Safestyle has announced that they are to raise £8.5m in cash as they prepare to issue 50m new shares to share holders. This move is to help raise cash to secure the future of the business, as they warned that a failure to raise the cash would make it hard for the business to continue to trade beyond a June lockdown.

This was the statement issues this morning:

Safestyle UK plc (AIM: SFE), the leading UK ‐ focused retailer and manufacturer of PVCu replacement windows and doors for the homeowner market, is pleased to announce the successful completion of the placing announced on 7 April (the “Placing Announcement”).

A total of 50,000,000 Placing Shares have been placed at the Issue Price of 17 pence per share, raising £8.5 million before expenses subject, inter alia, to Shareholder approval being obtained at the General Meeting of the Company to be convened for 27 April 2020. The Placing was conducted by way of an accelerated bookbuild process. Zeus Capital and Liberum acted as joint bookrunners on the Placing.

As outlined in the Placing Announcement, the net proceeds are intended to strengthen the Company’s balance sheet so that the business is well capitalised and has a strong cash buffer to ensure it can continue in business through and out of the current crisis relating to the COVID-19 pandemic.

The Directors have in aggregate subscribed for 619,000 Placing Shares at the Issue Price.

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is anticipated that Admission of the Placing Shares will take place at or around 8.00 a.m. on 28 April 2020. The Placing Shares will rank pari passu with the existing Ordinary Shares in issue. The Placing Shares will represent approximately 37.6% of the Company’s enlarged issued share capital on Admission (assuming no other issuance of Ordinary Shares prior to Admission).

Following Admission of the Placing Shares, the Company’s issued and fully paid share capital will consist of 132,808,896 Ordinary Shares, all of which carry one voting right per share. The Company does not hold any Ordinary Shares in treasury. The figure of 132,808,896 Ordinary Shares may be used by shareholders as the denominator for the calculation by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company, under the Disclosure Guidance and Transparency Rules.

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Mike Gallacher, Chief Executive Officer of Safestyle, said:

The strong support received from our shareholders, both existing and new, in the current challenging market is hugely welcome. I am also delighted that the Board has also committed to contribute significantly to the placing, demonstrating all of our Directors’ strong belief in the growth strategy and potential of the Group. The business has made strong progress in recent years and I believe that, as a result of the actions taken, we are well placed to weather the COVID 19 crisis and emerge to resume our recent positive momentum.

Together with our existing funding arrangements, this equity fund raise significantly strengthens our balance sheet, providing further headroom should we need to extend our temporary shutdown in line with Government guidance, protecting the NHS and saving lives. The business acted promptly in ceasing all operations on 24 March 2020 and I am grateful to our customers and staff who responded to this challenging situation and the disruption it has caused with such understanding and flexibility. In addition I would like to take the opportunity, on behalf of the Board, to thank our shareholders, suppliers, banks, brokers and advisers for their strong support as we have worked together to protect the business and ensure that it emerges strongly when this crisis passes, as in due course it will.

There was a document issued last night. It was a long one, but the single paragraph that stood out for me and highlighted the severity of the situation:

The Board would emphasise that if the Placing does not proceed, the Company could, if the current COVID Pandemic shutdown continues beyond the end of June, then lack the funding to underpin the business. Specifically, without the proceeds of the Placing and the consequent satisfaction of the condition to the amending of its banking arrangements with Aurelius, should the UK Government’s ‘Stay at Home Measures’ be extended beyond the end of June 2020, the Company could be at risk that it will not be able to continue trading as a going concern and the Company could then be unable to comply with one or more financial covenants that are in place under the terms of its existing facilities with Aurelius.

The cash set to be raised is due to be approved at a meeting on April 27th and is expected to be approved. This is the second fenestration sector company that has had to go to the market to raise extra cash as we all struggle to continue through the coronavirus crisis.

It was well received by traders:

Credit: Bloomberg

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