FESCO IPO back on track
AFTER a month of revisions and minor changes to the projections, Future Energy Source Company Limited (FESCO) has returned with its initial public offering (IPO) where 500 million shares will be on offer to the market as the company is aiming to become the 46th company to list on the Jamaica Stock Exchange’s (JSE) Junior Market.
The fuel distribution company is looking to raise $240 million from the issue of 300 million new shares at $0.80 and list on the Junior Market. The selling shareholders who are the current owners of FESCO are expected to collect $160 million from the sale of 200 million existing shares. The IPO is scheduled to open on March 31 and close on April 9 which is a similar timeline established by Tropical Battery Limited in their IPO that was also led by NCB Capital Markets (NCBCM). That IPO closed on the opening day and listed a week later.
FESCO intends to use the funds from the IPO to reduce its debt owed to company directors, support working capital, fund new company-owned locations and provide a platform to enter the cooking gas/liquified petroleum gas market within two years of listing on the JSE.
FESCO currently has a network of 14 dealer-owned gas stations with the Mandela Highway location set to open in April with capital support from the company to retail liquified natural gas for the transportation industry. Fesco will also be opening its first company-owned location on Beechwood Avenue by June.
FESCO supplies fuel and lubricants to its dealer network which are owned by the local dealers but use the Fesco brand. The company is looking to ensure that its network provides the necessary services such as supermarket, fast food, and money services to make FESCO location a one-stop location for customers.
“Apart from being a household name, we want to extend our relationships with our customers. We want to provide them with more value-added services as well as increasing the services that are available at our stations, said Chief Executive Officer Jeremy Barnes about the direction of FESCO to the Caribbean Business Report.
FESCO launched its own proprietary branded lubricants, Futroil, last month, which has been certified by the American Petroleum Institute which makes it competitive against the other options on the market. Futroil will be produced and distributed by Paramount Trading Limited which is listed on the Junior Market as well. The company will also be launching its own coolants and chemicals along with its own purified drinking water, FYC Water, through its convenience store network.
FESCO has grown its balance sheet from $63 million at the end of its 2016 financial year to $473.9 for its 2020 financial year (FY). The company grew its revenue base by 9 per cent to $5.9 billion and net profit by 164 per cent to $104.8 million. During the current COVID-19 period, up to December 2020, FESCO’S revenue only declined by 5 per cent to $4.3 billion with net profit 3 per cent to $70.9 million. Total assets were 3 per cent higher at $532.9 million with total liabilities declining by 26 per cent to $251.7 million. Fesco is projecting to end its 2021 FY with $132.4 million in net profit and $993.8 million in assets with the 2025 outline being $429.7 million in net profit and total assets of $2.06 billion. Fesco intends to pay out 25 per cent of its net profit to shareholders as dividends with the company, including a $90.5 million dividend payment in its 2022 FY projections.
When asked about the future of FESCO, Chairman Lyden “Trevor” Heaven stated, “The name Future Source Energy Company isn’t by accident. It’s definitive, and the reason is because we wish to ensure that our participation in this market lends itself to that kind of vision for the future. We want to be on the cutting edge of technology and bring to our locations the latest in terms of management and efficiency at our service stations. We’re also looking to do other things to diversify the concept of energy.”
The independent directors of the board include Harry Campbell, Belinda Williams, Gloria Declou, Vernon Barnes and Eaton Perkins with Lissant Mitchell to be the company mentor for FESESCO.
Potential investors are required to purchase a minimum of 1000 shares with increments of 1000 units. Applications will be processed through NCBCM’S GOIPO platform with the offer set to be a first come, first served basis for allotment. Only 35 per cent or 175 million shares would be reserved for the public with the other 325 million shares reserved for specific investors. 175 million shares would be available to the broker reserve pool, 125 million shares for the key partner reserve pool and 25 million employee reserve shares.