And There Is A Business Plan

By 40 Years A Blue
January 27 2006

Chelsea today announced record pre-tax losses of £140m for the period 1st July 2004 to 30 June 2005. This follows the previous year's losses of £88m.

Although the amount of money 'lost' is quite staggering, chief executive Peter Kenyon and chairman Bruce Buck explained and used the term 'exceptional circumstances' for the loss of a certain part of the £140m, which totalled nearly £60m.

Causes of these 'exceptional circumstances' were a) the termination of Chelsea's Umbro contract £25.5m, b) Mutu's transfer write-off £13.8m, c) Veron's transfer write-off £9m and d) Academy recruitment £5m.

Remember these losses are reported for the period up to the end of June 2005. Chelsea have achieved a new shirt sponsor contract with Samsung at £50m and a new shirt contract with Adidas for £100m (a new record in sponsorship) so although these losses may be too much to bear by some, when the results are published next year (at this time) figures should improve quite significantly.

Chelsea FC do have a 'business plan.' Now the reason why I have used ' and ' is that the whole world and his wife, dog, cat, meercat, dolphin think that Mr A has unlimited funds (which of course he has) and expect Mr A to walk away anytime when he gets fed up, but Chelsea expect by the start of the 2009/2010 season to be self-sustaining and both Peter Kenyon and Bruce Buck were at pains to explain this plan in more detail.

Kenyon said, "These figures reflect the continuing restructuring of the business which we began in 2003/4. The overall loss increase is, in the main, down to some exceptional items that were necessary in order to help us achieve our strategic business aim of break even by 2009/10. In simple terms we have taken some pain now for long-term gain.

"For example, we terminated the Umbro contract which had a huge impact on these figures, but we have not yet seen any of the financial benefit of our new Adidas contract. Similarly these figures do not include any of the monies from our new sponsorship deal with Samsung, which was the biggest in Premiership history.

"With continued success on the field and the resulting growth stemming from that of our fan base, memberships and revenues, we are confident of achieving our targets."

Buck said, "The very beginning of the business plan was that Chelsea Football Club should aspire to be successful on the pitch. We want to reduce significant investment ahead, so in the short-term our investment focuses on the Academy. We want to reduce salaries as a percentage of turnover. There’s two ways of doing that, reducing salaries or increasing turnover. If you assume players’ salaries stay where they are, you have to build revenues by 30 per cent.

"The five year plan is aggressive and if we didn’t meet it we wouldn’t be surprised. We want to meet it and we think we can, but if we don’t we go on. Mr Abramovich is here for the long haul."

On the subject of Roman Abramovich, Chelsea's Russian benefactor that many see as an individual that will walk away when he is fed up (if you saw TV coverage for the Charlton home draw and see the 'great man' squirm, then you doubters are in for a long wait), Buck said in almost in admission, "The five year plan is aggressive and if we didn’t meet it we wouldn’t be surprised. We want to meet it and we think we can, but if we don’t we go on. Mr Abramovich is here for the long haul."

Roman Abramovich, he said, was at ease with the situation. "We had a session with Mr Abramovich about the annual results and he’s pleased with the way that the business is progressing and is progressing in line with the business plan."

He estimated that the owner had invested approximately £380m into the club on top of the £60m he paid for the shares. This, he said, contrasts markedly with how much it cost to buy Manchester United.

Lastly and more importantly to Chelsea fans (diehards, pothunters or JCLs and the like) the situation on the Stamford Bridge ground and the rumours circling that Chelsea were looking at options to move.

Kenyon said, "We’ve always said if we can find a way of extending the capacity at Stamford Bridge that will be our first option. We’ve not yet completed or exhausted that option. But I’ve said all along that is a challenge. There is no desire to move from here, but if that’s not the case (achieving expansion) we will have to look at options. But I would like to make clear no decision has been taken yet over whether expansion at Stamford Bridge is possible or not, and therefore talk about other grounds is speculation.

"We’ve also got to look at trends in football, and while we have had a sell-out season and hope to continue to do that, with football on television and staggered kick-off times, that can have an effect on capacity. We would like to get our capacity up to 55,000."

40 YEARS A BLUE!