Jones heralds ‘new beginning’ for JJB
EMBATTLED retailer JJB Sports will raise £100m, £94m after expenses, in a major fundraising that will underpin its turnaround plan.
The terms of the deal were delayed from Friday after false rumours circulated the City regarding executive chairman Sir David Jones’ financial affairs.
In a statement late on Monday the company, which nearly went out of business this year, said the fundraising; “will allow the company to reduce its reliance on the availability of supplier credit and provide sufficient working capital to rebuild stock levels into 2010 and will provide necessary funds for the implementation of the group’s redefined “Serious about Sport” strategy.”
Sir David said the move was a “new beginning” for the company, which has rarely been out of the headlines this year, often for less than positive reasons.
The funds will be raised through a firm placing and placing and open offer, fully underwritten by Panmure Gordon and Numis.
JJB will issue 200,665,488 new shares pursuant to the placing and open offer and 199,334,512 shares in the firm placing.
If the deal goes ahead, JJB will extend its facilities with Bank of Scotland to September 2012.
Sir David said: “This capital raising represents a new beginning for JJB Sports. This business has been through a great deal but has survived thanks to the strength of its consumer proposition and the dedication of its staff.
“This fresh capital, together with the amended working capital facility from the Bank of Scotland, will provide the management team with the resources and flexibility it needs to implement the redefined strategy that will revitalise JJB and establish it as the destination for everyone who wants to participate in sport.
“With the funds from the capital raising we propose to pay drawn amounts under our amended working capital facility, increase our stock levels, refurbish our existing stores and have the resources to search for new stores in key retail areas.
“On behalf of the board I am delighted to put these plans in front of shareholders in the strong belief it will forge our path into the future.”
Shares will be issued at 25p a discount of 23.7% to the closing price of 32.75p on Friday. Investors will be asked to vote on the proposals on October 29.
Earlier it emerged that JJB had passed on a dossier of evidence to the City watchdog the Financial Services Authority regarding the mischievous rumour.
The FSA is expected to launch an investigation to find out who planted the rumours, which also involved former JJB boss David Whelan and his daughter Jayne Sharpe.
JJB said the rumours had been examined and were “totally unfounded”.
“The board is very concerned by the timing and concerted nature of these rumours and has passed on full details, with the results of its investigation, to the relevant regulatory authorities,” a statement said.
Four directors – Sir David, Richard Manning, Lawrence Coppock and Colin Tranter – will qualify for a £100,000 bonus on completion of the fundraising, JJB said
David Stoddard, an analyst at Altium Securities has revised his forecast on JJB’s shares from sell to ‘buy’.
He said: The fundraising secures JJB’s future. It will be able to re-stock its existing estate and refurbish/re-lay its targeted stores. Importantly, it will be able to add extra stores which should improve store contribution to central costs.
“The proceeds of the issue allied to the £25m BOS facility should prove adequate for these tasks. We will revise our forecasts formally once the issue has completed.
“However, our initial calculations, assuming a net increase in floor-space over the next two years, suggest scope to increase our target price at this stage to 39p”.
