Interim Results
IS Solutions PLC
02 September 2005
I S SOLUTIONS PLC
INTERIM RESULTS
Statement by the Chairman, Barrie Clark
The interim results for the 6 months ended 30th June 2005 are in line with the
Board's expectations: Pre-tax profits increased by 67% to £105,000 (2004:
£63,000) and earnings per share moved up by 60% to 0.40p (2004: (0.25)p) on
turnover of £2.57 million (2004: £2.85 million), down 9.8%. Cash remains strong
at £1.8 million (31st December 2004: £1.9 million, 30th June 2004: £1.8
million). The Board has noted in the accounts an overdue debt of £110,000,
primarily in respect of software development work (in which the Company retains
the IPR): it believes this to be fully recoverable.
Throughout the first half of 2005 we have continued to see a gradual improvement
in the general business climate for IT related expenditure with companies at
last having to revitalise their IT infrastructure and services after the dearth
of capital expenditure post Y2K. The recurring revenue stream from our
Outsourced Services and Financial Feeds continues to cover a substantial
proportion of overheads. Although we have seen some shrinkage in the Financial
Feeds market we are also seeing an increase in Project work which should offset
this over the course of the year.
As we stated at the year end our strategy for 2005 was to broaden our software
product portfolio through the formation of strategic relationships or by
acquisition. In the first six months of the year we have been appointed as the
UK Systems Integrator and reseller for Watchfire- this relationship has already
started to produce revenues and, although the sales cycle is quite long for
this type of product, the prospects are encouraging, especially in the financial
sector.
In addition we reached an agreement with Macromedia to become their training and
implementation partner for their newly launched product 'Breeze' - Web
communications software that allows online meetings, training and presentations
to be carried out with ultimate ease. Breeze is deployed using Macromedia's
Flash Player, already installed on more than 98% of browsers worldwide (Source:
Macromedia) and, although it is early in the product's life, the level of
interest being shown is encouraging.
GetMeThere.co.uk (our joint venture website with Toyota GB), has been awarded
five stars and named as the Best Site in an Auto Express review of online route
planners, beating off competition from the AA, MultiMap and the RAC. As Managers
and Developers of the site, we have continued to expand the range of traffic
applications and we recently launched 'TARA Mobile SatNav' - a unique 'Pay as
you Go' mobile navigation system for Smartphones and PDA's.
In line with our re-introduction of dividend payments last year, the Board is
pleased to announce a dividend for the half year of 0.1.3p per ordinary share,
which reflects both the improving trading environment and the strong balance
sheet and cash position of the Company. The interim dividend will be paid on
11th October 2005 to shareholders on the register at the close of business on
16th September 2005.
Outlook
The outlook continues to improve as we move into the second half of the year
with new projects being won which should lead the Company back to top line
growth as the new products become more established through the second half of
the year and into 2006. We will continue the broadening of our product portfolio
and this policy, coupled with the general increase in levels of business, leads
the Board to remain optimistic about the Company's prospects and the Board's
expectations for the current year.
On behalf of the Board
Barrie Clark, Chairman. 2nd September 2005
Consolidated income statement for the six months ended 30th June 2005 (unaudited)
6 months ended Year ended
30th June 31st December
2005 2004 2004
restated restated
£'000 £'000 £'000
Continuing operations
Turnover 2,573 2,849 5,514
Cost of sales (1,358) (1,602) (3,038)
Gross profit 1,215 1,247 2,476
Distribution costs (699) (841) (1,709)
Administration expenses (449) (370) (1,167)
Profit/(loss) from operations 67 36 (400)
Investment income 38 27 76
Profit/(loss) before tax 105 63 (324)
Tax (5) - 72
Profit/(loss) for the period 100 63 (252)
Attributable to minority interests - (1) (34)
Profit/(loss) attributable to equity holders of the parent 100 62 (286)
Earnings per share
Basic and diluted 0.40 p 0.25 p (1.15)p
Dividends
Amount paid per share (2005 proposed) 0.13 p 0.10 p 0.30 p
Reserves absorbed 31 25 48
Consolidated statement of changes in shareholders' equity for the period
(unaudited)
6 months ended Year ended
30th June 31st December
2005 2004 2004
restated restated
£'000 £'000 £'000
Profit/(loss) for the period 100 63 (252)
Total recognised income and expense for the period 100 63 (252)
Attributable to minority interests - (1) (34)
Purchase of own shares - - (102)
Dividends (48) - (25)
Change in shareholders' equity for the period 52 62 (413)
Shareholders equity at start of year 2,541 2,954 2,954
Shareholders' equity at end of period 2,593 3,016 2,541
Consolidated Balance Sheet as at 30th June 2005 (unaudited)
At 30th June At 31st Dec
2005 2004 2004
restated restated
£'000 £'000 £'000
Non-current assets
Goodwill 100 536 100
Other intangible assets - 28 -
Property, plant and equipment 275 286 299
375 850 399
Current assets
Trading investments - 4 -
Trade and other receivables 1,544 1,593 1,404
Tax repayable - - 33
Cash and cash equivalents 1,809 1,822 1,910
3,353 3,419 3,347
Total Assets 3,728 4,269 3,746
Current liabilities
Trade and other payables (1,130) (1,265) (1,224)
Tax liabilities (5) (40) -
(1,135) (1,305) (1,224)
Total liabilities (1,135) (1,305) (1,224)
Net assets 2,593 2,964 2,522
Equity
Share capital 496 496 496
Share premium account 1,783 1,783 1,783
Own shares (102) - (102)
Retained earnings 416 737 364
Attributable to equity holders of the parent 2,593 3,016 2,541
Minority interests - (52) (19)
Total equity 2,593 2,964 2,522
Consolidated Cash Flow Statement for the six months ended 30th June 2005
(unaudited)
6 months ended Year ended
30th June 31st December
2005 2004 2004
restated restated
£'000 £'000 £'000
Operating activities
Profit from operations 67 36 (400)
Adjustments for:
Depreciation of property, plant and 49 68 137
equipment
Amortisation of intangible assets - 27 55
Impairment of goodwill 19 - 436
(Increase)/decrease in debtors (140) (88) 101
(Decrease)/increase in creditors (94) 235 194
Cash generated by operations (99) 278 523
Income taxes repaid 33 1 -
Net cash from operating (66) 279 523
activities
Investing activities
Interest received 38 27 61
Proceeds on disposal of trading - - 19
investments
Purchase of tangible fixed assets (31) (47) (129)
Sale of tangible fixed assets 6 12 12
Net cash from/(used in) 13 (8) (37)
investing activities
Financing activities
Dividends paid (48) - (25)
Purchase of own shares - - (102)
Net cash used in financing (48) - (127)
activities
Net (decrease)/increase in cash and cash equivalents (101) 271 359
Cash and cash equivalents at start of 1,910 1,551 1,551
year
Net funds at end of period 1,809 1,822 1,910
Notes to the interim financial statements
1 Basis of preparation
The interim financial information for the six months ended 30 June
2005 and 30 June 2004 does not constitute statutory accounts within
the meaning of section 240 of the Companies Act 1985 and has not been
audited by the Group's auditors. The financial information for the
year ended 31 December 2004 is also unaudited. It has been extracted
from the statutory accounts for that year which have been filed with
the Registrar of Companies and which contain an unqualified audit
report and did not contain a statement under s237(2) or (3) of the
Companies Act 1985 but has been restated for the changes required as a
result of the transition to International Financial Reporting
Standards.
The interim financial information has been prepared on the basis of
the accounting policies and presentation required by those
International Financial Reporting Standards, incorporating
International Accounting Standards (IAS's) and Interpretations
(collectively IFRS), which are expected to be endorsed and applicable
for use in the company's annual financial statements for the year
ended 31 December 2005.
2 Earnings per ordinary share
The earnings per share figure of 0.40p (2004: interim 0.25p, final
(1.15)p loss) has been calculated on the basis of a profit
attributable to the equity shareholders of the parent for the period
of £100,000 (2004: interim £62,000, final £(286,000)) and the weighted
average number of shares in issue of 24,793,190 (2004 interim and
final: 24,793,190). The share options in issue had no dilutative
effect on the loss per ordinary share in any of the periods disclosed.
3 Transition to International Financial Reporting Standards (IFRS)
These are the Group's first interim financial statements for part of
the period covered by the first annual consolidated financial
statements prepared in accordance with IFRS. In line with the
transitional provisions set out in IFRS1, the directors have reviewed
the Balance Sheets, Income Statements and Cashflow Statements for the
comparative periods set out in the financial information to consider
whether any adjustments are required in order to align the numbers
previously reported under UK GAAP with IFRS. Where necessary the
amounts previously reported in accordance with UK GAAP have been
adjusted. In the opinion of the directors there were three areas
where there could have been material differences:
Employee Share Options - In line with IFRS 2, employee share options
are required to be fair valued at the date of grant and the resulting
charge expensed through the income statement over the vesting period.
Having performed the necessary calculations, in the opinion of the
directors, the charge required in respect of options granted by the
company is not material and thus no adjustment has been made.
Dividends - Following IAS 10, dividends are now accounted for when
paid, and not when proposed.
Goodwill - In line with IFRS 3, goodwill is no longer amortised but
is, instead, subject to an annual impairment test.
In the opinion of the directors, the only adjustments affecting the
cashflow statement were presentational in nature. The adjustments to
net assets and profit before tax were as follows
Net assets Profit Profit
before tax before tax
30/06/04 30/06/04 30/06/04 31/12/04
Reported balance 2,725 (151) (151) (317)
Dividends 25 - - -
Goodwill 214 214 214 (7)
Restated balance 2,964 63 63 (324)
4 Trade and other receivables
An overdue debt of £110,000 relating to software development remained
unpaid at the reporting date. The customer is well advanced in
obtaining Venture Capital funding, and IS Solutions retains the
Intellectual Property Rights in the software. The Directors consider
that successful funding is highly probable, and that otherwise the
value of the IPR is sufficient to cover the debt. They do not consider
that a provision is necessary.
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