JJB Sport hit by £455k fine over 'missing' cash figures

FINANCIAL watchdogs have doled out one of the highest fines ever for violations of disclosure rules after JJB Sports failed to reveal that it spent millions more on acquisitions than it originally seemed.

The 455,000 penalty levied by the Financial Services Authority centres on the 2007 purchase of Mike Ashley's Original Shoe Company and the 2008 acquisition of Qube footwear from Sir Tom Hunter's West Coast Capital investment house. JJB was found to have understated the cost of these two deals by a total of 16.5 million.

The fine - originally set at 650,000 before the application of an early settlement discount - is the second-largest to be handed out by the FSA for a breach of its disclosure and transparency listing rules.

The regulator, which is clamping down on market disclosure as part of its clean-up of the financial sector, last year fined Photo-Me International a total of 500,000 for similar transgressions.

Alexander Justham, the FSA's director of markets, said JJB had shown a lack of regard for both market rules and investors. "The action we have taken shows that it is unacceptable to tell only part of the story whilst leaving material facts unannounced in the background."

The FSA added that the level of the JJB fine took into account the fact that all of JJB's executive directors and most of its non-execs had changed since the time of the acquisitions.

Both deals were done under the stewardship of former chief executive Chris Ronnie, who was suspended a few months after the Qube acquisition when directors discovered that his 29 per cent stake in JJB had been seized by administrators to Icelandic bank Kaupthing. Ronnie was later fired.

JJB admitted in October that it would face a penalty from the FSA, though details of its violations were not released at that time. JJB said yesterday that it would immediately begin paying the fine through a series of six monthly instalments.

"No further investigations into the company by the FSA are ongoing, and the company welcomes the finality brought by the conclusion of this investigation," JJB said in a statement.

"The publication of today's notice by the FSA brings the matter to a close."

At the time of the deal in late 2007, JJB said it had purchased the Original Shoe Company for 5m. However, it failed to reveal that it also paid more than 10m cash for in-store stock.

The following year, JJB announced that it had acquired loss-making Qube for just 1.However, the company did not to mention that it had also settled Qube's 6.47m overdraft.

The information began to emerge in September 2008, when JJB published interim results showing that it had plunged into the red by almost 10m.

Qube and Original Shoe Company, which together formed JJB's "lifestyle" division, were put into administration in February 2009 with the subsequent loss of hundreds of jobs.