City’s owner wipes out £305m debt as losses rocket to £92m

MANCHESTER City today posted annual losses of more than £90m and revealed that billionaire owner Sheikh Mansour has converted £305m worth of loans into equity – meaning the club carries no debt.

The figures, announced for the year to the end of May 31 2009 and posted on the official club website, covers the first year of ownership of Abu Dhabi royal Sheikh Mansour.

Since buying the club from disgraced ex Thai premier Thaksin Shinawatra, Sheikh Mansour has pumped millions of pounds into transforming City on and off the pitch.

Brazil forward Robinho was signed from Real Madrid for a British record £32m in August 2008, and the club has dominated transfer spending in England since the Abu Dhabi takeover.

The club warned today of further heavy losses in the future – as a result of further heavy investment in the playing squad and infrastructure.

The losses for the 2010 financial year, which are certain to be higher still after last summer’s transfer spree on players such as Carlos Tevez, Emmanuel Adebayor – both signed for around £25m, Kolo Touré, Joleon Lescott and Gareth Barry and an increasing wage bill.

The figures will also cover the cost of terminating the contract of Mark Hughes and his coaching staff last month. 

Turnover for the year rose 6% to £87.0m (2008:£82.3m), despite a £4.5m fall in commercial revenues as a result of the decision not to use the City of Manchester Stadium for events such as pop concerts during the period.

Operating expenses soared from £83.9m to £121.2m – mostly as a result of increased playing staff costs.

This resulted in a net operating losses surging from £1.6m to £34.2m and a net loss for the year, after amortisation of player contracts and financing charges, of £92.6m – up from:£32.6m in 2008.

Costs relating to amortisation of player contracts increased in the year, rose to £39.4m from £25.4m in the previous year and reflecting again investment in the playing squad.

Interest payable and similar charges increased significantly as a result of the increased level of shareholder loans made to the business during the year.

Since the year-end Manchester City said it had restructured its balance sheet, with  Sheikh Mansour converting all of his existing £304.9m shareholder loans made to the Club into equity. Documents filed to Companies House on December 24 confirm the refinancing.

The club said Sheikh Mansour had also bought further shares to a value of £89.6m as a measure of his long term commitment.

The bulk of this figure is likely to represent the remaining 10% of shares held until September 2009 by Thaksin Shinawatra.

City’s chief financial and administration officer Graham Wallace 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 that 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.”

The figures show that match day attendances were up to 42,890 from an average of 42,081 in the previous season, with ticketing revenues ahead by £1.8m mainly as a result of the extended UEFA Cup run.

Television revenues were up 12% to £48.3m mainly as a result of UEFA cup performance, offset partially by a lower league placing than in the previous year.