The cash call is accompanied by the warning of a cut in its final dividend from 12.3p to 5.8p, making a total for the year of 10p (16.5p). That will be just covered by earnings, forecast at 10.2p following a restated 23.3p loss per share last time.
It is also forecasting taxable profits of at least pounds 14.2m for the year to March compared with a pounds 19.9m loss in 1992, restated from a pounds 24.6m profit because of accounting rule changes that force it to take a pounds 41.8m loss on disposal against profit before tax.
The City had been braced for a rights issue from Meyer as the economy picked up and the shares quickly recovered to close just 3p down at 365p, 75p above the price of the one-for-four rights issue.
Meyer said it would use the money to cut borrowings, giving it scope to fund increased working capital and invest in its branches as the market recovers. Debt at the year-end was pounds 131m - or about half net assets - up from pounds 102m last time, although pounds 19m of the increase was due to exchange movements. The rights issue will cut gearing to less than 20 per cent.
The group has cut back because of the recession, shedding a third of its staff - although some of these have been due to disposals. The cash call comes just two days after Meyer's rival, Travis Perkins, reported a 2 per cent increase in like-for-like sales since the start of the year. Meyer echoed that confidence, saying that there was 'increasing evidence that the tide has turned'.
Richard Jewson, chairman, said March sales were ahead of last year, the first time for some years, and the best for eight months. But he added: 'Although the tide has turned, it is still a long way down the beach.'
This is the first rights issue by a building materials group this year, although a number of housebuilders and contractors - including Berkeley, Bellway and Trafalgar House - have asked for cash. The City is braced for further fundraising in the sector as companies repair their balance sheets in preparation for increased demand.Reuse content