BDI.L Regulatory News (BDI)

RNS Number : 1561T

Bond International Software PLC

23 September 2010

 

 

FOR IMMEDIATE RELEASE 23 September 2010

 

 

 

UNAUDITED INTERIM RESULTS

 

 

Bond International Software plc ("the Group"), the specialist provider of software for the international recruitment and human resources industries, with operations in the UK, USA and Asia Pacific, today announces its unaudited interim results for the six months to 30 June 2010.

 

KEY POINTS

 

Commenting on the results, Group Chief Executive Steve Russell said:

 

·; Group revenue at £15.1m (2009: £17.1m)

·; No material change in the level of recurring revenues at £9.04m (2009: £9.04m)

·; Continuing successful transition of sales model to improve forward visibility and quality of earnings but causing a short term impact on margins and profit

·; Gross margin at 88% (2009: 92%)

·; Operating profit before amortisation of £1.1m (2009: £2.4m)

·; Pre - tax loss at £680,000 (2009 profit: £799,000)

·; Adjusted EPS of 1.34p (2009: 3.22p)

 

Commenting on the results, Group Chief Executive Steve Russell said:

"The second half of the year has started off on a more positive note. We are seeing some signs that the market for staffing software is recovering with some more positive decision making seen in our customer base. Whilst none of the evidence of recovery in the staffing market is conclusive and neither does it indicate the speed of recovery, the board firmly believes that the worst is over and that business will start to improve in the last quarter."

 

 

For further information, please contact:

 

Bond International Software plc:	Tel: 01903 707070
Steve Russell: Group Chief Executive	e-mail: ir@bond.co.uk
Bruce Morrison: Finance Director
Buchanan Communications:	Tel: 020 7466 5000
Tim Thompson	e-mail : cmcmahon@buchanan.uk.com
Chris McMahon
Cenkos Securities plc:	Tel: 020 7397 8900
Stephen Keys

Chairman's Statement

 

I am pleased to report the unaudited interim results for the six months ended 30 June 2010.

 

Financials

 

The market for staffing software has experienced some of the most difficult trading ever seen. As a consequence group revenue for the six months of £15,144,000 is 11.2% less than revenue of £17,057,000 for the equivalent period in 2009. Our gross margin has been adversely affected by the change in the mix of sales between higher margin software licences and lower margin consultancy services and has come down from 92% in 2009 to 88% in 2010. The group has taken steps to mitigate the effect of the fall in revenues and decline in margin by reducing overheads by 8% from £13,354,000 in 2009 to £12,310,000 in 2010. There has been no material change in the level of recurring revenues at £9,042,000 in 2010 (2009: £9,045,000) although recurring revenue now represents 73% of group overheads compared with 68% in 2009.

 

The group has made an operating profit before share of joint venture and amortisation of intangible assets of £1,062,000 (2009: £2,383,000). The company is reporting a loss before tax of £680,000 in the six months to 30 June 2010 compared with a profit before tax in 2009 of £799,000.

 

The group's tax credit has been affected by the inclusion of enhanced research & development credits which has resulted in a significant refund of corporation tax since the end of the half year. The adjusted earnings per share (after taking out the amortisation of intangible assets created on acquisition) were 1.34p (2009: 3.22p).

 

Cash generated from operations was £73,000 following a net working capital outflow of £1,257,000 arising principally from the release of deferred maintenance revenues to the income statement. The group has reduced net capital investment by nearly 11% in line with the fall in sales and the net cash outflow in the six months to 30 June 2010 is £1,796,000 bringing the net overdraft to £4,319,000 and the group's net debt including leases and other borrowings to £4,582,000.

 

Recruitment Software Division

 

The Recruitment Software Division, which comprises primarily Adapt and eEmpACT, accounted for 53% of group revenues in the first half of 2010 compared with 56% in 2009. Revenues for this division fell by 16% to £8,000,000 (2009: £9,511,000), analysed by revenue types and geographical areas as follows:

 

	Six months ended 30 June		Year ended 31 December
	2010	2009	2009
	£000	£000	£000

Revenue by type

Software sales & services		3,649		4,981		9,712
Software support		3,144		3,379		6,112
Software rental		1,201		1,140		2,323
Software revenue Hardware & other sales		7,994 6		9,500 11		18,147 23
		8,000		9,511		18,170
		Six months ended 30 June			Year ended 31 December
		2010	2009		2009
		£000	£000		£000
Revenue by location of operating company
United Kingdom		4,450		5,085		9,904
USA		2,956		4,006		7,370
Asia Pacific		594		420		896
		8,000		9,511		18,170

 

The financial performance of the recruitment software division has been directly affected by a general downturn in the market for staffing software which dates back to 2009. Whilst the staffing industry is seeing significant and sustained signs of a recovery, this has yet to be reflected in demand for staffing software. As a result we have seen revenues fall by 16% in this division almost all of which is in the sale of staffing software and services with recurring revenues from software support and software rental only down by 4%. The effect on the business has been compounded by the fact that the sales of high margin software licences totalled only £750,000 in 2010 compared with £2,020,000 for the same period in 2009. The decline in software licence sales can partly be explained by lack of activity but also by the fact that the vast majority of new deals signed up in 2010 are on a rental basis which will bring benefits in the future. Revenues in our US operation have fallen by 26% to £2,956,000 (2009: £4,006,000) which is partly due to a fall in the level of new business sales and partly due to the completion of a major project in the final quarter of 2009. The shortfall has also been exaggerated by the change in the business model in the US which has seen upfront licence sales replaced by future rental. In 2010 almost every new deal signed in the first six months has generated very little in the way of upfront revenues. We have taken steps to reduce our operating costs in the US but we do not want to damage the longer term prospects for growth in the business by cutting back too far. In Asia Pacific our Japanese operation is growing with the first few contracts signed in early 2010. Whilst it will be a while before the operation is profitable, the staffing industry in Japan is of such a size that maintaining a presence here is very important for the future development of the business in the that region. Since the end of June the group has started to see some signs of improvement in the market for staffing software although it is difficult to project how quickly the demand will grow at this stage. The rate at which software support revenues are declining has reduced and we have received a number of orders for software licences and upgrades. The division already has an expectation that rental income will increase significantly during the last quarter when a number of major projects currently in deployment will be completed. Furthermore the division will benefit from the launch of two new products before the end of the year. Bond Talent is a product designed to manage the recruitment processes for corporates and enhances our existing product offering in this area. Bond Vantage is a product specifically developed for the Executive Search market.   HR and Payroll Software Division The HR and Payroll Software Division provides a range of HR and payroll products including an integrated HR, Payroll and Time & Attendance solution, an out-of-the box HR solution and a fully accredited payroll-only solution which is suitable for small and medium sized companies. The division saw revenues fall by 11% from £2,899,000 for the six months to 30 June 2009 to £2,573,000 for the same period in 2010 but improved margins from 27.6% in 2009 to 28.7% in 2010 through effective management of overheads. Around 70% of revenues in this division are recurring in nature under annually renewable maintenance contracts compared with 64% in 2009. Since 30 June 2010 the division has seen a further reduction in its operating costs although the full benefit will not be felt until 2011.  Outsourced HR & Payroll Services The division comprises Strictly Education which provides outsourced services to the state school sector and Bond Payroll Services which provides outsourced payroll services to a range of private and public sector organisations. The division has seen a 9% growth in revenues to £2,598,000 (2009: £2,382,000) all of which is organic. The division has also seen its operating margin improve from 13.5% to 16.4% through increasing the average revenue per employee in 2010. This led to operating profit rising by 33% to £427,000 in the six months to 30 June 2010 compared with £321,000 for the same period last year. Since the half year the group has taken a decision to consolidate two offices which has resulted in increased efficiencies, the benefits of which will flow through in 2011. During the first half of 2010 Strictly Education was also a partner in a joint venture, Strictly Education Solutions which acquired contracts to provide outsourced services to schools in Waltham Forest. The group's share of the joint venture's profit in the six months to 30 June 2010 was £91,000. In July 2010 the group bought out the joint venture partner for a total cost of £160,000 payable in instalments over a year. The company generated revenues of £4.1m in its first 12 months of operation and an operating profit of £42,000. The acquisition allows Strictly Education to extend the range of services it provides to the education sector in areas such as ICT support, grounds maintenance, cleaning services and the provision of specialist staff such as Special Needs Assistants. Web Services The Web Services Division trades as Abacus e-media, a leading online developer specialising in the design and construction of websites, primarily for facilitating online publishing by leading media organisations such as Thomson and UBM as well as providing digital services to local authorities including e-recruitment solutions.  Although the division has seen revenues fall by 13% to £1,973,000 (2009: £2,265,000) we remain optimistic about the prospects. Recurring revenues remained at around 22% of overall revenues. The operating margin has reduced from 14.2% to 13.2% despite the requirement to relocate both the company's operations to new premises during the first half of 2010. Order intake from existing clients in the publishing sector has remained strong as the requirement to move their products on line continues and whilst it is proving difficult to secure new customers, the business currently has a healthy prospect list. The division is also looking to extend its product offering beyond its traditional B2B markets into Consumer Publishing as well looking at software to assist customers manage audience development. Product Strategy Since the group took the decision to develop Version 11 of Adapt, we have invested significant sums in research and development both in this and other products in the group. This level of expenditure has continued throughout the recession when perhaps it would have been easy to cut back with the result that the group now has a world class range of products which leave us well placed to exploit the expected upturn in our markets. Expenditure on development totalled £2,414,000 in the six months to 30 June 2010 (2009: £2,532,000). As the group reaches the end of the current development cycle we are looking at ways in which development expenditure can be reduced. The group has a number of offshore partners who provide outsourced development, the benefit of which is the ability to increase or decrease the level of resource in line with demand. Current trading and future prospects The second half of the year has started off on a more positive note. Whilst the staffing division has experienced difficult trading conditions the other divisions have proved more resilient to the effects of the recession primarily as a result of their high levels of recurring income. Consequently as the market for staffing software returns the group's revenues and profitability should improve. We are seeing some signs that the market for staffing software is recovering. The rate at which customers are reducing or cancelling maintenance has fallen to virtually nothing and, as their businesses start to grow again some of our customers have started to purchase additional user licences or upgrades. Furthermore whilst our prospect lists have remained strong throughout the recession the most common decision we have faced from customers has been to postpone the proposed investment in our software. We are now starting to see some more positive decision making. Whilst none of the evidence of recovery in the staffing market is conclusive and neither does it indicate the speed of recovery, the board firmly believes that the worst is over and that business will start to improve in the last quarter.  Chairman21 September 2010

 

 

 Consolidated income statement for the six months ended 30 June 2010 (unaudited)

 

 

		Six months ended 30 June			Year ended 31 December
	Note	2010	2009		2009
		£000	£000		£000
Revenue	2	15,144		17,057		32,537
Cost of sales		(1,772)		(1,320)		(2,649)
Gross profit		13,372		15,737		29,888
Post-acquisition reorganisation costs		-		-		(134)
Administrative expenses		(12,310)		(13,354)		(26,243)
Total administrative expenses		(12,310)		(13,354)		(26,377)
Operating profit before the share of post tax profit of joint venture and amortisation of intangible assets	2	1,062		2,383		3,511
Share of post tax profits of joint venture		91		-		87
Amortisation of intangible assets		(1,802)		(1,538)		(3,286)
Operating (loss)/profit		(649)		845		312
Finance income		17		10		16
Finance costs		(48)		(56)		(111)
(Loss)/profit on ordinary activities before tax		(680)		799		217
Income tax credit/(expense)	3	598		(278)		(46)
(Loss)/profit for the period attributable to owners of the parent		(82)		521		171
(Loss)/earnings per share	4
Basic		(0.25p)		1.58p		0.52p
Diluted		(0.25p)		1.58p		0.52p

 

The operating (loss)/profit for the period arises from the Group's continuing operations.

 

 

 

 

 

 

Consolidated statement of comprehensive income for the six months ended 30 June 2010 (unaudited)

		Six months ended 30 June			Year ended 31 December
		2010	2009		2009
		£000	£000		£000
(Loss)/profit for the financial period		(82)		521		171
Other comprehensive income net of tax
Currency translation differences on foreign currency net investments		176		(416)		(411)
Total other comprehensive income net of tax		176		(416)		(411)
Total comprehensive income for the financial period attributable to the owners of the parent		94		105		(240)

 

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

 

 

Consolidated balance sheet at 30 June 2010 (unaudited)

		At 30 June			At 31 December
		2010	2009		2009
		£000	£000		£000
ASSETS
Non-current assets Goodwill Other intangible assets Property, plant and equipment Investments in joint ventures accounted for using the equity method Deferred tax assets		14,000 16,811 3,092   268 1,327		13,999 16,526 3,084   - 1,092		14,003 16,919 3,073   177 943
		35,498		34,701		35,115
Current assets Inventories Trade and other receivables Income tax recoverable Cash and cash equivalents		67 10,203 292 840		75 10,492 - 1,408		59 10,132 - 1,392
		11,402		11,975		11,583
Total assets		46,900		46,676		46,698
EQUITY Share capital Share premium account Equity option reserve Currency translation reserve Retained earnings		331 17,906 773 (285) 12,056		330 17,879 710 (466) 12,709		331 17,906 757 (461) 12,380
Total equity attributable to equity shareholders of the company		30,781		31,162		30,913
LIABILITIES
Non-current liabilities Borrowings Deferred tax liabilities		176 3,109		173 3,253		141 2,991
		3,285		3,426		3,132
Current liabilities Trade and other payables Current income tax liabilities Borrowings		7,588 - 5,246		8,210 241 3,637		8,364 79 4,210
		12,834		12,088		12,653
Total liabilities		16,119		15,514		15,785
Total liabilities and equity		46,900		46,676		46,698

		Six months ended 30 June			Year ended 31 December
		2010	2009		2009
	Note	£000	£000		£000
Cash flows generated from operating activities Cash generated from operations Interest paid Income tax paid	6	73 (48) (4)		1,693 (56) (686)		3,307 (111) (619)
Net cash from operating activities		21		951		2,577
Cash flows from investing activities Acquisition of trade and assets Interest received Purchase of property, plant and equipment Purchase of other intangible assets Proceeds from sale of property, plant and equipment		- 16 (221) (1,500) -		(26) 10 (308) (1,584) -		(26) 16 (549)  (3,673) 4
Net cash flow used in investing activities		(1,705)		(1,908)		(4,228)
Cash flows from financing activities Issue of ordinary share capital Increase in bank loans Repayment of bank loans Repayment of other loans New finance leases Repayment of finance leases Equity dividend paid	5	- - (55) (36) - (21) -		- - (52) (16) 67 (21)  (528)		28 98 (109)  (32) 71 (46)  (528)
Net cash outflow from financing activities		(112)		(550)		(518)
(Decrease)/increase in cash and cash equivalents for the period		(1,796)		(1,507)		(2,169)
Cash, cash equivalents and bank overdrafts at the beginning of the period		(2,602)		(402)		(402)
Effects of foreign exchange rate changes		79		(136)		(31)
Cash, cash equivalents and bank overdrafts at the end of the period		(4,319)		(2,045)		(2,602)

Shown as:
Cash and cash equivalents		840		1,408		1,392
Bank overdraft		(5,159)		(3,453)		(3,994)
Cash, cash equivalents and bank overdrafts at the end of the period		(4,319)		(2,045)		(2,602)

 

For the purposes of the cash flow statement, cash includes deposits at call with financial institutions less bank overdrafts forming part of the working capital management.

 

 

 

 

 

Consolidated statement of changes to shareholders' equity for the six months ended 30 June 2010 (unaudited)

Six months ended 30 June 2010	Share capital	Share premium account	Equity option reserve	Currency translation reserve	Retained earnings	Total
	£000	£000	£000	£000	£000	£000
At 1 January 2010	331	17,906	757	(461)	12,380	30,913
Comprehensive income:
Loss for the period	-	-	-	-	(82)	(82)
Other comprehensive income net of tax:: Currency translation differences	-	-	-	176	-	176
Total comprehensive income for the year	-	-	-	176	(82)	94
Transactions with owners
Dividend paid	-	-	-	-	(265)	(265)
Share based payment expense	-	-	39	-	-	39
Share options lapsed or exercised	-	-	(23)	-	23	-
Total transactions with owners	-	-	16	-	(242)	(226)
At 30 June 2010	331	17,906	773	(285)	12,056	30,781

 

 

Six months ended 30 June 2009	Share capital	Share premium account	Equity option reserve	Currency translation reserve	Retained earnings	Total
	£000	£000	£000	£000	£000	£000
At 1 January 2009	330	17,879	640	(50)	12,709	31,508
Comprehensive income:
Profit for the period	-	-	-	-	521	521
Other comprehensive income net of tax Currency translation differences	-	-	-	(416)	-	(416)
Total comprehensive income for the period	-	-	-	(416)	521	105
Transactions with owners
Dividend paid	-	-	-	-	(528)	(528)
Share based payments expense	-	-	77	-	-	77
Share options lapsed or exercised	-	-	(7)	-	7	-
Total transactions with owners	-	-	70	-	(521)	(451)
At 30 June 2009	330	17,879	710	(466)	12,709	31,162

 

 

Year ended 31 December 2009	Share capital	Share premium account	Equity option reserve	Currency translation reserve	Retained earnings	Total
	£000	£000	£000	£000	£000	£000
At 1 January 2009	330	17,879	640	(50)	12,709	31,508
Comprehensive income:
Profit for the period	-	-	-	-	171	171
Other comprehensive income net of tax Currency translation differences	-	-	-	(411)	-	(411)
Total comprehensive income for the period	-	-	-	(411)	171	(240)
Transactions with owners
Dividend paid	-	-	-	-	(528)	(528)
Issue of ordinary shares	1	27	-	-	-	28
Share based payments expense	-	-	145	-	-	145
Share options lapsed or exercised	-	-	(28)	-	28	-
Total transactions with owners	1	27	117	-	(500)	(355)
At 31 December 2009	331	17,906	757	(461)	12,380	30,913

1. Basis of preparation

 

Bond International Software plc is incorporated in England and domiciled in the United Kingdom. Its registered office is Courtlands, Parklands Avenue, Goring, West Sussex BN12 4NG and its principal activities are the provision of software solutions to companies operating in the recruitment industry, the provision of HR and payroll software and the provision of outsourced services. The financial statements are prepared in pounds sterling.

 

The interim financial statements do not include all of the information required for full annual financial statements and do not comply with all the requirements of International Accounting Standard (IAS) 34 'Interim Financial Reporting'.

 

The interim financial statements are unaudited and were approved by the Board of directors on 13 September 2010. The financial information contained in these statements does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information for the year ended 31 December 2009 has been extracted from the statutory accounts for that year which received an unqualified audit report and did not contain a statement made under Section 498(2) and (3) of the Companies Act 2006, and have been filed with the Registrar of Companies.

 

Following publication of these results, the company is in breach of one of the financial covenants on its bank facilities. As required by IAS1 'Presentation of Financial Statements', the company's bank loan has been reclassified as repayable within one year. Discussions are currently taking place with the company's bankers to resolve the breach and the company expects to announce a resolution to this matter before the end of the year. The directors believe, based on the current forecasts and order book, the breach will have no impact on the group's ability to continue to trade as a going concern.

 

2. Segmental Review

 

(i) Operating segments

 

Segmental information is presented in respect of the Group's business segments. The primary business segments are based on the Group's reporting structure.

 

Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate and head office expenses.

	Six months ended 30 June		Year ended 31 December
	2010	2009	2009
	£000	£000	£000

Recruitment Software		8,000		9,511		18,170
HR and Payroll Software		2,573		2,899		5,410
Outsourcing		2,598		2,382		4,661
Web services		1,973		2,265		4,296
		15,144		17,057		32,537
Operating profit before the share of post tax profit of joint venture and amortisation of intangible assets
Recruitment Software		1		1,473		2,264
HR and Payroll Software		739		799		1,299
Outsourcing		427		339		545
Web services		261		321		570
Central departments		(366)		(549)		(1,167)
		1,062		2,383		3,511

2. Segmental review (cont'd)

 

(ii) Segmental analysis by location of operating company

 

	Six months ended 30 June		Year ended 31 December
	2010	2009	2009
	£000	£000	£000

United Kingdom		11,594		12,631		24,271
North America		2,956		4,006		7,370
Asia Pacific		594		420		896
		15,144		17,057		32,537

 

 

(iii) Revenues by income type are:

 

	Six months ended 30 June		Year ended 31 December
	2010	2009	2009
	£000	£000	£000

Software sales & service		6,094		8,000		15,093
Hardware and other sales		8		12		53
		6,102		8,012		15,146
Recurring income
Software support		5,725		5,912		11,361
Software rental income		1,181		1,141		2,323
Software as a service		2,136		1,992		3,707
		9,042		9,045		17,391
Total revenues		15,144		17,057		32,537

 

 

3. Income tax (credit)/expense

 

 

		Six months ended 30 June			Year ended 31 December
		2010	2009		2009
		£000	£000		£000
Current tax - UK Corporation Tax - Foreign tax - Adjustment in respect of prior years		27 - (395)		241 (1) -		258 2 (1)
Total current tax		(368)		240		259
Deferred tax		(230)		38		(213)
		(598)		278		46

4. (Loss)/earnings per share

 

The basic loss (six months ended 30 June 2009: earnings; year ended 31 December 2009: earnings) per share are based on the attributable loss for the period of £82,000 (six months ended 30 June 2009: profit £521,000; year ended 31 December 2009: profit £171,000) and on 33,079,000 ordinary shares (six months ended 30 June 2009: 33,009,000; year ended 31 December 2009: 33,017,000) being the weighted average number of ordinary shares in issue during the periods.

 

The diluted earnings per share is based on the attributable loss for the period of £82,000 (six months ended 30 June 2009: profit £521,000; year ended 31 December 2009: profit £171,000) and on 33,219,000 ordinary shares (six months ended 30 June 2009: 33,023,000; year ended 31 December 2009: 33,035,000), calculated as follows:

 

	Six months ended 30 June			Year ended 31 December
	2010	2009		2009
	No	No		No
Basic weighted average number of shares	33,079,000		33,009,000		33,017,000
Dilutive potential ordinary shares: Share options	140,000		14,000		18,000
	33,219,000		33,023,000		33,035,000

 

The Chairman's Statement refers to the earnings per share adjusted for the impact of the amortisation of certain intangible assets and share based payments. The adjusted earnings per share are based on the adjusted attributable profit calculated as follows:

 

	Six months ended 30 June			Year ended 31 December
	2010		2009	2009
	£000		£000	£000
(Loss)/profit for the financial period	(82)		521		171
Adjustments:
Amortisation of intangible assets arising on acquisitions	675		646		1,299
Share based payment expense	39		77		145
Taxation effect	(189)		(181)		(364)
Adjusted profit	443		1,063		1,251
Adjusted earnings per share Basic Diluted	1.34p 1.33p		3.22p 3.22p		3.79p 3.79p

 

 

5. Dividend

 

		Six months ended 30 June			Year ended 31 December
		2010	2009		2009
		£000	£000		£000
Dividend paid to equity shareholders
Dividend of nil per share (2009: 1.6p)		-		528		528

 

 

The proposed final dividend for 2009 of 0.8p per share was approved by the Board of Directors on 13 April 2010 and paid to shareholders on 6 August 2010. 6. Reconciliation of (loss)/profit before tax to net cash generated from operating activities

 

	Six months ended 30 June			Year ended 31 December
	2010	2009		2009
	£000	£000		£000
(Loss)/profit before tax	(680)		799		217
Adjustments for:
Depreciation of property, plant & equipment	232		258		522
Amortisation of intangible assets	1,802		1,538		3,286
Share based payment expense	39		77		145
Share of profit of joint venture	(91)		-		(87)
Finance income	(17)		(10)		(16)
Finance cost	48		56		111
Operating cash flows before movements in working capital	1,333		2,718		4,178
(Increase)/decrease in inventories	(8)		(14)		2
Decrease in trade and other receivables	97		487		975
Decrease in trade and other payables	(1,349)		(1,498)		(1,848)
Cash generated from operating activities	73		1,693		3,307

 

7. Post balance sheet events

On 15 July 2010 the company acquired the remaining 50% of Strictly Education Solutions Limited, formerly a joint venture, from the joint venture partner for a total consideration of £250,000 with £80,000 payable on completion and the balance in quarterly instalments over the next year. The company had revenues of £4.1m and made an operating profit of £42,000 in 2009.

 

This information is provided by RNS

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