TIDMDSG

RNS Number : 9883W

Dillistone Group PLC

29 April 2021

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 2020.

Highlights:

   --    New operating structure delivers excellent customer service from reduced cost base 
   --    Recurring revenues(1) represent 91% (2019: 82%) of Group revenue 

-- Recurring revenue covered 97% (2019: 89%) of administrative expenses before acquisition related and other costs(2)

-- Improved adjusted operating loss(2) of GBP0.166m (2019: loss GBP0.207m) before acquisition related and other costs

-- Reduced loss for the year of GBP0.663m (2019: loss GBP0.842m) despite the impact of Covid-19 on the business in 2020

   --    Granted CBIL loan of GBP1.5m 
   --    Cash at year end was GBP1.3m 
   --   Successful launch of Talentis executive search software (https://www.talentis.global/recruitment-software/insights/) after year end. First revenue now generated. 

Definitions:

(1) The component elements of recurring revenues are detailed in note 5.

(2) .Percentages and amounts based on adjusted profits figures - see note 4.

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

"The pandemic had a significant impact on the recruitment sector from which the Group derives the vast majority of its revenue. As a result, the business enters 2021 with lower recurring revenues than it entered the preceding year. However, the Board is pleased to report that the new operating structure implemented in 2019, and the further cost reductions implemented as a result of the pandemic, means that the Group is now operating with a much lower cost base. Furthermore, the Board believes that as revenues recover, the efficiencies realised will allow for improved operational leverage.

"The Group has had a positive start to the year in terms of trading, with incoming contracts ahead of management's expectations. Furthermore, the Board believes that Talentis ( https://www.talentis.global/recruitment-software/executive-search-software ), the new product we announced in January 2021, will have a significant impact on the Group's long-term performance. While the subscription nature of its revenue model means that realised revenue in 2021 will not be material, we are pleased to report that we have now generated our first revenue from the platform, with initial user feedback being almost universally excellent. Furthermore, we are pleased to report a rapidly developing sales pipeline.

"The Group has emerged from a challenging year in a strong position. Better than expected incoming orders in Q1 2021, improved operational leverage, a robust balance sheet and an enhanced product range gives the Board optimism for the future. The Board expects to issue a further update at the time of the AGM."

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 22 May 2021 for approval at the Annual General Meeting to be held on 16 June 2021.

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

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 have seen many of our clients shrink, with some clients closing. We have additionally supported many clients through agreeing discounted periods, contract variations and deferred terms.

The Board reacted swiftly, taking advantage of various government schemes, including furloughing, and staff unanimously supporting a temporary pay-cut (April to September), 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 enabling us to continue to deliver and develop products with confidence.

Development remains key to the Group's future success and we have continued to invest in our main products as well as actively developing our first new product for a number of years - Talentis. Talentis was announced in January 2021 and has been well received by the market. It utilises AI and big data advances to deliver, what the Board believes to be, a highly competitive solution for the needs of recruiters globally.

Looking back at 2020 the pandemic had a significant impact on revenue with the total falling 21% to GBP6.332m, and recurring revenue falling 13% to GBP5.745m. There was an adjusted operating loss in 2020 of GBP0.166m (2019: loss GBP0.207m), mainly due to the fall in revenue being offset with the full benefits of the reorganisation carried out in 2019, the benefit of costs savings measures introduced in 2020 and UK Government support through the furlough scheme and Australian grants. The operating loss, including reorganisation and acquisition related items, was GBP0.821m (2019: loss GBP1.090m).

Dividends

The Group is not recommending a final dividend in respect of the year to 31 December 2020 (2019: nil).

Staff

2020 has been a challenging year for everyone and on behalf of the Board I would like to take this opportunity to sincerely thank every one of our staff for their individual and collective contributions and for the professional way they have all risen to the challenges of the pandemic, continuing to deliver for our clients.

Corporate governance

It is the Board's duty to ensure that the Group is managed for the long-term benefit of all stakeholders.

Mike Love stepped down as a non-executive director in September 2020. I would like to sincerely thank him, for his outstanding contribution to the Group over many years. We also welcomed Steve Hammond to the Group Board in January 2021. Steve is the Chief Engineering Officer for the Group and oversees and is responsible for the development for all group products. Details of our governance processes and my role as Chairman of the Board are included in the corporate governance section that follows the Strategic Report.

Outlook

The pandemic had a significant impact on the recruitment sector from which the Group derives the vast majority of its revenue. As a result, the business enters 2021 with lower recurring revenues than it entered the preceding year. However, the Board is pleased to report that the new operating structure implemented in 2019, and the further cost reductions implemented as a result of the pandemic, means that the Group is now operating with a much lower cost base. Furthermore, the Board believes that as revenues recover, the efficiencies realised will allow for improved operational leverage.

The Group has had a positive start to the year in terms of trading, with incoming contracts ahead of management's expectations. Furthermore, the Board believes that Talentis ( https://www.talentis.global/recruitment-software/executive-search-software ) the new product we announced in January 2021, will have a significant impact on the Group's long-term performance. While the subscription nature of its revenue model means that realised revenue in 2021 will not be material, we are pleased to report that we have now generated our first revenue from the platform, with initial user feedback being almost universally excellent. Furthermore, we are pleased to report a rapidly developing sales pipeline.

The Group has emerged from a challenging year in a strong position. Better than expected incoming orders in Q1 2021, improved operational leverage, a robust balance sheet and an enhanced product range gives the Board optimism for the future . The Board expects to issue a further update at the time of the AGM.

Giles Fearnley

Non-Executive Chairman

CEO's Review

Our Group generates the vast majority of its revenue from the recruitment sector and, with an estimated 250 million jobs lost globally in 2020 as a result of the pandemic, it has been a challenging year, and I'd like to begin my review by thanking my colleagues across the World for the resilience and efforts they demonstrated during this exceptional period.

Across our product range, we provide solutions to facilitate everything from the scheduling of fast moving volume temporary placements through to the headhunting of CEOs, and from pre-employment testing of skills through to support with executive career branding.

Strategy and objectives

For any business dependent on recruitment-based revenues, Covid-19 constituted an existential risk. As a result, the Board has taken the view that our overriding objectives need to reflect our new environment and are consequently:

   --    Ensuring our staff and their families stay safe, engaged and effective; 

-- Taking appropriate action to maintain a strong and stable financial position, throughout this period and for the future.

-- Protecting and prioritising our product and development efforts around solutions that reflect the needs of a post Covid world; and

-- Taking all reasonable steps we can to help our clients through a challenging period for the recruitment sector;

While many of our markets remain challenging, it is the current view of the Board that the existential risk to the business has now passed and that 2021 will see a return towards normality.

As a result, while we will continue to respond to extraneous factors, management is now focussed on returning the business to growth.

Key Performance Indicators (KPIs)

As stated above, objectives changed in 2020 and were based around dealing with the Covid pandemic. Accordingly, the key KPIs for 2020 were:

 
 KPI                                        2020 outcome 
 Maintain a strong and stable financial     GBP1.291m cash at 
  position                                   year end 
 Protect and prioritise our product and     Development on key 
  development efforts                        products continued 
                                             and Talentis was 
                                             launched in January 
                                             2021 
 

Our business model

Following the reorganisation in 2019, the business is now organised as one trading division - Ikiru People rather than 3 divisions: Dillistone Systems, Voyager Software and GatedTalent. The reorganisation brought all of these businesses together with a strong focus on the products we sell.

The majority of our products are commercialised through one or more of the following:

   1.   Software as a Service (SaaS) subscription basis; or 
   2.   an upfront licence fee plus a recurring support fee; 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 fee towards cloud delivery (SaaS) services.

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 significant proportion of our clients. This is done through Microsoft Azure and AWS cloud data centres in Europe, the Americas, Singapore and Australia.

Group review of the business

2020 saw recurring revenues fall 13% to GBP5.745m (2019: GBP6.593m) reflecting the impact of Covid-19. Attrition exceeded new contract wins in the year. Non-recurring revenues were also impacted by Covid-19 and fell 58% to GBP0.485m (2019: GBP1.160m). As a result, overall revenues decreased by 21% to GBP6.332m (2019: GBP8.027m) with recurring revenues representing 91% of Group revenues (2019: 82%). Cost of sales reduced 31% to GBP0.584m (2019: GBP0.849m).

Adjusted EBITDA(1) was down 9% to GBP1.168m (2019: GBP1.282m). There was an adjusted operating loss of GBP0.166m (2019: loss GBP0.207m) and there was a pre-tax loss before acquisition related items and reorganisation and other adjustments of GBP0.259m (2019: loss GBP0.298m). The operating loss for the year reduced to GBP0.821m (2019: loss GBP1.090m) with reorganisation and other costs totalling GBP0.442m (2019: GBP0.578m) and acquisition related amortisation of GBP0.213m (2019: GBP0.305m). The loss for the year was GBP0.663m (2019: loss GBP0.842m). Net cash at the year end was GBP1.291m (2019: GBP0.402m).

(1) Adjusted EBITDA is adjusted operating profit with depreciation and amortisation added back. See note 5 .

Covid-19

The Covid-19 pandemic has had a major impact on the world economy and in our target market - recruitment. This has affected our business with many of our clients shrinking and with other clients ceasing to trade, directly impacting our revenue.

We reacted swiftly to control the impact of Covid-19 on our business, taking the following actions:

   --    Taking advantage of the UK Government furlough scheme 
   --    Implementing a temporary pay cut (April to October) 
   --    Switching to home working for the vast majority of staff 

-- Offering support packages to our clients to help them survive the period and, hopefully, remain as customers

   --    Using Government support in other jurisdictions where appropriate 

-- Agreeing the postponement of repayments on our GBP500,000 bank loan for 6 months. We are on track to repay this loan in full by 30 June 2021

   --    Obtaining a GBP1.5m loan under the Government's Business Interruption Loan scheme 
   --    Making necessary redundancies in light of the reduced trading activity. 

While we believe the existential threat to the business has passed, uncertainty still remains around the impact of the pandemic. 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.

Further details of this work are contained in Note 2 on Basis of Preparation. We are pleased to note that, with the funding support in place, our Balance Sheet remains strong.

Financial Review

Total revenues decreased by 21% to GBP6.332m (2019: GBP8.027m) with recurring revenues decreasing by 13% to GBP5.745m (2019: GBP6.593m) and non-recurring revenues by 58% to GBP0.485m (2019: GBP1.160m). Third party resell revenue amounted to GBP0.102m in the period (2019: GBP0.274m).

Cost of sales decreased to GBP0.584m (2019: GBP0.849m). Administrative costs, excluding acquisition related items and other costs and excluding depreciation and amortisation, fell 22% to GBP4.580m (2019: GBP5.896m). This was in part due to the full year impact of the reorganisation carried out in 2019 and the additional measures that were taken in 2020 to reduce the cost base. Depreciation and amortisation (excluding acquisition related amortisation and one-off write-offs) decreased to GBP1.334m (2019: GBP1.489m).

Acquisition related and other costs totalled GBP0.655m (2019: GBP0. 883m) and were in respect of:

   --    the amortisation of intangibles arising from acquisitions GBP0.213m (2019: GBP0.305m). 

-- other costs of GBP0.442m (2019: GBP0.578m) which included the write-off of intangibles discussed below.

Recurring revenues covered 97% of administrative expenses before acquisition related and reorganisation and other costs (2019: 89%). The administrative costs, excluding depreciation and amortisation of our own internal development and before acquisition related and reorganisation and other costs, are covered 125% (2019: 112%) by recurring revenues.

The Group benefitted from an income tax credit in 2020 of GBP0.251m (2019: credit GBP0.339m). The 2020 credit reflects the R&D tax credits available in the UK with the assumption that tax losses will be surrendered for the R&D tax credit payment where possible. It also reflects a prior year adjustment of a credit of GBP0.108m as the tax computations in respect of prior years were finalised and agreed. The acquisition related items tax credit of GBP0.041m (2019: GBP0.058m) reflects the reduction in deferred tax that arises as amortisation is charged in the income statement. The deferred tax charge also reflects the change in deferred tax rate to 19% (from 17%) and has been reflected through the prior year adjustment.

Loss for the year before acquisition related and reorganisation and other costs amounted to GBP0.116m (2019: loss GBP0.030m). The 2020 adjusted loss benefitted from tax income of GBP0.143m (2019: tax income of GBP0.268m). The statutory loss for the year was GBP0.663m (2019: loss GBP0.842m). Basic loss per share (EPS) was (3.37)p (2019: (4.28)p). Fully diluted EPS was to (3.37)p (2019: (4.28p)). Adjusted basic EPS fell to (0.59)p (2019: (0.15p)).

Dillistone Group Plc company results show a loss of GBP0.098m (2019: loss GBP1.843m).

Capital expenditure

The Group invested GBP0.971m in property, plant and equipment and product development during the year (2019: GBP1.100m). This expenditure included GBP0.969m (2019: GBP1.067m) spent on capitalised development related costs. The Group also wrote off intangibles assets with a net book value of GBP0.435m and included these costs in reorganisation and other costs.

Trade and other payables

As with previous years, the trade and other payables includes deferred income of GBP2.029m (2019: GBP2.873m), 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 2020 but are in respect of services to be delivered in 2021. 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".

Cash and debt

The Group finished the year with cash funds of GBP1.291m (2019: GBP0.402m). The Group obtained a loan of GBP1.5m in June 2020 under the Government CBIL scheme, which is repayable over 6 years with no repayment in the first year. The Group also received a six month payment holiday in respect of its June 2019 loan with repayments totalling GBP0.166m (2019: GBP0.126m). The Group expects to complete repayment of this loan in June 2021.

Bank borrowings at 31 December 2020 were GBP1.802m (2019: GBP0.374m). The Group also had a convertible loan of GBP0.408m (2019: GBP0.412m). It was agreed in the year that the convertible loan notes held by the Directors, would not be repaid until the bank loan was repaid.

Jason Starr

Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARED 31 DECEMBER 2020

 
                                                    2020       2019 
                                         Note    GBP'000    GBP'000 
 
 Revenue                                  5        6,332      8,027 
 
 Cost of sales                                     (584)      (849) 
                                               ---------  --------- 
 
 Gross profit                                      5,748      7,178 
 
 Administrative expenses                         (6,569)    (8,268) 
 
 Operating loss                                    (821)    (1,090) 
--------------------------------------  -----  ---------  --------- 
 Adjusted operating loss before 
  acquisition related, reorganisation 
  and other items                         4        (166)      (207) 
 Acquisition related, reorganisation 
  and other items                         7        (655)      (883) 
                                               ---------  --------- 
 Operating (loss)                                  (821)    (1,090) 
--------------------------------------  -----  ---------  --------- 
 
 Financial cost                                     (93)       (91) 
 
 Loss before tax                                   (914)    (1,181) 
 
 Tax income                               8          251        339 
 
 (Loss) for the year                               (663)      (842) 
 
 Other comprehensive income/(loss) 
 Items that will be reclassified 
  subsequently to profit and 
  loss: 
 
 Currency translation differences                     12       (16) 
 
 Total comprehensive (loss) 
  for the year                                     (651)      (858) 
                                               =========  ========= 
 

Earnings per share

 
 Basic      9       (3.37)p   (4.28)p 
 Diluted    9       (3.37)p   (4.28)p 
 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 31 DECEMBER 2020

 
 
 
 
                     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 
  2019                 983      1,631        365      1,687            14        106         63      4,849 
 Comprehensive 
  income 
 Loss for 
  the year         -          -          -            (842)             -          -          -      (842) 
 
 Other 
 comprehensive 
 income 
 Exchange 
  differences 
  on 
  translation 
  of overseas 
  operations             -          -          -          -             -          -       (16)       (16) 
 
 Total 
  comprehensive 
  loss                   -          -          -      (842)             -          -       (16)      (858) 
                 ---------  ---------  ---------  ---------  ------------  ---------  ---------  --------- 
 
 Transactions 
  with owners 
 Share option 
  charge                 -          -          -         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 
                 =========  =========  =========  =========  ============  =========  =========  ========= 
 
 Comprehensive 
  income 
 Loss for 
  the year 
  ended 31 
  December 
  2020                   -          -          -      (663)             -          -          -      (663) 
 
 Other 
 comprehensive 
 income/(loss) 
 Exchange 
  differences 
  on 
  translation 
  of overseas 
  operations             -          -          -          -             -          -         12         12 
 
 Total 
  comprehensive 
  loss                   -          -          -      (663)             -          -         12      (651) 
                 ---------  ---------  ---------  ---------  ------------  ---------  ---------  --------- 
 
 Transactions 
  with owners 
 Share option 
  charges                -          -          -          -             -         16          -         16 
 
 Total 
  transactions 
  with owners            -          -          -          -             -         16          -         16 
 
 Balance 
  at 31 
  December 
  2020                 983      1,631        365        208            14        110         59      3,370 
                 =========  =========  =========  =========  ============  =========  =========  ========= 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2020

 
                                             Group 
                                          2020       2019 
 
 ASSETS                                GBP'000    GBP'000 
 Non-current assets 
 Goodwill                                3,415      3,415 
 Other intangible assets                 3,362      4,234 
 Property, plant and equipment              24         54 
 Right to use assets                       680        754 
 Investments                                 -          - 
                                     ---------  --------- 
 Total non-current assets                7,481      8,457 
                                     ---------  --------- 
 Current assets 
 Trade and other receivables               883      1,222 
 Current tax receivable                    186        293 
 Cash and cash equivalents               1,291        690 
                                     ---------  --------- 
 Total current assets                    2,360      2,205 
                                     ---------  --------- 
 Total assets                            9,841     10,662 
 
 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                         208        871 
 Share option reserve                      110         94 
 Translation reserve                        59         47 
                                     ---------  --------- 
 Total equity                            3,370      4,005 
                                     ---------  --------- 
 
 Liabilities 
 Non-current liabilities 
 Trade and other payables                  271        443 
 Lease liabilities                         638        741 
 Borrowings                              1,749        523 
 Deferred tax liability                    296        340 
                                     ---------  --------- 
 Total non-current liabilities           2,954      2,047 
 Current liabilities 
 Trade and other payables                2,953      3,977 
 Lease liabilities                         103         82 
 Borrowings                                461        551 
 Total current liabilities               3,517      4,610 
 
 Total liabilities                       6,471      6,657 
 
 Total liabilities and equity            9,841     10,662 
                                     =========  ========= 
 

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEARED 31 DECEMBER 2020

 
                                               For the        For the        For the        For the 
                                                  year           year           year           year 
                                                 ended          ended          ended          ended 
                                           31 December    31 December    31 December    31 December 
                                                  2020           2020           2019           2019 
 Operating activities                          GBP'000        GBP'000        GBP'000        GBP'000 
 
 (Loss) before tax                               (914)                       (1,181) 
 Adjustment for 
 Financial cost                                     93                            91 
 Depreciation and amortisation                   1,984                         1,794 
 Share option expense                               16                            14 
 Foreign exchange adjustments arising 
  from operations                                 (28)                          (33) 
 
 
 Operating cash flows before                     1,151                           685 
 movement in working capital: 
 Decrease in receivables                           360                           282 
 Decrease in inventories                             -                             3 
 Decrease in payables                          (1,120)                         (603) 
 
 Taxation refunded                                 314                           167 
                                         -------------                 ------------- 
 
 Net cash generated from operating 
  activities                                                      705                           534 
 
 Investing activities 
 
 Purchases of property, plant and 
 equipment                                         (2)                          (29) 
 Sale of Fixed assets                                -                             2 
 Investment in development costs                 (969)                       (1,070) 
 
 Net cash used in investing activities                          (971)                       (1,097) 
 
 Financing activities 
 
 Interest paid                                    (84)                          (83) 
 Proceeds from bank loan                         1,500                           500 
 Bank loan repayments made                       (166)                         (126) 
 Lease payments made                             (114)                          (49) 
 (Repayment)/utilisation of banking 
  facility                                       (288)                           288 
 
 Net cash generated from financing 
  activities                                                      848                           530 
 
 Net increase/(decrease) in cash and cash 
  equivalents                                                     582                          (33) 
 
 Cash and cash equivalents at                                     690                           725 
 beginning of year 
 
 Effect of foreign exchange rate 
  changes                                                          19                           (2) 
 
 Cash and cash equivalents at end 
  of year                                                       1,291                           690 
                                                        -------------                 ------------- 
 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARED 31 DECEMBER 2020

   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 2020 or 2019, but is derived from these financial statements. The financial statements for the year ended 31 December 2019 have been audited and filed with the Registrar of Companies. The financial statements for the year ended 31 December 2020 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 2020 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 2020 and 2019 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.

A degree of doubt still remains with regard to the impact on the Group of the COVID-19 outbreak and the continuing lockdown into 2021 and this has been taken into account in considering the Group's adoption of the going concern basis. The Group has seen many of its clients shrink and with some clients closing and this has been built into the 2021 budgets and subsequent years forecasts. The Group continues to take advantage of the flexible furlough scheme and has secured a second payroll protection loan in the US.

A stress test scenario has been modelled that took GBP70,000 per month off Revenue from May 2021 has been considered. 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 an overdrawn GBP212,000 position in November 2021. This would slightly exceed the Group's overdraft of GBP200,000.

Based on current trading, the stress test scenario is considered remote. However, it is difficult to predict the overall impact and outcome of COVID-19 at this stage, particularly if further lockdowns are required towards the end of 2021. Nevertheless, after making enquiries, and considering the uncertainties described above, 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 

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 2019.

   4.         Reconciliation of adjusted profits to consolidated statement of comprehensive income 
 
                         Note    Adjusted       Acquisition       2020   Adjusted       Acquisition       2019 
                                  profits          related,               profits           related 
                                             reorganisation                          reorganisation 
                                                  and other                               and other 
                                                      costs                                   costs 
                                   2020               2020*                  2019             2019* 
 
                                 GBP'000            GBP'000    GBP'000    GBP'000           GBP'000    GBP'000 
 
 Revenue                            6,332                 -      6,332      8,027                 -      8,027 
 
 Cost of sales                      (584)                 -      (584)      (849)                 -      (849) 
                                ---------  ----------------  ---------  ---------  ----------------  --------- 
 
 Gross profit                       5,748                 -      5,748      7,178                 -      7,178 
 
 Administrative 
  expenses                        (5,914)             (655)    (6,569)    (7,385)             (883)    (8,268) 
 
 Operating /(loss)                  (166)             (655)      (821)      (207)             (883)    (1,090) 
 
 Financial income                       -                 -          -          -                 -          - 
 Financial cost                      (93)                 -       (93)       (91)                 -       (91) 
 
 (Loss) before 
  tax                               (259)             (655)      (914)      (298)             (883)    (1,181) 
 
 Tax income                           143               108        251        268                71        339 
 
 (Loss) for the 
  year                              (116)             (547)      (663)       (30)             (812)      (842) 
 Other comprehensive 
  loss net of tax: 
 Currency translation 
  differences                          12                 -         12       (16)                 -       (16) 
 
 Total comprehensive 
  (loss) for the 
  year net of tax                   (104)             (547)      (651)       (46)             (812)      (858) 
                                =========  ================  =========  =========  ================  ========= 
 

Earnings per share

 
 Basic      9   (0.59)p   -      (3.37)p   (0.15)p   -   (4.28)p 
 Diluted    9   (0.59)p   -     (3.37)p    (0.15)p   -   (4.28)p 
 

* See note 7

   5.         Segment reporting 

In 2019, the Group 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. The US business was renamed Ikiru People Inc. These changes came into effect on 31 December 2019. Accordingly, for 2020 onwards, the group is only reporting one trading segment.

Divisional segments

 
 For the year ended 31 December 
  2020 
 
 
                                     Ikiru People   Central     Total 
                                          GBP'000   GBP'000   GBP'000 
 Segment revenue                            6,332         -     6,332 
                                    -------------  --------  -------- 
 Segment EBITDA pre exceptional             1,211      (43)     1,168 
 Depreciation and amortisation 
  expense                                 (1,334)         -   (1,334) 
                                    -------------  --------  -------- 
 Segment result before 
  reorganisation and other 
  costs                                     (123)      (43)     (166) 
 Reorganisation and other 
  costs                                     (442)         -     (442) 
 
 Segment result                             (565)      (43)     (608) 
 
 Acquisition related amortisation                     (213)     (213) 
 
 Operating (loss)                           (565)     (256)     (821) 
 
 Loan interest/ lease interest               (39)      (54)      (93) 
 
 Loss before tax                                                (914) 
 Income tax income                                                251 
                                                             -------- 
 Loss for the year                                              (663) 
                                                             ======== 
 
 
 Additions of non-current 
  assets                                    1,006               1,006 
 

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 
 

Products and services

The following table provides an analysis of the Group's revenue by products and services:

Revenue

 
                               2020       2019 
                            GBP'000    GBP'000 
 Recurring income             5,745      6,593 
 Non-recurring income           485      1,160 
 Third party revenues           102        274 
                              6,332      8,027 
                          =========  ========= 
 

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 2020 or 2019.

   6.         Geographical analysis 

The following table provides an estimated 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. Previously the revenue was based on billing entity and in 2020 on country of customer.

Revenue

 
                    2020       2019 
                 GBP'000    GBP'000 
 UK                3,717      5,700 
 Europe              877        928 
 Americas          1,074      1,034 
 Australia           295        365 
 ROW                 369          - 
                   6,332      8,027 
               =========  ========= 
 

Non-current assets by geographical location

 
                    2020       2019 
                 GBP'000    GBP'000 
 UK                7,460      8,445 
 US                   20          6 
 Australia             1          6 
               ---------  --------- 
                   7,481      8,457 
               =========  ========= 
 
   7.         Acquisition related, reorganisation and other costs 
 
                                                      2020       2019 
                                                   GBP'000    GBP'000 
 Included within administrative expenses: 
 Reorganisation and other costs                         78        578 
 Grants received from overseas jurisdictions          (71)          - 
 Amortisation of acquisition intangibles               213        305 
 Write-off of capitalised development                  435          - 
                                                 ---------  --------- 
                                                       655        883 
                                                 =========  ========= 
 

Reorganisation and other costs include severance payments and loss of office payments. The Write-off of capitalised development relates to a product that is no longer actively sold.

   8.         Tax income 
 
                                                  2020       2019 
                                               GBP'000    GBP'000 
 
 Current tax                                      (99)       (50) 
 Prior year adjustment - current 
  tax                                            (108)      (140) 
                                             ---------  --------- 
 Total current tax                               (207)      (190) 
 
 Deferred tax                                    (123)       (67) 
 Prior year adjustment - deferred 
  tax                                               80       (24) 
 Deferred tax rate change to 19%                    40          - 
 Deferred tax re acquisition intangibles          (41)       (58) 
                                             ---------  --------- 
 Total deferred tax                               (44)      (149) 
                                             ---------  --------- 
 Tax (income) for the year                       (251)      (339) 
                                             =========  ========= 
 
 Factors affecting the tax credit for 
  the year 
 Loss before tax                                 (914)    (1,181) 
                                             =========  ========= 
 
 UK rate of taxation                            19.00%     19.00% 
 
 Loss before tax multiplied by the UK 
  rate of taxation                               (174)      (224) 
 
 Effects of: 
 Overseas tax rates                                  1          1 
 Impact of deferred tax not provided                 8        108 
 Enhanced R&D relief                             (143)      (129) 
 Disallowed expenses                                14         43   43 
 
 Deferred tax rate change to 19%                    40          8 
 Rate difference between CT rate 
  and rate of R&D repayment                         31         18 
 Prior year adjustments                           (28)      (164) 
 Tax (income)                                    (251)      (339) 
                                             =========  ========= 
 
   9.         Earnings per share 
 
                                           2020           2020             2019           2019 
                                 Using adjusted                  Using adjusted 
                                         profit                          profit 
 
 (Loss)/ attributable to           GBP(116,000)   GBP(663,000)      GBP(30,000)     GBP(842,000) 
  ordinary shareholders (note 
  4) 
 Weighted average number 
  of shares                          19,668,021     19,668,021       19,668,021       19,668,021 
 Basic (loss) per share            (0.59) pence   (3.37) pence     (0.15) pence     (4.28) pence 
                                ===============  =============  ===============  =============== 
 
 Weighted average number 
  of shares after dilution           19,670,013     19,670,013       19,668,021     19,668,021 
 Fully diluted (loss) per          (0.59) pence   (3.37) pence     (0.15) pence   (4.28) pence 
  share 
                                ===============  =============  ===============  ============= 
 

Reconciliation of basic to diluted average number of shares:

 
                                                  2020         2019 
 
 Weighted average number of shares 
  (basic)                                   19,668,021   19,668,021 
 Effect of dilutive potential ordinary 
  shares - employee share plans                  1,992            - 
 Weighted average number of shares 
  after dilution                            19,670,013   19,668,021 
                                           ===========  =========== 
 

There are 953,337 (2019: 1,970,005) 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.

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END

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April 29, 2021 02:00 ET (06:00 GMT)

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