Lessons in IBT float

IBT Education completed one of Western Australia’s biggest stock market floats in 2004 and now ranks as a successful top-20 WA stock. With the benefit of hindsight, however, managing director Rod Jones has acknowledged the company was “not quite ready”.

In an unusually frank assessment, Mr Jones has also acknowledged that he didn’t fully appreciate the amount of work that was needed to prepare IBT for its float.

The float preparations were complex because historically the group had operated as a federation of 12 independent companies, each with its own shareholders and directors.

In the space of just a few months, IBT had to complete the amalgamation of these colleges.

This process, which Mr Jones described as a “huge step”, was completed in November 2004 and just one week later the merged company issued the prospectus for its $40 million IPO.

“The time and effort that went in to taking ourselves from a private company to a public company was just enormous,” Mr Jones said.

“To be fair I didn’t really understand the volume of effort that was needed from everybody to take us to that next level.

“I look back at it now and think what we achieved was just unbelievable.”

Mr Jones admitted that “we probably were not quite ready in terms of everything being consoli-dated”. He also acknowledged that the focus on the amalgamation and listing meant “a little bit of focus was lost from the business”.

That came back to bite the company four months after the float, when it issued a profit downgrade.

The market reacted savagely, slashing its share price from $2.50 to about $1.50, even though the downgrade was relatively modest.

In fact, the company still achieved a profit increase, but not as big as it had forecast in the prospectus.

The savage reaction reflected the market’s lack of familiarity with IBT and the lack of understanding of IBT’s business model, which was unlike any other listed company in Australia.

The share price has never regained those early highs, and is currently sitting around $2, but Mr Jones believes the company has finally rebuilt its credibility with institutional investors.

“I did a roadshow (early this month) right through the eastern states and all of our major investors, almost to a man, commented that we have rebuilt confidence.”

He believes the key to this turnaround has been the company’s tangible performance.

“Over the past six to eight months we have delivered on everything we said we were going to do, and I think that is where the confidence has come back,” Mr Jones said.