Jose Mourinho was given a stark reminder on Tuesday that the days of virtually limitless spending at Chelsea are over when the club posted a huge annual loss of £49.4 million ($91.7 million) but still promised to meet UEFA’s strict new financial rules.
The losses for the 2012-13 season arose in spite of a record £255.8 million turnover and represent a significant step back from the previous financial year, when the club posted a small £1.4 million profit. That was the first time Chelsea have been in profit under Roman Abramovich and ensures the club will meet UEFA’s Financial Fair Play guidelines for the first formal monitoring period at the end of this season.
UEFA’s acceptable variation for the first two years of FFP is £37.5 million and, after subtracting spending of around £15 million on youth development and infrastructure, Chelsea expect UEFA to calculate a combined loss for 2011-12 and 2012-13 of £33 million.
Crucially, however, UEFA’s acceptable variation for the next monitoring period, the three accounting years from 2011 to 2014, is also £37.5 million. It means that Chelsea must not lose more than about £4.5 million in the current financial year, 2013-14, to comply with FFP.
The challenge then gets even harder, with UEFA only accepting losses on a rolling three-year basis of a maximum of £25 million. Given that these new 2012-13 accounts will form the first year of that equation, Chelsea will actually have to make an overall profit of around £9 million over the next two years to meet the UEFA guidelines at the end of the monitoring period in 2016.
UEFA is adamant that its FFP regulations will be backed up by meaningful sanctions that range from warnings to fines and possible exclusion from the Champions League. However, it will also take into account a club’s direction and there has been a very clear sense that Chelsea have made an effort to control their spending and move towards the UEFA principle of self-sustainability.
Chelsea remain adamant they will continue to meet the FFP regulations but the club’s reliance on owner Abramovich and also the need to limit spending is clear. Clubs that do not have an owner willing to turn losses into equity are not permitted to lose more than £4.2 million over any monitoring period.
The accounts also place a question mark over the extent to which Chelsea can keep making major signings at the same time as funding a wage bill that is second only to Manchester City in the Premier League.
Mourinho has recently said that Chelsea would be vastly improved with two major signings and has repeatedly outlined his concern that other clubs follow the FFP rules.
City spent £90 million on four new players during the summer transfer window despite running at a loss of £97.9 million in their most recently published accounts.
‘‘Next year Chelsea will have a phenomenal team,’’ said Mourinho. ‘‘Between the work we are doing and evolution of the players and a couple of clinical signings – two clinical players to complete the puzzle you are building – Chelsea next season will have a very good team.’’
In Chelsea’s favour are their growing revenues and a commercial income that rose in these accounts from £67 million to £79.6 million. New deals with Adidas – worth £300 million over 10 years – and Audi will also take effect from next year’s accounts.
The difference of more than £50 million in Chelsea’s profit/loss figure of 2011-12 compared to 2012-13 is largely explained by the cancellation of BSkyB shares in the club (worth around £17 million) and the fact that Chelsea won the Champions League in 2012. Although they won the Europa League last year, the Champions League triumph brought in around £60 million compared to about £43 million in UEFA competitions in 2012-13.
Chelsea are also relatively well placed in terms of the age of their squad after signing younger players in recent seasons, including Eden Hazard, Juan Mata, Oscar, David Luiz and Ramires.
Ron Gourlay, the Chelsea chief executive, said: ‘‘To achieve a record level of turnover despite our first group-stage elimination from the Champions League shows we have structured our business and are growing in the correct way for long-term stability.’’
Chairman Bruce Buck added: ‘‘From the beginning of the current ownership, a long-term objective was financial sustainability, and the implementation of Financial Fair Play brought that to the top of the agenda. We are pleased that we will meet the stipulations set down by UEFA in their first assessment period.’’
This story Administrator ready to work first appeared on Nanjing Night Net.