Savo-Solar IPO, planned listing

Finnish solar thermal collectors manufacturer Savosolar is conducting an Initial Public Offering. It has also left an application to be listed in Nasdaq First North Sweden. The expected ticker is SAVOS and trading is expected to commence on or about April 2 2015. S. If the FN Listing occurs, the Company expects trading to commence on First North Sweden on or about 2 April 2015. Financial advisor is Mangold Fondkommission AB. Finnish side is handled by FIM Sijoituspalvelut Oy.

In 2014 the company had sales of just over a million Euros in 2014 (nearly doubled from a year ago). Operating loss climbed to 2.08 million from 1.67 million in 2013. Reported result improved to -1.2 million from -1.8 million on account of an approximately one million extraordinary income from capital adjustments related to ongoing restructuring. This since in late 2013 the company sought corporate reorganization after losing its equity. The courts accepted the plan in early 2014. The big order from Denmark worth a total of 1.6 million, which is mostly delivered by now, was a transformational going forward following the debt reorganization. The company says has to invest in more capacity to be able respond to tenders on multiple projects it has been asked to make an offer for since landing that deal.

Savosolar’s products are based on a nano-technology assisted vacuum coating process; coating the entire absorber structure post assembly. The company promises highest efficiency available in the market. Some reference customers include Ruukki Construction, now a member of SSAB and Løgumkloster Fjernvarme district heat plant. Seventeen counties and four continents have been supplied with solutions used in buildings, industrial processes and water heating. The company says its main competitors delivering large systems and having their own production can be counted with one hand.

Currently the company has 3,258,960 shares divided into two different classes. Up to 2,036,850 new shares (and a maximum of 750,000 more if the Offering is oversubscribed) are being offered at 2 Euros per share (SEK amount to be announced later). All shares will be converted into class A shares if the Offering is successful and the share is listed. Currently B-share holders have some special rights in regaining their investment. In total new shares represent a maximum of about 38.5% (46.1%) of total shares. This would translate to a market value of around 10.6 million Euros (12.1 million).

Regarding shareholders, Finnish government-backed Cleantech Finland has invested in the firm through Cleantech Invest Oyj (18.53% of shares and votes as per 19.2.2015). Finnish Innovation Fund Sitra is the largest owner (28.35%). Other notable owners include Saar-Savon Osuuspankki (12.43%), Clean Future Fund Ky (5.89%) and company CTO Kai Pischow (also 5.89%). Sitra has commited to subscribe 28.35% of the offer shares. Suur-Savon Osuuspankki and Cleantech Invest have made a smaller commitment. Assuming full subscription, their shareholdings according to Savo-Solar would be 27.25 %, 12.82 % and 10.01 %. Shares held before the offering will be locked up for 12 months.

Revenue target for 2015 is 4 million and operating profit can be positive by earlier in H1 2016. Long-term targets are gross margin of >30%, EBITDA margin of 17-18% and net margin of 11% Without the expected further funding from the Offering, the current working capital would not have been sufficient to fulfil working capital needs arising in the next 12 months.

Current shareholders have the ability to pay their subscriptions by setting off loans they have given to the company proportionate to the subscription price. Assuming 2,036,850 new shares are subscribed, Offer expenses are expected to reach 0.6 million Euros, half of which go to underwriting commitments. Out of the remaining expected net proceeds of 3.5 million, a maximum of 1.1 million may be paid by offsetting loans. This would mean 2.4 million of cash-in that would cover expected 1.7 million working capital need for the next 12 months. The remaining 0.7 million is earmarked to production capacity investments in collector assembly and other required machinery.

Company Is yet to prove it can operate a profitable business. Much of its early development has been enabled by loans and grants, such as over 2 million from Tekes. Much of the current debt is being written down with restructuring going on until 2018. Current working capital is sufficient until early April, so you could say Offering is being done in the nick of time. The Offering is fully underwritten.