Business steady at Sword CTSpace?

Monitoring the construction collaboration technology businesses formerly known as Buildonline and Citadon since the combined CTSpace operation was acquired by France-based Sword Group SA in late 2007 (post) is not easy, particularly when companies get merged with other, unrelated operations. From a close reading of various annual reports and some company feedback, I believe the UK operation had an unremarkable 2009; it may have delivered a profit, but I suspect revenues were flat or down.

UK corporate changes

On 1 January 2009 the trade and assets of construction collaboration technology provider BuildOnline UK Ltd were hived across to a fellow subsidiary undertaking of the Sword Group. Exactly which undertaking wasn’t specified, though I later gleaned that it merged with Intech, Achiever and Sword UK – and its operations are now reported as part of Sword UK Ltd.

Intech provided risk management and compliance solutions to the insurance market, while Achiever is a risk management and compliance solution for corporate clients, but the combined reporting makes it difficult to identify how well (or not) the UK construction-oriented business has been doing, not least because Intech dwarfs the other operations.

The former BuildOnline business contributes a relatively minor amount to Sword UK’s revenues. In 2008, for example, Intech generated revenues of €22.9m, compared to BuildOnline’s €2.8m (£2.2m), while Achiever delivered revenues of a similar magnitude to BuildOnline (€2.9m). Judging from the numbers from Sword UK Ltd for the year ending 31 December 2009, Intech delivered £18.9m in revenues, while the two smaller operations, listed as ‘acquisitions’, generated a combined total of £5.3m. Assuming that both these businesses performed in line with the previous year, this would suggest that the former BuildOnline business generated a turnover of somewhere in the range of £2.0m to £2.6m in 2009 – though the latter figure may be optimistic in light of the construction slump. In 2008, BuildOnline UK made a loss of €36k; in 2009, the ‘acquisitions’ made a profit of £990k, but it is difficult to be make an assessment of what contribution the construction IT business delivered to that figure. I asked Sword CTSpace to comment; George Britton wrote: “we did deliver a profit in 2009” (in other words, somewhere in a range from £1 to £990k).

International SaaS operations

For the record, BuildOnline UK is now a dormant subsidiary of Sword Soft Limited (“an investment holding company” with interests in 48 companies [including Sword UK Ltd] – 18 of them dormant as at 31 December 2009). However, other BuildOnline companies and related businesses were still trading during 2009. Sword Group’s 2009 Annual Report (PDF) gives details of the revenues and earnings of its controlled companies, including seven businesses I identified from Sword’s 2008 annual report (post). [Sterling values below are based on 2009 average exchange rates].

Below the sub-total for those seven businesses, I have added my optimistic guess-timate for BuildOnline UK. Adjusting last year’s numbers to account for the disposal of Infotechno (Austria) – sold in August 2009 to a German publishing group, EPP – on this optimistic basis, it would appear that Sword’s combined construction collaboration solutions achieved revenues that were down 5% on last year’s total revenues of £10.272m – probably a sign of the impact of the recession’s impact on the construction industry. But, apparently, profits were up by around a third (allowing that the UK broke even – see quote from George Britton above) from £1.929m.

Segmented performance

How
ever, there are contradictory indicators elsewhere in the 2009 report where Sword Group segments its turnover and earnings by market sector (p.151). Here it says the energy, construction and utilities sector generated a turnover of €15.851m in 2009 (£14.123m), a whopping 40% down on the previous year’s €26.302m (£23.435m). EBIT for 2009 was €2.964m (£2.641m), 53% down from €6.324m (£5.635m) in 2008. Operating profitability was down, Sword explains, as: “entirely the result of the exceptional R&D plan initiated in 2009 that was completed at the end of Q1 2010. In 2010, we expect to see profitability improve.” No hint, then, that revenues were hit by the credit crunch – despite what other AEC businesses have found (most recently Unit4, for example – post).

These figures are also lower than those given to me by John Pomeroy, then Sword CTSpace’s business unit director, when we met in May (post), when he said the Sword CTSpace business achieved revenues of €18m across all its applications in 2009, though this may be because he included some non-energy/construction/utilities revenues in that number.

(Again, I sought clarification. George Britton informed me: “The combined revenue from construction collaboration solutions in all regions has been relatively steady.” On that basis, maybe the UK performed in line with the previous year, achieving around £2.2m?)

There is no distinction in Sword’s 2009 report between revenues from delivering applications on a Software-as-a-Service or ‘on-demand’ model versus revenues from on-premise solutions. Sword CTSpace’s portfolio includes both types of application: FusionEnterprise for in-house hosting; FusionLive as a SaaS offering, for example. However, my analysis of the eight SaaS businesses listed above, suggests their total revenues accounted for more than two-thirds of the group’s AEC-related turnover in 2009. One interpretation of the apparent differences between the SaaS results and the overall AEC figure could be that on-premise solutions outperformed SaaS products in revenue growth terms in 2009, but SaaS delivered better margins.