Sunday, February 15, 2009

Summer Clearout at Chelsea as Manchester City Target John Terry and Peter Kenyon

During the week, Chelsea FC announced club losses to the tune of £67.5m in the year of 2007 to 2008.

And as Roman Abrahomvich looks to rein in the serious debt that the club have incurred over his reign, it is now guaranteed that there will be an end of season sale at Stamford Bridge.

Having pledged that the club will be operating on zero losses in a single year by 2010, Peter Kenyon has all but confirmed that sales will take place in the summer...

Chelsea have been cutting their costs over the last four seasons without impacting upon the wage bill, but it now looks like that is the next target as the club looks to reduce its losses.

In 2005 the club recorded record losses of £140m, and since then, there has been a steady reduction in these figures. 2006 saw a dramatic reduction to -£80.2m which was followed up in 2007 and 2008 with -£74.8m and -£67.5, respectively.

The club had actually managed to reduce its losses last year to -£44.5 but had to pay out some £23m in compensation to ex-managers Jose Mourinho and Avram Grant after they and their staff were sacked by the club.

Luis Filipe Scolari will also receive compensation of £9m, but that figure will come out of next year's accounts.

As the club look to reduce the Premiership's highest wage bill of £130m a year, star names like Michael Ballack, Didier Drogba, Deco, Florent Malouda, Nicolas Anelka, and Joe Cole could all make their exit from Stamford Bridge.

All of the above players are amongst the highest paid in the Premiership and all can claim a weekly wage of six figures with the exception of Joe Cole.

Removing even one of these players from the wage bill would have an instant reduction of £5 to £6m. Move all six on and the club could save some £30m.

Moving these players on is easier said than done, though. And to do so Chelsea may have to agree to pay part of the players' wages and face losing some key players.

Stars like Frank Lampard, John Terry, Ashley Cole, and Ricardo Carvalho will all be coveted by other clubs and with Chelsea sending the message out that they need to sell players, these stars are the most likely transfer targets.

And already stories have begun to emanate from the Eastlands about the proposed transfer of John Terry to Manchester City.

But Kenyon and Abrahmovich are adamant that these losses need to be tackled, so it looks likely that Chelsea will have to part with one or more of its sons.

"Any squad restructuring in the summer will be funded prominently by sales, as we have consistently reduced our net transfer spend over the last five years and will attempt to continue this trend," said Peter Kenyon after the figures were released.

He added "We have ambitious require zero cash funding from the owner (Roman Abrahmovich) from the beginning of the financial year 2009/2010"

Since Roman Abrahmovich took over in 2003, the club has recorded combined losses of £448.5m. And the current wage bill of £130m accounts for 70 percent of their turnover. In comparison, Manchester United's wage bill of £97m is 43 percent of their turnover.

In an effort to further reduce the club's debt, Roman Abrahmovich has agreed to become the sole shareholder at the club. And the monies that the club owe him has been reduced from £609m to £339.8m as a result of him taking up the shares option.

Add all Abrahmovich's monies at Chelsea together, and you come to a staggering investment of £710m since 2003.

The main reason for the Oligarch taking up this share option was twofold. In becoming sole owner of the club Abrahmovich has moved to insulate himself from the current global financial downturn.

With sterling reducing in value greatly over the last year, the Russian billionaire has seen billions wiped from his fortune. This share option insulates at least some of his wealth.

The other reason for Abrahmovich wiping some £300m from Chelsea's debt is that it reduces the club's tax liability.

Michel Platini and Lord Triesman have spoken about the game's debt (Is the EPL Recession Proof, and how Foreign Investors and Debt Impact) in recent times and it is believed that tax liability is a battleground where UEFA can make progress against clubs who put themselves into serious debt to win trophies.

Another area that UEFA are looking at is club turnover and as recently as last week they put a proposal to Premier League clubs that was rejected. UEFA had wanted the clubs to agree to a points penalisation system if clubs spent more that 50 percent of turnover on wages.

On the plus side, Chelsea remain one of the World's leading franchises and with Stamford Bridge being a guaranteed sell out every week, it comes as no surprise to see the clubs turnover rising by 12 percent to £213m. If the club can reduce it's costs by £67m, it will record a profit for the first time in almost a decade.

The club have tackled debt all over the club in order to reduce it's outgoings. All staff now pay for meals in the canteen instead of them being complimentary. Frank Arnesen's scouting network has been all but demolished as Abrahmovich reduces the wage bill.

One member of staff that Chelsea will do everything in it's power to hold on to is Peter Kenyon. The Manchester City fan is currently being sounded out from afar to become the new Chief Executive at the Manchester based club after the owners became unhappy with current chief Gary Cook and his botched handling of the proposed Kaka transfer.

The next step is the wages of the squad and with the Chelsea ship currently rudderless with a part time Captain in Guus Hiddink, the club will have to shell out and bring in a manager who can bring success on limited funding.

Jose Mourinho anyone? (click on the link to see an interview with the Inter manager)

twitter / WillieGannon