BDI.L Regulatory News (BDI)

FOR IMMEDIATE RELEASE 20 March 2015

PRELIMINARY RESULTS AND STRATEGIC REVIEW

Bond International Software plc, a world leading supplier of staffing, HR and payroll software and services, with operations in the UK, USA, and Asia Pacific, today announces its audited preliminary results for the year ended 31 December 2014.

KEY POINTS

FINANCIAL HIGHLIGHTS

· Revenues up by 14% to £40.1m (2013: £35.1m)

· Recurring revenues up by 9% to £25.5m (2013: £ 23.4m)

· Operating profit* up 50% to £5.1m (2013 £3.4m)

· Profit before tax up 78% to £2.9m (2013: £1.6m)

· Diluted earnings per share up 47% to 5.17p (2013: 3.52p)

· Adjusted diluted earnings per shares up by 38% to 9.11p (2013: 6.60p)

· Recommended Final Dividend up 13.6% to 2.5p (2013: 2.2p)

* Pre amortisation of intangibles assets and exceptional items

OPERATIONAL HIGHLIGHTS AND CURRENT TRADING

· Acquisition of Eurowage Limited (FMP Europe) in May 2014

· Significant contract win in Australia

· Japanese operation trading profitably

· Strategic review to consider how to maximise the potential of the Group

· Commencement of an offer period

Commenting on the results Chief Executive Steve Russell, said:

"We are confident that the improvement already seen in the staffing markets worldwide will continue to increase. Our HR and Payroll Division has exciting new products for release in the first half of this year that will capitalise on the improving market conditions and will take advantage of the existing, large installed user base. Outsourcing continues to grow, both organically and by acquisition. The integration of FMP has gone extremely well and the company will become an increasingly important contributor to group profits.

The prospects for the group look better than they have done for several years and now is an appropriate time to consider the options available for the future structure of the Group. We look forward to a successful year in 2015 and will update the market on the options available to the Company in due course"

For further information, please contact:

STRATEGIC REVIEW AND COMMENCEMENT OF AN OFFER PERIOD

Bond continues to be financially robust with a strong balance sheet and consistent profitability/cash flow. The Recruitment Software Division has seen revenues rise by 5% from £17.8m in 2013 to £18.7m in 2014. The acquisition of Eurowage Limited in May 2014 was a significant step change for the Group and the Board believes this will produce good growth prospects. The Board maintains their confidence that Bond is well placed to benefit from global growth, combined with the Group's continued innovation in products and services.

Notwithstanding these strengths, Bond is constrained as a result of being a small, independent public company. As a result, the Board has determined this to be an appropriate time to evaluate the Group's future strategy to maximise the potential of Bond's market-leading software and services and take advantage of Bond's full growth potential.

Given the financial strength of Bond, continuing with the current strategy and structure remains a viable option. Nevertheless, the strategic review will be wide-ranging. The Board will consider all strategic options available to the Group including a strategic partnership, acquisition(s) to increase the scale of the Group, corporate divestitures, a sale of the Company or a new or extended bank facility to continue to invest in the Company. SunTrust Robinson Humphrey has been appointed to assist the Board in the strategic review.

As a consequence of this announcement, the Company is now considered to be in an "Offer Period" as defined in the City Code on Takeovers and Mergers (the "Takeover Code"). The dealing disclosure requirements and other provisions of the Takeover Code that now apply are listed below. A further announcement will be made as and when appropriate. The Board anticipates that this process will take several months.

Any discussions in relation to a merger with a third party or a sale of the Company will take place within the context of a "formal sale process" as defined in the Takeover Code in order to enable conversations with parties interested in making such a proposal to take place on a confidential basis.

Parties with a potential interest in making an offer for, or merging with the Company should contact SunTrust Robinson Humphrey (contact details as set out above). Any interested party will be required to enter into a non-disclosure agreement with the Company on terms satisfactory to the Board and on the same terms, in all material respects, as the other interested parties, before being permitted to participate in the process. The Board reserves the right to alter any aspect of the process or to terminate it at any time and will make further announcements as appropriate. The Board reserves the right to reject any approach or terminate discussions with any interested party or participant at any time.

The Panel on Takeovers and Mergers (the "Takeover Panel") has granted a dispensation from the requirements of Rules 2.4(a), 2.4(b) and 2.6(a) of the Takeover Code such that any interested party participating in the formal sale process will not be required to be publicly identified as a result of this announcement (subject to note 3 on Rule 2.2 and note 12 on Rule 8 of the Takeover Code) and will not be subject to the 28 day deadline referred to in Rule 2.6(a) of the Takeover Code, for so long as it is participating in the formal sale process. Interested parties should note Rule 21.2 of the Takeover Code, which prohibits any form of inducement fee or other offer-related arrangement, and that the Company has not at this stage requested any dispensation from this prohibition under Note 2 of Rule 21.2 of the Takeover Code.

In accordance with Rule 26.1 of the Takeover Code, a copy of this announcement will be available on the Company's website at www.bondinternationalsoftware.com as soon as possible and in any event no later than 12:00 noon (London time) on 20 March 2015 The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

SunTrust Robinson Humphrey, Inc, which is regulated in the United States by the Financial Industry Regulatory Authority, is acting exclusively as lead financial adviser to the Company and is acting for no-one else in connection with the matters referred to in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Suntrust Robinson Humphrey, Inc nor for providing advice in relation to the matters referred to in this announcement.

Cenkos Securities PLC, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as NOMAD to the Company and is acting for no-one else in connection with the matters referred to in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Cenkos Securities PLC nor for providing advice in relation to the matters referred to in this announcement.

This announcement is for information purposes only and is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise. The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.

Rule 2.10 Disclosure

In accordance with Rule 2.10 of the Takeover Code, Bond International Software plc confirms that it has 37,846,216 ordinary shares of one pence each in issue and admitted on the London Stock Exchange under the UK ISIN Code: GB0002369352. In addition Bond International Software confirms that it has 4,720,558 convertible non-voting shares of one pence each in issue.

For further information, please contact:

This is an announcement falling under Rule 2.4 of the Takeover Code and does not constitute an announcement of a firm intention to make an offer under Rule 2.7 of the Takeover Code. There can be no certainty that an offer will be made nor as to the terms on which any offer might be made.

Disclosure requirements of the Takeover Code

Under Rule 8.3(a) of the Takeover Code, any person who is interested (directly or indirectly) in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) of the Takeover Code applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to midnight on the day before the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested (directly or indirectly) in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror during an offer period. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) of the Takeover Code applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of: (i) the offeree company; and (ii) securities exchange offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3 of the Takeover Code. Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4 of the Takeover Code).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

CHAIRMAN' STATEMENT

Financial overview

I am pleased to report the audited preliminary results for the year ended 31 December 2014.

The Group's revenues have increased by 14.3% to £40,111,000 (2013: £35,100,000) through the acquisition of Eurowage coupled with organic growth. The Group's strategy continues to focus on growing recurring revenues with an increase of 9.1% to £25,492,000 (2013: £23,365,000) and these now represent 64% of total revenues (2013: 67%) but more importantly cover 97% (2013; 95%) of the Group's administrative expenses (excluding the amortisation of intangible assets). These have increased by 6.4% from £24,672,000 in 2013 to £26,243,000 in 2014 although the year on year increase without the acquisition of Eurowage was only 1.7% as the Group continues to keep a tight control on costs.

As a result 2014 has been a year of improving profitability with operating profit before amortisation of all intangible assets rising by 32% to £8,073,000 (2013: £6,124,000) and operating profit before the amortisation of acquired intangibles up by 50% to £5,124,000 compared with £3,419,000 in 2013.

Operating profit has increased by 74% to £3,141,000 (2013: £1,809,000) and the Group has made a profit before tax of £2,909,000 compared with £1,634,000 in 2013.

The Group has a reported undiluted increased earnings per share from continuing operations of 6.35p (2013: 3.52p) and diluted earnings per share from continuing operations of 6.34p (2013: 3.52p). 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 £4,339,000 (2013: £2,726,000) and the adjusted undiluted earnings per share were 10.29p (2013: 6.60p) and the adjusted diluted earnings per share were 10.28p (2013: 6. 60p).

The Group generated £7,056,000 of cash from operating activities (2013: £7,851,000) despite an increase in the working capital requirement of £1,428,000. As discussed in more detail below, the Group acquired Eurowage for an estimated consideration of £13,574,000, with a net cash outflow in 2014 of £2,650,000 with further payments to follow in 2015, 2016 and 2017, some of which is based on the financial performance of Eurowage over that three year period. The Group's capital expenditure on property, plant and equipment and internally generated product development fell by 6.6% to £3,906,000 (2013:£ 4,184,000) and the dividend payment increased by 26% from £744,000 to £936,000. As a result of these cash outflows the Group had net bank borrowings of £206,000 at the end of 2014 compared with net cash of £1,352,000 at the end of 2014. In addition the Group had further financial liabilities at 31 December 2014 comprising a loan note due to the vendor of Eurowage which had a fair value of £2,626,000 and amounts due in respect of finance leases of £55,000.

Based on the progress made by the Group, I am pleased to say that the Board is recommending the payment of a dividend of 2.5p per share which is a 13.6% increase on last year. The payment is subject to shareholder approval at the Annual General Meeting and, if approved, will be made on 7 August 2015 to shareholders on the register at 24 July 2015.

Acquisition

In May 2014 the Group continued its expansion through the acquisition of Eurowage, which trades as FMP Europe, for an estimated consideration of £13,574,000. Eurowage offers fully managed international payroll solutions to principally UK and USA organisations expanding into new countries. Bond has already partnered with Eurowage on previous deals and the Directors believe that by bringing the operation into the Group, it strengthens the Group's product offering and drives sustainable growth in revenues and profits from payroll operations. Details of the consideration including the maximum consideration payable and the assets acquired are set out in note 8.

Employees

The Group employs 490 people 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.

Martin Baldwin

Chairman

20 March 2015

BOND INTERNATIONAL SOFTWARE PLC

Group Chief Executive's Report

Overview

Following the acquisition of Eurowage, the Group has seen a significant increase in profitability with operating profit before the amortisation of acquired intangible assets improving by 50% to £5,124,000 (2013: £3,419,000).

Recruitment Software

Revenues from recruitment software which accounted for 47% of group revenues in 2014 (2013: 51%), have increased by 5% from £17,837,000 to £18,737,000 with strong growth in Asia Pacific following the announcement of the material contract in our Australian office in April 2014 and Japan seeing a significant increase in revenues as a result of a contract win. Revenues from our US operation fell by 9% primarily as a result of the change to a SaaS rental model which led to lower licence and support revenue. The nature of the change to SaaS means that the US operation will see an increase in valuable recurring SaaS revenues over time with a short term impact on less valuable licence and maintenance revenues.

*before amortisation of intangible assets and exceptional items

HR and payroll software

The division comprises four products of which two, Bond Payrite and Bond TeamSpirit are strategic.

The analysis of revenue by product is:

Overall revenues for the division fell by 11% in 2014 to £4,702,000 (2013: £5,262,000). The division has seen a reduction in income from the sale of licences and services because opportunities to earn consultancy in connection with Autoenrolment and RTI are no longer there.

Recurring revenues of £3,146,000 (2013: £3,313,000) represent 67% of total revenues (2013: 63%) and cover 112% of the fixed operating costs of the division (2013: 112%). The decrease in revenues has contributed to a 24% fall in operating profit from £1,901,000 in 2013 to £1,439,000 in 2014.

Outsourcing

This division comprises three separate operations, Strictly Education which provides outsourced HR, payroll and other services to schools in the UK state sector, Bond Payroll Services which provides payroll bureau services to organisations in both the private and public sectors and Eurowage that provides international managed payroll to customers in the UK and USA.

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 seen revenue growth of 4% from £9,742,000 in 2013 to £10,137,000 in 2014. Underpinning this growth is an increase of 7.7% in recurring income from annually renewable contracts. Consultancy revenues have fallen slightly as school budgets come under pressure. 2014 has also seen continued growth for Bond Payroll services with an increase of 5.8% in revenues to £2,389,000 (2013: £2,259,000).

Eurowage contributed a very impressive operating profit before the amortisation of intangible assets of £2,018,000 during the first 8 months of ownership by the Group.

The outsourcing division delivered an operating profit of £4,473,000 (2013: £2,041,000) with 20% organic growth from Strictly Education and Bond Payroll Services and the balance from the acquisition of Eurowage.

Product strategy

We continue to invest a significant proportion of our overall revenue in enhancing our products although we have seen a small increase in development costs from £4,515,000 to £4,826,000 which is 12.0 % of revenues compared with 12.9% in 2013.

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 2014 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 490 staff around the world with offices in UK, USA, Australia, Singapore, Japan, Hong Kong, and China as well as outsourced development teams in India and the Ukraine. I take this opportunity to thank them all for their hard work in 2014 and their continuing loyalty and support in 2015.

Outlook

The group is confident that the improvement already seen in the staffing markets worldwide will continue to increase. The demand for candidates in all our operating areas is growing and though the effects may have taken time, the improvement is now being seen worldwide. Our HR and Payroll Division has exciting new products for release in the first half of this year that will capitalise on the improving market conditions and will take advantage of the existing, large installed user base. Outsourcing continues to grow, both organically and by acquisition. The integration of Eurowage has gone extremely well and the company will become an increasingly important contributor to group profits.

In summary, the prospects for the Group look better than they have done for several years and now is an appropriate time to consider the options available for the future structure of the Group. We look forward to a successful year in 2015 and will update the market on the options available to the Group in due course.

Steve Russell

Group Chief Executive

20 March 2015

BOND INTERNATIONAL SOFTWARE PLC 

Consolidated income statement for the year ended 31 December 2014

BOND INTERNATIONAL SOFTWARE PLC 

Consolidated statement of comprehensive income for the year ended 31 December 2014

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

BOND INTERNATIONAL SOFTWARE PLC 

Consolidated balance sheet at 31 December 2014

BOND INTERNATIONAL SOFTWARE PLC 

Consolidated cash flow statement for the year ended 31 December 2014

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 2014

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 merger reserve comprises the premium arising on shares issued as consideration for the acquisition of subsidiaries where merger relief under section 612 of the Companies Act 2006 applies.

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 2014

1. Basis of preparation

The financial information for the year ended 31 December 2014 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 2014 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 2013.

As explained more fully in Note 8, the Group has not complied with the requirements of IFRS 3 in its treatment of contingent consideration on the acquisition of Eurowage Limited. As a consequence the Auditor has included a qualification in his report.

The comparative figures for the financial year ended 31 December 2013 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 20 March 2015.

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. 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 2014 (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 2014 (cont'd)

2. Segmental reporting (cont'd)

(a) Business segment (cont'd)

BOND INTERNATIONAL SOFTWARE PLC

Notes for the year ended 31 December 2014 (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 2014 (cont'd)

3. Income tax expense

4. 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 2014 (cont'd)

4. 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 221,350 shares (2013: 373,600 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 2014 (cont'd)

5. Dividends

The proposed final dividend was approved by the Board of Directors on 20 March 2015 and is payable to all shareholders on the Register of Members on 24 July 2015 and is subject to the approval of shareholders at the Annual General Meeting on 23 June 2015. In accordance with IAS10 'Events after the reporting period', the proposed final dividend has not been included as a liability in these financial statements.

6. Reconciliation of profit before tax to net cash flow from operations

BOND INTERNATIONAL SOFTWARE PLC

Notes for the year ended 31 December 2014 (cont'd)

7. Intangible assets