ASOS PLC (LON:ASC) surged on Wednesday after raising £247mln through a placing of shares at 1,560p each which it revealed late on Tuesday together with a trading update showing the online fashion retailer's sales had dropped by a quarter amid coronavirus disruption.
The placing price was just above Tuesday’s closing price of 1,559.5p. Most of the shares, which represent 18.8% of the AIM-listed retailer’s issued capital, were placed with existing investors, including majority shareholder Bestseller United, while the board subscribed to a small percentage.
The online fashion platform also said late on Tuesday it was going to extend a £60-80mln credit facility and apply for a corporate financing facility launched by the Bank of England.
ASOS added that it needed the additional capital to strengthen its balance sheet through the coronavirus crisis and said the cash would be enough to weather the storm if there is no improvement in current trading for at least 18 months.
Analysts at Hargreaves Lansdown said the new financing "will add a layer of protection to the balance sheet".
"A prolonged knock to ASOS’ trading wouldn’t be the best news – the group’s operating margins are already thin, meaning it’s more exposed to disruptive headwinds."
Sales down, promotions up
Despite its online-only model, ASOS revealed its sales tanked by around 20%-25% in the last three weeks as customers prioritised spending elsewhere due to the coronavirus outbreak.
However, in countries where self-isolation has been in place for a while, such as Italy, the group noted that demand has started to improve, albeit that sales remain below pre-pandemic levels.
The retailer said the uptick has been helped by new customers attracted by promotional activity.
ASOS added that it has implemented safety measures for workers in its warehouses, although the GMB workers union previously accused the firm of unsafe practices by not enforcing social distancing rules.
The retailer said there are contingency plans in place in case some warehouses are required to be shut, while most suppliers are operating as normal.
In the six months to 29 February, revenues jumped 21% to £1.5bn while profit before tax jumped 653% to £30mln. Net debt widened 332% to £163mln.
Shares surged 28% to 2,000p on Wednesday late morning.
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