When Norwegian IT services company EVRY IPO’d in June, the market viewed the company with skepticism. EVRY was brought to market by Apax, the private equity firm after being taken private in 2014.
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Before being taken private, EVRY was struggling. The company had great products and a high market share but was predominantly government-owned, and management had no incentive to make the business as good as it could be.
When the company was taken private in 2014, the government sold its 75% shareholding, allowing Apex to get on with the job of turning the business around. After only 18 months in private hands, public investors do not believe that EVRY’s problems could have been solved that quickly, but Reade Griffith, co-founder of Tetragon and CIO of Polygon’s European Event-Driven Fund disagrees.
Evry “came back quite quickly [to the stock market] and that’s one of the opportunities here. People don’t fully believe yet the fixes that have been made are permanent. If those prove out over the next 12 months, we think there’s significant upside,” he said as part of the presentation.
Reade Griffith on EVRY long thesis
EVRY was Mr. Griffith’s top stock pick at this year’s Sohn London investment conference. He believes that compared to its closest competitor Tieto, EVRY could be worth 50% more than its valuation today and during the past 18 months of private ownership the business has undergone a transformation.
In particular, the co-founder of Tetragon notes that during its first year of private ownership, EVRY’s EBITDA margins rose from 6.4% to 10.6% and he expects the margin to expand to 12% for the full-year 2017 and 14% by 2018/19.
Apex helped EVRY transform itself into a global tech company. A strategic partnership with IBM has allowed the group to reduce its fixed cost base as well as opening the door to do deals with bigger players such as Google, Microsoft, and Amazon.
As well as the international growth, EVRY is trying to expand its customer base closer to hope. Reade Griffith noted in his presentation that while the IT services industry in Norway is only growing at a rate of 1% or 2% per annum, EVRY is looking to grow at 5% to 6% by expanding into other regions such as Finnish banking. The group recently won a contract in this sector to provide services to 50 banks.
EVRY has charted a course to growth, and it looks as if its former owners want to be along for the rise. Apax only sold 46% of its stake in the business at IPO according to Mr. Griffith’s; they still own 54% of the outstanding shares. He speculates that the reason why the private equity house still owns the business is because it was hoping to get the IPO off in the upper 40s NOK whereas demand was so weak it only achieved 31 NOK at the time of the IPO.
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