Share sale to raise equity for IT leader
A leading Christchurch IT firm is offering $27 million worth of shares to the public at $1.50 a share, with Trade Me founder and entrepreneur Sam Morgan signing up for $1m.
Morgan invested $1m in SLI Systems late last year through his family trust and is now investing another $1m.
SLI, founded in 2000 by brothers Shaun and Grant Ryan and other IT specialists, sells search services mainly to retailers for their online retail websites.
Yesterday the company said the cost of the shares would be $1.50 each. The share sale offer starts on May 14 and closes on May 28. The shares will trade on the NZX from May 31.
Managing director Shaun Ryan said SLI's software made it easier for online shoppers to find the products they were looking for and that translated into more sales online for retailers. The retailers pay a yearly subscription fee for the search services and SLI runs and maintains the services.
The $1.50 price was set through a bidding system in which nine institutional investors bought shares in the young company.
Ryan said the company was a market leader in online retail search services in the United States. The difference in its software from others was that it "learnt" from how people used it and kept improving its results for online retailers.
SLI Systems earned 62 per cent of its revenues from its search suite of products and 20 per cent from another of its services, Site Champion, which helped retailers rank higher in a Google search.
Most of the company's revenues come from overseas and it counts luxury London department store Harrods, Hard Rock Cafe and Teleflora in the US. In New Zealand, Mitre 10 and The Warehouse are among its customers.
The company is raising $15m from issuing new shares and $12m of existing shares are being sold by shareholders, of which there are 24.
Ryan said he was selling 10 per cent of his holding and would be paying off some of his mortgage while other shareholders were selling up to 25 per cent including venture capital shareholder Pioneer Capital.
The $15m of new equity would be used to expand sales staff in overseas offices in San Jose, London and Melbourne, to expand what was offered to existing customers, to win new ones and expand into new markets, Brazil and Japan.
Ryan said the company had been growing strongly and it expected its "annualised recurring revenue" to be $19.25m at June 30 this year and to grow 35 per cent to $25.9m by June 30, 2014. Annualised recurring revenue is a point-in-time estimate of its core subscription revenue already secured for the next 12 months.
However, SLI expects the business to make losses in the near term "as we build the platform for future growth", it said in the prospectus.
It would not be distributing dividends to shareholders in the foreseeable future.
Chief financial officer Rod Garrett said SLI could produce a profit if it chose not to spend as much on growth initiatives.
Its models showed it would return to profit in a reasonably short time after June 2014 but it would be up to the board to decide whether to plough more into the company or produce a profit.