Bond Announce Unaudited Interim Results
- Revenue of £17.4m (2011: £18.4m)
- Recurring revenue of £11.7m (2011: £11.0m)
- Administration expenses reduced 3.6% to £13.1m (2011: £13.6m)
- Operating profit £1.0m (2011: £1.4m)
- Diluted earnings per share 0.43p (2011: 0.01p)
- Adjusted earnings per share 2.07p (2011: 2.85p)
- Significant new contracts won in Australia and Japan resulting in a 63% increase in revenues in our Asia Pacific operation
- Strong growth in Outsourcing Division
Commenting on the results, Group Chief Executive Steve Russell said:
“The staffing software market remains challenging and while we remain cautious about the UK and USA, the group is well placed to take advantage of continued growth in key emerging markets and to prosper when growth returns to the economy.
In the last six months Bond has continued to invest in, and expand operations, in Asia Pacific, leading to a significant contract win in Japan, showing continued confidence in our service offering and strength in this market.”
We are pleased to report the unaudited interim results for the six months ended 30 June 2012.
Although the Group’s recurring revenues have shown healthy growth, sales of software, in particular to the UK staffing industry, reflect the lack of IT investment being made by some of the larger recruitment companies. They also reflect the on going change in business model from the traditional licence sale to the provision of software on the basis of Software as a Service (“SaaS”). This has resulted in total revenues for the group showing a 5% drop for the six months from £18,375,000 in 2011 to £17,443,000 in 2012.
The increase in recurring revenue means that 89% of administrative expenses (excluding the amortisation of development costs) are covered compared with 82% for the same period last year.
With a reduction of 3.6% in administrative expenses the group operating profit, before the amortisation of acquired intangibles, was £995,000 (2011: £1,393,000) and basic earnings per share from continuing operations were 0.48p per share compared with 1.25p for the same period in 2011. The adjusted basic earnings per share from continuing operations were 2.07p for the first six months (2011: 2.85p) and adjusted diluted earnings per share were 1.83p (2011: 2.52p).
The group generated cash of £991,000 from operating activities in the period (2011: £1,534,000). Overall the company has increased net debt by £995,000 after capital expenditure of £1,973,000, mainly in on going product development.
Recruitment Software Division
Whilst the Recruitment Software Division has experienced difficult market conditions, we have been encouraged by continuing growth in recurring income from software support and SaaS which is up by 6.4% from 2011 to 2012.
Our Asia Pacific operation has made great strides in the first half of 2012 announcing the largest deal ever signed by us in Australia and the first contract of note through our Japanese office, both of which have had a positive impact on the first half of 2012 with revenues up by 63% and an operating loss of £89,000 in 2011 has been turned into an operating profit of £167,000 in 2012. The contracts should also have a further positive impact in the second half of 2012 and 2013 when the deployments are completed and more revenue is recognised.
In the US the process of merging the three separate operations has continued into 2012 so that whilst revenues have fallen by 8%, the operating profit before amortisation from this region has increased by 44% to £892,000 from £621,000.
Market conditions have been the most difficult in the UK where there has been an absence of sizeable licence sales during 2012. For this reason the operating profit before amortisation of development costs has fallen to £237,000 compared with £973,000 in 2011. The Company has a number of significant sales prospects but there is no question that the lead time for decision making has lengthened. To counter this, the company is considering a number of proposals to reduce the UK operating costs.
Analysis of Recruitment Software Division revenues
HR and Payroll Software Division
The HR & Payroll division supports two HR packages, a payroll and an integrated HR and payroll solution. Their target market is small to medium sized enterprises in both the private and public sector.
The division made an operating profit before amortisation of intangible assets of £867,000 representing a very healthy operating margin of 37% as costs have been adjusted to provide on-going support on all HR and payroll products as well as moving the strategic products forward.
Outsourced HR & Payroll Services
This division comprises two separate operations, Strictly Education which provides outsourced HR, payroll and other services to schools in the UK state sector, and Bond Payroll Services which provides payroll bureau services to organisations in both the private and public sectors.
The revenues for the division are a combination of monthly fees under annual contracts for a variety of outsourced services together with fees payable in respect of consulting services for projects undertaken on behalf of customers.
Strictly Education has seen an 11% increase in revenues from 2011 to 2012. Underpinning this growth is an increase of 18% in recurring income from annually renewable contracts. Consultancy revenues have remained flat as the UK Government cuts back on state spending on schools. Operating margins have remained the same at 12% resulting in an operating profit of £475,000 in 2012 (2011: £446,000).
Bond Payroll Services has seen a 2% increase in revenues year on year to £979,000 and operating profit is at a similar level to the first half of 2011 at £250,000. The business is now processing an average of 57,000 payslips per month which represents a 5% increase on last year. This follows additional investment in staff to improve customer service and retention rates as well as to generate new business through a greater sales and marketing effort. The business will see the benefits in the second half of 2012.
The group continues to invest a significant proportion of revenues in enhancing its product portfolio although overall expenditure on development fell slightly to £2,530,000 in 2012 compared with £2,575,000 for the same period last year.
Current trading and future prospects
Whilst the market for staffing software in the UK remains slow, the group has significant prospects both in the UK and abroad, although these are likely to be SaaS and may not have a material impact on the short term results. Trading has improved since the half year end and the recent opening of an office in Singapore demonstrates our confidence in the Asia Pacific region and its prospects for growth. The HR and Payroll division continues to produce high returns and the Outsourcing Division continues to grow at a satisfying rate.
It is true that there is much uncertainty surrounding the prospect for the global economy but the group is well placed to take advantage of the growth areas that do exist and to prosper when growth returns to the world at large.
24 September 2012
For further information, please contact:
Bond International Software Plc:
Tel: 01903 707070
Steve Russell: Group Chief Executive
Bruce Morrison: Finance Director
Tel: 0207 466 5000
Cenkos Securities plc:
Tel: 020 7397 8900