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Eroad close to decision on IPO valuing company at up to $200m

In last week's print edition of NBR (as part of a broader profile) Eroad founder Brian Michie, flagged the possibility of an IPO before the general election, with the company looking to raise $30 million to $50 million.

Earlier this week, I had a quick catch up with CEO Steven Newman (a Navman alumnus) to see if he could fill in a little more colour on that point.

He could; the float would be for 25% of shares, Newman said – implying a total value of up to $200 million*.

A decision will be made on whether to shoot for an NZX listing in about a month’s time, Newman says.

He won’t give revenue or profit figures but says the company’s profit margin was about 10% of revenue last year. He expects 100% revenue growth over the next 12 months.

The North Shore, Auckland maker of GPS/cellular system for collecting road user charges has doubled staff numbers over the past year, and is looking to increase its headcount by a similar number in the year ahead.

A key project is a tolling technology trial with the US state of Oregon, which will soon move into a live, commercial phase.

While GPS tracking and telematics is a crowded field, Newman pitches that his company has a unique mix of skills across tolling and tracking technology, areas like security, data privacy and, especially, e-government and regulatory issues. It even has economists on staff who can advise government clients (Eroad also sells solutions for large large tucking and transport outfits including NZ Couriers and DHL; see its customer brag list here).

He says while potential competitors will take some time to catch up, given the unique mix of complex in the area, “They will watch and learn.”

“Our biggest risk is not growing fast enough to capture the opportunities,” Newman says – although he also qualifies, “While we’ve grown very quickly, we’re a very conservative business. Collecting fees related to transport for business, we need to make sure everything we do is rock solid at one stage before we grow to the next.”

Eroad is chasing opportunities worldwide but the current focus tends to be on the US rather than Europe (where as NBR earlier reported, it was involved in a major trial to electronically track and charge 250,000 heavy vehicles on Swedish roads.)

The European situation is complex, Newman says, and governments tend to have a winner-takes-all contracts rather than the more collaborative US approach – which makes it an expensive business if you miss out.

Newman sprinkles his conversation with liberal mention of Xero and Wynyard Group. He reckons Eroad will also prove a “compelling global opportunity.” It will be interesting to see more detail once that comes out; there should be an IPO decision within 30 days.

Meanwhile, Eroad has funding to go on with; the company raised $5 million from a group of high net worth individuals late last year.

* Eroad is mostly owned by its management team and board. Newman is the largest shareholder 37.34%, with no other investor holding more than than 7%.

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