Wednesday, 23 September 2009

Services outshining software at Bond

(By Philip Carnelley, 23 Sep 09, 09:00). Recruitment and HR software and services player, Bond International, has announced its interims to 30 June. Unusually for a (primarily) software company, it is seeing more traction with services than software. It also has a small outsourcing operation which is also doing quite well - more to be expected. Despite the malaise in the recruitment industry, the company managed to increase sales in its biggest division, recruitment software/services, by 2%, to £9.5m. Overall, revenues were up 11% to £17m, which is pretty creditable, considering the markets it operates in, through a mixture of organic growth plus contributions from acquisitions. HR and payroll software revenues grew most strongly – up 45% to £2.9m – and outsourced Payroll/HR has also seen an increase in revenues, up 28% to £2.4m with an increasing number of sales into the state schools sector.

In the core recruitment division, growth was strong in the USA (up 49%) with an increase in services rather than software. UK revenues fell 15% partly due to a switch to a software rental model – and AP fell 37%. However the company says it sees “encouraging signs of new business” in the UK, with several new contract wins due to feed through into results. Overall, confirmed forward orders are up 5% on 2008. However a rise in the service element of its operations, less profitable than software licensing, has impacted profitability and so operating margin has fallen from 18% to 14%. As we noted previously (see Bond not sticking its head in the sand) the company’s move to an increasing proportion of software rental – while a good thing strategically, increasing visibility and reliability of revenues – also tends to depress margins at least in the short term. Finally, last time we expressed our doubts about the Abacus software acquisition. While the strategic rationale for this is still unclear to us at least its low profitability has been addressed as margins have jumped from 14% to 30%.

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