TT launches pounds 51m rights: Group seeks to cut borrowings and invest in businesses
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Your support makes all the difference.TT GROUP, the electrical components maker being aggressively built by two former Hanson executives, is raising pounds 51m in a rights issue.
The cash will eliminate current borrowings and allow the group to invest in its businesses. The company is currently geared at 47 per cent.
TT - previously called Tyzack Turner - has made three large acquisitions in the past three years, culminating in January with the pounds 13m purchase of AB Electronics.
The company says it needs to invest in new equipment, to make bolt-on acquisitions, and to purchase particular product lines for which it sees untapped potential. It expects to spend pounds 40m over the next two years.
Shareholders will be given the opportunity to buy one new share for every four owned. Convertible preference shareholders will qualify for five new shares for every 26 held. The issue is fully underwritten by Samuel Montagu, TT's merchant bank.
The subscription price will be 240p, an 18 per cent discount to yesterday's opening price of 293p. The shares fell 7p to 286p by the close.
John Newman, joint chief executive, also said AB Electronics was losing pounds 1m a month when it was taken over but is now making profits.
He said that his company had found it much easier to sell its products in recent months. 'The US is out of recession, UK manufacturing is out of recession and there is renewed demand worldwide for electrical components,' he said.
TT has taken the axe to AB's cost base - 500 of its 3,700 employees have been made redundant.
Ben Thefaut, an analyst with the stockbroker Albert E Sharp, marked up his profit forecast for TT in light of the rights, to pounds 21.4m this year, instead of pounds 19.7m. His projected earnings per share of 16.8p puts TT shares on a price earnings multiple of 17.
TT also said that it would pay an interim dividend of 2.6p - up from 2.4p - and would pay 6.6p in total this year, up from 6p. This promise means the shares have a prospective yield for this year of 2.9 per cent.
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