LONDON (ShareCast) - Power and data cabling solutions provider Volex has announced plans to raise £18.1m from the placing and open offer of 24.1m shares, alongside the extension of its committed bank facility.

The additional funds are being raised to give the group a stronger platform for the continued progress of its transformation plan which is being carried out to tackle the downturn in demand for its products seen over the last two years, it said.

At 75p a share, the issue price represents a discount of around 6% to the closing price on 79.75p on June 11th.

The group has blamed the downturn on a loss of alignment between its strategic goals and the requirements of its core customers in the power cord market, as well as on a reduction in demand from its key infrastructure customers, as a result of the completion of 4G roll-out projects in the US and Japan in the data market.

"This resulted in a reduction in sales orders from a number of the group's larger customers, which, coupled with its operational investment in increased production capacity, caused a significant reduction in profitability for the group," it explained.

Volex has concluded that the transformation plan, which is focused on cost reduction and improving relationships with clients, has been restricted by the group's high levels of debt, and as such requires greater financial flexibility in order to carry it out.

The facility has been reduced from $75m to $45m and extended by two years to June 15th 2017.

The company will also prepay $25m of its indebtedness out of the proceeds of the placing.

Shares declined 0.94% to 79p by 09:42 on Thursday.

NR

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