NZX IPO MASTERCLASS The Scales Listing Story. 25 March 2015

Transcription

1 NZX IPO MASTERCLASS The Scales Listing Story 25 March

2 Presentation Team Andy Borland, MD Steve Kennelly, CFO Tim Tubman, Partner Rachel Dunne, Partner Jennifer Martin, Director David Watt, Director Chris Simcock, Analyst Matthew Maher, Director 2

3 Agenda Introduction to Scales Why Scales chose to IPO IPO process and key decisions IPO outcome Life after listing Post-IPO capital raising options Capital raising landscape in 2015 Key differences in NZX s markets Q&A 3

4 Introduction to Scales Scales is a diversified agribusiness group currently operating in 3 divisions We touch 57% of New Zealand s merchandise trade We operate three divisions: - Horticulture - Storage & Logistics - Food Ingredients Scales Exposure to Primary Industry Sectors 30% Dairy Scales coverage 43% Other Percentage of New Zealand Exports 5% Horticulture 2% Fish 8% Wood 12% Meat Note: Scales exposure to primary industry sectors is not directly proportionate to the percentage of New Zealand exports presented above. Source: Statistics New Zealand 4

5 Horticulture We operate New Zealand s largest integrated apple business 1,000+ Ha. planted orchard 420m+ apples picked 4m boxes packed Outside Growers 130+ CUSTOMERS 40+ COUNTRIES 5 NZ$Ms FY2013 FY2014 Revenue EBITDA

6 Storage & Logistics We operate New Zealand s largest independent coldstore network ~500,000 pallets loaded in every year 702,300 m 3 Refrigerated Warehouse Space Under construction + 6

7 Storage & Logistics Complementary bulk liquid storage and freight logistics operations 57 tanks 22,200 MT capacity >17,000 TEUs Sea and Air Freight logistics 7 NZ$Ms FY2013 FY2014 Coldstores Bulk Liquids Freight Logistics Total EBITDA

8 Food Ingredients We process and sell 16,400 MT of petfood ingredients and 4.6m litres of apple and kiwifruit juice concentrate 16,400 MT Petfood Ingredients sold 4.6m Litres Juice Concentrate Apple Organic Kiwfruit 8 NZ$Ms FY2013 FY2014 Petfood Share of Juice Business Total EBITDA

9 Why we chose to IPO Liquidity and price transparency for shareholders: shareholders pre-listing some for decades - Improved price transparency and liquidity Re-orientation of shareholder register to reflect improvements in performance - Gain a balance of institutional and retail shareholders Reduce debt: - Pre-IPO term debt $60m (was $105m in December x EBITDA). - Currently $30m <1x EBITDA. - Resilient balance sheet enables us to: Pursue organic and acquisitive growth options Improved profile: - Improve confidence of our suppliers and customers - Ability to attract & retain talent and reward appropriately through share schemes 9

10 What we wish we had known before getting started We wish we had attended an NZX IPO Masterclass! We didn t appreciate the amount, type, and intensity of work involved - Nailing down Scales strategy and investment story. - Well developed financial models were more important than we realised: Pre-listing necessary to generate well-supported and robust financial forecasts as well as to explain the story behind movements in performance. A key component to due diligence, valuation, and investor appetite. Offer stage necessary to respond to investor and analyst questions. Post-listing continue to use financial models both from a strategic and investor communications perspective. - Scales multiple divisions / businesses added significant complexity. - Considerable time requirement in addition to day-job : Roadshows and investor presentations Offer documents, due diligence committees, verification processes 10

11 Pre-IPO Phase Scales preparation started about 12 months prior to listing Getting started Is the company ready for public investors? Management buy-in required (especially MD and CFO) significant time commitment to balance with the usual commitments Understand the IPO process, time and cost Develop detailed financial model Appoint trusted advisors Develop IPO timetable what is the optimal timing for listing seasonality, balance date? Upgrade company website and corporate brand profile Review board composition and management structure Important that the Board has cross section of relevant legal, accounting, marketing and public markets experience Ideally Board should be in place at the start of the due diligence process for the IPO Scales established a 6 member board with a diverse set of skills Define the equity story and strategy What is the rationale for listing? Clearly define business strategy for Scales this meant consolidating Scales trading businesses into a single operation and separating out the investments division (property assets and Turners & Growers shares) Determine target capital structure 11

12 Offer Preparation 1 Establish Due Diligence Committee - Superintends due diligence exercise (Legal, Financial, Tax and Insurance DD reports produced) - Reviews offer document and prospective financial information 2 Prepare Prospective Financial Information - Robust financial models to forecast financial information (Profit & Loss, Balance Sheet, Cash Flows) Often explained in terms of value drivers with reference to actual historic performance - Key assumptions should be explained to and reviewed by the DDC - Investigating Accountant Report 3 Establish document working group - Responsible for drafting the offer documents and delivering to DDC for review 4 NZX and FMA review - NZX will review document and give feedback. Also needs to give approval before offer proceeds (24 hour timeframe) - FMA will not review as a right, have to justify pre-offer engagement 5 Verify Offer Documents - Every statement must be reasonable and supportable - Big exercise that is best managed by a single dedicated person - Collate source material to verify statements as you prepare the offer documents 12

13 Generating price tension through the marketing process a targeted and effective campaign to maximise demand Institutional demand Pricing tension Retail demand Institutional roadshow 1-2 weeks in NZ and offshore following Analyst pre-marketing Retail roadshow Key advisor briefings throughout NZ Analyst pre-marketing 1-2 weeks in NZ and offshore Retail analyst briefing Education briefings by Research Analyst Public relations / advertising Ongoing communications with key media Sales force briefing Education briefings to private wealth research Site visit Enable key institutional clients to get a feel for the business Key Influencer Broker targeting Inform senior advisors along the way Define Investment case and undertake Early Look Roadshow Define Investment case and undertake Early Look Roadshow 13

14 IPO Outcome We successfully raised $149m and welcomed approximately 2,000 new investors onto our share register What went well / factors that helped our success: - Due diligence identified no material issues (legal, commercial, tax and accounting) - The depth of and capability of management team - Growth outlook for key divisions, especially the Mr Apple story: Best in New Zealand and the World Use of technology to drive improved yields Developing brand in emerging offshore markets Good growth prospects - Good spread of incoming shareholders 50/50 institutional / retail Strong support from NZ, Australian and HK institutions Challenges: - Crowded IPO market: Hirepool Investor fatigue - Rise in external risks (Middle East / Ukraine) - Price at bottom end of range - Doing the road-shows: Pre-deal Post-deal Institution vs public - Costs - $4m (excluding brokerage paid by shareholders on their sell down) - Post-IPO price performance: Share price below offer notwithstanding performance > PFI 14

15 Post Offer Deliver on IPO prospectus forecasts and continue to develop growth story Ongoing engagement with the investment community: Continuous, half-year and full-year disclosure obligations Report half-yearly Results roadshow One-on-one meetings with institutional investors Retail broker briefings Implement an investor relations programme Company pro-actively engages with the market Responds to investor enquiries Regulatory compliance Continuous disclosure Insider trading Substantial security holder notices Takeovers Code Related party transactions Analyst research Analyst community continues to publish on the company and distribute research reports to retail and institutional investors 15

16 Life After Listing Operating in a listed environment means continually raising the bar by investing in our people, systems, communications, and investor relations Communications and investor relations: - Half-year / full-year and continuous disclosure requirements. Timeframes tighter than prior to listing and can be challenging. Good systems are necessary for time critical and accurate information. - Supporting presentations, conference calls, and media releases all represent new work streams that are vetted by multiple parties. Achieving this has both a cost and time component. - Regular analyst and institutional queries, investor site visits. Additional requirements: - Regulatory requirements (FMA, NZX). - Governance requirements (Corporate Charter, Code of Ethics, Board Committees, Auditor Independence Policy etc). - Report disclosure striking the balance between remaining communicative and protecting sensitive information. Work closely with the listing team for continuity and efficiency. 16

17 Post IPO Capital Raising Options Post-listing capital raising options significantly more flexible and less costly Same class offer exclusions - listed issuers able to issue securities of the same class as already listed securities with minimal documentation - Have to have been quoted for 3 months before offer (with trading not suspended for more than 5 days) - Must give cleansing notice to NZX, be in compliance with continuous disclosure and financial reporting obligations and set out any information that would be captured by continuous disclosure but which has not been disclosed because of a relevant exclusion - Able to offer securities on a term sheet 17

18 FMCA Disclosure New regime means that new IPOs won t look like those of the past Disclosure documentation will be in prescribed Product Disclosure Statement format and an online register entry - Key focus on disclosing only business-specific material risks, meaning that risk analysis will have to be robust and comprehensive - PDS will contain limited financial information Page and word limits will force issuers to think carefully about necessary inclusions Advertising regime significantly liberalised - Pre-offer advertising permitted as long as prescribed text included (under old regime could only say what statute allowed you to say) - Post-registration advertising has the added requirement of not being materially inconsistent with PDS or register entry - All advertising must comply with fair dealing requirements 18

19 The Capital Raising Landscape in 2015 Current market conditions remain conducive to issuance Following two record years for the NZX which saw 19 new companies listing and raising nearly $6b of capital, the 2015 IPO pipeline appears solid, with a number of companies across a range of industries currently considering listing With trading multiples at historically elevated levels, the public markets are competing effectively to attract high quality listings New Zealand market 12 month forward PE multiple 22x 20x 18x 16x 14x 12x 10-yr avg 20.5x 15.3x The New Zealand market PE multiple (currently 20.5x) has fallen slightly in recent weeks from historic highs, but remains well above its 10 year average 10x Jan-95 Jan-00 Jan-05 Jan-10 Jan Source: First NZ Capital Research

20 Two distinct and targeted markets ensure best fit aligns the benefits of listing to the needs of different types of companies Market Cap Range: $50m + $10m - $100m Disclosure Regime: Continuous disclosure Prescribed disclosure Independent Directors: Minimum of 2 for up to 7 directors Minimum of 2 for up to 7 directors Audit: Spread Requirements: Research: Market makers: 1 Year historic and ongoing independent audit required Min 500 Shareholders 25% Free float Traditional broker sponsored research No formal market maker appointments 1 Year historic and ongoing independent audit required Min 50 shareholders 25% free float Independent Research provider appointed by NZX for all NXT companies Market maker appointed by NZX providing minimum liquidity levels 20

21 Questions? 21

22 Appendix One: The IPO team roles and responsibilities Lead Managers / Investment Bankers - Project management, including advice in relation to offer structure, valuation, corporate governance, timetable, preparation of offer documentation and participation in roadshows - Offer management bookbuild, pricing and allocation process, can include underwriting / firm allocations Legal Adviser - Manager the offer document preparation and verification, lead the regulatory engagement and due diligence process - Ensure compliance of all marketing materials with FMA and NZX requirements Accounting / Tax Advisers - Undertake finance and tax due diligence, prepare auditor s report - Review historical and prospective financial information for disclosure in the offer document, potentially provide IAR for inclusion in prospectus Company - Company involvement largely led by the CEO/MD, CFO and Directors who are members of the DDC - Participate in working group to oversee offer preparation, participate in DDC meetings and approve the offer documentation - Prepare historical financial statements and projections for review by the Accounts and Lead Manager(s) - Management roadshows to investors Other Key Advisers - Independent financial consultants assist the company to prepare financial forecasts, drafting of offer documents, verification and due diligence - PR adviser - Offer logistics share registry, designer, printers etc 22