AJ Lucas: Yet another capital raising

Small setbacks can be a big deal when you're in a difficult business

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

AJ Lucas Group Limited (ASX: AJL) has today released an operational update and profit guidance for its 2012 financial year. Thanks to wet weather in the past few weeks, the company's drilling operations have been significantly impacted, with virtually the entire Queensland drilling rig fleet stood down at various times.

Drilling activities have also been impacted by various delays and other interruptions in the coal seam gas drilling business due to site access factors.

The company's BCI division has been impacted by continuing resource restraints and delays in the award of projects and their progress. Capital constraints continue to impede progress on the tooling up for several projects.

No profit on the horizon

The company now expects a much stronger final quarter, assuming no resumption of wet weather, and expects full year underlying EBITDA to be in the range of $32-$37m. Given the company is likely to face significant finance costs, as well as depreciation and amortisation expenses, the 2012 net profit after tax is could well be another loss.

This comes on top of reported losses of $11.5m in 2011 and $7.1m in 2010.

Capital raisings

The company also announced that it was proceeding with a placement to raise approximately $15.5m which will cover the shortfall from the $51.3m rights issue conducted earlier this year. The placement is subject to shareholder approval, and the board have identified parties willing to subscribe to a placement. It is expected to be completed by the end of June 2012.

This comes on top of the 10m shares issued in October 2011, which were required to raise additional working capital.

The Foolish bottom line

This announcement shows how difficult it is for businesses to recover once they've hit the skids. With high levels of debt and thin profit margins, it only takes minor bumps to throw the company off the rails.

AJ Lucas is now struggling to raise capital, pay off its debts, keep its bankers onside and keep business on track. Mother Nature throwing curve balls at you at the same time doesn't help either.

If you are looking for ASX investing ideas, look no further than "The Motley Fool's Top Stock for 2012." In this free report, Investment Analyst Dean Morel names his top pick for 2012…and beyond. Click here now to find out the name of this small but growing telecommunications company. But hurry – the report is free for only a limited period of time.

More reading

Motley Fool contributor Mike King doesn't own shares in AJ Lucas.The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool's disclosure policy.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »