Dillistone Regulatory News (DSG)

16 September 2015

Dillistone Group Plc

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

Interim Results

Dillistone Group Plc, the AIM quoted supplier of software and services for the recruitment sector, is pleased to announce its interim results for the six months ended 30 June 2015.

Highlights include:

Financial

· Revenue up 12% to £4.71m

o Recurring revenues up 14% to £3.26m

o Non-recurring revenues up 6% to £1.20m

· Adjusted EBITDA1 up 9% to £1.19m

· Depreciation & amortisation up 53% following uplift in R&D

· Adjusted operating profits2 down 6% to £0.78m

· Adjusted basic EPS3 down 7% to 3.31p

· Cash balances of £1.34m at 30 June 2015 (2014: £1.19m) and debt of £0.40m (2014: £nil) after making final payments associated with acquisition of FCP

· 4% increase in interim dividend to 1.35p (2014: 1.30p)

Operational

Dillistone Systems Division

· Notable contract wins include multiple clients taken from direct competitors

· Preferred Provider Agreements signed with two major global executive search groups

· Significant improvement in client retention rates and return of a large former client

· Incoming order values up approx. 20% since launch of FileFinder Anywhere Further details available at: http://www.dillistone.com/en/page/Interim_Results_Presentation

Voyager Software Division

· Launch of cloud hosted version of Infinity with additional functionality for use in the temporary staffing sector

· Launch of integration of ISV FastPath and Infinity to facilitate cross selling opportunities

· Launch of version 6 of Evolve software

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

"These results demonstrate growth in revenue and EBITDA, with the benefits of our acquisition strategy showing through.

"We continue to invest in our products, services and infrastructure across the Group. These investments are expected to deliver long term shareholder benefits and strengthen Dillistone's position in its chosen markets.

"Our confidence in the future has allowed us to declare a further increase in our interim dividend."

Dr Mike Love, Chairman

1 Adjusted EBITDA is adjusted operating profit with depreciation and amortisation added back.

2 Adjusted operating profit is statutory operating profit before acquisition costs, related intangible amortisation, movements in deferred consideration and other one-off costs relating to acquisitions.

3. Adjusted earnings per share is computed from statutory profits after tax adjusted to exclude the post-tax effect of acquisition costs, related intangible amortisation, movements in deferred consideration and other one-off costs relating to acquisitions.

Results Webinar: Jason Starr, Chief Executive, and Julie Pomeroy, Finance Director, will be hosting a webinar at 2.45pm today to review the results and prospects. Those wishing to participate should register at https://attendee.gotowebinar.com/register/145321721560845569 or contact Tom Cooper on tom.cooper@walbrookpr.com or 0797 122 1972.

Enquiries:

Notes to Editors:

Dillistone Group Plc (www.dillistonegroup.com) is a leader in the supply and support of software and services to the recruitment industry. It has four trading businesses operating through two divisions: Dillistone Systems, which targets the executive search industry (www.dillistone.com); and Voyager Software, which targets other recruitment markets (www.voyagersoftware.com).

Dillistone has made three acquisitions: Voyager Software in September 2011, FCP Internet in July 2013 and ISV Software in September 2014. The Group operates under the FileFinder, Infinity, Evolve and ISV brands.

Dillistone was admitted to AIM, a market operated by the London Stock Exchange plc, in June 2006. The Group employs over 100 people globally with offices in London (head office) Basingstoke and Southampton, Frankfurt, New Jersey and Sydney.

Chairman's Statement

The Group has made good progress in the first half, delivering a solid set of financial results coupled with an impressive number of product updates launched in the period. We continue to pursue a growth strategy of investing in our products and services and targeting complementary acquisitions. This is a strategy that has served us well in the past and which remains our conviction at this time.

Revenues increased by 12% over the 6 months to June 2014 with recurring revenues up by 14% and now representing 69% of total revenues. Revenues have benefited from the acquisition of ISV in October 2014. Excluding the impact of ISV, which did not contribute to the comparative first half period in 2014, underlying revenue growth was 3%.

Administration expenses have risen in H1 2015, not only through the acquisition of the ISV business, but also through increased depreciation and amortisation charges, relating primarily to investment in product development. Excluding depreciation and amortisation and the impact of ISV, administrative expenses rose 3% over H1 2014.

EBITDA grew 9% to £1.19m (2014: £1.09m). Total depreciation and amortisation, including acquisition intangibles, increased to £0.60m (2014: £0.39m) resulting in profit before tax being down 12% to £0.57m (2014: £0.65m). Operating profits, excluding acquisition intangibles, were therefore £0.78m, down 6% on 2014.

Divisional review

Dillistone Systems (www.dillistone.com) reported revenues of £2.306m (2014: £2.302m).

The launch of FF Anywhere in September 2014 has been well received by existing clients and we have benefitted from a significant number of these clients upgrading, which has resulted in improved retention rates. The product has also led to us achieving a number of notable new client wins, with the most recent of these including our largest win in South America since 2006 and our largest win in the UK since 2012. These are in addition to the previously referenced notable wins in mainland Europe and North America. We are delighted to report that incoming order values for FileFinder have risen by approximately 20% in the year since the launch of FileFinder Anywhere. http://www.dillistone.com/en/page/Interim_Results_Presentation

Divisional profits are £0.218m down in the period mainly due to increased depreciation and amortisation charges, relating primarily to development costs and also to increased fixed assets, following our head office relocation in October 2014, and higher staff costs.

Voyager Software (www.voyagersoftware.com) has also enjoyed a good trading period with revenue 27% ahead of 2014 at £2.400m (2014: £1.896m). It has benefited from the impact of the ISV acquisition, which took place in October 2014. On a like for like basis, excluding ISV, underlying revenue would have been ahead by nearly 6%.

The Division continues to invest in product development and in the period launched a Cloud hosted version of its Infinity product together with additional functionality to allow the product to be used by clients in the temporary staffing sector.

We also launched our new integration between the ISV FastPath product and Infinity. We believe that this development will facilitate cross selling within the Division.

In July 2015 we were delighted to announce the release of version 6 of Evolve. The Evolve™ product was acquired through our acquisition of FCP in 2013 and this represents its biggest release in many years and again demonstrates our commitment to product development.

Divisional profits increased by £0.164m in the period.

Financial Performance

Revenue in the six months ended 30 June 2015 increased by 12% to £4.706m (2014: £4.198m). Recurring revenues increased by 14% to £3.257m over the comparable period last year (2014: £2.861m) and represented 69% of total revenues (2014: 68%). Non recurring revenues increased 6% to £1.202m (2014: £1.129m).

Costs of sales increased to £0.661m (2014: £0.548m) mainly due to the inclusion of ISV. Excluding acquisition related costs, administrative costs increased by 16% to £3.270m (2014: £2.825m). Excluding ISV costs, administrative costs grew 8%. In addition depreciation, excluding amortisation of acquisition intangibles, increased by 55% to £0.411m (2014: £0.265m), reflecting the impact of the increased amortisation of development costs. Administrative costs also include £0.189m (2014: £0.128m) relating to the amortisation of acquisition intangibles.

Profit before tax and acquisition related items fell by 7% to £0.772m (2014: £0.828m). Profit before tax and after acquisition related items fell by 12% to £0.566m (2014: £0.646).

The tax charge fell to £0.090m in the period to 30 June 2015 (2014: £0.132m). This gave an effective global tax rate of 15.9% (2014: 20.4%). The 2014 and 2015 rates have been reduced by claims in the UK 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.

Adjusted basic EPS fell 7% to 3.31p (2014: 3.55p), before acquisition related items, and fell 13% to 2.45p after such items.

Cash generated from operating activities remained strong at £1.111m (2014: £1.179m). Total cash flow in the 6 months ended 30 June 2015 showed a net cash outflow of £0.560m (2014: outflow £0.198m). The main elements of non-operating expenditure related to dividends paid in the period of £0.528m (2014: £0.475m) and investment in new product development of £0.464m (2014: £0.324m) and deferred and contingent consideration payments in respect of ISV and FCP totalling £0.666m (2014: £0.550m). At 30 June 2015 we had cash reserves of £1.335m (2014: £1.193m) and £0.406m in borrowings (2014: £nil).

We continue to follow a progressive dividend policy and, reflecting this, the Board has declared an increase in the interim dividend for 2015 of 4%. Accordingly, a dividend of 1.35p per share (2014: 1.30p) will be paid on 19 November 2015 to holders on the register on 16 October 2015. Shares will trade ex-dividend from 15 October 2015.

Strategy

The Group remains committed to a strategy of both organic and acquisitive growth underpinned by continued investment in our core products. Following the acquisition of ISV we have delivered a key goal with the launch of the integration between the ISV FastPath product and Voyager Infinity.

Outlook

The Board is pleased that our Dillistone Systems division has seen revenues grow after the fall seen last year. We expect this to continue as new and existing clients increasingly turn to the FileFinder Anywhere suite and more and more firms sign up for our cloud services.

The Board is aware that the executive search software market in which Dillistone Systems operates is far more competitive than it has been in previous years. Increased competition means that the Division has to work harder to win business and maintain standards, and this has required and continues to require ongoing investment in our products, in our services, and in our infrastructure.

The turnaround in Sales seen since the launch if FF Anywhere demonstrates that this strategy is working. It is particularly pleasing to note that, in the 12 months since launch, the value of total incoming orders has risen by approximately 20% and the Division has won more contracts and more users from our two closest competitors than in the previous four years combined.

The Board is of the view that it is in the best long term interest of all stakeholders that the Division continues to invest in products and services but is aware that, in reality, this means that, while Dillistone Systems will continue to operate in a very profitable manner, margins will be impacted and pre-tax profits will fall in 2015.

Our Voyager Software division has shown growth at both the revenue and the pre-tax profit level, and we expect this to continue into the second half. Our Infinity SaaS product, launched earlier in the summer, has already led to new business contract wins and we are optimistic that revenue growth will continue in 2015.

In the short term, expected growth in Voyager will not make up for the increased investment in Dillistone Systems and, as a result, Group revenue will grow but profits will fall in 2015 compared to 2014. However, the Group will continue to be very profitable.

The Board therefore remains confident in the future prospects of the Group and has declared an increase in the interim dividend to 1.35p per share.

Mike Love

15 September 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The interim report was approved by the Board of directors and authorised for issue on 15 September 2015. 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 2015 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.

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 2014 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 2014 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 2014.

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 50 Leman St, London, E1 8HQ. 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 Reconciliation of adjusted operating profits to consolidated statement of comprehensive income

30 June 2015 and 30 June 2014

Earnings per share - from continuing activities

* see accounts note 5

31 December 2014

Earnings per share - from continuing activities

* see accounts note 5

4. Segment reporting

4. Segment reporting (continued)

5 Acquisition related items

6 Tax

The tax charge is impacted by the higher rates of corporation tax payable in the US and Australia offset by the R&D tax credits available to both Dillistone Systems and Voyager Software. Deferred tax has been provided at 20%.

7. Dividends

The Board has decided to pay an interim dividend of 1.35 p per share (2014: 1.3p) on 19 November 2015 to holders on the register on 16 October 2015. Shares will trade ex-dividend from 15 October 2015.

8. Earnings per Share

9. 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.