JJB at record low on credit insurance blow

Published on Monday 6 October 2008 21:44

SHARES in ailing sportswear chain JJB Sports hit a record low yesterday after an insurer refused to cover suppliers against the firm being unable to pay them.

French-owned Coface – one of the world's biggest credit insurers – confirmed it had withdrawn its cover from suppliers dealing with the Wigan-based group.

The decision comes a week after JJB posted half-year losses of 9.7 million and its auditors said there was "significant doubt" about its ability to continue as a going concern.

Shares in JJB tumbled 25.5 per cent to a record low of 27p yesterday – valuing the group at about 65 million.

The slump comes just 15 months after JJB founder and Wigan Athletic chairman David Whelan – who set the business up in 1971 – netted 190m from the sale of his 29 per cent stake in JJB.

The company declined to comment on Coface's decision, which is set to hit the group's cashflow as its suppliers insist on more demanding terms.

As well as contending with damning comments from its auditors, JJB was also forced to deny claims that it was in breach of a covenant relating to a 15m banking facility with Bank of Scotland.

Arden Partners analyst Louise Richardson said: "Suppliers are likely to demand better terms, which could include up-front payments – this will clearly put more pressure on cashflow/working capital requirements."

The group, which has 400 retail stores, has looked to offset its reliance on replica kits by increasing the proportion of "own-brand products" in its stores, adding to existing examples such as Olympus, Patrick and Lotto.

But the group has been hurt by the failure of any of the home nations to qualify for this past summer's Euro 2008 football championships.

Current chief executive Chris Ronnie and Icelandic investor Exista acquired Whelan's stake last year.