Aerial work platforms maker Tanfield has raised funds through a placing to remove bottlenecks in its supply chain and to speed its expected return to profitability.
The company has conditionally raised £12m through the issue of 29.3m shares at 41p each, 4.875p below the mid-market closing price on the day before the fund raising was announced.
The company said that global demand for aerial work platforms is rapidly returning as the major fleet operators get around to replacing ageing equipment. In this new environment, pricing has improved and the firm's margins have increased.
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That's the good news. The bad news is that the company is having difficulty meeting this demand, as the supply chain has not yet recovered sufficiently to cope with the upturn, so the company is having to compete hard to get preferential treatment from suppliers, and in this regard constrained working capital has proved a hindrance, hence the decision to raise fresh funds.
Shorter supplier lead times will allow the company to take advantage of rising customer order books. The Tanfield directors currently estimate that the company would break even at an operating profit level on annual revenues of around £90m.
The new shares issued represent around 30.9% of the existing issued ordinary share capital of the company, so it is quite a chunky issue. The 10.1% discount of the placing price to the previous trading's day's mid-market closing price was a factor in the shares dipping just over 4% (1.875p) to 44p in early trading after the announcement.
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