Listed firm Ince’s shares have plummeted by more than 50% after this morning’s announcement that it plans to raise around £7m by issuing new shares to avoid ‘financial difficulties’.
Ince Group plc said today that the group is ‘at the limit of its borrowing facilities and was unable to make a short-term repayment’ at the end of May, with short-term working capital also ‘negatively impacted’ – partly as a result of a cyber attack in March, the estimated cost of which is £4.9m.
‘Without the fund-raising, the group will face financial difficulties and the company will need to look to alternative sources of funding in the short term, which may not be readily available or so advantageous to the group or its shareholders,’ Ince told the stock market today.
Chief executive Adrian Biles will step down and resign from the board, ‘subject to and with effect from the conclusion of the fund-raising’, to be replaced by Donald Brown – executive director of Ince and chief executive of corporate adviser and stockbroker Arden Partners, which was acquired in April.
The firm said Brown intends to buy £974,000 in ordinary shares at 5p per share, which ‘represents a discount of approximately 58%’ on yesterday’s middle market closing price, while Arden director James Reed-Daunter intends to subscribe for shares equivalent to £100,000.
Ince hopes to raise approximately £7m from issuing the new ordinary shares – which will represent approximately 62% of the enlarged share capital on admission – and use the funds to ‘strengthen the group’s balance sheet [and] provide additional working capital’.
The firm announced that the capital raised will also be used to implement a ‘cost rationalisation programme’, saying: ‘Management is now focused on delivering the £1m of synergies identified in the Arden acquisition and has identified further cost savings of £4m across the group which can be accelerated with the proceeds of the fund-raising.
‘These include potential for a reduced overseas footprint, review and rationalisation of non-core business streams, further property rationalisation and headcount reductions and tighter control of overhead costs. The directors believe that there are yet further cost savings to be driven across the group and that overall this will lead to a more streamlined and efficient structure for the group.’
The group, which has also reached an agreement with its principal funding bank to borrow £1.6m of sums repaid under its existing term loan, has ‘agreed not to pay any dividends or distributions to shareholders before 30 March 2023’. The issuing of new shares and the loan are both subject to the approval of shareholders at a general meeting next month.
In May, Ince said that pre-tax profits for the year ended 31 March 2022 are likely to be ‘short of market expectations’, citing the ongoing war in Ukraine and a cyber attack in March which hit the firm midway through an IT systems integration in Asia.
The firm today told the stock market: ‘The group has now assessed the full impact of the cyber-attack and the board currently estimates that the cash impact on the group will be approximately £4.9m. However, further work needs to be undertaken and this amount may change.
‘The group has submitted an initial insurance claim for £4.9m which should partially be covered by the group’s business interruption insurance cover of up to £2m, however the company’s management estimate the claim could take up to 12 months to be processed and received.’
It also revealed that the cyber attack ‘principally affected non-client data and internal systems, including a disruptive impact on billings in the final and very important weeks of FY22, with the recording of hours worked having to move to a manual process and the production of invoices by fee earners being impossible for an extended period’.
Ince said the cyber attack, the impact of Covid-19 on the UK market from November 2021, the ongoing impact of coronavirus in Hong Kong and China and the continuing conflict in Ukraine – which has affected global shipping, a ‘key market’ for the firm – all contributed to a ‘challenging final quarter’.
Shares in Ince Group plc were down by 52% to 5.75p on this morning’s news, after closing at 12p yesterday.
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