Dramatic improvement in City finances

The authoritative Swiss Ramble reviews the accounts of Manchester City where pre-tax profit improved from £5m to £42m, as revenue rose £43m (8%) from £570m to £613m, thanks to recovery from COVID and the return of fans to the stadium, while operating expenses only increased £11m (2%). Profit from player sales was almost unchanged at £68m.

City have had a few issues with FFP in the past, but were not among the clubs recently fined by UEFA. The SR's model suggests that they were fine over the latest monitoring period even before allowable deductions for “good” expenditure and COVID impact.

They benefited from the highest owner funding in the Premier League in the 10 years up to until 2021 with £684m, followed by Chelsea £516m. However, it’s a very different story for the five years up to 2021, when City’s £81m was much lower than Everton £448m and Aston Vila £400m.

City have become largely self-sufficient in recent years (excluding the impact of COVID), but the club did receive £23m additional share capital in 2020/21. To date, the owners have provided the football club with more than £1.3 bln of funding via new shares or loans.

The £42m profit is the best financial result of the leading European clubs that have reported 2021/22 figures to date. In stark contrast, large losses have been posted almost everywhere else, e.g. PSG £327m, Juventus £225m and Barcelona £157m (excluding their economic levers).

Their financial performance has dramatically improved since the early days of the current ownership, when they posted some of the PL’s highest losses, including the worst ever (£197m in 2011). As Khaldoon said, “In many ways we are beginning to achieve our long-term ambition.”

Profits were boosted by “significant” player trading, which generated a £68m gain, the highest in the Premier League. Mainly from the sale of Ferran Torres to Barcelona.  Player sales have become increasingly important, having made £137m profit in the last 2 seasons and over quarter of a billion in the last 5 years. This trend shows no sign of slowing down with substantial sales again this summer, such as Sterling, Jesus and Zinchenko.     What is striking is the high transfer fees they have achieved from the sale of academy products, e.g. this summer included Lavia, Bazunu, Edozie and Larios to Southampton for a reported £38m, representing pure profit in the account.

City have now reported profits in seven of the last 8eightyears with the sole exception being the £125m loss in 2019/20, driven by COVID. The £42m profit last season is not only a club record, but more than double the previous high (£20m in 2016).

Revenue has increased £78m (15%) from the 2019 pre-pandemic level of £535m, entirely drive by commercial income, which is up £82m (36%). Commercial now accounts for over half of City’s total revenue.  £613m revenue in 2022 is the second highest ever reported in the Premier League, only surpassed by Man United £627m in 2019. However, while United’s revenue has essentially not grown in the last five years, City’s is up by £160m (over a third).

In fact, despite City’s issues with UEFA, the Champions League has been a nice little earner for City with nearly half a billion Euros (€479m)  received in the last five years, around the same as Liverpool €478m, but well ahead of Chelsea €400m, Man United €321m and Spurs €255m.
Wages fell slightly by £1m to £354m, which means they have remained around this level for the last three years, while Man United wages have increased £100m in the same period. That said, City’s wage bill has grown 80% from £198m in 2016.
The wages to turnover ratio improved from 62% to 58%, one of the lowest (best) in the Premier League. Wages expected to rise after this summer’s signing of Erling Haaland, though the increase will be mitigated by the numerous departures.
City have splashed out £938m on player recruitment in the last 5 years, even more than £659m in the preceding 5-year period. This summer they again spent big on Erling Haaland and Manuel Akanji (both from Borussia Dortmund), Kalvin Phillips and Sergio Gomez (Anderlecht).
In fact, City have the highest transfer expenditure in the Premier League over the five years up to 2021 with nearly a billion, though their £992m outlay is pretty much the same as Chelsea, followed by Man United £850m, Arsenal £676m and Liverpool £660m.
The squad cost increased from £975m to £1,077m, which is the first time that a Premier League club has broken through the billion pound barrier. The next highest in England are Chelsea £959m (2021 figure) and Man United £779m.

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The Political Economy of Football V2

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