Chelsea’s latest financial results, announced during the final hours of 2019, went beyond
merely confirming a lean year at Stamford Bridge. They underlined that the club are
not sustainable at the elite level without the benefits of regular Champions League participation.
There was heavy spending in 2018-19 to acquire Kepa Arrizabalaga, Jorginho and Christian
Pulisic, but the accounts reveal that Roman Abramovich poured in a staggering £247 million
of his personal wealth to enable them to do so, via his holding company Fordstam Ltd.
In one sense that is hugely encouraging; it confirms Abramovich’s continued commitment
to Chelsea at a time when his interest was becoming tenuous and rumours suggested he
was looking to sell.
On the other hand, the level of Abramovich’s financial support sits uneasily with Chelsea’s
sustainability drive since UEFA introduced its Financial Fair Play (FFP) regulations
in 2012.
An eye-watering pre-tax loss of £101.8 million is the largest recorded by the club since
2005 (£140 million), when Abramovich was bankrolling the construction of Jose Mourinho’s
dominant Premier League title winners. Were it not for a £60.4 million profit on player
trading thanks in part to the sale of Thibaut Courtois to Real Madrid, the bottom line would
have been even uglier.
There is also nothing in the numbers to hint that Chelsea won a major European trophy in
2018-19. Overall broadcast revenue actually fell from £204.1 million in 2018 to £200.2
million in 2019, while match-day income dropped from £73.9 million in 2018 to £66.6 million
the following year, despite Stamford Bridge hosting two more games across all competitions.
In financial terms, the Europa League triumph with Maurizio Sarri was significantly less
valuable to Chelsea than elimination from the Champions League round of 16 under Antonio
Conte. That unforgiving reality underlines why, even in what is widely regarded as a
transition season, the pressure on Frank Lampard to deliver a top-four finish in the Premier
League is considerable.
“The stakes are high,” confirmed Dr Rob Wilson, football finance expert at Sheffield
Hallam University. “You get into a very difficult space if you have a couple of seasons
out of the Champions League, because your closest rivals are the ones taking the spots.
You have around a £60 million drop in your revenue while they get a £60 million boost
to theirs, so the net effect is around £120 million.”
Clubs are permitted to lose only a total of €30 million (about £25.5 million) over
the course of any three-year monitoring period. Chelsea’s pre-tax profits of £16 million
in 2017 and a club-record £67 million in 2018 ensure there is no immediate danger of
failing to comply, but the picture gets more complicated if 2020 yields another significant
loss.
The early signs on that front are positive, Chelsea have already banked £115.4 million
from player sales for the next financial year, headlined by the sale of Eden Hazard to Real
Madrid, and a FIFA-imposed transfer ban limited their summer spending to just the £40 million
required to sign Mateo Kovacic permanently. They are also back in the Champions League
and have qualified for the knockout stage.
Lampard is unlikely to be sacked anytime soon and even if he were, such a divorce would
be nothing like as costly as the £26.6 million it took to get rid of Conte and his large
backroom team. Chelsea’s decision to battle the Italian in the courts for more than a
year proved an expensive failed gamble, and it’s easy to see why they subsequently sought
about £5 million in compensation from Juventus to release Sarri.
Conte’s severance package — the most lucrative in the Abramovich era — takes the cumulative
amount the Russian has spent to get rid of managers since arriving at Stamford Bridge
in 2003 beyond £100 million. Given the FFP considerations governing the rest of Chelsea’s
football decisions, he has every reason to give Lampard time and patience to carry out
his rebuild.
Chelsea fought hard for the ability to be able to sign players this January, and there
is scope in the current FFP equation to strengthen Lampard’s squad. It is clear, though, that
any investment on the level that it would take to bring Jadon Sancho from Borussia Dortmund,
or to convince Leicester to part with Ben Chilwell, would be far simpler to balance
in the summer.
Just as important in the next two transfer windows will be the task of trimming what
has become a bloated wage bill — up to £285.6 million from £244.1 million in 2018, a worrying
63.9 per cent of the club’s turnover. The loss of Hazard will help ease the strain,
but Olivier Giroud, Ross Barkley and Marcos Alonso are just three examples of players
on the first-team fringe currently earning six-figure weekly salaries.
Lampard’s youth movement looks certain to save Chelsea millions in the transfer market
over the years to come, if not in terms of the wage bill. Mason Mount, Fikayo Tomori
and Ruben Loftus-Cheek are all paid Premier League wages after signing long-term extensions
this season, while Callum Hudson-Odoi’s bumper new deal — which starts on a £120,000
per week basic wage — has set the bar high for the upcoming negotiations with Tammy Abraham
and Reece James.
Marina Granovskaia’s talent for extracting maximum value from unwanted players will continue
to be crucial to Chelsea’s overall business model. They have generated £397.4 million
profit from player sales since 2013, a staggering figure that dwarfs any of their Premier League
rivals and makes the five major trophies won during the past six years look even more impressive.
We can also expect Chelsea to remain aggressive in pursuing the best possible commercial agreements.
Speaking to the Financial Times in 2017, the commercial director Chris Townsend signalled
his intention to more than double the number of Chelsea’s sponsors from 12 to between
30 and 35 — but this, like anything else, becomes harder if the club is not in the Champions
League.
Chelsea are in the final year of their £40 million-a-year shirt sponsorship agreement
with Yokohama, and The Athletic reported in September that they were testing the market
for a new partner. It wouldn’t be surprising if the club opted to wait until nearer the
end of the season in the hope that Lampard’s team delivers Champions League qualification,
strengthening their hand.
Ultimately though, the only truly game-changing avenue open to Chelsea is the project Abramovich
has shelved. Planning approval for the redevelopment of Stamford Bridge expires in March and, as
yet, there has been no indication as to whether it will be revived. Match-day revenue has
been virtually stagnant in the club’s accounts for years, affected only by Champions League
participation.
“There’s no appetite across the entire division to do anything with ticket prices,”
Wilson adds. “That ship has sailed and clubs also know that a change in ticket prices not
only gives you pretty bad press with your fanbase, but also doesn’t actually generate
a huge amount of additional revenue.
“The gains are very marginal, so the only tangible way of growing match-day revenue
is to get more fans through the door. Chelsea sell out pretty much every week, so they need
a new stadium.”
With no guarantee that a new Stamford Bridge will ever be built, keeping Chelsea winning
at the highest level on the pitch will continue to require a delicate balancing act in the
accounts — with Champions League qualification this season and beyond the top priority.