FFP -Manchester City

Cause for concern.

The last published accounts relate to the year 2010 and even sporting director Brian Marwood admits they are a concern.

A turnover of £153 million is acceptable, especially when you consider that it represents a 76% increase in Manchester City’s revenue from £87 million since the FFP initiative was announced in 2009, but expenses of £224 Million and an EBITDA of £71 million mean that there will be some bitten finger nails at Eastlands come the end of the season.

City have the same problem that Chelsea had a few years ago, the players they brought in initially to take them to another level, are now not as good as the players purchased during the 2nd wave of spending. Without a recent pedigree and Champion’s league football to tempt them, the bait for the first wave of new players was a hugely inflated salary and City now find themselves in a position where players such as Kolo Toure are unlikely to play but are still drawing a huge wage every week.

Even taking £34 million worth of Exceptional items into account and a massive sponsorship deal with Etihad, it’s still hard to see how “Citeh” are going to balance the books. Emanuel Adabayour, Edin Dzecko and Kolo Toure illustrate the problem that City face, all three were deemed surplus to requirements during the pre season; all three cost big fees; all three are on mega wage packets and that is the crux of the problem.

Adebayour, highlights the problem they face; he is an outstanding player on a going day and has done a fine job on loan to Real Madrid and Spurs in the past two seasons and should have guaranteed City a decent fee when they sold him although it could be argued that City made a rod for their own back by loaning him to Spurs in the first place. If you dance with the Devil then you have to expect to get burned, if you loan a player to a club and he plays well, then the club will want to sign him permanently and no one plays the transfer market harder than Daniel Levy, just ask the Lyon chairman. City were eventually forced to sell Adebayour to Spurs for a fraction of his true worth on deadline day, because they are desperate to get his wages off the books and the only way they could have sold Dzeko would have been by offering a similar fire sale price given his wages.

The club also showed a big loss on the sale of Nigel De Jong to Milan and Roque Santa Cruz and Wayne Bridge have again been loaned out with City still paying part of their wages. City are currently stuck in a Catch 22 situation that is difficult to break, they need continued success and especially Champions league football and the riches it brings; the way to success is to buy the best players but they need to drastically reduce costs to comply with FFP, certain players won’t take a pay cut to necessitate a move and selling clubs know that Sheik Mansour will pay over the odds, player’s agents know that they can ask silly money. The manager already has a strong squad, but like all managers Mancini wants to strengthen as he knows his job depends on continued success, particularly when you have been given the keys to the treasure chest. At a time when City should be drastically pruning costs the club have just added a net spend of around £30 million in transfer fees alone.

The 2010 loss for Manchester City, when adjusted for UEA’s FFP allowances is still just over £142 million and the club’s sporting director Brian Marwood has admitted that the club may struggle to meet their FFP commitments. The good news is that the revenues from two Champions league campaigns will help; the bad news is that the wage bill is likely to be higher than in 2010.

A further complication is that Roberto Mancini doesn’t have a good pedigree in the Champions league; is it just a coincidence that his Inter side struggled in the Champions league and City failed to get past the group stage last year. Admittedly they were in a tough group, but if it hadn’t been for a last gasp goal against Napoli and a last game win against a weakened Bayern side, who had already qualified, then last year’s campaign would have been an absolute disaster. City have been unfortunate to have been drawn in another tough group this time around and unless Mancini shows far more tactical nous in the Champions league in the next few months, it isn’t difficult to envisage City not qualifying from the group stage again which would impact on the bottom line of course. Winning the Champions league, would be the ideal scenario of course, if UEFA did consider expulsions it would be far more difficult for them to expel the reigning champions.

There is hope for City; as the Swiss Rambler points out:

A safety net might be provided by yet another exemption in the FFP rules, whereby UEFA will not apply sanctions, if:

(a) The club is reporting a positive trend in the annual break-even results;

(b) The aggregate break-even deficit is only due to the annual 2011/12 break-even deficit, which is in itself due to player contracts signed before 1 June 2010 (thus excluding wages for the likes of Carlos Tevez, Gareth Barry, Vincent Kompany, Joleon Lescott and Kolo Toure). Even that might not be enough, though UEFA will surely take note of City’s £100 million investment in their academy, plus their relative restraint in the transfer market this summer.”

As we have seen with the Emirates (or the Emigrates, as it has unkindly been dubbed in some quarters due to the mass exodus of players) stadium naming rights can provide a massive boost to a club’s coffers. The deal done by Manchester City, in conjunction with their long-term sponsors Etihad , dwarfs the Arsenal deal, but has left the club open to accusations of family investment way over and beyond it’s true market value. It will be interesting to see how UEFA handle the deal and whether it represents “fair value” in their opinion. If not they will not deduct the amount they deem to be excessive for the purposes of the FFP break-even figure, not the total amount.

At the end of the current season there will be some difficult decisions to be made at Eastlands. If City are still struggling and believe that UEFA will carry out their threat of expelling clubs from the Champions league then the obvious way to comply is to raise money through selling some of their better players. This of course is counter-productive, especially as you will not be able to spend a great deal in replacing them and as explained previously, there is the further problem of getting market value for the players given their huge wage packets.

The other alternative is to stick, rather than twist and prey that UEFA take into account the fact that the figures are heading South and that UEFA show leniency. Expulsion is the ultimate of the eight sanctions that UEFA can apply and City may gamble that they will get a lesser punishment, such as having to name a smaller squad for that season’s champions league campaign. The ironic part is that City could find themselves with huge financial backing, yet becoming a selling club.

A lot of people will be pleased to see City come unstuck and feel indignant that City have fast tracked their success through an open ended wallet, but as we’ve seen through the Zack Slaton model, all teams buy the premiership title some teams just do it in a far more overt and obvious way than others. I remember City’s fall from grace when they dropped into the 3rd tier of English football and their fans remained incredibly loyal through some very dark days.

Once again it’s an interesting time to be a Manchester City fan and there could be a few more twists and turns yet in the roller coaster ride that Man City fans have endured in the past twenty years.

Do you think than Manchester City will sell some of their best players to comply?

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