BDI.L Regulatory News (BDI)

22 Sep 2008 07:00



FOR IMMEDIATE RELEASE 22 September 2008

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 Australia, today announces its unaudited interim results for the six months to 30 June 2008.

KEY POINTS 

Operating profit before amortisation at £2.7m (2007: £2.9m)

Pre-tax profit at £1.5m (2007: £2m)

Basic EPS at 3.1p (2007: 4.7p)

Successful acquisition of both Team Spirit Software and Headcount Services in the period

Significant contract wins with Michael Page, Adecco and Vaco contributing to an extremely healthy order book

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

"Although we are facing challenging market conditions, the underlying business has shown a good performance. The transition of our sales model will help provide better forward visibility and stronger margins in the mid to long term."

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Chairman's Statement

I am delighted to report another good performance during the first half of 2008.

Group revenues for the six months ended 30 June 2008 have increased by 10% to £15,315,000 (2007: £13,881,000). I am particularly pleased to report that despite the economic difficulties currently being experienced in the major geographical markets in which we operate, the group has managed to deliver organic growth of nearly 7%. The remainder of the increase is as a result of including revenues from the former Gowi Group companies and Strictly Education for the entire six months in 2008 whilst they were acquired only part way through the first half of 2007.

Revenues of a recurring nature, such as software support and rental income, have increased by 19.9% to £7,383,000 in the first six months of 2008 compared with £6,159,000 for the same period in 2007 and now represent 48% of group revenues (2007: 44%) and 66% of group overheads (2007: 61%).

In line with the software industry in general, our sales model is in the process of changing from the traditional capital sale to a combination of software sale and software rental. This transition is greatly beneficial in the mid to long term as it hugely improves forward visibility of earnings and can significantly increase margins. In the short term, however, it has an adverse effect on current margins and the bigger the deal, the more noticeable is the effect. This and some pressure on costs in the first half has resulted in the operating profit before the amortisation of intangible assets being £2,734,000 (2007: £2,896,000) with earnings per share at 3.1p (2007: 4.7p).

The group's net cash position remained broadly the same at around £1.4m. This follows our acquisition for cash of £1.0m of the trade and assets of Team Spirit Software and Headcount Services and our investment of £1.4m in the development and enhancement of our product range. These together with the dividend payment of £0.5m accounted for the cash which we generated through operations in the first half of 2008.

Current global economic uncertainty limits visibility on timing of contract wins in the very short term, but the longer term prospects remain bright. 

Recruitment software division

Revenues from the sales of recruitment software grew by 10% to £9,312,000 (2007: £8,464,000), analysed by revenue types and geographical area as follows:

Revenue by type

We were delighted to announce that the group had been awarded significant contracts with Michael Page, Adecco and Vaco in the first six months of the year which have contributed not only to the growth in revenues but also to the group having an extremely healthy order book. Most of the benefit arising from these contracts will be felt in future years.

One of the significant changes to the way both the staffing software market and the group have changed over the last few years has been the increasing importance of making our staffing software available to customers on an ASP model. Software sold in this way has made our Adapt software more affordable for small to medium sized staffing firms as well as providing greater visibility for our income going forward. In the six months to 30 June 2008 we saw growth of 41% in rental income from ASP clients to £1,190,000 compared with £840,000 in 2007. One other contributing factor to the rise in rental income is the increasing number of corporate clients using our recruitment software and we announced a number of contracts of this nature in the first half of 2008 including HBOS, the Cooperative Group and Pentland Brands.

The recruitment division's UK operation has continued its progress in the first six months of 2008 with revenues up by 13.7% on the same period last year. We continue to generate revenues through new business and through providing additional software and services to our existing customer base. The UK staffing business also has a very high level of recurring income through support and software rental which has helped protect the company from the worst effects of the current economic downturn. In the USA where we are currently much more dependent on the sale of software and services, we have seen the impact of some prospects delaying capital investment projects and as a result we have seen a 3% fall in revenues although we still have a number of major prospects who may purchase our software before the end this year.

Asia Pacific continues to deliver significant growth in revenues which are up by some 45% on the same period last year. We remain optimistic about the prospects for further growth in the region particularly given the increasing number of sales opportunities in the Far East afforded us by the multilingual capabilities of Adapt.

Whilst we have seen growth in revenues, our divisional operating margins have been affected firstly by a shortage in resources which has contributed to increased costs of sale and secondly through the mix of revenues between software and services. The result is a decrease in our operating margin in the Recruitment Division from 30% to 25% and a small reduction in operating profit before amortisation to £2,363,000 (2007: £2,551,000).

HR and payroll software

When we acquired this division in 2007 we were aware of the requirement to modernise our product offering and work continues in this area. However we do not expect to see the full benefits of this until late 2009 or early 2010. In the meantime we have strengthened our customer base through the acquisition of the trade and assets of Team Spirit Software and Headcount Services in June 2008 and this will increase divisional monthly recurring revenues by some 45% in the second half of the year.

As we disclosed in the 2007 accounts we have started the process of consolidating the Recruitment and HR & Payroll Divisions under one management structure to better focus on cross selling opportunities between our recruitment products and the HR and Payroll products.

Outsourced HR & Payroll services

This division provides outsourced HR & payroll services primarily into the state school sector. Revenues have increased by 59% to £1,575,000 (2007: £989,000), partly because the division was not part of the group for the full first half of 2007, but also through organic growth in revenues of 35% as the company continues to sign up new schools and LEAs. 

One of the strengths of the business is its recurring income which at £1,099,000 represented 70% of total divisional revenue for the first six months of 2008 and covered 99% of the divisional overheads. We have increased our sales force in this area to continue to grow the business going forward.

Web Services

Our subsidiary operating in this market had an excellent 6 months to 30 June 2008 increasing revenues by 27% and operating profit by 22%. We signed some exciting deals including Centaur Publishing and a division of EMAP and our order book in this area is stronger than it has ever been.

Product Strategy

We continue to invest a significant proportion of our revenues in enhancing our product range with expenditure on development at £2,407,000 (2007: £2,004,000) representing 15.7% of sales (2007: 14.4%). We have an in house team of developers supported as appropriate by offshore development teams. With the new generation of Adapt now well established as a leading product in the recruitment industry, we are shifting our focus towards utilising this technology in the other areas in which we operate in order to bring a consistent technical platform to all of the group's software. We have a number of exciting new products currently in development and which we expect to bring to market in the first half of 2009.

Current trading and future prospects

Despite the difficult economic environment in which we are operating there are a number of reasons to remain optimistic about the group's prospects for the remainder of the year and into 2009. The recurring income together with the current order book give us better visibility than we have ever had in the past and we also have a healthy pipeline with a number of significant sales prospects. There are also some exciting new products in development which we expect to come online during 2009.

However it is fair to say that we have started to see the first signs of caution from our prospects in both Europe and the USA and we have also seen some deterioration in our operating margins. The business environment for the remainder of 2008 will clearly be challenging particularly given events over the last few weeks. The implication of this is that whilst we have a clear idea as to how we can deliver market expectations for 2008 it will depend on certain key contracts falling into place as planned. Given prevailing economic circumstances, we cannot be as confident as we were in delivering all the contracts required fully to meet market expectations but intend to keep the market fully informed on developments as they arise. We remain confident about the group's prospects for 2009 and beyond.

Martin Baldwin

Chairman

19 September 2008

Consolidated income statement for the 6 months ended 30 June 2008 (unaudited)

The operating profit for the period arises from the group's continuing operations

Consolidated statement of recognised income and expense for the six months ended 30 June 2008 (unaudited)

Consolidated balance sheet at 30 June 2008 (unaudited)

Consolidated cash flow statement for the six months ended 30 June 2008 (unaudited)

Notes to the financial statements (continued)

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 IAS 34 'Interim Financial Reporting'. 

The interim financial statements are unaudited and were approved by the board of directors on 19 September 2008. The financial information contained in these statements does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the year ended 31 December 2007 has been extracted from the statutory accounts for that year. The statutory accounts for the year ended 31 December 2007 received an unqualified audit report and did not contain a statement made under Section 237(2) and (3) of the Companies Act 1985, and have been filed with the Registrar of Companies.

2. Segmental Review

(i) Primary business segment

Segmental information is presented in respect of the group's business segments. The primary business segments are based on the group's reporting structure and comprise Recruitment Software, HR and Payroll Software, Outsourcing and Web Services.

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.

Revenue

  2. Segmental review (cont'd)

ii)  Segmental analysis by location of operating company

Revenue

(iii) Revenues by income type are:

Sale

3. Taxation

  4. Earnings per share

The basic earnings per share is based on attributable profit for the period of £1,021,000 (June 2007: £1,411,000; year ended 31 December 2007: £3,645,000) and on 32,934,000 ordinary shares (June 2007: 30,066,000; year ended 31 December 2007:31,249,000) being the weighted average number of ordinary shares in issue during the periods. 

The diluted earnings per share is based on attributable profit for the period of £1,021,000 (June 2007: £1,411,000; year ended 31 December 2007: £3,645,000) and on 33,399,000 ordinary shares (June 2007: 30,838,000; year ended 31 December 2007: 32,040,000), calculated as follows:

5. Dividend

6.  Reconciliation of operating profit to net cash generated from operating activities

  7. Statement of changes in shareholders' equity

  8. Acquisitions

On 13 June 2008 the group completed the acquisition of the business, assets and certain liabilities of Team Spirit Software Limited and Headcount Services Limited which were both in administration. The provisional impact of the acquisition on the consolidated balance sheet was: