IS Solutions (ISS), the AIM-listed web-focused SITS provider, reported full year revenue growth of 12.3% to £11m, and operating profit up 9.2% to £678k (6.2% margin vs. 6.3% in FY09). Pre-tax profits meanwhile were up 15.2% to £684k (6.2% margin vs. 6.1% in FY09). Software license sales were up 20% to £4.03m, recurring revenue was up 27% to £4.55m, although project work was down 16% to £2.4m.
On the sotware front, ISS said Government-based demand for licences is dropping, which is a ‘good thing’ as it’s low margin (via distribution channel). But software was nearly 40% of 2010 revenue, and 18% of gross profit, so we think it's not such a good thing for ISS if the software decline continues.
ISS overall is benefitting from an increase in recurring revenue coming from growth in managed services – recurring revenue is now 41% of total revenue versus 36% in 2009. The company is also experiencing an upturn in project work, which is “returning to pre-2010 levels” thanks in part to its recent focus on growth opportunities in web analytics. In October, alongside private equity group Beringea, it made a strategic investment in web analytic software partner Speed Trap Holdings Ltd, for a total of £700k. Speed Trap provides website analytics for companies such as Comparthemarket.com, Littlewoods, RBS and HSBC. ISS expects this new focus to improve the outlook for the project services business in 2011.