While many ASX companies are raising capital in order to simply survive, automotive software provider Infomedia Limited (ASX: IFM) is taking an offensive position amid the COVID-19 crisis, launching an $85 million capital raise to fast track its growth strategy.
CEO and Managing Director Jonathan Rubinsztein believes the crisis provides a unique opportunity to acquire quality assets, access new customers, and enter new geographies.
The capital raise consists of a $70 million institutional placement and $15 million share purchase plan. The placement will be conducted at $1.50 a share, an 11.8% discount to Infomedia's Wednesday close of $1.70. Shares in the company have fallen 9.4% today to $1.54.
What does Infomedia Limited do?
Infomedia Limited is a technology services developer and supplier of software systems to the global automotive industry. The company also provides information management and data analysis to the Australian automotive and oil industries. Founded in 1987, Infomedia boasts more than 170,000 users of its products in 186 countries.
What is the purpose of the Infomedia capital raise?
Infomedia will use the capital to accelerate its M&A strategy and emerge from the current environment in a position of strength. The execution of acquisition opportunities will be expedited to enhance core technology capabilities. This will open access to new customers and increase breadth and depth in key geographic markets.
"We believe COVID-19 provides a unique opportunity to fast-track our growth strategy towards acquiring quality assets that leverage our global parts, service, and data insights platform with enhanced technology, access to new customers, and entry to new geographies," Rubinsztein said.
"This puts us in a strong position to take advantage of value attractive and operationally accretive opportunities that will emerge in the current environment." he added.
How is Infomedia's business performing?
Infomedia reports that new car sales have been significantly disrupted by COVID-19. The company has introduced a number of pre-emptive measures to mitigate disruptions. These include an increased focus on cash collection and cost reductions, as well as measures to protect the top line and manage impacts on recurring revenue.
Despite the negative impacts of coronavirus, Infomedia reports that its trading performance remains robust. This is thanks to high levels of recurring revenues, global diversification, and a strategy focused on automotive aftersales. The company has reaffirmed its FY20 guidance of revenue of $93 to $95 million (up 10–12%) and net profit after tax of $18 million to $19 million (up 12–18%).
Foolish takeaway
Infomedia's capital raise leaves it cashed up and in a strong position to take advantage of acquisitive opportunities. While car sales are going backward, Infomedia is pushing forward in pursuit of its growth goals.
