The market reacted positively to the news - and to a forecast that the company would return to the dividend list this year - marking the shares up 3 1/2 p to 59 1/2 p. The two-for-one issue is priced at 45p.
The board said it proposed to pay an interim dividend of 0.43p in September and a final of 0.87p next spring. The group made pounds 4.8m in the year to October, against a loss of pounds 2.5m the previous year, and is forecast to make about pounds 6.9m before tax this financial year.
The rights issue is another stage in the rehabilitation of the group built up by the chairman, Peter Gummer, who is a brother of the Environment Secretary. Shandwick was built up quickly by acquisition in the 1980s into an international consultancy.
But as recession closed in towards the end of the decade, the resulting debt mountain and a series of earn-out payments associated with past acquisitions threatened the group's survival.
A succession of profit warnings sent its share price spinning from 145p to a low of 3p in 1992. It also found it more difficult to finance its debt, paying premium rates and seeing its banking facilities reduced to a one-year basis.
The group renegotiated its borrowings last month and secured three-year money. About pounds 17m of the rights proceeds will be used to bring debts down to about pounds 50m, with the rest earmarked for development.
But Dermot McNulty, chief operating officer, said that the group would not embark on another acquisition spree. 'We've now got the network in place and it's a question of pursuing the business opportunities available as economic recovery continues, while worrying a little less about the financial position of the group.'
He added that current trading was encouraging, with business in the UK, Europe and Asia-Pacific ahead of targets.Reuse content