Conject UK 2012 results hit by exceptional costs

Conject Ltd’s UK operation slid further backwards in 2012, revenues dropping 5% and exceptional costs deepening its operating losses.

Having just written about Asite’s recent financial performance, I did a quick check regarding some of the other UK Software-as-a-Service collaboration technology vendors. I discovered that Conject Ltd, the UK company previously known as BIW Technologies, had filed its financial results for the year to 31 December 2012 with Companies House back in July – and they don’t make pretty reading.

The headline numbers show that Conject UK, which rebranded in March 2012 (and formally changed its company name in August 2012), generated revenues of £4.334m, down 5% from £4.576m a year earlier (post), extending a downward slide from its 2008 peak to four years. With rival 4Projects recently repeatedly promising bumper double-digit growth in its revenues, Conject is likely to fall even further behind its main UK competitor and the converging lines suggest it could conceivably be overtaken by Asite unless it can arrest that downward slide.

Moreover, a pre-tax Conject Ltd loss in 2011 of £573k grew nearly 9% to a pre-tax loss of £622k in 2012, its fourth straight year of reported losses.

Exceptional costs

To me, this was an unexpected reverse – particularly as Conject group CEO Colin Smith had suggested an improving picture after a “flat” 2011 (rounded off by a “monster December” in 2012) when I spoke to him in January this year.

One big factor in the profit/loss performance is revealed in the detailed accounts: the company incurred exceptional expenses, totalling just over £400k, during 2012. This relates to a severance package for BIW founder and long-time director Bill Flind who, increasingly sidelined following BIW’s acquisition, resigned as a director on 1 October 2012. He received a £232k payment in lieu of notice and a further £135k in compensation for loss of office. The total value of the severance package, £403,239, is disclosed as exceptional administrative costs in the profit and loss account.

Clearly, without this exceptional cost, the loss would have been significantly reduced, to around £219k. The more worrying aspect was the lack of revenue growth, but there is an indication this may change: the firm’s order book at 31 December 2012 was standing at £10.82m, up around a third from the £8.12m reported a year earlier and a sign that the the company was finally winning more work. (Across the group, work-winning appeared to be accelerating in Q1 2013 when I spoke to Colin Smith in May.)

The Conject Group as a whole employs around 150 people and has combined revenues approaching €18m.

Update (24 October 2013) – Conject UK CEO Steve Cooper (right) has responded to my blog post, writing an upbeat post on the Conject blog, suggesting that I didn’t take into account recent market changes (though these are mainly to do with internal changes at Conject) or events since December 2012 (Steve mentions product enhancements, various wins, adding: “Up to the end of September 2013 revenues in the UK region have grown by 15%“). He also says it is more appropriate to compare Conject to its peers internationally – echoing a conversation I had with group CEO Colin Smith regarding German rival Think Project in May this year.

[Disclosure: from 2000 to early 2009, I was an employee of BIW Technologies, and have since undertaken occasional consultancy projects for Conject.]