29th Sep 2014 07:00
Monday, 29 September 2014
I S Solutions Plc
2014 Half-year results
for the six months ended 30 June 2014
STATEMENT BY THE CHAIRMAN, BARRIE CLARK
"The Board remains confident of achieving the market expectations for the full year based on recent business wins and the depth and quality of the prospects pipeline, following a weaker first quarter."
FINANCIALS
Revenue in the first half compared to 2013 was down by 30.9% to £3.427 million (2013: £4.960m) and we recorded an Operating loss of £310,000 compared to an Operating profit of £328,000 in HY2013. The Post-tax loss was £283,000 versus a 2013 Post-tax profit of £330,000. Fully diluted loss per share was 1.10p against an earnings per share of 1.29p in the comparable 2013 period.
A further factor affecting the overall profitability of the business has been the strength of Sterling; during the first half-year this caused a 9.4% reduction in our day rate (compared to HY2013) to our US clients. Since the end of the period under review the exchange rate has now moved back in our favour.
Cash at the half-year stood at £188,000 (2013: £657,000)
Reviewing our revenue performance by sector: | ||
2014 £000 | 2013 £000 | |
Project work | 889 | 1,873 |
Recurring revenues | 1,890 | 1,986 |
Product | 648 | 1,101 |
3,427 | 4,960 | |
Within all three areas of our business (Portals, Analytics, Enterprise Content Management (ECM), the Recurring revenues held up well whilst the Projects revenue fell across all three areas.
In February 2014, an Analytics contract was put on hold for this year due to our clients' internal budget constraints; this coincided with one of our major ongoing Portal projects entering a testing phase in the first half which also impacted on Revenue. However, because we knew that this was short-term, coupled with a healthy pipeline of prospects for the business, the Board took the decision to keep all costs in place at the expense, in the very short term, to the bottom line.
This was an important decision for our business flow, retaining our highly skilled personnel and avoiding the cost of re-hiring and training staff - which would also have an impact on the future flow and delivery of our business. This commitment means that we remain in a much stronger positon to pick up quickly and efficiently on both postponed jobs and new opportunities that lie ahead.
The ECM area of the business held its own in the Project area, showing a slight increase year on year. It is also normally the strongest contributor to the overall Product sales recording £740,000 in the first half of 2013 but only £82,000 in this first half. This was predominantly due to lack of Government spending for these products.
DIVIDEND
Although it has been the Company's practice to pay an interim dividend, the Board has decided at this half year stage to be prudent and preserve cash however, we do expect to resume our progressive dividend policy and return to paying a dividend based on the year's performance as a whole.
OUTLOOK FOR THE FINANCIAL YEAR
Portals
Within the Portals sector we have started on the next phase of development for our long standing major client and are also in full swing on the implementation of PCI DSS (Payment Card Industry Data Security Standard) for another key client which will also broaden our offering to other prospects in the retail and financial sectors thus strengthening our existing 27001 security clearance. There have also been further contract wins providing revenue for the second half including a substantial two-year contract for the hosting and managing of an Adobe based on-line meeting system for a UK Government department.
Analytics
As can be seen from the above figures the Recurring revenues for Analytics held up well but we suffered from a lack of new project work following the cancellation of the previously mentioned contract. During Q32014 we have secured a number of POC's (Proof of Concept) which, whilst being revenue generating business in their own right should also lead to longer term contracts benefiting the last quarter of the current financial year and into next year and beyond.
The Company is currently in final stage negotiations for a major Analytics project which, if closed will enhance our second half performance and underpin our expectation of comfortably achieving market expectations for the year as a whole.
ECM
As mentioned previously, ECM projects and Recurring revenues held up well in the first half of the year and we expect this trend to continue for the remainder of the year. We have also seen an improvement in Product sales in Q3.
SUMMARY
Despite the weaker than expected first quarter performance which has impacted the first half-year results, overall trading is set to improve. Based on this backdrop, together with the recent business wins and the depth and quality of the prospects pipeline and a number of projects coming back on stream, the Board remain confident that the Company will achieve results for the year as a whole in line with market expectations.
The Company will keep shareholders updated on our progress.
29 September 2014
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the six months ended 30 June 2014 | |||||
Six months ended | Year ended | ||||
30 June (unaudited) | 31 December (audited) | ||||
2014 | 2013 | 2013 | |||
£'000 | £'000 | £'000 | |||
Continuing operations | |||||
Revenue | 3,427 | 4,960 | 9,769 | ||
Cost of sales | (2,330) | (3,174) | (5,603) | ||
Gross profit | 1,097 | 1,786 | 4,166 | ||
Distribution costs | (944) | (998) | (2,137) | ||
Administration expenses | (466) | (467) | (1,084) | ||
Other operating income | 3 | 7 | 14 | ||
(Loss)/profit from operations | (310) | 328 | 959 | ||
Finance costs | (13) | (13) | (23) | ||
Other gains and losses | - | 30 | 30 | ||
(Loss)/profit before tax | (323) | 345 | 966 | ||
Tax | 40 | (15) | (173) | ||
(Loss)/profit for the period | (283) | 330 | 793 | ||
Other comprehensive income | |||||
Gains on property revaluation | - | - | 121 | ||
Total comprehensive income for the period attributable to equity holders of the parent | (283) | 330 | 914 | ||
(Loss)Earnings per share | |||||
Basic | (1.11)p | 1.32p | 3.14p | ||
Diluted | (1.10)p | 1.29p | 3.08p | ||
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2014 | |||||
Six months ended | Year ended | ||||
30 June (unaudited) | 31 December (audited) | ||||
2014 | 2013 | 2013 | |||
£'000 | £'000 | £'000 | |||
(Loss)/profit for the period | (283) | 330 | 793 | ||
Other comprehensive income | |||||
Items that will be reclassified to profit and loss | |||||
Gains on property revaluation | - | - | 121 | ||
Total comprehensive income | (283) | 330 | 914 | ||
Transactions with owners | |||||
Purchase of own shares | (123) | (31) | (42) | ||
Sale of own shares | 14 | 27 | 23 | ||
Share-based payments | 2 | 2 | 3 | ||
Issue of share capital | - | 31 | 57 | ||
Dividends paid | (284) | (251) | (373) | ||
Total transactions with owners | (391) | (222) | (332) | ||
Change in shareholders' equity for the period | (674) | 108 | 582 | ||
Shareholders' equity at start of period | 5,427 | 4,845 | 4,845 | ||
Shareholders' equity at end of period | 4,753 | 4,953 | 5,427 | ||
CONSOLIDATED BALANCE SHEET as at 30 June 2014 | |||||
At 30 June (unaudited) | At 31 December (audited) | ||||
2014 | 2013 | 2013 | |||
£'000 | £'000 | £'000 | |||
Non-current assets | |||||
Goodwill | 1,018 | 1,018 | 1,018 | ||
Other intangible assets | 28 | 47 | 38 | ||
Property, plant and equipment | 2,344 | 2,302 | 2,414 | ||
Investments | 800 | 800 | 800 | ||
Deferred tax assets | 54 | 17 | 7 | ||
4,244 | 4,184 | 4,277 | |||
Current assets | |||||
Trade and other receivables | 2,054 | 3,593 | 2,907 | ||
Cash and cash equivalents | 188 | 657 | 539 | ||
2,242 | 4,250 | 3,446 | |||
Total assets | 6,486 | 8,434 | 7,723 | ||
Current liabilities | |||||
Trade and other payables | (948) | (2,672) | (1,427) | ||
Tax liabilities | (164) | (25) | (166) | ||
Borrowings | (163) | (162) | (162) | ||
(1,275) | (2,859) | (1,755) | |||
Non-current liabilities | |||||
Borrowings | (458) | (622) | (541) | ||
(458) | (622) | (541) | |||
Total liabilities | (1,733) | (3,481) | (2,296) | ||
Net assets | 4,753 | 4,953 | 5,427 | ||
Equity | |||||
Share capital | 509 | 506 | 509 | ||
Share premium account | 1,893 | 1,870 | 1,893 | ||
Revaluation reserve | 171 | 50 | 171 | ||
Own shares | (81) | - | (2) | ||
Retained earnings | 2,261 | 2,527 | 2,856 | ||
Attributable to equity holders of the parent | 4,753 | 4,953 | 5,427 | ||
CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 June 2014 | |||||
Six months ended 30 June (unaudited) | Year ended 31 December (audited) | ||||
2014 | 2013 | 2013 | |||
£'000 | £'000 | £'000 | |||
Operating activities | |||||
(Loss)/profit from operations | (310) | 328 | 959 | ||
Adjustments for: | |||||
Depreciation of property, plant and equipment | 90 | 83 | 168 | ||
Loss on disposal of property, plant and equipment | - | - | 5 | ||
Amortisation of intangible assets | 10 | 9 | 18 | ||
Share-based payments | 2 | 2 | 3 | ||
Operating cash flows before movements in working capital | (208) | 422 | 1,153 | ||
Decrease/(Increase) in debtors | 853 | (921) | (235) | ||
(Decrease)/increase in creditors | (479) | 1,131 | (114) | ||
Cash generated by operations | 166 | 632 | 804 | ||
Income taxes paid | (9) | (47) | (54) | ||
Net cash from operating activities | 157 | 585 | 750 | ||
Investing activities | |||||
Interest paid | (13) | (13) | (23) | ||
Proceeds on sale of trading investments | - | 591 | 591 | ||
Purchase of property, plant and equipment | (20) | (24) | (115) | ||
Proceeds on disposal of property, plant and equipment | - | - | 10 | ||
Net cash/(used in) for investing activities | (33) | 554 | 463 | ||
Financing activities | |||||
Issue of new share capital | - | 31 | 57 | ||
Dividends paid | (284) | (251) | (373) | ||
Repayment of borrowings | (82) | (328) | (409) | ||
Purchase of own shares (net) | (109) | (5) | (6) | ||
Net cash used in financing activities | (475) | (553) | (731) | ||
Net movement in cash and cash equivalents | (351) | 586 | 482 | ||
Cash and cash equivalents at start of year | 539 | 70 | 70 | ||
Cash and cash equivalents at end of period | 188 | 656 | 552 | ||
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS | |||||
1. Basis of preparation The interim financial information for the six months ended 30 June 2014 and comparative interim figures for 2013 do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 and have not been audited by the Group's auditors. The financial information for the year ended 31 December 2013 has been extracted from the statutory accounts for that year 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).
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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. | |||||
Continuing operations Six months ended 30 June 2014 | Product | Project work | Recurring revenues | Total £'000 | |
External sales | 648 | 889 | 2,666 | 4,202 | |
Adjustment for agency basis | - | - | (776) | (776) | |
Reported revenue | 648 | 889 | 1,890 | 3,427 | |
Segment result (gross profit) | 103 | (211) | 1,205 | 1,097 | |
Other operating costs and income | (1,407) | ||||
Investing and financing activities | (13) | ||||
Profit before tax | (323) | ||||
Continuing operations Six months ended 30 June 2013 | Product | Project work | Recurring revenues | Total £'000 | |
External sales | 4,301 | 1,873 | 2,296 | 8,470 | |
Adjustment for agency basis | (3,200) | - | (310) | (3,510) | |
Reported revenue | 1,101 | 1,873 | 1,986 | 4,960 | |
Segment result/(loss) | 213 | 359 | 1,214 | 1,786 | |
Other operating costs and income | (1,458) | ||||
Investing and financing activities | 17 | ||||
Profit before tax | 345 | ||||
Geographical segments | |||||
The Company operates entirely within the UK. | |||||
3. Earnings per share | Six months ended | Year ended | |||
30.6.14 | 30.6.13 | 31.12.13 | |||
Earnings attributable to equity holders of the parent | (£283,000) | £330,000 | £914,000 | ||
Weighted average of ordinary shares in issue | 25,436,791 | 25,171,404 | 25,270,620 | ||
Weighted average of own shares | (53,663) | (80,343) | (15,802) | ||
Weighted average for calculating basic EPS | 25,383,128 | 25,091,061 | 25,254,818 | ||
Effective dilutive share options | 403,136 | 449,290 | 460,479 | ||
Weighted average for calculating diluted EPS | 25,786,264 | 25,540,351 | 25,715,297 | ||
4. Dividends | Six months ended | Year ended | |||
30.6.14 | 30.6.13 | 31.12.13 | |||
Amounts recognised as distributions to equity holders | £'000 | £'000 | £'000 | ||
Interim dividend for the year ended 31.12.13 of 0.44p | - | - | 99 | ||
Final dividend for the year ended 31.12.2013 of 1.00p (2012: 0.90p) | 284 | 251 | 274 | ||
284 | 251 | 373 | |||
No interim dividend will be paid for the year ended 31 December 2014. | |||||
5. Current liabilities - borrowings | Six months ended | Year ended | |||
30.6.14 | 30.6.13 | 31.12.13 | |||
£'000 | £'000 | £'000 | |||
Bank mortgage | 163 | 162 | 162 | ||
Bank overdraft | - | - | - | ||
163 | 162 | 162 | |||
6. This statement will be available to view and download from the Company's website.
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ENQUIRIES | ||
IS Solutions Plc John Lythall, Managing Director Tel: +44 (0) 1932 893333 | FinnCap Nominated Broker & Adviser Ed Frisby- Corporate Finance Stephen Norcross - Corporate Broking Tel: +44 (0) 207 220 0500 | TooleyStreet Communications Ltd IR & Media Relations Fiona Tooley, Director Tel: +44 (0) 7785 703523 |
Editor's Note IS Solutions is a systems integrator and value-added reseller focused on three web-related areas - portals, content/document management, with specialities in business intelligence and 'big data' analytics. Based in Sunbury-on-Thames, the Group was founded in 1985 and became a listed PLC 1997. The business currently employs 100 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 RBS. |
Ticker: AIM: ISL Accreditation: ISO27001 E-mail: [email protected] Website: www.issolutions.co.uk Follow us www.linkedin.com/company/issolutions | |
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