Dillistone profits upgraded after sharp H1increase

LONDON, Sept 1 (Reuters) - Blue Oar Securities has upgraded its 2008 full year profit estimates for recruitment software supplier Dillistone Group (DSG.L) Plc after a sharp increase in half-time earnings.

The broker has raised its 2008 pretax estimate to 1.35 million pounds, from 1.2 million previously, while for the following year it is predicting profits of 1.4 million pounds.

The upgrade follows a sharp 44 percent increase in half-time pretax profits to 949,000 pounds from the AIM-listed company, which supplies recruitment software to the likes of Hays (HAYS.L) Plc, one of the UK's largest recruitment firms.

"We've had an absoultely stonking first half on the back of some very strong orders towards the back end of 2007," group Chairman and Finance Director Jim McLaughlin told Reuters in a telephone interview this morning.

"While the second half of 2008 will not match those of the fist six months, trading for the full year will be somewhat ahead of market expectations," he added.

McLaughlin said the while there is some uncertainty over the economic climate in the UK, the group's leading market position and strong recurring revenue base would continue to drive growth. Total sales in the six months to end-June increased by 30 percent to 2.51 million pounds, with the proportion of recurring revenues up from 31 percent to 43 percent in the period. Across the regions, Asia posted an impressive 47 percent increase in sales, while Europe was up 36 percent and the UK 29 percent ahead on last year.

McLaughlin said the recent spate of consolidation within the sector - Swiss recruitment agency Adecco (ADEN.VX) launched a 1.3 billion pound takeover offer for British-based firm Michael Page International (MPI.L) Plc in August - was unlikely to impact the group. "Neither are clients of ours," he said.

In fact, the group is "actively looking" to do a deal on its own behalf and is sizing up a number of prospective candidates.

"We've got one or two ideas. We've got plenty of cash to do a deal, but we won't rush into it," he said.

The group ended the first half of 2008 with net cash of just over 2.0 million pounds and has no borrowings.

Dillistone, which was floated on AIM in June 2006 at 125 pence a share, saw its shares put on 10 pence, or 6.35 percent, to 167.5 at 7.40 GMT.