 -39%
Rangers (5,883) (23,148) 17,265 -75%

Total (93,803) (116,709) 22,906 -20%

Average per Club (7,817) (9,726) 1,909 -20%
Average per Club (excl Old Firm) (7,396) (6,529) (496) 8%

The fall in net debt during season 2005/06 has continued
the trend of recent years as clubs take additional measures
to reduce their debt burden and experience the benefits
of improved operating results. The current year has been
impacted by the JJB deal at Rangers, the Celtic equity issue
and the impact of the Romanov era at Hearts.
Falkirk
Falkirk are the only club in the SPL to have a positive cash
position with no debt. Funds were raised in the year via a
small share issue and the increase in turnover due to SPL
status has covered costs incurred in the year.

Aberdeen Dundee United

Aberdeen’s net debt increased by 16% to £10.9m in the year
(2005: £9.4m). As in prior years, the increase is due to the
additional usage of overdraft facilities rather than new loans
being drawn down. Post period end the club has secured
further banking arrangements with the Bank of Scotland
involving the sale and leaseback of Pittodrie stadium.
Celtic
As a result of the share issue in December, which was
underwritten by Dermot Desmond, Celtic raised funds of
£15m which has contributed to the 44% fall in net debt in the
year to £14.0m (2005: £24.9m). Further, due to the application
of FRS 25, funds previously classified as equity are now
presented as debt. This has had the effect of increasing debt
by £4.7m in the current year and £5.4m in the prior year.
Net debt levels at Dundee United increased by £0.2m to
£7.6m due to the additional usage of bank overdraft facilities
and further director loans (2005: £7.4m). The majority of the
debt (£6m) is held with the Bank of Scotland, to which Eddie
Thompson acts as personal guarantor.
Dunfermline
Dunfermline reduced its net debt by 2% to £7.8m. The
reduction is due to the repayment of £0.4m of connected
party debt as the usage of bank overdraft facilities has
increased by £0.2m to £3.1m.

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 19
Hearts Livingston

Bucking the trend of previous years, Due to the increase in operating

Hearts were one of only two SPL clubs
to increase their net debt in the year
due to additional funding received from
their parent company, UAB Ukio Banko
Investicine Grupe and the additional
usage of bank overdraft facilities.
Net debt was £28.4m, up by £6.9m
from the prior year (2005:£21.5m).
In addition, £2m of loan stock debt was
written off by the parent company which
was previously held by SMG.
Hibernian
Hibernian’s net debt is £6.8m, down by
26% from the prior year (2005: £9.3m).
The reduction is due to improved
operating results contributing to the
positive cash position at the year-end.
The main component of the remaining
debt is unchanged from the prior year
and includes a £6.5m stadium mortgage
and £1.4m of connected parent
company debt.
Inverness Caledonian Thistle
losses during the year Livingston’s
net debt increased by £0.5m to £0.7m
(2005: £0.2m). The debt is held with
connected parties and finance lease
creditors; there is no bank debt.
Motherwell
Motherwell’s net debt reduced in the
year to £0.4m (2005: £0.6m). As the
club does not have an overdraft, the
reduction in debt is due to improved
operating results and the decrease in
loans due to John Boyle; there is no
bank debt.
Rangers
As a result of the £18m JJB deal
upfront payment, Rangers’ net debt
has reduced significantly from £23.1m
to £5.9m. Gross borrowings remain
relatively unchanged at £28m, which is
largely made up of a £22m bank loan
and £5m of finance lease creditors.

As in prior years, Inverness Caledonian

Thistle continues to operate with a net
cash position as they hold only £20k of
debt which is in the form of an interest-
free loan; there is no bank debt.

Kilmarnock

Kilmarnock’s net debt decreased by

£0.6m to £12.4m in the year, primarily
due to the improvement in the club’s
gross cash position (2005: £13m).
The mixture of debt continues to relate
to both bank overdrafts and loans.

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 20
Part three
Cash flow 2006
Cash flow
Overview

For the second successive year, the SPL generated a net

Combined SPL   2006 2005 Movement
cash inflow of funds, which is down by £16.5m from the prior
Cash Flow £’000 £’000 %
year to £8.2m. This is largely as a result of reduction in levels
of finance raised in the period offset by increased spending Net Cashflow from
on capital investments. Operating Activities
27,140 9,949 173%

Cash generated from operating activities has increased by ROI and Servicing
(6,231) (8,512) -27%
£17.2m to £27.1m. Rangers increased their cash inflow by of Finance
£22m to £24.7m due to improved operating activities and
funds received from the JJB deal while Hearts increased Capital Expenditure &
(14,220) (5,610) 153%
their cash outflow by £4.6m to £5.2m due to increased Financial Investment
operating losses.
Taxation 272 51 433%
As a result of the significant reduction in Rangers’ debt levels,
the cash outflow from servicing of finance has reduced
by £2.3m to £6.2m. All other clubs outflow remained Acquisitions (221) 0 100%
relatively stable.
Management of
Due to the additional investment made in player registrations (15,000) 0 100%
liquid resources
during the year, cash outflow from capital expenditure
increased by £8.6m to £14.2m. The main contributors to Cash outflow
(8,260) (4,122) 100%
this outflow were Celtic £6.9m (2005:£4.5m), Rangers £5.8m before Financing
(2005: £0.9m) and Hearts £2.5m (2005: £0.3m).
Financing 16,410 28,801 -43%
The management of liquid resources of £15m (2005: £nil)
is derived solely from Rangers and represents the funds
received from the JJB deal transferred to a short-term Net Cash
8,150 24,679 -67%
deposit account. Inflow/(Outflow)

Due to the fact that no cashflow statement was presented

in their statutory accounts, the following clubs have
been omitted from the analysis – Dunfermline, Inverness
Caledonian Thistle and Livingston.

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 22
Cash flow
New finance raised

Cash flow from financing activities 2006 2005 Movement

New Finance Raised
has decreased by £12.4m to £16.4m Place chart here. £’000 £’000 %
in the year. The prior year was inflated Net Proceeds from Share Issue 15,116 51,004 -70%
by the funds raised via the Rangers
Debts 12,189 7,756 57%
Rights Issue.
Inflow from new finance 27,305 58,760 -54%
In the current year, Celtic raised £14.6m
   
via a share issue with smaller issues
at Falkirk and Dundee United. Further Repayment of Debt (10,493) (29,583) -65%
details on the debt raised in the period Capital Element of finance lease (402) (376) 7%
are contained within the Balance Sheet
Outflow from finance (10,895) (29,959) -64%
section of the report.
   
Net cashflow from financing 16,410 28,801 -43%

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 23
Cash flow
Cash flow from player transfers

The net cash outflow from player transfers has increased in the year to £6.8m (2005:
£0.1m). The level of cash outflow has remained relatively stable year-on-year while
the cash inflow has reduced significantly from £10.8m to £4.1m.

In the prior year, Rangers was the main contributor to the cash inflow due to the
sale of Jean-Alain Boumsong to Newcastle. In the current year, the inflow of £4m is
split between various clubs, most notably Hibernian and Rangers.

Analysis of cash movement from player transfers

  2006 2005
£’000 Outflow Inflow Net Outflow Inflow Net
Aberdeen (242) 35 (207) (315) 30 (285)
Celtic (4,477) 643 (3,834) (2,891) 350 (2,541)
Dundee United (397) 463 66 (414) 0 (414)
Heart of Midlothian (1,517) (113) (1,630) (116) 110 (6)
Hibernian (230) 1,555 1,325 0 79 79
Rangers (4,017) 1,527 (2,490) (7,077) 10,183 3,106
 
Totals (10,880) 4,110 (6,770) (10,813) 10,752 (61)
Source: Statutory Accounts

No balances in respect of movement in players’ transfers were disclosed for Falkirk,

Kilmarnock and Motherwell in their cash flow statement.

Net Transfer Fees 1997-2006

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
5000

-5000

-10000

-15000

-20000

-25000

-30000

The main influence in recent years on the net transfer fees of the SPL has been
the clubs’ ability to raise funds in player sales, as significant spending in the
transfer market by Scottish clubs remains scarce. In the past 5 years, Rangers
has generated almost £40m in player sales including the sale of Tore Andre Flo and
Jean-Alain Boumsong. Hibernian benefited in the current year due to the sale of
Garry O’Connor to Lokomotiv Moscow.

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 24
Part four
Club five year overview
This section provides a snapshot of the key financial numbers of turnover, profit/
(loss) before tax, wages and net debt over the past 5 years for each SPL club.
 Aberdeen

Over the past five years, Aberdeen’s debt levels have doubled from £4.5m to
£10.1m due to the recurring losses made by the club. Losses peaked at £2.5m
in 2001/02 and due to the tight control over costs by management these have
reduced by £0.9m and now sit at £1.5m. Although wage costs have reduced by
£1m over the period, turnover has also declined by £0.8m and is now at its lowest
level of £6.7m.
£000’s
12000
Debt
10000

8000

Turnover
6000

Wages
4000

2000

PBT
-2000

-4000 2001/2 2002/3 2003/4 2004/5 2005/6

Celtic

Celtic’s financial performance over the past five years has largely been driven by
success in European competitions, culminating in the appearance in the UEFA Cup
final in 2002/03. Turnover rose to a peak in season 2003/04 of £69m and since then
has tailed off as the Parkhead side have failed to progress further in Europe.

The turnover generated via European competitions has supported a significant

wage bill, which peaked at £41m in season 2003/04, however this has since
reduced by £8m.

Celtic have raised approx £37m from share issues in recent times which has
allowed debt levels to remain relatively manageable, peaking at £20m in 2004/05.
£000’s
70,000

60,000
Turnover

50,000

40,000

30,000 Wages

20,000

Debt
10,000

PBT
-10,000 2001/2 2002/3 2003/4 2004/5 2005/6
The 18th annual financial review of Scottish football August 2007
PricewaterhouseCoopers 26
Dundee United

Dundee United have reduced their total loss by £1.5m over the past five years
as a result of revenue growth, particularly in 2004/05 when the club experienced
successful runs in domestic cup competitions. Wage costs have remained relatively
stable over the period, although they have fallen by £0.7m in the current year.

Debt levels have increased by £3.7m peaking at £7.6m in the current year. Although
the rate of growth in debt has reduced in recent years due to a reduction in losses,
the cost of servicing such debt is c£0.5m per annum which is not sustainable.
£000’s
8,000
Debt
7,000

6,000

5,000

Turnover
4,000

3,000
Wages

2,000

1,000

0
PBT
-1,000

-2,000

-3,000 2001/2 2002/3 2003/4 2004/5 2005/6

Dunfermline Athletic

Dunfermline has one of the most significant reductions in debt levels in the SPL
which has fallen by £7m from its peak in 2001/02 of £14.8m. The reduction is
largely due to the various debt write-offs by third parties which has also impacted
the profit and loss results.

Wage costs have decreased by £2.5m over the past 5 years, after creeping up to
£4.6m in 2002/03. However, turnover has reduced by £1.2m in recent years and is
currently at its lowest level in the past 5 years.

£000’s
15,000

12,000

9,000
Debt

6,000

3,000 Turnover
Wages

0
PBT

-3,000

-6,000 2001/2 2002/3 2003/4 2004/5 2005/6

The 18th annual financial review of Scottish football August 2007
PricewaterhouseCoopers 27
 Falkirk

Falkirk’s promotion to the SPL in season 2005/06 has helped to produce the most
successful set of financial results in the past 5 years. Although wage costs are at
their highest level, the significant increase in turnover more than compensates for
this, resulting in an overall profit. The peak in financial results in 2002/03 was due
to one-off investment income received as a result of Falkirk selling Brockville Park
to set up a joint venture with Falkirk Council to establish a community
owned stadium.

£000’s
3,500
Turnover

3,000

2,500

2,000
Wages
1,500

1,000 Cash

500 PBT

-500

-1,000 2001/2 2002/3 2003/4 2004/5 2005/6

Heart of Midlothian

The financial effects of the take-over of Hearts by Vladimir Romanov was revealed
in the 2005/06 financial results. The most significant impact was the considerable
increase in wages. Over the past five years, wages have remained c£5m. However
they have more than doubled in the current year to £10.1m. Hearts’ debt levels
have risen consistently from £14.8m in 2001/02 to £28.5m in 2005/06, with a £6.9m
increase noted in the current year. After a slight improvement in 2002/03, losses
have continued to grow over the past few years rising to a high of £5.2m in the
current year. Turnover has increased steadily from a low of £6.1m to £10.3m in the
current year.
£000’s
30,000
Debt

25,000

20,000

15,000

Turnover
10,000
Wages

5,000

-5,000 PBT

-10,000 2001/2 2002/3 2003/4 2004/5 2005/6

The 18th annual financial review of Scottish football August 2007
PricewaterhouseCoopers 28
Hibernian

Over the past 5 years, Hibernian have reduced their wage costs by £2m which has
helped to move the club into a profitable position in 2005/06. Further, turnover has
increased due to improved on-field performances and has risen by £2.9m in the last
2 years. Debt levels have fallen since the peak of £14.5m in 2002/03 after the write
off of connected party debt. The club also benefited in the current year from gains
on player transfers.

£000’s
15,000

12,000

9,000 Turnover

Debt
6,000

Wages
3,000
PBT

-3,000 2001/2 2002/3 2003/4 2004/5 2005/6

Inverness Caledonian Thistle

Promotion to the SPL in season 2004/05 has had the most significant impact
on Inverness Caledonian Thistle’s results as turnover has more than doubled to
£2.7m as a result. Wage costs have also risen over the years but remain one of the
smallest wage bills in the SPL. The club has operated in recent years with no net
debt as management runs the club on a prudent basis.

As the club filed abbreviated accounts in 2005/06, no current year details on

turnover or wages was available.
£000’s
3,000

Turnover
2,500

2,000

1,500

Wages

1,000

500

0
PBT
Debt
-500 2001/2 2002/3 2003/4 2004/5
The 18th annual financial review of Scottish football August 2007
PricewaterhouseCoopers 29
 Kilmarnock

Losses have reduced gradually over 5 years at Kilmarnock as a result of increases

in turnover and reduction in wages. Turnover has increased by nearly £4m over
the past 5 years and currently peaks at £7.4m due to improved SPL performances.
Wage costs have decreased by £1m in recent years. As a result, a small profit was
generated in 2005/06 for the first time in 5 years. Debt levels however, remain high,
and peaked at £13m in 2004/05, although they fell by £0.6m in the current year.

£000’s
13,500
12,500 Debt
11,500
10,500
9,500
8,500
7,500 Turnover
6,500
5,500
4,500
3,500 Wages
2,500
1,500
500 PBT
-500
-1,500
-2,500 2001/2 2002/3 2003/4 2004/5 2005/6

Livingston

Livingston was placed into administration in February 2004 after the club was
unable to fund spiralling debt levels after years of recurring loses. The club exited
over a year later and debt of £4.8m was written off as a result. Wage costs have
also been dramatically reduced given the club’s relegation from the SPL in 2006.
The decrease in costs is well timed as turnover will drop as a result of the demotion
and wages are generally lower in the first division.

£000’s
5000

4000
Turnover
3000

2000

Wages
1000
Debt
0

PBT
-1000

-2000

-3000

-4000

-5000 2001/2 2002/3 2003/4 2004/5 2005/6

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 30
Motherwell

Motherwell was the first club in the SPL to be placed into administration after
debt levels peaked at £9m in 2002/03. As a result of the process, debt levels
fell by c£8m as club owner John Boyle wrote off the majority of the liability. Post
administration results show steady wages and turnover, which in turn has kept debt
levels below £1m.

£000’s
10,000

8,000

6,000

4,000
Turnover

Wages
2,000

Debt
0
PBT

-2,000

-4,000 2001/2 2002/3 2003/4 2004/5 2005/6

Rangers

Rangers underwent the most significant financial restructuring of all the SPL clubs
having reduced net debt levels by £68m in recent years. In 2003/04, Rangers’
net debt was £73.9m. However the combination of a £52m rights issue and £18m
upfront payment from the JJB licensing agreement deal has resulted in a current net
debt level of £5.9m.

Both turnover and wages have also moved in the right direction, with the Ibrox side
breaking through the £60m turnover barrier in 2005/06 and shaving nearly £10m off
their wage bill in recent years.

The profit generated in 2004/05 was due to the release of negative goodwill and not
trading related. The profit and loss account has been positively impacted by the
increase in turnover and reduction in wages and further improvements in results are
expected as the cost of servicing debt is reduced.

£000’s
80,000

70,000

60,000 Turnover

50,000

40,000

30,000 Wages

20,000

10,000
Debt
0
PBT
-10,000

-20,000

-30,000

-40,000 2001/2 2002/3 2003/4 2004/5 2005/6

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 31
The 18th annual financial review of Scottish football August 2007
PricewaterhouseCoopers #
Part five
Post balance
sheet events
 Celtic

Unaudited interim results released by Celtic for the period to end

31 December 2006 highlight:

• Turnover increased by 41.6% over the corresponding period

a year ago to £48.8m
• Profit before tax increased to £17.9m from a loss of £0.9m in the corresponding
period a year ago, after taking account of gains on player transfers
• Net debt increased from £13.9m at 30 June 2006 to £15m
at 31 December 2006

Celtic’s participation as Scotland’s sole representative in the UEFA Champions

League has had an encouraging effect on their interim results based on the same
period last year. Playing three more home games resulted in an increase of £9m
from ticket sales and increased income from multimedia of £7.9m.

The 2006/2007 season saw manager Gordon Strachan embark on his second
season at the helm of the Scottish Champions, walking away with the league title
and the Scottish Cup. In addition to this, Celtic emulated Rangers feat of last
season by qualifying for the last 16 of the UEFA Champions League, which should
improve their financial position even further this year.

Rangers

Full year results released by Rangers for the period ending 30 June 2007 highlight
the following:

• Turnover from continuing operations decreased by 4% to £41.8m

• Loss after tax was £6.3m
• Net debt at the year-end stood at £16.5m

Rangers endured a disappointing domestic season, which ultimately lead to the

replacement of the management team at Ibrox. Paul Le Guen left the club making
way for Walter Smith’s return, nine years after his departure.

A decrease in turnover and a reported loss was testament to not being involved
in the UEFA Champions League for the 2006/2007 season. Season ticket sales,
sponsorship, media and hospitality income, however, have all shown growth on the
same period last year.

The club’s business partnership with Las Vegas Sands was curtailed in
January 2007, after the Government’s decision to award the first regional casino
license to Manchester.

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 34
Appendix one
The season that
was 2005/2006
League Winners CIS Insurance Cup Winner

Bank of Scotland Scottish Premier League Winners Celtic

Winners Celtic Runners-up Dunfermline

Runners-up Hearts
For the first time since the 1994/95 season, the Old Firm’s
monopoly of the the top 2 spots in the SPL was broken,
with Celtic winning their first title under new manager
Gordon Strachan. After some early setbacks in their league
campaign, Celtic won a crucial Ne’erday tie against Hearts at
Tynecastle and never looked back. It was left to Rangers and
Hearts to battle it out for second place, with Hearts coming
out on top and clinching a valuable place in the second
qualifying round of the Champions League.
At the other end of the table, Livingston accumulated a record
low points tally of 18, and were duly relegated with St Mirren
taking their place from the SFL.
On a day where Celtic remembered their late hero Jimmy
‘Jinky’ Johnstone, Dunfermline tried to forget the 8 – 1
hammering they received at the hands of Celtic earlier on
in the season. The final scoreline was far lower than their
encounter earlier in the season, but Celtic still ran out
comfortable victors with goals from Zurawski, Maloney
and Dublin. The 3 – 0 win gave Gordon Strachan his first
silverware as manager of Celtic.
European Qualification
Champions League Celtic, Hearts
UEFA Cup Rangers

Tennents Scottish Cup Winner

Winners Hearts

Runners-up Gretna

After a fairytale run to the final, becoming the first team ever
from the third tier of Scottish football to reach the
final, Gretna were pipped at the post by Hearts, winning
their first Scottish Cup since 1998. Hearts took the lead
late in the first half through Rudi Skacel. However, Gretna
equalised in 75 minutes taking the game to extra time.
Neither team could break the deadlock during the extra
period, taking the game to penalties. Hearts converted all
four of their penalty attempts and while Gretna netted the first
two, consecutive misses ensured the Cup would be travelling
back to Tynecastle.

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 36
Scottish Football Writer’s Association
Player of the Year 2006:
Craig Gordon (Hearts)
Scottish Football Writer’s Association
Young Player of the Year 2006:
Steven Naismith (Kilmarnock)
Scottish Professional Footballers Association
Player of the Year 2006:
Shaun Maloney (Celtic)
Scottish Professional Football Association
Young Player of the Year 2006:
Shaun Maloney (Celtic)
Top Goal Scorer
Kris Boyd (Kilmarnock/Rangers) 32 goals
The 18th annual financial review of Scottish football August 2007
PricewaterhouseCoopers 37
European Competitions
Gordon Strachan suffered almost the worst imaginable
start to his managerial career at Celtic, losing 5 – 0 away
to Artmedia Bratislava in the first game of their Champions
League qualifying tie. Celtic battled well in the return leg, but
their 4 – 0 victory was not enough to see them through to the
financially lucrative group stages of the Champions League.
On the other hand, Rangers managed to dispose of
Anorthosis Famagusta by 4 goals to 1 on aggregate to make it
through to the group stages. Ironically, they came up against
Celtic’s conquerors, Artmedia Bratislava alongside European
heavyweights Inter Milan and FC Porto. Rangers got off to
a flying start with a crucial 3 – 2 victory at home to Porto.
Their hero came in the unlikely form of Sotirios Kyrgiakos
who clinched the game with a last minute header. This would
prove to be Rangers’ only win in the group stages. However,
consecutive draws against Bratislava, Porto and finally Inter
Milan at Ibrox proved enough to see Rangers make history as
the first Scottish team to qualify from the group stages of the
Champions League.
Rangers faced Villarreal in their first taste of the final 16. The
first leg of the tie ended 2 – 2 at Ibrox, setting up a tense
return tie in Spain. Despite taking the early lead through
Peter Lovenkrands, a heartbreaking equaliser from Rodolfo
Arruabarrena gave Villarreal the victory on away goals.
Dundee United and Hibernian were the two other clubs
representing Scotland in European competition. Dundee
United faced Finnish side MyPa in the second qualifying
round of the UEFA Cup. United drew the opening game
0 – 0 away from home, and a 2 – 2 draw a fortnight later
meant that their European hopes for the season also ended
on the away goals rule. Hibs came up against Ukrainian side
FC DniPro in the first round of the UEFA Cup. A nil-nil draw at
home proved to be very costly, as they went on to lose
5 – 1 in Ukraine with Derek Riordan scoring what proved to be
merely a consolation goal.
Changes in Management

Following a terrific unbeaten start to the season George

Burley was startlingly sacked in October as Hearts manager.
His replacement came in early November in the form of former
Chelsea coach Graham Rix. His tenure, however, was also
short lived and after four months in the job, Valdas Ivanauakas
was appointed as interim Head Coach to replace Rix.

Gordon Chisolm was dismissed as manager of Dundee United

in early January and 3 days later, Inverness Caledonian Thistle
manager Craig Brewster was appointed as his successor. In
February, Livingston manager Paul Lambert resigned after
a poor run of results left the club six points adrift at the
bottom of the table. Shortly afterwards, former Hearts and
Livingston player John Robertson was hired as Livingston’s
new manager.

Pressure was mounting on Rangers boss Alex McLeish

throughout the season, and despite Chairman David Murray
giving his manager a public vote of confidence in November,
it was announced in early February that McLeish would leave
the Ibrox club at the end of the current season. Speculation
mounted as to his replacement and, in early March, Murray
announced that former Olympic Lyonnais manager Paul Le
Guen would succeed McLeish on a 3 year contact.

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 38
Appendix two
What the
Chairmen and
Chief Executives
thought
Aberdeen: Stewart Milne, Chairman
“Following on from this agreement to drive forward on the
community stadium, the Club put in place banking facilities
which, it is hoped, will see the Club through the coming
crucial period up to March 2011.”
Celtic: Brian Quinn, Chairman
“The successful £15m share issue in December 2005 rebuilt
the balance sheet, reducing bank debt at year end from
£19.3m to £9.1m and almost doubling net assets. We also
increased investment in the acquisition of players from £2.3m
to £8.8m.”
“…salary packages for footballers are probably
unprecedentedly high, not just for those of the highest calibre,
but also for many outside the elite category. The main driver
seems to be the substantially larger sums available to FA
Premier League clubs from the recently agreed television
contract. Many clubs are spending money now that will not
be available for another year, creating echoes of the last boom
and bust in football.”
Dunfermline Athletic: Jim Yorkston, Chairman
“The year under review was one in which severe measures
were taken to control cash and reduce losses.”
“Cost control measures implemented have included
reductions both in player’s wages and in football management
salaries. Following an operational review, a redundancy
programme was effected to reduce total staff numbers.”
Rangers: David Murray, Chairman
“In March we announced a ten-year licence agreement with
JJB Sports plc worth a minimum of £48.0m to the Club. This
figure will increase by way of additional royalty payments
The 18th annual financial review of Scottish football August 2007
PricewaterhouseCoopers 40
if certain sales thresholds are exceeded. Early indications
in this respect are positive. This deal, coupled with the
extended run in Europe helped us achieve an operating
profit of £4.4m.”
“Exceptional items include a £1.0m gain on sale of players
and a £3.8m loss on the termination of our retail activities,
principally consisting of termination and redundancy costs.”
Dundee United: Edward Thompson, Director
“Despite the club’s wage bill being reduced during the year
by £667,313, payroll costs as a percentage of turnover in
the year were 68.1% (2005: 65%). The company has been
striving to decrease the wage bill in the year by disposing of
high earning players, however this has been impacted by the
fact that turnover has decreased.”
Kilmarnock: Michael Johnston, Chairman
“The last financial year proved to be something of a “roller
coaster” with significant gains due to footballing success
on the pitch and in the transfer market being tempered by
below budget performances by the hotel and the sports bar.
Success on the pitch also came at a cost with significant
bonus payments being incurred, as well as increased police
and stewarding charges”
Hearts: Roman Romanov, Chairman
“Financial highlights for the period include Heart of Midlothian
FC (Hearts) breaking through the £10 million revenue level
for the first time. The £10,277,000 income represents a
22% increase of over £1.8 million (2005: £8,428,000) on the
previous year.”
“A further financial benefit for Hearts was the forgiveness of
£2 million of debt by UAB Ukio Banko Investicine Grupe’s
(UBIG), a company controlled by Vladimir Romanov.”
National Team

The national side once again failed to qualify for the World
Cup, eventually finishing third in their group. However,
the team went on to show considerable improvement with
just two defeats in nine matches, compared to four defeats
from nine in the prior season. At the end of the season,
Scotland lifted silverware in the form of the Kirin Cup with
a convincing 5 -1 win over Bulgaria, and a scoreless draw
against hosts Japan.

Friendlies

August 2005 Austria 2 – 2 Scotland

November 2005 USA 1 – 1 Scotland

March 2006 Scotland 1 – 3 Switzerland

World Cup Qualifiers

September 2005 Scotland 1 – 1 Italy

September 2005 Norway 1 – 2 Scotland

October 2005 Scotland 0 – 1 Belarus

October 2005 Slovenia 0 – 3 Scotland

Kirin Cup

May 2006 Bulgaria 1 – 5 Scotland

May 2006 Japan 0 – 0 Scotland

The 18th annual financial review of Scottish football August 2007

PricewaterhouseCoopers 41
Appendix three
Significant
transfer activity

Player Date From To £

Maciej Zurawski Jul-05 Wisla Krakow Celtic 2,000,000

Adam Virgo Jul-05 Brighton Celtic 1,500,000
Shunsuke Nakamura Jul-05 Reggina Celtic 2,500,000
Julien Rodriguez Aug-05 Monaco Rangers 1,000,000
Kris Boyd Jan-06 Kilmarnock Rangers Undisclosed
Mirsad Beslija Jan-06 Racing Genk Hearts 850,000
Wes Hoolahan Jan-06 Shelbourne Livingston 100,000
Garry O’Connor Mar-06 Hibernian Lokomotiv Moscow 1,600,000

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PricewaterhouseCoopers 43
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