BDI.L Regulatory News (BDI)

21 Mar 2007 07:02

Bond International Software PLC21 March 2007 FOR IMMEDIATE RELEASE 21 March 2007 BOND INTERNATIONAL SOFTWARE PLC 2006 PRELIMINARY RESULTS Bond International Software plc, the specialist provider of software for theinternational recruitment and human resources industries, with operations in theUK, USA, Hong Kong and Australia, today announces its preliminary results forthe year ended 31 December 2006. KEY POINTS • Turnover up 26% to £17.2m (2005 as restated: £13.6m). • Adjusted pre-tax profit* up by 40% at £4.25m (2005 as restated: £3.04m). • Pre-tax Profit up 46% to £3.66m (2005 as restated: £2,51m). • EPS before amortisation up 47% to 12.9p (2005 as restated: 8.7p). • Basic EPS up 49% to 11.20p (2005 as restated:7.51p) • Strong cash generation resulting in net cash of £8.1m at 31 December 2006 (2005:£2.4m) • Proposed dividend of 1.4p per share (2005: 1p per share). * Adjusted for the amortisation of intangible assets and share based paymentsexpense Commenting on the results Chief Executive Steve Russell, said: "2006 has been another highly successful year. We continue to increase theproportion of contracted recurring revenue, thereby improving the visibility andquality of earnings going forward. The recent multi-territory contract withManpower has endorsed the significant investment we have made in enhancing ourproduct range and we look forward to further contracts of this nature. Our orderbooks remain at very healthy levels and having completed two very significantearnings enhancing acquisitions at the start of this year we are looking forwardto another successful year in 2007" For further information, please contact: Bond International Software plc: Tel: 01903 707070 ir@bond.co.uk www.bondadapt.com Steve Russell: Group Chief ExecutiveBruce Morrison: Group Finance Director Buchanan Communications: Tel: 020 7466 5000 Tim ThompsonNicola Cronk Oriel Securities Limited Tel: 020 7710 7600Nick Hyslop BOND INTERNATIONAL SOFTWARE PLC Chairman's Statement FINANCIAL OVERVIEW I am delighted to present the 2006 annual preliminary results for BondInternational Software plc. This has been an outstanding year on many fronts with the delivery of the newversion of Adapt, excellent organic growth across the group and the securing ofthe largest single contract in the group's history. Furthermore, since the yearend we have completed two strategic acquisitions in the UK, which willstrengthen the group's profitability and cash generation in the future. Group revenues have increased by an excellent 26% at £17,209,000 compared with2005 revenues of £13,633,000. This significant organic growth has been driven bya 43% increase in the sale of software and services both to new and existingclients. Importantly, in addition to a significant increase in revenues whencompared with 2005, our operating margin has also improved to 24.7% compared to22.3% in 2005, resulting in a 40% increase in adjusted pre-tax profit (adjustedfor amortisation of intangible assets and share based payments) to £4,253,000(2005: £3,038,000). The group continues to remain very cash generative with a net cash inflow fromoperations in 2006 of £5,550,000 as compared with last year's £3,304,000resulting in an overall increase in net funds at the end of the year to£8,117,000 compared to £2,370,000 at the end of 2005. This has enabled the groupto make the acquisitions of Gowi Group Limited and Strictly Education Limitedreferred to below. Earnings per share have also increased by 49% to 11.20p (2005: 7.51p). Thegroup's balance sheet has been further improved with shareholders' funds nowstanding at £16,394,000 compared with £10,702,000 twelve months ago, animprovement of some 53%. I am very pleased to recommend, on the basis of these strong results, a dividendof 14p per share to be paid on 22 June 2007 to shareholders on the register at25 May 2007. ACQUISITIONS On 19 December 2006 we announced the acquisition of Gowi Group Limited, acompany that specialises in the development and supply of software and servicesinto human resources, payroll and recruitment departments, primarily in thepublic, education and publishing sectors, which was subsequently completed inJanuary 2007. This will help further develop our core product suite and theservices which we can offer to our customers. The total consideration of £8.9mcomprised cash of £5.4m and £3.5m of new ordinary shares in the company at anissue price of £1.60 per share. In February 2007 we completed the acquisition of Strictly Education Limited, aspecialist provider of software and services into the state school sector. Webelieve this market sector has tremendous growth potential and the acquisitionwill enable the enlarged group to offer a broader range of products and servicesto existing and new customers. The cost was £2.67m which was satisfied in cashfrom existing resources. These two acquisitions will not only add their existing revenue streams but alsoincrease the organic growth potential of the group as a whole. STAFF The cornerstone of any business is the quality of its employees. We have workedand continue to work hard at ensuring that our employees are fully engaged withthe business and we have been very pleased with how well the companies that wehave acquired have integrated with the group as a whole. Following the recentacquisitions, Bond now employs nearly 400 staff and is very fortunate to havebeen able to attract and retain excellent technical, administrative and sales/marketing professionals. The board would like to thank all the staff for theirexcellent contribution. PROSPECTS Bond has undergone a dramatic transformation during the last few years. Ourproducts have established themselves as market leaders in their field. We havecontinued to enjoy strong organic growth across the business and, throughfocused acquisitions, believe we have created an excellent platform tofacilitate the continued rapid development of the business and the enhancementof shareholder value. The prospects for the staffing industry remain extremely positive in all ourgeographical markets and this is supported by our order book and prospect list,which both look extremely healthy. The post balance sheet acquisitions of Gowi Group Limited and Strictly EducationLimited will have a material impact on the business going forward. Theseacquisitions bring additional products and services which we will look to sellacross the existing customer base. Similarly many of the customers acquired willbe prospective candidates for existing Bond products. Importantly theacquisitions also bring with them experienced professionals, some of whom havebecome shareholders in the overall group as part of the transaction and theywill help complement the existing Bond management structure and provide abroader platform for future growth. Internationally the respective divisions have continued to perform well. Theadvent of the new Adapt release and the growing acceptance of Bond as a globalsupplier, as evidenced by the contract with Manpower, give the board confidencethat international operations will continue to prosper and grow. We will beworking hard on further large multi-territory agreements and to ensure that wehelp our international customers implement first class software platforms basedon Adapt across the globe. Martin BaldwinChairman20 March 2007 BOND INTERNATIONAL SOFTWARE PLC Group Chief Executive's Report Overview I believe that the last twelve months have probably been the most important inthe development of the group. We have seen operating profits increase by 44% to£3.6m compared to £2.5m in 2005%. Margins have been improved as we haveincreased the contracted revenue portion of our revenue streams, secured highlysignificant multi-territory business, managed our expenses and successfullyintegrated our US acquisitions. In addition we have recently completed twostrategic acquisitions in the UK, Gowi Group Limited and Strictly EducationLimited. These acquisitions will have a very positive impact on the business during 2007and going forward, not simply because they bring good profitable revenue streamswhich are earnings enhancing, but also experienced management resources. Inorder for us to achieve our long term strategic objectives we need to attractand retain the best talent in the industry and I am personally delighted that,as part of the recent acquisitions, several key managers opted for shares in thegroup instead of cash - a validation of the business, its products and strategyand demonstrating long term commitment from the acquired management teams. Product strategy We continue to invest a significant proportion of our revenue in enhancing ourproducts, with expenditure rising to £2,603,000 in 2006 which is 15.1% of salescompared with £2,011,000 representing 14.5% of sales in 2005. We believe this iskey to maintaining their enviable positions in the market places which theyserve. In order to make the investment go as a far as possible we have embracedoutsourced development as a fundamental tenet of the business model. This allowsus to receive a greater return on the investment made. Had all the work beendone in the UK, at UK rates, we would not have been able to take the veryimportant steps forward that we have achieved with our core products. Throughscale and ongoing commitment to outsourced development we have been able tofurther differentiate ourselves from our competitors and we believe that, atleast in part, the improvement in operating margin is due to the developmentmodel which we employ. The recent acquisitions of Gowi Group Limited and Strictly Education Limitedwill significantly broaden the products and services portfolio. We believe it isimportant to be able to address a broad set of requirements within our customerbase and the HR, payroll, payroll bureau, consulting and content managementapplications added to the existing family of products provide an excellentplatform for future organic growth. Analysis of turnover and operating profit by geographical region Adjusted pre-tax profit* Turnover 2006 2005 2006 2005 (restated) (restated) £000 £000 £000 £000 United Kingdom 9,275 8,198 2,666 2,430Asia Pacific 738 585 106 66North America 7,196 4,850 1,481 542 17,209 13,633 4,253 3,038 * excludes the amortisation of intangible assets and share based payment expense UK The UK operation remains the bedrock of the Bond business with revenues up by13% and operating profit before amortisation and share based payment expense upby 9.7%. Revenues from the sale of licences and services to new clients were up by 25% to£2.9m with the group taking orders for 156 new systems representing 1900 newusers of Adapt This brings the total number of clients in the UK to 650 andusers to approximately 27,000. The UK account management team, which manages the relationship with existingclients had a record year generating revenues of £2,055,000 through the sale ofadditional licences and services. Support revenues have also increased by 11% on 2005 as new systems weredeployed, whilst rental income from Vendor Managed Service and ASP are broadlythe same as last year following the renegotiation and extension of the contractfor Hays Workflow which we announced in November 2006. The increasing support revenues, rental income from VMS and ASP contracts andaccount management sales revenue have resulted in 106% of UK overheads beingcovered by income from existing clients with recurring contracted incomerepresenting 72% of UK overheads. Asia Pacific Our Australian operation posted their record result in 2006 both in terms ofsales and profitability with a 26% increase in revenues and 39% increase inprofit. They have also led the group's entry into the Far Eastern market withthe opening of the Hong Kong office in October 2006. North America The North American operation, which comprises six offices across the USA, hasbenefited significantly from the launch of the latest generation of Adapt. Wesigned a contract with Manpower to provide a global front office systemthroughout their world-wide network of 4,400 offices in more than 70 countries.The deal, worth up to $12m over five years, was awarded to Bond following anin-depth technical and functional review and is the largest single contract inthe group's history. The result is that sales in the US operation increased by 48% over 2005 to£7,196,000 and profitability increased by 173% to £1,481,000. People Bond has experienced a tremendous amount of growth during the last 24 months andthis is set to continue during 2007 as we integrate the latest acquisitions.Without dedicated and talented resources a company will not succeed and werecognise the need to involve our people in the development of the group. Aspart of the acquisition strategy we seek out like minded organisations that "buyin" to our vision. This makes integration less painful, reducing disruption andallowing time to best draw out the synergies which exist between the group andthe newly acquired companies. We are committed as an organisation to develop not only our products andservices but also our people. As we grow we look to promote from within, toutilise the talents which exist within the business and to ensure that newmembers of the team are fully engaged in the ongoing development of thebusiness. By adopting this approach we have been able to develop a fullycommitted workforce that is focused on pulling in the same direction. I would like to personally thank our employees for all their hard work anddedication which has helped us deliver these outstanding results. Further Iwould like to welcome the latest members of the team and look forward to leadingthe significantly enlarged business of some 400 people on to further successes. Outlook Bond has grown very quickly during the last few years. It has established itselfas a market leader in the UK recruitment sector, acquired businesses in theUnited States and has begun to develop operations in the Far East built on thesuccesses enjoyed by our Australian subsidiary. Historically this growth hasbeen achieved by creating a larger licensed software and related servicesfootprint combined with a series of strategic acquisitions of software companiesin related areas. This is a strategy we intend to continue and to build upon,hence the recent acquisitions of Gowi Group Limited and Strictly EducationLimited. These most recent acquisitions bring complementary products, servicesand new revenue streams which will, in the opinion of the board, accelerate therate at which we can grow the business. The markets which we serve are very large and we believe there is enormouspotential to expand our customer base both in the UK and internationally. Ourobjectives are set around profitable growth. We will continue to look foracquisitions which not only bring complementary products into our portfolio butalso deliver a services infrastructure allowing us to tap into budgets which arenot solely identified as being IT related. This approach will open up newmarkets in our existing clients, result in longer term service type engagementsand deliver excellent high visibility recurring revenues. Looking forward into 2007 we have much to do but we have started the year from aposition of great strength; our order books and sales prospect pipelines arevery healthy, the integration of Gowi Group Limited and Strictly EducationLimited is well underway, we are meeting the internal development targets thatwe have set ourselves and are fortunate in having a committed, talented anddedicated workforce. 2006 was a very good year for the group and I am very much looking forward to2007. Steve RussellGroup Chief Executive20 March 2007 BOND INTERNATIONAL SOFTWARE PLC Consolidated profit and loss account for the year ended 31 December 2006 Note 2006 2005 (restated) £000 £000 Turnover 2 - continuing operations 17,209 13,633 Cost of sales (915) (809) Gross profit 16,294 12,824 Administrative expenses (12,716) (10,316) Operating profit - continuing operations 3,578 2,508 Net interest receivable 78 3 Profit on ordinary activities before 3,656 2,511taxation (638) (616)Tax on profit on ordinary activities Profit for the financial year 3,018 1,895 Earnings per share (pence) 3 2006 2005 Basic 11.20p 7.51p Diluted 10.96p 7.34p CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND 2006 2005LOSSES FOR THE YEAR ENDED 31 DECEMBER 2006 (restated) £000 £000 Profit for the financial year 3,018 1,895 Currency translation differences on foreign currency (187) 115net investments Total recognised gains and losses for the year 2,831 2,010 Prior year adjustment (note 1 (132) Total recognised gains and losses recognised since 2,699the last annual report BOND INTERNATIONAL SOFTWARE PLCConsolidated balance sheet at 31 December 2006 2006 2005 £000 £000 (restated) (restated) £000 £000Fixed assets Intangible assets 8,141 7,343 Tangible assets 2,715 2,647 10,856 9,990 Current assets Debtors 4,298 3,479 Cash at bank and in hand 8,770 3,511 13,068 6,990 Creditors: amounts falling due within one (7,102) (5,680)year Net current assets 5,966 1,310 Total assets less current 16,822 11,300liabilities Creditors: amounts falling due after more (428) (598)than one year Net assets 16,394 10,702 Equity capital and reserves Called up share capital 281 252 Share premium account 9,180 6,209 Equity option reserve 266 189 Profit and loss account 6,667 4,052 Equity shareholders' funds 16,394 10,702 BOND INTERNATIONAL SOFTWARE PLCConsolidated cash flow statement for the year ended 31 December 2006 2006 2005 (restated) (restated) Note £000 £000 £000 £000 Net cash inflow from operating 4 5,550 3,304activities Returns on investments andservicing of finance Interest received 165 86Interest paid (87) (83)Net cash inflow from returns oninvestments and servicing offinance 78 3 Taxation Corporation tax paid (736) (596) Overseas taxation paid (38) (64) (774) (660)Capital expenditure Payments to acquire intangible (1,314) (836)fixed assets (504) (434)Payments to acquire tangiblefixed assets 36 - Receipts from sale of tangiblefixed assets (1,782) (1,270)Acquisitions Payments to acquire business - (1,114) Cash acquired with subsidiary - 112 - (1,002) Equity dividends paid (252) - Net cash inflow before 2,820 375financing Financing Issue of ordinary shares 3,100 5 Expenses of share issue (100) - New hire purchase loans 111 62 Repayment of bank loans (86) (341) Repayment of other loans (368) (359) Repayment of hire purchase (145) (65)loans Net cash inflow /(outflow) from 2,512 (698)financing Increase/(decrease) in cash 5,332 (323) Reconciliation of net cash flow 2006 2005to £000 £000movement in net funds Increase/(decrease) in cash 5,332 (323) Decrease in bank loans 86 341 Decrease in other loans 368 359 Loans and HP contracts acquired - (1,081)with subsidiary 32 3Decrease in hire purchase loans Change in net funds 5,818 (701) Foreign currency translation (71) 66differences 2,370 3,005Net funds at 1 January 2006 Net funds at 31 December 2006 8,117 2,370 BOND INTERNATIONAL SOFTWARE PLC Notes 1. Basis of preparation The above financial information does not constitute statutory accounts asdefined in section 240 of the Companies Act 1985. The above figures for the yearended 31 December 2006 are an abridged version of the company'saccounts whichwill be reported on by the auditors, depatched to the shareholders and filedwith the Registrar of Companies shortly. The audited accounts for the year ended 31 December 2005 have been delivered tothe Registrar of Companies and the report of the auditors was unqualified anddid not contain statements under Section 237(2) or (3) Companies Act 1985. The 2006 financial statements will disclose the following changes to thecompany's accounting policies in 2006: (i) The adoption of Financial Reporting Standard 20, Share BasedPayments, which requires the company to reflect in its profit and loss accountthe effects of share based payments such as employee share options. Thecompany's accounting policy is to charge the value of share options grantedsince 7 November 2002 to the profit and loss account on a straight line basisover the period from grant to vesting. The effect is to reduce the reportedprofit before tax for the year by £130,000 (2005:£117,000). (ii)The results of overseas subsidiaries are translated into sterlingat average rates of exchange for the year compared to the previous policy whichtranslated the results of overseas subsidiaries at closing rates of exchange.This change in accounting policy was adopted because the directors believe thatto use the average rate will more fairly reflect the financial results ofoverseas subsidiaries. The effect is to increase the reported profit before taxfor the year by £34,000 (2005 decrease: £40,000). The comparative figures for year ended 31 December 2005 have been restated toreflect these changes of accounting policies. 2. Turnover (a) The geographical analysis of turnover by destination is: 2006 2005 (restated) £000 £000 United Kingdom 8,671 7,375Rest of Europe 480 778Asia Pacific 753 619Africa 109 11North & South America 7,196 4,850 17,209 13,633 (b) Sales by product are: 2006 2005 (restated) £000 £000 Software sales & services 10,085 7,017Software support 5,563 5,014Vendor managed services 1,290 1,334 Software revenue 16,938 13,365Hardware & other sales 271 268 17,209 13,633 3. Earnings per share The basic earnings per share is based on attributable profit for theyear of £3,018,000 (2005 restated: £1,895,000) and on 26,932,952 ordinary shares(2005: 25,221,981) being the weighted average number of ordinary shares in issueduring the year. The diluted earnings per share is based on attributable profit for the year of£3,018,000 (2005 restated: £1,895,000) and on 27,533,859 ordinary shares (2005:25,828,497) calculated as follows: 2006 2005 No No Basic weighted average number of shares 26,932,952 25,221,981 Dilutive potential ordinary shares: Share options 600,907 606,516 27,533,859 25,828,497 4 Reconciliation of operating profit to net cash inflow from operatingactivities 2006 2005 (restated) £000 £000 Operating profit 3,578 2,508Depreciation 380 331Amortisation 467 410Profit on disposal of fixed (15) -assetsShare based payment expense 130 117Decrease in stocks 41Increase in debtors (627) (557)Increase in creditors 1,637 454 5,550 3,304 5 Report and Accounts Copies of the Report and Accounts will be circulated to shareholders shortly andmay be obtained after the posting date from the Company Secretary, BondInternational Software Plc, Courtlands, Parklands Avenue, Goring by Sea,Worthing, West Sussex, BN12 4NG. This information is provided by RNS The company news service from the London Stock Exchange