Battered JJB lives to fight another day after £83m gyms sale
JJB Sports today took the first steps on the path towards a secure future as it revealed the sale of its health clubs division for £83m, sacked former chief executive Chris Ronnie without a pay-off and announced a further three month standstill agreement with its lenders.
The beleaguered Wigan company, which in the last year has plunged into the red and lost 90% of its market value also plans to enter a Company Voluntary Arrangement with the landlords of 140 shops which have been shut, and move to monthly rental payements for the remaining 250 shops for 12 months.
Shares in the company jumped 30% as JJB said it had been granted £50m in working capital from its banks to keep it in business.
The much-anticipated disposal of the 52 fitness clubs and stores – made at the request of the three banks Barclays, HBOS (now Lloyds) and Kaupthing who are owed £60m – came after former JJB chairman David Whelan announced the deal yesterday.
Mr Whelan will pay the £83.4m settlement in a number of installments. An initial payment of £33.9m was made yesterday and has been placed in an Escrow account and will be used to pay down the creditors of the CVA, providing it is accepted.
A further £9.5m is due in mid April in respect of the stock of shops Mr Whelan has bought, while the remaining fee will be paid later.
With regard to former chief executive Chris Ronnie, JJB said he had been dismissed for gross misconduct without a pay-off following a disciplinary hearing on Monday related to the share ownership controversy earlier this year.
Mr Ronnie, pictured, had failed to tell the company he had lost control of a 27.5% stake in the business.
On the crucial matter of financing JJB, which is now led by former Next supremo Sir David Jones and ex Selfridges chief Peter Williams, said its lenders had extended their standstill agreement until June 17 – on the condition they are happy with the progress of the CVA and the completion of the fitness clubs deal.
No further fee will be paid by JJB beyond the £8.3m agreed with the banks in January.
The company said it still needs to secure long term banking facilities, and remains confident of doing so, it warned that if it fails for any reason, such as failure to agree the CVA, it “will no longer be able to trade as a going concern, which is likely to result in the appointment of receivers, liquidators or administrators.”
It said further restructuring of the business would be required to secure its long-term future and said it planned to sell non-core brands, its Irish fitness clubs and undertake a sale and leaseback of the Wigan HQ.
The company also provided a dire update on trading, which showed the horrendous affect the uncertainty over the company’s future has had.
In the 10 weeks to March 23 like-for-like sales, excluding the failed Lifestyle Division, are down 18.5%. Retail sales were down a massive 22.5%, while fitness club sales were up 6.7%.
JJB said: “In addition to the general weakness in consumer demand, the company believes that this decrease in retail sales is a direct result of the severe disruption in the supply of merchandise as a result of the well-publicised financial uncertainty that has surrounded the company’s future for the last six months.”
The retailer said it expects to make a loss before exceptional items of between £5m and £10m for the year to January 25.
Law fim Halliwells advised on the sale of the gyms while accountants at KPMG are working on the CVA.
