CEO Steve Kezirian said, "There is clearly
a growing momentum of U.S. technology companies listing on London's AIM. AIM has provided IBEX with the ideal investor base to fulfill its
growth potential and deliver sustainable shareholder returns. Our
employees drive excellent performance for our clients, many of whom continue to
expand their partnership with us globally. Opportunities for new business
exist within new geographies and industry sectors. The London Stock Exchange's AIM will be a valuable
platform from which to raise additional growth capital and London AIM-listed shares will be a powerful tool to ensure that the Company's success is shared
with the wider team, beyond the boardroom. IBEX has a bright future and I
am excited by our prospects. We are delighted to have received such
strong support from U.K.-based London AIM Institutional Investors."
Overview of Listing on London's AIM
Washington
D.C.-based IBEX Global Solutions raised $22.5 million ($16.6 million for the
Company and $5.9 million for the Strategic Investor) in its recent IPO on the
London Stock Exchange’s AIM.
IBEX
provides voice-based contact center services and other business process
outsourcing solutions in 11 languages to 70 enterprise customers, primarily U.S.-based,
Fortune 500 telecommunications and consumer technology companies. The Company earns 90% of its revenue from U.S.
clients, with the majority serviced ‘onshore’ from the Company’s eight
locations in the U.S. and the balance serviced ‘offshore’ from three locations
in the Philippines and one in Senegal.
IBEX focuses on contact center market segments that involve extensive
agent training, are essential to their clients’ ongoing corporate performance
and can be difficult to replace. Such
segments include inbound customer support and retention, technical assistance
and sales order entry and outbound sales.
The
Company’s competitive advantage lies primarily in maintaining efficient variable
and fixed cost structures. IBEX focuses
heavily on understanding the labor markets in which it operates and targets
optimal wage and benefit levels. Over
the last three years, this focus has contributed to an improvement in annual
staff retention rates of over 20%. The
Company minimizes fixed costs by locating the majority of its support functions
in Pakistan (software and technology development and analytics) and the
Philippines (workforce management and quality assurance), carefully managing
telecommunications costs and deploying internally developed and scalable
management processes and systems. IBEX
has chosen to develop its intellectual property as trade secrets rather than as
patents.
The
Company was founded in 2002 when the Strategic Investor acquired a stake in one
of the operating companies and then acquired and integrated six additional
companies over the next decade. IBEX has
8,000 employees; 3,850 in the U.S., 2,100 in the Philippines, 1,600 in Pakistan,
400 in Senegal and 50 in the U.K. French
language capabilities in Senegal will be used for expansion into Canada and
France.
IBEX’s London AIM IPO plans are to provide additional voice-based services to existing U.S. clients,
win new voice-based U.S. clients, diversify into non-voice services (website
administration, email support, chat) add industry verticals, such as healthcare
and utilities, and expand into Canada, the U.K. and France, where the Company either
has incumbent customers or possesses language and delivery capabilities.
Key Financial Metrics
The Company generated 91% - 92% of its revenue from the United States in each of the last three fiscal years, with its five largest clients accounting for 70% - 80% of revenue. The Company intends to pay dividends during its first fiscal year as an AIM-listed company.
(in
USD millions)
|
Y/E 6/30/11
|
Y/E 6/30/12
|
Y/E 6/30/13[1]
|
Δ ’11 - ‘12
|
Δ ’12 - ‘13
|
Revenue
|
$97.1
|
$104.3
|
$136.0
|
+7%
|
+30%
|
Cost
of Goods Sold
|
79.6
|
90.7
|
115.5
|
+14%
|
+27%
|
Operating
Expenses
|
18.0
|
15.9
|
17.5
|
-12%
|
+10%
|
Interest
Expense
|
2.0
|
1.7
|
1.9
|
-15%
|
+12%
|
Tax (Benefit)/Expense
|
(0.3)
|
0.2
|
0.1
|
+167%
|
-50%
|
Net (Loss)/Income
|
(2.2)
|
(4.2)
|
1.0
|
-91%
|
+124%
|
EBITDA
|
3.0
|
0.7
|
5.3
|
-77%
|
+657%
|
Total
Assets
|
48.6
|
52.0
|
45.6
|
+7%
|
-12%
|
Working
Capital
|
8.7
|
7.4
|
(4.2)
|
-15%
|
-157%
|
Cash
|
0.8
|
1.9
|
3.3
|
+138%
|
+74%
|
Line-of-Credit
|
11.2
|
12.0
|
16.8
|
+7%
|
+40%
|
The Company generated 91% - 92% of its revenue from the United States in each of the last three fiscal years, with its five largest clients accounting for 70% - 80% of revenue. The Company intends to pay dividends during its first fiscal year as an AIM-listed company.
Since
the London Stock Exchange AIM IPO did not complete within nine months of June 30, 2012, audited,
comparative, stub period financials were required for the six-months ended
December 31, 2012 and the Company chose to provide reviewed, comparative, stub
period financials for the three-months ended March 31, 2013.
Key London AIM IPO Listing Metrics
- $22.5m gross was raised on the London Stock Exchange's AIM, $16.6m for the Company listed on London's AIM and $5.9m for the Selling Shareholder
- $14.1m, net of offering costs, was raised on London's AIM for the Company listed on London's AIM intended to be used for:
- Paying down the line-of-credit
- Working capital
- Provide additional existing voice-based services to existing U.S. clients
- Win new voice-based U.S. clients
- Expand into Canada, the U.K. and France
- Continue diversification into new non-voice services
- Expand into new industry verticals; healthcare and utilities
- Selective acquisitions to accelerate geographic and industry expansion
- Aggregate transaction costs from listing on the London Stock Exchange's AIM amounted to 12.3% for the Company listed on London's AIM and Selling Shareholder
- Offering costs from listing on London's AIM amounted to 15.0% of the gross capital raised on London's AIM for the Company
- The London AIM IPO was undertaken on a ‘best efforts’ basis, as opposed to being underwritten
- Joint Nominated Brokers were engaged
- Broking commission of 5.0% for listing on London's AIM
- Undisclosed corporate finance fee for listing on London's AIM
- Selling Shareholder bore their own costs, which only amounted to the 5.0% broking commission
- Opening market capitalization upon listing on London's AIM of $89.9m
- Dilution to existing shareholders of 18.5%
- Free float on the London Stock Exchange's AIM of 25.03%
- Trailing pre-money revenue multiple on London's AIM of 0.5
- Trailing pre-money EBITDA multiple on London's AIM of 13.8
- Trailing pre-money P/E ratio on London's AIM of 73.3[2]
Shareholder Base
The Company had 32.3m shares outstanding prior to the IPO and issued 7.3m new shares for cash in the IPO, leaving the Company with 39.6m shares outstanding. The table below details those who held 3% or more of the Company after the IPO, along with the collective ownership of the Other New U.K. Investors.
Shareholder
|
Pre-IPO %
|
Post-IPO %
|
Strategic
Investor
|
100.00
|
|
Edinburgh,
Scotland-based Global Institution (Various Funds)
|
-
|
6.40
|
London
office of a Global Institution (Various Funds)
|
-
|
5.37
|
Reading,
U.K.-based Fund Manager and Private Client Broker
|
-
|
4.73
|
Other
New U.K. Investors
|
-
|
8.53
|
Totals
|
100.00
|
100.00
|
The origins
of IBEX date back to 2002 when the Strategic Investor acquired a stake in one
of the operating companies and then acquired and integrated six additional
companies over the next decade.
Beyond
the obvious benefit of creating $5.9 million of immediate liquidity on London's AIM for the Strategic
Investor, the Company can optimize its capital structure by paying down the
line-of-credit and deploying the remaining capital raised in its London Stock Exchange AIM IPO to further accelerate
growth; providing additional existing services to existing clients, winning new
clients, diversifying into new services and expanding the geographical footprint
and industries served. With a solid base
of blue-chip London AIM Institutional and Other U.K. Investors, the Company can create additional
post London AIM IPO liquidity and raise additional capital on London's AIM, if necessary. In addition, the Company believes that its
London AIM IPO and public market status by listing on the London Stock Exchange's AIM will raise its profile in the sector, particularly
internationally, and provide transparent incentives for existing and future
employees via the Company’s Share Option Plans.
London AIM Board of Directors and
Corporate Governance
The Board
of Directors consists of two Executive Directors (the CEO and the CFO) and four
Non-Executive Directors (a non-independent Chairman and a non-independent
Director by virtue of their firm’s shareholding as the Strategic Investor and two
independent NEDs); all with solid resumes and a good blend of complementary
experiences and skill sets. The Board will
meet at least four times per year.
Companies
listed on the London Stock Exchange's AIM are not required to comply with the U.K. Corporate Governance
Code, which is mandatory for companies listed on the Main Market of the London Stock Exchange (LSE); however, as
is typical, the Company intends to follow, to the extent appropriate for its size
and nature, the Corporate Governance Guidelines, which are published by the Quoted
Companies Alliance (QCA), and the QCA’s recommendations on corporate governance
for companies with shares listed on the London Stock Exchange's AIM.
The overarching principle of the Corporate Governance Guidelines is to
ensure that a company is managed in an efficient, effective and entrepreneurial
manner for the benefit of all London AIM shareholders over the long term.
The
Company has established an Audit Committee and a Remuneration Committee. Both committees are chaired by a different
independent NED with the other independent NED and the non-independent NED serving
as members. The Audit Committee will
meet formally at least four times a year and the Remuneration Committee will
meet when required, however, not less than two times a year. The Nomination Committee will be an ad hoc
committee constituted by the Board as and when required and, when constituted,
will be chaired by an independent NED.
London AIM Accounting Considerations
Since
the Company re-domiciled into the U.K., reporting using IFRS was required. Since the vast majority of the Company’s
revenues are earned in U.S. Dollars, the U.S. Dollar is the functional currency
and was also chosen as the reporting currency.
The
U.K. Member Firm of an international accountancy network acted as Auditor for
the six-months ended December 31, 2012 and as Reporting Accountant for the London AIM IPO. The U.K. Member Firm of a ‘Big Four’
accountancy network audited the three years ended June 30, 2012. Since the London Stock Exchange AIM IPO did not complete within nine
months of June 30, 2012, audited, comparative, stub period financials were
required for the six-months ended December 31, 2012 and the Company chose to
provide reviewed, comparative, stub period financials for the three-months
ended March 31, 2013.
An
unaudited pro forma statement of net assets is never required in connection
with a London AIM IPO and was not provided in this instance since the effect of the
net proceeds from the London AIM IPO on the net assets of the Company is obvious.
London AIM Legal Considerations
Even
though the Company is incorporated in the U.K., one of the three most important
elements of English corporate law, relating to takeovers and mergers, does not
automatically apply since the Company’s ‘place of central management and
control’ is outside the U.K. or one of its Crown Dependencies, the Channel
Islands and the Isle of Man (although this law is changing and it will
automatically apply from September 30, 2013).
As is customary, the Company amended its constitutional documents to
incorporate the main provisions of the U.K.’s City Code on Takeovers and
Mergers. The three main differences
between U.K. and U.S. corporate law are:
- Pre-emption
rights (i.e. anti-dilution) – Shareholders may participate in, or the Company
has to obtain approval from at least 75% of them for, the issuance of AIM-listed shares
for cash of more than 20% of the then outstanding shares during any 12-month
period.[5]
- Notifiable Interests – Shareholders are required to notify the Company of, and the Company is required to publicly announce, holdings at or above the 3% level and whenever a full percentage point is breached in either direction.
- Takeovers (i.e. mandatory offer) – If any party, or parties acting in concert, accumulates a holding of 30% or more, they must make a cash offer to the other London AIM shareholders at the highest price they paid for the Company’s shares during the last 12 months.
[1] Income statement items were extracted and
combined from the audited and reviewed financial statements for the six-months
ended December 31, 2012 and the three-months ended March 31, 2013,
respectively, and then extrapolated for comparative purposes. Balance sheet items were extracted from the
reviewed financial statements as of March 31, 2013.
[2] Not particularly meaningful given the
relatively small denominator.
[3] Subject to a six-month lock-in and customary
orderly market provisions on the London Stock Exchange's AIM for a further 18 months.
[4] In addition to the dilutive effect of the new
shares issued for cash by the Company in connection with the London AIM IPO, the Strategic
Investor raised $5.9 million as the Selling Shareholder.
[5] Since the Company raised a relatively small
amount of capital at the time of the London AIM IPO, this is higher than the typical 10%
level at which London Stock Exchange AIM-listed companies seek an annual standing authorization from
their shareholders for the issuance of additional shares for cash. This flexibility increases the certainty and
speed of small capital raises during the year and reduces transaction costs,
since further communications with, and approvals from, shareholders are not
required.