7:59 cut – PARK, DSG

Park Group (PARK) – FY Trading Update

The shopping voucher and Christmas savings company reports FY trading ahead of expectations but reported PBT below due to profit recognition timing issues and further exceptional costs. They also warn of future higher ongoing and exceptional costs.

An avenue of further research would be how much of their cash belongs to customers and whether these costs may constrain their ability to pay dividends since many will hold this for the good yield.

I have no current holding.

Dillistone Group – FY2018 Results

The supplier of software to recruitment agents that suffered the loss of a major customer and has developed an online database resembling a closed version of LinkedIn (“GatedTalent”) reports their FY results and details of a major restructuring.

Many people will be watching the GatedTalent progress in particular as £1.7m and much management time has been invested in this. Figures given today suggest that new sign-ups are holding up well at around 1000 a week, however this rate will vary significantly depending on the time of year and so it is unclear whether that is a snapshot (at an unspecified date) or an average including e.g. Christmas. The total figure of 50,000 is also undated, but based on my model I believe it was at the time the report was written. The GatedTalent website has been unchanged in claiming 40,000 since at least January.

I noticed they said they have been disappointed by the number of “executive” registrations, something I had not noticed before. There is also an implication they have changed the model slightly as they now imply only “executive” signups are free (the “nightclub” model).

For me the big news is that they do not expect to make profits in FY2020 and that restructuring costs look to consume all of their cash. I’m not sure the statement that costs are “expected to be met without recourse to shareholders” is intended to reassure or as a warning. They also have a convertible loan (I think I recall from directors) of £0.4m.

The company now appears to find itself in a rather fragile state. The loss of more customers could tip them over the edge and the profitability of GatedTalent is by no means assured. It now seems that without the investment in GatedTalent and in restructuring the business would have inevitably slowly slipped away but that in the short term the current policies appear to put the company in danger and shareholders at risk of severe dilution.

On the upside, there is the possibility that somebody may come buy the GatedTalent product / database.

On balance I have decided to attempt to sell my shares on the open.

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