(BDI) Bond International Software

FOR IMMEDIATE RELEASE                                                                     14 September 2011

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 2011.

KEY POINTS

·    Revenue increased by 40%  to £18.4m (2010 restated : £13.2m) as a result of:

o the acquisition of VCG LLC and the remaining 50% of Strictly Education Solutions Limited; and

o  organic growth of 13%

·    Recurring revenue grew by 36% to £11m (2010 restated : £8m) representing 7% organic growth

·    Administration expenses increased by 22% to £13.3m (2010 restated : £10.9m) primarily as a result of acquisitions

·    Adjusted profit after tax was £1.0m (2010 restated : £264k)

·    Adjusted earnings per share were 2.52p (2010 restated : 0.80p)

·    Net debt reduced to £2.3m

·    Disposal of Abacus Software for a total consideration of £1.8m

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

"The first six months of 2011 has undoubtedly seen significant improvement since the same period last year.  However, we remain cautious about the prospects for the second half particularly in the UK and USA although we have high hopes for our Asia Pacific operation in the medium term."

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Chairman's Statement

I am pleased to report the unaudited interim results for the six months ended 30 June 2011.

Financials

The first half of 2011 has seen a marked improvement on the equivalent period in 2010 with revenues increasing by 40% to £18,375,000 compared to the restated figure of £13,171,000.  The increase in revenues has resulted from the acquisitions of VCG LLC and the remaining 50% of Strictly Education Solutions Limited in the second half of 2010 together with organic growth of 13%.

Recurring revenue continued its upward trend and grew by 36% in 2011 to £11,008,000 (2010 restated: £8,090,000) of which 7% is organic growth.  It represented 60% of revenues compared with 61% for the first half of 2010 and 62% for the year ended 31 December 2010.  It covered 82% of administrative expenses (excluding amortisation of development costs) compared with 74% for the same period last year.  

Administrative expenses have increased by 22% to £13,301,000 (2010 restated: £10,888,000) primarily from the acquisitions referred to above.

The group has reported earnings per share of 0.01p (2010: 0.25p) of which 1.11p arose from continuing operations (2010 restated loss: 0.59p).  In order to assist with understanding the underlying financial performance of the group, we have reported adjusted earnings per share from continuing operations excluding the effects of the amortisation of intangible assets arising on acquisitions and the charge for share based payments.  On this basis the adjusted profit after tax was £1,041,000 (2010 restated: £264,000) and the adjusted earnings per share were 2.52p (2010 restated: 0.80p).

The group generated cash of £1,534,000 from operating activities between 31 December 2010 and 30 June 2011 (2010: £21,000) and was able to reduce overall net debt by £216,000 to £2,324,000 after total capital expenditure of £1,857,000, the majority of which was invested in product development.  In the last twelve months the group has reduced net debt by £2,258,000 and with an expectation of a further improvement in cash flows from operating activities in the second half of 2011.

Disposals

On 8 April 2011 the group completed the sale of Abacus Software Limited for a total consideration of £1,750,000 of which £700,000 was paid on completion, £250,000 is payable on the first anniversary of completion and the balance over three years. As we reported at the time, the disposal allows the group to focus on its core activities in the recruitment and HR industries.

As a consequence, Abacus Software Limited has been treated as a discontinued operation for reporting purposes and the results for the period to the date of disposal together with the loss on disposal, have been shown as one line in the income statement.  As required by accounting standards, the comparative figures for the six months ended 30 June 2010 and the year ended 31 December 2010 have been restated to show the discontinued operation separately from continuing operations. Further details of the impact on the group's results are set out in note 3.

Recruitment Software Division

Recruitment software now accounts for 62% of group revenues.  Having experienced difficult trading conditions for the last two years the division saw a significant upturn in the first six months of 2011 with revenues up by 42% on 2010 with organic growth of 19% and the balance through the acquisition VCG LLC in November 2010.

The division has seen an increase of 43% in recurring income to £6,208,000 of which 6% is organic growth driven primarily by increasing rental income as more systems are sold on a rental basis reflecting the change in business model. 

In the more traditional recruitment industry the recovery in demand for recruitment software has remained slow, particularly in the US and whilst confidence has recovered to a certain extent, companies appear reluctant to commit to significant capital projects before the current economic uncertainties have passed. However the group has exploited a number of opportunities provided by the more specialist recruitment companies resulting in a 40% increase in the sale of licences and services compared to the first six months of 2010.

Following the acquisition of VCG in November 2010 the group has embarked on a restructuring in the US which involves merging our three operating companies in North America into one organisation with streamlined  management and a strong product set going forward.

The Board is encouraged by the prospects for the Asia Pacific region.  Whilst our new Japanese operation still requires ongoing investment our decision to open an office in Tokyo has presented us with opportunities to work with a number of the largest recruitment companies in the region.  The revenue potential for this fledgling business remains significant.    

Chairman's Statement (continued)

Recruitment Software Division (cont'd)

Analysis of Recruitment Software Division revenues

Revenue by type

HR and Payroll Software Division

The HR & Payroll division looks after two HR packages, one payroll package and an integrated HR and payroll solution. Their target market is small to medium sized enterprises in both the private and public sector.

Whilst revenues have reduced by 5% to £2,449,000 (2010: £2,573,000) operating profit before the amortisation of intangible assets has increased from £739,000 in 2010 to £1,026,000 in 2011 as operating costs were further reduced in the last quarter of 2010. Operating margins have now improved to 42% from 29% for the same period last year and 39% for the year ended 31 December 2010. Recurring revenues account for 72% of total revenues and represent 135% of the fixed operating costs of this division.

Revenue by type

Chairman's Statement (continued)

Outsourced HR & Payroll Services

The division comprises two separate operations, Strictly Education which provides outsourced HR, payroll and other services to schools in the state sector, and Bond Payroll Services which provides payroll bureau services to organisations in both the private and public sectors.

The revenues for the Outsourced HR & Payroll Services Division are a combination of monthly fees under annual contracts for a variety for outsourced services together with fees payable in respect of consulting services for projects under taken on behalf of customers.

Strictly Education goes from strength to strength increasing revenues by 107% from £1,739,000 to £3,598,000 and operating profit by 75% to £446,000 (2010: £255,000).  The growth has been achieved through a combination of organic growth and the acquisition of Strictly Education Solutions in July 2010, the activities of which were hived up into Strictly Education Limited on 1 January 2011.  Operating margins have reduced from 18% to 12% reflecting the broader range of services the company provides following the acquisition.   The company continues to win contracts to provide consultancy services in connection with the Government's academy programme with the prospect of continued growth in this area to come.

Bond Payroll Services has seen revenues increase by 12% to £960,000 in 2011 from £859,000 for the same period last year reflecting the increasing number of pay slips processed.  The operating margin has also improved from 19% to 26% following the merger of two bureaux into one at the end of 2010.

Product Strategy

The group continues to invest a significant proportion of revenues in enhancing the product portfolio with overall expenditure on development rising to £2,575,000 in 2011 which is 14% of revenues compared with £2,059,000 for the same period last year, which was 16% of restated revenues.

Current trading and future prospects

The first six months of 2011 has undoubtedly seen a significant improvement in the group's fortunes when compared to the same period last year.  Order intake was strong and recurring income increased both organically and through acquisition. However whilst some level of confidence has returned to the staffing industry, we remain cautious about the prospects for the second half. In the UK and US, staffing companies still seem reluctant to commit to significant capital projects whilst the current uncertainties, which are acting as a brake on the economic recovery, continue to exist. We have high hopes for our Asia Pacific operation in the medium term but Japan and China are still in their infancy.

Our HR & Payroll Software division delivers strong and stable revenues but we do not expect to see significant growth in revenues in the second half of the year.

Our Outsourced HR & Payroll Services division continues to benefit from the increasing number of state schools who want to become academies and we are currently advising around 80 schools.  The division is working hard to refine its product offering in this area in order to achieve greater market penetration and exploit the opportunities that the Government's Academy Programme affords it.

Martin Baldwin

Chairman

13 September 2011

Consolidated income statement for the six months ended 30 June 2011 (unaudited)

Consolidated statement of comprehensive income for the six months ended 30 June 2011 (unaudited)

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

Consolidated balance sheet at 30 June 2011 (unaudited)