TIDMDSG
RNS Number : 4780X
Dillistone Group PLC
30 April 2019
Dillistone Group Plc
("Dillistone", the "Company" or the "Group")
Final Results
Dillistone Group Plc, the AIM quoted supplier of recruitment
software for the international recruitment industry through its
Dillistone Systems, Voyager Software and GatedTalent divisions, is
pleased to announce its audited final results for the 12 months
ended 31 December 2018.
Highlights for the year:
-- Recurring revenues(1) represent 82% (restated 2017: 82%) of Group revenue
-- Adjusted operating profit(2) of GBP0.055m (restated 2017:
GBP0.459m) before acquisition intangible writes offs, reflecting
the loss of the major contract announced in 2017 which reduced
revenues by GBP0.625m compared to 2017 in a ten-month period
-- Loss for the year of GBP0.260m (restated 2017: profit GBP0.057m)
-- Adjusted basic EPS(3) of 0.61p (2017: 3.73p)
-- The Group continued to generate cash from operating
activities resulting in cash at 31 December 2018 of GBP0.725m
(2017: GBP1.390m) with borrowings of GBP0.404m (2017:
GBP0.391m).
[2017 numbers have been restated for the introduction of IFRS
15, the new revenue recognition standard.]
Commenting on the results and prospects, Mike Love,
Non-Executive Chairman, said:
"2018 was clearly a challenging year for the Group. The
executive team has nevertheless worked tirelessly and, despite the
challenges faced during the year of GDPR, the loss of a major
client, the continued investment in new products and, during 2018,
the implications of re-structuring to reduce our cost base, we are
now well on our way to restoring Dillistone to healthy operating
profits on a sustainable footing."
Definitions:
(1) The component elements of recurring revenues are detailed in
note 5.
(2) Adjusted operating profit is statutory operating profit
before acquisition costs, related intangible amortisation,
movements in contingent consideration and other one-off costs. See
note 4.
(3.) Adjusted basic EPS is computed from statutory profits after
tax adjusted to exclude the post-tax effect of acquisition costs,
related intangible amortisation, movements in contingent
consideration and other one-off costs. See note 10
Results Webinar - Jason Starr, Chief Executive, and Julie
Pomeroy, Finance Director, will be hosting a webinar to review the
results at 3.00pm on Wednesday 8 May 2019. To register please visit
https://attendee.gotowebinar.com/register/8156505307777159948 or
contact Tom Cooper on tom.cooper@walbrookpr.com or 0797 122
1972.
Annual Report and Accounts - The final results announcement can
be downloaded from the Company's website (www.dillistonegroup.com).
Copies of the Annual Report and Accounts (in addition to the notice
of the Annual General Meeting) will be sent to shareholders by 31
May 2019 for approval at the Annual General Meeting to be held on
26 June 2019.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Enquiries:
Dillistone Group
Plc
Mike Love Chairman 020 7749 6100
Jason Starr Chief Executive 020 7749 6100
Julie Pomeroy Finance Director 020 7749 6100
WH Ireland Limited (Nominated
adviser)
Managing Director,
Chris Fielding Corporate Finance 020 7220 1650
Walbrook PR
Tom Cooper / Paul
Vann 020 7933 8780
0797 122 1972
tom.cooper@walbrookpr.com
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 five brands operating through three divisions:
Dillistone Systems, which targets the executive search industry
(www.dillistone.com); Voyager Software, which targets other
recruitment markets (www.voyagersoftware.com); and GatedTalent, the
next generation executive recruitment platform
(www.GatedTalent.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, ISV and GatedTalent 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
2018 was a challenging year for the business. The loss of a
major client, announced in Summer 2017 but materialising in
February 2018, had a year on year revenue impact of around
GBP0.625m. Meanwhile, the new General Data Protection Regulations
meant that the Group, like all technology businesses, had to invest
heavily in compliance. This investment covered everything from
product development and infrastructure through to staff training
and reviews of our various legal documents.
2018 was also the start of a period of change. In February of
2019, we announced the closure of our London office as part of a
broader restructuring. However, some of the groundwork for this
project was undertaken in 2018, with the implementation of various
company wide systems and procedures. The restructuring programme is
expected to return the Group to a healthy level of operating profit
on a sustainable basis.
While much work was undertaken behind the scenes in 2018, we
also continued to develop our products. Enhancements and new
functionality were delivered for each of our leading products,
while the year also saw the first revenue materialise for our
GatedTalent platform.
GatedTalent experienced various highs and lows during the year.
In the early stages of the year, we significantly surpassed our
initial expectations for recruiter take up but were disappointed by
the number of executive registrations. In the second half of the
year, we saw registrations begin to accelerate, and in Q4 we
launched "Member Services" which is a new premium B2C revenue
stream. We are pleased to report that this has proven successful
and, less than 6 months since launch, we now realise more recurring
revenue every month from Member Services than we do from any single
executive search firm contract.
Overall, Group revenue fell 11% to GBP8.692m, of which recurring
revenue fell 10% to GBP7.154m - a significant part of this loss was
the previously referenced client departure. IFRS 15 Revenue from
contracts with customers was introduced with effect from 1 January
2018 and has resulted in the restatement of the 2017 numbers.
Adjusted operating profit dropped significantly to GBP0.055m
(2017: GBP0.459m), in part due to the continued investment in
GatedTalent and in part due to the loss of the major client. The
operating loss generated by GatedTalent was GBP0.612m.
The Board remains committed to investing in and supporting the
Group's core products and remains excited by the potential of
GatedTalent.
Dividends
The Group is not recommending a final dividend in respect of the
year to 31 December 2018 (2017: 0.5p per share).
Staff
Our staff are fundamental to our success. It is through their
efforts, commitment and determination that we continue to be a
leading technology provider in the sectors we serve. On behalf of
the Board I would like to take this opportunity to thank all of our
staff for their individual and collective contributions during 2018
and the support we have seen for the changes we are making to the
Group.
Outlook
The current year has begun well in each of the three divisions.
However, the Board is cognisant of the economic challenges that the
year may bring.
As announced in February 2019, the Directors are taking the
opportunity to reduce the number of UK offices from three to two by
exercising an option to break the lease of the London office later
in the year and to increase the size of our Basingstoke and
Eastleigh offices.
The majority of our London based staff have been given the
opportunity to relocate to Basingstoke, Eastleigh or to work from
home and we are pleased to report that the vast majority of our
client facing staff are likely to accept this offer. The Board
anticipates that the efficiencies gained from merging the various
teams across the Group into fewer locations will allow the Group to
maintain current levels of client service and product development
investment while delivering a significant reduction in costs from
2020 onwards. This exercise will inevitably lead to the Group
incurring restructuring costs this year, which are currently
estimated to be in the region of GBP500,000 to GBP900,000 and which
are expected to be met without recourse to shareholders. An update
on the cost of the restructuring and the anticipated savings will
be provided later in the year.
The Board currently expects that the Group will deliver a profit
before tax in 2019 which will be comparable with 2018 (GBP0.018m)
before restructuring and acquisition related costs. Profit is
expected to grow strongly in future years as the benefits of the
restructuring and the investment in GatedTalent start to
materialise.
Dr Mike Love
Non-Executive Chairman
CEO's Review
Dillistone Group Plc supplies products and services to
facilitate recruitment. We do this through three divisions which,
between them, cover everything from retained executive search
technology through to tools to facilitate the hiring of temporary
staff, from pre-employment skills testing through to a B2C platform
that allows executives to share information with executive search
firms.
Strategy and objectives
In our time as a public company, we have made three acquisitions
and each of them has made a contribution to the business. However,
as our markets have become increasingly competitive, it has become
apparent that it is necessary to streamline our operating structure
and this is a major focus for us in 2019.
In the longer term, our strategy remains to grow the business
both organically and through acquisition.
This requires ongoing investment in product development which
ensures that the business continues to command a leading role in
the markets in which it operates.
Our acquisition strategy typically entails consideration of
businesses offering:
-- products that would further increase market share in the Group's core markets;
-- legacy applications, where clients could be transferred to our modern suite of products; or
-- complementary applications, which may be cross-sold to clients of the Group.
The Group's objectives are principally to:
-- ensure our products meet the needs of the recruitment sector
through continual investment and development;
-- be a leading player in all of the markets we serve;
-- develop our staff, delivering progressive career development; and
-- increase our profitability and deliver increased shareholder
value year on year in conjunction with a progressive dividend
policy.
Key Performance Indicators (KPIs)
The Board and management use absolute figures to monitor the
performance of the business using the financial KPIs set out below.
As discussed above the Board is undertaking a major restructuring
exercise to address the longer term performance of the
business:
FY 2017 FY 2018
GBP000 GBP000 Measure used by management Met /Not met
Total revenues 9,732 8,692 year on year growth not met
Recurring revenues 7,942 7,154 year on year growth not met
Non recurring
revenues 1,326 1,169 year on year growth not met
Adjusted profit before
tax 453 18 year on year growth not met
sufficient cash resources
Cash 1,390 725 maintained met
-------------------------- -------- -------- --------------------------- -------------
Adjusted profit before tax is statutory profit before
acquisition costs, related intangible amortisation, movements in
contingent consideration and other one-off costs. See note 4.
Restructuring Plan
Results in 2018 have clearly been disappointing and the Board
has embarked on a plan which, it believes, will deliver
significantly improved performance from 2020 onwards. We are now
well progressed on our plan to streamline our operating procedures
while maintaining our excellent reputation for client service. As
stated previously we expect the costs of the restructuring to be in
the region of GBP500,000 to GBP900,000. These costs are expected to
be met without recourse to shareholders.
We have:
-- Completed the implementation of a Group wide CRM system,
allowing team members to operate more easily on Group wide
projects.
-- Begun the process of implementing a Group wide financial
system and expect this to be complete prior to the year end.
-- Merged certain back office teams and are in the process of
merging the product development and other teams.
-- Terminated the lease of our London office while expanding our
Basingstoke office. We expect to vacate London before the end of
the year.
-- While conversations with staff are ongoing, we are pleased
that the vast majority of our client facing staff have agreed to
remain with the Group, ensuring that client service is not
negatively impacted by these changes.
-- Informed clients that certain products are being withdrawn
from the market, while maintaining overall product development
expenditure. We will continue to invest in product development for
each of our flagship products and believe that our new development
structure will lead to more efficient development going
forward.
Our business model
The business is currently split into three Divisions. Dillistone
Systems and Voyager Software are our established businesses, with
GatedTalent launched in the second half of 2017 with first revenue
seen in 2018. The statutory and operational structure of the Group
is being reviewed as part of the restructuring exercise with an aim
to simplify this and reduce the costs of reporting.
Dillistone Systems specialises in the supply of software and
services into executive-level recruitment teams. Voyager Software's
clientele are primarily involved in contingent recruitment,
including permanent placement, contract placement and the provision
of temporary staff. GatedTalent is a private network of executives,
accessed by executive recruiters. There is a close relationship
between GatedTalent and Dillistone Systems.
The majority of our products are commercialised through one or
more of the following:
1. an upfront licence fee plus a recurring support fee;
2. Software as a Service (SaaS) subscription basis; or
3. a hybrid model incorporating an upfront payment and recurring support and cloud hosting fees.
There is a continuing move away from the upfront licence model
towards our cloud delivery (SaaS) services.
The GatedTalent Division generates revenue from a combination of
recruiter subscription fees and premium fees direct from
executives. The business operates out of four countries: the UK,
Germany, the US and Australia. As well as supplying and supporting
our software we also host the software for a proportion of our
clients. This is done through data centres in Europe, the Americas,
Singapore and Australia.
Group review of the business
2018 saw recurring revenues fall 10% to GBP7.154m (restated
2017: GBP7.942m) reflecting principally the loss of the major
client in 2018. Non-recurring revenues decreased to GBP1.169m
(restated 2017: GBP1.326m). As a result, overall revenues decreased
by 11% to GBP8.692m (restated 2017: GBP9.732m) with recurring
revenues representing 82% of Group revenues (restated 2017: 82%).
Costs have reduced despite continuing investment in GatedTalent
which made, as expected, an operating loss of GBP0.612m (2017: loss
GBP0.439m).
Adjusted EBITDA(1) fell to GBP1.301m (restated 2017: GBP1.559m).
Adjusted operating profit fell to GBP0.055m (restated 2017:
GBP0.459m) and pre-tax profits before acquisition related items and
one-off adjustments reduced to GBP0.018m (restated 2017:
GBP0.453m). There was an operating loss for the year of GBP0.414m
(restated 2017: loss GBP0.364m) and loss for the year of GBP0.260m
(restated 2017: profit GBP0.057m). Cash at the year end was
GBP0.725m (2017: GBP1.390m).
(1) Adjusted EBITDA is adjusted operating profit with
depreciation and amortisation added back. See note 4.
Divisional Reviews
Dillistone Systems
The Dillistone Systems division is primarily focused on
providing technology solutions to the executive search market via
our range of "FileFinder" applications. This client group is made
up of both executive search firms and executive search teams in
major organisations.
Dillistone Systems' head office is currently in London and it
has offices in the US, Germany and Australia. The Division accounts
for 48% (restated 2017: 47%) of the Group's revenue and it saw
revenue fall 7% to GBP4.195m (restated 2017: GBP4.531m).
Product development focus in 2018 included GDPR and integration
with GatedTalent, along with a significant number of user
experience improvements. As part of our restructuring, we have
brought development resources from other parts of the Group in to
support FileFinder product development, and are already seeing the
benefits of this. We continue to invest in FileFinder and expect
new releases later in the year.
Earnings before interest, tax, depreciation and amortisation
('EBITDA') fell to GBP0.723m (restated 2017: GBP0.761m) as sales
fell and costs improved. The total amortisation and depreciation
charge was GBP0.644m (2017: GBP0.589m). Operating profit for 2018
was GBP0.079m (restated 2017: GBP0.172m).
Voyager Software
Voyager Software is a provider of technology products targeted
at the entire recruitment landscape, from front office to back
office and bureaus, and includes both recruitment management
systems and pre-employment skills testing technology.
In 2018, the Voyager Software division accounted for 51% (2017:
53%) of Group revenues. The Division's revenues decreased by 15% to
GBP4.429m (restated 2017: GBP5.201m) mainly due to the loss of a
major client in 2018. EBITDA decreased to GBP1.003m (restated 2017:
GBP1.367m). Amortisation and depreciation decreased to GBP0.475m
(2017: GBP0.511m). Divisional operating profit decreased to
GBP0.528m (restated 2017: GBP0.856m).
2018 saw some major developments in the Division including:
-- The addition of global addressing and location searching in Infinity
-- A new fast-paced temporary recruitment Planner system in Infinity
-- The extension of ISV.online to include psychometric as well as skills testing
-- Market leading support for enabling clients to work under the GDPR
We are in the process of removing certain legacy Voyager
products from the market. However we continue to invest in the core
products of the Division.
GatedTalent
GatedTalent was established in 2017 to provide a network
allowing executives to share information with selected executive
recruiters in a GDPR compliant manner. The GatedTalent product was
launched in late 2017 with first revenues occurring in 2018 of
GBP0.068m.
The basic platform has over 50,000 profiles and is free to
executives. New profiles are being added at around 1,000 per week.
Revenue is being generated from executive recruiters through
subscriptions to the platform. In Q4 2018, we launched "Member
Services" generating a new premium B2C revenue stream for the
Division. This has been successful and has accelerated rapidly. We
would anticipate that member revenues will be larger than recruiter
revenues in 2019. After less than six months, we realise more
recurring revenue every month from Member Services than we do from
any single executive search contract.
The Division is effectively a start-up business within the Group
and made an operating loss of GBP0.612m (2017 loss: 0.439m) after
depreciation and amortisation charges of GBP0.127m (2017: GBPnil).
The business is expected to remain loss making in 2019. The total
investment in Gated Talent (including capitalised development) to
31 December 2018 was over GBP1.700m.
The Board is confident that all three Divisions have strong
futures.
Financial Review
Total revenues decreased by 11% to GBP8.692m (restated 2017:
GBP9.732m) with recurring revenues decreasing by 10% to GBP7.154m
(restated 2017: GBP7.942m) while non-recurring revenues decreased
to GBP1.169m (restated 2017: GBP1.326m). Third party resell revenue
amounted to GBP0.369m in the period (2017: GBP0.464m).
Contractor and internal development costs were reclassified as
administrative expenses from costs of sales and the 2017
comparatives have also been restated on this basis. Cost of sales
decreased to GBP1.054m (2017: GBP1.247m).
Administrative costs, excluding acquisition related items,
depreciation and amortisation, fell 8% to GBP6.337m (2017: GBP
6.926m) as measures were taken to reduce costs following the loss
of the major contract in 2018. Depreciation and amortisation
(excluding acquisition related amortisation) increased to GBP1.246m
(2017: GBP1.100m).
Acquisition related administrative costs totalled GBP0.469m
(2017: GBP0.823m) and were in respect of the amortisation of
intangibles arising on the Voyager, FCP and ISV acquisitions. The
prior year figure included an acceleration of the acquisition
intangibles amortisation as a result of the loss of the major
contract in that business.
Recurring revenues covered 94% of administrative expenses before
acquisition related and one-off costs (restated 2017: 99%).
Excluding depreciation and amortisation of our own internal
development, the administrative costs are covered 112% (restated
2017: 115%) by recurring revenues.
The Group benefitted from a tax credit in 2018 of GBP0.191m
(restated 2017: credit GBP0.432m). The 2018 credit reflects the
significant R&D tax credits available to all three divisions
and the assumption that any tax losses will be surrendered for the
R&D tax credit payment. It also benefits from a deduction for
the IFRS 15 adjustment put through the accounts although this is
largely offset by the release of the deferred tax asset created in
the opening balance position at 1 January 2017. The acquisition
related items tax credit reflects the reduction in deferred tax
that arises as amortisation is charged in the profit and loss
account.
Profit for the year before acquisition related and other one-off
items amounted to GBP0.120m (restated 2017: GBP0.734m). The 2018
adjusted profits benefitted from a tax credit of GBP0.102m
(restated 2017: tax credit of GBP0.281m). The loss for the year
after acquisition related items and other one-off items was
GBP0.260m (2017: profit GBP0.057m). Basic loss per share (EPS) fell
to (1.32)p (restated 2017: EPS of 0.29p). Fully diluted EPS fell to
(1.32)p (restated 2017: EPS of 0.29p). Adjusted basic EPS fell to
0.61p (restated 2017: EPS of 3.73p).
Dillistone Group Plc company results show a profit of GBP1.338m
(2017: GBP1.311m after an impairment of GBP0.451m (2017: GBPnil) to
its investment in Voyager/FCP due to the loss of a major
contract.
Capital expenditure
The Group invested GBP1.536m in property, plant and equipment
and product development during the year (2017: GBP1.506m). This
expenditure included GBP1.446m (2017: GBP1.358m) spent on
capitalised development related costs.
Trade and other payables
As with previous years, the trade and other payables includes
deferred income of GBP3.575m (2017 restated: GBP3.811m), i.e.
income which has been billed in advance but is not recognised as
income at that time. This principally relates to support, SaaS and
cloud hosting renewals, which are billed in 2018 but are in respect
of services to be delivered in 2019. It also includes licence
revenue for which a support contract is required, and which is
spread over 5 years under IFRS15. Contractual income is recognised
monthly over the period to which it relates. It also includes
deposits taken for work which has not yet been completed; as such
income is only recognised when the work is substantially complete,
or the client software goes "live". At the end of 2018, there was
no contingent consideration payable (2017: GBP0.146m).
Cash
The Group finished the year with cash funds of GBP0.725m (2017:
GBP1.390m); and a convertible loan of GBP0.404m (2017: GBP0.391m
after taking into account the equity adjustment). This is after
capital expenditure of GBP1.536m, the final payment to the vendors
of ISV of GBP0.146m and dividend payments of GBP0.098m.
Jason Starr
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2018
2018 2017
restated
Note GBP'000 GBP'000
Revenue 5 8,692 9,732
Cost of sales (1,054) (1,247)
--------- ---------
Gross profit 7,638 8,485
Administrative expenses (8,052) (8,849)
Operating loss (414) (364)
----------------------------------- ----- --------- ---------
Adjusted operating profit
before acquisition related
and one-off items 4 55 459
Acquisition related and one-off
items 7 (469) (823)
--------- ---------
Operating (loss)/profit (414) (364)
----------------------------------- ----- --------- ---------
Financial income 1 1
Financial cost (38) (12)
Loss before tax (451) (375)
Tax income 8 191 432
(Loss)/profit for the year (260) 57
Other comprehensive income/(loss)
Items that will be reclassified
subsequently to profit and
loss:
Currency translation differences (30) (24)
Total comprehensive (loss)/income
for the year (290) 33
========= =========
Earnings per share
Basic 9 (1.32)p 0.29p
Diluted 9 (1.32)p 0.29p
See note 10 for details of restatement of 2017 numbers as a
result of a change in accounting policy.
Cost of sales have been reduced by GBP0.289m in 2017 and
administrative costs increased by the same amount due to the
reclassification of contractors and internal development costs.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2018
Share Share Merger Retained Convertible Share Foreign Total
capital premium reserve earnings loan option exchange
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January
2017 (as
previously
stated) 983 1,631 365 3,725 85 117 6,906
Prior year
adjustment
IFRS 15 (see
Note
26) (1,190) (1,190)
Balance at 1
January
2017
(restated) 983 1,631 365 2,535 - 85 117 5,716
Comprehensive
income
Profit for the
year (as
restated) - - - 57 - - - 57
Other
comprehensive
income
Exchange
differences
on translation
of overseas
operations - - - - - - (24) (24)
Total
comprehensive
income (as
restated) - - - 57 - - (24) 33
--------- ----------- --------- ---------- ------------ --------- --------- ---------
Transactions
with
owners
Share option
charge - - - 4 - 16 - 20
Issue of
convertible
loan note - - - - 14 - - 14
Dividends paid - - - (551) - - - (551)
--------- ----------- --------- ---------- ------------ --------- --------- ---------
Total
transactions
with owners - - - (547) 14 16 - (517)
Balance at 31
December
2017 (as
restated) 983 1,631 365 2,045 14 101 93 5,232
========= =========== ========= ========== ============ ========= ========= =========
Comprehensive
income
(Loss) for the
year ended 31
December
2018 - - - (260) - - - (260)
Other
comprehensive
income/(loss)
Exchange
differences
on translation
of overseas
operations - - - - - - (30) (30)
Total
comprehensive
income - - - (260) - - (30) (290)
--------- ----------- --------- ---------- ------------ --------- --------- ---------
Transactions
with
owners
Share option
charges - - - - - 5 - 5
Dividends paid - - - (98) - - (98)
--------- ----------- --------- ---------- ------------ --------- --------- ---------
Total
transactions
with owners - - - (98) - 5 - (93)
Balance at 31
December
2018 983 1,631 365 1,687 14 106 63 4,849
========= =========== ========= ========== ============ ========= ========= =========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2018
Group
2018 2017
Restated
ASSETS GBP'000 GBP'000
Non-current assets
Goodwill 3,415 3,415
Other intangible assets 4,754 4,881
Property, plant and equipment 113 164
Investments - -
--------- ---------
Total non-current assets 8,282 8,460
--------- ---------
Current assets
Inventories 3 3
Trade and other receivables 1,522 1,677
Cash and cash equivalents 725 1,390
--------- ---------
Total current assets 2,250 3,070
--------- ---------
Total assets 10,532 11,530
EQUITY AND LIABILITIES
Equity attributable to owners
of the parent
Share capital 983 983
Share premium 1,631 1,631
Merger reserve 365 365
Convertible loan reserve 14 14
Retained earnings 1,687 2,045
Share option reserve 106 101
Translation reserve 63 93
--------- ---------
Total equity 4,849 5,232
--------- ---------
Liabilities
Non-current liabilities
Trade and other payables 690 794
Borrowings 390 386
Deferred tax liability 489 508
Current liabilities
Trade and other payables 4,370 4,775
Borrowings 14 5
Current tax payable (270) (170)
--------- ---------
Total liabilities 5,683 6,298
Total liabilities and equity 10,532 11,530
========= =========
CONSOLIDATED CASH FLOW STATEMENT
AS AT 31 DECEMBER 2018
2017 2017
2018 2018 restated restated
Operating activities GBP'000 GBP'000 GBP'000 GBP'000
(Loss) before tax (451) (375)
Adjustment for
Financial income (1) (1)
Financial cost 38 12
Depreciation and amortisation 1,714 1,938
Share option expense 5 20
Foreign exchange adjustments arising
from operations 70 (12)
Operating cash flows before 1,375 1,582
movement in working capital:
(Increase) in receivables 171 573
Decrease in inventories - 2
(decrease) in payables (471) (273)
Taxation refunded/(paid) 65 (12)
-------- ----------
Net cash generated from operating
activities 1,140 1,872
Investing activities
Interest received 1 1
Purchases of property, plant and
equipment (55) (55)
Investment in development costs (1,481) (1,439)
Contingent and deferred consideration
paid (146) (219)
Net cash used in investing activities (1,681) (1,712)
Financing activities
Financial cost (33) (7)
Net proceeds from convertible
loan note - 400
Bank loan repayments made - (158)
Dividends paid (98) (551)
-------- ----------
Net cash used in financing activities (131) (316)
Net decrease in cash and cash equivalents (672) (156)
Cash and cash equivalents at 1,390 1,537
beginning of year
Effect of foreign exchange rate
changes 7 9
Cash and cash equivalents at end
of year 725 1,390
-------- ----------
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
1. Publication of non-statutory accounts
In accordance with section 435 of the Companies Act 2006, the
Directors advise that the financial information set out in this
announcement does not constitute the Group's statutory financial
statements for the year ended 31 December 2018 or 2017, but is
derived from these financial statements. The financial statements
for the year ended 31 December 2017 have been audited and filed
with the Registrar of Companies. The financial statements for the
year ended 31 December 2018 have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union. The financial statements for the year ended 31
December 2018 have been audited and will be filed with the
Registrar of Companies following the Company's Annual General
Meeting. The Independent Auditors Report on the Group's statutory
financial statements for the years ended 31 December 2018 and 2017
were unqualified and did not draw attention to any matters by way
of emphasis and did not contain statements under Section 498(2) or
(3) of the Companies Act 2006.
2. Basis of preparation
The preliminary announcement is extracted from the consolidated
financial statements of the Group. The financial statements of the
subsidiaries are prepared for the same reporting date as the parent
company. Consistent accounting policies are applied for like
transactions and events in similar circumstances.
All intra-group balances, transactions, income and expenses and
profits and losses resulting from intra-group transactions that are
recognised in assets or liabilities are eliminated in full.
3. Accounting policies and changes thereto
This preliminary announcement has been prepared in accordance
with the accounting policies adopted in the last annual financial
statements for the year to 31 December 2018.
IFRS 9 and IFRS 15 are effective for the first time for the
financial year beginning on or after 1 January 2018. Details of the
impact of IFRS 15 are seen in note 10. The impact of moving to the
expected credit loss model on receivables under IFRS9 required no
adjustment to 1 Jan 2017 or 2018 balances.
The following standards have been issued by the IASB and have
been adopted by the EU but not adopted early by the Group:
Standard Key requirements Effective date as adopted
by the EU
IFRS 16 Leases 01-Jan-19
IFRS 16 requires almost all leases to be recorded in the
statement of financial position. This requires recognition of a
right-of-use asset and lease liability. The lease liability is
measured as the present value of the future lease payments,
discounted at the interest rate implicit in the lease if
determinable, or otherwise at the lessee's incremental borrowing
rate. The asset is measured as equivalent to the lease liability,
adjusted for other costs including initial direct costs or
obligations under the lease such as restoration costs. The asset is
subsequently depreciated on a straight line basis to the expected
maturity date of the lease. The liability is increased by interest
and reduced by the lease payments made.
The Group expects to apply the modified retrospective approach
in adopting IFRS 16. This recognises the right-of-use asset at the
date of initial application (1 January 2019). The lease liability
is measured based on remaining payments. There is no effect on
prior year figures and no need to re-state comparatives.
The Group has undertaken a review of its lease arrangements and
concluded that the most significant leases the Group has are its
offices. Following the contracted closure of the Group's London
offices, it is expected that the impact of this standard for the
year ending 31 December 2019 will be reduced.
These calculations assume no changes to the contracted leases
anticipated in the reporting period to end 31 December 2019,
although it is possible additional leases will be entered into or
existing lease contracts amended during the forthcoming period.
Under the existing standard (IAS 17) GBP130,000 would be
expected as an expense in 2019. The adjustment to 'Current
liabilities - Trade and other receivables' arises on the reversal
of an accrual in respect of rent-free periods and other cash timing
differences that would be made under that standard.
4. Reconciliation of adjusted operating profits to consolidated
statement of comprehensive income
Note Adjusted Acquisition 2018 Adjusted Acquisition 2017
operating related operating related restated
profits and one-off profits items
items restated
2018 2018* 2017 2017*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 8,692 - 8,692 9,732 - 9,732
Cost of sales (1,054) - (1,054) (1,247) - (1,247)
----------- ------------- --------- ----------- ------------ ----------
Gross profit 7,638 - 7,638 8,485 - 8,485
Administrative
expenses (7,583) (469) (8,052) (8,026) (823) (8,849)
Operating profit/(loss) 55 (469) (414) 459 (823) (364)
Financial income 1 - 1 1 - 1
Financial cost (38) - (38) (7) (5) (12)
Profit/(loss)
before tax 18 (469) (451) 453 (828) (375)
Tax income 102 89 191 281 151 432
Profit/(loss)
for the year 120 (380) (260) 734 (677) 57
Other comprehensive
loss net of tax:
Currency translation
differences (30) - (30) (24) - (24)
Total comprehensive
income/(loss)
for the year net
of tax 90 (380) (290) 710 (677) 33
=========== ============= ========= =========== ============ ==========
Earnings per share
Basic 9 0.61p (1.32)p 3.73p 0.29p
Diluted 9 0.61p (1.32)p 3.73p 0.29p
* See note 7
5. Segment reporting
The Board principally monitors the Group's operations in terms
of results of the three divisions, Dillistone Systems, Voyager
Software and GatedTalent. Segment results reflect management
charges made or received.
Divisional segments
For the year ended 31 December
2018
Dillistone Voyager GatedTalent Central Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment revenue 4,195 4,429 68 - 8,692
----------- -------- ------------ -------- --------
Segment EBITDA 723 1,003 (485) 60 1,301
Depreciation and amortisation
expense (644) (475) (127) (1,246)
-
----------- -------- ------------ -------- --------
Segment result 79 528 (612) 60 55
Acquisition related amortisation - - - (469) (469)
Operating profit/(loss) 79 528 (612) (409) (414)
Financial income - 1 - - 1
Loan interest - - - (38) (38)
Loss before tax (451)
Income tax income 191
--------
Loss for the year (260)
========
Additions of non-current
assets 567 536 434 - 1,537
Divisional segments
For the year ended 31 December
2017
Dillistone Voyager GatedTalent Central Total
restated restated restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment revenue 4,531 5,201 - - 9,732
----------- ---------- ------------ -------- ----------
Segment EBITDA 761 1,367 (439) (130) 1,559
Depreciation and amortisation
expense (589) (511) - (1,100)
-
----------- ---------- ------------ -------- ----------
Segment result 172 856 (439) (130) 459
Acquisition related
amortisation - - - (838) (838)
Acquisition related
income - - - 15 15
----------- ---------- ------------ -------- ----------
Operating profit/(loss) 172 856 (439) (953) (364)
Financial income 1 - 1
Loan interest - - (7) (7)
Acquisition related
interest expenses - - (5) (5)
Loss before tax (375)
Income tax income 432
----------
Profit for the year 57
==========
Additions of non-current
assets 608 502 396 - 1,506
Products and services
The following table provides an analysis of the Group's revenue
by products and services:
Revenue
2017
2018 restated
GBP'000 GBP'000
Recurring income 7,154 7,942
Non-recurring income 1,169 1,326
Third party revenues 369 464
8,692 9,732
========= ==========
In the analysis above 'Recurring income' represents all income
recognised over time, whereas 'Non-recurring income' and 'Third
party revenues' represent all income recognised at a point in
time.
Recurring income includes all support services, SaaS and hosting
income and revenue on perpetual licenses with mandatory support
contracts deferred under IFRS 15. Non-recurring income includes
sales of new licenses which do not require a support contract,
and income derived from installing licences including training,
installation and data translation. Third party revenues arise from
the sale of third party software.
It is not possible to allocate assets and additions between
recurring, non-recurring income and third party revenue. No
customer represented more than 10% of revenue of the Group in 2018
or 2017.
6. Geographical analysis
The following table provides an analysis of the Group's revenue
by geographic market. The Board does not review the business from a
geographical performance viewpoint and this analysis is provided
for information only.
Revenue
2017
2018 restated
GBP'000 GBP'000
UK 6,188 6,782
Europe 1,007 1,041
US 1,118 1,341
Australia 379 418
8,692 9,732
========= ==========
Non-current assets by geographical location
2017
2018 restated
GBP'000 GBP'000
UK 8,274 8,453
US 4 5
Australia 4 2
--------- ----------
8,282 8,460
========= ==========
7. Acquisition related and other one-off items
2018 2017
GBP'000 GBP'000
Included within administrative expenses:
Estimated change in fair value of
contingent consideration - (15)
Amortisation of acquisition intangibles 469 379
Acceleration of amortisation of acquisition
intangibles - 459
469 823
Included within financial cost:
Unwinding of discount on contingent
consideration - 5
469 828
========= =========
8. Tax income
2017
2018 restated
GBP'000 GBP'000
Current tax (165) (100)
Prior year adjustment - current
tax (7) (238)
--------- ----------
Total current tax (172) (338)
Deferred tax 64 58
Prior year adjustment - deferred
tax 6 (1)
Deferred tax re acquisition intangibles (89) (151)
--------- ----------
Total deferred tax (19) (94)
--------- ----------
Tax (income) for the year (191) (432)
========= ==========
Factors affecting the tax credit for
the year
Loss before tax (451) (375)
========= ==========
UK rate of taxation 19.00% 19.25%
Loss before tax multiplied by the UK
rate of taxation (86) (72)
Effects of:
Overseas tax rates (3) 1
Impact of deferred tax not provided 10 18
Enhanced R&D relief (148) (209)
Disallowed expenses 14 32
IFRS15 impact (25)
Rate differences re current tax
and deferred tax (7) (1)
Rate difference between CT rate
and rate of R&D repayment 55 38
Prior year adjustments (1) (239)
Tax (income) (191) (432)
========= ==========
Deferred tax liability provided in the financial statements is
as follows:
Group
2017
2018 Movement restated
GBP'000 GBP'000 GBP'000
Internally generated
intangible and fixed
assets 251 (90) 341
IFRS 15 - 160 (160)
Provisions - -
Acquisition intangibles 238 (89) 327
---------
489 (19) 508
========= ========= ==========
Group
2017 Movement 2016
Restated restated Restated
GBP'000 GBP'000 GBP'000
Internally generated
intangible and
fixed assets 341 26 315
IFRS 15 (160) 22 (182)
Provisions - 9 (9)
Acquisition intangibles 327 (151) 478
----------
508 (94) 602
========== ========== ==========
The UK corporation tax rate for the year is 19.00%. Deferred tax
is provided in relation to the UK at rates of between 17% to 19%
depending on when reversals are expected to occur. The tax credit
is impacted by the R&D tax credits available to Dillistone
Systems division, Voyager Software division and GatedTalent
division. It has also been assumed that where there are tax losses
arising as a result of R&D tax credits they will be surrendered
for a tax repayment at the HMRC stated rate of 14.5%. The Group has
gross tax losses of GBP154,000 (2017: GBP205,000) for which no
deferred tax asset has been recognised as the timing of their
utilisation is uncertain.
9. Earnings per share
2018 2018 2017 2017
Using adjusted Using adjusted restated
operating operating
profit profit
restated
Profit/(loss) attributable GBP120,000 GBP(260,000) GBP734,000 GBP57,000
to ordinary shareholders
(note 2)
Weighted average number
of shares 19,668,021 19,668,021 19,668,021 19,668,021
Basic earnings/(loss) per 0.61 pence (1.32) pence 3.73 pence 0.29 pence
share
=============== ============= =============== =============
Weighted average number
of shares after dilution 19,797,067 19,668,021 19,676,018 19,676,018
Fully diluted earnings/(loss) 0.61 pence (1.32) pence 3.73 pence 0.29 pence
per share
=============== ============= =============== ===========
Reconciliation of basic to diluted average number of shares:
2018 2017
Weighted average number of shares
(basic) 19,668,021 19,668,021
Effect of dilutive potential ordinary
shares - employee share plans 129,046 7,997
Weighted average number of shares
after dilution 19,797,067 19,676,018
=========== ===========
There are 919,848 (2017: 1,270,732) share options not included
in the above calculations, as they are underwater or have not yet
vested.
The impact of the convertible loan notes in the period is not
dilutive and therefore does not impact the calculation of the fully
diluted earnings per share.
10. IFRS 15 impact on 2017 and 2018 results
The material change to the Group's reported revenue following
adoption of IFRS 15 arose on the timing of recognising revenue on
perpetual licences sold with mandatory support contracts.
Previously, these licences were deemed separate from the support
contract, whereas under IFRS 15 they represent one performance
obligation. Revenue on such licence sales was thus recognised at a
point in time, on the customer's practical acceptance of the
software. Under IFRS 15, this revenue is recognised over time.
As the actual life of the support contract is unknown at
inception, an estimate of 5 years has been made following analysis
of the historic turnover rates of support contracts. If this period
was shorter, revenue would be recognised more quickly and vice
versa.
Revenue from previous periods is thus deferred and recognised
later. Adjustments are required to:
- Revenue in the period, being revenue released as deferred from
prior periods and current period revenue deferred;
- Retained earnings, being revenue deferred from prior periods and cumulative tax effects;
- Trade and other liabilities both current and non-current, being deferred revenue; and
- Deferred and current tax, arising on revenue already subject
to tax that will be recognised in future periods.
The results for 2018 fully incorporate these changes. As IFRS 15
has been adopted retrospectively, the reported results for 2017
must also be adjusted as if that standard applied in full to that
period.
The impact of adopting IFRS 15 therefore had the following
effect on the Group's primary financial statements:
Impact on the Consolidated Statement of Comprehensive income for
the year ended 31 December 2017
As reported Effect As reported
previously under IFRS 15
GBP'000 GBP'000 GBP'000
Revenue 9,582 150 9,732
Cost of sales (1,536) - (1,536)
------------ -------- ---------------
Gross profit 8,046 150 8,196
Administrative expenses (8,560) - (8,560)
------------ -------- ---------------
Result from operating activities (514) 150 (364)
Financial income 1 - 1
Financial cost (12) - (12)
------------ -------- ---------------
Loss before tax (525) 150 (375)
Tax income 454 (22) 432
------------ -------- ---------------
(Loss) /profit for the period (71) 128 57
------------ -------- ---------------
Impact on Consolidated statement of financial position as at 31
December 2017
As reported Effect As reported
previously under IFRS
15
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets 8,460 - 8,460
Current assets 3,070 - 3,070
------------- --------- -------------
Total assets 11,530 - 11,530
------------- --------- -------------
EQUITY AND LIABILITIES
Equity
Share capital 983 - 983
Share premium 1,631 - 1,631
Merger reserve 365 - 365
Convertible loan reserve 14 - 14
Retained earnings 3,107 (1,062) 2,045
Share option reserve 101 - 101
Translation reserve 93 - 93
------------- --------- -------------
Total equity 6,294 (1,062) 5,232
Liabilities
Non current liabilities
Trade and other payables 12 782 794
Borrowings 386 - 386
Deferred tax 668 (160) 508
Current liabilities
Trade and other payables 4,335 440 4,775
Borrowings 5 - 5
Current tax (receivable)/payable (170) - (170)
------------- --------- -------------
Total liabilities 5,236 1,062 6,298
Total liabilities and equity 11,530 - 11,530
------------- --------- -------------
Impact on Consolidated statement of cash flows for year ended 31
December 2017
As reported Effect As reported
previously under IFRS
15
GBP'000 GBP'000 GBP'000
Operating activities
Loss before taxation (525) 150 (375)
Operating cash flows before
movements in working capital 1,432 150 1,582
Decrease in receivables 573 - 573
Decrease in inventories 2 - 2
Decrease in payables (123) (150) (273)
Taxation Paid (12) - (12)
Net Cash generated by operating
activities 1,872 - 1,872
------------- --------- -------------
Impact on Consolidated Statement of Comprehensive Income for
year ended 31 December 2018.
.
Under previous Effect As reported
accounting of IFRS under IFRS
policy 15 15
GBP'000 GBP'000 GBP'000
Revenue 8,588 104 8,692
Cost of sales (1,054) - (1,054)
--------------- --------- -------------
Gross profit 7,534 104 7,638
Administrative expenses (8,052) - (8,052)
--------------- --------- -------------
Result from operating activities (518) 104 (414)
Financial income 1 - 1
Financial cost (38) - (38)
--------------- --------- -------------
Loss before tax (555) 104 (451)
Tax income 206 (15) 191
--------------- --------- -------------
(Loss) /profit for the period (349) 89 (260)
--------------- --------- -------------
Impact on Consolidated Statement of Financial Position for year
ended 31 December 2018
Under previous Effect As reported
accounting of IFRS under IFRS
policy 15 15
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets 8,282 - 8,282
Current assets 2,250 - 2,250
--------------- --------- -------------
Total assets 10,532 - 10,532
--------------- --------- -------------
EQUITY AND LIABILITIES
Equity
Share capital 983 - 983
Share premium 1,631 - 1,631
Merger reserve 365 - 365
Convertible loan reserve 14 - 14
Retained earnings 2,659 (972) 1,687
Share option reserve 106 - 106
Translation reserve 73 (10) 63
--------------- --------- -------------
Total equity 5,831 (982) 4,849
Liabilities
Non current liabilities
Trade and other payables 2 688 690
Borrowings 390 - 390
Deferred tax 518 (29) 489
Current liabilities
Trade and other payables 3,931 439 4,370
Borrowings 14 - 14
Current tax (receivable)/payable (154) (116) (270)
--------------- --------- -------------
Total liabilities 4,701 982 5,683
Total liabilities and equity 10,532 - 10,532
--------------- --------- -------------
Impact on Consolidated Statement of Cash flows for year ended 31
December 2018
Under previous Effect As reported
accounting of IFRS under IFRS
policy 15 15
GBP'000 GBP'000 GBP'000
Operating activities
Loss before taxation (555) 104 (451)
Operating cash flows before movements in
working capital 1,271 104 1,375
Decrease in receivables 171 - 171
Decrease in inventories - - -
Decrease in payables (367) (104) (471)
Taxation Paid 65 - 65
Net Cash generated by operating activities 1,140 - 1,140
--------------- --------- -------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SESEFUFUSELL
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