Preliminary Results

RNS Number : 9186C

IS Solutions PLC

15 March 2011

 



Issued by Citigate Dewe Rogerson Ltd, Birmingham

Date: Tuesday 15 March, 2011                                                                   

IS Solutions Plc

Preliminary Results

for the year ended 31 December 2010

"fifth successive year of double digit growth in both turnover and profits"

Financial Highlights
·     Revenue £10.98 million (2009: £9.78 million)	+12.27%
·     Recurring Income accounted for 41.4% of revenue (2009: 36.4%)
·     Reported Profit from Operations £684,000 (2009: £594,000)	+15.15%
·     Group Profit* £758,000 (2009: £665,000)	+13.98%
·     Diluted Earnings per share 2.46 pence (2009: 2.22 pence)	+10.81%
·     Final dividend 0.79 pence ·     Total for the year 1.15p (2009: 1.10p)	+4.55%
·     Strong Balance Sheet and cash position of £574,000 at year-end

* Before tax and before share based payments, goodwill impairment and amortisation

"The second half of the year again saw strong growth in our recurring revenue stream   which increased to 41.4% of total revenue versus 36.4% in 2009. The strength of our recurring revenues helps to shield us from the worst of any ups and downs within the economy….."

"….strong demand for our Managed Services, seen in 2010 has continued into 2011. Coupled with this growth we are seeing signs of Project work returning to pre-2010 levels, from both our traditional customer base and also growth in our newer analytical customer base; therefore, we expect a stronger performance from this area of the business as we progress through the year."

Enquiries:
John Lythall, Managing Director	Fiona Tooley or Keith Gabriel
IS Solutions Plc	Citigate Dewe Rogerson
Tel: [phone]	Tel: [phone]
www.issolutions.co.uk	Mobile: [phone] (FMT)
Ticker: AIM: ISL
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IS Solutions Plc

('Group', 'Company' or 'IS Solutions')

Preliminary Results for the year ended 31 December 2011

Statement by the Chairman, Barrie Clark

The Board is pleased to report another solid performance in 2010 by the business, recording a fifth successive year of double digit growth in both turnover and profits; since 2005, turnover has more than doubled, from £5.09 million (2005) to £10.98 million (2010) and pre-tax, pre-amortisation profits and pre-share based payments has shown a seven-fold increase over the same period, up from £108,000 to £758,000.

Financial Results

For the year ended December 2010, the Group is reporting a credible performance against a backdrop of economic uncertainty with turnover increasing in the period by 12.27% to £10.98 million (2009: £9.78 million).

Group profit (before tax, share-based payments, goodwill impairment and amortisation of intangible assets of £74,000 (2009: £71,000) rose by 13.98% to £758,000 (2009: £665,000). Reported profit before tax increased by 15.15% year-on-year to £684,000 (2009: £594,000).

Diluted earnings per share rose to 2.46 pence, an increase of 10.81% over the comparable period (2009: 2.22 pence).

The Group continues to operate a strong Balance Sheet and during 2010, the business placed £500,000 of its cash with HSBC Investments to offset the very poor interest being earned on cash on deposit; as announced in October, an initial investment of £200,000 in cash was made to acquire a stake in Speed-Trap Holdings Limited ('Speed-Trap'). Our total investment in Speed-Trap will be £700,000, with the balance of £500,000 becoming due in first quarter of the current financial year.

The Group's cash position remains strong with cash flow from operations at £645,000 (2009: £834,000) leaving cash at the year end of £574,000 (2009: £1.24 million). Net assets at 31 December 2010 were £3.89 million compared to £3.54 million in 2009. The business continues to operate well within its banking facilities which are in place and not due for renewal until 2012.

Overview

The second half of the year again saw strong growth in our recurring revenue stream   which increased to 41.4% of total revenue versus 36.4% in 2009. The strength of our recurring revenues helps to shield us from the worst of any ups and downs within the economy and last year, this growth occurred mainly in the area of the Managed Services for our web-based analytics which is becoming a key component of our business (The Business Analytics market is forecast to grow at a compound rate of 7.2% to 2013 and the service side is set to grow at three times that rate (source IDC)).  As a result, the Board decided to take a strategic stake, alongside the international private equity and investment banking firm Beringea LLP in Speed-Trap, an independent software vendor of patented technologies that analyse how users interact with online applications. Founded in 1999, Speed-Trap has a partner network which, along with IS Solutions, includes Oracle, Teradata and SAS.

Due to the overall economic climate, 2010 proved a tough year for Projects with revenues falling by 19.6% as our clients rode out the financial storm. We were able to avoid cutbacks in staff however by re-training people to work on the areas of growth and I would like to thank our staff for their flexibility and co-operation in implementing this.

Product License sales were up on the previous year by 20.6%. This type of sale affects the revenue figure but due to the low margin nature of the distribution business, has less impact on the profitability of the Company.

Personnel

Once again, the Board would like to express its appreciation and thanks to all employees for their on-going support and in particular their flexibility and willingness to adapt to the changing technology and business areas in 2010. Our staff (and the knowledge that resides with them), are our most important asset; it is their adaptability and teamwork that allows us to give the consistency of service to clients and supplier partners that is the foundation of our business success.

Dividend

At the Half-year, the Board increased the interim dividend; following the strong second half performance, the Board will be recommending to shareholders an increase in the final dividend to 0.79 pence (2009: 0.77p). This together with the interim dividend of 0.36 pence (2009: 0.33p) paid in October 2010, gives a total for the year of 1.15 pence in 2010 (2009: 1.10 pence).

The final dividend, which is subject to shareholders' approval at the AGM (which is to be held on 19 May 2011), has an ex-dividend date of 27 April 2011 and will be paid on 27 May 2011 to shareholders on the Register at close of business on 3 May 2011.

Outlook

It seems that over the past few years that, whenever I come to write the 'Outlook' for the coming year, there is another crisis looming over the economy - this time in the form of escalating oil prices due to the unrest in the Middle East! 

Despite this backdrop, I can report that the strong demand for our Managed Services, seen in 2010 has continued into 2011. Coupled with this growth we are seeing signs of Project work returning to pre-2010 levels, from both our traditional customer base and also growth in our newer analytical customer base; therefore, we expect a stronger performance from this area of the business as we progress through the year.

Against this, we are seeing a drop in demand from our distribution led Product License sales as a large part of this has historically been government based purchases. The Board regards this change in the mix of business as positive as we have more control over the areas of Managed Services and Projects - both of which are higher margin constituent parts of the business - than we do over the predominantly supplier-led sales of the lower margin license sales.

As a Company, we look forward to updating shareholders further as the year progresses.

Barrie Clark, Chairman

15 March 2011

Consolidated income statement for the year ended 31 December 2010
		2010	2009
		£'000	£'000
Continuing operations
	Revenue	10,981	9,783
	Cost of sales	(7,806)	(6,543)
Gross profit		3,175	3,240
	Distribution costs	(1,825)	(1,790)
	Administration expenses	(760)	(928)
	Other operating income	88	99
Profit from operations		678	621
	Investment revenues	5	9
	Finance costs	(40)	(14)
	Other gains and losses	41	(22)
Profit before tax		684	594
	Tax	(65)	(61)
Profit for the period attributable to equity holders of the parent/total comprehensive income for the period		619	533
Earnings per share
	Basic	2.51 p	2.23 p
	Diluted	2.46 p	2.22 p

Consolidated statement of changes in equity for the year ended 31 December 2010
			2010	2009
			£'000	£'000
	Purchase of own shares		(13)	(10)
	Sale of own shares		10	249
	Share-based payments		15	11
Total income/(expense) recognised directly in equity			12	250
	Profit for the year/total comprehensive income for the year		619	533
	Dividends paid		(279)	(238)
Change in shareholders' equity for the year			352	545
	Shareholders' equity at start of year		3,542	2,997
Shareholders' equity at end of year			3,894	3,542

Consolidated balance sheet as at 31 December 2010
		2010	2009
		£'000	£'000
Non-current assets
	Goodwill	1,118	1,147
	Other intangible assets	-	30
	Property, plant and equipment	2,300	2,290
	Investments	200	-
	Deferred tax assets	47	64
	Derivative financial instruments	18	18
		3,683	3,549
Current assets
	Investments	541	-
	Trade and other receivables	2,229	2,366
	Cash and cash equivalents	574	1,243
		3,344	3,609
Total assets		7,027	7,158
Current liabilities
	Trade and other payables	(1,667)	(2,019)
	Tax liabilities	(56)	(38)
	Borrowings	(147)	(143)
		(1,870)	(2,200)
Non-current liabilities
	Borrowings	(1,263)	(1,410)
	Deferred tax liabilities	-	(6)
		(1,263)	(1,416)
Total liabilities		(3,133)	(3,616)
Net assets		3,894	3,542
Equity
	Share capital	496	496
	Share premium account	1,786	1,786
	Own shares	(12)	(20)
	Retained earnings	1,624	1,280
Attributable to equity holders of the parent		3,894	3,542

Consolidated cash flow statement for the year ended 31 December 2010
		2010	2009
		£'000	£'000
Operating activities
	Profit from operations	678	621
Adjustments for:
	Depreciation of property, plant and equipment	108	98
	Gain on disposal of property, plant and equipment	-	(3)
	Amortisation of intangible assets	30	60
	Impairment of goodwill	29	-
	Share-based payments	15	11
Operating cash flows before movements in working capital		860	787
	Decrease/(increase) in debtors	137	(296)
	(Decrease)/increase in creditors	(352)	343
Cash generated by operations		645	834
	Income taxes paid	(36)	(69)
Net cash from operating activities		609	765
Investing activities
	Interest received	5	9
	Interest paid	(40)	(14)
	Purchase of non-current investments	(200)	-
	Purchase of current investments	(500)	-
	Purchase of derivative financial instruments	-	(40)
	Purchase of property, plant and equipment	(118)	(2,254)
	Proceeds on disposal of property, plant and equipment	-	10
	Acquisition of subsidiaries	-	(298)
Net cash used in investing activities		(853)	(2,587)
Financing activities
	Dividends paid	(279)	(238)
	New borrowings	-	1,600
	Repayment of borrowings	(143)	(47)
	Purchase of own shares (net)	(3)	(7)
Net cash (used in)/from financing activities		(425)	1,308
Net decrease in cash and cash equivalents		(669)	(514)
	Cash and cash equivalents at start of year	1,243	1,757
Cash and cash equivalents at end of year		574	1,243

Notes to the Statement

1.            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 Managing Director to allocate resources to the segments and assess their performance. The Group has one reportable segment.

The information presented to the 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 reported to the Managing Director 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.

Continuing operations 2010		Licence sales	Project work	Recurring revenues	Total £'000
	External sales	4,609	2,421	5,345	12,375
	Adjustment for agency basis	(596)	-	(798)	(1,394)
	Reported revenue	4,013	2,421	4,547	10,981
	Segment result (gross profit)	562	751	1,862	3,175
	Other operating costs and income				(2,497)
	Investing and financing activities				6
	Profit before tax				684

Continuing operations 2009		Licence sales	Project work	Recurring revenues	Total £'000
	External sales	3,326	2,895	4,044	10,265
	Adjustment for agency basis	-	-	(482)	(482)
	Reported revenue	3,326	2,895	3,562	9,783
	Segment result (gross profit)	532	1,100	1,608	3,240
	Other operating costs and income				(2,619)
	Investing and financing activities				(27)
	Profit before tax				594

Geographical segments
	The Group operates entirely within the UK.

2.            Dividends

		2010	2009
Amounts recognised as distributions to equity holders		£'000	£'000
	Final dividend for the year ended 31 December 2009 of 0.77p (2008: 0.67p)	190	158
	Interim dividend for the year ended 31 December 2010 of 0.36p (2009: 0.33p)	89	80
		279	238
	Proposed final dividend for the year ended 31 December 2010 of 0.79p	196
The proposed final dividend is subject to shareholders' approval at the AGM and has not been included as a liability in these financial statements.

3.            The Group has sufficient financial resources to cover budgeted future cash flows, together with contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

In accordance with the Corporate Governance requirements, having reviewed the future plans and projections for the business, the Directors believe that the Company and its subsidiary undertakings have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

4.            The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2010 or 2009. Statutory accounts for 2009, which were prepared under IFRS, have been delivered to the Registrar of Companies, and those for 2010 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their report was unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006. The auditors' reports on the accounts for the 12 months to 31 December 2009 were unqualified and did not include a statement under Section 498(2) or (3) of the Companies Act 2006.

5.            This Preliminary announcement has been prepared on the basis of the accounting policies as stated in the financial statements for the year ended 31 December 2010. Whilst the financial information included in the Preliminary announcement has been completed in accordance with IFRS, the announcement does not itself contain sufficient information to comply with IFRS.

6.            Copies of the Report and Accounts will be issued to shareholders shortly.  Further copies will also be available from the Company's Registered Office: Windmill House, 91-93 Windmill Road, Sunbury-on-Thames, Middlesex, TW16 7EF and will also be available to download from the website, www.issolutions.co.uk .

 

END

 

 

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