Blacks Leisure in possible pre pack administration next year

7 December 2011

Blacks Leisure, the camping and outdoor wear store group, which announced a profit warning ahead of the Christmas trading period, has made put itself up for sale by way of an announcement to the Stock Exchange. The company said it would "invite offers to support further investment... which is most likely to involve a sale of the company or sale of one or more of the group's brands."

Blacks Leisure came close to going into administration in 2009 which saw it closing over 100 stores by using a company voluntary arrangement to restructure and rescue the business. Although no panacea, the CVA bought time for the company but ultimately management has failed to turn it around.

In our experience change is CRUCIAL before and after a CVA. It is interesting that Blacks has continued to struggle after the CVA despite dumping the poorly performing retail outlets, whilst Go Outdoors has grown quickly to 30 plus stores and gained backing from 3i. Management is usually the difference in turnarounds, one wonders if the business has been run well enough?

Black Leisure had been in talks with its lenders about additional funding. However, if it does not have a successful Christmas trading period then the company may well have to go into a pre pack administration sale

Shares in the company, which have fallen over 96pc in the past year are now very cheap, but bank debts have risen towards £40m, as losses of over £55m have been made in the last 2 years..

Mr Ashley has seen the value of his investment in Blacks fall dramatically since spending more than £50m to acquire a 29.38pc stake in 2006. Sports Direct currently holds 21pc.  Will he bail the company out??