Sir David Jones signalled his intention to step down as executive chairman of JJB Sports yesterday amid continuing controversy over a £1.5 million loan from Mike Ashley, his retailing rival.

His announcement came at the JJB Sports annual meeting. Once a new chief executive is found, Sir David will become part-time chairman.

The loan from Mr Ashley, who runs Sports Direct, the rival sports chain, and owns Newcastle United Football Club, has been repaid in full from Sir David’s own resources. The debt gave rise to allegations against Sir David of a conflict of interest. Sports Direct is a key supplier of products to JJB.

Sir David said yesterday: “In hindsight, I wished I had not made made that contract [with Mike Ashley]. In no way has that loan compromised my position as executive chairman.

“All I wanted to do [when I joined] was get on and get this business back on the road. I’m 66 and, as you know, not 100 per cent fit. My total motivation is on getting JJB back on track.

“We have started the process. Once I am satisfied that the foundations of recovery are established I will hand over to a younger person.”

The search for a chief executive appears to have started early amid continuing controversy over the loan. It is understood JJB still intends to raise fresh capital.

He said his chairmanship would be an extension of his turnaround efforts, likening it to the last years of his feted period at Next, the high street fashion retailer, where he mentored a young Simon Wolfson, now its chief executive.

Sir David faced questions from John Michael Lavelle, representing Mr Ashley at JJB’s annual meeting. Mr Lavelle did not ask about the loan but why the company no longer stocked Sports Direct brands. After the meeting Mr Lavelle was told by a security guard to leave the building.

Sir David told shareholders that, in February, Sports Direct had withheld more than £1 million in cash when JJB’s future was in doubt, in the hope of securing a payout for Chris Ronnie, the former chief executive, who was suspended at the time after it emerged that he had lost control of a 27 per cent stake in the business. He was later sacked for gross misconduct.

Last night Mr Ashley said: “The dispute over monies owed by Sports Direct International to JJB was not relevant to the conversations that I had with Sir David over the departure of Chris Ronnie.

“I once again call on JJB to correct its misleading stock market announcement of July 7, 2009.”

Meanwhile, only 2 per cent of shareholders voting by proxy opposed Sir David’s re-election as executive chairman, implying that he received the backing of even JD Sports Fashion, which owns a 10 per cent stake and may welcome a stable JJB as a foil to Mr Ashley’s Sports Direct.

Outside JJB’s headquarters in Wigan, Lancashire, a banner had been put up, proclaiming: “Sir David, we’re 100% behind you. From your 6,500 loyal employees”.

Sir David rejected comments by Mr Ashley last week that JJB was in for a “painful year of learning” because it had displayed ignorance of sportswear retailing.

Sir David said: “I found that quite an interesting comment . . . maybe the sports industry needs someone who is not totally versed in the tradition of the sports industry.”

JJB’s new regime hopes to reduce lead times of the main suppliers in order to accelerate stock rotation. It has also disposed of Sports Direct brands such as Lonsdale and LA Gear.

Sir David attempted to bolster the JJB board by appointing John Clare, the former chief executive of DSG International, the owner of Currys, as a senior independent director. Sir David is hoping to reposition JJB between the fashion-focused JD Sports and the downmarket Sports Direct by targeting serious amateur sportsmen and women.

Asked whether he thought the controversial loan from Mr Ashley was a Trojan horse, Sir David said: “I don’t know. If I had thought that, maybe life would have been a bit different.” The company said that there was no evidence that Sir David was compromised by a conflict of interest, though it had admitted that Sir David discussed sensitive JJB matters with Mr Ashley while the loan was overdue.

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