4Projects revenues down but profits up

Just over a year ago, I spent a couple of hours talking to Steve Nelson, the then Chief Financial Officer of Sunderland, UK-based SaaS construction collaboration technology vendor 4Projects (see 4Projects and Profitability). In recent months, there has been some change in the 4Projects boardroom, with Steve moving into a non-executive role and Chris Baty joining the company as CFO (and the role of chief technology officer being taken by a 4Projects ‘old boy’, Andy Ward). One of Steve’s last executive tasks will have been to complete the submission to Companies House in December of 4Projects Ltd’s accounts for the year to 30 March 2010.

Revenues dip

Steve Nelson had overseen six straight years of revenue growth, but the recent downturn in the UK construction market clearly had an impact. Revenues were down 8% from £5.502m in 2009 to £5.083m last year, but the business still managed to return a healthy profit of £2.067m, up 15% from £1.801m. The business was able to make a £1.95m dividend payment to its parent company, 4Projects Holdings Ltd.

The profit levels were clearly helped by staff savings. The number of employees dropped from 63 to 53 (the 10 comprising three in technical, and seven in sales, marketing and account management), with a corresponding 14% reduction in staff costs. (It is not clear if these reductions included any transfer of staff to sister company 4Retail Ltd, established in early 2009, which, according to its first set of accounts, has four staff. It recorded a £371k loss in the year to 31 March 2010.)

The 4Projects’ directors’ report is cautiously optimistic:

“The company has made good progress within its core UK market during the year in spite of unprecedented macro-economic conditions and has expanded into new overseas and vertical markets. The directors are confident that the company is performing relatively stronger than its traditional competitors and is well [placed] to take advantage of any economic upturn.”

Analysis

Despite Steve Nelson’s bullish forecasts a year ago (he talked of “the business’s continued growth and profitability”, remember), the dip in revenues is not unexpected. It echoes similar dips experienced by other UK-based vendors (eg: BIW – post, Unit4 Collaboration – post, Asite – post), which reflect the pressures they have faced in their domestic market over the past couple of years:

But the consistent profitability of 4Projects continues. It may be decelerating a little, but by avoiding exposure to the Dubai downturn that badly hit others (BIW, for example), the business, in terms of reported profits/losses, is clearly ahead of its UK-based rivals (something that will no doubt have pleased Steve Nelson – “turnover is vanity and profitability is sanity”):