Knutsford IPO gets in before door closes

Investors will have just one day to subscribe to shares in Knutsford Express, the latest IPO to hit the market, that is scheduled to open on December 27 as the company gets in just before the door closes on the 10 year tax break for junior market companies. The issue is scheduled to close on the same day.

The Company invites Applications on behalf of itself and the founding shareholders for 20,000,000 Ordinary Shares in the Invitation of which 4,867,338 shares are newly issued shares for subscription that will raise net of $20 million for the company and 15,132,662 shares are existing shares of the current shareholders. At the end of the IPO, the total number of shares issued will be 100 million, an increase from the 95,132,662 now in issue.

The Company intends to use the proceeds for working capital support, acquisition of one new coach and upgrade of existing coaches and payment of the expenses of the Invitation, estimated not exceed $4 million. Applications from the general public must be for a minimum of 100 Ordinary Shares and be made in multiples of 100. A processing fee of $110 per Application is payable to the Registrar of the Company (JCSD) and is payable by each applicant. Proven Wealth are the brokers for the issue.

Free Advertising | This company should be known by most as it earns free publicity just by its vehicles plying the routes proudly displaying its name and logo for all to see. Many have seen it between Kingston and Monetgo Bay and recently from Kingston to Negril. Knutsford Express seems set to be the next company to list on the stock exchange as it seeks to raise only a small sum for itself and some for its owners. The company, which has reported a profit from 2009, has filled a big gap left by Air Jamaica Express ending service between to two major cities. Customers seem to be impressed with the quality service and timeliness and the growth speaks volumes.

Revenue has increased by 27 percent in 2010 to $99.4 million from $78 million and in 2011 the growth inched to 28 percent to $127.5 million and jumped by 33 percent in 2012 to $170.4 million. In 2013 it moved to $203.2 million and increase of 19 percent, the slowest year so far.  Profit rose from $7.9 million in 2009 to reach $51 million in 2013 with growth of varying percentages for each of the years.  The last being 2013, with an increase of $30 million or 135 percent.

Revenues | Revenue of $ 71 million, a $17 million or 31% percent increase was generated for the first quarter of the 2014 financial year compared to the similar period in 2013 and flowed primarily from an increase in business from existing routes. Management projects further growth in revenue from the South Coast expansion in the third and fourth quarters. However, the expansion has led to an approximate $18 million increase in administrative and general expenses.

The Company recorded other income of $4.7 million derived from settlement of an insurance claim and as at August. Profit before tax stood at $21 million, a twenty-five percent (25%) improvement compared to the first quarter of 2013. Without the insurance inflows earnings would have been flat with 2012 of $16.7 million. The first quarter numbers suggest profit from ongoing operations of approximately 70 cents per share, that may be a tad high with seasonal factors affecting revenues and cost.

Asset base grew by fifty-two percent predominately due to growth of the fleet or “investment properties” which increased by twenty-one million to $75 million. In addition, accounts receivables grew to $18 million stemming from a deposit made on a coach. Approximately $8.8 million is due from Total Waters Limited, a related party, and settlement of this amount is expected in the third quarter of 2013/14. “There was also an inflow of $40 million from a facility used to expand our fleet for which a restriction was placed on a term deposit.” the company stated. Shareholders’ equity expanded to approximately$105 million. Loans payable of $49 million and cash funds of $15 million were on the books at the end of August. Current liabilities stood at $13 million and is mostly tax payable, while current assets stood at $61.5 million.

Who are they | Knutsford Express Services is a transportation company dedicated to offering customers an intercity luxury coach experience in Jamaica. The service began on June 1, 2006 with twenty-eight (28) departures weekly between Montego Bay and Kingston and now have one hundred and five (105) departures weekly and expanded this reach to Falmouth, Negril, Savanna-La-Mar, and Mandeville. The Company is required to hold Express Carriage Licenses for each bus in its fleet. Carriage licences are issued by the Transport Authority and are renewable on March 1st each year.

Principals & Directors | Oliver Townsend is the Managing Director and Chairman of the Company. Mr. Townsend has served in the Tourism & Service Sector for over 24 years in various management capacities including those that involved marketing locally & overseas. His career began in Caribic Vacations, a family-owned Destination Management Company, where he served as Director of Transport and C.E.O.

Gordon Townsend is a Director and Company Secretary of the Company. Prior to joining the company he has served for over 40 years in the Tourism Industry where he has held numerous positions. His career in tourism began as a hotelier where he served as Managing Director of Montego Bay Club Resort for 11 years. In 1982, he shifted his focus to his own newly formed company, Caribic Vacations, a Destination Management Company which provided hosting, transportation and other holiday services to the Tourism Industry where he remains as Chairman.

Anthony Copeland is a Director of the Company with special focus and responsibility on Operations, Maintenance and Standards. Copeland began his career in the Private Sector at Manhattan House in the area of Marketing before leaving to serve his country, which led to 18 years in the Jamaican Defense Force in the Engineering Regiment. With this expertise gained in Transport and Logistics his career led him in 1996 to become the Technical Advisor in Metropolitan Management Transport Holdings.

Peter Pearson is a graduate of Cornwall College and a graduate of the University of West Indies from which he holds a BSc. Peter is a Fellow of the Institute of Chartered Accountants and a Fellow of the Chartered Association of Certified Accountants. He retired as a partner of PricewaterhouseCoopers in 2013.

Mr. Wayne Wray is the Mentor to the Board for the purposes of the Junior Market Rules and has several years’ experience within the financial sector.

Stock Value | The stock is priced around 7 times 2014 earnings before taxation, which is not highly attractive but appealing with the rate of growth they have been enjoying, although that could slow down as the market matures.

Price to book is 5 to 1, which is somewhat on the expensive side compared with other junior market companies but the growth makes up for it. It appears that investors should hold some of these but don’t expect a ton loan of gains in the short term.