Financial ReportStrategic Report Manchester City FC

Strategic Report

The Directors present their annual report on the affairs of the Group, together with the financial statements and auditor’s report, for the year ended 31 May 2015.

Principal activities

The principal activity is the operation of a professional football club.

Business Review and Key Performance Indicators

Manchester City maintained its positive trajectory in 2014-15 by increasing revenues for the seventh consecutive year and delivering a bottom line profit for the first time since the acquisition of the Club by the Abu Dhabi United Group for Development and Investment in 2008.

The Club has reported a bottom line profit of £10.7m for 2014-15 while achieving a further increase in operating profit before player trading compared to 2013-14. The operating profit of £2.0m before profit on disposal of players demonstrates the underlying ability of the Club to generate revenues in excess of its outgoings.

Manchester City generated £351.8m in revenue in 2014-15, breaking the £350m threshold for the first time in its history. The Club has experienced overall revenue growth with commercial revenue up by 4% to £173.0m and broadcast revenue up by 2% to £135.4m, despite matchday revenue decreasing by 9% to £43.3m.

Key drivers of increased revenue in 2014-15 included the retention and recruitment of a variety of regional and global commercial partners.

The decline in matchday revenue can be largely attributed to a short Capital One Cup campaign and temporarily reduced seating capacity due to the Stadium expansion works. The Club hosted 19 home matches in the 2014-15 Barclays Premier League and a total of 28 home games in all competitions with average attendance at the Etihad Stadium at a reduced 45,365 during 2014-15.

Wage costs have continued to be controlled and the Club’s wage/turnover ratio now stands at a healthy 55%. Consistent with the commitment made in 2009-10 that transfers of the scale seen in previous years would be unlikely to be repeated, the Club has continued to benefit from greater stability in its first team squad resulting in reduced amortisation costs.

The Club has also made important progress on two key infrastructure projects during 2014-15. The opening of the City Football Academy in late 2014 has transformed the Club’s recruitment, training and development capabilities while the expansion of the Etihad Stadium to a capacity of 55,000 will enable more spectators to attend Manchester City home games from the 2015-16 season onwards.

Importantly, Manchester City’s financial position remains strong. The Club has net assets valued at more than £676m and continues to operate with zero financial debt.

We now enter the 2015-16 season as a profitable business with no outstanding sanctions or restrictions.

Risks and uncertainties

The Board acknowledges that there are a number of risks and uncertainties which could have a material impact on the Group’s performance. The Group’s income is affected by the performance of the first team because significant revenues are dependent upon strong team performances in the Premier League, domestic and European Cup competitions. The Club is regulated by the rules of the FA, Premier League, UEFA and FIFA and any change to these regulations could have an impact as the regulations cover areas such as: the distribution of broadcasting income, the eligibility of players and the operation of the transfer market. The Club monitors its compliance with all applicable rules and regulations on a continuous basis and considers the impact of any potential changes.

By order of the Board

J MacBeath
28 August 2015
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