Final Results
IS Solutions PLC
09 April 2003
I S Solutions plc
Preliminary Results for the year ended 31 December 2002
- Results in line with expectations
- Turnover of £7.426 million
- Pre-tax pre-goodwill loss (for continuing operations) of £442,000
- US operations discontinued
- Outsourcing annualised revenue covers 72 per cent. of total Company
overheads
- Net cash increased at year end to £1.094 million
'The Company traded at a small profit level in the fourth quarter of last year
and the Board expects that the first quarter of 2003 should be close to
breakeven.'
'It is the Board's belief that we are reaching the bottom of the down cycle in
our industry. We are experiencing more activity at the bidding stage and,
although the process of closing business is still long and drawn out, we believe
that 2003 offers greater opportunities.'
Chairman's Statement
Market conditions continued to be difficult throughout the second half of 2002
and, as previously announced, our US operation was closed. Having progressively
reduced the headcount in the US we had reached the stage where prospects for
recovery there were so limited that it became uneconomic to maintain our
presence.
Group turnover, including discontinued operations, was £7.426 million (2001:
£10.873 million) with a group pre-tax, pre-goodwill loss of £932,000 (2001:
profit of £215,000). This was struck after non-recurring operating losses for
the discontinued US operations of £490,000 comprising a bad debt of £217,000
(announced in the interims), US closure costs of approximately £82,000 and
trading losses in the US for the year of £191,000. Loss per share (excluding
goodwill amortisation) was 3.3 pence (2001: profit of 0.70p) with net assets at
31st December 2002 standing at £3.190 million (2001: £4.462 million). Net cash
increased in the year to £1.094 million as at 31st December 2002 (2001:
£758,000).
For the UK, the results were in line with Board expectations with turnover for
continuing operations for the full year at £7.155 million (2001: £10.004
million) and pre-tax, pre-goodwill loss for the continuing operations of
£442,000 (2001: profit of £223,000).
In view of the continuing difficult trading conditions, the board has elected
not to pay any dividend.
UK
Projects: 2002 was the second year that we experienced companies holding back
from investment in IT projects and, where projects were implemented, there was
substantial pressure on the daily charge out rates. Our focus throughout the
year continued to be on our existing client base and we would like to thank them
for their loyalty during this period.
Outsourcing: as indicated in my statement last year, outsourcing was a key area
for us during 2002, being an area that had the potential for some growth.
Revenues during the year grew by 8.3%. We continued to build on our major
outsourcing contracts with Toshiba, Toyota and Channel 4 and added a number of
new clients such as Veritas, Accord and Robbins Olivey. The ongoing annualised
revenue from this area now covers some 72% of our total company overheads.
Financial Products: financial products continues to be the most stable area of
our business and was a strong contributor throughout the year. A key client has
been Proquote Ltd. in which we had a small shareholding, held at a cost of
£25,000. The recent sale of Proquote to the London Stock Exchange Plc., dealt
with as a post balance sheet event, will result in the company receiving an
initial £480,000 (further boosting our cash reserves), with potential for a
further £400,000 over the next 2 years.
USA
As previously announced, the loss making US operation was closed due to there
being no signs of any significant medium term improvements in trading. All
closure costs, which total £82,000, are included in the 2002 accounts.
Personnel
The continuing recession in the IT industry meant that we had to further reduce
headcount during 2002 to keep our costs in line with the sustainable levels of
business. The Board would like to express its thanks to all our employees for
their mature approach in what has been a difficult year.
Outlook
With the closure of the US office and the reduction in our cost base which took
place in 2002, the Company was able to move into a small profit in the fourth
quarter of last year and the Board expects that the first quarter of 2003 should
be close to breakeven. Our balance sheet remains strong, we remain cash
generative and we have successfully retained the core skills required in the
group. It is the Board's belief that we are reaching the bottom of the down
cycle in our industry. We are experiencing more activity at the bidding stage
and, although the process of closing business is still long and drawn out, we
believe that 2003 offers greater opportunities. Although the current events in
the Middle East have cast some uncertainty on the potential for recovery, it is
three years since we experienced the IT investment of Y2K, and companies are now
beginning to look at replacing certain aspects of their IT infrastructure.
Barrie Clark
9 April 2003
Consolidated Profit and Loss Account for the year ended 31st December 2002
2002 2001
------ ------
Total Total
£'000 £'000
Turnover
Continuing operations 7,046 10,004
Acquisitions 109 -
Discontinued operations 271 869
------- -------
Group Turnover 7,426 10,873
Cost of sales (4,563) (6,489)
-------- --------
Gross profit 2,863 4,384
Distribution costs (2,578) (2,723)
Administration expenses (1,662) (1,896)
Operating loss
Continuing operations (791) (227)
Acquisitions (96) -
Discontinued operations (490) (8)
-------- --------
Group operating loss (1,377) (235)
Investment income 9 16
Interest payable and similar charges - (3)
(Loss)/profit before goodwill amortisation (932) 215
Amortisation of goodwill (436) (437)
------- --------
Loss on ordinary activities before taxation (1,368) (222)
Tax on loss on ordinary activities 47 (21)
-------- -------
Loss on ordinary activities after taxation (1,321) (243)
Equity minority interests 67 (21)
-------- -------
Loss for the financial year (1,254) (264)
Dividends - (60)
-------- --------
Transferred to reserves (1,254) (324)
-------- --------
Loss per ordinary share
Basic (5.06)p (1.06)p
Before goodwill amortisation (3.30)p 0.70p
Diluted (5.06)p (1.06)p
Proposed dividend - 0.24p
There are no material differences between reported profits and losses and
historical profits and losses on ordinary activities before tax.
Statement of total recognised gains and losses
2002 2001
------ ------
£'000 £'000
Loss for the year (1,254) (324)
Currency translation differences (18) 28
-------- --------
Total recognised gains and losses (1,272) (296)
-------- --------
Consolidated Balance Sheet as at 31st December 2002
2002 2001
£'000 £'000 £'000 £'000
Fixed assets ------- ------- ------- -------
Intangible assets 1,099 1,590
Tangible assets 428 704
Investments 29 29
------ ------
1,556 2,323
Current assets
Debtors 1,888 2,943
Cash at bank and in hand 1,094 758
------ ------
2,982 3,701
Creditors
Amounts falling due within one year (1,311) (1,545)
-------- --------
Net current assets 1,671 2,156
------- -------
Total assets less current liabilities 3,227 4,479
Provisions for liabilities and charges (82) -
------ -------
3,145 4,479
Equity minority interests 45 (17)
------- -------
Net assets 3,190 4,462
------- -------
Capital and reserves
Called up share capital 496 496
Share premium account 2,133 2,133
Profit and loss account 561 1,833
------- -------
Equity shareholders' funds 3,190 4,462
------- -------
Consolidated cash flow statement for the year ended 31st December 2002
2002 2001
£'000 £'000
------ ------
Net cash flow from operating activities 475 (132)
Returns on investments and servicing of finance ------ ------
Interest received 9 16
Interest paid - (3)
Net cash flow from returns on investments ------- -------
and servicing of finance 9 13
------- -------
Taxation (26) (188)
------- -------
Capital expenditure
Purchase of intangible fixed assets - (165)
Purchase of tangible fixed assets (128) (269)
Sale of tangible fixed assets 59 63
Transfer of investments - 39
------- -------
Net capital expenditure (69) (332)
------ ------
Acquisitions
Purchase of subsidiaries (3) (39)
Cash acquired with subsidiaries 8 31
------ ------
Net cost of acquisitions 5 (8)
------ -------
Equity dividends paid (40) (194)
------ -------
Cash flow before use of liquid resources
and financing 354 (841)
------ ------
Change in cash in the year 354 (841)
------ ------
Reconciliation of net cash flow to movement in net funds
2002 2001
£'000 £'000
------- -------
Change in cash in the year 354 (841)
Translation differences (18) 28
------ ------
Movement in net funds in the year 336 (813)
Net funds at 1st January 758 1,571
------- -------
Net funds at 31st December 1,094 758
-------- --------
Notes
1. Loss per share
2002 2001
------- -------
Loss for the financial year (£'000s) (1,254) (264)
Total issued shares (000s) 24,793 24,793
Weighted average number of ordinary shares (000s) 24,793 24,793
Dilutive share options (000s) - -
Basic loss per share (5.06)p (1.06)p
Diluted loss per share (5.06)p (1.06)p
2. Segmental information
2002 2001
£'000 £'000
------- -------
Turnover
UK 7,155 10,004
USA 271 869
------- --------
7,426 10,873
------- --------
Loss before taxation
UK (878) (214)
USA (490) (8)
-------- -------
(1,368) (222)
-------- -------
Net assets/(liabilities)
UK 3,426 4,473
USA (236) (11)
------- -------
3,190 4,462
------- -------
3. Post balance sheet events
The Company disposed of its investment in Proquote Ltd, held at a cost of
£25,000, in March 2003. This will result in the Company receiving an initial
£480,000 with potential for a further £400,000 over the next 2 years.
4. Reconciliation of operating loss to net cash flow from operating activities
2002 2001
£'000 £'000
------- -------
Operating loss (1,377) (235)
Net depreciation charge 400 401
Amortisation of goodwill 436 437
Decrease in stock - 74
Decrease/(increase) in debtors 1,109 (483)
Decrease in creditors (175) (326)
Increase in provisions 82 -
Net cash flow from operating activities 475 (132)
5. The results for the years ended 31 December 2002 and 31 December 2001 are
extracted from the audited accounts of I S Solutions plc on which the auditors
have issued an unqualified opinion which did not contain a statement under
section 237(2) or (3) of the Companies Act 1985. The audited accounts for the
year ended 31 December 2001 have been delivered to the Registrar of Companies.
6. It is anticipated that the Report and Accounts will be posted to
shareholders on 29 April 2003. Further copies of the Report and Accounts will
be available after that date from the Company's Registered Office: Windmill
House, 91-93 Windmill Road, Sunbury-on-Thames, Middlesex TW16 7EF.
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