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UK – Dillistone provides trading update, revenue to be hit by client loss and exchange rates

26 June 2018

Dillistone Group (DSG: LSE), the UK-based supplier of recruitment software for the recruitment industry, announced a trading update today.

The group said the previously announced loss of a major client and the impact of exchange rates have had a negative impact on recurring revenues compared to the same period in the previous year.

Dillistone reported that the first five months of the year has seen strong incoming orders, with both Voyager Software and Dillistone Systems reporting incoming orders well ahead of the same period in 2017. 

“The first half has also seen us generate our first revenues from GatedTalent, our new portal which allows executives to share information with trusted recruiters,” the group stated.

However, the group said it anticipates GatedTalent to be loss-making. Furthermore, it said that the General Data Protection Regulations (GDPR) has resulted in lower-than-anticipated creation of profiles at its platform and subsequent delay to profile monetization, which will further impact revenue.

“Prior to launch, our expectation was that the GDPR would lead to our clients sending in the region of 1 million compliance messages to senior executives around the world,” the group stated. “We are pleased to report that, with approximately half of our clients still to complete the initial mailings, we have already significantly surpassed this number and the product has performed well from a technical perspective.”

“We anticipated that a certain percentage of individuals receiving compliance messages via emails would subsequently visit our website and as a result create profiles. Conversion rates among our early adopters were good.  However, as the volume of GDPR compliancy emails from all sources increased, recipients increasingly failed to open them. Ultimately, the number of profiles created from those initial mailings is disappointing,” the group stated.

“We anticipate turning on our Search and Connect functionality in early autumn at which point we expect that the platform membership will be at a level that will allow monetisation of the profiles to begin,” the group stated.

“We continue to market the service to executive search firms and are pleased to report that, within nine months of the launch of the product, GatedTalent has already signed up more clients than our largest comparable UK based competitor in GatedTalent's market,” the group stated. “As a consequence, the Board remains excited by the potential of GatedTalent and believes that the delivery of the GatedTalent "Search and Connect" functionality later this year will have a positive impact on sales for our Dillistone Systems division.”

“We had anticipated that GatedTalent would be loss making in 2018 and this remains the case. The lower than anticipated initial number of profiles and subsequent delay to profile monetisation will impact further on revenue. As stated above, the Board is aiming to deliver a growth in profits year on year, prior to the impact of the anticipated GatedTalent loss, acquisition related items and the impact of IFRS15 (new accounting standards) adjustments,” the group stated.

As of last trade, Dillistone traded at £64.40, down 17.44% on the day and 28.80% above the 52 week low of £50.00 set on 25 September 2017. Based on its current share price the company has a market value of £15.32 million.

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