AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Amid COVID-19 crisis unfolding, the companies are increasingly tapping investors for capital. On 14 April 2020, three of the four companies under discussion announced capital raising plans to bring resilience in the business as COVID-19 crisis had impacted the businesses.
At the same time, some of the businesses are experiencing growth momentum at the backdrop of COVID-19 crisis. However, economic activity has been deteriorated since Governments have introduced lockdowns to contain the virus worldwide.
It is impacting most of the businesses to some extent as the employees are working from home. With social distancing measures in place in most of the regions across the world, the ability to interact with customers is hampered, and this may postpone spending decisions of the customers.
Let’s discuss the latest from these four companies:
QBE Insurance Group Limited (ASX:QBE)
QBE provided an update on first-quarter trading and its plans to raise capital. Insurer notes that the pandemic has created unprecedented economic and investment market uncertainty.
It is taking pre-emptive measures to raise the regulatory from 1.6x PCA to around 1.9x PCA through capital raising plans for institutional and retail shareholders. The capital raising positions the insurer to navigate a wide range of severe economic scenarios.
During the first quarter, the insurer witnessed strong trading conditions across the group despite the disruptions caused by the pandemic. Its group wide premium rate averaged 8% from 4% in the previous corresponding period.
QBE’s gross written premiums were USD 4,533 million, reflecting premium rate increases, solid volume growth along with improved retention across the divisions.
The insurer is undertaking a fully-underwritten institutional placement of around USD 750 million, and a non-underwritten share purchase plan to raise up to USD 75 million.
The Company has exited emerging markets, all equities as well as high yield debt. It has bought additional insurance to include 90% of crop hail exposure and undertaken corn price hedging.
The insurer’s PCA multiple was deteriorated to around 1.6x from 1.7x on 31 December 2019, primarily due to 2019 final dividend payment, negative investment returns.
On 16 April 2020, QBE was trading at $8.64, down by 1.706% (at AEST 1:00 PM).
Capitol Health Limited (ASX:CAJ)
Capitol Health notified the market that it has raised $29.8 million in a robustly supported placement to institutional investors. The proceeds would be utilised to reinforce CAJ’s balance sheet flexibility in the present macroeconomic uncertainty, decrease net debt along with the funding of prospective upcoming acquisitions etc.
On 14 April 2020, Capitol Health announced that it was undertaking an institutional placement of $29.8 million and a further $10 million through a share purchase plan at an issue price $0.16 per share (to be issued on 21 April post the settlement date of 20 April this year).
It was noted that the capital raising plan would ensure that the Company is well positioned to manage the challenging environment and continue its growth trajectory when conditions allow.
It was said that the business had performed consistent with the expectations over the YTD to March 2020, with organic growth and acquisitions of Fowler Simmons Radiology.
CAJ Managing Director, Justin Walter, noted that the Victorian Government has extended the Stage 3 pandemic measures until 11 May 2020, and the management continues to ensure the long-term performance amid this challenging environment.
The Board has determined to raise capital that would increase liquidity, provide balance sheet resilience. Fresh capital would enable the business to capitalise on current identified opportunities along with additional growth initiatives.
SPP would be available to shareholders in records on 14 April 2020 and additional details would be provided in the SPP booklet on 22 March 2020.
On 16 April 2020, CAJ was trading at $0.19, down by 2.564% (at AEST 1:05 PM).
InvoCare Limited (ASX:IVC)
InvoCare announced that it was undertaking an underwritten institutional placement to raise $150 million and launching a share purchase plan. It would allow to continue with the positive movement achieved on growth initiatives amid the current environment with temporary restrictions.
IVC said that case volumes have been unaffected by the COVID-19 restrictions, and the business continues to deliver high level services in line with social distancing measures announced by the Government.
It would utilise the funds to reduce the net debt, increase liquidity and balance sheet resilience, which would support the business during the uncertainty. The Company would deploy funds for digital transformation, pre-identified acquisitions and protect & grow strategy.
InvoCare continues to undertake a conservative approach to capital management and operational expenditure. The Board of the Company has decided to defer the final dividend of FY19 until there is more clarity on COVID-19 impact.
Source: IVC Capital Raising Presentation
Post the completion of the placement, the pro forma leverage ratio of the business would be reduced to 1.5x against the pro forma net debt of $204 million as at 31 December 2019. The placement would improve the pro forma liquidity to $258 million as at 31 December 2019, which includes cash in hand and undrawn bank facilities.
It would provide the first quarter update during the Annual General Meeting in May 2020. Martin Earp, CEO of InvoCare, stated that the COVID-19 restrictions are impacting the company ability to provide full service to the client. The Company has implemented contingency plans to lower the impact of COVID-19.
Meanwhile, the management is focused on delivering sustainable long term growth, and the actions outlined would improve the ability to weather the impact of current market uncertainties. A strong balance sheet would enable the business to capitalise on growth opportunities.
InvoCare also reported that CFO, Josée Lemoine, would be departing the business before the end of the current financial year to pursue other opportunities. The Board has commenced an executive search to fulfil the position.
Institutional placement would be conducted at $10.4 per new share. The non-underwritten share purchase plan seeks to raise up to $50 million, and the record date for the SPP is 9 April 2020.
On 16 April 2020, IVC was trading at $11.22, down by 2.52% (at AEST 1:17 PM).
LiveTiles Limited (ASX:LVT)
LVT announced a solid quarter of annualised recurring revenue growth, which reached $55.2 million as at 31 March 2020, indicating a growth of 60 percent on a y-o-y basis and 4.9x growth when compared to two years ago.
By March quarter, the Company concluded the partnership with N3, which provides sales and marketing services, specifically in the US market. LVT believes that the business is well placed to grow with its channels. The end of partnership resulted in $4.4 million churn in ARR, and the Company has taken cost actions to offset the loss in revenue.
It was noted that the Company is working with a number of Government organisations and health care organisations to support COVID-19 efforts. During the quarter, it has experienced strong interest from the prospective and existing customers.
LVT expects to record cash burn of around $9 million in Q3, and it has undertaken several measures to preserve cash. It also expects to review additional options to optimise cash burn, which are likely to be realised in the September quarter.
As at 31 March 220, the Company had no debt and cash of $33 million. Its target is to reach breakeven in operational cash flow in the calendar year 2020, and it has no plans to raise capital to fund operating cash burn.
On 16 April 2020, LVT was trading at $0.225, declining by 8.163% (at AEST 1:21 PM).
