April 30, 2010 11:28 pm

Blacks to press on with £20m rights issue

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Blacks Leisure will press ahead with a £20m fundraising that was initially scuppered by shareholder Sports Direct.

The outdoorswear retailer outlined its intentions as it posted a full-year pre-tax loss of £43.6m.

It proposes a placing and open offer of 37.2m new shares and a firm placing of 2.1m new shares at 54p a share – a 12.2 per cent discount to Thursday’s closing price. The money raised will fund 35 stores to open in the next two years.

“I’m positive that we’ve been through the worst phases doing unpleasant things such as cutting costs, redundancies, restructuring,” said Neil Gillis, chief executive.

He said the fundraising had not been derailed by Sports Direct, which owns 28.5 per cent of Blacks and refused to participate in the rights issue when it was tabled in February, instead making an offer for Blacks.

The rights issue – restructured so it cannot be blocked by Sports Direct – was oversubscribed, Mr Gillis said.

“We wanted to raise between £15m and £20m but we’re actually looking at slightly more than £20m.”

In March, the Takeover Panel issued a “put up or shut up” order stopping Sports Direct from bidding for Blacks for six months. Mr Gillis said he hoped that by October, when the order expires, business would have improved and there would be no risk it could be bought “on the cheap”.

Like-for-like sales rose 5.4 per cent for the year to February 27 from £253m to £240.5m but gross margin fell from 54.3 per cent to 50.7 per cent due to discounting.

Pre-tax losses widened from £6.6m due to lease compensation payments to landlords, restructuring charges and redundancy costs. Losses per share rose from 13.56p to 108.9p. No dividend was paid.

The shares fell 0.5p to 61p.

● FT Comment

Blacks, having wiped its slate clean, must now be judged on how much investors think it can grow from its remaining stores. Several big shareholders have already made their judgment by backing the fundraising. The future of Blacks could be bright as it is the leader in the growing outdoorswear market where smaller competitors enjoy good profit margins. Careful expansion and taking advantage of lower rents could spread out its overheads. But when it moves back into the black is not clear, so its shares are fairly valued.

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