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Dillistone – shares soar on ramptastic trading update; how’s the balance sheet?

By Steve Moore | Friday 9 February 2018


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Shares in Dillistone Group (DSG) are currently more than 20% ahead, heading towards 80p, on the back of a Trading Update & Notice of Results announcement… but then they were also approaching 100p around a year ago, so what’s the story here?

The shares were particularly hit in June - starting the month approaching 90p and closing it at sub 60p - following a Trading & New Product Update. This included that a “slow start to the year and the higher cost base mean that the results for the full year are expected to be significantly below market expectations. In view of the proposed fund raising, the board expects to reduce its dividend until the benefits of its investment in the new product flow through to the group's balance sheet”.

A “confidential nature” was emphasised about the new product, it also stated that “we believe that it has the potential to transform the nature of our business and to deliver significant shareholder value”. In December came a GatedTalent demand surpasses expectations announcement. ‘GatedTalent’ is the - previously confidential - new product and “a new private network designed to allow executives to share information with recruiters in a private manner while also assisting recruiters in their General Data Protection Regulation compliance”. However, I described the announcement as ramptastic and concluded that I continued to avoid.

The company now updates that its “operational performance improved in the second half relative to the first half of the year… this improvement means that operating profits for 2017 will be considerably better than current market expectations of £200,000 of operating profit, prior to acquisition related items and any adjustment related to the previously announced contract termination… the group ended the year with £1.4m in cash”.

The cash compares to £1.1 million at the half-year, though is also with £0.4 million of convertible loan notes in the second half (‘operating profit’ not turning into net cash generation then?) - and there was a £1.8 million net current liabilities position at the half-year stage.

Possibly helpful then for the company to see the shares currently soaring – and this helped by on GatedTalent it updated; “we are pleased that the level of demand is continuing, and that client subscription levels have more than doubled over the last two months and remain ahead of expectations”.

However, it is also admitted that “it remains too early to say what percentage of executives contacted will create profiles on our platform. It is from such profiles that we will derive much of our long-term revenue” - and with also continuing working capital concerns (another fundraising ahoy?), I currently continue to avoid.


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