Dec 12 2007

Aconex results hit by legal row

Some three months ago, I had a look at the 2006 financial results for Australia-based construction collaboration vendor Aconex, noting that its 2007 results would be available in November (as per Aconex marketing chief Frank Carron’s comment). After a slight delay (auditors requested an extension of time as some areas required additional testing), the latest figures covering the year ending on 30 June 2007 were received at the Australian Securities and Investments Commission on 26 November 2007. My key points:

  • Aconex revenues and order book have doubled
  • a healthy profit became a loss due to costs incurred in terminating a finance deal and defending a resulting legal action
  • less information about the performance of different parts of Aconex’s operations, including the UK.

Headline figures

Aconex achieved a turnover of AU$25.2m (£10.9m), up an impressive 115% from 2006’s AU$11.7m (£5.1m) thanks to what Aconex describe as “increased market penetration and investment in foreign markets” – the latter funded by a combination of cash flow, a $12.5 (£5.0m) million debt facility and capital injections (Aconex’s sustained revenue growth has also seen it named in the top 20 of the Deloitte Technology Fast 50 Awards in Australia – see Aconex news release).

The consolidated group made a pre-tax loss (EBITDA) of AU$3.1m (£1.34m) in the year to June 2007. By comparison, in 2006 it declared a pre-tax profit of AU$1.32m (£0.57m). However, this apparent reverse is directly attributed to costs associated with the legal dispute it has been engaged in with Hawthorn Glen since May of this year:

“The Hawthorn Glen finance facility termination costs and the legal costs up to year end associated with the subsquent dispute amounted to $4,116,940. Excluding these costs, the consolidated operating profit after tax would have been $574,221.”

The Aconex order book at 30 June 2007 stood at AU$41.6m (£18m), to be billed over the next 2-5 years, roughly double the level reported in 2006.

Legal impact

Despite Aconex’s view (see 24 September statement) that “The litigation does not impact on the company’s operations in any way“, it is clear that Aconex has had to make some allowances. As noted, there has been an impact on the company’s profitability, Aconex has also prudently invested in insurance to protect people against some legal liabilities, and the auditors have noted some contingent liabilities and assets:

“A premium of $9,559 has been paid to insure each of the directors and officers in the company in  respect of legal liability arising from any claim made against them by reason of any wrongful act, other than conduct involving fraud or a wilful breach of duty or claims which are specifically excluded.”

In the notes to the financial statements, the cost of terminating the Hawthorn Gen finance facility is given as AU$3,836,795. Aconex also gives an account of its dispute with Hawthorn Glen under Note 20: Contingent assets and contingent liabilities:

Contingent liability

The company previously had a financing facility with [Hawthorn Glen]. During the financial year, the company organised a replacement facility with the Commonwealth Bank of Australia and moved to terminate the facility with Hawthorn Glen. Disputes arose, amongst other things, regarding the release of the security for the loan and Hawthorn Glen’s non-participation in the 2005 capital raising. These disputes were eventually settled in March 2007 with Aconex issuing 300,000 Convertible Preference shares to Hawthorn Glen in April 2007.

Subsequently, Hawthorn Glen applied for $12 million worth of Convertible Preference shares in the 2007 Capital Raising, which was rejected. As a result, Hawthorn Glen commenced proceedings in the Federal Court and is seeking an order to require the company to allocate 461,538 Convertible Preference shares at the price of $26 per share to Hawthorn Glen for consideration of $12 million. The trial was held in October and early November 2007 and it is anticipated that judgment will not be delivered for a number of months. If Hawthorn Glen is successful then Aconex may be ordered to issue the shares sought and/or to pay damages and to pay costs. It is not possible to reliably estimate what these damages and costs may be as the outcome of the dispute is inherently uncertain pending judgment.

Contingent asset

If the company is successful, it may be able to recover some of its legal costs incurred in the dispute. The estimate of the Company’s costs for these legal proceedings amounts to approximately $1.65 million.

(AU$1.65m is about £0.72m.) Following some court activity during mid-November, Hawthorn Glen Pty Ltd v. Aconex Pty Ltd has been “Adjourned – judgement reserved”.

Regional operations

Last year’s report helpfully gave a breakdown of Aconex’s primary geographical segments: Australia – which accounted for a whopping 87.4% of total revenues in 2005 and an even greater 93.4% in 2006 – and the UK. But there is sadly no similar breakdown this year due to a change in accounting policies. Almost the only information given relates to the amount of loans from the parent company to its various regional operations; the UK division appears to still require substantial support funded by Aconex’s thriving Australia-based business.

The 2006 figures showed UK revenues in 2005-2006 of £0.323m, and a loss of £0.340m. At the time, Aconex was providing unsecured interest-free loans (in 2006 these amounted to AU$2.8m (£1.2m), the year before AU$1.9m (£0.8m)) on an arm’s length basis to its UK arm with repayment “due when the related party reaches profitability which is expected in 12-24 months”.

In the year to June 2007, further loans to the UK operation totalling AU$3.3m (£1.4m) were made (bringing the three-year total to £3.4m), along with AU$5.5m (£2.4m) worth of loans to operations in Hong Kong, Singapore, Malaysia, New Zealand, United Arab Emirates, South Africa, China, Japan, India, North America and Thailand. Profitability for this expanded group of controlled entities “is expected within 36 months”.

Update (14 December): I invited Aconex to answer some questions relating to the above issues and today received the following response from Frank Carron:

As a general note, we are happy to answer many of these types of questions when they come up. There will be some that, for commercial reasons, we will pass on.

Your questions on the court case have largely been dealt with in your blog post. We don’t expect a judgement before Christmas, and have no indication as to when one may be given, although January would seem likely.

In regards to Australia revenue as a proportion of global sales, we passed the point in mid-2
006 when monthly export revenue first exceeded ANZ revenue (we manage Australia and NZ as a single region). (The previous year’s financials overstated the importance of Australia in 05/06: significant sales to projects that were entirely overseas were invoiced through the Australian entity in that year. As we have created more overseas companies, this distortion has lessened considerably).

UK revenue in 06/07 was almost double the previous year’s, broadly in line with the group a s a whole. 06/07 also saw the UK business become profitable (although profitability of any one subsidiary is not in itself a strategic goal and as you can imagine is subject to decisions about the degree of cost that that subsidiary carries).

To elaborate on the final paragraph, doubling UK revenue would put Aconex (UK)’s turnover somewhere around £0.7m, making it a comparative minnow in the UK market. Frank’s statement doesn’t indicate how profitable the UK operation was (so when I come to redraw my graphs, I will have to post their profit just above the break-even line).

Permanent link to this article: http://extranetevolution.com/2007/12/aconex-results/

Dec 12 2007

Collaborative processes help US industry respond to growth pressures

 

FMI and the Construction Management Association of America (CMAA) have released their Eighth Annual Survey of Owners. Based on over 200 responses from a variety of owner types and industries, the survey has both good news and bad news for construction IT. Building information modelling (BIM) technologies are increasingly used, but there is also a continued lack of investment in information technology (see stories at AECcafe.com and Cadalyst).

The construction industry is said to be adopting new business approaches and making the ‘technological shift’ to meet the seven challenges — “the perfect storm” — converging on the construction industry:

  • Aging infrastructure
  • Schedule speed, complexity and ability to design and construct globally
  • Global competition
  • Alternative delivery and financing systems
  • Aging Workforce
  • Attraction of Gen Y; Retention of Gen X and Baby Boomers
  • Investment in Purposeful Training

FMI senior consultant Marisé Mikulis said: “One consistent trend we’ve noticed throughout the years is the increased application of collaborative work models to bridge the industry’s historically ‘silo-ed’ work processes.” The report indicates increased use of design/build as a procurement method, with increased reliance on construction and project managers.

Parallel to this movement to collaborative work models is growing use of BIM: approximately 35% of survey respondents had used BIM processes and technology for one or more years; 74% of current BIM users would recommend use of such systems.

Despite the expanding use of BIM, however, nearly 25% of owners still do not know how much IT spending takes place to support project objectives, the report states. Owners who apply technologies use them in ways that have limited observable impact, making financial or productivity-based justifications for their use difficult. Mikulis says: “Technology use in construction is obviously resulting in higher quality project execution, but owners are still having trouble justifying IT as a business cost.”

Permanent link to this article: http://extranetevolution.com/2007/12/collaborative-p/

Dec 11 2007

Emap Construct stays put

Earlier this year it looked like Emap’s construction titles might have been on the move as the UK parent media company looked at way to capitalise upon its profitable business-to-business ventures. However, at the weekend I learned (see Guardian story and Emap announcement) that, instead, the group’s radio and consumer magazines have been sold, leaving Emap to become a “focused business-to-business company”. For UK construction industry watchers, this means Emap has retained its interests in publications such as Construction News and New Civil Engineer (and the publications’ team running their conferences and awards events such as the Quality in Construction awards), plus the Interbuild trade-show and Glenigan construction information services.

Update (12 March 2008): In January 2008, it was announced that Emap’s B2B titles, including the construction industry journals, had been acquired by London-based Eden Bidco, a company formed by private equity fund Apax Partners and Guardian Media Group.

Permanent link to this article: http://extranetevolution.com/2007/12/emap-construct/

Dec 07 2007

SaaS growth in Asia

Three months ago, I wrote about Springboard Research findings regarding the state of the software-as-a-service (SaaS) market in Australia and New Zealand. Today, I received an email from Springboard’s Bhoorender Panwar attaching a press release headed: SaaS CRM Market in Asia Estimated to Grow 68% in 2007.

Springboard estimates that the SaaS CRM market will grow at a compound annual growth rate … of 61% between 2006 and 2010. Springboard pegged the SaaS CRM market in Asia at US$69 million in 2006, and expects it to reach US$460 million by 2010.

Australia, Singapore, Hong Kong, Korea, India, and China are the key SaaS CRM markets in Asia Pacific. Of these, Australia remains the top market, accounting for 35% of all SaaS CRM sales generated in the region.

While the research is focused on customer relationship management (CRM), it does have make some interesting points:

First, SaaS vendors such as Salesforce.com which traditionally targeted the SME market are now beginning to target larger enterprises, prompting a response from traditional CRM software players such as SAP, Microsoft and Oracle. This is, of course, the same response that is being seen in the Office software market, where Google is putting tools online prompting reactions from Microsoft.

Second, “Springboard currently estimates that SaaS CRM represents the largest segment of SaaS application expenditures in Asia at 45%, followed by collaboration, ERP/PLM/SCM applications, and human resource applications.” While CRM may be the largest SaaS segment in Springboard’s research, it would be interesting to know what the breakdown was across different industry sectors or different countries. For example, is CRM still the largest segment in sectors such as engineering or construction which place an increasingly high focus on collaborative design work? Is collaboration – however those tools are defined – a bigger issue in some countries than others?

Permanent link to this article: http://extranetevolution.com/2007/12/saas-growth-in/

Dec 06 2007

EADOC

My 30 July 2007 post on e-Builder has prompted a comment regarding a relative newcomer to the US construction collaboration market: Oakland, California-based EADOC.

The website is a bit sparse on detail about the company and its founders (a press release – in fact, the only press release – says entrepreneurs Eric Law and Arnout van Kuijk founded EADOC, based on open source technology), but it lists nine customers, and commenter Eric (I believe, Eric Law himself) says “they [ie: we] just beat E-builder, Autodesk, and Prolog for a $100 Million project” which will be publicised in February.

From his LinkedIn profile, chief technical officer Arnout van Kuijk was formerly at ERP vendor Baan and then business process management system specialist Cordys. CEO Law was also at Cordys, as manager of professional services.

Permanent link to this article: http://extranetevolution.com/2007/12/eadoc/

Dec 05 2007

Share and share alike

Jerry Laiserin ‘s latest AEC Insight column at Cadalyst usefully segments the US market for online plan rooms and what he calls project collaboration networks (PCNs) – ie: construction collaboration technologies as they are described in the UK – as in NCCTP, for example.

In Share and share alike (which, in passing, rightly describes the term ‘extranet’ as a misnomer – hence the NCCTP’s alternative), Laiserin has created a diagram showing different solutions arranged in relation to two axes: content and functionality. FTP appears at the lowest end of the both axes, while US PCNs Autodesk Constructware, CTSpace (formerly Citadon and BuildOnline), and e-Builder feature towards the higher end. Just below these PCNs is Autodesk Buzzsaw, which, Laiserin says, “offers a bit less in the way of workflow functionality and transaction-based content… [but] provides lower price and easier access (the latter facilitated by menu-level integration with Autodesk’s design-authoring tools….”

According to Laiserin, there is also a lot of action in the middle of the US market for online plan rooms, but he admits there is no room in his scheme for peer-to-peer document collaboration systems nor the collaborative elements of tools such as Adobe’s Share, Autodesk Design Review or Microsoft Office Sharepoint Services.

Laiserin foresees the content axis expanding to encompass BIM-like models, and functionality expanding to accommodate activities beyond workflow, such as procurement and fabrication, before looking across the Atlantic at what is happening in the UK:

Emerging standards may accelerate both adoption and migration. United Kingdom–based PCN providers such as 4Projects, Asite, BIW Technologies, and Causeway Technologies have formed the Network for Construction Collaboration Technology Providers (NCCTP) to promote standards for data export and import among the participating providers.

(Having attended the NCCTP steering group earlier today, I can confirm that the body – now part of Constructing Excellence, of course (see post) – remains committed to developing its data exchange standard, as well as looking to promote industry adoption through concerted marketing and information campaigns during 2008.)

Digital asset management

October’s Cadalyst also featured an article by Edward Goldberg on digital asset management. Goldberg writes: “to manage the physical project, you first must manage the information project” (original emphasis), before reviewing several solutions: attolist (a relative newcomer, conceived by an architect), the afore-mentioned Autodesk products, Bentley‘s ProjectWise, Expesite (another new one to me), Newforma Project Center (see previous post; also November 2007 Cadayst review by Jerry Laiserin), and WebArchives.

Permanent link to this article: http://extranetevolution.com/2007/12/share-and-share/

Dec 05 2007

Drowning in information…

Writing my paper on ICT and sustainable construction last week, I would have liked a quotation I found in Monday’s Guardian newspaper, where the Media section was edited by guest  editor Vint Cerf, ‘architect of the internet’. Cerf asked several influential internet gurus to “Tell me the future” and Peter Norvig, director of research at Google wrote:

Yale librarian Rutherford Rogers said “We’re drowning in information and starving for knowledge.” The internet is an ocean of information and in the near future we’ll speed through it effortlessly and intuitively, like a tuna.

The Rogers quote neatly summarises the issue we often face, I think (the tuna analogy – see the full article – is a little more complex but equally rewarding), and is even more remarkable when you consider that he said this to a New York Times reporter in 1985 and was referring to the increasing numbers of books published each year. Two decades later, his words resonate even more loudly in the internet context.

Permanent link to this article: http://extranetevolution.com/2007/12/drowning-in-inf/

Dec 03 2007

Google to target collaboration

Over two years ago, I first wrote about the JotSpot collaboration tool; 13 months ago, I noted that JotSpot had been acquired by Google. Today, via TechCrunch‘s Michael Arrington, I have been reading about Google’s 2008 plans for Google apps, and it appears Google is planning to deliver collaboration tools based on the JotSpot technologies that “will allow businesses to create intranets, project management tracking, extranets and other custom sites”.

Some of the online chat about this development, provisionally and perhaps unofficially named ‘Google Sites’, has focused on Office applications. There has been some talk about whether Google will be able to import PDFs and other graphical formats, noting that JotSpot did have the capacity to upload and store any file type, but this is still some way from allowing the kinds of collaboration focused on CAD files that characterise most AEC-oriented project collaboration solutions. Still, an interesting development and one to watch….

Update (3 December): Google’s plans are also covered on Slashdot and eWeek.com.

Permanent link to this article: http://extranetevolution.com/2007/12/google-to-targe/

Nov 29 2007

Vote for Sustrans Connect2

Across the UK, numerous small projects are planned to improve parts of the national cycle network. Whether these proceed depends on the outcome of votes cast on The People’s £50 Million Website. Four projects are in the running and the winner will get National Lottery cash to fund the project. As a one-time racing cyclist, now a club rider and occasional commuter, I am supporting Connect2 and urge anyone interested in sustainable transport to do the same.

Permanent link to this article: http://extranetevolution.com/2007/11/vote-for-sustra/

Nov 28 2007

IT and sustainability – 4

Apologies for the lack of posts this week. I have been putting the finishing touches to a document on ICT and construction sustainability (see IT and sustainable construction) prior to sending it to a few carefully chosen friends for some feedback. I am trying to conclude the document by Friday (30 November): deadline for submissions to the government’s consultation paper.

Technorati tags: AEC, UK, ICT, sustainability

Permanent link to this article: http://extranetevolution.com/2007/11/it-and-sustaina/

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