D4T4.L Regulatory News (D4T4)

28 Mar 2008 07:01

IS Solutions PLC28 March 2008 Issued by Citigate Dewe Rogerson Ltd, BirminghamDate: Friday, 28 March 2008 Embargoed: 7.00am IS Solutions plc (the "Company") providers of a range of Internet design, website development and systems support services to public and private sector Preliminary Results for the year ended 31 December 2007 "Continuing track record of strong cash generation, improving markets and prospects" • Overall strong performance with results ahead of market expectations • Strategy of achieving top-line growth and improving profitability through diversification into value-added products reflected in pre-tax profits up 43% to £410,000 (2006: £286,000) • Adjusted Diluted Earnings per share (before the recognition of a deferred tax asset) up 38% to 1.59p (2006: 1.16p). Unadjusted EPS 1.86p (2006: 1.16p) • Final Dividend proposed: 0.67p per share (2006: 0.33p) up 101% Dividend for the year 1.0p-a total increase of 100% • Net Cash at year end of £2.5 million (2006: £1.6m) "The Board is alert to the current background of economic uncertainty created bythe disruption in financial markets and, in view of this uncertainty, considersit prudent to be cautious on future prospects. However, at this stage in thisnew financial year the Company has not experienced any particular easing indemand for its products and services. This, together with the width and scope ofthe products and services we offer throughout the business give grounds for ourrelative confidence in the medium term. The Board also continues to seekopportunities for growth by acquisition." Barrie Clark, Chairman FULL STATEMENT ATTACHED Enquiries: John Lythall, Managing Director Fiona Tooley / Keith Gabriel IS Solutions Plc Citigate Dewe Rogerson LtdTel: +44 (0)1932 893333 Tel: +44 (0) 121 455 8370www.issolutions.co.uk Mobile: +44 (0)7785 703523Ticker: ISL.L IS Solutions plc Preliminary Results for the year ended 31 December 2007 STATEMENT BY THE CHAIRMAN Our on-going strategy of achieving top line growth and improving profitabilitythrough diversifying into value-added software products and product licensesales has been reflected in these results being reported. This trend is alsocontinuing. Financial Results I am pleased to report an overall strong performance in 2007 by the Group whichis shown in our profits being reported and which are also ahead of marketexpectations. Pre-tax profits for the year ended 31 December 2007, pre-intangible amortisationof £30,000 (2006: £23,000) rose by 42% to £440,000 (2006: £309,000). Whilstreported profit before tax increased by 43% to £410,000 (2006: £286,000). Diluted earnings per share, inclusive of the recognition of a deferred tax assetof £63,000 (not part of the underlying growth in earnings), increased by 60% to1.86 pence (2006: 1.16 pence). For comparative purposes, before the tax assetrecognition, the increase was 38% to 1.59 pence and net assets at 31 December2007 stood at £3.07 million (2006: £2.8 million). Cash-flow from operations hasagain been strong and cash and cash equivalents as at 31 December 2007 stood at£2.5 million (2006: £1.6 million). Overview In light of the sale of Vendor Software updates becoming an increasing featureof the Group's operating model and in-line with industry peers, the auditcommittee and the Board has decided to change the Group's accounting treatmentfor these sales from an invoiced basis to a net revenue basis thus, only thegross profit element from these contracts will now be included under Grouprevenues. On this basis, turnover for the full year increased by 18% to £7.9million (2006 restated: £6.7 million). If this change had not been made revenuefor 2007 would have been £8.5 million for 2007 (2006: £6.9 million) which isslightly ahead of market expectations. The strong software product sales reported at the half year continued for theremainder of the year with Web Analytics performing particularly well asclients increasingly seek to gain more useable information from their websites:the agreement signed with SAS (Business Intelligence products) in the secondhalf has already resulted in its first small order being secured in December. Professional Services benefited from product led sales both in Projects andWebservices (support contracts) contributing to an 88% increase in Groupoperating profit to £302,000 (2006: £161,000). Watchfire did particularly wellwith six new contracts being won in the period; in the latter part of the year,Watchfire was bought by IBM which we believe should lead to greater acceptanceof its products in the marketplace. 2007 also saw an increase in the deploymentof Content Management Services as clients demand greater control of the deliveryof content to their websites. Personnel Once again the Board would like to express its appreciation and thanks to allemployees for their support through the whole of 2007. It is the teamwork andcommitment to quality shown by our employees that has allowed us to build thestrong and sustainable relationships we have with our clients and suppliers. I would also like to take this opportunity to welcome Roger McDowell who joinedus as an Independent Non-Executive Director on 22 January 2008. Mr McDowell brings to the Board over 30 years of senior management experience.The Directors consider that Roger's comprehensive understanding of business, inparticular public companies, will add a wealth of experience to the Company andwill complement the existing skills already on the Board. Dividend At the half year the Board announced that it had reviewed the future dividendpolicy of the Group in the light of its historic cash balances, a continuingtrack record of strong cash generation, improving markets and prospects. Trading in the second half continued in the same vein and as a result the Boardis pleased to propose subject to shareholder approval, a similar increase in thefinal dividend from 0.33 pence to 0.67 pence per share. With an increase in theinterim payment of 101% to 0.33 pence this gives a total for the year of 1.0pence per share (2006: 0.5 pence), a total increase for the year of 100%. The final dividend which is subject to shareholders' approval at the AGM, to beheld on 15 May 2008, will be paid on 23 May 2008 to shareholders on the Registerat close of business on 25 April 2008. Outlook The Board is alert to the current background of economic uncertainty created bythe disruption in financial markets and, in view of this uncertainty, considersit prudent to be cautious on future prospects. However, at this stage in thisnew financial year the Company has not experienced any particular easing indemand for its products and services. This, together with the width and scope ofthe products and services we offer throughout the business give grounds for ourrelative confidence in the medium term. The Board also continues to seek opportunities for growth by acquisition. Consolidated income statement for the year ended 31 December 2007 2007 2006 Restated £'000 £'000Continuing operations Revenue 7,894 6,680 Cost of sales (5,078) (4,142) Gross profit 2,816 2,538 Distribution costs (1,670) (1,469) Administration expenses (844) (908) Profit from operations 302 161 Investment revenues 108 99 Other gains and losses - 26 Profit before tax 410 286 Tax 50 -Profit for the period attributable to equity holders 460 286Earnings per share Basic 1.89 p 1.18 p Diluted 1.86 p 1.16 p Consolidated statement of changes in shareholders' equity for the year 2007 2006 £'000 £'000 Profit for the year 460 286 Total recognised income and expense for the year 460 286 Purchase of own shares (70) (11) Sale of own shares 21 50 Share-based payments 2 - Dividends (161) (107) Change in shareholders' equity for the year 252 218 Shareholders' equity at start of year 2,819 2,601 Shareholders' equity at end of year 3,071 2,819 Consolidated balance sheet as at 31 December 2007 2007 2006 £'000 £'000Non-current assets Goodwill 254 254 Other intangible assets 7 37 Property, plant and equipment 127 185 Deferred tax assets 86 22 474 498Current assets Trade and other receivables 1,224 1,754 Cash and cash equivalents 2,504 1,563 3,728 3,317 Total Assets 4,202 3,815 Current liabilities Trade and other payables (1,110) (989) Tax liabilities (20) - (1,130) (989) Non-current liabilities Deferred tax liabilities (1) (7) Total liabilities (1,131) (996) Net assets 3,071 2,819 Equity Share capital 496 496 Share premium account 1,786 1,786 Own shares (97) (66) Retained earnings 886 603 Attributable to equity holders of the parent 3,071 2,819 Consolidated cash flow statement for the year ended 31 December 2007 2007 2006 £'000 £'000Operating activities Profit from operations 302 161Adjustments for: Depreciation of property, plant and equipment 114 109 Gain on disposal of property, plant and equipment (2) (1) Amortisation of intangible assets 30 23 Share-based payments 2 - Operating cash flows before movements in working capital 446 292 Decrease/(increase) in debtors 530 (631) Increase in creditors 121 41 Cash generated by operations 1,097 (298) Net cash from operating activities 1,097 (298) Investing activities Interest received 108 69 Proceeds on disposal of trading investments - 105 Disposal of operations - 26 Purchase of property, plant and equipment (60) (75) Proceeds on disposal of property, plant and equipment 6 5 Acquisition of subsidiaries - (238) Net cash from/(used in) investing activities 54 (108) Financing activities Dividends paid (161) (107) Purchase of own shares (49) (11) Net cash used in financing activities (210) (118) Net increase/(decrease) in cash and cash equivalents 941 (524) Cash and cash equivalents at start of year 1,563 2,087 Cash and cash equivalents at end of year 2,504 1,563 Notes 1 Business and geographical segments For management purposes the Group reports its revenue and gross profit by vendorgenerated third party sales (Distribution) and sales direct to the Group's owncustomers (Direct). No allocation of operating costs and other income to thesesegments is made because the directors consider that any such allocation wouldbe arbitrary and therefore not meaningful. Business segments 2007 Direct Distribution Unallocated Total Revenue 6,861 1,033 - 7,894 Gross profit 2,711 105 - 2,816 Other income and expense - - (2,356) (2,356) Segment result 2,711 105 (2,356) 460 Assets 1,159 - 3,043 4,202 Liabilities (612) (100) (419) (1,131) Business segments 2006 There were no reported distribution sales in 2006, and consequently nocomparative segmental analysis is provided. Geographical segments The Group operates entirely within the UK. 2 Dividends 2007 2006Amounts recognised as distributions to equity holders £'000 £'000 Final dividend for the year ended 31 December 2006 of 0.33p 80 65 (2005: 0.27p) Interim dividend for the year ended 31 December 2007 of 0.33p 81 42 (2006: 0.17p) 161 107 Proposed final dividend for the year ended 31 December 2007 of 0.67p 163 The proposed final dividend is subject to shareholders' approval at the AGM andhas not been included as a liability in these financial statements. 3 The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2007 or 2006. Statutory accounts for 2006, which were prepared under IFRS, have been delivered to the Registrar of Companies, and those for 2007 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their report was unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. 4 Other than as set out in note 5, the preliminary announcement has been prepared on the basis of the accounting policies as stated in the financial statements for the year ended 31 December 2006. Whilst the financial information included in the preliminary announcement has been completed in accordance with IFRS, the announcement does not itself contain sufficient information to comply with IFRS. 5 Change in accounting policy and reclassification of cost of sales as distribution costs Previously the Group presented the amounts invoiced on the resale of vendor maintenance contracts as gross revenue in the income statement. These contracts are an increasingly significant feature of the Group's revenue and it is now believed to be more appropriate to treat the Group as an agent rather than principal and to reflect only the commission earned on such transactions as revenue. The comparative reported revenue figures were restated accordingly and this had the effect of decreasing revenue and cost of sales by £229,000 in 2006. Also included in cost of sales in 2006 were certain departmental costs previously considered to be production costs but now more properly identified as internal support costs. The comparative cost of sales for 2006 has been reduced and distribution costs have been increased by £189,000. Neither adjustment has any effect on reported operating profit or shareholders' equity. 6 The Annual General Meeting will be convened for Thursday 15 May 2008. 7 Copies of the Report and Accounts will be posted to Shareholders on 23 April 2008. Further copies will be available after that date from the company's registered office: Windmill House, 91-93 Windmill Road, Sunbury-on-Thames, Middlesex, TW16 7EF and will also be available to download from our website www.issolutions.co.uk This information is provided by RNS The company news service from the London Stock Exchange