There’s a lot going on at Bond International Software. At the top line, the provider of software for the international recruitment and HR industries kept revenues pretty much flat at £32.4 million. Adjusted operating margins reduced to 8%, compared to 11% in 2009. And at the pre-tax level, the company made losses of £1.2 million compared to a profit of £217K in the previous year.
However, unpicking the numbers to ascertain what’s really going on isn’t particularly easy. For a start, despite making two acquisitions during the year – Strictly Education Solutions in July 2010 and VCG LLC in November 2010 - there is no indication of the organic revenue decline. As a result, it is hard to see whether Bond’s assertion at the time of its interim results in September (see Bond sees some signs of recovery) that the business would start improving in the last quarter, has come to pass. It appears that revenues in H2 were indeed up by 13% or £2 million. However, as VCG was a $6.8 million annual revenue company before the acquisition, it’s more than likely that all of this increase was attributable to acquisitive growth.
Indeed, though Bond talks of signs of recovery in the staffing industry (as we have reported on many occasions e.g. Hays reports strong growth despite tough public sector and UK IT staffing demand surges at Adecco), this doesn’t yet seem to have translated into significant new investment by its clients. Its core recruitment software division (accounting for 52% of revenues in FY10) saw revenues fall by 8% and operating profits fall to just £77K compared to £2.3 million in FY09; the division was impacted by a lack of new business sales, as well as the transition to a rental model for its software.
And then there’s all the other ‘stuff’ that Bond does, much which makes sense in light of its core recruitment software business - such as its HR and payroll software & services businesses - and some which seems like a distraction - like its web services business (Abacus) where revenues were down 9% to £4.0 million and the “other services” element of its outsourcing business (acquired as part of Strictly Education), which includes services such as ground maintenance and cleaning. The good news is that it appears the ‘outsourcing’ business achieved organic – as well as acquisitive - revenue growth. And actually, while the HR & payroll software business declined by 8% to £4.9 million, the business’ level of recurring revenue stood at 71%, operating margins increased to 38% as a result of reorganisation, and there is optimism that Bond can expand the business through cross-selling.
Nonetheless, the real test for Bond's business will come in the next six months, as the company waits to see if the recovery in the staffing sector translates into investment by its clients and prospective clients in new capital projects. Today also saw results announced by executive recruitment software company Dillistone (see Dillistone revenues up 16%), which appears to be in a recruitment sector sweet spot, but even it is approaching 2011 with caution.