Confidence strong for raising capital

Recent initial public offerings (IPOs) are a sign of confidence businesses have in their ability to raise money and enter the capital markets, Forsyth Barr broker Haley Van Leeuwen said yesterday.

Scales Corp, which was once part of the South Canterbury Finance stable of companies, yesterday announced it was considering an IPO and listing on the main board of the NZX.

Recently, Gentrack and Serko had announced capital raisings and Hirepool, which was taken into private equity after it merged with HireQuip, is said to be considering a listing later in the year.

HireQuip, which was headquartered in Dunedin, was previously listed.

Mrs Van Leeuwen said four years ago the current level of confidence in IPOs would not have been seen.

''Investors were really just interested in simple bonds, term deposits or the listed property sector.

''It is also good for the NZX to increase the depth of listed companies and expand the availability of stocks.''

In particular, the technology sector was a ''hotly contested'' area of investment internationally and was an area New Zealand seemed to excel at in terms of its ability to innovate and create, she said.

Last year two technology stocks - Wynyard and SLI Systems - listed on the market and were met by a relative confidence by investors.

''I think one of the many challenges for these types of companies is the market tends to take a very short-term view on performance and if earnings or profit announcements slightly disappoint, this can have devastating effects on the share prices.''

From an adviser's point of view, when attending broker presentations, Mrs Van Leeuwen wanted to have confidence in the forecast numbers in investment statements and know she was entering into a sound stock bidding process when it came time to acquire stock for clients.

It was also important to realise some of those companies would not suit more conservative investors, nor necessarily, those heavily reliant on income.

However, they would present opportunities for those clients who were growth investors and had a longer investment time horizon, she said.

Scales Corp is currently 84%-owned by private equity investor Direct Capital, through its Direct Capital IV and Pohutukawa II funds, along with co-investment management partners the New Zealand Superannuation Fund and ACC.

The balance was held by senior management team members and 400 external investors.

Scales said in a media statement the proposed offer would be through the sale of existing shares, to the extent any of the current shareholders elected to sell the shares they held, and the issue of new shares by the company.

Direct Capital intended selling down a portion of its shareholding but wanted to retain a cornerstone position.

A prospectus was expected to be available mid-June and a listing was likely late next month.

Earlier, Scales reported a lift in reported profit by 20% to $20.4 million in the year ended December 2013.

The company's total revenue increased 17.2% on 2012 to $278.1 million, with apple volumes and prices the single largest contributor.

The company, one of New Zealand's oldest, is involved in horticulture and primary-sector processing, export and logistics businesses.

It was founded in 1897 as a shipping business by George Herbert Scales and employs 400 staff throughout New Zealand.

 


At a glance

• Scales Corp to list in July. Involved in horticulture, storage and logistics, and food ingredients. Amount to be raised from investors not specified.

• Gentrack to list on June 25. Specialist utility and airport software solutions provider, seeking $101.8 million from investors.

• Serko to list on June 24. Cloud-based technology company seeking $22 million through $17 million of new shares and a further $5 million of shares from existing shareholders.

• GeoOp listed in October last year. Its software allows small businesses to manage their workforces. It raised $10 million to fund its global growth.

• Hirepool likely to soon announce an IPO. It is New Zealand's largest equipment rental company. The company would have a market capitalisation of $300 million after listing.


 

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