Listing Case Study

	Tony Coombe CHIEF FINANCIAL OFFICER TURNERS AUCTIONS NZX TICKER: TUA LISTED: October 2002

What was the main reason your company made a decision to publicly list?

“Our company had recently separated from its parent company, Turners and Growers, resulting in all the underlying shareholders getting a direct shareholding in Turners Auctions Ltd. While we had no immediate need for capital raising, our goals for listing were varied. The main reasons included the opportunity to diversify our shareholder base - increasing both the breadth and depth of shareholders, raising the profile of Turners Auctions as a separate entity – both from a branding and a business management perspective, and lastly, giving us the opportunity to raise cost-effective capital to enhance and grow our retail premises.”

What were the additional capital sources you considered, and was it cost that ultimately led to your decision to raise capital through public markets, or some other factor?

“One of the main considerations we took into account when choosing to list, was the fact that we were raising a relatively small amount of capital ($6 million). The cost of raising the capital was around 10%, which was not the cheapest option available to us at the time, but gave us the flexibility and positioning to continue growing. We offset the slightly higher initial capital raising costs, by the fact that ongoing capital raising would be simpler and easier.

Spreading the shareholder base was also a key consideration, and the main trigger why we moved from the Unlisted facility to the NZSX. We hadn’t been on the secondary board for long but we had already attracted some new shareholders, as some of the parent company shareholders sold down their newly acquired shares. But without many sellers our shares were very illiquid.

Through the Prospectus process we were able to attract a wider range of shareholders, by offering a good dividend yield [10.9%] at a competitive issue price of $1.50. You will recall that world equity markets were very depressed at the time of the float and we had to carefully consider how to make the offer attractive to new investors. I am pleased to say that we got the mix right and the 4 million shares (15% of the company) were significantly over-subscribed. This resulted in a successful float for the shareholders and also delivered against our objectives for diversifying our shareholder base. A significant proportion of the float capital was reserved for staff and existing shareholders, which resulted in increased loyalty and cultural participation.”

Who did you partner with as part of the listing process?

“JB Were was our lead broker, with ABN-AMRO and ASB Securities used as co-leads. We were fortunate to have such an experienced float team, given the relatively small size of our IPO, which I’m sure contributed to its overall success.”

Did you find compliance an issue at the point of listing? e.g. how much additional work/restructuring/ preparation internally did you undertake to comply with listing rules?

“When we separated from Turners and Growers, we had to untangle ourselves from a well established Board and financial reporting infrastructure. In turn we had to establish our own management and governance operations. We increased our financial capabilities within the accounting team, and added a new director at the Board level to assist us in managing our compliance on an ongoing basis. We were also fortunate to have excellent legal advisors who continue to assist us in avoiding any pitfalls in terms of compliance processes.”

What are the challenges for your organisation on an ongoing basis in remaining compliant and disclosing information to the market?

“It is important that compliance is considered a Board issue, and that they have a high degree of focus on the company maintaining its compliance standards. Having an experienced Board and management team is critical to this. It is also our view that you have to take a long term strategic view to compliance, to avoid any negative impact on shareholder value if you do not get it right.” “We found NZX helpful in assisting us with information relating to compliance, and we continue to work closely with them as we go forward.”

What have been the financial (tangible) benefits to your organisation since you listed?

“It has strengthened our financial position with the $6 million raised from the new capital. We have used the proceeds to eliminate our debt, and grow both our inventories and branches. We are now in a good position to have a further issue which provides more flexibility to consider expansion opportunities.”

What have been the intangible benefits that you have received?

“It has definitely raised our profile, and increased our brand value. More people and larger NZ companies are now considering auction as a way of sourcing or disposing of vehicles and commercial goods. Our higher profile has generated a very positive public image for our company with a notable increase in interest from off-shore companies”.

Have your company owners found releasing control to public shareholders an issue?

“Certainly our major suppliers and competitors now have a far greater awareness of our financial position than when we were a subsidiary of Turners & Growers. The added public profile has taken a bit of getting used to. However our major shareholders have been happy to release some of their control to increase the awareness of the Group and to unlock the inherent shareholder value in our previously closely held company."

Now that you have a greater profile as a listed company, what has been the impact on your culture?

“Our staff has watched the share price grow with some pride, as the market comes to appreciate the good business that we have in the NZ market. It is a great feeling to be part of a successful and growing company."

What advice would you give companies considering listing, based on your experience?

“Controlling the listing costs and detailed planning before you enter the process, is key. Ensure that your due diligence process is well carried out and with relevant materiality thresholds, so that the process does not get overdone. Timelines are invariably tight and the process requires a lot of co-ordination between the Board, legal advisors, brokers and auditors. Don’t under-estimate the time required to complete the task successfully.”