Dillistone Regulatory News (DSG)

16 Apr 2008 07:00

Dillistone Group PLC16 April 2008 16th April 2008 DILLISTONE GROUP PLC PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 Dillistone Group Plc ('Dillistone' or 'the Group'), the AIM listed supplier ofRecruitment Software, is pleased to announce its preliminary results for theyear ended 31st December 2007. Highlights for the period: 2007 2006 •Revenue +23% £4.07m £3.30m •Profit before tax +30% £1.20m £923k •Profit after tax +26% £804k £637k •Earnings per share (basic) +24% 14.9p 12.0p •Cash at Bank +185% £1.534m £539k •Operating Margin +4% 29% 28% •Recurring revenues increased by 29% to £1.67m, representing 41% of total turnover •Proposed final dividend of 6p per share recommended, making total dividend for year of 8.5p •Clients in over 50 countries world wide Commenting on the results, Jason Starr, Managing Director said: "We are very pleased with the continued global growth of Dillistone in 2007.Particularly significant is that 7 out of our 25 largest implementations withinthe period were into the world's 'emerging markets' and that many majorcontracts were won where clients moved over to Dillistone from directcompetitors. This is an endorsement of our position as the market leader in theglobal Recruitment Software industry. "Revenue growth has been complemented by an enhanced operating margin and strongprofits, demonstrating a robust performance across the business. The Group hasbeen very cash generative and gives us a strong platform to continue to developin 2008 despite the economic uncertainty seen recently in world markets." Contacts: Jim McLaughlin - Dillistone Group Plc 01934 710 509Chairman & Finance Director John Wakefield - Blue Oar Securities 0117 933 0020 Tom Cooper - Winningtons 0797 122 1972 CHAIRMAN'S STATEMENT I am pleased to present the annual report of the company for the year ended 31December 2007. Financial Performance The momentum we enjoyed in the year ended December 2006 flowed through into theyear covered by this report, with record profits and turnover for the Group as awhole. We benefited from the considerable investment in the development of a newversion of our FILEFINDER product which was launched in March 2007, winning somesignificant orders from new and existing clients. The financial results for theyear ended 31 December 2007 show substantial growth in both turnover and profitsover 2006. Revenue in the year increased by 23% to £4,066,463 (2006 - £3,301,362), andprofits before tax increased by 30% to £1,196,213 (2006 - £923,118) despitesevere weakening of both the Australian and US Dollars against the pound, whichtogether accounted for approximately 26% sales. Sales and profits growth in boththe UK and European markets have been particularly strong. The USA saw theeffects of a weakening dollar impact on the results, together with a slowdown inoverall business activity. In late 2006 we decided to offer our product on a"Software as a Service" basis in the US market and, whilst this has a negativeimpact on both revenue and results in the short term, it has improved theproportion and value of the revenue earned on a recurring basis, which will havea positive long term impact on quality of earnings. Recurring revenues (mainly arising from support agreements) increased by 29% inthe year, from £1.288m to £1.666m, whilst non recurring revenues (mainly fromnew license sales) increased by 19% from £2.014m to £2.401m. Recurring revenuesnow comprise 41% of Group turnover (2006- 39%) and help to provide a cushionagainst any slowdown, which may arise in new business as a result of a slowdownin overall economic activities. Operating margins were enhanced from 28% in 2006 to 29% in 2007, reflecting thestrong sales growth together with tight control over operating costs. Cashflow has continued to reflect the profitable performance of the business,and at the end of the year we held cash balances of £1,533,649, compared with£538,591 at the beginning of the year. The cash balance at 31 December 2007reflects the payment of an interim dividend of £135,000, and capital expenditureof some £110,741. The Group has no borrowings whatsoever. Earnings per share increased by 24% to 14.90p per share (2006 -12.0p per share).We paid an interim dividend of 2.5p per share in October 2007, and the board hasrecommended that a final dividend of 6p per share should be paid, subject toshareholder approval, on 23 May 2008 to holders on the register on 25 April.Shares will trade Ex-Dividend from 23 April 2008. The total dividend for theyear will be 1.75 times covered by earnings, a little less than envisaged at thetime of the flotation, but covered some 2.34 times by the cash generation of thebusiness. Staff As part of the flotation process, share options were granted to all our staffthrough both EMI approved and unapproved share schemes. I am pleased that wewere able to introduce these schemes on favourable terms for them, which isparticularly important in a services business and I look forward to welcomingthem as shareholders in due course. During the year we granted additionaloptions to a small number of employees, and at the end of the year, our staffheld options over 347,934 ordinary shares in the company, representing 6% of thecurrent issued share capital after exercise of the options. These options willmature from May 2009, and demonstrate the value placed on our staff, who haveperformed outstandingly well throughout the year. Prospects We announced in February 2008 that the order intake in the final quarter of 2007had been the highest ever recorded by the Group since its formation, and I ampleased to be able to confirm that this positive trend has continued. Orderintake for the year as a whole was some 31% ahead of the previous year, and atthe year end we held the highest value of confirmed orders we have everexperienced. This has led to a very good start to the current year. However, theeffects of the global credit squeeze appear to have made larger clientscurrently more apprehensive about committing themselves to ordering new systems,certainly in the short term, and the outlook for the longer term in thefinancial recruitment markets is less visible at the present time. Our strong balance sheet and substantial cash reserves at the year end, togetherwith the increasing value of recurring revenue contracts means that the Group isrelatively well protected against any short term slowdown in economic activity.The excellent start we have enjoyed in the first part of 2008 also assists inthis regard, and the Board believes that the Group is well positioned foranother successful year. Jim McLaughlin15 April, 2008 MANAGING DIRECTOR'S REPORT 2007 was another excellent year with significant improvements in revenues,profits and earnings. Sales growth was achieved in both recurring and non recurring revenues. The 29%increase in recurring revenues was delivered as a result of both strong supportsales and an increasing number of new system sales, delivered on a "Software asa Service" basis. The period saw us win 153 new business contracts which were implemented in 37countries. Our global spread is particularly pleasing - we now have clients inover 50 countries - with our largest ten implementations in 2007 featuringclients in UK, USA, Denmark, India, Asia Pacific and Russia along with apan-EMEA business. The emerging markets proved to be particularly important to us, with 7 of our 25largest implementations coming from the Middle East, Asia, Eastern Europe andCentral and Southern America. These contract wins are particularly significantas they often confer on us "market leadership" status in these regions. As thesemarkets continue to grow, we should enjoy continued success as a result of theseearly wins. Also pleasing was the fact that 2007 saw us attract a record number of clientsfrom direct competitors. We believe that this is partly down to our ongoingproduct development, but also down to a desire amongst the leading search firmsto invest in systems from a global leader. The corporate sector continues to bea small but growing niche for us, with a further Fortune 100 company introducingour system in 2007 for its internal talent acquisition. DIVISIONAL REVIEW UK, Middle East and India Our home region once again generated excellent results, with a 52.22% increasein profit. It should be noted, however, that a number of the larger clientsinvoiced from the UK - particular Spengler Fox - featured significantinternational work. The results of these contracts therefore fall within theaccounts of our UK subsidiary, even though the profits were actually earnedoverseas. In addition to Spengler Fox, significant contract wins in the UK alsoincluded Hays Executive - the Executive Search division of the UK's largestRecruitment firm - and Norman Broadbent. Each of these firms switched toFILEFINDER from a direct competitor. Europe Our European business also performed to an exceptional level, with year on yearprofits up 32%. European executive search firms are often smaller than theircounterparts in the UK and US, and so this performance reflects volume of newbusiness wins rather than scale. Our performance in Russia and Eastern Europewas particularly pleasing, with a number of significant contract wins. Asia Pacific Our Australia and Asia pacific business unit again performed very well, withyear on year results up 46.8%. Strategically important contract wins in theregion included The Wright Company and Jo Fisher Executive Search. The regionalso benefited from a major marketing push in November, when a conferenceorganised by the Group in Hong Kong attracted over 200 delegates from 19countries to discuss Executive Talent Acquisition in Asia. The event provedsignificant, and provided us with an opportunity for exclusive exposure to ourFILEFINDER product to leading firms in the region whilst also contributing asmall profit. United States Whilst the headline performance of our US business unit was disappointing, thisdoes not reflect fully the actual achievements of the business. Profits fell by9.3% based on sales which increased by 6%, but in practice, whilst realisedrevenues were relatively flat, incoming orders grew significantly. Our decisionto offer FILEFINDER on a "software as a service" model in the US (where clientsrent the software rather than purchase it) caused us some short term pain butmeans that 57% of revenues should recur in 2008. In 2007, the percentage wasjust 29%. Clearly, this decision should go a long way towards mitigating theeffects of the economic downturn in the region. A number of major wins in theregion are subject to non-disclosure agreements, but include a Fortune 100company and a number of search firms - including one internationally known -which are switching to FILEFINDER from US based competitors. PRODUCT STRATEGY 2007 was a major year in the development of FILEFINDER. In March, we launchedFILEFINDER 8. FILEFINDER 8 is the latest iteration of our main product andfeatures both a new interface and extensive new functionality. This was followedin September by the launch of a new release of our "FFImport" module. The newFFImport, compared to its predecessor, features significant additionalfunctionality for our clients and a lower cost of implementation for us. As theyear closed, our next generation tool for handheld devices, FFMobile, was in thefinal stages of beta testing and was released in January 2008. FFMobile isprovided as an add-on to our core FILEFINDER platform. We believe that FILEFINDER is used by more Executive Search firms than any otherproduct, and are committed to a development path that will maintain thatposition. Beyond FILEFINDER, we continue to develop a number of additional products andservices which are designed to both increase brand awareness of our organisationwhilst also providing additional revenue streams. In 2007 we ran conferences inLondon and Hong Kong and provided "executive search training skills" courses ina number of countries. Between the training we provide in FILEFINDER and ourmore generic courses in executive search skills, we believe we probably providethird party training to more retained executive search professionals than anyother organization. 2008 will see us extend our conference and trainingportfolio with events in New York, Frankfurt and London and the launch of onlinewebinar training. PEOPLE Our performance in 2007 reflects the fact that our group companies are made upof an exceptional team of people. I'd like to take this opportunity to thankthem for all of their efforts during the year. For the business to continue toperform it is important that we retain and develop our staff and, to that end,we issued new options over 30,000 shares to new members of staff and existingoption holders whose responsibilities within the business had increased sincethey were awarded their original options before the flotation. We are confidentthat if we can continue to retain our key staff, then our business will continueto perform better than others in our sector. CORPORATE DEVELOPMENT The board is acutely aware that the Group's future success is dependent on ourability to continue to meet the needs of the executive recruitment sector. Assuch, it continues to actively consider ways in which this may be done - througheither the development of existing products or the creation of new ones. We havea strong balance sheet and high cash reserves with which to pursue these goalsand we continue to consider opportunities to take advantage of these assets in away which would enhance the overall group position, its earnings and overallprofitability. Jason Starr15 April 2008 CONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 £ £ Revenue 4,066,463 3,301,362 Cost of sales (236,951) (274,481) ----------- ----------- Gross profit 3,829,512 3,026,881 Administrative expenses (2,659,390) (2,107,724) ----------- ----------- Results from operating activities 1,170,122 919,157 Financial income 26,091 3,961 ----------- ----------- Profit before tax 1,196,213 923,118 Tax expense (391,838) (285,913) ----------- ----------- Profit for the year 804,375 637,205 =========== =========== Earnings per share - from continuing activities Basic 14.90p 12.00pDiluted 14.05p 11.63p CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2007 Share Share Retained Share Foreign Total capital premium earnings option exchange £ £ £ £ £ £Balance at31 December 105,000 106,237 427,238 - 14,822 653,2972005 Profit forthe yearended31 December - - 637,205 - - 637,2052006 Bonus issuefrom 155,000 (106,237) (48,763) - - -reserves Issue of 10,000 240,000 - - - 250,000sharecapital Costs of the - (240,000) (936) - - (240,936)issue Fair valueof equitysettledshare option - - - 13,316 - 13,316expense Exchangedifferences - - - - (21,002) (21,002)onTranslationof overseasoperations Dividends - - (535,096) - - (535,096)paid ------- ------- ------- ------ ------- ------- Balance at 270,000 - 479,648 13,316 (6,180) 756,78431 December2006 Profit forthe year - - 804,375 - - 804,375ended31 December2007 Fair valueof equity - - - 13,462 - 13,462settledshare optionexpense Exchangedifferences - - - - 23,916 23,916ontranslationof overseasoperations Dividends - - (135,000) - - (135,000)paid ------- ------- ------- ------ ------- ------- Balance at31 December2007 270,000 - 1,149,023 26,778 17,736 1,463,537 ======= ======= ======= ====== ======= ======= CONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2007 Group 2007 2006 £ £ASSETS Non-current assetsIntangible assets 639,835 630,271Property plant and equipment 155,390 181,476Investments - - ----------- ----------- 795,225 811,747 Current assetsInventories 2,334 21,210Trade and other receivables 1,284,190 827,633Cash and cash equivalents 1,533,649 538,591 ----------- ----------- 2,820,173 1,387,434 ----------- -----------Total assets 3,615,398 2,199,181 =========== =========== EQUITY AND LIABILITIES EquityShare capital 270,000 270,000Retained earnings 1,149,023 479,648Share option reserve 26,778 13,316Translation reserve 17,736 (6,180) ----------- ----------- Total equity 1,463,537 756,784 Liabilities Non current liabilitiesDeferred tax liability 3,000 8,603Current liabilitiesTrade and other payables 1,848,038 1,205,219Current tax payable 300,823 228,575 ----------- ----------- Total liabilities 2,151,861 1,442,397 ----------- ----------- Total liabilities and equity 3,615,398 2,199,181 =========== =========== CONSOLIDATED CASH FLOW STATEMENTAS AT 31 DECEMBER 2007 2007 2007 2006 2006 £ £ £ £Operating activities Profit from operations 1,170,122 919,157Less taxation paid (319,590) (287,323)Adjustment forDepreciation and amortisation 126,606 94,582Share option expense 13,462 13,316Loss on disposal 657 1,117 ---------- --------- Operating cash flows beforemovement in working capital 991,257 740,849 (Increase) in receivables (456,557) (122,501)Decrease in inventories 18,876 11,204Increase in payables 637,216 201,735 ---------- --------- Net cash generated from 1,190,792 831,287operatingactivities Investing activities Interest received 26,091 3,961Purchase of property plant andequipment (35,653) (191,485)Investment in development (75,088) (73,888)costs ---------- --------- Net cash used in investing (84,650) (261,412)activities Financing activitiesProceeds from issue of share - 250,000capitalShare capital issue costs - (240,936)Dividends paid (135,000) (535,096) ---------- --------- Net cash used by financing (135,000) (526,032)activities --------- --------- Net increase in cash and cash 971,142 43,843equivalents Cash and cash equivalents at 538,591 515,750beginning of year Effect of foreign exchange 23,916 (21,002)rate --------- ---------changes Cash and cash equivalents at 1,533,649 538,591end ofyear ========= ========= NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 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 2007 are an abridged version of the company's accounts which will be reported on by the auditors, despatched to the shareholders and filed with the Registrar of Companies shortly. The audited accounts for the year ended 31 December 2006 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 2007. The announcement was approved by the board of directors on 15 April 2008. 2. Segment reporting Geographical segments The following tables provide an analysis of the Group's revenue. 2007 2006 £ £ UK 2,180,172 1,747,803Europe 845,745 640,483USA 633,597 598,807Asia-Pacific 406,949 314,269 ----------- ----------- 4,066,463 3,301,362 ----------- ----------- Business segment The following table provides an analysis of the Group's revenue by businesssegment 2007 2006 £ £ Recurring income 1,665,870 1,287,531Non-recurring income 2,400,593 2,013,831 ----------- ----------- 4,066,463 3,301,362 ----------- ----------- Recurring income includes all support services, and web hosting income.Non-recurring income includes sales of new licenses, and income derived frominstalling those licenses including training, installation, and datatranslation. 3. Earnings per share Basic earnings per share 2007 2006 Profit attributable to ordinary shareholders £804,375 £637,205 Weighted average number of shares 5,400,000 5,309,890 Basic earnings per share 14.90p 12.00p =========== =========== Weighted average number of sharesafter dilution 5,726,811 5,481,201 Fully diluted earnings per share 14.05p 11.63p =========== =========== 4. Copies of accounts The annual report will be sent to shareholders in due course. Copies of thisannouncement and the full statutory accounts can be obtained, when available,free of charge, from the Company's registered office at Third Floor, 50-52 PaulStreet, London EC2A 4LB or on the Company's website: www.dillistone.com This information is provided by RNS The company news service from the London Stock Exchange