Dillistone : Final Results for the year ended 31 December 2023 (25 April 2024)

25 April 2024

Dillistone Group Plc

("Dillistone", the "Company" or the "Group")

Final Results

& Investor Presentation

Dillistone Group Plc, 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 2023 ("FY2023").

Highlights:

• Adjusted operating profit increased by 241% to £0.220m, first adjusted operating profit since 2018.
• EBITDA increased 38% to £1.314m (FY2022: £0.949m)
• EDITDA margin increased to 23.5% (FY2022: 16.7%)
• Loss before tax improved 77% to £0.104m (FY2022: £0.453m)
• Recurring revenues represented 89% (FY2022: 89%) of Group revenue, equating to 100% of administration expenses (excluding depreciation and amortisation).
• Revenue decreased by 2% to £5.595m (FY2022: £5.699m) reflecting challenging market conditions.
• EPS returned to breakeven position at 0.01p (FY2022: (0.93p)).
• Net cash from operating activities £1.063m (FY2022: £1.189m).
• CBIL debt reduced by £0.300m.
• Net debt increased to £1.169m (FY2022: £1.017m)

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

"I am pleased to report the Group has returned to operating profitability in FY2023 for the first time since 2018.

"In a challenging market, the Group has delivered profit performance in line with expectations, paid down debt and continued to invest for the future.

"We have made a solid start to the year, with all products performing broadly in line with expectations in the first quarter. The Board is confident of making further progress in 2024."

Investor Presentation: 3pm on Tuesday 30 April 2024

Jason Starr, Chief Executive, and Ian Mackin, Finance Director, will hold an investor presentation to review the results and prospects at 3pm on Tuesday 30 April 2024.

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

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

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 18 May 2024 for approval at the Annual General Meeting to be held on 12 June 2024.

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

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

Enquiries:

Dillistone Group Plc
Giles Fearnley	Chairman	Via Walbrook PR
Jason Starr	Chief Executive Officer
Ian Mackin	Finance Director
WH Ireland Limited (Nominated adviser)
Chris Fielding	Deputy Head of Corporate	020 7220 1650
	Finance
Walbrook PR
Tom Cooper / Joe Walker	[e-mail]
	020 7933 8780
	0797 122 1972

Notes to Editors:

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

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

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

Learn about our products:
Talentis Software:	https://www.talentis.global/recruitment-software/
Voyager Software:	https://www.voyagersoftware.com
GatedTalent Services:	https://www.talentis.global/optimization-services/

CHAIRMAN'S STATEMENT

I am pleased to report the Group has returned to operating profitability in 2023 for the first time for a number of years.

In a challenging market, the Group has delivered profit performance in line with expectations while paying down debt and continuing to invest for the future.

The underlying business results continue to improve. The Group moved into profit at an operating level, adjusted EBITDA increased 38%, loss before tax was reduced by 77% and earnings per share reached breakeven. We have delivered on our turnaround and present profit results in line with market expectations.

For the purposes of obtaining true comparatives, we focus on measures which are adjusted to remove items of Government support, acquisition related or exceptional items, to better understand the underlying business.

The adjusted operating profit before acquisition related, furlough and other items improved by 241% to £0.220m (FY2022: (£0.156m)). This marks the first adjusted operating profit since 2018.

Net cash from operating activities dipped slightly to £1,063m (FY2022: £1.189m) with a similar level

of reduction in the change in cash and cash equivalents at (£0.441m) (FY2022: (£0.362m)).

During the year the Group paid down £300k of debt.

Dividends

The Group is not recommending a final dividend in respect of the year to 31 December 2023 (2022: nil).

Staff

In a challenging year for our markets, to deliver a successful outcome is creditable, and I would like to, once again, thank all involved for their efforts, commitment and determination to deliver first class products and services to the sectors we serve.

Corporate governance

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

Outlook

Our Group generates revenue primarily from the recruitment sector, and this is a market that remains soft. We assume that the environment will remain challenging, but we have made a solid start to the year, with all products performing broadly in line with expectations in the first quarter. With our recurring revenues covering our overheads and our ability to deliver our products far more efficiently than in recent years, the Board is confident of making further progress in 2024.

Giles Fearnley

Non-Executive Chairman

CEO's Review

Dillistone Group Plc is a global leader in the supply of technology to the recruitment sector worldwide, working with executive search, contingent recruiting and in-house staffing teams in over 1,000 organisations.

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

Contingency recruitment products:

Our products serving this sector are:

• Infinity, which is an established recruitment CRM used primarily by agencies in the UK, but also with users in Europe and Australia. It enables recruitment businesses to manage prospects, clients, candidates and jobs in one place and offers deep integration to Office365 and other recruitment industry complementary solutions. It is one of the few solutions in the UK market with extensive functionality for permanent, contract and temporary jobs all in one system;
• ISV.Online, which is an online skills testing product used by both recruitment agencies and corporate organisations and has a strong international footprint. It allows recruiters and HR professionals to assess individuals using our extensive portfolio of tests or to create their own unique tests to meet their requirements; and
• Mid-Office,which is a comprehensive pay & bill solution that allows recruitment businesses and back office service providers to process timesheets and bridges the gap between paying workers and invoicing clients. It can be used on a standalone basis or integrated with other recruitment systems including our Infinity product.

Contingency review:

• Despite market conditions, the recurring revenue associated with this part of our business was stable, generating a combined £3.460m in recurring revenue, (FY2022 £3.441m).
• In Q1 2023, we announced a contract with a well-known leading UK based contingency recruiter. This contract featured a significant amount of custom work and the scope of this work grew over the course of the year. As a result, while we anticipated that it would be fully live within the year, the platform is now expected to go live in 2024. A significant proportion of the non-recurring revenue associated with the custom development work was realised within the year in review.
• Summer 2023 saw us launch our Mid-Office cloud offering. This offers new and existing clients the ability to use our Mid Office product without the need for internal servers. We are seeing encouraging early adoption of this offering,

During Q1, we have delivered further enhancements to our range of contingency products, including the development and successful use of a psychometric testing service as an enhancement to our ISV platform. The first client to use this product was one of the best- known recruiting firms in the UK, operating on behalf of a globally known automotive company.

Executive Search products:

Our primary products in the Executive Search sector are:

• Talentis, which is our latest product targeting executive recruiters and is used for both candidate research and sourcing and as an executive recruiting CRM;
• FileFinder, which is an established CRM product with thousands of users worldwide; and
• GatedTalent, which is a service that helps recruiters source candidates and candidates find jobs.

Executive search review:

Our executive search products have suffered a challenging few years. However we are pleased to report that while we have further work to do in this sector, our performance is stabilising. Despite continued challenging market conditions, following a 24% fall in 2021 and a 10% fall in 2022, revenue fell by a lower 5% in 2023, totalling £2.135m compared to £2.258m in 2022.

The Board believes that Talentis will become the main revenue driver for the executive search division in the fullness of time. Initially positioned primarily as a research tool, we have continued to add CRM functionality and, since late Q4 2023, we have been actively positioning the platform as a viable upgrade option for FileFinder customers. As part of that process, the GatedTalent platform has since Q1 2024 no longer been supported by FileFinder and, instead, key GatedTalent functionality has been integrated with Talentis with the legacy GatedTalent platform being turned off.

While FileFinder and GatedTalent revenue fell in 2023, Talentis revenue grew. The Board believes that positioning Talentis as the natural successor to FileFinder will help to retain customers within the Group.

During Q1 2024, we have continued to enhance our executive search products, with the primary focus being on Talentis. Despite the challenging market conditions, Talentis revenues have grown in the quarter.

Cost savings and EBITDA Margin step-change.

During 2023, we made significant strides in improving margins within the business, reflecting our investment in improving our internal systems and architecture. This allows us to deliver products and services more efficiently and, with the downturn in our market, we were able to reduce our personnel related and office overheads while continuing to provide what we consider to be industry leading levels of service. The majority of the financial benefit of these moves will be felt from FY2024 onwards.

Nevertheless, due in part to these measures, we were able to reduce our cost base by £0.400m in FY23 enabling the adjusted EBITDA margin to reach 23.5%.

This is a step change from the margins obtained between 2017 and 2022, when the average margin was 16.8%. Excluding the Covid-19 support received from Government, the average historical margin over the same period was 14.9%.

KPIs and financial performance

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

	FY23	FY22	% Move
	£'000	£'000
Total revenue	5,595	5,699	(2%)
Recurring revenue	4,974	5,051	(2%)
Adjusted EBITDA *	1,314	949	38%
Cash from operating activities	1,063	1,189	(11%)
Adjusted profit /(loss) before tax **	65	(290)	122%

• EBITDA adjusted for exceptional items
• Adjusted profit / (loss) before tax is statutory profit before acquisition related intangible amortisation, reorganization and other costs. See note 2 and note 5.

Strategy

The Group's strategy is to grow the business organically. This strategy is made possible through our commitment to product development, which generates the future revenue of the business. In 2023, product development equated to 17.2% of revenues (FY2022: 17.4%) and we continue to invest in our products going forward.

The Group's objectives are principally to:

• Ensure our products meet the needs of the recruitment sector through continual investment and development;
• Be a leading player in all the markets we serve;
• Develop our staff; and
• Increase our profitability and deliver increased shareholder value year on year.

Financial Review

Summary

The Group saw a return to operating profitability in the year.

• First operating profit since 2016
• Improvement of £0.376m in operating profit before acquisition, reorganisation and other items results in first such profit since 2018
• Adjusted EBITDA increased by 38%
• EBITDA margin up to 23.5% from 16.7% in FY2022
• Loss before tax down by 77%
• EPS returned to breakeven position
• CBIL loan reduced by £0.300m in year
• Net debt increased to £1.169m (FY2022: £1.017m)

The above was achieved whilst maintaining the level of investment in our products and paying down the CBIL loan.

Revenue

Group revenue decreased by 2% to £5.595m from £5.699m in FY2022.

Revenue by type	FY 2023	FY 2022	%
			Change
	£'000	£'000
Recurring revenue	4,974	5,051	(1.5%)
Non-recurring revenue	497	488	1.8%
Third party revenue	124	160	(22.5%)
	5,595	5,699	(1.8%)
Recurring revenue %	89%	89%	-

The total annual contract value (TACV), which is a forward looking measure of recurring revenue expectations for the next 12 months, has fallen to £4.451m (FY2022: £4.995m).

Gross profit margin

The gross margin increased to 89% from 86%. Going forward, the management team is focused on maintaining gross margin levels, particularly during challenging economic conditions.

Adjusted EBITDA*

The adjusted EBITDA* increased by 38% to £1.314m from £0.949m in FY2022. This resulted in a higher EBITDA margin of 23.5%, compared to 16.7% in FY2022. This was a result of the Group's agility in responding to market conditions, as a result of the investment we have made in systems over recent years.

• Refers to segment EBITDA in note 3

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

The operating position, before acquisition related, reorganisation and other items (adjusted operating profit) improved greatly to deliver a profit of £0.220m from (£0.156m) in FY2022. This is the Group's first such profit since 2018.

Inclusive of acquisition related, reorganisation and other items, the Group made an operating profit of £0.051m compared to an operating loss of (£0.319m) in FY2022. This is the first profit at an operating level since 2016.

The loss before tax decreased to (£0.104m) from (£0.453m) in FY2022 representing a decrease in loss of 77%. This led to a small profit after tax of £0.003m (FY2022: (0.183m)).

This set of profit figures demonstrates the progress made in recent years.

Taxation

The net tax credit for the year was £0.107m (FY 2022: £0.270m).

Balance sheet

The Group's net assets decreased slightly to £3.217m (FY 2022: £3.223m).

Trade and other receivables decreased slightly to £0.559m (FY 2022: £0.608m). Trade and

other payables also decreased to £2.019m (FY2022: £2.341m).

The Group capitalised £0.963m in development costs in the year (FY 2022: £1.007m) as the business continued its commitment to developing its products. Amortisation of development costs was £0.994m (FY 2022: £0.980m).

The Group continues to pay down its debt. The repayment of the Government CBIL loan which is fully repayable by June 2026 is now well underway.

As a result, the CBIL loan balance at 31 December 2023 was £0.750m (2022: £1.050m). The Group also has a convertible loan to current and former Directors of £0.400m (2022: £0.400m), which will not be repaid until the CBIL loan has been repaid.

Due to the activation of a break clause on office space, lease liabilities were adjusted down by £0.475m. In 2024, a new lease was entered into for a reduced office space with liabilities of £0.218m on signing.

Cashflow

Net cash from normalised operating activities decreased 10% to £1.063m (FY2022: £1.189m). Net change in cash decreased to (£0.441m) (FY2022: (£0.362m)). The Group finished the year with a utilisation less than 10% of the current bank facility at (£0.019m) (2022: cash and cash equivalents £0.433m).

Summarised cashflow	FY 2023	FY 2022
		£'000	£'000
Adjusted net cash from normalised operating activities	1,063	1,189
Investing Activities - net	(972)	(1,022)
Financial Activities - net	(532)	(529)
Net change in cash and cash equivalents	(441)	(362)
Cash and cash equivalents at beginning of year	433	764
Effect of foreign exchange rate changes	(11)	31
Cash and cash equivalents at 31st December
(19)	433

Jason Starr

Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023

		2023	2022
	Note	£'000	£'000
Revenue	3	5,595	5,699
Cost of sales		(601)	(816)
Gross profit		4,994	4,883
Administrative expenses		(4,943)	(5,202)
Operating profit / loss	6	51	(319)
Adjusted operating profit / (loss) before
acquisition related, reorganisation and	2	220	(156)
other items
Acquisition related, reorganisation and	5	(169)	(163)
other items
Operating profit / (loss)		51	(319)
Financial cost	8	(155)	(134)
(Loss) before tax		(104)	(453)
Tax income	9	107	270
Profit / (loss) for the year		3	(183)
Other comprehensive income/(loss)
Items that will be reclassified subsequently
to profit and loss:
Currency translation differences		(3)	7
Total comprehensive profit / (loss) for		-	(176)
the year
Earnings per share
Basic	10	0.01p	(0.93p)
Diluted	10	0.01p	(0.93p)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023

				Convertible
	Share	Share	Merger	loan	Retained	Share	Foreign
	capital	premium	reserve	reserve	earnings	options	exchange	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January	983	1,631	365	14	262	64	63	3,382
2022
Comprehensive income
Loss for the year	-	-	-	-	(183)	-	-	(183)
Other comprehensive
income
Exchange differences on
translation of overseas	-	-	-	-	-	-	7	7
operations
Total comprehensive loss	-	-	-	-	(183)	-	7	(176)
Transactions with owners
Share option charge	-	-	-	-	14	3	-	17
Total transactions with	-	-	-	-	14	3	-	17
owners
Balance at 31 December	983	1,631	365	14	93	67	70	3,223
2022
Comprehensive income
Profit for the year	-	-	-	-	3	-	-	3
Other comprehensive
income
Exchange differences on
translation of overseas	-	-	-	-	-	-	(3)	(3)
operations
Total comprehensive loss	-	-	-	-	3	-	(3)	-
Transactions with owners
Share option charge	-	-	-		4	(10)	-	(6)
Total transactions with	-	-	-		4	(10)	-	(6)
owners
Balance at 31 December	983	1,631	365	14	100	57	67	3,217
2023