Interim Results

IS Solutions PLC 28 September 2001 Issued by Citigate Dewe Rogerson Ltd, Birmingham Date: Friday, 28 September 2001 Embargoed: 9.00am IS Solutions Plc Interim Results for the six months ended 30 June 2001 - Despite challenging markets, results in line with revised market expectations - Turnover £5.9 million - Profit before tax (pre-goodwill) £70,000 - Earnings per share (pre-goodwill) 0.20p - Interim Dividend 0.08p - Net assets £4.57 million - Solid contribution from AXL (acquired April 2000) - Strong balance sheet, net cash position - US operation secures contract within pharmaceutical industry that should provide stable revenue in H2 'The outlook for our business is very much tied to the direction of the global economy. To give a meaningful statement for the Company's outlook presupposes an understanding of what the global economy is going to do - something which is outside the remit of the Board. This outlook therefore concentrates on the Board's strategy in dealing with the current economic climate. 'Our priority is to ensure that the Company remains robust enough to ride out the current downturn whilst also emerging in a strong position to benefit from the reduced competition when markets do improve.' Barrie Clark, Chairman FULL STATEMENT ATTACHED Enquiries: John Lythall, Chief Executive Fiona Tooley IS Solutions Plc Citigate Dewe Rogerson Tel: 01932 893333 Tel: 0121 455 8370 IS Solutions Plc Interim Results for the six months ended 30 June 2001 STATEMENT BY THE CHAIRMAN, MR BARRIE CLARK The Board announced on 28 June 2001 that during May and June the Company had witnessed a severe downturn in short term prospects in the UK, primarily as a result of the reduction or deferral of larger IT capital projects for a number of existing and prospective UK clients, many of whom were subsidiaries of major US and Japanese groups. As indicated, this downturn has impacted significantly on the results for the six month period to 30 June 2001 and turnover was reduced to £5.9 million (2000: £6.53 million) and profit before tax and goodwill was £70,000 (2000: £482,000). Basic earnings per share (before goodwill amortisation) for the period were 0.20p (2000: 1.39p). The balance sheet remains healthy with net tangible assets standing at £4.57 million (2000: £4.97 million), with net cash of £ 824,000 (2000: £1.34 million). The Board has determined to pay a reduced interim dividend of 0.08p per share (2000: 0.35p) which will be paid on 9 November 2001 to all share holders on the register at the close of business on 12 October 2001. UK The global slowdown in world markets has had a severe impact on the projects side of the business in the first half with continuing delays in existing projects and a decline in new project starts. The emphasis put on increasing the recurring revenue side of the business in the earlier part of the year has helped to partially offset the decline in project revenues but we have had to reduce headcount in the Sunbury operation in line with current levels of business to enable us to stay in profit overall. Direct costs are now down by some 30% from the 2000 levels. On a brighter note, the high proportion of recurring revenue from AXL (acquired April 2000) has continued throughout the slowdown and continues to be a strong contributor to the bottom line. USA The current economic downturn originated in the USA and the effects have been more severe with our operation there showing a small loss before management charges for the period. Costs there have also been reduced to match the level of business. The US business has, as reported in the June statement, secured a solid viable contract (in late June) from a client in the pharmaceutical industry that should provide a stable revenue stream in the second half. Outlook The outlook for our business is very much tied to the direction of the global economy. To give a meaningful statement for the Company's outlook presupposes an understanding of what the global economy is going to do - something which is outside the remit of the Board. This outlook therefore concentrates on the Board's strategy in dealing with the current economic climate. Since inception in 1985 the Company has always been cash generative, self sufficient and profitable. It has also built and retained a strong and loyal corporate client base which, coupled with our increasing recurring revenue stream, will sustain us through to hopefully a more buoyant 2002. Our priority is to ensure that the Company remains robust enough to ride out the current downturn whilst also emerging in a strong position to benefit from the reduced competition when markets do improve. The Board has, therefore, sought to balance the need to reduce costs in line with current market conditions against the retention of core skills required within the business, the effects of which will flow through in the second half. This action, together with our strong balance sheet will enable the Group to take maximum advantage of the upturn when it comes. IS Solutions Plc Interim Results Consolidated Profit and Loss Account for the six months ended 30 June 2001 6 months ended Year ended 30 June 31 December Note 2001 2000 2000 £'000 £'000 £'000 Turnover 2 5,904 6,529 12,218 Cost of sales (3,954) (4,320) (7,997) Gross profit 1,950 2,209 4,221 Distribution costs (933) (1,060) (1,894) Administration expenses (1,187) (690) (1,825) Operating (loss)/profit (170) 459 502 Investment income 11 25 47 Interest payable and similar charges (2) (2) (2) Profit on ordinary activities before 70 482 868 goodwill (231) - (321) Amortisation of Goodwill (Loss)/profit on ordinary activities before 2 (161) 482 547 taxation Tax on profit on ordinary activities 3 (21) (145) (243) (Loss)/profit on ordinary activities after (182) 337 304 taxation Dividends 4 (20) (85) (260) Retained (loss)/profit (202) 252 44 Earnings per ordinary share 5 (0.73)p 1.39 p 1.23 p Earnings per share before goodwill 0.20 p 1.39 p 2.41 p amortisation Diluted earnings per ordinary share 5 (0.73)p 1.35 p 1.17 p Dividends per ordinary share 4 0.08 p 0.35 p 1.05 p IS Solutions Plc Interim Results Consolidated Balance Sheet as at 30 June 2001 at 30 June at 31 December 2001 2000 2000 £'000 £'000 £'000 Fixed assets Intangible assets 1,591 2,114 1,822 Tangible assets 825 894 887 Investments 68 0 68 2,484 3,008 2,777 Current assets Stocks 77 125 74 Debtors 2,900 3,213 2,348 Cash at bank and in hand 824 1,341 1,571 3,801 4,679 3,993 Creditors Amounts falling due within one year (1,714) (2,715) (2,012) Net current assets 2,087 1,964 1,981 Total assets less current liabilities 4,571 4,972 4,758 Net assets 4,571 4,972 4,758 Capital and reserves Called up share capital 496 496 496 Share premium account 2,133 2,170 2,133 Profit and loss account 1,942 2,306 2,129 Equity shareholders' funds 4,571 4,972 4,758 IS Solutions Plc Interim Results Consolidated Cash Flow Statement for the six months ended 30 June 2001 6 months ended Year ended 30 June 31 December 2001 2000 2000 £'000 £'000 £'000 Net cash flow from operating activities (366) (41) 952 Returns on investments and servicing of finance Interest received 11 25 47 Interest paid (2) - - Interest element of finance lease rentals - (2) (2) Net cash flow from returns on investments 9 23 45 and servicing of finance Taxation (7) - (390) Capital expenditure Purchase of tangible fixed assets (245) (311) (537) Sale of tangible fixed assets 21 8 14 Purchase of Investments - - (39) Net capital expenditure (224) (303) (562) Acquisition of subsidiary Purchase of subsidiary - (2,360) (2,381) Cash acquired with subsidiary - 123 102 Net cost of acquisition - (2,237) (2,279) Dividends paid (174) (151) (239) Cash flow before use of liquid resources and financing (762) (2,709) (2,473) Financing Issue of ordinary share capital - 1,780 1,743 Capital element of finance lease rental payments - (5) (5) Net cash flow from financing - 1,775 1,738 Decrease in cash in period (762) (934) (735) IS Solutions Plc Interim Results Net cash flow from operating activities 6 months ended Year ended 30 June 31 December 2001 2000 2000 £'000 £'000 £'000 Operating (loss)/profit (170) 459 502 Net depreciation charge 286 162 385 Amortisation of Goodwill 231 - 321 Change in working capital (713) (662) (256) Net cash flow from operating activities (366) (41) 952 Reconciliation of net cash flow to movement in net funds 6 months ended Year ended 30 June 31 December 2001 2000 2000 £'000 £'000 £'000 (Decrease) in cash in the period (762) (934) (735) Cash flow arising from lease financing - 5 5 Translation differences 15 2 33 Movement in net funds in the year (747) (927) (697) Net funds at 1 January 2001 1,571 2,268 2,268 Net funds at 30 June 2001 824 1,341 1,571 Statement of total recognised gains and losses 6 months ended Year ended 30 June 31 December 2001 2000 2000 £'000 £'000 £'000 (Loss)/profit for the period (202) 252 44 Currency translation differences 15 2 33 Total recognised gains and losses (187) 254 77 IS Solutions Plc Interim Results for the six months ended 30 June 2001 Notes to the Interim Financial Statements 1 Basis of Preparation The interim financial statements have been prepared on the basis of accounting policies set out in the Group financial statements for the year ended 31 December 2000. Minor differences in acquisitions values in the comparative figures are due to fair value adjustments at the year end. The statements are unaudited but have been reviewed by KPMG Audit Plc, and their report is set out on page 8. 2 Segmental Analysis Turnover arises from the distribution, design and installation of computer hardware and software systems. 6 months ended Year ended 30 June 31 December 2001 2000 2000 £'000 £'000 £'000 Turnover UK 5,502 5,544 10,217 USA 402 985 2,001 5,904 6,529 12,218 (Loss)/Profit before Taxation UK (114) 328 424 USA (47) 154 123 (161) 482 547 Net Assets/(Liabilities) UK 4,622 4,976 4,761 USA (51) (4) (3) 4,571 4,972 4,758 3 Taxation The taxation charge for the six months ended 30 June 2001 is based on an estimated effective rate of 30% for the full year. 4 Dividends The Directors have elected to pay an interim dividend of 0.08p per share (2000 interim dividend 0.35p, final dividend 1.05p) on 9 November 2001 to shareholders on the register at 12 October 2001. 5 Earnings per Share The basic earnings per share figure of (0.73p) (2000: 1.39p) has been calculated on the basis of a loss after tax of £182,000 (2000: £337,000 profit) and the weighted average number of shares in issue of 24,793,190 (2000: 24,304,178). The diluted earnings per share figure of (0.73p) has been calculated on the basis that 24,793,190 shares had been in issue in the period (2000: 24,890,678). 6 Interim Results The interim results are unaudited and do not comprise full accounts within the meaning of Section 240 of the Companies Act 1985. Full accounts for the year ended 31 December 2000, on which the auditors gave an unqualified report, have been delivered to the Registrar of Companies. Copies of this statement are available from the registered office. Independent Review Report by KPMG Audit Plc to IS Solutions Plc Introduction We have been instructed by the Company to review the financial information set out on pages 3 to 8 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where they are to be changed in the next annual accounts in which case any changes, and the reasons for them, are to be disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999 /4: Review of Interim financial information issued by the Auditing Practices Board. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2001. KPMG Audit Plc Chartered Accountants 1 Forest Gate Brighton Road Crawley West Sussex RH11 9PT 28 September 2001

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