Dillistone Share Discussion Threads

[valhamos] 26/9/2013 11:59

Cheers 2jamdog - A lot's happened in the accounting world over the last 10 years!

Under UKGAAP it was optional to capitalise development costs, but a lot of companies didn't bother - too much work to demonstrate they met the criteria, plus the extra record keeping while it was being amortised. Now it's compulsory under IAS which leads to greater comparability across different companies as well as giving a more accurate picture - the cost of the software developed or enhanced is written off over its useful life during which the company receives the benefit through the license revenue it generates.

[2jamdog] 26/9/2013 11:08

Until it went public, DSG did write off development costs as incurred, but once it had to comply with IAS rather than UK GAAP it was required to capitalise the development costs and amortise them over their expected useful lives. Directors & auditors will need to look at the total development spend and write off any that has no future value to the business, then capitalise the rest. They should then review the carrying values & remaining lives on a regular basis. This is obligatory under IAS and isn't open for discussion- the rules are there & need to be followed. I think the issue May be that amortisation is less the spend, which really isn't that surprising.

[2jamdog] 26/9/2013 11:08

Until it went public, DSG did write off development costs as incurred, but once it had to comply with IAS rather than UK GAAP it was required to capitalise the development costs and amortise them over their expected useful lives. Directors & auditors will need to look at the total development spend and write off any that has no future value to the business, then capitalise the rest. They should then review the carrying values & remaining lives on a regular basis. This is obligatory under IAS and isn't open for discussion- the rules are there & need to be followed. I think the unissued May be that amortisation is less the spend, which really isn't that surprising.

[valhamos] 26/9/2013 10:40

Everyone can have their own way of dealing with the numbers, which is fine. The problem is he doesn't just do this, rather he implies that these software companies are misleading investors (profits are 'inflated' etc). He's saying the numbers are wrong or are suspicious (a red flag comes out at this point). That's quite a serious charge for him to make.

Also does he have a go at pharmaceutical companies or media companies that put a load of intangibles on the balance sheet, or is it just software companies - in other words, is he being consistent?

[zoolook] 26/9/2013 10:19

I have sympathy for people applying their own rules to establish their value for a business. I doubt any successful entrepreneurs spreadsheet reflect IAS but does give them the information they value to run their business. More than one way to skin a cat / value a company. Just saying..

:-)

[valhamos] 26/9/2013 10:12

Sorry it's over your head. I guess that's the problem with Paul Scott making the comments he does - the average punter accepts what he says because he knows no better. But Paul Scott keeps repeating this mistake (this is the third software company I hold in recent weeks where this has happened). He is incorrectly suggesting that companies are being creative in their accounting - profits are "boosted" or the companies are "greatly inflating EBITDA" when they capitalise software development costs. This is disingenuous when they are merely following normal and well accepted accounting practice. Maybe he's a qualified accountant (so am I) but he's been "retired" a number of years - people easily forget things or become out of touch (for instance he refers to goodwill amortisation - something that hasn't happened in accounting for a few years).

So no, Paul does not understand software companies - and I wouldn't class IND as a software company (though it does have a small amount of software costs included in intangibles).

[zoolook] 25/9/2013 22:44

Over my head. He's a Chartered Accountant and former FD and must have his reasons and as a longstanding and major investor in Indigovison he's no stranger to software companies.

[valhamos] 25/9/2013 21:56

I take issue with Paul Scott's comment:

"They do capitalise development spending, £339k in H1, but my my calculations operating profit is stated after a £210k amortisation charge - i.e. profit is only boosted by £129k through capitalising development spend as opposed to expensing it fully as incurred (which is my preferred, more conservative accounting treatment)."

Profit is not "boosted by £129k" at all. If Paul wants to pursue his own mickey mouse accounting adjustments that fine, but others should realise he is arguing against international accounting standards. If he prefers a "more conservative accounting treatment" then no doubt he likewise prefers to fully expense expenditure on plant and machinery as incurred - it's the same principle, so why pick out software companies? There's a fundamental accounting concept here that cannot be ignored - costs are matched in the same period as the benefits are received.

[zoolook] 25/9/2013 20:57

Write up from Paul Scott today:

He's also bought some today.

[zoolook] 25/9/2013 17:35

Good day. As an investment whats not to like. Economy is on the up and consequently the recruitment sector's tail is up. Must be a few agencies due for a software upgrade

[skyracer] 25/9/2013 14:42

A good solid investment this. I like the "strong implementation pipeline" being carried into the second half in both divisions. With both organic and acquisition growth Dillistone is, well .... solid.

[valhamos] 25/9/2013 11:50

Over 100p with good follow through from yesterday's interim announcement.

The emphasis on the earnings enhancing acquisition and its contribution to H2 in the webinar bodes well for expectations for the full year.

[sammy_smith] 24/9/2013 09:00

LISTEN: Dillistone Group (DSG) - Interim results 2013

Click the link below

[valhamos] 24/9/2013 08:19

There's been a re-rating recently from a P/E of just below 10 to a P/E of 12 reflecting the excellent prospects with this company. With the benefit of the recent acquisition if they merely do in H2 what they did in H2 last year they will achieve 7.9p (before any one-off integration costs), so a with strong pipeline I'm expecting 8p+ eps for the full year.

[zoolook] 19/9/2013 22:02

Been a while but I was a previous purchaser of Filefinder (1996-2007) and always was impressed with the product. Now I'm on my own I have continued to use an old version unsupported for years and had no problems. Bombproof. My recruitment days are numbered but if I was properly back in the game I wouldn't use anyone else even though I'm sure there are cheaper alternatives.

[valhamos] 19/9/2013 17:31

Good breakout ahead of those interims.

[zoolook] 19/9/2013 16:03

Interims out next tuesday.

[valhamos] 11/9/2013 18:55

Showing a lot of strength leading up to the interims announcement. Historic PEG 0.83 with current forecasts looking a tad conservative and not reflecting the impact of the recent acquisition IMO.

[phoenix1234] 22/8/2013 16:55

Dillistone Group - half-year trading update, still decent value?

[tentrader] 10/7/2013 09:13

Good interview on the yesterday's acquisition

[phoenix1234] 09/7/2013 20:46

Dillistone Group - acquisition

[sammy_smith] 05/6/2013 11:34

Listen to Dillistone Group - AGM Trading Statement

http://www.brrmedia.co.uk/event/112322/jason-starr-chief-executive-officer

[valhamos] 05/6/2013 07:56

Positive AGM statement. Both Filifinder and Infinity showing improving sales orders over prior year.

[woodcutter] 29/4/2013 15:50

Val

Yep i'm aware of that, it doesn't stop them manipulating it though. As i said it looks a very sound business. I'll have a deeper look but my feelings on biannual capitalised development upgrades needs further consideration, i'm not so sure i'm a buyer at the current share price using that criteria. Each to his own as they say.

WC