How To Raise Capital For Your Business & List On The Stock Exchange With Meridian Capital
In our latest video, Daniel catches up with Michael Ivkovic – Managing Director at Meridian Capital.
See video and transcript below.
Morning Michael thanks very much for joining us. Tell us a little bit about Meridian Capital.
Well Meridian Capital was incorporated in 2007 with a specific objective to list on the national stock exchange of Australia and particularly to invest in small cap companies who had ambitions to themselves list on the either national stock exchange or Australian stock exchange, so in the 2 or 3 years since we’ve been listed we’ve undertaken a number of initiatives probably the most significant ones was the funding and then ultimate listing of meridian resources on the ASX, more recently about 12 months ago we became involved in Australian cable tray systems , we provided development capital in fact now we are the majority shareholder in that business and ultimately we believe that we can take it to the ASX as well.
What are some of the challenges that business faces?
Well Australian Cable tray systems was only incorporated in September last year. The market for cable tray whether its flat steel or mesh cable tray is about 160 000, 160 million a year. Its dominated by two players, easy strut and uni strut who together have about 70% of the market so there are a couple of smaller players but its effectively a duopoly and it’s a very difficult market potentially to break in because of the control these two companies have in the market place.
Some of the manufacturing for your product is done in Thailand, you also have some of the operation in Australia, now you mentioned before you have the ability to manufacturer components in Australia. How critical is it to the business being able to pivot or change your business depending on a currency or demand?
Well I think its very important, easy strut for instance manufacture in Australia their steel product but more and more as the Australian dollar has improved and like many manufacturing businesses in Australia their looking to source their product from offshore the danger in that is when the Australian dollar goes back to 80/85 cents their going to want to revert back to their local manufacturing. We will continue to manufacture all the sheet metal tray in Thailand but we are in the process and have acquired a mesh-making machine in Germany recently. It arrives in Australia in December 2011. And so we will be manufacturing mesh tray in Australia and mesh tray would comprise about 30-35% of our total sales. So what we’ve tried to do is build in a bit of a hedge so if the Australian dollar goes up further obviously the sheet metal part of our business which constitutes about 65 % there’s an advantage there, well certainly we wont be disadvantaged against other importers but if the Australian dollar goes the other way then you know we have this capacity to produce mesh in Australia and be very very competitive and it gets back to our overheads again that we’ll always have a competitive edge but I think we’ve designed the business and are sourcing the products in such a way that we have a natural hedge in terms of making sheet metal in Thailand and the mesh in Australia
How critical is the working capital issues for the business?
Oh look I think extremely important but more from a stock point of view, you know our major customers are electrical contractors, expect to be able to pick the phone up, order and either on the same day or certainly within a few days, get their stock. It’s a bit different with the big projects where you have lead times. Now uni strut and easy strut at any time would at least have 3 or 4million dollars worth of stock now if we don’t have that capability the easy struts and uni struts are going to have an advantage in that respect and ultimately will be found out. We’re just not going to be able to give the service to the major contractors that they expect. Certainly a combination of equity and new letter of credit and receivables funding facilities are extremely important and I think being a listed company and actually having a strong equity base would mean that we would be much more successful actually in putting the facilities that we need into place to grow the business.
Ok well Michael thank you very much for your time its been a pleasure.
Well thank you for helping us with everything