Chelsea accounts explained: A big loss, sponsor worry and an FFP headache
https://theathletic.com/4394846/2023/04/10/Chelsea-accounts-explained-ffp/
It was a season like no other for Chelsea. The inglorious end of Roman Abramovich’s 19-year reign as owner, two months of government sanctions and the eventual £2.5billion ($3.1billion) sale to a US consortium headed up by Todd Boehly and Clearlake Capital.
Those extraordinary 12 months changed everything around Stamford Bridge but, as the club’s newly published accounts for that 2021-22 campaign underline, the turbulence and change came at a price. Chelsea FC Holdings Ltd recorded a net loss of £121.3million last season, despite annual revenue climbing to £481million.
The numbers depict a club facing financial challenges given they spent more than £500million in the transfer market subsequent to the “extraordinary expenses and loss of revenue” that came with Abramovich’s downfall.
The Athletic assesses the key findings.
What are the headline figures?
The numbers are not new — Chelsea published a brief outline of their financial results on March 27 — but a recap is a good place to start.
The £121million loss was bad but the figures would have been worse without a productive season in the transfer market. Despite spending £118million on new players, including £97million on signing Romelu Lukaku in the summer of 2021, Chelsea turned a trading profit of £123.2million after selling Tammy Abraham to AS Roma, Marc Guehi to Crystal Palace, Fikayo Tomori to AC Milan, and Kurt Zouma to West Ham. That ensured an operating loss of £235million was broadly cut in half.
However, the loss still meant that Chelsea were the first club to have accumulated pre-tax losses exceeding £1billion since the Premier League began.
There were positives within the accounts. Turnover was up 10 per cent to £481million after the return of match-day supporters following the COVID-19 pandemic. Commercial income rose by £23.5million to £177million, even with the restrictions placed upon the club by the UK Government between March and May owing to Abramovich’s alleged links to Russian president Vladimir Putin — Chelsea were unable to sell merchandise or tickets that spring.
Gains in match-day and commercial income, though, were offset by a fall in broadcast revenue. That was down from £273million to £235million, largely due to Chelsea being unable to match the previous season’s UEFA prize money for winning the Champions League in 2021. Wages for the season, meanwhile, had climbed slightly to £340million.
Were there any devils in the detail?
The full accounts for Chelsea FC Holdings, 46 pages long, were published at Companies House on Sunday morning and revealed the money that was paid out during the sale of the club.
A total of £49.75million was given to former directors “in connection with services provided to Fordstam Limited (the former parent company of Chelsea) relating to the sale of the company to Blueco 22 Limited (the consortium headed by Boehly).”
None of those directors were detailed by name but Marina Granovskaia, the trusted former aide of Abramovich, took £35million under “remuneration for qualifying services”, as well as £1million in compensation. Former chairman Bruce Buck and chief executive Guy Laurence are also thought to have been among those paid from the £49.75m pot.
Another contributory factor in the losses were the impairment of player registrations of almost £77million, which amounts to Chelsea accepting a reduction in value of a company asset. That will almost certainly include Lukaku, whose return to Stamford Bridge proved disastrous last season. The Belgian, who turns 30 this summer, has been loaned to Inter Milan this season but still has three years remaining on a lucrative contract.
Not that the losses dissuaded Chelsea’s new owners from spending big in their first season.
The latest set of accounts add that since July 1 the overhaul of the club’s playing squad and management had come at “an initial cost of £368.7million”. Among that cost will be former boss Graham Potter, who Chelsea paid £21.5million for in compensation to Brighton. Potter failed to last seven months in charge.
Not included in that vast outlay, though, will be the club’s costly January signings, such as Enzo Fernandez, Mykhailo Mudryk and Benoit Badiashile.
So how healthy do Chelsea look based on these accounts?
Chelsea were never strangers to losing money in the Abramovich’s age of excess and, albeit with a season badly impacted by the COVID-19 pandemic, there have now been losses totalling £341million across the last four seasons. Only 2019-20, when a £36million profit was posted, breaks the recent cycle.
Chelsea will argue that these latest accounts are skewed by those “extraordinary expenses and loss of revenue” that came with the change of ownership, but the Clearlake consortium, with Boehly as figurehead, have taken spending to new heights in the last 12 months.
The £500million spent on recruitment was more than Chelsea’s turnover in all of last season and, as yet, has delivered very little. Thomas Tuchel and Potter have both been sacked but a 1-0 loss to Wolverhampton Wanderers under interim boss Frank Lampard has left Chelsea 11th in the table and 17 points adrift of the top four. This week’s Champions League quarter-final against Real Madrid offers the last chance to salvage the season.
Graham Potter’s replacement Frank Lampard during Chelsea’s loss to Wolves (Photo: Eddie Keogh via Getty Images)
These latest accounts, however, are a pertinent reminder that Chelsea’s business model has traditionally been reliant on player trading — the last five seasons have now seen a profit of £467million on player sales. But for every £10 spent on transfer fees under Boehly, only £1 has come the other way to date.
Chelsea do not have the financial capabilities of Premier League rivals. Tottenham Hotspur and Arsenal both have higher match-day incomes, while Manchester United, Liverpool and Manchester City all still have vastly superior commercial strength. Manchester City, for example, had almost twice the commercial income last season.
Chelsea had warnings on that front, too. The latest accounts say that the two-month period of inactivity due to government sanctions “will also have an impact on the following year’s financials due to restrictions on entering into contractual arrangements” this time last year.
A replacement for Three, the club’s primary commercial partner, has yet to be found. Nor has a new sleeve sponsor, with WhaleFin unwilling to continue with its backing next season. That amounts to a £60million void to fill ahead of next season.
Where does this leave Chelsea and Financial Fair Play?
Painted into an increasingly tight corner. For all the creative accountancy in play, like tying new arrivals to lengthy deals to aid FFP compliance, Chelsea have now suffered heavy losses in three of the last four seasons.
That saw them included on UEFA’s watchlist last September as one of 19 clubs that would be “monitored closely in the upcoming period” and the lavish spending witnessed in the last two transfer windows has only increased pressure. Fail to qualify for the Champions League, a feat that can only come with winning this season’s competition, and balancing the books grows harder still.
Chelsea have FFP headaches that realistically can only be remedied through player sales this summer. Cashing in on homegrown youngsters would allow the club to add that income immediately to their books, offsetting this season’s vast investments in the transfer market.
Chelsea’s academy products could be key again this summer. Selling Mason Mount, who will soon enter the final year of his contract, would provide enormous assistance in their attempts to stay within FFP rules, although their valuation of £70million is unlikely to aid a quick sale.
There are other options, too. England internationals Conor Gallagher, Callum Hudson-Odoi and Ruben Loftus-Cheek might also bring in a combined £100million if they became casualties of a summer restructure.
Chelsea need to sell this summer. And the sooner the better. Agreeing sales before June 30 would allow the money to be added to the accounts for this season.
“The football club continues to balance success on the field together with the financial imperatives of complying with UEFA and Premier League financial regulations,” the club’s accounts read. “The club has complied with these financial regulations since their inception in 2012 and expects to do so for the foreseeable future.”
That will be easier said than done.
