The second quarter for the year has kicked in, and while many ASX-listed resource companies have faced some difficult time during the March 2020 quarter due to the COVID-19 outbreak, some are holding guards up to tackle the hard times.
Many of the ASX-listed companies are now trying to mitigate risk via boosting liquidity and trimming cost, where possible. The paradigm of just cost-saving, which started in response to deal with the pandemic outbreak and its impact on businesses is now witnessing a shift towards capital rising as well.
The ASX-listed energy player- Oil Search Limited recently completed an accelerated pro-rata non-renounceable entitlement offer, an institutional placement, and an offer to eligible PNG shareholders to raise about $1,160 million, and now many companies on the exchange are now coming into the picture with similar strategies of cost-cutting and going for higher liquidity.
ASX-listed Companies Tapping Markets for Capital
InvoCare Limited (ASX:IVC)
IVC is an ASX-listed consumer services company which provides funeral, cemetery, crematoria and related services with operations across Australia, New Zealand, and Singapore.
The Company recently announced an institutional placement to raise $150 million under its Share Purchase Plan (or SPP) to further provide cushion to its growth initiatives and strengthen the balance sheet in the wake of COVID-19 impact.
IVC announced an underwritten institutional placement to raise $150 million and suggested that it has been relatively unaffected by the COVID-19 restrictions.
The Company also mentioned that albeit the case averages have been impacted by COVID-19, it still remains resilient to date with a nominal decline below 10 per cent and further suggested that the group continues to introduce innovative arrangements, such as video streaming and deferred memorial services to reduce the impact of COVID-19 on case averages.
IVC is also undertaking proactive measures such as deferring the payment of the FY19 final dividend, seeking an extension of the debt tranche that is due to mature in February 2021, to manage its liquidity position.
The recently proposed capital raising is designed to provide a buffer on its IVC’s covenants and propel its growth initiatives smoothly.
IVC also announced recently that following the receipt of significant demand from investors, it had completed a $200 million underwritten institutional placement, up by $50 million, from its initial proposition of $150 million.
The Company would now issue 19.2 million new fully paid ordinary shares at face value of $10.40 apiece.
The stock of the company last traded at $11.150, down by 3.12 per cent against its previous close on ASX.
Electro optic Systems Holdings Limited (ASX:EOS)
EOS is an ASX-listed leading technology company operating in space and defence markets. The Company recently announced an equity raising of ~ $134 million to boost liquidity and support the growth plans, while cementing the balance sheet.
The Company further suggested that it would issue 28,269,553 new shares under available placement capacity pursuant to ASX Listing Rule 7.1 and decided on a face value of $4.75, which represented a 17.4 per cent discount to its share closing price on 14 April 2020 and a 10.9 per cent discount to its 5-day volume weighted average price (or VWAP) of $5.33 apiece.
As EOS utilised its available placement capacity, no shareholders’ approval was required, and the placement remained a fast track.
EOS successfully completed the fully underwritten placement on 16 April 2020 to raise the desired capital.
- The Share Purchase Plan
The Company also suggested that it would now conduct an offer of New Shares under a share purchase plan (or SPP) to existing shareholders, which would provide each eligible shareholder with the opportunity to apply for up to $30,000 of new shares; and,
- The existing shareholders under SPP would be able to buy the new shares at a price equivalent to the placement or at a price equates to VWAP of over the five trading days up to, and including, the day before the issue of New Shares under the SPP.
EOS plans the SPP for a maximum of $10 million that any application exceeding the amount would be scaled back on a pro rata basis.
The Compay would now utilise, ~55 million to produce goods from April to July 2020, as it assumes the cash receipts for the same would be delayed to Q4 FY2020, ~31 million to fund investments, which would assist EOS to maintain momentum through FY2021 in high growth areas of communications and counter-UAS products.
EOS further plans to use ~14 million to fund the movement of the Company’s operations to a post-pandemic paradigm, which would further allow secure and classified work and operations across IT networks. The rest 34 million would be retained by the Company to provide additional cash liquidity, optionality to pursue growth opportunities and to fund transaction costs associated with the Placement.
EOS now anticipates that the Company would have sufficient cash to generate $27 million of earnings before interest and tax and to produce ~$140 million of billable goods within FY2020.
The Company has already agreed a $15 million line of credit from EFIC, which would provide additional funds, and EOS has not drawn any debt facility till now.
EOS has deferred about $70 million in production and associated revenue and $9 million of corresponding EBIT, which the Company anticipate receiving in FY2021, and the Company has now revised its guidance and estimates $230 million in revenue and $27 million in EBIT for FY2020, which would reflect 25 per cent growth to FY2019 EBIT of $21.7 million.
The stock of the company last traded at $4.660, down by 18.95 per cent against its previous close on ASX.
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