7 Sep 2011 07:00
Issued by Citigate Dewe Rogerson Ltd, Birmingham
Date: Wednesday, 7 September 2011
IS Solutions Plc
Half-year Results for the six month period ended 30 June 2011
"Planned change in mix of business strengthens IS Solutions'
position as a Leading Managed Service Provider"
Financial Highlights
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·; Significant Gross margin improvement since the start of the year reflecting the change in mix of business and ahead of the comparable Half-year
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·; Managed Services grew strongly Recurring Income accounting for 72.76% of revenue (2010: 63.88%)
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+15.8% |
·; Reported Profit from Operations £334,000 (2010: £232,000) | +43.9%
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·; Group Profit before Tax £310,000 (2010: £215,000) | +44.2%
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·; Earnings per share 1.09 pence (2010: 0.79 p) | +38.0%
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·; Interim dividend 0.40 pence (2010: 0.36p) | +11.1% |
"As we indicated in my closing remarks contained in the 2011 Outlook statement in our 2010 Accounts, we would see a reduction in Revenue and an increase in gross margins in 2011 through our planned focus on our core areas of Projects and Managed Services."
"Following this solid first half performance both in terms of trading and profitability, coupled with the on-going strength of activity in web-based analytics, the Board remain confident of achieving market expectations for the full year ending December 2011."
Enquiries: | |
John Lythall, Managing Director | Fiona Tooley or Keith Gabriel |
IS Solutions Plc | Citigate Dewe Rogerson |
Tel: +44 (0) 1932 893333 | Tel: +44 (0) 121 362 4035 |
www.issolutions.co.uk | Mobile: +44 (0) 7785 703523 (FMT) |
Ticker: AIM: ISL | |
Charlie Cunningham - Corporate Finance Stephen Norcross - Corporate Broking | |
FinnCap | |
Tel: +44 (0) 207 220 0500 |
I S Solutions Plc
Half-year Results for the six months ended 30 June 2011
Statement by the Chairman, Barrie Clark
The Board is pleased to announce a strong first Half-year performance as the Company continues to strengthen its position as a leading Managed Service Provider.
As indicated in my closing remarks contained in the 2011 Outlook statement in our 2010 Accounts, we would see a reduction in Revenue and an increase in gross margins in 2011 through our planned focus on our core areas of Projects and Managed Services. Since the beginning of this financial year, we have achieved a 14-point improvement in the gross margin to 43.6% (31 December 2010: 28.9%) and a 20-point increase over the Half-year period in 2010 which is a creditable performance.
Financials
Although we witnessed a reduction in top line revenue from £6.41 million last year to £4.05 million in the period being reported - this has been more than offset by the solid increase in pre-tax profit from £215,000 in 2010 to £310,000, a growth of 44.2%; profit from operations also grew by 43.97% to £334,000 (2010: £232,000). Earnings per share rose by 38% to 1.09p (2010: 0.79p).
Cash flow from operations has again been positive with £143,000 generated in the Half- year (2010: £214,000). In 2010, due to the low interest rates available for deposits, the Board elected to purchase trading investments equivalent to £500,000. Once again, with no improvement in interest rates the Board has continued this policy; at the half year the trading investment is valued at £541,000 and can be converted back to cash within a month. Following our initial investment in Speed-Trap Holdings Limited ('Speed-Trap') of £200,000 in October 2010, the Company invested a further £500,000 during Q1 thereby completing its total investment in this business at £700,000 which left the cash & cash equivalents at £nil by the end of the period being reported upon (HY 2010: £550,000). In July the Company's bank facility of £550,000 was renewed for a further year.
As predicted, large license sales which historically emanate from Government departments reduced in the period from £3.056 million to £496,000. This business is low margin and therefore the lower revenue stream from the de-emphasis of this area of our business has little impact on our overall gross profit return.
The key improvement has come through our Projects and Managed Services (recurring revenue stream) business.
Projects revenue dipped by 9.6% principally due to the disruption caused by the Japanese Tsunami leading to delays in the project approval process for some of our clients. However, with the higher level of consultancy associated with web-based analytics allowing a better day rate coupled with judicious cost control, we have realised an increased gross profit contribution from this area, more than doubling that of the previous year and recording a growth of 101.7% (see 'Segmental analysis' below).
Managed Services, the mainstay of our business which generates our Recurring income, once again performed strongly producing revenue growth of 15.8% with gross profit up by 35.6% and now contributes 72.76% of the total GP (2010: 63.88%).
Dividend
Earnings per share have risen in the period by 38% compared to HY2010 and trading continues to remain positive and encouraging, However, the Board consider that following its investments over the last year and at this stage of our strategic growth plans for the overall business, the focus is to grow the business for the long term benefit of all stakeholders.
An interim dividend of 0.40 pence (2010: 0.36p), up 11.1% over the comparable HY will be paid on 14 October 2011 to qualifying shareholders on the Register at the close of business on 30 September 2011.
Outlook
Despite the general economic outlook the Company has a strong order book and the delays in project work experienced in the first Half-year have now been resolved.
Following this solid first half performance both in terms of trading and profitability, coupled with the on-going strength of activity in web-based analytics, the Board remain confident of achieving market expectations for the full year ending December 2011.
The Directors look forward to updating shareholders on its progress at the end of the year.
On behalf of the Board
Barrie Clark
Chairman
7 September 2011
Consolidated income statement for the six months ended 30 June 2011
6 months ended | Year ended | |||
30 June | 31 December | |||
2011 | 2010 | 2010 | ||
| £'000 | £'000 | £'000 | |
Continuing operations | ||||
Revenue | 4,054 | 6,409 | 10,981 | |
Cost of sales | (2,288) | (4,925) | (7,806) | |
Gross profit | 1,766 | 1,484 | 3,175 | |
Distribution costs | (1,062) | (907) | (1,825) | |
Administration expenses | (396) | (396) | (760) | |
Other operating income | 26 | 51 | 88 | |
Profit from operations | 334 | 232 | 678 | |
Investment revenues | 3 | 3 | 5 | |
Finance costs | (19) | (20) | (40) | |
Other gains and losses | (8) | - | 41 | |
Profit before tax | 310 | 215 | 684 | |
Tax | (40) | (20) | (65) | |
Profit attributable to equity holders of the parent/total comprehensive income for the period | 270 | 195 | 619 | |
Earnings per share | ||||
Basic | 1.09 p | 0.79 p | 2.51 p | |
Diluted | 1.06 p | 0.78 p | 2.46 p | |
Consolidated statement of changes in equity for the six months ended 30 June 2011
6 months ended | Year ended | |||
30 June | 31 December | |||
2011 | 2010 | 2010 | ||
£'000 | £'000 | £'000 | ||
Purchase of own shares | - | - | (13) | |
Sale of own shares | - | - | 10 | |
Share-based payments | 3 | 8 | 15 | |
Total expense recognised directly in equity | 3 | 8 | 12 | |
Profit for the period | 270 | 195 | 619 | |
Dividends paid | (196) | (190) | (279) | |
Change in shareholders' equity for the period | 77 | 13 | 352 | |
Shareholders' equity at start of period | 3,894 | 3,542 | 3,542 | |
Shareholders' equity at end of period | 3,971 | 3,555 | 3,894 | |
Consolidated balance sheet as at 30 June 2011
At 30 June | At 31 December | |||
2011 | 2010 | 2010 | ||
£'000 | £'000 | £'000 | ||
Non-current assets | ||||
Goodwill | 1,118 | 1,147 | 1,118 | |
Property, plant and equipment | 2,317 | 2,318 | 2,300 | |
Investments | 700 | - | 200 | |
Deferred tax assets | 24 | 64 | 47 | |
Derivative financial instruments | 10 | 18 | 18 | |
4,169 | 3,547 | 3,683 | ||
Current assets | ||||
Investments | 541 | 500 | 541 | |
Trade and other receivables | 2,445 | 1,610 | 2,229 | |
Cash and cash equivalents | - | 550 | 574 | |
2,986 | 2,660 | 3,344 | ||
Total assets | 7,155 | 6,207 | 7,027 | |
Current liabilities | ||||
Trade and other payables | (1,628) | (1,141) | (1,667) | |
Tax liabilities | (73) | (29) | (56) | |
Borrowings | (295) | (143) | (147) | |
(1,996) | (1,313) | (1,870) | ||
Non-current liabilities | ||||
Borrowings | (1,188) | (1,339) | (1,263) | |
(1,188) | (1,339) | (1,263) | ||
Total liabilities | (3,184) | (2,652) | (3,133) | |
Net assets | 3,971 | 3,555 | 3,894 | |
Equity | ||||
Share capital | 496 | 496 | 496 | |
Share premium account | 1,786 | 1,786 | 1,786 | |
Own shares | (12) | (17) | (12) | |
Retained earnings | 1,701 | 1,290 | 1,624 | |
Attributable to equity holders of the parent | 3,971 | 3,555 | 3,894 | |
Consolidated cash flow statement for the six months ended 30 June 2011
6 months ended | Year ended | |||
30 June | 31 December | |||
2011 | 2010 | 2010 | ||
£'000 | £'000 | £'000 | ||
Operating activities | ||||
Profit from operations | 334 | 232 | 678 | |
Adjustments for: | ||||
Depreciation of property, plant and equipment | 62 | 66 | 108 | |
Gain on disposal of property, plant and equipment | (1) | - | - | |
Amortisation of intangible assets | - | 30 | 30 | |
Impairment of goodwill | - | - | 29 | |
Share-based payments | 3 | 8 | 15 | |
Operating cash flows before movements in working capital | 398 | 336 | 860 | |
(Increase)/decrease in debtors | (216) | 756 | 137 | |
Decrease in creditors | (39) | (878) | (352) | |
Cash generated by operations | 143 | 214 | 645 | |
Income taxes paid | - | (35) | (36) | |
Net cash from operating activities | 143 | 179 | 609 | |
Investing activities | ||||
Interest received | 3 | 3 | 5 | |
Interest paid | (19) | (20) | (40) | |
Purchase of non-current investments | (500) | - | (200) | |
Purchase of current investments | - | (500) | (500) | |
Purchase of property, plant and equipment | (87) | (94) | (118) | |
Proceeds on disposal of property, plant and equipment | 9 | - | - | |
Net cash used in investing activities | (594) | (611) | (853) | |
Financing activities | ||||
Dividends paid | (196) | (190) | (279) | |
Repayment of borrowings | (73) | (71) | (143) | |
Purchase of own shares (net) | - | - | (3) | |
Net cash used in financing activities | (269) | (261) | (425) | |
Net movement in cash and cash equivalents | (720) | (693) | (669) | |
Cash and cash equivalents at start of year | 574 | 1,243 | 1,243 | |
Cash and cash equivalents at end of period | (146) | 550 | 574 | |
Notes to the interim financial statements
1 | Basis of preparation | |||||
The interim financial information for the six months ended 30 June 2011 does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 and has not been audited by the Group's auditors. The financial information for the year ended 31 December 2010 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 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.
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Continuing operations 2011 | License sales | Project work | Recurring revenues | Total £'000 | ||
External sales | 496 | 1,155 | 3,314 | 4,965 | ||
Adjustment for agency basis | - | - | (911) | (911) | ||
Reported revenue | 496 | 1,155 | 2,403 | 4,054 | ||
Segment result (gross profit) | 134 | 347 | 1,285 | 1,766 | ||
Other operating costs and income | (1,432) | |||||
Investing and financing activities | (24) | |||||
Profit before tax | 310 | |||||
Continuing operations 2010 | License sales | Project work | Recurring revenues | Total £'000 | ||
External sales | 3,652 | 1,278 | 2,359 | 7,289 | ||
Adjustment for agency basis | (596) | - | (284) | (880) | ||
Reported revenue | 3,056 | 1,278 | 2,075 | 6,409 | ||
Segment result (gross profit) | 364 | 172 | 948 | 1,484 | ||
Other operating costs and income | (1,252) | |||||
Investing and financing activities | (17) | |||||
Profit before tax | 215 | |||||
Geographical segments | ||||||
The group operates entirely within the UK. | ||||||
3 | Earnings per share | 6 months ended | Year ended | |
30/06/2011 | 30/06/2010 | 31/12/2010 | ||
Earnings attributable to equity holders of the parent | £270,000 | £195,000 | £619,000 | |
Weighted average of ordinary shares in issue | 24,793,190 | 24,793,190 | 24,793,190 | |
Weighted average of own shares | (41,654) | (78,677) | (137,962) | |
Weighted average for calculating basic EPS | 24,751,536 | 24,714,513 | 24,655,228 | |
Effective dilutive share options | 600,893 | 182,655 | 516,795 | |
Weighted average for calculating diluted EPS | 25,352,429 | 24,897,168 | 25,172,023 | |
4 | Dividends | 6 months ended | Year ended | |
30/06/2011 | 30/06/2010 | 31/12/2010 | ||
Amounts recognised as distributions to equity holders | £'000s | £'000s | £'000s | |
Interim dividend for the year ended 31/12/2010 of .36p | - | - | 89 | |
Final dividend for the year ended 31/12/2010 of.79p (2009: .77p) | 196 | 190 | 190 | |
196 | 190 | 279 | ||
An interim dividend of 0.40p per share will be paid on 14 October 2011 to shareholders on the register at the close of business on 30 September 2011. | 99 | |||
5 | Current liabilities - borrowings | 6 months ended | Year ended | |
30/06/2011 | 30/06/2010 | 31/12/2010 | ||
£'000s | £'000s | £'000s | ||
Bank mortgage | 149 | 143 | 147 | |
Bank overdraft | 146 | - | - | |
295 | 143 | 147 | ||