Toilet roll maker Accrol Group Holdings (LON:ACRL) shares plunged after issuing another profit warning and saying that it will raise new capital in a heavily discounted share placing.
Chairman Peter Cheung said the past few weeks have been “extremely challenging” for Accrol and its shareholders as the company tackled industry-wide issues and sought to resolve its funding problems.
Shares fell 64.85% to 46.40p in the morning session as it resumed trading after a temporary suspension.
The company, which supplies loo roll to retailers including Lidl, will either break-even or record a marginal loss in adjusted underlying earnings (EBITDA) for the year to 30 April 2018, reflecting higher wood pulp prices.
In response the group has suspended its final dividend and cut 89 jobs to save costs.
It has amended its banking covenants and appointed Gareth Jenkins as its new chief executive in September to lead a restructuring of the business.
Accrol also created a new interim chief operating officer role to aid in the restructuring. Don Coates, former chief executive of DS Smith Paper, Powerflute and Brintons Carpets, has been appointed to the position.
Under the turnaround plan, the company is aiming to deliver annual cost savings of about 6%.
“We believe that the business is through the worst and thank all our investors for their patience, during the period of suspension," said Cheung.
"Our new CEO, Gareth Jenkins, who joined the company on 11 September, is already having a positive impact on the business. “
Accrol plans to raise £18mln through the placement of 36 million shares at 50p per share, a steep discount to the stock’s mid-market price of 132p before suspension on 5 October.
The proceeds will be used to help offset its short-term funding requirement, support future working capital needs, support the costs of its share placing, meet revised banking covenants and to implement its restructuring.
Cheung subscribed for 50,000 shares and Jenkins for 100,000 shares.
The net debt position of the company, taking into account the net proceeds from the placing, is expected to be about £22mln and no more than £23mln by year-end.