Roman's roubles to stay at Chelsea

Chelsea continue to make operating losses despite a pledge to have broken even by the end of the 2004/05 season. The revelation, declared in company accounts that announced an £80-million year’s loss to the City this week, puts in significant doubt the Chelsea board’s long-held target of becoming self-sustaining before 2009/10.

In the 12 months to June 30 last year, the club’s parent company recorded an operating loss of £8-million, up from £6,3-million the previous year.

Once player-trading activities are thrown in—taking the total to £80-million—Chelsea’s previously stated aim of sustainability looks a long way off. This might explain the subtle but significant shift in emphasis in that Chelsea now aims in the long term to “achieve operating profit break even”.

Though the official line remains that the club is on course to achieve a position that requires no external funding by 2010, for the first time this week executives were admitting this remains aspirational and cannot be “100% guaranteed”.

Chelsea’s board and auditors are, however, satisfied that, even without full break even being reached, the club will remain a going concern. The finances of owner Roman Abramovich have been investigated by the Chelsea board and auditors to verify that his commitment to the club is for the long term.

“In signing the accounts both the board and our accountants have to make investigations and take a view that the funding for Chelsea in the reasonable future is secure,” said chairperson Bruce Buck. “I can assure you that the board made its investigations and the accountants also. We did what we had to do and we are satisfied with the financial security of Chelsea going forward.

“Part of the process [was that] we had several conversations with Roman because we know we have to [announce financial results] every year.”

Buck’s announcement was motivated by reports that the Russian is beginning to lose interest in a football club that has benefited from more than £500-million in patronage from its billionaire owner.

Abramovich returned to Stamford Bridge after a five-week absence in time for Saturday’s 4 to 0 FA Cup fifth-round win over Norwich City. However, Buck insists the non-attendance of Abramovich was as a result of his political commitments in the eastern Siberian province of Chukotka, where he was recently reappointed as governor, and to a family holiday in the Caribbean.

“I can assure you his interest in the club has not waned—although he has been absent for four or five matches, he has watched those games on television,” Buck said. Neither, insist Chelsea executives, is Abramovich concerned about the latest avalanche of cash he has spent on his club in the form of non-interest-bearing loans.

For accounting purposes, these are subsequently transformed into equity, though he already holds 99,9% of the club’s shares. Apparently the Russian feels he has had a good return on his investment after seeing the club lift two Premiership titles and the Carling Cup in his three full seasons’ ownership of the club.

“One of the principles was we wanted short-term success on the field,” said Buck. “If we had not accepted that as a basic principle maybe we would have developed a different business plan.”

Buck explained that Abramovich is relaxed that everything is progressing according to projections.

“We are not working towards a question of ‘what if’ Roman should walk away, but we realised from day one we had to find a way to make this club profitable in the long term.

“No matter how much money the man has, and I don’t know how much, at some point he is not going to want to invest more money in the club. We are working towards a long-term position where this club can sustain itself without outside financial support.”

Despite the losses, however, Chelsea will not demand fans plug the funding gap and announced a second successive year’s ticket-price freeze for next season. The club declared this to be a real-terms 6% reduction on 2005/06 prices and declared the discounted tickets will be available for Champions League group-stage games next year.

“We understand that our ticket prices are at the higher end and we are sensitive to the economic demands on our supporters,” said Chelsea’s chief executive, Peter Kenyon. “This decision, taken after regular dialogue with the fans’ forum, achieves a good balance between those demands and the needs of our business. With the success we have had we believe Chelsea offers good value on and off the pitch.”

Meanwhile, David Ornstein writes, Arséne Wenger questioned the right of Chelsea to operate with a deficit of £80-million and warned that unless the club reduces its dependence on the “artificial income” their survival is in jeopardy.

Wenger suggested rules should be implemented to ensure clubs can only spend as much as they receive. “The rules allow them to do it,” Wenger pointed out. “I have said many times that all the clubs should be balanced with their natural resources. That means they can only spend what they earn.”—Â

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