Interim Results

IS SOLUTIONS PLC 30 September 1999 IS Solutions Plc Suppliers of value-added IT Business Solutions Unaudited Interim Results for the six months ended 30th June 1999 Turnover £4.3million Profit before Tax £362,000 Earnings per Share 5.28p Strong Balance Sheet - net cash £1.9million Increased interim dividend - 1.60p Realignment of US business - first half loss as anticipated - investments made beginning to show a return with a much stronger 3rd quarter performance - significant opportunities in the Internet field UK business up 13% restructured in response to market developments - strong surge in demand for line of business and e- commerce sites - new projects with a number of existing clients - major new client wins including e-commerce sites for Officentre.com and BTCellnet ' We have restructured the UK into two customer facing divisions - Total Internet and IT Services in order to simplify our sales and marketing message: 'Total Internet -provides Infrastructure support and design for Internet projects, and 'WEBSERVICE' has been created in response to demand from our clients as we build more and more 'line of business' sites that require 24hr/7 days/week coverage. IT Services - combines our FM & EM activities under one banner as essentially the point of contact within businesses for these two activities is the same and therefore allows a more focused approach to the sales and marketing of these activities. 'The strong activity level in the UK from both new and existing clients and the growth that we are experiencing in our web-specific outsourcing business, coupled with the realignment of the US to more closely match the UK, leads the Board to be optimistic for the second half and encouraged for prospects in the coming year'. Barrie Clark, Chairman Enquiries: John Lythall Fiona Tooley Managing Director Citigate Dewe Rogerson I S Solutions Plc Tel: 0121-631-2299 Tel: 01932-893333 Mobile: 0385-703523 Mobile: 0498-640215 IS Solutions Plc Interim Results Statement by the Chairman, Barrie Clark I am pleased to report that we have achieved further good progress in the UK and, with the refocus of our US business in line with the UK operation, we are in a strong position to move forward. Group sales were £4.3 million (1998: £4.2 million) with profit before tax of £362k (1998: £404k). Earnings per share for the period were 5.28p (1998: 5.68p) and the balance sheet remains strong with net tangible assets at 30th June standing at £2.5 million (1998: £2.1 million) with net cash at £1.9 million (1998: £1.3 million). An interim dividend of 1.60 pence per share (1998: 1.33p) will be paid on the 8th November 1999 to all shareholders on the Register at the close of business on the 15th October 1999. Restatement of accounts - To reflect the completion of our transition to a services based business the 'Cost of sales' now includes the cost of employee labour directly attributable to the production of the services that have resulted in the sales. The previous year's figures have been restated to allow a proper comparison. The Group figures were made up as follows:- UK Our UK business has experienced a 12% increase in profits before tax in the first six months, up from £346k (1998) to £390k. Sales for the six months were £3.646 million, up 13% over the same period last year (1998: £3.216 million). USA As mentioned in our 1998 Annual Report and again at the AGM, the realignment of the US business towards value added services has had an impact on its results. Sales in the period reduced from £982k (first half 1998) to £631k as we refocused our marketing and sales activities. This action, together with the additional salary and recruitment costs, resulted in a loss of £28k as anticipated in the first half (1998: £58k profit). Activities UK In response to market developments we have restructured from three divisions (Total Internet (TI), Facilities Management (FM), Enterprise Management (EM)) into two customer facing divisions in order to simplify our sales and marketing message: 1) Total Internet - we have strengthened our TI offering to reflect current demands being seen in the market with two new areas:- - Infrastructure support and design, due to the increasing size and complexity of Internet projects. - 'WEBSERVICE' which is now a formal offering for outsourced contracted support for a company's website. Webservice has been created in response to demand from our clients as we build more and more 'line of business' sites that require 24hr/7 days/week coverage. Since the summer we have seen a strong surge in demand for line of business and e-commerce sites with new projects being commissioned by existing clients such as Toyota, Toshiba and Thomas Cook. We have also recently won a number of major projects from new clients in this area including the first office products portal site for Officentre.com, the soon to be launched BTCellnet online store and also due to go live this Autumn a share dealing site for an international bank. Overall, we have seen a significant increase in the average contract value now being commissioned and the experience gained in the Internet arena over the last 5 years, coupled with our 15 years of experience in the design and implementation of I.T. infrastructure, leaves us well positioned to assist companies adapting to the changing world of business processes. 2) I.T. Services - we have combined our FM & EM activities under one banner as essentially the point of contact within businesses for these two activities is the same and therefore allows a more focused approach to the sales and marketing of these activities. USA The investment made in personnel is now beginning to show a return with a much stronger 3rd quarter and again we are seeing significant Internet opportunities which should come to fruition next year. The objective of broadening the client profile into one similar to that in the UK is working at the prospect level and, after taking lead times into account, should result in business coming through in the second quarter of year 2000. Outlook The strong activity level in the UK from both new and existing clients and the growth that we are experiencing in our web- specific outsourcing business, coupled with the realignment of the US to more closely match the UK, leads the Board to be optimistic for the second half and encouraged for prospects in the coming year. 30 September 1999 IS Solutions Plc Interim Results Consolidated profit and loss account for the six months ended 30th June 1999 6 months ended Year ended 30th June 31st December Note 1999 1998 1998 Restated Restated £'000 £'000 £'000 Turnover 2 4,277 4,198 8,745 Cost of sales 1 (2,713) (2,829) (5,683) Gross profit 1,564 1,369 3,062 Distribution costs (805) (623) (1,340) Administration expenses (431) (383) (856) Operating profit 328 363 866 Interest receivable and similar income 36 44 82 Interest payable and (2) (3) (6) similar charges Profit on ordinary activities before 2 362 404 942 taxation Tax on profit on ordinary 3 (110) (133) (285) activities Profit on ordinary activities after taxation 252 271 657 Dividends 4 (76) (63) (191) Retained profit 176 208 466 Earnings per ordinary 5 share Basic 5.28p 5.68p 13.77p Fully Diluted 5.22p 5.62p 13.62p Dividends per ordinary 1.60p 1.33p 4.00p share IS Solutions Plc Interim Results Consolidated balance sheet as at 30th June 1999 At 30th June At 31st Dec 1999 1998 1998 £'000 £'000 £'000 Fixed assets Tangible assets 425 402 377 Current assets Stocks 110 96 113 Debtors 3,048 2,752 2,427 Cash at bank and in hand 1,927 1,338 2,068 5,085 4,186 4,608 Creditors Amounts falling due within one (2,978) (2,354) (2,635) year Net current assets 2,107 1,832 1,973 Total assets less current 2,532 2,234 2,350 liabilities Creditors Amounts falling due after more - (148) (6) than one year Net assets 2,532 2,086 2,344 Capital and reserves Called up share capital 95 95 95 Share premium account 791 791 791 Profit and loss account 1,646 1,200 1,458 Equity shareholders' funds 2,532 2,086 2,344 IS Solutions Plc Interim Results Consolidated cash flow statement for the six months ended 30th June 1999 6 months ended Year ended 30th June 31st December 1999 1998 1998 £'000 £'000 £'000 Net cash flow from operating activities 112 93 1,091 Returns on investments and servicing of finance Interest received 36 44 82 Interest element of finance (2) (3) (6) lease rentals Dividends paid (128) (37) (100) Net cash flow from returns on investments and servicing of (94) 4 (24) finance Taxation (16) 1 (196) Capital expenditure Purchase of tangible fixed (146) (132) (182) assets Sale of tangible fixed assets 4 40 57 Net capital expenditure (142) (92) (125) Cash flow before use of liquid resources and financing (140) 6 746 Financing Capital element of finance lease rental payments (13) (26) (36) Net cash flow from financing (13) (26) (36) (Decrease)/Increase in cash in (153) (20) 710 period IS Solutions Plc Interim Results Net cash flow from operating activities 6 months ended Year ended 30th June 31st December 1999 1998 1998 £'000 £'000 £'000 Operating profit 328 363 866 Net depreciation charge 94 62 120 Change in working capital (310) (332) 105 Net cash flow from operating 112 93 1,091 activities Reconciliation of net cash flow to movement in net funds 6 months ended Year ended 30th June 31st December 1999 1998 1998 £'000 £'000 £'000 (Decrease)/Increase in cash in the period (153) (20) 710 Cash flow arising from lease 13 26 36 financing Translation differences 12 - - Movement in net funds in the (128) 6 746 year Net funds at 1 January 1999 2,041 1,295 1,295 Net funds at 30 June 1999 1,913 1,301 2,041 Statement of total recognised gains and losses 6 months ended Year ended 30th June 31st December 1999 1998 1998 £'000 £'000 £'000 Profit for the period 176 208 466 Currency translation 12 - - differences Total recognised gains and 188 208 466 losses IS Solutions Plc Interim Results Notes 1 Basis of preparation The interim financial statements have been prepared on the basis of accounting policies set out in the Group financial statements for the year ended 31st December 1998. However 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. The previous year's figures have been restated to allow a proper comparison. The statements are unaudited but have been reviewed by KPMG Audit Plc, and their report is set out below. 2 Segmental Analysis Turnover arises from the distribution, design and installation of computer hardware and software systems. 6 months ended Year ended 30th June 31st December 1999 1998 1998 £'000 £'000 £'000 Turnover UK 3,646 3,216 6,914 USA 631 982 1,831 4,277 4,198 8,745 Profit before Taxation UK 390 346 899 USA (28) 58 43 362 404 942 Net Assets/(Liabilities) UK 2,651 2,200 2,474 USA (119) (114) (130) 2,532 2,086 2,344 3 Taxation The taxation charge for the six months ended 30th June 1999 is based on an estimate of the anticipated effective rate of tax for the full year of 30%. 4 Dividends The Directors have elected to pay an interim dividend of 1.60p net per ordinary share (1998: interim dividend 1.33p, final dividend 2.67p) on 8th November 1999 to shareholders on the Register at 15th October 1999. 5 Earnings per share The basic earnings per share figure of 5.28p (1998: 5.68p) has been calculated on the basis of profit after tax of £252,000 (1998: £271,000) and the number of shares in issue throughout the period of 4,771,269 (1998: 4,771,269). The fully diluted earnings per share figure of 5.22p has been calculated on the basis that 4,824,069 shares had been in issue throughout the period (1998: 4,824,069). 6 Year 2000 The Directors have assessed the likely impact and extent of the 'Year 2000' problem on the business. The principal software applications used by the Group have been examined, and changes that were required have been instigated. The overall cost of these activities is not expected to be significant since computer equipment and software have been updated regularly. 7 The interim results are unaudited and do not comprise full accounts within the meaning of Section 240 of the Companies Act 1985. Full accounts for the year ended 31st December 1998, on which the auditors gave an unqualified report, have been delivered to the Registrar of Companies. Copies of this statement will be posted to all shareholders in the week commencing 11th October 1999. Further copies are available from the Registered Office: Admiral Hawke House, Green Street, Sunbury-on-Thames, Middlesex, TW16 6RA. Tel: 01932 893 333. Review report by KPMG Audit Plc to IS Solutions Plc Introduction We have been instructed by the company to review the financial information set out in this report and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibilities of, and has been approved by, the directors. The Listing Rules of the London Stock Exchange require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceeding annual accounts except where they are to be changed in the next annual accounts in which case any changes, and the reasons for them, are to be disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4: Review of Interim financial information issued by the Audited Practices Board. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 1999. KPMG Audit Plc Chartered Accountants 1 Forest Gate Brighton Road Crawley West Sussex RH11 9PT 30 September 1999

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