Final Results

RNS Number : 5093Q

Dillistone Group PLC

15 April 2009

 



                                                                                                                             15 April 2009

DILLISTONE GROUP PLC

PRELIMINARY ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2008

Dillistone Group Plc ('Dillistone' or 'the Group'), the AIM listed supplier of recruitment software, is pleased to announce its preliminary results for the year ended 31 December 2008.

Highlights for the year:

                                                                                2008            2007

• Revenue                                      +13%        £4.60m        £4.10m

• Operating profit                            +17%        £1.37m        £1.17m

• Profit before tax                           +19%        £1.43m        £1.20m

• Earnings per share (basic)             +24%        18.48p         14.90p

• Cash balances                              +53%        £2.40m        £1.50m

• Recurring revenues increased by 35% to £2.25m, representing 49% of total turnover

• Proposed final dividend of 7p per share recommended, making total dividend for year of 10.5p

• Clients in over 55 countries world wide 

Commenting on the results, Jim McLaughlin, Executive Chairman and Finance Director said: 

'The value of our support renewals for December 2008, which reflect in sales for 2009, shows a pleasing trend, and there are a number of significant prospective new clients on the horizon.  

The Group will see the impact of the recession in its 2009 results, but is well positioned to withstand the effects of this because of its strong balance sheet and cash reserves. The board has decided that, in the absence of major unforeseen circumstances, it will maintain the dividend of 10.5p per share paid in respect of 2008 through into 2009, as a sign of its confidence in the businesses' ability to weather the downturn.'

Annual Report and Accounts

Copies of this preliminary results announcement are available from the Company's website (www.dillistone.com). Copies of the Annual Report and Accounts will be sent to shareholders by 30 April 2009 for approval at the Annual General Meeting to be held on 5 June 2009.

Contacts:

Jim McLaughlin                         Dillistone Group Plc                        01934 710 509

Chairman & Finance Director

Emily Morgan                            Blomfield Corporate Finance           01275 871 717

Director, Corporate Finance

Daniel Briggs                             Religare Hichens, Harrison             020 7382 7776

Tom Cooper/Paul Vann              Winningtons                                   020 3043 4162

                                                                                                      0797 122 1972

Chairman's Statement

Financial Performance

We began the year with a very high level of confirmed orders, and this contributed to an excellent start to the year, and the year as a whole produced record profits and revenues for the Group.  

Revenue in the year increased by 13% to £4,608,197 (2007 - £4,066,463), and profits before tax increased by 19% to £1,425,572 (2007 - £1,196,213). These results were assisted somewhat by the weakness of the pound in the second half of the year, in particular against the US Dollar and Euro. Sales in the overseas markets held up extremely well, with increases of 19% in Europe, 26% in Asia-pacific, and 31% in the USA when measured in Sterling. When measured in local currency these increases moderated somewhat to 5%, 21% and 28% respectively, but nevertheless were creditable performances given the effects of the global economic slowdown.

I said last year that our decision to offer our product on a 'Software as a Service' (SaaS) basis in the USA would have a positive impact on the revenues in that market, and I am pleased to report that this initiative appears to have been successful. Recurring revenues in the USA increased by 47% in dollar terms, and now comprises 65% of all sales in that region. Notwithstanding the localised effects of the recession in the USA, our business there performed very well, posting an impressive 75% increase in pre-tax profits, albeit with some assistance from the currency strengthening in the latter part of the year.

Recurring revenues (mainly arising from support agreements) for the Group as a whole increased by some 35% from £1.666m to £2.246m, whilst non recurring revenues fell slightly as more new clients opted for the SaaS model. Recurring revenues now comprise some 49% of sales (2007 - 41%) and the level of renewals for 2009 are at an encouraging level.

Operating margins increased further during the year from 29% in 2007 to 30% for 2008, and the pre-tax margin increased from 29% to 31%, reflecting a higher level of interest income, and controls over operating costs.

Our cashflow has continued to reflect the profitable performance of the business, and we generated an inflow of £1.226m before dividends and currency gains (2007 - £1.106m). At the year end we held cash balances of £2.353m (2007 - £1.534m). This balance is struck after the payment of dividends during the year of £513,000 (2007 - £135,000). The group continues to have no borrowings whatsoever and our balance sheet remains very strong.  

Earnings per share increased by 24% to 18.48p per share (2007 - 14.90p). We paid an interim dividend of 3.5p in October 2008, and the board has recommended a final dividend of 7p per share (2007 - 6p), subject to shareholder approval, payable on 9th June 2009 to holders on the register on 8th May 2009. Shares will trade ex-dividend from 6th May 2009. The total dividend for the year, which amounts to 10.5p per share is an increase of 2p per share or 24% over 2007. The dividend is covered 1.76 times by earnings, and 2.16 times by the cash generation of the business.

Staff

Our staff again performed exceptionally well during the year, and share options that were granted in May 2006 will begin to crystallise in May 2009. At the year end, staff held options over 301,325 shares, representing 5.3% of the enlarged share capital. Some 277,000 of these options will mature in May 2009, and I look forward to welcoming the holders of these options to the share register in due course.

Prospects

During the latter part of 2008 our order intake reduced as a result of the global economic slowdown, and many of the major economies in which we trade are now in recession. A number of our clients are experiencing difficulties, with a few ceasing to trade altogether. However, the value of our support renewals for December 2008, which reflect in sales for 2009, shows a pleasing trend, and there are a number of significant prospective new clients on the horizon. Despite the slowdown, the board has committed to significant resources to further development of FILEFINDER to ensure that we retain our competitive position in the face of evolving technologies common to our market place; this will ensure that FILEFINDER is built on technologies that will serve our clients well into the next decade.

It is inevitable that the Group will see the impact of the recession in its 2009 results, but is well positioned to withstand the effects of this because of its strong balance sheet and cash reserves. The board has decided that, in the absence of major unforeseen circumstances, it will maintain the dividend of 10.5p per share paid in respect of 2008 through into 2009, as a sign of its confidence in the businesses' ability to weather the downturn. It will keep this position under constant review.

Jim McLaughlin

14th April 2009

Managing Director's Report

2008 proved to be another excellent year for the Group and I am delighted to report record levels of revenue, profits, cash generation, dividends and earnings per share. This was achieved against a somewhat gloomy economic backdrop and it should be noted that we did see a significant weakening in demand for our products and services in the final quarter of the year.

The year as a whole saw us win 142 new business contracts which were implemented in 31 countries.  Our global spread is particularly pleasing - we now have clients in 56 countries. Whilst the credit crunch continues to impact on the global economy and we have certainly been hit by that, this international exposure does give us some protection against the most extreme volatility. In particular it is worth noting, given the particular concerns around the state of the UK economy, that in 2008 we generated more revenue from outside the UK (51%, up from 46% in 2007) than from within. 

Our efforts to increase the use of our FILEFINDER software system by the in-house talent acquisition teams of major corporations has continued to bear fruits, and we now boast 6 of the Fortune 100 companies as clients. We are confident of extending our penetration of this space in 2009.

DIVISIONAL REVIEW

UK, Middle East and India

In previous reports, I have noted that the bulk of the Group cost base is carried by our UK business and this remains the case. The UK reported an increase in revenue of 3.5% (2008 - £2,256,516; 2007 - £2,180,172), however our increase in costs carried by the region meant that profitability in the region was almost unchanged in terms of its result, with a contribution from the region of £523,661 (2007 - £536,428).

Europe

Our European business broke the £1 million revenue mark for the first time with revenues increasing by 19% (2008 - £1,008,035; 2007 - £845,745). Profits rose by 11% (2008 - £729,318; 2007 - £656,827). This represents our best ever results within the region.

 

Asia Pacific

Our Asia Pacific region once again returned a pleasing set of results, with Revenue up 26% (2008 -£511,120; 2007 - £406,949) and this lead to an increase in profit of 19% (2008 - £307,447; 2007 - £258,064). Again, this is the best performance from the region yet.

 

United States

The United States benefited particularly from the decision to offer our FILEFINDER Software system on the SaaS model and the increase in recurring revenues, along with the fall in the value of Sterling, played a major part in our excellent results in the region. Revenue of £832,527 equates to an increase of 31% (2007 - £633,597) and this lead to an increase in profit of 75% to £324,377 (2007 - £185,339). 

PRODUCT STRATEGY

We continue to invest in our core FILEFINDER product, and in early 2009 we released the latest iteration of the product, FILEFINDER 9. This product features our new 'Research Zone' technology which allows users to utilise automated searches to mine the Internet for information on potential candidates and is functionality which, we believe, is groundbreaking.  

Despite releasing what we believe to be the leading product in our space, we consider that it is vital that the business continues to invest in its future. Our strong balance sheet means that, whilst many of our competitors are likely to be cutting back on product development, we have actually committed to a very significant increase in our R+D budget for 2009 and 2010. We believe that this will place us in the optimum position when the global economy does recover.

During 2007 and 2008 we ran a series of conferences, webinars and training events targeting the executive search industry. Although these events made a positive contribution to profitability in the year, it was noticeable that events in the last quarter of 2008 were less well attended, and as a result, we have reduced the number of such events we will be promoting during 2009.  

PEOPLE

Once again, I would like to record my appreciation for the efforts of the excellent group of people who we have working for us around the world. We are fully aware that our results are dependent on the efforts of our people and we believe that our continued investment in our staff will help us to take advantage in the economic upturn, when it comes.

Jason Starr

14th April 2009

CONSOLIDATED INCOME STATEMENT

	Note	2008		2007
		£		£
Revenue	2	4,608,197		4,066,463
Cost of sales		(202,997)		(236,951)
Gross profit		4,405,200		3,829,512
Administrative expenses		(3,033,799)		(2,659,390)
Results from operating activities	3	1,371,401		1,170,122
Financial income	4	54,171		26,091
Profit before tax		1,425,572		1,196,213
Tax expense	5	(427,672)		(391,838)
Profit for the year		997,900		804,375

Earnings per share - from continuing activities

Basic	6	18.48p		14.90p
Diluted	6	17.50p		14.05p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

		Share		Retained		Share		Foreign		Total
		capital		earnings		option		exchange
		£		£		£		£		£
Balance at  31 December 2006		270,000		479,648		13,316		(6,180)		756,784
Profit for the year ended 31 December 2007		-		804,375		-		-		804,375
Fair value of equity settled share option expense		-		-		13,462		-		13,462
Exchange differences on translation of overseas operations		-		-		-		23,916		23,916
Dividends paid		-		(135,000)		-		-		(135,000)
Balance at  31 December 2007		270,000		1,149,023		26,778		17,736		1,463,537
Profit for the year ended 31 December 2008		-		997,900		-		-		997,900
Fair value of equity settled share option expense		-		-		13,649		-		13,649
Exchange differences on translation of overseas operations		-		-		-		106,013		106,013
Dividends paid		-		(513,000)		-		-		(513,000)
Balance at  31 December 2008		270,000		1,633,923		40,427		123,749		2,068,099

CONSOLIDATED BALANCE SHEET

		Group
	Notes	2008		2007
ASSETS		£		£
Non-current assets
Intangible assets	8	707,396		639,835
Property plant and equipment	9	158,443		155,390
Investments		-		-
		865,839		795,225
Current assets
Inventories	10	50,628		2,334
Trade and other receivables	11	1,306,748		1,284,190
Cash and cash equivalents		2,352,794		1,533,649
		3,710,170		2,820,173
Total assets		4,576,009		3,615,398
EQUITY AND LIABILITIES
Equity
Share capital	13	270,000		270,000
Retained earnings		1,633,923		1,149,023
Share option reserve	15	40,427		26,778
Translation reserve		123,749		17,736
Total equity		2,068,099		1,463,537
Liabilities
Non current liabilities
Deferred tax liability	5	3,000		3,000
Current liabilities
Trade and other payables	12	2,328,489		1,848,038
Current tax payable		176,421		300,823
Total liabilities		2,507,910		2,151,861
Total liabilities and equity		4,576,009		3,615,398

The financial statements were approved by the board of directors and authorised for issue on 14th April 2009.  They were signed on its behalf by

J S Starr - Director

J McLaughlin - Director

CONSOLIDATED CASH FLOW STATEMENT

	2008		2008		2007		2007
Operating activities	£		£		£		£
Profit from operations	1,371,401				1,170,122
Less taxation paid	(552,074)				(319,590)
Adjustment for
Depreciation and amortisation	132,712				126,606
Share option expense	13,649				13,462
Loss on disposal	-				657
Operating cash flows before
movement in working capital	965,688				991,257
(Increase) in receivables	(22,558)				(456,557)
(Increase)/decrease in inventories	(48,294)				18,876
Increase in payables	480,451				637,216
Net cash generated from operating activities			1,375,287				1,190,792
Investing activities
Interest received	54,171				26,091
Purchases of property plant and
equipment	(71,747)				(35,653)
Investment in development costs	(131,579)				(75,088)
Net cash used in investing activities			(149,155)				(84,650)
Financing activities
Dividends paid	(513,000)				(135,000)
Net cash used by financing activities			(513,000)				(135,000)
Net increase in cash and cash equivalents			713,132				971,142
Cash and cash equivalents at
beginning of year			1,533,649				538,591
Effect of foreign exchange rate changes			106,013				23,916
Cash and cash equivalents at end of year			2,352,794				1,533,649

NOTES TO THE FINANCIAL STATEMENTS

1.    Basis of Accounting

The above financial information does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The above figures for the year ended 31 December 2008 are an abridged version of the company's accounts which will be reported on by the auditors, dispatched to the shareholders and filed with the Registrar of Companies shortly.

The audited accounts for the year ended 31 December 2007 have been delivered to the Registrar of Companies and the report of the auditors was unqualified and did not contain statements under Section 237(2) or (3) Companies Act 1985.

The financial information in this announcement has been prepared on the basis of the accounting policies set out in the interim financial statements for the 6 months ended 30 June 2008.

The announcement was approved by the board of directors on 14 April 2009.

2.    Segment reporting

Geographical segments

The following tables provide an analysis of the Group's revenue, assets, liabilities and additions by geographic market.

For the year ended 31 December 2008
	UK		Europe		USA		Asia-Pacific		Total
	£		£		£		£		£
Segment revenue	2,256,516		1,008,035		832,527		511,120		4,608,198
Depreciation and amortisation expense	131,395		-		-		1,317		132,712
Segment result	523,611		729,318		324,377		307,447		1,884,753
Central costs									(513,352)
Operating profit									1,371,401
Additions of non-current assets	203,326		-		-		-		203,326
Segment assets	2,953,757		329,468		583,553		214,838		4,081,616
Central assets - goodwill									494,393
Total assets									4,576,009
Segment liabilities	1,254,021		566,874		623,139		63,876		2,507,910

For the year ended 31 December 2007
	UK		Europe		USA		Asia-Pacific		Total
	£		£		£		£		£
Segment revenue	2,180,172		845,745		633,597		406,949		4,066,463
Depreciation and amortisation expense	78,308		30,198		10,449		7,651		126,606
Segment result	536,428		656,827		185,339		258,064		1,636,658
Central costs									(466,536)
Operating profit									1,170,122
Additions of non-current assets	101,332		2,609		4,704		2,096		110,741
Segment assets	1,264,901		838,202		559,533		458,369		3,121,005
Central assets - goodwill									494,393
Total assets									3,615,398
Segment liabilities	1,260,878		447,143		337,624		106,216		2,151,861

Business segment

The following table provides an analysis of the Group's revenue by business segment

Revenue  

			2008		2007
			£		£
Recurring income			2,245,943		1,665,870
Non-recurring income			2,362,254		2,400,593
			4,608,197		4,066,463

Recurring income includes all support services, and web hosting income. Non-recurring income includes sales of new licenses, and income derived from installing those licenses including training, installation, and data translation.

It is not possible to allocate assets and additions between recurring and non-recurring income.

3.    Result from operating activities

			2008			2007
			£			£
Result from operating activities is stated after charging:
Depreciation			68,694			61,082
Amortisation			64,018			65,524
Gain on foreign exchange transactions			(11,711)			-
Operating lease rentals - land and buildings			97,620			91,365
Money purchase pension contributions			32,285			31,966
Fees receivable by the group auditors:
Audit of financial statements			19,860				15,300
Other services:
Audit of accounts of subsidiary of the company			12,140				12,150
Other services relating to taxation			5,720				4,000
All other services			6,800				3,550

4.    Financial income

			2008		2007
			£		£
Interest receivable			54,171		26,091

5.    Tax expense

			2008		2007
			£		£
Current tax			427,672		379,533
Adjustment to previous period			-		17,908
Deferred tax			-		(5,603)
Income tax expense for the year			427,672		391,838
Factors affecting the tax charge for the year
Profit before tax			1,425,572		1,196,213
Effective rate of taxation			30.00%		30.37%
Profit before tax multiplied by the effective rate of tax			427,672		363,290
Effects of :
Change in tax rate			(25,301)		-
Non deductible expenses			(40,067)		(3,470)
Adjustments for overseas tax paid			57,829		(904)
Depreciation and amortisation disallowed			26,538		29,881
Capital allowances			(18,999)		(9,264)
Adjustments to previous periods			-		17,908
Deferred tax liability			-		(5,603)
Tax expense			427,672		391,838

Deferred tax provided in the financial statements is as follows:

		Group
		2008		2007
		£		£
Accelerated capital allowances		3,000		3,000

6.    Earnings per share

			2008		2007
Profit attributable to ordinary shareholders			£997,900		£804,375
Weighted average number of shares			5,400,000		5,400,000
Basic earnings per share			18.48 pence		14.90 pence
Weighted average number of shares after dilution			5,702,087		5,726,811
Fully diluted earnings per share			17.50 pence		14.05 pence

7.    Profit for the financial year

As permitted by section 230 of the Companies Act 1985, the holding group's profit and loss account has not been included in these financial statements. The profit for the financial year for the holding company was £628,469 (2007 - £226,168).

8.    Intangible assets

Group			Development costs			Goodwill		Total
				£		£		£
Cost
At 1 January 2007				303,307		494,393		797,700
Additions				75,088		-		75,088
At 31 December 2007				378,395		494,393		872,788
Additions				131,579		-		131,579
At 31 December 2008				509,974		494,393		1,004,367
Amortisation
At 1 January 2007				167,429		-		167,429
Charge for the year				65,524		-		65,524
At 31 December 2007				232,953		-		232,953
Charge for the year				64,018		-		64,018
At 31 December 2008				296,971		-		296,971
Carrying amount
At 31 December 2008				213,003		494,393		707,396
At 31 December 2007				145,442		494,393		639,835
At 31 December 2006				135,878		494,393		630,271

9.    Property, plant and equipment

Group		Land and buildings		Office & computer equipment		Fixtures and fittings		Total
		£		£		£		£
Cost
At 1 January 2007		163,073		150,391		21,115		334,579
Additions		-		31,494		4,159		35,653
Disposals		-		(3,874)		-		(3,874)
At 31 December 2007		163,073		178,011		25,274		366,358
Additions		-		71,747		-		71,747
At 31 December 2008		163,073		249,758		25,274		438,105
Depreciation
At 1 January 2007		12,490		119,498		21,115		153,103
Charge for the year		32,329		28,466		287		61,082
Eliminated on disposal		-		(3,217)		-		(3,217)
At 31 December 2007		44,819		144,747		21,402		210,968
Charge for the year		32,692		33,922		2,080		68,694
At 31 December 2008		77,511		178,669		23,482		279,662
Carrying Amount
At 31 December 2008		85,562		71,089		1,792		158,443
At 31 December 2007		118,254		33,264		3,872		155,390
At 31 December 2006		150,583		30,893		-		181,476

10.    Inventories

		Group
		2008		2007
		£		£
Licences for resale		50,628		2,334

11.    Trade and other receivables

		Group
		2008		2007
		£		£
Trade and other receivables		1,165,385		1,174,952
Group receivables		-		-
Other current assets		-		14,965
Prepayments and accrued income		141,363		94,273
		1,306,748		1,284,190

12.    Trade and other payables

		Group
		2008		2007
		£		£
Trade and other payables		467,146		226,015
Group payables		-		-
Deferred income		1,614,836		1,481,533
Accruals		246,507		140,490
		2,328,489		1,848,038

13.    Share capital

						2008		2007
						£		£
Authorised
10,000,000 ordinary shares of 5 pence each						500,000		500,000
Allotted, called up and fully paid
5,400,000 ordinary shares of 5 pence each						270,000		270,000

14.    Operating lease arrangements

At 31 December 2008 the Group had future total commitments under non-cancellable operating leases as follows:

						2008		2007
						£		£
Commitments payable:
Within one year						67,504		49,077
Between two and five years						23,106		114,057

15.    Share options

As at 31 December 2008, 32 employees (including directors) held options (granted on 3 May 2006 and 14 September 2007) over a total of 301,325 (2007 - 347,934) ordinary shares at an average exercise price of 36.86p (2007 - 40.41p), as follows:

Date of grant	Number of shares under option at 31 December 2007	Granted during the year	Forfeited during the year	Number of shares under option at 31 December 2008	Exercise price	Earliest exercise date
3 May 2006	317,934	-	(40,609)	277,325	16.15p	3 May 2009
14 September 2007     30,000		-	(6,000)	24,000	297.5p	14 September 2010
	347,934	-	(46,609)	301,325

No share options were exercised during the period.  The company's share price on 31 December 2008 was 155p.

The weighted average time to expiry of the share options outstanding at 31 December 2008 was 0.45 years (2007 - 1.46 years). Details of individual expiry dates are shown above.

The fair value of all options granted is shown as an employee expense with a corresponding increase in equity. The employee expense is recognised equally over the time from grant until vesting of the option. The employee expense for the year was £13,649. The fair value has been measured using the Black Scholes model. The expected volatility is based on the historic volatility adjusted for any expected changes in future volatility. The material inputs to the model have been:

			Granted in year ended
			31 December 2006		31 December 2007
Average share price at grant			£2.97		£2.97
Average exercise price			£2.97		£2.97
Expected volatility			10%		10%
Expected life			3 years		3 years
Expected dividend yield			nil		nil
Risk-free rate of return			5%		5%

16.    Employees

The average number of employees was:

			2008		2007
Operations			41		37
Management			4		4
Employee numbers			45		41

Their aggregate remuneration comprised:

			2008		2007
			£		£
Wages and salaries			1,668,543		1,506,624
Social security costs			209,452		190,527
Pension costs			32,960		31,966
			1,910,955		1,729,117

17.    Control

The ultimate controlling parties, by way of their significant holding of shares in Dillistone Group Plc at 31 December 2008, were:

						Ordinary Shares
J McLaughlin						1,000,000
J S Starr						1,162,461
R Howard						1,162,461

18.    Related party transactions

Company

The company has a related party relationship with its subsidiaries, its directors, and other employees of the company with management responsibility.  

During the year the company received a management charge of £291,250 (2007 - £135,243) from its subsidiary company Dillistone Systems (US) Inc. At the year end Dillistone Systems (US) Inc owed the company £nil (2007 - £231,546).

During the current year Dillistone Systems Limited paid a dividend of £513,000 to Dillistone Group Plc.  The company was recharged salary expenses by Dillistone Systems Limited of £491,399 (2007 - £418,193), and was paid a management charge of £500,000 (2007 - £nil). At the year end Dillistone Systems Limited was owed £1,208,815 (2007 - £1,341,706).

Management charges payable by Group members to Dillistone Group PLC relate to sales and technical support provided directly to them, together with third party software licenses on products sold, and a contribution towards central operating and product development costs.

At the year end Dillistone Systems (Australia) Pty Limited was owed £58,736 (2007 - £49,993).

During the previous year the company paid for preliminary set up expenses for its subsidiary Dillistone Solutions Limited totalling £1,134.  There were no transactions between the companies in the current year. At 31 December 2008 the company was owed £1,134 (2007 - £1,134).

The directors received dividends paid by the company of £332,625 (2007: £82,816).

 

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