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JSE connection just the thing for software group
LISTING PLANS
SPECIALIST information technology retail company The Software Connection Group is set to list on the JSE in October and raise R48-million in a private and public offer. Software Connection started seven years ago as a small store in Sandton City, and has since grown to include eight Software Connection stores, the Training Connection, Software Connection USA, a corporate licensing division and a 28% interest in Business Connection. One of its interests which will be left out of the listing is the new value mart-type Incredible Connection. The group's turnover is about R600-million, of which the listed entities make up approximately R180-million. Chief executive Philip Cowles will not reveal financial details until the prospectus is issued, but says that in the past three years turnover has increased 25% and compound earnings more than 80% year on year. In the 1998 financial year earnings are expected to grow by more than 50%. Software Connection will raise R48-million through the sale of 40% of the business. This will include a R35-million private placing, an R8-million public offer and a R5-million preferential placement. The listing will enable it to fund future growth and retire debt. Cowles says that in 1996 management bought out Persetel's 69% interest with the help of Firstcorp Merchant Bank. The funds raised through the listing will largely be used to reduce subsequent debt. They will also be used to neutralise debt incurred in expanding Incredible Connection. This means shareholders will be asked to help reduce debt in Incredible Connection, but only to participate in its future growth at a later stage. Finance director Pierre Joubert says the group is listing its mature companies. It opened its first Incredible Connection store in Woodmead in July 1995 and its yearly turnover is already R120-million. "We have opened four more around the country in the past nine months, and while they have shown excellent growth potential, they do not yet boast the same trading history or stability that Woodmead has displayed." Incredible Connection's risk profile is high relative to the rest of the group, but Software Connection shareholders will have a pre-emptive right to these shares, expected to be offered within 12-18 months. Cowles says the US office in New York is mainly used as "our eyes and ears", looking for trends, buying products and allowing the group to import niche products.
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