British defence group Chemring plans to tap shareholders for £80.8m to tame the high debt levels and repayment costs which are hampering its restructuring efforts.
The British-based company's full-year pre-tax loss for the year ending October 31 widened to £9.1m, from £5.2m a year earlier.
Underlying operating profit slipped 26.34 per cent to £34.4m, while revenue declined 6.4 per cent to £377.3m. Meanwhile, its net debt rose 13.79 per cent £154.3m.
Its shares slumped as much as 11.66 per cent to 157.25p per share this morning, taking it to the bottom of the FTSE.
Why it's interesting
Chemring, which makes flares and explosive device detectors, was hurt by a delayed contract to supply 40mm ammunition to a Middle East customer and delays to several key export orders in the sensors and electronics segment last year.
The British-based company has been struggling for several years, prompting it to a string of profit warnings, most recently in October. It's come as Western government cut their military budgets, following the withdrawal of troops from Iraq and Afghanistan.
But the firm has been positioning itself to benefit from what it anticipates will be increased military spending from governments in the Middle East and South Asia, reducing its reliance on the United States, UK and European defence markets.
Today, Chemring’s chief executive, Michael Flowers, said US defence spending was more stable than it'd been for some time. However, he admitted the military budgets of Middle Eastern governments would be constrained by low oil prices, which are currently hovering around 12-year lows.
Chemring also announced its chairman Peter Hickson is due to stand down as soon as a suitable replacement has been appointed.
What Chemring said
"The situation for US defence spending is more stable than it has been for some time, and ongoing geopolitical tensions in the Middle East and elsewhere emphasise the need for robust defence and security measures," Flowers said.
"The timing of Middle East order placement and contract activity remains difficult to predict, in part due to the impact that recent falls in the oil price are having on Government spending in the region."
"Nevertheless, our continued customer focus means the Group is well positioned to benefit from any sustained increase in demand in its markets."
Its shares dived on the £80.8m rights issue, as well as the news that pre-tax losses widened to 9.1m in 2015.