Analysis of Manchester City's 2021 financial statements
Hail the highest revenue earner in the world! *New visuals alert*
Seating ten points clear at the top of the EPL table, Manchester City’s (City) quest for European glory will be the main objective for the 2nd half of the 2021/2022 season. On the financial front, City has displaced rivals, Manchester United (Man Utd), as the highest revenue earner in England – in fact, City’s 2021 figure puts them number one in Europe. As the only EPL club to report a profit after tax in 2021, City’s business model and recruitment policy are setting the pace, on and off the field.
Profitability
City’s £5m 2021 profit after tax (PAT) is a £120m increase from 2020’s loss. The positive growth of PAT reflects the club’s 2020/2021 success in the EPL, progress in the UCL, and is a byproduct of the club’s recruitment policy (discussed below).
Following Chelsea’s lead (who reported -£1.08bn as retained earnings in 2021), City has negative retained earnings of £730m – cumulative loss - as of 2021. It is not a coincidence that both clubs have achieved remarkable on-field success in the past 15 years. Success in football is expensive. However, this does not take away the fantastic scouting, coaching capacity, and recruitment policy City – and Chelsea – operate.
More often than not, a club reporting profit results from increased revenue rather than reduced expenses. You guessed it! That is the case for City’s 2021 PAT.
Revenue
City’s total revenue is the highest in the EPL and Europe. This is the first time Man Utd is not leading the EPL revenue table, at least as far back as my data goes – trust me, it goes way back! 20 years! Though Liverpool, Paris St Germain, and Arsenal have not published their accounts, I’m certain none of their revenue figures will surpass City’s.
So what happened in 2021?
Simply put, City reaching the UCL final, winning the EPL, and the pandemic-induced loss of matchday revenue – which adversely impacted other clubs more - is why City generated the most revenue in 2021. Matchday revenue fell from £42m to £732,000 in 2021 because matches were played behind closed doors. In 2020, matchday revenue accounted for about 9% of City’s revenue, the lowest percentage of the top 6 clubs (here is a link to my analysis that explains why).
Broadcast revenue grew by 56%, primarily due to City reaching the UCL final. Also, revenue for nine matches of the 2019/2020 season played in July 2020 -a month after the club’s June reporting period – spilled into 2021 figures. By my estimation, the financial reward for winning EPL -compared with 2nd position the previous year- will have contributed less than £2m additional broadcast revenue. Because the differential is minimal, City winning the EPL is financially less noteworthy.
In 2020 (link to article), I spoke about how City’s recent focus on social media, on-field success, and the owners’ network has contributed to the growth in commercial revenue. With more on-field success, City’s commercial revenue now stands at £271m (10% annual increase), exceeding hitherto commercial giant Manchester United by £40m. Now that is something!
In its entirety, though impressive, I do not see City sustaining its 2021 place at the top of revenue earners next year. Why? Man Utd’s matchday revenue in 2021 was £7m, but pre-covid, the club comfortably reported £100m+. With City’s 2021 total revenue figure exceeding Man Utd’s by £75m, it is difficult to see how City maintains top spot in 2022.
Players: wages and salaries, trading and profit
City’s recruitment policy is to buy high-potential players aged 22-25 (see video below) for significant transfer fees and reward them with top wages on long-term contracts. The club’s state-of-the-art facilities and quality coaching staff help the players to reach and, in some instances, exceed their perceived potential. The on-field reward for City’s strategy goes without saying; 3 EPL trophies in 5 years, 5 Carabao cups in 6 years. An additional benefit of signing players at a young age is that their resale value will increase while approaching their peak age at the club.
[Minutes 7:00 to 9:45 in the video is where the Chairman of City speaks about the recruitment policy and philosophy]
This visual is an analysis of EPL players (more to come!). Rodri was signed by City in 2019 for about £60m. He was 22! He is now 25. See how he stands tall above every Midfielder this season? What a buy.
In the comments, you can let me know what you’d like to know about your club or a specific player’s performance.
City’s £355m wage bill is [and will be] the highest in the EPL (though only a handful of clubs have published their accounts). The £4m increase from 2020 results from the movement of players in and out of the club. Nevertheless, in 2021, City paid its staff – football and non-football – 62% of its revenue, 9% less than 2020. Obviously, the improvement is due to the increase in City’s revenue.
The £194m signings of Dias, Ake, Torres, and 3 academy and fringe players in 2021 were partly funded by the £94m sales of Sane, Otamendi, and Adarabioyo. Following the significant outlay in 2018, City’s recent recruitment is specific and specialist, for the lack of better words.
City’s gross spending under Sheikh Mansour has now exceeded £2bn in 14 years, just £193m less than what Chelsea has spent in Roman Abramovich’s 17 years ownership.
In 2021, City made £69m in profit from the sale of Sane, Otamendi, and Adarabioyo, a 72% increase from 2020. As I mentioned, City can either benefit from the players on the field or sell unhappy players with rising resale values; this was the case with Sane.
There is not much to comment on City’s debt as the club’s leverage is low. It hasn’t changed much since my 2020 analysis. You can have a look at it here.
Conclusion
Once again, City will be looking to break their European duck by winning the 2022 UCL title after the disappointing loss to Chelsea last year. Nevertheless, sitting comfortably on the EPL table, impressive financial performance, and a playing squad that seems to have no ceiling, it is modest to say that City has established itself as the best team in Manchester and England, on and off the field.