27 Mar 2009 07:30
Issued by Citigate Dewe Rogerson Ltd, Birmingham
Date: Friday, 27 March 2009
Embargoed: 7.30am
IS Solutions Plc
Preliminary Results for the year ended 31 December 2008
| Turnover £8.85 million (2007: £7.89 million) | +12% |
| Pre-tax profit* £551,000 (2007: £440,000) | +25% |
| Reported profit £452,000 (2007: £410,000) | +10.24% |
| Diluted earnings per share 1.82 pence** (2007: 1.86 pence) - on like for like basis 1.59 pence | -2.15% +14.46% |
| Maintained final dividend proposed of 0.67 pence (2007: 0.33 pence) Total for the year 1.00 pence (2007: 1.00 pence) | |
| Strong balance sheet and cash flow Cash at Bank at year end stood at £1.76 million (2007:£2.50 million) | |
| Creditable organic growth in revenue and profitability from underlying business with strong contributions from Chapter26 acquired in July 2008 | |
* before tax, AIM transfer costs and intangible amortisation
** inclusive of the recognition of a deferred tax asset
"Against a background of global and economic uncertainty, the completion of the transfer to AIM and the acquisition of Chapter26 Ltd ('Chapter26') the Board is pleased to announce a strong performance for the year to 31 December 2008."
"The Group has continued to see a robust demand for its services from our longstanding clients and this, coupled with the addition of new clients won in the early part of the new financial year, leads the Board to be optimistic about the future, notwithstanding the economic situation we find ourselves in."
"The spread of products and services, coupled with our strong balance sheet, gives the Board confidence for the future and leaves the Group well placed and in a position to take advantage of new opportunities for acquisitions which may arise from the current climate."
Barrie Clark, Chairman
FULL STATEMENT ATTACHED
| Enquiries: | |
| John Lythall, Managing Director | Fiona Tooley/Keith Gabriel |
| IS Solutions Plc | Citigate Dewe Rogerson Ltd |
| Tel: +44 (0) 1932 893333 | Tel: +44 (0)121 455 8370 |
| www.issolutions.co.uk | |
| (AIM: ISL) | |
| Neil McDonald/Sandy Fraser | |
| Brewin Dolphin Limited | |
| Tel: 0845 213 4217 | |
IS Solutions Plc
("the Group" or "the Company")
Preliminary Results for the year ended 31 December 2008
STATEMENT BY THE CHAIRMAN, BARRIE CLARK
Against a background of global and economic uncertainty, the completion of the transfer to AIM and the acquisition of Chapter26 Ltd ('Chapter26') the Board is pleased to announce a strong performance in the year to 31 December 2008.
Financial Results
The Board is pleased to report an overall strong performance with revenues growing to £8.85 million (2007: £7.89 million), an increase of 12.16%. Of this increase 9.04% can be attributed to Chapter26 (which contributed to five months of Group revenue) whilst the underlying business achieved growth of 3.12%. This creditable organic growth was achieved principally in the areas of content management, automated compliance testing (Watchfirebased projects) and support contracts.
Group profit (pre-tax, AIM transfer costs and intangible amortisation of £99,000 (2007: £30,000)) rose by 25.23% to £551,000 (2007: £440,000). Reported profit before tax increased to £452,000 (2007: £410,000), of which 6% was organic improvement.
Diluted earnings per share, inclusive of the recognition of a deferred tax asset of £63,000 in 2007 decreased by 2.15% to 1.82 pence (2007: 1.86 pence and exclusive of the recognition of the deferred tax asset was 1.59 pence). Accordingly, 2008 showed a 14.46% increase on a like-for like-basis.
Net assets at 31 December 2008 were £2.96 million (2007: £3.07 million). Cash flow from operations was £325,000 (2008: £1.10 million) leaving cash at the year end of £1.76 million (2007: £2.50 million) after the acquisition of Chapter26, increased dividend payments and purchase of treasury shares during the year.
Overview
Against the background of an uncertain economic environment throughout 2008, the Group achieved strong growth both in its project work and also web services (support contracts), resulting in an increase in our recurring revenue stream.
Overall product sales were down on the previous year but the second half of the year saw a resurgence in our low margin distribution business, revenues from which rose to £1.51 million (2007: £1.03 million) resulting in a year on year growth of 46%. Notwithstanding this movement in revenues, the Group maintained its gross profit margin due to our services revenue growing by £999,000 (of which Chapter26 contributed £654,000) to £4.63 million (2007: £3.64 million) a total increase for the year of 27.50% and organic growth of 9.50%.
On 16 June 2008, the Group transferred trading in the Company's shares from the main market of the London Stock Exchange to AIM. AIM offers the Group greater flexibility, particularly with regard to corporate transactions where we believe that the Company can agree and execute certain transactions more quickly and cost-effectively.
This proved to be the case in July when a major event for the Group was the acquisition on 22 July 2008 of Chapter26, specialists in enterprise content management services.
The Company has a content management practice that addresses the small to medium sized/departmental business and with the addition of Chapter26 has extended its offering into the enterprise arena allowing us to capitalise on the fast growing CMS market. This combination gives us a solid platform on which to build and to exploit in the future.
As shareholders can see from our financial results above, Chapter26 contributed strongly to the Group's performance in the five months to December 2008. The integration of Chapter26 will be completed during 2009 and we expect to see further growth and another solid contribution from the business during 2009.
Personnel
Once again the Board would like to express its appreciation and thanks to all employees for their support throughout the whole of 2008. It is the teamwork and commitment to quality shown by our employees that has allowed us to build the strong and sustainable relationships we have with our clients and suppliers which will carry us through the current economic turbulence.
Dividend
In 2007, the Company increased the dividend by 100% reflecting the underlying strength of the business. This was paid in 2008.
The Group continues to have a strong balance sheet and cash flow and although it has produced a creditable second half performance in 2008 coupled with a reasonable start to trading in the current financial year, the Directors believe, in view of the general uncertainties around which could impact both our customers and markets, that it would be prudent to preserve the Group's financial strength. This action will not only safeguard the business and its people in the short-term but it will allow us to continue to invest and develop the business for the future.
Therefore, the Board will be recommending to shareholders a maintained final dividend of 0.67 pence which, with the interim dividend of 0.33 pence paid, gives a total dividend for the year of 1.00 pence (2007: 1.00 pence).
The final dividend which is subject to shareholders' approval at the AGM (which is to be held on 14 May 2009) will be paid on 22 May 2009 to shareholders on the Register at close of business on 24 April 2009.
Outlook
The Group has continued to see a robust demand for its services from our longstanding clients and this, coupled with the addition of new clients won in the early part of the new financial year, leads the Board to be optimistic about the future, notwithstanding the economic situation we find ourselves in.
In addition, certain of the areas in which the Company operates (such as online meetings) are areas that can actively assist companies in an economic downturn whilst others are driven by compliance and regulatory issues and we are also now finding that our financial strength and track record is assisting us to win business as clients look for stability in their suppliers.
The spread of products and services, coupled with our strong balance sheet, gives the Board confidence for the future and leaves the Group well placed and in a position to take advantage of new opportunities for acquisitions which may arise from the current climate.
Going concern
The Group has sufficient financial resources to cover budgeted future cash-flows, together with contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.
In accordance with the Corporate Governance requirements, having reviewed the future plans and projections for the business, the directors believe that the Company and its subsidiary undertakings have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
27 March 2009
| Consolidated income statement for the year ended 31st December 2008 | |||
| 2008 | 2007 | ||
|
|
| Restated | |
| £'000 | £'000 | ||
| Continuing operations |
| ||
| Revenue | 8,854 | 7,894 | |
|
| Cost of sales | (5,855) | (5,222) |
| Gross profit | 2,999 | 2,672 | |
| Distribution costs | (1,565) | (1,526) | |
| Administration expenses | (1,177) | (936) | |
| Other operating income | 92 | 92 | |
| Profit from operations | 349 | 302 | |
| Investment revenues | 103 | 108 | |
| Profit before tax | 452 | 410 | |
| Tax (charge)/credit | (22) | 50 | |
| Profit for the period attributable to equity holders of the parent | 430 | 460 | |
| Earnings per share |
| ||
| Basic | 1.83 p | 1.89 p | |
|
| Diluted | 1.82 p | 1.86 p |
| Consolidated statement of changes in equity for the year | |||
| 2008 | 2007 | ||
|
| £'000 | £'000 | |
| Purchase of own shares | (515) | (70) | |
| Sale of own shares | 235 | 21 | |
| Share-based payments | 14 | 2 | |
| Total expense recognised directly in equity | (266) | (47) | |
| Profit for the year | 394 | 460 | |
| Dividends paid | (238) | (161) | |
| Change in shareholders' equity for the year | (74) | 252 | |
| Shareholders' equity at start of year | 3,071 | 2,819 | |
| Shareholders' equity at end of year | 2,997 | 3,071 | |
| Consolidated balance sheet as at 31st December 2008 | |||
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| Non-current assets |
| ||
| Goodwill | 603 | 254 | |
| Other intangible assets | 90 | 7 | |
| Property, plant and equipment | 141 | 127 | |
| Deferred tax asset | 99 | 86 | |
|
|
| 933 | 474 |
| Current assets |
| ||
| Trade and other receivables | 2,070 | 1,224 | |
| Cash and cash equivalents | 1,757 | 2,504 | |
|
| 3,827 | 3,728 | |
| Total assets | 4,760 | 4,202 | |
| Current liabilities |
| ||
| Trade and other payables | (1,676) | (1,110) | |
|
| Tax liabilities | (69) | (20) |
| (1,745) | (1,130) | ||
| Non-current liabilities |
| ||
| Deferred tax liabilities | (18) | (1) | |
| Total liabilities | (1,763) | (1,131) | |
| Net assets | 2,997 | 3,071 | |
| Equity |
| ||
| Share capital | 496 | 496 | |
| Share premium account | 1,786 | 1,786 | |
| Own shares | (280) | (97) | |
| Retained earnings | 995 | 886 | |
| Attributable to equity holders of the parent | 2,997 | 3,071 | |
| Consolidated cash flow statement for the year ended 31st December 2008 | |||
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| Operating activities |
| ||
| Profit from operations | 349 | 302 | |
| Adjustments for: |
| ||
| Depreciation of property, plant and equipment | 116 | 114 | |
| Gain on disposal of property, plant and equipment | (1) | (2) | |
| Amortisation of intangible assets | 37 | 30 | |
| Impairment of goodwill | 25 | - | |
| Share-based payments | 14 | 2 | |
| Operating cash flows before movements in working capital | 540 | 446 | |
| (Increase)/decrease in debtors | (594) | 530 | |
| Increase in creditors | 379 | 121 | |
| Cash generated by operations | 325 | 1,097 | |
| Income taxes paid | (20) | - | |
| Net cash from operating activities | 305 | 1,097 | |
| Investing activities |
| ||
| Interest received | 74 | 108 | |
| Purchase of trading investments | (250) | - | |
| Proceeds on sale of trading investments | 279 | - | |
| Purchase of property, plant and equipment | (109) | (60) | |
| Proceeds on disposal of property, plant and equipment | 6 | 6 | |
| Acquisition of subsidiaries | (311) | - | |
| Net cash (used in)/from investing activities | (311) | 54 | |
| Financing activities |
| ||
| Dividends paid | (238) | (161) | |
| Purchase of own shares | (503) | (49) | |
| Net cash used in financing activities | (741) | (210) | |
| Net (decrease)/increase in cash and cash equivalents | (747) | 941 | |
| Cash and cash equivalents at start of year | 2,504 | 1,563 | |
| Cash and cash equivalents at end of year | 1,757 | 2,504 | |
1.
| Business and geographical segments | |||||
| For management purposes the Group reports its revenue and gross profit by vendor generated third party sales (Distribution) and sales direct to the Group's own customers (Direct). No allocation of operating costs and other income to these segments is made because the directors consider that any such allocation would be arbitrary and meaningless. | |||||
| Business segments 2008 | Direct | Distribution | Unallocated | Total | |
| Revenue | 7,341 | 1,513 | - | 8,854 | |
| Gross profit | 2,905 | 94 | - | 2,999 | |
| Other income and expense | - | - | (2,605) | (2,605) | |
| Segment result | 2,905 | 94 | (2,605) | 394 | |
| Assets | 1,304 | 545 | 2,875 | 4,724 | |
| Liabilities | (740) | (440) | (583) | (1,763) | |
| Business segments 2007 | |||||
| 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) | |
| Geographical segments | |||||
| The group operates entirely within the UK. | |||||
2.
| Dividends | 2008 | 2007 | |
| Amounts recognised as distributions to equity holders | £'000 | £'000 | |
| Final dividend for the year ended 31st December 2007 of 0.67 pence (2006: 0.33 pence) | 158 | 80 | |
| Interim dividend for the year ended 31st December 2008 of 0.33 pence (2007: 0.33 pence) | 80 | 81 | |
| 238 | 161 | ||
| Proposed final dividend for the year ended 31st December 2008 of 0.67 pence | 157 | ||
|
The proposed final dividend is subject to shareholders' approval at the AGM and has 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 2008 or 2007. Statutory accounts for 2007, which were prepared under IFRS, have been delivered to the Registrar of Companies, and those for 2008 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 2007. 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 restatement of cost of sales
The change in accounting policy for cost of sales implemented last year has been further refined and the figure for cost of sales in 2007 has therefore been increased by £144,000. A matching decrease in operating costs means that there is no effect on the reported operating profit or shareholders' equity.
6. Copies of the Report and Accounts will be issued to Shareholders by the 22 April 2009. 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.