24 Nov 2015 07:00
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London: Tuesday, 24 November 2015
IS Solutions Plc
Specialists in Data solutions
("IS Solutions" or the "Group" or "Company")
2016 Unaudited Half-Year Report
Ø 6 months pre-tax profit ahead of previously reported 15-month period by 28.3%
Ø Return on sales 18.2% - from 9.3%
Ø Top line growth 118%
Ø New contract wins in HY1 2016 adds £4.00m in recurring revenue
Ø Underlying strong demand continues for Group services
Ø Pipeline of opportunities growing across our data management business
Ø Progressive dividend policy resumed
Introduction
During this calendar year, the Company has successfully transitioned itself into a 'data solutions' business with a clear focus on delivering 'best of breed' in data management which is used in solving business issues for our growing number of multinational customers in the key sectors of financial services, retail and airlines who require reliable, safe and secure data intelligence through Analytics and Big Data which in turn will help them deliver a first class customer experience and service.
The market for business intelligence and Analytics remains one of the fastest growing global software markets with financial organisations being the largest investors in big data solutions. Market research produced by Gartner in 2014 revealed that the market in 2013 was worth $37.7bn; based on current forecasted growth to 2018, this part of the software market is expected to increase by 9.4% CAGR.
The Group's revenue shows in excess of 70% of it deriving from Analytics and this percentage is expected to at least remain at this level in the foreseeable future.
Group's half year trading performance
Half year 30.9.15 | 15-months 31.3.15 | Half year 30.9.14 | |
Revenue -Continuing business (IS Solutions) -Celebrus Technologies (Celebrus) |
£7.04m £1.43m |
£12.29m £0.55m |
£3.88m - |
£8.47m | £12.84m | £3.88m | |
Gross profit | £3.96m | £4.7m | £1.24m |
GP margin | 46.78% | 36.37% | 31.95% |
Underlying pre-tax profit/(loss)
| £1.54m | *£1.20m | £(0.35)m |
Adjusted fully diluted EPS | 3.36p | 3.86p | (1.13)p |
Dividend | 0.50p | 0.56p | - |
Strong cash generation - net cash position | £2.09m | £(0.09)m | £(0.26)m |
(* Pre-acquisition costs)
Business income is generated by three streams: products ie software license sales, projects, and recurring revenue from its managed and maintenance services offering.
During the period under review, of the £8.47m of income, £4.8m came through projects, whilst £2.25m from recurring income and £1.45m from product sales. This is a strong performance from IS Solutions and Celebrus reflecting a percentage increase across our business streams over the same time last year of +350%, +12% and +78% respectively.
It is extremely pleasing to report that the continuing IS Solutions business experienced strong underlying demand, growing revenue overall 105.3% to £7.04m over the comparable period with its Analytics activities generating £4.60m of that revenue in HY1. Celebrus, acquired at the start of 2015, also added to our Analytics business by growing strongly and generating £1.43m of revenue bringing Analytics to some 72% of Group turnover. Being part of a larger organisation has helped Celebrus capitalise on its increasing pipeline of opportunities and securing new business. It is encouraging to report that this part of our business has delivered a performance which is 49.3% ahead of the same period last year (ie. before it became part of our business).
If we look at gross profit contribution from the business streams on the same basis, our projects work delivered £2.14m (2014: loss £0.25m), with our recurring income and products reported £1.12m and £0.71m respectively (2014: £1.36m and £0.13m). Overall, gross profit from the continuing IS Solutions business amounted to £3.23m whilst the Celebrus division reported £0.73m in the period and profit before tax of £1.30m and £0.24m respectively, giving a Return on Sales of 18.5% and 16.8% respectively and an overall ROS of 18.2%, up from 9.31% on the 15-month period ended 31 March 2015.
The IS Solutions and Celebrus are both well established and respected brands in the data Analytics segment of the IT market. Together, we have successfully opened up a number of cross-selling opportunities and at the same time created a much more balanced business with stronger higher margin license sales and progressively greater project and recurring revenue.
Contract wins
We are pleased to report that during the first half of this financial year our business team secured two additional major contracts with existing and new customers from within the financial services and airlines industries. The two contracts vary in duration and size; in total over the current financial year as a whole they are expected to contribute around £4.00 million in contracted revenue and in excess of £350,000 per annum of recurring revenue in subsequent years. We are confident that due to the nature of our projects and working partnerships our project work will open up further opportunities that will extend both our recurring income and project fee streams over the medium to longer term.
Investment and our people
We place great importance on the training, developing, progression and succession of our people at both front line, back office and across the operational management teams as a whole. Over the last year, we have been reviewing and refining our future plans and requirements to ensure that we can continue to drive performance and the further development of our commercial business.
On behalf of the Board and stakeholders we thank each colleague for their ongoing hard work and determination that has assisted in us delivering such a solid first half performance. As we look to the future with an invigorated confidence we will be investing further in our business and its people.
Within the UK, IS Solutions is expanding its direct sales team so we are able to market and sell the collective portfolio to a broader customer base. Within the US, to support our marketing and sales drive in that territory, we have employed locally based personnel ahead of the opening of a US office. This operation is expected to be fully operational by the end of the financial year; it will provide real time customer service and pre-sales support to our existing substantial US business and a foundation for future growth. As we indicated in our trading update released in September, combining these recent initiatives with current opportunities from both new and existing customers, means as a business and team members, we all have an exciting future to look forward to.
Dividend policy
Based on our confidence in the overall performance and underpinning the prospects of the business, we are pleased to declare an interim dividend of 0.50p per share. This will be paid on Wednesday, 6 January 2016 to shareholders on the register on Friday, 4 December 2015. The shares will become ex-dividend on 3 December 2015. As we indicated in our September trading update, we are committed to a progressive dividend policy and rewarding our stakeholders whilst also balancing our investments for future growth.
Outlook & Trading
"Our business is driven one hundred percent by data - It's all about the data."
Currently with over 70% of our ongoing business coming from our Analytics capability, we are in a very good situation to build on our current market position within the data solutions arena and to exploit the growing global opportunity within this segment, utilising our extensive technical know-how and skills base.
At this stage of the year, we are pleased to report that trading for both the continuing IS Solutions business and Celebrus continues to remain strong. Since the start of HY2 we have already added two new customer projects, one with a new retail customer and the other with an existing financial services customer where we are entering the second phase. These will add £150,000 of recurring revenue in this second half. In addition, we have a number of other exciting opportunities in the pipeline with the potential to convert before the end of the financial period.
Overall, the Board remains very encouraged and expects the Company to deliver results comfortably in line with current market expectations for the year ending 31 March 2016.
We will keep shareholders updated with our progress.
24 November 2015
ENQUIRIES
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IS Solutions Plc John Lythall, Managing Director Peter Kear, Executive Director Tel: +44 (0) 1932 893333 or email: moreinfo@issolutions.co.uk
FinnCap (Nominated Broker & Adviser) Ed Frisby/Emily Watts - Corporate Finance or Stephen Norcross - Corporate Broking Tel: +44 (0) 207 220 0500
TooleyStreet Communications (IR & media relations) Fiona Tooley: Tel: +44 (0) 7785 703523 or email: fiona@tooleystreet.com |
EDITOR'S NOTE
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IS Solutions Plc | Ticker: AIM: ISL | Accreditation: ISO27001; PCI (DSS)
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Established in 1985, IS Solutions is a Data Solutions company focusing on three revenue streams, namely License Sales, Projects and Recurring Revenue. The recent acquisition of Celebrus has further strengthened its position as a leading player in the field of Analytics which is now its fastest growing sector. Specifically, IS Solutions specialises in bringing together a range of components from various technological solutions providers and software developers to create a unified and fully functioning system for the end client. The business employs 118 staff, including 3 in US, and 26 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, Compare The Market™, URENCO, M&S and HSBC. follow us: www.linkedin.com/company/issolutions | ||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the six months ended 30 September 2015 | |||
Six months ended 30 September | 15-month period ended 31 March | ||
(unaudited) | (audited) | ||
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Continuing operations | |||
Revenue | 8,470 | 3,879 | 12,839 |
Cost of sales | (4,508) | (2,640) | (8,170) |
Gross profit | 3,962 | 1,239 | 4,669 |
Distribution costs | (1,313) | (1,043) | (2,451) |
Administration expenses | (1,102) | (544) | (1,557) |
Other operating income | 22 | 7 | 25 |
Profit/(loss) from operations | 1,569 | (341) | 686 |
Investment income | - | - | 4 |
Finance costs | (32) | (9) | (38) |
Profit/(loss) before tax | 1,537 | (350) | 652 |
Tax | (289) | 63 | (120) |
Profit/(loss) for the period | 1,248 | (287) | 532 |
Other comprehensive income | |||
Gains on property revaluation | - | - | 57 |
Total comprehensive income for the period attributable to equity holders of the parent | 1,248 | (287) | 589 |
Earnings/(loss) per share | |||
Basic | 3.51p | (1.13)p | 1.99p |
Diluted | 3.36p | (1.13)p | 1.92p |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 30 September 2015 | |||
Six months ended 30 September | 15-month period ended 31 March | ||
(unaudited) | (audited) | ||
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Profit/(loss) for the period | 1,248 | (287) | 532 |
Items that will be reclassified to profit and loss | |||
Gains on property revaluation | - | - | 57 |
Total comprehensive income | 1,248 | (287) | 589 |
Transactions with owners | |||
Purchase of own shares | - | (86) | (154) |
Sale of own shares | 3 | - | 26 |
Share-based payments | 1 | (4) | 4 |
Issue of share capital | 572 | - | 4,876 |
Contingent shares | (606) | - | 1,289 |
Deferred tax on outstanding share options | 30 | - | 91 |
Dividends paid | (198) | (285) | (285) |
Total transactions with owners | (198) | (375) | 5,847 |
Change in shareholders' equity for the period | 1,050 | (662) | 6,436 |
Shareholders' equity at start of period | 11,863 | 5,196 | 5,427 |
Shareholders' equity at end of period | 12,913 | 4,534 | 11,863 |
CONSOLIDATED BALANCE SHEET at 30 September 2015 | |||
At 30 September | At 31 March | ||
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Non-current assets | |||
Goodwill | 8,696 | 1,018 | 8,696 |
Other intangible assets | 1,882 | 24 | 2,014 |
Property, plant and equipment | 2,382 | 2,393 | 2,414 |
Investments | - | 847 | - |
Deferred tax assets | 728 | 7 | 698 |
13,688 | 4,289 | 13,822 | |
Current assets | |||
Trade and other receivables | 2,702 | 2,718 | 4,823 |
Cash and cash equivalents | 2,090 | 29 | 95 |
4,792 | 2,747 | 4,918 | |
Total assets | 18,480 | 7,036 | 18,740 |
Current liabilities | |||
Trade and other payables | (3,089) | (1,635) | (4,427) |
Tax liabilities | (294) | 19 | (59) |
Borrowings | (403) | (460) | (454) |
(3,786) | (2,076) | (4,940) | |
Non-current liabilities | |||
Borrowings | (1,381) | (426) | (1,537) |
Deferred tax liabilities | (400) | - | (400) |
(1,781) | (426) | (1,937) | |
Total liabilities | (5,567) | (2,502) | (6,877) |
Net assets | 12,913 | 4,534 | 11,863 |
Equity | |||
Share capital | 732 | 509 | 708 |
Share premium account | 7,118 | 1,893 | 6,570 |
Revaluation reserve | 228 | 171 | 228 |
Own shares | (76) | (99) | (80) |
Equity reserve | 803 | - | 1,380 |
Retained earnings | 4,108 | 2,060 | 3,057 |
Attributable to equity holders of the parent | 12,913 | 4,534 | 11,863 |
Total equity | 12,913 | 4,534 | 11,863 |
CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 September 2015 | |||
Six months ended 30 September | 15-month period ended 31 March | ||
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Operating activities | |||
Profit/(loss) from operations | 1,569 | (341) | 686 |
Adjustments for: | |||
Depreciation of property, plant and equipment | 54 | 54 | 228 |
Amortisation of intangible assets | 155 | 44 | 24 |
Share-based payments | 1 | (4) | 4 |
Operating cash flows before movements in working capital | 1,779 | (247) | 942 |
Decrease/(Increase) in receivables | 2,121 | 107 | (924) |
(Decrease)/increase in payables | (1,338) | (117) | (87) |
Cash generated by/(used in) operations | 2,562 | (257) | (69) |
Income taxes paid | (54) | (19) | (139) |
Net cash from/(used in) operating activities | 2,508 | (276) | (208) |
Investing activities | |||
Interest received | - | - | 4 |
Interest paid | (32) | (9) | (38) |
Purchase of property, plant and equipment | (45) | (147) | (171) |
Acquisition of subsidiary | - | - | (1,369) |
Net cash used in investing activities | (77) | (156) | (1,574) |
Financing activities | |||
Issue of new share capital | - | - | (37) |
Equity reserve | (35) | - | - |
Dividends paid | (198) | (285) | (285) |
New borrowings | - | - | 2,000 |
Repayment of borrowings | (207) | (69) | (212) |
Purchase of own shares (net) | 4 | (85) | (128) |
Net cash (used in)/from financing activities | (436) | (439) | 1,338 |
Net movement in cash and cash equivalents | 1,995 | (871) | (444) |
Cash and cash equivalents at start of period | 95 | 607 | 539 |
Cash and cash equivalents at end of period | 2,090 | (264) | 95 |
NOTES TO THE INTERIM FINANCIAL STATEMENTS |
1. Basis of preparation |
The interim financial information for the six months ended 30 September 2015 and comparative interim figures for 2014 do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 and have neither been audited nor reviewed by the Group's auditors. The financial information for the 15-month period ended 31 March 2015 has been extracted from the statutory accounts for that period 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 Managing Director 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 including Celebrus Technologies interim period ended 30 September 2015 £000's | ||||
Product | Project work | Recurring revenues | Total | |
External sales | 1,448 | 4,768 | 2,444 | 8,660 |
Adjustment for agency basis | - | - | (190) | (190) |
Reported revenue | 1,448 | 4,768 | 2,254 | 8,470 |
Segment result (gross profit) | 709 | 2,137 | 1,116 | 3,962 |
Other operating costs and income | (2,393) | |||
Investing and financing activities | (32) | |||
Profit before tax | 1,537 | |||
Continuing operations interim period ended 30 September 2014 £000's | ||||
Product | Project work | Recurring revenues | Total | |
External sales | 813 | 1,060 | 2,271 | 4,144 |
Adjustment for agency basis | - | - | (265) | (265) |
Reported revenue | 813 | 1,060 | 2,006 | 3,879 |
Segment result (gross profit) | 127 | (252) | 1,364 | 1,239 |
Other operating costs and income | (1,580) | |||
Investing and financing activities | (9) | |||
(Loss) before tax | (350) | |||
Continuing operations 15-month period ended 31 March 2015 £000's | ||||
Product | Project work | Recurring revenues | Total | |
External sales | 1,927 | 6,146 | 6,048 | 14,121 |
Adjustment for agency basis | - | - | (1,282) | (1,282) |
Reported revenue | 1,927 | 6,146 | 4,766 | 12,839 |
Segment result (gross profit) | 537 | 1,566 | 2,566 | 4,669 |
Other operating costs and income | (3,983) | |||
Investing and financing activities | (34) | |||
Profit before tax | 652 | |||
Geographical segments: The Group operates entirely within the UK. |
The table underneath details the 2015 Interim figures for Continuing Operations and the Celebrus Technologies business separately.
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Continuing operations including Celebrus Technologies interim period ended 30 September 2015 £000's | |||
Continuing Operations | Celebrus Technologies | Total | |
External sales | 7,237 | 1,423 | 8,660 |
Adjustment for agency basis | (190) | - | (190) |
Reported revenue | 7,047 | 1,423 | 8,470 |
Segment result (gross profit) | 3,229 | 733 | 3,962 |
Other operating costs and income | (1,902) | (491) | (2,393) |
Investing and financing activities | (32) | 0 | (32) |
Profit before tax | 1,295 | 242 | 1,537 |
3. Earnings per share | |||
Six months ended 30 September | 15-month period ended 31 March | ||
2015 | 2014 |
2015 | |
Earnings attributable to equity holders of the parent | £1,248,000 | £(287,000) | £532,000 |
Weighted average of ordinary shares in issue | 35,657,048 | 25,436,791 | 26,784,110 |
Weighted average of own shares | (101,161) | (118,720) | (111,542) |
Weighted average for calculating basic EPS | 35,555,887 | 25,318,071 | 26,672,568 |
Effective dilutive share options | 1,590,683 | - | 1,065,704 |
Weighted average for calculating diluted EPS | 37,146,570 | 25,318,071 | 27,738,272 |
The weighted average number of ordinary shares used for the purpose of calculating the diluted loss per share for the six months ended 30 September 2014 is the same as that used for calculating the basic loss per share. This is because the exercise of share options would have the effect of reducing loss per share and is therefore not dilutive under the terms of IAS33 "Earnings per share".
4. Dividends £000's | |||
Six months ended 30 September | 15-month period ended 31 March | ||
2015 | 2014 | 2015 | |
Amounts recognised as distributions to equity holders | |||
Final dividend for the year ended 31/12/2013 of 1.12p (2012: 1.00p) | - | 285 | 285 |
Final dividend for the period ended 31/03/2015 of 0.56p | 198 | - | - |
198 | 285 | 285 | |
No interim dividend was paid for the period ended 31 March 2015.
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An interim dividend of 0.50p per share will be paid on Wednesday, 6 January 2016 to shareholders on the register at the close of business on Friday, 4 December 2015. The shares will become ex-dividend on 3 December 2015.
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5. Current liabilities - borrowings £000's | |||
Six months ended 30 September | 15-month period ended 31 March | ||
2015 | 2014 | 2015 | |
Bank loans and mortgage | 403 | 167 | 454 |
Bank overdraft | - | 293 | - |
Forward Looking Statement This document contains certain forward-looking statements. The forward-looking statements reflect the knowledge and information available to the Company during the preparation and up to the publication of this document. By their very nature, these statements depend upon circumstances and relate to events that may occur in the future thereby involve a degree of uncertainty. Therefore, nothing in this document should be construed as a profit forecast by the Company. |
Electronic Communications |
The Company is not proposing to bulk print and distribute hard copies of this half-yearly financial report for the six months ended 30 September 2015 unless specifically requested by individual shareholders. News updates, Regulatory News, and Financial statements, can be viewed and downloaded from the Group's website, www.issolutions.co.uk. Copies can also be requested via moreinfo@issolutions.co.uk or by writing to: The Company Secretary, IS Solutions Plc, Windmill House, 91-93 Windmill Road, Sunbury on Thames, Middlesex, TW16 7EF. |