(Alliance News) - Dods Group PLC said Friday it would raise GBP13 million through an equity raise to fund its Meritgroup Ltd acquisition, as it sank to an annual loss amid a sharp rise in costs.
For the year ended March, the business services firm recorded a GBP5.7 million pretax loss from a GBP1.3 million profit the year prior. This was despite revenue rising to GBP21.3 million from GBP20.6 million the year before.
Profit performance was hurt by a rise in cost of sales and administrative expenses, as well as one off-costs.
"Whilst the UK market remains challenging and somewhat uncertain, the board is confident that the group's strategic initiatives, combined with selective investment opportunities, including the proposed acquisition of Meritgroup, is capable of sustainable profit streams in the longer term," Dods Chair David Hammond said.
Earlier in June, Dods announced it would buy data services firm Meritgroup Ltd for up to GBP22.4 million.
In order to fund the purchase, Dods also announced a GBP13.2 million equity fundraise through the issue of shares at 6.5 pence each in a subscription, placing and open offer. Shares in Dods were 5.9% lower at 8.00p in London on Friday, giving it a market capitalisation of GBP27 million.
"The acquisition of Merit is the first step on our journey to becoming a significant augmented intelligence business where the combination of machine learning, artificial intelligence and human application meet to inform actionable business outcomes (we call this AI2)," Hammond explained
"There is a clear strategic fit and industrial logic in purchasing Merit which is a highly skilled, competent and educated business with over 15 years of domain expertise in data engineering," Hammond continued.
Dods does not currently pay a dividend.
"The start of the financial year has been encouraging and following completion of the proposed acquisition, the group will benefit from an approximate 9-month contribution from the Meritgroup business in the current financial year," Hammond added. "The group continues to be cash generative and has strengthened and diversified its capabilities. The board views the group prospects with confidence."
