29 Jun 2015 07:00
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Monday, 29 June 2015
IS Solutions Plc
("IS Solutions" or the "Company")
Preliminary results for the 15-month period ended 31 March 2015
Introduction
The Board is pleased to report a solid finish to the financial reporting period, with strong demand from our Analytics sector resulting in the underlying performance being in line with market expectations.
In January 2015 we completed the acquisition of Speed-Trap Holdings Limited, parent company to Celebrus Technologies Limited ("Celebrus"). This business operates in the field of big data to provide business intelligence and analysis, specialising in supplying detailed data feeds on customer interactions through internet enabled devices at an individual customer level to corporates and organisations. The consideration was approximately £8.5m in cash and shares. This move has transformed the Group from a Service-led business into a more balanced Product and Services business.
Following this enhancement to our business, we amended the Company's accounting reference date from 31 December to 31 March. As well as some commercial benefit, this change was made primarily so that the market and investors would gain greater clarity and understanding of the new business model and trading performance and thereby deliver 'clean' operational trading results for the enlarged business with effect from 1 April 2015 onwards.
The financial results being reported upon therefore cover the fifteen month trading period 1 January 2014 to 31 March 2015.
Financials
Following the stronger second half within the traditional IS Solutions business and the nine weeks of contribution from Celebrus, we are pleased to announce results for the period that are in line with market expectations.
Continuing operations | Fifteen months ended 31 March 2015 | 12months ended 31 December 2013 | change % |
Revenue -Analytics -Portals -ECM |
£5.94m £4.94m £1.96m |
£3.10m £3.88m £2.79m |
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Total revenue | £12.84m | £9.77m | +31% |
Gross profit (after acquisition costs of £270k) | £4.67m | £4.17m | +12% |
Underlying profit before tax* | £1.20m | £0.96m | +25% |
Operating profit | £0.69m | £0.96m | |
Profit before tax | £0.65m | £0.96m | |
Earnings per share -adjusted basic* -adjusted diluted* -basic -diluted |
4.02p 3.86p 1.99p 1.92p |
3.14p 3.08p | |
Dividends -Interim paid -Final proposed |
- 0.56p |
0.48p 1.12p |
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*before acquisition costs of £539,000 | |||
Revenue in the period under review increased by 31% to £12.839m (2013: £9.769m), of which revenue of £0.54m was contributed by Celebrus since acquisition. Recurring revenues contributed 55% to gross profit.
Underlying profit before tax before acquisition costs of £539,000 was £1.2m.
Administration costs were higher in the period at £1.56m principally as a result of non-recurring costs including acquisition related charges totalling £0.27m. Therefore reported profit from operations was £686,000 to £959,000 in 2013 and post-tax profit of £532,000 (2013: £793,000).
Cash and cash equivalents at 31 March 2015 stood at £0.095m (2013: £0.53m). Total net assets at the end of the period were £11.86m compared to £5.42m at the end of 2013.
Adjusted fully diluted earnings per share was 3.86p, unadjusted EPS was 1.92p (2013: 3.08p).
Review
Looking at the performance of our business streams:-
Analytics:
At the start of the year, recurring revenues for Analytics was impacted by the cancellation of a large contract due to the client's internal budget constraints. However, in December 2014 we won a large contract in the financial services sector which offers a level of recurring revenue contracted for the next five years with potential for further project work being generated.
During 2014, both IS Solutions and Celebrus have been engaged in a growing number of POCs (Proof of Concept) with their partners SAS and Teradata across a number of industries and with a strong focus in the financial and retail sectors, as both sectors look for ways to minimise customer churn and maximise earnings per customer. These POCs, paid for by the client, vary in length from one month to around three months and represent a substantial investment by our clients. Although POC's are revenue generating, it is pleasing to report that we are now benefiting from a significant number of these moving to a full scale roll out in 2015, the resultant effect being a substantial uplift in licence sales and subsequent professional services revenue from the implementation of these solutions all of which will require on-going support, and in some cases, hosting contracts thus enhancing IS Solutions' recurring revenue stream in the current financial year and beyond.
Analytics finished the period strongly with revenue increasing by 91.61% to £5.94m (2013: £3.10m). During the nine weeks under our ownership Celebrus contributed £0.54m in sales.
Portals:
Growth in this segment remained flat year on year with revenue of £4.94m compared to £3.88m in 2013. This has been mainly caused (as reported at the half year) by one of our major clients requesting more of the work we carry out for them to be done off-shore in our Indian operation.
Enterprise Content Management:
ECM projects and recurring revenues stabilised by the end of the period having had a very weak start to the 2014 year. Revenue amounted to £1.96m with most in product sales and the business is currently based on legacy technology. To allow this part of our business to refocus its efforts over the short to medium term, we are researching and implementing new technologies.
Dividend
The Directors' focus remains on capital growth through investment in the business and increasing ROCE. As a Board, we are also committed to a progressive dividend policy whilst balancing our investment in the business for the future benefit of all stakeholders, customers and colleagues.
We remain confident in the future of the business - we have a clear strategy in place to develop the opportunities we have already identified that will deliver growth. We are increasing our investments in the business in order to accelerate this particularly with Celebrus. At this stage in our development, we are proposing a final dividend of 0.56p, which, subject to Shareholder approval at the Annual General Meeting which is to be held on 30 July 2015, will be paid on 13 August 2015 to Shareholders on the Register at the close of business on 17 July 2015. The Ordinary shares become ex-dividend on 16 July 2015.
The return to a progressive dividend stream will be a priority for the Board. As we indicated at the interim stage, it is our intention to review the overall dividend policy going forward so as to ensure it reflects the Company's future prospects. On this basis we are confident that we will resume our progressive dividend policy and if appropriate, return to paying a dividend based on the overall performance in the financial period ending 31 March 2016.
People
I would like to take this opportunity to welcome staff who joined us during the period.
Following the completion of Celebrus, Geoff Shingles joined the Company as a non-executive director. Since the year end, we have also welcomed Peter Simmonds to the Main Board as non-executive deputy chairman who will take over as Chairman from Barrie Clark after the AGM. Both Geoff and Peter have considerable business entrepreneurial experience having been involved in a number of companies in various industry sectors including services, software and internet solutions. Their combined knowledge and expertise further strengthens the Board as well as increasing its independence and diversity.
We continue to recruit quality staff and also invest in our people at all levels through training and personal development programmes to ensure we have the right balance of skill sets and know-how to drive the business forward. On behalf of my fellow directors and all shareholders, I would like to acknowledge the hard work and commitment of all of our highly skilled technical staff around the world who continue to work together to enhance the Group's reputation with both our customers and suppliers.
Outlook
Overall we are making good progress across the business and already have a number of project opportunities with new and existing customers in the key sectors of financial services, retail and airlines. The integration of the two businesses is ongoing and on track and has also opened up a number of cross-selling opportunities for us. Celebrus, with its strong IP, strengthens our offering in the Analytics arena whilst also giving us the opportunity to develop a much more balanced business with stronger higher margin license sales giving rise to greater project and recurring revenue.
Following the strong finish to the period being reported, the Board is pleased to report that this trend has continued into the new financial year, with strong underlying demand continuing in our Analytics sector. This, together with recent contract wins, put us in a good position for the new financial year ending 31 March 2016.
The market for business intelligence and Analytics is one of the fastest growing software markets. Financial organisations are the largest investors in big data solutions, with energy, utilities, communications and media organisations presenting significant growth areas as they seek to optimise the monetisation of their base of customers and potential customers. The ability to individualise and personally target customers is becoming more important to businesses and the Celebrus product portfolio caters for this trend. Having worked together as partners for the past 10 years, and now operating as one unit, we are much better placed to serve this sector and optimise the opportunities presented
All of this bodes well for the future. The Board is confident that the Company can deliver another year of solid progress and will achieve current market expectations for the year ending 31 March 2016.
Barrie Clark, Chairman
on behalf of the Board of Directors
IS Solutions Plc
29 June 2015
Unaudited consolidated statement of comprehensive income for the 15 months ended 31 March 2015 (2013: 12-months ended 31 December) | ||||
2015 | 2013 | |||
£'000 | £'000 | |||
Continuing operations | ||||
Revenue | 12,839 | 9,769 | ||
Cost of sales | (8,170) | (5,603) | ||
Gross profit | 4,669 | 4,166 | ||
Distribution costs | (2,451) | (2,137) | ||
Administration expenses | (1,557) | (1,084) | ||
Other operating income | 25 | 14 | ||
Profit from operations | 686 | 959 | ||
Investment income | 4 | - | ||
Finance costs | (38) | (23) | ||
Other gains and losses | - | 30 | ||
Profit before tax | 652 | 966 | ||
Tax | (120) | (173) | ||
Profit for the period | 532 | 793 | ||
Other comprehensive income | ||||
Gains on property revaluation | 57 | 121 | ||
Total comprehensive income for the period attributable to equity holders of the parent | 589 | 914 | ||
Earnings per share | ||||
Basic | 1.99 p | 3.14 p | ||
Diluted | 1.92 p | 3.08 p | ||
Unaudited consolidated statement of changes in equity for the 15 months ended 31 March 2015 (2013: 12-months ended 31 December) | |||||||
Share capital | Share premium | Revaluation reserve | Own shares | Equity reserve | Retained earnings | Total £'000 | |
Balance at 1 January 2013 | 503 | 1,842 | 50 | - | - | 2,450 | 4,845 |
Total comprehensive income | 121 | 793 | 914 | ||||
Issue of share capital | 6 | 51 | 57 | ||||
Dividends paid | (373) | (373) | |||||
Purchase of own shares | (42) | (42) | |||||
Sale of own shares | 40 | (17) | 23 | ||||
Share-based payments | 3 | 3 | |||||
Balance at1 January 2014 | 509 | 1,893 | 171 | (2) | 0 | 2,856 | 5,427 |
Total comprehensive income | 57 | 532 | 589 | ||||
Issue of share capital | 199 | 4,677 | 4,876 | ||||
Dividends paid | (285) | (285) | |||||
Purchase of own shares | (154) | (154) | |||||
Sale of own shares | 76 | (50) | 26 | ||||
Share-based payments | 4 | 4 | |||||
Deferred tax on outstanding share options | 91 | 91 | |||||
Contingent shares | 1,289 | 1,289 | |||||
Balance at 31 March 2015 | 708 | 6,570 | 228 | (80) | 1,380 | 3,057 | 11,863 |
Unaudited consolidated balance sheet as at 31 March 2015 (as at 31 December 2013) | ||||
2015 | 2013 | |||
£'000 | £'000 | |||
Non-current assets | ||||
Goodwill | 8,696 | 1,018 | ||
Other intangible assets | 2,014 | 38 | ||
Property, plant and equipment | 2,414 | 2,414 | ||
Investments | - | 800 | ||
Deferred tax assets | 698 | 7 | ||
13,822 | 4,277 | |||
Current assets | ||||
Trade and other receivables | 4,823 | 2,907 | ||
Cash and cash equivalents | 95 | 539 | ||
4,918 | 3,446 | |||
Total assets | 18,740 | 7,723 | ||
Current liabilities | ||||
Trade and other payables | (4,427) | (1,427) | ||
Tax liabilities | (59) | (166) | ||
Borrowings | (454) | (162) | ||
(4,940) | (1,755) | |||
Non-current liabilities | ||||
Borrowings | (1,537) | (541) | ||
Deferred tax liabilities | (400) | - | ||
(1,937) | (541) | |||
Total liabilities | (6,877) | (2,296) | ||
Net assets | 11,863 | 5,427 | ||
Equity | ||||
Share capital | 708 | 509 | ||
Share premium account | 6,570 | 1,893 | ||
Revaluation reserve | 228 | 171 | ||
Own shares | (80) | (2) | ||
Equity reserve | 1,380 | - | ||
Retained earnings | 3,057 | 2,856 | ||
Attributable to equity holders of the parent | 11,863 | 5,427 | ||
Unaudited consolidated cash flow statement for the period ended 31 March 2015 (2013: 12-months ended 31 December) | ||||
2015 | 2013 | |||
£'000 | £'000 | |||
Operating activities | ||||
Profit from operations | 686 | 959 | ||
Adjustments for: | ||||
Depreciation of property, plant and equipment | 228 | 168 | ||
Loss on disposal of property, plant and equipment | - | 5 | ||
Amortisation of intangible assets | 24 | 18 | ||
Share-based payments | 4 | 3 | ||
Operating cash flows before movements in working capital | 942 | 1,153 | ||
Increase in receivables | (924) | (235) | ||
Increase/(decrease) in payables | 413 | (114) | ||
Cash generated by operations | 431 | 804 | ||
Income taxes paid | (139) | (54) | ||
Net cash from operating activities | 292 | 750 | ||
Investing activities | ||||
Interest received | 4 | - | ||
Interest paid | (38) | (23) | ||
Proceeds on sale of investments | - | 591 | ||
Purchase of property, plant and equipment | (171) | (115) | ||
Proceeds on disposal of property, plant and equipment | - | 10 | ||
Acquisition of subsidiaries net of cash acquired | (1,369) | - | ||
Net cash from/(used in) investing activities | (1,574) | 463 | ||
Financing activities | ||||
Issue of new share capital | (37) | 57 | ||
Dividends paid | (285) | (373) | ||
New borrowings | 1,500 | - | ||
Repayment of borrowings | (212) | (409) | ||
Purchase of own shares (net) | (128) | (19) | ||
Net cash used in financing activities | 838 | (744) | ||
Net (decrease)/increase in cash and cash equivalents | (444) | 469 | ||
Cash and cash equivalents at start of year | 539 | 70 | ||
Cash and cash equivalents at end of year | 95 | 539 | ||
Notes to the Preliminary Statement | |||
1. Analysis of revenue | Group | ||
2015 | 2013 | ||
Continuing operations | £'000 | £'000 | |
Sale of goods | 1,927 | 1,567 | |
Rendering of services | 10,912 | 8,202 | |
12,839 | 9,769 | ||
Other operating income | 25 | 14 | |
Investment income | 4 | - | |
12,868 | 9,783 | ||
Analysis of other operating income | |||
Operating lease receipts | 19 | 4 | |
Director's fees received from Speed-Trap Holdings Ltd. | 6 | 10 | |
25 | 14 | ||
2. Business and geographical segments | |||||
The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and assess their performance.
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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. The principal activity of the Group is split into three categories of product sold: License sales; Project work; Recurring revenues. No allocation of other income and costs to these categories is made because the Directors consider that any such allocation would be arbitrary. Any allocation of assets and liabilities to these categories would also be arbitrary. The reporting below is consistent with that provided to the Chief Executive. | |||||
Continuing operations 2015 | Licence sales | Project work | Recurring revenues |
Total | |
£'000 | £'000 | £'000 | £'000 | ||
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 | ||||
Major customers (over 10% of revenue) | |||||
Customer 1 | 249 | 4,313 | 544 | 5,106 | |
Customer 2 | 238 | 689 | 1,437 | 2,364 | |
Continuing operations 2013 | Licence sales | Project work | Recurring revenues | Total |
£'000 | £'000 | £'000 | £'000 | |
External sales | 4,767 | 4,003 | 4,859 | 13,629 |
Adjustment for agency basis | (3,200) | - | (660) | (3,860) |
Reported revenue | 1,567 | 4,003 | 4,199 | 9,769 |
Segment result (gross profit) | 270 | 1,231 | 2,665 | 4,166 |
Other operating costs and income | (3,207) | |||
Investing and financing activities | 7 | |||
Profit before tax | 966 | |||
Major customers (over 10% of revenue) | ||||
Customer 1 | - | 1,455 | 971 | 2,426 |
Customer 2 | - | 536 | 938 | 1,474 |
The accounting policies of the reportable segments are the same as the Group's accounting policies contained in the Annual Report and Financial statements. | ||||
The Group operates entirely within the UK. | ||||
3. Profit from operations | 2015 | 2013 | ||
Profit from operations has been arrived at after charging/(crediting): | £'000 | £'000 | ||
Research and development costs | 266 | 167 | ||
Net foreign exchange (gain)/loss | (49) | 108 | ||
Depreciation of property, plant & equipment | 228 | 168 | ||
Loss on disposal of property, plant & equipment | - | 5 | ||
Amortisation of intangible assets | 24 | 18 | ||
Staff costs | 6,119 | 4,818 | ||
Auditors' remuneration for audit services (Group and Company, the Company fee is not separately quantifiable) | 37 | 27 | ||
Auditors' remuneration for tax compliance and advisory services | 5 | 5 | ||
Costs incurred in acquiring subsidiary | 539 | - | ||
4. Dividends | 2015 | 2013 |
Amounts recognised as distributions to equity holders | £'000 | £'000 |
Final dividend for the year ended 31 December 2013 of 1.12p (2012: 1.00p) | 285 | 250 |
Interim dividend for the period ended 31 March 2015 of nil (31 December 2013: 0.48p) | - | 123 |
285 | 373 | |
Proposed final dividend for the period ended 31 March 2015 of 0.56p | 198 |
5. Earnings per share | 2015 | 2013 |
Earnings, being the net profit attributable to equity holders of the parent (£'000) | 532 |
793 |
Weighted average of ordinary shares in issue | 26,784,110 | 25,270,620 |
Weighted average of own shares | (111,542) | (19,738) |
Weighted average for the purpose of basic earnings per share | 26,672,568 | 25,250,882 |
Effect of dilutive share options | 1,065,704 | 460,479 |
Weighted average for the purpose of diluted earnings per share | 27,738,272 | 25,711,361 |
6. Acquisition of subsidiary - Speed-Trap Holdings Ltd acquired on 23 January 2015 | ||||||
Provisional fair value £'000 | ||||||
Net assets acquired | ||||||
Intangible fixed assets | 2,000 | |||||
Future value of acquired contracts | - | |||||
Deferred tax asset | 600 | |||||
Trade and other receivables | 992 | |||||
Cash and cash equivalents | 143 | |||||
Trade and other payables | (2,587) | |||||
Tax asset | 88 | |||||
Deferred tax liability | (400) | |||||
Bank loans | - | |||||
836 | ||||||
Goodwill | 7,678 | |||||
Total consideration | 8,514 | |||||
Satisfied by: | ||||||
Cash | 1,512 | |||||
Transfer of own shares | 4,913 | |||||
Accrual for future transfer of own shares | 1,289 | |||||
Transfer from investments | 800 | |||||
8,514 | ||||||
Had the subsidiary been purchased on 1 January 2014 then its contribution (loss) to the Group profit would have been | (1,156) | |||||
7. Share capital | ||||
2015 | 2013 | |||
Shares | £'000 | Shares | £'000 | |
Ordinary shares of 2p each | ||||
Authorised | 37,500,000 | 750 | 37,500,000 | 750 |
Issued and fully paid up | ||||
Balance at 1 January | 25,436,791 | 509 | 25,148,291 | 503 |
Issued during year | 9,984,787 | 199 | 288,500 | 6 |
Balance at period end | 35,421,578 | 708 | 25,436,791 | 509 |
Total Voting Rights (TVR)
As at today's date, the Company has 35,421,578 ordinary shares in issue. The Company holds 137,452 ordinary shares in treasury, representing approximately 0.34 per cent of the share capital excluding these treasury shares, which do not carry voting or dividend rights. The figure of 35,284,126 may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest, or change to their interest, in the Company under the Disclosure and Transparency Rules.
8. Annual Report and Financial Statements This Preliminary statement will not be posted to shareholders. The Company's Report and Accounts for the 15-months year ended 31 March 2015 together with the Notice of Annual General Meeting are being sent to shareholders shortly and will be available to view and download from the Company's website: www.issolutions.co.uk.
9. Annual General Meeting The Annual General Meeting will be held on Thursday 30 July 2015 at the Company's Registered office: Windmill House, 91-93 Windmill Road, Sunbury on Thames, TW16 7EF. |
ENQUIRIES |
IS Solutions Plc John Lythall, Managing Director: Tel: +44 (0) 1932 893333
FinnCap (Nominated Broker & Adviser) Ed Frisby/Simon Hicks - 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 Email: fiona@tooleystreet.com |
EDITOR'S NOTE IS Solutions Plc (Ticker: AIM: ISL Accreditation: ISO27001)
Established in 1985, IS Solutions is a systems integrator focusing on three business areas, namely portals, analytics and enterprise content management. 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. Within each of its business areas, IS Solutions generates three principal revenue streams across product sales, projects and managed services and licence maintenance.
The business employs 116 staff, including 18 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, KBC Bank, Compare The Market™, URENCO, HMRC, M&S and HSBC.
email: moreinfo@issolutions.co.uk or Follow us: www.linkedin.com/company/issolutions
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