Case study: Coote lists to fix cash flow problem

With more than 100 Western Australian companies listing on the ASX in 2006, the decision to go public has proven a popular method of raising capital for many businesses looking to fund growth.

Among these was Maddington-based Coote Industrial Group Ltd, which has engineering, logistics and manufacturing divisions, officially listing on the exchange this week after raising $25 million.

Just more than 18 months ago, Coote Industrial Group chief executive officer Michael Coote made the decision to go public, aiming to raise funds to further grow the company following its acquisition of Sweden-based manufacturer, Hedamora Diesel.

“As businesses grow, the most difficult part is cash flow, and getting the funds to grow,” Mr Coote said.

“Really we’d solved all the other issues of growing pains of systems and people and locations and so on; the last bit we had to do was solve that cash flow problem.”

But while the listing led to a desirable outcome for the company, Mr Coote conceded that the 18-month process was hard work, involving the management and accounting team putting in months of overtime to compile the prospectus, as well as implementing changes to business structures and accounting systems.

“The first stage involved making changes within the company in terms of the way the company was structured, consolidating accounts, the way the business was set up, and getting rid of things that didn’t look quite right,” Mr Coote said.

While the company used predominantly internal staff to manage the prospectus and other accounting requirements, external legal and auditing teams were brought in, often with mixed results.

“The quality of the advice varied a lot; some were fantastic, others struggled with it,” Mr Coote said.

“At first we were led to believe we had to go down the path of getting the top tier law and accounting firms. We chose not to do that. We used people that were like-minded and similar sized businesses to us.”

The company used its own local accountants, who were already familiar with the business, as well as auditors who had a previous association with the company.

The company’s COO, Don Patterson, wrote the majority of the prospectus, which was then reviewed by the lawyers.

“The beauty is we got some very talented people who would come and see us who were actually part of the firm. So we see all those things as supporting the business rather than just telling someone what to do, which worked really well,” Mr Coote said.

“It was a heck of a task getting the prospectus together. There’s obviously some slick people around that could do it, but we found that we could do it ourselves because it wasn’t the presentation that was the most difficult, it was the content.”

Listing also proved an expensive exercise, with the overall cost between $1.5 million and $2 million.

But the biggest challenge, according to Mr Coote, was time.

“It takes so much time, and trying to also keep your focus on the business. It really consumed some of our key people,” he told WA Business News.

“We relied on people doing things in their own time, and that affected what they did in their day to day jobs. Our accountants working to 2-3am for months.”

Further capital raisings, Mr Coote has been assured, should be a much simpler process.

But in the meantime, the company is back on track, focusing on the growth of the business through its next phase as a public company.

“We’ve really been playing catch up to get our people back focussed on the main task,” Mr Coote said.

“Being listed is wonderful, but we’re working on our profits and out business and that’s the most important part.”