Recruitment software supplier Bond International (BDI:AIM) has effectively hoisted the 'for sale' sign as it attempts to arrest years of limp growth. While the Sussex-based business intends to look at several options, including strategic partnerships, acquisitions to increase scale, selling parts of the business (the HR or payroll bits perhaps) and tapping its banking lenders for growth funding, shareholders look likely to push for a complete sale of the company.
'Prospects for the group look better than they have done for several years and now is an appropriate time to consider the options available for the future structure,' says chief executive Steve Russell. With the shares currently trading at 120p, barring a brief rally last summer, the stock hasn't been this high since 2007-2008.
Coming alongside another set of pretty lacklustre full year figures, for the year to end December 2014, it's not hard to see why investors might think enough is enough despite Russell's apparent optimism. A 14% increase in reported revenues to £40.1 million may look decent enough, yet most of that jump was acquisition fuelled by Eurowage. Strip that purchase out and the real top line progress was typically unexciting at just 2.5%.
True, profitability has continued to improve, partly thanks to tight control on costs, but the real problem here remains one of scale, or lack of it. Staffing markets may be steadily improving across the globe yet Bond seems incapable of consistently tapping into this trend, albeit not for want of trying.
'We suspect that there will be shareholder pressure to find a buyer for the company,' spells out Lee Prout today, analyst at IT consultancy Megabuyte.
Recent buyouts in the space have gone for enterprise value (EV) multiples of around 10 to 12-times earnings before interest, tax, depreciation and amortisation (EBITDA), leaving plenty of upside to the current share price, in theory anyway. Yet there is only so far cost cutting and efficiency will take the company, beyond that Bond desperately needs to find a way to substantially raise the revenue growth ante. And given that constraint, we believe getting a buyer to shell out much more than maybe seven-times underlying profits will be a tall order. Still, that could imply a take out offer in the region of £56 million, a price shareholders are unlikely to refuse.