Half-year results-six months ended 30 June 2014

RNS Number : 8002S

IS Solutions PLC

29 September 2014

 

Monday, 29 September 2014

I S Solutions Plc

2014 Half-year results

for the six months ended 30 June 2014

STATEMENT BY THE CHAIRMAN, BARRIE CLARK

"The Board remains confident of achieving the market expectations for the full year based on recent business wins and the depth and quality of the prospects pipeline, following a weaker first quarter."

FINANCIALS

Revenue in the first half compared to 2013 was down by 30.9% to £3.427 million (2013: £4.960m) and we recorded an Operating loss of £310,000 compared to an Operating profit of £328,000 in HY2013.  The Post-tax loss was £283,000 versus a 2013 Post-tax profit of £330,000.  Fully diluted loss per share was 1.10p against an earnings per share of 1.29p in the comparable 2013 period.

A further factor affecting the overall profitability of the business has been the strength of Sterling; during the first half-year this caused a 9.4% reduction in our day rate (compared to HY2013) to our US clients.  Since the end of the period under review the exchange rate has now moved back in our favour.

Cash at the half-year stood at £188,000 (2013: £657,000)

Reviewing our revenue performance by sector:
	2014 £000	2013 £000
Project work	889	1,873
Recurring revenues	1,890	1,986
Product	648	1,101
	3,427	4,960

Within all three areas of our business (Portals, Analytics, Enterprise Content Management (ECM), the Recurring revenues held up well whilst the Projects revenue fell across all three areas.

In February 2014, an Analytics contract was put on hold for this year due to our clients' internal budget constraints; this coincided with one of our major ongoing Portal projects entering a testing phase in the first half which also impacted on Revenue.  However, because we knew that this was short-term, coupled with a healthy pipeline of prospects for the business, the Board took the decision to keep all costs in place at the expense, in the very short term, to the bottom line.

This was an important decision for our business flow, retaining our highly skilled personnel and avoiding the cost of re-hiring and training staff - which would also have an impact on the future flow and delivery of our business.  This commitment means that we remain in a much stronger positon to pick up quickly and efficiently on both postponed jobs and new opportunities that lie ahead.

The ECM area of the business held its own in the Project area, showing a slight increase year on year.  It is also normally the strongest contributor to the overall Product sales recording £740,000 in the first half of 2013 but only £82,000 in this first half.  This was predominantly due to lack of Government spending for these products.

DIVIDEND

Although it has been the Company's practice to pay an interim dividend, the Board has decided at this half year stage to be prudent and preserve cash however, we do expect to resume our progressive dividend policy and return to paying a dividend based on the year's performance as a whole.

OUTLOOK FOR THE FINANCIAL YEAR

Portals

Within the Portals sector we have started on the next phase of development for our long standing major client and are also in full swing on the implementation of PCI DSS (Payment Card Industry Data Security Standard) for another key client which will also broaden our offering to other prospects in the retail and financial sectors thus strengthening our existing 27001 security clearance.  There have also been further contract wins providing revenue for the second half including a substantial two-year contract for the hosting and managing of an Adobe based on-line meeting system for a UK Government department.

Analytics

As can be seen from the above figures the Recurring revenues for Analytics held up well but we suffered from a lack of new project work following the cancellation of the previously mentioned contract.  During Q32014 we have secured a number of POC's (Proof of Concept) which, whilst being revenue generating business in their own right should also lead to longer term contracts benefiting the last quarter of the current financial year and into next year and beyond.

The Company is currently in final stage negotiations for a major Analytics project which, if closed will enhance our second half performance and underpin our expectation of comfortably achieving market expectations for the year as a whole.

ECM

As mentioned previously, ECM projects and Recurring revenues held up well in the first half of the year and we expect this trend to continue for the remainder of the year.  We have also seen an improvement in Product sales in Q3.

SUMMARY

Despite the weaker than expected first quarter performance which has impacted the first half-year results, overall trading is set to improve.  Based on this backdrop, together with the recent business wins and the depth and quality of the prospects pipeline and a number of projects coming back on stream, the Board remain confident that the Company will achieve results for the year as a whole in line with market expectations.

The Company will keep shareholders updated on our progress.

29 September 2014

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the six months ended 30 June 2014
			Six months ended		Year ended
			30 June (unaudited)		31 December (audited)
			2014	2013	2013
			£'000	£'000	£'000
Continuing operations
	Revenue		3,427	4,960	9,769
	Cost of sales		(2,330)	(3,174)	(5,603)
Gross profit			1,097	1,786	4,166
	Distribution costs		(944)	(998)	(2,137)
	Administration expenses		(466)	(467)	(1,084)
	Other operating income		3	7	14
(Loss)/profit from operations			(310)	328	959
	Finance costs		(13)	(13)	(23)
	Other gains and losses		-	30	30
(Loss)/profit before tax			(323)	345	966
	Tax		40	(15)	(173)
(Loss)/profit for the period			(283)	330	793
Other comprehensive income
	Gains on property revaluation		-	-	121
Total comprehensive income for the period attributable to equity holders of the parent			(283)	330	914
(Loss)Earnings per share
	Basic		(1.11)p	1.32p	3.14p
	Diluted		(1.10)p	1.29p	3.08p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2014
			Six months ended		Year ended
			30 June (unaudited)		31 December (audited)
			2014	2013	2013
			£'000	£'000	£'000
(Loss)/profit for the period			(283)	330	793
Other comprehensive income
Items that will be reclassified to profit and loss
	Gains on property revaluation		-	-	121
Total comprehensive income			(283)	330	914
Transactions with owners
	Purchase of own shares		(123)	(31)	(42)
	Sale of own shares		14	27	23
	Share-based payments		2	2	3
	Issue of share capital		-	31	57
	Dividends paid		(284)	(251)	(373)
Total transactions with owners			(391)	(222)	(332)
Change in shareholders' equity for the period			(674)	108	582
	Shareholders' equity at start of period		5,427	4,845	4,845
Shareholders' equity at end of period			4,753	4,953	5,427

CONSOLIDATED BALANCE SHEET as at 30 June 2014
			At 30 June (unaudited)		At 31 December (audited)
			2014	2013	2013
			£'000	£'000	£'000
Non-current assets
	Goodwill		1,018	1,018	1,018
	Other intangible assets		28	47	38
	Property, plant and equipment		2,344	2,302	2,414
	Investments		800	800	800
	Deferred tax assets		54	17	7
			4,244	4,184	4,277
Current assets
	Trade and other receivables		2,054	3,593	2,907
	Cash and cash equivalents		188	657	539
			2,242	4,250	3,446
Total assets			6,486	8,434	7,723
Current liabilities
	Trade and other payables		(948)	(2,672)	(1,427)
	Tax liabilities		(164)	(25)	(166)
	Borrowings		(163)	(162)	(162)
			(1,275)	(2,859)	(1,755)
Non-current liabilities
	Borrowings		(458)	(622)	(541)
			(458)	(622)	(541)
Total liabilities			(1,733)	(3,481)	(2,296)
Net assets			4,753	4,953	5,427
Equity
	Share capital		509	506	509
	Share premium account		1,893	1,870	1,893
	Revaluation reserve		171	50	171
	Own shares		(81)	-	(2)
	Retained earnings		2,261	2,527	2,856
Attributable to equity holders of the parent			4,753	4,953	5,427

CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 June 2014
			Six months ended 30 June (unaudited)		Year ended 31 December (audited)
			2014	2013	2013
			£'000	£'000	£'000
Operating activities
	(Loss)/profit from operations		(310)	328	959
Adjustments for:
	Depreciation of property, plant and equipment		90	83	168
	Loss on disposal of  property, plant and equipment		-	-	5
	Amortisation of intangible assets		10	9	18
	Share-based payments		2	2	3
Operating cash flows before movements in working capital			(208)	422	1,153
	Decrease/(Increase) in debtors		853	(921)	(235)
	(Decrease)/increase in  creditors		(479)	1,131	(114)
Cash generated by operations			166	632	804
	Income taxes paid		(9)	(47)	(54)
Net cash from operating activities			157	585	750
Investing activities
	Interest paid		(13)	(13)	(23)
	Proceeds on sale of trading investments		-	591	591
	Purchase of property, plant and equipment		(20)	(24)	(115)
	Proceeds on disposal of property, plant and equipment		-	-	10
Net cash/(used in) for investing activities			(33)	554	463
Financing activities
	Issue of new share capital		-	31	57
	Dividends paid		(284)	(251)	(373)
	Repayment of borrowings		(82)	(328)	(409)
	Purchase of own shares (net)		(109)	(5)	(6)
Net cash used in financing activities			(475)	(553)	(731)
Net movement in cash and cash equivalents			(351)	586	482
	Cash and cash equivalents at start of year		539	70	70
Cash and cash equivalents at end of period			188	656	552

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS
1.      Basis of preparation The interim financial information for the six months ended 30 June 2014 and comparative interim figures for 2013 do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 and have not been audited by the Group's auditors.  The financial information for the year ended 31 December 2013  has been extracted from the statutory accounts for that year which have been filed with the Registrar of Companies and which contain an unmodified audit opinion and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The interim financial information has been prepared on the basis of the accounting policies and on a consistent basis with the latest published annual accounts.  Those financial statements were prepared in accordance with International Financial Reporting Standards, incorporating International Accounting Standards (IAS's) and Interpretations (collectively IFRS).
2.      Business and geographical segments The Group has one reportable business segment. 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, as shown below.  No allocation of other income and costs to these categories is made because the Directors consider that any such allocation would be arbitrary, as would be any allocation of assets and liabilities.
Continuing operations Six months ended 30 June 2014		Product	Project work	Recurring revenues	Total £'000
	External sales	648	889	2,666	4,202
	Adjustment for agency basis	-	-	(776)	(776)
	Reported revenue	648	889	1,890	3,427
	Segment result (gross profit)	103	(211)	1,205	1,097
	Other operating costs and income				(1,407)
	Investing and financing activities				(13)
	Profit before tax				(323)
Continuing operations Six months ended 30 June 2013		Product	Project work	Recurring revenues	Total £'000
	External sales	4,301	1,873	2,296	8,470
	Adjustment for agency basis	(3,200)	-	(310)	(3,510)
	Reported revenue	1,101	1,873	1,986	4,960
	Segment result/(loss)	213	359	1,214	1,786
	Other operating costs and income				(1,458)
	Investing and financing activities				17
	Profit before tax				345
Geographical segments
	The Company operates entirely within the UK.
3.   Earnings per share			Six months ended		Year ended
			30.6.14	30.6.13	31.12.13
	Earnings attributable to equity holders of the parent		(£283,000)	£330,000	£914,000
	Weighted average of ordinary shares in issue		25,436,791	25,171,404	25,270,620
	Weighted average of own shares		(53,663)	(80,343)	(15,802)
	Weighted average for calculating basic EPS		25,383,128	25,091,061	25,254,818
	Effective dilutive share options		403,136	449,290	460,479
	Weighted average for calculating diluted EPS		25,786,264	25,540,351	25,715,297
4.   Dividends			Six months ended		Year ended
			30.6.14	30.6.13	31.12.13
Amounts recognised as distributions to equity holders			£'000	£'000	£'000
Interim dividend for the year ended 31.12.13 of 0.44p			-	-	99
Final dividend for the year ended 31.12.2013 of 1.00p (2012: 0.90p)			284	251	274
			284	251	373
No interim dividend will be paid for the year ended 31 December 2014.
5.   Current liabilities - borrowings			Six months ended		Year ended
			30.6.14	30.6.13	31.12.13
			£'000	£'000	£'000
	Bank mortgage		163	162	162
	Bank overdraft		-	-	-
			163	162	162
6.   This statement will be available to view and download from the Company's website.

ENQUIRIES
IS Solutions Plc John Lythall, Managing Director Tel: [phone]	FinnCap Nominated Broker & Adviser Ed Frisby- Corporate Finance Stephen Norcross - Corporate Broking Tel: [phone]	TooleyStreet Communications Ltd IR & Media Relations Fiona Tooley, Director Tel: [phone]
Editor's Note IS Solutions is a systems integrator and value-added reseller focused on three web-related areas - portals, content/document management, with specialities in business intelligence and 'big data' analytics. Based in Sunbury-on-Thames, the Group was founded in 1985 and became a listed PLC 1997.  The business currently employs 100 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 RBS.		Ticker: AIM: ISL Accreditation: ISO27001 E-mail:  [e-mail] Website:  www.issolutions.co.uk Follow us  www.linkedin.com/company/issolutions

 

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