Acquisition and Placing

Dillistone Group Plc

("Dillistone" or the "Company")

Acquisition and Placing

21 September 2011

Dillistone, the AIM quoted supplier of software for the international recruitment industry, is pleased to announce that it has today entered into an agreement to acquire Woodcote Software Limited ("Woodcote") ("Acquisition") and that Religare Capital Markets Plc has completed a placing on behalf of Dillistone of 694,445 new ordinary shares of 5p each in the share capital of Dillistone ("Placing Shares") to raise £500,000 (before expenses) at a price of 72p per Placing Share ("Placing"). Completion of the Acquisition and the Placing are subject only to admission of the Placing Shares and the Consideration Shares (as defined below) to trading on AIM.

The Company has also announced its interim results today and these are included in a separate announcement.

Woodcote

Woodcote is a non-trading holding company. Voyager Software Limited ("Voyager") (http://www.voyage.co.uk/), a wholly owned subsidiary of Woodcote, sells a number of software products to its target market of recruitment agencies. The products are designed to facilitate the filling of temporary or permanent vacancies. Voyager Software (Australia) Pty Ltd. ("Voyager (Australia)"), a wholly owned subsidiary of Voyager, markets a similar product range.

Between them, Voyager and Voyager (Australia) have over 700 active unique clients and nearly 5,000 active licenced users.

ExpressHR Services Limited, a subsidiary of Woodcote, is also being acquired by Dillistone as part of the Acquisition and on completion of the Acquisition ("Completion") will be immediately sold to Geoffrey Warburton, who holds shares in Woodcote through his pension scheme, for a consideration of £1.

For the year ended 30 June 2011 the unaudited consolidated management accounts of Woodcote (excluding ExpressHR Services Limited and excluding accounting for goodwill) showed profit before tax and profit after tax of £139,000 and £107,000 respectively on revenues of £2.2m. These accounts also showed net assets of £167,000 as at 30 June 2011.

Consideration

On Completion, an initial consideration of £1.5m in cash ("Initial Cash Consideration") and £390,000 in new ordinary shares of 5p each in Dillistone ("Ordinary Shares") (calculated by reference to the average of the closing middle market price of the Ordinary Shares, for the 30 dealing days up to and including 15 September 2011), amounting to 505,509 Ordinary Shares ("Consideration Shares"), is payable by the Company. The Consideration Shares are subject to a six month lock-in from the date of Completion. In addition, Dillistone has agreed to pay earn-out consideration up to a maximum of £1,910,000 as follows:-

1. Provided that the revenue of Woodcote, Voyager and Voyager (Australia) (together the "Voyager Group") exceeds £2,200,000 in the year ending 30 June 2012, £200,000 is to be paid in cash by the later of the expiration period of 5 business days following the announcement of Dillistone's 2012 interim results or the determination or agreement of the June 2012 consolidated accounts of the Voyager Group.

2. Provided that the revenue of the Voyager Group exceeds £2,300,000 in the year ending 31 December 2012, consideration of 30 per cent. of such excess to be paid within the period of 5 business days from the later of the announcement of Dillistone's audited results for the year ended 31 December 2012 or the determination or agreement of the December 2012 consolidated accounts of the Voyager Group.

3. Provided that the revenue of the Voyager Group exceeds £2,300,000 in the year ending 31 December 2013, consideration of 30 per cent. of such excess to be paid within the period of 5 business days from the later of the announcement of Dillistone's audited results for the year ended 31 December 2013 or the determination or agreement of the December 2013 consolidated accounts of the Voyager Group.

All revenue figures used for the calculation of the earn-out consideration exclude any revenue connected to any business or company acquired by Dillistone or the Voyager Group post Completion.

Placing

The Company has raised £500,000 (before expenses) through the successful placing of 694,445 Ordinary Shares at 72p per share. The proceeds of the Placing will be used to pay part of the Initial Cash Consideration with the remainder of the Initial Cash Consideration and professional fees and expenses and costs (totalling approximately £125,000) in connection with the Acquisition and the Placing being paid from the Company's existing cash resources. It is anticipated that any earn-out consideration will also be paid from the Company's existing cash resources.

Following the Placing and the issue of the Consideration Shares the holdings of the directors of Dillistone ("Directors") in the enlarged share capital of the Company, as enlarged by the Placing and the Consideration Shares will be:

\* The participation by Dr. Mike Love in the Placing is through his pension scheme, Cabot Trustees Limited SIPP 1803, and is regarded as a related party transaction for the purposes of the AIM Rules for Companies. With the exception of Dr. Mike Love and Julie Pomeroy (who is also purchasing shares in the Placing), the Directors consider, having consulted with its nominated adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned. Dr. Mike Love also holds his existing shares through his pension scheme Cabot Trustees Limited SIPP 1803.

Following the Placing and the issue of the Consideration Shares the holdings of the Significant Shareholders (as defined under the AIM Rules for Companies) of Dillistone in the enlarged share capital of the Company, as enlarged by the Placing and the Consideration Shares, as far as the Company is aware, will be:

Grant of options

The Company is also pleased to announce that on Completion it will grant 25,974 options over Ordinary Shares to Julie Pomeroy, Finance Director, under the Dillistone Group Share Option Scheme adopted on 3 May 2006. These options will be exercisable at a price of 77p subject to approval by HMRC and may be exercised between 21 September 2014 and 21 September 2021. These options are not subject to any performance conditions.

Under the same scheme and on the same terms the Company will also grant, on Completion, a total of 392,000 options to employees of the enlarged group (taking into account employees joining Dillistone as a result of the Acquisition).

Admission to AIM

Application has been made to the London Stock Exchange plc for the Placing Shares and the Consideration Shares to be admitted to trading on AIM. It is expected that admission will take place and dealings in the Placing Shares and the Consideration Shares will commence at 8.00 a.m. on 21 September 2011. Both the Placing Share and the Consideration Shares will rank pari passu with the existing Ordinary Shares.

Jason Starr, Managing Director of Dillistone commented:

"Voyager and Voyager (Australia) are long standing and well regarded suppliers to the UK and Australian recruitment markets respectively. The two companies have a significant client base and a high proportion of recurring revenues with strong management teams and hard working and professional staff.

We believe that this Acquisition will have a transformational impact on the Company. Historically, we have operated globally in what is very much a niche market - Executive Search. This Acquisition takes us into a substantially larger market."

Total Voting Rights

For the purposes of the Financial Services Authority's Disclosure and Transparency Rules, the total number of Ordinary Shares in issue following the Placing and the issue of the Consideration Shares will be 18,196,277 with each Ordinary Share holding one voting right. There are no Ordinary Shares held in treasury.

The above figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in the Company, under the Disclosure and Transparency Rules. 

Enquiries:

Mike Love (Chairman) Dillistone Group Plc 020 7749 6100

Jason Starr (Managing Director) Dillistone Group Plc 020 7749 6100

Julie Pomeroy (Finance Director) Dillistone Group Plc 020 7749 6100

Emily Staples /

Derek Crowhurst (Nomad) Religare Capital Markets 020 7444 0800

Daniel Briggs (Broker) Religare Capital Markets 020 7444 0500

James Wood (Sales) Religare Capital Markets 020 7444 0509

Tom Cooper Winningtons Financial PR 020 3176 4722