BDI.L Regulatory News (BDI)

FOR IMMEDIATE RELEASE 9 April 2014

2013 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 audited preliminary results for the year ended 31 December 2013.

KEY POINTS

FINANCIAL HIGHLIGHTS

· Recurring revenues now represent 95% of administrative expenses (2012: 92%)

· Administrative expenses* down by 4.1% to £24.7m (2012: £25.7m)

· Operating profit* up 23% to £3.4m (2012 £2.7m)

· Profit before tax up 193% to £1.6m (2012: £0.56m)

· Diluted earnings per share up 53% to 3.5p (2012: 2.3p)

· Recommended Final Dividend up 22% to 2.2p (2012: 1.8p)

· Moved to net cash position of £1.4m (2012 net debt: £1.8m)

* Pre amortisation of intangibles assets and exceptional items

OPERATIONAL HIGHLIGHTS AND CURRENT TRADING

· £8.5m Acquisition of Eurowage Limited (FMP Europe)

o A fully managed International Payroll solution to multi-national companies in the UK and overseas

o Adds international payroll solutions to Bond's portolio of product offerings

o Immediately earnings enhancing

o Significant contract wins in UK and US

o The board believe the Group is well placed to benefit from the ongoing economic recovery

Commenting on the results Chief Executive Steve Russell, said:

"The group is seeing all our worldwide recruitment markets improve on a real and sustainable basis. The reorganisation in our US business is having a positive effect, Asia Pacific continues to present opportunities for significant growth and our payroll operations continue to show material upside underpinned by the acquisition of Eurowage to the group. We have made good strategic progress this year and are confident on the future prospects of the Group."

For further information, please contact:

BOND INTERNATIONAL SOFTWARE PLC

Chairman's Statement

I am pleased to report the results for the year ended 31 December 2013 which show a year of improving profitability with operating profit before amortisation of all intangible assets and exceptional items rising by 13.1% to £6,124,000 (2012: £5,413,000) and operating profit before the amortisation of acquired intangibles up by 23.0% to £3,419,000 compared with £2,779,000 in 2012.

As previously reported, the group's strategy has focussed on growing recurring revenues as part of its drive to build value in the business. Recurring revenues provide less benefit in the year in which the revenue is acquired but in the long term they are more valuable to the group and to the future value of the business. The recurring revenues were marginally down on 2012, as they were impacted by the expiry of a fixed term contract which we are now invoicing on a time and materials basis. However the underlying trend continues to be upwards as we focus on increasing our SaaS (Software as a Service) customers along with recurring revenues from other sources such as the group's payroll operations. Looking forward, the group expects to see increasing revenues from SaaS although the impact will be offset to some extent by reducing support revenues from our legacy products. In 2013 recurring revenues were £23,365,000 compared to £23,609,000 in 2012. These now represent a substantial 67% of total revenues (2012: 67%) and cover 95% (2012; 92%) of the group's administrative expenses (excluding the amortisation of intangible assets). These have reduced by 4.1% from £25,738,000 in 2012 to £24,672,000 in 2013.

Profit before exceptional items has increased by 57.2% to £1,809,000 (2012: £1,151,000) and the group has made a profit before tax of £1,634,000 compared with £558,000 in 2012.

The group has a reported undiluted earnings per share from continuing operations of 3.52p (2012: 2.30p) and diluted earnings per share from continuing operations of 3.52p (2012: 2.30p). 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 £2,726,000 (2012: £2,556,000) and the adjusted undiluted earnings per share were 6.60p (2012: 6.19p) and the adjusted diluted earnings per share were 6.60p (2012: 6.19p).

The group generated £7,851,000 of cash from operating activities (2012: £3,952,000) helped by a reduction in the working capital requirement of £1,346,000 through improved credit control and cash collection. The group's capital expenditure on property, plant and equipment and internally generated product development increased by 6.5% to £4,184,000 (2012:£3,927,000) and the dividend payment increased by 50% from £496,000 to £744,000. The positive cash flows allowed the group to turn net debt of £1,790,000 at the end of 2012 to net cash of £1,352,000 at the end of 2013.

Based on the progress made by the group, I am pleased to say that the board is recommending the payment of a dividend of 2.2p per share which is a 22% increase on last year. The payment is subject to shareholder approval at the Annual General Meeting on 26 June 2014 and if approved, will be made on 8 August 2014 to shareholders on the register at 18 July 2014.

Acquisition

We have today announced the conditional acquisition of Eurowage Limited, which trades as FMP Europe, for a minimum consideration of £8.5m with additional amounts payable based on the company's performance over the next three years. The company offers fully managed international payroll solutions to principally UK and USA organisations expanding into new countries.

Bond has seen its payroll operations deliver consistent growth in revenue and profitability over the last few years and is seeking to expand them further both organically and through acquisition. The payroll operations, which utilise Bond's intellectual property, are currently operating in the UK only. Increasingly companies with overseas subsidiaries or branches are looking for one payroll provider to meet all their payroll needs, something that Bond cannot offer in its own right. In order to broaden its customer base to multinational companies in the UK and international companies, primarily in the US, the board believes that Bond has to offer payroll solutions in countries other than the UK.

Eurowage provides managed payroll solutions in many countries around the world. Bond has already partnered with Eurowage on previous deals but believe that bringing the operation into the group will strengthen its product offering and drive sustainable growth in revenues and profits from payroll operations. Furthermore Bond's existing customer base includes organisations with operations in many countries around the world and to whom the group will be well placed to offer international managed payroll solutions through Eurowage.

The company which was established in 2005 has seen revenues grow to £3.90m in 2013 with a profit before taxation of £1.78m and the board believes it will be earnings enhancing from the date of acquisition.

Employees

The group employs 460 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

The board has been encouraged by the start to 2014. Trading conditions are good in the major markets in which we operate and we believe the group is well placed to benefit from the ongoing economic recovery. The acquisition we announced today will complement our payroll bureau operation by allowing us to offer international payroll solutions to customers and prospects alike.

Martin Baldwin

Chairman

8 April 2014

BOND INTERNATIONAL SOFTWARE PLC

Group Chief Executive's Report

Overview

We have seen an improvement in margins with operating profit before the amortisation of acquired intangible assets improving by 23% to £3,419,000 (2012: £2,779,000).

Recruitment software

Recruitment software accounted for 51% of group revenues in 2013 compared with 57% in 2012 with the reduction reflecting the move from capital sale of software and services to the rental (SaaS) model especially in the UK and the USA. The move to SaaS continues to increase, although one contract expired at the end of 2013, the impact of which masks underlying growth in rental income. The majority of system sales are now on a rental basis.

During the year we announced two significant contracts, one in the UK worth a minimum of £2.5m in revenue and one in the USA. Both of these contracts are on-going with further significant revenues and cash to be generated in 2014 and beyond.

In Asia Pacific we are working on a major deployment which is scheduled for completion in the second quarter of 2014. This had a significant (but temporary impact) on the revenues and profitability in the regions.

*before amortisation of intangible assets and exceptional items

HR and payroll software

Bond Payrite and Bond Teamspirit are strategic products for the group and we 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 for the division grew by 15% in 2013 to £5,262,000 (2012: £4,559,000) with strong growth in revenues from Bond Payrite and Bond Teamspirit. The division has benefited from the opportunities afforded by the introduction of RTI (Real Time Information) by HMRC in 2013 as well as the challenges faced by companies as a result of the government's legislation of autoenrolment of employees to company pension schemes. In March 2013 the group announced that agreement had been reached with Carpetright plc for Bond Teamspirit to provide integrated HR, Payroll and Time & Attendance software along with outsourced payroll for their entire business.

Recurring revenues of £3,313,000 (2012: £3,361,000) represent 63% of total revenues (2012: 74%) and cover 112% of the fixed operating costs of the division (2012: 128%). The increase in revenues has contributed to a 16% rise in operating profit from £1,640,000 in 2012 to £1,901,000 in 2013.

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 13% increase in revenues from £8,637,000 in 2012 to £9,742,000 in 2013. Underpinning this growth is an increase of 12% in recurring income from annually renewable contracts. Consultancy revenues have also increased by nearly 13% as the company continues to increase the number of schools to which it provides outsourced service. The business now has the significant benefit of 95% (2012: 96%) coverage of all overheads by recurring contract income.

2013 has also seen continued growth for Bond Payroll services with an excellent 14.6% increase in revenues to £2,259,000 (2012: £1,972,000). Significant new clients include Henderson Global Investors, Southern Dental, Fabulous Fanfayre and Vitacress. The business is now processing around 70,000 payslips per month which represents an 11% increase on last year.

The outsourcing division delivered an operating profit of £2,041,000 (2012: £1,741,000) which represents a 17% increase.

Both Strictly Education and Bond Payroll Services have made an encouraging start to 2014 and the division will be further strengthened by the acquisition of FMP Europe which we announce today. The acquisition will add international payroll solutions to the group's portfolio of products and services and enable the group to offer outsourced payroll solutions to multi-national companies in the UK and overseas.

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 £4,821,000 to £4,515,000 which is still 12.9% of revenues compared with 13.6% in 2012.

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 2013 that saw additional functionality being added to the Adapt platform including the ongoing 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, the introduction of extremely advanced and intelligent search and match technology, and the development of dashboard technologies, allowing recruiters to set up snapshots of their working day.

People

The group employs around 460 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 2013 and their continuing loyalty and support in 2014.

Outlook

The group is seeing all markets improve on a worldwide basis and the results for the first quarter continue to provide encouragement that the recovery is real and sustainable. The reorganisation that we effected in our US business in 2012 is having a positive effect and the combination of a rejuvenated salesforce and a brand new and exciting product portfolio is already showing returns.

Asia Pacific continues to present opportunities for significant growth and we have already succeeded in selling systems to the indigenous clients in addition to multinational companies.

Our payroll operations continue to grow and with the addition of FMP to the group, looks set to have another successful year in 2014.

Steve Russell

Group Chief Executive

8 April 2014BOND INTERNATIONAL SOFTWARE PLC 

Consolidated income statement for the year ended 31 December 2013

BOND INTERNATIONAL SOFTWARE PLC 

Consolidated statement of comprehensive income for the year ended 31 December 2013

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

BOND INTERNATIONAL SOFTWARE PLC

Consolidated balance sheet at 31 December 2013

BOND INTERNATIONAL SOFTWARE PLC

Consolidated cash flow statement for the year ended 31 December 2013

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

BOND INTERNATIONAL SOFTWARE PLC

Consolidated statement of changes to shareholders' equity for the year ended 31 December 2013

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

Notes for the year ended 31 December 2013

1. Basis of preparation

The financial information for the year ended 31 December 2013 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006 but represents extracts from the company's audited accounts which have been reported on by the auditor, and will be dispatched to the shareholders and filed with the Registrar of Companies following the AGM in June 2014. 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 audited consolidated financial statements of the group for the year ended 31 December 2013 were prepared in accordance with International Financial Reporting Standards adopted for use in the European Union and by applying the accounting policies and presentation that were used in the preparation of the group's financial statements for the year ended 31 December 2012.

The comparative figures for the financial year ended 31 December 2012 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 8 April 2014.

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 set out 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

Notes for the year ended 31 December 2013 (cont'd)

2. Segmental reporting (cont'd)

(a) Operating segments (cont'd)

Segmental information about these businesses is presented below.

BOND INTERNATIONAL SOFTWARE PLC

Notes for the year ended 31 December 2013 (cont'd)

2. Segmental reporting(cont'd)

(a) Business segment (cont'd)

BOND INTERNATIONAL SOFTWARE PLC

Notes for the year ended 31 December 2013 (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

Notes for the year ended 31 December 2013 (cont'd)

3. Exceptional items

4. Income tax expense/(credit)

5. Earnings per share

(a) Basic

The basic earnings per share is calculated by dividing the profit 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

Notes for the year ended 31 December 2013 (cont'd)

5. Earnings per share (cont'd)

(b) Diluted

The diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For these 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. 

Options over 373,600 shares (2012: 436,450 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.

(c) Adjusted

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

Notes for the year ended 31 December 2013 (cont'd)

6. Dividends

The proposed final dividend was approved by the Board of Directors on 8 April 2014 and is payable to all shareholders on the Register of Members on 18 July 2014 and is subject to the approval of shareholders at the Annual General Meeting on 26 June 2014. 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

Notes for the year ended 31 December 2013 (cont'd)

8. Intangible assets

The capitalised internally generated intangible assets relate to costs incurred on specific product development programmes.

The remaining amortisation periods for software are between 6 and 7 years, customer contracts between 6 and 8 years and internally generated intangible assets up to 10 years. The total charge for the amortisation of intangible fixed assets for the year is shown on the face of the Consolidated Income Statement.

BOND INTERNATIONAL SOFTWARE PLC

Notes for the year ended 31 December 2013 (cont'd)

9. Post Balance Sheet Event

On 8 April 2014 the group entered into a conditional agreement to acquire the entire issued share capital of Eurowage Limited, trading as FMP Europe, for a minimum consideration of £8,500,000 comprising the payment of £6,000,000 and the issue of 1,073,537 new ordinary shares at an issue price of 93.15p with deferred consideration of £1,500,000 payable in two instalments of £1,000,000 and £500,000 on the first and second anniversaries of completion respectively. There is also provision for further amounts to be paid based on the financial performance of the company during the year ended 31 December 2014 and the average annual profits for the company for the three years ended 31 December 2016.

Due to the timing of the acquisition the accounting has not yet been finalised.

10. Report and Accounts

Copies of the Report and Accounts will be circulated to shareholders shortly and may be obtained after the posting date from the Company Secretary, Bond International Software plc, Courtlands, Parklands Avenue, Goring by Sea, Worthing, West Sussex, BN12 4NG.