BWX’s problems are more than superficial – ShareCafe

Shares of BWX plunged yesterday after emerging from a requested trading halt last Friday as the company revealed its financial condition had all but collapsed.

Tuesday saw announcements from the company for a fundraiser, a poor business update that led to questions about the future of the company and news that the company is backed by its bank as it goes through a major overhaul.

The shares fell sharply, ending down more than 40% at 69.5 cents, the lowest close on record.

BWX stock price has fallen more than 87% in the past 12 months; more than 84% in 2022 alone.

Following the poor trading update, a surprise warning of impending writedowns in asset values ​​and news that the company is Commonwealth backed, BWX is now asking shareholders for more cash of around 23 millions of dollars.

It’s a claim that won’t be helped by the lackluster details of the update – an after-tax loss for the year through June 30, cost cuts and other changes to the business as well as major marketing changes.

The weak trading position, impending writedowns and other issues revealed in the filings also help explain the massive 47% reduction in the share price on placement and issuance – 60 cents per share from 1.17 $ at which the shares were trading on June 23. the day before the stoppage of trading was requested.

News of a board cleanup with up to four new non-executive directors to be found by the AGM later in the year and the promise of a new salary incentive structure for management were also telling. .

However, perhaps the most telling sign of the company’s current troubles was news of the attitude of its bankers – the Commonwealth.

BWX’s lender, the Commonwealth Bank of Australia (CBA), is supporting the capital raise, the company said.

“CBA has agreed to suspend BWX’s financial covenant reporting obligations for the periods ending June 30, 2022 and September 30, 2022,” BWX said in the statement.

“BWX will repay $10 million to CBA as a permanent debt reduction from the proceeds of the capital raise,” the company told the market. This is the support price.

The centerpiece of the announcement was the $23.2 million fundraising that will be used to reduce growing debt and will be backed in part by new shareholder Andrew Forrest’s investment firm Tattarang, as well as another major shareholder, Bangarra.

Of this amount, $13.5 million will be raised through a placement with “sophisticated and professional investors” and a one-for-10 non-revocable right offering will seek to raise an additional $9.7 million.

BWX told the market that proceeds from the offering will be used to accelerate debt reduction and for working capital. “Pro forma net debt as of June 30, 2022 is expected to be in the range of $58 million to $62 million. Pro forma net debt as of June 30, 2023 is expected to decrease to $23 million,” the company said.

The company said in the update that 2021-22 sales will total approximately $206 million compared to $194 million the previous year, but EBITDA is now expected to fall by $34 million for the year to date. in June 2021 at between 6 and 10 million dollars per year. to this Thursday (June 30).

Revenue is down from guidance in early May (when shares fell 22% in one day) from a range of $233 million to $243 million and the company also forecasts EBITDA of 27 to 30 millions of dollars. It will now be $20 million or more less.

This in turn will see the company report a net loss for the year of $10-14 million.

These estimates are before significant items that the company believes will include write-downs.

Tuesday’s statement contained this warning to investors “The Board of Directors believes that it is likely that BWX’s intangible assets will be impaired at a level significantly below their book value.”

Considering that they increased by more than 50% as of December 31 to reach $465 million against $300 million a year earlier, the depreciation could be very significant, as could the loss of profit as of June 30 for the company. .

But after cutting costs, raising capital, reducing debt and other savings, BWX estimates growth will be back on track with revenue rising to $260 million to $270 million from lows. forecast of $206 million for 2021-2022.

EBITDA should increase in 2023 from 6 to 10 million dollars to 45 to 49 million dollars.

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