Grafenia issues new shares to boost M&A plans

By Jo Francis, Tuesday 17 April 2018

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Grafenia is set to raise more than £3m via a share placing aimed at boosting the group’s plans to build up a nationwide network of signage businesses through targeted acquisitions.

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The new Nettl Business Store in Liverpool Waters

The PLC, which is listed on the AIM market, has announced that it has conditionally raised £3.5m via a placing of 29,258,331 new shares at 12p. The shares have been placed with existing and fresh investors in the group.

Langfrist, Grafenia’s largest investor, will take an additional 10,833,332 shares; while chief executive Peter Gunning will up his stake in the business by 175,000 shares, and non-executive director Conrad Bona is taking 250,000 shares.

After expenses, the net proceeds of the placing will be around £3.44m. The group, which owns the Nettl, Printing.com and Marqetspace brands, will use up to £2m “to repay and renegotiate certain of its existing debt arrangements, to achieve more favourable terms and save unnecessary interest payments”.

Grafenia wants to build upon its acquisition strategy in the signage space and is targeting profitable businesses with sales of at least £250,000 with the aim of building a national network of sign businesses serving SME customers. It plans to finance the buys with “a prudent mix of equity and debt”.

The group said that since acquiring ADD Signs in Liverpool in January 2017, sales at the business in the subsequent year had grown by more than 30% and it had beaten its profit targets.

ADD has been relocated into a 465sqm unit at Liverpool Waters and rebranded as a Nettl Business Store. The new facility, which will officially open later this month, includes a trade counter, design studio, meeting room hire, a retail display area, and a drive-in bay for installing vehicle graphics.

“We’ve been working hard on our transformation plan and we've made significant progress within the constraints of cashflow. Constraint is good, since it forces us to be disciplined and creative. Now we’re excited to move onto the next phase and are pleased with the support that our shareholders have shown,” Gunning told PrintWeek.

“We’re looking for two kinds of people. Owners of sign businesses who’re looking to exit and perhaps retire. But more importantly, we’re looking for bright entrepreneurs who want to grow their graphics business with Grafenia’s help. To open their own Nettl Business Superstore. We’re asking both to get in touch.”

Grafenia had sales of £10.4m last year and posted a £625k loss. It is expecting to file sales of around £15m for the financial year just ended, following the acquisition of £5.5m turnover Image Everything last summer, but will still post a loss.

The company has acknowledged that it needs to achieve greater scale in order to justify the expense of being a PLC. 

A general meeting of shareholders will be held on 2 May to ratify the placement, and if approved the new shares will enter circulation on 3 May. The placement is being handled by Grafenia’s new adviser and broker, Allenby Capital.

Grafenia’s share price was at 11.5p at the time of writing (52-week high: 13.10p; low: 6.35p).

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