This article analyses Manchester City finances in respect of the 2020/21 season.
Season review
Manchester City started the 2020/21 season hell-bent on regaining its Premier League crown from Liverpool. Despite a rocky start, the club rampaged to its fifth title in ten years, cementing its domestic dominance over the past decade.
However, there was anguish in Europe as City’s chase for its first UEFA Champions League (UCL) trophy goes on after defeat against Chelsea in the UCL final.
European performance was however a significant boost to Manchester City finances. The Citizens bounced back from a £125m loss (before tax) to record a £5m profit thanks to UCL performance, deferred broadcast revenue and increased player sales.
2021 also marked the year Manchester City surpassed Manchester United as the highest revenue generating club in the Premier League
Manchester City Finances – Revenue
Revenue rose from £479m to £570m (19%) as Manchester City reached its highest ever revenue levels. In the process, the club also overtook its neighbours Manchester United (£494m) in revenue terms.
Chelsea (£437m) and Tottenham (£360m) have also released their 2021 finances, meaning Manchester City are way out in front in revenue generation in 2021 in the Premier League.
Matchday
Matchday revenue was virtually non-existent (£0.7m) as games were played behind closed doors. This was a £41m reduction in this revenue stream. This is significantly less than the reductions suffered by Manchester United (£90m) and Tottenham (£93m) due to their larger stadia.
The return of fans in 2021/22 should see the majority of this revenue recovered in 2022.
Broadcast
Broadcast revenue rose significantly from £190m to £297m (56%). This was primarily due to two reasons. Firstly, the club’s run to the UCL final boosted revenue considerably, having only reached the quarter finals in 2019/20. Secondly, the delays to the 2019/20 season meant that the club recognised a portion of its Premier League and UCL revenue in the 2020/21 financial year.
2022 broadcast revenue is unlikely to rise significantly due to the absence of this deferred revenue, even if the club goes one step further and secures European glory.
Commercial
Commercial revenue rose from £246m to £272m (10%) as the club agreed several new commercial deals. With the main sponsors remaining unchanged, commercial revenue growth is likely to be limited to a similar level of growth at most.
Manchester City Finances – Revenue summary
Manchester City has finally done it. The Citizens are now the highest revenue generating club in Manchester (and the Premier League) which while not the main goal of the club, is certainly an important milestone. The club will now want to consolidate its revenue, although it may reduce in 2022 due to the absence of deferred broadcast revenue, with UCL performance critical to avoiding this.
Manchester City Finances – Operating costs
Operating costs fell from £495m to £466m (6%) as Manchester City managed to reduce its cost base while substantially increasing revenue, improving profitability immensely.
Wages
Wages remained relatively flat, rising from £351m to £355m (1%). This equates to a wage bill of £6.8m per week. Due to the rise in revenue, the wages to revenue ratio improved to 62%. This is comfortably below UEFA’s recommended limit of 70%. Wages are unlikely to rise substantially (if at all) in 2022 with the only major signing in 2021/22 (Grealish) likely offset by some departures (Torres, Aguero, Angelino etc.).
Other costs
Other operating costs fell from £144m to £111m due largely to matchday cost savings. The majority of these costs will return in 2022.
Manchester City Finances – Operating costs summary
The Citizens did a good job of managing its costs to assist its return to profitability in 2021. Costs are unlikely to rise substantially in 2022, meaning that the club is likely to be in with a chance of profits again in 2022, dependant on revenue levels.
Manchester City Finances – Transfers
Clubs across the globe were lately cautious in the 2020/21 transfer markets given the circumstances. This did not stop Manchester City who had a relatively big summer transfer window. In came Dias (£61m), Ake (£41m), Torres (£30m), Stevanovic (£8m), Bustos (£6m), Rosa (£5m) and Kabore (£4m) for a combined £155m. Departing the Etihad Stadium were Sane (£54m), Otamendi (£14m) and Adarabioyo (£1m) for a combined £69m. This resulted in Manchester City recording a £86m net transfer spend.
Amortisation
Player amortisation rose from £146m to £164m following this transfer activity. This does however include an impairment of £18m, likely in respect of Benjamin Mendy. The club-record Grealish purchase is likely to result in a similar level of player amortisation charges, less the impairment amount.
Profit on player sales
Manchester City recorded a profit on player sales of £69m in 2021. This compares to £40m in 2020. This additional income was critical to the club recording a profit in 2021.
Increased sales in 2021/22 means the club is likely to record a similar or higher profit on player sales in 2022.
Transfer debtors / creditors
Manchester City is a net transfer creditor, meaning it owes more in transfer fees than it is owed. The club is owed £32m in transfer fees, while owing £103m. This results in a net creditor position of £71m. This does not appear to be an issue affecting transfer spending following the club-record Grealish purchase.
Manchester City Finances – Transfers summary
Player sales are an important income generator for Manchester City given its state-of-the-art training/academy facilities and strong squad at all levels. Player sales in 2021 were vital to Manchester City recording a profit and sales to date in 2021/22 will be important to 2022 profitability.
Manchester City Finances – Profitability
The Citizens returned to profitability after a £125m pre-tax loss in 2020.
Operating profit / loss before player trading
Before player trading, Manchester City recorded an operating profit of £106m. This compares to a £14m loss in 2020, a £119m swing. This was primarily due to the £92m revenue increase. With costs likely to rise slightly in 2022, and revenue likely to be flat or fall, Manchester City will likely experience a drop in operating profits.
Operating profit / loss after player trading
After player trading, Manchester City recorded an operating profit of £10m. This compares to a £120m loss in 2020, a £130m swing. Manchester City makes a loss from player trading given the sums spent in the transfer market. Despite this, the level of players sales is critical to profitability and is likely to remain at similar levels to 2021 in 2021/22.
Profit / loss before tax
Due to finance costs of £5m, Manchester City recorded a profit before tax of £5m. This compares to a £125m loss in 2020.
Manchester City Finances – Profitability summary
It was a good financial performance for Manchester City, especially given the losses incurred by some of its rivals. Chelsea (£169m), Manchester United (£24m) and Tottenham (£80m) recorded combined losses before tax of £273m. The Citizens will be hoping to maintain its profitable performance in 2022, however a strong UCL campaign will be critical to this.
Manchester City Finances – Assets / Liabilities
A profitable season meant the club did not need additional funding to operate.
Cash flow
Unfortunately, the published accounts do not provide a cash flow statement. However, cash levels did improve from £18m to £45m. This was due to the increased revenue, but also a reduction in transfer debtors, which fell by £34m to £32m. It does appear that there may have been a £24m capital injection, with called up share capital rising by this amount.
Debt
Manchester City has £94m of debt, of which the majority (£65m) relates to lease charges on the Etihad Stadium. The remaining £29m is owed to its owner.
Net debt
Net debt hence fell from £78m to £49m.
Manchester City Finances – Final Remarks
Manchester City is a rare case of profitability for major European clubs who lost a significant amount of revenue from playing behind closed doors. Having overtaken Manchester United as the highest revenue generating club in the Premier League, Manchester City will be intent on staying there via its performances in Europe and continued commercial growth.
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