Glasgow Celtic, in which financier Mr Dermot Desmond has an estimated 14 per cent stake, is to plough its £5.2 million profit into its playing squad, the club said yesterday. The Scottish soccer team has reported a dramatic improvement in its fortunes but no dividends are being paid on the ordinary shares. Chairman, Mr Fergus McCann, said the club's financial performance in the year to June 30th had exceeded the board's objectives in all areas.

However, he added: "Although the season began with a strengthened player squad, which also benefited from further investment during the year, success on the playing field proved elusive."

He went on: "Our first team's performance over the year did not reach the hoped-for level and the loss of key matches resulted in no domestic trophies and a lack of progress in Europe.

"I can assure shareholders and supporters, however, that the substantial profit earned this year will be reinvested to improve the success of the club on the field. "In turn, football success will come hand in hand with our success as a business."

The results revealed Celtic turned a pre-tax loss of £1 million in the year to June 30th, 1996 into a taxable profit of £5.2 million in the latest financial year.

Despite a lack of success on the field, attendances at Celtic's first team matches increased by 37 per cent to 1.69 million.

Turnover jumped from £16 million to £22.2 million.

Mr McCann said the club's policy of investing in a high-capacity stadium and boosting the first team squad was justified.

"With Jack Brown as general manager of football operations and Wim Jansen as our head coach, we believe we have the right structure and the right people."

A new Celtic museum and visitors' centre is being built, along with a retail megastore, with openings scheduled for November.