Dillistone Regulatory News (DSG)

11 Apr 2007 07:01

Dillistone Group PLC11 April 2007 Dillistone Group Plc Revenue growth underpinned by record profits Dillistone Group Plc ("Dillistone" or "the Company"), the AIM listed supplier ofrecruitment software, is pleased to announce its preliminary results for theyear ended 31st December 2006. These are the Group's first full year resultssince its successful admission to AIM last June. Commenting on these results, Jason Starr, Managing Director at Dillistonecommented; "The year ended 31st December 2006 was another excellent one for the Group.Globally, revenue grew by 30% to £3,301,362, with profit before tax increasingby 44% to £923,118. This, in a 12 month period which also saw the flotation ofthe Company, is by far the best result for the Company since its formation.Furthermore, this headline growth figure is underpinned by record profitcontributions from each of our regional businesses." 2006 2005 Turnover + 30% £3.30m £2.53mProfit before tax + 44% £923k £640kProfit after tax + 45% £637k £440kEarnings per share + 42% 12.00p 8.46p Contacts: Jim McLaughlinChairman & Finance Director Dillistone Group Plc 01934 710 509 Barrie Newton Blue Oar Securities Plc 01225 424 666 John Wakefield Blue Oar Securities Plc 0117 933 0020 Tom Cooper Winningtons Financial PR 0797 122 1972 DILLISTONE GROUP PLC (formerly Dillistone Group Limited) PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 CHAIRMAN'S STATEMENT BUSINESS REVIEW Chairman's Statement I am pleased to present the first annual report of the company following itsadmission to trading on the AIM Market of the London Stock Exchange on 15th June2006. This report covers the year ended 31st December 2006. Financial Performance The financial results for the year ended 31st December 2006 show substantialgrowth in both turnover and profits over 2005 despite the distractions caused bythe considerable workload associated with the company's admission to AIM and therelocation of the London and Sydney offices during the year. Turnover in the year increased by 30% to £3,301,362 (Year ended 31st December2005 - £2,530,313), and profits before tax increased by 44% to £923,118 (2005 asrestated - £639,754) despite severe weakening of both the Australian and USDollars against the Pound. Sales and profits growth in both the UK and Europeanmarkets has been particularly strong, although the UK result is slightlyflattered by the completion of a contract amounting to some £80,000 whichcommenced prior to the year end, but was completed in February. Operating Margins were enhanced from 25% in 2005 to 28% in 2006, 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 £538,591, compared with£515,750 at the beginning of the year. The cash balance at 31st December 2006reflects the non-recurring pre-flotation dividend payment of £400,000 to theinvestors who supported the management buy out in January 2003, a furtherdividend of £135,000 to all shareholders following the flotation, and thecapital expenditure associated with the relocation of our London headquarters ofsome £163,000. The Group has no borrowings whatsoever. Earnings per share increased by 42% to 12.00p per share (2005 - 8.46p pershare). At the time of the flotation in June, we indicated that we anticipatedpaying an additional dividend of some £100,000 (approximately 1.85 pence pershare) following the publication of the interim results. The board decided that,in the light of the excellent results in the first half that this dividendshould be increased to £135,000. We indicated at the time of the flotation thatthere would be no final divided in respect of 2006, and accordingly none isproposed. I can however confirm that we expect to pay a dividend in October2007, following the announcement of the interim results, and a final dividend inMay 2008, based on the year's outcome and a dividend cover of some 2 timesearnings. Flotation On 15th June 2006 the company's shares were admitted to trading on the AIMmarket of the London Stock Exchange. 200,000 new ordinary shares of 5p each wereissued at a price of £1.25, raising £250,000 for the company. The costs of theissue amounted to £240,936, leaving the company net proceeds from the issue of£9,064. I would like to record my thanks to all our staff and professionaladvisers in this matter for their commitment to ensuring that the issue andadmission to AIM went as smoothly as it did. 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, and I lookforward to them becoming shareholders in due course. At the end of the year, ourstaff held options (for which they will be required to pay 16.154p per share)over 323,886 ordinary shares in the company. These options will mature in May2009, and demonstrate the value placed on our staff, who have performedoutstandingly well throughout the year. I would also like to formally welcome both Alex James and Mike Love to the Boardof the Group. Alex has been with the Group since October 1999, and is thedirector responsible for the implementation of new projects. Mike joined theboard on 31st May 2006, as our senior non-executive director. He brings with hima wealth of relevant experience as Chairman of SciSys plc and ClearStreamTechnologies Group plc. He is also a member of the AIM advisory panel. Offices In August 2006 we relocated both our London head office and our Asia-Pacificoffices. The move of the London office, in particular, has enhanced the workingenvironment. Prospects We announced in February 2007 that the order intake in the final quarter of theyear had been the highest ever recorded by the group since its formation, and Iam pleased to be able to confirm that this positive trend has continued. Orderintake in January and February 2007 is some 32% ahead of the same period in2006. The short lead time between taking an order and completing theinstallation, however, means that predicting the outcome for the year as a wholeat this early stage is as difficult as ever. In March 2007, we released version 8 of our "Filefinder" software. This is thefirst major release for 2 years, and has entailed not only significantdevelopment expenditure, but also a major effort to train our own staff forsupport and installation, particularly towards the latter part of 2006. Earlyreactions to the new software from our clients have been extremely encouraging,and I expect that reaction to reflect in sales performance during the year. The outlook for the retained executive search market remains positive throughoutthe world, and the Board believes that the outcome for the year as a whole willbe very satisfactory. Looking beyond 2006, the trend for the adoption of our "Filefinder" software bylarge corporate clients gives comfort that the group will continue to deliverfurther growth. Jim McLaughlin11th April, 2007 MANAGING DIRECTOR'S REVIEWFOR THE YEAR ENDED 31 DECEMBER 2006 Overview The year ended 31st December 2006 was another excellent one for the Group.Globally, revenue grew by 30% to £3,301,362, with profit before tax increasingby 44% to £923,118. This, in a 12 month period which also saw the flotation ofthe Company, is by far the best result for the Company since its formation.Furthermore, this headline growth figure is underpinned by record profitcontributions from each of our regional businesses. Our performance in our core "executive search" market has been good, with atotal of 112 new sales to executive search firms, spread across 31 countries.Although independent market share data is hard to obtain in this sector, themanagement believe that the Group remains in the global market leadershipposition in what is a rapidly expanding niche. In addition, our strategy of expanding beyond our core "executive search" markethas shown early signs of success with sales to corporate organisations rangingfrom financial services groups to software houses and media organisations and weare pleased to list a number of Fortune 100 Organisations as clients. Our performance in 2006 was the result of the skills and efforts of our superbteam of staff. This means that our ability to recruit, retain and motivate ourstaff is key. To that end, we have - over the course of 2006 - relocated orupgraded a number of our offices and introduced, as part of the flotationprocess share option schemes. We continue to follow a policy of promoting fromwithin when possible and, as a result of this, our executive management team nowhave an average of 7 1/2 years of experience within the company. Regional Review and Key Performance Indicators United Kingdom Our home market saw excellent growth with revenue up 44% on the preceding yearand with operating profits rising by 55%. This excellent return reflects bothhigh levels of sales to new clients, and our ability to provide ongoing servicesto our existing clients. This performance was achieved despite the relocationof our head office, which took place in August of 2006, at a total cost of£163,000, funded from our earnings in the year. Europe Our European business also performed well, with operating profits up 41% basedon a revenue increase of 23%. This was in part a reflection of the improvedeconomic environment in the region but also reflected the growth of our marketeastward - we made a number of sales into the countries in the east of thecontinent. Furthermore, our training and conference services were particularlywell attended by delegates from these markets. I believe that emerging marketswill prove to be a major driver of our European growth, and our early leadershipin countries such as Bulgaria, Russia and Turkey positions us strongly for thelong term. Asia Pacific Our Asia Pacific business, based in Sydney, produced a pleasing 33% increase inprofit, up from £131,982 to £175,800. This was achieved despite a slight dropin revenues, caused by a number of operational issues which have now beenresolved. The business achieved a good order intake towards the end of 2006,and therefore carries a significant order pipeline for the first quarter of2007. Over the last 3 years, revenues and profitability in our Asia Pacificbusiness have grown by 103%, and a significant investment is scheduled for 2007to ensure that Asia-Pacific continues to play a significant role in our drivefor growth going forward. Americas Our US business performed well with a 30% increase in sales, despite the severeweakening of the US Dollar against the Pound. After eliminating the effect ofthe changes in translation rates, US sales grew by 34% on a like-for-like basis. This growth rate is particularly pleasing when considered against a backdropof an increasingly price sensitive market and has been achieved in part by goodperformance in the corporate sector. Despite this sales growth, our profit grewonly by 21%, reflecting investments in both marketing and personnel made duringthe year. These investments ensure that we are in a position to take advantageof expected revenue growth in 2007 and beyond. Customer Service A key part of our business strategy is to provide excellent customer service.This ensures that we maximise our recurring revenues whilst also ensuring thatour sales teams are able to clearly differentiate ourselves from ourcompetitors. This is achieved in a number of ways and 2006 saw us implement anumber of new strategies designed to develop our customer service offering stillfurther. These include a range of complementary online training courses for keyusers, the scheduling of a series of "user events" in key markets around theworld and the implementation of a new call logging system. To the best of ourknowledge, none of our direct competitors provide this level of ongoing serviceto their clients. Partly as a result of this, our recurring to non-recurring revenue ratioremained constant at 61:39, despite a substantial increase in new businesssales. Furthermore, our reputation for customer service also plays a key rolein our new business development strategy, and in 2006 around half of our clientscame about as a result of a recommendation from a satisfied client or formeruser. The consistency and predictability of our recurring revenue stream enables theGroup to plan its future with some degree of certainty, and invest heavily inproduct development, to the benefit of both itself and its extensive user base. Product Development During the course of 2006, our R+D team were focussed on the development of ourlatest Filefinder suite of software - Filefinder 8. This product, released onMarch 1st 2007, will strengthen our position in the market still further, andearly signs are that the product has been very well received. Principal Risks and Uncertainties The management of the business and the execution of the Group's strategy aresubject to a number of risks. Risks are reviewed by the board and appropriate processes are in place tomonitor them, and if necessary mitigate their effects. The principal risks whichthe Group recognises are as follows: Competition The Group operates in a competitive market, which may exert downward pressure onprices and margins. In order to mitigate this risk, our sales teams monitor theprices and products available from our competitors, and respond as appropriate,taking into account the technical differences as well as prices and paymentterms between the competitors' products and our own. Employees The Group's performance depends on the performance of its staff. The resignationof key individuals and the inability to recruit replacements could adverselyimpact the Group's results. To mitigate the likelihood of this occurring, theGroup has implemented a share option scheme, with key staff carefully targetedso as to retain their services, and it also ensures that proper training isprovided to all members of staff, depending on their needs. Currency Risk Operating in a global economy, with offices in the UK, Europe, Australia and theUS inevitably exposes the Group to currency fluctuations, both through thetranslation of earnings, and by holding assets in foreign currencies. The Groupseeks to minimise the currency risks associated in its business, by tradingwherever possible in Sterling, and by minimising the value of assets heldoverseas. Jason Starr11th April 2007 CONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2006 As restated 2006 2005 £ £Continuing activities Revenue 3,301,362 2,530,313 Cost of sales (274,481) (271,171) Gross profit 3,026,881 2,259,142 Administrative expenses (2,107,724) (1,622,087) Results from operating activities 919,157 637,055 Financial income 3,961 2,699 Profit before tax 923,118 639,754 Tax expense (285,913) (199,776) Profit for the year attributable toequity holders of the company 637,205 439,978 Earnings per share -from continuing activities Basic 12.00p 8.46pDiluted 11.63p 8.46p CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2006 Share Share Retained Share Foreign Total capital premium earnings option exchange £ £ £ £ £ £Balance at31 December 2004 105,000 106,237 354,760 - (5,562) 560,435 Profit for the year ended31 December 2005 - - 439,978 - - 439,978 Exchange differenceson translation ofoverseas operations - - - - 20,384 20,384 Dividends paid - - (367,500) - - (367,500) Balance at31 December 2005 105,000 106,237 427,238 - 14,822 653,297 Profit for the year ended31 December 2006 - - 637,205 - - 637,205 Bonus issue fromreserves 155,000 (106,237) (48,763) - - - Issue of share capital 10,000 240,000 - - - 250,000 Costs of the issue - (240,000) (936) - - (240,936) Fair value of equitysettled share optionexpense - - - 13,316 - 13,316 Exchange differenceson translation ofoverseas operations - - - - (21,002) (21,002) Dividends paid - - (535,096) - - (535,096) Balance at31 December 2006 270,000 - 479,648 13,316 (6,180) 756,784 CONSOLIDATED CASH FLOW STATEMENTAS AT 31 DECEMBER 2006 As restated 2006 2006 2005 £ £ £Operating activities Profit for the year / period 637,205 439,978Adjustment for Depreciation and amortisation 94,374 75,744 Share option expense 13,316 - Loss / (profit) on disposal 1,117 - Operating cash flows beforemovements in working capital 746,012 515,722 Decrease / (increase) inreceivables (122,501) (63,254)(Increase) in inventories 11,204 (3,230)Increase in payables 199,081 374,550 Net cash generated fromoperating activities 833,796 823,788 Investing activities Purchase of property plant andequipment (190,033) (21,762)Investment in development costs (73,888) (63,285) (263,921) (85,047) Financing activities Proceeds from issue ofshare capital 250,000 -Share capital issue costs (240,936) -Dividends paid (535,096) (367,500) Net cash provided byfinancing activities (526,032) (367,500) Net increase in cash andcash equivalents 43,843 371,241 Cash and cash equivalents atBeginning of year / period 515,750 124,125 Effect of foreign exchange ratechanges (21,002) 20,384 Cash and cash equivalents atend of year / period 538,591 515,750 CONSOLIDATED BALANCE SHEETFOR THE YEAR ENDED 31 DECEMBER 2006 Group As restated 2006 2005 £ £ASSETS Non-current assets Intangible assets 630,271 616,078 Property plant and equipment 181,476 25,995 Investments - - Deferred tax asset - 3,055 811,747 645,128 Current assets Inventories 21,210 32,414 Trade and other receivables 827,633 705,132 Cash and cash equivalents 538,591 515,750 1,387,434 1,253,296 Total assets 2,199,181 1,898,424 EQUITY AND LIABILITIES EquityShare capital 270,000 105,000Share premium - 106,237Retained earnings 479,648 427,238Share option reserve 13,316 -Translation reserve (6,180) 14,822 Total equity 756,784 653,297 Liabilities Non current liabilities Deferred tax liability 8,603 -Current liabilities Trade and other payables 1,205,219 1,015,142Current tax payable 228,575 229,985 Total liabilities 1,442,397 1,245,127 Total liabilities and equity 2,199,181 1,898,424 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006 1. Basis of Accounting The 2006 financial statements will disclose the following changes to the Group'saccounting policies as a result of the adoption of International FinancialReporting Standards (IFRS): (i) Under IFRS goodwill is stated at cost and subjected to annual impairment reviews. In previously reported financial statements, goodwill was written off over its estimated useful economic life. The effect of restating and not amortising goodwill is to increase the profit for the year by £24,720. (ii) Under IFRS development costs that meet certain criteria must be capitalised and amortised over their estimated useful economic life, whereas in previously reported financial statements the group took the option not to capitalise such costs. The effect of capitalising and amortising development costs is to increase the profit for the year by £14,193. 2. Segment reporting Geographical segments The following tables provide an analysis of the Group's revenue. 2006 2005 £ £ UK 1,747,803 1,213,607Europe 640,483 520,377USA 598,807 460,499Asia-Pacific 314,269 321,018Africa - 14,812 3,301,362 2,530,313 Business segment The following table provides an analysis of the Group's revenue by businesssegment 2006 2005 £ £ Recurring income 1,287,531 977,713Non-recurring income 2,013,831 1,552,600 3,301,362 2,530,313 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 2006 2005 £ £ Profit attributable to ordinary shareholders 637,205 439,978 Weighted average number of shares 5,309,890 5,200,000 Basic earnings per share 12.00p 8.46p Weighted average number of sharesafter diluted shares 5,481,201 5,200,000 Diluted earnings per share 11.63p 8.46p 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