Neil Gillis: Blacks is back – and the proof is in the takeover bids

The outdoor specialist is on the mend but life is never dull with Mike Ashley around
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The Independent Online

This time last year Neil Gillis, the chief executive of the outdoor retail specialist Blacks Leisure, was staring into the abyss. Following an ill-fated move into surfwear before he took the helm in November 2007, Mr Gillis was trying to ensure that Blacks avoided financial ruin with a company voluntary arrangement, an insolvency procedure. When creditors approved the CVA in November 2009, Blacks Leisure was able to ditch 88 unprofitable Blacks, Millets and Freespirit stores and move forward.

Skip forward nearly a year and the prospects for Mr Gillis and Blacks Leisure's beleaguered shareholders looks far rosier. Two days ago, Blacks confirmed it had again received takeover offers from "several parties", believed to include the private equity firm Lion Capital. Shares in Blacks had traded at 271p in October 2007 but closed at 43p yesterday, despite a jump this week.

Lion Capital made an earlier offer for Blacks in February 2009, along with Mike Ashley, who controls Sports Direct, but formal offers never materialised.

While Blacks is still a long way from the rude health of its hiking enthusiast customers – it is forecast to make a £5m pre-tax loss this financial year – its turn-around strategy is well under way. Mr Gillis said: "We have sorted out a lot of the problems. The CVA helped us to get back on an even keel."

The biggest change has been getting rid of the boardwear business, which "was a distraction and something we were not very good at", says Mr Gillis. Bolstered by its completion of a £19.7m fundraising earlier this year, Blacks is now refurbishing its estate and is on track to open 15 new stores this year. The average sales density at the new shops is "30 per cent ahead of the rest of the estate", says Mr Gilliis.

At its Blacks store in Holborn, central London, he waxes lyrical about the company's focus on retail disciplines, such as sectioning off brands, notably Berghaus and North Face, and how it has added more than 75,000 customers to its database since introducing a loyalty card in May. In fact, Blacks is just the latest ride on what has been a roller coaster career for Mr Gillis, whose previous roles have brought him into close contact with Prince Charles and pop legend Sir Paul McCartney.

Before he joined Blacks, Mr Gillis was the chief executive at Esporta, between 2003 and 2007. He sold the sports club chain for £460m to the property tycoon Simon Halabi in late 2006, although Esporta fell into administration several months after Mr Gillis had left.

His time at Blacks Leisure – which now has 98 Blacks, 208 Millets and 11 Freespirit stores – has been no less colourful, not least because Mr Ashley, who also controls Newcastle United Football Club, remains major shareholder.

The retail tycoon had already looked at acquiring Blacks in 2007 before Mr Gillis joined. Earlier this year, Mr Ashley ratcheted up the pressure on Mr Gillis by blocking the retailer's proposed £20m cash call. He then abandoned his second takeover approach in just a year, following a lack of clarity over the intention of certain suppliers, notably North Face, to boycott trade with Sports Direct.

With this "unwelcome distraction" out of the way, Blacks was able to proceed with its £19.7m fundraising. Mr Ashley's refusal to participate saw his stake reduced to 14.5 per cent. "It [the fund raising] was critical – without this we could not roll out the new store programme," says Mr Gillis.

Asked about having Mr Ashley on the share register, he smiles and says it is "interesting". He adds: "It is a bit like the rest of the business. There is never a dull moment with Blacks and there is never a dull moment with Mike Ashley."

Their last meeting was in April, when Mr Gillis presented the rights issue to Sports Direct's deputy executive chairman and his finance director. Mr Gillis says: "We had a good meeting. It was very cordial and professional."

Speaking before this week's take-over bids emerged, Mr Gillis discussed the prospect of a potential approach. "It is the ultimate indicator they see value in what we have done. I would not be disappointed in years to come if someone wanted to buy the business."

Despite this week's bids, Blacks is not yet out of the woods, although the CVA also cut its net debt to just £12.6m. For the 17 weeks to the end of June, the group reported a 7.5 per cent fall in like-for-like sales. Mr Gillis says that May was a particularly "tough month" for a lot of retailers. While he accepts that forthcoming public sector job cuts and tax rises means the British retail sector is in for "quite a long tough haul", a more fundamental change is the shifting dynamic between British retailers and the Chinese manufacturers that supply them.

He says that rising costs, currency pressures and wage inflation are leading retailers such as Blacks to increasingly consider alternative manufacturing bases in countries including Vietnam, Sri Lanka and Thailand. But he says it is not easy to find the same skills base and level of expertise that there is among factory workers in China.

The chances of the turnaround specialist Mr Gillis seeing out such structural changes in the industry at Blacks seem slim, irrespective of whether this week's offers develop into full blown bids.

"I tend to like doing these things [turnarounds] for a relatively short period of time. Most of my roles have been three to four years so I don't ever see myself staying at any one company for a long period of time. That is just not me."

A Beatle, a prince and nudity

* As the managing director of Linda McCartney Foods in the late 1990s, Neil Gillis spent time discussing food products with Sir Paul McCartney after the former Beatle's wife died. He even played on John Lennon's guitar during a tour of Sir Paul's memorabilia.

* When he was chairman of Duchy Originals, Mr Gillis spoke regularly to Prince Charles, who he says is "really committed to what he does".

* As chief executive of Esporta health clubs between 2003 and 2007, he once gave a presentation naked to 1,000 staff to warn them against being exposed by mystery shoppers and auditing.

* Away from work, he makes thousands of bottles of sparkling wine at his Suffolk vineyard, Thelnetham, which he sells to local restaurants.

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