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JJB Sports lost nearly a quarter of its value after the company failed to rule out a possible equity fundraising.
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In response to weekend press speculation, the company said that it is "reviewing a range of possible options to provide additional capital", which could also include further assets disposals or an extension of its bank working capital facility, due to expire in September 2010.
However, analyst John Stevenson at broker KBC Peel Hunt says the £25m facility "is barely sufficient to restock the group ahead of peak trading" and that an equity financing is the most likely route to provide the level of financing needed to implement a much-needed transformation programme. Reports suggest JJB is looking to raise nearer to £50m, through a discounted placing and open offer.
We have consistently argued that, even after securing its survival, the real challenge would be turning long-neglected JJB into a differentiated and profitable business, and that such a tranformation would be expensive. At 24p, the shares remain high enough.
Last IC view: High enough, 25p, 29 April 2009
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