23 Sep 2009 07:00
FOR IMMEDIATE RELEASE 23 September 2009
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 2009.
KEY POINTS
Commenting on the results, Group Chief Executive Steve Russell said:
"Given the current economic climate, this is a satisfactory performance. We have secured new contracts and markedly increased our proportion of recurring revenue which will increase the Group's forward visibility and quality of earnings. Despite the negative short term impact this has on our margins and profit, the transition to this new business model leaves the company is in a good position for medium and long term future performance."
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 : nicolac@buchanan.uk.com |
| Nicola Cronk | |
| Chris McMahon | |
| Cenkos Securities plc: | Tel: 020 7397 8900 |
| Stephen Keys |
Bond International Software Plc
Chairman's Statement
I am pleased to report the results for the six months ended 30 June 2009.
Financials
The last twelve months have seen difficult trading conditions throughout the markets in which the Group operates. Despite this, Group revenues for the period increased by 11% to £17,057,000 (2008:£15,315,000). This increase arises through organic growth and through the inclusion of revenues from Team Spirit and Headcount Services for the entire six months to 30 June 2009 whilst they were only acquired towards the end of the first half of 2008.
Recurring revenues such as software support and rental income have increased by 22.5% to £9,045,000 in the period (2008: £7,383,000) and now represent 53% of Group revenues (2008; 48%) and 68% of Group overheads (2008: 66%). Our strategy of increasing recurring revenue has allowed the Group to weather the global recession and minimise the impact of a slowdown in sales within certain parts of the business.
We have continued the process of changing our business model from the traditional capital sale to a combination of software sale and software rental. This is an exciting development for the Group which will have a benefit on visibility and the quality of future earnings. The Group currently has contracted recurring income of £2.6m per annum which relates to projects currently in implementation and which the Group has not yet started billing. However there is a short term negative impact on sales and profit.
One effect of the economic downturn has been the change in mix of services versus software licences in the Recruitment Software Division. As a Group we have been as busy as ever in 2009 when it comes to the sale of services but the sale of higher margin software licences as a proportion of sales (excluding recurring revenue) has declined from 58% to 41%. This, coupled with the transition to rental deals, has further affected the Group's operating margin with the result that despite an 11% increase in revenues, operating profit before amortisation is down by 12.8% at £2,383,000 compared with £2,734,000 in 2008. Operating profit after amortisation is £845,000 (2008: £1,452,000) and adjusted earnings per share are 3.22p (2008: 4.72p) after taking out the amortisation of intangibles created on acquisition.
Cash generated from operations was £1,693,000. The Group invested just over £1.9m in capital expenditure which together with tax payments of £686,000 and the dividend of £528,000 accounted for the major part of the overall net cash outflow of £1.5million.
Recruitment Software Division
The Recruitment Software Division, which comprises Adapt, Talent and eEmpACT, accounted for 56% of Group revenues in the first half of 2009 compared with 61% in 2008. Revenues from the sales of recruitment software grew by 2% to £9,511,000 (2008: £9,312,000), analysed by revenue types and geographical area as follows:
| Six months ended 30 June | Year ended 31 December | ||
| 2009 | 2008 | 2008 | |
| £000 | £000 | £000 | |
Revenue by type
| Software sales & services | 4,981 | 4,886 | 9,391 | |||
| Software support | 3,379 | 3,175 | 6,273 | |||
| Software rental | 1,140 | 1,190 | 2,271 | |||
| Software revenue Hardware & other sales | 9,500 11 | 9,251 61 | 17,935 131 | |||
| 9,511 | 9,312 | 18,066 | ||||
| Six months ended 30 June | Year ended 31 December | |||||
| 2009 | 2008 | 2008 | ||||
| £000 | £000 | £000 | ||||
| Revenue by location of operating company | ||||||
| United Kingdom | 5,085 | 5,960 | 10,879 | |||
| USA | 4,006 | 2,683 | 6,024 | |||
| Asia Pacific | 420 | 669 | 1,163 | |||
| 9,511 | 9,312 | 18,066 | ||||
For this division the first half of 2009 has been mixed. Revenues were up by 2% on the same period last year but this does not tell the whole story. In the UK we have seen a 15% fall in revenues primarily as a result of the increase in rental sales but also because of a slowdown in the sale of licences and services to our existing customers together with a reduction in support income as user numbers have declined. However the UK operation has also seen encouraging signs of new business including significant contract wins including ones with Remploy, Academic Work and Alexander Mann. Our Australian operation has seen a significant fall in demand for staffing software resulting in a fall of 37% in revenues in the Asia Pacific region as a whole. The US operation has performed strongly producing a 49% increase in revenues through the sale of services in particular.
HR and Payroll Software Division
The HR and Payroll Software Division has a number of products each with an established customer base providing the Group with a significant revenue stream from software support. It is the Group's strategy to maintain and develop these products to meet customer needs whilst at the same time developing a new combined HR and payroll product that customers can upgrade to in the future.
Revenues have benefited from the acquisition of Team Spirit in June 2008 and as a result revenues for this division have increased by 44% to £2,899,000 (2008: £2,006,000).
Following the acquisition of Team Spirit in June 2008 we undertook a reorganisation of the management structure within this division which has realised annual costs savings of around £300,000. As a result of this reorganisation, and the acquisition, operating margins have improved from 18% to 27% resulting in an operating profit before amortisation of £799,000 (2008: £366,000).
Outsourced HR & Payroll Services
The Division comprises two operations, 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. Revenues have increased by 28% to £2,382,000 compared with £1,859,000 for the same period last year. Operating margins have declined from 17.6% to 14.2% due to cuts in interest rates which have had an adverse impact on interest earned on client monies held.
Strictly Education has continued to grow and now provides services to around 500 primary and secondary schools in the state sector. As we highlighted in the last annual report, the Company handles up to £20 million of client monies each month which historically has given rise to significant interest income and which forms part of the revenues of the Company. In the six months ended 30 June 2008 interest income amounted to £153,000 compared with only £13,000 in 2009. As a result revenues have stayed at a similar level to last year at £1,572,000 (2008: £1,575,000) despite an increase in the number of contracts. The lack of interest income has also affected profitability with the operating margin reduced from 17.3% in 2008 to 9.1% in 2009. This is set to continue until interest rates start to rise again. The Company has also invested in a joint venture to provide services to 70 schools in Waltham Forest but this has yet to make a significant contribution to the results of the business.
Bond Payroll Services was created through the merger of the payroll bureau acquired with the Gowi Group in 2007 and Headcount Services (which was acquired in June 2008). Revenues have increased from £284,000 in 2008 to £810,000 in 2009 of which £457,000 relates to Headcount Services which was only acquired in June 2008. As the economic difficulties continue, companies are increasingly looking for outsourcing to help reduce their cost base and we believe we are well positioned to take advantage of the opportunities that will arise.
Web Services
Abacus Software is a leading developer of web based products and offers consultancy, design and development services, primarily to the media and public sectors. They had another good six months having started the period with a very strong order book. Consequently revenues are up by around 6% with operating margins improving to over 30%.
Product Strategy
We continue to invest a significant proportion of our revenues in both developing new products and enhancing our existing product range with expenditure on development in the six months to June 2009 totalling £2,532,000 (2008: £2,407,000) representing 14.8% of revenues (2008: 15.7%). The Board believes it is important that the Group maintains its current development strategy and level of spend to keep our products at the forefront in their markets and leave the Group well positioned to benefit from the inevitable upturn in demand when it arrives. Our focus is to maintain Adapt Staffing as the leading staffing software solution whilst extending the reach of Adapt technology into new areas of the Human Capital Management market.
Current trading and future prospects
The global economic recession continues to have a mixed impact on the Group's fortunes. There is no doubt that we have seen a contraction in the level of spend by some of our existing clients as they downsize their operations, It has also had an effect on operating margins as the mix between high margin licence income and services has changed. Finally low interest rates have had an impact on the profitability of our outsourced payroll operations.
However, we continue to sign new clients at an encouraging rate. In the year to date we have confirmed orders for software and services with a value of £12.2m which is some 5% up on the same period last year and our prospect lists, particularly for staffing software, remain very healthy.
Given the current economic climate this is a satisfactory performance. We have secured new contracts and markedly increased our proportion of recurring revenues which will improve the Group's forward visibility and quality of earnings. Despite the negative short term impact this has on our margins and profit, the transition to this new business model leaves the Group is in a good position for medium and long term future performance.
Chairman
23 September 2009
Bond International Software Plc
Consolidated income statement for the six months ended 30 June 2009 (unaudited)
| Six months ended 30 June | Year ended 31 December | |||||
| Note | 2009 | 2008 | 2008 | |||
| £000 | £000 | £000 | ||||
| Revenue | 2 | 17,057 | 15,315 | 31,973 | ||
| Cost of sales | (1,320) | (1,219) | (2,573) | |||
| Gross profit | 15,737 | 14,096 | 29,400 | |||
| Post-acquisition reorganisation costs | - | (200) | (313) | |||
| Administrative expenses | (13,354) | (11,162) | (23,671) | |||
| Total administrative expenses | (13,354) | (11,362) | (23,984) | |||
| Operating profit before the amortisation of intangible assets | 2 | 2,383 | 2,734 | 5,416 | ||
| Amortisation of intangible assets | (1,538) | (1,282) | (2,576) | |||
| Operating profit | 845 | 1,452 | 2,840 | |||
| Finance income | 10 | 18 | 81 | |||
| Finance costs | (56) | (18) | (88) | |||
| Profit on ordinary activities before tax | 799 | 1,452 | 2,833 | |||
| Income tax expense | 3 | (278) | (431) | (822) | ||
| Profit for the period attributable to equity shareholders of the company | 521 | 1,021 | 2,011 | |||
| Earnings per share | 4 | |||||
| Basic | 1.58p | 3.10p | 6.10p | |||
|
|
| |||||
| Diluted | 1.58p | 3.06p | 6.04p | |||
The operating profit for the period arises from the Group's continuing operations.
Bond International Software Plc
Consolidated statement of comprehensive income for the six months ended 30 June 2009 (unaudited)
| Six months ended 30 June | Year ended 31 December | |||||
| 2009 | 2008 | 2008 | ||||
| £000 | £000 | £000 | ||||
| Profit for the financial period | 521 | 1,021 | 2,011 | |||
| Other comprehensive income | ||||||
| Currency translation on foreign currency net investments |
(416) |
44 | 191 | |||
| Other comprehensive (expense)/income for the period (net of tax) | (416) | 44 | 191 | |||
| Total comprehensive income for the financial period attributable to the equity shareholders of the company | 105 | 1,065 | 2,202 | |||
Bond International Software Plc
Consolidated balance sheet at 30 June 2009 (unaudited)
| At 30 June | At 31 December | |||||
| 2009 | 2008 | 2008 | ||||
| Note | £000 | £000 | £000 | |||
|
| ||||||
| ASSETS | ||||||
| Non-current assets Goodwill Other intangible assets Property, plant and equipment Deferred tax assets | 13,999 16,526 3,084 1,092 | 14,300 16,230 2,963 887 | 13,998 16,786 3,075 1,157 | |||
| 34,701 | 34,380 | 35,016 | ||||
| Current assets Inventories Trade and other receivables Cash and cash equivalents | 75 10,492 1,408 | 52 8,585 1,403 | 61 11,565 2,024 | |||
| 11,975 | 10,040 | 13,650 | ||||
| Total assets | 46,676 | 44,420 | 48,666 | |||
| EQUITY Share capital Share premium account Equity option reserve Currency translation reserve Retained earnings | 330 17,879 710 (466) 12,709 | 330 17,878 555 (197) 11,706 | 330 17,879 640 (50) 12,709 | |||
| Total equity attributable to equity shareholders of the company | 31,162 | 30,272 | 31,508 | |||
| LIABILITIES | ||||||
| Non-current liabilities Borrowings Deferred tax liabilities | 173 3,253 | 273 3,468 | 2,635 3,365 | |||
| 3,426 | 3,741 | 6,000 | ||||
| Current liabilities Trade and other payables Current income tax liabilities Borrowings | 8,210 241 3,637 | 9,426 808 173 | 10,262 715 181 | |||
| 12,088 | 10,407 | 11,158 | ||||
| Total liabilities | 15,514 | 14,148 | 17,158 | |||
| Total liabilities and equity | 46,676 | 44,420 | 48,666 | |||
Bond International Software Plc
Consolidated cash flow statement for the six months ended 30 June 2009 (unaudited)
| Six months ended 30 June | Year ended 31 December | |||||
| 2009 | 2008 | 2008 | ||||
| Note | £000 | £000 | £000 | |||
|
| ||||||
| Cash flows generated from operating activities Cash generated from operations Interest paid Income tax paid | 6 | 1,693 (56) (686) | 3,108 (18) (52) | 3,163 (88) (312) | ||
| Net cash from operating activities | 951 | 3,038 | 2,763 | |||
| Cash flows from investing activities Acquisition of trade and assets Purchase of property, plant and equipment Purchase of other intangible assets Proceeds from sale of property, plant and equipment | (26) (308) (1,584) - | (1,010) (319) (1,395) 43 | (1,010) (621) (2,788) 51 | |||
| Net cash flow used in investing activities | (1,918) | (2,681) | (4,368) | |||
| Cash flows from financing activities Issue of ordinary share capital Repayment of bank loans Increase in other loans Repayment of other loans New finance leases Repayment of finance leases Interest received Equity dividend paid | 5 | - (52) - (16) 67 (21) 10 (528) | 258 (49) 63 (4) 46 (56) 18 (528) | 259 (104) 67 (14) 54 (84) 81 (528) | ||
| Net cash outflow from financing activities | (540) | (252) | (269) | |||
| (Decrease)/increase in cash and cash equivalents for the period | (1,507) | 105 | (1,874) | |||
| Cash and cash equivalents at the beginning of the period | (402) | 1,257 | 1,257 | |||
| Effects of foreign exchange rate changes | (136) | 41 | 215 | |||
| Cash, cash equivalents and bank overdrafts at the end of the period | (2,045) | 1,403 | (402) | |||
Bond International Software Plc
Consolidated statement of changes to shareholders' equity for the six months ended 30 June 2009 (unaudited)
| 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 |
| Currency translation adjustments | - | - | - | (416) | - | (416) |
| Profit for the period | - | - | - | - | 521 | 521 |
| Total recognised income and expense for the period | - | - | - | (416) | 521 | 105 |
| Dividend paid | - | - | - | - | (528) | (528) |
| Share based payment expense | - | - | 77 | - | - | 77 |
| Share options lapsed or exercised | - | - | (7) | - | 7 | - |
| At 30 June 2009 | 330 | 17,879 | 710 | (466) | 12,709 | 31,162 |
| Six months ended 30 June 2008 | Share capital | Share premium account | Equity option reserve | Currency translation reserve | Retained earnings | Total |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| At 1 January 2008 | 328 | 17,622 | 441 | (241) | 11,176 | 29,326 |
| Currency translation adjustments | - | - | - | 44 | - | 44 |
| Profit for the period | - | - | - | - | 1,021 | 1,021 |
| Total recognised income and expense for the period | - | - | - | 44 | 1,021 | 1,065 |
| Dividend paid | - | - | - | - | (528) | (528) |
| Issue of new ordinary shares | 2 | 256 | - | - | - | 258 |
| Share based payments expense | - | - | 151 | - | - | 151 |
| Share options lapsed or exercised | - | - | (37) | - | 37 | - |
| At 30 June 2008 | 330 | 17,878 | 555 | (197) | 11,706 | 30,272 |
| Year ended 31 December 2008 | Share capital | Share premium account | Equity option reserve | Currency translation reserve | Retained earnings | Total |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| At 1 January 2008 | 328 | 17,622 | 441 | (241) | 11,176 | 29,326 |
| Currency translation adjustments | - | - | - | 191 | - | 191 |
| Profit for the period | - | - | - | - | 2,011 | 2,011 |
| Total recognised income and expense for the year | - | - | - | 191 | 2,011 | 2,202 |
| Dividend | - | - | - | - | (528) | (528) |
| Issue of ordinary shares | 2 | 257 | - | - | - | 259 |
| Share based payments expense | - | - | 249 | - | - | 249 |
| Share options lapsed or exercised | - | - | (50) | - | 50 | - |
| At 31 December 2008 | 330 | 17,879 | 640 | (50) | 12,709 | 31,508 |
Bond International Software Plc
Notes to the financial statements (continued)
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 22 September 2009. 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 2008 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.
2. Segmental Review
(i) Primary business 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 | ||
| 2009 | 2008 | 2008 | |
| £000 | £000 | £000 | |
Revenue
| Recruitment Software | 9,511 | 9,312 | 18,066 | |||
| HR and Payroll Software | 2,899 | 2,006 | 5,276 | |||
| Outsourcing | 2,382 | 1,859 | 4,357 | |||
| Web services | 2,265 | 2,138 | 4,274 | |||
| 17,057 | 15,315 | 31,973 | ||||
| Operating profit before the amortisation of intangible assets |
| |||||
| Recruitment Software | 1,473 | 2,363 | 4,296 | |||
| HR and Payroll Software | 799 | 366 | 915 | |||
| Outsourcing | 339 | 329 | 696 | |||
| Web services | 321 | 242 | 614 | |||
| Central departments | (549) | (566) | (1,105) | |||
| 2,383 | 2,734 | 5,416 | ||||
2. Segmental review (cont’d)
| Six months ended 30 June | Year ended 31 December | ||
| 2009 | 2008 | 2008 | |
| £000 | £000 | £000 | |
Revenue
| United Kingdom | 12,631 | 11,963 | 24,786 | |||
| USA | 4,006 | 2,683 | 6,024 | |||
| Asia Pacific | 420 | 669 | 1,163 | |||
|
| ||||||
| 17,057 | 15,315 | 31,973 |
(iii) Revenues by income type are:
| Six months ended 30 June | Year ended 31 December | ||
| 2009 | 2008 | 2008 | |
| £000 | £000 | £000 | |
Sales
| Software sales & service | 8,000 | 7,869 | 15,940 | |||
| Hardware and other sales | 12 | 63 | 307 | |||
| 8,012 | 7,932 | 16,247 | ||||
| Recurring income | ||||||
| Software support | 5,912 | 4,840 | 10,228 | |||
| Software rental income | 1,141 | 1,190 | 2,270 | |||
| Outsourced services | 1,992 | 1,353 | 3,228 | |||
| 9,045 | 7,383 | 15,726 | ||||
| Total revenues | 17,057 | 15,315 | 31,973 |
| Six months ended 30 June | Year ended 31 December | |||||
| 2009 | 2008 | 2008 | ||||
| £000 | £000 | £000 | ||||
|
| ||||||
| Current tax United Kingdom Overseas Adjustment in respect of prior years | 241 (1) - | 469 45 - | 843 36 (242) | |||
| Total current tax | 240 | 514 | 637 | |||
| Deferred tax | 38 | (83) | 185 | |||
| 278 | 431 | 822 | ||||
4. Earnings per share
The basic earnings per share are based on the attributable profit for the period of £521,000 (six months ended 30 June 2008: £1,021,000; year ended 31 December 2008: £2,011,000) and on 33,009,000 ordinary shares (six months ended 30 June 2008: 32,934,000; year ended 31 December 2008: 32,971,000) 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 £521,000 (six months ended 30 June 2008: £1,021,000; year ended 31 December 2008: £2,011,000) and on 33,023,000 ordinary shares (six months ended 30 June 2008: 33,399,000; year ended 31 December 2008: 33,281,000), calculated as follows:
|
| Six months ended 30 June | Year ended 31 December | |||
| 2009 | 2008 | 2008 | |||
| No | No | No | |||
| Basic weighted average number of shares | 33,009,000 | 32,934,000 | 32,971,000 | ||
| Dilutive potential ordinary shares: Share options | 14,000 | 465,000 | 310,000 | ||
|
|
|
| |||
|
| 33,023,000 | 33,399,000 | 33,281,000 | ||
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 attributable profit calculated as follows:
| Six months ended 30 June | Year ended 31 December | ||||
| 2009 | 2008 | 2008 | |||
| £000 | £000 | £000 | |||
| Profit for the financial period | 521 | 1,021 | 2,011 | ||
| Adjustments: | |||||
| Amortisation of intangible assets arising on acquisitions | 646 | 534 | 1,183 | ||
| Share based payment expense | 77 | 151 | 249 | ||
| Taxation effect | (181) | (150) | (331) | ||
|
|
|
| |||
| Adjusted profit | 1,063 | 1,556 | 3,112 | ||
| Adjusted earnings per share Basic Diluted | 3.22p 3.22p | 4.72p 4.66p |
9.44p 9.35p | ||
| Six months ended 30 June | Year ended 31 December | |||||
| 2009 | 2008 | 2008 | ||||
| £000 | £000 | £000 | ||||
| Dividend paid to equity shareholders | ||||||
| Dividend of 1.6p per share (2008: 1.6p) | 528 | 528 | 528 | |||
6. Reconciliation of profit before tax to net cash generated from operating activities
| Six months ended 30 June | Year ended 31 December | |||||
| 2009 | 2008 | 2008 | ||||
| £000 | £000 | £000 | ||||
|
| ||||||
| Profit before tax | 799 | 1,452 | 2,833 | |||
| Adjustments for: | ||||||
| Depreciation of property, plant & equipment | 258 | 225 | 476 | |||
| Amortisation of intangible assets arising on acquisitions | 646 | 534 | 1,183 | |||
| Amortisation of internally generated development costs | 892 | 748 | 1,393 | |||
| Loss on sale of property, plant & equipment | - | 10 | 31 | |||
| Share based payment expense | 77 | 151 | 249 | |||
| Investment income | (10) | (18) | (81) | |||
| Interest expense | 56 | 18 | 88 | |||
| Operating cash flows before movements in working capital | 2,718 | 3,120 | 6,172 | |||
| (Increase)/decrease in inventories | (14) | 14 | 5 | |||
| Decrease/(increase) in trade and other receivables | 487 | 6 | (2,579) | |||
| Decrease in trade and other payables | (1,498) | (32) | (435) | |||
| Cash generated from operations | 1,693 | 3,108 | 3,163 | |||