Company Registration No. 4578125 (England and Wales)
ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2010
DILLISTONE GROUP PLC
CONTENTS
Highlights
Directors and advisers
Chairman‟s statement
Business review
Financial review
Directors‟ report
Corporate governance report
Report to the shareholders on directors‟ remuneration
Independent auditors‟ report to the members
Consolidated income statement
Consolidated statement of changes in equity
Company statement of changes in equity
Consolidated and Company balance sheets
Consolidated cash flow statement
Company cash flow statement
Notes to the financial statements
Page
1
2
3
5
8
9
12
15
17
19
20
21
22
23
24
25
DILLISTONE GROUP PLC
HIGHLIGHTS
Highlights for the year:
Revenues up 16% to £4.3m with non recurring revenues up 31%
Record level of recurring revenues at £2.5m
Operating profits up 9% to £1.2m
Final dividend of 7p per share recommended, making total dividend
for year of 10.5p
Cash funds of £2.1m up 18%. The Group remains debt free
Clients in 61 countries world wide
Delivery of our largest ever US based implementation
FileFinder 10 launched on 31 March 2011
Commenting on the results, Mike Love, Non-Executive Chairman, said:
“Dillistone has made excellent progress in 2010 despite the broader
economic uncertainty. We have grown the client base, invested in product
development and delivered an increase in profits.
“We are a market leader in the executive recruitment software industry
where our products are business critical to our clients. We are committed to
investing in maintaining and building on that advantage for the benefit of
both clients and shareholders. The release of „FileFinder 10‟ is evidence of
this strategy.”
Page 1
DILLISTONE GROUP PLC
DIRECTORS AND ADVISERS
Directors
M D Love – Non-Executive Chairman
J S Starr – Managing Director
R Howard – Operations Director
A D James – Product Development Director
J P Pomeroy – Finance Director
G R Fearnley – Non-Executive Director
A F Milne – Director of Support Services
Secretary
J P Pomeroy
Company number
4578125
Registered office
Independent auditors
Principal Bankers
Solicitors
3rd Floor
50-52 Paul Street
London, EC2A 4LB
Saffery Champness
Beaufort House
2 Beaufort Road
Clifton
Bristol, BS8 2AE
Barclays Bank PLC
240 Whitechapel Road
PO Box 14623
London, E1 1SH
Osborne Clarke
2 Temple Back East
Temple Quay
Bristol, BS1 6EG
Nominated Adviser
Religare Capital Markets (UK) Limited
100 Cannon Street
London, EC4N 6EU
Broker
Registrars
Religare Capital Markets plc
100 Cannon Street
London, EC4N 6EU
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU
Page 2
DILLISTONE GROUP PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2010
Results Overview
We entered 2010 with some signs of an improving market, following a very difficult 2009 for the
sector and this has been borne out by our results for the year which saw revenue increase by
16% to £4.3m and operating profits increase by 9% to £1.2m. These results are in line with
market expectations.
Dillistone is a leading player in the executive recruitment software sector and our continued
investment in product development is fundamental to retaining this position in the market. To this
end, we have spent over £0.6m in 2010 and launched the new, next generation, release of our
core FileFinder product, FileFinder 10, on 31 March 2011. This major new version of FileFinder
has been in development since 2008 and represents the realisation of an investment of over
£1m. Further details of FileFinder 10 are contained in the Managing Director‟s Business Review.
Strategy
Dillistone‟s strategy is to continue to grow the business both organically and through acquisition.
Our organic growth is underpinned by our commitment to product development which ensures
that the business continues to command a leading role in the sector and that FileFinder is a
natural choice for consideration by customers when looking to acquire software in our field.
The Board is also actively pursuing an acquisition strategy. This entails consideration of firms
offering:
executive search products that would increase our share of our core markets; and
products that would broaden our offering to the recruitment sector.
Investor Relations
The executive management have invested significant time meeting with both existing and
potential investors including private client brokers. During 2010 we gained a new significant
institutional investor and an additional investment from an existing institutional investor.
To help increase liquidity and marketability of our shares, a resolution will be included at the next
annual general meeting (AGM) in June to approve a two for one bonus issue of the Company‟s
shares. Further details will be included in the AGM papers. Having taken appropriate advice, the
Board believes that the bonus Issue may enhance and thereby strengthen the equity base of the
Company.
Dillistone will continue to review opportunities to broaden its shareholder base.
Dividends
An interim dividend of 3.5p per share was paid in November 2010. The Board has recommended
a final dividend of 7p per share, subject to shareholder approval, payable on 21 June 2011 to
holders on the register on 20 May 2011. Shares will trade ex-dividend from 18 May 2011. This
takes the total dividend for the year to 10.5p (2009: 10.5p). For the avoidance of doubt, the
recommended dividend of 7p per share, which is subject to shareholder approval, is in respect of
existing ordinary shares only and not in respect of any new ordinary shares issued as a result of
the two for one bonus issue.
Page 3
DILLISTONE GROUP PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2010
Board Changes
Jim McLaughlin resigned as Executive Chairman and Finance Director in February 2010 and I
stepped into the role of Non-Executive Chairman. Julie Pomeroy joined us as Finance Director in
April 2010 and has also become Company Secretary. Giles Fearnley became a Non-Executive
Director in May 2010 and is Chair of the audit committee.
Alistair Milne also joined the Board as Director of Support Services with effect from January 2011.
Alistair has been with the Group since 2003, and continues as a Director of our UK subsidiary,
Dillistone Systems Ltd.
Staff
Our staff are fundamentally important to the success of the business. It is through their efforts,
commitment and determination that we continue as a leading player in the executive search
software industry and have been able to produce strong results for 2010. On behalf of the Board
I would like to take this opportunity to thank all of them.
Outlook
The Group continues to work hard to maintain its position in the sector. The launch of our new
FileFinder product, FileFinder 10, will underpin this.
We have started 2011 well with a strong order book. However, our approach to the launch of
FileFinder 10 is to cautiously roll it out in the first few months. Consequently, we expect trading in
the first half of the year to be broadly in line with H1 2010. We expect revenues to increase more
strongly once clients and potential clients have had the opportunity to see the benefits of the new
product. We anticipate that the real benefits of the investment in FileFinder 10 will be seen in
2012 and beyond.
Dillistone will continue to actively search for suitable acquisitions to enhance its product portfolio
and deliver shareholder value. Dillistone also enjoys a strong balance sheet and remains debt
free. As such, the Board considers it is well placed to compete in the global market place in
which it operates.
Dillistone has made excellent progress in 2010 and I look forward to updating you further at the
time of our Annual General Meeting in June.
Dr Mike Love
Chairman
Page 4
DILLISTONE GROUP PLC
BUSINESS REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2010
2010 has proven to be a good year for the business. Once
implemented more
that we have
again, we believe
systems, in more countries, for more executive search
firms, than any comparable supplier. Worldwide, we were
signing up an average of 3 new clients every week, with
this representing a 50% increase on incoming orders over
2009. We have grown our recurring revenue base to
record levels (£2.5m against £2.3m in 2009) and have
maintained our excellent reputation for delivery, with 2010
seeing us implement our largest ever US contract (which
also represents our largest contract win since our floatation
in 2006).
Recurring revenue
s
0
0
0
£
2,900
2,400
1,900
1,400
900
2005 2006 2007 2008 2009 2010
The year has also seen us implement our software outside of our traditional markets, with
successful implementations at major corporations (ranked up to Fortune 100 level) and at a
number of academic and venture capital institutions. This has been achieved despite much of our
focus being on preparing for the launch of our “next generation” software application, FileFinder
10, and despite our target markets still suffering from a degree of economic uncertainty.
We continue to offer our FileFinder products for both outright purchase and under the software as
a service (SaaS) model. The latter continues to grow, with 18% of new licence sales in 2010
being under this model (9% in 2009). By offering our products under both models we are able to
ensure the delivery of returns to our shareholders in both the short and longer terms.
UK, Middle East and Africa (UKMEA)
Our regional split is somewhat arbitrary, as all of our regions
are expected to provide service to all of our clients. That
said, our largest region remains UKMEA which accounted for
43% of total sales at £1.8m (2009: £1.5m).
Europe
Our European business continued to feel the effects of the
economic downturn with revenues down by 15% to £0.8m
(2009: £1.0m). The profits for our European operation in
2010 were £0.1m (2009: £0.8m) after carrying a £0.5m
recharge from the UKMEA business.
USA
% of revenue by region
in 2010
Asia-
Pacific
13%
UKMEA
43%
USA
25%
Europe
19%
Our US office is based in New Jersey and primarily looks after our US, Canadian and South
American business. We saw revenues increase by 30% in 2010 to £1.1m (2009: £0.8m). The
US operations accounted for 25% of total sales in 2010 (2009: 22%).
Australia
Our Asia Pacific business is primarily looked after by our office in Sydney, Australia, and has
bounced back strongly after a very difficult 2009. Revenues grew by 60% to £0.6m (2009:
£0.4m) and accounted for 13% of total sales (2009: 10%).
Page 5
DILLISTONE GROUP PLC
BUSINESS REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2010
As mentioned in the Chairman‟s Statement, product development is fundamental to retaining a
leading position in the executive recruitment software market. On 31 March 2011, we announced
the general availability of our “Next Generation” FileFinder system, FileFinder 10.
FileFinder 10 has been in development since 2008 and represents the culmination of an
investment of more than £1m. Whilst the product shares many characteristics of previous
versions, it has been entirely re-written to take full advantage of Microsoft‟s .NET Framework.
We believe that the new version of the software will bring many advantages to our user base and,
in turn, we believe that this will be beneficial to our shareholders:
FileFinder 10 has a new interface designed to be both more attractive and intuitive. We
believe that this will increase our conversion rate and reduce training requirements,
thereby allowing us to implement more systems, more quickly;
the new product may be delivered, when required, entirely on a Microsoft platform. Our
historical
technology (combining Powerbuilder and Sybase SQL Anywhere) was
considered to be disadvantageous, particularly when bidding for corporate clients;
the new product has been designed to better meet the specific needs of larger executive
search firms. We believe that, over time, this will see an increase in our average contract
size for new business wins;
our decision to develop the new generation of FileFinder software using an industry
standard platform should make it easier to achieve synergies from any acquisitions we
might make; and
continuing development is important if we are to maintain our support and SaaS contracts.
We believe that the launch of FileFinder 10 will facilitate increased client retention.
In the build up to the launch of FileFinder 10 on 31 March 2011, we presented the product to a
number of existing and potential clients. Feedback was extremely positive, to such an extent that
we now have a waiting list of existing clients wishing to upgrade. This waiting list includes clients
in 11 countries. In addition to this, we have won a number of contracts from firms wishing to
implement FileFinder for the first time. This includes firms in both Europe and the United States,
and includes a number of firms which plan to implement FileFinder having previously used
competing systems.
The launch of FileFinder 10 is a major step for the business and one which, we believe, will lead
to substantial long term benefits. However, it is important for the reputation of the Company that
we manage the roll out of the product cautiously. Our budget for the first half of the year reflects
this and it is the opinion of the Board that Dillistone will not fully enjoy the benefits of the new
product until 2012.
Page 6
DILLISTONE GROUP PLC
BUSINESS REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2010
FileFinder 10 offers enhanced
its
user experience over
predecessor
FileFinder 10
FileFinder 9
Page 7
Jason Starr
Managing Director
DILLISTONE GROUP PLC
FINANCIAL REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2010
Overview
Total revenues increased by 16.3% to £4.3m (2009: £3.7m), with operating profits up 9.4% to
£1.2m (2009: £1.1m). Recurring revenues increased by 8.2% to its highest ever level of £2.5m
(2009: £2.3m). Non-recurring revenues saw an increase of 30.8% to £1.7m from £1.3m in 2009.
Administrative costs rose 17.1% to £2.9m (2009: £2.5m). This was after a fairly austere 2009
which saw expenditure fall from over £3.0m in 2008 by not awarding staff bonuses, reductions in
general marketing and administrative expenditure and staff reductions through natural wastage.
Costs increased in 2010 in part due to some one-off costs in 2010 as well as increased marketing
related spend which helped us deliver higher sales. Selective recruitment was also carried out
with average staff numbers (excluding directors) in the Group rising from 43 in 2009 to 46 in
2010. Administration costs also include Director and staff bonuses of £0.1m in 2010 (2009: £nil).
Excluding 2010 bonuses, administrative costs rose by approximately 11%.
Tax has been provided at an effective rate of 26.2% (2009: 22.6%). This rate reflects the R&D
tax credits that have been claimed, though not yet agreed, as well as the higher rates of
corporation tax that are payable in the US and Australia.
Profits for the year rose 4.2% to £0.9m (2009: £0.8m). Basic EPS rose 2.5% to 15.39p (2009:
15.02p) while fully diluted EPS rose 4.2% to 15.30p (2009: 14.68p).
Capital expenditure
Dillistone invested £0.7m in fixed assets and product development during the year (2009: £0.6m)
of which £0.6m was spent on development costs (2009: £0.5m).
Trade and other receivables
£0.1m (2009: £nil) has been included in non-current assets, reflecting extended payment or
billing terms agreed with customers.
Trade and other payables
This liability includes income which has been billed in advance but is not recognised at that time.
This principally relates to support renewals which have been billed in December 2010 but that are
in respect of services to be delivered in 2011. This also impacts on debtors at the year end.
Support 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 complete or the client software goes “live”.
Cash
Dillistone finished the year with cash funds of £2.1m (2009: £1.8m) and remains debt free.
Operating activities generated strong cash flows which were invested in development costs and
also payment of dividends to shareholders.
Julie Pomeroy
Finance Director
Page 8
DILLISTONE GROUP PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2010
The directors present their report and financial statements for the year ended 31 December 2010.
Principal Activities and Review of the Business
The principal activity of the Company continued to be that of a parent company. The principal
activity of the Group is the sale of specialist computer software and the provision of related
support services. A review of the business is contained on pages 5 to 7
Results and dividends
The consolidated statement of comprehensive income for the year is set out on page 19.
An interim dividend of 3.5p per share (based on 5,665,441 shares in issue at the time) was paid
in November 2010. A final dividend of 7p per share will be paid, subject to shareholder approval,
on 21 June 2011.
Directors
The following directors have held office since 1 January 2010:
M D Love - (Non-Executive Chairman)
J S Starr
R Howard
A D James
J P Pomeroy - (appointed 19 April 2010)
G R Fearnley - Non-Executive Director - (appointed 1 June 2010)
J McLaughlin – Chairman – (resigned 17 February 2010)
A Milne (appointed 3 January 2011)
The interests of the directors (including family interests) in the share capital of the Company are
listed on page 16.
Dr Mike Love and Rory Howard, who are proposed for re-election at the forthcoming AGM, have
a service contract with a 1 year notice period. As Alistair Milne and Giles Fearnley have been
appointed since the last AGM they are also required to stand for re-election.
Principal shareholders
At the 31 March 2011 the directors have been notified of the following shareholdings in excess of
3% of the Company‟s issued share capital:
J S Starr
R Howard
J McLaughlin
Herald Investment Management
G Fearnley
Unicorn Asset Management
R Howells
CFS Independent
Ordinary shares
of 5 pence each
1,184,811
1,174,811
857,374
566,000
331,145
255,773
250,000
244,000
Page 9
Percentage
20.91%
20.74%
15.13%
9.99%
5.84%
4.51%
4.41%
4.31%
DILLISTONE GROUP PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2010
Creditor payment policy
The Group agrees payment terms with individual suppliers which vary according to the
commercial relationship and the terms of the agreement reached. Payments are made to
suppliers in accordance with the terms agreed. The number of supplier days represented by
trade payables at 31 December 2010 was 48 (31 December 2009: 30).
Annual General Meeting
The Company‟s Annual General Meeting will be held at its offices located at 50-52 Paul Street
London, EC2A 4LB on Monday 13 June 2011 at 11:00 am. The Notice convening the Annual
General Meeting and an explanation of the business to be put to the meeting is contained in the
separate document to shareholders which accompanies this report.
Auditors
A resolution proposing that Saffery Champness be re-appointed as auditors to the Company will
be put to the forthcoming Annual General Meeting.
Directors’ responsibilities
The directors are responsible for keeping proper accounting records which disclose with
reasonable accuracy at any time the financial position of the Company, for safeguarding the
assets of the Company, for taking reasonable steps for the prevention and detection of fraud and
other irregularities and for the preparation of a Directors' Report which complies with the
requirements of the Companies Act 2006.
The directors are responsible for preparing the Annual Report and the financial statements in
accordance with the Companies Act 2006. The directors have chosen to prepare financial
statements for the Group and the Company in accordance with International Financial Reporting
Standards (IFRSs) as adopted for use in the European Union.
International Accounting Standard 1 requires that financial statements present fairly for each
financial year the Company's financial position, financial performance and cash flows. This
requires the faithful representation of the effects of transactions, other events and conditions in
accordance with the definitions and recognition criteria for assets, liabilities, income and
expenses set out in the International Accounting Standards Board's 'Framework for the
preparation and presentation of financial statements'. In virtually all circumstances, a fair
presentation will be achieved by compliance with all applicable IFRSs. A fair presentation also
requires the directors to:
• consistently select and apply appropriate accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable,
comparable and understandable information; and
• provide additional disclosures when compliance with the specific requirements in IFRSs is
insufficient to enable users to understand the impact of particular transactions, other events
and conditions on the entity's financial position and financial performance.
Page 10
DILLISTONE GROUP PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2010
Statement of disclosure to auditor
In the case of each of the persons who are directors at the time when this report is approved, the
following applies;
(a) so far as each director is aware, there is no relevant audit information of which the
Company‟s auditors are unaware, and;
(b) each director has taken all the steps that he ought to have taken in his duty as a director in
order to make himself aware of any relevant audit information and to establish that the
Company‟s auditors are aware of that information.
On behalf of the board
J P Pomeroy
Company Secretary
4 April 2011
Page 11
DILLISTONE GROUP PLC
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2010
Corporate Governance
The Board supports the principles of good governance. In fulfilling their responsibilities, the
Directors believe that they govern the Group in the best interests of the shareholders, whilst
having due regard to the interests of other stakeholders in the Group including, in particular,
customers, employees and suppliers.
The Workings of the Board and its Committees
The Board
For the majority of 2010 the Board comprised a Non-Executive Chairman, one Independent Non-
Executive Director and four Executive Directors. All Directors are obliged to submit themselves
for re-election at least every three years. The Chairman and Non-Executive Director are
considered to be independent of management and free from any business or other relationship
which could materially interfere with the exercise of their independent judgement. Giles Fearnley
is the current Senior Independent Director. To enable the Board to discharge its duties, all
Directors have full and timely access to all relevant information. They are also able to take
independent professional advice as appropriate. With effect from 3 January 2011 Alistair Milne
joined the Board as an Executive Director
The Board meets at least six times each year and has adopted a formal schedule of matters
specifically reserved for decision by it, thus ensuring that it exercises control over appropriate
strategic, financial, operational and compliance issues. At these meetings the Board reviews
trading performance, ensures adequate financing, sets and monitors strategy, examines
investment and acquisition opportunities and discusses reports to shareholders. The following
Committees have been established to deal with specific aspects of the Group‟s affairs.
Audit Committee
In 2010 the Audit Committee comprised the Chairman and Non-Executive Director and met twice
during the year.
The Finance Director, Group Managing Director and external Auditors attend by invitation. It
makes recommendations to the Board on issues surrounding the appointment, resignation or
removal of Auditors and their remuneration. It discusses and agrees the scope of the audit with
the external Auditors before the audit.
The Audit Committee reviews external audit activities, monitors compliance with statutory
requirements for financial reporting and reviews the half-year and annual accounts before they
are presented to the Board for approval. It is also required to review the effectiveness of the
Group‟s internal control systems, to review the Group‟s statement on internal control systems
prior to endorsement by the Board and to consider, from time to time, the need for a risk
assessment of the Group‟s internal control systems.
Page 12
DILLISTONE GROUP PLC
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2010
Remuneration Committee
In 2010 the Remuneration Committee comprised the Chairman, the Non-Executive Director and,
by invitation, the Group Managing Director and Company Secretary. It is responsible for
recommending to the Board the contract terms, remuneration and other benefits for Executive
Directors, including performance-related bonus scheme and participation in the Group‟s long term
share option schemes.
Internal Controls
The Board has overall responsibility for the Group‟s system of internal controls. However, such a
system is designed to manage rather than eliminate the risk of failure to achieve business
objectives, and can only provide reasonable and not absolute assurance against material
misstatement. In order to discharge that responsibility in a manner which ensures compliance
with laws and regulations and promotes effective and efficient operations, the Directors have
established an organisation structure with clear operating procedures, lines of responsibility and
delegated authority. There is an established framework of internal controls set out and approved
by the Executive Management. The more important elements of this framework are as follows:
Management structure
The Board has overall responsibility for the Group and each Executive Director has been given
responsibility for specific aspects of the Group‟s affairs.
Corporate accounting and procedures
Responsibility levels are communicated throughout the Group as part of the corporate
communication procedure. Accounting, delegation of authority and authorisation levels,
segregation of duties and other control procedures, together with the general ethos of the Group
are included in these communications, and standardised accounting policies are in place
reflecting this policy.
Quality and integrity of personnel
The integrity and competence of personnel is ensured through high recruitment standards and
subsequent training courses. Quality personnel are seen as an essential part of the control
environment and the ethical standards expected are communicated through senior members of
staff.
Budgetary process
Each year the Board approves the annual budget, which includes an assessment of key risk
areas. Performance is monitored and relevant action taken throughout the year by monthly
reporting to the Board of updated forecasts together with information on key risk areas.
Investment appraisal
Capital expenditure is regulated by the use of authorisation levels, which are currently under
review. For all expenditure beyond specified levels, Board approval is required.
Page 13
DILLISTONE GROUP PLC
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2010
Internal monitoring
The Audit Committee considers and determines relevant action in respect of any control issues
raised by the Auditors. Given the size of the Group and the close day to day control exercised by
the Executive Directors and senior management, no formal financial internal audit department is
considered necessary. The Operations Director is responsible for maintaining registrations and
quality related certifications and defining and agreeing the procedures, standards and practices to
be followed in all aspects of the Group‟s business.
The Directors have reviewed the effectiveness of the system of internal controls in operation
during the year through the compliance monitoring process set out above and by reports from
senior managers concerning the operations for which they are responsible. It must be recognised
that such a system can provide only reasonable and not absolute assurance and, in that context,
the review revealed nothing, which in the opinion of the Directors, indicates that the system was
inappropriate or unsatisfactory.
Relations with Shareholders
The Company seeks to maintain good communications with shareholders. The Executive
Directors make presentations to institutional shareholders covering the interim and full year
results. The Group despatches the notice of Annual General Meetings („AGM‟), with an
explanatory circular describing items of special business, at least 21 working days before the
meeting. All shareholders have the opportunity formally or informally to put questions to the
Company‟s AGM and the Group MD makes a statement on current trading conditions at that
meeting. The Chairman of the Audit and Remuneration Committees attends the AGM and will
answer questions that may be relevant to the remit of those Committees. At each AGM the
Chairman advises shareholders of the proxy voting details on each of the resolutions, which are
dealt with on a show of hands.
Page 14
DILLISTONE GROUP PLC
REPORT TO THE SHAREHOLDERS ON DIRECTORS’ REMUNERATION
FOR THE YEAR ENDED 31 DECEMBER 2010
Remuneration Policy
The objective of the Group‟s remuneration policy is to attract, motivate, and retain high quality
individuals who will contribute significantly to shareholder value. The remuneration committee
decides on the remuneration of the directors and other senior management, which comprises a
basic salary, benefits, bonus scheme, share options and longer term incentive plan.
Service Contracts
The Board‟s policy is that service contracts of Executive Directors should provide for termination
by the Group on one year‟s notice. The service contracts of each of the current Executive
Directors provide for such a period of notice.
The Independent Non-Executive Directors have letters of appointment providing fixed three-year
service periods, which may be terminated by giving six months notice.
Non-Executive Directors’ Remuneration
The fees for the Chairman and Independent Non-Executive Directors are determined by the
Board. The Chairman and Non-Executive Directors are not involved in any discussions or
decisions about their own remuneration.
The Chairman and Independent Non-Executive Directors do not receive bonuses or pension
contributions and are not entitled to participate in any of the Group‟s share schemes. They are
entitled to be reimbursed the reasonable expenses incurred by them in carrying out their duties
as Directors of the Company.
Executive Directors’ Remuneration
The remuneration package of the Executive Directors includes the following elements:
Basic salary
Salaries are normally reviewed annually. Pay reviews take into account Group and personal
performance.
Performance related pay scheme
The performance related pay scheme for Executive Directors is in line with the scheme covering
other senior members of staff. Payments under the scheme are based in part upon the
achievement of budgeted profit targets for the Group as appropriate and in part on the
achievement of other key performance criteria as set from time to time. The board as a whole
decide the remuneration of the Non-Executives. A bonus of £87,000 was payable to the
executive directors in respect of 2010 (2009 - £nil).
Auditors
A resolution authorising the directors to fix the remuneration of the auditor will be put to
shareholders at the forthcoming Annual General Meeting.
Page 15
DILLISTONE GROUP PLC
REPORT TO THE SHAREHOLDERS ON DIRECTORS’ REMUNERATION
FOR THE YEAR ENDED 31 DECEMBER 2010
Directors’ remuneration
Details of the remuneration of the directors for the financial year are set out below:
Salary
&
Fees
£’000
Bonus
Pension
Other
2010
2009
Payments*
£’000
payments**
£’000
Total
£’000
£’000
Total
£’000
Executive
directors
J S Starr
R Howard
A D James
J P Pomeroy
J McLaughlin
Non-executive
directors
M D Love
G Fearnley
109
99
75
37
7
32
4
363
28
26
23
10
-
-
-
87
* Includes cash payments in lieu of employer contributions
** Compensation payment following resignation
Directors’ Interests
1
1
1
-
-
-
-
3
-
-
-
-
16
-
-
16
138
126
99
47
23
32
4
469
109
100
75
-
41
8
-
333
The interests of the directors (including family interests) in the share capital of the Company at
the year end are set out below
J S Starr
R Howard
A D James
M D Love
G R Fearnley
Ordinary shares of 5 pence each
At 31 December
2010
1,184,811
At 31 December
2009
1,184,811
1,174,811
40,498
19,231
331,145
1,174,811
40,498
19,231
331,145
Page 16
DILLISTONE GROUP PLC
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
FOR THE YEAR ENDED 31 DECEMBER 2010
We have audited the Company‟s financial statements on pages 19 to 41. The financial reporting
framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent
company financial statements, as applied in accordance with the provisions of the Companies Act
2006.
This report is made solely to the Company‟s members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might
state to the Company‟s members those matters we are required to state to them in an auditors‟
report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company‟s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors‟ Responsibilities Statement, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board‟s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to the Group‟s and the parent company's
circumstances and have been consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and the overall presentation of the
financial statements. In addition, we read all the financial and non-financial information in the
Chairman‟s Statement, Business Review, Financial Review, Directors‟ Report, Corporate
Governance Report and the Report to the Shareholders on Directors‟ Remuneration to identify
material inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of affairs of the Group and the
parent company as at 31 December 2010 and of the group‟s profit for the year then ended;
and
the group financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union; and
the parent company financial statements have been properly prepared in accordance with
IFRSs as adopted by the European Union and as applied in accordance with the provisions of
the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors‟ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Page 17
DILLISTONE GROUP PLC
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
FOR THE YEAR ENDED 31 DECEMBER 2010
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate
for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records
and returns; or
certain disclosures of directors‟ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
David Wragg (Senior Statutory Auditor)
For and on behalf of Saffery Champness
Chartered Accountants
Statutory Auditors
Beaufort House
2 Beaufort Road
Clifton
Bristol BS8 2AE
Date: 4 April 2011
Page 18
DILLISTONE GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2010
Revenue
Cost of sales
Gross profit
Administrative expenses
Results from operating activities
Financial income
Profit before tax
Tax expense
Profit for the year
Other comprehensive income:
Currency translation differences
Total comprehensive income for the year
Note
3
4
5
6
2010
£’000
4,251
(187)
4,064
2009
£’000
3,655
(113)
3,542
(2,889)
(2,468)
1,175
1,074
7
1,182
(310)
872
59
931
7
1,081
(244)
837
(17)
820
Earnings per share – from continuing activities
Basic
Diluted
7
7
15.39p
15.30p
15.02p
14.68p
The notes on pages 25 to 41 are an integral part of these consolidated financial statements.
Page 19
DILLISTONE GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2010
Share
capital
£’000
Share
Retained
Share
Foreign
Total
premium
earnings
option
exchange
£’000
£’000
£’000
£’000
£’000
Balance at 31 December
2008
270
Comprehensive income
Profit for the year ended
31 December 2009
-
-
-
1,634
40
123
2,067
837
-
-
837
Other comprehensive
income
Exchange differences on
translation of overseas
operations
Transactions with
owners
Issue of share capital
Transfer share option
reserve on exercised
options
Dividends paid
Balance at 31 December
2009
Comprehensive income
Profit for the year ended
31 December 2010
Other comprehensive
income
Exchange differences on
translation of overseas
operations
Transactions with
owners
Share option charge
Dividends paid
Balance at 31 December
2010
-
-
-
-
(17)
(17)
13
30
-
-
-
-
-
-
30
(30)
(594)
-
-
-
-
43
-
(594)
283
30
1,907
10
106
2,336
-
-
-
-
-
-
-
-
872
-
-
872
-
-
(595)
-
2
-
59
59
-
-
2
(595)
283
30
2,184
12
165
2,674
The notes on pages 25 to 41 are an integral part of these consolidated financial statements.
Page 20
DILLISTONE GROUP PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2010
Share
Share
Retained
Share
Total
capital
premium
earnings
£’000
£’000
£’000
option
£’000
£’000
270
-
295
40
605
-
-
364
-
364
13
30
-
-
43
-
-
30
(30)
-
Balance at 31 December
2008
Comprehensive income
Profit for the year ended
31 December 2009
Transactions with owners
Issue of share capital
Transfer share option reserve
on exercised options
Dividends paid
-
-
(594)
-
(594)
Balance at 31 December
2009
Comprehensive income
Profit for the year ended
31 December 2010
Transactions with owners
Share option charge
Dividends paid
Balance at 31 December
2010
283
30
95
10
418
-
-
-
-
-
-
1,245
-
1,245
-
(595)
2
-
2
(595)
283
30
745
12
1,070
The notes on pages 25 to 41 are an integral part of these consolidated financial statements.
Page 21
DILLISTONE GROUP PLC
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2010
ASSETS
Non-current assets
Intangible assets
Property plant and equipment
Investments
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Group
Company
Notes
2010
£’000
2009
£’000
2010
£’000
2009
£’000
9
10
11
13
12
13
1,689
71
-
68
1,828
55
1,346
2,147
3,548
1,167
95
-
-
1,262
56
1,260
1,820
3,136
-
-
1,623
-
1,623
-
82
11
93
-
-
1,623
-
1,623
-
5
110
115
Total assets
5,376
4,398
1,716
1,738
EQUITY AND LIABILITIES
Equity attributable to
owners of the parent
Share capital
Share premium
Retained earnings
Share option reserve
Translation reserve
Total equity
Liabilities
Non current liabilities
Deferred tax liability
Current liabilities
Trade and other payables
Current tax payable
Total liabilities
15
17
6
14
283
30
2,184
12
165
2,674
283
30
1,907
10
106
283
30
745
12
-
2,336
1,070
197
94
2,408
97
2,702
1,925
43
2,062
-
646
-
646
283
30
95
10
-
418
-
1,320
-
1,320
Total liabilities and equity
5,376
4,398
1,716
1,738
The notes on pages 25 to 41 are an integral part of these consolidated financial statements.
The financial statements were approved by the board of directors and authorised for issue on 4
April 2011. They were signed on its behalf by
J S Starr – Director
Company Registration No. 4578125
Page 22
DILLISTONE GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2010
Operating activities
Profit from operations
Less taxation paid
Adjustment for
Depreciation and amortisation
Share option expense
Operating cash flows before
movement in working capital
Decrease/(increase) in receivables
Decrease/(increase) in inventories
(Decrease)/increase in payables
Net cash generated from operating
activities
Investing activities
Interest received
Purchases of property plant and
equipment
Investment in development costs
2010
£’000
1,175
(155)
183
2
1,205
(154)
1
483
7
(56)
(623)
2010
£’000
2009
£’000
2009
£’000
1,074
(286)
160
-
948
46
(5)
(403)
1,535
586
7
(20)
(537)
Net cash used in investing activities
(672)
(550)
Financing activities
Proceeds from issue of share capital
Dividends paid
-
(595)
43
(594)
Net cash used by financing activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at
beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of
year
(595)
268
1,820
59
2,147
(551)
(515)
2,352
(17)
1,820
The notes on pages 25 to 41 are an integral part of these consolidated financial statements.
Page 23
DILLISTONE GROUP PLC
COMPANY CASH FLOW STATEMENT
AS AT 31 DECEMBER 2010
Operating activities
Profit from operations
Less taxation paid
Adjustment for
Share option expense
Operating cash flows before
movements in working capital
(Increase) in receivables
(Decrease)/increase in payables
Net cash generated from operating
activities
Financing activities
Dividends paid
Issue of share capital
Net cash used in
financing activities
Net (decrease)
in cash and cash equivalents
Cash and cash equivalents at
beginning of year
Cash and cash equivalents at
end of year
2010
£’000
1,245
-
2
1,247
(77)
(674)
(595)
-
2010
£’000
2009
£’000
2009
£’000
364
(49)
-
315
(5)
15
496
325
(594)
43
(595)
(99)
110
11
(551)
(226)
336
110
The notes on pages 25 to 41 are an integral part of these consolidated financial statements.
Page 24
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
Dillistone Group Plc (the “Company”) is a company incorporated in England and Wales. The
financial statements are presented in thousands Pounds Sterling, and were authorised for issue
by the directors on 4 April 2011.
The Group financial statements consolidate those of the Company and its subsidiaries (together
referred to as the “Group”). The parent company financial statements present information about
the Company as a separate entity and not about its Group.
Both the Group financial statements and the Company financial statements have been prepared
and approved by the directors in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union (“EU”), IFRIC Interpretations and the Companies Act
2006 applicable to companies reporting under IFRS. In publishing the Company financial
statements here together with the Group financial statements, the Company has taken advantage
of the exemption in s408 of the Companies Act 2006 not to present its individual income
statement and related notes in these financial statements.
1.
Accounting policies
Basis of accounting
1.1
The financial statements have been prepared on the historical cost basis.
The preparation of financial statements in conformity with IFRS requires management to make
judgements, estimates, and assumptions that affect the application of the policies and reported
amounts of assets and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results for which form the basis of making the
judgements about carrying values of assets and liabilities that are not readily available from other
sources. Actual results may differ from these estimates.
Key areas of judgement are considered to relate to the carrying values of goodwill and
development costs (see notes 1.6 and 1.8).
The accounting policies set out below have, unless otherwise stated, been applied consistently
by the Group to all periods presented in these financial statements.
1.2 Going concern
The Group‟s business activities and financial position, together with the factors likely to affect its
future development, performance and position are set out in the Business Review and Financial
Review on pages 5 to 8. In addition, note 2 to the financial statements include the Company‟s
objectives, policies and processes for managing its capital; its financial risk management
objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.
The Group has considerable financial resources together with well established relationships with
a number of customers and suppliers across different geographic areas.
As a consequence, the directors believe that the Company is well placed to manage its business
risks successfully despite the current uncertain economic outlook.
Page 25
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
1.
Accounting policies (continued)
The directors have a reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future. Thus they continue to adopt the
going concern basis of accounting in preparing the annual financial statements.
Basis of consolidation
1.3
The consolidated financial statements include the financial statements of Dillistone Group Plc and
its subsidiaries. There are no associates or joint ventures to be considered.
Intra-group balances, and any unrealised gains and losses or income and expenses arising from
intra-group transactions, are eliminated in preparing the consolidated financial statements. The
Group uses the purchase method of accounting to account for the acquisition of subsidiaries.
Revenue
1.4
Revenue is recognised in the income statement as follows:
licensing income is recognised when the software has been installed and is available for
use by the customer
income from training and installation is recognised when the training or installation occurs
support income is recognised over the period of the contract.
Share based payments
1.5
The Company operates two share option schemes. The fair value of the options granted under
these schemes is recognised as an employee expense with a corresponding increase in equity.
The fair value is measured at grant date and spread over the period at the end of which the
option holder may exercise the option.
The fair value of the options granted is measured using the Black-Scholes model, adjusted to
take into account sub-optimal exercise factor and other flaws in Black Scholes, and taking into
account the terms and conditions upon which the incentives were granted.
1.6 Goodwill
Goodwill is determined by comparing the amount paid, including the full undiscounted value of
any deferred and contingent consideration, on the acquisition of a subsidiary or associated
undertaking and the group‟s share of the aggregate fair value of its separate net assets. Goodwill
is capitalised and is subject to annual impairment reviews in accordance with applicable
accounting standards.
Segment reporting
1.7
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified
as the Board of Directors.
Page 26
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
1.
Accounting policies (continued)
Development Costs
1.8
Costs incurred on product development relating to the design and development of new or
enhanced products are capitalised as intangible assets when it is reasonably certain that the
development will provide economic benefits, considering its commercial and technological
feasibility and the resources available for the completion and marketing of the development, and
where the costs can be measured reliably. The expenditures capitalised are the direct labour and
subcontracted costs, which are managed and controlled centrally. Product development costs
previously recognised as an expense are not recognised as an asset in a subsequent period.
Capitalised product development expenditure for versions of the Group‟s FileFinder product (up
to version 9) is amortised over its useful life of 3 years, commencing a year following the costs
being incurred.
Capitalised product development expenditure for the Company‟s version 10 .Net platform is
amortised over its useful life of 10 years, commencing in the year in which the product is first
brought into use.
Capitalised product development expenditure is subject to regular impairment reviews and is
stated at cost less any accumulated impairment losses and amortisation. Any impairment taken
during the year is shown under administrative expenses on the income statement.
Depreciation
1.9
Property, plant and machinery are stated at cost less accumulated depreciation. Depreciation on
these assets is provided at rates estimated to write off the cost, less estimated residual value, of
each asset over its expected useful life as follows:
Leasehold land and buildings
Office and computer equipment
Fixtures, fittings & equipment
over the remaining lease period
33% -50% straight line
25% straight line
1.10 Financial assets
The Group classifies its financial assets under the definitions provided in International Accounting
Standard 39 (IAS 39) Financial Instruments: Recognition and measurement, depending on the
purpose for which the financial assets were acquired. Management determines the classification
of its financial assets at initial recognition. The possible categories under IAS 39 are: at fair value
through profit and loss, loans and receivables, and available for sale. Management consider that
the Group‟s financial assets fall under the „loans and receivables‟ category.
Loans and receivables are non-derivative financial assets with fixed or determined payments that
are not quoted in an active market. They are included in current assets, except for maturities
greater than 12 months after the balance sheet date, which are classified as non-current assets.
The Group‟s loans and receivables comprise trade receivables, intercompany trading balances,
and cash and cash equivalents.
Page 27
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
1.
Accounting policies (continued)
1.11 Financial liabilities
The Group classifies its financial liabilities under the definitions provided in IAS 39, either as
financial liabilities at fair value through profit or loss, or financial liabilities measured at amortised
cost. Management consider that the Group‟s financial liabilities fall under the „financial liabilities
measured at amortised cost‟ category. The Group‟s „financial liabilities measured at amortised
cost‟ comprise trade payables, intercompany trading balances, and accruals.
1.12 Fixed asset investments
Investments in subsidiary companies are included at cost in the accounts of the Company less
any amount written off in respect of any impairment in value.
1.13 Leasing
Rentals payable under operating leases are charged against income on a straight line basis over
the lease term.
Inventory
1.14
Inventory being licences for re-sale are valued at the lower of cost and net realisable value on a
FIFO basis.
1.15 Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less any provision for impairment.
1.16 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other
short-term highly liquid investments with original maturities of three months or less.
1.17 Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method.
1.18 Share capital
Ordinary shares are classified as equity.
1.19 Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into Sterling at
the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are
recorded at the rate ruling at the date of the transaction. All differences are taken to the income
statement.
On consolidation, the assets and liabilities of the Group‟s overseas subsidiaries are translated at
exchange rates prevailing on the balance sheet date. Exchange differences arising on the
translation of overseas subsidiaries are classified as equity and transferred to the Group‟s
translation reserve.
Page 28
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
1.
Accounting policies (continued)
1.20 Deferred taxation
Deferred tax is provided in full in respect of temporary differences between the treatment of
certain items for taxation and accounting purposes.
Deferred tax assets are recognised where unused tax losses are available to offset against future
profits and where there is convincing evidence that sufficient taxable profits will be available
against which the unused tax losses can be offset.
1.21 Defined contribution pension scheme
The pension costs charged in the financial statements represent the contributions payable by the
Group during the year.
1.22 New accounting standards
Of the IFRSs in issue but not effective, IAS 24 Related Party Transactions (Revised), which is
effective for accounting periods beginning on or after 1 January 2011, may have an impact upon
disclosures in the accounts. However, implication of this and the other standards is not expected
to have a significant effect on the Group or Company's results or balance sheet
2.
Financial risk management
2.1
Financial risk factors
There are a number of risks and uncertainties which could have an impact on the Group‟s long
term performance and cause actual results to differ materially from expected and historical
results. The directors seek to identify material risks and put in place policies and procedures to
mitigate any exposure.
(i)
(ii)
(iii)
Competitor risk
The market for staffing software is extremely fragmented with a large number of small
suppliers operating in all of the Group‟s geographical markets. Very few of these suppliers
have the necessary financial, technical and marketing resource to be able to sustain their
competitive position. However, the competition may intensify through consolidation or new
entrants to the market and in order to mitigate this risk and maintain competitive position
management work to build strong customer relationships and maintain and develop the
Group‟s products ahead of the competition.
Economic risk
The staffing industry has a reputation for being vulnerable to the cyclical nature of the
economy. The directors have taken a number of steps to mitigate any perceived risk such
as geographical expansion and product development.
Foreign currency
The Group‟s foreign operations trade in their own currencies. As a result the Group is not
subject to any significant foreign exchange transactional exposure except when
repatriating profits. The Group‟s main exposure therefore arises from the translation of
overseas results into Sterling. The Group only seeks to remit profits to the UKMEA when
the exchange rates are appropriate. In light of this the Group does not hold any
sophisticated hedging instruments such as derivatives.
Page 29
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
2.
Financial risk management (continued)
(iv)
(v)
(vi)
Interest rate risk
The Group has a limited exposure to interest rate volatility. The Group has no debt and
the only interest rate exposure is therefore asset based. The principal risk therefore is lost
opportunity. This is mitigated by a twice weekly treasury review by the Board.
Credit risk
Historically, the cash collection profile has been excellent, and the bad debt charge has
also historically been low.
Liquidity risk
The trade and other payables as set out in note 14 indicates that all such liabilities are
payable within 12 months. The directors consider there to be no significant liquidity risks
due to the significant cash balances of the Group.
Capital risk management
2.2
The Group‟s objectives when managing capital are to safeguard the entity's ability to continue as
a going concern, so that it can continue to provide returns for shareholders and benefits for other
stakeholders.
The Group sets the amount of capital in proportion to risk. The Group manages the capital
structure and makes adjustments to it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to shareholders, return capital to shareholders,
issue new shares, or sell assets.
The Company has no debt, and therefore the total capital managed by the Group as at the year
end was its total equity balance of £2,673,000 (2009: £2,336,000). Further details in respect of
movements in capital are provided in the statement of changes in equity.
2.3 Quantitative risk analysis
Foreign currency
At the year end, the Group had assets totalling £867,000 and liabilities totalling £440,000
denominated in Euros (2009: assets totalling £700,000 and liabilities totalling £477,000), assets
totalling £897,000 and liabilities totalling £540,000 denominated in US Dollars (2009: assets
totalling £626,000 and liabilities totalling £506,000) and assets totalling £539,000 and liabilities
totalling £159,000 denominated in Australian Dollars (2009: assets totalling £113,000 and
liabilities totalling £19,000). If each of the exchange rates weakened by 5% as at the year end,
the impact on the income statement would be a decrease in total comprehensive income of
£60,000 (2009: decrease of £22,000).
Interest rate risk
At the year end, the Group had positive cash balances totalling £2,147,000 (2009: £1,820,000).
Had interest rates been 1% lower during the financial year, the impact on profit would have been
a decrease in profit for the year of £7,000 (2009: decrease of £7,000).
Page 30
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
2.
Financial risk management (continued)
Credit risk
The ageing profile of trade receivables as at the year end is as follows:
Current
31 - 60 days overdue
More than 60 days overdue
Total
2010
£’000
996
55
110
1,161
2009
£’000
795
291
78
1,164
Based on knowledge and previous experience of the customer base, the directors consider the
risk of non recovery of both current and overdue trade receivable balances to be low.
2.4
Carrying value of financial assets and liabilities
The carrying values of loans and receivables and financial liabilities are considered approximate
to their fair values.
3.
Segment reporting
Management principally monitors the Group‟s operations in terms of geographical areas and
accordingly the segment reporting is presented below by geographical area.
Geographical segments
The following tables provide an analysis of the Group‟s revenue, assets, liabilities and additions
by geographic market.
Page 31
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
3.
Segment reporting (continued)
For the year ended 31 December 2010
UKMEA
£’000
1,810
Europe
£’000
823
177
892
1
138
USA
£’000
1,051
3
239
163
677
2,587
-
101
867
889
Asia-
Pacific
£’000
567
2
145
46
2
539
Segment revenue
Depreciation and amortisation
expense
Segment result
Central costs
Operating profit
Income tax expense
Additions of non-current assets
Segment assets
Central assets - goodwill
Total assets
Segment liabilities
1,572
440
532
159
For the year ended 31 December 2009
UKMEA
£’000
1,528
Europe
£’000
963
USA
£’000
Asia-
Pacific
£’000
810
354
157
178
-
761
2
358
1
150
148
-
49
47
557
2,487
-
678
-
626
-
113
Segment revenue
Depreciation and amortisation
expense
Segment result
Central costs
Operating profit
Income tax expense
Additions of non-current assets
Segment assets
Central assets - goodwill
Total assets
Total
£’000
4,251
183
1,414
(239)
1,175
310
679
4,882
494
5,376
2,703
Total
£’000
3,655
160
1,447
(373)
1,074
244
557
3,904
494
4,398
Segment liabilities
1,082
456
505
19
2,062
Page 32
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
3.
Segment reporting (continued)
Business segment
The following table provides an analysis of the Group‟s revenue by business segment
Revenue
Recurring income
Non-recurring income
2010
£’000
2,536
1,715
2009
£’000
2,344
1,311
4,251
3,655
Recurring income includes all support services, software as a service income (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.
It is not possible to allocate assets and additions between recurring and non-recurring income.
4.
Results from operating activities
2010
£’000
2009
£’000
Result from operating activities is stated after charging:
Depreciation
Amortisation
Gain on foreign exchange
transactions
Operating lease rentals - land and buildings
Money purchase pension
contributions
Fees receivable by the Group
auditors:
Audit of financial statements
Other services:
Audit of accounts of subsidiary of the Company
Other services relating to taxation
All other services
82
101
-
118
22
15
14
11
17
83
77
(38)
104
26
25
12
13
4
Page 33
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
5.
Financial income
Interest receivable
6.
Tax expense
Current tax
Deferred tax
Income tax expense for the year
Factors affecting the tax charge for the year
Profit before tax
UK rate of taxation
Profit before tax multiplied by the UK rate of taxation
Effects of :
Overseas tax rates
Deferred tax not provided
Enhanced R&D relief
Disallowed expenses
Rate change impact on deferred tax
Prior Year adjustments
Exchange rate
Tax expense
2010
£’000
7
2010
£’000
207
103
310
1,182
28%
331
37
3
(76)
15
(16)
13
3
310
2009
£’000
7
2009
£’000
150
94
244
1,081
28%
302
(1)
13
(70)
-
-
-
244
Deferred tax provided in the financial statements is as follows:
Group
Company
2010
£’000
2009
£’000
2010
£’000
2009
£’000
Accelerated intangible
amortisation
197
94
-
-
Page 34
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
7.
Earnings per share
Profit attributable to ordinary shareholders
2010
£872,000
2009
£837,000
Weighted average number of shares
5,665,441
5,572,440
Basic earnings per share
15.39 pence
15.02 pence
Weighted average number of shares after dilution
5,699,857
5,701,325
Fully diluted earnings per share
15.30 pence
14.68 pence
8.
Profit for the financial year
As permitted by section 408 of the Companies Act 2006, the holding company‟s profit and loss
account has not been included in these financial statements. The profit for the financial year for
the holding company was £1,245,000 (2009: £364,000).
9.
Intangible assets
Group
Cost
At 1 January 2009
Additions
At 31 December 2009
Additions
At 31 December 2010
Amortisation
At 1 January 2009
Charge for the year
At 31 December 2009
Charge for the year
At 31 December 2010
Carrying amount
At 31 December 2010
At 31 December 2009
At 31 December 2008
Development
costs
£’000
Goodwill
£’000
510
537
1,047
623
1,670
297
77
374
101
475
1,195
673
213
Page 35
494
-
494
494
-
-
-
-
-
494
494
494
Total
£’000
1,004
537
1,541
623
2,164
297
77
374
101
475
1,689
1,167
707
Land and
buildings
£’000
Office &
computer
equipment
£’000
Fixtures
and
fittings
£’000
Total
£’000
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
10.
Property, plant and equipment
Group
Cost
At 1 January 2009
Additions
At 31 December 2009
Currency impact
Additions
At 31 December 2010
Depreciation
At 1 January 2009
Charge for the year
At 31 December 2009
Currency impact
Charge for the year
At 31 December 2010
Carrying Amount
At 31 December 2010
At 31 December 2009
At 31 December 2008
163
-
163
-
-
163
77
33
110
-
33
143
20
53
85
250
20
270
3
56
329
179
50
229
3
47
279
50
41
71
11.
Non-current asset investments
Company
Cost
At 1 January 2010 & 31 December 2010
Page 36
25
-
25
3
-
28
23
1
24
1
2
27
1
1
2
438
20
458
6
56
520
279
84
363
4
82
449
71
95
158
Unlisted
Investments
£’000
1,623
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
11.
Non-current asset investments (continued)
The Company has the following subsidiary undertakings:
Name
Principal activity
Holding of
ordinary
shares
Registered
Dillistone Systems Limited
Sale of computer software and
related support services
100%
England &
Wales
Dillistone Systems (Australia) Sale of computer software and
Pty Limited
related support services
100%
Australia
Dillistone Systems (US) Inc
Sale of computer software and
related support services
100%
USA
12.
Inventories
Group
2010
£’000
2009
£’000
Company
2010
£’000
2009
£’000
Licences for resale
55
56
-
-
13.
Trade and other receivables
Trade and other receivables*
Group receivables
Other current assets
Prepayments and accrued
income
Group
Company
2010
£’000
1,161
-
-
253
2009
£’000
1,164
-
-
96
1414
1,260
2010
£’000
78
4
-
82
2009
£’000
-
-
5
-
5
*Trade and other receivables includes £68,000 (2009: £nil) receivable in more than one year and
have been included in non-current assets.
Page 37
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
14.
Trade and other payables
Trade and other payables
Group payables
Deferred income
Accruals
15.
Share capital
Allotted, called up and fully paid
Group
Company
2010
£’000
352
-
1,799
257
2009
£’000
294
-
1,523
108
2010
£’000
5
546
-
95
2009
£’000
16
1,292
-
12
2,408
1,925
646
1,320
2010
£’000
2009
£’000
5,665,441 Ordinary shares of 5 pence each
283
283
During 2009, 265,441 Ordinary shares of 5 pence were issued for a consideration of £42,879.
16. Operating lease arrangements
The Group leases offices under non-cancellable operating lease agreements.
At 31 December 2010 the Group had future total commitments under non-cancellable operating
leases as follows:
Commitments payable:
Within one year
Between two and five years
2010
£’000
2009
£’000
83
203
84
244
Page 38
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
17. Share options
As at 31 December 2010, 11 employees including directors (2009: 12 employees including
directors) held options (granted on 3 May 2006 and 14 September 2007) over a total of 33,884
(2009: 35,884) ordinary shares at an average exercise price of 187.74p (2009: 204.44p), as
follows:
No of shares
under option at
31 December
2009
Exercised
during the
year
Lapsed
during the
year
No of shares
under option at
31 December
2010
Exercise
price
Date of grant
3 May 2006
11,884
14 September 2007
24,000
35,884
-
-
-
-
11,884
16.15p
(2,000)
22,000
297.5p
(2,000)
33,884
No directors exercised share options during the year. The Company‟s share price on 31
December 2010 was 175p.
The weighted average time to expiry of the share options outstanding at 31 December 2010 was
6.2 years (2009: 7.3 years). Details of individual expiry dates are shown above.
The fair value of all options granted is shown as an employee expense with a corresponding
increase in equity. The employee expense is recognised equally over the time from grant until
vesting of the option. The employee expense for the year was £2,000. (2009: £4,000). The fair
value has been measured using the Black Scholes model. The expected volatility is based on the
historic volatility adjusted for any expected changes in future volatility. The material inputs to the
model have been:
Granted in year ended
Average share price at grant
Average exercise price
Expected volatility
Expected life
Expiry date
Expected dividend yield
Risk-free rate of return
31 December
2006
£0.16
£0.16
10%
3 years
3 May 2016
nil
5%
31 December
2007
£2.97
£2.97
10%
3 years
14 Sept 2017
nil
5%
Page 39
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
18.
Employees
The average number of employees was:
Operations
Management
Employee numbers
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs
2010
46
4
50
2010
£’000
2,093
234
22
2,349
2009
43
4
47
2009
£’000
1,799
206
29
2,034
The aggregate remuneration includes directors‟ remuneration and costs totalling £457,000 (2009:
£356,000) that have been capitalised in intangible assets. Further details relating to directors‟
remuneration are disclosed on page 16 of the financial statements.
19.
Control
The ultimate controlling parties, by way of their significant holding of shares in Dillistone Group
Plc, were:
J Starr
R Howard
Ordinary Shares
1,184,811
1,174,811
20.
Related party transactions
Company
The Company has a related party relationship with its subsidiaries, its directors, and other
employees of the Company with management responsibility.
During the year the Company received a management charge of £72,000 (2009: £nil) and a
dividend of £nil from its subsidiary company Dillistone Systems (US) Inc (2009: £309,743). At the
year end Dillistone Systems (US) Inc owed the Company £70,000 (2009: £nil).
Page 40
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
20.
Related party transactions (continued)
During the current year Dillistone Systems Limited paid a dividend of £1,500,000 (2009:
£285,000) to Dillistone Group Plc. The Company was recharged salary expenses by Dillistone
Systems Limited of £422,000 (2009: £380,000), and was paid a management charge of £240,000
(2009: £254,000). At the year end Dillistone Systems Limited was owed £513,000 (2009:
£1,225,000).
The Company received a management charge during the year from Dillistone Systems (Australia)
Pty Limited of £48,000 (2009: £nil) and at the year end owed it £33,000 (2009: £59,000).
Management charges payable by Group members to Dillistone Group Plc relate to management
support provided directly to them.
The directors received dividends paid by the Company of £289,000 (2009: £360,000).
21.
Dividends
The dividends paid in 2010 and 2009 were £595,000 (10.5p per share) and £594,000 (10.5p per
share) respectively. A final dividend in respect of the year ended 31 December 2010 of £397,000
(7p per share) will be paid on 21 June 2011. These financial statements do not reflect this
dividend.
Page 41
Dillistone Group plc
Third Floor
50-52 Paul Street
London EC2A 4LB
Tel: +44 (0)20 7749 6100
www.Dillistone.com