Dillistone Group (LSE:DSG) — Final results for the year ended 31 December 2025

0:01 Good afternoon, and welcome to the DILLISTONE GROUP PLC final results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the q and a tab situated on the right hand corner of your screen. Just simply type in your questions and press send. Before we begin, I would like to submit the following poll, and I would now like to hand you over to CEO, Jason Starr. Good afternoon to you. Hi, Alex. Thank you very much indeed for your support and getting you set up. Thank you. Welcome, everybody. My name is Jason Star. I am the chief executive officer of DSGROUP PLC, joined today by my colleague, Ian MacKin, who's our finance director. Hi, Ian. Hello. Hello. So thank you all for joining us today. I can see from looking at the numbers, we did a preview or live, I believe, count of the number of people in the room.

0:52 We are significantly better attended than we have been ever before, so thank you for that. To those of you that are existing investors, we appreciate your your support over the weeks, months, years, however long it's been. To those of you that are new. Thank you for your interest, and we're happy to be able to talk to you today. I have just lost my slide number data, but I can get that back. Excellent. Good. Okay. So, obviously, I think it's fair to say that the reason why we have a significantly higher number of people in the room today than we normally do is because of the news that we shared in February. And, obviously, I know most of you are here to learn more about the news we shared in February. So we will come on to that. But, obviously, the headline for today's session is a summary of last year's results, and so we do need to talk a bit about last year's results. So I'm gonna begin by bringing you up to speed on what the business is currently, and we're gonna talk to you about the numbers we've just reported, and then we'll talk a bit about the bit about the future.

1:53 Before we do anything else, I need to share a disclaimer with you. Now those of you that have been attending these webinars for a few years will know that if we have a good year, I go through the disclaimer really, really quickly. If it's been a bad year, I read every word out very slowly just to kill time. The good news is I won't be reading the disclaimer today because we've got lots of good things to talk about. So moving swiftly on to who we are. So DILLISTONE GROUP going forward is going to be different to DILLISTONE GROUP as it is now. Last year, DILLISTONE GROUP basically did one thing, and we did it through one company, which was Ikuru People. Ikuru People is a supplier of software to recruitment organizations. We have a number of products, and we split them into two groups. So on the executive search side, we have Filefinder, which is our established executive search CRM.

2:42 We have a platform called Sorentis, which is our next generation platform. And we have a product called Gate to Talent, which sits between candidates and clients and helps candidates put themselves forward to to to search for us. Executive search client base is is truly global. We have clients in pretty much every continent by Antarctica, literally all over the world pretty much. On the contingent side, our client base is typically agencies that do a bit of perm, a bit of temp primarily, but not exclusively UK based. In that market, we have three different products, Voyager Infinity, which is a CRM for contingency search firms, Mid Office, which helps our clients pay their taps, and then ISV, which is a skills testing platform designed to help assess candidates and their ability to take on new roles. So that's essentially what the business has been doing for the last last few years. I'll ask Ian to talk you through the numbers last last year specifically. So, Ian, over to you.

3:44 Thank you, Jason. Well, it's been a little bit of a whirlwind since we were last here to discuss the interim results. In that time, we secured new investment of 1,500,000, 1,400,000 net of fees, and we did it at a premium to the market price. This transaction has stabilized the balance sheet. And when the long running civil loan is fully replay paid in a couple of months in June, this frees up a further 300,000 in free cash flow to the business per annum. I know Jason's going to talk more about the fundraise and its implications later. Now looking at the business we operate in 2025, it was pleasing to see that the margins were creeping up.

4:31 Now this slide illustrates the steps the business has made in recent years, which has enabled it to restore the operating profitability in a period where we have to admit the revenues have declined. Now the margins have increased each year with 2025 result of 28.3%, standing over double the margin rate of just four years ago of 13.2%. This lean cost base will serve the group well in in the future when future revenue recoveries feed most for the most part straight down to the bottom line. Now although revenue did decline in 2025, which we were upfront and and we said to everyone that revenue would decline, the signs within 2025 itself were some were positive.

5:25 New business orders grew compared to prior year, and we saw a large pickup in Telentis ARR in h two as new CRM functionality came on stream for the product. Telentis is now in a position to target and win larger customers, and we saw a definite switch through the year from search type clients on a monthly contract to CRM users on annual contracts. Now that's a big change in the customer base, And that change should decrease attrition on the product because customers don't generally turn off their core CRM system they use to run their business in the same way they turn on and off a search product when they have assignments to work on. The high proportion of recurring revenue gives us a somewhat predictable revenue stream, and this mix is predicted to stay stable around this level into the future for the current operating business.

6:23 Coupled with the margin increases, this should drive the organic growth within the current operating company. So on to results we published this morning. Now the first point to make is even though the figures were withdrawn from the market while we work through the implications of the strategy pivot, the profit linked figure here is in line with expectations of breakeven that were in the market before they were withdrawn. Revenue, as we said, would be down. It was down 14%, four 0.9 to 4,200,000. This fall was expected and we could see it in the cancellations we received in FY twenty four.

7:08 As can be seen above that the 700 ks fall was almost entirely due to a reduction in recurring revenue. As I say, it was expected. Although the revenues fallen by 700,000, the adjusted EBITDA has only fallen a 100,000. As a consequence, the EBITDA decreased only 7% down to GBP 1,190,000, with the adjusted EBITDA margin moving upwards as shown on the earlier slide to 28.3%. The adjusted operating profit, which refers to figures before acquisition, reorganization and one off costs, decreased a similar 100,000 to 166,000. And the adjusted profit before tax it just showed the same 100,000, circa 100,000 decrease to end at a profit of 11,000.

8:03 To reiterate, this was what was expected this year. We expected decreased revenue, and we expect it to be around breakeven. We achieved what we said. The cost base is stable, and once revenues rise, so should the profit measures. The effect of all the above is that we recorded a drop in EPS to minus 1.46p. Moving on to some of the details behind the cash flow. The net cash from operating activities increased 13% to 1,082,000. Investing activities is down slightly by around 25,000 to 863,000 in the year, and financing activities excluding fundraising are broadly the same, ticking up very slightly to 475,000.

8:59 The financing activities excluding fundraising is mainly the repayment of the principal and interest on the civil loan and interest on the three tranches of loan notes that we have. Now if you take the investing and operating financing activities into account, this led to a like for like overall adjusted net change in cash of minus 256,000 compared to minus 395,000 the previous year, a 36% reduction in cash burn. It should be noted that this 156,000 is less than the annualized 300,000 civil loan repayments, which will be repaid in June this year, even excluding interest payments associated with it.

9:47 During the year, we did raise funds through an issue of loan notes for a 520,000, but this is opposed to having to raise 360,000 in 2024, which means a net change in cash and cash equivalents of 136,000. Obviously, post year end, we've received circa 1,400,000 net from the proceeds of the fundraising. This fundamentally changes the financial position of the company and its balance sheet going forward. Now I'll hand you back over to Jason. Thank you. So as I touched on at the top, I'm very aware everybody is more interested in our future than than our past. And our future is as a business develops over time, Ikaroo, the current trading business is going to become a smaller and smaller part of the totality.

10:42 As a result, in our update this morning, we didn't provide huge amounts of data in terms of Ikaroo's outlook. We have no numbers in market at the moment, but we did want to highlight that in terms of the start to the year, our order book in the first quarter of this year was the best quarter in the last three years. That's true whether you define it based on new business sales only or total order values. And we are in a market that is still really, really challenging. And I can see we've got some questions around that, which we'll touch on in a moment. But we're in a very challenged market. It certainly hasn't improved significantly. I don't think it's getting worse, but it hasn't improved significantly. We've just report reported our best q one for for orders in, well, 12 successive quarters.

11:30 So that's a positive start to the year. And, obviously, that confidence in the order book excuse me. Sorry. That confidence from the order book gives us confidence for the remainder of the year, and we are in the view that the the trading subsidiary will improve its performance over the course of the year. Something else which we've started to work on across the business at the top, I talked about our free executive search products, and I talked referred to Filefinder as our established executive search CRM and Telentis as our challenger. We've now reached a stage where we are actively migrating Filefinder clients aggressively now to Telentis. And over the course of the year, we expect to see more and more of that. As a result, come 2027, our cost base, our revenue base, our client base will look very different indeed, and that gives us good confidence for for future years as well.

12:24 So that's the core business as it is now. Obviously, February was our our big news when we we we put out our change of strategy, our fundraising, our new investors, our new board members. So I suspect everybody on the call is okay with this, but just a brief recap for anyone that may not be. We raised 1,500,000, a combination of replacing and a subscription. The raising was at a price of 10 p. Closing price the day before was 8.5 p, so that equates to a premium 17.6%. The investment came from a number of organizations and individuals. That includes a number of our directors. It includes a number of existing and a number of new investors. A key part of that is p and r, p and r investment management.

13:11 I'll talk about that in a moment. But as a concept party, that group took 28.8% of the business. I'll talk slightly more about them in a moment. Why did we undertake the fundraising is the obvious next question. Well, there's there's really two reasons. Firstly, we needed to strengthen the balance sheet as Ian has just just alluded to. You know, we we we we made a we broke even last year, and but we did so in a context where we were having to pay out cash every single month. It's been tight for the business over the last few years, and every decision has been made made based on managing the cash flow. By bringing in some additional funding, some additional resources, it means we can actually make proper decisions for doing the long term term interest of the business as opposed to purely making decisions based on ensuring that we we live within our our means. So firstly, was about improving the balance sheet for the the business as it is. But the real opportunity was a new strategy to go out and do something different. Our view is that we can be a successful business in the recruitment software market, but to deliver the type of returns we want to our shareholders, we need to go beyond that. So this is the starting point of a new strategy based around m and a. The plan is to go out and buy businesses that are established, that generate cash, bring them into the group, leave them to run themselves, and reinvest the cash. That's the plan going forward.

14:41 Now that is obviously very different to what we've done before. And as a result, we flagged at the time of the investment that a new strategy required new leadership. I'd like to begin by thanking Simon Warburton and Steve Hammond. They both stepped off the board, the group board at the time of the announcement. So back in February March time, they're both still with the group. I'm delighted to say doing great work for us, so thank you both to to them. They did that to facilitate allowing Matthijs and Akash to join us. Matthijs and Akash, many of you will know the names. They are associated with the concert party I referred to. They are both experts in buy and build strategies. You probably know Matthijs as the chair of Software Circle, which is named Mr. PLC, which is something very similar.

15:32 These guys have come to us with the idea, the strategy, and they're now sitting on the board to help us execute. So we're we're really excited by that. We've also announced today or we said at the time of the investment that we would be making further changes to the board. And we've announced today that the search for a new CEO is is well underway. So sadly, from my perspective, but probably happily from some of yours, this may well be the last time I present at one of these webinars. So we are actually looking for a successor. The single most important thing that this group can do for our shareholders is get leadership right. The current board or the historic board, historic leadership, myself, we can talk about how good, bad, or indifferent we are as a equipment software company management team, but we are not the team to lead a new strategy involving going out and and and allocating capital, making a buy and build strategy. So the single most important thing we can do is bring in correct leadership, and the most important that is bringing in a new CEO. So the search is underway.

16:37 We've had lots of conversations. And, of course, as soon as we're in a position to share more with you, we will we will do so. So that's that's the news today. Happy to answer questions, and I've already got a couple. So if you'd like to submit more, I'll be very happy to try to answer them within the context of what's possible, but drop them in. I've already had a couple. So thank you to well, a few people actually have asked questions about our strategy, what we're going to be buying, and and related topics. So let me let me deal with that firstly. So as I say, we're bringing in a new CEO, and we're bringing in a new CEO who is going to be someone who has significant expertise in this field.

17:22 For us to bring someone in that has significant expertise, but for me to tell you before they arrive, this is what we're gonna be doing makes no sense. So I can't tell you it's going to be this sector, it's going to be that sector, because that is something that the board has obviously given consideration to, but the CEO we hire will clearly have input into. What I can do, obviously, is talk about the shape of the business. It's not I can't necessarily say to you whether it's going to be x sector or y sector or zed sector. But what we're going to be looking at is businesses that generate cash, businesses that are stable, businesses that do not need excessive management. So you can probably take from that businesses that are well established, have been around a long time. They're not new startups. They're not fast growth. They're businesses that we can bring into the group and basically lead to get on with things. That's very much the the target in terms of the shape of the business. But as I say, we will share a lot more with the with you once our new CEO is on board regarding the, you know, the the more specific targets that we may be looking at.

18:31 Got a question on the traditional business, so thank you for that. Someone has asked about the impact of AI on executive search and and temp agencies and and broader recruitment. It's obviously a very good question. I don't know if you saw. There was an article in the Feet, what, two weeks ago on this particular topic. And it was quite interesting actually because it it was doom and blue as you would imagine. It wasn't saying good things about recruitment. But what it did say was that if you're running a recruitment business, you want to be either in the executive search sector or in the temp sector. Our products are primarily positioned at the executive search sector and the temp sector. So I think that is something that we take huge confidence from. And as I say, the fact that the recruitment industry is in a fairly tricky place, but we've just delivered our first quarter, which is is positive in terms of incoming orders, I I I think gives us a degree of confidence that we've positioned ourselves in the right part of the sets of it. But, yeah, clearly, recruitment is a market that is challenged, and, you know, we we have to live within those constraints.

19:42 Question from Franco. Thank you, Franco. This is this is a good question. So Franco has asked about the the ecosystem, the investors, how we look at fundraising, how did we meet them, why did we choose them, and so on and so forth. It's a it's a good question. So, obviously, as you've have seen if you followed us for a few years, we have we've been requiring cash on a fairly regular basis. So this has been a conversation that has been fairly top of top of mind constantly. We we're lucky enough to have supportive shareholders, directors to believe in the business, and and we've always been able to get debt financed when we needed it. But it clearly wasn't something we wanted to carry on doing. What was interesting, though, was that literally on the day or a few days before our AGM of last year, we were contacted by Matthias and his team. And our first meeting with them was actually on the day of the AGM last year. So we spent six, well, more than six months, what, seven, eight months getting to know them before we signed on the dotted line.

20:48 They approached us. They sold us on their vision. You only need to look at what Matthias has achieved to see how exciting that vision is and the potential. And they spent a lot of time getting to know us. We spent a lot of time getting to know them. You know, I remember meeting Matthias in the summer. We had a period in the run up till the end of last year where they did extensive due diligence with us. They spent a lot of time talking to us, understanding the numbers. And, we got to know each other, lots of face to face meetings, lots of lots of calls, and we we just got on. You know, we we believe in them. They trust them. We trust them. Hopefully, they have a similar view of us, and the passion they've got, the experience they've got, and the funding that they're able to bring to bear made it a fairly simple simple simple decision to take. And I think I'd reiterate the fact that a number of directors participated in this, which shows our belief in in in this process, And the investors invested at a premium on share price, which I think shows their belief.

21:52 So I think it's a really good match, and I'm very, very happy with with how we've got to that place. This is a question from Ben, which I'm gonna ask Ian to to respond to, but I suspect he's probably gonna point to the fact this is multiple companies as opposed to one companies and probably avoid answering it. But talking Ben has a question about operating leverage and what do you think the business needs once revenue starts to go. And if you'd like to add that in? Yeah. I mean, if we go back to the the margin slides and the recurring revenue, talking specifically about the current operating company. You as you say, once revenue start to grow, it will go pretty much that straight down to that bottom line. The the cost base is a pretty fixed cost base with the quite a bit of growth before we start to look at step changes.

22:53 So leverage is very high once that revenue starts to grow in the current operating business. Obviously, once we start on a buy and build strategy, each company within that will have their own their own profile. As Jason says, we'll be looking at at cash positive businesses to roll into into the group so we can take advantage and start to grow exponentially from that point. I've had a couple of questions most recently from Jordan. There was a couple that came in advance as well talking about time scales and when we will start to see things moving. I think all I can say on that is really what I said before. We our view is that a CEO is for life, not for Christmas.

23:44 Present company accepted. So we think it's important that we bring in the right person to make these decisions. You know, we don't wanna bring you know, go out and buy a company in x sector and then bring in a specialist who doesn't believe in that sector or or has views on on a different direction. So I understand where you're coming from. I'm aware that we we have a new investor base that's very excited about what we what we're going to do and wants us do it as quickly as possible, and I am part of that. As I say, I I'm an investor in this as long as you guys, and we wanna do it as quickly as we possibly can, but we wanna do it right. And to do it right, we need to make sure we have the right leadership in place. Question on on the share price, again, from Jordan. That's not really for me to comment on, but, I mean, our focus is on the long term. We're not we're not massively focused on what share price is today, this week, this month. You know, it's all about long term. One of the things that we've learned from Matthias and Akash is the focus on the long term. So, you know, we're we're we're not gonna be responding to every uptick or every downtick. We're not completing outreaches every five minutes. It's all about delivering long term results and making sure that the the share price follows that. So, yeah, that that would be my answer on that.

25:09 Question from from Franco about further capital increases. I think I think it's reasonable to assume that with the the scale of the opportunity and the vision of our new board members, there will certainly be further investments at some point down the track. It's not for me to say whether that will be near near term, long term, but, I mean, we're certainly not expecting to build a serial acquisition business with with purely with that that one fundraising we've made. So I think you can reasonably assume that at some point, we will be bringing further monies into the business, but that is something for for the future board and the future CEO to to to communicate with investors, I I would suggest. Okay. I've got a question on the business again. Ian, you made a comment about the changing nature of clients and and and the revenue model. Do you do you just wanna provide a bit more meat on that? Sorry. Thank you, Jennifer.

26:08 Yeah. No. I mean, as as we said, we we have seen a definitive change in the client base from low volume monthly clients to CRM clients who generally have more more seats per company than than a search for. Now to put that in context, in the second half of twenty twenty four, annual contracts accounted for only 12% of the new licenses that were activated. Flip that to the second half of twenty twenty five, that's totally turned around. Annual contracts accounted for 85% of all new licenses that were activated.

26:56 So it is an absolute switch in the customer base, and that switch is fundamental to Fence's future as a CRM product that is core to people's businesses. Thank you. Thank you. Question from from from Neil, I think is good and fair question. It's quite quite long. So I'll I'll summarize it. Neil is asking, okay. You're not gonna tell us what you are going to buy into. What are you not going to buy into? I I certainly don't want to prejudice future decisions, but I think I can say with a degree of confidence, Neil, that our target market is not going to be recruitment software businesses. I think we are very aware of the risk that the SaaS industry faces from AI, and we are very aware of the risk that recruitment has from AI and other topics. So I I certainly think that our investors have gone out and bought the very best recruitment software company there is.

28:00 I doubt we'll be buying other ones in in in that site sector, and I would be fairly confident in that. However, as I say, it's not a decision that I expect to be be driving, but I I I I think you can go away with degree of comfort. We understand your concerns, and they reflect some of our internal internal conversation, Neil. So thank you for your question. Okay. I believe that was my my final question. So thank you again very much indeed. As I say, for those of you that have been investors a long time, we really do appreciate it. I know it's been there's been some some some good years and some, should we say, less good years, so we appreciate you sticking through. Those of you that are new, thank you for for coming. I'm as I say, I will be stepping down from the CEO role at some point, but I remain extremely excited about the future of this group. And, yeah, I I I'm looking forward to to to what happens next. So I may see you at the next one of these, but if I don't, thank you all very much indeed for your your support overviews. Thank you. Bye bye. Fantastic.

29:04 Jason, Ian, thank you very much indeed for updating investors today. On behalf of the management team, we would like to thank you for attending today's presentation, and good afternoon to you all.