Troubled JJB up for sale

SHARES IN JJB Sports plummeted by more than 80% yesterday as fears mounted over the debt-ridden retailer’s future after it put itself up for sale.

The company — which operates six stores in Tayside and Fife and employs more than 4,000 staff nationwide — yesterday admitted it had been unable to raise the cash required to implement its economic turnaround plan.

The firm has been walking a financial tightrope for months after it was forced to issue a series of profits warnings after being unable to halt a slide in sales.

JJB yesterday gave up on its internal fight for survival and said it was putting itself on the market in the hope of rescue by a third party.

The firm said investors’ stakes in the company could be worthless following any deal.

The announcement sparked panic on the market yesterday with shareholders dumping stock throughout morning trading.

By 2pm, the value of shares had dropped by more than 80% and closed down 83.5% on the day and were worth just 0.39p each.

The company’s financial problems have continued despite JJB having seemingly been thrown a lifeline four months ago when US retailer Dick’s Sporting Goods ploughed £20 million into the firm and a further £10m was raised from existing shareholders.

JJB earmarked £20m of the cash to carry out a re-fit of 60 of its key outlets to a new better performing sales format.

However, the refurbishment programme has not been completed and poor trading across its 180 stores has continued with JJB last month admitting it would need additional funds sooner than expected.

In a statement announcing its proposed sale yesterday, JJB said its net bank debt was £16.5m, it had outstanding convertible loan notes of £18.75m and it had drawn down £1.1m from a trade loan facility — a total of more than £36m.

It said it had been in funding talks with its partners over the past six weeks, but trading had decreased further in that period with a 3.3% fall off in like-for-like sales and a 9.5% decrease in margins on the same basis.

The firm said: “The company has continued its discussions with its strategic partners regarding a further capital raising and restructuring of its store portfolio to facilitate the turnaround of the group’s trading performance.

“However, following these discussions, the directors do not believe that the company will be able to raise the level of funds required to implement the turnaround.

“As a result, the board has decided to conduct a formal sale process of the company and now wishes to invite offers to support further investment in the company, which may result in a sale of the company or its assets.”

Matthew McEachran, a retail analyst at Singer Capital Markets, said he could not see JJB Sports being sold in its current state.

He said it was more likely the company would go into administration and rivals such as Sports Direct and JD Sports Fashion would be circling to pick up the assets.

Mr McEachran said: “On the assumption that a sale is unlikely, the next step is likely to be administration which will inevitably see capacity withdrawn via closures, albeit not necessarily of the entire business.”

The proposed sale of JJB is being handled by business recovery and restructuring firm KPMG.

Shutters down on the JJB store in Murraygate, Dundee yesterday.