When we looked at Bond International Software’s results for FY11 (see Bond International: moving towards recovery) we noted some positive operational signs hinting that Bond was on the road to recovery, albeit a slow one. Unfortunately we cannot say the same for H112 (six months to 30th June 2012).Total revenues for the period dropped 5% to £17.4m. And while the staffing, HR and payroll software provider drove down administration expenses (from £13.6m to £13.1m), operating profits headed south from £1.4m to £1.0m, and the adjusted operating profit from £1.39m to £995K.
The big problem area was the UK recruitment software business (with the US recruitment software business not far behind). Revenues fell 17% to £4.2m. So even thought the recruitment software division made some progress in the Asia Pac market, with new contracts driving revenues in the region up from £737K to £1.2m, it wasn’t enough to prevent a decline of 11% in revenues (to £10.1m) for the business unit. In the UK, as well as suffering due to a lack of IT investment by larger recruitment companies leading to an “absence of sizeable license sales”, the company is also struggling as traditional license sales demise and SaaS sales take over. In the recruitment software division, this was highlighted by the large 32% decline in traditional software sales and services globally, while software support and SaaS revenues increased 6.4%. With operating profits from the UK recruitment software business down from £973K to £237K, management is now considering options to reduce UK operating costs.
In the other divisions, HR & payroll solutions division watched revenues fall by 5% to £2.3m but the business remains highly profitable (operating margin of 37%). We can’t help feel that, with the UK Government determined to use smaller software providers, there should be an opportunity for Bond to grow this business. While in outsourced and payroll services, revenue growth was healthy (11% in Strictly Education and 2% in Bond Payroll Services).
Overall it’s another mixed picture for Bond. Unfortunately none of the challenges faced by the UK recruitment software business are likely to disappear anytime soon. And its foray into emerging markets is not yet delivering enough growth to compensate. A tough time ahead.