West Midlands car components group Wagon has proposed a 10-for-1 rights issue at 4p per share to raise £49 million.
The Birmingham-based firm also posted a higher full-year underlying pre-tax profit as revenues rose from higher-than-expected volumes.
However, the company, whose corporate headquarters are at Birmingham Business Park, said it expects the current sales volumes, which are in line with its expectations, to be hit in the current year due to OEM schedules, model changeovers and general market conditions.
For the year-to-end March 2008, Wagon said its pretax profit excluding non-recurring items rose to £12.7 million from £4.2 million last year as total continuing revenues increased to £714.7 million from £710 million earlier.
The net proceeds of the rights issue, which has been underwritten in full by funds managed by WL Ross, a major shareholder in Wagon, will be used in part to provide capital expenditure funding to support the company’s recent contract successes and to partly prepay the existing debt facilities, it said.
The company added it has decided not to propose a final dividend given the rights issue.
The automotive components group also said it has entered into a revised debt facility of 155 million euros to replace the existing debt facilities of 166 million euros, which are due to expire on December 31.
The group expects the revised structure of its debt position to result in a reduction in interest costs of about £2 million in the year ending March 31, 2009.
The company said it also plans to sell and leaseback two freehold German properties to raise about 34.5 million euros, before expenses. It will use the net proceeds of the disposal to reduce the revised debt facilities to around 125 million euros.
Wagon does not expect the effect of the sale of properties on its continuing profit to be material and anticipates a broadly neutral effect on continuing earnings per share. It also expects that the amount received will result in a ‘small aggregate exceptional loss’ for the year-to-end March 2009.
The company will continue to seek out opportunities for growth, both organic and by acquisition, it added.
“The board expects that the recent organisational, management process and strategic changes, when combined with the successful completion of the proposed refinancing initiatives, will enable the group to realise further operational performance improvements, and that the recent strong order intake will provide benefits from 2009/10,” chief executive Jurgen von Heyden said.