- Diagnostic imaging provider Capitol Health (CAJ) has been forced to raise capital after the Victorian government recently extended the state’s stage three COVID-19 restrictions
- The news comes after the company cut operating costs by 40 per cent and differed its interim dividend payments to retain liquidity
- Despite these previous measures, the company now plans to raise $29.8 million through an institutional placement and up to another $10 million through a voluntary share purchase plan
- Capitol Health will use the proceeds to weather the current environment and continue its three-year growth plan when conditions improve
- Capitol Health stock has seen no change since the start of the Easter break. Shares are trading for 19.5 cents per share
Healthcare services provider Capitol Health (CAJ) has been forced to raise capital after the Victorian government recently extended stage three COVID-19 restrictions across the state.
The news comes after the company cut operating cost by 40 per cent and deferred its interim dividend payments to retain liquidity.
Despite these previous measures, Capitol Health’s board of directors believes the company will need to strengthen its balance sheet and mitigate the impact to its business.
As a result, the company will raise $29.8 million through an institutional placement. Furthermore, the company hopes to raise up to another $10 million through a voluntary share purchase plan.
Capitol Health plans to use the proceeds to weather the current macroeconomic challenges and continue its growth plans when the conditions improve.
While healthcare services are broadly experiencing increased demand, Capitol Health specialises in diagnostic imaging services. This segment of the industry is experiencing a severe turndown as voluntary procedures continue to be forestalled to free-up medical resources limit the virus’s spread.
Before the COVID-19 began to impact the company’s operations, Capitol Health was meeting its 2020 guidance. However, since then the company has recalled its guidance due to the ongoing unpredictability in the market.
Capitol Health’s Managing Director, Justin Walter believes these steps are necessary, given the challenges facing the company.
“In response to these ongoing challenging times, we continue to take action to ensure our Company’s long-term performance.
“To this end, the Board has determined a capital raise to increase liquidity and provide for balance sheet flexibility is a prudent course of action. This capital raise will position us to capitalise on current identified opportunities as well as additional growth initiatives in line with our three-year strategic plan,” he said.
Capitol Health stock has seen no change since the start of the Easter break. Shares are trading for 19.5 cents per share.