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IS Solutions

  • BY: Andrew Hore |
  • POSTED: 23/03/2010 |

Online technology services provider IS Solutions is growing profits on the back of increasing managed services revenues.

Two-fifths of the revenues of £9.78m in 2009 relate to managed services. New business wins will keep these revenues growing. Just a couple of years ago it was little more than one-quarter of revenues.

Website analytics are driving the growth of the company. Companies want to understand more about their customers and generate more revenues from them. Managing director John Lythall says that these customers can achieve a quick return on investment.

Document management and collaboration portals businesses are also growing.

Underlying profits, excluding amortisation and the costs of moving back to Aim in 2008, improved from £551,000 to £654,000. Revenues increased by nearly 11%.

The final dividend of 0.77p a share means that the total dividend for 2009 is 10% higher at 1.1p a share.

IS Solutions decided to use its spare cash to buy its office in Sunbury-on-Thames last September. It cost £2.1m and this was part-funded by a 10 year mortgage of £1.6m. This means that the company has moved into a net debt position of £310,000 by the end of 2009 but the rent saving will be more significant than any interest cost. Cash flow is strong enough to pay the dividend and move back into a cash positive position.

The business continues to grow but management is willing to consider acquisition that will help supplement that growth. The main problem is the share price, which is perceived to be too low to make it worthwhile to pay for an acquisition with shares.

FinnCap forecasts a rise in profit to £790,000 in 2010.

At 23.25p a share, up 2.25p on the day, IS Solutions is valued at £5.74m. The shares are trading on nine times prospective earnings for 2010. The yield is 4.7%.

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