National Express launches share placing amid Covid-19 crisis
Transport operator National Express announced on Wednesday a placing of just under 20% of its issued share capital as it looks to lower gearing and provide "further financial flexibility" to invest in growth opportunities as it exits the Covid-19 crisis.
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The company will conduct a non pre-emptive placing of new ordinary shares of 5p each. In conjunction with the placing, which is being conducted by way of an accelerated bookbuild, certain members of the board and executive management team intend to subscribe for new ordinary shares at the placing price and contribute around £1m.
National Express said the total number of placing and subscription shares will not exceed 102.4m, which represents approximately 19.99% of the existing issued share capital.
The placing, along with recently increased lending facilities and the "significant"” management actions underway, will leave the company with "a stronger balance sheet, further liquidity, increased covenant headroom in future periods and enhanced resilience to manage the business through this market", it said.
News of the placing came alongside a trading update, in which the company said it has seen a "significant" drop in revenue since the impact of Covid-19, as services have been withdrawn.
National Express has analysed a range of potential exit scenarios, including the mitigating actions available to the group under such scenarios. Based on a pessimistic downside scenario where further lockdowns are imposed to contain any future peaks in infection, it reckons revenue would recover slowly from the start of the third quarter, remaining at somewhat lower levels into and throughout 2021.
Under this scenario, 2020 earnings before interest, tax, depreciation and amortisation would fall around 40% from 2019, the company said. "However, with the embedded growth in the business (such as the 2019 acquisition of WeDriveU and the significant new contracts wins in Rabat and Casablanca), revenue and EBITDA in 2021 under this downside scenario would recover close to 2019 levels," it added.
The group said it still plans to resume its dividend policy "at the earliest prudent opportunity".
Chief executive Dean Finch said: "We have acted swiftly and decisively and have made significant cost-cutting measures, struck agreements with public authorities and contracted customers to maintain payment, and secured enhanced liquidity and covenant waivers. These have all been crucial in underpinning our future prospects.
"The placing builds on these actions, providing enhanced resilience and financial flexibility as we address an extended period of uncertainty and it increases our ability to invest in further growth opportunities once this period has passed. By strengthening our balance sheet we are also able to set a new, lower gearing target."