We’ve got ambitious plans to grow our business across our full range of specialist cleaning, hygiene and decontamination services. And with the success of our recent share placing, we’re now in a better position to make that happen. Last week, we officially announced a placing of 83,101,597 new ordinary shares of 0.25 pence each in the capital of React Group plc (the Company) at a price of 1.5 pence per Placing Share. In this blog, we’re going to have a closer look at what that will mean for our business.
An injection of capital
The aim of the share placing was to raise some £1.25 million, before expenses. The Placing utilises the Company's existing authority to issue new ordinary shares for cash on a non-pre-emptive basis. We also announced the appointment of Allenby Capital Limited as sole broker to the Company with immediate effect. The Placing was materially oversubscribed, following demand from both new and existing institutional and other investors.
Expanding our first-response services
We intend to use the net proceeds of the Placing of £1.16 million to grow the business. We’ll be strengthening our sales and marketing activities, and we’ll be supporting a growing contract pipeline and accelerating organic growth. The proceeds will also provide additional working capital and strengthen our balance sheet to support a long-standing aspiration to secure larger contracts.
React’s business is divided into two parts of approximately equal size in revenue terms: reactive cleaning services and regular maintenance services. In the current conditions, our reactive cleaning services have been experiencing high demand to provide decontamination and infection control services in all sectors. This has included thorough deep cleaning of premises thought to be harbouring SARS-CoV-2, the virus responsible for Covid-19. We provide a rapid response to the threat posed by Covid-19, thanks to our dedicated teams of first-response cleaners. We apply best-practice standards of deep cleaning and testing to enable customers to return potentially infected properties to safe operational use.
Meanwhile, our regular maintenance services business largely operates in the healthcare, road and rail sectors. Revenue continues to grow in the rail and healthcare sectors, more than compensating for temporary disruption in others. As the effects of the pandemic subside, we also expect growth in this side of the business.
Organic growth for the business
Recent trading has been ahead of management expectations. As a result, the Company is expected to deliver a small operating profit for the six months to 31 March 2020. And we remain well-placed to meet or exceed management expectations for the full year to 30 September 2020.
Looking to the future, we believe there’s an opportunity to scale the business through organic growth and carefully selected acquisitions. We’ll be focusing on markets where React has differentiation and access to higher margins. Additionally, we also believe there is an opportunity to materially grow profitable revenue with large customers in the health, rail, and facilities management sectors. And we’ll be looking to strengthen recurring revenue streams through incremental and long-term contracts.
With the share placing, we’ve strengthened the Company's balance sheet. We’re providing ourselves with the resources to ensure we’re well-capitalised to support organic growth and take advantage of these opportunities. And we’re maintaining our fundamental values: providing excellent service, protecting our staff and the general public, and acting responsibly towards the environment.
For full details of the placing, please see the announcement from the London Stock Exchange website dated 3 Jun 2020.
To find out more about this share placement and our plans for future organic growth, contact one of the team today.
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