JJB issues £31.5m cash call
STRUGGLING sportswear retailer JJB Sports has announced that it is proposing to raise a further £31.5m in cash via a new share placing in a bid to buy time to revive its fortunes.
The Wigan-based firm said that it has gained the support of key stakeholders in the business – including its major shareholders, Harris Associates and activist fund Crystal Amber. It has also gained support from Invesco Perpetual, the Bill & Melinda Gates Foundation and GoldenPeaks Capital to support the fundraising.
The five investor groups currently own 44.3% of the company’s shares, which could rise to somewhere between 58% and 71.7%, depending on the level of take-up from the remainder of the company’s investors.
The placing will be made at 5p per share, a premium to yesterday’s close of 4.4p.
Alongside the equity fundraising, the firm said it had gained an agreement from its principal funder, Bank of Scotland, to waive a covenant test due next month on its £25m bank loan on the basis that its fundraising will be successful. JJB had warned earlier this month that it was likely to breach the terms of its loan.
The board has also announced that acting chairman John Clare, who only stepped into the job following the retirement of Sir David Jones in July, is to be replaced by former Cable and Wireless chief Mike McTighe.
Finance director Lawrence Coppack is also being replaced by TJ Hughes’ Dave Williams, while representatives from each of the core group of five investors are to be offered non-executive posts on the board.
The firm said that its key stakeholders “welcomes the steps taken by management to strengthen the short term financing of the business”, and that it had support from strategic partners such as Adidas and Nike.
The company is recovering, but not as quickly as had been anticipated. This morning, it said that like-for-like sales between August and December 19 were 1.6% higher than last year and that year-to-date sales were 8.5% higher, with gross margins improving by 39.9%.
However, it said that poor weather had impacted both on sales and stick deliveries in its key Christmas trading period. . This has led to a fall in sales between 8 November and the end of last week of 15.7%.
The fundraising will be the second attempted by the company to sort out its finances in just over a year. After completing a company voluntary arrangement allowing it to shed non-trading stores, JJB completed a £100m share placing and rights issue in October 2009 in a bid to shore up its balance sheet.
Its current net debt levels stand at around £21.4m, and JJB said that it is “prudently” managing its cash,.
“With the mitigating actions that directors are taking, the directors currently believe that the company has sufficient funds to enable it to operate within its cash headroom pending receipt of the proceeds of the proposed capital raising,” the company said in a statement.
“However, the ability of the company to operate within its cash headroom is dependent on trading over the important Christmas and New Year period and trading conditions in general.”
