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Chelsea’s 2018/19 financial results covered a season when they finished 3rd in the Premier League, thus qualifying for the Champions League, won the Europa League and reached the League Cup final. Coach Maurizio Sarri replaced by Frank Lampard in July. Some thoughts follow #CFC
#CFC swung from £67m profit before tax to a £102m loss a huge £169m deterioration. Although revenue slightly increased by £3m (1%) to a record £447m, the damage was done by profit on player sales falling £53m to £65m and expenses rising by a hefty £119m. Loss after tax was £97m.
Commercial income increased £15m (9%) from £165m to £180m, but there were reductions in the other revenue streams, mainly due to impact of playing in Europa League instead of Champions League: match day down £7m (10%) from £74m to £67m and broadcasting £4m (2%) lower at £200m.
There was significant #CFC cost growth: the wage bill increased by £41m (17%) to £286m, player amortisation surged £44m (36%) to £168m and other expenses rose £12m (12%) to £118m. There were also £27m exceptional costs for the departure of Antonio Conte and his coaching team.
Unsurprisingly, #CFC £102m loss before tax is the highest reported to date in the 2018/19 Premier League and significantly more than the worst reported in 2017/18 (Crystal Palace £36m). Both Manchester clubs posted profits: #MUFC £27m and #MCFC £10m.
#CFC loss would have been even higher without £60m profit on player sales, mainly from Thibaut Courtois’ move to Real Madrid. This is the highest reported in the Premier League to date, ahead of #MCFC £39m and #MUFC £26m, but it is only around half Chelsea’s £113m in 2017/18.
Nevertheless, player trading remains extremely important for #CFC. In fact, five of the 15 highest ever profits in the Premier League from this activity have been delivered by Chelsea.
#CFC business model is far more reliant on player sales than any other major English club. In the last 6 years, they made a hefty £398m from this activity with only #THFC and #LFC anywhere near them (£265m & £260m in 5 years). For context, #MCFC and #MUFC only made £147m & £76m.
#CFC £102m loss was their second biggest ever, only surpassed by £140m in 2005. It follows two consecutive profitable years: £16m in 2017 and £67m in 2018. This season should be better, due to the return to the lucrative Champions League and the sale of Eden Hazard to Real Madrid
#CFC figures were hit by £27m for the exit of Antonio Conte and his coaching team (including legal costs), compared to £6m prior year to buy retail & merchandising rights. Total £234m in last 15 years, mainly £96m for sacked managers and £93m for early termination of shirt deals.
Profit from player sales has had an increasing influence on #CFC. Between 2010 and 2013, they averaged £15m profit from this activity, but this more than quadrupled to £66m in the six years since then. Excluding player sales, Chelsea’s 2019 loss would have been a massive £162m.
#CFC EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), considered as a proxy for cash operating profit, as it excludes player sales and exceptional items, fell from £94m to £43m (after three consecutive years of growth).
Following the decline, #CFC EBITDA of £43m is only mid-table in the Premier League, around the same level as Burnley. As a comparison, this is less than a quarter of #MUFC’s amazing £186m, which is due to United’s amazing ability to generate cash, and also below #MCFC £118m.
#CFC have grown revenue by £118m (36%) in the 3 years since 2016, mainly commercial £63m and broadcasting £57m, with match day relatively flat. Chairman Bruce Buck described the revenue growth as “consistent”, but worth noting that the 2019 increase was only £3m (less than 1%).
#CFC £447m revenue is the fourth highest in the Premier League, though way behind #MUFC £627m and #MCFC £535m. The Blues are currently very close to Liverpool’s 2017/18 figure of £455m, but the Reds will be significantly higher in 2018/19 following their Champions League success.
#CFC had the 8th highest revenue in the world in 2017/18 according to the Deloitte Money League, though there is a chance that they will be overtaken by #THFC in 2018/19 following their rivals’ run to the Champions League final and the move to the new stadium.
#CFC broadcasting income dropped £4m to £200m in 2018/19, as the £13m increase in domestic TV money to £159m was offset by the £17m decrease in money from Europe to £41m. The decrease would have been even higher if European TV rights had not risen in 2018/19.
#CFC £146m Premier League TV money was £4m higher than the previous season, primarily due to a higher merit payment (3rd place vs. 5th), partly offset by lower facility fees (broadcast live 25 times vs. 26). Club has received £1.1 bln from the Premier League in the last 14 years.
#CFC earned €46m (£41m) from Europe for winning the Europa League, a fair bit less than the €65m they got for reaching the Champions League last 16 in 2017/18. However, this was the highest distribution in the Europa League, €7m more than beaten finalists #AFC €39m.
Despite winning the Europa League, #CFC €46m was only around half the €93m that #MUFC and #MCFC received for reaching the Champions League quarter-finals. Winners #LFC €111m and finalists #THFC €102m earned €55-65m more, underlining the importance of CL qualification.
The difference between the European competitions is vividly seen in the new UEFA coefficient payment (based on performances in Europe over 10 years). The highest ranked English team in the Champions League (#MUFC) received €31m, while #CFC only got €3m in the Europa League.
Despite not qualifying for Europe in 2016/17, #CFC have earned an impressive €220m from Europe in the last five years, within striking distance of #THFC, #AFC and #MUFC, though a fair way behind #MCFC €337m.
#CFC commercial revenue rose £15m (9%) from £165m to £180m, mainly due to new sponsorship agreements, the merchandising rights buyback and higher player loan fees. This is the third highest in England, but still a long way behind the top two: #MUFC £275m and #MCFC £227m.
However, since 2016 #CFC commercial income has increased by 54%, which is the highest to date in the Premier League (#LFC, #AFC and #THFC 2018/19 results to come). The absolute £63m rise is better than both #MCFC £49m and #MUFC £7m, where growth has stalled.
#CFC have good sponsorship deals: Nike £60m (though this is £900m over 15 years, which might look low later in that period); Yokohama shirt £40m (in last year, so likely tom increase in 2020/21); Carabao training wear £20m; and Hyundai sleeve £6m.
#CFC match day income fell £7m (10%) from £74m to £67m, despite staging 2 more home games due to the Europa League run. They are now only the 5th highest in the Premier League, outpaced by #MUFC £111m, #AFC £99m, #LFC £81m and #THFC £71m.
#CFC average attendance down 3% from 41,482 to 40,436, partly due to reduction in capacity to improve access for disabled supporters and away teams not taking up their allocation. Only 8th highest in top flight (4th best in London). Ticket prices remain frozen at 2011/12 levels.
This is why Chelsea were looking to upgrade their stadium to a 60,000 capacity, but the £1 bln development been put on hold, officially “due to the current unfavourable investment climate”, but probably also linked to Roman Abramovich’s difficulties in extending his UK visa.
#CFC wage bill surged £42m (17%) from £244m to £286m, which means an increase of £66m (30%) in the last two years. The wages to turnover ratio worsened from 55% to 64%. Total directors’ remuneration more than doubled from £916k to £2,257k.
As recently as 2015, #CFC had the highest wage bill in the Premier League, but their £286m is now behind #MUFC £332m and #MCFC £315m and may well be overtaken by #LFC, when the Reds publish their 2018/19 accounts.
Nevertheless, #CFC wages are a fair bit higher than all other Premier League clubs, notably #AFC £223m, #THFC £148m and #EFC £145m (though these are all 2017/18 figures).
Despite the increase in the #CFC wages to turnover ratio from 55% to 64%, this is still around mid-table in the Premier League. That said, it is worse than both of the “big” clubs that have published 2018/19 accounts, namely #MCFC 59% and (particularly) #MUFC 53%.
#CFC player amortisation, the annual charge to expense transfer fees over the length of a player’s contract, shot up £44m (36%) to £168m. This has increased by nearly £100m from £71m just 3 years ago.
Not only is #CFC £168m player amortisation £40m more than #MCFC and #MUFC, but it is actually the highest figure ever reported for this expense by a Premier League club.
Other expenses also increased by 12% (£12m) to £118m without any real explanation, though this might be linked to buying back merchandising rights. Either way, these costs have now risen by £47m (65%) in just three years.
#CFC made enormous player purchases of £281m, including Kepa Arrizabalaga, Christian Pulisic and Jorginho, which means they have splashed out £571m in the last two years. To place this into context, #MUFC and #MCFC only spent £103m and £87m respectively in 2018/19.
However, #CFC only spent £41m last summer (on previous loanee Mateo Kovacic), due to a FIFA transfer ban linked to a breach of regulations on registration of Academy players. This ban has recently been reduced, so the club is free to spend again in January.
#CFC only have £79m debt in the football club, though it should be noted that the holding company, Fordstam Limited, has £1.5 bln of debt in the form of an interest-free loan from the owner, theoretically repayable on 18 months notice.
Other clubs have the burden of sizeable debt, most notably #MUFC still have over half a billion even after all the Glazers’ re-financings, while some have taken on debt for new stadiums, e.g. #THFC £466m, #BHAFC £280m and #AFC £217m. #EFC debt is up to £224m.
As a result, #CFC have only paid £2.5m interest (mainly on transfer fee stage payments), while others have had to pay substantial sums, e.g. #MUFC £19m, #THFC £14m, #WHUFC £13m (interest accrued on owner loans over past 6 years) and #AFC £12m.
#CFC cash flow from operations was negative £55m, but the club still spent £162m (net) on player purchases and £12m capex (acquisition of Kingsmeadow stadium leasehold) and £4m tax, which required an additional £238m of borrowings (net).
Since Abramovich acquired the club, he has put £1.2 bln into the club (including a chunky £247m in 2019), split £876m loan & £350m share capital. Most of this funding has been seen on the pitch with a massive £1.1 bln (83%) spent on players (net), while £164m went on capex.
#CFC have confirmed that they have complied with UEFA and Premier League financial regulations (i.e. FFP) and expect to do so for the foreseeable future. The rolling three-year assessment means that the 2019 loss is largely offset by profits in the previous two years.
#CFC chairman Bruce Buck said, “the club is well placed to sustain its pursuit of success both on and off the pitch, as well as maintain its financial stability over the coming years.” This is true, but the strategy still relies on player sales and Champions League qualification.
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