Final Results - Pre-tax Profit Up 28%

IS Solutions PLC 5 April 2000 I S Solutions Plc Preliminary Results for the year ended 31st December 1999 Strong Performance from I S Solutions as it responds to market developments Turnover £11.8m + 35% Pre-tax profit £1.2m + 28% Earnings per share 17.56p + 28% Dividend - final 3.2p - total 4.8p + 20% Third generation sites completed include: TD Waterhouse : online share dealing service Toshiba : customer and press site BT Cellnet : retail phone store Fourth generation sites being developed in the current year Development partnership with BroadVision provides platform for further development in the US & UK Application to move to the Official List in May. 'Over the past three years, the Group has significantly remodelled its activities to take advantage of the emerging Internet marketplace. By being an early entrant in this area we have established a very strong reputation as a leading implementor of Web technology which is based on real experience and, as such, has led to a strong and growing client list. The investment during 1999 in the US to realign the business towards the UK model is now beginning to show dividends with web contracts being won. The strong demand for our services in the UK, coupled with the realignment of the US operation leads the Board to be optimistic about the future provided that we can continue to recruit suitably skilled staff.' Barrie Clark, Chairman FULL STATEMENT ATTACHED Enquiries: John Lythall, Managing Director Peter Kear, Sales & Marketing Director Fiona Tooley, Director I S Solutions Plc Citigate Dewe Rogerson web-site: www.issolutions.co.uk Tel: 0171-282 8000 Tel: 0171-282 8000 Mobile: 07768 640215 (JL) Mobile: 07785 703523 Thereafter: 01932 893333 Thereafter: 0121-631 2299 -2- I S Solutions Plc Preliminary Results for the year ended 31st December 1999 STATEMENT BY THE CHAIRMAN, BARRIE CLARK The second half of 1999 was very strong for the Group, with turnover up on the second half of 1998 by 66%, giving an increase in turnover for the full year of 35% to £11.818 million (1998: £8.746 million). The increase in turnover was accompanied by an increase in pre tax profits for the full year of 28% to £1,205,000 (1998: £942,000). Earnings per share for the year increased by 28% to 17.56 pence (1998: 13.77 pence) with net assets at 31st December 1999 standing at £2.938 million (1998: £2.344 million) and net cash of £2.273 million (1998: £2.068 million). The Directors are recommending a final dividend payment of 3.20 pence per share, which, together with the interim dividend of 1.60 pence per share, represents a total dividend of 4.80 pence per share (1998: 4.00p per share). The final dividend, which is subject to shareholders' approval at the Annual General Meeting to be held on 26th May 2000, will be paid on 30th May 2000 to shareholders on the register at the close of business on 25th April 2000. Personnel The Group currently employs 104 people and 27 contractors of whom 34 are on client sites as part of the Company's I.T. Services activities. The Company is proposing to move to larger premises to provide additional capacity during the first half of the year. The Group's business is that of designing and supplying Web applications, plus I.T. Services to its client base and, consequently, is heavily dependent on the skill & application of its people. On behalf of the shareholders and the Directors I would like to thank our employees and long term contractors for their commitment and dedication which has enabled the Group to meet its obligations to its clients throughout the year. The Group has established a strong reputation in its field of operation, which would not have been possible without a committed team effort. Official List The Company has been trading on AIM since September 1997 and the Board has concluded that it is now appropriate to consider a move up to the Official List of the London Stock Exchange. I am pleased to inform you that arrangements are being put in place for application to be made for the Company's shares to be admitted to the Official List during May 2000. Outlook Over the past three years, the Group has significantly remodelled its activities to take advantage of the emerging Internet marketplace. By being an early entrant in this area we have established a very strong reputation as a leading implementor of Web technology which is based on real experience and, as such, has led to a strong and growing client list. The investment during 1999 in the US to realign the business towards the UK model is now beginning to show dividends with web contracts being won. The strong demand for our services in the UK, coupled with the realignment of the US operation leads the Board to be optimistic about the future provided that we can continue to recruit suitably skilled staff. -3- I S Solutions Plc Preliminary Results for the year ended 31st December 1999 STATEMENT BY THE MANAGING DIRECTOR, JOHN LYTHALL I S Solutions' positioning in the digital marketplace demonstrates why we are considered the e-business partner of choice among corporate clients in Europe and the US. Traditionally, the market has operated in two distinct areas - either in the marketing design and consultancy sector for producing the graphical front end of web sites or in the systems integration and technical consultancy space for implementation and integration of back office systems. I S Solutions has successfully 'bridged the gap' between these two disparate areas through combining design studio expertise with development and engineering skill over several years. This is underpinned by I S Solutions' extensive IT Services capabilities, which include consultancy, support, maintenance, systems integration and on-site help desk services, all of which further strengthens our position as a market leader. Activities In response to market developments the business was restructured during 1999 from three divisions into two customer facing divisions, Total Internet Solutions and IT Services, enabling simplification of the sales and marketing messages to our customer base. The Total Internet Solutions marketplace has further evolved during the year to show a marked shift from First Generation 'company centric' sites, and Second Generation 'information centric' sites, towards Third Generation 'visitor-centric' sites. These Third Generation sites demand complex integration with existing business systems and high levels of support and maintenance. Both of these areas are where I S Solutions have been traditionally strong, and they enable us to exploit our technical and support expertise to the full, coupling this with our extensive in-house design skills, to deliver an effective communications channel to our clients. The next evolutionary stage, Fourth Generation 'relationship- centric' sites, are already being planned by our clients and I S Solutions is well placed to implement these multiple touchpoint Customer Relationship Management solutions during 2000. Third Generation projects completed during 1999 include an online share dealing service for TD Waterhouse, customer and press sites for Toshiba and a retail mobile phone store for BT Cellnet. Other completed projects include sites for Automotive Products, Thorn Lighting, Braxxon, Thomas Cook and Panasonic. The design studio has also been recognised for their skill in communicating client's messages on the web sites we have delivered, with several sites, including Toshiba and Oasis, being finalists at the London International Advertising Awards. -4- IT Services is the amalgamation of our former Enterprise Management and Facilities Management businesses, which was achieved during the first half of 1999. These two areas had the same point of contact within the customers business and infrastructure sales were usually accompanied by elements of maintenance and support services. The combining of these two areas enables a more focused approach to these activities. Customers who use our traditional IT Services offerings include Ranger Oil, Oracle, Channel 4 and SR Communications. A major area of focus, which emerged during 1999, was to provide services specifically aimed at the Total Internet Solutions area, reflecting the increasing importance of these solutions to our customer's businesses. Providing support services for web sites enables I S Solutions to support and maintain every customer solution we deliver. IT Services in this area are provided for clients which include Toyota, Toshiba, TD Waterhouse and Thomas Cook. BroadVision During 1999, I S Solutions has built upon the 4 year relationship with BroadVision Inc., the leading world-wide supplier of personalised e-business, to confirm our position as the leading e-business partner of choice and, as announced in the first quarter of 2000, was awarded a contract by BroadVision to implement a generic application for its Knowledge product. The implementation of BroadVision applications for Third Generation web sites represents a powerful step forward in total internet solutions and marketing. For Enterprises looking to have more than just an information based web site, BroadVision provides a unique solution that allows companies to move towards personalised and targeted information delivery for every individual visitor, based on the profile of that visitor. The software provides solutions for managing relationships with individuals in the organisation, customer or partner business, encompassing e-commerce, finance and knowledge management. During the second half of 1999, I S Solutions implemented sites for Toshiba using BroadVision's One to One Knowledge application, TD Waterhouse using One to One Enterprise and BT Cellnet based around the One to One Retail Commerce application. With the internet firmly embedded in the IT infrastructures of corporates, I S Solutions has established a strong position in the UK and has considerable opportunities both here and in the US. John Lythall, Managing Director 5th April 2000 Glossary of Terms First Generation 'company centric' site - a standalone web site which provides only general marketing and public relations information to the visitor, such as on-line versions of printed brochures and other corporate literature. Second Generation 'information centric' site - a web site which is integrated with an existing business system such as a database and contains product and service information, which the visitor must search through to find items of interest. Third Generation 'visitor centric' site - a web site which has only empty web page templates, the completed page which is seen on the screen is generated specifically for each individual visitor. The page content depends on the profile of the user, which is based on any stated interests or is determined by how the web site is browsed. Fourth Generation 'relationship centric' site - an extension to the Third Generation site which tracks and records every way in which the visitor contacts or 'touches' the organisation whether using the web site, telephone, e-mail, via a call centre, digital television, palm pilot, fax etc. Every part of the company uses the same client profile, transaction and historical records regardless of the customers chosen method of communication or 'touchpoint' to provide true Customer Relationship Management. -5- I S Solutions Plc Preliminary Results CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31st December 1999 Audited Audited 1999 1998 Notes Restated £'000 £'000 Turnover 1 11,818 8,745 Cost of sales 7,950 5,683 Gross profit 3,868 3,062 Distribution costs (1,740) (1,340) Administration expenses (979) (856) Operating profit 1,149 866 Interest receivable and similar income 62 82 Interest payable and similar charges (6) (6) Profit on ordinary activities before 1 1,205 942 taxation Tax on profit on ordinary activities 2 (367) (285) Profit on ordinary activities after 838 657 taxation Dividends 3 (229) (191) Profit for the financial year 609 466 Earnings per ordinary share Basic 4 17.56p 13.77p Fully diluted 4 17.12p 13.62p 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 1999 1998 £'000 £'000 Profit for the period 609 466 Currency translation differences (15) - Total recognised gains and losses 594 466 -6- I S Solutions Plc Preliminary Results CONSOLIDATED BALANCE SHEET as at 31st December 1999 Audited Audited 1999 1998 Notes £'000 £'000 £'000 £'000 Fixed assets Tangible assets 634 377 Current assets Stocks 85 113 Debtors 3,044 2,427 Cash at bank and in hand 2,273 2,068 5,402 4,608 Creditors Amounts falling due within one (3,098) (2,635) year Net current assets 2,304 1,973 Total assets less current 2,938 2,350 liabilities Creditors Amounts falling due after more - (6) than one year Net assets 1 2,938 2,344 Capital and reserves Called up share capital 95 95 Share premium account 791 791 Profit and loss account 2,052 1,458 Equity shareholders' funds 2,938 2,344 -7- I S Solutions Plc Preliminary Results CONSOLIDATED CASH FLOW STATEMENT for the year ended 31st December 1999 Audited Audited 1999 1998 £'000 £'000 £'000 £'000 Net cash flow from operating activities 1,151 1,091 Returns on investments and servicing of finance Interest received 62 82 Interest paid (2) - Interest element of finance lease (4) (6) rentals Dividends paid (204) (100) Net cash flow from returns on investments and (148) (24) servicing of finance Taxation (308) (196) Capital expenditure and financial investment Purchase of tangible fixed assets (473) (182) Sale of tangible fixed assets 19 57 Net cash outflow from capital expenditure and financial (454) (125) investment Cash flow before use of liquid resources 242 746 and financing Financing Capital element of finance lease rental (21) (36) payments Net cash flow from financing (21) (36) Increase in cash in period 220 710 Reconciliation of net cash flow to movement in net funds 1999 1998 £'000 £'000 Increase in cash in the period 220 710 Cash flow arising from lease financing 21 36 Translation differences (15) 0 Movement in net funds in the year 226 746 Net funds at 1 January 1999 2,041 1,295 Net funds at 31 December 1999 2,267 2,041 -8- I S Solutions Plc Preliminary Results NOTES for the year ended 31st December 1999 1. Segmental Information 1999 1998 £'000 £'000 Turnover UK 9,113 6,914 USA 2,705 1,831 11,818 8,745 Profit before Taxation UK 1,188 899 USA 17 43 1,205 942 Net Assets/(Liabilities) UK 3,057 2,474 USA (119) (130) 2,938 2,344 2. Taxation 1999 1998 £'000 £'000 UK Corporation Tax 367 287 Overprovision in prior year - (2) 367 285 3. Dividend 1999 1998 £'000 £'000 Proposed Dividend 4.8p (1998: 229 191 4.0p) 4. Earnings per Share Profit for the financial year 838 657 (£'000) Weighted average number of 4,771 4,771 ordinary shares ('000) Dilutive share options ('000) 124 53 Basic earnings per share 17.56p 13.77p Fully diluted earnings per share 17.12p 13.62p 5. Reconciliation of operating profit to net cash flow from operating activities 1999 1998 £'000 £'000 Operating profit 1,149 866 Net depreciation charge 197 120 Decrease in stocks 28 (5) Decrease in debtors (617) (221) Increase in Creditors 394 331 Net cash flow from operating 1,151 1,091 activities -9- 6. The results for the years ended 31st December 1999 and 31st December 1998 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 31st December 1998 have been delivered to the Registrar of Companies. The results for 1998 have been restated so that the 'Cost of Sales' now includes the cost of internal labour directly attributable to the production of the services that have resulted in the associated Sales. 7. The final dividend, which is subject to shareholders' approval at the Annual General Meeting, will be paid on 30 May 2000 to shareholders on the register at the close of business on 25 April 2000. 8. It is anticipated that the Report and Accounts will be posted to shareholders on 25th April 2000. Further copies of the Report and Accounts will be available after that date from the Company's Registered Office: Admiral Hawke House, Green Street, Sunbury-on-Thames, Middlesex, TW16 6RA. 9. The Annual General Meeting will be held at Admiral Hawke House, Green Street, Sunbury-on-Thames, Middlesex, TW16 6RA on 26th May 2000.

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