JJB PLUMBS OLD LOWS – WILL DICKS STEP UP AGAIN?

The RNS this morning from JJB was truly shocking and, as much as it pains me to say it, Evil Knievil was correct on this one and we were wrong.

We were ready to give Keith Jones the benefit of the doubt following extensive dialogue with him towards the end of last year. Alas, it is apparent that he, and the balance of the Groups incumbent (although perhaps another word beginning with inc… is applicable!) management do not have their ‘hands on the ball’ (if you’ll excuse the pun) – the cost base is still too high and the losses are beginning to blow out once more at an alarming rate…

The most telling element in the AGM statement this morning, to us, is – 

“This is likely to accelerate the timing of the additional funding required, which is dependent upon the trading performance of the business and the successful implementation of the management initiatives.  Given the potential requirement to accelerate funding to implement the turnaround, the Group is in discussions with its strategic partners.”

This means one thing, and one thing only – new capital requirement. Question is, with things going so sour so quickly will Dicks step up again? The other £20m of Convertible loan notes that Dicks can take up most probably will be, but, given the 888m of shares that these can be converted into, I would expect them to extract a heavy price on not just the interest rate but also the equity dilution (in essence, issuing potential new shares at a whisker under 5p). In short, todays news all but makes certain that Dicks have secured a backdoor takeover as they will own some 75% of the potential equity should they convert and at a price of around 5p.

A sad day for AIM and JJB shareholders and yet again, the management of these companies seem to get away with impunity. Something has to change.