From Digital Look (Thursday 13 November 2008) - see original here

Small Cap Focus: BIW's AIM project

There are still plenty of companies keen to join AIM despite the tough stock market conditions. Software provider BIW is one of these. It is a profitable Software as a Service company with strong recurring revenues from construction projects that can last a number of years.

BIW has shown that it can grow as a private company but feels it could achieve more with an AIM quotation and access to more capital. The weak stock market has delayed the flotation although some of the ground work has been done.

None of this has put BIW off joining AIM it still feels it is the correct thing to do and it will enhance the prospects of the business. It is also prepared to wait for the right time and is in no hurry to float.

Finance director Bill Flind says it is likely that BIW won’t come to AIM until next spring. The half year end is March so it could be after the interims are finalised.

Flind says that BIW has chosen a nominated adviser and broker but not officially appointed yet. Flind says that the response from the potential investors he has seen has been positive.

BIW has gone through the flotation process before but the timing proved too difficult. The company was formed in January 2000 near the height of the technology boom and initially raised £1m. Like many young companies in those days it had planned to float later in that year and Panmure Gordon was chosen as broker.

The intention was to raise £10m but when BIW was in a position to float it found it had missed the boat. BIW obtained £2.5m in debt instead. It has subsequently raised £7m from share issues, mainly from angel investors.

BIW’s project control and management software is either used on large construction projects or by the likes of Sainsbury to manage its new sites and refurbishment and maintenance of existing sites. The main customers are in retail, local and central government, property and financials.

The software enables all the different parties involved in a project to access the latest plans and information because it is all held centrally and can be shared with registered users – both customers and suppliers. This means that there are fewer disputes or they are at least easier to resolve because everything can be traced back.

BIW has only one significant client in the housing sector and it only works on big schemes. The main weakness is coming from the financial sector and retail, although Flind says that retailers are still investing. He also adds that if a project has been started it is unlikely to be stopped so the business already won is continuing.

Revenues are generated on a monthly subscription basis – either per project or per customer. Projects can last three-to-five years so this provides predictable contracted revenues. There are 11,000 customers and 110,000 users of the software. Flind says that the order book is worth £13m and lasts an average of four years.

An office has been opened in Dubai and BIW’s software is being used on the Nakheel Tower, which will be more than 1km tall. Flind says that the Middle East accounts for £1.2m of group turnover of £7.3m in the year to September 2008.

BIW would like to raise between £2m and £4m from a share issue. There is currently around £3m of debt in the business and the additional cash would help the company to expand.  It could be used to grow the business in existing markets and open more offices in the Middle East. There may be one or two potential acquisitions that could add clients or additional services but the focus is organic growth.  There is no intention to pay dividends and all the cash generated from operations will be ploughed back into the business.

BIW is the type of cash generative business that would be a good addition to AIM and its willingness to be patient shows that AIM is still a desired destination for companies, despite all the knocking copy in the press.