This article is from the Australian Property Journal archive
IN a challenging market for home builders, Simonds is looking to support its balance sheet and working capital needs with a $25.5 million pro rata traditional renounceable entitlement offer.
Simonds Group Limited (ASX:SIO) announced the move after the board investigated a range of capital solutions to bolster the company’s balance sheet in an attempt to help it withstand the possibility of an ongoing challenging trading period.
“The company has been dealing with a range of factors that have adversely impacted the business and the Australian residential building sector more generally, including prolonged wet weather, flooding, supply chain shortages, delivery delays and reduced availability of skilled labour,” said Rhett Simonds.
“These factors have delayed the improvement of margins, as the Company must first trade through the older lower margin contracts in its pipeline and we now expect adverse conditions to continue for longer than originally anticipated.”
The Simonds board, comprising independent non-executive directors, David Denny and Iain Kirkwood, landed on the $25.5 million equity raising combined with negotiating terms for the company’s secured financing facilities.
The funds will be raised via a traditional pro rata renounceable entitlement offer of new ordinary shares to eligible existing shareholders.
With Simonds’ largest shareholder, Vallence Gary Simonds, entering an underwriting agreement to fully underwrite the offer, excluding his own entitlements, which he has committed to exercise in full.
Net proceeds raised will be put back into the company to support its working capital requirements and reset its capital structure.
After completing the offer, the company should have pro forma liquidity of at least circa $44.2 million to carry it through the difficult and uncertain trading period, as at 30 September 2022.
“Once the adverse conditions subside, the Company will be able to respond to the opportunities presented in the recent Federal Government Budget announcements concerning the new Housing Accord and a new national housing supply target as well as work through its existing pipeline of contracts,” added Simonds.
Australia’s construction industry has so far had a tumultuous year, with the collapse of giants Probuild in February followed by Condev in March. With other groups such as Merhis Group, Snowdown Developments, Hotondo Homes Horsham, Solido Builders and Pivotal Homes have either entered administration or liquidation.
While the country’s largest home builder, Metricon, received a $30 million capital injection from its owners and support from the Commonwealth Bank as it sought to stave off ongoing industry and media speculation about its viability.
