Bus manufacturer Optare is raising £8.6m before expenses.
The shares are being issued at 7p each, compared with a market price of 7.625p, down 0.375p on the day. The share issue will raise £8.06m after expenses and it will also more than double the number of shares in issue.
Net debt was £9.4m at the end of February 2009 and there were outstanding provisions of £3.83m which will lead to cash outflows over more than one year. Optare admits that it lost up to £2.5m in the first half of 2009 and net debt was £10.1m at the end of June 2009.
Optare has breached certain covenants for its borrowings but the bank is keeping its facility in place until 29 October 2009. Now that Optare is raising cash it will be interesting to see whether it retains the same level of facility.
Jim Sumner became chief executive on 1 June 2009. He has already started to improve efficiency. The cash is required for tooling and product development. Demonstrator vehicles are required for export markets, such as South Africa.
Costs are being cut and Optare hopes to at least breakeven in the fourth quarter of 2009.
Ray Stanley, Optare’s main shareholder before the latest share issue, stepped down from the board at the end of July 2009. He currently owns 30.3% - before the new shares are issued.
The bus market is expected to decline by up to 30% this year. The market could bottom out early next year according to Optare. Demand from fleet operators has declined fastest. Optare has started to deal directly with retail clients.
Optare is developing low carbon buses and has launched the ‘zero emission’ Solo Electric Vehicle.
The Disability Discrimination Act will force bus companies to replace two-fifths of their buses by 2016.
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