City release Annual Report: Losses reduce, turnover and wages rise

City yesterday released their Annual Report, always an interesting announcement given some of the astronomical numbers that have featured over the past few seasons since the ADUG takeover.

The key highlights from the report:

• Increased turnover from £153.2m to £231.1m with Commercial income increasing to £112.1m (from £57.8m) - the first year that the Etihad deal is counted in the records.
• However, there were only marginal increases in both matchday and TV revenue; highlighting quite how important the efforts to increase commercial revenue and move into new areas are.
• These increases saw City's losses halved to £97.9m, down from £197.5m a year ago and it is this figure that is ultimately key to City's ongoing compliance with the Financial Fair Play (FFP) regulations. This figure, of course, sees City still well in excess of UEFA's allowable amount, yet it is a significant step in the right direction.
• A potential barrier though is City's spending on wages, now up to £201.7m; an increase of £27.8m and the first time a Premier League club has had a wage bill in excess of £200m.

And a couple of other interesting points:

• The "capital base of the club was strengthened through the issuing of £169m in new equity" during the year.
• A £500,000 payment was made to departed CEO Garry Cook.
• 77% of City's Academy players are drawn from the local area, with a £4.8m annual investment made by the club.
• City are the top ranked soccer team in terms of social media utilisation and were behind only the LA Lakers in terms of overall sports teams/franchises.

And some commentary from those in positions of power:

Chairman Khladoon al-Mubarak on the importance of City's Football Academy:

"...the most significant current initiative to secure the long-term sustainability of the Club's football operations."

CEO Ferran Soriano on the general outlook:

"What I have found is a Club on the verge of a historic transformation, reinforced by a genuine commitment to doing things well. It is a Club with a rich history and the potential for an even brighter future."

Whilst there are undoubted concerns remaining about the ability of the club to comply with the Financial Fair Play (FFP) regulations, the official site finishes with an upbeat message:

Whilst the 2011-12 financial results represent a further step towards achieving the Club's objective of long-term sustainability both on and off the field, the application of UEFA allowable reliefs for certain categories of expenditure and investment in 2011-12, position the Club well for compliance with UEFA's Financial Fair Play regulations which come into effect in season 2013-14.

David Conn in The Guardian elaborates further on this point:

The exemption on which City are set to rely begins with an allowance Uefa will make if a club's losses are higher than €45m for the 2011-13 years, but are being steadily reduced. City have halved their loss from the £197m, the highest ever in English football, in 2010-11, so will show Uefa that positive "trend". In this 2012-13 year, despite exiting the Champions League at the group stage, City will again expect to diminish the loss by increasing their income from commercial sponsorships and reducing costs by being prudent in the transfer market.

If that trend is happening, clubs can escape a Uefa sanction if they can show their overall loss is higher than the €45m allowed only because they made a loss in 2011-12 caused by the wages of players' contracts signed before 1 June 2010. That is vitally important to City, who did heavily invest in several top players, including Gareth Barry, Joleon Lescott and the £200,000-per-week Carlos Tevez, before that date.

City will clearly rely on the 'postive loss trend' that Conn mentions and there a number of UEFA exemptions City can utilise to ensure compliance, something the excellent Sporting Intelligence points out on their twitter timeline and is well

The full report can be found here and the at a glance summary here. Both are well worth checking out.