More small Irish firms to follow Zutec to Sweden
At least 10 other Irish companies believed to be exploring Stockholm listing
Zutec Holdings could be the first of many smaller Irish companies to list on the Nasdaq First North exchange in Stockholm, chief executive Brendan O'Riordan said.
The construction-focused tech firm raised €5m through an IPO on the Swedish market last week, listing with a capitalisation of €17m.
"We are blazing a trail," said O'Riordan. "We are the first Irish company to go to this market and we are doing things slightly differently."
O'Riordan said he was personally aware of up to 10 small Irish companies which are exploring a similar listing on the Stockholm-based exchange, with a number having started the process.
"I think we could see plenty of others go this route too. The Swedes certainly hope so. The investors and the advisers there see Ireland as an excellent source of good companies. They recognise the fact that Facebook, Google and all the big tech companies are basing themselves in Ireland and that the skillset here is very technology-focused."
Swedish people tend to invest their money rather than put it in banks, meaning there is a very good investor culture, said O'Riordan.
"Investors in Sweden are very tech-focused and very savvy with a very good investor culture there. They are also very accepting of companies from outside the Nordic region. It has been a very positive experience so far."
Teething problems, for example with Irish investors unable to directly purchase the Swedish-listed shares, had been addressed ahead of the flotation by Davy Stockbrokers and Swedish corporate adviser Remium, said O'Riordan.
"We have encountered a lot of the problems and found the solutions," he said.
Zutec develops software used in the construction sector to log data and manage projects, supplying it currently in Australia, the Middle East, Italy, the UK and Ireland.
It has worked on major projects in the past including London's Shard building, the Dundrum Town Centre and Abu Dhabi airport. In the year to the end of last June the company had a turnover of €2.4m, while the company secured sales of €3.2m in the full year to the end of 2017.
"The Irish market does not really suit a company of our size," said O'Riordan. "There is less trading and less liquidity on the Irish Stock Exchange and a smaller company needs this to drive share price. The Alternative Investment Market (AIM) in London was a possibility but with Brexit we were unsure about that.
"We looked further afield and we came across the Nasdaq First North exchange in Stockholm, which is for companies of our size and is heavy on technology." Another key consideration for the company was the Nasdaq brand because Zutec plans to expand into the north American market.
"We decided not to go with venture capital. A listing was the way for us because of our growth. Not going the private equity route has allowed the original shareholders in the company to keep more control of the company."
The listing will also enable Zutec to establish a share option scheme for its 34 existing staff and new employees, he said.
"It's similar to what companies such as Google do. There are difficulties to overcome with this but rule changes over the last number of years have helped."
O'Riordan said he was not overly concerned that Zutec was so focused on the construction sector, which is prone to boom-and-bust cycles.
"We've been through a bust before so it's always a concern. But what we provide is cloud software. We can go to where there isn't a bust to sell."
He said the collapse of Carillion in the UK had been a concern for the whole sector but that Zutec was not impacted by it directly.
"But we have been through situations in the Middle East where they changed contractors mid-project. Because we hold all the data we can move on with the next contractor and our technology helps our clients with that transition between companies.
"So, strangely enough, a Carillion happening every so often can almost be a positive for us."
Nevertheless, the company has changed focus from winning large individual projects to being more focused on volume-based business.
"We are also changing our perception internally to become a software company rather than a construction software company. There are other industries that we can start to look at once we settle and get our formula right in construction."
Sunday Indo Business