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Established niche-player with dividends If there is one thing I have learned about companies on AIM, it is that the successful ones have a habit of keeping on winning. Software firm Dillistone is a great example of an AIM winner. In the last five years, the shares have more than doubled as the company has been reporting profits and paying dividends to shareholders.

Currency movements have not helped The company today looks like a rare AIM investment opportunity: a smallcap software firm with an impressive dividend yield. Dillistone is a provider of software to the recruitment industry. The company first came to AIM in 2006. Dillistone’s current form has come about via three acquisitions: Voyager in 2011, FCP Internet (the company behind ‘Evolve’) in 2013 and finally ISV at the end of September this year. Dillistone’s solutions are configured for the different flavours of recruitment that take place in industry. Executive search is handled through the group’s eponymous Dillistone Systems. This division accounted for just over half of H1 group revenues. Voyager Software Limited addresses the temp and contingency recruitment market with customers in more than 20 countries.

‘Evolve’ is a general recruitment database programme with additional mid-office software links through to invoicing etc. Distinct to these activities, but related, is the group’s skills testing operation ISV Software. Recruiters use this product to assess candidates’ skill levels. The company’s recent development makes comparison with prior years difficult. Things are complicated further as sales move to a subscription model. This is a phenomenon being repeated across the industry. The transition results in immediate revenues being swapped for longerterm recurring revenues. This was evident with the company’s recent interim results. Dillistone reported non-recurring revenues down 6% at £1.13m for the six months ending in June. Recurring revenues, however, were 19% higher at £2.86m. Pre-tax profit fell from £817k to £646k. Currency movements have not helped: if 2013 exchange rates had held, adjusted H1 2014 pre-tax profits would have shown a 4% increase on the comparable period. The dividend was increased 4%. Dillistone Systems’ flagship product FileFinder Anywhere has recently been through an ambitious upgrade. Management expects the administrative overhead that comes

with rolling out the new product to hold back immediate growth, resulting in a 2014 outcome for the Group similar to the previous year. Given that Dillistone reported a net profit of £1.2m last year, the shares today do not look particularly cheap. However, the company is well-financed and can be expected to enjoy some growth thanks to the recent acquisitions.

the company is well-financed Dillistone has a solid track record. It’s enhanced product range will bring significant opportunities to crosssell. Recent noises around FileFinder Anywhere are very encouraging. Considering more than 80% of the company’s revenues are earned at home, improving business confidence in the UK could deliver a significant sales boost. DILLISTONE GROUP (LON:DSG) FOR Longstanding success Good dividend yield AGAINST FileFinder Anywhere needs to sell Acquisition integration risk Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high

£18m 93p:98p 12.7 4.0% 88p:127p 3

November 2014 AIM Prospector  
November 2014 AIM Prospector  

Featuring ten AIM-quoted companies: Dillistone Group, Begbies Traynor, FW Thorpe, Gooch & Housego, Nationwide Accident Repair Services, Spr...