Saints proud of profits

Saints declared a profit of £3.3 million after player sales which leaves the club in great financial shape in football's uncertain financial climate.

Lowe has already demonstrated a firm hand in transfers which has made sure that the club are not held to ransom by players or agents. As a result player wages are 48% of football turnover. While Lowe still feels this to be far too high, it is substantially better than most other clubs.

With wages set to fall in the future, this percentage should fall further allowing the club to invest elsewhere.

The move to the new stadium has seen attendance double. The new Saints Megastore has brought in double what it's predecessor made and there is a much wider range of goods available.

The club's hospitality centre can now cater for more than ten times it's predecessor and has been an unqualified success.

Saints are also looking firmly at the future of it's playing staff, investing a ,million into its academy and facilities.

The future for the club is a bright one indeed. Now if we can just beat Everton...

CHAIRMAN'S STATEMENT

Introduction

I am delighted to report to you that your Company is able to announce a profit before taxation of £3.3m for the full year ended May 2002. The most encouraging aspect is the fact that we achieved an operating profit of £4.7m before player trading. We have managed to reduce the player and coaches wages to 48% of football related turnover despite a 17% increase in the wage bill over the year as a result of our increased turnover. Like many clubs our wages are too high but there are now encouraging signs that the worst excesses of the recent bubble are behind us. This will allow clubs of our size to more effectively manage wage increases without being too exposed to the danger of losing their best players.

Our achievements over the year have been significant. We completed The Friends Provident St. Mary's Stadium on time and after another poor start to the season, finished in a very creditable eleventh position in the FA Premier League. On both counts we proved many of the pundits wrong thereby giving the Club a stronger foundation looking forward.

The Board is pleased to recommend an increased final dividend of 2p per share to those on the register on 20 September 2002. We believe that it is important to reward our shareholders when the Company has a successful and profitable year. The volatile and uncertain nature of football club revenues mean that a progressive dividend policy is, however, unworkable and it is important that our shareholders understand this philosophy.

The financial results for the year ended 31 May 2002 are analysed in more detail in the financial review.

Football update

I would like to congratulate Gordon Strachan, his staff and all the players in our squad on the outcome of last season. After the uncertainty and instability which we suffered as a result of the departure of Glenn Hoddle and Dean Richards, it was a great achievement to finish eleventh in the FA Premier League. It should be remembered that despite the regular managerial upheaval that we have suffered recently we have a very stable playing squad and this continues to be the case as we head towards the new season. This gives us great benefit and I believe our squad is currently stronger than at any time during my five years as Chairman.

We have purchased Michael Svensson who will strengthen our defensive options and are looking to bring in another player to strengthen the right side of midfield. We have extended the contracts of Jason Dodd (2004) and Marian Pahars (2006), captain and top scorer respectively, and look forward to the coming season with great confidence, always aware of the competitive nature of the FA Premier League. Our squad is currently insured for £30.0 million which reflects the fact that we have some very exciting young players. Five of them represented their country in the recent World Cup competition while several others narrowly missed selection this time round.

Our Academy operation continues to develop and everybody has understandably been given great encouragement as a result of Wayne Bridge's selection for the England team. We have recruited Georges Prost as Academy Technical Director from Marseille to strengthen the quality and structure of our coaching at the early stages of development. He will also take charge of the U17 team for the coming season. Huw Jennings, Academy Director and all his staff are aware of the strategic importance of their operations to the Club looking ahead and to this end we have invested heavily in improving our training ground facilities over the summer months. Producing local players who understand the Club is vital as we will find it difficult to sustain the level of investment we have made over the past few years without making some strategic sales.

This season we have to contend with transfer windows in the FA Premier League. This is not something we supported, being in favour of free markets. It was driven through by the big clubs with their eye on Europe but on balance we believe its effect on us will be neutral.

I would like to pay tribute to Matthew Le Tissier who retired at the end of last season. He made a massive contribution to our Club over many years and deserves great credit for his loyalty. He will remain closely involved with the Club but we will all miss his unique talent on the pitch.

Friends Provident St. Mary's Stadium

The close season between the 2000/1 and 2001/2 seasons saw the Club move to St. Mary's. Despite a very tight timescale and financial constraint, the move was completed on time and on budget. The stadium was ready for its official opening on 11 August 2001, a little over three years from the original idea of moving to the St. Mary's gasworks.

The closing celebrations at the Dell and plans for the opening of St. Mary's posed a substantial challenge to Club staff as did the integration of an expanded stewarding team and the new catering workforce of our joint venture partner, Facilities Management Catering (FMC). On a gold fixture game, a staff headcount of over 900 look after up to 32,000 fans.

History will record that, off the field, the move went very smoothly with staff soon finding their feet in the new stadium. I am delighted to report that over the course of the 2001/2 season, fans voted the St. Mary's stadium as the second best venue in the FA Premier League behind the Stadium of Light. This is a phenomenal achievement in the first year of operation.

Transport, suspected of being the Achilles heel of the stadium project, did not end up as the problem forecast with Park and Ride, Park and Walk and through ticketing making a big contribution to reducing congestion on matchdays. At the end of the season, the transport plan was nominated for a national transport award attesting to the measure of forethought, planning and teamwork by the Club, City and Emergency Services.

In this regard the Board would like to acknowledge the contribution of Chris Egelstaff and his Operations team who have made St. Mary's the pleasant and safe place to watch football that it is. The Board would also like to record its gratitude to David Pallett who retired at the end of the season after ten years as Safety Officer. He will be succeeded by Brendan McGlinchey who ran last year's successful matchday transport operation.

During the close season we have been working hard to improve the stadium. Air conditioning of the hospitality areas, hard wiring for broadcasting equipment, and additional concourse catering outlets have all been installed. We hope that these improvements will add to visitors' matchday experience wherever they sit.

For the ticket office staff, the first season at St. Mary's certainly proved to be a massive learning curve. The transition from The Dell was smooth, but, in comparison, the amount of tickets the staff were faced with selling per game was certainly an awesome prospect. The Ticket Office Manager's brief was to concentrate on improving all levels of customer service and by increasing our ticket office opening hours and being the first FA Premier League Club to introduce an on-line purchasing facility through our web site (www.saintsfc.co.uk), we have gone a long way in achieving that aim. Up to 10% of our total transactions are being purchased through the Internet and those participating are finding just how quick and easy this system is to use. This project is being extended further, and by the end of October, we will increase the portfolio of products available to include Cup games, Car parking, Travel Club and Membership.

We are constantly updating our systems and have recently introduced an outsourced call centre facility to deal with our incoming booking calls as and when demand dictates. This facility, based in Barnstaple, is well used to ticket sales having worked with other football clubs, and most importantly for us, the centre has great knowledge of our ticketing system. Already this has proved very useful, greatly reducing the time the caller has to wait on the telephone.

Commercial and marketing overview

The Club's commercial operation has expanded significantly over the year. We completed the first season of an increased primary sponsorship deal with Friends Provident who are now both shirt and stadium sponsors and consolidated key long term founding partner arrangements with a number of impressive brands - Southern Daily Echo, Power FM, Carlsberg, Centerprise, Enodis and Scotthalls Hampshire.

The new stadium offers us an extensive array of additional sponsorship opportunities and the department is committed to providing innovative marketing solutions and value for money for all our partners.

The corporate hospitality capacity increased from 180 to almost 1,500 spread across four suites and 47 boxes. Many games were totally sold out and we saw a large amount of repeat business in the second half of the year which is very encouraging for this season.

Our reputation for both our matchday catering provision, and particularly our non-matchday event business, is growing from strength to strength and reflects the Club's philosophy of providing a quality service and value for money. The stadium has served some 50,000 meals during the past 12 months and hosted over 300 events both large and small.

Much of this success is due to our excellent working relationship with our joint venture partners FMC who provide us with catering and event management support. The stadium has now become the leading venue for functions, conferences and events in Central Southern England and it is used regularly by high profile organisations such as P&O, Argos, B&Q and many more.

Many events are the result of true partnership with local businesses, club sponsors and major charities coming together with the Football Club to plan, organise and stage prestigious events. The Ryder Cup Gala Dinner and The James Bond Premier Charity Dinner being held at the stadium later this year are just two examples of organisations pulling together to create and stage major events at the stadium.

A valuable new income stream is therefore developing and the activity being created is helping to raise the profile of the stadium in the business community.

Our commitment to improve communication with our supporters remains strong. We have introduced a quarterly mailing which is now sent to a highly targeted database of 50,000 homes. We recruited Graham Hiley from The Echo to bolster our web site (www.saintsfc.co.uk) editorial and since joining
in December, traffic has increased culminating in a record 1.3m page impressions in April. We also launched the on-line Saints TV giving supporters access to highlights and goals on-line and the exploitation of vital revenue streams will be a focus. This year has also seen the launch of "The Saint", our own digital radio station, which is broadcast from the stadium and is on air, all day, everyday and can be found on Sky digital channel 899.

To increase the level of national press exposure, we enlisted the help of top London PR company, Bell Pottinger and strengthened our press team and as a result we are now beginning to attract the level of coverage a club of our standing deserves.

Community review

The Club undertook an enormous amount of community and charitable work during the year. With the ever increasing TV exposure and high profile stars, it is vital that the Club recruits supporters at a very young age. The community programme, taking the Club out to schools, is probably the most important part of this recruitment process. We employed two new full time coaches, extending our sphere of influence down into Dorset and up to Newbury and we are running over 100 weekly courses. With the support of Barclaycard and the Outer Shirley Regeneration Scheme we have brought our coaching to over 10,000 disadvantaged and special needs children.

We are also committed to the development of girl's and women's football, extending the Centre of Excellence, launching an Academy and taking over the FA Premier League team, The Southampton Saints.

Summary and outlook

Our business is now focused on the successful management, both on and off the pitch, of Southampton Football Club. Football is a business where winner takes all and the devil takes the hindmost. The penalties for profligate investment in players/wages are now clear for all to see, as are the penalties for under investing in one's playing squad. In short, football earnings are by nature erratic but with the completion of The Friends Provident St. Mary's Stadium we now have the resources to continue to grow our turnover.

This in turn allows us to support, attract and retain the best players who are better placed to accomplish the essential task of any football club, which is to win football matches. The level of support is crucial to our long term success and the best guide to that support is the level of a club's season ticket holders. Manchester United and Newcastle stand out as two examples of loyal committed season ticket holders in impressive numbers. We have outstanding season ticket holders (17,000) but our aim must be to work to attract them in greater numbers thereby giving more certainty to the Club's financial revenues. Matchday ticket sales are underpinned by around 25,000 members and we are actively working to grow our revenues from corporate hospitality and sponsorship. Our Academy and Community operations bring us into close contact with the next generation of Southampton supporters and we are fortunate to be the only FA Premier League club south of London.

Our staff have been exceptional this year and have adapted well to all the changes which have taken place. They have hosted a Japan/Nigeria international, an England Under 21 game and we have now been asked to provide the venue for a full England International against Macedonia on 16 October 2002. This is in no small part due to their professionalism and commitment.

Friends Provident have continued to be excellent sponsors and together we have worked on many valuable initiatives.

The FA Premier League has two years left to run on its existing domestic broadcasting contract with Sky as well as its overseas broadcasting contract. Planning has started to analyse the best way forward for the League on both contracts. These discussions are important to Southampton Football Club looking forward and we will be taking an active part in the outcome.

We look forward to the coming season with confidence and optimism, always aware of the unpredictable nature of sporting success. Relegation would force upon us some very difficult decisions but there is plenty to play for on the upside with vast revenues available for the Champions League and UEFA Cup.

R J G Lowe - Chairman
2 September 2002