SIG to raise £341m in rights issue
SIG, the Sheffield-based insulation group, confirmed that it is to raise £341m in a rights issue.
The announcement came 24 hours after the group issued a statement saying that it was considering a range of options including a potential equity raising in the light of growing press speculation.
The group also released its financial results for the year ended December 31, 2008 after delaying their publication.
SIG will issue more than 200m shares at 75p each representing a 28.6% discount to the closing price of 105p per share.
An Extraordinary General Meeting to approve the placing is expected to be held on April 9.
SIG said that the proceeds would be used to create a more “appropriate capital structure” and provide greater resilience and financial flexibility in the current environment.
It added that the funds would give it “appropriate headroom” under covenant levels in its existing debt facilities.
Analysts had raised concerns that without a cash injection the firm could be in danger of breaching its banking covenants.
In January, SIG, which is Europe’s biggest insulation group, said that net debts stood at £710m at the end of 2008 – well above the group’s £600m target – as a result of sterling’s fall.
The company has to contend with £70m of debt maturing in mid-2009 and a further £170m in 2010.
Cost cutting efforts saw the group shed 1,000 jobs and close 80 trading sites.
Chris Davies, chief executive of SIG, said that in the light of challenging trading conditions, the board had taken quick and decisive action to “right-size” many of its operations.
“We continue to focus on costs and cash conservation and we have a number of contingency plans in place should trading deteriorate further,” he added.
Despite the challenging economic conditions the group reported a dip in pre-tax profits from £140.1m in 2007 to £137.3m for the period ended December 31, 2008.
Group sales for the financial year were £3bn, an increase of 24.4% on 2007. Like-for-like sales also grew by 6.5%.
Total cost savings as a result of measures already implemented are expected to be around £35m in 2009.
Mr Davies added: “The raising of equity will provide the group with a more appropriate capital structure and provide financial flexibility in the current environment. In the longer term, it will enable the group to capitalise on the long-term growth drivers in its end markets.”
A series of further measures are being implemented in 2009, which are expected to deliver additional savings of £12m.
“In the medium to long term, the directors believe that this readjustment to the company’s capital structure should enable SIG to trade through, and emerge from, the current downturn in a significantly strengthened position,” it added.
