BDI.L Regulatory News (BDI)

FOR IMMEDIATE RELEASE 3 April 2013

2012 UNAUDITED PRELIMINARY RESULTS

Bond International Software plc,a world leading supplier of staffing, HR and payroll software and services, with operations in the UK, USA, Hong Kong, Japan, China, Singapore and Australia, today announces its unaudited preliminary results for the year ended 31 December 2012.

KEY POINTS

FINANCIAL HIGHLIGHTS

·; Recurring Revenues up 5% to £23.6m (2011: £22.5m) and now contributing 67% of total revenues

·; Operating profit before the amortisation of acquired intangible assets and exceptional items risen by 4% to £5.4m (2011: £5.2m)

·; Adjusted*operating profit increased 7.5% to £2.8m (2011: £2.6m)

·; Adjusted* EPS of 6.19p (2011: 4.71p)

·; Reduction in admin expenses by 4% to £25.7m (£26.8m)

·; Final dividend of 1.8p, a 50% increase on last year.

* Adjusted for the amortisation of acquired intangibles, exceptional items and impairment of intangible assets

OPERATIONAL HIGHLIGHTS AND CURRENT TRADING

·; Significant contracts won in Australia and Japan, further increasing our successin the region

·; New contract win with Carpetright announced 6 March 2013

·; Newly configured AdaptSuite product launched in February 2013 in the USA

·; On track to meet current market expectations

Commenting on the results Chief Executive Steve Russell, said:

"2013 has seen a strong start for the year. Demand for our products and services in the UK is increasing. The emerging markets in Asia Pacific are continuing to present opportunities for growth on the back of the first major Japanese contract announced last year and the staffing market in the USA is showing signs of sustainable recovery which we are well placed to exploit with the launch of AdaptSuite.

 With increased recurring revenue and lower overheads the board believes the group is well placed to grow profits over the coming year."

For further information, please contact:

BOND INTERNATIONAL SOFTWARE PLC

Chairman's Statement

As previously reported, the group's strategy has focussed on increasing recurring revenues as part of its drive to build increasing value in the business. Recurring revenues provide less impact in the year in which the business is acquired but in the long term they are more valuable to the group as a whole and to the future value of the business. I am delighted to report a significant rise of 5% in recurring revenues as the sales of our software as a service-based (SaaS) products continue to grow and we expand the outsourced operations. In 2012 recurring revenues grew to £23,609,000 from £22,449,000 in 2011 now representing a substantial 67% of total revenues (2011: 61%) covering 92% of the group's administrative expenses (excluding the amortisation of intangible assets). This growth, which is almost hidden on first examination, represents a major step forward for the group, creating greater visibility of future earningsand offering a solid foundation for the future. It becomes all the more impressive when examining the record over the three years from 2009 to 2012, during which the group's recurring revenues from continuing operations have grown from £16.2m to £23.6m, an increase of 46%

Allied to this growth in recurring revenues, the group has reduced administrative expenses by 4% from £26,820,000 in 2011 to £25,738,000 in 2012 following the reorganisation of the three US businesses into one in 2011. The grouprestructured its UK staffing operations in November 2012 which will realise further annual savings of approximately £1.2m from 2013 onwards.

The combination of increasing recurring revenues and reduced administrative expenses has increased the group's resilience to the ups and downs of major software licence sales. As a consequence, the operating profit before amortisation of all intangible assets and exceptional itemsand impairment of intangible assets has risen by 4% to £5,413,000 (2011: £5,209,000) and operating profit before the amortisation of acquired intangibles is up 7.4%to £2,779,000 compared with £2,588,000 in 2011.

Profit before exceptional items has increased by 15.3% to £1,151,000 (2011: £998,000) and the group has made a profit before tax of £558,000 compared with a loss of £1,430,000 in 2011 when the group made provision for the impairment of goodwill of £1,368,000. The group has also identified further expenditure on which it was able to claim research & development credits and as a result it has benefitted from the recovery of prior year corporation tax of £393,000 which is included as a tax credit in 2012.

The group has a reported undiluted earnings per share from continuing operations of 2.60p (2011: loss of 3.48p) and fully diluted earnings per share from continuing operations of 2.30p (2011: loss of 3.48p). In order to assist with understanding the underlying performance of the group we have reported adjusted earnings per share excluding the effects of the amortisation of acquired intangibles and one-off exceptional items. On this basis the adjusted profit after tax was £2,556,000 (2011: £1,948,000) and the adjusted undiluted earnings per share were up 31% to 6.99p (2011: 5.32p) and the adjusted fully diluted earnings per share were up a similar percentage to6.19p (2011: 4.71p).

The group generated £3,951,000 of cash from operating activities (2011: £5,317,000) with working capital adversely affected by, inter alia, the late payment of an invoice by one customer which was subsequently settled in 2013. The group's capital expenditure on property, plant and equipment and internally generated product development increased by 2.5% to £3,927,000(2011:£3,828,000) and the dividend payment increased by 50% from £330,000 to £496,000. The result was an increase in net debt from £987,000 to £1,790,000.

The grouphas reached provisional agreement with Barclays Bank to replace the existing loan facility which expires in April 2013 with a new a medium term loan facility of £6 million on similar terms. The new facility, which is subject only to completing legal documentation is to be used for working capital and acquisition funding on an as needed basis.

I am pleased to say that the board is recommending the payment of a dividend of 1.8p per share which is a 50% increase on last year. The payment is subject to shareholder approval at the Annual General Meeting on 20 June 2013 and, if approved, will be made on 2 August 2013 to shareholders on the register at 19 July 2013.

Employees

The group employs nearly 500 people in our offices around the world. A motivated and committed workforce is vital to the continuing development of the group and I would like to thank all the staff for their continuing hard work, dedication and loyalty to the group.

Prospects

We have seen a promising start to 2013. Our staffing business is benefitting both from the reduced cost base after the reorganisation in 2012 and increasing demand for its staffing software products. Our outsourcing division is growing healthily and the HR and Payroll business has just won a significant contract. This coupled with improving cash flows allow us to approach coming years with increasing optimism.

Martin Baldwin

Chairman

2 April 2013

BOND INTERNATIONAL SOFTWARE PLC

Group Chief Executive's Report

Overview

Thegroup has seen encouraging growth in recurring income which is up by 5% to £23.6m and following reorganisation in the US and UK, we can see the improvement in margins with operating profit before the amortisation of acquired intangible assets improving by 7.4% to £2,779,000 (2011: £2,588,000). As reported in the Chairman's Statement this is a culmination of three years growth resulting in an overall improvement of recurring revenues by 46% during the period. In a difficult world market, we have managed a transition from large on-premise licence and support fees to a substantial recurring revenue and with an established sales model, which our customers enjoy and which is generally accepted as the correct business model for driving maximum future growth.

Recruitment software

Recruitment software accounted for 57% of group revenues in 2012 compared with 62% in 2011 with the reduction reflecting the move from capital sale of software and services to the rental (SaaS) model both in the UK and the USA. The move to SaaS continues unabated with rental income increasing by 30%. Despite a couple of notable exceptions, the majority of system sales are now on a rental basis rather than the traditional licence and software support agreement.

During the year we announced two significant deals in Asia Pacific, one in Australia and one in Japan. Both of these deployments are on-going with further significant revenues and cash to be generated in 2013. Both the UK and USA businesses took steps to reduce their cost base in 2012, although much of this benefit will not be felt until 2013.

In the US, we released in February 2013 our newly configured AdaptSuite, a web-based front-to-back office suite of software, which we believe to be unique in the US staffing market. Interest in this product is already rapidly growing and we are confident that significant sales will follow.

*before amortisation of intangible assets, exceptional items and impairment of intangible assets

We have been much encouraged by trading in the first quarter of2013. With the lower cost base in the UK we have seen an immediate increase in profitability. Further encouragement can be taken from the improving prospect list which now includes a number of enterprise level prospects, some of which we expect to secure in the first half of 2013. We also see great significance in the return of what we would classify as mid-range deals (for 20-100 users) for the first time since 2008 and believe that this is due to the new highly competitive SaaS pricing model which is so beneficial for the value of the group.

HR and payroll software

Payrite and Team Spirit remain strategic products for the group and it is the board's intention to continue developing and enhancing both products. They are at the heart of our Payroll Outsourcing operations, allowing the group to grow revenues and operating profits in those divisions.

The analysis of revenue by product is:

Overall revenues are 5% lower in 2012 at £4,559,000 (2011: £4,810,000) as a result of the reducing number of customers using Professional and Workforce. As a consequence operating profit has reduced from £1,967,000 in 2011 to £1,640,000.

Recurring revenues represent 74% of total revenues (2011: 72%) and cover 128% of the fixed operating costs of the division (2011: 123%).

The first quarter of 2013 has seen a significant increase in activity compared to 2012 and we are encouraged about the prospects for this division.

Outsourcing

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 had another year of excellent growth with a 15% increase in revenues from £7,509,000 in 2011 to £8,637,000 in 2012. Underpinning this growth is an increase of 19% in recurring income from annually renewable contracts. Consultancy revenues have also increased by nearly 9% despite the UK Government cut-backs on state spending on schools. The business now has the significant benefit of 100% coverage of all overheads by recurring contract income. In addition, the NAHT (National Association of Head Teachers) has chosen Strictly Education as its preferred partner for its members under an NAHT brand called 'Assure'. This means that the state schools run by an NAHT member are being supported by Assure via Strictly Education for HR and Health and Safety advice. It is early days but business has already started to be transacted and as the Local Authorities reduce their support services, the NAHT is able to offer its members a replacement reliable service.

2012 has also seen continued growth for Bond Payroll services with an 8% increase in revenues to £1,972,000. Significant new clients include Bain Capital (who have been on the RTI pilot with the HMRC), ECDP, Merlin Medical, The Birmingham Repertory Theatre and RE Personnel. The business is now processing an average of 63,000 payslips per month which represents a 25% increase on last year.

There has been increased focus on the solutions that are offered through the Bureau and particular attention has been concentrated on the recruitment sector that Bond already services through the Adapt business, creating a Pay & Charge solution that is capable of providing a managed payroll solution to recruiters as well as providing invoicing capabilities. This solution was launched at the end of 2012 and has already seen some significant wins.

The outsourcing division delivered an operating profit of £1,741,000 (2011: £1,659,000) although it was adversely affected by increased property costs following the relocation of Strictly Education in July 2012. These costs will not recur in 2013, allowing us to further improve the operating margins moving forward.

Both Strictly Education and Bond Payroll Services have made a strong start to 2013. In February the group announced that Carpetright plc had selected Bond Payroll Services and Bond Team Spirit to provide the retailer with outsourced payroll, together with in-house HR and payroll software for their entire business.

Product strategy

We continue to invest a significant proportion of our overall revenue in enhancing our products although we have seen a small reduction in development costs from £4,945,000 to £4,821,000 which is 13.6% of revenues compared with 13.5% in 2011.

The group has continued to invest in its flagship product, Adapt, as well as configuring new applications using Adapt technology to achieve, where possible, a consistent technical platform. A number of major projects were carried out in 2012 that saw additional functionality being added to the Adapt platform including the development of a new integrated front and back office system for the US market, the development of a more intuitive and aesthetically pleasing user interface, ready for launch in the second quarter of2013, the introduction of extremely advanced and intelligent search and match technology, built around the concept of contextual language matching, allowing the recruiter to better identify jobs and candidates when compared to more traditional 'key word' search methods, and the development of dashboard technologies, allowing the recruiter to setup snapshots of their working day

People

The group employs nearly 500 staff around the world with offices in UK, USA, Australia, Singapore, Japan, Hong Kong, China and Peru as well as outsourced development teams in India and the Ukraine. I take this opportunity to thank them all for their hard work in 2012 and their continuing loyalty and support in 2013.

Outlook

On the evidence we have seen so far, 2013 looks to be an exciting year for the group. All three divisions have had a strong first quarter, delivering profit ahead of the same period last year. In the staffing division our prospect list includes a number of enterprise level deals and we are confident of securing at least two such deals in the first half of the year. Our emerging markets in Asia Pacific continue to present opportunities for growth on the back of the first major Japanese contract announced last year. In the USA, the staffing market is well on the way to recovery and with our new AdaptSuite product we are well placed to maximise the opportunities that are presented.

The outsourcing businesses continue to grow at an encouraging rate and in 2013 we have already announced a new contract that will benefit both the HR & Payroll Software Division and the Outsourcing Division. This contract builds on the increasing success that the group has had in cross selling its products to existing customers of the group who already know and trust Bond.

Steve Russell

Group Chief Executive

2 April 2013BOND INTERNATIONAL SOFTWARE PLC

Unaudited consolidated income statement for the year ended 31 December 2012

BOND INTERNATIONAL SOFTWARE PLC

Unaudited consolidated statement of comprehensive income for the year ended 31 December 2012

There are no taxation effects in respect of the foreign currency translation differences.

BOND INTERNATIONAL SOFTWARE PLC

Unaudited consolidated balance sheet at 31 December 2012

BOND INTERNATIONAL SOFTWARE PLC

Unaudited consolidated cash flow statement for the year ended 31 December 2012

For the purposes of the cash flow statement, cash includes deposits at call with financial institutions

BOND INTERNATIONAL SOFTWARE PLC

Unaudited consolidated statement of changes to shareholders' equity for the year ended 31 December 2012

Attributable to owners of the parent

The share premium account is used to record the amounts received in excess of the nominal value of shares issued.

The currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

The equity option reserve is used to record the reserve set aside for share based payment expense.

The retained earnings reserve and currency translation reserve represent the cumulative net gains and losses arising in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income.

BOND INTERNATIONAL SOFTWARE PLC

Unaudited notesfor the year ended 31 December 2012

1. Basis of preparation

The financial information for the year ended 31 December 2012 does not constitutestatutory accounts as defined in section 435 of the Companies Act 2006 but represents extracts from the company's unaudited accounts which will be reported on by the auditor, dispatched to the shareholders and filed with the Registrar of Companies following the AGM in June 2013. These extracts do not provide as full an understanding of the financial performance and position, or financial and investing activities of the group as the complete Annual Report & Accounts.

The unaudited consolidated financial statements of the group for the year ended 31 December 2012 were prepared in accordance with International Financial Reporting Standards adopted for use in the European Union andby applying the accounting policies and presentation that were used in the preparation of the group's financial statements for the year ended 31 December 2011.

The comparative figures for the financial year ended 31 December 2011 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditor and have been delivered to the Registrar of Companies. The report of the auditor was unqualified, did not include a reference to any matter to which the auditor drew attention by way of emphasis without qualifying their report, and did not contain a statement under Sections 498(2) or 498(3) of the Companies Act 2006.

The announcement was approved by the Board of Directors and authorised for issue on 2 April 2013.

2. Segmental Reporting

(a) Operating segments

For management purposes, the group is currently organised into three operating segments - Recruitment software, HR and payroll software, and Outsourcing. These divisions are the basis on which the group reports its segment information. The operating segments presented in the following tables are presented on the same basis as that used for internal reporting purposes to the Board, which is the Chief Operating Decision Maker (CODM).

The group measures the performance of its operating segments based on revenue and profit from operations, before any exceptional items and amortisation. Accounting policies used for segment reporting reflect those used for the group. Inter-segment sales are priced on an arms-length basis. Costs and overheads incurred centrally are assigned to an unallocated segment.

The principal activities used to identify the segments for reporting are as follows:

Recruitment software: Supply of specialist recruitment software

HR and payroll software: Supply of integrated HR and payroll solutions

Outsourcing: Outsourced HR, payroll and other services to schools in the state sector, and payroll bureau services to a variety of organisations in the state and private sectors.  

Unallocated items comprise mainly corporate and head office items.

BOND INTERNATIONAL SOFTWARE PLC

Unaudited notes for the year ended 31 December 2012(cont'd)

2. Segmental reporting (cont'd)

(a) Operating segments(cont'd)

Segment information about these businesses is presented below.

BOND INTERNATIONAL SOFTWARE PLC

Unaudited notes for the year ended 31 December 2012(cont'd)

2. Segmental reporting(cont'd)

(a) Business segment (cont'd)

BOND INTERNATIONAL SOFTWARE PLC

Unaudited notes for the year ended 31 December 2012(cont'd)

2. Segmental reporting(cont'd)

(b) Revenue by income type:

(c) Geographical areas

The further segmental information is provided in respect of the geographical region in which the subsidiary operates:

BOND INTERNATIONAL SOFTWARE PLC

Unaudited notes for the year ended 31 December 2012(cont'd)

3. Exceptional items

4. Income tax credit

5. Earnings/(loss) per shar

(a) Basic

The basicearnings/(loss)per share is calculated by dividing theprofit/(loss) attributable to equity holders of the parent company by the weighted average number of ordinary shares in issue during the year.

BOND INTERNATIONAL SOFTWARE PLC

Unaudited notes for the year ended 31 December 2012(cont'd)

5. Earnings/(loss) per share(cont'd)

(b) Diluted

The diluted earnings/(loss) per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has two categories of dilutive potential ordinary shares; non voting convertible shares and share options. The non voting convertible shares are assumed to have been converted into ordinary shares. For the share options a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company's shares based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of the share options. 

The diluted loss per share for 2011 has been restated to basic loss per share because the inclusion of potentially dilutive shares reduced the loss per share.

Options over 436,450 shares (2011: 830,450 shares) are antidilutive because the exercise price is higher than the average share price in the year and have not been included in the calculation of diluted earnings per share.

The Chairman's Statement discusses a comparison between the earnings per share from continuing operations adjusted for the impact of the amortisation of certain intangible assets and the share based payment expense for the periods covered by this annual report. The adjusted earnings per share are based on adjusted profit calculated as follows: 

BOND INTERNATIONAL SOFTWARE PLC

Unaudited notes for the year ended 31 December 2012(cont'd)

6. Dividends

The proposed final dividend was approved by the Board of Directors on 2 April 2013 and is payable to all shareholders on the Register of Members on 19July 2013 and is subject to the approval of shareholders at the Annual General Meeting on 20 June 2013. In accordance with IAS10 'Events after the reporting period', the proposed final dividend has not been included as a liability in these financial statements.

7. Reconciliation of loss before tax to net cash flow from operations

BOND INTERNATIONAL SOFTWARE PLC

Unaudited notes for the year ended 31 December 2012(cont'd)

8. Intangible assets