Good morning, it's Paul here with the SCVR for Monday.

Today's report is now finished.

Agenda - these are the small cap company updates that I've selected to write about today;

Hss Hire (LON:HSS) - discounted fundraising

Augean (LON:AUG) - small tax refund re HMRC dispute

Eckoh (LON:ECK) - Trading update

Inland Homes (LON:INL) - Trading update

Driver (LON:DRV) - Trading update

United Carpets (LON:UCG) - Trading update

Advfn (LON:AFN) - Final results

Re Yourgene Health (LON:YGEN) - I've read through its update today, but I don't have anything to add to it.


Hss Hire (LON:HSS)

Share price: 22p (up 5%, at 09:44)
No. shares: 170.2m
Market cap: £37.4m

Proposed Capital Raise of up to £54m

Ever since this tool hire company floated in Feb 2015, I’ve been flagging that its balance sheet was dangerously over-geared. That, combined with disappointing trading & restructuring, has largely destroyed shareholder value. This is one situation where I don’t have much sympathy with shareholders, because the terribly weak balance sheet was obvious from day one. You just had to look.

This seems to be a preliminary announcement today, giving the outline of the refinancing. Key points;

  • Firm placing & open offer to raise c.£54m
  • Priced at just 10p (a whopping 55% discount)
  • Dilution is heavy, with c.540m new shares to be issued, dwarfing the 170m currently in issue. This means the share count will rise more than 4-fold
  • Possible covenant breach & serious consequences by end 2020 has driven need for fundraising
  • Details of the open offer not given, or I might have missed them? £35.5m total, but it’s not stated how many new shares existing holders can apply for
  • 3 largest shareholders are supportive - Toscafund (26.9%) often stands by its mistakes, or even takes them private
  • Free float of only 13.8% has led the company to explore other listing venues - not stated, but I wonder if this might mean a move to AIM possibly?
  • Revenues (presumably the monthly run rate?) now hack up to 90% of last year’s
  • Increase in online penetration
  • Intending to permanently close 134 branches

My opinion - this deal should avert financial distress, even insolvency, at end 2020. It shows the value of having a concentrated institutional shareholder base, in that they are defending…

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