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Accompanied by dire warnings of the consequences of failure, Philip Swinstead and Paul Davies, the ‘encore’ top team at ITSA (IT staff agency) cum system house Parity, have announced a proposed cash call through a firm placing of some 21m shares, and a placing and open offer of 9.5m shares, a 30% dilution. The placing price of 23p is a 16% discount to last night’s 27.5p close, and will raise £7m gross (£6.4m net) if fully subscribed. Parity’s directors will toss £0.5m of their own dosh into the pot. Should the funding fail, “the Group may not necessarily have adequate headroom to finance the business on a day to day basis”.
Swinstead and Davies have been explicit about how the funds will be used. Almost half will go on further restructuring and working capital, with the rest on ‘investment in the future’, including new (unspecified) faces on the top team, ‘advanced applications’ in the Systems (projects) division, a ‘first move’ for the new talent management business (I still don't get it), the creation of 'Parity TechLab', and last - and very definitely least – boosting the core Resources (ITSA) business. A couple of these initiatives will be with (unspecified) partners.
I’ve been harping on for yonks that Parity should stick to its knitting. It has a well respected (and profitable) ITSA business and a hapless projects business; more recently it grew a new third ‘leg’ – Talent Management (see Is Parity’s business of three halves two too many?). Why not feed the needy and let the terminally sick rest in peace? No need to bear new children either. But it has to be said, Swinstead and Davies are smart eggs and know the industry and market inside out. Perhaps they see something I don’t.
