Preliminary results - 15 months ended 31.3.15

RNS Number : 4375R

IS Solutions PLC

29 June 2015

 

Monday, 29 June 2015

IS Solutions Plc

("IS Solutions" or the "Company")

Preliminary results for the 15-month period ended 31 March 2015

Introduction

The Board is pleased to report a solid finish to the financial reporting period, with strong demand from our Analytics sector resulting in the underlying performance being in line with market expectations.

In January 2015 we completed the acquisition of Speed-Trap Holdings Limited, parent company to Celebrus Technologies Limited ("Celebrus").  This business operates in the field of big data to provide business intelligence and analysis, specialising in supplying detailed data feeds on customer interactions through internet enabled devices at an individual customer level to corporates and organisations.  The consideration was approximately £8.5m in cash and shares.  This move has transformed the Group from a Service-led business into a more balanced Product and Services business.

Following this enhancement to our business, we amended the Company's accounting reference date from 31 December to 31 March.  As well as some commercial benefit, this change was made primarily so that the market and investors would gain greater clarity and understanding of the new business model and trading performance and thereby deliver 'clean' operational trading results for the enlarged business with effect from 1 April 2015 onwards. 

The financial results being reported upon therefore cover the fifteen month trading period 1 January 2014 to 31 March 2015.

Financials

Following the stronger second half within the traditional IS Solutions business and the nine weeks of contribution from Celebrus, we are pleased to announce results for the period that are in line with market expectations.

Continuing operations	Fifteen months ended 31 March 2015	12months ended 31 December 2013	change %
Revenue -Analytics -Portals -ECM	£5.94m £4.94m £1.96m	£3.10m £3.88m £2.79m
Total revenue	£12.84m	£9.77m	+31%
Gross profit (after acquisition costs of £270k)	£4.67m	£4.17m	+12%
Underlying profit before tax*	£1.20m	£0.96m	+25%
Operating profit	£0.69m	£0.96m
Profit before tax	£0.65m	£0.96m
Earnings per share -adjusted basic* -adjusted diluted* -basic -diluted	4.02p 3.86p 1.99p 1.92p	3.14p 3.08p
Dividends -Interim paid -Final proposed	- 0.56p	0.48p 1.12p
*before acquisition costs of £539,000

Revenue in the period under review increased by 31% to £12.839m (2013: £9.769m), of which revenue of £0.54m was contributed by Celebrus since acquisition.  Recurring revenues contributed 55% to gross profit.

Underlying profit before tax before acquisition costs of £539,000 was £1.2m. 

Administration costs were higher in the period at £1.56m principally as a result of non-recurring costs including acquisition related charges totalling £0.27m.  Therefore reported profit from operations was £686,000 to £959,000 in 2013 and post-tax profit of £532,000 (2013: £793,000).

Cash and cash equivalents at 31 March 2015 stood at £0.095m (2013: £0.53m).  Total net assets at the end of the period were £11.86m compared to £5.42m at the end of 2013.

Adjusted fully diluted earnings per share was 3.86p, unadjusted EPS was 1.92p (2013: 3.08p).

Review

Looking at the performance of our business streams:-

Analytics:

At the start of the year, recurring revenues for Analytics was impacted by the cancellation of a large contract due to the client's internal budget constraints.  However, in December 2014 we won a large contract in the financial services sector which offers a level of recurring revenue contracted for the next five years with potential for further project work being generated. 

During 2014, both IS Solutions and Celebrus have been engaged in a growing number of POCs (Proof of Concept) with their partners SAS and Teradata across a number of industries and with a strong focus in the financial and retail sectors, as both sectors look for ways to minimise customer churn and maximise earnings per customer.  These POCs, paid for by the client, vary in length from one month to around three months and represent a substantial investment by our clients.  Although POC's are revenue generating, it is pleasing to report that we are now benefiting from a significant number of these moving to a full scale roll out in 2015, the resultant effect being a substantial uplift in licence sales and subsequent professional services revenue from the implementation of these solutions all of which will require on-going support, and in some cases, hosting contracts thus enhancing IS Solutions' recurring revenue stream in the current financial year and beyond.

Analytics finished the period strongly with revenue increasing by 91.61% to £5.94m (2013: £3.10m).  During the nine weeks under our ownership Celebrus contributed £0.54m in sales.

Portals:

Growth in this segment remained flat year on year with revenue of £4.94m compared to £3.88m in 2013.  This has been mainly caused (as reported at the half year) by one of our major clients requesting more of the work we carry out for them to be done off-shore in our Indian operation.

Enterprise Content Management:

ECM projects and recurring revenues stabilised by the end of the period having had a very weak start to the 2014 year.  Revenue amounted to £1.96m with most in product sales and the business is currently based on legacy technology.  To allow this part of our business to refocus its efforts over the short to medium term, we are researching and implementing new technologies.

Dividend

The Directors' focus remains on capital growth through investment in the business and increasing ROCE.  As a Board, we are also committed to a progressive dividend policy whilst balancing our investment in the business for the future benefit of all stakeholders, customers and colleagues. 

We remain confident in the future of the business - we have a clear strategy in place to develop the opportunities we have already identified that will deliver growth.  We are increasing our investments in the business in order to accelerate this particularly with Celebrus.  At this stage in our development, we are proposing a final dividend of 0.56p, which, subject to Shareholder approval at the Annual General Meeting which is to be held on 30 July 2015, will be paid on 13 August 2015 to Shareholders on the Register at the close of business on 17 July 2015.  The Ordinary shares become ex-dividend on 16 July 2015.

The return to a progressive dividend stream will be a priority for the Board.  As we indicated at the interim stage, it is our intention to review the overall dividend policy going forward so as to ensure it reflects the Company's future prospects.  On this basis we are confident that we will resume our progressive dividend policy and if appropriate, return to paying a dividend based on the overall performance in the financial period ending 31 March 2016.

People

I would like to take this opportunity to welcome staff who joined us during the period. 

Following the completion of Celebrus, Geoff Shingles joined the Company as a non-executive director.  Since the year end, we have also welcomed Peter Simmonds to the Main Board as non-executive deputy chairman who will take over as Chairman from Barrie Clark after the AGM.  Both Geoff and Peter have considerable business entrepreneurial experience having been involved in a number of companies in various industry sectors including services, software and internet solutions.  Their combined knowledge and expertise further strengthens the Board as well as increasing its independence and diversity. 

We continue to recruit quality staff and also invest in our people at all levels through training and personal development programmes to ensure we have the right balance of skill sets and know-how to drive the business forward.  On behalf of my fellow directors and all shareholders, I would like to acknowledge the hard work and commitment of all of our highly skilled technical staff around the world who continue to work together to enhance the Group's reputation with both our customers and suppliers.

Outlook

Overall we are making good progress across the business and already have a number of project opportunities with new and existing customers in the key sectors of financial services, retail and airlines.  The integration of the two businesses is ongoing and on track and has also opened up a number of cross-selling opportunities for us.  Celebrus, with its strong IP, strengthens our offering in the Analytics arena whilst also giving us the opportunity to develop a much more balanced business with stronger higher margin license sales giving rise to greater project and recurring revenue.

Following the strong finish to the period being reported, the Board is pleased to report that this trend has continued into the new financial year, with strong underlying demand continuing in our Analytics sector.  This, together with recent contract wins, put us in a good position for the new financial year ending 31 March 2016.

The market for business intelligence and Analytics is one of the fastest growing software markets.  Financial organisations are the largest investors in big data solutions, with energy, utilities, communications and media organisations presenting significant growth areas as they seek to optimise the monetisation of their base of customers and potential customers.  The ability to individualise and personally target customers is becoming more important to businesses and the Celebrus product portfolio caters for this trend.  Having worked together as partners for the past 10 years, and now operating as one unit, we are much better placed to serve this sector and optimise the opportunities presented

All of this bodes well for the future.  The Board is confident that the Company can deliver another year of solid progress and will achieve current market expectations for the year ending 31 March 2016.

Barrie Clark, Chairman

on behalf of the Board of Directors

IS Solutions Plc

29 June 2015

Unaudited consolidated statement of comprehensive income for the 15 months ended 31 March 2015 (2013: 12-months ended 31 December)
			2015	2013
			£'000	£'000
Continuing operations
	Revenue		12,839	9,769
	Cost of sales		(8,170)	(5,603)
Gross profit			4,669	4,166
	Distribution costs		(2,451)	(2,137)
	Administration expenses		(1,557)	(1,084)
	Other operating income		25	14
Profit from operations			686	959
	Investment income		4	-
	Finance costs		(38)	(23)
	Other gains and losses		-	30
Profit before tax			652	966
	Tax		(120)	(173)
Profit for the period			532	793
Other comprehensive income
	Gains on property revaluation		57	121
Total comprehensive income for the period attributable to equity holders of the parent			589	914
Earnings per share
	Basic		1.99 p	3.14 p
	Diluted		1.92 p	3.08 p

Unaudited consolidated statement of changes in equity for the 15 months ended 31 March 2015 (2013: 12-months  ended 31 December)
	Share capital	Share premium	Revaluation reserve	Own shares	Equity reserve	Retained earnings	Total £'000
Balance at 1 January 2013	503	1,842	50	-	-	2,450	4,845
Total comprehensive income			121			793	914
Issue of share capital	6	51					57
Dividends paid						(373)	(373)
Purchase of own shares				(42)			(42)
Sale of own shares				40		(17)	23
Share-based payments						3	3
Balance at1 January 2014	509	1,893	171	(2)	0	2,856	5,427
Total comprehensive income			57			532	589
Issue of share capital	199	4,677					4,876
Dividends paid						(285)	(285)
Purchase of own shares				(154)			(154)
Sale of own shares				76		(50)	26
Share-based payments						4	4
Deferred tax on outstanding share options					91		91
Contingent shares					1,289		1,289
Balance at 31 March 2015	708	6,570	228	(80)	1,380	3,057	11,863

Unaudited consolidated balance sheet as at 31 March 2015 (as at 31 December 2013)
			2015	2013
			£'000	£'000
Non-current assets
	Goodwill		8,696	1,018
	Other intangible assets		2,014	38
	Property, plant and equipment		2,414	2,414
	Investments		-	800
	Deferred tax assets		698	7
			13,822	4,277
Current assets
	Trade and other receivables		4,823	2,907
	Cash and cash equivalents		95	539
			4,918	3,446
Total assets			18,740	7,723
Current liabilities
	Trade and other payables		(4,427)	(1,427)
	Tax liabilities		(59)	(166)
	Borrowings		(454)	(162)
			(4,940)	(1,755)
Non-current liabilities
	Borrowings		(1,537)	(541)
	Deferred tax liabilities		(400)	-
			(1,937)	(541)
Total liabilities			(6,877)	(2,296)
Net assets			11,863	5,427
Equity
	Share capital		708	509
	Share premium account		6,570	1,893
	Revaluation reserve		228	171
	Own shares		(80)	(2)
	Equity reserve		1,380	-
	Retained earnings		3,057	2,856
Attributable to equity holders of the parent			11,863	5,427

Unaudited consolidated cash flow statement for the period ended 31 March 2015 (2013: 12-months ended 31 December)
			2015	2013
			£'000	£'000
Operating activities
	Profit from operations		686	959
Adjustments for:
	Depreciation of property, plant and equipment		228	168
	Loss on disposal of property, plant and equipment		-	5
	Amortisation of intangible assets		24	18
	Share-based payments		4	3
Operating cash flows before movements in working capital			942	1,153
	Increase in receivables		(924)	(235)
	Increase/(decrease) in payables		413	(114)
Cash generated by operations			431	804
	Income taxes paid		(139)	(54)
Net cash from operating activities			292	750
Investing activities
	Interest received		4	-
	Interest paid		(38)	(23)
	Proceeds on sale of investments		-	591
	Purchase of property, plant and equipment		(171)	(115)
	Proceeds on disposal of property, plant and equipment		-	10
	Acquisition of subsidiaries net of cash acquired		(1,369)	-
Net cash from/(used in) investing activities			(1,574)	463
Financing activities
	Issue of new share capital		(37)	57
	Dividends paid		(285)	(373)
	New borrowings		1,500	-
	Repayment of borrowings		(212)	(409)
	Purchase of own shares (net)		(128)	(19)
Net cash used in financing activities			838	(744)
Net (decrease)/increase in cash and cash equivalents			(444)	469
	Cash and cash equivalents at start of year		539	70
Cash and cash equivalents at end of year			95	539

Notes to the Preliminary Statement
1.    Analysis of revenue		Group
		2015	2013
Continuing operations		£'000	£'000
Sale of goods		1,927	1,567
Rendering of services		10,912	8,202
		12,839	9,769
Other operating income		25	14
Investment income		4	-
		12,868	9,783
Analysis of other operating income
Operating lease receipts		19	4
Director's fees received from Speed-Trap Holdings Ltd.		6	10
		25	14

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 Chief Executive 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 Chief Executive.
	Continuing operations 2015	Licence sales	Project  work	Recurring revenues	Total
		£'000	£'000	£'000	£'000
External sales		1,927	6,146	6,048	14,121
Adjustment for agency basis		-	-	(1,282)	(1,282)
Reported revenue		1,927	6,146	4,766	12,839
Segment result (gross profit)		537	1,566	2,566	4,669
Other operating costs and income					(3,983)
Investing and financing activities					(34)
Profit before tax					652
Major customers (over 10% of revenue)
Customer 1		249	4,313	544	5,106
Customer 2		238	689	1,437	2,364

Continuing operations 2013	Licence sales	Project  work	Recurring revenues	Total
	£'000	£'000	£'000	£'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
The accounting policies of the reportable segments are the same as the Group's accounting policies contained in the Annual Report and Financial statements.
The Group operates entirely within the UK.

3.    Profit from operations			2015	2013
Profit from operations has been arrived at after charging/(crediting):			£'000	£'000
Research and development costs			266	167
Net foreign exchange (gain)/loss			(49)	108
Depreciation of property, plant & equipment			228	168
Loss on disposal of property, plant & equipment			-	5
Amortisation of intangible assets			24	18
Staff costs			6,119	4,818
Auditors' remuneration for audit services (Group and Company, the Company fee is not separately quantifiable)			37	27
		Auditors' remuneration for tax compliance and advisory services	5	5
		Costs incurred in acquiring subsidiary	539	-

4.    Dividends	2015	2013
Amounts recognised as distributions to equity holders	£'000	£'000
Final dividend for the year ended 31 December 2013 of 1.12p (2012: 1.00p)	285	250
Interim dividend for the period ended 31 March 2015 of nil (31 December 2013: 0.48p)	-	123
	285	373
Proposed final dividend for the period ended 31 March 2015 of 0.56p	198

5.    Earnings per share	2015	2013
Earnings, being the net profit attributable to equity holders of the parent (£'000)	532	793
Weighted average of ordinary shares in issue	26,784,110	25,270,620
Weighted average of own shares	(111,542)	(19,738)
Weighted average for the purpose of basic earnings per share	26,672,568	25,250,882
Effect of dilutive share options	1,065,704	460,479
Weighted average for the purpose of diluted earnings per share	27,738,272	25,711,361

6.    Acquisition of subsidiary - Speed-Trap Holdings Ltd acquired on 23 January 2015
						Provisional fair value £'000
Net assets acquired
Intangible fixed assets						2,000
Future value of acquired contracts						-
Deferred tax asset						600
Trade and other receivables						992
Cash and cash equivalents						143
Trade and other payables						(2,587)
Tax asset						88
Deferred tax liability						(400)
Bank loans						-
						836
Goodwill						7,678
Total consideration						8,514
Satisfied by:
Cash						1,512
Transfer of own shares						4,913
Accrual for future transfer of own shares						1,289
Transfer from investments						800
						8,514
Had the subsidiary been purchased on 1 January 2014 then its contribution (loss) to the Group profit would have been						(1,156)

7.    Share capital
	2015		2013
	Shares	£'000	Shares	£'000
Ordinary shares of 2p each
Authorised	37,500,000	750	37,500,000	750
Issued and fully paid up
Balance at 1 January	25,436,791	509	25,148,291	503
Issued during year	9,984,787	199	288,500	6
Balance at period end	35,421,578	708	25,436,791	509

Total Voting Rights (TVR)

As at today's date, the Company has 35,421,578 ordinary shares in issue.  The Company holds 137,452 ordinary shares in treasury, representing approximately 0.34 per cent of the share capital excluding these treasury shares, which do not carry voting or dividend rights.  The figure of 35,284,126 may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest, or change to their interest, in the Company under the Disclosure and Transparency Rules.

8.    Annual Report and Financial Statements This Preliminary statement will not be posted to shareholders.  The Company's Report and Accounts for the 15-months year ended 31 March 2015 together with the Notice of Annual General Meeting are being sent to shareholders shortly and will be available to view and download from the Company's website:  www.issolutions.co.uk.  9.    Annual General Meeting The Annual General Meeting will be held on Thursday 30 July 2015 at the Company's Registered office: Windmill House, 91-93 Windmill Road, Sunbury on Thames, TW16 7EF.

ENQUIRIES

IS Solutions Plc John Lythall, Managing Director: Tel: [phone] FinnCap  (Nominated Broker & Adviser) Ed Frisby/Simon Hicks - Corporate Finance or Stephen Norcross - Corporate Broking Tel: [phone] TooleyStreet Communications (IR & media relations) Fiona Tooley Tel: [phone] Email: [e-mail]

EDITOR'S NOTE IS Solutions Plc (Ticker: AIM: ISL  Accreditation: ISO27001) Established in 1985, IS Solutions is a systems integrator focusing on three business areas, namely portals, analytics and enterprise content management.  Specifically, IS Solutions specialises in bringing together a range of components from various technological solutions providers and software developers to create a unified and fully functioning system for the end client.  Within each of its business areas, IS Solutions generates three principal revenue streams across product sales, projects and managed services and licence maintenance. The business employs 116 staff, including 18 in Chennai, India, who provide product development and support.  It also has a strong blue-chip client base which includes Toyota, Toshiba as well the AA, NHS, KBC Bank, Compare The Market™, URENCO, HMRC, M&S and HSBC. email:  [e-mail] or Follow us: www.linkedin.com/company/issolutions

 

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