Bond International announce results & acquisition
• Recurring revenues now represent 95% of administrative expenses (2012: 92%)
• Administrative expenses* down by 4.1% to £24.7m (2012: £25.7m)
• Operating profit* up 23% to £3.4m (2012 £2.7m)
• Profit before tax up 193% to £1.6m (2012: £0.56m)
• Diluted earnings per share up 53% to 3.5p (2012: 2.3p)
• Recommended Final Dividend up 22% to 2.2p (2012: 1.8p)
• Moved to net cash position of £1.4m (2012 net debt: £1.8m)
* Pre amortisation of intangibles assets and exceptional items
OPERATIONAL HIGHLIGHTS AND CURRENT TRADING
• £8.5m Acquisition of Eurowage Limited (FMP Europe)
o A fully managed International Payroll solution to multi-national companies in the UK and overseas
o Adds international payroll solutions to Bond's portolio of product offerings
o Immediately earnings enhancing
o Significant contract wins in UK and US
o The board believe the Group is well placed to benefit from the ongoing economic recovery
Commenting on the results chief executive, Steve Russell, said, "The group is seeing all our worldwide recruitment markets improve on a real and sustainable basis. The reorganisation in our US business is having a positive effect, Asia Pacific continues to present opportunities for significant growth and our payroll operations continue to show material upside underpinned by the acquisition of Eurowage to the group. We have made good strategic progress this year and are confident on the future prospects of the Group.
Acquisition of Eurowage Limited
The company has also announced the conditional acquisition (the "Acquisition") of Eurowage Limited ("Eurowage"), which trades as FMP Europe, for a minimum consideration of £8,500,000 (including the value of the consideration shares to be issued as part of the Acquisition) and further contingent consideration to be based on the financial performance of Eurowage in the three years following completion of the Acquisition.
Eurowage is an international HR & payroll company providing fully managed payroll solutions to organisations in approximately 65 countries around the world. Their solutions are designed to fit the requirement for a centralised single payroll process that provides coordination of all aspects of setting up employees in a foreign country without the need for a complex group of legal entities.
Eurowage also has a number of strategic commercial partnerships with organisations such as Paychex, a leader in payroll, human resource and benefits outsourcing in the USA, and Western Union, an industry leader in global money transfer.
Eurowage was originally established in 2005 and its headquarters are in Chichester, West Sussex. In the year ended 31 December 2013 Eurowage had unaudited revenues of £3,904,000, unauditedprofit before taxation of £1,784,000 and unauditednet assets of £3,575,000 at 31 December 2013.
The board believe that the Acquisition will be immediately earnings enhancing.
Bond has seen its payroll operations deliver consistent growth in revenue and profitability over the last few years and is seeking to expand the offering both organically and through acquisition. The payroll operations, which utilise Bond's intellectual property, are currently operating in the UK only. Increasingly, companies with overseas subsidiaries or branches are looking for one payroll provider to meet all their payroll needs. In order to broaden its customer base to multinational companies in the UK and international companies, primarily in the US, the board believes that Bond has to offer payroll solutions in countries other than the UK.
Eurowage provides managed payroll solutions in many countries around the world to customers based in the UK and overseas based customers. Bond has already partnered with Eurowage on previous deals but the board believes that bringing it into the group will strengthen its product offering and drive sustainable growth in revenues and profits from payroll operations. Furthermore Bond's existing customer base includes organisations with operations in many countries around the world and to whom the group will be well placed to offer international managed payroll solutions through Eurowage.
Bond has the strategic aim to grow recurring revenues. Eurowage typically enters into three year rolling contracts which generate revenues that are recurring by nature, and so is well fitted to the group's current model.
Under the terms of the agreement for the acquisition, Bond has conditionally agreed to acquire the entire issued share capital of Eurowage, the consideration for which will be satisfied by:
• Cash consideration of up to £6,000,000
• Deferred consideration of £1,500,000 payable as to £1,000,000 in cash on the first anniversary of the completion date and £500,000 in cash to be paid on the second anniversary of the completion date
• A loan note for the value of the completion net assets of Eurowage, which includes estimated cash of £3,250,000 and which is capped at £4,000,000
• The issue and allotment of 1,073,537 ordinary shares in the capital of Bond, representing a value of £1,000,000 and
• Contingent consideration of up to £9,500,000.
The total maximum consideration payable by the Company, dependant on the financial performance of Eurowage in the three years following completion of the acquisition, is £22,000,000, including cash in the business estimated to be £3,250,000.
In accordance with the agreement, the acquisition is conditional on, inter alia, the passing of a resolution to authorise the directors to allot the consideration shares to be proposed at the general meeting of Bond expected to be held on 28th April 2014.
Application will be made to London Stock Exchange plc for the consideration shares to be admitted to trading on AIM. It is expected that admission will become effective on 7th May 2014.
A circular containing the details of these proposals and the notice of the general meeting will be posted to shareholders of Bond tomorrow and will be available on Bond's website: www.bondinternationalsoftware.com.
Commenting on the deal, Russell said, "We are delighted to be announcing the acquisition of Eurowage Limited today, which significantly strengthens our proposition in our payroll operations.
"Bond Payroll Services has provided strong levels of growth for the Group in recent years and this transaction will ensure Bond's product offering remains best in class and the strong cross selling opportunities with Bond's existing customer base following the acquisition will enable the group to further accelerate our growth."