Audited Preliminary Results - Year to Dec 2013

RNS Number : 6266C

IS Solutions PLC

19 March 2014

 

Wednesday, 19 March 2014

IS Solutions Plc

Audited Preliminary Results

for the year ended 31 December 2013

"Eighth year of successive growth in Pre-tax profit with focus on Services business improving Return of Sales to 10%"

Highlights	2013	2012	%
Ø Revenue	£9.77m	£9.21m	+6.1%
Ø Profit before tax (pre goodwill write-off and share-based payments)	£969,000	£895,000	+8.3%
Ø Reported profit before tax	£966,000	£792,000	+22.0%
Ø Earnings per share -fully diluted	3.08p	2.87p	+7.3%
Ø Increase in dividend -interim(paid) -final (proposed)	0.48p 1.12p	0.44p 1.00p	+11.0%
Ø Strong balance sheet - net cash	£539,000	£70,000
Ø Recurring Revenues:  improved margin; contributing 63.97% of the total GP (2012: 68.84%)
Ø Projects:  strong revenue growth of 31.16%: over 50% of total projects business now coming from Web Analytics

"Following a strong second half performance in 2013 our results to December 2013 provided an eighth year of successive growth in pre-tax profit (adjusted) and results in line with market expectations. "Our concentration towards our higher margin Services business has seen our adjusted Return on Sales ('ROS') continuing to move ahead improving by 0.2% over last year to 9.92% (2012: 9.72%). "Taking into consideration factors highlighted including the improving economic situation, our continuing strong level of Recurring Revenue and our strong balance sheet, the Board is reasonably optimistic for a ninth year of increasing profitability." Barrie Clark, Chairman (Non-Executive)

Enquiries:
IS Solutions Plc	FinnCap	TooleyStreet Communications Ltd
John Lythall, Managing Director	Nominated Broker & Adviser	IR & Media Relations
[phone]	Ed Frisby- Corporate Finance Stephen Norcross - Corporate Broking	Fiona Tooley, Director Tel: [phone]
	Tel: [phone]	Mobile: [phone]
Editor's Note IS Solutions is a systems integrator and value-added reseller focused on three web-related areas - portals, content/document management, with specialities in business intelligence and 'big data' analytics. Based in Sunbury-on-Thames, the Group was founded in 1985 and became a listed PLC 1997.  The business currently employs 100 staff, including 18 in Chennai, India, who provide product development and support. It also has a strong blue-chip client base which includes Toyota and Toshiba as well as BP, BT, GSK, HMRC, M&S and RBS.		Ticker: AIM: ISL Accreditation: ISO27001 E-mail:  [e-mail] Website: www.issolutions.co.uk Follow us  www.linkedin.com/company/issolutions

IS Solutions Plc

Preliminary Results for the year ended 31 December 2013

Statement by the Chairman, Barrie Clark

The Board is pleased to announce that following a strong second half performance in 2013 our results for the financial year ended December 2013 provided an eighth year of successive growth in pre-tax profit (adjusted) and results in line with market expectations.

Following our concentration towards our higher margin Services business, we are pleased to report that once again, we have seen our adjusted Return on Sales ('ROS') continuing to move ahead improving by 0.2% over last year to 9.92% (2012: 9.72%).

Financials

Revenue in the period under review improved by 6.09% to £9.769 million (2012: £9.208 million), producing an 8.27% growth in Profit before tax (before share-based payments and in 2012, goodwill write-down), from £895,000 in 2012 to £969,000.  Reported Profit before tax increased by 21.97% to £966,000 (2012: £792,000 including £100,000 goodwill impairment).  Fully diluted earnings per share rose by 7.32% to 3.08p (2012: 2.87p).

Due to the increasing amount of business emanating from around the world we were impacted by the strength of the pound, which in the period led to an exchange rate loss of some £108,000 (2012: £20,000).  However, our balance sheet remains strong; Cash at the year-end stood at £539,000 (2012: £70,000).

During the year, the Board elected to cash in its trading investment valued at £591,000 (2012: £561,000) of which, £250,000 was used to reduce the mortgage on our headquarters building and thus lowering the long term debt to £541,000; the building has a current value of £2.2million.  The Company also has a £250,000 bank facility renewable in July 2014.  Interest cover stood at 42 times (2012: 24 times).

Looking at our business:-

Projects:  We experienced strong revenue growth of 31.16% with most of this increase coming from Analytics which now represents 50.51% of our total projects business.  The growth in Analytics projects was somewhat offset by a reduction in the project revenues from the Portals section of our business.

Recurring Revenues:  Within this section of our business we witnessed a 10% decrease in top line revenues compared to the previous year; this was due to the end of an Analytics contract in December 2012.  However, against this was an increase in the gross profit margin of six percentage points thus leaving the GP contribution the same as the previous 2012 period.  Recurring Revenues continue to be the mainstay of our business generating, the majority of our gross profit with the contribution for the year being 63.97% of the total (2012:68.84%).

Product Sales:  This area of our business continues to be the least predictable and in 2013 produced revenue growth of 5.74% year on year following on from two successive years of shrinkage.

The Company's policy is to  maintain three areas of revenue - Projects, Products and Recurring Revenues across a minimum of three technology sectors currently focused on Portals, Analytics and Enterprise Content Management helps to shield the Company from any business shift in any one sector and has allowed us to record an eighth successive year of growth in profitability.

Personnel

Once again, the Board would like to express its appreciation and thanks to all employees both in the UK and India for their on-going support and teamwork - their knowledge and expertise are an invaluable and important asset; this, combined with their work ethic ensures we continue to give the consistency of service to clients and supplier partners that is the foundation of our business success.

Dividend

Diluted Earnings per share advanced in the period by 7.32% compared to 2012.  In the light of this, and, on the back of another successive year of increasing profits, the Board will be recommending to shareholders an increase in the final dividend to 1.12 pence (2012: 1.00 pence).  This, together with the interim dividend of 0.48 pence (2012: 0.44 pence) paid in October 2013 gives a total for the year of 1.60 pence (2012: 1.44 pence), an increase of 11.00%.

Subject to shareholder approval at the Annual General Meeting, which is being held on 23 May 2014, the final dividend will be paid on 6 June 2014, to qualifying shareholders on the Register at the close of business on 9 May 2014.  The ordinary shares ex-dividend date is 7 May 2014. 

Outlook

The latter half of the year exhibited a marked improvement both for our business and the economy as a whole.  On the downside - as the Company executes more business internationally particularly within the Analytics sector, we are experiencing the consequences of the strength of £Sterling especially against the US Dollar.  Although we don't expect the US Dollar to weaken to the same extent in the year (2013: £/US$ depreciation was circa 11.5%), should the US Dollar remain at current levels it will effectively be lowering our day rate for our US$ business projects by the same percentage.  To offset this, the Board is looking at a number of options including, increasing its day rate overseas on new projects, re-negotiating rates as projects come up for renewal as well as exploring ways to increase the efficiency and skills of our staff.

Against the above factors  and taking into consideration the improving economic situation coupled with our  continuing strong level of Recurring Revenue and our strong balance sheet, your Board is reasonably optimistic for a ninth year of increasing profitability.

We look forward to updating stakeholders on our progress over the coming year.

19 March 2014

Consolidated statement of comprehensive income for the year ended 31 December 2013
	Note			2013 £'000	2012 £'000  2
	Continuing operations
		Revenue	1/2	9,769	9,208
		Cost of sales		(5,603)	(5,321)
	Gross profit			4,166	3,887
		Distribution costs		(2,137)	(2,293)
		Administration expenses		(1,084)	(842)
		Other operating income		14	38
	Profit from operations			959	790
		Finance costs		(23)	(33)
		Other gains and losses		30	35
	Profit before tax			966	792
		Tax		(173)	(62)
	Profit for the period			793	730
		Gains on property revaluation		121	-
	Total comprehensive income for the period attributable to equity holders of the parent			914	730
	Earnings per share
		Basic		3.14p	2.94p
		Diluted		3.08p	2.87p
	Consolidated statement of changes in equity for the year ended 31 December 2013
			Note	2013	2012
				£'000	£'000
	Profit for the year			793	730
	Other comprehensive income
	Items that will be reclassified to profit and loss
		Gains on property revaluation		121	-
	Total comprehensive income			914	730
	Transactions with owners
		Purchase of own shares		(42)	(8)
		Sale of own shares		23	3
		Share-based payments		3	3
		Issue of share capital		57	34
		Dividends paid	3	(373)	(335)
	Total transactions with owners			(332)	(303)
	Change in shareholders' equity for the year			582	427
		Shareholders' equity at start of year		4,845	4,418
	Shareholders' equity at end of year			5,427	4,845

Consolidated balance sheet as at 31 December 2013
				2013	2012
				£'000	£'000
	Non-current assets
		Goodwill		1,018	1,018
		Other intangible assets		38	56
		Property, plant and equipment		2,414	2,361
		Investments		800	800
		Deferred tax assets		7	17
				4,277	4,252
	Current assets
		Investments		-	561
		Trade and other receivables		2,907	2,672
		Cash and cash equivalents		539	70
				3,446	3,303
	Total assets			7,723	7,555
	Current liabilities
		Trade and other payables		(1,427)	(1,541)
		Tax liabilities		(166)	(57)
		Borrowings		(162)	(155)
				(1,755)	(1,753)
	Non-current liabilities
		Borrowings		(541)	(957)
				(541)	(957)
	Total liabilities			(2,296)	(2,710)
	Net assets			5,427	4,845
	Equity
		Share capital		509	503
		Share premium account		1,893	1,842
		Revaluation reserve		171	50
		Own shares		(2)	-
		Retained earnings		2,856	2,450
	Attributable to equity holders of the parent			5,427	4,845
These financial statements of IS Solutions Plc, registered number 01892751, were approved by the Board of Directors and authorised for issue on 19 March 2014 and were signed on its behalf by: J Lythall, Director

Consolidated cash flow statement for the year ended 31 December 2013
			2013	2012
			£'000	£'000
	Operating activities
		Profit from operations	959	790
	Adjustments for:
		Depreciation of property, plant and equipment	168	161
		Loss on disposal of property, plant and equipment	5	-
		Amortisation of intangible assets	18	-
		Impairment of goodwill	-	100
		Share-based payments	3	3
	Operating cash flows before movements in working capital		1,153	1,054
		Increase in receivables	(235)	(333)
		Decrease in payables	(114)	(398)
	Cash generated by operations		804	323
		Income taxes paid	(54)	(41)
	Net cash from operating activities		750	282
	Investing activities
		Interest paid	(23)	(33)
		Purchase of non-current investments	-	(100)
		Proceeds on sale of investments	591	-
		Capitalisation of development costs	-	(56)
		Purchase of property, plant and equipment	(115)	(97)
		Proceeds on disposal of property, plant and equipment	10	-
	Net cash used from/ (used in) investing activities		463	(286)
	Financing activities
		Issue of new share capital	57	34
		Dividends paid	(373)	(335)
		Repayment of borrowings	(409)	(151)
		Purchase of own shares (net)	(19)	(5)
	Net cash used in financing activities		(744)	(457)
	Net increase/ (decrease) in cash and cash equivalents		469	(461)
		Cash and cash equivalents at start of year	70	531
	Cash and cash equivalents at end of year		539	70

Notes
1.	Revenue
			Group
	Continuing operations	2013 £'000		2012 £'000
	Sale of goods	1,567		1,482
	Rendering of services	8,202		7,726
		9,769		9,208
	Other operating income	14		38
		9,783		9,246
	Analysis of other operating income
	Operating lease receipts	4		28
	Director's fees received from Speed-Trap (Holdings) Ltd	10		10
		14		38

2.	Business and geographical segments
	The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009.  IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief operating decision maker to allocate resources to the segments and assess their performance.
	The information presented to the Group Managing Director for the purpose of resource allocation and assessment of segment performance is focused on the type of product sold.  The principal activity of the Group is split into three categories of product sold: ·      License sales ·      Project work ·      Recurring revenues No allocation of other income and costs to these categories is made because the Directors consider that any such allocation would be arbitrary.  Any allocation of assets and liabilities to these categories would also be arbitrary.  The reporting below is consistent with that provided to the Group Managing Director.
	Continuing operations 2013		Licence sales	Project work	Recurring revenues	Total £'000
		External sales	4,767	4,003	4,859	13,629
		Adjustment for agency basis	(3,200)	-	(660)	(3,860)
		Reported revenue	1,567	4,003	4,199	9,769
		Segment result (gross profit)	270	1,231	2,665	4,166
		Other operating costs and income				(3,207)
		Investing and financing activities				7
		Profit before tax				966
		Major customers (over 10% of revenue)
		Customer 1	-	1,455	971	2,426
		Customer 2	-	536	938	1,474

2.	Business and geographical segments ….continued
		Continuing operations 2012		Licence sales	Project work	Recurring revenues	Total £'000
			External sales	1,482	3,052	5,556	10,090
			Adjustment for agency basis	-	-	(882)	(882)
			Reported revenue	1,482	3,052	4,674	9,208
			Segment result (gross profit)	296	915	2,676	3,887
			Other operating costs and income				(3,097)
			Investing and financing activities				2
			Profit before tax				792
			Major customers (over 10% of revenue)
			Customer 1	-	1,287	1,200	2,487
		The accounting policies of the reportable segments are the same as the Group's accounting policies.
	Geographical information:  The Group operates entirely within the UK.

3.	Dividends
		2013	2012
		£'000	£'000
	Amounts recognised as distributions to equity holders
	Final dividend for the year ended 31 December 2012 of 1.00p (2011: 0.90p).	250	224
	Interim dividend for the year ended 31 December 2013 of 0.48p (2012: 0.44p.)	123	111
		373	335
	Proposed final dividend for the year ended 31 December 2013 of 1.12p.	285
	The proposed final dividend is subject to shareholders' approval at the AGM in May 2014, and has not been included as a liability in these financial statements.

4.	Earnings per share
		2013	2012
	Earnings, being the net profit attributable to equity holders of the parent (£'000)	793	730
	Weighted average of ordinary shares in issue	25,270,620	24,852,767
	Weighted average of own shares	(15,802)	-
	Weighted average for the purpose of basic earnings per share	25,254,818	24,852,767
	Effect of diluted share options	460,479	539,568
	Weighted average for the purpose of diluted earnings per share	25,715,297	25,392,335

5.

Annual Report & General Meeting

The Company's Report and Accounts for the year ended 31 December 2013 together with the Notice of Annual General Meeting are being sent to shareholders shortly and will be available to view on the Company's website:  www.issolutions.co.uk.  The Annual General Meeting will be held at 10.00 am on Friday, 23 May 2014 at the Company's Registered office: Windmill House, 91-93 Windmill Road, Sunbury on Thames, TW16 7EF.

 

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