Software company K3 Business Technology Group PLC (LON:KBT) has unveiled plans to raise up to £9.2mln as it looks to strengthen its balance sheet.
The company is currently undertaking an internal review of its growth strategy and said the fresh injection of cash would help to give it financial flexibility during the assessment process.
READ: K3 Business Technology on recovery mission after new warning
Manchester-headquartered K3 is looking to raise up to £7.5mln through a placing of 5.35mln shares at 140p each, as well as a further £1mln via an open offer to shareholders, also at 140p apiece.
An additional £700,000 is also being invested into the business through the exercise of warrants by non-executive director Johan Claesson.
“As we have reported previously, we are now engaged in a review of the group's resources,” said chief executive Adalsteinn Valdimarsson.
“The objective of this review is to refocus K3's growth strategy around its cash generating business units and the group's large SME customer base.”
"This proposed placing and open offer to qualifying shareholders will strengthen the group's balance sheet and provide additional working capital during this review and enables us to operate with full flexibility as we make strategic decisions.”
In a note to clients, analysts at 'house broker' finnCap pointed out: “The significant majority of the group’s 3,700 customers are SMEs serviced by profitable business units, providing stable profit and cash flow.
“By dealing with the remaining business units, the group’s prospects can be significantly improved both at absolute levels and in terms of visibility and risk profile.”
The analysts reiterated a 200p target price for K3 shares which, in late afternoon trading, were down 4.5%, or 7.0p at 147.5p with the discounted fund-raising.
Full-year results to miss expectations
It was always likely that K3 would go cap in hand to investors for extra funding, particularly after it revealed in May that revenues and profits for the year to the end of this month (June) would be “significantly below…market expectations”.
Back in that update, the company said the failure to secure a number of “large” contracts was to blame for the weak performance.
That left a hole in the balance sheet, which K3 is hoping to fill with today’s fundraise.
Chairman to retire after 20 years
In this morning’s stock exchange announcement, K3 also revealed that long-time chairman David Bolton is retiring after almost 20 years at the company.
Non-executive director Stuart Darling will take over as chairman on an interim basis while a successor is found.
Elsewhere, chief financial officer Rob Price has been appointed to the board.
Given the discounted placing, shares eased 6% lower to 145p.
-- Adds broker comment, share price --