- Unbound shares slump on discounted placing shocker
- Placing and offer to raise £3.3 million for expansion
- Extra £2 million of costs not reflected in analysts’ forecasts
Retail and apparel group Unbound (UBG:AIM) announced an unexpected, deeply-discounted equity fund raise after the close on 21 July intending to raise £3.3 million.
The proposed raise is priced at 15p per share and represents a 32% discount to the prior closing share price. If successful, the new shares will represent 67.9% of the company’s existing capital.
Shareholders not taking part in the placing of new shares will be able to participate through an open offer on the basis of one new share for every 6.33 existing shares. Those who decide not to participate will therefore be heavily diluted.
Unsurprisingly, the shares were marked down heavily on Friday, dropping 40% to 13.2p. With the shares trading at a discount to the open offer price, there is likely to be little incentive for retail shareholders to participate.
DISAPPOINTING SPIN-OUTS
Focused on the over 55 age demographic, Unbound was spun-out of private equity company Electra in February 2022, following the demerger of Hostmore (MORE:AIM) the owner of American themed iconic restaurant group TGI Fridays in November 2021.
Both shares have been disappointing investments so far, falling around 75% below their issue prices.
Unbound said it intended to use the proceeds from the placing to ‘accelerate its growth strategy and boost profitability’.
The company intends to diversify beyond its Hotter Shoes brand by onboarding selective third-party brands targeting the same customer segment.
CURRENT TRADING
Revenues in the first four months of the current financial year grew 12.5% reflecting ‘softer’ comparatives while the gross margin improved to 68.7% from 66.7% last year driven by an increase in selling prices, offsetting higher costs.
The company had net debt of £9.7 million at the end of June. Worryingly, management said current analysts’ forecasts failed to reflect income or expenses related to the group’s growth plans, estimated to be around £2 million.
Disappointingly, the extra costs effectively wipe out expected pre-tax profit of around £2 million for the full year ending 31 January 2023.
