Chief executive Hamer says move will stabilise the company after £29m pre-tax loss
Engineering group WYG plans to drum up £30m in equity funding to offset debts labelled as “unsustainable” by the group’s chief executive, Paul Hamer.
Under the plan, the Leeds-based firm will carry out a debt-for-equity swap with its creditors. According to Hamer (pictured), the refinancing plan is “the final piece of the jigsaw” to stabilise the company.
“In 2009 we began a process of restructuring to get our business into the right shape,” he said.
“This refinancing plan will give us the fuel to keep our company going.”
David Wilton, group finance director, has already held talks with household insurers and fund managers regarding a debt-for-equity swap.
David Brockton, an analyst at Execution Noble, believes the company’s refinancing plan will give it a platform for growth.
“WYG has already successfully reduced its cost base,” he said. “Under this plan, it will clear its debt and have cash on the balance sheet, which provides a good opportunity for growth.”
Last week, WYG announced a pre-tax loss of £28.6m for the nine months ending 31 March 2011, on revenues of half the level reported last year. The news sent the firm’s share price down a third, falling 4.17p to 8.58p.
Just two years ago the firm was on the brink of insolvency after a strategy of expansion fuelled by acquisitions unwound as a result of the recession. Since then, it has cut costs by £110m and released more than 50% of its staff.
WYG is planning more office closures in the UK - the group currently runs 30 offices nationwide, down from a peak of 80. However, Hamer believes future growth lies overseas - the firm’s order book stands at £104m for international markets, up slightly from £100.6m recorded in June 2010.
“We would like to have eight main offices in the UK and a similar amount of regional offices,” he said.
“[Then] we will look to grow our business internationally, particularly in the Middle East and China.”