Final Results

29 April 2014

Dillistone Group Plc("Dillistone", the "Company" or the "Group")Final Results

Dillistone Group Plc, the AIM quoted supplier of recruitment software, is pleased to announce its audited results for the 12 months ended 31 December 2013.

Results Webinar - Jason Starr, Chief Executive, and Julie Pomeroy, Finance Director, will be hosting a webinar to review the results of 2013 at 3pm today. To register please visit www.dillistonegroup.com/ir.aspx or contact Tom Cooper on [email protected] or 0797 122 1972.

Annual Report and Accounts - The final results announcement can be downloaded from the Company's website (www.dillistonegroup.com). Copies of the Annual Report and Accounts (in addition to the notice of the Annual General Meeting) will be sent to shareholders by 16 May 2014 for approval at the Annual General Meeting to be held on 11 June 2014.

Contacts:

Notes to Editors:

Dillistone Group Plc (www.dillistonegroup.com) is a leader in the supply and support of recruitment software. It has three trading businesses operating through two divisions: Dillistone Systems, which targets the executive search industry (www.dillistone.com); and Voyager Software, which targets other recruitment markets via its Voyager and Infinity products (www.voyagersoftware.com) and its recently acquired FCP Internet business (www.evolvedb.co.uk).

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

Chairman's Statement

The Group has again enjoyed another successful year in 2013, delivering its best ever performance in terms of both revenue and operating profit. Revenue was up 15% to £8.1m and adjusted operating profits up 7% to £1.8m. We have two divisions - Dillistone Systems and Voyager Software - and both delivered top line and bottom line growth.

The acquisition of FCP Internet (FCP) in July 2013 has once again proven our ability to acquire and integrate businesses successfully. The FCP team is now settled into our wider Group, client retention has been good and the evolveTM SaaS product is continuing to perform well in the market. FCP contributed £472,000 to revenue and £55,000 to profit before taxation in 2013.

It is the view of the Board that product development is fundamental to the long term success of the business and as a result 2014 will see us continue to invest in the development of software within both of our divisions.

Dividends

The Board was pleased to increase the interim dividend payment in September 2013 to 1.25p (2012: 1.2p). The Board has recommended a final dividend of 2.6p per share (2012: 2.5p), subject to shareholder approval, payable on 25 June 2014 to holders on the register on 16 May 2014. Shares will trade ex-dividend from 14 May 2014. This takes the total dividend based on the 2013 results to 3.85p, and gives a yield of 3.5% on a share price of 111p.

This represents another year on year increase in the dividend, in line with our progressive dividend policy, which illustrates the Board's confidence in the future prospects of the Group. The business is committed to maintaining its policy of investing in its products and services whilst rewarding its shareholders.

Staff

Our staff are fundamentally important to the success of the business. It is through their efforts, commitment and determination that we continue to be a leading technology provider in the sectors we serve. On behalf of the Board I would like to take this opportunity to thank all of them.

Outlook

The Board retains a confident outlook on prospects for the Group.

At this stage, while first half revenues are expected to be ahead of the equivalent period for 2013, it is anticipated that first half pre-tax profit will be below that delivered in 2013. We announced in summer 2013 that we were strengthening our management team and this, along with the increased amortisation of our product development, are two of the key reasons behind the increase in expected costs. However, taking the year as a whole, the Group expects to make positive progress in 2014, the scale of which will become clearer as the year evolves.

Within our Dillistone Systems division, we have sold more new systems in the first quarter of 2014 than we did in the same period of 2013, however, income from new systems sales in 2014 is lagging that seen in 2013, in part due to an increase in the proportion of purchases delivered on the cloud subscription model, which has an impact on near term revenues.

Our Voyager division delivers products into a range of recruiting markets. Performance has varied across these, with a number of products delivering a strong performance.

With a strong profile of recurrent revenues, the Group continues to generate cash allowing us to continue to invest in improving our products and services whilst maintaining our dividend policy.

Both the Dillistone Systems and Voyager Software divisions anticipate making significant product related announcements later in the year.

Dr Mike Love

Non-Executive Chairman

28 April 2014

Chief Executive's Statement

Introduction

Dillistone Group Plc is a global leader in the supply of technology solutions and services to the recruitment industry worldwide.

Strategy and objectives

The Group's strategy is to grow the business both organically and through acquisition. This strategy is made possible by our commitment to product development, which ensures that the business continues to command a leading role in all of the markets in which it operates.

Our acquisition strategy typically entails consideration of firms offering:

· products that would further increase market share in the Group's core markets;

· legacy applications where clients could be transferred to our modern suite of products; or

· complementary applications which may be cross-sold to clients of the Group.

The Group's objectives are principally to:

· ensure our products meet the needs of the recruitment sector through continual investment and development of our products;

· be a leading player in all of the markets we serve;

· develop our staff;

· increase our profitability and deliver increased shareholder value year on year and to follow a progressive dividend policy.

Review of the business

2013 saw recurring revenues grow 16% to £5.271m (2012: £4.529m) reflecting the acquisition of FCP Internet, whose revenues (£472,000) are included in the Group results for the first time and are mainly recurring in nature. Recurring revenues represent 65% of Group revenues (2012: 64%). Overheads have increased across the business in part as a result of our decision to strengthen management depth in anticipation of future growth but, despite this, pre-tax profits before acquisition related items increased 7% to £1.801m (2012: £1.684m).

Dillistone Systems

The Dillistone Systems division is primarily focused on providing technology solutions to the executive search market. This client group is made up of both executive search firms and executive search teams in major organisations.

In my 2013 report, I noted that, in 2012,- according to statistics from the Trade association, the Association of Executive Search Consultants (AESC), the retained search market had shrunk but that Dillistone Systems had grown its install base despite that trend. I am able to report a very similar story in 2013, with the AESC reporting that the total number of mandates taken on by search firms in 2013 fell by 8.5%. Despite this, Dillistone Systems was again able to sign up a new client roughly every other working day.

In addition, we successfully sold our FileFinder product into a variety of different corporate sectors. These included retail, technology, private equity, management consulting, energy, banking, publishing and the public sector.

The division continued to invest in enhancing our products and services. For a number of years, Dillistone Systems has offered cloud hosting facilities in the UK and Australia, and facilities in the US and Asia have been added since the publication of our last report.

Our development team has continued to develop the FileFinder product, and has delivered performance and functionality improvements since launch. The division expects to make an important product related announcement later this year.

Dillistone Systems' head office is in London and it has offices in the US, Germany and Australia. The division accounts for 61% (2012: 66%) of the Group's revenue and saw recurring revenue grow 3% to £3.248m (2012: £3.144m). As a whole, the division saw segmental operating profit before amortisation and depreciation increase by 5% to £2.013m (2012: £1.912m).

Revenue

Voyager Software

Voyager Software performed well in 2013. The division successfully delivered its largest ever contract and has seen its 'Infinity' product gain good momentum in the market.

The Infinity product was a major development for the business and, since launch, work has continued to optimise it for larger firms and certain delivery models.

July 2013 saw us acquire FCP Internet, a UK focused SaaS business targeting the recruitment industry via its product, evolveTM. The integration of the business has been successfully completed, with the majority of staff transferring to existing Group offices in Basingstoke and London. Client retention has been strong, and the evolveTM platform today supports more users than ever before.

In 2013, the Voyager Software division accounted for 40% of Group revenues. The division's revenues were £3.202m and it had a segmental operating profit before amortisation and depreciation of £0.598m.

Revenue

Although both divisions are run separately, synergies continue to be delivered. Both divisions are committed to continuing to invest in their products to ensure they retain their market leading positions.

Jason Starr

Chief Executive Officer

Finance Director's Statement

Financial review

Total revenues increased by 15% to £8.101m (2012: £7.052m), with profit before tax and acquisition related items up 7% to £1.801m (2012: £1.684m). Recurring revenues increased by 16% to £5.271m (2012: £4.529m). Non-recurring revenues saw an increase of 13% to £2.428m from £2.140m in 2012. Third party software product sales amounted to £0.402m in the period (2012: £0.383m). These results include FCP revenues from July 2013.

Cost of sales increased by 11% to £0.957m (2012: £0.864m), reflecting the impact of FCP from 8 July 2013.

Administrative costs, excluding acquisition related items, depreciation and amortisation, rose 15% to £4.901m (2012: £4.246m), reflecting a part year of FCP and increased investment in management. Depreciation and amortisation increased to £0.449m (2012: £0.327m). Acquisition related administrative costs totalled £0.210m (2012: £0.102m) and relate to acquisition costs and amortisation of intangibles arising on the Voyager and FCP acquisitions offset by a reduction in the estimated contingent consideration payable re Voyager of £0.058m. Interest income has also been offset by the unwinding of the discount in respect of the deferred consideration.

Recurring revenues covered 98% of administrative expenses before acquisition related costs (2012: 99%). Excluding depreciation and amortisation of our own internal development, the administrative costs are more than covered at 108% (2012: 107%).

Tax has been provided at an effective rate of 19% (2012: 22%) excluding acquisition related items and at 19% (2012: 18%) post acquisition related costs. These rates reflect the R&D tax credits available to both Dillistone Systems and Voyager Software that have been claimed, partially offset by the higher rates of corporation tax that are payable overseas. The post acquisition related items rate also reflects the reduction in deferred consideration and the write off of acquisition costs together with the reduction in deferred tax rate used in the accounts from 23% to 21%.

Profits for the year before acquisition related items rose 11% to £1.455m (2012: £1.311m) and profits for the year after acquisition related items decreased marginally to £1.231m (2012: £1.235m). Basic earnings per share (EPS) rose 11% to 7.99p (2012: 7.20p) before acquisition related items and decreased by 0.5% to 6.76p (2012: 6.79p) after such items. Fully diluted EPS rose 7% to 7.70p (2012: 7.18p) and decreased 4% to 6.51p (2012: 6.76p) after acquisition related items.

Capital expenditure

The Group invested £0.830m in property, plant and equipment and product development during the year (2012: £0.872m). This expenditure included £0.747m (2012: £0.803m) spent on development costs, of which £0.250m relates to development in Voyager Software (2012: £0.403m), that has been capitalised under IFRS in the Group accounts.

Trade and other payables

As with previous years, the trade and other payables include income which has been billed in advance but is not recognised as income at that time. This principally relates to support, SaaS and hosting renewals which are billed in December 2013 but that are in respect of services to be delivered in 2014. Contractual income of this type 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'. Also included in trade and other payables is £0.918m (2012: £0.360m) relating to consideration and contingent consideration due to former Voyager and FCP shareholders. The contingent consideration in respect of Voyager Software is dependent on the level of revenue achieved by the division in the periods up to 31 December 2013. There are four tranches of deferred contingent consideration in respect of FCP and they are dependent on levels of revenue achieved in periods up until 31 March 2015.

Cash

Dillistone finished the year with cash funds of £1.399m (2012: £1.643m) and remains debt free. This is after capital expenditure of £0.830m, the payment to the vendors of Voyager and FCP of £0.900m (net of cash received with FCP) and dividend payments of £0.683m.

Julie Pomeroy

Finance Director

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2013

Earnings per share - from continuing activities

*see accounts note 4 & 7

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2013

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED

31 DECEMBER 2013

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2013

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 2013 or 2012, but is derived from these financial statements. The financial statements for the year ended 31 December 2012 have been delivered to the Registrar of Companies. The financial statements for the year ended 31 December 2013 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 2013 will be forwarded to the Registrar of Companies following the Company's Annual General Meeting. The Auditors have reported on these financial statements; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

The consolidated statement of financial position at 31 December 2013 and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended have been extracted from the Group's financial statements. Those financial statements have not yet been delivered to the Registrar.

2. Basis of preparation

The preliminary announcement is extracted from the consolidated financial statements of all the entities within 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.

The preliminary announcement has been prepared under the historical cost convention, except for revaluation of certain financial instruments.

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.

3. Accounting policies and changes thereto

This preliminary announcement has been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31 December 2012 except for the adoption of the following new interpretations, revisions and amendments to IFRS issued by the International Accounting Standards Board, which are relevant to and effective for the Group's financial statements for the financial year beginning 1 January 2013:

None of the above had a material impact on the financial statements of the group. As such there have been no material changes to the Group's accounting policies since the previous Annual Report.

4. Reconciliation of adjusted operating profits to consolidated statement of comprehensive income

Earnings per share - from continuing activities

* see note 7

5. Segment reporting

The Board principally monitors the Group's operations in terms of results of the two divisions, Dillistone Systems and Voyager Software. Segment results reflect management charges made or received. Intercompany balances are excluded from segment assets and liabilities.

Divisional segments

For the year ended 31 December 2012

Products and services

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

Revenue

Recurring income includes all support services, SaaS and hosting income. Non-recurring income includes sales of new licenses, and income derived from installing those licenses 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.

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

Non-current assets by geographical location

7. Acquisition related items

8. Tax expense