Chelsea’s £90m Loss: Impact on PSR Analysis
Chelsea Football Club has recently reported a pre-tax loss of £90.1 million ($114.8m) in their accounts for the 12-month period ending on June 30, 2023. This decrease from the previous financial year’s loss of £121.4 million has raised concerns about Chelsea’s ability to comply with the financial regulations set by the Premier League and UEFA. However, the club remains adamant that they will meet these regulations.
Despite the loss, Chelsea saw their overall turnover rise to a club-record high of £512.5 million, driven by an increase in commercial revenue to £210.1 million and matchday income rising to £76.5 million. The club was once again allowed to operate freely after the UK government imposed sanctions on Roman Abramovich to force him to sell in 2022. However, their broadcast revenue fell to £225.9 million from £235 million in the previous year, mainly due to a lower payment resulting from their 12th-placed finish in the Premier League.
The parent company of Chelsea, BlueCo 22 Limited, which was established by the ownership group led by Todd Boehly and Clearlake Capital after their takeover in May 2022, reported a massive pre-tax loss of £678.2 million for the year ending June 30, 2023. This loss was primarily driven by investments in both the men’s and women’s playing squads.
Chelsea’s recent financial figures indicate a trend of significant pre-tax losses over the past three years: £156 million in 2020-21, £121 million in 2021-22, and £90.1 million in 2022-23. Although these figures suggest some improvement, structural challenges continue to pose a significant obstacle for Chelsea. These challenges include a relatively small and aging stadium that limits matchday income and commercial revenue that remains lower than that of other top clubs such as Manchester City, Manchester United, Liverpool, and Tottenham.
As a result, Chelsea heavily relies on profits from player sales to offset their operating losses and create room for transfer spending within the financial rules of football. In the year ending June 30, 2023, the club generated profits of £142.2 million from player registrations and fixed assets.
Regarding compliance with the Premier League’s profit and sustainability rules (PSR), Chelsea insists that they are currently compliant. These rules allow clubs to incur losses of up to £105 million over a three-year monitoring period. Although the recent figures may seem contradictory to this claim, deductions can be made for expenditures on the women’s team and academy. Additionally, allowances can be made for the impact of the COVID-19 pandemic, particularly for the 2020-21 accounts. Chelsea may also argue for further adjustments to account for revenue lost while operating under UK government sanctions in 2021-22.
Respected football finance analyst Swiss Ramble estimates that once these necessary deductions and adjustments are made, Chelsea will remain compliant with PSR for 2022-23.
Looking ahead, next year poses more significant challenges for Chelsea. The absence of European football is expected to result in substantial drops in broadcast, matchday, and commercial revenue. While Boehly and Clearlake believe that their overhaul of the first-team squad has reduced the overall wage bill by tens of millions of pounds, next year’s accounts will include over £400 million in transfer fees committed to acquiring 11 players. Notably, Mason Mount’s sale to Manchester United for an initial £50 million has raised significant funds. However, despite the club’s denials, many outside Chelsea believe that additional funds need to be raised before June 30 to ensure compliance with PSR.
In summary, Chelsea’s recent financial figures raise concerns about the club’s ability to meet the financial regulations set by the Premier League and UEFA. While improvements have been made, structural challenges and heavy reliance on player sales for profitability continue to pose obstacles for the club. Chelsea remains confident in their compliance with PSR, with necessary deductions and adjustments considered. However, next year’s figures are expected to show a decline in revenue, making additional funds essential for maintaining compliance.