Confusion surrounds the future of JJB
It may be a mainstay of the high street but the future of JJB is shrouded in mystery today as the group's auditors raise concerns about the company's future as a going concern. The shares of the UK's most popular sports retailer have collapsed by 40% this morning and settled around the 60p level. Claims and counter claims continue to hit the market with the auditors claiming the group has breached a banking covenant and may breach others later in the year, while the group claims to have taken legal advice and refutes the allegations.
Whatever the real situation may be the markets are concerned about the downturn in sales and the suspicion that banking agreements may have been breached. Indeed it has been revealed that JJB Sports has had to take on a £20 million bridging loan which the company claims will be repaid through cash flow and asset sales over the next 12 months. However, more concerning is the disagreement between the group and the auditors regarding the forecast for future sales and the profit margins they may or may not deliver.
The fact that the group is in ongoing talks with bankers at the moment would seem to indicate that trading is tough, but the situation will no doubt become clearer over the weeks and months ahead.
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