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Kenyan-owned IT firm Empire Microsystem is set to go public by floating its shares on the Growth Enterprise Market Segment (GEMS) of the Nairobi Securities Exchange (NSE) mid this month, joining a growing list of small and medium-sized enterprises that have done so.
The firm says the move will help it earn the confidence of strategic investors keen to inject millions into the implementation of mega IT projects in the country. “We are listing so that investors can see value in us,” managing director James Mworia told The EastAfrican.
The GEMS board, which was introduced by the NSE last year, gives firms which do not qualify to list on the bourse’s main board an alternative trading platform. It allows SMEs to bolster their capital reserves, enhance price discovery and improve brand visibility.
The concept, which has been embraced by some of the counterpart securities exchanges within the East Africa Community, is also being viewed as an integral aspect of the planned integration of the regional capital markets. Tanzania has an SME market segment dubbed the Enterprise Growth Market Segment (EGMS), which has two listings while Uganda is reviewing the rules and regulations for its Growth Enterprise Market Segment.
According to NSE acting chief executive Andrew Wachira, there is an overwhelming interest for firms to list on the SMEs’ market segment mainly because it provides an affordable avenue for listing on the bourse in comparison to the Main Investment Market Segment (MIMS) and the Alternate Investment Market Segment (AIMS). “A firm listing on this segment is not required to provide any profitability record,” he said.
Listing on GEMS offers a shorter listing process by way of introduction, it requires capital of $111,111 with not less than 100,000 shares in issue to the public, providing the firm with easier access to public equity and debt capital while allowing them to enjoy lower fees. NSE in partnership with the Nominated Advisors has carried out marketing and awareness campaigns to the target audience, since the launch of the segment. “The listings are as a result of continuous engagement and education on the benefits of this market,” said Mr Wachira.
So far three firms have listed on the NSE GEMS market: Real estate firm Home Afrika Ltd, which listed on July 15, 2013; manufacturing firm Flame Tree Group (November 6) and Sharia-compliant investment vehicle Kurwitu Ventures Ltd (November 13).
In addition, a number of companies have shown interest in listing on GEMS including Atlas Development, Empire Microsystems and East Africa Data Handlers. “Listing on GEMS enables medium tier firms to bolster their capital Base, facilitating their development strategies, in turn promoting the growth of our capital markets,” said Mr Wachira.
Empire, which was incorporated in 2007, has already secured lucrative outsourcing of telecommunications services deals with major telcos including Safaricom, Wananchi Group, Huawei and Jamii telecom.
While large firms lay the cables, Empire Microsystems is contracted to negotiate with landlords and carry out door-to-door connections, maintenance and support.
Linking Internet service providers to their customers is Empire’s core business but the firm says it intends to go big in the IT sector by initiating more projects around digital centres, arguing that the data “tsunami” is in the offing.
“We want to transform this company from being just a mere business entity to a business platform that will give investors, both local and international, an opportunity to invest,” Mr Mworia said but declined to divulge more details on the amount of shares on offer and its pricing, saying the move could jeopardise the transaction that is yet to receive regulatory approvals.
“We are yet to receive the requisite approvals. Our proposal is still pending at NSE,” he said, noting that putting Empire which has five board members on the NSE would also help improve its brand visibility provide investors with an elaborate exit mechanism.
Mr Wachira said a team has been constituted to ensure that the approval for the listing is granted within 2-3 weeks when submissions are fully complete. “We expect the turnaround time for approvals to reduce drastically because we now have a team. But this is dependent on how complete the submissions by the potential issuers are,” said Mr Wachira.
Listing on the NSE is part of Empire’s five-year (2015-2019) restructuring and transformation strategy through which it seeks to attain an annual turnover of $11 million compared with a turnover of $555,555 last year.
“In 2014 we started a restructuring and transformational process that will ensure that Empire becomes a more serious institution with its own structures and processes. Our business is dependent on people and we needed Empire to be ready for the future,” said Mr Mworia.
Empire Microsystems plans to list on the Nairobi bourse’s Growth Enterprise Market Segment (GEMS), which is reserved for small and medium enterprises.
“The listing is part of our expansion strategy aimed at aligning the company with the growth in IT industry, as well as the boom in property and infrastructure space where we play a key link role between the two sectors and the end user,” Empire Microsystems chairman Julius Kipng’etich said in a statement.
The firm works with other technology firms like Huawei, Jamii Telecoms, Safaricom and Wananchi Group to provide last-mile Internet connections to customers.
In the past six years, it has connected 5,000 buildings and 50,000 customers to various Internet service providers.
Empire Microsystems says it has hired Equity Investment Bank as the lead transaction advisor and ABC Capital and Equity Investment Bank as co-sponsoring stock-brokers for the planned listing that is awaiting NSE’s approval.
The firm joins a list of others, including consumer goods and tank manufacturer Flame Tree, Mayfox and East African Data Handlers in plans to list on GEMS this year.
Source: Business Daily
Empire Microsystems expects to execute its delayed listing by introduction on the Nairobi Securities Exchange (NSE) in the first week of March.Listing on the NSE’s Growth Enterprise Market Segment (GEMS) was supposed to take place last month, but the company decided to push it forward by a few more weeks.
Founder and chief executive James Mworia said since approvals had not been given by December, the IT firm has now decided to include audited results for 2014, which were not in the original information memorandum. “Then we were working with projections for 2014. We are doing another information memorandum that has full-year results,” Mr Mworia told the Business Daily.
The firm said after the listing it would go to the capital markets to raise funds for expansion. “We will call for funding in the second quarter. We want to set up chargeable Wi-Fi starting with Nairobi County,” he said. Mr Mworia said he could not give details on the amount the firm would be seeking because transaction advisers are still working on a capital raising programme.
Equity Investment Bank is the transaction adviser and co-sponsoring broker alongside ABC Capital.
OMK Advocates are the legal advisers while Njoroge Kibebe & Associates are the reporting accountants. The Central Depository and Settlement Corporation is the share registrar.
The debut will make it the first tech company to list on the GEMS and the fifth firm to list on the segment designed for small companies.
East African Data Handlers was also expected to list around the same time as Empire but the management had not got back to the Business Daily by the time of going to press.
Upon graduation, James Mworia was literally head-hunted by big firms for his skills in technology. But unlike many a graduate who would have welcomed such opportunities, Mr Mworia said: “No, thank you.”
“The offers were many, all based on my final year project and the fact that I had scored a first class but I was advised against taking any of them,” he told Money.
His project was a sacco management software that automates day-to-day transactions by integrating both the front-office and back-office deals. The software by the Jomo Kenyatta University of Agriculture Technology 2005 graduate caught the eye of a leading sacco in Kenya but instead of taking up a plum job post, Mr Mworia negotiated to contract out his product to the microlender at a fee.
Then, he was an inexperienced 21-year-old with little exposure to big money agreements.
“The contract was worth Sh500,000. I would not have negotiated such an amount without the help of my lecturers,” he says, adding this is the point Empire Microsystems limited, an information technology solutions firm that he has built over a period of nine years was established.
By offering telecommunication outsourcing, financial management software and other business solutions, he estimates his enterprise to be worth Sh300 million after nine years of business. At 30, he is the chief executive of a firm with presence in over 20 African countries handling clients ranging from financial institutions to telecommunication firms.
Later this year, Mr Mworia says that the company has an ambitious target of listing on the Nairobi Securities Exchange or court a venture capitalist to help raise about Sh1 billion to fund its expansion. “Whichever comes first, the bottom line is that we will be aiming to raise capital to up our coffers and strengthen our capacity to serve,” notes Mr Mworia, now a PhD student.
The firm was registered in 2005 when Mr Mworia signed his maiden contract. He was the sole staff then. Today, the firm boasts of a workforce of 200 employees. By 2007, he had over 20 saccos on his client list, prompting him to register a limited company to conform to taxation rules and also ready himself for more opportunities.
“I did not at any time doubt my programming skills and I was sure great opportunities lay ahead,” he said.
When in 2008 the IT industry was gripped by the fibre optic craze, Mr Mworia diversified into the telecoms, a step away from his flagship sacco management software. The move paid off instantly as Empire Microsystems landed a contract with one of the major triple play (video, voice and data) companies in Kenya as opportunities continued to prove limitless for his venture.
“What the company does here is basically outsourcing. The operator gives us the mandate to install, maintain and support its clients,” he says. In 2010, the two arms seemed not enough for the ambitious start-up, seeing the firm diversify into project management outsourcing with an eye on banks and financial institutions.
Under the new unit, the firm provides human resource expertise to financial institutions intending to change or overhaul their information technology systems. And for its success, the company was feted last month by the ICT association of Kenya as part of the Kenya @50 celebrations: “We were crowned ICT Company of the Year Award (SME) beating a list of 45 competitors and this has fuelled our belief,” he said.
Empire Microsystems has an estimated annual turnover of Sh100 million which the CEO says is just a scratch on the surface, considering the enormous opportunities in the ICT industry.
How have you managed to steer your firm considering your age? I ask. “We’ve solid structures in place without which probably the venture would still be a small entity,” he said.
The company draws ideas from a think tank comprising of individuals from various fields. It advises the executive committee which Mr Mworia chairs. The team is the firm’s command centre where projects are conceptualised and delegated to a designated manager. “If we’ve a contract to overhaul a bank’s IT system, we hand the project to a manager who has a free hand in determining staff, budget and time for as long he accomplishes the task,” said Mr Mworia.
It has not been an easy ride to establish and run such a company with the major challenge being high employee turnover due to the many opportunities and better offers in the IT industry.