Published 7 August 2018, updated 8 August 2018:
Update: The placement was completed overnight, with the full $20.8 million raised.
Steel & Tube Holdings Ltd announced 2 capital issues on Tuesday to raise $80.9 million, and produced slightly more positive guidance on its financial results for the year that ended on 30 June.
Chief executive Mark Malpass said the company was recapitalising its balance sheet to allow it to execute its business transformation initiatives and achieve its longer-term strategic objectives.
The placement is intended to raise $20.8 million at $1.15/share. It will be followed by a fully underwritten pro rata 1:1.9 rights offer at $1.05/share.
This represents a 28.1% discount to the closing price on the NZX on Monday, and an 18.3% discount to the theoretical ex-rights price of $1.28/share, after the placement & rights offer, based on the pre-announcement close of $1.46.
In year-end guidance based on unaudited management accounts, the company said it had reduced its ebit (earnings before interest & tax) loss projection from $38 million to $36.2 million and expected normalised ebit of $16.5 million, compared to $16 million announced in the 23 May guidance statement.
Guidance for 2019 is for ebit of $25 million, rising to $35-40 million in the next 3 years.
Company chair Susan Paterson said: “We remain deeply committed to rebuilding Steel & Tube as a leading provider of steel products & solutions in New Zealand. We have worked hard to address legacy issues, and early benefits from Project Strive business transformation initiatives are now being seen.
“The capital raised will be used to repay debt, strengthening our balance sheet and giving us greater flexibility to execute our strategy and deliver better value for our shareholders. In addition, we expect the capital-raising to strengthen Steel & Tube’s share register and help create liquidity which will benefit all shareholders.”
She said the capital-raising would significantly reduce Steel & Tube’s gearing, and the company was resetting its capital structure policy to operate with net debt of less than 2.0 times normalised ebitda (earnings before interest, tax, depreciation & amortisation).
While Steel & Tube won’t pay a final dividend for the 2018 financial year, Ms Paterson said the company expected to resume dividend payments in 2019, consistent with its stated policy of paying 60-80% of normalised net profit after tax.
Steel & Tube shares went into a trading halt today for the placement, expected to be completed in the morning.
The rights offer will open on Friday 17 August and close on Monday 3 September. There will be a bookbuild for any shortfall on Wednesday 5 September.
Steel & Tube is one of New Zealand’s largest providers of steel products & solutions. Its 2 business divisions, distribution & infrastructure, – operate in the construction, manufacturing & rural sectors.
27 July 2018: Lawyer says interest in class action grows as steel mesh sentence awaited
24 June, 2 July 2018: Updated: Steel & Tube agrees second sale & leaseback
23 May 2018: Review puts Steel & Tube ebit loss at $38 million
4 May 2018: Steel & Tube puts second property up for sale & leaseback
29 November 2017: Steel & Tube owns up to mesh label & testing guilty pleas
20 November 2017: East Tamaki property sold as Steel & Tube rings in changes
21 August 2017: Steel & Tube performance dissatisfies new chair
Attribution: Company release.