The figures to June 2005 show Chelsea's income dipped by 3.6 per cent, or by £5.5m from £152.1m to £146.6m. Yet their expenditure soared, to £286.6m, principally due to a series of "one-off items" that included the cancellation of their sportswear deal with Umbro, writing off the contracts of Adrian Mutu and Juan Sebastien Veron, and spending on "academy recruitment", which included hiring Frank Arnesen from Tottenham.
The Umbro deal cost £25.5m to annul, and Chelsea have replaced it with a 10-year, £100m deal with adidas. Cancelling Mutu's contract cost £13.8m, although this was a "book cost" rather than an outgoing payment. The figure represents the player's estimated value when he was sacked in October 2004 after failing a drugs test. He had been bought for £15.8m in summer 2003. Similarly, Veron was estimated to be worth £9m, of the £15m originally paid for him in 2003, when he was loaned to Internazionale in July 2004. It was effectively a free transfer. His contract expires in the summer.
Chelsea's biggest cost was wages, which actually fell six per cent, from £115.5m to £108.9m. The wages to turnover ratio is now 74.3 per cent, a dip from last year's 76 per cent but still significantly higher than the 50 per cent ratio which is widely acknowledged to be sustainable.
Transfer spending - on fees, agents' fees and related costs - also fell, down to £101m in the year to June 2005 against £175.1m the previous year.
When Chelsea announced record losses last year, their chief executive, Peter Kenyon, proclaimed: "Two years ago we were seen as streets paved with gold. That is over. Chelsea is now being run properly."
Despite Chelsea being a business that has shipped an additional £140m in a year, Kenyon claimed yesterday that they remain on course to break even by the 2009-10 season. "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," he said.
"These [latest] figures reflect the continuing restructuring of the business which we began in 2003-04 ... In simple terms we have taken some pain now for long-term gain."
By looking ahead to 2009 as a break-even year, Chelsea are evidently reluctant to suggest they will turn things around sooner. They are right to exercise such caution because guestimates of next year's figures point to further losses.
Income should climb, principally because the deals with adidas (£10m a year) and Samsung (£11m a year) will kick in, and income from the Champions' League prize pot will increase in 2005-06 because Chelsea won the Premiership last season. The adidas deal will bring around £5m more income that the equivalent deal with Umbro, and the Samsung deal will earn an extra £8m, for a combined increase of £13m. Champions' League earnings could be up by £10m, depending on performance. So all other things being equal, and with no "one-off items", total revenue would jump to around £170m.
Yet wages are expected to remain around the £110m mark, Chelsea themselves are forecasting transfer spending at £57.5m for the year to June 2006, and with a repeat of all other costs, of around £25m, expenditure will be at least £192m and losses still tens of millions. If transfer spending is higher than forecast, or there are unforeseen extra costs, they could be higher.
On the plus side, a £20m loss would be small change to Abramovich, who is worth an estimated £7bn, and might even give credence to Kenyon's claim that the club is heading for break-even in 2009. Club insiders say they will meet that target if they increase income by 30 per cent, or to around £190m, by 2010.
The theory is sound. Ish. In practice, Chelsea will need to avoid any more "one-offs" (four of which came in the year to June 2005), while maintaining excellent results, and certainly Champions' League football, at an advanced stage, every season.
The club's debts are £151.1m, mostly in the form of interest-free loans from Abramovich. Chelsea also insist, without giving details, that they have financial guarantees in place to ensure they would not instantly go bust in the event that Abramovich ceased to be the owner. "In order for the accounts to be signed off, the auditors have to be happy that the club has been provided with security," a spokesman said.
Reading between the lines, Abramovich would cancel all debt upon any departure, leaving behind a club with nothing owing. If it happened tomorrow, it would be a club haemorrhaging money, and in need of rapid belt-tightening. But tomorrow is not where Chelsea are looking: 2009 is their dream horizon.
Key figures from Chelsea's annual accounts, to June '05
* INCOME £146.6m (down £5.5m from £152.1m)
Wages: £108.9m (down six per cent from £115.5m)
Transfer fees: £101m (down from £175.1m)
Umbro kit sponsorship termination: £25.5m
Mutu write-off: £13.8m
Veron write-off: £9m
Academy recruitment: £5m
Other running costs: £23.4m
Total expenditure: £286.6m
Total annual loss: £140m (up from £87.8m)
Cumulative loss in first two full seasons of Roman Abramovich's reign: £227.8m
Debts: £151.1m, primarily interest-free loans by AbramovichReuse content