The potential transfer of Victor Osimhen and its implications for Chelsea’s FFP position
Despite spending close to £1bn on new additions since taking over the reins at Chelsea, co-owners Todd Boehly and Clearlake Capital are reportedly ready to get out their cheque book once again.
Sitting tenth after 20 games, 12 points off the top four and with Champions League football looking something of a pipe dream for this season, making it a second successive campaign without the lucrative European competition aiding the club’s bottom line, was not the position that Boehly and co had envisaged when they began their tactic of heavy spending.
The Chelsea view remains that, long term, having acquired so many of Europe’s brightest young talents on long deals, amortising the cost of those deals across seven, eight and even nine years, that they will be in a position to return themselves to glory in English football in the not too distant future, even if evidence thus far would question such confidence.
The issue for Chelsea moving forward is how they square this spending with the Premier League’s profit and sustainability regulations (PSR), the rules in place which allow for clubs to make a combined loss of no more than £105m over a three-year accounting period.
According to figures presented by football finance expert Swiss Ramble, based on projections for the three-year PSR position for Chelsea through to 2023/24, the current accounting period, the Blues have a projected loss over the three year monitoring period of £323m. Of that figure, including allowable deductions related to investment in infrastructure, women’s football and the academy of around £122m, that still leaves Chelsea with a projected loss of £201m, £96m above the PSR limit.
Those figures could be impacted positively or negatively by new commercial deals or the signing or sale of players before the end of June.
Chelsea will likely be compliant for the 2022/23 period, with the club’s financial year running to the end of June.
The club are set to publish their accounts for 2022/23 in the next month or so, with the club, according to Swiss Ramble estimates, set to fall below the PSR threshold by £37m thanks to the three-year period dropping the £102m pre-tax loss in 2018/19 and replacing it with a smaller projected loss of £70m for 2022/23.
But given the problem that the club could have coming down the tracks with regards to their PSR position in 2023/24, it is likely that the transfer business the club engages in before the June financial year end will be determined by the kind of money that the club can recoup in sales.
For example, Conor Gallagher is a player who has been repeatedly linked with an exit from Stamford Bridge this month, with clubs such as Tottenham Hotspur linked and a fee of as much as £50m bandied about.
For Chelsea, selling an academy product like Gallagher is a sure fire way to improve their finances and PSR position due to the fact that academy graduates have no book value in terms of transfer cost, meaning that whatever they are sold for is pure profit.
Unlike when signing players, where transfer fees are accounted for through a process known as amortisation, when the guaranteed fee is spread over the length of a contract, when selling a player the guaranteed fee can be booked into the accounts immediately.
That means Chelsea can reduce their PSR worries by £50m straightaway upon the sale of a player like Gallagher, if indeed that were to be the fee. Add into that the new commercial deal with sleeve sponsor BingX and the potential for further sales in January, and potentially in early summer before the end of the financial year, and they will have some confidence of being compliant if they decided to act.
Napoli striker Victor Osimhen is a player who has been linked with a switch to Chelsea, with the Nigerian having a reported £103m release clause. Say, for example, Chelsea did decide to press ahead with that deal at that price, the tactic that they had used to offer up to nine year deals has now been closed, with amortisation limited to five years. That means that Osimhen would cost £20.6m per year in terms of his fee being accounted for. That would be significant sum to be added to the books without getting rid of players first, and players who would deliver the highest profit, such as Gallagher, would be the most obvious choice.
So, Chelsea could finance an Osimhen move if they so wished. It would, however, almost certainly require them to move on some big names before the end of June to be PSR compliant, and with a lack of European football impacting revenue generation into next year’s accounts then it wouldn’t be without significant risk.