Chelsea is unsustainable, vast liabilities

Gilly

Gilly

Gilly

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Will Chelsea become the next Leeds United?

[...]

They all seem to think that the world started the day the Russian came to town, although there are some sensible ones that know they were very, very close to going into liquidation (as we were in the Scholar days) and thus becoming another Leeds United.

They wax lyrical about their achievements but what is there to gloat about? I am not THAT old but in my time I have seen my Club do the first Double in modern football, have seen them win the FA Cup 6 times (including 1967), have seen them get to a European Cup semi final when the tournament was for Champions only, have seen them become the first British Club to win ANY European trophy (i.e. European Cup Winners Cup), have seen them win the UEFA Cup twice, the League Cup (Carling Cup) 3 times and the Charity Shield 5 times - is there ANY Chelsea fan that can match that lot - alive or dead????

OK, back to the matter in hand and to ponder just how secure Chelsea are. There was a recent poll on the Chelsea site asking who they should be more thankful for - the owner or the manager? I would have thought that would have been a no brainer for even the biggest [...]. Without the Russian there is NO Chelsea period. You don`t agree?

What are the facts?

First of all let us be clear of the construction of the Club. There are 3 distinct Companies involved with Chelsea and are as follows:

Chelsea Football Limited - Company Registration Number: 1965149.

Chelsea FC plc - Company Registration Number: 2536231.

Chelsea Limited - Company Registration Number: 04784127.

Chelsea Football Limited is the Company dealing with the football Club side of the business. It is a subsidiary of Chelsea FC plc which also encompasses the Hotel/Catering/Nightclub/Merchandising/Leisure Services/Car parking sides of the business.

The parent company of Chelsea FC plc is Chelsea Limited. Funds for the Group are provided by Chelsea Limited who are supported by the ultimate owner, Mr Roman Abravomich.

There has been a great deal of speculation concerning how much Chelsea are in debt etc. and some of the [...] will have you believe that they have huge assets and also a Trust Fund in place should anything happen to the Russian. Of course, it is all nonsense and be assured that if anything happens to the Russian then Chelsea are on their way to being the next Leeds United.

I have the latest Audited Accounts for all the Companies mentioned (financial year ending 30th June 2006). For clarity I will quote everything from the holding Company (Chelsea Limited). Just one point I would make about the footballing side of the business is that the ratio of wages versus T/O is 79.4%. As I am going to refer to the holding Company then I must state that the wages versus T/O ratio for the whole Group is 74.5% (which is still unsustainable as was confirmed by their very own Mr Kenyon).

I do not wish to teach people how to suck eggs but I have to do things in the simplest terms for some of the [...] to understand. Every Company will have assets but if you have debts greater than your assets then you have liabilities. You will hear some [...] telling you that they have no debts but according to the official Audited Accounts Chelsea Limited have loans and liabilities amounting to £550,419,000.

Their assets consist of Intangible Fixed Assets (players) of £198,834,000 and Tangible Fixed Assets (Stadium, Hotel, Cobham etc.) of £188,194,000.

Therefore, their liabilities exceed their assets by £255,293,000. Which means that if you liquidate the Company and sell off all the players, stadium, hotel etc. you will still be short of over £255 million.

You will also hear garbage from the [...] saying that they are not in cash negative spending. Let me quote you from their own Director`s Report from the Audited Accounts: "The Group is currently cash negative spending £129.8 million in the last financial year."

Let me also remind you that the Company lost £81.2 million in the last financial year (£141 million the previous year).

There has also been speculation about a "Trust Fund" having been set up to cater for Chelsea should anything happen to the Russian - total nonsense as usual and all the Russian has stated VERBALLY is that he will "provide sufficient funds to finance the business for the foreseeable future."

So, there we have it - Chelsea are trading at a loss and are nowhere near breaking even; their wages versus T/O ratio is unsustainable (as confirmed by Kenyon); they are deeply in debt and are only still trading because of the Russian; there is no capital hidden away in any Trust Fund.

Given all the facts I wonder who they would rather have now - Roman or Jose?

Take some good advice and worship the Russian and keep him as sweet as you can because without him you WILL be the next Leeds United.
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Butchered a bit to removed unnecessary aggro (it was written by a spurs fan).

Interesting - wonder if it is at all accurate.
 
I can't imagine Roman suddenly packing up and leaving them in the **** but you never know. It'll be interesting the day it does happen.
 
i think it's quite fair to say that if abramovich left tomorrow then chelsea would find themselves in an untenable financial position.
 
Ripper said:
I can't imagine Roman suddenly packing up and leaving them in the **** but you never know. It'll be interesting the day it does happen.
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There's plenty of very rich Russians still being investigated. He doesn't have to leave by choice to disappear for good :)
 
The current situation with Abramovich's bottomless pockets he could bail them out probably just on interest from his assets. Without Abramovich is another matter entirely, but just how likely is he to seperate himself from Chelski football club?

Being arrested for some international dodgy dealing or just getting bored. Who knows both are possible, but severly unlikely.
 
Still feels to me like Chelsea is a play thing for Roman and if the numbers are true then its even more obvious, at the same time he seems like the sort of person who will quite happily drop them and move onto something else.
 
Gilly said:
There's plenty of very rich Russians still being investigated. He doesn't have to leave by choice to disappear for good :)
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Exactly, while Putin is in power he should be fine (providing he doesn't fall out with Putin) but if and when Putin is no longer in power then there is a chance that Abramovich, like many Russina billionaires before him, will either disappears or be put in jail.

Also regarding the debt Chelsea have, its very risky to use the players as assets; if they were to sell Makelele or Sheva whould they get back the £47m they cost?
 
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I do think RA will not be there for the long term.. but i am suprised to find how much they are in dept.. i also read about manu's dept today.. it does seem the forign investment is just putting the top clubs into dept!
 
I bet the author would love it if we went bust, LOVE IT!
When Chelsea published it's last accounts a lot of money people said that if they continue the way they are there's no reason why they shouldn't become financially independent.
It's obvious that frugality is high on the agenda now, as this season's spending proves, and I'd bet that any losses made this year are minimal in comparison.
Chelsea are growing immensely in most of the African footballing nations, Asia and the USA and if RA does leave, someone else with money will take over :)
 
I was convinced Chelsea were in deep do-do around 5 years ago (in fact I posted as much on this forum), but then Abramovich came long.

I can't see him leaving any time soon as not many other attainable clubs could provide him with the same chance of short-term glory as Chelsea.
 
If Abromavic wants to leave who will buy the club off him? No one will want an unsustainable business so RA is stuck with Chelsea for the meantime.
 
JohnnyG said:
There's no proof that it isn't sustainable, just theories at the moment:)
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A debt of £500m and still losing money, surely thats proof enough?

If RA leaves for one reason or another then Chelsea would be in serious trouble, its going to take a sustained period of success to build up there fan base to even contemplate making a profit big enough to pay-off a debt that large (especially when you consider they are still losing huge sums), let alone make a return for anybody looking at Chelsea as a business.

The only way Chelsea would survive if RA left them in a position like this would be if another RA style guy comes along.
 
BaZ87 said:
A debt of £500m and still losing money, surely thats proof enough?

If RA leaves for one reason or another then Chelsea would be in serious trouble, its going to take a sustained period of success to build up there fan base to even contemplate making a profit big enough to pay-off a debt that large (especially when you consider they are still losing huge sums), let alone make a return for anybody looking at Chelsea as a business.

The only way Chelsea would survive if RA left them in a position like this would be if another RA style guy comes along.
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How do you know they've got a debt of £500m and are still losing huge sums?
That article for instance is based on the accounts as at 30/06/2006.
 
JohnnyG said:
How do you know they've got a debt of £500m and are still losing huge sums?
That article for instance is based on the accounts as at 30/06/2006.
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Has year ending 30/06/2007 results been released yet? If not then that the only proof available and it doesn't take rocket science to know that you're going to lose money again for the last year.
 
Not yet they haven't.
The debt might be half what it was and the losses might be reduced the same as I'm sure you'll agree our spending has been cut dramatically.
I doubt we're in £500m of debt for starters and just guessing at a companies current financial health has never worked in the business world:)
 
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