Football

Chelsea start to answer Financial Fair Play questions

Winning the Champions League may be Chelsea's saving grace (©GettyImages)
Winning the Champions League may be Chelsea's saving grace (©GettyImages).

It must be pretty exciting being a Chelsea fan at the moment. A new transfer rumour everyday, a £20 million splashed here, a £30 million there. Oh, and the Blues are reigning European champions.

Interesting developments are also taking place off the pitch. It’s been a lucrative couple of months for Chelsea since their victory over Bayern Munich in the Allianz Arena, which is just as well with the impending arrival of Financial Fair Play (FFP).

Yesterday the club announced a new three-year sponsorship deal with Gazprom, the Russian state-owned energy company to whom Blues owner Roman Abramovich sold his controlling stake in oil company Sibneft to in 2005 for £8.4 billion.

Chelsea chairman Ron Gourlay seemed happy enough with the deal, and for good reason too.

"This is another very exciting global partnership for the club, and demonstrates the ever-growing appeal of Chelsea FC," he said.

"Our huge fan base around the world will help Gazprom reach their key markets in Europe and Asia, while we will benefit from their support in developing further our wide-ranging (Corporate Social Responsibility) CSR programs," Gourlay added.

Gazprom last week also confirmed an agreement with UEFA to become an official partner of the UEFA Champions League and the UEFA Super Cup for the next three seasons. Make of that what you will.

While choosing a company known as ‘corrupt and secretive’ as the BBC puts it to act as a partner to help create an image of social responsibility for both parties seems more than a little strange, a look at Chelsea’s finances reveal the need to generate income as they prepare to meet the demands of UEFA’s FFP directive.

Spurred on by Chelsea’s win in Europe the west London outfit have splashed the cash in the transfer market so far, snapping up Eden Hazard for around £32 million and Marko Marin for around £6 million.

If reports are to be believed, Internacional’s Oscar is under-going an medical at the club’s Cobham training ground, a deal for Porto’s Hulk is close to being done and Edinson Cavani wants £150,000 before making the move to Stamford Bridge.

Abramovich’s desire to drive Chelsea on to greater things is welcomed by the club’s fans but it will come at a price, In more ways than one.

The last set of accounts available from Chelsea show that in 2010/11 they lost £72.04 million and had by far and away the Premier League’s highest wage bill.

Add into that a series of astronomical transfer fees and UEFA’s goal of registering a maximum debt figure of €45 million for the first two-year accounting period between 2011 and 2013 seems some way off.

That target reduces down to around €5 million if the respective club owner refuses to put his hand in his own pocket and invest money into the club – something Abramovich won’t be shy about.

UEFA are ready to sanction heavy punishments for teams who don not comply with the new rules – anything from a warning to a ban on competing in UEFA tournaments and withholding TV and prize money - but all is not lost, especially now Gazprom are on board.

With one eye on FFP on the horizon, Chelsea have heavily added to their commercial partners in recent weeks – their hook-up with Delta airlines recently came weeks before their money-spinning pre-season tour to America.

It also seems the club’s major overhaul of its commercial team last year in a bid to attract new sponsors and boost its brand in Asia specifically was also geared towards helping meet the FFP guidelines.

And while the club have been maneuvering themselves into a position where they can significantly boost their income through new markets, they have also been raking it in back home.

In TV money from the last Premier League season they took home almost £55 million in securing their joint-lowest finish in the last twenty years, while their glorious European jaunt was equally lucrative.

In winning the competition outright Chelsea netted an astonishing €60 million, including TV money and participation bonuses.

Add into that their efforts in shifting big-earners from the wage bill – Didier Drogba, Salomon Kalou as well as Florent Malouda in the near future, while the cost of new arrivals such as Hazard will be spread across the length of his contract when it comes to FFP, rather than the whole £32 million sum going into one year’s accounts and things stop looking quite so bleak for the west London club.

In any case, the overall loss of around £70 million for 2010/11 reflected the cost of getting ride of Carlo Ancelotti and signing up Andre Villas-Boas which set the club back around £28 million.

One problem they do face is that the cost of sacking Andre Villas-Boas, who reportedly took home around £12 million in compensation having been let go in March, will be reflected in the next set of accounts.

They will however be able to write off costs incurred form the bid to move to Battersea Power Station and their plans to regenerate Stamford Bridge, as well as the wages of players signed before June 1 2010 – so the wages of big earners such as Frank Lampard, John Terry, Petr Cech and Michael Essien will not count towards the final total.

The deal with Gazprom looks like being another building block towards helping Chelsea meet the FFP regulations, and although no figures are mentioned in the press release, it is likely to be worth millions to the club – maybe its not so bad having Abramovich, a man with plenty of friends in high places, running the club after all.

But what is most notable about Chelsea is their current spending is that it shows no sign of slowing down – a bold move considering they are currently in the middle of the first accounting period UEFA will analyse, especially given the fact that they are on the back foot with a £70 million handicap from the first year of the two year period.

What it does demonstrate is that Chelsea want to take a different approach to FFP and perhaps not the one UEFA had in mind – they intend not to meet the regulations by lowering and cutting costs in order to reduce outgoings, but by upping their revenue by landing huge commercial deals and hoping their new big name signings will bring them continued success on the pitch, with the financial rewards that brings.

In the recently released Forbes football rich list, Chelsea came in 7th, with a value less than half of Real Madrid and almost a third of Manchester United. Their revenue, $362 million, is also well behind the big boys and it is this area that Abramovich and the club are focusing most of their efforts on.

Questions about how clubs like Chelsea and Manchester City will meet the FFP regulations have been asked ever since UEFA announced their plans to force clubs to make sure their outgoings and incomings are balanced. Now Chelsea at least are showing how they plan to answer those questions.

Topics:
Didier Drogba
Football
Chelsea
Premier League

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