Good morning!

Another busy day today for announcements, I'll cover as many as I can this morning, as am busy working with a private company this afternoon, with my FD hat on.


Sepura (LON:SEPU)

Share price: 64.25p (down 30.9% today)
No. shares: 184.4m
Market cap: £118.5m

Trading update & financial position - in my report of 4 Apr 2016 I covered Sepura's profit warning, and warned that a discounted fundraising looked inevitable, therefore the shares were much too high risk to consider catching the falling knife at 120p. The price has nearly halved since then, as my fears over its weak capital structure have been confirmed.

The company today says:

The Company's current net debt and consequential leverage position is largely the result of the working capital expansion referred to above. The working capital position is expected to significantly ease during this financial year. However, the Company is subject to short term cash constraints which the board expects will require an extension of its banking facilities and a waiver of a possible covenant breach at 30 June 2016.

Discussions with the Company's debt providers regarding the Company's liquidity requirements and the possibility of covenant breaches are ongoing.  The Company has also commenced discussions with major shareholders regarding an equity capital raise of up to £50 million to reduce leverage and provide the working capital to support the development of the business.  

So a substantial equity raise is on the cards, as I expected. We're now in the realms of the unknown. It all depends whether existing shareholders are keen to support the company, or not. To a certain extent they have to support it, otherwise the value of their existing shares could be destroyed if a deeply discounted Placing occurs.

If major shareholders are indeed supportive, then the discount on the new equity fundraising might be quite modest. Or it might be quite large, we simply don't know.

There's a risk that private shareholders may not be allowed to participate in the fundraising. Therefore for us, buying shares now would be little more than a gamble.

The rest of the information given in today's statement sounds reasonably alright - i.e. in line with the trading update given on 4 Apr 2016. Although note that the more precise revenue & adj. EBITDA figures given today (for y/e 1 Apr 2016) are near the bottom of the previously…

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