West Australian seafood company entering unchartered waters with IPO

One of Western Australia’s most cherished seafood businesses is expanding its operations interstate as it seeks to list on the ASX and raise upwards of $5 million from an initial public offering (IPO) launched in December 2021.

Family-run Catalano’s Seafood (Catalano Seafood Ltd) intends to use the raised capital to upgrade its Perth processing facility, expand its distribution network to the east coast and roll out its Catalano-branded retail equipment to independent supermarkets.

“As a family, and having being in the game for 50 years, you get to a point where you kind of stagnate a little bit, and you can't go back and you can't stay the same,” CEO and executive chairman Nick Catalano told Business News Australia.

“So, to enable us to grow to the next level and achieve some of the goals and objectives that we'd like to achieve within the seafood industry, we felt that we needed a capital injection.”

Catalano’s Seafood entered the seafood market when family patriarch Francesco Catalano purchased a fish and chip shop in Cannington, Perth in 1969.

Nick Catalano, one of Francesco’s sons, has run the company since 1985 – initially focusing on growing out the wholesaling and major processing arms of the business from the back of the fish and chip shop.

For almost a decade from the late 1980’s onwards, the Perth-based business sold fish directly to supermarkets, including 40 Coles stores, before pivoting again in the mid 2000’s when the business opened two traditional ‘wet’ fish shops in the Carousel Shopping Centre and Belmont Forum, Perth.

Although the ‘wet’ fish stores didn’t quite work out, as the product didn’t resonate with customers, Catalano’s Seafoods currently operate one of only a handful of toll processing facilities in Australia at its facility in the Bassendean where the company employs over 70 people. The business also runs two stores in Garden City and Whitford City in Perth.

The company operates three branded sections within IGA supermarkets, six unbranded category-managed supermarkets and its products appear on the shelves of more than 50 independent supermarkets as part of their ‘ocean-to-plate’ distribution network.

Catalano’s Seafood is seeking to raise a minimum of $5 million at an offer price of $0.20 per share - with a maximum raise of $6 million - giving the company an indicative market cap of just under $17.5 million.

“We felt that we needed a capital injection which enables us to acquire more machinery, invest heavily in equipment, in people, and also develop the retail chain that we've been working on for the last couple of years,” says Catalano.

“We are certainly very excited about the listing and I think, with the family members that are still involved in our business, there's about 160 years of intellectual property (IP) and as a result - I think we're pretty well poised to carry out this this opportunity.”

Catalano’s Seafood generated revenue of $17.1 million in FY21 – an increase in revenue of 41 per cent from the previous year. However, its cost of sales increased 37 per cent over the same period to $13.9 million.

The company posted an overall loss each year for the past three financial years - $864,000 (FY19), $461,000 (FY20) and $500,000 (FY21) - although it did post a net cash operating profit of $204,000 in FY21.

Although Catalano’s Seafoods will continue as a family-run business, the family stake belonging to the executive management of Catalano will dilute from 5.35 per cent to 3.55 per cent, after the IPO. 

Nick Catalano is excited by the fresh challenge awaiting the business and will continue as CEO and executive chairman - receiving $260k per year for his dual role.

“I’m a young ‘old bloke’ and I don’t see a real issue as we've got my nephew, and two of my sons, that provide some of that IP that exists in the family that will be carried on,” added Catalano. 

Nick’s son Josh Catalano, who appeared in the debut season of the reality television cooking show MasterChef Australia in 2009, is no longer involved in the business.

Catalano’s Seafood processes an extensive range of fish at their Bassendean processing centre including prawns, oysters, salmon, and a variety of other Australian fish species such as snapper and barramundi.

The company also provides seafood processing services to West Leederville-based Austral Fisheries, Curtin University and Fremantle’s Ocean Grown Abalone although there are no formal contracts in place with these key customers.

“That is pretty normal in our industry, especially in the freshness factor of it, and over the years we have established very strong relationships with the fishing companies,” says Catalano.

As Catalano’s Seafoods look to branch out to the East Coast of Australia, Nick Catalano is not worried about the potential unfamiliarity of the Western Australian brand or running up against industry rivals like Tasmanian-based Tassal Group (ASX:TGR).

“80 per cent of Australians eat seafood - so there's enormous potential for growth,” says Catalano.

“We're focusing on what we call a ‘Seafood Management System’ (SMS), and over the last few years we've moved into the area of the independent supermarket - part of the supermarket industry where they don't have a solution for their seafood sales.

“They're not in a really strong position to be able to deal with fishermen and buy from different wholesalers and have that continuity of supply.

“So, what we are offering is a turnkey opportunity where we have the Catalano brand in a corner of the store and we provide all the services, we provide the products, and we provide the regular delivery structure and it gives them the opportunity to sell seafood.”

Silvestro Morabito, former COO, general manager and CEO at Metcash, is set to join the board of directors and Catalano believes his experience will prove invaluable to the business as it looks to expand east.

“Silvestro has a very good understanding of the independent supermarket sector and has got enormous contacts there - so we're hoping to identify our first SMS pilot - although we've, just before Christmas, took on the Lorenzo Group in Melbourne and have started providing them with some frozen products,” explains Catalano.

“There are more than 2,000 independent supermarkets across Australia. We see a huge opportunity to put West Australian seafood into more of them.”

According to IBISWorld research, Australia’s retail seafood market is expected to be worth $934 million in 2021-22 and the expected revenue from the wholesale market is set to be $4.3 billion.

As per the prospectus, the IPO Offer is expected to close on 10 February 2022 with a proposed listing date of 24 February 2022 under the ASX ticker ‘CSF’.

Elsewhere in the listed seafood industry space, in last quarter of 2021 Tasmanian salmon giant Huon Aquaculture was acquired by Brazilian meat giant JBS for $425 million, and South Australian oyster farmer Angel Seafood (ASX: AS1) received a non-binding takeover bid potentially worth $32.3 million from fund manager Laguna Bay.