Munitions maker Chemring (LON:CHG) will launch a heavy rights issue after delays to a Middle East contract put it in danger of a loan covenant breach.
Shares slumped by 40% on the news of the share issue, which will raise £90mln in the first quarter of 2016.
The ammunitions contract, worth in excess of £100mln, had been delayed by a failure to receive permits and export approvals, said chief executive Michael Flowers.
This order was expected to contribute this year, but has been pushed back to 2016. A £12mln cash advance payment expected this year might also be delayed.
Underlying operating profit in the current year, to end October, is now seen falling by a third to £33mln, while net debt is expected to rise to between £155mln-£165mln.
A dividend cut is also on the cards as Chemring said it would maintain its policy of a payment covered three times by earnings.
Flowers said the company’s high debts were a major impediment and it would go ahead with the rights issue even if the money expected from the contract comes through.
The delay means the company has an order book for next year of £344.6mln, 75% of 2016’s expected revenue.
Shares fell 79p to 148p.