Chelsea have announced losses of £80.2m for the financial year to June 2006.
Costs at the Premiership champions have been cut by 42.9% and keep the big-spending Blues on target to break even by 2009-10.
The losses are £60m down on the £140m deficit recorded in 2004-05 and are the lowest in three years recorded under Russian owner Roman Abramovich.
"These figures demonstrate the business is moving in the right direction," said Chelsea chief executive Peter Kenyon.
"That positive trend will only continue as, for example, this year end does not take into account the benefits of our adidas deal.
"Last year we took some painful decisions in order to help us achieve our long-term business aims. This year's figures prove that was the correct decision.
"With increasing sponsorship income, television revenue, and ongoing success on the field, those positive trends are projected to continue."
Abramovich has now spent in the region of £500m at the London club, who are second in the Premiership and battling for silverware on four fronts this season.
The bulk of the new income comes from shirt sponsorship with Samsung and next year's accounts will show the benefits of the £13m-a-year kit deal with adidas as costs start to fall.
Chelsea are also broadening their worldwide appeal with expansion into Chinese and American markets.
Transfer spending has also been reduced and Chelsea did not sign any players in the January transfer window.
Asked if the figures were a sign of success on the financial front, the club's director of public affairs Simon Greenberg told BBC Radio 4: "No, I do not think it is success. It is moving in the right direction, reducing losses and increasing major income streams.
"Our turnover was up and football activities increased income by 6.6%.
"We are not spending as much as we used to do on wages and they are more manageable - they are down by 2%.
"We think that has become more stable and as revenues grow the business will become more successful."
Costs at the Premiership champions have been cut by 42.9% and keep the big-spending Blues on target to break even by 2009-10.
The losses are £60m down on the £140m deficit recorded in 2004-05 and are the lowest in three years recorded under Russian owner Roman Abramovich.
"These figures demonstrate the business is moving in the right direction," said Chelsea chief executive Peter Kenyon.
"That positive trend will only continue as, for example, this year end does not take into account the benefits of our adidas deal.
"Last year we took some painful decisions in order to help us achieve our long-term business aims. This year's figures prove that was the correct decision.
"With increasing sponsorship income, television revenue, and ongoing success on the field, those positive trends are projected to continue."
Abramovich has now spent in the region of £500m at the London club, who are second in the Premiership and battling for silverware on four fronts this season.
The bulk of the new income comes from shirt sponsorship with Samsung and next year's accounts will show the benefits of the £13m-a-year kit deal with adidas as costs start to fall.
Chelsea are also broadening their worldwide appeal with expansion into Chinese and American markets.
Transfer spending has also been reduced and Chelsea did not sign any players in the January transfer window.
Asked if the figures were a sign of success on the financial front, the club's director of public affairs Simon Greenberg told BBC Radio 4: "No, I do not think it is success. It is moving in the right direction, reducing losses and increasing major income streams.
"Our turnover was up and football activities increased income by 6.6%.
"We are not spending as much as we used to do on wages and they are more manageable - they are down by 2%.
"We think that has become more stable and as revenues grow the business will become more successful."
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