Company Registration No. 4578125 (England and Wales)
ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2011
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 statement of comprehensive income
Consolidated statement of changes in equity
Company statement of changes in equity
Consolidated and Company statement of financial position
Consolidated cash flow statement
Company cash flow statement
Notes to the financial statements
Page
1
2
3
5
7
9
15
18
21
23
24
25
26
27
28
29
DILLISTONE GROUP PLC
HIGHLIGHTS
Highlights for the year:
Revenues up 28% to £5.4m with non recurring revenues up 24%
Record level of recurring revenues of £3.2m up 28% from 2010
Underlying organic growth in revenues of 12%
Operating profits before exceptional items up 17% to £1.4m and up
4% to £1.2m after exceptional items
Final dividend of 2.3333p per share recommended, making total
dividend for year of 3.5p
Cash funds of £1.6m (2010: £2.1m) and the Group remains debt free
EPS* pre exceptional items up 22% to 6.26p and up 4% to 5.34p
post exceptional items
Acquisition of Voyager Software successfully completed
Results of Voyager Software included from 21 September 2011
Healthy growth in new clients: clients in more than 60 countries
FileFinder 10 launched on 31 March 2011
Commenting on the results, Mike Love, Non-Executive Chairman, said:
“2011 has been an excellent year for Dillistone. The Group has delivered a
strong set of results, completed its first acquisition and launched its next
generation executive search software.”
*rebased following 2:1 bonus issue
Page 1
DILLISTONE GROUP PLC
DIRECTORS AND ADVISERS
Directors
M D Love – Non-Executive Chairman
G R Fearnley – Non-Executive Director
J S Starr – Chief Executive Officer
R Howard – Operations Director
A D James – Product Development Director
J P Pomeroy – Group Finance Director
A F Milne – Director of Support Services
Secretary
J P Pomeroy
Company number
4578125
Registered office
Independent auditors
Principal Bankers
Solicitors
Nominated Adviser
Broker
Registrars
3rd Floor
50-52 Paul Street
London, EC2A 4LB
Grant Thornton UK LLP
Grant Thornton House
Melton Street
Euston Square
London, NW1 2EP
Barclays Bank PLC
240 Whitechapel Road
PO Box 14623
London, E1 1SH
Ashfords LLP
Tower Wharf
Cheese Lane
Bristol BS2 0JJ
WH Ireland Limited
24 Martin Lane
London
EC4R 0DR
WH Ireland Limited
24 Martin Lane
London
EC4R 0DR
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 2011
Results Overview
The Group enjoyed a successful year in 2011, achieving a number of its shorter and longer term
objectives. A strong set of results were delivered showing a profit before exceptional items of
£1.084m (2010: £0.872m). The profit after exceptional items was £0.926m (2010: £0.872m).
The Group began the year with our Dillistone Systems subsidiaries specialising in supplying our
FileFinder software to the executive search industry. The main operational objective for Dillistone
Systems in 2011 was to launch its next generation platform, FileFinder 10. This was achieved
and has been well received in the market.
We also said in our 2010 annual report that we were actively pursuing an acquisition strategy.
This strategy came to fruition when, in September 2011, the Group acquired Woodcote Software
Limited and its subsidiary companies, Voyager Software and Voyager Software (Australia) Pty.
Voyager Software is a recruitment software firm which provides software solutions to a number of
sectors of the wider recruitment market outside the executive search sector. The acquisition
significantly broadens our capabilities and market reach. This is my first opportunity to welcome
publicly the new members of our enlarged team to the Group.
Strategy
The Group’s strategy is to continue to grow the business both organically and through acquisition.
Our organic growth is supported by our commitment to product development which ensures that
the business continues to command a leading role in all of the market sectors in which it
operates.
We are focussed on the integration of Voyager Software and Dillistone Systems. Whilst separate
brands and products will be maintained, a number of synergies and cost savings have been
identified and are being implemented. Voyager Software’s UK management team has been
retained and they will continue to manage their brand and customers which are fundamentally
important to the success of the business. We anticipate making further acquisitions, although we
do not expect to make any announcements on this front in the near future.
Investor relations
In my last report, I stated that we planned to make a bonus issue of shares. The aim of this was
to increase the liquidity and marketability of our shares. The AGM in June 2011 subsequently
approved the two for one bonus issue which was then completed on 14 June 2011. We believe
that this has proven successful with the share spread reducing to around 5% from over 15%
previously.
I also stated that a strategic objective was to broaden our shareholder base. Through the issuing
of shares as part of the acquisition consideration and the issue of shares in a placing to part
finance the acquisition we have made some progress with this. Directors’ holdings have reduced
to 45.7% (2010: 48.6%) and institutional holdings increased to over 20%.
The Group will continue to develop opportunities to broaden its shareholder base. As part of this
strategy, I am delighted that we have appointed WH Ireland as our Nomad and Broker as of 5
Page 3
DILLISTONE GROUP PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2011
April 2012. On a related topic, the Board has appointed Grant Thornton UK LLP as our Auditors
for the year ended 31 December 2011. We would like to thank our former Nomad, Broker and
Auditors for their efforts on our behalf in previous years.
Dividends
An interim dividend of 1.1667p per share was paid in November 2011. The Board has
recommended a final dividend of 2.3333p per share, subject to shareholder approval, payable on
26 June 2012 to holders on the register on 1 June 2012. Shares will trade ex-dividend from 30
May 2012. This takes the dividend for the year to 3.5p and gives a yield of 4.9% on a share price
of 71.5p.
Board Changes
Alistair Milne 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 and
now recruitment software industries and have been able to produce strong results for 2011. On
behalf of the Board I would like to take this opportunity to thank all of them.
Outlook
We issued a trading update in January in which we stated that the market was patchy, but that
Dillistone Systems had enjoyed some success winning contracts with larger clients. Both of
these statements continue to reflect the state of our markets.
Dillistone Systems operates internationally and, as such, is subject to the difficulties in Europe
whilst enjoying the improving market in the Americas.
Voyager Software is currently much more focussed on the UK and, to a lesser extent, Australian
markets. Although the company delivered better than expected results in the three months of our
ownership prior to our year end, it is more exposed to the domestic economy. The next 18
months for Voyager Software will primarily be focussed on the launch of its next generation
recruitment technology platform within the UK and taking this new product offering into further
overseas markets. Therefore, whilst we anticipate that Voyager Software will deliver earnings
enhancing results for the Group in 2012, it is our belief that we can significantly improve the
performance of the Voyager Software business in the longer term.
Whilst the Group is not immune to wider economic difficulties, at this stage we remain confident
in making further progress in FY 2012.
Dr Mike Love
Non-Executive Chairman
Page 4
DILLISTONE GROUP PLC
BUSINESS REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2011
Business Review
I believe that 2011 will prove to be a transformational year for the Group. March saw Dillistone
Systems launch the latest generation of its FileFinder software system, whilst in September the
Group completed its first acquisition of Woodcote Software and its subsidiaries Voyager Software
and Voyager Software Australia.
In our report last year, I was able to state that “we
believe that we have implemented more systems, in
more countries, for more executive search firms, than
any comparable supplier.” I believe that this
statement still applies, and, with the acquisition of
Voyager taking our business into the wider recruitment
industry, we believe that, in terms of number of new
contract wins, the Group has become one of Europe’s
leading suppliers of specialist software to the third
party recruitment industry.
The business now has 2 distinct brands and products serving different sectors of the recruitment
industry and we will in future years, report on the business on the basis of two divisions, namely
Dillistone Systems, our executive search software business, and Voyager Software, our
recruitment software business.
Dillistone Systems
Dillistone Systems launched its next generation FileFinder 10 application at the end of March
2011. This product has been well received in the market, and is currently being used by more
than 130 firms. In December 2011, we announced the availability of our “WebPort” tool for social
network integration and are pleased to announce that our web application for smart phones
“FFMobile” will be launched in May 2012.
Dillistone Systems’ head office is based in London and it has offices in the US, Germany and
Australia. We saw revenues in this division increase by 12% in 2011 to £4.759m (2010:
£4.251m). It had a segmental operating profit of £1.630m (2010: £1.414m) before unallocated
central costs and exceptional items.
Voyager Software
Voyager Software is a software firm with a number of products targeting different parts of the
recruitment sector to Dillistone Systems. It has operations in the UK and Australia. Voyager
Software is well known in the recruitment industry and its brand will be maintained. It has a
strong customer base of over 700 customers and maintains good customer relationships, which
are fundamental to the future well being of the business. Voyager Software also has an excellent
work force.
Page 5
1,500 1,700 1,900 2,100 2,300 2,500 2,700 2,900 3,100 3,300 3,500 20072008200920102011£'000sRecurring revenue
DILLISTONE GROUP PLC
BUSINESS REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2011
We have consolidated the results of Voyager Software from 21 September 2011, with revenues
of £0.689m and a segmental pre tax profit of £0.165m before unallocated central costs and
exceptional items.
The acquisition of Voyager will make the combined group more UK centric in the short term as
the Voyager Software business is largely UK based. In the longer term we would anticipate
Voyager Software leveraging Dillistone Systems’ experience in international sales, marketing and
implementation of recruitment software.
The integration of Voyager has gone smoothly with trading being ahead of internal expectations
in 2011. The teams in both divisions have worked well together which has helped to deliver
synergy benefits. On an annualised basis, we have already made savings in Voyager Software
worth more than £200,000, and we will continue to make savings where appropriate. All staff
(both Voyager Software and Dillistone Systems) were granted options (in aggregate over 420,794
ordinary shares) immediately following the acquisition.
Product development
Product development remains fundamental to both businesses. Dillistone Systems launched its
next generation of technology, FileFinder 10, in 2011, and Voyager Software is going through a
similar process, expecting to launch its “Infinity” platform later this year. Infinity has been
developed using similar technologies to those behind the FileFinder 10 platform and we
anticipate that this will allow the Group to generate further synergies over time.
The global market for Voyager Software’s products is potentially much larger than that for
Dillistone Systems, and as such, represents a significant opportunity for the Group. The
acquisition has seen us inherit a first class team and, working with the existing staff of Dillistone
Systems, we are confident of our ability to take advantage of the new opportunities created by the
acquisition.
Jason Starr
Chief Executive Officer
Page 6
DILLISTONE GROUP PLC
FINANCIAL REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2011
Overview
Total revenues increased by 28% to £5.448m (2010: £4.251m), with profit before tax and
exceptional items up 19% to £1.405m (2010: £1.182m). Recurring revenues increased by 28%
to £3.248m (2010: £2.536m). Non-recurring revenues saw an increase of 24% to £2.122m from
£1.715m in 2010. Third party software product sales amounted to £0.078m in the period (2010:
£nil).
Excluding the acquisition of Voyager, revenues grew organically by 12% to £4.759m (2010:
£4.251m) with recurring revenues increasing by 13% to £2.874m (2010: £2.536m). Non recurring
revenues saw a 10% increase to £1.885m (2010: £1.715m).
On a Group basis we saw strong growth in UKMEA and Europe in
2011 with a slight fall in US revenues due to the implementation of
an exceptional contract in that region in 2010. In reality, the
number of new orders received in the US increased in 2011.
Cost of sales increased by 136% to £0.441m (2010: £0.187m).
£0.098m of the increase relates to costs associated with Voyager
Software and the balance mainly relates to development costs
which have not been capitalised.
Administrative costs excluding exceptional items rose 26% to £3.627m (2010: £2.889m). This
was in part due to the administration costs of Voyager Software from 21 September 2011 which
totalled £0.394m. Exceptional items total £0.172m and relate to the costs of the acquisition that
have been expensed totalling £0.115m plus amortisation of intangibles arising on acquisition.
Tax has been provided at an effective rate of 23% (2010: 26.2%) excluding exceptional items and
at 25% post exceptional costs. These rates reflect the higher R&D tax credits available to both
Dillistone Systems and Voyager Software that have been claimed, though not yet agreed,
partially offset by the higher rates of corporation tax that are payable in the US and Australia.
Profits for the year before exceptional items rose 24% to £1.084m (2010: £0.872m) and profits for
the year after exceptional items increased by 6% to £0.926m. Basic EPS rose 22% to 6.26p
(2010: 5.13p) before exceptional items and 4% to 5.34p after exceptional items. Fully diluted
EPS rose 22% to 6.23p (2010: 5.12p) and 4% to 5.32p after exceptional items.
Capital expenditure
Dillistone invested £0.661m in fixed assets and product development during the year (2010:
£0.679m) of which £0.580m was spent on development costs (2010: £0.623m) of which £0.101m
relates to expenditure on development in Voyager Software that has been capitalised under IFRS
in the Group accounts since acquisition.
Page 7
DILLISTONE GROUP PLC
FINANCIAL REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2011
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 2011 but that are
in respect of services to be delivered in 2012. 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. Income is only recognised when the
work is complete or the project goes “live”.
Also included in trade and other payables is £0.098m relating to the working capital payment
which was paid in February 2012 and £0.499m relating to contingent consideration due to
Woodcote shareholders. The contingent consideration is dependent on the level of turnover
achieved in 12 month periods to:
30 June 2012
31 December 2012
31 December 2013
Cash
Dillistone finished the year with cash funds of £1.617m (2010: £2.147m) and remains debt free.
This was after taking into account cash from Voyager Software of £0.171m. The Group raised
£0.5m from a placing and paid out £1.638m (including fees) to acquire Voyager Software.
Dividends paid in the year totalled £0.609m (2010: £0.595m).
Julie Pomeroy
Group Finance Director
Page 8
DILLISTONE GROUP PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2011
The Directors present their report and financial statements for the year ended 31 December
2011.
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 and 6.
Results and dividends
The consolidated statement of comprehensive income for the year is set out on page 23.
An interim dividend of 1.16667p per share was paid in November 2011. A final dividend of
2.3333p per share will be paid, subject to shareholder approval, on 26 June 2012.
Key performance indicators
The following financial KPIs are used by the Board and management to monitor the performance
of the business:
In addition the Board monitors order levels and employee numbers as well as performance
against budget.
Financial Risk Management
The Group’s operations expose it to a number of risks that include the effect of changes in
interest rates, credit, foreign currency exchange rates and liquidity. The Group does not trade in
financial instruments. Further details in relation to these risks are shown in note 21.
Interest rate risk
The Group finances its activities through retained cash and equity finance. The Group monitors
its exposure to interest rate risk when investing its cash resources.
Credit risk
The Group has a large customer base of approximately 1,800 customers (2010: approximately
1,100) and is not dependent on a small number of customers. Accordingly the Group does not
believe it is exposed to significant credit risk. In addition it only places money with banks with
strong credit ratings.
Page 9
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 £000 £000 £000 £000 £000 Revenues 4,066 4,608 3,655 4,251 5,448 Recurring revenues 1,666 2,246 2,344 2,536 3,248 Non recurring revenues 2,400 2,362 1,311 1,715 2,122 Other revenue - - - - 78 Profit before tax and exceptionals 1,196 1,426 1,081 1,182 1,405 Cash 1,534 2,353 1,820 2,147 1,617
DILLISTONE GROUP PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2011
Exchange risk
The Company is exposed to translation and transaction foreign exchange risk. The Group’s
foreign operations trade in their own currencies reducing the transaction risk. As a result the
main foreign exchange transactional exposure arises when repatriating profits. The Group only
seeks to remit cash when required in the UK and it usually has some flexibility on timing of such
appropriations to minimise any exchange losses. To a degree, the Group relies on a partial
natural hedge of Euro, Australian Dollar and US Dollar to cover the translation exposures.
Liquidity risk
The Group maintains positive cash resources and has sufficient available funds for its operations
and planned expansion of its existing activities.
Principal risks and uncertainties
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. The table of risks that follows gives details of the principal risks and the
approach being taken to manage them.
Risk
Economic risk
Potential adverse impact
The recruitment industry has a
reputation for being vulnerable to the
cyclical nature of the economy.
continuity
risks
Business
associated with operational
failure of hosting facilities
A failure of our hosting facilities could
lead to loss of customer confidence
and to potential claims for loss of
profits.
How we mitigate the risk
The Company operates globally
and so is not reliant on one
economy. It enjoys a high % of
recurring revenues.
In a downturn there may be a
reduction in new permanent hires
which may be replaced by
temporary hires. The Group’s
suite of products now supports
more aspects of the third party
recruitment market through its
acquisition of Voyager.
Data backups occur daily and the
necessary test carried out on a
regular basis to ensure data can
be restored.
Attrition of customer base
Competitor activity
Failure to attract new customers or
the loss of existing customers could
have a detrimental effect on the
Group’s ability to generate revenues.
The Group continues to invest in
product development to ensure
that it remains competitive in the
market.
The market for recruitment 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 resources to
Management work to build strong
customer relationships and uses
account management to keep in
touch with clients.
The Group continues to invest in
its product development and
Page 10
DILLISTONE GROUP PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2011
Employee retention
New product risk
Acquisition risk
be able to develop their competitive
position. However, the competition
may intensify through consolidation or
new entrants to the market.
Some competitors offer a broader
product range enabling them to
compete across the whole of the
sector.
Our capability to meet the demands of
the markets in which the Group
operates and compete effectively with
other software suppliers is partially
dependent on the skills, experience
and performance of our people.
Failure to attract or retain high calibre
employees could seriously impede
future growth and present
performance.
The introduction of new products
might contain significant bugs that
make them unusable. This could
damage the Group’s reputation and
result in loss of new orders and
therefore reduce revenue growth. It
could also result in claims against the
company.
The Group has made its first
acquisition in 2011 and is likely to
make further acquisitions in the
future. This creates the potential risk
that acquisitions may not perform or
contain hidden risks or liabilities.
2011 saw the launch of FF10
which is based on .net
technology. It continues to
innovate and provide solutions to
client needs.
The acquisition of Voyager gives
the group access to the broader
range of recruitment companies
and will in the longer term enable
it to compete more effectively.
To retain staff the Group
operates competitive
remuneration packages and an
appropriate culture in which staff
work.
Products are tested pre launch
and launch strategies developed
to minimise risks.
For all acquisitions and in
advance of completion,
management undertake due
diligence and prepare detailed
integration plans including risk
identification. These papers are
reviewed and approved by the
Board prior to any commitment
being entered into.
Page 11
DILLISTONE GROUP PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2011
Directors
The following Directors have held office since 1 January 2011 other than where stated:
M D Love - Non-Executive Chairman
J S Starr
R Howard
A D James
J P Pomeroy
G R Fearnley - Non-Executive Director
A Milne (3 January 2011)
The interests of the Directors (including family interests) in the share capital of the Company are
listed on page 20.
Jason Starr and Alex James, who are proposed for re-election at the forthcoming AGM, have a
service contract with a 1 year notice period.
Principal shareholders
At the 16 April 2012 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 R Fearnley
Unicorn Asset Management
CFS Independent
R Howells
Creditor payment policy
Ordinary shares
of 5 pence each
3,554,442
3,524,433
2,572,122
1,767,444
993,435
900,043
870,889
750,000
Percentage
19.53%
19.37%
14.14%
9.71%
5.46%
4.95%
4.79%
4.12%
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 2011 was 16 days (31 December 2010: 48 days).
Directors’ and Officers’ Insurance
The Group maintains insurance cover for all Directors and Officers of Group companies against
liabilities which may be incurred by them while acting as Directors and Officers.
Page 12
DILLISTONE GROUP PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2011
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 29 May 2012 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
Grant Thornton UK LLP was appointed as auditor for the year ended 31 December 2011 and a
resolution proposing their re-appointed as auditors to the Company will be put to the forthcoming
Annual General Meeting.
Directors’ responsibilities
The Directors are responsible for preparing the Report of the Directors and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year.
Under that law the Directors have elected to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the European Union (IFRSs). Under
company law the Directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs and profit or loss of the Company and
Group for that period. In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent;
state whether applicable IFRSs have been followed, subject to any material departures
disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records that are sufficient to show
and explain the Company’s transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that the financial statements comply
with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
In so far as each of the Directors is aware:
there is no relevant audit information of which the Company’s auditors are unaware; and
the Directors have taken all steps that they ought to have taken to make themselves
aware of any relevant audit information and to establish that the auditors are aware of that
information.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
Page 13
DILLISTONE GROUP PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2011
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
24 April 2012
Page 14
DILLISTONE GROUP PLC
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2011
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
The Board comprises a Non-Executive Chairman, one Independent Non-Executive Director and
five 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 and his shareholding of approximately 6% is not considered by the Board to
change his independence. 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.
The Board meets at least four 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 2011 the Audit Committee comprised the Chairman and Non-Executive Director and met twice
during the year.
The Finance Director, Group Chief Executive Officer and external Auditors attend by invitation.
The Audit Committee 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 Chairman
also chaired the selection panel to appoint auditors during 2011.
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 15
DILLISTONE GROUP PLC
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2011
Remuneration Committee
In 2011 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
assumptions underlying it. 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.
Page 16
DILLISTONE GROUP PLC
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2011
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 non financial 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 Chairman typically 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.
Auditors
A resolution authorising the Directors to set the remuneration of the auditor will be put to
shareholders at the forthcoming Annual General Meeting.
Page 17
DILLISTONE GROUP PLC
REPORT TO THE SHAREHOLDERS ON DIRECTORS’ REMUNERATION
FOR THE YEAR ENDED 31 DECEMBER 2011
Remuneration Report
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 the Independent Non-Executive Director are determined by the
Board. The Chairman and the Non-Executive Director are not involved in any discussions or
decisions about their own remuneration.
The Chairman and the Independent Non-Executive Director 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 taking into account inflation and salaries paid to directors
of comparable companies. Pay reviews also take into account Group and personal performance.
The Board as a whole decide the remuneration of the Non-Executives.
Performance related pay scheme
There are two performance related pay schemes for Executive Directors. The first is an annual
bonus scheme which is based upon the achievement of certain profit and commercial targets for
the Group as appropriate. A bonus of £90,000 was payable to the Executive Directors in respect
of 2011 (2010: £87,000). In addition, an ex-gratia bonus of £10,000 was paid to one Director in
the year.
The second scheme was introduced in 2011 and is a long term incentive plan linked to growth in
earnings per share over a three year period. Executive Directors may be granted “phantom
share options” at the ruling mid market price at the time of the grant. The awards are subject to
meeting challenging growth targets and will be cash settled. It is expected that annual awards
will be made under the scheme. The value of the award is calculated at each reporting period
using a Black Scholes model (see note 19 for further details). The awards made in the period are
Page 18
DILLISTONE GROUP PLC
REPORT TO THE SHAREHOLDERS ON DIRECTORS’ REMUNERATION
FOR THE YEAR ENDED 31 DECEMBER 2011
included below. The remuneration committee can also choose to grant share options in place of
phantom options under this scheme with the same growth targets.
Directors’ remuneration (Audited)
Details of the remuneration of the Directors for the financial year are set out below:
Salary
& Fees
£’000
Bonus
£’000
Pension
Payments*
£’000
Benefits**
£’000
2011
Total
£’000
2010
Total
£’000
Executive Directors
J S Starr
R Howard
A D James
J P Pomeroy
A Milne
J McLaughlin
Non-Executive Directors
M D Love
G R Fearnley
112
102
80
72
65
-
33
12
476
23
21
27
15
14
-
-
-
100
* Includes cash payments in lieu of employer contributions
** 5% of salary set aside for future benefits
LTIP Award (Not Audited)
1
1
1
-
1
-
-
-
4
6
5
4
4
3
-
-
-
22
142
129
112
91
83
-
33
12
602
138
126
99
47
-
23
32
4
469
J S Starr
R Howard
A D James
J P Pomeroy
A Milne
Number of
phantom
options
granted in
year
168,000
152,250
120,000
104,250
101,250
645,750
Value at 31
December
2011
£’000
9
8
7
6
6
36
Page 19
DILLISTONE GROUP PLC
REPORT TO THE SHAREHOLDERS ON DIRECTORS’ REMUNERATION
FOR THE YEAR ENDED 31 DECEMBER 2011
Directors’ Interests
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
A Milne
J P Pomeroy
Ordinary shares of 5 pence each
At 31 December
2010*
At 31 December
2011
3,554,443
3,524,433
121,494
127,137
993,435
72,189
13,888
3,554,443
3,524,433
121,494
57,693
993,435
72,189
-
*after adjusting for the 2 for 1 bonus issue
In addition to the above, Julie Pomeroy was granted share options over 25,794 shares at 77p in
the Company on 21 September 2011 which are exercisable from 21 September 2014. There are
no performance conditions attaching to these shares.
Page 20
DILLISTONE GROUP PLC
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
FOR THE YEAR ENDED 31 DECEMBER 2011
Independent auditor's report to the members of Dillistone Group Plc
We have audited the financial statements of Dillistone Group Plc for the year ended 31 December
2011 which comprise the Group statement of comprehensive income, the Group and parent
company statements of changes in equity, the Group and parent company statement of financial
position, the Group and parent company statements of cash flow and the related notes. 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 auditor’s
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 auditor
As explained more fully in the Directors’ Responsibilities Statement, set out on page 13, 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
(APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the Group's and of the parent
company's affairs as at 31 December 2011 and of the Group's profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union;
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 21
DILLISTONE GROUP PLC
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
FOR THE YEAR ENDED 31 DECEMBER 2011
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.
Paul Etherington BSc FCA CF
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
24 April 2012
Page 22
DILLISTONE GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2011
Before
Exceptional
items
2011
£’000
Exceptional
Items
2011
£’000
Note
2
5,448
(441)
5,007
-
-
-
2011
£’000
5,448
(441)
5,007
2010
£’000
4,251
(187)
4,064
Revenue
Cost of sales
Gross profit
Administrative expenses
Results from operating activities
Financial income
Profit before tax
Tax expense
3
4
6
7
(3,627)
(172)
(3,799)
(2,889)
1,380
(172)
1,208
1,175
25
-
25
7
1,405
(172)
1,233
1,182
(321)
14
(307)
(310)
Profit for the year
1,084
(158)
926
872
Other comprehensive income:
Currency translation differences
Total comprehensive income
for the year
(2)
-
1,082
(158)
(2)
924
59
931
Earnings per share – from continuing activities
Basic**
Diluted**
8
8
6.26p
6.23p
5.34p
5.32p
5.13p
5.12p
**The comparative earnings per share have been adjusted to reflect the effect of the two for one bonus
issue.
The notes on pages 29 to 61 are an integral part of these consolidated financial statements.
Page 23
DILLISTONE GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
Share
Share
Merger
Retained
Share
Foreign
Total
capital
premium
reserve
earnings
option
exchange
£’000
£’000
£’000
£’000
£’000
£’000
£’000
283
30
-
1,907
10
106
2,336
Balance at 31
December 2009
Comprehensive
income
Profit for the year
ended 31 Dec 2010
Other comprehensive
income
Exchange differences
on translation of
overseas operations
Total comprehensive
income
Transactions with
owners
Share option charge
Dividends paid
-
-
-
-
-
-
-
-
-
-
Balance at 31
December 2010
283
30
Comprehensive
income
Profit for the year
ended 31 Dec 2011
Other comprehensive
income
Exchange differences
on translation of
overseas operations
Total comprehensive
income
Transactions with
owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
872
-
872
-
(595)
-
-
-
2
-
-
872
59
59
59
931
-
-
2
(595)
2,184
12
165
2,674
926
-
926
-
-
(609)
(567)
-
-
-
-
12
-
-
-
926
(2)
(2)
(2)
924
-
-
-
-
846
12
(609)
-
Issue of share capital
60
421
365
Share option charge
Dividends paid
Capitalisation of
reserves
Balance at 31
December 2011
-
-
567
-
-
-
-
-
-
910
451
365
1,934
24
163
3,847
The notes on pages 29 to 61 are an integral part of these consolidated financial statements.
Page 24
DILLISTONE GROUP PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
Share
Share
Merger
Retained
Share
Total
capital
premium
reserve
earnings
£’000
£’000
£’000
£’000
option
£’000
£’000
Balance at 31 December
2009
Comprehensive income
Profit and total comprehensive
income for the year ended 31
Dec 2010 *
Transactions with owners
Share option charge
Dividends paid
283
30
-
-
-
-
-
-
Balance at 31 December
2010
283
30
-
-
-
-
-
95
10
418
1,245
-
1,245
-
(595)
2
-
2
(595)
745
12
1,070
Comprehensive income
Profit and total comprehensive
income for the year ended 31
Dec 2011
Transactions with owners
Issue of share capital
Share option charge
Dividends paid
Capitalisation of reserves
Balance at 31 December
2011
*
see note 24
-
-
-
1,406
-
1,406
60
421
365
-
-
567
-
-
-
-
-
-
-
-
(609)
(567)
-
12
-
-
846
12
(609)
-
910
451
365
975
24
2,725
The notes on pages 29 to 61 are an integral part of these consolidated financial statements.
Page 25
DILLISTONE GROUP PLC
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2011
ASSETS
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Investments
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Equity attributable to owners
of the parent
Share capital
Share premium
Merger reserve
Retained earnings
Share option reserve
Translation reserve
Total equity
Liabilities
Non current liabilities
Trade and other payables
Deferred tax liability
Current liabilities
Trade and other payables
Current tax payable
Total liabilities
Total liabilities and equity
Group
Company
Notes
2011
£’000
2010
£’000
2011
£’000
2010
£’000
10
11
12
13
15
14
15
17
19
16
7
16
2,490
2,710
143
-
23
5,366
11
1,728
1,617
3,356
8,722
910
451
365
1,934
24
163
3,847
364
565
3,795
151
4,875
8,722
494
1,195
71
-
68
1,828
55
1,346
2,147
3,548
5,376
283
30
-
2,184
12
165
2,674
-
197
2,408
97
2,702
5,376
-
-
-
4,111
-
4,111
-
39
13
52
-
-
-
1,623
-
1,623
-
82
11
93
4,163
1,716
910
451
365
975
24
-
283
30
-
745
12
-
2,725
1,070
344
-
1,094
-
1,438
4,163
-
-
646
-
646
1,716
The notes on pages 29 to 61 are an integral part of these consolidated financial statements.
The financial statements were approved by the Board of Directors and authorised for issue on 24
April 2012. They were signed on its behalf by
J S Starr – Director
Company Registration No. 4578125
Page 26
DILLISTONE GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2011
Operating activities
Profit from operations
Less taxation paid
Adjustment for
Depreciation and amortisation
Share option expense
Foreign exchange adjustments arising from
operations
Operating cash flows before
movement in working capital
(Increase) in receivables
Decrease in inventories
Increase in payables
2010
£’000
2011
£’000
2011
£’000
1,208
(171)
309
12
17
1,375
(214)
44
366
2010
£’000
1,175
(155)
183
2
-
1,205
(154)
1
483
Net cash generated from operating activities
1,571
1,535
Investing activities
Interest received
Purchases of property plant and
equipment
Investment in development costs
Acquisition of subsidiaries net of cash acquired
25
(81)
(580)
(1,292)
7
(56)
(623)
-
Net cash used in investing activities
(1,928)
(672)
Financing activities
Net proceeds from issue of share capital
Dividends paid
457
(609)
-
(595)
Net cash used by financing activities
Net (decrease)/increase 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
(152)
(509)
2,147
(21)
1,617
(595)
268
1,820
59
2,147
The notes on pages 29 to 61 are an integral part of these consolidated financial statements.
Page 27
DILLISTONE GROUP PLC
COMPANY CASH FLOW STATEMENT
AS AT 31 DECEMBER 2011
2011
£’000
1,400
-
12
1,412
(1)
243
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
Investing activities
2010
£’000
2011
£’000
2010
£’000
1,245
-
2
1,247
(77)
(674)
1,654
496
Investment in acquisitions
(1,500)
-
Net cash used in investing activities
(1,500)
-
Financing activities
Dividends paid
Placing monies raised
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
(609)
457
(595)
-
(152)
(595)
2
11
13
(99)
110
11
The notes on pages 29 to 61 are an integral part of these consolidated financial statements.
Page 28
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Dillistone Group Plc (the “Company”) is a company incorporated in England and Wales. The
financial statements are presented in thousands Pounds Sterling.
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.
Use of accounting estimates and judgements
Many of the amounts included in the financial statements involve the use of judgement and/or
estimation. These judgements and estimates are based on management’s best knowledge of the
relevant facts and circumstances, having regard to prior experience, but actual results may differ
from the amounts included in the financial statements. Information about such judgements and
estimation is contained in the accounting policies and/or the notes to the financial statements and
the key areas are summarised below.
Customers’ practical acceptance of licence software
As detailed in note 1.4, licence fee revenues are recognised on practical acceptance of the
software. The Group uses the “live” date as the basis of determining the timing of customer
practical acceptance, thereby reducing the judgement required to ascertain the timing of licence
revenue recognition.
Capitalisation of internal development expenditure
Management exercises judgement in establishing both the technical feasibility of completing an
intangible asset which can be used internally or sold and the degree of certainty that a market
exists for the asset, or its output, for the generation of future economic benefits. In addition,
amortisation rates are based on estimates of the useful economic lives and residual values of the
assets involved. The assessment of these useful economic lives is made by projecting the
economic lifecycle of the asset which is subject to alteration as a result of product development
and innovation. Amortisation rates are changed where economic lives are re-assessed and
technically obsolete items written off where necessary.
Valuation of assets and liabilities
Management has made a number of assumptions with regards to the models used to value
assets and liabilities at the statement of financial position date. Valuation techniques commonly
used by market practitioners are applied. In respect of the provision for bad and doubtful
Page 29
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
1.
Accounting policies (continued)
receivables and credit note provisions, management have made relevant judgments based on
discussions with the account managers as regards the recoverability of trade receivables.
Valuation of share-based payments
The estimation of share-based payment costs requires the selection of an appropriate valuation
model and consideration as to the inputs necessary for the valuation model chosen. The Group
has made estimates as to the volatility of its own shares, the probable life of options granted,
leaver rates and the time of exercise of those options. The model used by the Group is a Black-
Scholes valuation model. Further details are shown in note 19.
Impairment of goodwill and other intangible assets
There are a number of assumptions management have considered in performing impairment
reviews of goodwill and intangible assets which include an estimate of the future cash flows
expected to arise from the cash generating unit and a suitable discount rate in order to calculate
present value.
Business combinations:
On initial recognition, the assets and liabilities of the acquired business are included in the
consolidated statement of financial position at their fair values. In measuring fair value,
management uses estimates about future cash flows and discount rates. However, actual results
may vary. Details of acquired assets and liabilities are given in note 20.
Valuation of separately identifiable intangible assets
As detailed in note 1.6 separately identifiable intangible assets are identified and amortised over
a defined period. The Directors use an acknowledged approach but this is reliant upon certain
judgments which they determine are reasonable by reference to companies in similar industries.
Contingent consideration:
Where contingent consideration is payable in cash and discounting would have a material effect,
management uses an appropriate discount rate. Where the deferred consideration is contingent
and dependent upon future trading performance, an estimate of the present value of the likely
consideration payable is made. See note 20.
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 21 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 30
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
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 Group financial statements consolidate those of Dillistone Group Plc and of its subsidiary
undertakings at the statement of financial position date. Subsidiary undertakings are entities over
which the Group has the power to govern the financial and operating policies so as to obtain
benefits from the activities, which is considered to represent control. The Group obtains and
exercises control through voting rights. 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.
Acquisitions of subsidiaries are dealt with by the acquisition method.
Revenue
1.4
General
Revenue is the fair value of the total amount receivable by the Group for supplies of services
which are provided in the normal course of business. VAT or similar local taxes and trade
discounts are excluded.
Licensing
The Group licenses software under licence agreements. Licence fee revenues are recognised on
practical acceptance of the software, when all obligations have been substantially completed.
This is when the customer has accepted the product, the risks and rewards of ownership have
been transferred, it is probable that the economic benefits of the transaction will flow to the
Group, all costs and revenue in relation to the transaction can reliably be measured and the
Group has no further managerial involvement over the goods to the degree usually associated
with ownership. To the extent that payments have been received in advance for licences, where
practical acceptance has not yet been reached, these amounts are recognised as deferred
income.
Professional services
The Group provides professional services which include installation, consulting, data translation
and training. Such revenues are recognised as the services are completed or where they are
part of the sale and installation of software, they are recognised when the obligations under the
contract are complete. To the extent that payments have been received in advance for such
services these amounts are recognised as deferred income.
Product support, hosting and software as a service (SaaS)
Revenues from support, hosting or SaaS agreements are recognised over the period to which
they relate but only after practical acceptance of the software, as defined above, have been
received. As revenue is invoiced in advance for such services, the amount in advance is
included in deferred revenue and released over the period to which the service relates.
Page 31
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
1.
Accounting policies (continued)
Share based payments
1.5
The Company operates two share based schemes.
The first is an equity settled share-based compensation plan (share options) for remuneration of
its employees.
All employee services received in exchange for the grant of any share-based compensation are
measured at their fair values. These are indirectly determined by reference to the share option
awarded. Their value is appraised at the grant date and excludes the impact of any non-market
vesting conditions (e.g. profitability or sales growth targets).
All share-based compensation is ultimately recognised as an expense in the profit or loss with a
corresponding credit to share-based payment reserve, net of deferred tax where applicable. If
vesting periods or other vesting conditions apply, the expense is allocated over the vesting
period, based on the best available estimate of the number of shares options expected to vest.
Non market vesting conditions are included in assumptions about the number of options that are
expected to become exercisable. Estimates are subsequently revised if there is any indication
that the number of share options expected to vest differs from previous estimates. No adjustment
to expenses recognised in prior periods is made if fewer share options ultimately are exercised
than originally estimated.
Upon exercise of share options, the proceeds received, net of any directly attributable transaction
costs, up to the nominal value of the shares issued are reallocated to share capital with any
excess being recorded as additional share premium.
The second scheme is cash settled share based compensation plan for directors. The directors
“phantom” options which have performance conditions related to the growth in earnings per share
of the Group. The options will automatically be exercised following the publication of the annual
report of the company, three years after the grant. These phantom options are re-valued at each
half year end using a Black Scholes model and the necessary movement in the provision in
recognised through profit and loss. The liability is included in non-current liabilities.
Business combinations
1.6
The Group applies the acquisition method in accounting for business combinations. The
consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum
of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests
issued by the Group, which includes the fair value of any asset or liability arising from a
contingent consideration arrangement. Acquisition costs are expensed as incurred.
The Group recognises identifiable assets acquired and liabilities assumed in a business
combination regardless of whether they have been previously recognised in the acquiree’s
financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally
measured at their acquisition-date fair values. Goodwill is stated after separate recognition of
identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of
consideration transferred, b) the recognised amount of any non controlling interest in the acquiree
and c) acquisition-date fair value of any existing equity interest in the acquiree, over the
acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets
exceed the sum calculated above, the excess amount (ie gain on a bargain purchase) is
recognised in profit or loss immediately.
Page 32
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
1.
Accounting policies (continued)
Exceptional charges
1.7
Charges which are both material and considered by the Directors to be unusual in either nature
or size are separately disclosed on the face of the Statement of Comprehensive Income. These
include acquisition costs.
Impairment testing of goodwill, other intangible assets and property, plant and
1.8
equipment
For impairment assessment purposes, assets are grouped at the lowest levels for which there are
largely independent cash inflows (cash generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating unit level. Goodwill is
allocated to those cash-generating units that are expected to benefit from synergies of the related
business combination and represent the lowest level within the Group at which management
monitors goodwill. Cash-generating units to which goodwill has been allocated (determined by
the Group’s management as equivalent to its operating segments) are tested for impairment at
least annually. All other individual assets or cash-generating units are tested for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable.
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s
carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to
sell and value-in-use. To determine the value-in-use, management estimates expected future
cash flows from each cash-generating unit and determines a suitable interest rate in order to
calculate the present value of those cash flows. The data used for impairment testing procedures
are directly linked to the Group’s latest approved budget, adjusted as necessary to exclude the
effects of future reorganisations and asset enhancements. Discount factors are determined
individually for each cash-generating unit and reflect management’s assessment of respective
risk profiles, such as market and asset-specific risks factors. Impairment losses for cash-
generating units reduce first the carrying amount of any goodwill allocated to that cash-generating
unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating
unit. With the exception of goodwill, all assets are subsequently reassessed for indications that
an impairment loss previously recognised may no longer exist. An impairment charge is reversed
if the cash-generating unit’s recoverable amount exceeds its carrying amount.
Segment reporting
1.9
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.
1.10
Intangible assets
Internal development costs
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.
Page 33
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
1.
Accounting policies (continued)
Capitalised product development expenditure for versions of the Group’s FileFinder product (up
to version 9) and for expenditure on subsequent enhancements and releases to FileFinder 10 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 FileFinder version 10 .Net and
Voyager Infinity 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 Consolidated Statement of
Comprehensive Income.
Acquired as part of a business combination
In accordance with IFRS 3 Business Combinations, an intangible asset acquired in a business
combination is deemed to have a cost to the Group of its fair value at the acquisition date. The
fair value of the intangible asset reflects market expectations about the probability that the future
economic benefits embodied in the asset will flow to the Group. Where an intangible asset might
be separable, but only together with a related tangible or intangible asset, the Group of assets is
recognised as a single asset separately from goodwill where the individual fair values of the
assets in the Group are not reliably measurable. Where the individual fair values of the
complementary assets are reliably measurable, the Group recognises them as a single asset
provided the individual assets have similar useful lives.
Subsequent to initial recognition, intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is provided to write off the cost of
each intangible asset over its useful economic life, which is between 1 – 15 years.
1.11 Depreciation
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
the lower of 5 years or the remaining lease
period
33% -50% straight line
25% straight line
1.12 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. 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 statement of financial position 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 34
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
1.
Accounting policies (continued)
Trade receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest rate method, less any provision for impairment. Receivables are
considered for impairment when they are past due or when other objective evidence is received
that a specific counterparty may default. Receivables that are not considered to be individually
impaired are reviewed for impairment in groups. The impairment loss estimate is then based on
recent historical counterparty default rates and current economic conditions.
De-recognition of financial assets occurs when the rights to receive cash flows from the
investments expire or are transferred and substantially all of the risks and rewards of ownership
have been transferred. An assessment for impairment is undertaken at least at each statement of
financial position date whether or not there is objective evidence that a financial asset or a group
of financial assets is impaired.
1.13 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.
Trade payables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method.
Investments
1.14
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.
1.15 Leases
Finance leases are recognised as being those that transfer substantially all the risks and rewards
of ownership. Assets held under finance leases are capitalised and the outstanding future lease
obligations are shown in payables at the present value of the lease payments. They are
depreciated over the term of the lease or their useful economic lives, whichever is the shorter.
The interest element (finance charge) of lease payments is charged to profit or loss over the
period of the lease.
All other leases are regarded as operating leases and the payments made under them are
charged to profit or loss in the period in which they are incurred. The Group does not act as a
lessor.
Inventory
1.16
Inventories are stated at the lower of cost and net realisable value. Cost includes all directly
attributable expenses. Costs of ordinarily interchangeable items are assigned using the first in,
first out cost formula. Net realisable value is the estimated selling price in the ordinary course of
business less any applicable selling expenses.
1.17 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 and which are
subject to an insignificant risk of changes in value.
Page 35
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
1.
Accounting policies (continued)
1.18 Equity
Equity comprises the following:
•
•
•
•
•
•
“Share capital” represents the nominal value of equity shares.
“Share premium” represents the excess over nominal value of the fair value of
consideration received for equity shares, net of expenses of the share issue.
“Merger reserve” is used where more than 90% of the shares in a subsidiary are
acquired and the consideration includes the issue of new shares by the Company,
thereby attracting merger relief under the Companies Act 2006.
“Share-based payment reserve” represents equity-settled share-based employee
and non-employee remuneration until such share options are exercised.
“Retained earnings” represents retained profits and losses.
“Foreign exchange reserve” represents translation differences arising on the
consolidation of investments in overseas subsidiaries.
1.19 Foreign currency translation
The consolidated financial statements are presented in sterling, which is also the functional
currency of the parent company.
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at
the rates of exchange ruling at the statement of financial position date. Transactions in foreign
currencies are recorded at the rate ruling at the date of the transaction. All differences are taken
to profit and loss.
On consolidation, the assets and liabilities of the Group’s overseas subsidiaries are translated
from their functional currency to sterling at exchange rates prevailing on the statement of financial
position date. Income and expenses have been translated from their functional currency into
sterling at the average rate for each month over the reporting period. Exchange differences are
charged/credited to other comprehensive income and recognised in the currency translation
reserve in equity.
Income taxes
1.20
Current income tax assets and liabilities comprise those obligations to fiscal authorities in the
countries in which the Group carries out its operations. They are calculated according to the tax
rates and tax laws applicable to the fiscal period and the country to which they relate. All changes
to current tax liabilities are recognised as a component of tax expense in profit and loss.
Deferred income taxes are calculated using the liability method on temporary differences. This
involves the comparison of the carrying amount of assets and liabilities in the consolidated
financial statements with their respective tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, or on the initial recognition of an asset or liability unless the related
transaction is a business combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with investments in subsidiaries is not provided if reversal of
these temporary differences can be controlled by the Group and it is probable that reversal will
not occur in the foreseeable future.
Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the
extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilised. Deferred tax assets and liabilities are calculated at tax rates that are
Page 36
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
1.
Accounting policies (continued)
expected to apply to their respective period of realisation, provided they are enacted or
substantively enacted at the statement of financial position date.
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
The Group has adopted 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 annual period beginning 1 January 2011.
The following standards, amendments and interpretations would be effective for the first time
during 2011:
IAS 24 (revised), ‘Related party disclosures’
Amendment to IAS 32, ‘Classification of rights issues’
IFRIC 19, ‘Extinguishing financial liabilities with equity instruments’
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.
Standards, amendments and interpretations to existing standards that are not yet effective
and have not been early adopted by the Group in the 31 December 2011 financial
statements
At the date of authorisation of these financial statements certain new Standards, amendments
and Interpretations to existing standards have been published but are not yet effective. The
Group has not early adopted any of these pronouncements. The new Standards, amendments
and Interpretations that are expected to be relevant to the Group’s financial statements are as
follows:
Standard
Content
Applicable for financial years
beginning on/after
IAS1
IAS 19
IFRS 9
IFRS 10
IFRS 12
IFRS 13
Presentation of Items of Other Comprehensive Income
(Amendments to IAS1)
‘Employee benefits’
1 July 2012
1 January 2013
Financial instruments: Classification and measurement
1 January 2015
‘Consolidated financial statements’
Disclosure of Interests in Other Entities
‘Fair value measurement’
1 January 2013
1 January 2013
1 January 2013
Amendments to IAS 1 Presentation of Financial Statements (IAS 1 Amendments)
Page 37
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
1.
Accounting policies (continued)
IAS 19, ‘Employee benefits’
In June 2011 IAS 19, ‘Employee benefits’ was amended. As the Group does not hold any defined
benefit pension schemes the amendment will not have any impact on the financial statements.
IFRS 9, ‘Financial instruments: Classification and measurement’
In November 2009, the IASB issued the first part of IFRS 9 relating to the classification and
measurement of financial assets. IFRS 9 will ultimately replace IAS 39. The standard requires an
entity to classify its financial assets on the basis of the entity’s business model for managing the
financial assets and the contractual cash flow characteristics of the financial asset, and
subsequently measures the financial assets as either at amortised cost or fair value. The new
standard has yet to be adopted by the EU, but is expected to be mandatory for annual periods
beginning on or after 1 January 2015. This standard is not expected to have a significant impact
on the Group’s financial statements.
IFRS 10, ‘Consolidated financial statements’
IFRS 10, ‘Consolidated financial statements’ builds on existing principles by identifying the
concept of control as the determining factor in whether an entity should be included within the
consolidated financial statements of the Parent Company. The Group does not expect the
standard to have a significant impact on the Group’s financial statements due to the
straightforward nature of its corporate structure. The Group expects to adopt the standard in
2013, subject to EU endorsement.
IFRS 12 Disclosure of Interests in Other Entities (IFRS 12)
IFRS 12 integrates and makes consistent the disclosure requirements for various types of
investments, including unconsolidated structured entities. It introduces new disclosure
requirements about the risks to which an entity is exposed from its involvement with structured
entities.
IFRS 13, ‘Fair value measurement’
IFRS 13 does not affect which items are required to be fair-valued, but clarifies the definition of
fair value and provides related guidance and enhanced disclosures about fair value
measurements. It is applicable for annual periods beginning on or after 1 January 2013. The
Group’s management have yet to assess the impact of this new standard.
In 2011, the Group did not early adopt any new or amended standards and does not plan to early
adopt any of the standards issued not yet effective.
Page 38
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
2.
Segment reporting
Since the acquisition of Woodcote, the Board have principally monitored the Group’s operations
in terms of results of the two divisions, Dillistone and Voyager rather than on the geographical
basis used prior to the acquisition and accordingly the segment reporting on this basis is also
presented for 2011. It is expected that in future years the geographic segmental analysis will not
be included, although a breakdown of turnover will continue to be provided. Voyager numbers
are included from 21 September 2011. 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 2011
Segment revenue
Depreciation and amortisation
expense
Segment result
Central costs
Exceptional charges
Operating profit
Financial income
Income tax expense
Additions of non-current assets
Additions on acquisition
Segment assets
Intangibles and goodwill
Central assets
Total
Segment Liabilities
Central liabilities
Dillistone
£’000
Voyager
£’000
4,759
250
1,639
689
3
165
25
-
560
-
3,124
101
57
375
3,078
986
Total
£’000
5,448
253
1,804
(424)
(172)
1,208
25
(307)
926
661
57
3,499
5,200
23
8,722
4,064
811
4,875
No comparative is given as in 2010 only the Dillistone division existed.
Page 39
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
2.
Segment reporting (continued)
Geographical segments
The following tables provide an analysis of the Group’s revenue, assets, liabilities and additions
by geographic market.
For the year ended 31 December 2011
Segment revenue
Depreciation and amortisation
expense
Segment result
Central costs
Exceptional charges
Operating profit
Financial Income
Income tax expense
Additions of non-current assets
Additions on acquisition
Segment assets
Central assets and goodwill
Total assets
Segment liabilities
Central liabilities
UKMEA
£’000
2,669
247
1,253
2
653
57
1,517
Europe
£’000
Americas
£’000
1,076
-
236
-
-
-
991
4
129
6
4
-
Asia-
Pacific
£’000
712
2
186
17
4
-
872
779
331
2,730
563
559
212
Total
£’000
5,448
253
1,804
(424)
(172)
1,208
25
(307)
926
661
57
3499
5,223
8,722
4,064
811
4,875
Page 40
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
2.
Segment reporting (continued)
For the year ended 31 December 2010
UKMEA
£’000
1,810
177
892
Europe
£’000
823
1
138
USA
£’000
1,051
3
239
Asia-
Pacific
£’000
567
2
145
677
2,587
-
867
-
889
2
539
Segment revenue
Depreciation and amortisation
expense
Segment result
Central costs
Operating profit
Financial Income
Income tax expense
Additions of non-current assets
Segment assets
Central assets - goodwill
Total assets
Segment liabilities
1,571
440
532
159
Business segment
The following table provides an analysis of the Group’s revenue by business segment
Total
£’000
4,251
183
1,414
(239)
1,175
7
(310)
872
679
4,882
494
5,376
2,702
Revenue
Recurring income
Non-recurring income
Third Party Revenues
2011
£’000
3,248
2,122
78
5,448
2010
£’000
2,536
1,715
-
4,251
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. 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.
Page 41
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
3.
Exceptional Items
Fees relating to the acquisition of Woodcote
and its restructuring
Amortisation of intangibles
2011
£’000
2010
£’000
115
57
172
-
-
-
Note 20 contains details of the acquisition giving rise to the exceptional charges
2011
£’000
2010
£’000
4.
Results from operating activities
Result from operating activities is stated after charging:
Depreciation
Amortisation
Loss 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*
66
243
9
137
31
20
25
17
-
*Fees of £30,000 were paid to Grant Thornton prior to their appointment as auditors
5.
Employees
The average number of employees was:
Operations
Management
Employee numbers
2011
54
6
60
Page 42
82
101
-
118
22
15
14
11
17
2010
46
4
50
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
5.
Employees (continued)
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs
Share based payments charged
2011
£’000
2,562
292
31
48
2,933
2010
£’000
2,093
234
22
-
2,349
The aggregate remuneration includes directors’ remuneration and costs totalling £418,000 (2010:
£457,000) that have been capitalised in intangible assets.
Key management of the Group are the Directors and, from acquisition, the directors of Voyager
Software. Remuneration of Key management was a follows:
Wages and salaries and benefits
Social security costs
Pension costs
Share based payments charge including LTIP charge
2011
£’000
2010
£’000
661
72
7
40
780
466
51
3
-
520
Details of Directors’ emoluments, share options and pension entitlements are given in the
Remuneration Report on pages 18 to 20.
6.
Financial income
Interest receivable
2011
£’000
25
2010
£’000
7
Page 43
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
7.
Tax expense
Current tax
Deferred tax
Deferred tax re acquisition intangibles
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
2011
£’000
234
62
11
307
1,233
26.5%
327
29
-
(70)
63
(13)
(32)
3
307
2010
£’000
207
103
-
310
1,182
28%
331
37
3
(76)
15
(16)
13
3
310
Deferred tax provided in the financial statements is as follows:
Accelerated intangible
amortisation
Provisions
Acquisition Intangibles
Group
Company
2011
£’000
2010
£’000
2011
£’000
2010
£’000
299
(14)
280
565
208
(11)
-
197
-
-
-
-
-
-
-
-
Page 44
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
8.
Earnings per share
Profit attributable to ordinary
shareholders
Weighted average number of shares*
2011
Pre exceptional
£’000
2011
Post
exceptional
£’000
1,084,000
926,000
2010
£’000
872,000
17,328,365
17,328,365
16,996,323
Basic earnings per share
6.26 pence
5.34 pence
5.13 pence
Weighted average number of shares
after dilution
Fully diluted earnings per share
17,392,866
17,392,866
17,031,975
6.23 pence
5.32 pence
5.12 pence
* a bonus issues of shares took place in June 2011 and the number of shares in 2010 have been adjusted to take
account of this issue.
9.
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 £1,406,000 (2010: £1,245,000).
Page 45
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
10. Goodwill
Group
Cost
At 1 January 2010
Additions
At 31 December 2010
Additions
At 31 December 2011
Amortisation
At 1 January 2010
Charge for the year
At 31 December 2010
Charge for the year
At 31 December 2011
Carrying amount
At 31 December 2011
At 31 December 2010
At 31 December 2009
Goodwill
£’000
494
-
494
1,996
2,490
-
-
-
-
-
2,490
494
494
At the year end date an impairment test has been undertaken by comparing the carrying values
of goodwill with the recoverable amount of the cash generating unit to which the goodwill has
been allocated. The recoverable amount of the cash generating unit (CGU) is based on value-in-
use calculations. These calculations use cash flow projections covering a 3 year period based on
financial budgets and a calculation of the terminal value, for the period following these formal
projections.
The key assumptions used for value-in-use calculations are those regarding growth rates,
increases in costs and discount rates. The discount rate is reviewed annually to take into
account the current market assessment of the time value of money and the risks specific to the
cash-generating units and rates used by comparable companies. The pre tax discount rate used
to calculate value-in-use is 12% (2010: 12%). Growth rates for forecasts take into account
historic experience and current market trends. Costs are reviewed and increased for inflation and
other costs pressures. The long term growth rate used for the terminal value calculation is 2%.
Page 46
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
10. Goodwill (continued)
(2010: 2%) for all CGUs. The allocation of goodwill across the CGUs is as follows:
Opening
£’000
Addition
£’000
Impairment
£’000
Closing
£’000
Dillistone UKMEA
Dillistone Europe
Dillistone Australia
Dillistone US
Voyager consolidated
290
110
40
54
494
-
-
-
-
1,996
1,996
-
-
-
-
-
-
290
110
40
54
1,996
2,490
Sensitivities
To reduce the headroom in the impairment calculation to £nil for the Voyager consolidation
goodwill would require a reduction of terminal growth rate to 0% and an increase in the discount
rate to 20%. No meaningful sensitivity for the Dillistone goodwill reduces the headroom to £nil.
11.
Intangible assets
Group
Cost
At 1 January 2010
Additions
At 31 December 2010
Additions
At 31 December 2011
Amortisation
At 1 January 2010
Charge for the year
At 31 December 2010
Charge for the year
At 31 December 2011
Carrying amount
At 31 December 2011
At 31 December 2010
At 31 December 2009
Development
costs
£’000
Acquisition
Intangibles
£’000
-
-
-
1,178
1,178
-
-
-
57
57
1,121
-
-
1,047
623
1,670
580
2,250
374
101
475
186
661
1,589
1,195
673
Page 47
Total
£’000
1,047
623
1,670
1,758
3,428
374
101
475
243
718
2,710
1,195
673
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
11.
Intangible assets (continued)
Acquisition Intangibles can be summarised as follows:
Cost
At 1 January 2011
Additions
Amortisation
At 31 December 2011
Developed
Technology
Contractual
relationship
Non
contractual
relationship
£’000
£’000
£’000
-
306
(8)
298
-
171
(34)
137
-
507
(12)
495
Brand
£’000
-
194
(3)
191
Total
£’000
-
1,178
(57)
1,121
12.
Property, plant and equipment
Group
Cost
At 1 January 2010
Currency impact
Additions
At 31 December 2010
Currency impact
Additions by acquisition
Additions
At 31 December 2011
Depreciation
At 1 January 2010
Currency impact
Charge for the year
At 31 December 2010
Currency impact
Depreciation on acquisition
Charge for the year
At 31 December 2011
Carrying Amount
At 31 December 2011
At 31 December 2010
At 31 December 2009
Land and
buildings
£’000
Office &
computer
equipment
£’000
Fixtures
and
fittings
£’000
Total
£’000
270
3
56
329
-
112
81
522
229
3
47
279
-
100
40
419
103
50
41
163
-
-
163
-
-
-
163
110
-
33
143
-
-
20
163
-
20
53
Page 48
25
3
-
28
-
102
-
130
24
1
2
27
-
57
6
90
40
1
1
458
6
56
520
-
214
81
815
363
4
82
449
-
157
66
672
143
71
95
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
13.
Non-current asset investments
Company
Cost
At 1 January 2011
Acquired - Woodcote
31 December 2011
Unlisted
Investments
£’000
1,623
2,488
4,111
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%
(indirect)
Australia
Dillistone Systems (US) Inc
Sale of computer software and
related support services
100%
USA
Woodcote Software
Limited
Holding company
100%
England &
Voyager Software
Limited *
Sale of computer software and
related support services
100%
Voyager Software
(Australia) Pty Limited
Sale of computer software and
related support services
100%
(Indirect)
Wales
England &
Wales
Australia
* The ownership of Voyager Software was transferred from Woodcote Software Limited to Dillistone Group Plc on 30
December 2011.
Page 49
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
14.
Inventories
Group
2011
£’000
2010
£’000
Company
2011
£’000
2010
£’000
Licences for resale
11
55
-
-
15.
Trade and other receivables
Trade and other receivables*
Group receivables
Other current assets
Prepayments and accrued
income
Group
Company
2011
£’000
1,514
-
44
193
2010
£’000
1,161
-
-
253
1,751
1,414
2011
£’000
-
30
8
1
39
2010
£’000
-
78
4
-
82
*Trade and other receivables includes £23,000 (2010: £68,000) receivable in more than one year
and have been included in non-current assets.
The carrying value of trade receivables is considered a reasonable approximation of fair value.
All of the receivables have been reviewed for indicators of impairment. The movement in the
provision is shown below:
At start of year
Movement in the year
At the year end
2011
£’000
52
26
78
2010
£’000
-
52
52
The ageing profile of trade receivables past due date but not impaired as at the year end is as
follows:
Current
31 - 60 days overdue
More than 60 days overdue
Total
2011
£’000
1,346
71
97
1,514
2010
£’000
996
55
110
1,161
Page 50
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
16.
Trade and other payables
Group
Company
2011
£’000
476
-
2,473
846
3,795
£’000
308
36
20
364
2010
£’000
352
-
1,799
257
2,408
£’000
-
-
-
-
Current liabilities
Trade and other payables
Group payables
Deferred income
Accruals
Non current liabilities
Contingent consideration
Cash settled option provision
Other provisions
17.
Share capital
Allotted, called up and fully paid
2011
£’000
10
626
-
458
1,094
£’000
308
36
-
344
2010
£’000
5
546
-
95
646
£’000
-
-
-
-
2011
£’000
2010
£’000
18,196,277 Ordinary shares of 5 pence each
910
283
In June 2011 the Company carried out a 2 for 1 bonus issue of 11,330,882 Bonus Shares. In
September 2011 the Company placed 694,445 shares @72p to partially finance the acquisition of
Woodcote Software Limited. It also issued 505,509 shares to the Vendors of Woodcote as part
of the consideration paid.
Shares issued and fully paid
2011
2010
Beginning of the year
Bonus issue
Shares issued on placing
Issued on acquisition of Woodcote
Shares issued and fully paid
5,665,441
11,330,882
694,445
505,509
18,196,277
5,665,441
-
-
-
5,665,441
Page 51
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
18. Operating lease arrangements
The Group leases offices under non-cancellable operating lease agreements.
At 31 December 2011 the Group had future total commitments under non-cancellable operating
leases as follows:
Commitments payable:
Within one year
Between two and five years
19. Share options
Share based payments
2011
£’000
479
154
325
2010
£’000
286
83
203
There are two share option schemes in operation: an Enterprise Management Incentive Scheme
(“the EMI Scheme”) which complies with the requirements of HMRC and a scheme which has not
been approved by HMRC (“the Unapproved Scheme”). If the options remain unexercised after a
period of 10 years from the date of grant, the options expire. Options are normally forfeited if the
employee leaves the Company before the options become available to exercise. There are no
performance conditions associated with these options
During 2011 the Group made two grants of options. The fair values of the services received in
exchange for share-based payments were calculated using a Black-Scholes pricing model.
The inputs into the model were as follows:
Date of grant
Number
granted*
Share
price on
issue
date*
Exercise
price *
Expected
volatility
Vesting
period
Leaver
rate over
vesting
period
Risk free
rate
Expected
dividend
yield
14 Jan 2011
30,000
58.33p
58.33p
21 Sept 2011
420,794
77.00p
77.00p
65%
65%
3 years
3.33
years
0%
1.75%
15%
0.79%
4.5%
4.5%
*Adjusted for the 2 for 1 bonus issue where appropriate
No options were granted in 2010.
Page 52
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
19. Share options (continued)
Details of the number of share options and the weighted average exercise price (WAEP)
outstanding during the year are as follows:
Outstanding at beginning of year
Granted during year
Exercised during year
Forfeited during year
Outstanding at the end of the year
Exercisable at the year end
2011
No of options*
101,652
450,794
-
-
552,446
101,652
WAEP*
55.27
75.76
74.01
66.27
2010
No of options*
107,652
-
-
(6,000)
101,652
101,652
WAEP*
68.11
-
-
99.17
66.27
66.27
*Adjusted for the 2 for 1 bonus issue were appropriate
No directors exercised share options during the year. The Company’s mid-market share price on
31 December 2011 was 72.5p.
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 £ 12,000 (2010: £2,000).
Share options remaining in the schemes are as follows:
Scheme Type
Date of Grant
Exercise From
Lapse Date
EMI
Unapproved
EMI
Unapproved
Unapproved
EMI
Unapproved
03/05/2006
03/05/2006
14/09/2007
14/09/2007
14/01/2011
21/09/2011
21/09/2011
03/05/2009
03/05/2009
14/09/2010
14/09/2010
14/01/2014
21/09/2014
21/09/2014
02/05/2016
02/05/2016
13/09/2017
13/09/2017
13/01/2021
20/09/2021
20/09/2021
Options
remaining
8,913
26,739
60,000
6,000
30,000
398,794
22,000
552,446
Ex Price (p)
5.38
5.38
99.17
99.17
58.33
77.00
77.00
Cash settled options
During the year the Board introduced a long term incentive scheme for directors. The scheme
grants phantom options to the participants and these options are cash settled on the vesting date,
which will be the date of the publication of the appropriate annual report. The amount payable
will be the increase in share price between the date of grant and vesting multiplied by the number
of phantom options granted multiplied by the performance factor. The performance factor is
based on the percentage rise in the earnings per share over the period.
The fair values of the services received in exchange for cash based option payments were
calculated using a Black-Scholes pricing model at 31 December 2011.
Page 53
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
19. Share options (continued)
The inputs into the model were as follows
Date of grant
Number
granted*
Exercise
price *
Expected
volatility
Share
price on
issue
date*
Remaining
period to
vesting
Leaver
rate over
vesting
period
Risk free
rate
Expected
dividend
yield
28 April 2011
645,750
58.33p
66.67p
65%
2.33 years
0%
0.4%
4.25%
*Adjusted for the 2 for 1 bonus issue
The expense charged for the year for the year was £36,000 (2010: £nil). The total provision
carried forward was £36,000 (2010: £nil) and is included in non-current liabilities
20.
Acquisitions
On 21 September 2011, the Group acquired the entire share capital of Woodcote Software
Limited for an estimated consideration before fees of £2,487,000, which was satisfied as detailed
below. This was part of the Group’s strategy to broaden our offering to the recruitment sector.
Woodcote is a non-trading holding company. Voyager Software Limited (www.voyage.co.uk/),
which was a wholly owned subsidiary of Woodcote, sells a number of software products to its
target market of recruitment agencies. The products are designed to facilitate the filling of
temporary or permanent vacancies. Voyager Software (Australia) Pty Ltd., a wholly owned
subsidiary of Voyager, markets a similar product range. Between them, Voyager and Voyager
(Australia) have over 700 active unique clients and nearly 5,000 active licensed users.
Page 54
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
20.
Acquisitions (continued)
The details of the business combination are as follows:
Book
value
£'000
Fair Value
adjustments
£'000
Fair Value
£'000
ASSETS
Non-current assets
Property plant and equipment
Intangible assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Trade and other payables
Deferred tax liability
Net assets acquired
Goodwill
57
-
125
208
390
(756)
-
(366)
-
1,178
-
-
1,178
(24)
(295)
859
Satisfied by
Cash consideration
Settled in shares
Cash consideration in relation to surplus working capital *
Contingent consideration
Fair value of Consideration transferred
Amount settled in cash consideration in period
Cash and cash equivalents acquired
Net cash outflow on acquisition
Acquisition fees relating to placing charged to share premium
reserve
Acquisition costs charged to expenses
Net cash paid relating to acquisition
*included in trade payables at the year end
57
1,178
125
208
1,568
(780)
(295)
493
1,994
2,487
1,500
390
98
499
2,487
£'000
1,500
(208)
1,292
43
115
1,450
Equity consideration was agreed at £390,000 and satisfied by the issue of 505,509 ordinary
shares in Dillistone Group. It was also contractually agreed that the price used to calculate the
shares would be the mid market price over the average of the previous 30 days. This was
calculated to be 77.15p.
The placing was carried out at a price of 72p and this has been used to value the equity issued.
Page 55
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
20.
Acquisitions (continued)
The total consideration of £2,487,000 net of cash acquired of £208,000 was £2,279,000 before
fees. The fair value adjustment of £24,000 to liabilities was in relation to employee redundancy
costs which had been approved by previous management pre acquisition but not recognised.
Fees of £43,000 in respect of the issue of equity have been offset against the merger reserve
and £115,000 were expensed as exceptional costs. In addition, following a detailed review of
the fair value of assets and liabilities acquired, in accordance with IFRS3 Business
Combinations the Group has recognised 4 intangible assets totalling £1,178,000 made up as
follows:
Intangible assets:
Brand
Developed technology
Contractual customer relationships
Non contractual customer
relationships
£’000
Estimated
life
194
306
171
507
15 years
11.25 years
1.25 years
10.25 years
1,178
Goodwill of £1,994,000 represents the excess of the purchase price over the fair value of the net
tangible and intangible assets acquired. The goodwill arising on the acquisition consists largely
of the workforce value, synergies and economies of scale expected from combining the
operating with Dillistone Group companies.
As part of the acquisition, the Group agreed to pay additional consideration against surplus
working capital up to a certain level that was retained in the business at completion. Following a
completion accounts verification process, an amount of £98,000 was agreed to be paid to the
vendors and is included in creditors at the year end. In addition the vendors are entitled to
contingent consideration:
£200,000 - provided that the revenue of the acquired companies exceeds £2,200,000 in
the year ending 30 June 2012
30 per cent of the revenue of the acquired companies over £2,300,000 in the year ending
31 December 2012
30 per cent of the revenue of the acquired companies over £2,300,000 in the year ending
31 December 2013
From the date of acquisition to 31 December 2011, the acquired companies contributed £689,000
to revenue and £165,000 to profit before taxation. In the last financial year, being the year ended
30 June 2011 the acquired companies made a profit before taxation of £105,000 and before an
exceptional loss totalling £384,000 relating to a loan write-off to a Group company, ExpressHR
Services Limited, which was sold on acquisition. However, due to a change in year end, lack of
audited accounts, changed capital structure and exceptional write-offs, pro-forma profit or loss of
the combined entity for the complete 2011 reporting period cannot be readily be determined.
Page 56
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
21
Financial instruments
The Group uses various financial instruments; these include cash and bank deposits and various
items such as trade receivables and trade payables that arise directly from its operations. The
main purpose of these financial instruments is to provide finance for the Group’s operations.
The Group finance department maintains liquidity, manages relations with the Group’s bankers,
identifies and manages foreign exchange risk and controls Group treasury operations. Treasury
dealings such as investments and foreign exchange are conducted only to support underlying
business transactions. Consequently, the Group does not undertake speculative foreign
exchange dealings for which there is no underlying exposure.
The Group’s policies for management of the financial risks to which it is exposed are outlined
below.
(i)
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 on the Group’s bank deposits. The Group’s policy is to
maintain capital preservation and flexibility rather than to optimise interest rates on bank deposits
held, Cash deposits in sterling and foreign currencies are made at prevailing interest rates.
Where rates are fixed, the fixed interest period is generally no more than 1 month.
At the year end, the Group had positive cash balances totalling £1,617,000 (2010: £2,147,000).
Had interest rates been 1% higher during the financial year, the impact on profit would have been
an increase in profit for the year of £ 21,000 (2010: increase of £20,000).
(ii)
Credit risk
The Group’s principal financial assets are cash and cash equivalents and trade and other
receivables.
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial
instrument fails to meet its contractual obligations and arises principally from the Group’s
receivables from customers and monies on deposit with financial institutions.
Historically, the cash collection profile has been very good. Debt aging and collections are
monitored on a regular basis. Some of the unimpaired trade receivables are past due as at the
reporting date. Information on financial assets past due but not impaired are included in Note 16.
The credit risk on liquid funds and derivative financial instruments is limited because the
counterparties are banks with high credit ratings assigned by international credit rating agencies.
The Group has no significant concentration of credit risk.
Page 57
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
21
Financial instruments (continued)
The Group’s maximum exposure to credit risk at the reporting date is represented by the carrying
value of financial assets, as follows:
Trade and other receivables (current assets)
Trade and other receivables (non-current assets)
Cash and cash equivalents
Total
(iii)
Liquidity risk
2011
£’000
1,728
23
1,617
3,368
2010
£’000
1,346
68
2,147
3,561
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall
due. The Group’s approach to managing liquidity is to ensure it will has sufficient liquidity to meet
its liabilities when due.
As at 31 December 2011, the Group and Company’s financial liabilities (being trade and other
payables and deferred income and income tax) have contractual maturities as summarised
below:
Group
31 December 2011
Trade and other payables (current liabilities)
Trade and other payables (non-current liabilities)
31 December 2010
Trade and other payables (current liabilities)
Trade and other payables (non-current liabilities)
Company
31 December 2011
Trade and other payables (current liabilities)
Trade and other payables (non-current liabilities)
Carrying
amount
< 1 year
1-2 years
2-5 years
£’000
3,795
364
4,159
£’000
3,795
-
3,795
£’000
-
128
128
£’000
-
236
236
Carrying
amount
< 1 year
1-2 years
2-5 years
£’000
2,408
-
2,408
£’000
2,408
-
2,408
£’000
-
-
-
£’000
-
-
-
Carrying
amount
< 1 year
1-2 years
2-5 years
£’000
1,094
344
1,438
£’000
1,094
-
1,094
£’000
-
108
108
£’000
-
236
236
Page 58
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
21
Financial instruments (continued)
31 December 2010
Trade and other payables (current liabilities)
Trade and other payables (non-current liabilities)
Carrying
amount
< 1 year
1-2 years
2-5 years
£’000
2,408
-
2,408
£’000
2,408
-
2,408
£’000
-
-
-
£’000
-
-
-
The directors consider there to be no significant liquidity risks due to the significant cash balances
of the Group.
(iv)
Foreign currency risk
The Group is exposed to foreign currency risk on sales and purchases which are denominated in
a currency other than sterling. Exposures to currency exchange rates are primarily denominated
in US Dollars ($), Australian Dollars (AUD) and Euros (€). The Group does not use derivatives to
hedge translation exposures arising on the consolidation of its overseas operations.
At the year end, the Group had assets totalling £852,000 and liabilities totalling £563,000
denominated in Euros (2010: assets totalling £867,0000 and liabilities totalling £440,000), assets
totalling £759,000 and liabilities totalling £559,000 denominated in US Dollars (2010: assets
totalling £889,000 and liabilities totalling £532,000) and assets totalling £323,000 and liabilities
totalling £212,000 denominated in Australian Dollars (2010: assets totalling £539,000 and
liabilities totalling £159,000). If each of the exchange rates weakened by 5%, the impact on the
income statement would be a decrease in profit before tax by £27,000 (2010: decrease of
£27,000).
Capital risk management
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 £3,847,000 (2010: £2,674,000). Further details in respect of
movements in capital are provided in the statement of changes in equity.
Page 59
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
21
Financial instruments (continued)
Summary of financial assets and liabilities by category
The carrying amounts of the financial assets and liabilities as recognised at the statement of
financial position date of the years under review may also be categorised as follows:
Financial assets
Loans and receivables
Cash and Cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Contingent consideration
22.
Control
Group
2011
£'000s
-
1,617
1,751
2010
£'000s
-
2,147
1,414
Company
2011
£'000s
2010
£'000s
-
13
39
-
11
82
3,368
3,561
52
93
3,660
499
4,159
2,408
-
2,408
939
499
1,438
646
-
646
No individual shareholder, or shareholders acting in concert, hold more than 50% of voting
shares, and accordingly there is not considered to be an “ultimate controlling party”.
23.
Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note. These take the form of
management charges payable by Group members to relating to support services provided
directly to them and dividends.
The directors received dividends paid by the Company of £292,000 (2010: £289,000).
24.
Dividends
The dividends paid in 2011 and 2010 were £ 609,000 (3.5p per share) and £595,000 (3.5p per
share) respectively after adjusting for the bonus issue. A final dividend in respect of the year
ended 31 December 2011 of 2.3333p per share will be paid on 26 June 2012. These financial
statements do not reflect this dividend.
Page 60
DILLISTONE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
24.
Dividends (continued)
Under company law, any distribution made by a company to its shareholders must not exceed the
amount of distributable reserves reported in the last annual accounts of the company circulated to
shareholders. In the event that the last annual accounts do not show sufficient distributable
reserves to pay all or any part of the dividends concerned, then it is a company law requirement
that a company prepares unaudited interim accounts demonstrating sufficient distributable
reserves prior to payment of such dividend (“Interim Accounts”). In the case of a public company,
Interim Accounts need to have been properly prepared and filed with the Registrar of Companies
before a dividend is declared or (in the case of an interim dividend) paid.
In the years 2006 to 2010, the Company paid dividends to shareholders in part out of
distributable profits generated in the year in which the dividends were paid, rather than in respect
to the distributable reserves available by reference to the last filed annual accounts or relevant
Interim Accounts.
Whilst the Group did have sufficient distributable reserves at the relevant times to cover the
whole amounts of the dividends paid in the years 2006 to 2010, at the time that those dividends
were paid, sufficient distributable reserves had not been distributed from the other companies
within the Group and paid to the Company by way of intra-group dividends. Accordingly the
payment of the dividends in this period has given rise to certain technical breaches of the
Companies Act 1985 or the Companies Act 2006.
Interim Accounts for the six months to 30 June 2011 were prepared by the Company and filed
with the Registrar of Companies, showing distributable reserves sufficient to allow the
appropriation of reserves necessary to rectify the past dividend issue.
At a general meeting in November 2011, shareholders voted on and passed four resolutions to
rectify and ratify the payment of the dividends paid in the years 2006 to 2010, which were made
in breach of the Companies Act 1985 or the Companies Act 2006 and to release any claims that
the Company may have against its shareholders or directors (whether past present or future) in
respect of the dividends paid incorrectly. This matter is now resolved.
Page 61
Dillistone Group Plc
Third Floor
50-52 Paul Street
London EC2A 4LB
Tel: +44 (0)20 7749 6100
www.Dillistonegroup.com