Bond International Share Discussion Threads

[dlku] 09/5/2016 13:40

buy at 40p, must be gonna have a profit warning like Hays, Page, etc
Brexit troubles

Avoid

[asagi] 09/5/2016 13:38

thanks for posting WJCCGHCC.

Asagi (long BDI)

[wjccghcc] 09/5/2016 12:49

I doubt it will be 9.5mm. Eurowage made 958k in H1 and the vendors get 2mm if they reach 2.5mm for the FY - otherwise 2mm less 3 x the shortfall.

For the other 5.5mm contingent consideration, then the average profit for FY14, 15 and 16 needs to exceed 3.5mm.

Unless they are significantly H2 weighted, it seems the 2mm might be reached, but the second part looks highly unlikely.

[asagi] 09/5/2016 12:32

dunno. But clues here I'm sure:

(the 2010 announcement of the issue of the shares)



this gave Constellation a seat on the board, without giving them 'negative control' i.e. with 24% of the votes, they could not stop a takeover. But conversion would force them to make an offer for all the share capital.

Now that October 2015 has passed at Constellation was allowed to increase its stake in the voting shares, which was not permitted to pass 29.9% (that's my reading of the RNS). Constellation bought its shares at 75p.

Conversion gives Constellation 'negative control' - they can block a takeover.

Now, perhaps my brain is too small to work this out but perhaps Constellation did sell on valuation grounds - top-slicing if you like - to take the price in the market rather than wait on the outcome of other sales.

Remember - Constellation is primarily interested in Bond's recruitment software. When they bought in it was to support the acquisition of a recruitment software business.

Since then, Strictly Education has grown significantly as have the rest of the non-recruitment software businesses i.e. payroll (Eurowage). There is still a large (£9.5m) contingent consideration on the Eurowage acquisition. That's a substantial amount and might be the reason the shares look so cheap - Bond is making all the revenues and profits from Eurowage but has not recognised the full liability.

Asagi (long BDI)

[dangersimpson2] 09/5/2016 12:03

I think the link is now pretty clear from the last RNS. And also pretty clear why they were selling in March - so that they could convert and remain below the takeover threshold. Most importantly not do do with any valuation concern.

Why conversion is necessary is not clear though. Usually non-voting shares (e.g. SDRC, DWHA) are economically identical to voting so would receive dividends, returns of capital etc. So either there were unusual terms that would mean they would miss out on dividends/returns of capital or they felt the higher voting influence would help advance their interests even at the cost of a slight overall reduction in holding. Did the 2010 AR give any details what the rights of the non-voting shares were?

[value viper] 09/5/2016 11:10

so what we saying boys ? constellation seem determined NOT to have to bid for the lot ?? mkt doesn't see the value the directors are seemingly creating that's for sure.

[cockerhoop] 09/5/2016 10:32

I may be wrong but the link between Constellation and the convertibles wasn't that obvious, I went back to the 2010 accounts to establish a connection!

[dangersimpson2] 09/5/2016 10:28

Interesting, I'd not really clocked Constellation selling since the 8.3 announcements are not being reported on investegate for some reason. They have in effect been forced sellers. Their selling may have also caused other to sell as they saw the largest holder responding to strategic review update by selling shares. Now it's clear that they were selling so could convert and remain below the threshold it puts quite a different light on the recent share price weakness.

[cockerhoop] 09/5/2016 07:57

So Constellation up to 29.9% now on the conversion of their non-voting shares. I've not done the maths but assume that's why they've sold shares over the last few months - to keep them under 30% on conversion.

[battlebus2] 04/5/2016 14:21

Some confident buying today...

[dlku] 04/5/2016 07:36

buy at 40p, must be gonna have a profit warning like Hays, Page, etc
Brexit troubles

[battlebus2] 03/5/2016 19:03

Exactly assagi, I doubt the directors would speak of shareholder value if they didn't believe they could return a lot more than the current market cap.

[asagi] 03/5/2016 18:09

furthermore, recruitment software division delivered £3.4m of operating profit in 2014, versus a similar number the year before.

That's 2.2 times as much profit as the Strictly Education business, which sold for £11.3m today.

[asagi] 03/5/2016 16:46

Strictly Education delivered £780k of opearating profit in H1.

Eurowage + Payroll Services did £1.3m of operating profit in the same period.

Then there is the rest of the business, which delivered 57% of group revenues in H1.

Asagi (long BDI)

[rubberbullets] 03/5/2016 10:32

hardly any cash to return after paying off debts
hugely eps dilutive move
what a disaster this is

[dangersimpson2] 03/5/2016 10:11

I think the read through from the Strictly Education sale depends much more on how much amortized intangibles are allocated to it than unallocated central costs. £1.8m out of £8.1m before amortized intangibles is quite different to £1.8m out of £3.1m operating profit.

There are also signs that SE may not be the highest growth area of their business:

FY
Strictly Education has seen revenue growth of 4% from £9,742,000 in 2013 to £10,137,000 in 2014. Underpinning this growth is an increase of 7.7% in recurring income from annually renewable contracts. Consultancy revenues have fallen slightly as school budgets come under pressure.

HY
Strictly Education has seen 1.3% increase in revenues from 2014 to 2015. Non recurring revenues rose by 3% to £1,617,000 (2014: £1,569,000) whilst recurring revenues from annually renewable contracts were £3,294,000 (2014: £3,281,000). These represent 110% of fixed overheads creating a low risk operating environment for the company. Strictly Education made an operating profit of £781,000 in 2015 (2014: £806,000).

TBH it's quite hard to get any read across from today's announcement. Hopefully with today's sale announced they can release pro-forma FY15 results with SE broken out.

[asagi] 03/5/2016 08:31

Strictly Education was around one quarter of group revenues. Point taken though WJC.

Asagi (long BDI)

[wjccghcc] 03/5/2016 07:48

Tricky to value. Strictly Education PBT was 1.8mm in 2014 which looks like 62% of the company PBT so on the face of it, an enterprise value of 28mm after the disposal doesn't appear to indicate it's cheap, particularly as I doubt the multiples for the more cyclical businesses will be as high. I suppose it depends on the allocation of the unallocated central costs of 1.2mm.

I hate it when companies are sold off piecemeal.

[battlebus2] 03/5/2016 07:17

Strictly education sold for 11 million with half the proceeds paying off debt. Clears the way for further sales imv.

[battlebus2] 25/4/2016 11:24

20k seller appears again today......

[battlebus2] 20/4/2016 17:28

Bit of buying today...hopefully news is imminent.

[battlebus2] 19/4/2016 12:59

Price is down due to selling pressure, can't be anyone other than a major holder with the amount of stock of loaded, reasons will become clear but I'm still hopeful of a positive outcome for shareholders.

[pawdaw] 19/4/2016 11:58

Doesn't look like it. At least they should have the courtesy to supply an update on negotiations with some sort of timescale on the outcome thereof - if they have one, that is.