JFP furniture company to raise $280m in IPO
Published:Wednesday | February 16, 2022 | 12:08 AM
JFP Limited, a supplier of furniture for hospitality clients and offices, plans to raise $280 million in its initial public offering of shares, half of which will go towards paying out shareholders, who are matching the number of shares being offered by the company under the IPO.
The short-term prospects are positive for the company formerly known as Jamaica Fibreglass Products Limited, with delayed projects coming back on stream and its build-out contract at the Sangster International Airport in Montego Bay, which is currently expanding its food court. But JFP’s revenues are still affected by the fallout from COVID-19.
Through their company JFP Property Investments Limited, selling shareholders Stephen Sirgany, Richard Sirgany and Metry Seaga are putting up 140 million of the 280 million shares on offer, but together will continue holding the majority of shares in JFP after the IPO.
The offer at $1 per share opens February 21 and closes a week later on the 28th.
The company led by CEO Metry Seaga started operations in 1985 as Jamaica Fibreglass Products. It’s board is chaired by Ian Levy.
Of the 280 million shares on offer, 60 per cent or 168.4 million units will be available to the general public for subscription. The general public includes institutional investors, such as pension funds.
The remainder of the shares are reserved for GK Investments, 61.6 million units; key partners, 40 million units; and employees, 10 million units.
The total shares in issue will grow from 980 million units to 1.12 billion units after the IPO.
The Sirganys and Seaga will each hold 25 per cent of the company, or a combined 75 per cent, after the offer.
Although annual sales for JFP fell during the first year of the pandemic, dropping from a record half-billion dollars to $443 million, JFP closed its 2020 fiscal period with higher net profit of $71 million.
It earnings faltered even more in 2021, with sales over the first nine months to September dropping from $312 million to $210 million, and earnings from $78 million to $3.5 million.
Additionally, the company’s cash fell into deficit, compared to positive cash holdings of $46 million a year earlier.
JFP explained that the fall in revenue was related to project delays arising from COVID-19 curfews, rather than any material impact on the company’s performance.
“The company’s revenues from contracted work for the nine-month period were delayed as a result of multiple unforeseen contract delays caused by the COVID-19 pandemic. More specifically, the various COVID-19 containment measures reduced the number of working hours which slowed the production and completion of work in progress jobs,” JFP said in its IPO prospectus, indicating that the company expects a steady flow of pipeline projects into 2022.
The expected revenue from these delayed projects is about $81 million.
The company plans to list its shares on the junior market at $1, which at the current low pretax profit levels of less than $5 million year to date, would take about 100 years to grow into that price, but it would comfortably grow to support its listing price, were it to return to 2020 profit levels.
The 2020 pretax profit at $83 million, with 1.12 billion shares in issue, equates to about seven cents per share, or about 12 times earnings, in a market that trades at 20 times annual earnings.
GK Capital Management, the lead arranger and broker of the IPO, puts the PE for JFP at 13 times, once profit is normalised.
Historically, JFP’s revenue has been derived from the hotel industry, government agencies and restaurants. Combined, these three industries have been the source of 72 per cent of sales for the past five years, with one-third of the company’s revenues being earned from the restaurant industry, the company stated in the prospectus.
“Locally, the pipeline of contracted orders for the 2022 financial year remains robust as evidenced by the company being awarded a substantial contract to provide furnishing for the Montego Bay Jamaica – Sangster International Airport. In November 2021, the company completed an order with FLOW for their new location in Montego Bay and have numerous other jobs coming on stream,” JFP said.