Dillistone Regulatory News (DSG)

24 September 2013

Dillistone Group Plc("Dillistone", the "Company" or the "Group")Interim Results

Dillistone Group Plc, the AIM quoted supplier of recruitment software, is pleased to announce its unaudited Interim results for the six months ended 30 June 2013.

Highlights:

· Revenue up 6% to £3.81m

o Recurring revenues up 7% to £2.41m

o Non-recurring revenues up 4% to £1.21m

o Third party revenues up 6% to £0.20m

· Operating profits up 17% to £0.81m

· Basic EPS excluding amortisation of acquisition intangibles up 11% to 3.69p

· EBITDA up 13% to £1.07m

· The Group continues to be debt free; cash of £1.90m at 30 June 2013 (2012: £1.57m)

· Dillistone Systems (www.dillistone.com) delivers highest ever H1 sales (£2.52m, up 6%)

· Voyager Software (www.voyagersoftware.com) revenue increased by 7% to £1.31m

· Further synergies delivered from the Voyager Software acquisition

· FCP Internet (www.evolvedb.co.uk), acquired in July 2013, will contribute to profits in H2

· 4% increase in interim dividend to 1.25p (2012: 1.2p)

Commenting on the results, Mike Love, Non-Executive Chairman, said:

"These are an encouraging set of results. We have delivered good revenue growth in both of our divisions in the first half of the year, and have entered the second half with a strong pipeline. Our results in the second half will be augmented by the acquisition of FCP Internet, completed in early July, which is expected to be immediately earnings enhancing.

"The Board expects to make further progress in the second half of the year."

Webinar:

Group Chief Executive Jason Starr and Finance Director Julie Pomeroy will host a webinar and Q+A session to review these results at 3pm today. To register to attend this webinar, please visit: http://www.dillistonegroup.com/news.aspx?newsID=66

Investor Lunch:

In addition, Dillistone will be holding an Investor Lunch on 13 November 2013 for Private Client Investment Managers and Private Investors. Those wishing to attend should contact Tom Cooper on tom.cooper@winningtons.co.uk or 020 3176 4722.

Contacts:

Notes to Editors:

Dillistone Group Plc (www.dillistonegroup.com) is a leader in the supply and support of recruitment software. It has two main trading businesses: Dillistone Systems, which targets the executive search industry (www.dillistone.com) and Voyager Software which targets other recruitment markets (www.voyage.co.uk). Dillistone was admitted to AIM, a market operated by the London Stock Exchange plc, in June 2006.

Chairman's Statement

The Group has enjoyed a good first half, with good progress in both of its divisions.

Dillistone Systems (www.dillistone.com) has delivered its best ever H1 revenue performance, with revenue of £2.52m showing growth of 6% on the previous year. Although 6% revenue growth is pleasing, it actually understates the performance of the Division in the market. New business order values are significantly up in H1 of 2013 and, with both conversion rates and average contract values having increased in the period under review, the Division carries a strong implementation pipeline into the 2nd half. This sales growth has helped the Division deliver a 10% increase in operating profits.

Voyager Software (www.voyagersoftware.com) has also enjoyed a good trading period with a highlight being the winning of its largest ever contract. This contract is expected to be implemented in H2. Revenue in this Division is up by 7%, although operating profits are down 8% due, in part, to increasing resources within the Division in anticipation of future growth. As with Dillistone Systems, Voyager Software is carrying a strong pipeline into the second half.

The Group is a consolidator in what is a highly fragmented recruitment software market. I am happy to say that the Voyager Software acquisition - completed in September 2011 and the first in the history of the Group - has been integrated well. In addition to the cost savings and revenue benefits already delivered, we are also seeing operational improvements made as a result of implementing "best practice" processes across the Group.

In July 2013, the Group acquired FCP Internet Holdings. FCP Internet (www.evolvedb.co.uk) offers a comparable product to Voyager Software's Infinity product and presents further resource sharing opportunities. Integration of the FCP Internet business with the Voyager Software division has begun, with the relocation of the FCP Internet team to existing Group offices having been successfully completed. FCP Internet is already contributing to the visibility of the future revenues and will contribute to profits in the second half.

Improved trading in existing divisions, along with the expectation of earnings enhancement from the acquisition of FCP Internet, gives the Group much to be positive about. The Board is however conscious of the risk of overstretching resources. As a result, the Group has recruited additional staff to strengthen its depth of management over recent months, and this will continue in H2. This will help prepare our businesses for future organic and acquisitive growth.

Financial Performance

Revenue in the 6 months ended 30 June 2013 increased by 6% to £3.81m (2012: £3.60m). Recurring revenues increased by 7% to £2.41m over the comparable period last year (2012: £2.25m) and represented 63% of total revenues (2012: 63%). Non recurring revenues increased 4% to £1.21m (2012: £1.16m).

Costs of sales increased to £0.45m (2012: £0.44m) with administrative costs increasing by 4% to £2.56m (2012: £2.47m). Administrative costs included £0.05m (2012: £0.11m) relating to the amortisation of acquisition intangibles. Depreciation, excluding amortisation of acquisition intangibles, increased by 56% to £0.21m (2012: £0.14m).

Profit before tax and amortisation of acquisition intangibles increased by 6% to £0.86m (2012: £0.81m). Profit before tax and after amortisation of acquisition intangibles was up 17% at £0.82m (2012: £0.70m).

The tax provision remained static at £0.17m in the period to 30 June 2013 (2012: £0.17m). This gave an effective global tax rate of 21.0% (2012: 24.3%). The 2012 and 2013 rates have been reduced by a claim in the UKMEA for research and development tax credits reflecting the continuing development of our products. The falling UK tax rates have also had a positive impact on the charge which is offset by the higher rates of corporation tax payable in the US and Australia.

Basic EPS rose 11% to 3.69p (2012: 3.33p) before amortisation of acquisition intangibles and 22% to 3.54p after such amortisation.

The Board was pleased to note press reports earlier this year that the Company was the highest yielding software company on the London market. We continue to follow a progressive dividend policy and, reflecting this, the Board has decided to increase the interim dividend for 2013 by 4%. Accordingly, a dividend of 1.25p per share (2012: 1.2p) will be paid on 6 November 2013 to holders on the register on 4 October 2013. Shares will trade ex-dividend from 2 October 2013.

Cash generated from operating activities increased by 19% to £1.07m (2012: £0.9m). Total cash flow in the 6 months ended 30 June 2013 showed a net cash inflow of £0.23m (2012: outflow £0.02m). The main elements of non-operating expenditure related to dividends paid in the period of £0.46m (2012: £0.43m) and investment in new product development of £0.34m (2012: £0.36m). At 30 June 2013 we had cash reserves of £1.90m (2012: £1.57m) and no borrowings.

Investor Relations

The Group is pleased to announce that we will be offering increased opportunities for investors to speak with our management team. This will include an interactive webinar, scheduled to take place on the day of the results. It is our anticipation that the webinar will become a regular event, timed to coincide with every major announcement by the Group. In addition, we will be hosting a lunch for Private Client Investment Managers and Private Investors in London in November.

Strategy

The Group remains committed to a strategy of both organic and acquisitive growth. The acquisition of Voyager Software proved to be earnings enhancing, and it is anticipated that the acquisition of FCP Internet will follow suit. As with Dillistone Systems, both Voyager Software and FCP Internet are cash generative and so will support our aim to follow a progressive dividend strategy, subject to the cash needs of the business.

Outlook

Good sales growth and visibility across the business, supported by the earnings enhancing acquisition of FCP Internet, gives the Board confidence that the Group will make further progress in the remainder of the year.

Mike Love

23 September 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Earnings per share (pence) before amortisation of acquisition intangibles and exceptional items

The interim report was approved by the Board of directors and authorised for issue on 23 September 2013. They were signed on its behalf by:

JS Starr J P Pomeroy

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NOTES TO THE INTERIM

CONSOLIDATED STATEMENT OF

1. Basis of Preparation

The financial information for the six months ended 30 June 2013 included in this condensed 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 on pages 10 - 14.

These interim financial statements have not been audited nor have they been reviewed by the auditors under ISRE 2410 of the Auditing Practices Board. 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 2012 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 2012 financial statements of Dillistone Group Plc and on a going concern basis. They are presented in sterling which is also the functional currency of the parent company. They do not include all of the information required in annual financial statements in accordance with IFRS and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2012.

Dillistone Group Plc is the Group's ultimate parent company. It is a public listed company and is domiciled in the United Kingdom. The address of its registered office and principal place of business is 3rd Floor, 50-52 Paul Street, London, EC2A 4LB. Dillistone Group Plc's shares are listed on the Alternative Investment Market (AIM).

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.

3. Segment reporting

3. Segment reporting (continued)

4. Amortisation of acquisition intangibles and exceptional items

5. Tax

The tax charge is impacted by the higher rates of corporation tax payable in the US and Australia partially offset by the R&D tax credits available to both Dillistone Systems and Voyager Software and the reduction in the longer term UK tax rates which impact on provided deferred tax.

6. Dividends

The Board has decided to pay an interim dividend of 1.25 p per share (2012: 1.2p) on 6 November 2013 to holders on the register on 4 October 2013. Shares will trade ex-dividend from 2 October 2013.

7. Earnings per Share

8. 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.

There were no transactions with any other related parties.

9. Post Balance Sheet event

On 8 July 2013 the Group completed the acquisition of FCP Internet Holdings Limited ("Holdings"). The acquisition is consistent with the Group's strategy of enhancing strength and achieving scale through acting as a consolidator in a largely fragmented market.

Holdings is a non-trading holding company. Its wholly owned subsidiary and sole asset, FCP Internet Limited ("FCP") (www.evolvedb.co.uk/), sells its Evolve software product to its target market of recruitment agencies. This product, which is wholly delivered through a Software as a Service ("SaaS") model, is designed to facilitate the filling of vacancies and is used by hundreds of users around the World. FCP operates in the same market sector as the Group's Voyager Software business and is UK based.