The Descartes Systems Group Annual Report 2019

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FY2019 Annual Report · The Descartes Systems Group

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12 Cedarwood, Crockford Lane,
Chineham Business Park,
Basingstoke
RG24 8WD

ANNUAL
REPORT 2019

www.dillistonegroup.com

Designed and printed by Perivan

ANNUAL REPORT 2019

DILLISTONE GROUP PLC
EMPOWERING RECRUITMENT
GLOBALLY THROUGH TECHNOLOGY

Dillistone Group Plc is a leading global provider of software and
services that enable recruitment firms and in-house recruiters to
better manage their selection process and address the training
needs of individuals. Dillistone Group works with 2,000+ clients in
over 60 countries.

Contents

Strategic Report

Highlights

Dillistone Group at a glance

Chairman’s statement

CEO’s review

Financial review

Governance

Corporate governance report

Audit Committee report

Report to the Shareholders on Directors’
remuneration

Board of Directors

Directors’ report

Financial Statements

Independent Auditor’s report to the
members of Dillistone Group Plc

Consolidated statement of
comprehensive income

Consolidated statement of changes in equity 38

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

Directors and advisers

FINANCIAL STATEMENTSDILLISTONE GROUP PLC Annual Report and Accounts 2018HIGHLIGHTS

82%

Recurring revenues1
2018: 82%)

(cid:129) Successfully completed the group restructuring
to time and at the lower end of forecast cost.
New operating structure working well with
reduced cost base

(cid:129) Reorganisation ﬁ nanced through a £0.5m

bank loan

(cid:129) Recurring revenues1 represent 82% (2018:

82%) of Group revenue

(cid:129) Adjusted operating loss2 of £0.207m (2018:
proﬁ t £0.055m) before acquisition related,
reorganisation and other costs

(cid:129) Loss for the year of £0.842m (2018: loss

£0.260m) reﬂ ecting the costs associated with
reorganising the business

(cid:129) Cash at 28 July 2020 was £2.1m, reﬂ ecting

post period CBIL loan of £1.5m.

STRATEGIC REPORT

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

“The changes made to the
business in 2019 have improved
our ability to meet the needs of our
global clients swiftly and efﬁ ciently,
while signiﬁ cantly reducing
our cost base, and placed the
business in a situation where we
had fully anticipated a return to
proﬁ tability in H1 of 2020.

After a strong start to the year,
the impact of the Covid-19
pandemic has been signiﬁ cant
but swift action to manage the
cost base during this period,
coupled with working to support
our clients and improved new
business performance, is enabling
the company to effectively work
through the challenges.

With a healthy cash balance
and having protected, and now,
increasing investment in our
product development, the Board
is optimistic that the business will
emerge strongly as the economy
recovers.”

Deﬁ nitions:

1 The component elements of recurring revenues are detailed in note 3.

2 Adjusted operating proﬁ t is statutory operating proﬁ t before acquisition costs, related intangible amortisation

and reorganisation and other costs. See note 2.

Visit our investor relations website at
www.dillistonegroup.com for further
information about Dillistone Group Plc.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

DILLISTONE GROUP
AT A GLANCE

The Group traded through 3 divisions for most of 2019:

(cid:129) Dillistone Systems Division

(cid:129) Voyager Software Division

(cid:129) GatedTalent

In December 2019 the Group restructured the business, collapsing
the divisional structure and becoming a brand based business under
the Ikiru People trading name.

Ikiru People is a leader in the supply of technology solutions and
services to recruitment, stafﬁ ng and executive search businesses, as
well as corporate HR teams around the world.

Providing the platforms they need to test and train candidates,
support further development, enhance the recruitment process and
source the best talent.

Operating in more than 60 countries over six continents and working
with hundreds of ﬁ rms, we boast more than 30 years in the market
and 100s of years of collective experience. While the Ikiru People
brand is the new face of the group, one thing has never changed:
our dedication to delivering a fast and professional service that puts
our customers ﬁ rst.

OUR BRANDS

STRATEGIC REPORT

FileFinder
FileFinder is a leading cloud executive search
solution used by thousands of executive
recruiters globally. An easy-to-use yet feature-
rich management app designed speciﬁ cally for
executive search and headhunting.

GatedTalent
Top executive ﬁ rms don’t run job ads — they
headhunt. GatedTalent is the private network
designed to allow executives to share their
information and achievements with recruiters,
all while supporting GDPR compliance. Unlike
our other products, GatedTalent generates
both B2B and B2C revenues.

ISV.online
A market leader in online skills testing,
working with consultancies and employers
to help them secure and retain the best
talent. ISV.online gets the recruitment
process right by avoiding bad hires and
improving onboarding.

Voyager
Voyager recruitment software is the easy-
to-use, innovative, all-in-one solution that
streamlines recruitment processes and
automates mundane admin tasks, making
businesses more efﬁ cient, customer-centric
and competitive.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

CHAIRMAN’S STATEMENT

For the year ended 31 December 2019

2019 was a year of signiﬁ cant change.
This started in February when the Group
announced a fundamental reorganisation of
the business. This involved merging the two
UK ofﬁ ces into a single, expanded location in
Basingstoke, together with also relocating and
expanding our Eastleigh development facility.
The Group has streamlined its corporate
structures and operations, resulting in the UK
businesses being combined into one trading
entity and renamed Ikiru People Limited.
A similar reorganisation has occurred in
Australia. These changes came into effect on
31 December 2019, were delivered on time
and within budget, and are delivering the
planned efﬁ ciencies.

The restructuring was an important step
in our plan to streamline our operating
procedures while maintaining our excellent
reputation for client service in order that the
Group could deliver signiﬁ cantly improved
performance starting immediately from 2020.

2020 started well for the Group with our early
months delivering results ahead of internal
expectations. However, the impact of the
Covid-19 pandemic on our target market –
the recruitment sector – is clear. We’ve seen
many of our clients shrink, with some clients
closing. We have additionally supported many
clients through agreeing discounted periods
and deferred terms.

The Board has reacted swiftly, taking
advantage of various government schemes,
including furloughing, and staff unanimously
supporting a temporary pay-cut, including
all executive and non-executive directors. In
June 2020, the Company secured a loan of
£1.5m under the UK Government’s Business
Interruption Loan scheme. This enables us
to continue to deliver and develop products
with conﬁ dence.

The reorganisation in 2019 resulted in some
staff working from home and this led to
investment in infrastructure to support this.
This therefore enabled the Group immediately
to move to home working for the majority
of staff as a result of the pandemic and still
operate efﬁ ciently and effectively.

Looking back at 2019, overall, Group revenue
fell 8% to £8.027m, of which recurring
revenue fell 8% to £6.593m of which
£0.130m related to the loss of a major client
as previously announced.

There was an adjusted operating loss in 2019
of £0.207m (2018: Proﬁ t £0.055m), mainly
due to the fall in revenue and with the full
beneﬁ ts of the reorganisation not expecting
to be seen until 2020. The operating loss
including reorganisation and acquisition related
items was £1.090m (2018: loss £0.414m).

Dividends
The Group is not recommending a ﬁ nal
dividend in respect of the year to 31
December 2019 (2018: nil).

Staff
On behalf of the Board I would like to take this
opportunity to thank all of our staff for their
individual and collective contributions during
2019 and for the professional way they have
all risen to the challenges of the pandemic,
continuing to deliver for our clients. They
ensured that we continued to deliver excellent
service throughout 2019’s major restructuring
and it is through their efforts, commitment
and determination that we continue to be a
leading technology provider.

Corporate governance
It is the Board’s duty to ensure that the
Group is managed for long-term beneﬁ t of all
stakeholders.

We have made a number of changes to our
Group Board over the last 12 months. I would
like to sincerely thank my predecessor, Dr
Mike Love, for his outstanding leadership of
the Board over last 9 years. I am very grateful
to him for staying on in a non-executive role to
allow for a smooth transition.

I also thank Rory Howard and Alistair Milne
who both stepped down from the Board as
the restructuring completed. They have both
contributed extensively to the business over
very many years. I am delighted to welcome
Paul Mather and Simon Warburton to the
Board. Both Paul and Simon joined the

Group in 2011 on the acquisition of Voyager
and have been leading members of the
Executive Team.

Details of our governance processes and my
role as Chairman of the Board are included in
the corporate governance section that follows
the strategic report.

Outlook
The Group was trading ahead of internal
targets for 2020 prior to the impact of
Covid-19 and swift action by management
has helped mitigate some of the impact of the
pandemic.

The majority of our clients are in the
recruitment sector and this has been
signiﬁ cantly affected by the recession. Our
client base has reduced in size with many
of our clients having fewer licences than
previously. We believe this would be true for
virtually any supplier in our sector.

However, we are pleased to report that
– while revenue from existing clients has
fallen – the business has improved its new
business performance on the same period
in 2019, winning more new contracts for a
higher combined value, despite our decision
to withdraw our “Evolve” product from the
market. While this will not make up for
the loss of revenue from existing clients,
it demonstrates our ability to compete
successfully and gives us conﬁ dence of a
return to growth when markets return to a
semblance of normality.

However, the most likely outcome for H1 will
be a small and much reduced loss compared
with the prior year. It remains too early to
quantify the impact of the pandemic over the
full year, but the Board currently expects to
see an improvement on our 2019 result.

With a healthy cash balance and having
protected, and now, increasing investment
in our product development, the Board is
optimistic that the business will emerge
strongly as the economy recovers.

Giles Fearnley
Non-Executive Chairman
29 July 2020

STRATEGIC REPORT

CEO’S REVIEW

For the year ended 31 December 2019

Key Performance Indicators
(KPIs)
The Board and management use absolute
ﬁ gures to monitor the performance of the
business using the ﬁ nancial KPIs set out
below. As discussed above the Board has
undertaken a major restructuring exercise
to address the longer term performance of
the business:

Dillistone Group Plc
supplies products and
services to facilitate
recruitment. We cover
everything from retained
executive search
technology through to tools
to facilitate the hiring of
temporary staff, pay and
bill, from pre-employment
skills testing through
to a B2C platform that
allows executives to share
information with executive
search ﬁ rms.

Strategy and objectives

In light of Covid-19, the Board has taken
the view that until any material business
risk from the pandemic is behind us, our
objectives would be revised so that we can
successfully navigate the crisis. We will
strive to ensure that we exit the current
crisis in a strong position with products that
meet the needs of clients. Consequently,
our focus will be to:

(cid:129) Ensure our staff and their families stay

safe, engaged and effective;

(cid:129) Take all reasonable steps we can to help
our clients through a challenging period
for recruitment;

(cid:129) Protect and prioritise our product and

development efforts around solutions that
reﬂ ect the needs of a post Covid world;
and

(cid:129) Take appropriate action to maintain a
strong and stable ﬁ nancial position,
throughout this period and into the
future.

Total revenues

Recurring revenues

Non recurring revenues

Adjusted proﬁ t/(loss) before tax

Cash

FY 2018
£000

8,692

7,154

1,169

725

FY 2019
£000

8,027

6,593

1,160

(298)

Measure used by management

Met /Not met

year on year growth

not met

402

sufﬁ cient cash resources maintained met

Adjusted proﬁ t before tax is statutory proﬁ t before, related intangible amortisation, reorganisation and other costs. See note
2 and note 5.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

CEO’S REVIEW

Continued

Restructuring
During the year, the Group merged two
UK ofﬁ ces into a single, expanded location
in Basingstoke. We also relocated and
expanded our Eastleigh development
facility. The Group also streamlined its
corporate structures and operations to
achieve efﬁ ciencies across the business.
This resulted in the ﬁ ve UK businesses
being combined into one trading entity
subsequently renamed Ikiru People Limited.
A similar reorganisation has occurred in
Australia combining our two companies
into one and renamed as Ikiru People Pty
Limited. Our sole business in the US was
also renamed. Ikiru People Inc.

The restructuring and reorganisation has
allowed us to integrate teams across the
business and to leverage knowledge across
the Group to accelerate performance and
improve the quality of our services to our
clients.

As part of the reorganisation, a review was
made of the Company product strategy. As
a result of this review, one of the Group’s
six core products, Evolve, was withdrawn
from the market at the end of 2019. Going
forward, product development investment
has been refocussed with a view to prioritising
development which will lead to signiﬁ cant long
term growth, rather than short term product
enhancements. This has led the Company
to increase investment in areas such as user
experience and quality assurance.

At the time that we announced our
restructuring plans, we anticipated that the
costs of the restructuring would be in the
region of £500,000 to £900,000. We are
pleased to report that costs were at the lower
end of this estimate at £578,000. These
costs were met without recourse to equity
funding from shareholders.

Adjusted EBITDA1 was down 1% to
£1.282m (2018: £1.301m). There was
an adjusted operating loss of £0.207m
(2018: proﬁ t £0.055m) and there was a
pre-tax loss before acquisition related items
and reorganisation and other adjustments
of £(0.298)m (2018: proﬁ t £0.018m).
The operating loss for the year increased
to £1.090m (2018: loss £0.414m) with
reorganisation and other costs totalling
£0.578m (2018: £nil) and acquisition related
amortisation of £0.305m (2018: £0.469m).
The loss for the year was £0.842m (2018:
loss £0.260m). Cash at the year end was
£0.402m (2018: £0.725m).

Adjusted EBITDA is adjusted operating proﬁ t with
depreciation and amortisation added back. See
note 3.

Divisional Reviews as structured
through 2019

Dillistone Systems

The Dillistone Systems division was primarily
focused on providing technology solutions
to the executive search market via our range
of “FileFinder” applications. This client
group is made up of both executive search
ﬁ rms and executive search teams in major
organisations.

The Division accounts for 49% (2018: 48%)
of the Group’s revenue and it saw revenue
fall 7% to £3.895m (2018: £4.195m).

The executive search market remains a
key market for our business and is one we
continue to invest in signiﬁ cantly.

Earnings before interest, tax, depreciation
and amortisation (‘EBITDA’) improved
to £1.021m (2018: £0.723m) as costs
improved despite reduced sales. The total
amortisation and depreciation charge was
£0.747m (2018: £0.644m). Operating proﬁ t
for 2019 was £0.094m (2018: £0.079m) after
reorganisation and other costs of £0.180m.

Our business model
The business was previously split into
three Divisions. Dillistone Systems and
Voyager Software and GatedTalent. The
reorganisation has brought all of these
businesses together into effectively one
division with a focus more on the products
we sell than on divisional structures.

The majority of our products are
commercialised through one or more of the
following:

1. an upfront licence fee plus a recurring

support fee;

2. Software as a Service (SaaS) subscription

basis; or

3. a hybrid model incorporating an upfront

payment and recurring support and cloud
hosting fees.

There is a continuing move away from the
upfront licence model towards our cloud
delivery (SaaS) services. The GatedTalent
Division generates revenue from a
combination of recruiter subscription fees
and service fees from executives.

The business operates out of Europe,
the US and Australia but services clients
globally. As well as supplying and supporting
our software we also host the software for
a proportion of our clients. This is done
through Microsoft Azure and AWS data
centres in Europe, the Americas, Singapore
and Australia.

Group review of the business
2019 saw recurring revenues fall 8%
to £6 .593m (2018: £7.154m) of which
£0.130m related to the previously
announced loss of a major client and with
attrition exceeding new contract wins in
the year. Non-recurring revenues were in
line with the previous year at £1.160m
(2018: £1.169m). As a result, overall
revenues decreased by 8% to £8.027m
(2018: £8.692m) with recurring revenues
representing 82% of Group revenues
(2018: 82%). Cost of sales reduced 19% to
£0.849m (2018: £1.054m).

STRATEGIC REPORT

Voyager Software

Voyager Software was a provider of
technology products targeted at the entire
recruitment landscape, from front ofﬁ ce to
back ofﬁ ce and bureaus, and includes both
recruitment management systems and pre-
employment skills testing technology.

In 2019, the Voyager Software division
accounted for 47% (2018: 51%) of Group
revenues. The Division’s revenues decreased
by 14% to £3.795m (2018: £4.429m)
£0.130m of this due to the previously
announced loss of a major client. EBITDA
decreased to £0.691m (2018: £1.003m).
Amortisation and depreciation increased to
£0.553m (2018: £0.475m). Divisional
operating loss was £(0.034)m after
reorganisation and other costs of £0.172m
(2018: £0.528m).

2019 saw some major developments in the
Division including:

(cid:129) The addition of IR35 support for both

public and private sector workers in our
Inﬁ nity and Mid-Ofﬁ ce pay and bill solution

The Division generated revenue of £0.337m
(2018: £0.068m) and made an operating
loss before reorganisation and other costs
of £0.484m (2018 loss: 0.612m) after
depreciation and amortisation charges
of £0.189m (2018: £0.127m). The
reorganisation and other costs credit of
£1.427m mainly related to the write off of
intercompany funding from Dillistone Group
which was not expected to be recoverable in
the foreseeable future. In 2020, although we
no longer report proﬁ ts on a divisional level, it
is the view of the Board that the GatedTalent
product is now consistently generating cash.

Following the reorganisation, the divisional
structure has been dismantled and in 2020 the
business will not report on a divisional basis.

Covid-19
The Impact of Covid-19 pandemic has had
a major impact on the world economy and
in our target market – recruitment. This has
impacted our business as we have seen
many of our clients shrink, with other clients
closing. This directly impacts our revenue.

(cid:129) Signiﬁ cantly improved support for the

placement of shift based temps

We reacted swiftly to minimise the impact of
Covid-19, taking the following actions:

(cid:129) Release of a full suite of Power BI based

business intelligence function to clients on
our SaaS platform

(cid:129) Approximately 20% of our UK staff have
been furloughed under the government
scheme

(cid:129) Enhancements to our ISV.Online suite

(cid:129) Other staff and Directors have agreed to a

Uncertainty around the scale, timing and
impact of the coronavirus pandemic means
it is difﬁ cult to give meaningful external
guidance for forecasts in the year ahead.
We have analysed a range of outcomes for
the current year for different sales scenarios.
Further details are contained in Note 1.2 on
Going Concern. We have performed stress
testing on our cashﬂ ows, to determine what
is the maximum strain that the business
could bear over the next 12 months in
respect of the potential impacts of Covid-19.
We are pleased to note that, with the funding
support in place, our Balance Sheet is now
strong, with signiﬁ cant cash available to us at
very competitive rates.

Section 172 Statement
Recent legislation requires that directors
include a separate statement in the annual
report that explains how they have had
regard to wider stakeholder needs when
performing their duty under Section 172(1)
of the Companies Act 2006. This duty
requires that a director of a company must
act in the way he or she considers, in good
faith, would be most likely to promote the
success of the company for the beneﬁ t of its
members as a whole, and in doing so have
regard (amongst other matters) to:

a) the likely consequences of any decision in

the long term;

(cid:129) Withdrawal of the Evolve product from
the market, successfully switching
the majority of clients onto our Inﬁ nity
application

GatedTalent

GatedTalent was established in 2017 to
provide a network allowing executives to
share information with selected executive
recruiters in a GDPR compliant manner. The
GatedTalent product was launched in late
2017 with ﬁ rst revenues occurring in 2018.

Revenue is being generated from executive
recruiters through subscriptions to the
platform and through Member Services
generating a premium B2C revenue stream
for the Division.

temporary pay cut

b) the interests of the company’s employees;

(cid:129) The vast majority of our staff switched to

home working

(cid:129) Our clients were offered support packages

c) the need to foster the company’s business
relationships with suppliers, customers
and others;

to help them survive the period and,
hopefully, remain as customers

d) the impact of the company’s operations
on the community and the environment;

(cid:129) Used government support in other
jurisdictions where appropriate

(cid:129) Agreed the postponement of bank loan
repayments on our £500,000 loan for 6
months

(cid:129) Obtained in June 2020 a £1.5m loan
under the Government’s Business
Interruption loan scheme

e) the desirability of the company

maintaining a reputation for high
standards of business conduct; and

f) the need to act fairly as between members

of the company.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

CEO’S REVIEW

Continued

Guidance recommends that in connection
with its statement, the board describe in
general terms how key stakeholders, as
well as issues relevant to key decisions,
are identiﬁ ed, and also the processes
for engaging with key stakeholders and
understanding those issues. It is the
board’s view that these requirements are
predominantly addressed in the corporate
governance report on pages 13 to 18,
Guidance also recommends that more
detailed description is limited to matters that
are of strategic importance in order to remain
meaningful and informative for shareholders.
The board believes that three decisions
taken during the year fall into this category,
and engaged with internal and external
stakeholders on this. These are:

(cid:129) The decision to restructure the business
and close the London ofﬁ ce. This is
described in the Chairman’s Statement
and the CEO report. The restructuring has
allowed the business to integrate teams
and to leverage knowledge across the
Group to accelerate performance and
improve the quality of our services to its
clients. Signiﬁ cant internal discussion
with staff took place throughout the
reorganisation. The restructure also leads
to a reduced cost base which should
increase long term value for shareholders.

(cid:129) The decision to ﬁ nance the restructuring
through a bank loan of £500,000 rather
than recourse to shareholders. The loan
was for a 2 year period and as it was for a
short term period, the Board considered
that it was in the interests of shareholders
to raise this money via a bank loan,
rather than dilute shareholders by
carrying out a placing.

(cid:129) A review was made of the company

product strategy. This has led to product
development investment being refocussed
with a view to prioritising development
which will lead to signiﬁ cant long term
growth, rather than short term product
enhancements. This has led the
Company to increase investment in areas
such as user experience and quality
assurance. This should increase long term
shareholder value.

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 ﬁ nancial
instruments. Further details in relation to
these risks are shown in note 25.

Interest rate risk

The Group is exposed to interest rate risk
through its bank loan, ﬂ oating rate overdraft,
and through its management of retained
cash. The Group monitors its exposure
to interest rate risk when borrowing and
investing its cash resources.

Credit risk

The Group has a large customer base
and is not dependent on a small number
of customers. Covid-19 may impact on
a customer’s ability to pay, though this is
not expected to impact on 2019 year end
balances. The Group will consider the
impact of Covid-19 as part of its credit risk
management procedures in 2020.

Exchange risk

The Group is exposed to translation and
transaction foreign exchange risk. The
Group’s foreign operations primarily trade
in their own currencies, reducing the
transaction risk. As a result, the main foreign
exchange transactional exposure arises when
repatriating proﬁ ts. The Group only seeks to
remit cash when required in the UK and it
usually has some ﬂ exibility on timing of such
appropriations to minimise any exchange
losses. The Group is, however, exposed to
translation risks on net assets held and on
the translation of overseas results.

Liquidity risk

The Group produces 3 year cashﬂ ows to
help ensure that it has the liquid resources
it requires. This gives the Group the ability
to plan for necessary borrowings or fund
raisings to meet the needs of the business.

STRATEGIC REPORT

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

Mitigation

The recruitment industry has a reputation for being
vulnerable to the cyclical nature of the economy. This
can impact signiﬁ cantly on non-recurring revenue and
to a lesser extent recurring revenue.

The Company operates globally and so is not reliant on
one economy. It enjoys a high percentage of recurring
revenues. Acquisitions have increased the exposure to
the UK economy.

In a downturn there may be a reduction in new
permanent hires which may be replaced by temporary
hires. The temporary recruitment market is potentially
anti-cyclical. The Group’s products support both
permanent and temporary hires.

Innovation and new products help maintain
opportunities for the business world-wide.

Products are tested pre-launch, and launch and
implementation strategies developed to minimise risks.

Agile project methodology so stakeholders have regular
visibility and inﬂ uence on what is being developed.

New product risk

All technology suppliers need to develop new products
and applications and there is always a risk that new
products may not function as expected. 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 Group.

The cost and time frame for developing and releasing
new products could be a bigger drain on resource than
built into budgets and forecasts.

Attrition of customer base

Failure to attract new customers, or the loss of existing
customers, may have a detrimental effect on the
Group’s ability to generate revenues.

Actively manage existing customer relationships through
account management structures and promptly dealing
with issues.

Support provided to clients during the Covid crisis.

The Group continues to invest in new products with new
features being added.

Competitor activity

Some competitors offer a broader product range
enabling them to compete across the whole of the sector.

The Group has strong customer relationships and uses
account management to keep in touch with clients.

The businesses can easily lose market share if its
products are not well regarded either from being “out of
date” or “buggy”.

Some ﬁ rms may try to compete on price, particularly if
the market deteriorates.

Business continuity risks
associated with information
systems, operational failure,
data security and cyber
security risks

A failure of systems or failure of hosting facilities
leading to loss of customer conﬁ dence in the Group
being able to deliver their requirements.

Loss or corruption of data held on behalf of customers
which could have a detrimental effect on their
conﬁ dence in data security processes and could
cause ﬁ nancial loss.

External attacks on servers could result in lost or
corrupted data and loss of reputation.

The Group continues to invest in its product development
and 2019 saw the continued development of temp
functionality to Inﬁ nity, and the continued development
of ISV Online, FileFinder and GatedTalent. The Group
continues to innovate and provide solutions to client needs.

The Group continues to look into developing new products
and additional features to more readily compete.

Each division is reliant on data centres provided by third
parties.

Plans are regularly reviewed on how to improve data
centre management.

Data backups occur at least daily and the necessary
test carried out on a regular basis to ensure data can be
restored.

Penetration testing helps minimise the risk of attacks.

Regular review of Group wide infrastructure to improve
cyber defences locally and at data centres.

Information security committee meets monthly to review
appropriate risks and strategies.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

CEO’S REVIEW

Continued

Principal risks and uncertainties
Continued
Risk

Potential adverse impact

Employee engagement and
retention

Management capacity

Capability to meet the demands of the markets in
which the Group operates and competes effectively
with other IT suppliers is largely dependent on the
skills, experience and performance of staff.

Failure to attract or retain high calibre employees
could seriously impede future growth and present
performance.

Reliability on small group of people, especially in parts
of the business.

Size of business means that management tends to be
stretched and under resourced. As the business grows
there may be insufﬁ cient support to ensure that the
growth is effectively managed and integrated.

Mitigation

To retain staff the Group operates competitive
remuneration and beneﬁ ts packages.

Appraisals are carried out which also consider
individuals’ personal development.

Cross training being carried out where possible.

A major restructuring in 2019 has helped add
efﬁ ciencies to the Group and reduced the layers of
management.

Foreign exchange volatility

The Group has substantial operations in both the
UK and overseas. Proﬁ ts are exposed to variations in
exchange rates thereby impacting on reported proﬁ ts.

There is usually some element of natural hedge in the
currencies, although if sterling strengthens against all
currencies it can have a negative impact on results.

Brexit

The UK withdrew from the EU on 31 January 2020
and has entered a transition period until the end of
2020. Trade negotiations with the EU are planned for
2020 and whilst the outcome remains uncertain, there
is always the associated risk of adverse implications
for the business.

Potential economic uncertainty could lead to a
reduction in orders in the short to medium term,
impacting adversely on the Group’s results.

It may impact recruiting individuals with European
languages requirement. It may increase the time and
difﬁ culty in recruiting skilled employees.

Clients usually choose best in class and already buy
from global ﬁ rms. The Group continues to monitor
implications and is continually reviewing its products
and pricing to ensure it stays competitive.

We deal with visa requirements for some staff already.

Data protection legislation

Ensure that all Group products comply with
international data protection legislation and
demonstrate to clients that they do.

Reliance on core 3rd party
systems and integrations

The Group’s solutions will utilise or integrate to a
number of 3rd party products and services. In some
cases these are integral to core functions. Should
these integrations cease to be available at short notice
it would have an adverse impact for our clients who
may seek alternative solutions.

Ability to source new talent

The Group is reliant on specialist skills, especially in
Development and Dev Ops and it may not be possible
to recruit resources locally.

Work continues to be carried out to ensure data is
secure and protected at appropriate levels.

Senior member of executive team has GDPR
practitioner certiﬁ cate. Appropriate internal committee
established. Data Protection Ofﬁ cer (‘DPO’) appointed.

In many cases there are alternative suppliers of similar
functions available that could be switched to with the
appropriate development debt. There are some however
where this is not possible and no readily available
alternatives exist.

Our contracts make clear where our responsibility
ends and 3rd party function begins protecting us from
contractual recourse.

Look more broadly at where staff are based or use of
outsourcing.

STRATEGIC REPORT

Risk

Potential adverse impact

Mitigation

Covid-19 including going
concern

The worldwide spread of the Covid-19 virus and
subsequent impacts on people and businesses around
the World creates unique risks for all businesses.

The Group is actively monitoring the impact of Covid-19
on its business and has put in place a number of
mitigations to minimise the impact.

The Group needs sufﬁ cient cash to ensure it can
continue to invest in its products in the coming years.

The Group has spent considerable time assessing the
potential impacts that Covid-19 could have on our
operations. This assessment has taken in to account
the current measures being put in place by the Group
to preserve cash and reduce discretionary expenditure,
and potential reductions in revenues resulting from the
economic impact on customers due to lockdown and
an expected economic downturn. The Group obtained
a loan of £1.5m through the Government Business
interruption scheme in June 2020.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

FINANCIAL REVIEW

For the year ended 31 December 2019

Total revenues decreased by 8% to
£8.027m (2018: £8.692m) with recurring
revenues decreasing by 8% to £6.593m
(2018: £7.154m) while non-recurring
revenues decreased by 1% to £1.160m
(2018: £1.169m). Third party resell revenue
amounted to £0.274m in the period (2018:
£0.369m).

Cost of sales decreased to £0.849m (2018:
£1.054m). Administrative costs, excluding
acquisition related items, reorganisation and
other costs, depreciation and amortisation,
fell 7% to £5.896m (2018: £6.337m)
as measures were taken to reduce the
cost base. Depreciation and amortisation
(excluding acquisition related amortisation)
increased to £1.489m (2018: £1.246m).

Acquisition related and reorganisations
and other costs totalled £0.883m (2018:
£0. 469m) and were in respect of:

(cid:129) the amortisation of intangibles arising on
the Voyager, FCP and ISV acquisitions
£0.305m (2018: £0.469m).

(cid:129) reorganisation and other costs totalled

£0.578m (2018: £nil).

Recurring revenues covered 89%
of administrative expenses before
acquisition related and reorganisation
and other costs (2018: 94%). Excluding
depreciation and amortisation of our own
internal development, the administrative
costs (before acquisition related and
reorganisation and other costs) are covered
112% (2018: 112%) by recurring revenues.

The Group beneﬁ tted from an income
tax credit in 2019 of £0.339m (2018:
credit £0.191m). The 2019 credit reﬂ ects
the R&D tax credits available to all three
divisions and the assumption that any tax
losses will be surrendered for the R&D tax
credit payment. It also reﬂ ects a prior year
adjustment of a credit of £0.140m as the
tax computations in respect of prior years
were ﬁ nalised and agreed. The acquisition

related items tax credit of £0.058m (2018:
£0.089m) reﬂ ects the reduction in deferred
tax that arises as amortisation is charged in
the proﬁ t and loss account.

Proﬁ t for the year before acquisition
related and reorganisation and other costs
amounted to a loss of £0.030m (2018:
proﬁ t £0.120m). The 2019 adjusted proﬁ ts
beneﬁ tted from tax income of £0.268m
(2018: tax income of £0.102m). The
statutory loss for the year after acquisition
related items and reorganisation and other
costs was £0.842m (2018: loss £0.260m).
Basic loss per share (EPS) fell to (4.28)
p (2018: (1.32)p). Fully diluted EPS fell to
(4.28)p ( 2018: (1.32)p). Adjusted basic
EPS fell to (0.15)p (2018: 0.61p).

Dillistone Group Plc company results show
a loss of £1.843m (2018: proﬁ t £1.338m)
after a write-off of the intercompany loan
with GatedTalent of £1.450m which was
necessary to facilitate the reorganisation of
the Group.

Capital expenditure
The Group invested £1.100m in property,
plant and equipment and product
development during the year (2018:
£1.536m). This expenditure included
£1.067m (2018: £1.446m) spent on
capitalised development related costs.

Trade and other payables
As with previous years, the trade and other
payables includes deferred income of
£2.873m (2018: £3.575m), i.e. income
which has been billed in advance but is
not recognised as income at that time. This
principally relates to support, SaaS, cloud
hosting renewals and other subscriptions,
which are billed in 2019 but are in respect
of services to be delivered in 2020. It
also includes licence revenue for which a
support contract is required, and which
is spread over 5 years under IFRS15.
Contractual income is recognised monthly

over the period to which it relates. It also
includes deposits taken for work which
has not yet been completed; as such
income is only recognised when the work
is substantially complete, or the client
software goes “live”.

The Group implemented IFRS 16 during the
year. The result is to recognise right to use
assets on the balance sheet of £0.754m as
at the year end and the corresponding lease
liabilities which totalled £0.823m. See Note
23 for more detailed analysis.

Cash and debt
The Group ﬁ nished the year with cash
funds of £0.402m (2018: £0.725m) made
up of positive (£0.690m) and negative
(£0.288m) current account balances which
can be netted off under the banking facility.

The Group obtained a loan of £0.5m in
June 2019 of which £0.126m was repaid
in the year leaving £0.374m (2018: £nil)
repayable at the year end. It also had
a convertible loan of £0.412m (2018:
£0.404m). It was agreed in the year that the
convertible loan notes would not be repaid
until the bank loan was repaid.

On behalf of the Board

Julie Pomeroy
Finance Director

29 July 2020

The Strategic Report is signed on behalf of
the Board by

Jason Starr
Chief Executive

29 July 2020

CORPORATE GOVERNANCE REPORT

For the year ended 31 December 2019

GOVERNANCE

The Board is collectively responsible
for setting the tone and culture of the
Group and promoting good corporate
governance. Dillistone has adopted the
Quoted Companies Alliance Corporate
Governance Code (the “Code”). At Dillistone
we believe in good corporate governance
and accountability and we make robust
corporate governance part of our culture
and business values. Details of the Code
and how Dillistone complies with it is
detailed below:

1. Establish a strategy and
business model which promote
long-term value for shareholders

Compliance

The Group’s strategy has been to grow
the business both organically and through
acquisition. This strategy is made possible
through our commitment to product
development, which ensures that the
business continues to command a leading
role in all of the markets in which it operates.
The strategy has been modiﬁ ed in response
to the Covid-19 pandemic. Details of the
Group’s strategy, objectives and business
model are set out on Pages 5 and 6 of this
report. The key challenges and risks faced
by the business are included on Pages 9
to 11.

Until the end of 2019, the business was
split into three Divisions. Dillistone Systems,
Voyager Software and GatedTalent.

Dillistone Systems specialises in the supply
of software and services into executive-level
recruitment teams. Voyager Software’s
clientele are primarily involved in contingent
recruitment, including permanent
placement, contract placement and the
provision of temporary staff. GatedTalent is
a private network of executives, accessed
by executive recruiters. This Division
generates revenue based on a combination
of recruiter subscription, member services
and transaction fees for connecting with
executives. There is a close relationship
between GatedTalent and Dillistone Systems.

In 2019 the group carried out a major
reorganisation with the UK activities all
being under one company and similarly the

operations in Australia have been merged.
The business now trades under the Ikiru
People name and the divisional structure no
longer exists.

There is a 3-year rolling process of business
planning throughout the Group, within a
framework and structure set by the Board.
For new projects or products, a 5-year
horizon may be used. The Group seeks
to deliver long term growth and value to
shareholders and other stakeholders and
its strategy evolves over time as the Group
grows. The Executive Directors through
the Chief Executive Ofﬁ cer are responsible
for executing the strategy once agreed by
the Board. The Chief Executive Ofﬁ cer is
also responsible for reporting on business
strategy, operational performance, risks and
other signiﬁ cant developments at Board
meetings.

2. Seek to understand and
meet shareholder needs and
expectations

Compliance

The Board recognises its primary role of
representing and promoting the interests
of the Group’s shareholders. The Board
is accountable to shareholders for the
long-term performance and success
of the Company. The Chief Executive
Ofﬁ cer and Finance Director hold regular
meetings with institutional shareholders
and private client brokers to discuss and
review the Group’s activities, strategies
and performance. Investor feedback from
these meetings is provided by the Group’s
NOMAD. The Chief Executive Ofﬁ cer and
Finance Director also present interim and
annual results through webinars open to all
shareholders and members of the public,
which has been well received. Questions
are also encouraged at these sessions. For
the majority of RNS announcements the
Chief Executive also records an appropriate
update to explain the announcement and
again this is available to shareholders. The
Chief Executive Ofﬁ cer and Finance Director
also make themselves available to speak to
potential institutional shareholders. These
meetings and discussions give the Board an

opportunity to gauge shareholder feedback
and expectations.

A RNS is published after the AGM to
announce the resolutions passed at
the AGM. To date all AGM resolutions
proposed have been passed; the Group
has not experienced signiﬁ cant dissenting
shareholder votes for resolutions proposed at
the AGM (over 20%), including proxy votes.

3. Take into account wider
stakeholder and social
responsibilities and their
implications for long-term success

Compliance

The Board recognises its prime
responsibility under UK corporate law is to
promote the success of the Group for the
beneﬁ t of its members as a whole.

Our customers are essential to our business
and we maintain long-term relationships
with our customers. Dillistone operates a
system of key account managers whose role
is to communicate with them and ensure
close liaison, in addition to the day-to-day
communication that occurs with every
customer contract. Customer feedback is
considered at management meetings, and
our services evolves accordingly. Senior
executives have frequent discussions with
key customers and regular newsletters and
other mailings are used to inform customers
and potential customers.

Our staff are key to the business and
the Directors recognise the need for
engagement with employees. Regular staff
meetings are held to update staff on current
matters. With around 100 people, it means
that Directors and management staff are
relatively accessible to all employees.

We develop long standing relationships
with our bankers and keep them regularly
updated as to how the business is
performing. We also seek to maintain long
term relationships with key suppliers.

The Board also understands that it
has a responsibility to consider, where
practicable, the social, environmental and
economic impact of its approach.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

CORPORATE GOVERNANCE REPORT

For the year ended 31 December 2019
Continued

4. Embed effective risk
management, considering both
opportunities and threats,
throughout the organisation

Compliance

The Board undertakes a regular and robust
assessment of the effectiveness of the
Group’s risk management framework at
least annually. Each Board meeting includes
an agenda item on risk and consideration
is also given to whether any new risks have
been identiﬁ ed. The latest annual summary
of the signiﬁ cant risks and uncertainties, is
contained in pages 9 to 11. We do not have
a formal risk committee.

Our internal governance and reporting
structure, for example through monthly

management meetings and ﬁ nancial
reporting, provides a key and effective
risk management tool. Divergences
from expected ﬁ nancial and project
performances are discussed in detail and
remedial action taken where possible. All
management meetings are attended by the
Chief Executive and Finance Director.

The Group takes external advice from its
advisors on signiﬁ cant matters, and also
tries to ensure that it has qualiﬁ ed staff who
understand key risk issues. For example,
GDPR had a signiﬁ cant impact within the
recruitment and software industry. A senior
member of executive team qualiﬁ ed for a
GDPR practitioner certiﬁ cate and also an
internal committee was established to help
manage risk and compliance legal advice
was also sought.

5. Maintain the board as a well-
functioning, balanced team led
by the chair

Compliance

The Board exercises full and effective control
over Dillistone Group. There is a formal
schedule of matters reserved speciﬁ cally for
its decisions, relating to strategy, ﬁ nance,
risk, operations and governance.

The Board delegates certain functions to
its three principal committees, the Audit
Committee, the Remuneration Committee
and the Nomination Committee, as set out
below.

Details of the members of the Board are set
out below and further biographical details are
on pages 23 to 25 or on our website.

Non-Executive Directors

G R Fearnley

Non-executive Chairman from 1 January 2020

M D Love

Non-executive director (chairman until
31 December 2019)

Independent - Mr Fearnley holds 2.3% of the share capital
and this level of holding is not considered by the Board to
change his independence.

Commitment to the business is approximately 1 day per
month.

Independent – although Dr Love has served on the Board
for over 10 years and holds 5% of the share capital he is
free from any business or other relationship which could
materially interfere with the exercise of his independent
judgement.

Time commitment to the business is appropriately ½ day
per month.

Executive Directors

J S Starr

A D James

Chief Executive

Chief Product Ofﬁ cer

Full time

J P Pomeroy

Finance director

Part time – 4 days per week

Operations director resigned 31 December 2019

Part time – 3 days per week

R Howard

A Milne

Managing Director – Dillistone Systems Division
resigned 31 December 2019

P Mather

Chief Operations Ofﬁ cer from 2 January 2020

S Warburton

Chief Technology Ofﬁ cer from 2 January 2020

Full time

GOVERNANCE

6. Ensure that between them the
directors have the necessary
up-to-date experience, skills and
capabilities

Compliance

Directors who have been appointed to the
Company have been chosen because of
the skills and experience they offer. Full
biographical details of the Directors are
included under the Management section
on the website and on pages 23 to 25 of
this report.

The Board considers itself sufﬁ ciently
diverse when considering the background,
knowledge and experience that each
individual member brings to the Board.
Where Board appointments are made the
whole Board is involved. One member of
the Board is female. Board appointments
are made solely on merit. Other senior
management appointments, i.e.
subsidiary directors, are considered by the
remuneration committee and the Board.

Directors are encouraged to keep their skills
up to date by attending appropriate courses
or by being members of other boards where
new skills and ideas can be learned. The
Board keeps under review the strength
and depth of its senior management and
encourages the divisional teams to ensure
they have the skills required. Succession
planning is considered as part of the Board
appraisal process.

The Chairman leads the Board, while
the Chief Executive Ofﬁ cer is charged
with managing the Group’s business.
The roles of the Chairman and Chief
Executive Ofﬁ cer are distinct. The Code
expects an appropriate combination of
executive and non-executive directors.
Our split is between ﬁ ve Executive and two
Non-Executive Directors (including the
Non-Executive Chairman).

The Chairman and the Board collectively
believes this split between its Executive
and Non-Executive Directors is appropriate.
This composition continues to provide
the expertise, breadth of experience and
independence of thought needed, while
maintaining efﬁ cient Board meetings.

The Group considers that both of its Non-
executive directors are independent as
discussed above. The Board considers its
composition appropriate for an AIM-quoted
Group of its size, market cap, and individual
circumstances.

The Board meets at least ﬁ ve times each
year and has adopted a formal schedule of
matters speciﬁ cally reserved for decision
by it, thus ensuring that it exercises control
over appropriate strategic, ﬁ nancial,
operational and compliance issues. At
these meetings the Board reviews trading
performance, ensures adequate ﬁ nancing,
sets and monitors strategy, examines
investment and acquisition opportunities
and discusses reports to Shareholders.

The Board meeting attendance record for
2019 is set out below.

Number of
meetings held

Number of
meetings
attended

Name

M D Love

G R Fearnley

J S Starr

A D James

J P Pomeroy

R Howard

A Milne

Currently one third of the Board submits
itself for re-election at each AGM as part of
the Group’s formal retirement by rotation
policy. Under the current Articles every
Director must offer himself for re-election
every three years. We consider a re-
election every three years appropriate for
all Directors, which is not in line with the
Code’s suggestion of annual re-elections.
Mike Love and Giles Fearnley have served
on the Board for more than 9 years; despite
serving the Board on a long term basis, the
Directors individually believe that they act
objectively in their respective roles and can
act with sufﬁ cient independence.

All Directors are given full and timely access
to all relevant management and accounting
information. All Directors are able to seek
independent professional advice in the
course of their duties, at the Group’s
expense. If any Director has concerns
regarding unresolved business issues,
they are entitled to require the Company
Secretary to minute their concerns.

Formal terms of reference have been
agreed for all Board Committees.

The Board has three principal committees.
The audit committee which is made up of
the two non executive directors, meets twice
yearly and is chaired by Giles Fearnley. The
remuneration committee again is made up
of the two independent directors and meets
on an adhoc basis and is chaired by Mike
Love. The nomination committee meets as
and when required and there were no such
meetings in 2019.

The Board reviews trading and operational
performance regularly. Divergences
from expected performance are followed
up promptly and rigorously. Monthly
management accounts are prepared and
distributed to members of the Board.
During 2019, Divisional management
accounts were also produced and
circulated to divisional directors.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

CORPORATE GOVERNANCE REPORT

For the year ended 31 December 2019
Continued

Board member

Role

Giles Fearnley

Chairman

Mike Love

Independent Director

Jason Starr

CEO

Alex James

Director

Julie Pomeroy

Finance director and Company
Secretary

Experience

Giles has signiﬁ cant experience leading a large business in the
passenger transport sector. He brings real commercial judgement to
Dillistone through his knowledge of working in challenging sectors.

Mike brings a wealth of experience to the Dillistone Board. He was group
managing director of SciSys from 1986 to 2003 during which time he
led a management buy-out of the business and ﬂ oated it on AIM in 1997
and Chairman from 2004 to 2019. In 2019 he oversaw the sale of SciSys
to CGI. He was also chairman of a private company Redcliffe Precision
Ltd recently merged with Avon Valley Precision Engineering Ltd. He has
a good understanding of software development projects and he brings
strong independent judgement to Dillistone.

Jason has worked for the majority of his career at Dillistone and so
knows the sector extremely well. He also brings further AIM experience
through his role as a non-executive director of AIM listed PCIPAL PLC
where he chairs the remuneration committee.

Alex brought his experience of quality control and account manager as
well as his background in recruitment to Dillistone when he joined in
1999. He has since worked in training and consultancy and in projects
management. He is now responsible for the implementation of products
and services GatedTalent and also projects director for Voyager Division.

Julie is a chartered accountant (ACA) with additional qualiﬁ cations
in both tax and treasury. She is also a Chartered Director. She is an
experienced ﬁ nance director of quoted and private companies. Julie was
also a non-executive director of Nottingham University Hospitals NHS
Trust until January 2020.

Operations Director – resigned
31 December 2019

Rory has a background as a technical and database analyst as well as
being an experienced project manager and a PRINCE2 practitioner.

Rory Howard

Alistair Milne

Managing Director – Dillistone Systems
Division – resigned 31 December 2019

Paul Mather

Simon Warbuton

Chief Operations Ofﬁ cer from
2 January 2020

Chief Technology Ofﬁ cer from
2 January 2020

Alistair brought with him a background in marketing and management
when he joined Dillistone in 2003. He has worked principally in support
and technical services within the business.

Paul has a strong background in operations and had been the Voyager
division Operations Director since 2003.

Simon has a strong technology background and joined the Voyager
business in 1997 and was managing director at the time it was acquired
by Dillistone Group in 2011.

7. Evaluate board performance
based on clear and relevant
objectives, seeking continuous
improvement

Compliance

The Group undertakes regular monitoring of
personal and corporate performance using
agreed Key Performance Indicators and
detailed ﬁ nancial reports.

The Board does not expect to undertake an
annual independent evaluation as

recommended by the Code. A two-yearly
internal evaluation is considered appropriate
given the smaller size of the Board and
regular day-to-day contact between Board
members. The Board’s ﬁ rst evaluation
took place in March 2019 with the results
reported to the Board in April 2019. The
Chairman and Independent Non-Executive
Director prepared the board evaluation
questionnaire and assessment criteria
drawing on their experience of running
evaluation programmes at other quoted
companies. The key areas addressed by the
questionnaire were as follows:

(cid:129)

Board Role and Agenda Setting (Monitoring
Performance and Strategic Planning)

Size, Composition and Independence of
Boa rd

(cid:129) Director Orientation and Development

(cid:129)

Board Leadership, Teamwork and
Management Relations

(cid:129) Board (and Committee) Meetings

(cid:129)

Director and Board Evaluation,
Compensation and Ownership

Management Evaluation, Compensation
and Ownership

(cid:129) Succession Planning

(cid:129) Ethics

GOVERNANCE

The Chairman aggregated the scores and
the results were discussed.

Directors’ performance was reviewed
formally by the Chairman during 2019.

The Board keeps under review the strength
and depth of its senior management and
encourages the divisional teams to ensure
they have the skills required. Succession
planning is considered as part of the Board
appraisal process.

9. Maintain governance
structures and processes that are
ﬁ t for purpose and support good
decision-making by the board

Compliance

The Board sets the Group’s strategic aims
and ensures that necessary resources are
in place in order for the Group to meet its
objectives. All members of the Board take
collective responsibility for the performance
of the Group and all decisions are taken in
the interests of the Group.

The Chairman leads the Board, while the
Chief Executive Ofﬁ cer is charged with
managing the Group’s business. The roles
of the Chairman and Chief Executive Ofﬁ cer
are distinct.

8. Promote a corporate culture
that is based on ethical values
and behaviours

Compliance

Our corporate values of openness and
respect, set by the Board, seek to promote
good corporate behaviours. The Group
operates in international markets and is
mindful that respect of individual cultures is
critical to corporate success.

The Group has an anti-bribery policy and
has implemented adequate procedures
described by the Bribery Act 2010.

The Group has undertaken a review of
its requirements under the General Data
Protection Regulation, implementing
appropriate policies, procedures and
training to ensure it is compliant. A senior
member of executive team has a GDPR
practitioner certiﬁ cate and also an internal
committee has been established to help
manage risk and compliance. Legal advice
was also sought.

Board member

Role

Giles Fearnley

Chairman

Responsibilities

Leads the Board

Mike Love

Jason Starr

Alex James

Independent Director

NED

CEO

Director

Managing the Group’s businesses

Responsible for the implementation of products and services for
GatedTalent and also projects director for Voyager Division.

Julie Pomeroy

Finance director

Group ﬁ nance director and Company Secretary.

Rory Howard

Alistair Milne

Operations Director – resigned
31 December 2019

Responsible for operations at Dillistone Division including commercial
contracts and insurance until the completion of the restructuring. He is
also Group DPO.

Managing Director – Dillistone Systems
Division – resigned 31 December 2019

Responsible for the performance of Dillistone Division until the
completion of the restructuring.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

CORPORATE GOVERNANCE REPORT

For the year ended 31 December 2019
Continued

In conjunction with the Group’s Nomad and
other ﬁ nancial advisers we distribute news
in a timely fashion through appropriate
channels, to ensure that shareholders are
able to access material information about the
Group’s progress.

Details of the work of the audit and
remuneration committee are dealt with
above. The remuneration report is contained
on pages 20 to 22 and the audit committee
report in on page 19.

Regular newsletters are sent to customers
and potential customers to keep them
updated. Also LinkedIn groups have been
formed which enable interested parties to
have appropriate dialogues with the various
businesses.

Regular staff meetings are held to keep
employees informed about developments in
the business and for issues to be raised.

Details of RNS announcements and copies
of annual and interim reports are contained
within the accounts and RNS sections of the
AIM Rule 26 area of our website.

We have two main Board committees; an
Audit Committee and a Remuneration
Committee. The Board as a whole makes
up the Nomination committee. Their
responsibilities are summarised below:

Audit Committee

(cid:129)

The Committee is made up of the 2
non executive directors and meets
twice a year to consider the scope
of the annual audit and the interim
ﬁ nancial statements and to assess the
effectiveness of the Group’s system of
internal controls.

It reviews the results of the external
audit, its cost effectiveness and the
objectives of the auditor.

Given the size of the Group, the Audit
Committee considers an internal audit
function is not currently justiﬁ ed.

The audit committee meets at least
annually with the auditors without
executive management.

During 2019 the 3 divisions operated as
separate units with areas of autonomy
set by the Board, they are supervised by
the Board through structured Divisional
board meetings and reporting, which were
attended by the Chief Executive Ofﬁ cer,
and reported back into the Board meetings.
Divisional boards normally meet monthly.

A separate Information Security committee
exists and meets monthly. A Data Protection
Ofﬁ cer has been appointed.

Further details of the Group’s corporate
governance arrangements are provided
within this Corporate Governance section
of the website. The appropriateness of the
Company’s governance structures will be
reviewed as the Company evolves.

10. Communicate how the
company is governed and is
performing by maintaining a
dialogue with shareholders and
other relevant stakeholders

(cid:129)

The audit committee reports its
discussions to the next Board Meeting

Compliance

Remuneration Committee

(cid:129)

It meets at least once a year to determine
Group policy on senior Executive
remuneration, to make detailed
recommendations to the Board regarding
the remuneration packages of the Executive
Directors and to consider awards under the
Group’s option schemes.

The Chief Executive Ofﬁ cer is consulted on
remuneration packages and policy but does
not attend discussions regarding his own
package.

The remuneration and terms and
conditions of the appointment of Non-
executive Directors are determined by the
Board.

The Board recognises its primary role of
representing and promoting the interests
of the Group’s shareholders. The Board is
accountable to shareholders for the long-
term performance and success of the Group.
The Chief Executive and Finance Director
hold regular meetings with institutional
shareholders and private client brokers to
discuss and review the Group’s activities,
strategies and performance. Investor
feedback from these meetings is provided
by WH Ireland. The Chief Executive Ofﬁ cer
and Finance Director also make themselves
available to speak to potential institutional
shareholders. These meetings and
discussions give the Board an opportunity
to gauge shareholder feedback and
expectations. The Chairman is also available
to shareholders if they request a meeting.

GOVERNANCE

AUDIT COMMITTEE REPORT

For the year ended 31 December 2019

I am pleased to present the report on behalf
of the Audit Committee.

The Committee is responsible for
challenging the quality of internal
controls and for ensuring that the
ﬁ nancial performance of the Group is
properly reported and reviewed. The
Board considers that the Company is not
currently of the size to warrant the need
for an internal audit function although the
Board has put in place internal ﬁ nancial
procedures to ensure close internal
controls.

Committee Composition
The members of the Audit Committee
are myself Giles Fearnley, as Chair and
Dr Mike Love. We are both independent
Non-Executive Directors. The Board is of
the view that we have recent and relevant
experience. In 2019 two meetings were
held attended by both committee members.
The Chief Executive Ofﬁ cer, the Finance
Director and the Group’s auditors attend by
invitation. I report to the Board following an
Audit Committee meeting and minutes are
available to the Board.

Committee Duties
The main duties of the Committee are set
out in its terms of reference, which are
available on the Company’s website. In this
period the main items of business included:

(cid:129)

recommending the external
auditor’s remuneration and terms of
engagement;

reviewing a wide range of ﬁ nancial
matters including the annual and half
year results, ﬁ nancial statements and
accompanying reports;

monitoring the controls which ensure
the integrity of the ﬁ nancial information
reported to the shareholders.

Financial reporting
The Committee reviews reports provided
by the external auditor on the annual
results which highlight any observation
from the work they have undertaken. In the
ﬁ nancial year commencing 1 January 2019
the Group applied one new accounting
standard.

IFRS 16 Leases
IFRS 16 is effective for periods beginning
on or after 1 January 2019. The Group has
elected to adopt IFRS 16 retrospectively
with the cumulative effect of applying
IFRS 16 recognized at the date of initial
application 1 January 2019. Consequently
the comparative period has not been
restated. See note 23 for further details.

The Group does not expect any other
standards issued by the IASB, but not yet
effective, to have a material impact on the
Group.

External Auditor
The Committee considers that its
relationship with the auditor is working well
and is satisﬁ ed with their effectiveness.

The Committee is responsible for ensuring
there is a suitable policy for ensuring that
non-audit work undertaken by the auditor
is reviewed to ensure it will not impact
their independence and objectivity. The
breakdown of fees between audit and
non-audit services is provided in note 6 on
page 57 of the Group’s ﬁ nancial statements.
The non audit fees primarily relate to Group
taxation compliance.

As necessary the Committee held private
meetings with the auditor to review key
items in its responsibilities. Taking into
account the auditor’s knowledge of the
Group and experience, the Committee has
recommended to the Board that the auditor
is re-appointed for the period ending 31
December 2020.

Giles Fearnley
Chair of the Audit Committee

29 July 2020

DILLISTONE GROUP PLC Annual Report and Accounts 2019

REPORT TO THE SHAREHOLDERS
ON DIRECTORS’ REMUNERATION

For the year ended 31 December 2019

Remuneration report

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 ﬁ xed three-year service periods, which may be terminated by
giving six months’ notice.

Non-Executive Directors’ remuneration
The fees for the Chairman and independent Non-Executive 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 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 inﬂ ation and salaries paid to directors of comparable companies. Pay reviews also take into
account Group and personal performance. The Board as a whole decides the remuneration of the Chairman and the Non-Executive Director.

Performance related pay scheme

There are two performance related pay schemes for Executive Directors. The ﬁ rst is an annual bonus scheme which is based upon the
achievement of certain proﬁ t and commercial targets for the Group, as appropriate. The Executive Directors’ bonus recognised in the 2019
ﬁ nancial year is £nil (2018: £nil) including Employer’s National Insurance.

The second scheme is a long-term incentive plan linked to growth in earnings per share over a three year period or other targets set by the
Remuneration Committee. At the discretion of the Remuneration Committee, Executive Directors are either granted share options at the ruling
mid-market price at the time of the grant or a pure cash bonus ﬁ xed as a percentage of salary. The awards are subject to meeting challenging
targets. Annual awards are usually made under this scheme. Where options are awarded, the value of the award is calculated using a
Black-Scholes model (see note 24 for further details). The awards made in the period are included in the LTIP tables below.

Directors’ remuneration
Details of the remuneration of the Directors for the ﬁ nancial year are set out below:

Executive Directors

J S Starr
R Howard
A D James
J P Pomeroy
A Milne
Non-Executive Directors

M D Love
G R Fearnley

Salary*
and fees
£’000

Compensation
payment**
£’000

Pension
payments***
£’000

Beneﬁ ts
£’000

124
46
96
91
88

35
13
493

-
42
-
-
50

-
-
92

8
33
11
12
10

-
-
75

1
1
-
1
-

-
-
3

2019
£’000

134
122
107
104
148

35
13
663

2018
£’000

133
80
107
104
106

35
13
578

* Salary is calculated after deducting salary sacriﬁ ce payments which totalled £40,000.

** Compensation payment includes PILON, compensation for loss of ofﬁ ce, accrued holiday pay and associated Pension contributions. Payments were made in 2020.

*** Includes salary sacriﬁ ce payments which totalled £40,000.

GOVERNANCE

Long term incentive payments made in the period are not included in the above ﬁ gures but are detailed below.

LTIP award – % of salary arrangement

J S Starr
R Howard

Maximum payout
awarded in period
£’000

Paid in the year including
Employer’s NI
£’000

Total value of salary
based LTIP awards carried
at 31 December 2019*
£’000

Total value of all salary
based LTIP awards carried
at 31 December 2018*
£’000

-
-
-

2
2
4

1
1
2

* Awards accrued over the period that they relate to and the valuation takes into account the likelihood of performance conditions being met.

LTIP award – share options

J Starr
A D James
J P Pomeroy
A Milne
Total

Number of options granted
under LTIP scheme in year

Total number of options
granted under LTIP
scheme at 31 December
2019

Total number of options
granted under LTIP scheme
at 31 December 2018

20,000
20,000
20,000
-
60,000

20,000
190,000
190,000
170,000
570,000

-
264,471
264,063
264,471
793,005

No options were exercised in the year.

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 5p each

At 31 December 2019

At 31 December 2018

3,577,591
3,300,000
112,744
989,754
453,435
59,109
63,733

DILLISTONE GROUP PLC Annual Report and Accounts 2019

REPORT TO THE SHAREHOLDERS
ON DIRECTORS’ REMUNERATION

For the year ended 31 December 2019
Continued

The Dillistone Group Plc also issued an 8.15% convertible loan note in which the Directors participated. Their holdings are as follows:

J S Starr
R Howard
A D James
M D Love
G R Fearnley
J P Pomeroy

8.15% convertible loan notes

At 31 December 2019

At 31 December 2018

£24,250
£24,250
£1,000
£250,000
£75,000
£10,000

The Loan Notes carry an interest coupon of 8.15% pa over their maximum term of 36 months, with a conversion price of 71.6p per new
Dillistone ordinary share. The interest payments are payable quarterly in arrears and will be satisﬁ ed through the issue of further new ordinary
shares or in cash at the individual Director’s election.

In addition, the following Directors had total share options including the options granted under the LTIP scheme above and options granted
under the sharesave scheme.

J S Starr
A D James
J P Pomeroy
A Milne

Options over ordinary shares of 5p each

At 31 December 2019

At 31 December 2018

20,000
190,000
201,523
174,627
586,150

-
264,471
275,586
269,098
809,155

BOARD OF DIRECTORS

For the year ended 31 December 2019

GOVERNANCE

MIKE LOVE
71
NON-EXECUTIVE
DIRECTOR
(CHAIRMAN UNTIL
31 DECEMBER 2019)

JASON STARR
48
CHIEF EXECUTIVE

Mike Love has a PhD in Theoretical Physics and over 40 years’
experience in the software industry. He was non-executive
chairman of SciSys plc, also an AIM quoted company, and was
director and chairman at Redcliffe Precision Ltd. He was group
managing director of SciSys from 1986 to 2003 during which
time he led a management buy-out of the business and ﬂ oated
it on AIM in 1997. He is a previous member of the AIM Advisory
Group of the London Stock Exchange.

Jason Starr joined Dillistone Systems in 1994. He became
Marketing Manager in 1996 before becoming Managing
Director of the UK business in 1998. Following the MBO,
Jason became Managing Director of Dillistone Systems Ltd and
subsequently became Group Chief Executive Ofﬁ cer. Jason was
appointed a non-executive director of AIM listed PCIPAL PLC
from 1 January 2015.

Jason has a BA (Honours) Business Studies degree from the
London Guildhall University.

RORY HOWARD
52
OPERATIONS
DIRECTOR
(RESIGNED
31 DECEMBER 2019)

ALEX JAMES
47
CHIEF PRODUCT
OFFICER

Rory Howard has a BA (Honours) in Business Administration
and is a PRINCE2 practitioner. Rory started his career with the
Dixons Stores Group and from 1991 to 1994 he worked in the
systems and control department as a technical support analyst
working on their EPOS systems, data reporting and security.
He then joined JATO Dynamics Ltd, a software company
specialising in the automotive research market, as a database
analyst, developing databases for pricing models for the
large automotive manufacturers. In 1998 he joined Dillistone
Systems Limited as a project manager, and the following year
became the Global Projects Manager, tasked with restructuring
all implementations and data migrations procedures and
operations. In 2003 Rory became Operations Director of
Dillistone Systems Limited and a member of the Board.

Alex graduated from Swansea University in 1995 with a degree
in Psychology. In 1995 Alex joined Mallinckrodt Veterinary,
working in quality control. In 1997 he moved to Responseability,
a company that manages aspects of the recruitment process
for clients, starting in administration before progressing into an
account management role. Alex started at Dillistone in 1999 in
a training/consultancy position prior to becoming the UK and
then Global Projects Manager, being ultimately responsible
for the implementation of all products and services to both
new and existing clients. Alex joined the Board of Dillistone
Systems Limited in January 2005 and the Group Board in
February 2006.

Alex is a Director of both Dillistone Systems and GatedTalent
and sits on the Group Board with an overall responsibility for
Product Development.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

BOARD OF DIRECTORS

For the year ended 31 December 2019
Continued

ALISTAIR MILNE
44
MANAGING DIRECTOR
– DILLISTONE
SYSTEMS DIVISION
(RESIGNED
31 DECEMBER 2019)

JULIE POMEROY
64
FINANCE DIRECTOR

Alistair started his career at Richmond Theatre in 1994,
working in both the marketing department and box ofﬁ ce. In
1997 he joined The Football Association, initially in a ticketing
administration role, before progressing to a management role.
Alistair then began working at the Shaw Theatre as Box Ofﬁ ce
Manager. He joined Dillistone Systems in 2003. He was initially
appointed to the UK and then Global Support Manager role
with responsibility for all aspects of support services. He was
promoted to the Dillistone Systems Limited Board in 2006 and
joined the Group Board in January 2011.

Alistair became Managing Director of Dillistone Systems in
October 2018, previously being the Director of Support Services.

Julie is an experienced ﬁ nance director of quoted and private
companies. She graduated with an honours degree in Physics
from Birmingham University and is a Chartered Accountant and
Chartered Director. She also holds tax and treasury qualiﬁ cations.
Julie was group ﬁ nance director of Carter & Carter Group plc
until October 2005, having joined in 2002 to help grow and ﬂ oat
the business. She had previously been chief ﬁ nancial ofﬁ cer of
Weston Medical Group plc and prior to this Julie worked at East
Midlands Electricity plc as director of corporate ﬁ nance. She was
ﬁ nance director of AIM quoted Biofutures International plc until
July 2010. Julie is also a non-executive director of Nottingham
University Hospitals NHS Trust.

GILES FEARNLEY
65
NON-EXECUTIVE
DIRECTOR,
CHAIRMAN FROM
1 JANUARY 2020

PAUL MATHER
44
CHIEF OPERATIONS
DIRECTOR
(APPOINTED
2 JANUARY 2020)

A career in the passenger transport industry saw Giles lead an
MBO in 1991, forming Blazeﬁ eld Holdings Limited, a business
operating bus networks principally across Yorkshire and
Lancashire. This company was sold to Transdev in 2006.

In 1997 he was appointed chief executive of Prism Rail PLC,
having been one of that company’s founders, and held that
position until its sale to National Express in 2000. Prism Rail
operated four of the UK’s passenger rail franchises with a
turnover of £500 million per annum.

Giles is currently managing director - Bus, UK and Ireland for
First Group Plc. Giles served as chairman of the Association of
Train Operating Companies in 1999/2000 and as chairman of
The Confederation of Passenger Transport UK.

Paul has been employed in the group since 1999 after
graduating with an honours degree in Physics from the University
of Surrey. Paul joined in a 2nd line support role with Voyager
Software Ltd before taking over the support function in 2000. In
2001 he became Customer Services Director before taking over
as Operations Director in 2003. After selling Voyager to Dillistone
Group in 2011 Paul was part of the due diligence teams for the
subsequent Group acquisitions and is now responsible for Group
operations globally.

GOVERNANCE

SIMON WARBURTON
43
CHIEF TECHNOLOGY
OFFICER
(APPOINTED
2 JANUARY 2020)

Simon graduated with an honours degree in Computer Science
from the University of Leeds and following a brief stint with an
IT recruitment business, joined Voyager Software’s technical
team in 1997. In the following years, Simon held various roles
in the business in both the technical and sales arenas before
becoming Managing Director in 2002, where he remained until
Voyager Software’s acquisition by Dillistone Group in 2011.
Post-acquisition, Simon continued in the role of Managing
Director for the contingent recruitment division of the Group,
which included the acquisition of two further businesses in 2013
and 2014. Simon’s responsibilities also included the Group’s IT
infrastructure before being formally appointed as CTO in January
2020. Simon continues to be responsible for the Group’s IT
infrastructure alongside his other responsibilities in the sales,
marketing and account management operations.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

DIRECTORS’ REPORT

For the year ended 31 December 2019

The Directors present their report and ﬁ nancial statements for the year ended 31 December 2019.

Results and dividends

The consolidated statement of comprehensive income for the year is set out on page 37.

No ﬁ nal dividend will be paid (2018: nil).

Directors

The following Directors have held ofﬁ ce since 1 January 2019:

M D Love – Non-Executive Chairman until 31 December 2019, subsequently Non-Executive Director,
J S Starr
R Howard resigned 31 December 2019
A D James
J P Pomeroy
G R Fearnley – Non-Executive Director and became Chairman on 1 January 2020
A Milne resigned 31 January 2019
P Mather appointed 2 January 2020
S Warburton appointed 2 January 2020

The interests of the Directors (including family interests) in the share capital of the Company are listed on pages 21 and 22.

Jason Starr is proposed for re-election at the forthcoming AGM. Jason has a service contract with a one year notice period. Mike Love and
Giles Fearnley have been Non-Executive Directors for over nine years and therefore will offer themselves for re-election annually. As Paul
Mather and Simon Warburton have been appointed since the last AGM they are also required to stand for re-election.

Financial risk management

Details of the Group’s ﬁ nancial risk management are set out in the Strategic Report section.

Directors’ and ofﬁ cers’ insurance

The Group maintains insurance cover for all Directors and ofﬁ cers of Group companies against liabilities which may be incurred by them while
acting as Directors and ofﬁ cers.

Future developments

The Directors consider that the continued investment in product and market development will allow the business to grow organically in its
core markets. In view of the Covid-19 pandemic there has been some change in focus to ensure the business successfully navigates the
crisis and emerges in a strong position with products that meet the needs of clients. This is outlined in the Chairman’s Statement and the
Strategic Report

Going Concern

The Group’s business activities and ﬁ nancial position, together with the factors likely to affect its future development, performance and
position, are set out in the CEO’s Review and Financial Review on pages 5 to 12. In addition, note 25 to the ﬁ nancial statements includes
the Company’s objectives, policies and processes for managing its capital; its ﬁ nancial risk management objectives; details of its ﬁ nancial
instruments; and its exposures to credit risk and liquidity risk. The Group prepare budgets and cashﬂ ow forecasts to ensure that the Group
can meet its liabilities as they fall due.

The uncertainty as to the future impact on the Group of the recent Covid-19 outbreak has been considered as part of the Group’s adoption
of the going concern basis. The Group has seen many of its clients shrink and with some clients closing. It has additionally supported many
clients through agreeing discounted periods and deferred terms. Accordingly, the Group will see a reduction in revenue in 2020. However,
the Group has acted quickly, taking advantage of various government schemes, including furloughing, and staff unanimously supporting a
temporary pay-cut, including all executive and non-executive directors. The Group also agreed a 6 month payment holiday on its existing bank
loan. The Company has also secured a loan of £1.5m under the UK Government’s Business Interruption Loan (CBIL) scheme.

GOVERNANCE

The Board has considered various downside scenarios on the Group’s results as a result of the Covid-19 outbreak. In preparing this analysis
the following assumptions were made for the base case: a reduction in recurring revenue and non recurring revenue in 2020 with some
recovery in the second half of 2020 but with revenue not returning to full pre Covid-19 levels in 2020 or 2021. This base case took £0.5m off
2020 revenue. A further scenario was modelled (“stress test scenario”) that took a further £0.5m off revenue with a deeper long term impact
on the business.

If revenue were to fall in line with the stress test model, the Company would take further remedial action to counter the reduction in proﬁ t and
cash through a cost cutting exercise that would include staff redundancies and general cost control measures. On this basis, the Group’s cash
reserves would be reduced to £nil in May 2021 though it would still have access to its bank overdraft of £0.2m.

Based on current trading, the stress test scenario is considered unlikely. However, it is difﬁ cult to predict the overall impact and outcome of
Covid-19 at this stage, particularly if there was a second wave towards the end of 2020. Nevertheless, after making enquiries, and considering
the uncertainties described above and after receiving a CBIL loan of £1.5m, the directors have a reasonable expectation that the company
has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going
concern basis in preparing the annual report and accounts.

Subsequent events

Like most businesses worldwide the Group is having to deal with the impact of Covid-19, with its primary concern being for the safety and
wellbeing of its staff and their families. The Group has seen many of its clients shrink and with some clients closing. We have additionally
supported many clients through agreeing discounted periods and deferred terms. Accordingly, we will see a reduction in revenue in 2020.
However, the Group has acted quickly, taking advantage of various government schemes, including furloughing, and staff unanimously
supporting a temporary pay-cut, including all executive and non-executive directors. Currently it is not possible to give a reasonable estimate of
the impact on the results for 2020.

In June 2020, the Company secured a loan of £1.5m under the UK Government’s Business Interruption Loan (CBIL) scheme. The Loan is
repayable over 6 years with capital repayments commencing in July 2021. Interest is payable at 3.99% over base with the UK Government
effectively paying the ﬁ rst 12 months interest under the CBIL scheme.

Research and development activities

The Group continues its development programme of software for the recruitment market including the research and development of new
products and enhancement to existing products. The Directors consider the investment in research and development to be fundamental to the
success of the business in the future.

Overseas branch operations

The Group has a branch operating in Germany. Details of all subsidiaries and their locations are detailed in note 15.

Annual General Meeting

The Company’s Annual General Meeting will be held at the ofﬁ ces of Voyager Software, 12 Cedarwood, Crockford Lane, Chineham Business
Park, Basingstoke, RG24 8WD on 23 September 2020 at 10:30am. 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.

Auditor

A resolution proposing the reappointment of BDO LLP as Auditor to the Group and Company will be put to the forthcoming Annual General Meeting.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

DIRECTORS’ REPORT

For the year ended 31 December 2019
Continued

Directors’ responsibilities

The Directors are responsible for preparing the Directors’ Report and the ﬁ nancial statements in accordance with applicable law and
regulations.

Company law requires the Directors to prepare ﬁ nancial statements for each ﬁ nancial year. The Directors are also required to prepare
ﬁ nancial statements in accordance with the rules of the London Stock Exchange for companies trading on the Alternative Investment Market.
The Directors have elected under company law to prepare the Group and Company’s ﬁ nancial statements in accordance with International
Financial Reporting Standards as adopted by the European Union (IFRSs). Under company law the Directors must not approve the ﬁ nancial
statements unless they are satisﬁ ed that they give a true and fair view of the state of affairs and proﬁ t or loss of the Group and Company for
that period.

In preparing the Group and Company ﬁ nancial statements, the Directors are required to:

(cid:129)

select suitable accounting policies and then apply them consistently;

(cid:129) make judgements and accounting estimates that are reasonable and prudent;

(cid:129)

state whether they have been prepared in accordance with IFRSs adopted by the EU;

prepare the ﬁ nancial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will
continue in business.

The Directors are responsible for keeping adequate accounting records that are sufﬁ cient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the ﬁ nancial position of the Company and enable them to ensure that the ﬁ nancial statements
comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication

The Directors are responsible for ensuring the Annual Report and the ﬁ nancial statements are made available on a website. Financial
statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and
dissemination of ﬁ nancial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s
website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the ﬁ nancial statements
contained therein.

The Directors conﬁ rm that so far as each Director is aware:

(cid:129)

there is no relevant audit information of which the Company’s Auditor is unaware; and

the Directors have taken all steps that they ought to have taken as Directors to make themselves aware of any relevant audit information
and to establish that the Auditor is aware of that information.

On behalf of the Board

J P Pomeroy
Company Secretary

29 July 2020

FINANCIAL STATEMENTS

INDEPENDENT AUDITOR’S REPORT

to the members of Dillistone Group Plc
For the year ended 31 December 2019

Opinion
We have audited the ﬁ nancial statements of Dillistone Group Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
31 December 2019 which comprise consolidated statement of comprehensive income, the consolidated and company statement of changes
in equity, the consolidated and company statement of ﬁ nancial position, the consolidated and company cash ﬂ ow statement and notes to the
ﬁ nancial statements, including a summary of signiﬁ cant accounting policies.

The ﬁ nancial reporting framework that has been applied in the preparation of the ﬁ nancial statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company ﬁ nancial statements, as
applied in accordance with the provisions of the Companies Act 2006.

In our opinion:

•

the ﬁ nancial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 1 December 2019
and of the Group’s loss for the year then ended;

the Group ﬁ nancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union ;

the Parent Company ﬁ nancial 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 ﬁ nancial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the ﬁ nancial statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of
the ﬁ nancial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulﬁ lled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufﬁ cient and appropriate to
provide a basis for our opinion.

Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

•

the Directors’ use of the going concern basis of accounting in the preparation of the ﬁ nancial statements is not appropriate; or

the Directors have not disclosed in the ﬁ nancial statements any identiﬁ ed material uncertainties that may cast signiﬁ cant doubt about the
Group or the Parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months
from the date when the ﬁ nancial statements are authorised for issue.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

INDEPENDENT AUDITOR’S REPORT

to the members of Dillistone Group Plc
For the year ended 31 December 2019
Continued

Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most signiﬁ cance in our audit of the ﬁ nancial statements of the
current period and include the most signiﬁ cant assessed risks of material misstatement (whether or not due to fraud) we identiﬁ ed, including
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the ﬁ nancial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

Key audit matter

Description of key audit matter

Our response

Capitalised
development costs

As described in note 1.12 of the consolidated ﬁ nancial
statements, the group capitalises costs incurred
on product development relating to the design and
development of new or enhanced products. Capitalised
development costs are disclosed in Note 13 of the
consolidated ﬁ nancial statements. Details of the products
concerned are given in the “Dillistone Group at a Glance”
section of the annual report on pages 2- 3.

The Directors apply judgement in the classiﬁ cation of
expenditure as capital in nature rather than ongoing
operational expenditure. The signiﬁ cant judgements and
related risk are that:

• Internal costs are capitalised that should be expensed
under the requirements of IAS 38 “Intangible Assets”;
and

Our audit procedures involved:

• Assessing the nature of the sampled items

capitalised and evaluated the appropriateness of
their classiﬁ cation as capitalised costs, having regard
to IAS 38 requirements. This included assessing
whether major projects are technically feasible and
commercially viable.

• Making enquiries of “Heads of Development” within
the group to understand procedures performed to
capitalise internally generated intangible assets.

• Reviewing all project summary reports for all ongoing
and completed projects during the year to validate
that costs capitalised met the IAS 38 recognition and
measurement criteria.

• Determining the value of salary costs relating

to members not in the development team to be
capitalised.

Management have also utilised signiﬁ cant judgement in
assessing the technological and commercial feasibility of
the projects.

• Making enquires of “Heads of Development” to

determine the availability of technical competence to
complete the development whether through contractor
costs or internally available resources.

• For a sample of capitalised payroll costs reviewed
employment contracts and timecards to verify that
only development related costs have been capitalised.

• Considering the appropriateness of the disclosures

provided in Note 13.

Key observations
Based on procedures performed, we consider that the
costs capitalised by management were in line with the
requirements of IAS 38.

FINANCIAL STATEMENTS

Key audit matter

Description of key audit matter

Our response

Revenue recognition

The group’s revenue recognition policy can be found in
note 1.4 to the ﬁ nancial statements.

We consider the key risk of material misstatement to arise
from the recognition of revenue around the year end,
including the recognition of the correct apportionment of
revenue in the year and the related amount deferred at
the year end. Further, the offering of bonus schemes and
incentive plans; as well as Revenue being a key KPI for
shareholder decision making; increases the risk that the
sales may be overstated.

We consider the compliance of Group’s revenue
recognition policy in accordance with IFRS 15 (Revenue
from Contracts with Customers) to be a key risk.

Because of the above, we have deemed revenue
recognition to be a key audit matter.

We tested that the Group’s revenue recognition policy is
compliant with IFRS 15 ‘Revenue from Contracts with
Customers’ by reviewing a selection of contracts, tracing
the satisfaction of performance obligations to supporting
documentation, such as licence keys, cash receipts and
revenue postings into the income statement.

We performed testing over all material revenue streams,
including:

• Applied predictive analytical testing procedures
for contract revenue earned during the year and
investigated all movements that were not consistent
with independent expectations set. Inputs used to set
those expectations have been tested by agreeing them
to related supporting documentation on a sample
basis.

• For a sample of bespoke and non-recurring orders
received in the year, reconciling to underlying
agreements, cash receipt and appropriate trigger
events for revenue recognition.

• Selecting a sample of entries deferred at year end,

tracing these back to the cash receipt and expected
delivery of performance obligations.

• Agreeing a sample of revenue items posted either side
of year end to contracts to check that revenue has
been recognised in the appropriate period.

We also considered the adequacy of the Group’s
disclosures relating to revenue recognition in notes 1.4
and 3.

Key observations
Based on the work performed we consider that revenue
has been recognised appropriately during the year, and
is in accordance with the Group’s revenue recognition
policy and accounting standards.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

INDEPENDENT AUDITOR’S REPORT

to the members of Dillistone Group Plc
For the year ended 31 December 2019
Continued

Key audit matter

Description of key audit matter

Our response

Impairment of Goodwill
and Intangible Assets

The group’s policy regarding impairment of goodwill
and intangible assets can be found in note 1.10 to the
ﬁ nancial statements.

During the current period, the group continued to
experience lower sales and proﬁ ts which are indicators of
impairment.

Determining if an impairment charge is required for
goodwill and other intangible assets involves signiﬁ cant
judgements about the future performance and cash
ﬂ ows of the business, including forecast growth in
future revenues and operating proﬁ t margins, as well as
determining an appropriate discount factor and long term
growth rate. Details of these are given in Note 12 and 13.

We therefore focused on these areas and the judgements
applied to future forecasts.

Our audit procedures involved:

•

Obtained the cash ﬂ ow forecasts and impairment
assessments including the discounted cash ﬂ ow
analysis from management.

With assistance from a BDO valuation specialist, we
performed audit procedures on the reasonableness
of the growth rates, margin and discount rate applied
including comparison to economic and industry
forecasts where appropriate.

Based on external evidence such as published
outlook statements, and cumulative audit knowledge
over the prior year cash ﬂ ow movements, we
performed sensitivity testing on the assumptions
used in the impairment assessment.

Compared the discounted cash ﬂ ow forecasts used
to historical results and actual post year end results.

Considered the appropriateness of the disclosures
included in Note 12 and 13.

Key observations
Based on procedures performed consider that
management’s judgements and disclosures in
considering the impairment of good will and intangible
assets were appropriate.

FINANCIAL STATEMENTS

Key audit matter

Description of key audit matter

Our response

Going concern
assessment

Note 1.2 of the ﬁ nancial statements explain how the
Directors have formed a judgement that it is appropriate
to adopt the going concern basis of preparation for the
Group ﬁ nancial statements.

That judgement is based on an evaluation of the inherent
risks to the Group’s business model and how those risks
might affect the Group’s ﬁ nancial resources or ability to
continue operations over a period of at least a year from
the date of approval of the ﬁ nancial statements.

The Group’s ability to continue as a going concern has
been subject to increased audit scrutiny in line of the
anticipated ﬁ nancial impact of COVID-19 and its potential
impact on the markets as a whole, and the Group
speciﬁ cally. The Directors have considered the impact of
COVID-19 and sensitised their forecasts accordingly.

Due to the high level of judgement involved in the
assessment we considered going concern to be a key
audit matter.

Our audit procedures involved:

•

Discussing with management their assessment of the
Group’s ability to continue as a going concern.

Critically evaluating the revenue and cost projections
underlying the model with reference to market
information as well as past performance of the
Group.

Analysing the projected cash ﬂ ow and working
capital assumptions to understand those
assumptions used in the Group forecasts,
through robust interrogation of the forecasts and
understanding how these were derived;

Assessing the impact of COVID-19 on the cash-
ﬂ ow projections as well as the assumptions
and sensitivities relating to this, through robust
interrogation of the forecasts and understanding how
these were derived.

Reviewing the outcome of mitigating actions already
undertaken by directors to manage and conserve
cash, as these were key assumptions included in the
COVID-19 adjusted cash ﬂ ow forecast.

Performing analysis of changes in key assumptions
including a reasonable possible (but not unrealistic)
reduction in forecast revenue to understand the
sensitivity in the cash ﬂ ow forecasts.

Reviewing management’s disclosures in relation
to the COVID-19 pandemic and its potential
impact and to check that these are consistent with
management’s stress test scenario and the Board’s
view of the current market conditions.

Reviewing the terms of the £1.5m CBIL loan received
post year end, and the existing ﬁ nancing within
the group, focusing on the covenant requirements
per the agreements, to check that the Group could
remain compliant for the next 12 months, when
considering the stress test model prepared.

Key observations
Our observations in respect of going concern are set out
in the ‘Conclusions relating to going concern’ section
above.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

INDEPENDENT AUDITOR’S REPORT

to the members of Dillistone Group Plc
For the year ended 31 December 2019
Continued

Our application of materiality
We apply the concept of materiality in performing our audit and evaluating the effect of misstatements. We consider materiality to be the
magnitude by which misstatements, including omissions, could inﬂ uence the economic decisions of reasonable users that are taken on the
basis of the ﬁ nancial statements.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account of the nature of identiﬁ ed misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the ﬁ nancial statements as a whole.

We agreed with the audit committee that we would report to them all individual audit differences identiﬁ ed during the course of our audit
in excess of £6,450 (2017: £7,150). We also agreed to report differences below these thresholds that, in our view, warranted reporting on
qualitative grounds.

Overall group materiality

Group performance materiality
(75% of Overall materiality)

Basis for determining
(Group and Parent)

Rationale for benchmark applied

£120,400 (2018: £131,000)

£90,300 (2018: £97,500)

Group: 1.50% of total group revenue (2018: 1.50%)
Parent: 1.50% of total revenue (2018: 1.5%)

Revenue is the group’s main KPI, and therefore we considered this ﬁ nancial
measure to be the most relevant to the users of the ﬁ nancial statements in
assessing the performance of the Group and Parent.

Parent company materiality

Parent company performance materiality
(75% of Overall materiality)

£89,000 (2018: £121,000)

£66,750 (2018: £90,750)

Performance materiality was set at 75% (2018 – 75%) of the above materiality ﬁ gures. This is based on our risk assessment, together with our
assessment of the Group’s overall control environment.

Component materiality
Component materiality is established when performing audits on complete ﬁ nancial information of subsidiaries within the group where the
subsidiary is considered signiﬁ cant to the group.

We determined component materiality as follows:

Range of component materiality 4% to 74% (2018: 3% to 93%) of group materiality

An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding of the group and its environment, including the group’s system of internal control, and
assessing the risks of material misstatement in the ﬁ nancial statements at the group level.

In determining the scope of our audit we considered the level of work to be performed at each component in order to ensure sufﬁ cient assurance
was gained to allow us to express an opinion on the ﬁ nancial statements of the Group as a whole. We tailored the extent of the work to be
performed at each component, based on our assessment of the risk of material misstatement at each component. We identiﬁ ed four centrally
controlled components as signiﬁ cant, and have audited these for group reporting purposes. Dillistone Systems Group Plc (the Parent Company)
was subject to a full scope audit performed by BDO LLP.

The group audit team centrally performed the audit of 100% (2018: 82%) of group revenue and 95% (2018: 95%) of total assets using the
materiality levels set out above.

FINANCIAL STATEMENTS

For two of the components not considered signiﬁ cant, a BDO member ﬁ rm performed speciﬁ c scope procedures, on instruction from BDO LLP,
based on their relative size, risks in the business and our knowledge of those entities appropriate to respond to the risk of material misstatement.
This work was subjected to review by BDO LLP. Review and speciﬁ c scope procedures were performed by the group audit team on the remaining
ﬁ ve reporting components not considered signiﬁ cant to the group.

Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual report other
than the ﬁ nancial statements and our auditor’s report thereon. Our opinion on the ﬁ nancial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the ﬁ nancial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the ﬁ nancial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the ﬁ nancial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:

•

the information given in the strategic report and the Directors’ report for the ﬁ nancial year for which the ﬁ nancial statements are prepared
is consistent with the ﬁ nancial statements; and

•

the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the
audit, we have not identiﬁ ed material misstatements in the strategic report or the Directors’ report.

We have nothing to report in respect of the following matters in relation to which 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 ﬁ nancial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration speciﬁ ed by law are not made; or

• we have not received all the information and explanations we require for our audit.

Responsibilities of directors
As explained more fully in the Directors’ responsibilities statement set out on page 28, the Directors are responsible for the preparation of
the ﬁ nancial statements and for being satisﬁ ed that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of ﬁ nancial statements that are free from material misstatement, whether due to fraud or error.

In preparing the ﬁ nancial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the ﬁ nancial statements
Our objectives are to obtain reasonable assurance about whether the ﬁ nancial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

INDEPENDENT AUDITOR’S REPORT

to the members of Dillistone Group Plc
For the year ended 31 December 2019
Continued

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to inﬂ uence the economic decisions of users taken on the basis of these ﬁ nancial statements.

A further description of our responsibilities for the audit of the ﬁ nancial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report
This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

David Butcher
For and on behalf of BDO LLP, Statutory Auditor
London, UK

29 July 2020

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME

For the year ended 31 December 2019

Revenue

Cost of sales

Gross proﬁ t

Administrative expenses

Operating loss

Adjusted operating (loss)/proﬁ t before acquisition related, reorganisation and
other items

Acquisition related, reorganisation and other items

Operating (loss)

Financial income

Financial cost

Loss before tax

Tax income

(Loss) for the year

Other comprehensive income/(loss)

Items that will be reclassiﬁ ed subsequently to proﬁ t and loss:

Currency translation differences

Total comprehensive (loss) for the year

Earnings per share

Basic

Diluted

Note

2019
£’000

8,027

(849)

7,178

(8,268)

(1,090)

(207)

(883)

(1,090)

(91)

(1,181)

339

(842)

(16)

(858)

(4.28)p

2018
£’000

8,692

(1,054)

7,638

(8,052)

(414)

(469)

(414)

(38)

(451)

191

(260)

(30)

(290)

(1.32)p

The notes on pages 43 to 81 are an integral part of these consolidated and company ﬁ nancial statements.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY

For the year ended 31 December 2019

Share
Share
capital premium
£’000
£’000

Merger Retained
reserve earnings
£’000

£’000

Convertible
loan
reserve
£’000

Share
Foreign
option exchange
£’000
£’000

Total
£’000

Balance at 1 January 2018 Comprehensive income

983

1,631

365

2045

101

5,232

Loss for the year

Other comprehensive income

Exchange differences on translation of overseas operations

Total comprehensive income

Transactions with owners

Share option charge

Dividends paid

Total transactions with owners

Balance at 31 December 2018

Comprehensive income

Loss for the year ended 31 December 2019

Other comprehensive income/(loss)

Exchange differences on translation of overseas operations

Total comprehensive income

Transactions with owners

Share option charges

Total transactions with owners

Balance at 31 December 2019

(260)

(98)

(260)

(30)

(290)

(98)

(93)

983

1,631

365

1,687

106

4, 849

(842)

983

1,631

365

871

(842)

(16)

(858)

(12)

4,005

The notes on pages 43 to 81 are an integral part of these consolidated and company ﬁ nancial statements.

FINANCIAL STATEMENTS

COMPANY STATEMENT OF
CHANGES IN EQUITY

For the year ended 31 December 2019

Balance at 1 January 2018

Comprehensive income

Total comprehensive income for the year ended 31 December 2018

Transactions with owners

Share option charge

Dividends paid

Total transactions with owners

Balance at 31 December 2018

Comprehensive income

Total comprehensive loss for the year ended 31 December 2019

Transactions with owners

Share option charge

Total transactions with owners

Balance at 31 December 2019

Convertible

Share
Share
capital premium
£’000
£’000

Merger
reserve
£’000

loan Retained
reserve earnings
£’000

£’000

Share
option
£’000

Total
£’000

983

1,631

365

2,589

101

5,683

1,338

(98)

(93)

983

1,631

365

3,829

106

6,928

(1,843)

(12)

983

1,631

365

2,011

5,098

The notes on pages 43 to 81 are an integral part of these consolidated and company ﬁ nancial statements.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

CONSOLIDATED AND COMPANY STATEMENTS
OF FINANCIAL POSITION

As at 31 December 2019

ASSETS

Non-current assets

Goodwill

Other intangible assets

Property, plant and equipment

Right to use assets

Investments

Total non-current assets

Current assets

Inventories

Trade and other receivables

Current tax receivable

Cash and cash equivalents

Total current assets

Total assets

EQUITY AND LIABILITIES

Equity attributable to owners of the parent

Share capital

Share premium

Merger reserve

Convertible loan reserve

Retained earnings

Share option reserve

Translation reserve

Total equity

Liabilities

Non-current liabilities

Trade and other payables

Lease liabilities

Borrowings

Deferred tax liability

Total non-current liabilities

Current liabilities

Trade and other payables

Lease liabilities

Borrowings

Total current liabilities

Total liabilities

Total liabilities and equity

Group

2019
£’000

Note

2018
£’000

3,415

4,754

113

8,282

1,522

270

725

2,520

10,802

983

1,631

365

1,687

106

4,849

690

390

489

3,415

4,234

754

8,457

1,222

293

690

2,205

10,662

983

1,631

365

871

4,005

443

741

523

340

2,047

1,569

3,977

551

4,610

6,657

10,662

4,370

4,384

5,953

10,802

Company

2019
£’000

7,168

928

8,096

983

1,631

365

2,011

5,098

523

1,924

551

2,475

2,998

8,096

2018
£’000

7,151

1,289

8,440

983

1,631

365

3,829

106

6,928

390

392

1,091

1,120

1,512

8,440

The loss for the ﬁ nancial year for the parent Company was £(1,843,000) (2018: proﬁ t £1,338,000).

The notes on pages 43 to 81 are an integral part of these consolidated and company ﬁ nancial statements.

The ﬁ nancial statements were approved by the Board of Directors and authorised for issue on 29 July 2020. They were signed on its behalf by
J P Pomeroy – Director
Company Registration No. 4578125

FINANCIAL STATEMENTS

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2019

For the year ended
31 December 2019
£’000

For the year ended
31 December 2018
£’000

Operating activities

(Loss) before tax

Adjustment for:

Financial income

Financial cost

Depreciation and amortisation

Share option expense

Foreign exchange adjustments arising from operations

Operating cash ﬂ ows before

movement in working capital:

Decrease in receivables

Decrease in inventories

Decrease in payables

Taxation refunded

Net cash generated from operating activities

Investing activities

Interest received

Purchases of property, plant and equipment

Sale of Fixed assets

Investment in development costs

Contingent and deferred consideration paid

Net cash used in investing activities

Financing activities

Interest paid

Proceeds from bank loan

Bank loan repayments made

Lease payments made

Utilisation of banking facility

Dividends paid

(1,181)

1,794

(33)

685

282

(603)

167

(29)

(1,070)

(83)

500

(126)

(49)

288

(451)

(1)

1,714

1,375

171

(471)

534

1,140

(55)

(1,481)

(146)

(1,097)

(1,681)

(33)

(98)

Net cash generated from/(used in) ﬁ nancing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

Effect of foreign exchange rate changes

Cash and cash equivalents at end of year

530

(33)

725

(2)

690

(131)

( 672)

1,390

725

The notes on pages 43 to 81 are an integral part of these consolidated and company ﬁ nancial statements.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

COMPANY CASH FLOW STATEMENT

For the year ended 31 December 2019

Operating activities

(Loss)/Proﬁ t before tax

Adjustment for:

Financial cost

Impairment

Share option expense

Operating cash ﬂ ows before

movements in working capital

Decrease/(Increase) in receivables

Increase/(Decrease) in payables

Net cash generated from operating activities

Investing activities

Acquisition of subsidiaries

Contingent consideration paid

Net cash used in investing activities

Financing activities

Proceeds from bank loan

Financial cost

Bank loan repayments made

Utilisation of banking facility

Dividends paid

Net cash used in ﬁ nancing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

2019
£’000

(1,843)

(1,773)

361

829

(18)

500

(46)

(126)

288

2018
£’000

1,338

451

1,831

(355)

(1,313)

(146)

(33)

(98)

2019
£’000

(583)

(18)

616

(15)

2018
£’000

163

(146)

(131)

(114)

(15)

The notes on pages 43 to 81 are an integral part of these consolidated and company ﬁ nancial statements.

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019

Dillistone Group Plc (the ‘Company’) is a company incorporated in England and Wales. The ﬁ nancial statements are presented in thousand
Pounds Sterling. The principal activities have been detailed in the Strategic Report and the registered ofﬁ ce is 12 Cedarwood, Chineham
Business Park, Basingstoke, RG24 8WD.

The Group ﬁ nancial statements consolidate those of the Company and its subsidiaries (together referred to as the ‘Group’). The parent
company ﬁ nancial statements present information about the Company as a separate entity and not about its Group.

Both the Group ﬁ nancial statements and the Company ﬁ nancial 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 ﬁ nancial statements here together with the Group
ﬁ nancial 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 ﬁ nancial statements.

Accounting policies

1.1

Basis of accounting

The consolidated and company ﬁ nancial statements have been prepared using the signiﬁ cant accounting policies and measurement bases
summarised below:

Signiﬁ cant estimates
In the application of the Group’s accounting policies the Directors are required to make estimates and assumptions about the carrying
amounts of assets and liabilities. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods. The key areas are summarised below:

Expected life of support contracts
As detailed in note 1.4, the Group recognises revenue arising on perpetual licences with mandatory support contracts over time. The Group
must determine the relevant period to be the life of the support contract, which is unknown at inception. Having reviewed support contract
turnover, Management estimates the typical life of relevant contracts to be ﬁ ve years. Changes to this estimate would impact the timing of
revenue recognition on such contracts.

(cid:129)
(cid:129)

Alternative accounting judgement could have been applied – this could be a longer or shorter period for the life of the contract.
Effect of that alternative accounting judgement – change in revenue ﬁ gure and deferred income by the same amount.

Amortisation of internal development expenditure
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 life cycle 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. The
carrying value of capitalised development is reviewed for impairment indicators at each accounting period end. See note 13.

In addition, management estimate the amount of Directors’ costs that are capitalised given the degree of the Director’s involvement in relevant
projects.

(cid:129)
(cid:129)

Alternative accounting judgement that could have been applied – not capitalising development costs.
Effect of that alternative accounting judgement – reduction of £3,055,000 of assets’ carrying value.

Impairment of goodwill, other intangible assets and investments
There are a number of assumptions management has considered in performing impairment reviews of goodwill, other intangible assets and
investments which include an estimate of the future cash ﬂ ows expected to arise from the cash generating unit and a suitable discount rate in
order to calculate the recoverable amount. See notes 12, 13 and 16.

(cid:129)
(cid:129)

Alternative accounting judgement that could have been applied – impair goodwill, other intangible assets and investments.
Effect of that alternative accounting judgement – details of sensitivities to estimates are shown in accounts notes 12 and 16

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

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 ﬁ nancial
position date. Valuation techniques commonly used by market practitioners are applied. In particular, in applying the provision matrix model to
trade receivables (see note 1.14), Management has estimated the impact of forward-looking economic data on the future collectability of its trade
receivables. In particular, given its geographical areas of operation include the UK and Europe, Management has considered the potential impact
of the UK’s exit from the European Union. Although it is thought likely to increase default levels, the ongoing uncertainty of the outcome to this
process and the uncertainty of its effect on the Group’s clients has meant that precision is very difﬁ cult to achieve. Thus the Group evaluated a
range of outcomes in determining probable future loss rates and chose what it considered to be the most likely scenario. See note 18.

(cid:129)
(cid:129)

Alternative accounting judgement that could have been applied – increase or decrease the expected loss rate
Effect of that alternative accounting judgement – The current level of Loss allowance provision is £82,000 on gross debtors of £1,082,000.
An increase in the loss rate would increase the Loss allowance provision and decrease the net carrying value of the trade receivables

Leases - Incremental borrowing rate
Management have concluded that the interest rate implicit in the leases cannot be readily determined therefore the leases held have been
discounted by the incremental borrowing rate (IBR), being the rate of interest that the Group would have to pay to borrow over a similar term,
and with a similar security, the funds necessary to obtain assets of a similar value to the right of use assets in a similar economic environment. To
determine the IBR, management considered its existing borrowing obligations and concluded that 5% was an appropriate rate.

(cid:129)
(cid:129)

Alternative accounting judgement that could have been applied – increase or decrease the incremental borrowing rate
A 1% increase in the incremental borrowing rate would reduce the closing asset value by £0.032m and also reduce the closing lease
liability by £0.026m.

Judgements in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, Management makes various judgements that can signiﬁ cantly affect the amounts
recognised in the ﬁ nancial statements. The critical judgements are considered to be the following:

Valuation of separately identiﬁ able intangible assets
As detailed in note 1.8, separately identiﬁ able intangible assets are identiﬁ ed and amortised over a deﬁ ned period. The Directors use
acknowledged approaches eg: relief from royalty method, capital asset pricing model, excess earnings valuation method but these are reliant
upon certain judgements and assumptions which they determine are reasonable by reference to companies in similar industries.

Customers’ practical acceptance of licence software
As detailed in note 1.4, various elements of the Group’s revenue recognition policy require determination of point at which control of the good
or service being provided passes to the customer.

The Group uses the ‘live’ date as the basis of determining the timing of customer practical acceptance of the software and the passing of
control. In particular for sales of perpetual licences without mandatory support, this constitutes the point in time at which performance
obligations relating to the licence are fulﬁ lled and revenue can be recognised. Likewise, for SaaS contracts, this date is the commencement for
the period of time over which licence revenue can be recognised. Alternative judgements of when control passes to the customer could impact
the timing of 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 beneﬁ ts. See
‘Capitalisation and amortisation of internal development expenditure’ in Signiﬁ cant estimates above for further details.

Determining whether a contract or part of a contract contains a lease
IFRS 16 sets out the criteria to establish whether a contract or part thereof contains a lease. The Group exercises judgement in applying these
criteria, by considering the following:

(cid:129)

Is there an identiﬁ ed asset that the Group has the right to use? Such an asset must be explicitly or implicitly identiﬁ ed in the contract,
and if the lessor retains a substantive right of substitution from contract inception and throughout the period of use then no identiﬁ ed
asset exists. Such substantive rights only exist if the lessor has the practical ability to substitute the asset and an economic beneﬁ t would
accrue to them from substitution.
Does the Group have the right to obtain substantially all the economic beneﬁ ts of use of the underlying asset? Economic beneﬁ ts may
arise directly or indirectly. Contract terms may mean that the Group’s access to all the economic beneﬁ ts of use of the asset are limited,
for example by only allowing its use under certain conditions or at certain times.

FINANCIAL STATEMENTS

(cid:129)

Does the Group have the right to direct the use of the identiﬁ ed asset? This means that the Group must be able to decide how and for
what purpose the asset is used throughout the period of use.

Determining lease terms
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension
option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the
lease is reasonably certain to be extended (or not terminated). The following factors are typically considered:

(cid:129)
(cid:129)

(cid:129)

If there are signiﬁ cant penalties to terminate (or not extend), the group is typically reasonably certain to extend (or not terminate).
If any leasehold improvements are expected to have a signiﬁ cant remaining value, the group is typically reasonably certain to extend (or
not terminate).
Otherwise, the group considers other factors including historical lease durations and the costs and business disruption required to
replace the leased asset.

The accounting policies set out below have, unless otherwise stated, been applied consistently by the Group to all periods presented in these
ﬁ nancial statements.

1.2

Going concern

The uncertainty as to the future impact on the Group of the recent COVID-19 outbreak has been considered as part of the Group’s adoption
of the going concern basis. The Group has seen many of its clients shrink and with some clients closing. It has additionally supported many
clients through agreeing discounted periods and deferred terms. Accordingly, the Group will see a reduction in revenue in 2020. However,
the Group has acted quickly, taking advantage of various government schemes, including furloughing, and staff unanimously supporting a
temporary pay-cut, including all executive and non-executive directors. The Group also agreed a 6 month payment holiday on its existing bank
loan. The Company has also secured a loan of £1.5m under the UK Government’s Business Interruption Loan (CBIL) scheme.

The Board has considered various downside scenarios on the Group’s results as a result of the COVID-19 outbreak. In preparing this analysis
the following assumptions were made for the base case: a reduction in recurring revenue and non recurring revenue in 2020 with some
recovery in the second half of 2020 but with revenue not returning to full pre Covid-19 levels in 2020 or 2021. This base case took £0.5m off
2020 revenue. A further scenario was modelled (“stress test scenario”) that took a further £0.5m off revenue with a deeper long term impact
on the business.

Based on current trading, the stress test scenario is considered unlikely. However, it is difﬁ cult to predict the overall impact and outcome
of COVID-19 at this stage, particularly if there was a second wave towards the end of 2020. Nevertheless, after making enquiries, and
considering the uncertainties described above and after receiving a CBIL loan of £1.5m, the directors have a reasonable expectation that the
company has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the
going concern basis in preparing the annual report and accounts.

1.3

Basis of consolidation

The Group ﬁ nancial statements consolidate those of the parent company and all of its subsidiaries as of 31 December 2019. The parent
controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those
returns through its power over the subsidiary. All subsidiaries have a reporting date of 31 December.

All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on
transactions between Group companies. Amounts reported in the ﬁ nancial statements of subsidiaries have been adjusted where necessary to
ensure consistency with the accounting policies adopted by the Group.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

Proﬁ t or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of
acquisition, or up to the effective date of disposal, as applicable.

1.4 Revenue

The Group’s revenue recognition policy is based on the principle of transfer of promised goods and services (‘performance obligations’) to the
customer. Revenue is recognised on the satisfaction of these contractual performance obligations using a ﬁ ve-step approach, consisting of:

identiﬁ cation of the contract with the customer;
identiﬁ cation of all performance obligations in that contract;

(cid:129)
(cid:129)
(cid:129) determination of the transaction price;
(cid:129) allocation of the transaction price to the performance obligations; and
recognition of revenue as the performance obligations are fulﬁ lled.
(cid:129)

Contracts are broken down into distinct goods and services in order to identify the separate performance obligations within. Goods and
services are considered distinct if they are capable of being used independently by the customer, and if they are separately identiﬁ able in the
context of the contract.

Depending on the work being performed, customers are typically invoiced work in two stages: a deposit invoice at contract inception before
work commences, then a ﬁ nal invoice on completion. For ongoing contracts such as support and SaaS contracts, invoices are issued in
advance for the relevant subscription period. All such invoices are typically due for payment within 30 days.

Transaction prices are the amounts of consideration the Group expects to be entitled to in exchange for the transfer of promised goods and
services to the customer, exclusive of VAT or any applicable sales taxes. If the timing of payments provides either the Group or customer
with a beneﬁ t of ﬁ nancing the transfer of goods or services, a signiﬁ cant ﬁ nancing component exists. Although standard payment terms for
all customers is 30 days, there is some variability in the timing of payment and delivery (for instance, some customers pay by instalments).
However, timing differences between delivery and settlement are one year or less. As such, the Group applies the practical expedient in IFRS
15 not to adjust for signiﬁ cant ﬁ nancing components.

Transaction prices are allocated to contractual performance obligations based on stand-alone selling prices. Where the Group occasionally
offers discounts to customers, these are allocated to performance obligations within the contract on the basis of relative stand-alone selling
prices.

Revenue is recognised when control of the good or service has been passed to the customer by satisfying the performance obligation, either
over time or at a point in time, as follows:

(cid:129)
(cid:129)

Over time: this typically occurs when the customer simultaneously receives and consumes the beneﬁ ts of a service performed by the Group.
At a point in time: The moment of transfer of control is typically indicated by:
o
o
o
o
o

the Group having right to payment;
the customer having legal title to the asset;
the Group transferring physical possession of the asset to the customer, where relevant;
the customer having signiﬁ cant risks and rewards of ownership of the asset;
the customer having accepted the asset.

The incremental costs incurred in obtaining contracts with customers (e.g. sales commissions) are recognised as an expense as incurred using the
practical expedient under IFRS 15 since, if such costs were recorded as an asset, the amortisation period of that asset would be less than one year.

The Group has considered the most signiﬁ cant ways it generates revenue from the goods and services it sells. The following sets out how the general
principles above apply to each of these signiﬁ cant areas and how revenue on each is recognised.

Sales of perpetual licences without a mandatory support contract
The Group licences software under licence agreements. The customer typically pays a one-off amount to purchase a licence conferring a
perpetual right to use a version of the software. Revenue is recognised at a point in time, when control of the licence passes to the customer
through practical acceptance. The Group considers the ‘live’ date to indicate practical acceptance of the software (refer note 1.1) and thus
the date for transfer of control. If payments have been received in advance for licences, where practical acceptance has not yet been reached,
these amounts are not recognised as revenue but as deferred income in the statement of ﬁ nancial position.

FINANCIAL STATEMENTS

Sales of perpetual licences with a mandatory support contract
Some of the Group’s perpetual licences are sold with mandatory support contracts. In these instances, if the customer decides to cancel their support
contract their ability to use the perpetual licence ceases. In these cases, the Group considers the provision of the perpetual licence and the support
contract to constitute one performance obligation. As such, the Group recognises the revenue relating to the perpetual licence over time, being the
life of the support contract. As this is not known at inception, the group estimates the expected life of support contracts to be ﬁ ve years.

Subscription services, such as support, hosting and SaaS (‘Software as a Service’)
Each subscription service constitutes a separate contractual arrangement, and separate performance obligation. In each case the customer
pays a regular ﬁ xed amount for the right to access relevant services, commencing on practical acceptance of the software (as previously
deﬁ ned). As these services are consumed as they are provided revenue is recognised over time, matching the period of the contract. If
subscription services are invoiced in advance, these amounts are deferred and recognised as revenue over the relevant period.

Installations
The customer pays a fee for the software to be installed. To the extent to which this work is not complex and could be performed by a third
party, revenue is recognised at a point in time, on completion. Complex work constitutes one performance obligation with the software licence,
with installation revenue recognised in accordance with how revenue is recognised on the licence.

Training
The customer pays a fee for training. To the extent to which training is not essential for use of the software, revenue is recognised at a point in
time, on delivery. Training that is considered essential constitutes one performance obligation with the software licence, and training revenue is
recognised in accordance with how revenue is recognised on the licence.

Third party revenues
The Group sells, predominantly as principal, software developed by other organisations together with services that are bought in from third
parties. The Group applies the principles of its revenue recognition policy to sales of third-party software in the same way it does sales of its
own licenced products. As such, where perpetual licences that are capable of independent use represent one performance obligation, revenue
on these is recognised at a point in time on practical acceptance of the software. If use of the software relies on using other services that are
consumed over time, revenue from perpetual licence sales are recognised over time in line with recognition of those other services. Services
are recognised over time in the period in which they are provided.

Tokens
The Group sells single-use tokens to access certain services within the business. Tokens are normally bought in bundles and can be used
once within a certain period of time. Tokens have a ﬁ xed expiry period after which the customer has no legally enforceable right to claim on the
tokens. The performance obligation conveyed by each token is satisﬁ ed when the token is used. As such, revenue is recognised at a point in
time, being on use of the token or on expiry of unused tokens.

1.5

Share based payments

The Company operates a share based payment scheme. It 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
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. proﬁ tability or sales growth targets).

All equity-settled share-based compensation is ultimately recognised as an expense in the proﬁ t 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 share 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.

1.6

Long term incentive plan (“LTIP”) – capped cash bonus

The LTIP awards can be share based or cash based. The cash awards are based on a capped cash bonus with performance conditions related
to the growth in earnings per share of the Group or other targets set by the Remuneration Committee. These awards automatically mature

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

following the publication of the Annual Report of the Company, three years after the period to which the grant relates. The liability is accrued
and recognised in the statement of comprehensive income.

1.7

Long term incentive plan (“LTIP”) – share option based award

The LTIP awards can be share based or cash based. The number of share option granted under these awards are usually based on a
percentage of salary with performance conditions related to the growth in earnings per share of the Group or other targets set by the
Remuneration Committee. These awards can be exercised between three and ten years after the date of the grant. This element is expensed
and recognised in the statement of comprehensive income over the vesting period.

1.8

Business combinations

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 identiﬁ able assets acquired and liabilities assumed in a business combination regardless of whether they have been
previously recognised in the acquiree’s ﬁ nancial 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 identiﬁ able 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 identiﬁ able net assets. If the

fair values of identiﬁ able net assets exceed the sum calculated above, the excess amount (ie gain on a bargain purchase) is recognised in
proﬁ t or loss immediately.

Where contingent consideration relates to the results spread over different accounting periods, the fair value of such consideration is
recalculated at each year end and any adjustment is recognised in proﬁ t or loss immediately.

1.9

Adjusted operating proﬁ t

Adjusted operating proﬁ t excludes acquisition costs and related intangible asset amortisation and movements in contingent consideration and
other one-off costs which can include, as an example, reorganisation costs. See notes 2 and 5.

1.10 Impairment testing of goodwill, other intangible assets and property, plant and equipment

For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inﬂ ows (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 beneﬁ t 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 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 ﬂ ows from each cash generating unit and determines a suitable interest rate in order to calculate the present value of those cash
ﬂ ows. 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 reﬂ ect management’s assessment of respective risk proﬁ les, such as market and asset-speciﬁ c risks factors. Impairment losses for
cash generating units reduce ﬁ rst 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.

FINANCIAL STATEMENTS

1.11 Segment reporting

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
identiﬁ ed as the Board of Directors.

1.12 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 beneﬁ ts, 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 costs and subcontractor costs, which are managed and controlled centrally. Product
development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Capitalised product development expenditure is amortised over its useful life of ﬁ ve years. As development expenditure is incurred on multiple
projects simultaneously, with roll-outs occurring on a continuous basis, amortisation commences in the month of costs being incurred.
Maintenance costs are expensed. Amortisation of new products commences once a product is available for use.

Capitalised product development expenditure is subject to regular impairment reviews and is stated at cost less any accumulated impairment
losses. Any impairment taken during the year is shown under administrative expenses on the statement of comprehensive income.
Development costs that do not meet the requirements for capitalisation are written off to proﬁ t and loss as incurred. In accordance with IAS
38, no research costs are capitalised to the balance sheet, but are expensed as incurred.

Purchased Software
Software acquired externally is capitalised when it is expected to have ongoing use within the business. Capitalised expenditure includes both
the purchase price and any costs directly associated with bringing the software into use. Amortisation is charged over the useful economic life
of the software, typically 3 to 5 years, beginning when it is capable of being used by the business.

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 reﬂ ects market expectations about the probability that the
future economic beneﬁ ts embodied in the asset will ﬂ ow 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 as follows:

Intangible assets:

Brand and IP
Acquired developed technology
Contractual customer relationships
Non-contractual customer relationships

Estimated life

15 years
6 – 11.25 years
1.25 years
6 – 10.25 years

The useful economic life of intangible assets are reviewed annually. The Group has reviewed its useful economic life in respect of non
contractual relationships following the loss of a major contract in one part of the business.

1.13 Property, plant and equipment

Property, plant and equipment 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
Right to use assets
Ofﬁ ce and computer equipment
Fixtures, ﬁ ttings and equipment

the lower of 5 years or the remaining lease period
Lease period
3-5 years straight line
4-5 years straight line

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

1.14 Financial assets

The Group classiﬁ es its ﬁ nancial assets under the deﬁ nitions provided in International Financial Reporting Standard 9 (IFRS 9), depending on
the purpose for which the ﬁ nancial assets were acquired. Management determines the classiﬁ cation of its ﬁ nancial assets at initial recognition.

Management considers that the Group’s ﬁ nancial assets fall under the amortised cost category. These are non-derivative ﬁ nancial assets
with ﬁ xed 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 ﬁ nancial position date, which are classiﬁ ed as non-current assets. The Group’s ﬁ nancial assets held
at amortised cost arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate
other types of contractual monetary asset. As such they comprise trade receivables, intercompany trading balances (in relation to Company
accounts), and cash and cash equivalents. Financial assets do not comprise prepayments.

The Group’s ﬁ nancial assets are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue.
The exception are trade and receivables balances, which are recorded at their transaction price as they do not contain a signiﬁ cant ﬁ nancing
component (see note 1.4). The Group’s ﬁ nancial assets are subsequently measured at amortised cost using the effective interest rate method,
less provision for impairment.

Impairment provisions for trade receivables, being loss allowances for ‘expected credit losses’ (ECLs) per IFRS 9, are measured on a lifetime
basis using the simpliﬁ ed approach set out in that ﬁ nancial reporting standard. The Group’s method in measuring ECLs reﬂ ects:

(cid:129)
(cid:129)
(cid:129)

unbiased and probability-weighted amounts, determined using a range of possible outcomes;
the time value of money; and
reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current
conditions and forecasts of future economic conditions.

The Group has applied the practical expedient in IFRS 9 of using a provision matrix to calculate ECLs. This requires the use of historical credit
loss experience, as revealed for groupings of similar trade receivable assets, to estimate the relevant ECLs. As such, the Group has employed
the following process in calculating ECLs:

(cid:129)

(cid:129)
(cid:129)

Grouping – trade receivables are grouped based on the similarity of their customer risk proﬁ le, being underlying product type and
geographical region;
Default deﬁ nition – amounts not collected are deﬁ ned in accordance with the credit risk management of the Group and include qualitative
factors, broadly encompassing scenarios where the customer is either unable or unwilling to pay.
Collection proﬁ les and loss rates – the collection time periods (e.g. within 30 days, 30 – 60 days, etc.) for sales made in the preceding
12-month period are gathered, amounts not collected assessed and loss rates based on ageing inferred;
Historical periods – historic losses are reviewed over a 3-year time horizon;
Forward-looking assessment – the Group considers relevant future economic factors affecting each group of trade receivables, giving an
expected probability of default for the portfolio.

The resultant expected loss rates are applied to the ageing proﬁ le of grouped trade receivables at the balance sheet date to give the lifetime
ECLs for each. This produces the loss allowances to be booked as an impairment adjustment to the carrying value of trade receivables. For
further details on the estimates applied in these calculations, see note 1.1.

Trade receivables are reported net of the resultant loss allowances. The loss is recognised within administrative expenses in the consolidated
statement of comprehensive income. On conﬁ rmation that the trade receivable will not be collectable, the gross carrying value of the asset is
written off against the associated provision.

Impairment provisions for other receivables are recognised based on the general impairment model within IFRS 9.

The Parent Company’s receivables due from Group company’s are subject to the requirements of IFRS 9, with speciﬁ c considerations
relating to:

(cid:129)
(cid:129)
(cid:129)

Whether the loans are within the scope of IFRS 9;
Whether the loans meet the Solely Payments of Principal and Interest test; and
Whether the loans are in a “hold to collect” business model.

The Parent Company has followed the considerations required under IFRS 9 on the above, and determined the appropriate recognition of the
balances receivable from Group companies is at ‘amortised cost’ following the General ECL model.

FINANCIAL STATEMENTS

This requires the Parent Company to further consider:

(cid:129)
(cid:129)

Whether the loans are credit impaired; and
Whether the loans have suffered a signiﬁ cant increase in credit risk.

The Parent Company has followed the considerations required under IFRS 9 on the above, and noted that neither of the above have occurred
during the year ended 31 December 2019, and as such, the appropriate model is the 12-month ECL model. The implications of this have
been disclosed in note 18.

1.15 Financial liabilities

The Group classiﬁ es its ﬁ nancial liabilities under the deﬁ nitions provided in IFRS 9. All ﬁ nancial liabilities are recorded initially at fair value plus
or minus directly attributable transaction costs. Except where noted, such liabilities are then measured at amortised cost using the effective
interest method.

Financial liabilities measured at amortised cost include trade payables, intercompany trading balances (in relation to Company accounts),
bank loans and accruals. All ﬁ nancial liabilities are recognised in the statement of ﬁ nancial position when the Group becomes a party to the
contractual provision of the instrument.

Unless otherwise indicated, the carrying values of the Group’s ﬁ nancial liabilities measured at amortised cost represents a reasonable
approximation of their fair values.

1.16 Convertible loan notes

The proceeds received on issue of the Group’s convertible loan note are allocated into their liability and equity components. The amount
initially attributed to the debt component equals the discounted cash ﬂ ows using a market rate of interest that would be payable on a
similar debt instrument that does not include an option to convert. Subsequently, the debt component is accounted for as a ﬁ nancial liability
measured at amortised cost until extinguished on conversion or maturity of the loan note. The remainder of the proceeds is allocated to the
conversion option and is recognised in the ‘Convertible loan note reserve’ within Shareholders’ equity, net of income tax effects.

1.17 Investments

Investments in subsidiary companies are included at cost in the accounts of the Company less any amount written off in respect of any
impairment in value.

1.18 Leases

Prior to 1 January 2019, the Group accounted for its leasing contracts under IAS 17 Leases. This meant that leases taken by the Group were
assessed individually as to whether they were ﬁ nance leases or operating leases. Leases were classiﬁ ed as ﬁ nance leases whenever the terms
of the lease transferred substantially all the risks and rewards of ownership to the lessee. All other leases were classiﬁ ed as operating leases.
Operating lease rental payments were recognised as an expense in the income statement on a straight-line basis over the lease term. The
beneﬁ t of lease incentives was spread over the term of the lease.

From 1 January 2019, the Group accounts for its leasing contracts under IFRS 16 Leases. The Group has applied the modiﬁ ed retrospective
approach on adoption of IFRS 16, with recognition of transitional adjustments on the date of initial application (being 1 January 2019) without
restatement of comparative ﬁ gures. The effect on the Group’s primary ﬁ nancial statements of the adoption of IFRS 16 is set out in note 23.

Under IFRS 16 a lease is deﬁ ned to be a contract or part of a contract that conveys a right to use an asset (the underlying asset) for a period of
time in exchange for consideration. The Group reviews relevant contracts for such arrangements, using the judgements set out in note 1.1 to
establish which contracts contain leases. The Group’s most signiﬁ cant leases are those of its ofﬁ ce space in the UK, US and Australia. These
leases usually have a ﬁ xed period, some with an ability to extend at the option of the Group. The Group also leases some Computer Equipment
on a ﬁ xed term basis. Lease terms are negotiated on an individual basis and contain a range of different terms and conditions. The lease
agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may
not be used as security for borrowing purposes. The Group acts only as lessee, not as lessor.

On the transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are
leases. It applied IFRS 16 only to contracts that were previously identiﬁ ed as leases. Contracts that were not identiﬁ ed as leases under IAS 17
and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the deﬁ nition of a lease under IFRS 16 was applied only to contracts
entered into or changed on or after 1 January 2019.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the
group. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present
value of:

(cid:129)
(cid:129)
(cid:129)

ﬁ xed payments (including in-substance ﬁ xed payments), less any lease incentives receivable;
the exercise price of a purchase option if the group is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reﬂ ects the Group exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the Group’s incremental borrowing rate, being the rate the Group would expect to pay to borrow the
funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and
conditions.

To determine the incremental borrowing rate, the Group:

(cid:129)

where possible, uses recent third-party ﬁ nancing as a starting point, adjusted to reﬂ ect changes in ﬁ nancing conditions since third party
ﬁ nancing was received; and
makes adjustments speciﬁ c to the lease, eg term, country, currency and security.

Lease payments are allocated between principal and ﬁ nance cost. The ﬁ nance cost is charged to proﬁ t or loss over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

(cid:129)
(cid:129)
(cid:129)
(cid:129)

the amount of the initial measurement of lease liability
any lease payments made at or before the commencement date less any lease incentives received
any initial direct costs, and
restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Payments
associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an
expense in proﬁ t or loss. Short-term leases are leases with a lease term of 12 months or less.

1.19 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 insigniﬁ cant risk of changes in value.

1.20 Equity

Equity comprises the following:

(cid:129)
(cid:129)

(cid:129)

(cid:129)
(cid:129)

‘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.
‘Convertible loan note reserve’ represents the equity element arising on the issue of a loan note with rights to an equity conversion.
‘Share option reserve’ represents equity-settled share-based employee and non-employee remuneration until such share options are
exercised.
‘Retained earnings’ represents retained proﬁ ts and losses.
‘Foreign exchange reserve’ represents translation differences arising on the consolidation of investments in overseas subsidiaries.

1.21 Foreign currency translation

The consolidated ﬁ nancial 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 functional currency at the rates of exchange ruling at
the statement of ﬁ nancial position date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All
differences are taken to proﬁ t and loss.

FINANCIAL STATEMENTS

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 ﬁ nancial 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.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in
the income statement.

1.22 Income taxes

Current income tax assets and liabilities comprise those obligations to ﬁ scal 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 ﬁ scal period and the country to which they relate.
Tax expense recognised in proﬁ t or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or
directly in equity.

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 ﬁ nancial 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 proﬁ t. 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
proﬁ ts will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are calculated at tax rates
that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the statement of
ﬁ nancial position date.

1.23 Deﬁ ned contribution pension scheme

The pension costs charged in proﬁ t or loss represent the contributions payable by the Group during the year.

1.24 Accounting standards

The following new standards, amendments or interpretations, effective for the ﬁ rst time for the ﬁ nancial year beginning on or after 1 January
2019 have had the following impact on the Group:

IFRS 16 Leases (IFRS 16)
IFRS 16 speciﬁ es how the Group will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model,
requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low
value. From 1 January 2019 the Group recognised an asset reﬂ ecting the right of use leased asset for the Company’s two property leases and
an equipment lease, and a lease liability reﬂ ecting the obligation to make lease payments. Both the asset and the liability have been recognised
on the balance sheet where previously they were off balance sheet. There was no impact on cash ﬂ ow but there was an impact on the Income
Statement as the operating lease payment included within administrative expenses was replaced with a depreciation charge on the leased asset
(included in administrative expenses) and an interest expense on the lease liability (included in ﬁ nancial cost). EBITDA also increased as both
interest cost and depreciation charge are excluded from the calculation. Note 23 outlines the effect of IFRS 16 on the ﬁ nancial statements.

The Group has also adopted the following amendments to standards, which have had no material impact on the Group’s results or ﬁ nancial
statement disclosure: IFRIC 23 ‘Uncertainty over Income Tax Treatments’

The following standards have been issued by the IASB and have been adopted by the EU but not adopted early by the Group:

Standard

Conceptual Framework and Amendments to References to the Conceptual Framework in IFRS Standards
Amendments to IFRS 3 Business Combinations
Amendments to IAS 1 and IAS 8: Deﬁ nition of Material
Interest Rate Benchmark Reform: amendments to IFRS 9, IAS 39 and IFRS 7
IFRS 17 - Insurance Contracts

Effective date

1 January 2020
1 January 2020
1 January 2020
1 January 2020
1 January 2020

The Directors are evaluating the impact that these standards will have on the ﬁ nancial statements of Group. It does not believe that the
amendments to IAS 1 will have a signiﬁ cant impact on the classiﬁ cation of its liabilities, as the conversion feature in its convertible debt
instruments is classiﬁ ed as an equity instrument and therefore, does not affect the classiﬁ cation of its convertible debt as a non-current liability.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

2. Reconciliation of adjusted proﬁ ts to consolidated statement of comprehensive income

Note

Adjusted
proﬁ ts
2019
£’000

8,027

(849)

7,178

(7,385)

(207)

(91)

(298)

268

(30)

(16)

(46)

Acquisition
related,
reorganisation
and other costs
2019*
£’000

(883)

2019
£’000

8,027

(849)

7,178

(8,268)

(1,090)

(91)

(883)

(1,181)

(812)

339

(842)

(16)

Acquisition
related
reorganisation
and other costs
2018*
£’000

(469)

(380)

2018
£’000

8,692

(1,054)

7,638

(8,052)

(414)

(38)

(451)

191

(260)

(30)

Adjusted
proﬁ ts
2018
£’000

8,692

(1,054)

7,638

(7,583)

(38)

102

120

(30)

(812)

(858)

(380)

(290)

(0.15)p

(4.28)p

0.61p

(1.32)p

Revenue

Cost of sales

Gross proﬁ t

Administrative expenses

Operating proﬁ t/(loss)

Financial income

Financial cost

Proﬁ t/(loss) before tax

Tax income

Proﬁ t/(loss) for the year

Other comprehensive loss net of tax:

Currency translation differences

Total comprehensive income/(loss)
for the year net of tax

Earnings per share

Basic

Diluted

* See note 5

FINANCIAL STATEMENTS

3. Segment reporting
During the Year, the Board principally monitored the Group’s operations in terms of results of the three divisions, Dillistone Systems, Voyager
Software and GatedTalent. Segment results reﬂ ect management charges made or received.

Divisional segments
For the year ended 31 December 2019

Segment revenue

Segment EBITDA pre exceptional

Depreciation and amortisation expense

Segment result before reorganisation and other costs

Reorganisation and other costs

Segment result

Acquisition related amortisation

Operating proﬁ t/(loss)

Financial income

Loan interest/lease interest

Loss before tax

Income tax income

Loss for the year

Dillistone
£’000

3,895

1,021

(747)

274

(180)

(1)

Voyager
£’000

3,795

691

(553)

138

(172)

(34)

(35)

GatedTalent
£’000

337

(295)

(189)

(484)

1,427

943

–

943

Central
£’000

–

(135)

(1,653)

(1,788)

(305)

(2,093)

(55)

Total
£’000

8,027

1,282

(1,489)

(207)

(578)

(785)

(305)

(1,090)

(91)

(1,181)

339

(842)

Additions of non-current assets

446

1283

191

1,920

Divisional segments
For the year ended 31 December 2018

Segment revenue

Segment EBITDA

Depreciation and amortisation expense

Segment result

Acquisition related amortisation

Operating proﬁ t/(loss)

Financial income

Loan interest

Loss before tax

Income tax income

Loss for the year

Dillistone
£’000

4,195

723

(644)

Voyager
£’000

4,429

1,003

(475)

528

GatedTalent
£’000

Central
£’000

(485)

(127)

(612)

(469)

(409)

(38)

Total
£’000

8,692

1,301

(1,246)

(469)

(414)

(38)

(451)

191

(260)

Additions of non-current assets

567

536

434

1,537

As the business was reorganised into one trading CGU and central costs on 31 December 2019, it is not possible to allocate assets and
liabilities to the divisional units as at that date.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

Products and services

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

Revenue

Recurring income

Non-recurring income

Third party revenues

2019
£’000

6,593

1,160

274

8,027

2018
£’000

7,154

1,169

369

8,692

See note 1.4 on the revenue recognition policy under IFRS 15 and the distinction on timing of revenue recognition. In the analysis above
‘Recurring income’ represents all income recognised over time, whereas ‘Non-recurring income’ and ‘Third party revenues’ represent all
income recognised at a point in time.

Recurring income includes all support services, SaaS and hosting income and revenue on perpetual licenses with mandatory support
contracts deferred under IFRS 15. Non-recurring income includes sales of new licenses which do not require a support contract, and
income derived from installing licences 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 in 2019 or 2018.

During the year, the Group streamlined its corporate structures and operations to achieve efﬁ ciencies across the business. This resulted
in the ﬁ ve UK businesses being combined into one trading entity subsequently renamed Ikiru People Limited. A similar reorganisation has
occurred in Australia combining our two companies into one and renamed as Ikiru People Pty Limited. These changes came into effect on
31 December 2019. The reorganisation has brought all of the businesses together into effectively one trading division with a focus more on the
products we sell than on divisional structures. Accordingly, for 2020 onwards, the group will only report one trading segment.

4. Geographical analysis
The following table provides an analysis of the Group’s revenue by geographic market. The Board does not review the business from a
geographical performance viewpoint and this analysis is provided for information only.

Revenue

Europe

Australia

Non-current assets by geographical location

Australia

2019
£’000

5,700

928

1,034

365

8,027

2019
£’000

8,445

2018
£’000

6,188

1,007

1,118

379

8,692

2018
£’000

8,274

8,457

8,282

FINANCIAL STATEMENTS

2019
£’000

578

305

883

2018
£’000

469

5. Acquisition related and other one-off items

Included within administrative expenses:

Reorganisation and other costs

Amortisation of acquisition intangibles

Reorganisation and other costs include severance payments, loss of ofﬁ ce payments, duplication running costs and lease terminations costs.

6. Operating loss

Operating loss is stated after charging:

Depreciation on property, plant and equipment

Depreciation on Right to use assets

Amortisation

Operating lease rentals – land and buildings

Expenses relating to short-term leases

Money purchase pension contributions

Fees receivable by the Group auditors:

Audit of ﬁ nancial statements

Other services:

Audit of accounts of subsidiaries of the Company

Taxation compliance services

Tax advisory services

Other services

7. Employees
The average number of employees was:

Operations

Management

Total Employee numbers

2019
£’000

118

2018
£’000

106

1,591

1,608

104

399

100

229

359

2019
number

110

2018
number

108

120

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

Their aggregate remuneration including Directors’ remuneration comprised:

Wages and salaries

Social security costs

Pension costs

Share based payments

LTIP share based

LTIP non share based

2019
£’000

4,843

443

399

2018
£’000

5,139

542

359

(7)

(10)

5,701

6,035

The aggregate remuneration includes salary cost totalling £1,021,000 (2018: £1,253,000) that has been capitalised in intangible assets.

Key management of the Group are the Directors and the divisional directors. Remuneration of key management was as follows:

Wages and salaries

Social security costs

Pension costs

Share based payments charged

LTIP share based

LTIP non share based

2019
£’000

1,080

125

107

2018
£’000

922

115

100

(7)

(10)

1,320

1,122

The Company’s only employees are the Directors. Details of Directors’ emoluments, share options and pension entitlements are given in the
Report to the Shareholders on Directors’ Remuneration on pages 20 to 22.

8. Financial income and cost

Interest receivable

Finance cost on bank overdraft

Finance cost on bank loan

Finance cost on convertible loan

Finance cost on lease liabilities

Unwinding of discount on convertible loan

2019
£’000

(4)

(12)

(33)

(37)

(5)

(91)

2018
£’000

(1)

(33)

(4)

(37)

FINANCIAL STATEMENTS

2019
£’000

(50)

(140)

(190)

(67)

(24)

(58)

(149)

(339)

2018
£’000

(165)

(7)

(172)

(89)

(19)

(191)

(1,181)

19.00%

(224)

(451)

19.00%

(86)

108

(129)

(164)

(339)

(3)

(148)

(25)

(7)

(1)

(191)

9. Tax income

Current tax

Prior year adjustment – current tax

Total current tax

Deferred tax

Prior year adjustment – deferred tax

Deferred tax re acquisition intangibles

Total deferred tax

Tax (income) for the year

Factors affecting the tax credit for the year

Loss before tax

UK rate of taxation

Loss before tax multiplied by the UK rate of taxation

Effects of:

Overseas tax rates

Impact of deferred tax not provided

Enhanced R&D relief

Disallowed expenses

IFRS 15 impact

Rate differences re current tax and deferred tax

Rate difference between CT rate and rate of R&D repayment

Prior year adjustments

Tax (income)

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

Deferred tax liability provided in the ﬁ nancial statements is as follows:

Internally generated intangible and ﬁ xed assets

Acquisition intangibles

Internally generated intangible and ﬁ xed assets

IFRS 15

Acquisition intangibles

Group

Movement
£’000

(91)

(58)

(149)

Group

Movement
£’000

(90)

160

(89)

(19)

2019
£’000

160

180

340

2018
£’000

251

238

489

2018
£’000

251

238

489

2017
£’000

341

(160)

327

508

Company

2019
£’000

2018
£’000

2017
£’000

The UK corporation tax rate for the year is 19.00%. Deferred tax is provided in relation to the UK at a rate of 17%. The tax credit is impacted
by the R&D tax credits available to the UK business. It has also been assumed that where there are tax losses arising as a result of R&D
tax credits they will be surrendered for a tax repayment at the HMRC stated rate of 14.5%. The Group has gross tax losses of £459,000
(2018: £154,000) for which no deferred tax asset has been recognised as the timing of their utilisation is uncertain.

Factors that may affect future tax charges
Changes to the UK corporation tax rates were substantively enacted as part of the Finance Act 2016 (on 15 September 2016), which included
a reduction to the main rate of corporation tax to 17% from 1 April 2020.

As the changes have been substantively enacted at the reporting date, their effects are included within these ﬁ nancial statements. Accordingly,
deferred tax balances have been calculated using a rate of 17%. The Chancellor’s Spring Budget on 11 March 2020 announced that the UK
corporation tax rate is to remain at 19% effective from 1 April 2020. This was enacted on 11 March 2020. The deferred tax balances have not
been updated to reﬂ ect this.

10. Earnings per share

2019
Using adjusted
proﬁ t

2018
Using adjusted
proﬁ t

2019

2018

(Loss)/proﬁ t attributable to ordinary shareholders (note 2)

£(30,000)

£(842,000)

£120,000

£(260,000)

Weighted average number of shares

Basic earnings/(loss) per share

19,668,021

(0.15) pence

(4.28) pence

0.61 pence

(1.32) pence

Weighted average number of shares after dilution

19,668,021

19,797,067

19,668,021

Fully diluted earnings/(loss) per share

(0.15) pence

(4.28) pence

0.61 pence

(1.32) pence

Reconciliation of basic to diluted average number of shares:

Weighted average number of shares (basic)

Effect of dilutive potential ordinary shares – employee share plans

Weighted average number of shares after dilution

2019

2018

19,668,021

129,046

19,668,021

19,797,067

There are 1,970,005 (2018: 919,848) share options not included in the above calculations, as they are underwater or have not yet vested.

The impact of the convertible loan notes in the period is not dilutive and therefore does not impact the calculation of the fully diluted earnings
per share.

FINANCIAL STATEMENTS

11. Proﬁ t for the ﬁ nancial year
As permitted by section 408 of the Companies Act 2006, the parent company’s income statement has not been included in these ﬁ nancial
statements. The loss for the ﬁ nancial year for the parent Company was £(1,843,000) (2018: proﬁ t £1,338,000) and has been approved by the
Directors.

12. Goodwill

Group

Cost

At 1 January 2018

Additions

At 31 December 2018

Additions

At 31 December 2019

Carrying amount

At 31 December 2019

At 31 December 2018

Goodwill
£’000

3,415

At the year end date, an impairment test has been undertaken by comparing the recoverable amount of the cash generating units listed below
(CGU) to which the goodwill has been allocated, against the carrying value of those CGUs. The recoverable amount of the cash generating unit
is based on value-in-use calculations. At the year end the businesses were amalgamated, and operations have been merged across CGUs.
The focus going forward will be on products and the revenue generated by each less the direct cost of sales of each product. For the purposes
of the 2019 accounts the cash ﬂ ow projections for the combined business have been allocated based on an estimate of gross margin less
gross salary costs for each CGU covering a four year period and a calculation of the terminal value.

The key assumptions used for value-in-use calculations are those regarding growth rates 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 speciﬁ c to the cash generating units and
rates used by comparable companies. The pre-tax discount rate used to calculate value-in-use is 15.5% (2018: 15.5%). Costs are reviewed
and increased for inﬂ ation and other cost pressures. The long term growth rate used for the terminal value calculation was 2.0% (2018: 2.5%)
for all CGUs. The allocation of goodwill across the CGUs is as follows:

Dillistone Division

Voyager and FCP consolidated

ISV

Opening
£’000

494

2,251

670

3,415

Addition
£’000

Impairment
£’000

Closing
£’000

494

2,251

670

3,415

Sensitivities
A decrease in the forecast future cashﬂ ow by 15% or an increase in the discount rate to 17.5% would reduce the headroom (£0.610m) to £nil
for the Voyager and FCP consolidated CGU. For ISV the discount rate would need to increase to 17.5% or future forecast cash ﬂ ows would
need to fall by 11% to reduce the headroom (£0.215m) to £nil. Cashﬂ ows in respect of Dillistone CGU would need to reduce by over 61% or
the discount rate to increase to over 36% to reduce the headroom to £nil.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

13. Other intangible assets

Group

Cost

At 1 January 2018

Additions

At 31 December 2018

Additions

At 31 December 2019

Amortisation

At 1 January 2018

Charge for the year

At 31 December 2018

Charge for the year

At 31 December 2019

Carrying amount

At 31 December 2019

At 31 December 2018

Acquisition intangibles can be summarised as follows:

NBV

At 1 January 2019

Amortisation

At 31 December 2019

Development
costs
£’000

Purchased
software
£’000

Acquisition
intangibles
£’000

7,970

1,446

9,416

1,067

10,483

5,045

1,128

6,173

1,255

7,428

3,055

3,243

127

162

166

119

146

4,172

2,338

469

2,807

305

3,112

1,060

1,365

Developed
technology
£’000

Brand and IP
£’000

Contractual and
non-contractual
customer
relationships
£’000

123

(41)

440

(41)

399

702

(210)

492

Brand
£’000

100

(13)

Total
£’000

12,269

1,481

13,750

1,071

14,821

7,388

1,608

8,996

1,591

10,587

4,234

4,754

Total
£’000

1,365

(305)

1,060

Intangible assets under development are reviewed each reporting period for impairment prior to amortisation. Forecasts of future revenue are
prepared and these are discounted and compared to the carrying value. Sensitivities are carried out including applying differing growth and
attrition rates as well as alternative discount rates.

Purchased software is reviewed for impairment based on its continued use within the business.

The Company has no intangible assets.

FINANCIAL STATEMENTS

Land and
buildings
£’000

Ofﬁ ce &
computer
equipment
£’000

Fixtures and
ﬁ ttings
£’000

186

(186)

120

157

(186)

861

920

(2)

(9)

927

774

841

(2)

(7)

882

165

166

(1)

176

154

161

(-)

167

Total
£’000

1,212

1,272

(3)

(195)

1,103

1,048

106

1,159

(2)

(193)

1,049

113

14. Property, plant and equipment

Group

Cost

At 1 January 2018

Currency impact

Additions

At 31 December 2018

Currency impact

Additions

Disposals

At 31 December 2019

Depreciation

At 1 January 2018

Currency impact

Charge for the year

At 31 December 2018

Currency impact

Charge for the year

Eliminated on disposal

At 31 December 2019

Carrying amount

At 31 December 2019

At 31 December 2018

The Company has no property, plant and equipment.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

15. Right of use assets

Group

Cost

Reclassify at 1 January 2019

Additions

At 31 December 2019

Depreciation

Reclassify at 1 January 2019

Charge for the year

At 31 December 2019

Carrying amount

At 31 December 2019

At 31 December 2018

16. Non-current asset investments

Company

Cost

At 1 January 2018

Impairment

At 31 December 2018

Impairment

At 31 December 2019

Land and
buildings
£’000

Ofﬁ ce &
computer
equipment
£’000

791

842

114

728

Total
£’000

821

872

118

754

Investments in
subsidiaries
£’000

7,602

(451)

7,151

(-)

7,151

Investments are reviewed when evidence exists that there may be a loss in value or in certain circumstances where dividends are paid by
the subsidiary. In 2018, following the loss of a major contract the Voyager/FCP investment has been reviewed as has the ISV investment
following a dividend payment. The recoverable amount of the cash generating unit is based on value-in-use calculations. At the year end the
businesses were amalgamated, and operations have been merged The focus going forward will be on products and the revenue generated by
each less the direct cost of sales of each product. In view of the segment losses in 2019 an impairment review was carried out. The cash ﬂ ow
projections for the combined business have been allocated based on an estimate of gross margin less gross salary costs for each investment.
These calculations use cash ﬂ ow projections covering a four year period and a calculation of the terminal value, for the period following these
formal projections.

The key assumptions used in these calculations are those regarding growth rates, increases in costs and discount rates. The pre-tax discount
rate used was 15.5% (2018: 15.5%). Costs are reviewed and increased for inﬂ ation and other cost pressures. The long term growth rate used
for the terminal value calculation was 2.0% (2018: 2.5%).

The calculations for Voyager/FCP showed the discount rate would need to be increased by over 20% or the cashﬂ ow reduced by 24% before
an impairment became necessary. An impairment for ISV of £0.1m would be required if the discount rate increased by 1% and if cashﬂ ows
fell 1% then an impairment of £0.07m would be required. No impairment loss was required for Dillistone and cashﬂ ows would need to reduce
by over 64% before impairment was considered necessary

FINANCIAL STATEMENTS

The Company has the following subsidiary undertakings:

Name

Principal activity

Holding of
ordinary shares

Registered

Ikiru People Limited (previously Dillistone
Systems Limited)

Ikiru People Pty Limited (previously
Dillistone Systems (Australia) Pty Limited

Ikiru People Inc (previously Dillistone
Systems (US) Inc)

Sale of computer software and related support services

100% England & Wales

Sale of computer software and related support services

100%

Australia

Sale of computer software and related support services

100%

USA

FCP Internet Limited

Provision of software services and related consultancy services
(dormant from 31 December 2019)

FCP Internet Holdings Limited

Dormant holding company

GatedTalent Limited

ISV Software Limited

Provision of software services (dormant from
31 December 2019)

Provision of software services and related consultancy services
(dormant from 31 December 2019)

Woodcote Software Limited

Dormant company

Voyager Software Limited

Voyager Software (Australia) Pty Limited

Sale of computer software and related support services
(dormant from 31 December 2019)

The registered addresses of related undertakings are as follows:

100% England & Wales

100%

Australia

Company

Dillistone Group Plc

Ikiru People Limited

Registered Address

12 Cedarwood, Crockford Lane, Chineham Business Park, Basingstoke, RG24 8WD

Ikiru People Pty Limited

Suite 3, Level 3, 245 Castlereagh Street, Sydney, NSW 2000, Australia

Ikiru People Inc

FCP Internet Limited

221 River Street, 9th Floor, Suite 9126, Hoboken, NJ 07030, USA

12 Cedarwood, Crockford Lane, Chineham Business Park, Basingstoke, RG24 8WD

FCP Internet Holdings Limited

12 Cedarwood, Crockford Lane, Chineham Business Park, Basingstoke, RG24 8WD

GatedTalent Limited

ISV Software Limited

Woodcote Software Limited

Voyager Software Limited

12 Cedarwood, Crockford Lane, Chineham Business Park, Basingstoke, RG24 8WD

Voyager Software (Australia) Pty Limited

Suite 3, Level 3, 245 Castlereagh Street, Sydney, NSW 2000, Australia

17. Inventories

Licences for resale

Group
Group

2019
£’000

2018
£’000

Company
Company

2019
£’000

2018
£’000

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

18. Trade and other receivables

Trade receivables – net

Group receivables

Other current assets

Prepayments and accrued income

Group
Group

Company
Company

2019
£’000

1,000

203

1,222

2018
£’000

1,171

316

1,522

2019
£’000

913

928

2018
£’000

1,253

1,289

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 expected credit losses (ECLs) provision is shown below.

Trade receivables are recorded and measured in accordance with note 1.14 above. The Group applies the IFRS 9 simpliﬁ ed approach to
measuring ECLs using a lifetime expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis,
trade receivables are grouped based on similar credit risk and aging.

The expected loss rates are based on the Group’s historical credit losses experienced over the three-year period prior to the period end. The
historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group’s customers.
The Group has identiﬁ ed gross domestic product (GDP) as the key macroeconomic factor for each geographical region where the Group
operates. It has also considered the impact of the UK’s exit from the European Union on the recoverability of its trade receivables. This has
resulted in a range of potential loss rates and provision levels, as set out below. See note 1.1 and 1.14 for further details on the Group’s
approach to calculating ECLs and the material estimates and judgements involved.

Trade Receivables

Gross Carrying Amount

Loss Allowance Provision

Expected Loss Rate

The movement in the provision for loss allowances is as follows:

Current
£’000

From 1 to 30
days past due
£’000

From 31 to 60
days past due
£’000

Greater than 60
days past due
£’000

679

248

17%

138

26%

Balance as at 1 January 2018

Unused amounts reversed

Amounts written off as uncollectible

Balance as at 31 December 2018

Increase during the year

Balance as at 31 December 2019

Total
£’000

1,082

£’000

148

(2)

(75)

FINANCIAL STATEMENTS

The ageing proﬁ le of trade receivables as at the year end is as follows:

Current

Past due date:

Up to 30 days overdue

More than 30 days overdue

Total

2019
£’000

679

248

155

2018
£’000

1,064

116

1,082

1,242

The Company’s group receivables, being amounts due from wholly-owned subsidiaries, are repayable on demand. Additionally, all companies
are covered by a group-wide guarantee.

The Parent Company has determined that Credit risk for receivables from Group Company’s has not increased signiﬁ cantly since their initial
recognition. The Parent Company have considered a range of scenarios relating to amounts to be received from amounts receivable from
Group Company’s, and the likelihood of those outcomes. The impact of these scenarios using the 12-month ECL model disclosed in note 1.14
was not material to the Company.

19. Trade and other payables

Current liabilities

Trade payables

Group payables

Deferred income

Accruals

Non-current liabilities

Deferred Income

Cash settled LTIP

Group
Group

2019
£’000

661

2,430

886

3,977

2018
£’000

776

2,887

707

4,370

Company
Company

2019
£’000

107

1,519

297

2018
£’000

122

824

145

1,923

1,091

£’000

443

688

690

The deferred income in 2019 and 2018 represents the entire balance of contract liabilities from contracts with customers. The movement on
this balance is recognised as revenue in the reporting period.

20. Cash and cash equivalents

Cash balances available on demand

Group
Group

2019
£’000

690

2018
£’000

725

Company
Company

2019
£’000

2018
£’000

The balances are shown gross before netting off as allowed by the Group’s bank overdraft facility. A negative balance on UK accounts was
£0.288m which would give a net cash balance of £0.402m.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

21. Borrowings

Current bank borrowings

Current loan note borrowings

Non current bank borrowings

Non current loan note borrowings

Total borrowings

Group
Group

Company
Company

2019
£’000

534

128

395

1,074

2018
£’000

390

404

2019
£’000

534

128

395

1,074

2018
£’000

390

419

The Directors consider that the fair value of borrowings approximates to the carrying value except for the convertible loan note.

In June 2019 the Company took out a loan from the Bank of £500,000 repayable over 2 years carrying an interest coupon of 3.25% over
base. One of the conditions of the loan was that the loan notes repayment would be deferred until the bank borrowings were repaid.

The Group has an overdraft facility in the UK of £200,000 which was unused at the year-end (2018: unused). Under the banking
arrangements all UK accounts are netted, however for the purposes of the accounts the balances are shown gross before netting off.

Reconciliation of liabilities arising from
ﬁ nancing activities

2018
£’000

Cashﬂ ows
£’000

Lease
adjustments –
see note 23
£’000

Non cash
changes –
interest
adjustment
£’000

Non cash
Movement
between current
and non current
£’000

Closing 2019
£’000

Non current borrowings

Bank Loan

Convertible loan note

Lease liabilities

Total non current borrowings

Current borrowings

Banking facility

Bank Loan

Convertible loan note

Lease liabilities

Total current borrowings

Non current borrowings

Convertible loan note

390

500

288

(126)

(30)

(85)

871

(372)

(130)

(502)

372

130

502

128

395

741

1,264

288

246

633

2017
£’000

Cashﬂ ows
£’000

Non cash
changes –
equity
adjustment
£’000

Closing 2018
£’000

386

390

FINANCIAL STATEMENTS

2019
£’000

983

2018
£’000

983

2019
Number

2018
Number

19,668,021

22. Share capital

Allotted, called up and fully paid

Ordinary shares of 5p each

No share options were exercised in the period (2018: nil).

Shares issued and fully paid

Beginning of the year

Shares issued on exercise of options

Shares issued and fully paid

23. Lease arrangements
From 1 January 2019, the Group accounts for its leases under IFRS 16 as set out in Note 1, resulting in the following amounts being recorded:

Impacts on ﬁ nancial statements:

The effect of initially applying this standard is as follows:

(I)

recognition of a right of use asset and depreciation of this asset;

(II)

removal of rent prepayment/accrual and charge to statement of proﬁ t or loss; and

(III)

recognition of lease liability non-current and current and interest on this liability.

The following table summarises the impact of transition to IFRS 16 on retained earnings at 1 January 2019.

Right of use asset

Trade and other payables adjust provision for dilapidations

Loans and borrowings – non-current: lease liability due in more than one year

Loans and borrowings – current: lease liability due in less than one year

Note

Impact of
adopting
IFRS 16 at
1 January 2019
£’000

(5)

(6)

(40)
-

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

Amounts recognised in the Consolidated Statement of Financial Position

Right-of-use assets

Balance at 1 January 2019

Additions

Depreciation charge of right-of-use assets

Lease Liabilities

Current

Non-current

Amounts recognised in the Statement of Comprehensive Income

Depreciation charge of right-of-use assets

Interest expense (included in ﬁ nance cost)

Expense relating to short-term leases

Total Cash outﬂ ow for Leases in 2019 was:

Short term leases

Leases under IFRS 16

Total cash outﬂ ow in respect of leases

Land and
Buildings
£’000

791

(114)
728

Computer
Equipment
£’000

(4)
26

2019
£’000

118

141

2019
£’000

136

185

Total
£’000

821

(118)
754

2019
£’000

741
82 3

2018
£’000

The Group has an option to extend the lease of its Basingstoke ofﬁ ce, which it has assumed it will do based on the considerations set out in
Note 1.

The maturity of undiscounted lease liabilities is as follows:

Less than one year

One to ﬁ ve years

More than ﬁ ve years

2019
£’000

125

554

408

1,087

2018
£’000

FINANCIAL STATEMENTS

Reconciliation of operating lease commitments in 2018 to recognised lease liabilities

Minimum operating lease commitment at 31 December 2018

Less: short term leases not recognised under IFRS 16

Undiscounted lease payments

Less: effect of discounting as at the date of initial application

Lease liabilities recognised on 1 January 2019

£’000

182

(121)

(15)

As set out in Note 1, the Group has applied the modiﬁ ed retrospective approach with recognition of transitional adjustments on the date of
initial application, being 1 January 2019, without restatement of comparative ﬁ gures.

On adoption of IFRS 16, the Group recognised right-of-use assets and lease liabilities in relation to leases of ofﬁ ce space. The Group has
applied the practical expedient not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining
as of the date of initial application, as permitted by the standard.

Lease liabilities were measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing
rate (being the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions).
The Group applied the practical expedient permitted by the standard to apply a similar discount rate to a portfolio of leases with similar
characteristics. The rate applied was 5%. The right-of-use assets were recognised by reference to the measurement of the lease liability on
that date, including estimates for items such as dilapidation cost obligations under the lease, and amortised on a straight-line basis.

The effects of adopting IFRS 16 for the period ending 31 December 2019 are as follows:

Impact on the Consolidated Statement of Comprehensive Income

Revenue

Cost of sales

Gross proﬁ t

Administrative expenses

(Loss) from operations

Finance expense

(Loss) before tax

Tax income

(Loss) for the year

Currency translation differences

Total comprehensive income for the year

As reported
2019
£’000

IFRS 16
Adjustments
2019
£’000

8,027

(849)

7,178

(8,268)

(1,090)

(91)

(1,181)

339

(842)

(16)

( 858)

(16)

Without
adoption of
IFRS 16
2019
£’000

8,027

(849)

7,178

(8,284)

(1,106)

(54)

(1,160)

339

(821)

(16)

( 837)

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

Impact on the Consolidated Statement of Financial Position:

Non-current assets

Goodwill

Other intangible assets

Property, plant and equipment

Right-of-use assets

Current assets

Trade and other receivables

Current tax receivable

Cash and cash equivalents

Total current assets

Total assets

Liabilities

Current

Trade and other payables

Lease liabilities

Borrowings

Total current liabilities

Non-current liabilities

Trade and other payables

Lease liabilities

Borrowings

Deferred tax liabilities

Total non-current liabilities

Total liabilities

Equity

Share capital

Share premium

Merger reserve

Convertible loan reserve

Retained earnings

Share option reserve

Translation reserve

Total equity

Total Liabilities and Equity

As reported
2019
£’000

IFRS 16
Adjustments
2019
£’000

3,415

4,234

754

8,457

1,222

293

690

2,205

10,662

(754)

Without
adoption of
IFRS 16
2019
£’000

3,415

4,234

7,703

1,222

293

690

2,205

9,908

3,977

551

4,025

(82)

551

4,610

(34)

4,576

443

741

523

340

2,047

6,657

983

1,631

365

871

4,005

10,662

(741)

(775)

(754)

443

523

340

1,306

5,882

983

1,631

365

892

4,026

9,908

FINANCIAL STATEMENTS

As reported
2019
£’000

IFRS 16
Adjustments
2019
£’000

Without
adoption of
IFRS 16
2019
£’000

(1,181)

(1,160)

1,794

(33)

685

282

(603)

167

534

(29)

(1,070)

(1,097)

(83)

(49)

(126)

288

500

530

(33)

(37)

(118)

(134)

(86)

1,676

(33)

551

282

(555)

167

448

(29)

(1,070)

(1,097)

(46)

(126)

288

500

616

(33)

Impact on the Consolidated Statement of Cashﬂ ows:

Operating Activities

(Loss) before tax

Adjustment for

Financial income

Financial cost

Depreciation and amortisation

Share option (gain)/expense

Other including foreign exchange adjustments arising from operations

Operating cash ﬂ ows before movements in working capital

(Decrease)/increase in receivables

Decrease in inventories

Increase/(decrease) in payables

Add taxation (paid)/repaid

Net cash generated from operating activities

Investing Activities

Interest received

Purchases of property plant and equipment

Sale of ﬁ xed assets

Investment in development costs

Net cash used in investing activities

Financing Activities

Interest paid

Lease payments

Bank Loan less repayments

Utilisation of banking facility

Proceeds from bank loan

Net cash used by ﬁ nancing activities

Net change in cash and cash equivalents

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

For comparative purposes, as at 31 December 2018, and as accounted for under IAS 17 per Note 1, the Group had future total commitments
under non-cancellable operating leases as follows:

Commitments payable, being due:

Within one year

Between two and ﬁ ve years

24. Share options

Share based payments

2018
£’000

182

172

There are three share option schemes in operation: an Enterprise Management Incentive Scheme (the ‘EMI Scheme’) which complies with
the requirements of HMRC; a scheme which has not been approved by HMRC (the ‘Unapproved Scheme’) and a Share Save Scheme (“SAYE
Scheme”). The terms and conditions of the EMI and Unapproved schemes are the same. 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, which would normally be three years after grant. Performance conditions are associated with the LTIP options.
The Company launched its ﬁ rst SAYE scheme in 2016 with a second issue in 2017. Under this scheme discounts of up to 20% can be
offered. The scheme has a linked savings contract of 3 years.

Expected volatility takes into account historic volatility of the share price and its current trend.

There were two grants of options in 2019. The weighted average share price of all grants in 2019 was 33p. 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

3 July 2019 LTIP/EMI

3 July 2019 EMI

Share
price on
issue
date

33p

Number
granted

415,000

165,000

Exercise
price

Expected
volatility

Vesting
period

Leaver
rate over
vesting
period

Risk-free
rate

33p

35%

3.3 years

10%

1.00%

35%

3.3 years

20%

1.00%

Details of the number of share options and the weighted average exercise price (‘WAEP’) outstanding during the year are as follows:

Outstanding at the beginning of year

Granted during the year

Exercised during the year

Forfeited during the year

Outstanding at the end of the year

Exercisable at the year end

2019

2018
2018

No of options

WAEP

No of options

1,975,561

580,000

(585,556)

1,970,005

408,7720

69.40

33.00

77.32

56.33

86.81

2,367,445

(391,884)

1,975,561

403,000

Expected
dividend
yield

2.0%

WAEP

74.75

101.73

69.40

88.15

The Company’s mid-market share price on 31 December 2019 was 24.5p. The average mid- market share price in 2019 was 34.47p.

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 expense charged takes into account the likelihood of performance
targets being met. The employee expense for the year was £14,000 (2018: £5,000).

FINANCIAL STATEMENTS

Share options remaining in the schemes are as follows:

Scheme type

EMI

Unapproved

EMI

Unapproved

EMI

Sharesave

EMI (LTIP)

EMI

Sharesave

EMI (LTIP)

EMI

Date of grant

Exercise from

Lapse date

21/09/2011

21/09/2014

20/09/2021

21/09/2011

21/09/2014

20/09/2021

08/07/2013

08/07/2016

07/07/2023

25/11/2013

25/11/2016

24/11/2023

08/12/2014

08/12/2017

07/12/2024

Options
remaining

76,500

15,000

17,000

10,000

08/12/2014

08/12/2017

07/12/2024

126,000

03/02/2015

03/02/2018

02/02/2025

14/10/2016

01/11/2019

30/04/2020

58,500

95,772

09/11/2017

09/11/2020

08/11/2027

814,000

09/11/2017

09/11/2020

08/11/2027

09/11/2017

01/12/2020

31/5/2021

03/07/2019

03/07/2022

02/07/2029

03/07/2019

03/07/2022

02/07/2029

70,000

97,233

415,000

165,000

1,970,005

Exercise
price (p)

77.00

79.50

115.00

97.00

90.50

77.80

58.00

52.20

33.00

The weighted average remaining contractual life of options at 31 December 2019 was 7.03 years (2018: 6.9 years).

LTIP

LTIP awards under the long term incentive plan take the form of a cash bonus of up to one-third annual salary or the grant of share options,
with appropriate performance conditions in place. In 2019, the credit in respect of the LTIP schemes, which are share based and require
separate disclosure under IFRS 2, was (£5,000) (2018: £7,000).

25. Financial instruments
The Group uses various ﬁ nancial instruments; these include cash, bank deposits, bank loans and various items such as trade receivables and trade
payables that arise directly from its operations. The main purpose of these ﬁ nancial instruments is to provide ﬁ nance for the Group’s operations.

The Group’s ﬁ nance department maintains liquidity, manages relations with the Group’s bankers, identiﬁ es 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 ﬁ nancial risks to which it is exposed are outlined below.

(i)

Interest rate risk

The Group is exposed to interest rate risk on its ﬂ oating rate borrowings and its ﬁ nancial assets. The interest rate proﬁ le of the Group’s ﬁ nancial
assets at 31 December 2019 was:

At 31 December 2019

Trade and other receivables (current assets)

Cash and cash equivalents

Total

Group

Company

Group Non
interest bearing
ﬁ nancial assets
£’000

Floating rate
ﬁ nancial assets
£’000

Non interest
bearing
ﬁ nancial assets
£’000
£’000

Company
Floating rate
ﬁ nancial assets
£’000

1,019

690

913

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

The interest rate proﬁ le of the Group’s ﬁ nancial assets at 31 December 2018 was:

At 31 December 2018

Trade and other receivables (current assets)

Cash and cash equivalents

Total

Group

Company

Non interest
bearing
ﬁ nancial assets
£’000

Floating rate
ﬁ nancial assets
£’000

Non interest
bearing
ﬁ nancial assets
£’000
£’000

Floating rate
ﬁ nancial assets
£’000

1,205

725

1,253

The table below shows the Group’s ﬁ nancial liabilities split by those bearing interest at ﬂ oating rates or ﬁ xed rates and those that are non
interest bearing.

At 31 December 2019

Group

Company

Trade and other payables (current liabilities)

Trade and other payables (non-current liabilities)

Borrowings – convertible loan note

Borrowings – bank

Non interest
bearing
ﬁ nancial
liabilities
£’000

1,200

Non interest
bearing
ﬁ nancial
liabilities
£’000
£’000

1,902

Fixed rate
ﬁ nancial
liabilities
£’000

417

662

Fixed rate
ﬁ nancial
liabilities
£’000

417

662

1,200

1,079

1,902

1,079

At 31 December 2018

Group

Company

Trade and other payables (current liabilities)

Trade and other payables (non-current liabilities)

Borrowings – convertible loan note

Borrowings – bank

Non interest
bearing
ﬁ nancial
liabilities
£’000

1,126

1,128

Fixed rate
ﬁ nancial
liabilities
£’000

404

Non interest
bearing
ﬁ nancial
liabilities
£’000
£’000

1,068

1,070

Fixed rate
ﬁ nancial
liabilities
£’000

404

419

The bench marks for interest rates on ﬂ oating rate ﬁ nancial assets and ﬁ nancial liabilities are bank base rates for the currencies in which the
assets are held. Sensitivities of movements in interest rates have been considered by Directors and reasonably possible movements in interest
rates are not considered to have a material impact on future Group proﬁ ts or equity.

(ii) Credit risk

The Group’s principal ﬁ nancial assets are cash and cash equivalents and trade and other receivables. Credit risk is the risk of ﬁ nancial loss to
the Group if a customer or counterparty to a ﬁ nancial instrument fails to meet its contractual obligations and arises principally from the Group’s
receivables from customers and monies on deposit with ﬁ nancial institutions.

Trade receivables are adjusted for credit risk by applying the impairment methodology set out in IFRS 9 (see note 1.14). Provisions for loss
allowances arising from expected credit losses are booked against the carrying value of trade receivables (see note 1 8). Once the Group has
determined that there is no reasonable expectation of recovery, the relevant trade receivable balances are written off against the loss allowance
provision. Indicators that recovery cannot reasonably be expected include the conclusion of legal proceedings or 3rd-party debt collection
without full recovery.

FINANCIAL STATEMENTS

Historically, the cash collection proﬁ le has been very good. Debt ageing and collections are monitored on a regular basis and for new
customers deposits are usually required. Some trade receivables are past due as at the reporting date. The company bases its provisions on
trade receivable balances based on the expected credit loss model (‘ECL’) as required by IFRS. Information on ﬁ nancial assets past due are
included in note 1 8. Covid-19 is not expected to impact 2019 balances. The Group will consider the impact of Covid-19 as part of its credit
risk management procedures in 2020.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating
agencies. The Group has no signiﬁ cant concentration of credit risk. The Group’s maximum exposure to credit risk at the reporting date is
represented by the carrying value of ﬁ nancial assets, as follows:

Trade and other receivables (current assets)

Cash and cash equivalents

Total

Group
Group

Company
Company

2019
£’000

1,019

690

1,709

2018
£’000

1,205

725

1,930

2019
£’000

913

2018
£’000

1,253

The Company’s other receivables are primarily intercompany loans made to wholly-owned subsidiaries and supported by a group-wide
guarantee and repayable on demand. The Company has followed the considerations required under IFRS 9 on the above and as such, no
provision has been raised on these balances. See note 1 8.

(iii) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its ﬁ nancial obligations as they fall due. The Group’s approach to managing
liquidity is to ensure it has sufﬁ cient liquidity to meet its liabilities when due.

As at 31 December 2019, the Group and Company’s ﬁ nancial liabilities (excluding deferred income, payroll taxes, VAT and similar taxes) have
contractual cashﬂ ows as summarised below:

Group
At 31 December 2019

Trade and other payables (current liabilities)

Trade and other payables (non-current liabilities)

Borrowings

Bank facility

At 31 December 2018

Trade and other payables (current liabilities)

Trade and other payables (non-current liabilities)

Borrowings

Carrying amount
£’000

1,200

791

288

< 1 year
£’000

1,200

263

288

2,279

1,751

Carrying amount
£’000

1,126

400

< 1 year
£’000

1,126

1,528

1,126

1-2 years
£’000

2-5 years
£’000

528

1-2 years
£’000

2-5 years
£’000

400

402

The Group forecasts its cash requirements through its budget processes and looks to ensure that it has sufﬁ cient cash over the coming year to
meet liabilities as they fall due and over each subsequent annual period covered by the 3 year forecast. As such it considers the time bands
set out above the most appropriate representation of its liquidity risk proﬁ le.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

Company
At 31 December 2019

Trade and other payables (current liabilities)

Trade and other payables (non-current liabilities)

Borrowings

Bank overdraft

At 31 December 2018

Trade and other payables (current liabilities)

Trade and other payables (non-current liabilities)

Borrowings

Bank overdraft

Carrying amount
£’000

1,902

791

288

< 1 year
£’000

1,902

263

288

2,981

2,453

Carrying amount
£’000

1,068

400

< 1 year
£’000

1,068

1,485

1,083

1-2 years
£’000

2-5 years
£’000

528

1-2 years
£’000

2-5 years
£’000

400

402

The Group would normally expect that sufﬁ cient cash is generated in the operating cycle to meet contractual cash ﬂ ows as disclosed above.
In addition, the Group has signiﬁ cant cash balances as at the year end to minimise any liquidity risk.

(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.

The Group aims to manage foreign exchange risk at a local level by matching the currency in which revenue is generated and expenses are
incurred.

At the year end, the Group had assets totalling £291,000 and liabilities totalling £371,000 denominated in Euros (2018: assets totalling
£1,105,000 and liabilities totalling £695,000), assets totalling £996,000 and liabilities totalling £922,000 denominated in US Dollars
(2018: assets totalling £1,239,000 and liabilities totalling £1,187,000) and assets totalling £491,000 and liabilities totalling £550,000
denominated in Australian Dollars (2018: assets totalling £497,000 and liabilities totalling £473,000).

If each of the exchange rates strengthened by 5%, the impact on the statement of comprehensive income would be as follows:

Euros

US Dollars

Australian Dollars

Group
Group

2019
£’000

(1)

2018
£’000

(1)

At the year end, the Company had liabilities totalling £116,000 denominated in Euros (2018: liabilities totalling £116,000), assets totalling
£289,000 denominated in US Dollars (2018: assets totalling £288,000) and assets totalling £46,000 denominated in Australian Dollars
(2018: assets totalling £42,000).

FINANCIAL STATEMENTS

For the Company, a 5% increase in the value of each of the above currencies would have resulted in an impact on the income statement as follows:

Euros

US Dollars

Australian Dollars

Company
Company

2019
£’000

(6)

2018
£’000

(6)

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 beneﬁ ts 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, sell assets or take on bank
debt. The decision to take on some element of debt gives the Group additional ﬂ exibility in its capital structure and enables it to lower its cost
of capital.

The Group considers its capital to include share capital, share premium, merger reserve, translation reserve, convertible loan note reserve,
share option reserve, retained earnings and net cash. Net cash comprises borrowings less cash and cash equivalents.

Total borrowings

Less cash or cash equivalents

Net borrowings

Total equity

Total capital gearing ratio

NoteNote

2019
£’000

1,074

(690)

384

4,005

9.6%

2018
£’000

404

(725)

(321)

4,849

Summary of ﬁ nancial assets and liabilities by category
The carrying amounts of the ﬁ nancial assets and liabilities as recognised at the statement of ﬁ nancial position date of the years under review
may also be categorised as follows:

Loans and receivables

Cash and cash equivalents

Trade and other receivables

Financial liabilities held at amortised cost

Trade and other payables

Borrowings

Bank borrowings

Group
Group

2019
£’000

690

1,019

1,709

2018
£’000

725

1,205

1,930

Company
Company

2019
£’000

913

2018
£’000

1,253

1,200

1,128

1,902

1,070

412

662

404

412

662

404

2,274

1,532

2,976

1,489

DILLISTONE GROUP PLC Annual Report and Accounts 2019

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019
Continued

Financial assets and ﬁ nancial liabilities measured at fair value in the statement of ﬁ nancial position are grouped into three Levels of a fair value
hierarchy. The three Levels are deﬁ ned based on the observability of signiﬁ cant inputs to the measurement, as follows:

(cid:129) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

(cid:129) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

(cid:129) Level 3: unobservable inputs for the asset or liability.

The Group’s ﬁ nance team performs valuations of ﬁ nancial items for ﬁ nancial reporting purposes, including Level 3 fair values, in consultation
with third party valuation specialists for complex valuations. Valuation techniques are selected based on the characteristics of each instrument,
with the overall objective of maximising the use of market-based information. The ﬁ nance team reports directly to the Group Finance Director
and to the audit committee.

26. Subsequent events
Like most businesses worldwide the Group is having to deal with the impact of COVID-19, with its primary concern being for the safety and
wellbeing of its staff and their families. The Group has seen many of its clients shrink and with some clients closing. We have additionally
supported many clients through agreeing discounted periods and deferred terms. Accordingly, we will see a reduction in revenue in 2020.
However, the Group has acted quickly, taking advantage of various government schemes, including furloughing, and staff unanimously
supporting a temporary pay-cut, including all executive and non-executive directors. Currently it is not possible to give a reasonable estimate of
the impact on the results for 2020.

27. Control
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’.

28. Related party transactions

Group

The Directors received dividends paid by the Company of £nil (2018: £43,000).

Details of earnings of key management is included in note 7. Such remuneration includes a divisional director’s spouse who is employed as a
software engineer. The amounts outstanding at the year end due to key management was £7,000 (2018: £10,000) (excluding Employer’s NI)
and related to estimated bonus payments payable in relation to 2019.

The Directors and certain key management participated in the issue of convertible loan notes in 2017as follows:

Mike Love
Giles Fearnley
Jason Starr
Rory Howard
Julie Pomeroy
Alex James
Simon Warburton
Paul Mather

£250,000
£75,000
£24,250
£24,250
£10,000
£1,000
£8,000
£7,500

Company

The Company has a related party relationship with its subsidiaries, its Directors, and other employees of the Company with management
responsibility.

During the year the Company received a dividend of £nil from its subsidiary company Dillistone Systems (US) Inc (2018: £nil). At the year
end, Dillistone Systems (US) Inc owed £289,000 (2018: owed £282,000) to the Company.

FINANCIAL STATEMENTS

During the current year Dillistone Systems Limited paid a management charge of £184,000 (2018: £264,000) to Dillistone Group Plc. At the
year end Dillistone Systems Limited was owed £1,090,000 (2018: £185,000).

The Company was owed £46,000 (2018: £42,000) by Dillistone Systems (Australia) Pty Limited at the year end.

Voyager Software paid a management charge of £144,000 (2018: £144,000) and a dividend of £nil (2018: £500,000). It owed the Company
£82,000 at the year end (2018: £255,000).

FCP Internet Limited paid a management charge of £84,000 (2018: £84,000) and a dividend of £nil (2018: £500,000) and was owed by the
Company £421,000 at the year end (2018: owed by the Company £538,000).

A management charge of £60,000 (2018: £60,000) was received from ISV Software together with a dividend of £nil (2018: £250,000) and at
the year end the Company owed ISV £7,000 (2018: £100,000).

GatedTalent Limited paid a management charge of £65,000 (2018: £50,000) and owed the Company £475,000 at the year end (2018:
£654,000). The Company wrote off amounts due from GatedTalent of £1,450,000 during the year (2018: £nil).

FCP Internet Holdings Limited was owed by the Company £2,000 at the year end (2018: owed by the Company £2,000).

Woodcote Software Limited owed the Company £13,000 (2018: £13,000).

Management charges payable by Group members to Dillistone Group Plc relate to management support provided directly to them.

29. Dividends
The dividends paid in 2019 and 2018 were £nil and £98,000 (0.5p per share) respectively. No ﬁ nal dividend in respect of the year ended 31
December 2019 is proposed.

DILLISTONE GROUP PLC Annual Report and Accounts 2019

DIRECTORS AND ADVISERS

Directors

Secretary

Company number

Registered ofﬁ ce

Independent auditor

Principal bankers

Solicitors

Nominated adviser

Broker

Registrars

G R Fearnley Non-Executive Chairman
M D Love –– Non-Executive Director
J S Starr – Chief Executive
A D James – Product Development Director
J P Pomeroy – Group Finance Director
P Mather – Chief Operations Ofﬁ cer
S Warburton – Chief Technology Ofﬁ cer

J P Pomeroy

4578125

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ANNUAL REPORT 2019

DILLISTONE GROUP PLC
EMPOWERING RECRUITMENT
GLOBALLY THROUGH TECHNOLOGY

Contents

Strategic Report

Highlights

Dillistone Group at a glance

Chairman’s statement

CEO’s review

Financial review

Governance

Corporate governance report

Audit Committee report

Report to the Shareholders on Directors’
remuneration

Board of Directors

Directors’ report

Financial Statements

Independent Auditor’s report to the
members of Dillistone Group Plc

Consolidated statement of
comprehensive income

Consolidated statement of changes in equity 38

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

Directors and advisers

FINANCIAL STATEMENTSDILLISTONE GROUP PLC Annual Report and Accounts 201812 Cedarwood, Crockford Lane,
Chineham Business Park,
Basingstoke
RG24 8WD

ANNUAL
REPORT 2019