UK: Ocado secures new debt deal, issues shares

By Michelle Russell | 19 November 2012

  • Launches GBP35.8m placing
  • Extends GBP100m debt facility
Ocado said the proceeds of the placing will “strengthen the companys balance sheet and support the continued growth of Ocado”

Ocado said the proceeds of the placing will “strengthen the company's balance sheet and support the continued growth of Ocado”

Shares in Ocado surged this morning (19 November) as the UK online retailer said it had extended its debt facility and would raise GBP35.8m (US$57m) in a placing to fund expansion of the business.

In an announcement today, the retailer said its existing lenders Barclays, HSBC and Lloyds had agreed to extend the maturity of a GBP100m capital expenditure facility by 18 months to July 2015. The group also launched a GBP35.8m share placing through the sale of 55.8m new shares. Ocado's stock was up 26.5% at 76.60 pence at 12:13 GMT.

The retailer said the proceeds of the placing will "strengthen the company's balance sheet and support the continued growth of Ocado".

It also provided a trading update for the 14 weeks to 11 November and said it achieved year-on-year gross sales growth of 11%.

Ocado, which is struggling against better service propositions from its supermarket rivals, has struggled to make a profit since its flotation in July 2010. In June the retailer reported flat first-half profits and in September reported a slowdown in sales growth in the third quarter.

Show the press release

Ocado Group PLC ("Ocado" or the "Company") Extension of Capex Facility and Placing of New Ordinary Shares to Fund Ongoing Expansion of the Business

Summary

· Extension of capex facility to July 2015

· Placing to raise £35.8 million

· Current trading - improved sales growth of 13.7% in 6 weeks to 11 November

Introduction

Ocado announces today that the Company's existing lenders, Barclays, HSBC and Lloyds, have agreed to extend the maturity of the Company's existing £100 million capital expenditure facility for a further 18 months to 6 July 2015. The extended facility now comprises a capex term facility of £90m and a working capital revolving credit facility of £10m.

Additionally, the Company announces that it has received offers from certain existing shareholders, including members of the Company's Board, to raise new equity of £35.8 million through a placing (the "Placing") at a premium to the most recent closing market price of the Company's shares.

The Placing comprises 55,875,557 new ordinary shares in the Company (the "Placing Shares") at a price of 64 pence per Placing Share (the "Placing Price") representing approximately 9.99 per cent. of the Company's existing issued share capital. The Placing Price represents a premium of 5.7 per cent. to the closing middle market price of 60.55 pence per ordinary share on 16 November 2012, being the latest trading date prior to this announcement.

The Company will make a proportion of the Placing Shares available to existing institutional shareholders in the Company at the Placing Price through the Bookbuild (as defined below) immediately following this announcement. The Placing Price and the number of Placing Shares will not change as a result of the Bookbuild.

Current trading and financial background

As anticipated, growth has accelerated as the quarter has progressed. For the 14 weeks to 11 November 2012, Ocado achieved year-on-year growth in Gross Sales of 11.0%. For the 6 weeks to 11 November 2012, Ocado achieved year-on-year growth in Gross Sales of 13.7%. Weekly orders reached 140,000 per week for the first time in November 2012.

The Company has completed construction of CFC2 in Dordon, with equipment installation almost complete, and testing underway since May 2012. The CFC2 project remains in line with budget. Subject to the successful completion of testing, fulfillment of customer orders from CFC2 is planned to commence in February 2013. The Company expects to incur the final £46 million of capital expenditure during 2013 to complete this stage of CFC2.

As at 28 October 2012, the Company had net debt of £93.4 million, a cash balance of £56.0 million and drawings on its existing capital expenditure facility of £85.3 million.

Tim Steiner, Chief Executive Officer of Ocado, commented:

"We are delighted that Ocado has achieved such strong endorsement from both its institutional and other shareholders and its lenders who support our confidence in our business model and growth prospects."

Duncan Tatton-Brown, Chief Financial Officer, said:

"We have undertaken this Placing and early extension of our existing facilities to ensure that Ocado has the continuing resources to focus on delivering growth through increasing the range and enhancing our customers' shopping experience. It also gives us greater flexibility to invest in various marketing initiatives around the opening of CFC2 and significantly expand our non-food offering."

Details of the Placing

The Placing is subject to the terms and conditions set out in the Appendix. Goldman Sachs International and Numis Securities Limited (the "Joint Bookrunners") will today commence an accelerated bookbuild process (the "Bookbuild") in respect of the Placing, subject to the terms and conditions set out in the Appendix. The Placing Shares are to be placed at the Placing Price. The book will open with immediate effect following this Announcement. The Bookbuild is expected to close no later than 4.30 p.m. (London time) today but may be closed earlier or later at the discretion of the Joint Bookrunners after consultation with the Company. Allocations are at the discretion of the Company after consultation with the Joint Bookrunners.

The Placing Shares, when issued, will be fully paid and will rank pari passu in all respects with the existing ordinary shares of the Company, including the right to receive all dividends and other distributions declared, made or paid after the date of issue. The Placing Shares represent an increase of approximately 9.99 per cent. of the current issued ordinary share capital of the Company.

Application will be made for the Placing Shares to be admitted to the premium listing segment of the Official List (the "Official List") of the Financial Services Authority (the "FSA") and to be admitted to trading on the main market for listed securities of the London Stock Exchange plc (the "London Stock Exchange") (together, "Admission"). Settlement for the Placing Shares and Admission is expected to take place on or before 8.00 a.m. on 26 November 2012. The Placing is conditional, among other things, upon Admission becoming effective. The Placing is also conditional upon the placing agreement between the Company and the Joint Bookrunners (the "Placing Agreement") not being terminated. The Appendix sets out further information relating to the Bookbuild, the terms and conditions of the Placing and the Placing Agreement.

The proceeds of the Placing will strengthen the Company's balance sheet and support the continued growth of Ocado.

Details of the extended facility

Barclays, HSBC and Lloyds, have agreed to extend the maturity of the Company's existing capital expenditure facility for a further 18 months to 6 July 2015. The extended facility comprises a capex term facility of £90m and a working capital revolving credit facility of £10m. The extension of the capital expenditure and working capital facility agreement is conditional upon the completion of the Placing. The net debt: EBITDA covenant in the extended facility is 3.5x for FY 2012 and FY 2013, gradually reducing to 2.25x during the 18 month extension period. The EBITDA: net interest covenant is 4.0x for FY 2012 and 2013, gradually increasing to 5.0x during the 18 month extension period. There is a requirement, for any 12 month period in which EBITDA is less than £35m, that gross debt: EBITDA shall not exceed 5.5:1. For any FY in which the net debt: EBITDA ratio exceeds 2.5:1 there is a cap on capital expenditure which is set above the Company's current expectations over the extended term of the facility agreement.

 

Original source: Ocado

Sectors: Financials, Multichannel, Retail

Companies: Ocado

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