Constellation Software Inc has added to its holding in Bond International Software following the recruitment software provider’s 2009 figures.
The stake has gone up from 10.35% to 12.95%. Constellation recently won its bid battle with membership software provider Gladstone, which admitted defeat earlier this week.
TSX-listed Constellation has told Bond that it views its stake as an investment.
Revenues edged ahead to £32.5m in 2009 but the lack of licence sales meant that margins fell. Recurring income accounts for 53% of revenues and covers two-thirds of overheads.
The main growth in revenues was from outsourcing but its profit contribution was lower as interest on client money declined. Payroll software increased its profit contribution on flat revenues because costs were reduced.
Underlying group pre-tax profit fell from £3.1m to £1.3m. The decline would have been worse without the diversification away from the core recruitment software business.
Net debt was just under £3m at the end of 2009. Bond has renewed its £6m of bank facilities for a further three years at a slightly more expensive rate. The dividend has been halved to 0.8p a share.
According to chief executive Steve Russell, Bond was overwhelmed by pent up demand at the end of the last recession. There is no guarantee that will happen again, though. The general election is likely to hold back any progress for the time being. The recovery has to be sustainable for the recruitment companies to increase their software spending and buy new systems. Additional user licenses are being bought by existing customers.
Contracts are being won and a six and a half year contract with Remploy – Bond’s first government client – will boost the 2010 figures. Michael Page will be another important client in 2010.
Bond is interested in acquisitions that would add further operations in the human resources area to the group. Psychometric testing has been mentioned in the press.
House broker Cenkos forecasts a rise in underlying profit to £2.3m, which is still well below the profits reported in 2007 and 2008. Cenkos expects cash flow to improve and for Bond to move into a positive cash position in 2011.
At 71p a share, up 2p, Bond is valued at £23.5m. The shares are trading on 15 times prospective earnings for 2010, falling to nine in 2011.
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