Eroad plans $18m capital raise as it pushes US expansion
ERoad is in a trading halt as it looks to raise at least $18 million through a placement and a share purchase plan to fund an upgrade of its back-end systems amid a push into North America.
The company said it wants to raise at least $14 million through a placement of new shares and at least $4 million through the share placement plan. The placement will be conducted today through a bookbuild run by First NZ Capital Securities, while the terms of the share purchase plan will be announced in more detail in early 2018, though ERoad said it would mean New Zealand registered shareholders would have the opportunity to pay the lower of the placement price or a discount to the share price at the time.
ERoad's largest shareholder, NMC Trustees, which holds 26 percent of the firm, will also sell about $5 million alongside the planned placement. The company's chief executive Steven Newman has an indirect interest in the shares held by NMC but "remains fully committed to the ERoad business, and will remain a significant shareholder following the placement", the firm said. Newman will indirectly hold more than 21.5 percent of the company's shares through NMC after the sale. That sale will run concurrently to the placement.
The firm will use $4.5 million to upgrade customer support systems and as working capital for inventory growth, while $5 million will be used to replace non-bank lender funding "to simplify ERoad's funding structure and operational activities", it said. The remaining $8.5 million will be used to "develop and expand disruptive product offerings as well as building a digital ecosystem to better collect and analyse transport data and potential inorganic growth."
In late November, ERoad said it had asked FNZC to undertake a strategic review of its North American business to see how it can drive faster growth. The Auckland-based company reported a net loss of $3.6 million, or 6.03 cents per share, in the six months ended Sept. 30, compared to a loss of $241,000, or 0.4 cents, a year earlier. That was largely due to a 57 percent jump in operating costs to $16.9 million as it spent more acquiring customers in the US which ERoad sees as its major engine of growth.
Today, ERoad said it expects revenue of between $46.9 million and $47.6 million in the 2018 financial year, and earnings before interest, tax, depreciation and amortisation of between $12.8 million and $13.3 million. In the first half, it had revenue of $20.9 million and ebitda of $4 million.
In an investment presentation accompanying the capital raise announcement, ERoad said it is seeing ongoing growth in New Zealand and Australia, and increasing momentum in North American unit sales. It said revenue in the second half of FY18 will be predominantly driven by growth in new contracted units, recognition of additional revenue for units sold partway through the prior period, and increased recurring revenue per unit at $54 per month.
As at Sept. 30, the firm had $33.4 million total debt capacity, from which it had drawn down $18.1 million, but it said that any significant non-unit capital expenditure requires additional funding as most of its debt facilities are provided against the future contracted income of its rental units.
ERoad shares last traded at $3.30, and have gained 106 percent this year.