Manchester City, the Premier League team owned by Abu Dhabi’s Sheikh Mansour bin Zayed Al Nahyan, had the largest fiscal loss ever in English soccer.
City, which is five points clear at the top of the league, had a loss of 197.5 million pounds ($312.4 million) in the 12 months ended May 31, the team said today on its website. That’s 76.2 million pounds more than last year’s loss and surpasses the record 132.8 million-pound loss posted by Chelsea in 2005.
City has spent more than 500 million pounds on transfer fees and salaries since Mansour bought the team in September 2008. The club won the F.A. Cup last season, its first trophy in 35 years, and qualified for Europe’s top club competition, the Champions League. It’s leading Manchester United, the record 19-time English champion, in the league this season and defeated the rival a 6-1 at Old Trafford last month October.
“Our losses, which we predicted as part of our accelerated investment strategy, will not be repeated on this scale in the future,” City’s Chief Operating Officer Graham Wallace said in the team’s annual report.
City’s spending has dwarfed that of its rivals in recent years. During the fiscal year, it spent more than 150 million pounds on players like Edin Dzeko, David Silva, Yaya Toure, Mario Balotelli and James Milner. Acquiring such a roster meant its wage bill of 174 million pounds outstripped its revenue by 21 million pounds. Manchester United’s annual sales of 331.4 million pounds are more than double City’s.
Wallace said the results represent a “bottoming out of financial losses at Manchester City.” Revenue will be strengthened next season thanks to Champions League income and the start of a record 10-year naming rights agreement worth more than 300 million pounds with Abu Dhabi national airline Etihad.
Unlike Manchester United, which has debts of more than 400 million pounds, City’s spending has been covered by its owner. Mansour has pumped 291 million pounds of equity into the club since June 2010, bringing his total investment to almost 800 million pounds, leaving the club with no debt.
Buying the best talent hasn’t always gone smoothly. The team said it wrote off 34.4 million pounds on the value of players it previously signed. It may soon have another loss when Carlos Tevez leaves the club. Media reports said City paid as much as 47 million pounds for the Argentine two years ago and he’s expected to leave in January after first refusing to play in a game and then returning to his homeland without permission.
The loss comes at a time when other teams across Europe are reigning in spending to meet governing body UEFA’s financial regulations. Teams with losses of more than 45 million euros ($61 million) could be barred from the Champions League from 2014. Clubs that show trends of reduced losses could be spared the sanction, according to UEFA’s Financial Fairplay regulations.
The deal with Etihad, which is controlled by Sheikh Khalifa, Mansour’s brother and the ruler of Abu Dhabi, is among a slew of commercial deals signed with companies from the Emirate. That’s led rival owners like Liverpool’s John W. Henry to question whether City’s contracts are valued correctly. UEFA said it has a team of specialists that will examine the pacts.
“As we undertake the club’s commercial transformation, we are cognizant of the incoming UEFA Financial Fair Play regulations and consequently we continue to maintain positive and ongoing dialogue with all appropriate football authorities,” Wallace said.
Commercial sales grew 49.7 percent to 48.5 million pounds and television income increased 27 percent to 68.4 million pounds as City was the third most-broadcast team last season. Champions League appearance will probably move that figure to close to 100 million pounds next year.
City’s spending hasn’t been confined to the pitch. Earlier this year, it announced plans for a youth development complex, sports science institute and a new training ground around the Etihad Stadium. The project will provide work in one of the poorest regions of the U.K., where a regeneration project stalled amid the global meltdown.
“It is more important than ever to redouble our efforts and to work towards achieving our ambition to establish Manchester City as a more successful, sustainable and internationally competitive football club, which remains rooted in the heart of the community it serves,” said team chairman Khaldoon al-Mubarak, an adviser to the Abu Dhabi royal family.