A Sydney software firm just kicked off this year's biggest Australian tech IPO to raise $25 million

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Sydney human capital management software company Elmo has released a prospectus for an ASX listing, seeking to raise $25 million by floating 23% of its ownership.

The IPO sees 12.5 million shares sold at $2 each, which values the company at just over $108 million of market capitalisation. This makes it the biggest public listing of a technology company in Australia this year.

Elmo was established in 2002 with an e-learning platform as its debut product, but now has expanded out to produces what it calls “talent management software”, which manages recruitment, education and performance appraisal activities for businesses throughout the entire lifecycle of each employee.

Its cloud-based software, competing against the likes of Oracle and SAP, is sold on a subscription basis to mid-sized businesses, which Elmo chair Jim McKerlie said would easily benefit from further economies of scale.

“Over 93% of Elmo’s revenue is generated from the sale of its software-as-a-service solutions, which enables the company to generate high incremental profit margins from additional software and services sold,” said Elmo chair Jim McKerlie.

While the company made a $191,000 net profit off revenue of $13.5 million for the 2016 financial year, it is forecasting a $794,000 net loss off $16.4 million revenue for the current year.

The IPO process will take place this month with an ASX listing set for June 29.

The company quoted Frost & Sullivan research that it currently holds 4% of the market in Australia and New Zealand, and stated in the prospectus that it would seek to expand that share with the extra capita generated. Other markets would be looked at in the future.

“Elmo sees a strong case to eventually expand to markets such as the USA. and the UK, where Elmosees a large addressable market opportunity for mid-market organisations,” the company stated.

Elmo also earmarked acquisitions as a growth strategy, citing its recent buyout of human resources tech company Techni Works.

“The [human capital management] industry is a highly fragmented market, with many small vendors of HCM solutions. Elmo believes that there is an opportunity to gain additional market share through targeted acquisitions of smaller HR technology companies across Australia and New Zealand who provide single point solutions within the HCM industry,” stated Elmo in its prospectus.

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