A new £20m cash injection might well be its last chance.
Just how many times can a company be headed straight for the wall, only to be turned aside at the very last moment? In the case of JJB Sports (LSE: JJB), the answer is at least one more time.
This time, the sporting goods retailer that badly overstretched itself in an expansion spree that left it with crippling debt has been bailed out by a cash injection from US retailer Dick's Sporting Goods.
An initial sum of £20m has been promised, and with the further rights to buy up to £20m in convertible loans next year, Dick's stake in its ailing British counterpart could reach a controlling 60%.
Dick's, which runs a chain of 550 stores across the USA, sees its participation in JJB as a stepping stone to future growth, and it should help accelerate the current turnaround plan that has led to a number of store closures and a revamp of some of the surviving ones.
Another full-year loss
JJB chief executive Keith Jones said: "We believe this investment package and strategic alliance with Dick's will provide a real opportunity to accelerate JJB's turnaround." That sounds to me like like management-speak for "Phew, that was a close one", after JJB Sports delivered another set of underwhelming results, this time for the year to 29 January.
Revenue continues to slide, having fallen 22% from the previous year to £284m. But at least losses this year weren't as bad as last year, with a recorded adjusted operating loss of £56m actually providing a 24% improvement on last year's £74m.
Losses per share have been stemmed to some extent, too, with last year's loss of 72.45p having been reduced to 40.4p this time, and the end-of-year net debt position also improved further, falling from £19m to £11m -- but that has grown again to more than £20m since the end of January.
The skin of its teeth
JJB was only saved from the administrators last year thanks to its shareholders stumping up another £65m in a placing that pulled it back from the brink, and it is only a going concern now because it has managed to get an agreement from the Bank of Scotland to extend its facilities until May 2015.
That's quite some breathing space, and with the backing of suppliers like Adidas, this really could be the turnaround that shareholders have long been waiting for. The relief is apparent from the share price, which has put on a 20% spurt since hints of a new strategic partnership were released earlier in the week.
JJB has done better than I expected -- I really didn't think it would make it this far.
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