26 September 2023

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

Dillistone Group Plc, the AIM quoted supplier of software and services to recruiters, is pleased to announce interim results for the six months ended 30 June 2023.

Financial Highlights

·    Group eliminates losses, makes first H1 adjusted operating profit since 2018 of £0.036m (H1 2022: loss (£0.129m)).

·    Rolling 12 month adjusted operating profit also turns positive at £0.009m for the first time since H2 2018 (12 months to June 2022: loss (£0.342m)).

·    First H1 recurring revenue growth since 2017 up 4% to £2.564m (2022: £2.477m).

·    Recurring revenues represented 91% (H1 2022: 88%) of Group revenue. Total revenue flat at £2.826m (2022: £2.823m).

·    Net cash from operating activities broadly the same at £0.565m (2022: £0.560m).

·    Cash at period end of £0.249m (2022: £0.608m) reflecting ongoing repayment of Government support loans (£0.300m annually). The Board does not expect the Group to require additional funding.

·    Board expects to deliver full year profit results in line with market expectations.

Operational Highlights

·    Strong start to year for all products, followed by deterioration in Q2 due to widely reported drop in UK advertised vacancies during this period leading to a downturn in demand for many of our clients.

·    Improved operational gearing ensures that business is able to react rapidly to changes in demand.

·    Post period end, major enhancements delivered for Talentis, Infinity and Mid-Office, including integrations with OpenAI (the technology behind ChatGPT) for both Talentis and Infinity.

·    Implementation of previously announced major contract win progressing well.

Commenting on the results and prospects, Giles Fearnley, Non-Executive Chairman, said:

"In my statement in the annual report, I said that the underlying business had improved. These results confirm that statement with the Group returning an adjusted operating profit for the first time since 2018, despite the challenging economic environment.

"Even with the current economic turbulence, we fully expect to make further progress during the remainder of the year. The Board is confident of delivering full year profit results in line with market expectations."

*           Note: "Adjusted" refers to activities before acquisition, reorganisation, Government support, and one-off costs

Investor Presentation: 3pm on Tuesday 26 September 2023

Jason Starr, Chief Executive, and Ian Mackin, Finance Director, will hold an investor presentation to review the results and prospects at 3pm on Tuesday 26 September 2023.

The presentation will be hosted through the digital platform Investor Meet Company. Investors can sign up to Investor Meet Company and add to meet Dillistone Group Plc via the following link https://www.investormeetcompany.com/dillistone-group-plc/register-investor. For those investors who have already registered and added to meet the Company, they will automatically be invited. 

Questions can be submitted pre-event to [email protected] or in real time during the presentation via the "Ask a Question" function. 

Mello Results Special webinar: Wednesday 27 September 2023 - event starting at 12pm

Dillistone will be presenting at the Mello Results Special webinar, on Wednesday 27 September 2023 taking place via Zoom Webinar. The event starts at 12.00pm.

Jason Starr, Chief Executive, and Ian Mackin, Finance Director, will be presenting to webinar participants during the event and taking questions.   Investor wishing to attend can register here for a free ticket for the event using code SHR100.  The recording will be sent out to all registrants within 48 hours of the event.

Contacts:

This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR").  Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

The person responsible for arranging the release of this announcement on behalf of the Company is Ian Mackin, Finance Director of the Company.

Notes to Editors:

Dillistone Group Plc is a leader in the supply and support of software and services to the recruitment industry. Dillistone operates through the Ikiru People (www.IkiruPeople.com) brand.

The Group develops, markets and supports the Talentis, FileFinder, Infinity, Mid-Office, ISV and GatedTalent products.

Dillistone was admitted to AIM, a market operated by the London Stock Exchange plc, in June 2006. 

Learn about our products:

Talentis Software:                            https://www.talentis.global/recruitment-software/

Voyager Software:                           https://www.voyagersoftware.com

GatedTalent Executive Jobs:           https://talentis.global/all-jobs

Chairman's Statement

In my statement in the annual report, I said that the underlying business had improved. These results confirm that view with the Group achieving its first half year adjusted operating profit since H2 FY2018 and its first half year profit from operating activity since H1 FY2016.

It is perhaps though, the rolling 12-month measure of adjusted operating profit which truly shows the progress made. The table below shows the scale of recovery the company has achieved, with a small profit of £0.009m being achieved in the 12 months to 30 June 2023, a turnaround in operating performance of more than £350k, when accounting for government support.

In the annual report I also pointed to challenging economic conditions. These worsened during Q2, with the widely reported reduction in hiring leading to a number of recruitment agencies downsizing, subsequently reducing demand for our products.

However, as a result of the restructuring undertaken over recent years, the Group now has the ability to rapidly adjust cost in line with market fluctuations and steps have been taken in H2 to reflect the harsher sales environment we face. As a result, the Board remains confident of continuing its financial recovery in 2023.

Operational Review

We split our products into two groups - products primarily targeting contingency recruiters (largely, but not exclusively, in the United Kingdom) and products used by executive search firms and in-house executive search teams across the globe.

Contingency review:

In March, we announced that the Group had won a significant contract for our Infinity product. We stated that "The contract includes a significant amount of tailored development work which will determine the final value of the contract. The sum total of this development work and the ongoing licence revenue is expected by the Board to result in the contract being the largest won since the restructuring of the Group in January 2020."

We are pleased to report that this project is progressing well and we anticipate that the non-recurring revenue part of the project will largely be realised in H2 2023. While the final value of this work remains unconfirmed, at this stage, we are now anticipating that this will be marginally higher than originally anticipated.

While some of our development focus has been driven by the requirements of this contract, we continue to enhance our contingency products to deliver more value for all our clients.

During Q2, we completed the integration of Infinity with the "Talentis TalentGraph", allowing our contingency users to search across the huge datapool which was previously available exclusively to our Talentis clients. We believe this enhancement will create a competitive advantage for Infinity, and the primary aim is to support client retention. In addition, we are charging users a small additional fee to take advantage of this functionality and we have already started to generate new revenue as a result.

As noted above, the UK recruitment market saw a marked decline in Q2, and we saw a number of our clients reduce licence numbers or take steps to cancel contracts. We also saw a steep decline in new business orders during this period.

The recruitment software industry tends to be relatively slow in Q3 and this has proven to be the case this year. However, there are no obvious signs of further deterioration, and we anticipate the previously mentioned large contract win will ensure a positive result for this part of the business in H2, regardless of the economic environment.

Executive search review:

Our executive search platforms enjoy a far greater global client base than our contingency products, with users accessing our systems from virtually every continent. While we've seen a steep decline in the recruitment sector in the UK, other countries have been less consistent with some territories and sectors doing better than others. Nevertheless, we have more clients in the UK than in other territories and as a result our executive search products were not immune to the fluctuations referenced above and as a result, recurring revenue associated with our headhunting products dropped in Q2.

In late Q2 following an extensive review by the organisation in question, we signed a "preferred provider agreement" for Talentis with a major global recruitment business. This has already created opportunities that have generated new revenue for the Group.

As with our contingency products, the market for executive search technology is typically slow over the summer months. However, after a tough second quarter, we are pleased to report that our Talentis product has outperformed expectations over the summer.

We continue to develop Talentis aggressively and, post period end, announced our first integrations with OpenAI - the technology that underpins ChatGPT. These integrations allow users to search for candidates more efficiently, and helps users to find "similar candidates" based on a "template candidate". These enhancements have been well received by our clients.

While the market remains challenging for all our executive search products, we are pleased to see that Talentis is increasingly being considered as a viable option for medium sized firms and we are pleased to note increasing levels of engagement with search firms who are considering Talentis as a CRM alternative to an existing platform - rather than a secondary resourcing tool.

KPIs and financial performance

The Group's operational performance has improved significantly in recent years, with H1 FY2023 marking our return to operating profit. The success measure for each of the KPIs used by management is year on year improvement.

*     EBITDA adjusted for Government support

**   Operating cash adjusted for Government support received

*** (Loss) before tax adjusted for Government support associated with Covid and exceptional costs

Revenue

Group revenue stayed broadly flat at £2.826m from £2.823m in H1 FY2022

Recurring revenues increased by 4%, the first H1 increase since 2017, to £2.564m over the comparable period last year (2022: 2% decline to £2.477m). Recurring revenues represented 91% of total revenues (2022: 88%).  Non-recurring revenues were down 23% at £0.200m (2022: £0.260m).  

Adjusted EBITDA*

The adjusted EBITDA* increased by 34% to £0.581m from £0.435m in H1 FY2022. This resulted in a higher EBITDA margin of 20.6%, compared to 16.7% in H1 FY2022, reflecting the Group's focus on efficiency, whilst maintaining our customer service.

Operating profit/(loss) and profit/(loss) before tax

The Group moved back into an operating profit in H1 FY2023. The operating profit, before acquisition related, reorganisation and other items, increased by 128% to stand at £0.036m from (£0.129m) in H1 FY2022.

Inclusive of acquisition related and other items, the operating profit was £0.027m compared to a loss of (£0.105m) in H1 FY2022.

The loss before tax decreased to (£0.046m) from (£0.274m) in H1 FY2022. Using a like for like measure, excluding Government support of £0.059m for H1 FY2023, the comparative figure for H1 FY2023 is (0.105m), a decrease in loss of 62%.

Taxation

The net tax credit for H1 is £0.054m (FY 2022: £0.091m).

Balance sheet

The Group's net assets increased slightly to £3.236m (H1 FY2022: £3.213m)

Trade and other receivables decreased to £0.635m (H1 FY2022: £0.739m).

Trade and other payables also decreased to £2.523m (H1 FY2022: £2.847m).

R&D development

The Group capitalised £0.460m in development costs in the period (H1 FY2022: £0.476m) as the business continued its commitment to developing its products. Amortisation of development costs was £0.496m (H1 FY2022: £0.490m)

Financing

The CBIL loan balance stands at £0.900m (31 December 2022: £1.050m) and, on the current payment profile, will be repaid by June 2026. The Group also has a convertible loan of £0.400m (31 December 2022: £0.400m), which is not expected to be repaid until the CBIL loan has been repaid.

Cashflow

Net cash from normalised operating activities (before government support) decreased 7% to £0.519m (H1 FY2022: £0.560m). Adjusted net change in cash before government support deteriorated by 17% to (£0.217m) (H1 FY2022: (£0.186m)).

At 30 June 2023, we had net cash reserves of £0.249m (2022: £0.608m).

Strategy

Our long-term strategy is unchanged, concentrating on reducing the size of our product range to concentrate on the best opportunities while broadly maintaining consistent levels of product development expenditure. While the economic climate is challenging, we intend to maintain our current focus and deliver significant improvements to users of both our product groups.

Outlook

After a challenging few years for the Group, the Board is delighted to report a return to profitability in the first half of 2023.

The recruitment sector has had a turbulent time in recent months, and this has unquestionably impacted upon demand for our services. To be able to report improved performance despite these market conditions is particularly pleasing and we are confident that the Group has exciting times ahead of it, especially when we see improvement in our recruitment and search customer bases. 

Despite this current economic turbulence, we fully expect to make further progress during the remainder of the year. The Board is confident of delivering full year profit results in line with market expectations.

Giles Fearnley

Non-Executive Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The interim report was approved by the Board of directors and authorised for issue on 25 September 2023.  They were signed on its behalf by: 

JS Starr                                                IJ Mackin

CONSOLIDATED STATEMENT OF CASH FLOWS

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 2023 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.

The financial information in these interim results is that of the holding company and all of its subsidiaries (the Group). It has been prepared in accordance with UK adopted international accounting standards but does not include all of the disclosures that would be required under International Financial Reporting Standards (IFRSs). The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2022 and are those which will form the basis of the 2023 financial statements.

The comparative financial information presented herein for the year ended 31 December 2022 does not constitute full statutory accounts for that period. The Group's annual report and accounts for the year ended 31 December 2022 have been delivered to the Registrar of Companies. The Group's independent auditor's report on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Going concern

The directors have continued to perform detailed forecasting on a regular basis taking into account current trading and expectations and cash balances and, having reflected upon these forecasts, the directors of the Company continue to adopt the going concern basis of accounting in preparing the financial statements.

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 12 Cedarwood, Crockford Lane, Chineham Business Park, Basingstoke, RG24 8WD.  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 

6 months ended 30 June 2023 and 30 June 2022

*  see accounts note 5

Earnings per share - from continuing activities

Year Ended 31 December 2022

*  see accounts note 5

Earnings per share - from continuing activities

4.         Segment reporting

5.         Acquisition related items and other one off costs

6.         Tax

The tax charge is calculated for each jurisdiction based on the estimated position for the year.  Deferred tax has been provided at a rate of 25% (2022: 25%).

7.         Dividends

The Board has decided not to pay an interim dividend (2022: nil per share).

8.         Earnings per Share

 9.        Related party transactions

The Company has related party relationships 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. 

The Directors participated in the issue of convertible loan notes in 2017 which carry interest at 8.15% per annum payable quarterly in arrears. 

There were no transactions with any other related parties.

10.       Cautionary statement

This Interim Report has been prepared solely to provide additional information to shareholders to assess the Company's strategies and the potential for these strategies to succeed. The Interim Report should not be relied on by any other party or for any other purpose. The Interim Report contains certain forward-looking statements with respect to the financial condition, results of operations and businesses of the Company. These statements are made in good faith based on the information available to them up to the time of their approval of this report. However, such statements should be treated with caution as they involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future.  There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements.  The continuing uncertainty in global economic outlook inevitably increases the economic and business risks to which the Company is exposed. Nothing in this announcement should be construed as a profit forecast.