Bond International - Strong growth at a reasonable valuation

Slap

You really do need to read the 2004 Annual Report to resolve your BS queries. Go to the company's website www.bondadapt.com

As at 31/12/04 the creditors due within 12m figure was £3.5m. Of this, £1.9m was deferred income and a further £0.4m was accrued expenses. Only £0.2m was owed to trade creditors, so the cash has clearly not come from delaying payments to creditors.

If you read the notes to the accounts you will see where the deferred income arises. Support contracts are billed in advance and revenue relating to the unexpired portion of these contracts is treated as deferred income in the accounts. The accounting is as follows:

1) Invoice raised for support contract
Dr Debtors
Cr Creditors (deferred income)

2) As support contract revenue is 'earned'
Dr Creditors (deferred income)
Cr Sales

Billing support contracts in advance certainly helps their cashflow as that deferred revenue is sitting either in cash or in debtors. Nothing abnormal about it though in this sector and it in no way represents a liability as, even if a contract were terminated, the money would probably be forfeited.