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When Chelsea get a new manager they spend big.

By Tony Attwood

Mr Wenger made a comment this week that quite a few newspapers have picked up on.  In essence the comment is that once Chelsea have their new manager in place they will start spending big time.

Fernando Torres  said on Wednesday that he thought Chelsea would sign  Atlético Madrid’s Radamel Falcao, especially if Mourinho returns as manager – because both men have the same agent.  There is also expectation that André Schürrle will move from  Bayer Leverkusen for something around £20m.

And that’s just for starters.  Chelsea are also said to want to bring in another  central midfield player.  The suggestion is that Paulinho of Corinthians might be the man.

“I’m afraid of what Chelsea can do in the summer,” said Mr Wenger in a press conference. “We have to be prepared for them to be one of the biggest movers in terms of investment once the window opens.

“Even though they already have a great base to their squad, notably their young players such as Oscar, Juan Mata, Ramires and Eden Hazard, I think they will be busy during the transfer window. We’ve heard a lot of talk about Falcao. Some people say it’s already a done deal but I’ve heard nothing.”

Jose Mourinho has not at all ruled out returning to Chelsea whom he left in 2007, providing the club is in the Champions’ League next season.  He seems almost certain to leave Real Madrid in the summer.

The league table in Spain tells its own story

Club Pld W D L F A Pts
Barcelona 32 27 3 2 99 33 84
Real Madrid 32 22 5 5 83 30 71
Atlético Madrid 32 21 5 6 57 25 68
Real Sociedad 32 15 10 7 57 39 55

Barcelona have sailed away with the title, and improbable though it seems Real Madrid have turned the eternal two-horse race into a three-horse race.

This is not what is expected in Spain – the two big clubs are expected to take first and second position, and also one of them is supposed to be in the Champions’ League final.  Given all the success Mourinho has had in the past, this looks like something of a dismal failure.

Mr Wenger continued, “I think Chelsea currently have a great coach in Rafa Benítez, but if they part ways at the end of season, of course José Mourinho would be a good solution for Chelsea. Mourinho is one of the best in the world. I consider Benítez to be doing a good job at Stamford Bridge but, honestly, I’m not really well informed about the possibility of Mourinho returning to Chelsea.”

Yet one would expect Mr Wenger to be very well informed about the transfers of the summer since he and his team are already working the market place to bring new players to Arsenal.

So is he right – are Chelsea just going to spend and spend as before, without taking any particular notice of FFP?  Or indeed do they have a way of driving the proverbial coach and horses through FFP?

Chelsea made a profit of £1.4m for the financial year ending on 30 June 2012, the first time the club has made a profit in the Abramovich era alongside a record group turnover of £255.7m.  These figures compare with a £67.7m loss in the previous financial year.

At the time they said they were in a good position to comply with UEFA’s Financial Fair Play which requires clubs over a fixed period to achieve a break-even figure when expenditure is measured against income from football-related activities.

By way of comparison Arsenal’s profit for the same period was  £30.6m.

Chelsea have undoubtedly been helped by higher revenues from commercial activities and of course winning the Champions League.

The figures quoted above include a profit of £28.8m in the transfer market.  But the next set of accounts will include the first write down of signings such as Eden Hazard for £30m, Juan Mata (£23.5m) and Gary Cahill (£7m).  Against this there have not been major incomes from sales to balance this.   So how does FFP balance?

The debt of  around £166.6m has been was turned into equity during the course of the year “making Chelsea FC plc debt free”.  Maybe that does work as an FFP loop hole, but I didn’t think it did.  If it does then FFP seems to be meaningless.

Either way Chelsea looks certain to be one of the defining points as to FFP.  If they can keep on spending, and as a result return to loss making, with that loss being turned into shares, then I’ve misunderstood FFP all the way through.  (But me misunderstanding stuff is hardly new).  But then, that’s so obvious surely someone in Uefa would have thought of it.

On the other hand it has always been said that Chelsea were the club that proposed FFP to Uefa – so maybe they built in their own loophole.

As usual such matters are quite beyond me, but I’m sure someone will help me out.

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23 comments to When Chelsea get a new manager they spend big.

  • Matt

    UEFA are keen to ensure that clubs don’t go deeper and deeper into debt so insist that any clubs losses over €5m during a single 3 year Monitoring Period are fully funded by their owner. In practice this means that clubs can only lose up to the maximum €45m during the first 3 year Monitoring Period if their owner is able and willing to put their hand in their pocket for any loss over €5m and, in UEFA’s terminology, ‘convert the loss to equity’. But what does this term mean and what are the implications? Let’s use an example of a club losing €30m during the first Monitoring Period. We can see that the club passes the Break-Even test (as the loss is below the €45 threshold). However the €30m loss is above the €5m figure and the owner will need to take some action. In this example the club will create additional shares which the owner will have to buy for €25m (the difference between €30m and €5m). The Club will gain €25m in cash (ensuring the club’s overdraft/debt doesn’t increase) and the owner will be out of pocket by €25m. However, the owner will now hold a potentially worthless paper share certificate. The problem for the owner is that they may never get their €25m back again they might possibly get it back if they sold the club, or if the club makes a profit in future years and he gets paid a dividend). This scenario might not trouble Abramovich or Sheikh Mansour but is the irksome prospect facing the owners of clubs such as Newcastle, Sunderland and Aston Villa.

  • There is one other exclusion that causes most confusion amongst journalists and fans; clubs are able to exclude certain wages for their long-standing players. By way of background; when the rules were first proposed, some clubs complained that they were already committed to paying high wage bills for some players on existing contracts and that they could fail the Break Even test as a result. UEFA therefore introduced an appendix to the rules which allows clubs who have failed the Break Even test to run the test again, but this time deduct the wages paid to players on pre-June 2010 contracts. However clubs can only deduct the wages paid to their long-standing players during one season (2011/12) and can only use the exclusion if they can show their Break Even deficit is reducing each year. Chelsea, for example, will probably find that they are not able to deduct the wages paid to Terry, Lampard, Drogba etc during 2011/12. This is because club losses are likely to increase in 2012/13 (they won the Champions League in 2011/12 and are likely to see their UEFA receipts and commercial income reduced in 2012/13).

  • AL

    Mourinho will be bad for the premiership, simple as that. He’s got a poisonous tongue, what the English media see in him I’ll never know. The primary reason he left Italy is the press there ridiculed him at every turn. Even the Spanish press, which is pro-Madrid, has been less than welcoming to Mourinho and have criticised him quite a few times. Most notably during his initial duels with Guardiola which saw him losing heavily at home or away with his team playing defensive football, prompting Madrid greats and the media to declare that’s not how Madrid should play football. I agree with the assessment that with the investment that Madrid have poured into the team, his tenure at Madrid should be considered a failure. Where else would one find a bench that’s worth over £100m, including a former world player like Kaka? This team should be winning everything.

    Chelsea will probably bring him back, cos they clearly need each other. But it would be bad for the premiership at large.

  • AL

    And did I mention UEFA labelling Mourinho an enemy of football? Which manager or player has ever been called that? Even Suarez, with all his antics, hasn’t been called that.

  • Mike T

    For me the major confusion is that many people seem to look at bottom line in the accounts and assume the same figure will apply in the FFP calculations.
    I haven’t got immediately to hand the figures that the Swiss Rambler suggested would be the figure that would be taken forward to FFP in 2011 when £67 million loss was shown in accounts but it was in the region £8 million.
    People forget that expenses such as depreciation, monies spent on youth and community projects, the academy infrastructure and one offs are all disregarded so in Chelsea figures 2012 there is in probability significant FFP credit.
    In terms of transfers the first element of Matas & Cahills transfer fees have already shown up in the accounts but as players contracts such are extended the year on year costs of a players transfer fee reduces whereas transfer fees received are shown in the year of the transfer.
    It is wrong to say that Chelsea didn’t make much in transfers out in 2012 for just 3 of the players transfered out such as Zirkov, Alex and Manciene were sold for in excess of £25 million whilst that isn’t a lot by Arsenal standards its a not a sum to be sneezed at.
    Also key to all this is the reduction in wages. The in year departures of Drogba, Alex, Anelka & Kalou players all of which were very high earners and another raft of players will follow in the summer.
    Chelsea’s finances and player structure is in beter shape than many realise and yes it is right to say that monies received from European football will be down however my guess is Chelsea will yet again the biggest earners in the EPL from this source of income.

  • Mick

    @Al
    ‘Mourinho will be bad for the premiership, simple as that. He’s got a poisonous tongue, what the English media see in him I’ll never know.’
    I think you have answered your own question there.

  • Stevie E

    There is a certain delicious irony in the fact that an article highlighting one of the most glaringly obvious reasons for the massive inequality in the league (which allows the buying of trophies) draws only 6 comments, whereas an article which allows hindsight and a degree in Football Manager 2013 draws in hundreds.

  • Arvind

    Ha yeah.. I agree Stevie E. But that’s how the world is..and I guess that’s how people are. Whatever is the easiest to comprehend and the most fun will usually take precedence about what is harder to understand and the true issue. Not too many (me included) will understand too much of the finance so I guess that’s one main reason. All the same the article does touch on an important point…and it certainly will be nice to get more comments on it.

    This weekend though has been dominated by United and the return of RVP… so I wouldn’t read too much into it. There’ve been many great articles on Untold in the best that’ve got plenty of comments.

  • Sav from Australia

    I have no idea how FFP will turn out. Hope for the best, prepare for the worst, I suppose.

    Lol @Stevie E’s comment:
    April 27, 2013 at 1:01 am

    Ironic indeed.

  • ARSENAL 13

    Ironic indeed Stevie..

    These articles are so informed and thoughtful that it blows right over our puny brains……..

    Even the most vocal and hell bent critics of the Untold have to fall in line and agree.

  • Adam

    Chelsea also have their sponsorship deal with Gazprom, which the amount has never been released? So there’s another get out of jail free card, courtesy of the Kremlin.

  • Mandy Dodd

    I think Chelsea are one of the clubs that do not actually give a flying whatever about FFP. If EUFA fail, they let down a huge amount of clubs that voted for this. I have always been on the opinion that they would make an example of a couple smaller clubs, trying to encourage the bigger clubs to go along with something they may not be able to actually universally enforce. A change of attitudes. FFP is partly the baby of Platini, unfortunately the flawed , but fairly non corruptable Frenchman is not flavour of the month in the upper echelons of the criminal cleaaes that is FIFA. Do Chelsea, Citeh, Monaco, PSG et al know something we dont about a more lenient successor to Platini? If FFP is not enforced, where does it leave Arsenal? We have an owner who clearly will not invest further in the club, I believe it is only Wengers genuis that has kept us where we are in the clubs current climate, without him, and without FFP we would surely fall into relative decline with our current business model. Maybe that is what Usmanov awaits?

  • Mike T

    Adam

    You are right that the figures have never been issued my guess has always been that at some time Gazprom will be the clubs main sponsor had Samsung not taken up the option to extend their deal I would not have been suprised to see them take over as the clubs main sponsor.There are other deals in place with the likes of Delta agin no value has been circulated but again all contributions gratefuly received

    Mandy

    I am not sure that it is correct to say Chelsea dont give a f*** about FFP I would suggest its more along the lines that they have clearly been planning and managing whereas it seems to me that for some reason Arsenal supporters have brought into the arguement that all is well at Arsenal and will improve when bigger sponsorship deals are in place almost ignoring that other clubs will likewise increase revenue streams.

  • Mandy Dodd

    You may be right mike t on Chelsea. Our fate could well depend on who manages us I would imagine stan is desperate to extend wengers deal. I know it is open to debate but cannot see many managers consistany keeping us in the top four on what we have spent. Yes our bottom line will increase but so will that of others. I have no faith in an org linked to FIFA doing anything that is not self serving

  • Mike T

    @ Mandy
    As an outsider I am watch with great interest as I find it very strange that despite claims otherwise your club do have the resources to buy better but somehow the powers that be have convinced the supporters that 4th place is your target. Yes CL football is worth a lot of money but that said I find it hard to grasp how from the manager to the supporters so much time, energy and debate centres around others finances and through that so many are prepared to accept the current state of affairs.
    One of the reasons I struggle with FFP is that UEFA do not have the best track record in enforcing their own rules or when they do they take the line of least resisitance. It says it all for me that had they enforced rules that have been in place for quite a while Barcelona wouldnt be playing CL football nor come to that would many Spanish clubs

  • Adam

    Mike T, how can Gasprom sponsor Chelsea when they own Zenit Saint Petersburg?

    Do you know of any rules outlawing this, as I know a company cannot hold a certain percentage of differing teams within UEFA competitions. But as Gasprom don’t own any shares in Chelsea I cannot see anything wrong with this, although to me its a bit close to the mark.

    And as a Chelsea fan, how do you feel about your club having direct links to the Russian government?

  • Adam

    That was good timing

  • AL

    Just watching A. Madrid v R Madrid, R Madrid are playing their B-side, but its still worth over £300m! And that’s not even including their bench, with £33m signing Modric… this can’t be right, bring on FFP!

  • Mike T

    Adam
    I think there would be an issue if Gazprom wanted to buy shares in another club but I seem to think that the fact that they already have a commercial link with Chelsea sort of ties UEFAs hands in that had they an issue they should have already voiced their concerns .Also they , UEFA, have been happy to take monies from them.
    As for links with the Russian government in truth I dont have an issue I suspect thats the same as most supporters whose clubs sponsors are in effect arms of a state and I guess you include both Man City and Arsenal in that.

  • Adam

    Mike T, Yes there does seem a lot of money coming into football from state run business’s. My only issue is Chelsea seem to have been given a blank get out of jail cheque. Whereas other sides have definite terms to commercial deals. Maybe a bit of the green eyed monster?

    I personally can’t figure out what Gazprom want from football?

    Agree many sides are more than happy to take the money and don’t seem to care its taxation paid in another country. So we could state that English football has been artificially inflated through the proceeds of foreign taxation. Although Abramovich’s money is direct from himself.

  • Mike T

    Adam

    As I have argued on here on maany occasions FFP is flawed there are so many issues that any club expecting major change will be dissapointed.
    Man Citys huge deal reamains unchallenged which would set the standardif it is challenged Man Utd continue to secure huge deals which as long as you dont exceed will set a bench mark.
    What do Gazprom want? I wont give a cyncial answer as but one could argue they are raising their profile.

  • Adam

    Its a starting platform (FFPR) and my own opinion is that it was only implemented to stay ahead of the EU imposing their own rules or laws on football. I think we are still at the beginning of a very slow and drawn out process. A power struggle between too many parties. Football or rather the running of it has to change, but how to go about that is the difficult question.

  • We know that Chelsea always changes their manager..
    the best manager for Chelsea is “The Spesial One” Jose Mourinho…