Dillistone Regulatory News (DSG)

24 September 2010

Dillistone Group Plc

("Dillistone", the "Company" or the "Group")

Unaudited Interim Results for the six months ended 30 June 2010

Dillistone, the AIM quoted supplier of recruitment software, is pleased to announce its Interim Results for the six months ended 30 June 2010.

Highlights:

·; Revenue up 8% to £1.968m

o Non-recurring revenues up 22% to £0.755m

o Recurring revenues of £1.213m up 1% on H1 2009 (£1.204m) and 6% on H2 2009 (£1.140m)

·; Operating profits up 10% to £0.511m

·; Basic earnings per share up 3.9% to 6.67p

·; Increase in subscription based sales - offering increased confidence in visibility of future revenues

·; Net cash inflow over period - cash of £1.912m at 30 June 2010

·; The Group continues to be debt free

·; Dividend policy maintained, with Interim payment of 3.5p due in November

·; Strong project pipeline carried into H2 2010

Commenting on the results, Mike Love, Chairman of Dillistone, said:

"Against an unsettled economic backdrop, these results represent excellent progress. We are carrying a strong pipeline into H2 2010 and this, along with our high level of recurring revenues, gives us confidence in our ability to meet market expectations for the full year."

For further enquiries:

Notes to Editors:

Dillistone Group Plc is a leader in the supply and support of recruitment software to the search and selection market. Dillistone was admitted to AIM, a market operated by the London Stock Exchange plc in June 2006.

Dillistone develops, publishes and supports Filefinder, its executive recruitment software, for recruitment companies and in-house recruitment teams. Filefinder is unique in providing tailored workflow and 24 hour support for global users, to mirror the profile and demands of an executive search assignment. Filefinder has been adopted by around 1000 companies in more than 55 countries.

Chairman's Statement

The Group has had an excellent start to 2010 with a number of significant indicators showing an improvement over the same period in the previous year.

Financial Performance

Revenue in the 6 months ended 30 June 2010 increased by 8% to £1.968m (2009: £1.822m) with operating profits showing an increase of 10% to £0.511m (2009: £0.466m). Administrative costs increased by 8% to £1.397m (2009: £1.296m), with the increase due mainly to higher depreciation costs (increase of £0.022m) and one-off costs of £0.048m.

Recurring revenues increased by 1% to £1.213m (2009: £1.204m) and by 6% over the £1.140m of recurring revenues earned in the second half of 2009. Recurring revenues in the 6 months to 30 June 2010 accounted for 62% of total revenues (2009: 66%). It should be noted that we are increasingly delivering our platform via a subscription pricing model.

Non recurring revenues saw a 22% growth to £0.755m (2009: £0.618m). This reflects a significant year-on-year improvement in new contract wins.

Regionally, our European division saw a 19% fall in revenues and Asia Pacific saw a 77% increase. The UK, Middle East and Africa ("UKMEA") business saw revenues increase by 17% and the US division showed a marginal increase of 2% in revenues for the same period. The profitability of the European business has been impacted by a management charge from the UKMEA business.

Cash flow in the 6 months ended 30 June 2010 showed a net cash inflow of £0.107m (2009: outflow £0.532m). The main elements of expenditure related to dividends in the period of £0.396m (2009: £0.396m) and investment in new product development of £0.279m (2009: £0.235m). At 30 June 2010 we had cash reserves of £1.912m (2009: £1.795m). The Group does not have any borrowings.

The tax provision increased to £0.134m in the period to 30 June 2010 (2009: £0.119m). This gives an effective global tax rate of 26.2% (2009: 25.3%). The 2009 and 2010 rates have been reduced by a claim in the UKMEA for research and development tax credit reflecting the continuing development of our products.

Basic earnings per share amounted to 6.67p (2009: 6.42p). As announced in our annual report for 2009, the Board has decided to maintain the Interim dividend for 2010 at the same level as was paid in respect of 2009, and accordingly a dividend of 3.5p per share (2009: 3.5p) will be paid on 5 November 2010 to holders on the register on 8 October 2010. Shares will trade ex-dividend from 6 October 2010.

Board Changes

Jim McLaughlin resigned as Executive Chairman and Finance Director in February 2010 and I stepped into the role of Non-Executive Chairman. Julie Pomeroy joined us as Finance Director in April 2010 and has also become Company Secretary. Giles Fearnley became a Non-Executive Director in May and is chair of the audit committee.

Outlook

The Group has made an excellent start to the year, a performance which does not appear to be reflected in a peer group comparison across the sector. A strong project pipeline was carried into the second half of 2010 yet we remain cautious.

While continued uncertainty about the state of the economy makes it difficult to predict long term performance, our post period performance, combined with this excellent start to the year underpins our confidence in our ability to achieve market expectations for 2010.

The Group enjoys a strong balance sheet and remains debt free. As such, the Board considers it well placed to compete in the global market place in which it operates.

The Board continues to follow a growth strategy and will, as part of this strategy, consider acquisitions or joint ventures that would enhance its product portfolio and deliver shareholder value.

Mike Love

23 September 2010

NOTES TO THE INTERIM

CONSOLIDATED STATEMENT OF

1. Basis of Preparation

The financial information for the six months ended 30 June 2010 included in this interim report comprises the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of cash flows, the consolidated statement of changes in equity and the related notes. This statement has been prepared in accordance with IAS 34 "Interim Financial Reporting".

This interim financial information is unaudited but has been reviewed by the auditors. The financial information set out in this report does not constitute statutory accounts as defined by the Companies Act 2006. The comparative figures for the year ended 31 December 2009 were derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. Those accounts received an unqualified audit report which did not contain statements under sections 498(2) or (3) (accounting records or returns inadequate, accounts not agreeing with records and returns or failure to obtain necessary information and explanations) of the Companies Act 2006.

The interim financial statements have been prepared on the basis of the accounting policies set out in the December 2009 financial statements of Dillistone Group Plc.

2. Share Based Payments

The Company operates two share option schemes. The fair value of the options granted under these schemes is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period at the end of which the option holder may exercise the option.

The fair value of the options granted is measured using the Black-Scholes model, adjusted to take into account sub-optimal exercise factor and other flaws in Black-Scholes, and taking into account the terms and conditions upon which the incentives were granted.

3. Segment reporting

3. Segment reporting (continued)

4. Tax

5. Dividends

A second Interim dividend of 7p per share in respect of the year ended 31 December 2009 was paid on 1 April 2010. The total cost of this dividend was £396,581.

The Board has decided to pay an interim dividend of 3.5 pence per share (2009: 3.5p) on 5 November 2010 to holders on the register on 8 October 2010. Shares will trade ex-dividend from 6 October 2010.

6. Earnings per Share

7. Related party transactions

The Company has a related party relationship with its subsidiaries, its directors, and other employees of the Company with management responsibility. There were no transactions with these parties during the period outside the usual course of business.

Dividends paid to directors in the period totalled £0.169m.

There were no transactions with any other related parties.