Chelsea FC’s financial accounts and understanding Roman Abramovich

Chelsea’s billionaire owner Roman Abramovich is a man who polarises opinions. Most accept that a) he’s a smart businessman and b) he loves football and Chelsea, but beyond that there are two camps – those who believe that Roman will ‘grow tired’ of Chelsea and those who believe that Roman is truly dedicated to Chelsea.

Both camps are missing the point somewhat. Roman Abramovich’s attachment to Chelsea is based on both passion and sound business sense. This isn’t a sordid love affair (once you’re a fan, you’re a fan for life, right?) and considering his heavy investments in the club and the fact that it will take quite some time to recoup them, he’s not going anywhere for a long time.

In that backdrop, the latest (06/07) financial documents from Chelsea Limited make for some interesting reading (download PDF here).

The highlights:

  • Operating expenses increased by 35m, of which almost 19m was a result of higher payroll costs (more wages to be paid).
  • Loss was ‘reduced’ by less than 5m – but the extra 15m earned in 07/08 in TV revenue will help reduce it more in 07/08.
  • Abramovich’s ‘covering’ of Chelsea’s losses and payments for transfers are listed as an interest-free loan (578m), repayable on 18 months notice – fun numbers for a doomsday scenario but as Azar will eventually drop in and explain, this is not as bad as it sounds.
  • We can assume that Roman’s going to keep bankrolling Chelsea’s losses until they start showing a profit, so you can expect Roman’s loan to balloon up to around 650-700m.
  • The squad was valued at 266m as of 20 June 2007.

The Numbers – do they mean anything?

News reporting is often an exercise in simplification – to reduce the complex into a single-sentence argument that evokes a primal emotional response, regardless of whether the argument is correct or whether the response is justified. Buttons need to be pushed, and nothing pushes them better than playing on fear and loss.

So when we read that the combined debt of Chelsea and Manchester United is 1.5bn, should one get worried? What for, really? The game is being played with the same passion, and considering that football is a business whether ‘fans’ own the club (Arsenal) or entrepreneurs own it (United, Chelsea, Liverpool), it’s not as if the lack of debt would make the world a better place for football fans.

The total amount of Chelsea’s debt – 736m – is an impressive figure to throw about but when taken in context it just points to Chelsea’s financial strength. Assuming that Roman is a smart money-man (it would be naive not to), we can safely say that he has catered for the worst-case scenario (Chelsea not breaking even in the next 5 years) and therefore if the owner can afford to bankroll a loss of 700m+ or so (while playing for profits and gains 30 years down the road) then isn’t this a sign of Chelsea’s strength as opposed to weakness?

In case you’re not clear on this, your illusions of what is fair and unfair in football has nothing to do with the financial stability of a football club.

The numbers give us valuable insight into how the club is being run (we’ve analysed Manchester United’s debt earlier this month) but in no way point to or predict an impending crisis.

Far from it, Chelsea are in a strong financial position as long as they can break even in the next few years (something that might need a cutback in wages and could spell the end of time for certain players at Chelsea this season).

But it’s easier to pander to the notion that Chelsea is staggering under debt and that Roman has made a mistake – isn’t it?

Also see:

Football Debt, Spiralling Wages and the future of European Football

Transfer Rumors 20 May 2008: Carson to Villa, Cuellar to Newcastle, Bridge to Juventus, and more
Exeter City: Goodbye to the Conference


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