Dillistone Group Plc is a leading global provider of software and services to recruitment firms and recruiting teams within major corporations. I have a holding in my growth portfolio (epic code: DSG).
Dillistone announced their interims and an acquisition today. Revenue for the six months ended 30 June 2014 increased by 10% to £4.198m,
gross margins though at 86.9% were lower by 136bps and with admin costs up by £0.397m,
EBIT was 14.2% lower than last year at £0.696m. Eliminating amortisation of intangibles relating to acquisitions in both years, EBIT is £0.824m lower than last year by 3.7%.
EPS at 2.72p was 20.5% below last year, excluding amortization costs of acquired businesses adjusted EPS was 3.8% below last year at 3.55p.
The interim dividend has been increased by 4% to 1.3p.
Free cash flow showed an improved position up from £0.710m last year to £0.827m this year. Net cash was down from the year-end by £0.206m to £1.193m following payment for deferred consideration on an acquisition of £0.550m and payment of the final dividend amounting to £0.475m from FCF.
Management have warned that: "...The introduction of new products necessitates a slower implementation cycle in the first few months and with the continuation of (a) strong pound, the Directors anticipate that adjusted profits are likely to be at a similar level to 2013..." So that's a substantial 23.4% off the house broker W H Ireland's current forecast for 2014
Despite that miss on W H Ireland's forecasts, the house broker was prepared to place £0.5m of new shares at 95p (less than 10% discount to the pre-announcement price) to part finance the acquisition also announced today.
The acquisition is of ISV Software Limited a UK based supplier of training and testing services, primarily to the recruitment industry. For the year ended 31 December 2013 the unaudited accounts of ISV showed PBT and profit after tax of £162,000 and £159,000 respectively on revenues of £750,000.
On Completion, an initial consideration of £850,000 in cash will be payable by Dillistone. A further payment of £150,000 will be payable on 15 January and it has been agreed that surplus cash (calculated as the amount of cash in ISV at 30 September less £150,000, plus any debtors in excess of £65,000) will also be paid out.
There is a deferred cash consideration of approximately 30% of net revenues arising in the 3 years to 30 September 2017 will be payable in 4 tranches with the first payment due in February 2015. It is currently anticipated that any earn-out consideration will be paid from the Group's existing cash resources. The maximum total consideration payable under the agreement is capped at £2.5m.
I would have thought that the institutions that subscribed for this placement, would have been brought on-side and made insiders before the announcement of the interims, to ensure that the placing would get away against the background of such a large miss on market expectations. This would indicate that institutional investors would have been comfortable with the company's long-term prospects. The company also state that they expect to raise a further similar amount (£0.5m) at a similar price (95p), not sure why they would split this, unless it is tied to some requirement from the institutional shareholders.
Free cash flow showed an improved position up from £0.710m last year to £0.827m this year. Net cash was down from the year-end by £0.206m to £1.193m following payment for deferred consideration on an acquisition of £0.550m and payment of the final dividend amounting to £0.475m from FCF.
Management have warned that: "...The introduction of new products necessitates a slower implementation cycle in the first few months and with the continuation of (a) strong pound, the Directors anticipate that adjusted profits are likely to be at a similar level to 2013..." So that's a substantial 23.4% off the house broker W H Ireland's current forecast for 2014
Despite that miss on W H Ireland's forecasts, the house broker was prepared to place £0.5m of new shares at 95p (less than 10% discount to the pre-announcement price) to part finance the acquisition also announced today.
The acquisition is of ISV Software Limited a UK based supplier of training and testing services, primarily to the recruitment industry. For the year ended 31 December 2013 the unaudited accounts of ISV showed PBT and profit after tax of £162,000 and £159,000 respectively on revenues of £750,000.
On Completion, an initial consideration of £850,000 in cash will be payable by Dillistone. A further payment of £150,000 will be payable on 15 January and it has been agreed that surplus cash (calculated as the amount of cash in ISV at 30 September less £150,000, plus any debtors in excess of £65,000) will also be paid out.
There is a deferred cash consideration of approximately 30% of net revenues arising in the 3 years to 30 September 2017 will be payable in 4 tranches with the first payment due in February 2015. It is currently anticipated that any earn-out consideration will be paid from the Group's existing cash resources. The maximum total consideration payable under the agreement is capped at £2.5m.
I would have thought that the institutions that subscribed for this placement, would have been brought on-side and made insiders before the announcement of the interims, to ensure that the placing would get away against the background of such a large miss on market expectations. This would indicate that institutional investors would have been comfortable with the company's long-term prospects. The company also state that they expect to raise a further similar amount (£0.5m) at a similar price (95p), not sure why they would split this, unless it is tied to some requirement from the institutional shareholders.
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