Athlone Extrusions will have a stock market value of £41.9 million when its shares begin trading on the Dublin and London stock markets next Thursday.
The valuation of the company is lower than the £45£50 million estimate when Athlone first indicated its plans for flotation at the beginning of the Far East financial crisis last October. Athlone has also decided to raise less money than it first indicated - £2 million (£1.34 million after expenses), against the £5 million it indicated at the time of the October announcement.
Asked why the valuation put on the company has fallen in a period when the Irish stock market has risen over 20 per cent, chief executive Mr Jimmy McGee told a press briefing yesterday that the multiple of 13 times historic earnings compared favourably with Athlone's peer group in the plastics sector. He added that the group also did not want to dilute existing shareholders too much.
NCB corporate finance director Pat Landy said: "We had to price this issue to go. In terms of Athlone's peer group, it's attractively priced. There was a considerable appetite for the shares at the 91p price, the roadshows were very successful and we have 13 new institutional shareholders and three market-makers."
Athlone has placed 2.2 million new shares to raise £2 million, although the proceeds to the company are just £1.34 million after the costs of the flotation are deducted. Existing shareholders have also sold just over 5 million shares, worth £4.6 million at the 91p placing price, with the result that Athlone will have 46.1 million shares in issue when trading begins next Thursday. Athlone employees took up almost 1.6 million of the 7.2 million shares that have been placed.
Mr McGee said that the proceeds of the placing would be used for working capital and capital investment on new extrusion lines at the Athlone plant. He said, however, that the group was looking to expand through acquisition in Britain and continental Europe, and could handle an acquisition of up to £15 million without going back to shareholders. "We are very cash-generative," he said, pointing to the group's debt-free balance sheet.
He added that while the group had done due diligence on some potential acquisitions, nothing was being actively pursued at the moment. Mr McGee said that trading in the first quarter of the group's year had been satisfactory and that "the prospects for the current year are encouraging".
In the year to the end of September 1997, Athlone's pretax profits rose from £2.4 million to £3.2 million while sales were 11 per cent higher on £24.3 million. The bulk of the group's sales are in Britain, but Mr McGee said lower raw material costs from Britain had balanced out the weakness of the pound against sterling. Athlone manufactures a range of plastic sheet and film products and its 400-odd customers are drawn from the automotive, sanitary ware, toy, leisure and retail industries. The flotation is the first of an expected 10 new listings on the Irish stock exchange this year.
