Dillistone Share Discussion Threads

[tintin82] 22/4/2015 19:01

Thanks ten. Hopefully all will be well. Nice to see the price stable and not drifting as of late.

[tentrader] 22/4/2015 16:47

Full Year Results On Monday (27th)

There is going to be a webcast with the CEO and FD at 1pm to cover the results. The link is - hxxps://attendee.gotowebinar.com/register/19058201051526913

[zoolook] 04/2/2015 12:03

hxxp://www.stockopedia.com/content/small-cap-value-report-4-feb-2015-pla-xlm-bry-egs-blur-wgb-dsg-91383/

Some commentary from Paul Scottwho who is disgruntled by the illiquidity.

Obviously a nice bounce but still below year high.

Good GARP share which deserves a higher rating

[valhamos] 04/2/2015 08:42

Agreed. Very promising update - the expected improvement in H2 2014 and an uplift in orders across the group. Orders at Dillistone Systems are up 20% with the introduction of FileFinder Anywhere and the largest contract wins in North America and mainland Europe for a number of years looks good for 2015 results. Decent yield to keep us going in the meantime.

[tintin82] 04/2/2015 07:49

Great update, Filefinder delivering. Profitable and generating cash! Happy this morning.

[mg1982] 01/10/2014 11:39

Valhamos - I stand corrected. Thank you.

Will monitor this for a lower entry. One of the quiet shares around.

[tentrader] 30/9/2014 16:39

there is a webinar on Thursday at 11am to expand on the prospects - hxxps://www1.gotomeeting.com/register/490957657

[valhamos] 30/9/2014 16:25

MG1982

I think the RNS is pretty clear:

"The maximum total consideration payable under the agreement is capped at £2,500,000." The FD confirms this in the brrmedia link in the previous post.

So if revenue remains £750,000 for each year of the earn-out period the total consideration will be £1,675,000 plus closing cash adjustment (£750k x 3 years at 30% plus £850k plus £150k)

Obviously increased revenue is expected from the cross-selling opportunities, and no doubt there will be cost savings in due course in addition to the retiring CEO's costs based on ISV's proximity to Voyager.

[tintin82] 30/9/2014 15:13

No concerns regarding the departure from software development, as they say, the opportunity for cross selling will be great and enhance earnings all round.

Good news all round IMO

[mg1982] 30/9/2014 14:28

Valhamos - they have paid 1m now for the business and they will end up paying upto another 2.5m by 2017 = 3.5m

[zoolook] 30/9/2014 12:37

Im not currently a holder but have been and would again but this deal, as others have commented, looks very expensive and furthermore is also a departure from licenced software developemnt and support which I see as their core competency and into online candidate testing which isnt.

[valhamos] 30/9/2014 11:49

MG1982

I agree at first glance it does not look cheap but how do you arrive at £3.5m? The announcement says the maximum total consideration is capped at £2.5m.

[mg1982] 30/9/2014 10:57

Just reading through the aquisition details. To me it seems like they will end up paying a lot more for it over the years. To my calculations it has the potential to cost them £3.5m by 2017. For a company making currently 162k PBT that does look like an expensive deal for us.

Any thoughts?

Not a holder but interested in doing DD

[valhamos] 30/9/2014 10:46

The reduced H1 profit was flagged up in the 2013 results outlook comment. I am not really concerned about the foreign currency impact as the proportion of international revenue is a lot less than a few years ago as a result of acquisitions that are more UK focused. The latest acquisition looks interesting and the increase in dividend offers support to the idea of resumed growth in 2015.

[tintin82] 02/9/2014 00:01

Great news today regarding FileFinder Anywhere. Serious earnings enhancement for an already cheap off the radar stock.

[valhamos] 07/2/2014 16:18

"so really it's up to the management"

Not really. They have to follow the criteria. It appears that MCGN do not because they engage in development when they are not sure of the technical feasibility. As such that is akin to research which is always expensed. I don't think I would be comfortable investing in a software company that was devoting significant amounts to development before technical feasibility had been established.

"If they're conservative, they'll use language like MCGN's which says they're not 100% sure it will get the customer sign off until it's fully deployed - which you could say for any piece of software including DSG's."

When you talk of customer sign-off you may have put your finger on the difference between MCGN and DSG - as I say I am not familiar with the former. DSG's development does not depend on customer sign-off. It merely needs to demonstrate that it has the technical ability to bring the development to a marketable product (e.g. a new release) and that there is a market for it. It rather sounds from what you say that MCGN's development is rather more bespoke in concept.

This is certainly not a case of companies doing what they want to do; the accounting standards are aimed specifically at avoiding that.

[wjccghcc] 07/2/2014 15:53

As far as I can see, IAS 38 gives company a lot of leeway as to whether they do or not capitalise software development so really it's up to the management. If they're conservative, they'll use language like MCGN's which says they're not 100% sure it will get the customer sign off until it's fully deployed - which you could say for any piece of software including DSG's. If they're less conservative, they'll capitalise everything (LRM springs to mind). Both can be justified under IAS 38.

[valhamos] 07/2/2014 15:39

WJCCGHCC - Looking at the latest published accounts for the 3 companies that you mention, they all have as part of the accounting policies words such as "Costs incurred on internal development projects relating to new or substantially improved products are recognised as intangible assets from the date upon which all IAS 38 criteria have been satisfied."

The issue is not whether development expenditure is expensed or capitalised, but whether or not any such expenditure that meets the criteria for being capitalised. Meeting these criteria depend on demonstrating the technical feasibility and commercial viability of the project. In other words capitalise only if a case can be made that there will be future returns arising from the costs incurred.

AVV actually do capitalise some software development expenditure according to note 17 of the latest annual report.

MCGN say none of their development costs meet the criteria because "technical feasibility of development has only been satisfied once the product is deployed into a live customer environment". I am not familiar with what MCGN do, but this rather suggests that they have a history of doing development work that proves not to be successful when it goes live. This is different to DSG's product and experience where a new version of the product is programmed every couple of years and the technical feasibility is well established beforehand.

[wjccghcc] 07/2/2014 13:54

So how come I have several software companies who expense R&D. IGP, MCGN, AVV for starters.

I don't have a view on the rights or wrongs of doing it. My point is that when the capitalisation is significantly bigger than the amortisation as here, it flatters the figures against those companies in the sector who don't do it.

[2jamdog] 07/2/2014 13:52

The really interesting analysis on this is when you split the company into the pre/post acquisition of Voyager, and look at the relative EPS for each, taking into account the shares issued for Voyager. That seems to indicate that the growth is coming from the acquisition, rather than the underlying DSG business. They do seem to be messing about with management charges a bit, which makes interpretation difficult, & I would wish them to be more transparent on this issue, so we could appreciate the relative performances of the 2 brands & geographical results.

[jimmcl] 07/2/2014 13:50

I Agree with Valhamos here - there will be NO software companies on the LSE which expense all software development - it simply doesn't comply with IFRS. As for DSG, the depreciation & Amortisation charge in 2012 was £553k, of which £238k was software development, £227k acquisition intangibles, and £88k depreciation of other fixed assets. See notes 12 & 13 to the accounts.

[valhamos] 07/2/2014 13:01

WJCCGHCC- The figures are not flattered at all. It is important in terms of accuracy and relevance of the accounts that companies DO capitalise software development, so that current investment, whose returns are in subsequent periods, is not expensed immediately but charged (via amortisation) in line with the benefits of that investment. Hence why this treatment is mandated by the accounting standards that listed companies have to comply with. See post 83 onwards for an earlier discussion of this point.