Friday, March 12, 2010

Still Living The Dream

Another day, another football club in the High Court. This time it was Cardiff City, who were facing their third winding-up order on Wednesday over a £1.9m debt to Her Majesty’s Revenue and Customs, a government department that is becoming all too familiar to football fans across the land. Fortunately for the Bluebirds, they have in Peter Ridsdale a chairman who understands debt problems better than most, having presided over the most infamous financial collapse ever seen in British football at Leeds United.

Thanks to his efforts, “living the dream” has entered football folklore as a phrase synonymous with financial imprudence or living beyond ones means, which resulted in Yorkshire’s finest “marching on together” to administration, only burdened by debts of over £100m.

Cardiff have just about avoided this fate, but have been given a final date of 5 May (three days after the end of the season) to settle their debts with the taxman, even though HMRC’s counsel argued that the club should be wound up immediately, as it was “plainly insolvent”. The second winding-up order in the High Court had been adjourned for 28 days in February after Cardiff paid £1m towards the tax bill, which then stood at £2.7m. Half of the remaining £1.7m was paid on Tuesday, leaving £850,000 outstanding.

However, the HMRC counsel said club the payment was only possible after the club defaulted on its ongoing obligations to pay PAYE and VAT, meaning that the total debt now stands at £1.9m. The Registrar said, “On the face of it this company is not able to pay its debts as they fall due”, but granted an adjournment of 56 days for full settlement and Cardiff are now in a race against time to find the money. The club hopes that the sale of two plots of land around the Cardiff City Stadium for around £1.8m will provide a lifeline, but fans have learnt to be wary of the club’s promises.

"Is his nose getting longer?"

The supporters could have been forgiven for believing that the worst was behind them back in December when the first winding-up petition was dismissed by the High Court and Peter Ridsdale triumphantly commented, “This puts any doubts that anybody had about the future of the club behind us.”

Just in case there were any lingering misgivings, Ridsdale repeated his confident message on 8 January, “We as a club will have paid off the Inland Revenue by the end of January and we will be bringing in new players.” This was after the News of the World had run a story claiming that the club had to settle a £2.7m tax bill or face being wound up. Ridsdale appeared more concerned that the information might have come from documents stolen from club officials, but that did not mean it was untrue.

Blue Peter” indulged in his own form of wind-up, when he reassured fans that, “We are happy that Cardiff City Football Club’s relationships with its creditors including HMRC are such that we will not have any financial issues that will affect the ability of the club to continue to trade as normal in all aspects of its business.”

The Riddler’s commitment to transparency has enjoyed a somewhat checkered history, epitomised by his tetchy response to a question at a press conference on 28 January on whether the outstanding tax bill would be paid before the second High Court hearing, “You will find out on February 10. Why do I have to tell you? With respect, it’s nothing to do with you, it’s to do with our shareholders.” By implication, it was also nothing to do with the club’s increasingly restless fans. When he was later asked if the club was going into administration, he stormed out, for once in his life claiming that he had “nothing more to say.”

"Happy customers"

Chairman of the South Wales club since October 2006, Ridsdale shows every sign of repeating the mistakes he made at Leeds United by effectively gambling on success on the pitch paying the ever-increasing bills off the pitch. His “strategy” at Elland Road relied on qualification for the Champions League, while he is now (probably literally) banking on promotion to the Premier League. There was a horrible sense of déjà vu when you heard him boasting of the club’s aspirations after last summer’s £5.25m spending spree, “If you look at our levels of investment, I don’t think we can be accused of not being ambitious.”

Nobody has ever charged Ridsdale with under-spending at Cardiff (or anywhere else for that matter), especially when he brought in expensive old pros like Robbie Fowler and Jimmy Floyd Hasselbaink to boost the wage bill, sorry, chances of promotion. Amusingly, Ridsdale has blamed football’s structure, specifically the enormous financial gap between the Championship and Premier League for creating a “temptation to over-spend”, to which Football League Chairman, Lord Mawhinney, simply responded, “clubs have to live within their means”. Even a humble supporter realised this fundamental economic principle, “The club needs to tighten its purse strings. It thinks it’s in the Premier League and it’s not.”

So how do the financials look under Peter Ridsdale’s stewardship? In the last three sets of accounts (2006-8), Cardiff City has reported an operating loss very single year: £5.7m, £5.5m and £8.4m. Most worryingly, the wage bill has increased over this period from £8.1m in 2006 to £13.4m in 2008, which was actually higher than turnover of £12.8m. The salaries are running at £1.2m a month, which helps explain why the club has difficulties in paying irritants like the taxman and why the debt has risen from £27.1m in 2006 to £32.8m in 2008, despite making well over £20m profit in transfers.

"You probably think this blog is about you"

PR Pete was at his best when it came to explaining the debt, “We haven’t borrowed a penny from the bank since I came here. We’ve been self-sufficient and we don’t have a bank overdraft.” This may well be true, but he neglected to mention the other significant debt the club is struggling to service, like the mortgage with PMG, the developers of Cardiff Stadium, or the unsecured redeemable loan stock, which is believed to require a £10m settlement in December or increase in £1m increments until it is repaid.

To be fair, Ridsdale did manage to agree a settlement with former owner Sam Hammam’s Langston Corporation that the loan stock was not repayable until 2016. Bearing in mind his profligacy in the summer transfer market, it was a bit surprising to hear Ridsdale sum up the desperate situation so accurately just a few months later, “against a backdrop of the club having to find money to build and fit out the stadium, meet repayments on loans to former directors, make repayments on the debt owed to PMG and make repayments to the Langston Corporation.”

Another significant cost to Cardiff is Ridsdale’s own salary, so riddle me this, how could he have earned £1m in 2007 while Cardiff made a loss of £5m? This is especially pertinent when you consider the comments he made on the publication of his book “United We Fall: Boardroom Truths About the Beautiful Game”, when he bleated, “The only benefit I wanted from this was a chance to tell the truth. I am very keen that nobody thinks I’m lining my pockets.”

Ridsdale was remunerated for “consultancy services” via his company WH Sports, including a £500k bonus for “successfully renegotiating the size and terms of the loan notes and achieving unconditionality on the new stadium project.” Is it just me, or does this mean that he was effectively given a bonus for increasing the club’s debt?

Having “saved the club from administration”, Ridsdale invested his bonus in Cardiff City shares (at a heavily discounted price). The latest accounts showed that Ridsdale’s firm was paid a further £325,000 in 2008, presumably before it went bust owing nearly £374,000 to the taxman. Of course, Ridsdale now employs what is know in the trade as the “Storrie defence”, named after Portsmouth’s own Peter, protesting that he is now only “a salaried employee”.

"Put your hands up for Cardiff"

The great man (Peter the Great?) is still full of confidence, describing the club’s problems as a “hiccup”. He patiently explained that, “We have short-term cash challenges like many football clubs” (and he should know), but this blithely ignores that the short-term problems are being solved with long-term money. What happens next year if you’ve already spent the income from 10,000 season tickets?

That wage bill shows no sign of going away – and nor does the taxman. Supporters Trust board member Keith Morgan articulated the issue, “What I suppose is a worry is that there is no firm plan or actual promised cash to come in to deal with the medium to long-term debts.”

In the interests of balance, we have to acknowledge that Ridsdale has done some good things for Wales’ biggest club, most notably delivering the spanking new Cardiff City stadium, but even this has not been free of problems. Apparently, the club still owes millions to contractors who have carried out work on the stadium, as the budget for fitting out offices and hospitality boxes spiralled out of control.

Even though the club had gone to great expense installing undersoil heating to ensure that games went ahead in the winter, it did not work, leading to the lucrative Christmas match with Leicester City being called off. It would also be interesting to know what the club have assumed for attendances in their business plan (if they have one). Cardiff attract very good crowds for the Championship (around 20,000), highlighting the club’s potential, but this is still well short of the 27,000 capacity.

"Oops, I did it again"

Ridsdale has also produced good money from player sales, but then again he is the consummate salesman with one Wall Street operator during his time at Leeds saying that he “could sell ice to Eskimos”. That being said, it is difficult to understand why he did not insist on a sell-on clause when transferring the extremely talented Aaron Ramsey to Arsenal, though some have argued that the insistence on the money being paid upfront is indicative of the club’s pressing financial needs.

However, a large section of Cardiff’s fans have lost trust in their Chairman, especially after the so-called Golden Ticket fiasco, when Ridsdale promised that all the money from early season ticket renewals would be spent on new players in the January transfer window, effectively asking the fans to put their hands in their pocket to help the club get promoted, “We will be bringing in new players this month, I can guarantee that. I would go so far as to say that come January 31, we will be holding a press conference to parade the players we have brought in during the month.” When there turned out to be no new additions to the squad, Ridsdale said that he was prepared to eat large helpings of “humble pie” (maybe that’s why he’s so, er, robust), but “I don’t believe I’ve lied. I allowed something to go out there that was misleading.”

"Who ate all the humble pies?"

This is how I see it: either a promise was made to season ticket holders that Ridsdale knew that the club had little chance of honouring or he is unaware of the perilous state of the club’s finances. In other words, Ridsdale is either, shall we say, cavalier with the truth or financially incompetent. The wider issue is that not only was the £3m+ from the season ticket sales (10,000 at a minimum price of £299) not used for buying players, but it obviously did not find its way to the taxman either, given the appearance at the High Court.

At the club’s recent Extraordinary General Meeting, Finance Director Alan Flitcroft explained that, “there have been significant costs since we launched the scheme”, giving the strong impression that the club would not have been able to cover those costs without the injection of the season ticket money, which is extremely worrying. The best thing to come out of this sorry affair was Cardiff’s statement, which harrumphed with no apparent sense of irony, “We do not apologise for ensuring that the viability and financial health of the club is the ultimate priority.”

Nor do the fans believe all the talk about new money coming into the club, “I am talking to investors, sponsors, people who have access to funding.” They have heard plenty about fairy godmothers baling out the club in the past three years, but the only tangible investment to date has been a paltry £500,000 from Malaysian “property tycoon” (aren’t they all?) Datuk Chan Tien Ghee. As sports agent Jerry Maguire famously said in the movie of the same name, “Show me the money!”

"The fans speak loud and clear" (photo credit: Jon Candy)

When the fans dared to protest against the club’s financial situation, Ridsdale whined, “We are currently seeking external investment. Will a march against the current management or the club assist that?” Ah, so that’s it. Nobody has invested in Cardiff City in the last three years, as they were worried that the fans might one day stage a peaceful demonstration against financial incontinence. Over 2,000 fans, carrying banners and a coffin, called for Ridsdale’s resignation before Cardiff’s match against Middlesbrough. Their mood was probably not helped by reports of a bust-up between Ridsdale and manager Dave Jones after the 3-0 defeat at Preston, when the Chairman charged into the dressing room to make Jones aware of his unhappiness with the performance, drawing on all of his vast experience of man management and football tactics.

Questions were even asked in the house with the Welsh Assembly’s Sports Minister, Alun Ffred Jones, being asked about the club’s financial troubles, “Many fans believe that they were misled by Peter Ridsdale. Do you also share fans’ concerns about the future of Cardiff City, one of Wales’ top football clubs, because of very significant financial challenges faced by the club that have been highlighted in the media?” In a way the Welsh had already given their opinion of Peter Ridsdale in 2007, when he finished bottom of the candidates seeking to be elected as one of six South Wales representatives on the Football Association of Wales council.

"Cat got your tongue?"

In spite of this lack of popularity, Ridsdale is still holding the reins, even though he threatened to leave back in 2007, though in his typical self-serving manner, “I am getting more stick for saving Cardiff City than I did when things went wrong at Leeds. Right now, I feel like walking away.” Note the neat switch between the active and passive voice there.

After seeing off an attempted vote of no confidence at the recent EGM, Ridsdale claimed, “I am chairman, because if I walked away the board’s view is that the football club would be worse off” and “the shareholders have reached the conclusion that the likelihood of this club being in the right financial state is better served with me remaining than running away.” Right. Maybe this view is not quite so remarkable when you consider that most of the shareholders are local businessmen who are heavily involved in property development with little interest in football – and the second largest shareholder with a 10% stake is a certain Peter Ridsdale.

With Publicity Pete, it’s all about him. When he complained that he had been “turned out” of the Leeds United boardroom after he returned to Elland Road with Cardiff in 2006, his card was well and truly marked by Ken Bates of all people, “It’s a pack of lies, but I’m sure he needs the attention.” When he first arrived at Cardiff, he was anxious to downplay his role, “This isn’t about me jumping up and down, screaming from the rooftops, saying, ‘Look at me, I’ve done a great job here’”, but, almost in the same breath, he went on to say, “I’m enjoying what I’m doing here. It gives me a chance to prove to people that I understand how to run a football club.”

"I'm putting on my top hat"

Funnily enough, Ridsdale said much the same thing in his previous role as Barnsley owner and chairman, “I know I have something to prove and the only way I can do that is by focusing on Barnsley and making a success of it.” However, he nearly took his new “theatre of dreams” into liquidation, proving that old habits die hard, when it was reported that Barnsley paid more to agents than any other team in their division in his first year. His successor drily observed that, “the club was running into a financial position that was less than comfortable and it became clear that cash had to be injected”, while noting that “there are areas where we have spent too much.” Quelle surprise.

Of course Ridsdale is best known for his catastrophic reign at Leeds United, which became the poster child for poor financial management in the football world. During his six-year tenure, the club first enjoyed some success, famously reaching the Champions League semi-finals in 2001, before spectacularly imploding as a result of some “courageous” (a.k.a. insane) financial decisions, not least making Ridsdale the highest-paid chairman in the Premier League, when his salary was increased by 60% to £600,000 in 2001.

Before the likes of Chelsea and Manchester City brought in their billionaire benefactors, Leeds had reported the largest ever loss by an English football club: £49.5m in 2003 (after a mere £34m loss the previous year). When Ridsdale jumped ship in 2003, transfer spending had risen to almost £100m and Leeds were £105m in debt. His replacement, Professor John McKenzie, memorably joked, “Leeds lived the dream – and I inherited the nightmare.” Living the lie, more like.

"You don't know what you're doing"

Ridsdale decided to “go for it”, embarking on a grand acquisition strategy using innovative finance models, i.e. other people’s money. First, he utilised a sale-and-leaseback arrangement, which allowed Leeds to spread the cost of buying a player over the length of his contract, the drawback being that the interest rate was higher than the banks would charge and they had to pay for insurance on top of that. As their ambitions grew, they tweaked this arrangement, so that only half the original cost was paid off in stages, leaving the remaining 50% as a lump sum payment at the end.

This again increased costs, although it did defer the Day of Judgment. Finally, they raised £60m, the largest ever loan for an English football club, via a 25-year securitisation loan, which was essentially secured on the fans’ loyalty, i.e. money from their season tickets. Many clubs used similar devices, but there was one major difference with Leeds’ “cunning plan”, which was that they spent the funds on the squad, while others made long-term investments in a new stadium or stands.

This really was money to burn, but the club was not concerned, because they had a Plan B, namely to sell their assets (players) to wipe out the debt if it all went pear-shaped. However, there are many flaws in this logic. Like the housing market, transfer prices can go down as well as up and it turned out that Leeds had bought most of their players at the peak. Also, if a player is not doing his stuff on the pitch, his value is likely to fall. Furthermore, if a club is making distress sales, it will almost certainly have to do so at a discount. This was evidenced by the 2003 accounts, which reported a £24m loss for sales of players considerably below their valuations in the books, including defender Jonathan Woodgate, who Ridsdale had said “would never be sold”.

"Hey, big spender!"

Other examples of financial mismanagement were revealed by the accounts, including millions paid in compensation to former managers David O’Leary and Terry Venables and even salaries to players who had long since left the club. The club paid £70,000 in a single year for private jets, while Ridsdale’s successor publicised an invoice for the upkeep of goldfish in his office as an icon of the club’s over-indulgence.

Even after this damning indictment ("The Damned United”, if you will), Ridsdale incredibly told the BBC’s Money Programme that with the benefit of hindsight he would still not do things differently, “Mistakes were made, but I don’t think there’s a single thing I could change.”

While Yorkshire’s version of Edith Piaf is belting out his version of “Non, Je Ne Regrette Rien”, he is more than happy to point the finger at others for his failings, placing the blame for some of Leeds’ greatest extravagances with the manager David O’Leary, though his allegations were clearly contradicted by documents published in the Daily Mail, while O’Leary himself called Ridsdale “deranged” and “two-faced”.

He also put the boot into the players, “At the end of the day, the strategy went wrong because we stopped performing on the field.” If that wasn’t enough, he needlessly added, “I would have no problem with players speaking to the press if I believed that they were intellectually capable of doing so.” So says the Brain of Britain.

"I'm in the dark as much as anyone"

On Planet Ridsdale he still thinks that he would have saved Leeds from relegation to England’s third tier, “I actually believe that had I been allowed to stay around, I don’t believe that Leeds would be in the situation they are now.” No, they might be sleeping with the fishes along with Chester City.

Demonstrating an almost total lack of understanding, in both senses of the word, he also said, “It’s only 12 months since Leeds were in the play-off final and yet people talk today of decisions that were made four or five years ago that are causing their plight.” Well, yes. Even when Ridsdale appeared to be making an apology, it was heavily qualified, as when he told BBC Radio 4, “I regret a number of things we did. I think I said ‘yes’ too often to the manager. We bought too many quality players.”

All this from a man football agents fondly referred to as “Father Christmas”. In an attempt to break the world record for the number of strikers at a club, Ridsdale splashed out £22m on the “Two Robbies”: the overweight Fowler and the wasteful Keane. He also broke the British transfer record when he paid £18m for Rio Ferdinand, but the worst example of his generosity was when he paid £7m for the very ordinary midfielder Seth Johnson and then added insult to injury by paying him £37,000 a week, which was approximately £32,000 more than he had been earning and was £24,000 higher than his agent had been looking for.

"It's a fair cop"

Peter Ridsdale comes across an arrogant man, who genuinely seems to believe that he is a victim of circumstance, bringing to mind the old saying, “there is none so blind as he who will not see.” His best quality is a thickness of skin that would be envied by a rhinoceros, as we can see in the unintentional comedy video made about his time at Leeds, “My Leeds United”, where he gives us the classic line, “My job is to make sure this club is in safe hands.” For the sake of Cardiff City, I sincerely hope that lightning does not strike twice. Let’s hope that the fans “Won’t Get Fooled Again”.

No comments:

Post a Comment

Related Posts Plugin for WordPress, Blogger...