CARDIFF CITY FOOTBALL CLUB held an E.G.M. today to approve a land sale to raise vital urgent funds to clear a tax demand but they also agreed to answers shareholder questions relating to the current financial situation at the club.
David Sugarman, Cardiff City Supporters Trust Membership Secretary, provided this comprehensive report for CardiffCity.com messageboard users which I've copied here.
Representing Cardiff City Football Club (Holdings) Ltd at today's Extraordinary General Meeting were Chairman Peter Ridsdale, Group Finance Director Alan Flitcroft, Company Secretary Alan Whiteley and board member Steve Borley. Apologies were given for the absence of missing board members Keith Harris and Dato Chan Tien Ghee.
The Chairman opened the meeting at 10am by giving the shareholders some background information regarding the House of Sport land sale proposal, which was the only official item on the agenda. While doing so, he confirmed the board would take questions from shareholders later in the meeting regarding the club's current financial situation, and he then invited any questions specific to the land sale proposal.
A shareholder asked if the price of the land in respect of the proposed deals with Borley Engineering Services Ltd and PMG Developments PLC had been valued independently. Peter Ridsdale confirmed that it had and stated that the council were fully satisfied that the best value on the deals had been achieved.
Shareholder Mike Roderick asked if the deal regarding the House of Sport was in the best interests of the football club as it appeared to him that a valuable future income stream was being sold off in order to service current debts.
Steve Borley explained that the value of the land where the House of Sport is to be situated was deemed to be nominal by two independent valuations due to the club's commitment to the council to build the facility. He said the House of Sport was never intended to be a money-earner for the club, but was instead one of the community benefits that formed an essential part of the original planning agreement with the council. Borley stated that the club desperately needs its own indoor training facility in order to satisfy the Football Association's criteria for Academy status, as the Vale has recently sold the indoor facility the club has been renting for the Academy players to the WRU. He added that the club was therefore in danger of losing Academy status if the House of Sport facility isn't built within the next eighteen months. He said he had been heavily involved in the club's youth structure since first becoming a director back in 1997 and he was desperate to ensure that the Academy continues to flourish.
Borley said that having his company build the House of Sport discharged a £3.5 million obligation the club could not afford at present. He admitted that his company's business plan in relation to the facility had been put together quickly in order to help ease the club's current cash-flow problems. He then assured the shareholders there was no financial benefit to him personally or for his company in building and running the House of Sport. With that in mind, he invited any shareholders present to join him as a partner in the project if they believed it would be a money-making scheme.
Alan Whiteley told the meeting that the club has an agreement with Borley Engineering Services Ltd to purchase the House of Sport at build cost within a period of twelve to eighteen months following practical completion of the facility.
Peter Ridsdale echoed Steve Borley's sentiments about the House of Sport being an obligation as opposed to a profit-making vehicle for the club, and said he felt it was very much in the club's best interests to pass that obligation on to Borley Engineering Services Ltd at this current point in time. He said the rental costs the club will have to pay BESL in order to use the facility once it is built will mirror the fees City are currently paying to use a similar facility at the Vale. Ridsdale added that the club's players and staff will be able to use a considerably better facility once the House of Sport is built, but on very similar financial terms.
Steve Borley said the rental figures he had used in his company's business plan had been obtained by comparing costs at other equivalent facilities. He said he could have cut costs and reduced the rental figures, but that would have meant the club's future players using a substandard facility, which would not be beneficial for their development. He added that some of the figures quoted in the press have been exaggerated with regard to the rental fees as the club won't be using it all year round.
Former-Chairman and shareholder Tony Clemo asked what would happen to the £450,000 Borley Engineering Services Ltd was proposing to pay for the House of Sport plot.
Peter Ridsdale stated the money would be wiped off the debt the club already owes to BESL for work the company has carried out on the new stadium project. He added the deal would significantly ease the club's current cash-flow problems as it would bring in direct funds through the second £1.8 million land deal with PMG Developments PLC.
A vote was then taken on the House of Sport land sale proposal. The Chairman revealed that proxy votes sent in by shareholders not in attendance at the meeting had amounted to approximately 22 million share votes for, and none against. He then asked for a show of hands. All of the shareholders present at the meeting voted in favour of the proposal bar two, so the motion was carried.
Tony Clemo asked when the accounts for the year ending 31 May 2009 are likely to be made available to shareholders and added a request for an Annual General Meeting to pass those accounts and the accounts for the year ending 31 May 2008.
Peter Ridsdale stated that the publication of the 31 May 2009 accounts is likely to be delayed due to an issue over the valuation of the land banks and stadium assets. However, he said he expected that issue to be resolved soon and the accounts to be published accordingly. Alan Flitcroft explained that the club is no longer required to hold an AGM under the provisions of the Companies Act 2006. However, the Chairman gave an undertaking to explore the possibilities of holding an AGM to pass the accounts, and in response to a request from another shareholder he also gave an undertaking to send the 2008 and 2009 accounts to all shareholders through the post.
Peter Ridsdale then gave a lengthy presentation outlining how far he and the board believe the club has come since 2005, when the Chairman first got involved with Cardiff City. He said when he arrived in South Wales, the club had debts of more than £30 million, was losing more than £9 million a year, was battling against relegation, the new stadium project was a pipedream and crowds were averaging 11,400.
Since then, he said the club's achievements have included four mid-table finishes in the Championship, an FA Cup final, the building and completion of a new stadium, the building of a new training facility at the Vale upon which the club has agreed a 15-year lease, and average crowds at present of 20,400.
The Chairman stated the board's business strategy in 2005 was: 1) to build the stadium, 2) to keep the club in the Championship, and 3) to sell players and assets in order to achieve the first two goals.
He said the board's business strategy in 2010 and going forwards is: 1) to seek new investment and funding, 2) to sell the club to new owners, and 3) to continually review overheads and costs until either of the first two goals are achieved.
Ridsdale suggested that five Championship clubs are currently receiving Premiership parachute payments, thirteen are being subsidised by wealthy individual owners and six are attempting to be self-sufficient. He said those six clubs are Cardiff, Doncaster, Plymouth, Preston, S****horpe and Swansea.
The Chairman pointed to the three main reasons as to why he believed the club had encountered serious cash-flow problems since the summer months:
1) The board had anticipated two major player sales during the close-season but only one deal had been struck (he later admitted that Joe Ledley was the second player the club had expected to sell)
2) The majority of the money the club had received from Birmingham City for Roger Johnson was immediately reinvested in the squad
3) The directors had been given assurances that new investment ranging between £2 and £6 million would be coming into the club, but so far only £500,000 has materialised
He added that the above issues had come 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.
In answer to a question from a shareholder, the Chairman stated the only future income stream that had effectively been mortgaged at the new stadium was the catering contract which is being handled by Compass. However, he said that the royalties Compass pay the club is still well in excess of the money the club earned from the catering facilities at Ninian Park.
Ridsdale concluded his presentation by saying that the current cash-flow situation is a short-term issue as opposed to along-term problem. He admitted that mistakes have been made by the board, and he issued an apology for those mistakes, but he assured the shareholders that the directors are fully committed to tackling the current problems and they are confident they will be able to do so. The Chairman then opened up the meeting to questions from the floor.
Tracey Marsh of the Supporters' Trust asked how much money the Platinum Ambassadors season ticket scheme had raised and how that had been spent.
Alan Flitcroft responded that the scheme had raised a total of approximately £2.6 million a sum that was smaller than the season ticket sales from the same period in 2008/09. He said that since the scheme had been launched, the club had paid out £2.3 million in wages and a similar amount in taxes. He admitted the season ticket income had largely been spent on those areas, although he stated the situation was far more complex as the club had also raised money through various other means and had spent money on other running costs during the same period.
After Keith Morgan of the Supporters' Trust had clarified several technical points in relation to the financial figures quoted in Peter Ridsdale's presentation, shareholder Annis Abraham then called for a vote of no confidence in the Chairman. He also asked Steve Borley if Ridsdale has his backing as regards his position at the club. The vote of no confidence was seconded by shareholder Sam Murphy.
The Chairman stated that if any shareholder wishes to stage a vote of no confidence in either him or any other board member, they need to call a General Meeting for that specific purpose and obtain the backing of at least 5% of the company's shareholders in order to table such a resolution, as required by the company's constitution. Steve Borley then asked Annis Abraham what he thought he was trying to prove by asking such a question. Abraham stated that he wanted to know if the Chairman had his backing and the backing of the other major shareholders, such as Paul Guy and Mike Hall. Borley confirmed that the Chairman does indeed have his backing.
Shareholder Mike Roderick asked if the anticipated investment which had apparently failed to arrive before Christmas had been delayed because the Chairman had been unprofessional and had not made the potential investors aware of the club's true financial position.
Peter Ridsdale stated that neither he nor the club's other representatives have had any meaningful meetings with potential investors without revealing the club's full financial liabilities. He maintained that he had informed one potential investor of the HMRC winding-up order on the same day that he had first learned about it.
Responding to an earlier question from Keith Morgan, the Chairman stated the club had made significant operating losses in recent seasons in its attempt to stay in the Championship, as losing its Championship status would have been a disaster. He confirmed that an operating loss will again be made during the current season on the basis that the club has spent substantial funds in order to fit out the new stadium. When pressed by a shareholder, Ridsdale refused to put a figure on this season's losses on the grounds that the relevant accounts have yet to be audited or published.
Geraint Jones, Secretary of the Supporters' Trust, asked Peter Ridsdale to list the club's short-term creditors. He also asked what those creditors are owed and how the club intends to service those debts. The Chairman responded that he was unable to give a list of short-term creditors as the information was confidential and commercially sensitive. However, he said he fully understood the concerns of the shareholders with regard to that situation. He stated that the directors are acutely aware of the requirement to pay all of the club's creditors and they are doing everything within their powers to make sure cash is available to meet those debts. He added that £2.3 million has recently been paid to the Inland Revenue and more money will be paid to them next week.
Shareholder Steve Perry asked if the club faces a further winding-up order in April from a firm owed a figure of approximately £700,000 in relation to services provided at the new stadium.
Alan Flitcroft confirmed that there is currently a petition for a winding-up order against Cardiff City Stadium Ltd (a wholly-owned subsidiary of Cardiff City Football Club (Holdings) Ltd), and that order has been adjourned until April. Flitcroft said he hoped the club would be able to reach a satisfactory arrangement with the company concerned before the matter goes back to court.
A shareholder asked if director Keith Harris is paid a six-figure salary by the club.
Peter Ridsdale stated that Harris is not paid a six-figure salary by the club. He said he believes that, to date, Harris has not been paid any fees at all by the club, and if he has they are certainly not in six figures.
Phil Nifield of the Supporters' Trust asked the board to confirm or deny if the club is currently under a Football League transfer embargo, and if it is to state when that embargo was put in place.
The Chairman confirmed that the club is currently under such an embargo and will be until such a time that the current tax situation is satisfactorily resolved. He said the embargo initially came into effect during the autumn.
Phil Nifield asked why the club was promoting the Platinum Ambassadors season ticket scheme by promising fans that the squad would be strengthened in January with the proceeds when the club was in fact under a transfer embargo.
Peter Ridsdale stated that at the time of the season tickets launch, the board was fully expecting money to come into the club in the form of new investment which would have enabled the tax debts to be cleared and the season ticket cash to be spent on new players. He said that investment hadn't materialised, and therefore the club hadn't been able to clear the tax debt as expected.
Alan Flitcroft stated that he wasn't going to attempt to kid anyone and confessed that of course he had known when the season ticket campaign was launched that the club owed HMRC a significant amount of money. He said the messages the club was putting out about backing manager Dave Jones during the January transfer window were based on commitments that had been given to the board by potential investors. As those commitments were not honoured, the board couldn't spend the season ticket money as they had wanted to. He admitted he was embarrassed by the situation and apologised to the shareholders for it.
On the subject of investment, the Chairman stated that before the General Meeting had started he had asked his colleagues if they felt the club would be more likely to attract the new investment they are currently working to secure if he were to go than if he were to stay. Ridsdale said the board's view is that new investment is more likely to happen if he stays than if he goes. He added that if their answer had been the opposite, he wouldn't have been present at the meeting.
A shareholder asked what the annual cost of servicing the club's long-term debts is.
Alan Flitcroft said the club is committed to paying £1 million a year to Langston, £1 million a year to PMG and approximately £720,000 in director's loans. He said that while these are obviously significant sums, he feels they are affordable within the club's current budget.
The same shareholder asked if the club was likely to have sell players this coming summer.
Peter Ridsdale confirmed that the club almost certainly will have sell players during the next close-season, just as it has done in previous years.
Dave Sugarman of the Supporters' Trust asked if Dato Chan Tien Ghee is a director of the club and, if he is, why hasn't his directorship been registered at Companies House.
Alan Whiteley confirmed that Dato Chan is a director, but he said the form which was sent to Companies House in order to register him as such was rejected because it was filled out incorrectly. Whiteley added that an amended form is in the process of being registered.
Dave Sugarman then asked if any of the club's directors have been awarded bonuses in relation to the completion of the new stadium and, if so, how much were those bonuses.
Alan Whiteley stated that three directors were paid bonuses in recognition of the work they had put into the scheme. He said Peter Ridsdale had been awarded a bonus of £100,000, while he and Steve Borley had been awarded bonuses of £50,000 each.
A shareholder asked how long the Chairman felt the club could survive without further investment.
Peter Ridsdale said the club has money coming in from various income streams every day of the week. He stated that if the directors didn't think the club could survive long-term, they wouldn't be sitting in a meeting like this one but would instead be busy taking other action. He added that it was only because the board believed in the financial viability of the club that they had set up the General Meeting in order to help take things further forward.
The Chairman then refused to answer a question from shareholder Mike Roderick in connection with WH Sports Group Ltd, the liquidated consultancy company through which he was initially paid fees by the club. He merely stated that he was happy that his affairs in connection with WH Sports were being appropriately managed.
Tony Clemo asked what sort of form the board believes a potential takeover might take in view of the fact that almost all of the shares from the 2007 issue have now been subscribed to.
Alan Whiteley said a takeover may take the form of existing shareholders selling their stakes to a new investor, or a new share issue may need to be set up, in which case the shareholders would have to pass the resolution at a specially-convened General Meeting. Peter Ridsdale added that the club is currently talking to four groups of potential investors, and those groups include people who have said they are interested in both types of takeover.
A shareholder made a statement that he believed a vocal minority at the meeting were pursuing their own agendas and did not represent the feelings of the majority of shareholders. Another shareholder then asked how far the talks with potential investors regarding a takeover had progressed.
The Chairman said he couldn't answer that question with any degree of certainty as the board had received written commitments from potential investors in recent months which hadn't been honoured. Therefore, he said he didn't feel in a position to make any definitive statements about the progress on new investment. However, he added that there are two interested parties who he believes are very strong possibilities for future investment, both of which he has spoken to again this week.
Ridsdale said he is totally committed to finding new owners for the club as a matter of urgency so that he can hand over control to them, which he said would no doubt please some of the people in the room. He stated he believes the club can only continue to compete at the top end of the Championship or get promoted to the Premiership if new investment comes in, and the board is determined to deliver such investment in order to avoid a situation whereby the club goes backwards. He added that he and his colleagues are spending many hours each day trying to ensure that new investment does come into the football club as soon as possible.
Keith Morgan asked if proper due diligence has been carried out on the potential investors. He pointed to the recent situation that had arisen with supposed investor Ben Steele, who had subsequently proved to be something of a timewaster as far as the club was concerned.
The Chairman confirmed that the people the club is currently talking to are known to be genuine. He admitted the situation with Steele had been unfortunate, but pointed out that it was Steele himself who had been building himself up in the press. Ridsdale said he felt the board had a duty to the shareholders to investigate anybody who expressed an interest in investing in the club, and he was confident that the groups who are currently in talks with the club are serious in their intentions.
A shareholder then suggested that a number of people in the meeting had come along merely to stir up trouble and he implored the supporters who would later be speaking to the press to talk in positive terms about the club. He said the fans should get behind the current board for the next few months and hope they can turn things around for the club. His comments received an ovation from a fair percentage of those present.
Peter Ridsdale wrapped up the meeting, which had lasted almost exactly two hours, by thanking the shareholders for their attendance. On behalf of the board, he apologised for the current cash-flow problems and the Platinum Ambassadors season ticket situation. He admitted mistakes have been made and stated that he and his colleagues are fully committed to solving the issues which have resulted from those mistakes. He closed by saying the board is also fully committed to finding new investment which will help to take the club on to the next level.
The meeting ended at 12:03pm.
Dave Sugarman
Membership Secretary
Cardiff City Supporters' Trust
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