LONDON (Alliance News) - Critical communications services company Sepura PLC on Wednesday said it is holding talks with its lenders as order delays have hurt its working capital position and put short-term constraints on cash, leading it to consider raising fresh equity.
Sepura shares were down 22% to 72.30 pence on Wednesday, the worst performer in the FTSE All-Share.
Sepura said it expects revenue for the year to the end of March to be EUR191.0 million, up 45% year-on-year thanks to 10% organic growth and a contribution from the Teltronic business it acquired.
However, as previously flagged by the company, purchase orders on two big deals were not secured in time to be booked in the 2016 financial year results, hitting both group revenue and adjusted earnings.
The delays in the purchase orders will mean net debt for Sepura will be around EUR119.0 million at the year end, with the inventory having already been purchased for those two orders. The net debt also reflects slower-than-expected receipts from customers who had previously paid to terms.
Slow debt collection is partly a function of its geographical diversification, Sepura said, and the tough conditions in some of its operating markets. In addition, it said it incurred further costs on the Teltronic deal and made additional investments to accelerate expected synergies.
Sepura said it expects its working capital position to ease over the course of the current financial year, but said it is now subject to short-term cash constraints which it expects will require an extension to its banking facilities and a waiver of a possible covenant breach at the end of June.
The group has entered talks with its lenders on its liquidity requirements and the possibility of covenant breaches. The talks are ongoing.
It also has started talks with shareholders to raise around GBP50.0 million through an equity fundraising to reduce leverage and provide further working capital.
Sepura maintained its earnings expectations for the current financial year, boosted by an expected contribution from the delayed orders and a full year of synergy benefits from the Teltronic deal.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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