Chelsea reveal £66m loss as they count cost of managerial departures

13 February 2009 09:11
The accounts reveal that owner Roman Abramovich's personal commitment to the club has grown to £709.7m, but in a significant move he has converted more than half of that loan into equity in the club. Abramovich has converted £369.9m of his loans into equity, leaving the remainder of £339.8m as interest-free loan.

The club hope that the move will draw the sting from criticism of the club's reliance on Abramovich, which has been questioned in the last year by Uefa president Michel Platini and FA chairman Lord Triesman.

The club hope it will also stand as evidence of Abramovich's ongoing commitment to the club, although events of the last week that saw Luis Felipe Scolari personally sacked by the Russian and replaced by Guus Hiddink have demonstrated that he remains fully engaged with the club.

The losses, down almost £20m from the £74.8m recorded the previous year, include £23.7m in compensation payments to managers Jose Mourinho and Avram Grant, both of whom were sacked last year. Scolari's pay-off of £7.5m, which could grow to £10m when his support staff are included, is not included in these accounts.

The £66m loss continues the downward trend since the club posted record losses of £140m in 2005, and would have been 43 per cent down on the previous year without the pay-outs ot Mourinho and Abramovich. Nevertheless it remains a significant challenge to meet the commitment to break even by 2010.

More immediately chief executive Peter Kenyon wants the club to be 'operationally independent' of Abramovich by the start of next season, meaning they will require no cash assistance for the day-to-day running of the club.

The biggest barrier to that is a squad that is in urgent need of a significant overhaul and has saddled the club with a wages-to-turnover ratio of 70 per cent, among the highest in the league.

Club sources have indicated that the club intends to finance the bulk of summer transfers from day-to-day revenue or from the proceeds of player sales, but major acquisitions will still require the assistance of the owner.

Turnover was up 12 per cent to £213.1m thanks largely to the increase value of the Premier League's television deal, which brought the club £46m during the season, and the run to the Champions League final. Gross turnover, including adidas global sales of Chelsea merchandise, was £248m.

With the stadium at capacity and commercial deals for the next year already signed it will become harder to secure double-digit turnover increases in 2008-09.

Chelsea chairman Bruce Buck said the accounts would silence speculation over Abramovich's commitment: 'Following the conversion of half of the interest-free loans into equity there should now be no doubt as to the owner's commitment to the club and the stability of the company's funding structure.

'We have always believed that this "debt", now reduced by 50 per cent, has been misrepresented. Chelsea has no external debt and makes no punitive interest payments to external funders.'

Kenyon said: 'There is no doubt that the positive upward trends of turnover and the continued reduction in losses shows that Chelsea is building a strong business base to build on in what will be challenging times. This is even more evident given that the results were adversely affected by the exceptional items.

'We have set ourselves ambitious targets to be EBITDA neutral on June 30, 2010 and to require zero cash funding from the owner at the beginning of the financial year 2009/2010.

'We have consistently advocated the aim of self-sufficiency which has always been supported by the owner. We are hopeful of being close to these targets in the timeframes we have set given the underlying strengths of the business.

'Success on the field is a key part of this. But in line with our long stated business aims, any squad restructuring in the summer will be funded predominantly by sales as we have consistently reduced our net transfer spend over the last five years and will attempt to continue this trend.

'This is the fifth set of financial accounts since the takeover and Chelsea has made huge progress during that period as a football club and a business. 'In that time we have had significant on-field success, our turnover has increased by 96 per cent, which ranks us fifth in the world, and our fan base has increased hugely. That gives us great confidence for the next five years.'

Source: Telegraph