Manchester City will today announce losses of £92.6m for the last financial year, the second-biggest single-year loss for any club in the history of English football, after Chelsea – and City's figures do not even take into account the summer's £125m spending spree.
City's staggering losses are more than twice the £44.4m annual losses announced last month by Chelsea but they are still not as big as those that the London club disclosed four years ago. Chelsea posted a deficit of £140m for the 2004-05 financial year, when their owner Roman Abramovich's spending was at its height. However, City's losses next year are anticipated to be their most stunning.
The City accounts released today only run to the end of May last year taking in the £34.2m spent on Robinho in the summer of 2008 on Sheikh Mansour's first full day in ownership of the club. They also include the money spent on Shay Given, Craig Bellamy, Nigel de Jong and Wayne Bridge, all bought for a combined cost of around £53m in the January transfer window.
Last summer, City spent roughly a further £125m on the likes of Gareth Barry, Emmanuel Adebayor, Kolo Touré, Roque Santa Cruz, Joleon Lescott and Carlos Tevez which will form the basis of next year's accounts. Those accounts will also include the estimated £12m cost of terminating Mark Hughes' contract to appoint Roberto Mancini as manager last month.
The extent of Sheikh Mansour's investment in the club will be made clear in a proviso in the accounts that reveal the Abu Dhabi businessman has converted loans of £304.9m into equity and invested another £89.6m through the purchase of further shares in the club.
Given that the club announced in September that Sheikh Mansour, one of the Abu Dhabi royal family, had bought the remaining 10 per cent of City shares not in his control following his initial 2008 takeover, it is not clear under what terms the new shares were issued. Abramovich did the same last month with Chelsea – turning debt into equity is how clubs such as Chelsea and City hope to beat new Uefa rules coming in that will prevent heavily indebted clubs from competing in the Champions League.
It is thought that Sheikh Mansour has earmarked around £771m for the entire investment, taking in the acquisition of the club, player transfer fees and wages. With a new manager to back in this month's transfer window he is expected to spend again, with Patrick Vieira, the former Arsenal captain, anticipated to be the first signing of the Mancini era.
City's spending will infuriate those such as the Uefa president, Michel Platini, and the Arsenal manager Arsène Wenger, who believe that a club's spending should be in line with its capability to generate income. The club's turnover came to only £87m, which is dwarfed by that of Arsenal (£313.3m in their last accounts) and Manchester United (£256m) – both re Champions League perennials.
The club described their key cost as "operating expenses", primarily paying the transfer fees of their top players, which was £121.2m, augmented by payments of £92.6m which accounted for salaries and player amortisation. Amortisation is the decreasing value of a player to a club's accounts as he comes closer to the end of his contract.
City attempted to put a brave face on their spending, which coincides with what promises to be one of the most austere years for Britain's economy, by conceding that the high losses are likely to continue for some time. There were none of the bold promises that Chelsea's former chief executive Peter Kenyon made in the early Abramovich years that his club would eventually break even.
A City statement said: "A period of significant planned investment in all areas of the club; the playing squad, the youth academy, infrastructure, website and technology applications and our people. Not surprisingly, this substantial investment has had a significant impact on this year's financial results. This investment is also forecast to similarly impact the financial results of the next several years as the club seeks to achieve success both on and off the field."
The promise that City's financial performance would improve off the field as well as on it was another of Chelsea's tactics and that has, in the short term, proved a forlorn hope. Recent history would suggest that, despite the strides Chelsea made with two Premier League titles, they have been unable to touch the match-day revenue figures earned by traditionally larger clubs such as United and Arsenal.
Graham Wallace, City's chief financial and administration officer, said: "The financial results reflect a period of rapid change at the club, the result of long-term planning and investment by the board and our owners, to create a sustainable business in the future.
"We have always said this transformation will take a number of years and these figures reflect that. The owners' decision to convert debt to equity is in line with their previously stated financial strategy and is fantastic news for supporters of Manchester City, whose club is now on a secure financial foundation that gives a tremendous platform to build from in future years."
Unbalanced teams: Profits and losses
Manchester City £92.6m loss (year ending 31 May 2009)
Manchester United £44.8m loss (30 June 2008)
Chelsea £44.4m loss (30 June 2009)
Liverpool £42.6m loss (31 July 2008)
Arsenal £35.2m profit (31 May 2009)
Tottenham Hotspur £23.2m profit (30 June 2009)
City's transfers in that period
Jo (CSKA Moscow) £18m
Vincent Kompany (Hamburg) £6m
Robinho (Real Madrid) £32.5m
Shaun Wright-Phillips (Chelsea) £8.5m
Pablo Zabaleta (Espanyol) £6.5m
Shay Given (Newcastle) £8m
Wayne Bridge (Chelsea) £10m
Nigel de Jong (Hamburg) £16m
Craig Bellamy (West Ham) £14mReuse content