ISOTeam plans to raise up to $10.3 million in net proceeds via a one-for-one rights issue, to pay down debt and to generate more working capital to help the company recover from the pandemic-induced downturn.
Under terms of the rights issue, which is not underwritten, eligible shareholders can subscribe for a new share at 3 cents each, for every existing share they already own.
The rights share is priced at a discount of 60.5% off ISOTeam's June 26 close of 7.6 cents.
Under a maximum subscription scenario, up to 347.2 million new shares will be issued.
The company explains that it has suffered three consecutive years of losses because of the pandemic.
With the easing of restrictions and business activities picking up, it has managed to grow its revenue for 1HFY2023 by 18.6% y-o-y thanks to new contracts won.
However, it expects cost pressures to persist.
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Its cash and equivalents as at Dec 31 2022 was $7.6 million, down from $18.6 million as at June 30 2022.
However, it has a debt load of some $46.7 million for the half year ended Dec 31 2022.
The company, with an eye on taking on more contracts, sees the need for more cash reserves to support working capital needs. It plans to allocate 70% of the proceeds from the rights issue for working capital, and the remaining 30% to pare debt.
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According to ISOTeam, its board has considered other ways to raise funds, such as placements to third-party investors but chose not to as that would dilute existing shareholders.
A group of controlling shareholders, including executive director and CEO Anthony Koh, have given their undertaking to subscribe for their entitlement.
"The board and management team of ISOTeam remain confident about the prospects of our industry and we hope that our shareholders will continue to support us unwaveringly by subscribing to the rights Issue,” says Koh.
As at May 29, the company's order book stood at $195.1 million, with projects to be delivered between June 2023 and March 2026.
