Reece Taps Investors For Capital, Qube Scraps Outlook

A busy day yesterday for fundraisings with plumbing supplies giant Reece becoming another company to ask shareholders for a new investment – this time it was $600 million.

Reece told the ASX it was a “pre-emptive and decisive” step taken to strengthen its balance sheet and position it for the future.

It also said it was “temporarily” suspending dividends.

The money to be raised will comprise a fully underwritten $232 million accelerated pro-rata non-renounceable entitlement offer, a fully underwritten $368 million Institutional Placement and a non-underwritten share purchase plan.

Reece said the money raised would be used to support the business during the period of global economic uncertainty, increase liquidity and reduce net debt, and enhance the company’s balance sheet.

“Reece has a 100-year history of strengthening the business through tough times – the current crisis is no exception. We believe that Reece, and the plumbing and construction trades it supports, has an essential role to play in times of crisis,” Reece CEO Peter Wilson told the ASX.

“We want to continue to run our business with a long-term view, despite the short-term challenges. A more conservative balance sheet will give us the confidence to continue to act on long term objectives for the benefit of our shareholders,” he said.

Despite the coronavirus pandemic, Reece said it had experienced a strong start to calendar 2020 with “strong March quarter sales”. It reported no material impact on its supply chain from COVID-19.

The company’s major shareholders, Melbourne’s Wilson family will subscribe $170 million to fully support the issue.

Reece shares are in a trading halt until this morning. The stock closed at down 4.5% on Friday at $8.69.

The issue price is $7.60, a 12.5% discount to the last sale, which makes it one of the cheapest issues in the current wave.

Around 79 million new shares will be issued by Reece or about 14.1% of the company’s existing issued capital.

Freight and logistics company Qube Holdings was another ASX 200 company joining the withdrawal queue yesterday.

The company said it was dropping its guidance for the 2019-20 year because it cannot forecast underlying earnings in uncertain conditions.

Cost-cutting has started with directors and the CEO taking a 50% cut to their fixed remuneration, while senior management will also take a pay cut.

“Qube presently expects a decrease in volumes in several of its markets as the impact of the tighter restrictions impacts demand as well as operations,’’ the company told the ASX yesterday

It says oil and gas activities have been steady, thanks to a new contract with Shell, but forestry-related logistics will be impacted by a one-month closure directed by the New Zealand government.

Qube said that container volumes were already weaker before COVID-19 shut down ports in China and disrupted global supply chains.

“Qube is in a strong financial position with significant liquidity (cash and available undrawn facilities) of over $450 million after the payment of the interim dividend which will occur on the 7th April 2020,’’ CEO Maurice James said. April 7 is today (Tuesday).

“Qube has no near term debt maturities and material headroom to its covenants.” It is also looking to increase bank facilities, he added.

Qube shares fell nearly 5% to $2.12 yesterday in a wider market up more than 4%.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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