06/01/2014 - 10:01

AusGroup placement buys breathing space

06/01/2014 - 10:01

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AusGroup placement buys breathing space

Shares in Singapore-listed construction and engineering firm AusGroup have risen after the company announced a $S15.2 million ($A13.4 million) capital raising overnight.

AusGroup said it had entered a conditional agreement with international financer DBS Bank for a $S15.2 million share placement, priced at S16.8 cents (15 cents) per share.

Following completion of the placement, undisclosed clients of DBS will hold around 20 per cent of the issued shares in AusGroup.

The placement was at an 8.5 per cent discount to the company’s weighted average share price, while in early trade in Singapore this morning, AusGroup shares were up 32.3 per cent, trading at 25 cents.

The funds will be a welcome boost for the company, which has seen its shares drop by more than 70 per cent over the past 12 months.

The company's struggles culminated in December after prominent Singapore stockbroker OSK-DMG said the company was a serious insolvency risk, with its on-hand order book of around $220 million unlikely to turn a profit.

Managing director Stuart Kenny said the placement was a great way to start 2014 for the contractor, which has recently restructured its operations and debt following significant cost overruns on two major contracts.

The cost overruns contributed to AusGroup's largest quarterly loss of $15 million in the first quarter of FY2014, stoking OSK-DMG's fears the company would lodge its first-ever full year loss.

“The placement is a great way to start the year, boosting working capital as we work closely with new and existing customers to target opportunities in a changing market,” Mr Kenny said in a statement.

“Combined with the recent repayment of senior debt, this is positive news as we set about building market confidence, delivering for our customers and creating a platform for enhancing shareholder value.”

Mr Kenny also said new banking arrangements would soon be finalised, which would provide a further injection of working capital.

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