When Sir David Jones received his knighthood his grandson was disappointed to
discover that the title did not come with complementary sword and armour.
Perhaps JJB's executive chairman has also wondered whether such equipment
might have come in handy over the past four months as he has fought to
rescue the once mighty sports chain now teetering on the brink of bankruptcy.
Having won a stay of execution from JJB's bankers and secured an essential
injection of funds by selling off JJB's sports clubs to David Whelan,the
group's founder, Sir David, 65, is now limbering up for the final battle.
In a fortnight's time, JJB will approach its creditors with the aim of
securing a rescue deal in the form of a company voluntary arrangement (CVA).
If Sir David pulls it off, the sports chain will be the first listed company
to avoid collapse using a CVA, in which creditors agree to write off some of
the money owed them, since the credit crunch started. If it fails, the
company will fall into administration, putting more than 10,000 jobs at risk.
Sir David admits that it was a mad impulse that prompted him to take on the
job of trying to sort out JJB after years spent coping with Parkinson's
disease and a bruising fight to secure new management at the Morrisons
supermarket chain in 2006. Even then he was supposed to have been retired
after years successfully running the Next fashion chain, which he brought
back from near bankruptcy.
Sir David says that JJB is his biggest challenge yet. “This is far worse than
Next and Morrisons,” he says. “JJB has been poorly served in many ways for
the past 12 to 18 months. I do believe there is a fantastic opportunity here
despite the fact that the sports trade is a minefield of personalities.”
It's certainly a very incestuous business, with Mike Ashley, the chief of
rival retailer Sports Direct, owning at least 5 per cent of JJB, and
potentially more if market rumours are to be believed. Mr Ashley is also
closely linked to Chris Ronnie, the former chief executive of JJB, who was
fired by Sir David over a share deal.
Sir David says that as a result of some “bad decisions” by Mr Ronnie, JJB had
two big problems. First it was heavily in debt having spent about £16million
on Original Shoe Company and Qube, the failing footwear chains, and secondly
it was lumbered with 140 empty stores costing it about £20million a year.
The purpose of the CVA is to release JJB from the deadweight of the closed
stores by offering landlords £10million, equivalent to about six months'
rent on the leases. It is asking landlords of the stores that remain open to
accept monthly payments, rather than quarterly. Sir David says: “It seems to
me the reception has been so far quite favourable.” And he says he is “as
confident as I can be” that the 75 per cent of creditors required to back
the CVA will do so.
Leading landlords and property insiders spoken to by The Times agreed that
JJB's proposal was “realistic,” “fair” and “open” and they were encouraged
that the management team had a clear plan to take the business forward. They
said that JJB's CVA was likely to be successful because, unlike the failed
CVA put forward by Stylo, the footwear retailer, in February, it was focused
on renegotiating leases on empty stores, not those it wished to trade from.
However, some landlords oppose all CVAs in principle, because they put the
bulk of the pain of a failing retailer on to creditors. And even if the CVA
does gain approval from the majority of creditors, those who felt aggrieved
could launch a court challenge within 28 days. It was just such action that
scuppered a CVA by Powerhouse, the electical retailer, several years ago.
Shareholders will also have to vote on the deal, with a 50 per cent yes vote
required to pass the CVA. A question mark hangs over that vote because JJB
still does not know who owns a 10per cent block of shares that were rumoured
to have been bought by Mr Ashley. It is also no wiser about who is behind a
13per cent stake held in contracts for difference, a complex form of
derivative, via a company called Monecor, despite the issuance of 212
notices which should force the shareholder to step forward.
Sir David says that he is not concerned because the way the CVA has been
structured means that the creditor vote takes precedence over shareholders'
views, but again that is open to legal challenge.
Even if we assume that the CVA goes ahead, JJB is still faces a long and rocky
road to viability. Sir David wants to hire a new team for the job. He says
that Peter Williams, the executive director, who held a similar role at
Selfridges and is helping to lead the turnaround, is a “trouble shooter and
reconstruction expert” with a very specific job to do. Headhunters are
already seeking for the longer term a new chief executive, finance director
and head of buying.
Sir David himself is determined to stay in control until he starts to see
signs of recovery and a new team in place. He says: “I haven't been able to
get a team together because I haven't known whether we are going to live or
die. This is the first week for months I have sat down and worried about
actually running the business.”
But he is convinced there is a future for the ailing chain. “There is no
national sports equipment and sports clothing brand. I want to utilise my
belief that the future of retail is out of town and the internet. If
somebody wants to buy a table-tennis table I want them to be able to buy
from our internet site and we'll deliver it.”
He adds: “We are doing less than £10million on the internet, we should be
doing £100million.”
Certainly, having built Next into Britain's first multi-channel retailer Sir
David should know a thing or two about the power of home shopping. But
ranged against that experience is the maverick power of Mr Ashley and his
Sports Direct chain, which has hammered JJB on price for years.
Sir David also admits that JJB has struggled to get sufficient stock because
of its money troubles and currently has only half the level of stock it had
this time last year. Although he says that the big brands, such as adidas
and Nike have been supportive, these companies demand orders six months
before delivery, giving a tight deadline to sort out stock for the peak
Christmas season.
He says that if the CVA goes through, the £50million in funding that the
company has agreed with Barclays and Lloyds Banking Group will provide
enough resources to support it until the end of its financial year in
January. But with the economic downturn and stock problems he is not
expecting any upturn in like-for-like sales for some months.
Sir David says: “Don't expect any miracles or excitement from a sales or
profit point of view this year. We are already some months through the year
and short of stock but I believe we have got the working capital to get
through this bad year and next year just watch us go. This is going to be my
third turnaround.”
CV
Qualified as an accountant and became finance director of Kays homeshopping
catalogue at the age of 23
1980 Appointed associate director of GUS, owner of Kays
1981 Became chief executive of Grattan, the rival to GUS
1982 Diagnosed with Parkinson's but keeps it secret until 2001
1986 Grattan merges with Next and Sir David becomes chief executive,
leading to a famous boardroom battle with George Davies of Per Una fame
2001 Becomes chairman of Next
2004 Appointed a non-executive deputy chairman of Wm Morrison where he
led a battle to appoint a new executive board
2006 Retires as chairman of Next and from board of Morrisons
2007 Joins JJB as non-executive director, becomes non-executive
chairman of Littlewoods
2009 Promoted to executive chairman of JJB, knighted in New Year's
Honours List for his charity work
