Where next as Temple & Webster launches $40m capital raise?

We examine the highlights and implications from the online furniture and homeware company's just-announced capital raise.

Online furniture and homewares company Temple & Webster (TPW) on Wednesday revealed that it was looking to raise $40 million in fresh capital, in a move aimed at shoring up its balance sheet and providing optionality to pursue organic and inorganic growth opportunities.

It’s an appropriate time to raise new capital too – with the stock trading around all-time highs, closing Tuesday's session up 2.1% at $6.310 per share.

Temple & Webster share price and the e-commerce boom

The emergence of the coronavirus has seen the adoption of e-commerce accelerate, with shopping moving online as societal and consumption trends rapidly change. As Deloitte argued in a recent piece of research: ‘While many companies are challenged to survive in the short-term, the crisis also presents opportunity; bold companies that invest ambitiously and timely in their online business are likely to emerge as market leaders.’

Speaking to the hype behind e-commerce right now: in the last three months the TPW share price has been bid over 200% higher.

Beside those share price moves, Temple & Webster has also seen its fundamentals improve strongly year-to-date. Indeed, as part of the company's most recent business update, covering the fiscal year to 31 May, TPW reported:

  • Revenues hit $151.7 million, up 68%
  • Earnings (EBITDA) reached $7.1 million, up 668%
  • Active customers reached 440,257, up 68%

Besides those, the company noted that sales momentum has been sustained heading into June – up 130% on a year-over-year basis. Full-year earnings (EBITDA) is expected to come in above $8 million.

The company is poised to provide its (pre-audit) FY20 results around the end of July

Details and consequences of the raise

The $40 million raise – which will be fully underwritten and aimed at institutional investors – will see the company issue 7.0 million new shares, representing approximately 6.2% of the company’s issued capital.

These shares will be issued at an offer price of $5.70 per share – representing a modest discount to the stock's last traded price. Following the completion of the raise, TPW expects to have $69.2 million in available cash.

The capital raise will be led by Canaccord Genuity Australia.

Speaking of today's announcement, Temple's Chief Executive, Mark Coulter said 'we remain very excited about the position of Temple & Webster and our unique opportunity to capitalise on the structural shift from offline to online for furniture and homewears.'

Looking at what the funds will be used for, Mr Coulter finished by saying:

'With the recent acceleration in this trend, we think it is financially prudent for the Company to strengthen its balance sheet to provide us with the flexibility to make additional investment into our growth.'

Looking forward, it was revealed that the company recently made a small investment in an off-shore interior design-focused artificial intelligence start-up; as well as entered into a long-term agreement with that company to localise its A.I. solutions.

Though currently in a trading halt, TPW’s stock is expected to be tradable on Thursday, 2 July, following the placement bookbuild.

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