Roy Cokayne
RBA HOLDINGS plans to recapitalise its business to relieve the financial stress it has been operating under in recent years.
The affordable homes developer said this week that it had raised R7 million to further improve its liquidity and working capital position in anticipation of a planned recapitalisation transaction.
Of the R7m raised, R4m was raised through a general issue of shares for cash at 10c a share to various investors and R3m via a short-term loan from a major shareholder.
The share issue represented a 6.51 percent increase in its issued ordinary share capital.
RBA confirmed that a transaction to raise R31.2m through the issuing of debentures and granting of share options to Riskowitz Capital Management, Protea Asset Management, Midbrook Lane and Hillside International Holdings had been formally approved by shareholders at a meeting this week.
It also confirmed that it had been in discussions with a strategic investment partner about its strategy to recapitalise the business, a due diligence process was being completed and the parties were in the process of obtaining final internal approvals for the transaction. RBA reported this week that its overall loss nearly doubled to R21.9m in the six months to June from the R11m loss in the previous corresponding period.
RBA was established in 1997. The bulk of its revenue is generated through the marketing and sale of building packages to prospective clients and from the subsequent construction of houses for clients who had approved home loans once all town planning approvals had been achieved on a development site.
It launched a turnaround strategy in September 2012 when Adian-John Rothman, a former top investment banker and corporate strategist, was appointed chief executive.
Rothman said this week that RBA planned to complete a transaction to recapitalise the business during the fourth quarter and “decisively address working capital constraints and improve the company’s balance sheet position that has come under pressure as a result of cumulative losses in recent years”.
He said RBA had over the past two years increased the number of serviced stands available for sale, improved its project pipeline, increased its construction capacity and was achieving record levels of sales performance. “With these building blocks in place the major constraint currently preventing the company from sustainably operating at levels above break-even is further working capital finance.”
Rothman said the business continued to operate at below break-even levels during the reporting period because of poor liquidity, which significantly affected raw material supply and production output.
Indicative of this was the 29 percent decline in revenue to R94.9m from R133m because of the reduction in the number of freehold houses built during the period despite improved serviced land availability and sales, he said. Rothman said this was the major contributing factor to the company’s overall loss in the period.
He said these losses, together with cumulative losses since the financial crisis of 2008, had had a negative impact on the balance sheet, with its net asset value being reduced to R16.5m in June from R57.9m a year ago.
Commenting on RBA’s future prospects, Rothman said the number of clients wanting to purchase freehold houses and applying for home loans remained strong and the affordable housing market remained a focal point of the major commercial banks.
The AltX-listed shares rose 1c to 8c in very thin trade.