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Improving balance sheet flexibility is the aim of logistics services company Qube's (ASX: QUB) $500 million entitlement offer announced this morning.
The company hopes to pursue growth opportunities and build resilience in the face of COVID-19, all the while ensuring it has sufficient liquidity to manage the financial crisis.
The entitlement offer will see shares offered at $1.95 per share, representing a discount of 11.8 per cent to the company's last closing price of $2.21.
Approximately 256 million new shares will be issued, representing 15.7 per cent of Qube's existing issued capital. New shares will rank equally with existing shares.
As at 31 March 2020, Qube had liquidity of $470 million after adjusting for the FY20 interim dividend, with headroom to its covenants and no near term debt maturities.
In combination with the entitlement offer Qube will have over $1.15 billion of total liquidity.
"Despite the near term challenges of COVID-19, our diversified business remains resilient and our long term strategic growth priorities remain unchanged," says Qube managing director Maurice James.
"Qube has a long track record of investing across its core business, including through acquisitions to diversify its capabilities and operations and provide a platform for long term earnings growth. We maintain a significant pipeline of organic and inorganic opportunities, and only expect this to increase in the current environment.
"The Entitlement Offer announced today will leave us conservatively geared, with significant balance sheet flexibility to continue to pursue this robust agenda."
So far in FY20 Qube has undertaken capital expenditures to support growth contracts including with BlueScope Steel to provide East Coast interstate steel train services and intermodal terminal operations at Qube's North Dynon facility in Melbourne, with Shell Australia to provide supply base management, and with BHP Nickel West to construct and maintain a haul road and the provision of nickel ore haulage services.
Other recent transactions include the acquisition of the remaining 52.8 per cent interest in a Quattro Grain joint venture, the acquisition of New Zealand based log marshalling company NFA Holdings, the acquisition of logistics group Chalmers, and the purchase of mining and industrial services company LCR Group.
With regard to COVID-19 Qube says near term impacts associated with the coronavirus are being experienced in a number of its markets.
"However, Qube's business model remains resilient and continues to generate solid earnings and cash flows from its diversified and essential logistics activities and its investment in long term strategic growth priorities remains unchanged," says Qube.
Qube says it is not in a position to provide an earnings outlook for FY20 to the market at this time.
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