Grafenia flexes finances with new bond issue

Jo Francis
Wednesday, July 15, 2020

Grafenia has put in place a facility to issue up to £50m in ‘perpetual bonds‘ on the Frankfurt Stock Exchange, with £2m raised via an initial £3m issue, to support working capital and the group’s acquisition strategy.

Nettl: 14 new partners signed up in the UK
Nettl: 14 new partners signed up in the UK

In a trading update issued today (15 July) the AIM-listed print PLC said that in May sales had recovered from the severe slump during March and April, but were still only around 40% compared with 2019.

In June, sales were “back to 90%” of last year, with Grafenia reporting strong sales of Covid-related products, including banners for football stadiums. “It's too early to tell how July and the rest of the summer will trade. However, not everything we've been selling has been related to Coronavirus – orders for our existing product range such as brochures, displays and marketing material have been received," the firm said. 

Around 90 of 180 team members were furloughed initially, and this has now reduced to around 50, with people working on rotation via the JRS. Grafenia also carried out some restructuring in February.

The group said that litho print sales had been “most impacted” during Q2, “partially offset by year-on-year growth of signage and websites”.

During lockdown Grafenia added 14 new Nettl partners in the UK, two in the Netherlands and three in the US. Some of its Nettl and partners “hibernated” as a result of the crisis, while others became active in community response including building new support websites.

Chairman Jan Mohr said the virus crisis had put “significant pressure” on the group’s transformation plan, but praised the executive team for their handling of the situation. He said Grafenia wanted to be on the front foot in being able to act on any M&A opportunities that came up.

“Given the uncertainty in the economy we strongly believe it's prudent to create a financing facility to meet our working capital needs under all circumstances and to be able to acquire sign businesses when the right opportunity emerges,” he stated.

The ‘Perpetual Bond Facility’ involves bonds issued at 67% of their nominal value, with no interest payable for three years and then interest of 6% per annum. 

The first tranche of £3m bonds has been issued, with net proceeds of £2.01m (before expenses) going to Grafenia. Bonds with a value of £2.8m were taken up by TGV Truffle Fund. This counts as a related party transaction as the investment fund is managed by Langfrist, in which Mohr has a near-30% stake.

Chief executive Peter Gunning commented: “We like the mechanism of the bond. As we see future attractive acquisition opportunities, we can access capital as necessary. We did consider raising equity, but the board decided that this bond was better for shareholders as it's not dilutive."

He said Mohr had recently been involved with a separate bond issue in Frankfurt. "So we were able to learn from that process. And it's a very effective way of raising capital."

Grafenia shares rose by nearly 2% to 7.9p on the news.

The group had sales of £15.96m in its last financial year and currently has a market capitalisation of £8.97m.




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