The PayGroup Ltd (ASX: PYG) share price has tanked more than 11% after the company announced a $3.5 million capital raise.
Details on PayGroup’s capital raise
PayGroup announced today that the company had successfully raised $3.5 million via institutional placement.
The payroll provider said new and existing investors supported the placement, in which 6 million new shares would be issued at 58 cents per share. That’s a 14.5% discount from the company’s last closing price.
PayGroup will use the capital raise to integrate its latest acquisition, TalentOz. The capital will also allow the company to pursue growth initiatives and working capital for its payroll platform, Astute One Limited.
In addition, PayGroup management said the placement would enable the company to capitalise on immediate growth opportunities, including possible further acquisitions. It noted PayGroup’s strong sales pipeline gave the company a positive outlook in FY21.
What does PayGroup do?
PayGroup is an Australian-based company that provides payroll and human capital management solutions to medium and large enterprises. The company services more than 915 client entities, representing more than 5 million payslips per annum.
In July, the company acquired Malaysian-based payroll provider TalentOz for $1.2 million. The new purchase follows PayGroup’s 2019 acquisition of the human capital management company, Asute One.
For the first quarter of FY21, PayGroup reported an operating cash flow surplus of $1 million. In addition, the company received $4.5 million in receipts over the period, as well as $3 million in new contract wins. PayGroup ended the first quarter of FY21 with $2.1 million cash on hand and additional access to around $260,000 in unused finance facilities.
Securities in PayGroup were placed in a trading halt yesterday pending the release of today’s announcement. At the time of writing, the PayGroup share price has rallied slightly to 61 cents after tanking more than 11.5% earlier to an intra-day low of 60 cents.
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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