Chelsea losses soar to record £88m

Chelsea made losses of £87.8m last season, a record in British football, according to accounts to be submitted to Companies House today.

Chelsea made losses of £87.8m last season, a record in British football, according to accounts to be submitted to Companies House today.

Amid a sea of dizzying statistics that would have most chief executives reaching for smelling salts - and an insolvency practitioner's telephone number - the one number that is largely responsible for the deficit relates to wages. Chelsea's salary bill in 2003-04, the first year of the Roman Abramovich era, was £115.5m, representing a staggering year-on- year leap of 210 per cent.

Among the highest earners on the payroll was the chief executive Peter Kenyon, with a package worth £3.53m, although another 34 employees at Stamford Bridge pocketed £2m or more each in the year.

Not since Peter Ridsdale lived the dream at Leeds, leading to record annual losses of £49.5m in 2003, has one club spent so extravagantly in pursuit of success. The Leeds gamble failed because they had limited resources to combat on-pitch failure, leading them to the brink of administration until Ken Bates took over last week. Unless anything untoward happens to Abramovich, Chelsea should have no such concerns.

The other key figures from Chelsea's accounts are £152m (turnover, up 40 per cent), and 76 (the percentage of turnover spent on wages). Such a ratio would cripple most clubs, but then Chelsea under their billionaire owner have never been an ordinary club.

Kenyon said yesterday that the first season of Abramovich's tenure was exceptional and that Chelsea were aiming to break even by 2010.

"Two years ago we were seen as streets paved with gold," he said. "That is over. Chelsea is now being run properly. The club is being run as a business."

Kenyon, who was recruited from Manchester United after Abramovich's arrival, said the club was looking to become financially self-sufficient and that they have a five-year plan to reduce their dependency on the Russian.

Part of that plan is to increase commercial income, and Chelsea yesterday announced an eight-year, £100m kit deal with adidas, which will start next year. Kenyon is also in talks with at least six multinational companies about a new shirt sponsorship deal, with the mobile phone firms Siemens and Orange both reportedly in the running.

Abramovich's money has certainly led to an improvement in on-field performance, with Chelsea leading the Premiership by 10 points and still in contention in three cup competitions.

The accounts filed today, however, might reasonably be used as evidence that massive spending does not necessarily buy success. The season in which the £87.8m loss was sustained, under Claudio Ranieri, ended without a trophy. Some of the most expensive players - and most costly in terms of wages - were flops at Stamford Bridge, namely Juan Veron, Adrian Mutu and Hernan Crespo. Only since the arrival of Jose Mourinho have Chelsea really started purring, and future expenditure under him is likely to be more constrained.

Kenyon said he will set "some aggressive targets" for reducing the club's payroll and that Mourinho is happy to work with a squad of 24 players. Kenyon admitted: "Our squad [before] was too large and too expensive." Kenyon also said that Mourinho understands that further big-money signings will only be made if he sells first. This will be tested by the availability of various high-price superstars in the long summer transfer window.

One concern for Chelsea fans must be their club's fate if Abramovich decides he wants to leave. Kenyon has told fans not to worry.

"Roman is at Chelsea for the long run," he said. "He has bought in completely to the vision of making this club one of the biggest and best in Europe. This was not a vanity purchase for the owner. It is a serious investment with a long-term business plan." The adidas deal is part of that. "We believe a global partnership with adidas will be a huge step in helping the club achieve its long-term strategic goals," Kenyon said.

Chelsea hope to target key geographical areas, including America and China, in order to expand their fan base and income. With accounts like today's, they might need it.

Chelsea by numbers from 2003-04 accounts

£87.8m Annual losses, a British record

£115.5m Wage bill, a 210 per cent year-on-year rise

£152.1m Turnover, a 40 per cent year-on-year rise

35 The number of employees earning £2m or more per year

£3.53m Earnings of Peter Kenyon (right), chief executive

£175m Amount spent on players in Roman Abramovich's first season

£20m Severance payments to former players and Claudio Ranieri

£151m Debts, including £115m interest-free loan from Abramovich

76 per cent Chelsea's ratio of wages to turnover

£300m Abramovich's estimated spending since summer 2003