Football Management

Commentary on the management of over 160 English football clubs by Dr John Beech, winner of the FSF Writer of the Year Award 2009/10 Twitter: @JohnBeech Curator of! Football Finance

St Modwen v. Swindon Town

Posted by John Beech on November 17, 2009

Swindon Town have one of the worst financial records among English league clubs.  They last turned a profit in 1996/97, and have been into Administration in February 2000 with debts of £3.5m, and again in March 2002 with debts of £1.8m. Following the second Administration, they did not emerge from a CVA until the end of May 2008.  Their financial instability has been compounded by their lack of stability in the pyramid, having been as low as the current League 2 following a single season in the Premier League in 1993/94.

A report in The Guardian (1) that they are once more in financial trouble, under threat of a winding-up order to be serve by property developers St Modwen, came as no great surprise.  The report refers to “the non-repayment of a £2.45m loan dating back to 2005“, adding that St Modwen “is claiming the original £1.45m loan plus £1m in interest“.  The club’s response, however, says that the “matter referred to dates back to 2003 when the Club’s former holding company established a joint venture company, Shaw Park Developments Ltd, with St. Modwen” (2).

The quite horrific amount of interest would suggest that no interest has been paid since 2005, and that, at such a high rate, the club were seen as toxic, a very unsafe bet.

Certainly the club were in serious trouble in January 2005.  On 24 January the BBC reported that they faced an unpaid tax bill of £600,000 (sic), and had been given until 2 February to clear the debt (3).  Three days later the BBC reported “Sir Seton Wills, the club’s major shareholder and benefactor, and Town’s development partner St Modwen provided a £750,000 loan to cover the amount” (4). Roll on another nine minutes, and the BBC are reporting a different version of events: “major shareholder Sir Seton Wills stepped in and brokered a loan deal with property company St Modwen” (5).

Roll on until 19 October the same year, and we find that the club has again faced a winding-up order for non-payment of VAT, and has narrowly escaped closure.  And who paid this time? “It is unclear how the current bill was paid.  A club spokesman said: “I’m not aware of the details”” (6).  Given the level of revenues at the club during this period, it looks as if no tax was being paid until writs were served, and the not out of cashflow – Modwen and Sir Sefton Wills were relied on to bail the club out.  The regime at the time, under the chairmanship of Willie Carson, were not overfond of filing accounts either – accounts for 2004/05 were not filed until May 2007, and for the next three seasons did not appear until a new board had taken control.

So, the assertion that the demand is for the repayment of £2.4m lent to pay off tax debts in 2005 is perfectly plausible, but the club, now under a new regime with Andrew Fitton as Chairman, insist that the debt, which they dispute, is to do with the establishment of a joint venture company, Shaw Park Developments Ltd, back in 2003.

This was established in connection with a somewhat fanciful plan (7) to build a new 23,000-seat stadium, with the seemingly mandatory hotel and gym, at a site which, although largely ‘brownfield’, included part of the Great Western Park, which would necessitate the felling of thousands of recently planted trees (8) – a plan hardly likely to proceed with serious opposition.

I use the word ‘fanciful’ as Swindon’s average attendances have not exceeded 10,000 since the 1997/98 season (9). Like far too many clubs, Swindon suffered from a ‘cargo cult’ belief that a large empty stadium would attract twice or three times the number of spectators.  It was also fanciful in that there was no huge profit to be made by the club in selling the old ground to developers – it was owned by the council and the club were tenants.  Nevertheless, the whole project fell within the regeneration remit, and would appeal to property developers.

Now, if the phrase ‘property developer’ automatically fills you with dread when used in a football context, you should think again with respect to St Modwen.  If you don’t take my word for it,check out their website. It will rapidly become clear that they are the Goliath in this dispute with Swindon Town.  Their high prestige redevelopments include the regeneration of Trentham Gardens, turning it into one of Britain’s most popular visitor attractions (10), and the MG Rover Longbridge site (11).  They are no strangers to redevelopment projects with football clubs – their Trentham Lakes project (12) includes, as a relatively small part, Stoke City’s Britannia stadium, and they are leading partners with Worcester City on the Nunnery Way project (13, and, for my thoughts on this particular project, 14).

Why should such a giant get involved in a dispute over what is, by St Modwen standards, pretty small beer, if rather more crucial a sum for Swindon Town?  There is the pretty obvious reason that the Swindon redevelopment is no longer going ahead, the club instead looking to a phased redevelopment at the existing County Ground (15), with the announcement being made a few weeks ago.  This will have made absolutely clear to St Modwen  that there was no longer any chance of major scheme requiring their involvement.  Time to tidy up and close the Swindon account then.

Another reason may well be that this is a bad time for redevelopment with companies, with their property portfolios taking a hit in value with lowered property prices.  This is certainly part of the reason why St Modwen have yet to begin the building development on Stoke City’s old Victoria Ground, vacated by the club in 1997. St Modwen’s latest financial accounts show an annual loss of £50.7m, as opposed to a profit of  in the previous year of £93.7m (16).  As I expect they can’t resist saying in the world of regeneration through retail parks and supermarkets, ‘every little helps’.

There seems little chance of a quick and simple resolution of this dispute.  As Ian King has pointed out (17), it will become bogged down in arguments about the interpretation of documentation. Nothing but more worry for Swindon fans, and no doubt Worcester City fans will also be watching on with interest.

To me this sorry tale makes clear that any notion of a CVA being a kind of ‘half way house’ in the rehabilitation process for companies coming out of Administration is laughable.  The regime under which the failure to pay taxes from cashflow and the reliance on an unsustainable old-style benefactor model operated under what, I believe, is the longest CVA in the football sector.  If ever there was a case for some form of monitoring of companies while still in a CVA, the previous Swindon Town board provide ample evidence.


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