TIDMDSG
RNS Number : 5398U
Dillistone Group PLC
30 July 2020
Dillistone Group Plc
("Dillistone", the "Company" or the "Group")
Final Results
Dillistone Group Plc ("Dillistone", the "Company" or the
"Group"), the AIM quoted supplier of software for the international
recruitment industry, is pleased to announce its audited final
results for the 12 months ended 31 December 2019.
Highlights:
-- Successfully completed the group restructuring to time and at
the lower end of forecast cost. New operating structure working
well with reduced cost base
-- Reorganisation financed through a GBP0.5m bank loan
-- Recurring revenues(1) represent 82% (2018: 82%) of Group revenue
-- Adjusted operating loss(2) of GBP0.207m (2018: profit GBP0.055m) before acquisition related, reorganisation and other costs
-- Loss for the year of GBP0.842m (2018: loss GBP0.260m)
reflecting the costs associated with reorganising the business
-- Cash at 28 July 2020 was GBP2.1m, reflecting post period CBIL loan of GBP1.5m.
Current Trading & Outlook:
-- The Group traded ahead of internal expectations during the
early months of 2020, and speedy measures by management helped to
mitigate some of the impact of Covid-19
-- While revenue from existing clients has fallen, new business
performance compared to the same period in 2019 has been
encouraging, winning more new contracts for a higher combined
value.
Covid-19:
-- The Company has taken appropriate action to maintain a strong
and stable financial position throughout this current period and
for the future - including accessing Government schemes and a
temporary company-wide pay cut
-- On 3 June 2020, secured a GBP1.5m loan under the UK
Government's Coronavirus Business Interruption Loan scheme ("CBIL
Loan"), repayable over 6 years at an interest rate of 3.99% over
base. Interest is waived in the first twelve months and monthly
repayments commence in July 2021. The CBIL Loan can be repaid early
without penalty.
Commenting on the results and prospects, Giles Fearnley,
Non-Executive Chairman, said:
"The changes made to the business in 2019 have improved our
ability to meet the needs of our global clients swiftly and
efficiently, while significantly reducing our cost base, and placed
the business in a situation where we had fully anticipated a return
to profitability in H1 of 2020.
"After a strong start to the year, the impact of the Covid-19
pandemic has been significant but swift action to manage the cost
base during this period, coupled with working to support our
clients and improved new business performance, is enabling the
Company to effectively work through the challenges.
"With a healthy cash balance and having protected and continued
to invest in our product development, the Board is optimistic that
the business will emerge strongly as the economy recovers."
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 and
reorganisation and other costs. See note 4.
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 28
August 2020 for approval at the Annual General Meeting to be held
on 23 September 2020.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Enquiries:
Dillistone Group
Plc
Giles Fearnley Chairman Via Walbrook PR
Jason Starr Chief Executive
Julie Pomeroy Finance Director
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. Dillistone operates through the Ikiru People brand
(www.IkiruPeople.com).
The Group develops, markets and supports the 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. The Group employs around 100
people globally with offices in Basingstoke, Southampton,
Frankfurt, New Jersey and Sydney.
ISV Skills Testing: https://www.isv.online
Recruitment Software:
https://www.voyagersoftware.com/recruitment-software-blog/best-recruitment-software-agencies/
Software for Temps:
https://www.voyagersoftware.com/temporary-recruitment-agency-software/
GatedTalent: https://www.Talentis.global
CHAIRMAN'S STATEMENT
2019 was a year of significant change. This started in February
when the Group announced a fundamental reorganisation of the
business. This involved merging the two UK offices into a single,
expanded location in Basingstoke, together with also relocating and
expanding our Eastleigh development facility. The Group has
streamlined its corporate structures and operations, resulting in
the UK businesses being combined into one trading entity and
renamed Ikiru People Limited. A similar reorganisation has occurred
in Australia. These changes came into effect on 31 December 2019,
were delivered on time and within budget, and are delivering the
planned efficiencies.
The restructuring was an important step in our plan to
streamline our operating procedures while maintaining our excellent
reputation for client service in order that the Group could deliver
significantly improved performance starting immediately from
2020.
2020 started well for the Group with our early months delivering
results ahead of internal expectations. However, the impact of the
Covid-19 pandemic on our target market - the recruitment sector -
is clear. We've seen many of our clients shrink, with some clients
closing. We have additionally supported many clients through
agreeing discounted periods and deferred terms.
The Board has reacted swiftly, taking advantage of various
government schemes, including furloughing, and staff unanimously
supporting a temporary pay-cut, including all executive and
non-executive directors. In June 2020, the Company secured a loan
of GBP1.5m under the UK Government's Business Interruption Loan
scheme. This enables us to continue to deliver and develop products
with confidence.
The reorganisation in 2019 resulted in some staff working from
home and this led to investment in infrastructure to support this.
This therefore enabled the Group immediately to move to home
working for the majority of staff as a result of the pandemic and
still operate efficiently and effectively.
Looking back at 2019, overall, Group revenue fell 8% to
GBP8.027m, of which recurring revenue fell 8% to GBP6.593m of which
GBP0.130m related to the loss of a major client as previously
announced.
There was an adjusted operating loss in 2019 of GBP0.207m (2018:
Profit GBP0.055m), mainly due to the fall in revenue and with the
full benefits of the reorganisation not expecting to be seen until
2020. The operating loss including reorganisation and acquisition
related items was GBP1.090m (2018: loss GBP0.414m).
Dividends
The Group is not recommending a final dividend in respect of the
year to 31 December 2019 (2018: nil).
Staff
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 2019 and for the professional way they have
all risen to the challenges of the pandemic, continuing to deliver
for our clients. They ensured that we continued to deliver
excellent service throughout 2019's major restructuring and it is
through their efforts, commitment and determination that we
continue to be a leading technology provider.
Corporate governance
It is the Board's duty to ensure that the Group is managed for
long-term benefit of all stakeholders.
We have made a number of changes to our Group Board over the
last 12 months. I would like to sincerely thank my predecessor, Dr
Mike Love, for his outstanding leadership of the Board over last 9
years. I am very grateful to him for staying on in a non-executive
role to allow for a smooth transition.
I also thank Rory Howard and Alistair Milne who both stepped
down from the Board as the restructuring completed. They have both
contributed extensively to the business over very many years. I am
delighted to welcome Paul Mather and Simon Warburton to the Board.
Both Paul and Simon joined the Group in 2011 on the acquisition of
Voyager and have been leading members of the Executive Team.
Outlook
The Group was trading ahead of internal targets for 2020 prior
to the impact of Covid-19 and swift action by management has helped
mitigate some of the impact of the pandemic.
The majority of our clients are in the recruitment sector and
this has been significantly affected by the recession. Our client
base has reduced in size with many of our clients having fewer
licences than previously. We believe this would be true for
virtually any supplier in our sector.
However, we are pleased to report that - while revenue from
existing clients has fallen - the business has improved its new
business performance on the same period in 2019, winning more new
contracts for a higher combined value, despite our decision to
withdraw our "Evolve" product from the market. While this will not
make up for the loss of revenue from existing clients, it
demonstrates our ability to compete successfully and gives us
confidence of a return to growth when markets return to a semblance
of normality.
However, the most likely outcome for H1 will be a small and much
reduced loss compared with the prior year. It remains too early to
quantify the impact of the pandemic over the full year, but the
Board currently expects to see an improvement on our 2019
result.
With a healthy cash balance and having protected, and now,
increasing investment in our product development, the Board is
optimistic that the business will emerge strongly as the economy
recovers.
Giles Fearnley
Non-Executive Chairman
CEO's Review
Dillistone Group Plc supplies products and services to
facilitate recruitment. We cover everything from retained executive
search technology through to tools to facilitate the hiring of
temporary staff, pay and bill, from pre-employment skills testing
through to a B2C platform that allows executives to share
information with executive search firms.
Strategy and objectives
In light of Covid-19, the Board has taken the view that until
any material business risk from the pandemic is behind us, our
objectives would be revised so that we can successfully navigate
the crisis. We will strive to ensure that we exit the current
crisis in a strong position with products that meet the needs of
clients. Consequently, our focus will be to:
-- Ensure our staff and their families stay safe, engaged and effective;
-- Take all reasonable steps we can to help our clients through
a challenging period for recruitment;
-- Protect and prioritise our product and development efforts
around solutions that reflect the needs of a post Covid world;
and
-- Take appropriate action to maintain a strong and stable
financial position, throughout this period and into the future.
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 has undertaken a major restructuring
exercise to address the longer term performance of the
business:
FY 2018 FY 2019
GBP000 GBP000 measure used by management Met /Not met
Total revenues 8,692 8,027 year on year growth not met
Recurring revenues 7,154 6,593 year on year growth not met
Non recurring revenues 1,169 1,160 year on year growth not met
Adjusted profit/(loss)
before tax 18 (298) year on year growth not met
sufficient cash resources
Cash 725 402 maintained met
-------------------------- -------- -------- --------------------------- -------------
Adjusted profit before tax is statutory profit before, related
intangible amortisation, reorganisation and other costs. See note 4
and note 7.
Restructuring
During the year, the Group merged two UK offices into a single,
expanded location in Basingstoke. We also relocated and expanded
our Eastleigh development facility. The Group also streamlined its
corporate structures and operations to achieve efficiencies across
the business. This resulted in the five UK businesses being
combined into one trading entity subsequently renamed Ikiru People
Limited. A similar reorganisation has occurred in Australia
combining our two companies into one and renamed as Ikiru People
Pty Limited. Our sole business in the US was also renamed, Ikiru
People Inc.
The restructuring and reorganisation has allowed us to integrate
teams across the business and to leverage knowledge across the
Group to accelerate performance and improve the quality of our
services to our clients.
As part of the reorganisation, a review was made of the Company
product strategy. As a result of this review, one of the Group's
six core products, Evolve, was withdrawn from the market at the end
of 2019. Going forward, product development investment has been
refocussed with a view to prioritising development which will lead
to significant long term growth, rather than short term product
enhancements. This has led the Company to increase investment in
areas such as user experience and quality assurance.
At the time that we announced our restructuring plans, we
anticipated that the costs of the restructuring would be in the
region of GBP500,000 to GBP900,000. We are pleased to report that
costs were at the lower end of this estimate at GBP578,000. These
costs were met without recourse to equity funding from
shareholders.
Our business model
The business was previously split into three Divisions.
Dillistone Systems and Voyager Software and GatedTalent.
The reorganisation has brought all of these businesses together
into effectively one division with a focus more on the products we
sell than on divisional structures.
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 service fees from executives.
The business operates out of Europe, the US and Australia but
services clients globally. As well as supplying and supporting our
software we also host the software for a proportion of our clients.
This is done through Microsoft Azure and AWS data centres in
Europe, the Americas, Singapore and Australia.
Group review of the business
2019 saw recurring revenues fall 8% to GBP6,593m (2018:
GBP7.154m) of which GBP0.130m related to the previously announced
loss of a major client and with attrition exceeding new contract
wins in the year. Non-recurring revenues were in line with the
previous year at GBP1.160m (2018: GBP1.169m). As a result, overall
revenues decreased by 8% to GBP8.027m (2018: GBP8.692m) with
recurring revenues representing 82% of Group revenues (2018: 82%).
Cost of sales reduced 19% to GBP0.849m (2018: GBP1.054m).
Adjusted EBITDA(1) was down 1% to GBP1.282m (2018: GBP1.301m).
There was an adjusted operating loss of GBP0.207m (2018: profit
GBP0.055m) and there was a pre-tax loss before acquisition related
items and reorganisation and other adjustments of GBP(0.298)m
(2018: profit GBP0.018m). The operating loss for the year increased
to GBP1.090m (2018: loss GBP0.414m) with reorganisation and other
costs totalling GBP0.578m (2018: GBPnil) and acquisition related
amortisation of GBP0.305m (2018: GBP0.469m). The loss for the year
was GBP0.842m (2018: loss GBP0.260m). Cash at the year end was
GBP0.402m (2018: GBP0.725m).
(1) Adjusted EBITDA is adjusted operating profit with
depreciation and amortisation added back. See note 5.
Divisional Reviews as structured through 2019
Dillistone Systems
The Dillistone Systems division was 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.
The Division accounts for 49% (2018: 48%) of the Group's revenue
and it saw revenue fall 7% to GBP3.895m (2018: GBP4.195m).
The executive search market remains a key market for our
business and is one we continue to invest in significantly.
Earnings before interest, tax, depreciation and amortisation
('EBITDA') improved to GBP1.021m (2018: GBP0.723m) as costs
improved despite reduced sales. The total amortisation and
depreciation charge was GBP0.747m (2018: GBP0.644m). Operating
profit for 2019 was GBP0.094m (2018: GBP0.079m) after
reorganisation and other costs of GBP0.180m.
Voyager Software
Voyager Software was 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 2019, the Voyager Software division accounted for 47% (2018:
51%) of Group revenues. The Division's revenues decreased by 14% to
GBP3.795m (2018: GBP4.429m) GBP0.130m of this due to the previously
announced loss of a major client. EBITDA decreased to GBP0.691m
(2018: GBP1.003m). Amortisation and depreciation increased to
GBP0.553m (2018: GBP0.475m). Divisional operating loss was
GBP(0.34)m after reorganisation and other costs of GBP0.172m (2018:
GBP0.528m).
2019 saw some major developments in the Division including:
-- The addition of IR35 support for both public and private
sector workers in our Infinity and Mid-Office pay and bill
solution
-- Significantly improved support for the placement of shift based temps
-- Release of a full suite of Power BI based business
intelligence function to clients on our SaaS platform
-- Enhancements to our ISV.Online suite
-- Withdrawal of the Evolve product from the market,
successfully switching the majority of clients onto our Infinity
application
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.
Revenue is being generated from executive recruiters through
subscriptions to the platform and through Member Services
generating a premium B2C revenue stream for the Division.
The Division generated revenue of GBP0.337m (2018: GBP0.068m)
and made an operating loss before reorganisation and other costs of
GBP0.484m (2018 loss: 0.612m) after depreciation and amortisation
charges of GBP0.189m (2018: GBP0.127m). The reorganisation and
other costs credit of GBP1.427m mainly related to the write off of
intercompany funding from Dillistone Group which was not expected
to be recoverable in the foreseeable future. In 2020, although we
no longer report profits on a divisional level, it is the view of
the Board that the GatedTalent product is now consistently
generating cash.
Following the reorganisation, the divisional structure has been
dismantled and in 2020 the business will not report on a divisional
basis.
Covid-19
The Impact of Covid-19 pandemic has had a major impact on the
world economy and in our target market - recruitment. This has
impacted our business as we have seen many of our clients shrink,
with other clients closing. This directly impacts our revenue.
We reacted swiftly to minimise the impact of Covid-19, taking
the following actions:
-- Approximately 20% of our UK staff have been furloughed under the government scheme
-- Other staff and Directors have agreed to a temporary pay cut
-- The vast majority of our staff switched to home working
-- Our clients were offered support packages to help them
survive the period and, hopefully, remain as customers
-- Used government support in other jurisdictions where appropriate
-- Agreed the postponement of bank loan repayments on our GBP500,000 loan for 6 months
-- Obtained in June 2020 a GBP1.5m loan under the Government's Business Interruption loan scheme
Uncertainty around the scale, timing and impact of the
coronavirus pandemic means it is difficult to give meaningful
external guidance for forecasts in the year ahead. We have analysed
a range of outcomes for the current year for different sales
scenarios. Further details are contained in Note 2 on Basis of
Preparation. We have performed stress testing on our cashflows, to
determine what is the maximum strain that the business could bear
over the next 12 months in respect of the potential impacts of
Covid-19. We are pleased to note that, with the funding support in
place, our Balance Sheet is now strong, with significant cash
available to us at very competitive rates.
Financial Review
Total revenues decreased by 8% to GBP8.027m (2018: GBP8.692m)
with recurring revenues decreasing by 8% to GBP6.593m (2018:
GBP7.154m) while non-recurring revenues decreased by 1% to at
GBP1.160m (2018: GBP1.169m). Third party resell revenue amounted to
GBP0.274m in the period (2018: GBP0.369m).
Cost of sales decreased to GBP0.849m (2018: GBP1.054m).
Administrative costs, excluding acquisition related items,
reorganisation and other costs, depreciation and amortisation, fell
7% to GBP5.896m (2018: GBP6.337m) as measures were taken to reduce
the cost base. Depreciation and amortisation (excluding acquisition
related amortisation) increased to GBP1.489m (2018: GBP1.246m).
Acquisition related and reorganisations and other costs totalled
GBP0.883m (2018: GBP0. 469m) and were in respect of:
-- the amortisation of intangibles arising on the Voyager, FCP
and ISV acquisitions GBP0.305m (2018: GBP0.469m).
-- reorganisation and other costs totalled GBP0.578m (2018: GBPnil)
Recurring revenues covered 89% of administrative expenses before
acquisition related and reorganisation and other costs (2018: 94%).
Excluding depreciation and amortisation of our own internal
development, the administrative costs (before acquisition related
and reorganisation and other costs) are covered 112% (2018: 112%)
by recurring revenues.
The Group benefitted from an income tax credit in 2019 of
GBP0.339m (2018: credit GBP0.191m). The 2019 credit reflects the
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 reflects a prior year adjustment of a
credit of GBP0.140m as the tax computations in respect of prior
years were finalised and agreed. The acquisition related items tax
credit of GBP0.058m (2018: GBP0.089m) 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
reorganisation and other costs amounted to a loss of GBP0.030m
(2018: profit GBP0.120m). The 2019 adjusted profits benefitted from
tax income of GBP0.268m (2018: tax income of GBP0.102m). The
statutory loss for the year after acquisition related items and
reorganisation and other costs was GBP0.842m (2018: loss
GBP0.260m). Basic loss per share (EPS) fell to (4.28)p (2018:
(1.32)p). Fully diluted EPS fell to (4.28)p (2018: (1.32)p).
Adjusted basic EPS fell to (0.15)p (2018: 0.61p).
Dillistone Group Plc company results show a loss of GBP1.843m
(2018: profit GBP1.338m) after a write-off of the intercompany loan
with GatedTalent of GBP1.450m which was necessary to facilitate the
reorganisation of the Group.
Capital expenditure
The Group invested GBP1.100m in property, plant and equipment
and product development during the year (2018: GBP1.536m). This
expenditure included GBP1.067m (2018: GBP1.446m) spent on
capitalised development related costs.
Trade and other payables
As with previous years, the trade and other payables includes
deferred income of GBP2.873m (2018: GBP3.575m), i.e. income which
has been billed in advance but is not recognised as income at that
time. This principally relates to support, SaaS, cloud hosting
renewals and other subscriptions, which are billed in 2019 but are
in respect of services to be delivered in 2020. 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".
The Group implemented IFRS 16 during the year. The result is to
recognise right to use assets on the balance sheet of GBP0.754m as
at the year end and the corresponding lease liabilities which
totalled GBP0.823m. See Note 9 for more detailed analysis.
Cash and debt
The Group finished the year with cash funds of GBP0.402m (2018:
GBP0.725m) made up of positive (GBP0.690m) and negative (GBP0.288m)
current account balances which can be netted off under the banking
facility.
The Group obtained a loan of GBP0.5m in June 2019 of which
GBP0.126m was repaid in the year leaving GBP0.374m (2018: GBPnil)
repayable at the year end. It also had a convertible loan of
GBP0.412m (2018: GBP0.404m). It was agreed in the year that the
convertible loan notes would not be repaid until the bank loan for
repaid.
Jason Starr
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2019
2019 2018
Note GBP'000 GBP'000
Revenue 5 8,027 8,692
Cost of sales (849) (1,054)
--------- ---------
Gross profit 7,178 7,638
Administrative expenses (8,268) (8,052)
Operating loss (1,090) (414)
------------------------------------- ----- --------- ---------
Adjusted operating (loss)/
profit before acquisition
related, reorganisation and
other items 4 (207) 55
Acquisition related, reorganisation
and other items 7 (883) (469)
--------- ---------
Operating (loss) (1,090) (414)
------------------------------------- ----- --------- ---------
Financial income - 1
Financial cost (91) (38)
Loss before tax (1,181) (451)
Tax income 339 191
(Loss) for the year (842) (260)
Other comprehensive income/(loss)
Items that will be reclassified
subsequently to profit and
loss:
Currency translation differences (16) (30)
Total comprehensive (loss)
for the year (858) (290)
========= =========
Earnings per share
Basic 8 (4.28)p (1.32)p
Diluted 8 (4.28)p (1.32)p
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2019
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
2018 983 1,631 365 2045 14 101 93 5,232
Comprehensive
income
Loss for
the year - - - (260) - - - (260)
Other
comprehensive
income
Exchange
differences
on
translation
of overseas
operations - - - - - - (30) (30)
Total
comprehensive
income - - - (260) - - (30) (290)
--------- --------- --------- --------- ------------ --------- --------- ---------
Transactions
with owners
Share option
charge - - - - - 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
========= ========= ========= ========= ============ ========= ========= =========
Comprehensive
income
Loss for
the year
ended 31
December
2019 - - - (842) - - - (842)
Other
comprehensive
income/(loss)
Exchange
differences
on
translation
of overseas
operations - - - - - - (16) (16)
Total
comprehensive
income - - - (842) - - (16) (858)
--------- --------- --------- --------- ------------ --------- --------- ---------
Transactions
with owners
Share option
charges - - - 26 - -12 - 14
- - - - - - -
--------- --------- --------- --------- ------------ --------- --------- ---------
Total
transactions
with owners - - - 26 - 12 - 14
Balance
at 31
December
2019 983 1,631 365 871 14 94 47 4,005
========= ========= ========= ========= ============ ========= ========= =========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
Group
Notes 2019 2018
ASSETS GBP'000 GBP'000
Non-current assets
Goodwill 3,415 3,415
Other intangible assets 4,234 4,754
Property, plant and equipment 54 113
Right to use assets 9 754
Investments - -
--------- ---------
Total non-current assets 8,457 8,282
--------- ---------
Current assets
Inventories - 3
Trade and other receivables 1,222 1,522
Current tax receivable 293 270
Cash and cash equivalents 690 725
--------- ---------
Total current assets 2,205 2,520
--------- ---------
Total assets 10,662 10,802
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 871 1,687
Share option reserve 94 106
Translation reserve 47 63
--------- ---------
Total equity 4,005 4,849
--------- ---------
Liabilities
Non-current liabilities
Trade and other payables 443 690
Lease liabilities 9 741 -
Borrowings 523 390
Deferred tax liability 340 489
--------- ---------
Total non-current liabilities 2,047 1,569
Current liabilities
Trade and other payables 3,977 4,370
Lease liabilities 9 82 -
Borrowings 551 14
Total current liabilities 4,610 4,384
Total liabilities 6,657 5,953
Total liabilities and equity 10,662 10,802
========= =========
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2019
For the For the For the
For the year year year
year ended ended ended ended
31 December 31 December 31 December 31 December
2019 2019 2018 2018
Operating activities GBP'000 GBP'000 GBP'000 GBP'000
(Loss) before tax (1,181) (451)
Adjustment for
Financial income - (1)
Financial cost 91 38
Depreciation and amortisation 1,794 1,714
Share option expense 14 5
Foreign exchange adjustments
arising from operations (33) 70
Operating cash flows before 685 1,375
movement in working capital:
Decrease in receivables 282 171
Decrease in inventories 3 -
Decrease in payables (603) (471)
Taxation refunded 167 65
------------- -------------
Net cash generated from operating
activities 534 1,140
Investing activities
Interest received - 1
Purchases of property, plant
and
equipment (29) (55)
Sale of Fixed assets 2
Investment in development costs (1,070) (1,481)
Contingent and deferred consideration
paid - (146)
Net cash used in investing activities (1,097) (1,681)
Financing activities
Interest paid (83) (33)
Proceeds from bank loan 500 -
Bank loan repayments made (126) -
Lease payments made (49) -
Utilisation of banking facility 288 -
------------- -------------
Dividends paid - (98)
------------- -------------
Net cash generated from/(used
in) financing activities 530 (131)
Net decrease in cash and cash equivalents (33) (156)
Cash and cash equivalents at 725 1,390
beginning of year
Effect of foreign exchange rate
changes (2) 7
Cash and cash equivalents at
end of year(1) 690 725
------------- -------------
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2019
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 2019 or 2018, but is
derived from these financial statements. The financial statements
for the year ended 31 December 2018 have been audited and filed
with the Registrar of Companies. The financial statements for the
year ended 31 December 2019 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 2019 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 2019 and 2018
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.
The uncertainty as to the future impact on the Group of the
recent Covid-19 outbreak has been considered as part of the Group's
adoption of the going concern basis. The Group has seen many of its
clients shrink and with some clients closing. It has additionally
supported many clients through agreeing discounted periods and
deferred terms. Accordingly, the Group will see a reduction in
revenue in 2020. However, the Group has acted quickly, taking
advantage of various government schemes, including furloughing, and
staff unanimously supporting a temporary pay-cut, including all
executive and non-executive directors. The Group also agreed a 6
month payment holiday on its existing bank loan. The Company has
also secured a loan of GBP1.5m under the UK Government's Business
Interruption Loan (CBIL) scheme.
The Board has considered various downside scenarios on the
Group's results as a result of the Covid-19 outbreak. In preparing
this analysis the following assumptions were made for the base
case: a reduction in recurring revenue and non recurring revenue in
2020 with some recovery in the second half of 2020 but with revenue
not returning to full pre Covid-19 levels in 2020 or 2021. This
base case took GBP0.5m off 2020 revenue. A further scenario was
modelled ("stress test scenario") that took a further GBP0.5m off
revenue with a deeper long term impact on the business.
If revenue were to fall in line with the stress test model, the
Company would take further remedial action to counter the reduction
in profit and cash through a cost cutting exercise that would
include staff redundancies and general cost control measures. On
this basis, the Group's cash reserves would be reduced to GBPnil in
May 2021 though it would still have access to its bank overdraft of
GBP0.2m.
Based on current trading, the stress test scenario is considered
unlikely. However, it is difficult to predict the overall impact
and outcome of Covid-19 at this stage, particularly if there was a
second wave towards the end of 2020. Nevertheless, after making
enquiries, and considering the uncertainties described above and
after receiving a CBIL loan of GBP1.5m, the directors have a
reasonable expectation that the company has adequate resources to
continue in operational existence for the foreseeable future. For
these reasons, they continue to adopt the going concern basis in
preparing the annual report and accounts.
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 16 are effective for the first time for the financial year
beginning on or after 1 January 2019. IFRS 16 specifies how the
Group will recognise, measure, present and disclose leases. The
standard provides a single lessee accounting model, requiring
lessees to recognise assets and liabilities for all leases unless
the lease term is 12 months or less or the underlying asset has a
low value. From 1 January 2019 the Group recognised an asset
reflecting the right of use leased asset for the Company's two
property leases and an equipment lease, and a lease liability
reflecting the obligation to make lease payments. Both the asset
and the liability have been recognised on the balance sheet where
previously they were off balance sheet. There was no impact on cash
flow but there was an impact on the Income Statement as the
operating lease payment included within administrative expenses was
replaced with a depreciation charge on the leased asset (included
in administrative expenses) and an interest expense on the lease
liability (included in financial cost). EBITDA also increased as
both interest cost and depreciation charge are excluded from the
calculation. Note 9 outlines the effect of IFRS 16 on the financial
statements.
4. Reconciliation of adjusted profits to consolidated statement of comprehensive income
Note Adjusted Acquisition 2019 Adjusted Acquisition 2018
profits related, profits related
reorganisation reorganisation
and other and other
costs costs
2019 2019* 2018 2018*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 8,027 - 8,027 8,692 - 8,692
Cost of sales (849) - (849) (1,054) - (1,054)
--------- ---------------- --------- --------- ---------------- ---------
Gross profit 7,178 - 7,178 7,638 - 7,638
Administrative
expenses (7,385) (883) (8,268) (7,583) (469) (8,052)
Operating profit/(loss) (207) (883) (1,090) 55 (469) (414)
Financial income - - - 1 - 1
Financial cost (91) - (91) (38) - (38)
Profit/(loss)
before tax (298) (883) (1,181) 18 (469) (451)
Tax income 268 71 339 102 89 191
Profit/(loss)
for the year (30) (812) (842) 120 (380) (260)
Other comprehensive
loss net of tax:
Currency translation
differences (16) - (16) (30) - (30)
Total comprehensive
income/(loss)
for the year net
of tax (46) (812) (858) 90 (380) (290)
========= ================ ========= ========= ================ =========
Earnings per share
Basic 8 (0.15)p - (4.28)p 0.61p - (1.32)p
Diluted 8 (0.15)p - (4.28)p 0.61p - (1.32)p
* See note 7
5. Segment reporting
During the Year, the Board principally monitored 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
2019
Dillistone Voyager GatedTalent Central Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment revenue 3,895 3,795 337 - 8,027
----------- -------- ------------ -------- --------
Segment EBITDA pre exceptional 1,021 691 (295) (135) 1,282
Depreciation and amortisation
expense (747) (553) (189) (1,489)
----------- -------- ------------ -------- --------
Segment result before
reorganisation and other
costs 274 138 (484) (135) (207)
Reorganisation and other
costs (180) (172) 1,427 (1,653) (578)
Segment result 94 (34) 943 (1,788) (785)
Acquisition related amortisation - - - (305) (305)
Operating profit/(loss) 94 (34) (943) (2,093) (1,090)
Financial income - - - -
Loan interest/ lease
interest (1) (35) - (55) (91)
Loss before tax (1,181)
Income tax income 339
--------
Loss for the year (842)
========
Additions of non-current
assets 446 1,283 191 - 1,920
Divisional segments
For the year ended 31 December
2018
Dillistone Voyager GatedTalent Central Total
d
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
--------
Profit for the year (260)
========
Additions of non-current
assets 567 536 434 - 1,537
Products and services
The following table provides an analysis of the Group's revenue
by products and services:
2019 2018
GBP'000 GBP'000
Recurring income 6,593 7,154
Non-recurring income 1,160 1,169
Third party revenues 274 369
8,027 8,692
========= =========
Revenue
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 2019
or 2018.
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
2019 2018
GBP'000 GBP'000
UK 5,700 6,188
Europe 928 1,007
US 1,034 1,118
Australia 365 379
8,027 8,692
========= =========
Non-current assets by geographical location
2019 2018
GBP'000 GBP'000
UK 8,445 8,274
US 6 4
Australia 6 4
--------- ---------
8,457 8,282
========= =========
7. Acquisition related, reorganisation and other costs
2019 2018
GBP'000 GBP'000
Included within administrative expenses:
Reorganisation and other costs 578 -
Amortisation of acquisition intangibles 305 469
883 469
883 469
========= =========
Reorganisation and other costs include severance payments, loss
of office payments, duplication running costs and lease
terminations costs
8. Earnings per share
2019 2019 2018 2018
Using adjusted Using adjusted
profit profit
(Loss)/profit attributable GBP(30,000) GBP(842,000) GBP120,000 GBP(260,000)
to ordinary shareholders
(note 4)
Weighted average number
of shares 19,668,021 19,668,021 19,668,021 19,668,021
Basic earnings/(loss) per (0.15) pence (4.28) pence 0.61 pence (1.32) pence
share
=============== ============= =============== ===============
Weighted average number
of shares after dilution 19,668,021 19,668,021 19,797,067 19,668,021
Fully diluted earnings/(loss) (0.15) pence (4.28) pence 0.61 pence (1.32) pence
per share
=============== ============= =============== =============
Reconciliation of basic to diluted average number of shares:
2019 2018
Weighted average number of shares
(basic) 19,668,021 19,668,021
Effect of dilutive potential ordinary
shares - employee share plans - 129,046
Weighted average number of shares
after dilution 19,668,021 19,797,067
=========== ===========
There are 1,970,005 (2018: 919,848) 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.
9. IFRS 16 impact on 2019 results
From 1 January 2019, the Group accounts for its leases under
IFRS 16 as set out in Note 1, resulting in the following amounts
being recorded:
Impacts on financial statements:
The effect of initially applying this standard is as
follows:
(I) recognition of a right of use asset and depreciation of this asset;
(II) removal of rent prepayment/accrual and charge to statement of profit or loss; and
(III) recognition of lease liability non-current and current and interest on this liability.
The following table summarises the impact of transition to IFRS
16 on retained earnings at 1 January 2019.
Impact of
adopting IFRS
16 at 1 January
2019
GBP'000
Right of use asset 51
Trade and other payables adjust provision
for dilapidations (5)
Loans and borrowings - non-current: lease
liability due in more than one year (6)
Loans and borrowings - current: lease
liability due in less than one yea (40)
-----------------
-
-----------------
Amounts recognised in the Consolidated Statement of Financial
Position
Right-of-use assets Land and Computer Total
Buildings Equipment
GBP'000 GBP'000 GBP'000
Balance at 1 January 2019 51 - 51
Additions 791 30 821
Depreciation charge of right-of-use assets (114) (4) (118)
728 26 754
----------- ----------- --------
Lease Liabilities 2019
GBP'000
Current 82
Non-current 741
822
--------
Amounts recognised in the Statement of Comprehensive Income
2019 2018
GBP'000 GBP'000
Depreciation charge of right-of-use assets 118 -
Interest expense (included in finance 37 -
cost)
Expense relating to short-term leases 141 -
Total Cash outflow for Leases in 2019 was:
2019 2018
GBP'000 GBP'000
Short term leases 136 -
Leases under IFRS 16 49 -
-------- --------
Total cash outflow in respect of leases 185 -
-------- --------
The Group has an option to extend the lease of its Basingstoke
office, which it has assumed it will do based on the considerations
set out in Note 1.
The maturity of undiscounted lease liabilities is as
follows:
2019 2018
GBP'000 GBP'000
Less than one year 125 -
One to five years 554 -
More than five years 408 -
1,087 -
-------- --------
Reconciliation of operating lease commitments in 2018 to
recognised lease liabilities
GBP'000
Minimum operating lease commitment at 31
December 2018 182
Less: short term leases not recognised under
IFRS 16 (121)
Undiscounted lease payments 61
Less: effect of discounting as at the date
of initial application (15)
--------
Lease liabilities recognised on 1 January
2019 46
--------
As set out in Note 1, the Group has applied the modified
retrospective approach with recognition of transitional adjustments
on the date of initial application, being 1 January 2019, without
restatement of comparative figures.
On adoption of IFRS 16, the Group recognised right-of-use assets
and lease liabilities in relation to leases of office space. The
Group has applied the practical expedient not to recognise
right-of-use assets and liabilities for leases with less than 12
months of lease term remaining as of the date of initial
application, as permitted by the standard.
Lease liabilities were measured at the present value of the
remaining lease payments, discounted using the Group's incremental
borrowing rate (being the rate at which a similar borrowing could
be obtained from an independent creditor under comparable terms and
conditions). The Group applied the practical expedient permitted by
the standard to apply a similar discount rate to a portfolio of
leases with similar characteristics. The rate applied was 5%. The
right-of-use assets were recognised by reference to the measurement
of the lease liability on that date, including estimates for items
such as dilapidation cost obligations under the lease, and
amortised on a straight-line basis.
The effects of adopting IFRS 16 for the period ending 31
December 2019 are as follows:
Impact on the Consolidated Statement of Comprehensive Income
As IFRS 16 Without adoption
reported Adjustments of IFRS 16
2019 2019 2019
GBP'000 GBP'000 GBP'000
Revenue 8,027 8,027
Cost of sales (849) - (849)
--------- ------------ -----------------
Gross profit 7,178 - 7,178
Administrative expenses (8,268) (16) (8,284)
--------- ------------ -----------------
(Loss) from operations (1,090) (16) (1,106)
Finance expense (91) 37 (54)
--------- ------------ -----------------
(Loss) before tax (1,181) 21 (1,160)
Tax income 339 - 339
--------- ------------ -----------------
(Loss) for the year (842) 21 (821)
Currency translation differences (16) - (16)
--------- ------------ -----------------
Total comprehensive income for
the year (842) 21 (821)
--------- ------------ -----------------
Impact on the Consolidated Statement of Financial Position:
As reported IFRS 16 Without adoption
Adjustments of IFRS 16
2019 2019 2019
GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 3,415 - 3,415
Other intangible assets 4,234 - 4,234
Property, plant and equipment 54 - 54
Right-of-use assets 754 (754) -
8,457 (754) 7,703
------------ ------------ -----------------
Current assets
Trade and other receivables 1,222 - 1,222
Current tax receivable 293 293
Cash and cash equivalents 690 - 690
------------ ------------ -----------------
Total current assets 2,205 - 2,205
------------ ------------ -----------------
Total assets 10,662 (754) 9,908
------------ ------------ -----------------
Liabilities
Current
Trade and other payables 3,977 48 4,025
Lease liabilities 82 (82) 0
Borrowings 551 - 551
Total current liabilities 4,610 (34) 4,576
------------ ------------ -----------------
Non-current liabilities
Trade and other payables 443 - 443
Lease liabilities 741 (741) -
Borrowings 523 - 523
Deferred tax liabilities 340 - 340
------------ ------------ -----------------
Total non-current liabilities 2,047 (741) 1,306
------------ ------------ -----------------
Total liabilities 6,657 (775) 5,882
------------ ------------ -----------------
Equity
Share capital 983 - 983
Share premium 1,631 - 1,631
Merger reserve 365 - 365
Convertible loan reserve 14 - 14
Retained earnings 871 21 892
Share option reserve 94 - 94
Translation reserve 47 - 47
------------ ------------ -----------------
Total equity 4,005 21 4,026
------------ ------------ -----------------
Total Liabilities and Equity 10,662 (754) 9,908
------------ ------------ -----------------
Impact on the Consolidated Statement of Cashflows:
As reported IFRS 16 Without adoption
Adjustments of IFRS 16
2019 2019 2019
GBP'000 GBP'000 GBP'000
Operating Activities
(Loss) before tax (1,181) 21 (1,160)
Adjustment for
Financial income - - -
Financial cost 91 (37) 54
Depreciation and amortisation 1,794 (118) 1,676
Share option (gain)/expense 14 - 14
Other including foreign exchange
adjustments arising from operations (33) - (33)
------------ ------------ -----------------
Operating cash flows before
movements in working capital 685 (134) 551
(Decrease)/increase in receivables 282 - 282
Decrease in inventories 3 - 3
Increase/(decrease) in payables (603) 48 (555)
Add taxation (paid)/repaid 167 - 167
Net cash generated from operating
activities 534 (86) 448
Investing Activities
Interest received - - -
Purchases of property plant
and equipment (29) - (29)
Sale of fixed assets 2 - 2-
Investment in development
costs (1,070) - (1,070)
Net cash used in investing
activities (1,097) - (1,097)
Financing Activities
Interest paid (83) 37 (46)
Lease payments (49) 49 -
Bank Loan less repayments (126) - (126)
Utilisation of banking facility 288 288
Proceeds from bank loan 500 - 500
------------ ------------ -----------------
Net cash used by financing
activities 530 86 616
Net change in cash and cash
equivalents (33) 0 (33)
------------ ------------ -----------------
For comparative purposes, as at 31 December 2018, and as
accounted for under IAS 17 per Note 1, the Group had future total
commitments under non-cancellable operating leases as follows:
2018
GBP'000
Commitments payable, being due: 182
Within one year 172
Between two and five years 10
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 SEMEFUESSEIW
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July 30, 2020 02:00 ET (06:00 GMT)
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