LONDON (Alliance News) - Volex PLC Thursday opted not to pay a dividend, as it posted a widened pretax loss for the year to March 30 and announced a GBP18.1 million equity fund-raising to support its turnaround strategy.
The power and data cabling products company plans to raise USD18.1 million in a placing and open offer through the issue of 24.07 million new shares at a price of 75 pence each. Volex will use funds raised from the placing to reduce its existing bank facility and extend its maturity.
Volex said that the issue price was around a 6% discount on its closing price of 79.75 pence Wednesday.
Shares in Volex were trading up 1.3% at 79.50 pence Thursday midday.
The company posted a pretax loss of USD14.2 million in the recent year, widened significantly from a loss of USD887,000 the year before, as revenue declined to USD400.2 million from USD473.2 million, and it posted higher exceptional costs.
Volex blamed the downturn in revenue on its failure to adapt to intensifying pricing competition, as it continued to chase the higher margins it had previously achieved. Volex said it had failed to meet the requirements of its core customers and as a result, it saw demand drop off in the first half.
Due to this disappointing trading performance, Volex is overhauling its business with what it calls the "Volex Transformation Plan". This involves restructuring, cutting staff and recruiting new management.
Volex said as a result of its new strategy, its revenue in the second half of the year was up 3.6%, compared to the first half.
During the year Volex posted exceptional costs of of USD11.1 million, compared to USD8.0 million in the previous year, consisting of USD8.6 million in restructuring costs, USD1.6 million in financing costs and a USD835,000 charge for historic sales tax claims.
It expects to see further restructuring costs in the new year, although at a reduced level, it said.
Volex said revenue in the first two month of the new year is up 13%, with factory loading in the first quarter indicating revenue will be 10% ahead of the previous year and 4% over the previous quarter.
Volex said that the proposed fund raising and subsequent refinancing of its debt facility will secure its longer-term finances and enable it to complete its turnaround plan.
The placing has been supported by Volex's largest shareholder, NR Holdings Ltd, and Nathaniel Rothschild, who have irrevocably undertaken to subscribe in full for the shares available in the open offer. Rothschild and NR Holdings hold a combined 25.5% interest in the company.
"Whilst there remains much to do, we are confident that we have the right strategy to make good progress in the current financial year providing the group with a firm foundation for future growth," Chairman Karen Slatford said in a statement.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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