WH Ireland has proposed a share placing in a bid to raise £5m to shore up its ability to meet its capital adequacy requirements.
The announcement comes after last month’s profit warning, in which the wealth manager said it was expecting higher exceptional costs due to the challenging market conditions, but suggested circumstances have worsened.
The group said the directors saw no foreseeable improvement to trading conditions and it expected operating losses to be “substantially higher” in the second half of the year compared with the first six months.
“In addition, since the trading update (6 February), the directors have also identified additional exceptional costs, some of which are the result of the ongoing transformation strategy of the company, which they will look to provide for in the final results for the year ending 31 March 2019,” the stock exchange announcement on Tuesday said.
A spokesman confirmed most of the exceptional costs were personnel-related, as the raft of senior management changes continues.
The proposed placing, subject to shareholder approval, intends to issue 11 million new ordinary shares of 5p each at a price of 45p each – roughly a 30% discount to closing mid-market price of 64p per share on 4 March.
On the news, shares immediately fell to 43.5p before a momentary correction to 45p, only to fall back to 43.5p at the time of writing.
Placing the ‘most cost-effective’ method
The group opted against a public offering, with the directors believing that a placing is “the most cost-effective and certain method to raise funds at this time”.
WH Ireland added: “Following a broad review of the group’s likely future regulatory capital requirements and in particular, the group’s regulatory capital buffers, the directors believe the placing will ensure that the group has sufficient resources in place to satisfy the FCA’s present capital adequacy requirements.”
The group also said the fundraising would increase its core tier 1 capital ratio, improving its “financial stability and strength for market regulators and investors” while boosting its working capital.
All that said, the board supported the new management’s plans to return the group to profitability “through a combination of cost reduction programmes, by increasing revenues through organic growth and, in the longer term, through corporate activity”.
It added: “These initiatives will take some time to implement and complete, but the board hopes to see some of the benefits coming through in the next financial year.”
Dealings in the placing are scheduled to take place on 22 March.
