Jenny Ruth: Jasons on quest for $3.6m from argonauts

Jasons Travel Media founder and managing director John Sandford says he is really a frustrated journalist, which is why he got into publishing.

He'd been told he'd need to get a degree to become a journalist, but he was no scholar.

The company, which is aiming to raise $3.6 million and to list on the NZAX, publishes 35 accommodation and tourism guides in New Zealand, Australia and the South Pacific. It also runs websites in New Zealand and Australia providing tourism information.

Its flagship publication is Jasons Motels, Apartments and Motor Lodges. The company makes its money by charging providers of accommodation and tourism attractions to advertise their services, but Sandford says the focus remains firmly on the end users for whom the publications are free.

One of the strongest aspects of the float is that Sandford has been in business since 1967. After a year of selling advertising for another publisher, he decided to branch out on his own.

Along the way, he did get to dabble in journalism, having owned the Waimarino Bulletin, now the Ruapehu Bulletin, and farming publications. In fact, he counts an award from the Limousin Breeders Association of America among his achievements.

All the money raised from the float, which will represent 42.4 per cent of the company, will be used to repay debt and fund growth rather than going into Sandford's pockets, although he will get a net repayment of loans he's made to the company of about $380,000.

At first glance, the post-float balance sheet suggests Jasons ought to be raising more equity. The pre-float balance sheet shows $5.3 million in negative shareholders' funds at March 31 this year and $7.7 million in debt. And that's with $2.1 million in intangible assets on its books.

Post-float, shareholders' funds will at least be in positive territory to the tune of $634,000 and $2 million in debt. But that's against $5.5 million in total assets.

Sandford says despite this, the board doesn't think the business needs more capital than it's raising.

Certainly, the business is clearly generating plenty of cash relative to its size - it is projected to produce $1.35 million from operating activities in the year ending June 3, 2006.

And the company's key asset, its database, isn't in the balance sheet. Sandford says that includes 30,000 tourism businesses and up to 235 pieces of information on each business.

"I've got a rough idea of what it's worth, but that's our most valuable asset. It's updated every day and it drives the revenues of the company. It's absolutely our best asset by light years."

Another sign of the directors' confidence that the business won't need much cash going forward is that the company is planning on paying out between 70 per cent and 85 per cent of net profits in dividends. The prospectus promises a gross dividend yield of 9 per cent for the year ending next March.

The float isn't a recent idea. Sandford says the company has been planning to list since 2000. It has had an independent board of directors since then.

The chairman for four years, Geoff Burns, has experience in publishing and the tourism industry and is also a director of Tamaki Tours and the New Zealand Tourism Industry Association.

Sandford, 58, says the float process is about reducing the risk should anything happen to him. As well as Sandford, the company has a six-person management team, all but one female.

"We go through a robust selection process. Almost without exception, women come out on top. We employ the best people for the job," he says.

He's adamant the float isn't part of his retirement planning. "There's no way I'm going out. But if something did happen to me, the company's well structured."

Sandford's family will own 36.5 per cent after the float, down from 64 per cent, and has given an undertaking not to sell more than 5 per cent of their holding in each of the two years after the float.

But he says he isn't planning on selling down. During the past three years, he's had three separate approaches to sell. "If we crystallised some cash, what do we do with it? What better place to have our money invested than in a business we've spent a lifetime building up. We know it inside out."

Compared to the company's track record, the prospectus forecasts appear to be conservative. On a pro-forma basis, including the Australian operation formally acquired from April 1, earnings before interest, depreciation and amortisation (ebitda) are forecast to rise 12.2 per cent from $1.32 million to $1.75 million.

Before listing and underwriting costs of $240,000, that will mean a $422,000 net profit. Excluding the Australian business, the company's ebitda rose 37.7 per cent last year and 21 per cent this year.

But it hasn't been plain sailing in Australia. Although the company has been in Queensland for 20 years, it only decided in 2000 to try taking on the other states, and started working in South Australia, Victoria and Tasmania.

The company has since closed the South Australian and Victorian operations and written off the $3.7 million in development expenses. The prospectus says the expansion into these states was, in hindsight, "overly ambitious".

Sandford said the company hired a consultant to recommend how it should have gone about expanding into those states and that was a waste of money because the consultant came up with exactly the same business model.

He said no single thing went wrong, but it was just taking too long to break even. Part of the problem was that there were a lot more fly-by-night publishers in Australia than in New Zealand, so it took longer to establish trust.

From here on, the company's expansion in Australia will be purely through its website.

As for the forecasts, Sandford says reliability and delivering on promises is "deeply ingrained in our business. There's no way we can afford to miss our numbers - fine toothcombs have got nothing on it."

Although the business is dependent on tourism, Sandford said it had never been affected by one-off shocks such as the Sars epidemic or the Asian financial crisis. That reflects its diverse customer base of 6000 advertisers, its geographical coverage from Kiribati to Stewart Island, from Tahiti to Perth, and the diverse nature of its publications from luxury lodges to backpackers and river rafting to golf.

Sandford says his biggest dream is that a big chunk of subscribers will be his advertisers. "If I see their names on the register, that will be wonderful."

JASONS PROFILE

Jasons Travel Media headquarters: 2 Ngaire Ave, Newmarket, Auckland
Profile: The company publishes tourism guides and runs tourism-related websites. Post-float market capitalisation: $8.5 million.
Results: The company made a $177,000 bottom-line loss in the year ended March and has forecast a net profit before listing costs of $422,000 for the year ending March next.
Management: Managing director John Sandford, group general manager Mary Ansell, operations manager Mary Fitzgerald, distribution services manager Clive Jimmieson, national sales manager Gaye Carrothers and marketing managers Sandy Kilgour and Vicki Smith.
Major shareholder: The Sanford family with 36.5 per cent, post-float.