Dillistone (DSG) – GatedTalent update
Dillistone, the provider of software to the recruitment industry that branched out into a private LinkedIn-style recruitment network and is dependent on financial support from its ex-Chairman, (deep breath), today reports they have just signed up their 100,000th member.
As a previous shareholder, I have previously modelled GatedTalent and can confirm that since their April this represents an acceleration of sign-ups per month, although not percentage growth.
One issue is that it is impossible to gauge the quality of the potential candidates they have on their books. We have no idea how senior they are, how many are amenable to changing their jobs and indeed how many are still pre-retirement. Their target market was originally executives, but by naming “Software and Computer Services” first in the list of industries the suspicion will be that many are directors of single-person limited companies aka IT Contractors.
Another concern (previously highlighted) is their funding situation and effective control of the company by the ex-Chairman and the current CEO.
The quality of the GatedTalent pool will be determined by the the profits they can make from it and there is a significant danger that if and when these profits start flowing outside shareholders will have been diluted.
B&M Bargains (BME) – Trading Update
B&M are a major customer and stockist of UPGS‘s products and so I keep an eye on their trading updates. There is increasing evidence that well-executing companies selling small-ticket items have done (perhaps) surprisingly well over Christmas (see also today’s JD Sports’ Update) and indeed B&M also report modest like-for-like growth.
While +0.3% may not be sufficient to keep ahead of every increasing staffing costs, it is much better than many were predicting for the sector and it is the headline +8.8% that is relevant to their suppliers. Even their struggling German Jawoll business that UPGS also sell through was not bad at -1.5%.
In the detail they report this was “slower performance than anticipated during the run up to Christmas“, but UPGS holders will be drawn to the statement:
Our LFL performance was held back by disappointing sales across the Toys & Seasonal Confectionery categories, which was offset by continued strength and outperformance across our Home Departments.
This suggest that they not only bought more UPGS stock but also sold more of it than in previous years, boding well not only for calendar Q4 but restocking in Q1.
Non-food store growth is certainly slowing in percentage terms, but today’s update reduces the risk of poor UK discounter performance affecting UPGS.
This time last year UPGS were required an issue an unscheduled trading update because it was already highly certain that their sales for H1 ending 31st January were materially ahead of expectations (edit: it would have been about FY sales). The window for a repeat this year appears to have passed, but with three weeks of the period still to go, an FY upgrade with the H1 trading update is still very possible.
Small Caps Live
At 11am today Mark Simpson and I will host the first ever Small Caps Live. This will include a discussion of retail but also a look forward to the coming week. Time permitting I will also share my forecasts for UPGS H1 2020 ahead of their scheduled February trading update.
Please register ahead of the event here: https://discordapp.com/invite/vBQjDaZ