What's the deal with Chelsea and PL Profit & Sustainability rules?

Why we shouldn't have reason to fear next year

So on Monday we saw Chelsea had (much to many journalists despair I suspect), complied fully with the Premier League Profit and Sustainability rules for season 22/23.

There were fears and speculation we’d be in breach, but according to the ever reliable David Ornstein, Chelsea always felt they were compliant, as we have turned out to be.

Of course attention will soon return to Chelsea finances again, this time with our finances for this season, 23/24, under review. Some sections of the press seem to be on one man missions to get us points deductions, fines and are almost thirsting for us to get relegated from the PL. So they’ll likely be more scaremongering headlines.

I thought it might be good to avoid panic from any potential scaremongering and present some details where Chelsea could be and how we can avoid any issues. Now obviously, I’m not a finance expert and some figures presented below are estimates, so I’ve tried to round up or down depending on the figures involved. But I hope what’s below captures the essence of our circumstances and how we can solve them. I also want to acknowledge the help of financial expert Swiss Ramble and The Athletic, where a lot of this information comes from

So, where are Chelsea financially?

Well lets start with some brutal honesty. Chelsea aren’t in the clear for 23/24 right now. At the end of last summer, Swiss Ramble, who tends to be pretty accurate in his reporting, projected Chelsea to record a pre-tax loss of £132million this season (23/24), and an overall £201million adjusted loss for the next monitoring period, almost double the £105million allowable limit. This prediction was taking into account, and assuming Chelsea NOT qualifying for the Champions League, which turned out to be correct

The PL financial judgements are judged over a three year reporting period, and the two seasons impacted by the pandemic, 19/20 and 20/21, can be combined and reported together. Swiss Ramble estimated Chelsea’s losses resulting from Covid-19 in the 2019-20 and 2020-21 seasons average out at £64million.

Within the figures, clubs can make deductions for healthy expenditures (such as costs associated with the women’s team, academy and general infrastructure), as well as a sizeable adjustment for losses arising from the pandemic. Chelsea, you could reasonably argue, could easily present evidence showing the damaging impact of sanctions on Chelsea’s accounts too

Now of course, that can change depending on player sales and revenue increases between now and the end of June 2024.

Chelsea essentially need to make about £96m in cash minimum to be compliant, or next year we’d face a points deduction.

My guess is even if this happened next year, we’d be on course for enough points for it not to be an issue. The relegated teams made 34 points at most last year, in my view there’s simply no chance Chelsea won’t make at least 50 points next season, in fact I’d say we’d make about 70 plus.

So, what do we do about this year?

Back to our current figures, as last year, any profit from player sales completed by the end of June will fall within this year’s financial figures. Also the reduction in wages due to sales would help our financial figures.

This, and not some secret anti-academy agenda, is the reason we’re hearing about various academy talents being sold.

Academy sales are, as we all know by now, pure profit on the books. Remember if we sell a player we signed, the only profit we can make is if we sell higher than their amortised value, which probably rules out Romelu Lukaku, Kepa and Marc Cucurella- however their wages would make a difference.

Here’s a few realistic deals we could do before June which could resolve this shortfall. To be clear, this is not me saying I want these players sold, or they will be sold, but this is one option open to us. I’ve tried to put as realistic prices on them as possible.

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Ian Maatsen: He has a £35m release clause, confirmed by Fabrizio Romano, which I suspect will be activated by a club in June. Matt Law has confirmed we will also receive a loan fee of £2m for him from Dortmund.

Trevoh Chalobah: The club value him at £25m and there is PL interest, he is likely to be sold in January.

Armando Broja: This would be more likely to move in June if we sign a striker, West Ham and other clubs have held interest, and he is still highly rated. He could earn us £30-35m

Conor Gallagher: Sadly he has still not signed a new deal, nor been offered one. This sale would be crazy in my view but maybe the club feel they need to sell to ensure we remain within PL rules. He’d get £45-50m in cash up front.

Harvey Vale: Having a good season on loan at Bristol Rovers, could probably sell for about £1-2m

Bashir Humphreys: This again would be crazy in my view, but he’s having a good loan at Swansea and you could likely get £10-20m for him. But really we should not be selling Bashir at all.

TOTAL: £168m.

All cash on the books.

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So as you can see, Chelsea have no need to worry in truth. We sold 11 players last June and would only need about 4 sales to cover ourselves by the end of this June. If we made £168m in sales, we’d be within the PL rules by £62m. If you sold all the others and kept Gallagher, we’d likely be within the rules. I doubt all the above will be sold, but I’d suspect at least 3-4 to be sold before the end of June 2024.

It’s important to note here how wages are factored into these figures, and our wage bill went down significantly in the summer. It was reported last year most contracts handed out by the new owners have an automatic deduction related to Champions League participation, rumoured to be anywhere between 20-30%. That could save the club anything from £20-30m in wages alone, maybe more. Not to mention the annual combined wages of the players we sold or left on a free last summer amounted conservatively to at least £70-80m based on their combined rumoured weekly wages at Chelsea, probably more. (again, I’m speculating on exact figures, but its been well reported Kante alone was on about 290k per week, which is roughly £14m a year).

Even taking into account the new signings, which lets say for arguments add £40-50m to the wage bill, Chelsea’s wage bill could be down anywhere between £40-70m this season which is a huge saving from last year.

There’s also the potential for new commercial deals to begin before the end of June. We’ve already signed a new commercial deal with crypto firm BingX, worth £12m per year. We’re wearing their logo on shirt sleeves this year, and training kits from next season. As we’re already wearing their logo on our shirts, I’d argue its fair to assume some form of payment for that deal - maybe half of the £12m per year given they are starting half way through the season - might have been made already.

If so, you can add £6m to the figures. There could of course be more commercial deals agreed before the end of June, though its likely those would begin next season.

Which brings me to the £140m cash injection into the club made recently. According to the Athletic, this can’t be registered under this seasons figures, but CAN be under next financial years, beginning in July. This is a smart decision, given we are unlikely to make the Champions League for next season.

So, what about next season, we have no Champions League?

First up, I want to say on this my previous point. The owners have injected £140m cash into the club, and this will go on next year’s books. That’s a good start.

But how else will we make up the shortfall this next season without Champions League.

Well, we have a good chance of making the UEFA Conference League this year either through the league cup or the PL. Of course the prize/TV money for Conference League is a lot less than for Champions League qualification, but there would still be some revenue increase.

According to UEFA, a club makes £2.5m for making the group stage plus £430k per victory in the group stage. So if you win 4 group games (enough to win a group), you could make £4.3m from the group stage. Winning the competition would make you a further £4.3m with smaller increments for getting to other knockout stages, so the competition could be worth at least £10-15m, which whilst its not the riches of the CL, would be more revenue, and of course playing in Europe would increase match-day revenue to the extra home games, which again boosts revenue.

If absolutely needed, we have a lot of the young talent we signed which could be sold at a small profit too. We had big offers for Andrey Santos in the summer, trebling the value we signed him for. Angelo has had a good season for Strasbourg, so he would make a profit if sold in future. Datro Fofana looks like he’s not going to make it at Chelsea, so he is one who could be sold for likely a very small profit.

Obviously you’d hope some of the young signings make it in the first team Chelsea squad, but the ones who don’t we’ll either make back what we made, or more likely, make a small profit. Young talents don’t tend to decrease in value too much. Of course there’s also the chance some players may want to move on or be moved on by the club as others come in.

Plus of course, the likely sales of Lukaku (who has a £30-37m release clause), Kepa, Hakim Ziyech, potentially Marc Cucurella and maybe even one our current wingers in the summer (possibly in June, possibly after so showing on next years figures) will all help remove a lot of wages from the books next year, and there’s also loan fees for next season to take into account.

The other thing for next year, is we could potentially have a new front of shirt sponsor on bigger money than this year, and Infinite Athlete could continue to be a club sponsor. Both of these deals would help increase commercial revenue, with potentially more lucrative deals if we reach European competition.

All in all, I don’t see much reason to worry. We’re run by financial experts who, as we already know, clearly are aware of all the financial rules and all the potential loopholes.

I see our trajectory as a team and a club going only upwards, and once we’ve made it through this year, I doubt the financial issues will be as much a concern (as much as certain journalists would like them to be).

I hope I’m right.

The Score