COSOL LTD Case Study Report

Background Information

COSOL, a global, professional-consultancy that provides strategic advise and practical delivery to streamline enterprises assets management busines process and the technologiscal systems.The Company offer specific industry expertise in  support of commercial systems and production , implementation analysis,design, optimisation and production within a tailored and flexible delivery framework. COSOLs knowledge of system and businesses process together with the capability to interact from shop floor to the board-room enable transformation of a  streamlined sustainable business processes. COSOL haS maintained a strong Ellipse practiceS since its  inception, providing technical support and business improvement .COSOL also maintain a SAP practices with a range of functional & technical specialist  . COSOL maintain a  network and relationship with industrys recognized-solution provider and they sell their own integrations, data-migration and reporting solution. The company have realised busines benefit for its client through the deployment & planning of these solution. The company differentiate itself via high quality-asset intensive-industry consultant for both SAP & Ellipse and its products significant development RP-Connect and the  IP retention for enterprises resources planning for data migration project.

IPO- Initial Public Offerings is when shares of a privately owned company are offered to the public. This is through a new stock listing. The transitioning to a company that is public limited from privately limited company allows the company to trade to the public its shares  thus raising capital. ASX – Australian Stock Exchange is the main securities exchange listing platform and regulates all listed companies. in Australia for a company to be listed in Australia with Australian stock exchange, ASX, it must meet the following criteria

• Shareholders- The company is required to have minimum 300 non affiliated shareholders with a minimum value of $2000 holding which isn’t subject to Australian Stock Exchange imposed nor voluntary escrow. Before the listing application is made its not a requirement to have the free float or required spread. The listing approval is subject to the company adhering to shareholders spread requirement through its IPO/
• Capital- There isn’t a working capital requirement if the admission you’re seeking is under the profit test. But your company must have minimum A$1. M of working capital if the admission you’re seeking is under the asset test. The PDS, information memorandum or the prospectus, also should include a statement to illustrate that to carry out its slated goals the company has sufficient working capital.
• Financial Reporting – This is a requirement for every company listed with ASX. At least $1 million aggregated profit before tax from continuous operation for the last 3 full financial years. For the last twelve months to date not more than two month from date of application for admission, the operating profit before tax from continuing operations must be at least $500000.

The management team is composed of very experienced proffessionals with more than 10 yars of experience. Human capital is a key element in any company.

COSOL ltd is an asset management company based in Australia. The company was founded in the year 2019. It completed the acquisition of COSOL Australia whiz was founded in year 2000 by Scott Mc Gowan (CEO), Melanie Woodward (chief financial officer) and ben secret, secretary. The company’s main activity is software provision and service for solutions delivery to clients who operate in assets intensive industry. It focuses on resources and capital-intensive infrastructure focused systems and enterprise assets management, EAM. It serve to different industries, like, health services, mining, defense, public infrastructure, utilities and oil gas and pharmaceutical. To the public infrastructure it develops and deliver tailored solution and in the mining industries it offers a range of services, optimizing assets performance and insight provision, solution and advice for business process improvement across operations, logistics, maintenance, human resources, finance and operations.

IPO, Criteria for Listing in the AXS

Since year 2000 the COSOL Australia was operating as a private ltd company, this is a company that is privately held by members. Each member owns a certain number of shares and that’s forms the basis of their liability. The following are features of a private limited company;

• The shares are owned by the founders, management or the investors’ shares cannot be traded in the open market/ thus the number of shareholders is small and thus reduces the complexity in decision making
• Private limited companies are governed by law under the companies act which sets a minimum number of shareholders to be two and a maximum of 50
• Private ltd have perpetual life, that means the company if live before the lay, incase a member quits or dies, that can’t lead to insolvency
• Prospectus- a legal requirement to publish to members the companies state every year. This is not a legal requirement in private ltd

In the year 2019 COSOL made its Initial Public Offer, this means that the company was now transitioning from a privately owned, COSOL Australia, company to a public limited company. This means its shares were traded to the public. the following are the features of a public limited company

• The minimum number of shareholders is one, but there is no maximum number of shareholders. The minimum legal requirement of the number of directors is 3, and of whom two of them must be Australian ordinary residents. There is also a requirement of a company secretary, at least one and an official registered office that is available during certain hours to the public.
• A public limited whether unlisted or listed, its within its capacity to issue shares to the public in order to raise capital
• Prospectus- is a legal requirement to all public companies to make it to the public their financial and operational status annually. They are required to provide those reports to the shareholder, maintain a share register, hold A G M and make the company’s constitution available to their shareholders. In the case of a listed public company, it’s a requirement to give their shareholders a 28 day notice of the AGM and make the share earnings available. this is done for transparency purposes and to  protect the interests of the shareholders who may not have access to the company’s documents.

In the new structure as a public limited company COSOL ltd has four director, Geoffrey Lewiss, ( Non-executive chairman) , Grant Pestellv, Stephen Johnstone( non- executive director ) and Gerald Strautins( non, executive director ) . the company secretary was Ben Secrett , the companys proposed Australian Stock Exchange code was COS, and registered office was Murcia Pestel hilland lawyers, Suit 183, Level 6 , 580 Hay street Perth WA 6000, T (08) 92210033

By being a listed  public ltd, COSOL would experience the following advantages

By being a public limited company and being listed in the stock exchange market it means that COSOL would trade her shares to raise capital. By being listed in the stock market  the company could attract more investment from mutual funds, hedge funds and other institution traders.

By trading the share , it means that the ownership of the company would spread to many shareholders. To the investors who had earlier had a large number shares can sell a part of it at a profit and still retain a substantial portion of shares. Previously as a private ltd COSOL relied on angel investors for capital to facilitate their growth, by going public it means the company will raise its capital from a variety of shareholders. Angels investors will expect to be influential to the operations and direction of the company as they seek to maximize returns on their investments

Share capital as well, COSOL , will find itself in an advantageous position when hunting for potential sources of funds. Maintaining a stock exchange listing and being a public limited company and thus in issuing a corporate debt will help improve the creditworthiness of the company. Financial institutions and banks are more likely to provide finances to public company, for a fact that they are listed thus their repayment risk mis very minimal. Listed companies are also better positioned to negotiate for favorable interest rate and the loans repayment period.

COSOL Ltd Management Team

By being in a position to raise funds more easily and having finances readily available and at better negotiable terms than a private ltd, companies that are public ltd can ;

• gain new entries into other markets, pursue new projects and even new products
• to support the business , make capital expenditure
• finance research or development
• negotiate for better terms on the existing debts or paying off the debts
• Acquire acquisitions
• Confidence and Prestigious Profile

From the general public there is a different view of a public limited company. The company is viewed as a more transparent and successful company. This gradually affect the behavior of employees, customers and even the suppliers. If a company is public, more persons are likely to be aware of it more so when  its listed in the stock exchange market. Such a company is greatly likely to receive great attention from investment professionals and the media. The company will receive publicity for free thus more persons will recognize the limited company and her products  and services. This will make the company increase its sales as well as making the company more visible to potential partners.

In a public limited company, its more easy to transfer shares than in private ltd, thus the shareholders enjoys liquidity. More so in a company listed with stock exchange potential shareholders and existing shareholders finds it easy for share transfer within the company.  Shareholders are always at comfort  for the fact that they are less bound or are less restricted to be with the company, and thus they may sell their shares and let people who are more willing to invest to buy the shares. Unlike in private limited , in public ltd , there are no restrictions on transferability of shares,  thus making it easier to address unforeseen situations like a shareholders death by allowing transfer of shares with reference to the terms of  a will

In a public limited company the founders have a room to exit the business if they so wish at some point . increased visibility of the company to potential shareholders and higher transferability and performance of the business may increase bid interest chances from potential suitors

In the year 2019 COSOL Ltd made an acquisition of COSOL Australia as the Board was convinced that making an investment with COSOL Australia company was healthy and attractive mainly due to the reasons listed below ;

• Profit Growth – The Company,COSOL Australia, has had a profit history and the company was forecasting a 47% growth rate in the financial year 2020 in the EBIT  to $4.07 m from $2.76 million in the financial year 2019
• Proprietary Technology- COSOL Australia had developed a suit of tech solution which are related,to the data analytics and data migration. The company has already startet ti issue license to client and offer a great significance top them
• Business Model that can be Scaled – The intention of the board is to scale their current model of business with am aim of unlocking expanding opportunity with reference to its already existing customer and market more broad in key sectors COSOL Australia is currently serving and through getting into new markets and sectors. They look forward to incorporate artificial intelligence software and services and increased digital based solutions into services being offered by COSOL Australia
• Credible Management Team and the Board- COSOL Ltd has a very credible and management team and the board to continue with the expansion and commercialization of the companys solution offerings

 COSOL ltd made a 60,000000 shares as an initial public offer  at $0.2 as the issue price per share to raise a total sum of  $12,000,000 before the  costs,offer. This offer was underwritten fully by Euros Securitis limited and the accordingly minimum of subscription under the offer is $12000000.  COSOL Australia  could also issue an additional 22500000 of shares to the COSOL Australian vendors  in connection to the acquisition but the COSOL ltd. the earnings from the offer will be utilized by, COSOL Ltd to finance the financial considerations that are  due to the COSOL Australia vendors as well as providing capital for the growth and expansion aspirations of the company, COSOL ltd.

Acquisition of COSOL Australia by COSOL Ltd

Upon the completion of the offer and he acquisition settlement key management personnel and the directors will hold the following interest in the shares

COSOL ltd then came up and identified key objectives  which its looking forward-to-target following the listng and of  which they form the companys overall-strategy. For the company to measure success and progress it set realizable targets to ensure the business long-term sustainability.

• Corporate strategy- for organic growth , utilize unique digital solutions, under targeted acquisitions enhance digital IP, to win larger contracts leverage board and management expertise
• Financial objectives- to take  the advantage of a strategic-acquisition and other opportunities leverage public company structure, year on year deliver strategic revenue growth, maintenance of targeted EBIT margin as a revenue  percentage
• Objectives of the client- through the strategic-planning will improve client interaction, improve client service and client satisfaction.

To achieve the stated objectives various process and organizational initiatives were established.

1. development improvement ,
2. harvest and productization of COSOL Australia intellectual property,
3. planning improvement and strategic sales execution,
4. to improve-value that is created through partner-network ,
5. to improve- delivery of project and service so that they become-strategic advantage,
6. to improve reporting-internal business process and governance,
7. and to enhance innovation , evolve the business structure

1. Enhance consultancy capability
2. Enhance presales and sales capability
3. Improvement of external and internal communication
4. Evolve & protect bssn and org culture
5. Attract retain and develop capable persons
6. For growth enhance leadership capabilities

The financial information summary pre I P O ( COSOL Australia)

before the Initial public offer listing COSOL ltd had forecasted a revenue growth of $4.07 million in the year 2020 from $2.76 million in the financial year 2019, this would represent a 47%growth. In the year 2020, COSOL was one of the best performing Initial public offers, in January 2020, the share price was listed at twenty cents and by August 2020 the share price had rose to ninety three($93) cents. By the end of the financial year 2020, COSOL ltd  had exceeded the prospectus forecast despite challenges that  posed by the corona virus pandemic. During the first six month of successful operations, CONSOL shares were trading at 365%. The companys revenue for the whole year was over $8.7 million from a forecast of $4.07 in the prospectus. This represent a 67% increase in revenue growth from the previous year. The companys earning before interest and tax (EBIT ) Increased to $4.45 million from $2.8  million in the previous year, this presented a 61% increase. The company recorded an aftr tax net profit of $1.5 million in the  first 6 months . it also recorded a net post tax operation cashflow amounting to $2.92 million for the period to June 30 2020, the companys total operating cash flows as at June 30 22 was at $6.8 million. A total amount of $0.12 million as at 30 June 2020 represented the net-debt including deferred-consideration. In the same period a total amount of $1.58 million was spent on research and development expenses. The company has mobilized for a new finance facility on favorable terms and conditions of up to $6.5 million for the future expansion strategies.

The pre money future valuation was;

 60,000,000 shares * $0.2 per share = $12,000,000

The post money future valuation ( after one year) the shares were trading ata  cost of $0.92 per share . the company realized a $8.7 million revenue earnings which represented a 67% growth from previous year

All these successes of revenue growth were made possible by several factors

• There was Major Clients Wins- : New clients contract secured with the Australian Defense Forces and Clean Co, a company that is focused in providing clean energy option to Queens land household , and the sustainment service with Queens land Energy was extended, and anupgrade for the  Queens land Urban Utility’s  , and the new data-management and the  cleansing and migration service projects with the Anglo-American.
• High Growth rate of digital-platform RP Connect : RP Connect has progressively continued to position the COSOL ltd engagements sole sorced in sole sourced including Clean Co, Defense  department and the Anglo American .
• The ABB Practices, is the largest in the APAC-region, and thus continue  to strategically  position COSOL in the sole-sourced engagement as a result of  the company’s proprietary skill set including the defense-Department and Queens land Urban-Utilities.
• Increased in Support and IP-Based Revenues : COSOL ltd has increased it’s IP-based and support ,product and product service ,revenue-contribution to more than 55 % of total-revenue
• RP Connect platform Greate-development : The RP Connect platform was been improved to accommodate more function capability  accelerating the SAP, ECC6 to SAP S/4 transformation. RP Connect data-management functionalities were improved and deployed to the Anglo-American to provide platform to drive the data-cleaning through data-quality KPI’s.
• Openingg of Melbourne offices : this made an expansion of the reach of COSOL in Australia as a result of opening the office in Melbourne to offer service key client, to get new accounts and to get through the market in south and west region of Australia

References

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17. https://www2.asx.com.au/listings/how-to-list/listing-requirements

18.

https://www.dnb.com/business-directory/company-profiles.cosol_australia_pty_ltd.6031092fc1bd550e83e1113263077ce0.html

19. https://www.intelligentinvestor.com.au/shares/asx-cos/cosol-limited

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