Dillistone Group PLC Trading & New Product Update (0875H)
June 05 2017 - 1:00AM
UK Regulatory
TIDMDSG
RNS Number : 0875H
Dillistone Group PLC
05 June 2017
Dillistone Group Plc
Trading and New Product Update
Dillistone Group Plc ("Dillistone", the "Company" or the
"Group"), the AIM quoted supplier of software for the international
recruitment industry through its Dillistone Systems and Voyager
Software divisions, is providing an update on trading and its new
product under development ("New Product") ahead of its Annual
General Meeting to be held on Wednesday 7 June.
This announcement contains inside information for the purposes
of Article 7 of Regulation 596/2014.
At the final results announcement for 2016 released in April,
the Board noted some softness in the UK recruitment market,
following the BREXIT vote. As we have moved further into the year,
we have seen some improvement in terms of the volume of new
business wins and are pleased to have taken a number of clients
from our direct competitors. However, a significant majority of our
new clients have been new or young businesses with relatively few
users purchasing on a subscription, as opposed to a licence model.
While these subscriptions may be valuable in the long term, they
have a much reduced impact on short term revenues and this has not
allowed us to catch up on the slow start to the year.
The Group has also been informally told that a contract with a
major client is likely to expire later this year or early next.
This contract, which is with a client using a legacy product, is
worth in the region of GBP600,000 per annum in contribution terms
to the Group.
Despite this, we are pleased that recurring revenues in both
divisions are at record levels providing good forward visibility
and largely underpinning the Group's administrative cost base. This
enables us to anticipate that revenue in the first six months of
the year will be broadly in line with the first six months of the
previous year.
The Group has announced its intention to develop an entirely New
Product. Development to date has been funded by internal resources
while the Company explored the feasibility of the New Product. The
New Product addresses a market need which, in the view of the
Board, is global in nature and has the potential to be very
significant for the Group. We believe that our New Product will be
unique in scope, its commercial model, and its method of
delivery.
Although the confidential nature of the product means that it
has not been possible to discuss it widely with the potential
market, those conversations that have taken place have been
positive. These have led to the Board receiving a non binding
letter of intent from an organisation which is globally recognised
in the market it serves and which plans in principal to adopt the
product on release. While other conversations are not as far
developed, the Board is confident that similar agreements will be
reached and, as such, the Board has now approved the project and
fundraising for completion and launch of the product is now being
explored.
We anticipate that development, marketing and other cash costs
associated with the New Product in the period to 31 December 2018
will be in the order of GBP2.4 million but excluding any revenue
generated in this period. Approximately GBP0.7m of these costs will
be capitalised. While significant investment in the New Product has
already been made, and will increase through the year, it is not
anticipated that meaningful revenues will be generated prior to
2018 and the New Product is not expected to be profitable before
2019. Thereafter we anticipate that it will be highly cash
generative.
The Group's cost base increased in 2016, in particular to
develop cloud based hosting services, and remains at the level
required to continue with our product development programme and to
pursue the New Product project.
The Group had a cash balance at 2 June 2017 of GBP1.3m. Medium
term prospects given the introduction of the General Data
Protection Regulation in 2018 and the New Product launch remain
positive. Despite the increased investment in the New Product, some
of which will impact the P&L in the current half, the Group
expects to make a small operating profit before acquisition related
items in the first half of the year.
The Board currently expects that the second half of the year
will deliver better results than the first half in terms of general
trading. However, the slow start to the year and the higher cost
base mean that the results for the full year are expected to be
significantly below market expectations. In view of the proposed
fund raising, the Board expects to reduce its dividend until the
benefits of its investment in the New Product flow through to the
Group's balance sheet.
Jason Starr, CEO of Dillistone Group, commented:
"We've seen improvement in the order book since the beginning of
the year and are confident that this will improve further in
H2.
"We are delighted by the early response to our New Product and
excited by its potential. The New Product is essentially a start up
being developed within the auspices of an established business. We
believe that it has the potential to transform the nature of our
business and to deliver significant shareholder value."
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)
Head of Corporate
Chris Fielding 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 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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