JJB Sports has sold its fitness clubs business and proposed a company voluntary arrangement (CVA) to some of its shop landlords in order to address the group’s current financial difficulties and create a stable financial platform for the revitalisation of its core sports retail business.
The retailer’s fitness clubs division, which comprises 53 sites, has been sold to JJB founder Dave Whelan for £83.4million. The CVA proposal is to compromise claims of landlords of around 140 closed stores and temporarily vary the terms of the leases of approximately 250 stores currently open to permit monthly rent payments. JJB is also seeking a further extension of the standstill arrangements it has with its lenders (Barclays, Lloyds, and Kaupthing, Singer & Friedlander) until the CVA proposal has been approved.
Former CEO Chris Ronnie has been dismissed by JJB for gross misconduct – the company gave no further details for the sacking. JJB suspended Ronnie on January 20 after it began an internal investigation into his holding company, Guro, which relinquished its 27.5 percent stake in JJB. The action followed a loan agreement with Iceland’s Kaupthing Bank, which collapsed last year.
Finance director David Madeley will leave JJB on May 31, while Richard Manning has been appointed as the company’s legal director and company secretary.
Looking ahead, JJB has also confirmed it will continue its ‘Serious about Sport’ strategy, in which the retailer will stock a comprehensive selection of equipment, footwear and casualwear from Nike, adidas and other brands. JJB is hoping this move will reposition it between a more fashion-focused sports casualwear offering and a mass-market offering competing principally on price.
Says executive chairman Sir David Jones: “In announcing our series of measures, we have taken the first step in securing JJB’s long-term future after months of speculation. We have worked very hard with our advisers and lending banks to propose a robust, solvent restructuring of the group that we believe is in the best interests of all our stakeholders.
“In addition to the continued support of our lending banks, our proposals require the approval of our unsecured creditors and our shareholders. Their support of our CVA proposal will ultimately allow us to focus on realising the full potential of the company’s core sports retail business.”
JJB has also reaffirmed its statement in its trading update on January 14 that it expects to record a loss before tax and exceptional items of between £5million-£10 million, before any one-off costs associated with its banking facilities, for the 52 weeks ending January 25, 2009. The company’s Lifestyle division, which is now in administration, is expected to incur losses of around £15million for the full year.
During the 10-week period from January 12 to March 23, total group sales (excluding the Original Shoe Company and Qube), on a like-for-like basis, were 18.5 per cent lower than the same period last year. This consisted of a 6.7 per cent increase in revenue for JJB’s fitness clubs business and a 22.5 per cent decrease in retail sales. In addition to the general weakness in consumer demand, JJB believes that this decrease in retail sales is a direct result of the disruption in the supply of merchandise as a result of the well-publicised financial uncertainty that has surrounded the company’s future for the past six months.
