Companies: BDI   

While it remains one of the most consistent software vendors on AIM (a trading blip several years ago notwithstanding), Bond International Software has attracted nothing more than a modest rating. This frustrating situation could finally change as the upcoming full year results are likely to impress its growing band of supporters.

September’s interim numbers from the group brimmed with promise. Sales increased 40 per cent to £5.9 million and pre-tax profits surged 50 per cent to £1.1 million – record figures for the period. Moreover, the company, which sells specialist software solutions to recruitment firms, corporate HR departments and the like, continues to pick up significant contracts.

Mid-September, for instance, saw CompHealth – a US firm providing staffing services to the healthcare industry – sign up for Bond’s flagship Adapt application. Two further contracts, each worth £400,000, were subsequently secured with UK recruitment firm right4staff and Capita Resourcing, a division of the eponymous business services giant. This latter deal will see Capita Resourcing, which already has 200 workers using the software, roll out Adapt to a further 300 individuals. Matalan, easyJet and Southern Water have all recently become customers as well.

Given that Bond is debt free, boasts over £3 million of cash in the bank and is experiencing strong revenue growth in the UK, Europe and North America, it is more than a little surprising that the shares currently trade on a single digit prospective p/e for 2006.

Bond’s poor performance in 2002 – when a £1.3 million profit reversed into a near £2 million loss as US sales collapsed – may be partly responsible for this, with the market remaining a little wary of pushing the shares too far too early. As Alan Matthews from house broker Seymour Pierce points out: ‘if you look at the shares [which now change hands for 97p] they’ve had a pretty good rise considering they were down at around 15p three years ago, but I do think they’ve been overlooked over the past 12 months.’

In a bid to avoid similar problems in the future, Bond has moved to enhance its presence in the US through the acquisition of Minnesota-based Prairie Developments – a deal completed in early 2005. At the time, chief executive Steve Russell stated that this would not only grant Bond a greater presence in the Mid-West but would also improve its ability to sell to smaller organisations. His assertions appear to have been justified, with US sales more than doubling in the first half.

As for the current year, much of the emphasis will be on the release of the latest version of Adapt, which has cost Bond over £1.6 million to develop. Russell and his team have high hopes for the product, which was released in the US late last year and is being billed as the first ‘global web-based staffing solution’, providing users with multi-lingual functionality. ‘We think this may really kick-start things for them,’ adds Matthews.

Based on the recent contract wins and the strong first half performance, Matthews expects sales of £13 million for the period and reckons pre-tax profits will rise to around £3 million, with earnings of 8.9p per share. Forecasts for the year to December 2006 then hint at a £3.5 million profit (and 10.3p of earnings) from £14.5 million of sales. These estimates place the shares on a prospective p/e of only 9.4. That is good value. Buy.

Bond International Software	AIM	£15.18m	46.00p	1.00p
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