HR and payroll software and services provider Bond International is in the midst of an important strategic shift to delivering its software as a service (Saas), which for now is having a negative impact on the overall top line.
First half revenue fell 2.4% to £17m against a 3.7% drop in the previous full year (see Bond International inches forwards). While these structural shifts take place, Bond has been rightly removing costs from operations, which helped boost operating profits by 35% to £1.35m (margin 7.9% vs. 5.7% last time).
Bond’s largest division, recruitment software is being particularly badly hit by the shift to the cloud, with revenue down 14.3% to £8.68m. Within this, traditional licence sales and support were down 29.5% and 11.6%, meanwhile SaaS and software rental revenue were up, but only a modest 4.3%.
The good news for Bond is that growth is coming from HR and payroll software and outsourcing, which were both up 14% to £2.65m and £5.7m respectively.
Bond’s outsourced HR and payroll services is delivered by its Strictly Education division, which provides HR, payroll and other services to UK schools, as well as the UK private sector. This division will compete with the likes of HR software and services player Midland HR, and much larger players like Northgate and Capita. There are pickings to be had, for instance, last year Bond won a deal with the NAHT (National Association of Head Teachers) as its sole support partner, and in March it won a HR and payroll contract with retailer Carpetright. Outsourcing is likely to be the main reason for the UK business heading in the right direction in H1 (revenue was up 7.1% to £12.4m).
Bond’s big challenge lies in its core recruitment space, which saw a 45% drop in traditional licence sales in the UK (apparently in line with expectations). Bond is growing SaaS user numbers and revenues from recruitment. But it will need to accelerate this adoption even more if it wants to return to headline growth any time soon.