Celtic, the Glasgow football club, warned yesterday that it faced a "taxing challenge" keeping both a quality squad and an affordable wage bill as it reported widening full-year losses on the back of a 20 per cent rise in player salaries and bonuses.

In spite of a double-winning season contributing to "unprecedented" ticket sales and higher turnover, operating profits fell from £6.73m last time to £4.87m. Pre-tax losses widened from £5.79m to £7.47m.

Brian Quinn, chairman, warned that wage costs relative to current income "cannot be sustained" and the club would have to "continue to seek economies" on player costs in the short term.

Last season, the club won the Scottish Premier League by a margin of 17 points and the Tennents' Scottish Cup for the 39th time - the 13th time it had won the double.

Turnover rose 14 per cent to £69m in the year to June 30 - a10th successive annual increase - aided by a regularly-packed Celtic Park and a European campaign worth £11.5m.

Sales of 50,618 standard and 2,540 premium season tickets were the highest in UK football, the club reported. In all, the club said it sold 86,000 more tickets than the previous season, thanks to its appearance in the group stages of the European Champions League.

Merchandise sales were up 17 per cent. The club also paid down debt by £2m over the year to £15.8m.

But total costs were 19 per cent higher overall, with salary and bonus payments up by a fifth and labour costs rising 4 per cent to 58.7 per cent of turnover.

Mr Quinn said the high costs were a legacy of contracts arising from football's asset "bubble", before the fall in TV receipts in Scotland and elsewhere.

He said the club was "on track to break even" over the course of a five-year plan, saying he expected "more reality in costs and contracts" as the football market stabilised.

The club lamented that Scottish football's financial plight, with several top clubs either in administration or on its brink after the collapse in TV revenues, had "reduced the economic value of the local football product".

However, Mr Quinn rejected suggestions that Celtic would seek to defect from the Scottish Premier League for the more remunerative English Premiership.

He said overtures two years ago from the then Nationwide League came to nothing and that, for the present, Celtic had no ambitions to make its own overtures towards English football.

He added: "I'm not encouraging the thought that we're gagging at the idea of joining the Premiership - we're in the SPL: that's what we do and that's where we perform."

Losses per share were 29.15p (42.91p).