Interim Results

IS Solutions PLC 28 September 2006 Issued by Citigate Dewe Rogerson Ltd, Birmingham Date: Thursday, 28 September 2006 IS Solutions plc Interim Results for the six months ended 30th June 2006 • IS Solutions returns to top-line growth via the strategy of diversifying into value-added software products • Turnover £3.38 million (2005: £2.57 million) up 31% • Pre-tax profits £128,000 (2005: £105,000) up 22% • EPS 0.53 pence (2005: 0.40 pence) up 32% • Cash remains strong at £1.7 million at the half-year stage • Acquisitions integrating well • Interim dividend proposed of 0.17 pence (2005: 0.13 pence) Chairman Barrie Clark said: In the first half of the year we have experienced growth in all three areas of products, projects and support, leading to a better balanced business with less reliance on winning large projects to achieve growth. The Board continues to seek to broaden our portfolio with complementary products and services whether by resale agreements or acquisition. The Directors remain optimistic about the Group's prospects for the year as a whole. FULL STATEMENT ATTACHED Enquiries: John Lythall, Managing Director Katie Dale/Liz Rudman IS Solutions Plc Citigate Dewe Rogerson Ltd Tel: 01932 893333 Tel: 0121 455 8370 www.issolutions.co.uk -2- IS Solutions plc Interim Results for the six months ended 30th June 2006 STATEMENT BY THE CHAIRMAN, BARRIE CLARK The interim results for the six months ended 30th June 2006 are in line with the Board's expectations. Pre-tax profits increased by 22% to £128,000 (2005: £105,000) and earnings per share moved up by 32% to 0.53p (2005: 0.40p) with an increase in turnover of 31% to £3.38 million (2005: £2.57 million). Cash remains strong at £1.7 million (31st December 2005: £2.1 million, 30th June 2005: £1.8 million). The first half of 2006 has seen the company return to top line growth via the strategy of diversifying into value-added software products first adopted at the end of 2004. The growth in revenue has occurred across all areas with increases in product license sales leading to an increase in project work from implementation services and also in recurring revenue streams generated by the sale of support contracts. However, due to the investment required to build up the product sales and support infrastructure we have yet to realise an improvement in gross margins in this area. As mentioned in the 2005 Report & Accounts, at the end of the first quarter 2006 we purchased Candric Ltd, a small loss making IT services company, to give us the critical mass to operate more effectively in the services arena. I am pleased to report that the consolidation of Candric into our Sunbury operation went very well and is now complete, allowing it to contribute to the bottom line as well as increasing the top line growth. In June of this year we also acquired the European distribution rights to Watchfire - Website scanning software for QA, Accessibility and Compliance checking for which we first signed a reseller agreement in 2005. Dividend The Board is pleased to announce a dividend for the half year of 0.17p per ordinary share (2005 half year: 0.13p), which reflects both the continuing improvement in the trading environment and the strong balance sheet and cash position of the Company. The interim dividend will be paid on the 1st November 2006 to shareholders on the register at the close of business on the 6th October 2006. Outlook In the first half of the year we have experienced growth in all three areas of products, projects and support, leading to a better balanced business with less reliance on winning large projects to achieve growth. The Board continues to seek to broaden our portfolio with complementary products and services whether by resale agreements or acquisition. The Directors remain optimistic about the Group's prospects for the year as a whole. -3- IS Solutions plc Consolidated Income Statement for the six months ended 30th June 2006 6 months ended Year ended 30th June 31st December 2006 2005 2005 £'000 £'000 £'000 ----------------------------------------------------------------------------------- Continuing operations Revenue 3,376 2,573 5,085 Cost of sales (2,176) (1,358) (2,652) ----- ----------------------------------------------------------------------------- Gross profit 1,200 1,215 2,433 Distribution costs (663) (699) (1,453) Administration expenses (473) (449) (971) ----------------------------------------------------------------------------------- Profit from operations 64 67 9 Investment income 64 38 99 ----------------------------------------------------------------------------------- Profit before tax 128 105 108 Tax - (5) (20) ----------------------------------------------------------------------------------- Profit attributable to equity holders of the parent 128 100 88 ----------------------------------------------------------------------------------- Earnings per share Basic 0.53 p 0.40 p 0.37 p Diluted 0.51 p 0.40 p 0.35 p ----- ----------------------------------------------------------------------------- Consolidated statement of changes in shareholders' equity for the period 6 months ended Year ended 30th June 31st December 2006 2005 2005 £'000 £'000 £'000 ------------------------------------------------------------------------------------ Profit for the period 128 100 88 ------------------------------------------------------------------------------------ Total recognised income and expense for the period 128 100 88 Sale of own shares 45 - - Dividends paid (65) (48) (79) ------------------------------------------------------------------------------------ Change in shareholders' equity for the period 108 52 9 Shareholders equity at start of 2,601 2,592 2,592 period ---------------------------------------------------------------------- ------------- Shareholders' equity at end of period 2,709 2,644 2,601 ------------------------------------------------------------------------------------ -4- IS Solutions plc Consolidated balance sheet as at 30th June 2006 At 30th June At 31st December 2006 2005 2005 £'000 £'000 £'000 -------------------------------------------------------------------------------- Non-current assets Goodwill 249 100 100 Other intangible assets 52 - - Property, plant and equipment 240 275 223 Deferred tax assets 11 - - -------------------------------------------------------------------------------- 552 375 323 -------------------------------------------------------------------------------- Current assets Trading investments - 51 75 Trade and other receivables 1,498 1,544 999 Cash and cash equivalents 1,659 1,809 2,087 -------------------------------------------------------------------------------- 3,157 3,404 3,161 -------------------------------------------------------------------------------- Total Assets 3,709 3,779 3,484 -------------------------------------------------------------------------------- Current liabilities Trade and other payables (980) (1,130) (863) Tax liabilities (10) (5) (20) -------------------------------------------------------------------------------- (990) (1,135) (883) Non-current liabilities Deferred tax liabilities (10) - - -------------------------------------------------------------------------------- Total liabilities (1,000) (1,135) (883) -------------------------------------------------------------------------------- Net assets 2,709 2,644 2,601 -------------------------------------------------------------------------------- Equity Share capital 496 496 496 Share premium account 1,786 1,783 1,783 Own shares (63) (102) (102) Retained earnings 490 467 424 -------------------------------------------------------------------------------- Total equity 2,709 2,644 2,601 -------------------------------------------------------------------------------- -5- IS Solutions plc Consolidated Cash Flow Statement for the six months ended 30th June 2006 6 months ended Year ended 30th June 31st December 2006 2005 2005 £'000 £'000 £'000 -------------------------------------------------------------------------------- Operating activities Profit from operations 64 67 9 Adjustments for: Depreciation of property, plant and 45 49 108 equipment Amortisation of intangible assets 8 - - Impairment of goodwill - 19 19 (Increase)/decrease in debtors (383) (140) 405 Increase/(decrease) in creditors 46 (94) (361) ---------------------------------------------------------------------------------- Cash (utilised by)/generated by operations (220) (99) 180 Income taxes repaid - 33 33 ---------------------------------------------------------------------------------- Net cash (used in)/from operating activities (220) (66) 213 ---------------------------------------------------------------------------------- Investing activities Interest received 34 38 75 Proceeds on disposal of trading 105 - - investments Purchase of tangible fixed assets (62) (31) (61) Sale of tangible fixed assets - 6 29 Acquisition of subsidiary (234) - - --------------------------------------------------------------------------------- Net cash (used in)/from investing activities (157) 13 43 --------------------------------------------------------------------------------- Financing activities Dividends paid (65) (48) (79) Sale of own shares 14 - - --------------------------------------------------------------------------------- Net cash used in financing activities (51) (48) (79) --------------------------------------------------------------------------------- Net (decrease)/inc rease in cash and cash equivalents (428) (101) 177 Cash and cash equivalents at start of year 2,087 1,910 1,910 --------------------------------------------------------------------------------- Net funds at end of period 1,659 1,809 2,087 --------------------------------------------------------------------------------- -6- IS Solutions plc Notes to the interim financial statements 1. Basis of preparation The interim financial information for the six months ended 30 June 2006 and 30 June 2005 does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 and has not been audited by the Group's auditors. The financial information for the year ended 31 December 2005 has been extracted from the statutory accounts for that year which have been filed with the Registrar of Companies and which contain an unqualified audit report and did not contain a statement under s237(2) or (3) of the Companies Act 1985. The interim financial information has been prepared on the basis of the accounting policies and presentation required by International Financial Reporting Standards, incorporating International Accounting Standards (IAS's) and Interpretations (collectively IFRS) and on a consistent basis with the latest published Annual Accounts. 2. Business and geographical segments Business segments The group is involved solely in the supply of internet services. Geographical segments The group operates entirely within the UK. 3. Acquisition On 22nd March 2006 the Group acquired 100% of Candric Limited. Consideration paid was £200,000 comprising cash of £150,000 and treasury shares of £50,000. 4. Earnings per ordinary share The basic earnings per share figure of 0.53p (2005: interim 0.40p, final 0.37p) has been calculated on the basis of a profit attributable to the equity shareholders of the parent for the period of £128,000 (2005: interim £100,000, final £88,000) and the weighted average number of shares in issue of 24,227,572 (2005 interim: 24,793,190, and final: 23,993,190). The diluted earnings per share figure of 0.51p (2005: interim 0.40p, final 0.35p) has been calculated on the same basis but including the dilutive effect of 689,310 share options (2005 interim: nil, final: 950,000). 5. Dividends During the period a dividend of £65,000 (0.27p per share) was paid in relation to the year ended 31st December 2005 (2005: £48,000 (0.20p per share) in relation to the year ended 31st December 2004). An interim dividend of 0.17p per share (2005: 0.13p) is proposed, and will be paid on 1st November 2006 to shareholders on the register at the close of business on 6th October 2006. -7- INDEPENDENT REVIEW REPORT TO I S SOLUTIONS PLC Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2006 which comprise the consolidated income statement, the consolidated balance sheet, the consolidated statement of changes in shareholders' equity, the consolidated cash flow statement and related notes 1 to 5. 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. This report is made solely to the company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. 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 excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) 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 2006. Deloitte & Touche LLP Chartered Accountants Reading, UK 27 September 2006 This information is provided by RNS The company news service from the London Stock Exchange

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