JJB fights on as US retailer Dick’s pumps in £20m
RETAILER JJB Sports today announced a £30m investment package, with £20m coming from US retailer Dick’s Sporting Goods, which it said would “give it a chance of completing its turnaround.”
The Wigan company said its major investors had also agreed to back its latest cash call, but conceded it would need to raise more funds next year.
Pittsburgh-based Dick’s, a $5bn enterprsie with 500 stores will pump £20m into JJB and at least one of its executives will join the board.
A deal with key supplier, German sports brand Adidas and its bank, Bank of Scotland, has also been agreed, JJB said.
The £30m investment package came as AIM-listed JJB posted annual results which showed a steep fall in both sales and losses, a result of a CVA process which has seen 41 stores closed.
Dick’s will invest an initial £20m in new shares and convertible loan notes, with the right to invest a further £20m in convertible loan notes.
Its existing shareholders IAML, Harris Associates, Crystal Amber and Bill and Melinda Gates’ Foundation Trust, will invest an additional £10m by exercising existing warrants and subscribing for new shares.
The company, which has 185 shops nationwide and has 4,000 staff, said Adidas would provide security for a two-stage loan of up to £15m to assist in its store transformation programme ahead of this summer’s European Championships and the London Olympics.
JJB was advised on the investment package by KPMG’s corporate finance team
including Alex Hartley and David McCorquodale.
Keith Jones, JJB’s chief executive said: “We believe this investment package and strategic alliance with Dick’s will provide a real opportunity to accelerate JJB’s turnaround.”
“We have always said that the turnaround of JJB was never going to be easy or quick, and the current retail environment has made our work even more difficult. But we have made significant progress since our restructuring in April last year particularly in e-commerce, cost efficiencies and the early results from our new store format.
“With the financial and commercial support we are announcing today, we can go further and faster and take advantage of the tremendous opportunities we see in our market in 2012 and beyond.”
In the 52 weeks to January 29 revenue fell 21.7m to £284.2m from £362.9m in 2011. Gross margins were up 1.3% and operating losses down 43% at £43.1m.
The loss before tax showed an improvement too, falling 44.3% to £101.1m.
JJB said trading remains tough, and in the nine weeks to April 1, like-for-like sales had fallen 5.7%, and its like-for-like cash gross margin was down by 24.9% in monetary terms.
Net debt, as a result of the enhanced store refurbishment plan has risen from January 29 from £11.3m to £20.6m.
Chairman Mike McTighe said: “Looking ahead, the ongoing credit squeeze on consumers and weaker UK employment numbers creates a tough environment.
“However, the platform we have built over the past 12 months and the strategic investment and financing package that the company has announced today have given JJB a chance to complete its turnaround programme.”
See also: Ex-JJB chief Ronnie charged by Serious Fraud Office.
Dick’s will buy £18.75m in junior secured convertible notes and invest £1.25m in JJB Sports shares, subject to shareholder approval.
Upon full conversion of the notes, Dick’s, the largest publicly traded US sporting goods retailer, will become a controlling shareholder of JJB.
Dick’s chairman and chief executive Edward W Stack said: “This is an exciting strategic investment that provides us with a valuable introduction into the workings of the United Kingdom sporting goods market from an established company that shares our commitment to serving the needs of core athletes.”
