Real estate group The Agency (ASX: AU1) plans to keep expanding despite its latest acquisition raising some financial red flags.
The group has announced a capital raise of approximately $4.5 million, which is just higher than the $4.2 million loss it posted in FY19.
Of the amount raised $1.5 million will go toward potential acquisitions and growth capital, $1.7 million for repaying existing debts, $400,000 for offer expenses and $900,000 for working capital.
The three-year-old company's takeover of Top Level - known for its brand Sell Least Property - was completed in January 2019 following a capital raise of $13.4 million.
The acquisition played a big part in contributing to an increase in the number of agents, listings and properties sold, and while it ultimately triggered a loss The Agency's revenue rose by 86 per cent to $31.3 million.
Top Level was acquired for a substantial $10.5 million, well above The Agency's own market capitalisation of $7.06 million at the time.
The company now has a market cap of just $8.45 million.
Whether the business is spending beyond its means remains to be seen, but this capital raise appears to indicate it intends to continue acquiring and consolidating the market.
Business News Australia
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