Given the steep decline in Videndum (VID), supplier of TV/film quality broadcast equipment and software, investors need to take a deep breath before reading today's FY'24 trading update.
The good news is that FY'24 performance was in line with previously reduced guidance, year-end banking covenants were met, and the sales pipeline (eg Cine and Broadcast) appears to be improving.
However, the bad news is that the Mar'25 covenant tests (re interest cover of >1.25x EBITA and net debt <5.5x EBITDA) will be breached thanks to subdued H2'24 and probably H1'25 trading.
This means deeper cost cutting is required and [reading between the lines, absence a takeover offer, say from PE] an equity placing is almost certainly in the cards. So if correct, how much money might need to be raised?
Well, given there's £105m of net bank debt, I'd guess VID will need to get back to reasonable cover ratios of 3x EBIT interest and 2.5x EBITDA in order to refinance its existing RCF, which is due to expire in Aug'26.
Assuming this is the case, it could mean a £20m+ placing vs a current mrkcap of £58m. Ouch!
Follow News & Updates from Videndum: