Final Results
IS Solutions PLC
11 April 2002
Issued by Citigate Dewe Rogerson
Date: Thursday, 11 April 2002 Embargoed: 7.00am
IS Solutions Plc
Preliminary Results
for the year ended 31st December 2001
• Results in line with expectations
• Turnover £10.873m
• Pre-tax profit (pre-goodwill) £215,000
• Earnings per share 0.70p
• Final dividend 0.16p
• Net cash position at year end
• Difficult year for IT industry as a whole and although project
revenues substantially reduced, IS Solutions maintained client base
including Toyota, Oracle, Toshiba and Channel 4
• New clients included Hays Group, Woolwich Independent Financial
Advisory Services, Eurostar and Sun Microsystems
• Substantial growth achieved in outsourcing activities - including
securing new contract to implement and manage hosting strategy for the
European Operation of Toshiba
'We have seen a significant reduction in the number of competitors in our market
place over the past 12 months and, although there is currently less business to
compete for, prospective clients are looking for financial stability and a track
record in suppliers - we have both and therefore believe that we are well
positioned to take advantage of any recovery this year.'
'It is your Board's belief that some form of recovery is likely in the second
half of the year, although to what level remains to be seen. Having been prudent
with the cost base any reasonable recovery will have a material effect on Group
profitability.'
'2002 will be a year of ensuring the platform is right for a return to
anticipated growth in 2003.'
Barrie Clark, Chairman
FULL STATEMENT ATTACHED
Enquiries:
John Lythall, Chief Executive
Peter Kear Fiona Tooley
IS Solutions Plc Citigate Dewe Rogerson
Tel: 01932 893333 Tel: 0121 455 8370
-2-
IS Solutions Plc
Preliminary Results
for the year ended 31st December 2001
STATEMENT BY THE CHAIRMAN, BARRIE CLARK
Although market conditions in the second half of 2001 were difficult the results
were in line with expectations with turnover for the full year at £10.873
million (2000: £12.218 million) and pre-tax, pre-goodwill profits for the full
year of £215k (2000: £868k). Earnings per share (excluding goodwill
amortisation) were 0.70 pence (2000: 2.55 pence) with net assets at 31 December
2001 standing at £4.462 million (2000: £4.758 million) and net cash of £758k
(2000: £1.571 million).
The results of Open Methods, which was treated as a trade investment last year,
have been included in the Group's consolidated accounts for the first time in
2001 as IS Solutions exercised significant management influence throughout the
year. Open Methods, which specialises in project methodology and consultancy in
the Internet arena, contributed turnover of £897k and pre tax profit of £29k.
The minority interest in the post tax profit of Open Methods was £21k.
The directors are recommending a final dividend of 0.16 pence per share which,
together with the interim dividend of 0.08 pence per share, represents a total
dividend of 0.24 pence per share (2000:1.05p). Subject to shareholders' approval
at the AGM, to be held on 24 May 2002, this dividend will be paid on 31 May 2002
to shareholders on the register at close of business on the 3 May 2002.
UK
Projects - 2001 was a tough year for the whole of the IT industry and
specifically for project based businesses as the global slowdown caused
companies to delay or cancel major IT projects. Our strategy for 2001 was to
focus on protecting and developing our existing client base whilst targeting the
customers of our less resilient competition. Although our project revenue
reduced substantially during the year in line with the industry as a whole, we
have maintained our client base including Toyota, Oracle, Toshiba, GCHQ and
Channel 4. Additionally a number of new clients have been added (Hays Group,
Woolwich Independent Financial Advisory Services, Eurostar and Sun Microsystems)
which should benefit us when the industry moves back into a growth phase.
Outsourcing - Having recognised in the early part of the year that major
projects revenue would shrink, we switched our sales focus to the outsourcing
side of the business. This resulted in substantial growth for this part of the
business with the monthly run rate for the Sunbury operation doubling during the
course of the year. A major win for us was being awarded the contract to
implement and manage the hosting strategy for the European operation of Toshiba
which, along with a few smaller contracts, gave a significant boost to our
recurring revenue stream. The revenue from outsourcing now covers some 44% of
total company overheads.
Financial Products (formally AXL) - This side of the business has a high
percentage of recurring revenue and is therefore less affected by economic
slowdowns. It continued to show reasonable growth through the year adding a
number of new customers for investor relations and financial feeds.
USA
Our Californian operation is entirely projects based and therefore suffered a
significant drop in revenue. By controlling costs however, it was able to break
even on the year and also undertook work for a new client (BioRad - a
Pharmaceutical company) in the second half of the year and for whom we continue
to do project work.
continued...
-3-
Personnel
2001 saw a sea change in personnel as we moved from a severe shortage of skilled
staff and a reliance on contractors to a position of virtually no contracting
staff and a zero attrition rate with our own staff.
In the past year it was necessary to reduce staff numbers commensurate with the
level of business, but in doing so we aimed at keeping our core skills intact to
allow us to give the right level of service to our existing clients and also to
be in a position to take on new clients when the market starts to expand.
The Board would like to express its thanks for our loyal employees continued
support and application throughout what has been a year of change.
Outlook - UK
The year has started with no improvement in the outlook for project based
business and therefore we expect the market in the first half to remain
difficult. However, we are seeing increasing activity in the tendering stages
for projects and have recently been qualified as a preferred supplier for a
major potential client. Visibility of specific projects for this and other
clients is uncertain at this stage, although any increase in project revenues
would have a marked effect on the second half of the year.
The increase in the run rate of recurring revenue stream will give a better
balance to the year and will continue to be a point of focus with the
introduction of new products in this area.
We have seen a significant reduction in the number of competitors in our market
place over the past 12 months and, although there is currently less business to
compete for, prospective clients are looking for financial stability and a track
record in suppliers - we have both and therefore believe that we are well
positioned to take advantage of any recovery this year.
Outlook - USA
There are more signs in the US of a recovery and, again, we are benefiting from
the reduction in competition. The slowdown has been much more severe than in the
UK and therefore it is likely that any upturn will be sharper, although it is
too early to say at this stage if we are at the beginnings of a sustainable
recovery.
Outlook - Summary
It is your Board's belief that some form of recovery is likely in the second
half of the year, although to what level remains to be seen. Having been prudent
with the cost base any reasonable recovery should have a material effect on
Group profitability.
2002 will be a year of ensuring the platform is right for a return to
anticipated growth in 2003.
-4-
IS Solutions Plc
Preliminary Results
for the year ended 31st December 2001
STATEMENT BY THE MANAGING DIRECTOR, JOHN LYTHALL
The value that our clients put on heritage, security and low risk from IS
Solutions came to the forefront during the difficult trading conditions of 2001.
However the economic climate also allowed us the opportunity to take a long,
hard look at the products and services that we offer.
IS Solutions recognised that businesses were confused by the claims being made
by IT vendors and IT Services suppliers. They had paid out large sums for IT
projects in the past but had no measurable return from these projects. To help
our clients understand exactly what we could do for them, we re-defined our
service offerings and began to build partnerships with other like-minded IT
Services suppliers. The re-structuring has enabled us to be strategically poised
to take advantage of the emerging Web Services area and this is further
strengthen by our recent achievement in becoming a Microsoft Gold Certified
Partner for E-commerce.
IS Solutions has strengthened the quality of the core team and has moved key
contracting staff to permanent employees. Strategic recruitment during 2001
ensures that the management team are well positioned and ready for growth.
Activities
IS Solutions recommends, builds and supports solutions that make it easy for our
clients' customers to do business with them across Content Exchange Networks
such as the web, email, wireless, DiTV and call centre. Everyone is a customer
of information whether employee, partner, business or consumer end-user, and is
empowered to do business with our clients through enterprise self-service
channels.
Our offerings fall into three broad areas, consultancy; solutions and support.
Every service that we offer within each of these areas is a service that we can
prove expertise in through having at least three reference clients, presenting
our clients with a very low risk choice.
continued...
-5-
Consultancy
IS Solutions offers Consultancy services that help our clients to lay the
foundations for a successful project. Time spent up-front with our clients
speeds up project delivery, minimises risks and guarantees a fit with their
business requirements. We work together to define their needs and then identify
innovative solutions that will help their customers to do business with them.
Our experience comes from defining requirements for clients like Shell Geostar,
Norgren, Eurostar, Ladbrokes and Toshiba Europe.
Our Consultancy services commence before the start of the project to help our
clients to understand what they have in place already. We identify how they can
realise the investment they have already made and set out a phased approach to
help them move forward in the future. Our services include technical
healthchecks, project workshops, project scoping and definition, functional
specification, technical analysis, system architecture and testing plans.
Solutions
By employing best-of-breed and industry standard technologies, we work with our
clients to develop tailored, future-proof solutions that are reliable, scalable
and secure. We focus on providing our clients with customer-centric e-business
solutions that integrate with their existing infrastructure through custom-built
business systems interfaces. Through innovative use of technologies such as
Java, Active Server Pages (ASP), Microsoft .Net and BroadVision coupled with
technical design skills, we have delivered projects for clients such as Link 24
7, Toshiba, Proquote, CrystalEyes, Mazda, Bio-Rad Laboratories and Eurostar. The
type of solution that we deliver is illustrated through the Link 24 7 and Toyota
case studies.
The solutions we deliver help our clients customers do business with them by
solving common business problems in such areas as communications, content
management, news and financial datafeeds, e-business infrastructure,
personalisation, reporting, analytical tools and security.
Support
IS Solutions understands that internal systems and e-business solutions are
critical to our clients' customers. We manage and support our client's IT
infrastructure and e-business applications, to alleviate the pressure on them,
using a Service Level Agreement that is tailored to their unique requirements.
We provide a secure and robust technology platform that they can rely on 24
hours a day, 7 days a week if that's what their business and customers demand.
During 2001 we helped our clients' customers by making sure that the services
they relied on were available when they needed them. Our client's in this area
include Channel Four, Eurostar, Third Space, Sun Microsystems, Marks and Spencer
and Toshiba.
IS Solutions' managed services include hardware, software, network, application
support, security, technical services, content management, hosting and reporting
enabling us to deliver as much or as little support as our clients wanted for
their customers. Our support services use a proactive approach so that we can
identify potential issues and propose how best to resolve them before they
become a problem, so unplanned system downtime is minimised.
Partnerships
During 2001, IS Solutions recognised that it was necessary to partner with other
organisations to help us win business. Clients need integrated, best-of-breed
solutions from multiple providers but with the services across these different
providers being co-ordinated by a pivotal provider. We identified a number of
organisations that complement the products and services that we offer, so that
clients no longer have to rely on luck to find the right supplier. There are big
benefits to IS Solutions from adopting this approach including having more sales
teams selling our services and therefore more opportunities with less marketing
expenditure needed for lead generation activity. We also get more business with
fewer pitches which results in lower cost of sales and greater profits.
-6-
CASE STUDIES
Toyota
IS Solutions has been working with Toyota (GB) on their web strategy since 1997.
During 2001 Toyota felt that their business was ready to fully embrace the
technology that had previously been deployed. This was to empower their business
managers to be able to maintain the site to provide more personalised and
relevant content to their prospects and customers, whilst taking the opportunity
to bring the site design bang up-to-date.
Due to the length of buy and ownership cycles, it is important for Toyota to
build a relationship with its customers from the outset. They need to convert
browsers into buyers and then to maintain the relationship over a number of
years to encourage the owner to remain loyal and buy another Toyota. The site
has been developed with the visitor in mind, to replicate the experience of
entering a dealership, with sections for new and used car sales and after-sales
service. The site, has been built using BroadVision's application software and
makes extensive re-use of existing content to promote the Toyota brand, with
favourite sections such as news and information on the progress of the Toyota
Formula 1 team easy to locate.
IS Solutions has developed the whole site so that Toyota's Business Managers can
easily maintain it. They can create, edit or delete site content and business
rules quickly and simply through direct publishing and management facilities.
To help Toyota achieve a higher ratio of browsers turning in to buyers, IS
Solutions has developed the 'Persistent Guest' technology. This enables content
to be personalised based on on-line behaviour and business rules to build up a
picture over repeat visits, before the visitor ever registers. Delivering
relevant content in this way ensures that the visitor sees content that
interests them and encourages them to move from 'suspect' to 'prospect' by
registering.
New technologies such as Java and XML play a significant part in Toyota's web
solution. IS Solutions have implemented an XML database as temporary storage for
the constantly updating syndicated used car content.
IS Solutions has provided Toyota with a flexible, personalised web site that
makes it easy for customers to do business with Toyota and makes it easy for
Toyota's Business Managers to understand and interact with their customers
through being able to easily update and manage content. IS Solutions also
provide extensive support capabilities for the Toyota web site, covering the
infrastructure, applications and site monitoring, managed via the IS Solutions
helpdesk.
Link 24 7
www.nurselink.co.uk
Link 24 7 Company Limited identified that the Healthcare sector has high costs
associated with using agency staffing, so they approached IS Solutions to build
and support a solution to deliver their vision for a system to help the
recruitment of temporary nursing staff. Their criteria for the system were that
it had to be secure, robust, reliable, scalable and flexible, easy for the
hospitals, agencies and nurses to use and require no software to be locally
installed. The system also had to provide a mechanism for cost comparison,
displaying mini-resumes and management reporting. In addition, it had to be able
to work seamlessly with the NHS' new Oracle-based HR payroll system. The NHS
works around the clock, so the solution had to run 24 hours a day, 7 days a
week.
continued...
-7-
The result was Nurselink.co.uk, an innovative new service provided free of
charge to hospitals, for managing their agency staff. Nurselink also acts as a
complete management tool for Nursing Agencies subscribing to the service. IS
Solutions used Java based technology to build Nurselink.co.uk incorporating a
custom-built matching engine, which matches availability against the profile of
a nurse. It enables healthcare establishments to fill their temporary staffing
requirements by suitably qualified and available nurses via their chosen nursing
agencies, using the Internet. Due to the sensitive and personal nature of the
nurses profile information, the whole system features extensive security
measures.
'Usability is key and IS Solutions has done exceptionally well in this respect -
its a good endorsement of their skills.' Says Chris Carter, Link 24 7 founder.
The Nurselink system helps hospitals to regain control of costs. By providing a
simple and fast way of sourcing staff, ward managers can concentrate on nursing
instead of administration. Nursing agencies also benefit from using the service,
through immediate and effective communication with hospitals reducing clerical
errors. Nurses themselves benefit too - their capabilities and availability is
held within the Nurselink database ensuring that up-to-date details and
availability are readily obtainable resulting in more continuous working
patterns.
IS Solutions has built the system with the future in mind. Using Java based
technology means that it can be easily ported to other environments such as
wireless and digital television platforms and is ready for full integration into
future technologies.
In April 2002, Link 24 7 were named the overall winner of the prestigious
Institute of Directors' Young Entrepreneur Awards.
-8-
IS Solutions Plc
Preliminary Results
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31st December 2001
2001 2000
Total Total
£'000 £'000
Turnover
Continuing operations 9,976 12,218
Acquisitions 897 -
Group turnover 10,873 12,218
Cost of sales (6,489) (7,997)
Gross profit 4,384 4,221
Distribution costs (2,723) (1,894)
Administration expenses (1,896) (1,825)
Operating (loss)/profit
Continuing operations (257) 502
Acquisitions 22 -
Group operating (loss)/profit (235) 502
Investment income 16 47
Interest payable and similar charges (3) (2)
Profit before goodwill amortisation 215 868
Amortisation of goodwill (437) (321)
(Loss)/profit on ordinary activities before taxation (222) 547
Tax on (loss)/profit on ordinary activities (21) (243)
(Loss)/profit on ordinary activities after taxation (243) 304
Equity minority interests (21) -
(Loss)/profit for the financial year (264) 304
Dividends (60) (260)
Transferred to reserves (324) 44
Earnings per ordinary share
Basic (1.06)p 1.24p
Before goodwill amortisation 0.70p 2.55p
Diluted (1.06)p 1.17p
Proposed dividend 0.24p 1.05p
There are no material differences between reported profits and losses and
historical profits and losses on ordinary activities before tax.
-9-
IS Solutions Plc
Preliminary Results
CONSOLIDATED BALANCE SHEET
as at 31st December 2001
2001 2000
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets 1,590 1,822
Tangible assets 704 887
Investments 29 68
2,323 2,777
Current assets
Stocks - 74
Debtors 2,943 2,348
Cash at bank and in hand 758 1,571
3,701 3,993
Creditors
Amounts falling due within one year (1,545) (2,012)
Net current assets 2,156 1,981
Total assets less current liabilities 4,479 4,758
Equity minority interests (17) -
Net assets 4,462 4,758
Capital and reserves
Called up share capital 496 496
Share premium account 2,133 2,133
Profit and loss account 1,833 2,129
Equity shareholders' funds 4,462 4,758
-10-
IS Solutions Plc
Preliminary Results
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31st December 2001
2001 2000
£'000 £'000
Net cash flow from operating activities (132) 952
Returns on investments and servicing of finance
Interest received 16 47
Interest paid (3) -
Interest element of finance lease rentals - (2)
Net cash flow from returns on investments and servicing of finance 13 45
Taxation (188) (390)
Capital expenditure
Purchase of intangible fixed assets (165) -
Purchase of tangible fixed assets (269) (537)
Sale of tangible fixed assets 63 14
Transfer/(purchase) of investments 39 (39)
Net capital expenditure (332) (562)
Acquisitions
Transfer/purchase of subsidiaries (39) (2,381)
Cash acquired with subsidiaries 31 102
Net cost of acquisitions (8) (2,279)
Equity dividends paid (194) (239)
Cash flow before use of liquid resources and financing (841) (2,473)
Financing
Issue of ordinary share capital - 1,743
Capital element of finance lease rental payments - (5)
Net cash flow from financing - 1,738
Change in cash in the year (841) (735)
-11-
IS Solutions Plc
Preliminary Results
for the year ended 31st December 2001
2001 2000
Reconciliation of net cash flow to movement in net funds £'000 £'000
Change in cash in the year (841) (735)
Cash flow arising from lease financing 0 5
Translation differences 28 33
Movement in net funds in the year (813) (697)
Net funds at 1 January 2001 1,571 2,268
Net funds at 31st December 2001 758 1,571
Reconciliation of operating (loss)/profit to net cash flow 2001 2000
from operating activities
£'000 £'000
Operating (loss)/profit (235) 502
Net depreciation charge 401 385
Amortisation of goodwill 437 321
Decrease in stock 74 17
(Increase)/decrease in debtors (483) 1,010
(Decrease)/increase in creditors (326) (1,283)
Net cash flow from operating activities (132) 952
Statement of total recognised gains and losses 2001 2000
£'000 £'000
(Loss)/profit for the year (324) 44
Currency translation differences 28 33
Total recognised gains and losses (296) 77
-12-
IS Solutions Plc
Preliminary Results
NOTES
for the year ended 31 December 2001
1. Segmental Information
2001 2000
£'000 £'000
Turnover
UK 10,004 10,217
USA 869 2,001
10,873 12,218
(Loss)/profit before taxation
UK (214) 424
USA (8) 123
(222) 547
Net assets/(liabilities)
UK 4,473 4,761
USA (11) (3)
4,462 4,758
2. Earnings per share
2001 2000
(Loss)/profit for the financial year (£'000s) (243) 304
Total issued shares (000s) 24,793 24,793
Weighted average number of ordinary shares (000s) 24,793 24,550
Dilutive share options (000s) - 1,128
Basic earnings per share (1.06)p 1.24p
Diluted earnings per share (1.06)p 1.17p
3. The results for the years ended 31st December 2001 and 31st
December 2000 are extracted from the audited accounts of IS 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 31st December 2000 have
been delivered to the Registrar of Companies.
4. It is anticipated that the Report and Accounts will be posted to
shareholders on 1st May 2002. 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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