Two very different floats for tech firms
Two technology companies have unveiled plans to float on the NZX, each offering different investment opportunities for shareholders.
Gentrack and Serko, which announced their initial public offerings yesterday, are both Auckland-based firms that sell software for businesses with a strong export focus, but there their similarities end.
Gentrack, which is seeking to raise up to $101.8 million from its float, has been in business for almost 30 years making software that lies at the heart of many utilities' billing systems. Domestic clients include Genesis Energy, Meridian Energy and Trustpower.
The firm with a staff of 191 has proved to be something of a mini "blue chip" stock in private hands and is offering the prospect of term deposit-like returns with an initial forecast cash dividend yield of about 5 per cent.
Chief executive James Docking said Gentrack had a policy of paying out 70 per cent to 80 per cent of net profit as dividends.
"The company has got a long track record of growth [but] we don't see ourselves as a Xero, Wynyard or SLI-type stock. We will perhaps have more modest growth, but deliver a lot of profit."
Additional opportunities were being created by the deregulation of electricity industries overseas, he said.
Potential high-growth stock Serko, founded seven years ago, has developed a cloud-based software service that is used by big businesses and state agencies to administer their corporate travel. It aims to raise up to $22m.
The firm is enjoying much faster revenue growth than Gentrack, but has yet to turn a profit, recording a loss of $1.7m on revenues of $6.7m in the year to March.
While revenues are forecast to rise by 53 per cent to $11m this financial year, the company said in its prospectus that it expected to post losses for at least the next two years.
Serko chief executive Darrin Grafton said the company had built up a strong customer base, especially in Australia, and the additional capital would be used to develop new markets in the Asia Pacific region.
The company employs 90 staff and is owned by Grafton, co-founder Bob Shaw and two other private equity shareholders.
If the IPO raises the full $22m, Grafton and Shaw will each retain a shareholding of about 20 per cent.
Gentrack's float will value its business at between $151.4m and $180.2m, depending on the price set for shares during the offer to institutional and retail brokers. There will be no public pool.
Its existing shareholders will sell down their stake to about 42.5 per cent as a result of the offer.
The IPO should also help it win more business from larger overseas clients who, given the critical nature of its software to their businesses, wanted the additional reassurance a listing would provide, that Gentrack would be intact for 20 or 30 years, Docking said.
Both companies expect to list on the NZX within a day of each other, Serko on the NZX on June 24, and Gentrack on both the NZX and ASX on June 25.