logo-loader

Low & Bonar looking to raise £54mln in bid to slash debts

Published: 09:15 30 Jan 2019 GMT

ajax training pitch
Low & Bonar built the membrane cover for Ajax’s new training pitch

Performance materials group Low & Bonar PLC (LON:LWB) is looking to raise £54mln from shareholders as it looks to strengthen its balance sheet after a “challenging” few years.

The company, which built the membrane cover over Ajax’s new training pitch, has had to deal with soaring raw materials costs of late, while a “failed strategy” to grow its Civil Engineering business through acquisition hasn’t panned out as hoped.

All of this, coupled with an “overly complex” organisational structure and recurring production issues at some of its sites, has hammered its profitability.

READ: Low & Bonar mulls equity raise to cut debts

Revenue slipped 3.3% in 2018 to £431.9mln (2017: £446.5mln), but the big fall was at the bottom line, where underlying pre-tax profits halved to £16.7mln (2017: £30.7mln).

Given the poor performance, Low & Bonar slashed its dividend to 1.42p from just over 3p this time last year, although that is hardly a surprise when the net debt has stayed around £130mln – more than twice the company’s market capitalisation.

At the moment, Low & Bonar’s net debt-EBITDA ration stands at 3.2x. If this goes above 3.5x when the company’s accounts are tested by its lenders in May, it will be in breach of its banking covenants. The bar drops to under 3.0x in the test after that, currently scheduled for November.

As a result, bosses have unveiled plans to raise £54mln, of which around £50mln will find its way into the company’s coffers after various fees have been paid.

The money will be used to pay down some of the debt and help Low & Bonar get its net debt-EBITDA ratio down to around 2.0% over the next couple of years.

The firm is looking to sell 359.65mln new shares at 15p apiece – a 17% discount to Tuesday’s closing price of 18.1p.

Shares fell 8% to 16.7p on Wednesday morning.

Chesnara reports strong 2023 results with improved cash generation and...

Chesnara PLC (LSE:CSN) chief executive Steve Murray discusses the company's full-year results for 2023 with Proactive's Stephen Gunnion, describing them as strong and particularly highlighting £53 million in commercial cash generation and a dividend coverage of around 150%. The company has...

34 minutes ago