Aconex IPO

Construction software maker Aconex will become the latest in a surge of disruptive technology companies to list on the ASX, with an initial public offering to be completed the end of November valuing the Melbourne-based company at between $400 million and almost $700 million.

The listing of Aconex, whose software permits companies working on construction projects to exchange and track information, will boost the fortune of co-founders Leigh Jasper and Rob Phillpot, who together own nearly a quarter of the company, beyond the $75 million that made them mainstays of BRW’s Young Rich List.
Between 40 per cent and 50 per cent of the company’s shares will be offered in the float. The co-founders will keep a minimum stake of about 15 per cent.

Aconex, whose software was first used on Melbourne’s Rialto tower, and which has since been rolled out on projects including the Marina Bay Sands hotel in Singapore and the Panama Canal expansion, commands a 22 per cent of a global market that investment bank UBS estimates is currently worth just under $300 million.
The software – for which the company typically charges clients 0.1 per cent of a project’s value – integrates the document and information management systems of the hundreds of different companies on a project, speeding up processes such as verifying and checking and reducing the errors that come from multiple re-entering of data.
“With bringing the project team onto a common platform, you eliminate the data re-entry,” senior vice-president of product Mr Phillpot told The Australian Financial Review.

“That information flows seamlessly. Plus, we then become the clearing house for all the transactions, so there’s never a dispute about whether something was sent or when it was sent. [Companies] never have fights with subbies [sub-contactors] any more about whether anything was sent.”
BOOK-BUILD

UBS and Macquarie Bank are joint lead managers in the float that aims to lodge its prospectus and complete a book-build later this month.

The company’s last investment round was held in 2008, when US-based private equity group Francisco Partners paid $57.5 million for an undisclosed minority stake. The firm is likely to exit the stock in the IPO.
“Shareholders can choose to stay in or sell out,” Mr Jasper said. “It’s giving them flexibility in terms of their shareholding as well.”

Some of the proceeds of the IPO will be used to invest in the development of new services, such as scheduling and cost information, and also in benchmarking, to permit companies to compare their performance and productivity with peers and to rank the performance of subcontractors working for them.
It will also permit the acquisition of companies with bolt-on services, Mr Jasper said.
“We’ve got number of relations with companies in the space,” he said. “Post-IPO we’d then start to look more actively at that.”

Rivals include Sydney-based ProjectCentre, owned by Germany’s RIB Software, German firm Conject, Sweden’s eBuilder and UK-based 4Projects’ Viewpoint software.
Aconex has an estimated 63 per cent of the Australian market. Its second deepest penetration is in Middle Eastern markets like Dubai, Abu Dhabi and Saudi Arabia. Global revenue is likely to grow 16 per cent this year, UBS says.
Adam Lewis, the former managing partner of consulting firm McKinsey in Australia, is Aconex chairman.
ROAD TO PROFITABILITY

The company is on a road to profitability. In the year to June, revenue rose 27 per cent to $66.2 million from $52.3 million and cut its EBITDA loss to $4.1 million from $8.9 million a year ago. In 2012 the loss was $3.3 million on revenue of $44.3 million. EBITDA will be positive this year, Mr Jasper said.
“As the [Australian] market has matured, it’s become very profitable for us,” he said. “Our international markets are following the same trajectory. The Middle East business is generating cash, the Asian business is not far off being at neutral to positive from a cash-generative point of view and in the US, we expect in the next year to two years to flip positive as well.”

Mr Jasper, who has just relocated to Melbourne from San Francisco, and Mr Phillpot became friends while boarding at Melbourne’s Scotch College.

The company has had its share of ups and downs. In 2011, it came under fire from Victoria’s Baillieu family, one of its early investors, over what it said was a failure to report cancelled bookings, including of a $5.2 million construction job contract in Portugal. A Baillieu family push to remove former chairman Martin Hosking failed.
Aconex seeks to emulate the success of Urbanise, a fellow Melbourne-based company that sells cloud-based management tools for building owners.

Australia’s IPO market has surged in 2014, with 44 IPOs raising a total of $US8.5 billion ($10 billion) in the first nine months of the year, according to the latest EY Global IPO Trends report.
This already equals the number of IPOs for 2013 and well exceeds the $US5.3 billion raised during 2013.