eg Solutions PLC Regulatory News (EGS)

21 Mar 2006 07:02

EG Solutions plc21 March 2006 21 March 2006 eg solutions plc ("eg" or the "company") Strong performance for the year Maiden Dividend Buoyant New Business Pipeline eg solutions plc the IT software and support services company which joined AIMin June 2005, today announces impressive preliminary results for the year ended31 January, 2006. In its first year as a quoted company eg has deliveredstrong, organic, top-line growth and generated adjusted operating profits at20.5% of sales, despite investments made in additional staff and productdevelopment. As a result the Board is recommending a final dividend of 1.1ppayable on 12 June 2006 to shareholders on the register on 12 May 2006 toreflect the company's strong performance, buoyant outlook for the future and inline with its progressive dividend policy. Full year financial highlights: • Turnover up 43.3% to £5.9m (2005: £4.1m) • Operating profit of £0.7m (2005: £0.1m) • Adjusted operating profit* increased to £1.2m (2005: £1.0m) • Earnings per share of 4.4p (2005: 0.7p) • Adjusted earnings per share** of 8.3p (2005:9.5p) • 1.1p dividend per share recommended (2005: Nil) Key business highlights: • Launch on AIM in June 2005 • Staff numbers increased from 30 at 31 January 2005, to 51 currently. • New contracts finalised with Portman Building Society, Co-operative Group, Co-operative Financial Services, Nationwide Life and 2 UK mortgage lending subsidiaries of a US merchant bank. • New contracts since year end with Co-operative Bank and a major general insurer. • Continued investment in product development for roll out in 2006. • Client survey reveals 100% would recommend eg to a third party. • Contracted sales on hand and maintenance income scheduled for the current financial year already total £3m (2005: £1.8m). Commenting on the results, Elizabeth Gooch, Chief Executive Officer at egsolutions stated: "These are excellent results for our first full year as a quoted company andwe're delighted to be in a position to pay our shareholders a dividend. eg hasdelivered substantial revenue growth while maintaining net margins, highlightingthe future potential for the business. In addition, we have made a significantinvestment in our people, almost doubling the number of employees in the lastyear, to ensure we maintain our momentum and the high level of service ourclients have come to expect. With such an encouraging first year we are lookingforward to expanding into new sectors and demonstrating the outstanding cost,productivity and service benefits eg can bring to an ever-widening customerbase. The year has started well and contracted sales on hand and maintenanceincome scheduled for the current financial year already total £3m compared to£1.8m at this time last year. The pipeline for new business is buoyant and weare encouraged by the level of visibility that we already have for 2006/7." Further enquiries: Elizabeth Gooch (Chief Executive Officer) 01785 715772David Blain (Finance Director) 01785 715772Richard Evans (Brewin Dolphin Securities) 0161 214 5553Michael Henman (Cubitt Consulting) 0207 367 5100 *Adjusted operating profit is defined in Note 3.**Adjusted earnings per share is defined in Note 4. About eg eg leads the field of Operations Management solutions in the financial servicessector. The company's products deliver immediate results, measurableperformance improvements and a guaranteed increase in productivity. eg's clients include HBOS Financial Services, Royal and SunAlliance, NorwichUnion, Scottish Equitable and Co-operative Financial Services. eg joined AIM in June 2005. Chairman's Statement In this first annual report as a quoted company, I am delighted to announce thateg has delivered an exceptional performance. Our results reflect the strategicobjectives set by the Board, and the strength of the proposition that we offerto our customers. The headline numbers demonstrate substantial, profitable and manageable growth,combined with a continuing investment in the underlying business which willensure that the company can deliver comparable performance as its scaleincreases. Importantly, the business has grown both at the top line, where sales were ahead43% to £5.9 million, while maintaining its operating margin at the 20% levelwhich it has achieved over the last three years. Adjusted Operating Profit was20% higher at £1.2 million. At the time of the company's admission to AIM in June last year, we made clearthat we intended to follow a progressive dividend policy. I am delighted toannounce with these results that the Board is recommending a final dividend of1.1p per share. We regard developing a progressive dividend policy as animportant obligation for a quoted company and are delighted to be making thisfirst payment. It reflects the Board's satisfaction with a successful year andconfidence in the outcome for the current year. Behind the figures, there have been some important business developments whichElizabeth will describe in more detail in her Chief Executive's Statement. 2005 saw valuable new business wins which, importantly, included animplementation in the retail business of The Co-operative Group which is outsideour traditional financial services area. The Board continues to seek to develop the company's activities into new marketsectors and new territories, as well as developing our software capabilities toserve better our clients' needs. As well as investing in software development,we have also invested substantially in people to broaden our sales and deliverycapability. All of these developments provide a strong foundation for thelong-term growth of the business. The admission to AIM was a key milestone for us. As well as raising £2 millionfor the business which will play an important part in financing its growth, itestablished a new set of relationships with external shareholders and our staff.Both are vital to the business and we look forward to rewarding them boththrough the company's continued development. A flotation period is a testing onefor any company and I am delighted that throughout this our staff worked hard toensure the continuing success of the business. This has been an important, exciting and successful year for the company. Priorto flotation we carefully selected our Non Executive Directors based on theirskills and experience relative to our strategic objectives. Each of them has aproven track record in creating shareholder value and has made a qualitycontribution to our achievements in 2005. I particularly want to thank all ourstaff and my colleagues on the Board for their major contribution. Inparticular, Elizabeth Gooch, who founded the company in 1988, deserves ourthanks and congratulations for creating and leading a unique business which hasenormous potential for the future. I am also delighted to say that the current year has started well. We areencouraged by the new business pipeline which gives us a high level ofconfidence in the outcome for the year. Rodney Baker-BatesChairman20 March 2006 Chief Executive's Statement Financial results The year ended 31 January 2006 has seen a strong performance from the businessfully justifying our confidence when we joined AIM. Sales at £5.9 million, were43.3% ahead of last year and adjusted operating profit was up 21.4% to £1.2million, representing 20.5% of sales. We are encouraged by the stability ingross margin and by our performance at the net margin level, which remainedstrong, notwithstanding substantial investments in both staff and productdevelopment. Consistent with eg's prospectus pledge to shareholders of a progressive dividendpolicy, the Board is recommending a final dividend payment of 1.1p. Strategy Upon admission to AIM, eg made it clear to investors that we planned to follow agrowth strategy based on two core objectives: • To extend our activities in financial services and enter other new UK market sectors. • To develop our activities outside of the UK. These objectives underpin eg's plans for a substantial increase in the scale ofour business over the medium term. Key marketing objectives eg intends to penetrate new sectors and territories initially through thesuccessful extension of existing client relationships and, thereafter, based ondetailed market research and planning. In the current financial year we will: • Establish the dynamics and characteristics of our target geographic and industry markets and structure our marketing and distribution mechanisms accordingly. • Continue to develop our operational capability in order to increase the scale of the business. The investments we make internally will ensure we maintain our high standard of customer service as well as support effective client delivery. We are currently completing implementations within the retail division of theCo-operative Group and this work is clearly demonstrating the applicability ofour products beyond our traditional base in financial services. 2005 has been a good year for client development. Highlights include newimplementations for Portman Building Society, Co-operative Financial Services,The Co-operative Group, Nationwide Life and two subsidiaries of a US investmentbank, thus broadening the eg client base from our traditionally strong mortgageand life & pensions business. Good progress is being made in developing our approach to overseas markets wherewe intend to achieve sales later in the current financial year. Product development eg software is fully developed but undergoes continual modification andimprovement to meet technological advances, customer and new marketrequirements. In partnership with our clients we have formalised a softwaredevelopment roadmap, providing both parties with a structured approach toenhancing and extending capabilities. During the year we were delighted to achieve Microsoft platform certificationfor eg work manager(R) version 4.94 and for eg operational intelligence(R). In2006 eg solutions became a Microsoft Certified Partner within the IndependentSoftware Vendor competency facilitating competency continued access to Microsoftexpertise, knowledge base and tools. Working in conjunction with Microsoft, eg's products have demonstratedscalability up to 10,000 users on a single server. People We are pleased to announce the appointment of Ian Wright as Chief OperatingOfficer who will join us in April 2006. Ian brings considerable senior IT andoperational management experience and expertise to the company. We have also broadened the senior management team formalised roles andresponsibilities and commenced management development to increase theircapability. Over the last financial year staff numbers have almost doubled from 30 to 51with the greater part of this increase focused on client delivery and sales. During 2006 we have recruited a Partner Manager and an additional BusinessDevelopment Manager. These organisation changes will enable me to focus on eg'sinternational strategy. Customer feedback As a customer-centric organisation, we undertook a major project in 2005 todiscover more about client perception of the eg brand. Of the clients surveyed,100 per cent stated that they would recommend eg to a third party. The surveyrevealed that hard work and a sense of partnership, coupled with energy andenthusiasm have made a significant impact on the client experience. The survey also highlighted the opportunity to enhance product support and thisis an area of focus for 2006. Impact of IPO The company raised a net £2million and came to AIM in June last year in what hasbeen a major strategic development for the business. As well as providing funding to develop our resources, expertise and themanagement team, the IPO brought a range of additional benefits. It strengthenedour ability to recruit the people we wanted and has given us a public visibilitywhich we believe has been valuable in our business development. The share option scheme has meant that everybody at eg has an interest in thebusiness. This has had a noticeable effect on performance and focus. The obligation to shareholders and the strategic objectives that we have laidout have speeded the decision making process and improved performance monitoringand accountability. While the disciplines of running a quoted company have beengood for us, we have made best use of the opportunities that a quotation offersand will continue to do so. Current trading The year has started well and contracted sales on hand and maintenance incomescheduled for the current financial year already total £3m compared to £1.8m atthis time last year. The pipeline for new business is buoyant and we areencouraged by the level of visibility that we already have for 2006/7. Conclusion and outlook The Board is delighted with our strong revenue growth and the expansion of thecompany in its first year since launching on AIM. It is a substantialachievement to be in a position to reward shareholders with a dividend in ourmaiden year. eg's success is a testament to the capabilities of our products,our people and the broadening of our client base outside mortgages and life &pensions. The investment in personnel has enabled us both to grow revenue andprofits whilst maintaining the high standards of client delivery. We anticipatea highly productive year ahead releasing new versions of our software, andcontinuing to demonstrate applicability of our products across all marketsectors. Elizabeth GoochChief Executive Officer20 March 2006 Profit and Loss Accountfor the year ended 31 January 2006 Notes Year ended 31 Year ended 31 January 2006 January 2005 £'000 £'000 Turnover 5,879 4,103Cost of sales (1,572) (1,045) Gross profit 4,307 3,058Administrative expenses (3,569) (2,957) Operating profit 738 101Other interest receivable and similar income 50 1Interest payable and similar charges (19) (11) Profit on ordinary activities before taxation 769 91 Tax on profit on ordinary activities (239) (21) Profit for the financial year 530 70 Earnings per share- basic 4.4p 0.7p- fully diluted 4.3p 0.7p Adjusted earnings per share- basic 8.3p 9.5p- fully diluted 8.1p 9.5p Turnover and Operating Profit are derived from the company's continuingoperations. No separate Statement of Total Recognised Gains and Losses has been presented asall such gains and losses have been dealt with in the Profit and Loss Account. eg solutions plcBalance Sheetas at 31 January 2006 Notes 31 January 31 January 2006 2005 £'000 £'000 Fixed assetsTangible assets 141 75 141 75 Current assetsStocks 27 24Debtors due within one year 1,575 416Cash at bank and in hand 2,035 410 3,637 850 Current liabilitiesCreditors: Amounts falling due within one year (1,218) (913) Net current assets/(liabilities) 2,419 (63) Total assets less current liabilities 2,560 12 Deferred tax (4) (4) Net assets 2,556 8 Capital and reservesCalled up share capital 143 101Share premium account 2,910 6Capital reserve 72 -Own shares held (1,000) -Profit and loss account 431 (99) Equity shareholders' funds 2,556 8 eg solutions plcReconciliation of movements in shareholders' fundsfor the year ended 31 January 200 6 2006 2005 £'000 £'000 Profit for the financial year 530 70New share capital subscribed 3,500 -Share issue costs (554) -Capital reserve movement 72 -Purchase of own shares (1,000) - Net addition to shareholders' funds 2,548 70 Opening shareholders' funds/(deficit) 8 (62) Closing shareholders' funds 2,556 8 eg solutions plcCash Flow StatementFor the year to 31 January 2006 Notes Year ended 31 Year ended 31 January January 2006 2005 £'000 £'000 Cash flow from operating activities (210) 576Returns on investments and servicing of finance 31 (10)Taxation - 3Capital expenditure and financial investment (1,118) (29) Cash outflow before financing (1,297) 540Financing 2,946 - Increase in cash in the period 1,649 540 Year ended 31 Year ended 31 January January 2006 2005 £'000 £'000 Reconciliation of net cash flow to movement in net debtIncrease in cash in the period 1,649 540Net cash/(debt) at 1 February 2005 386 (154) Net cash at 31 January 2006 2,035 386 Notes to the financial information 1. Basis of preparation The financial information has been prepared on a consistent basis using the accounting policies set out in the report and financial statements for the year ended 31 January 2005. 2. Non statutory accounts The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 January 2006 but is derived from those accounts. The results for the year ended 31 January 2005 are derived from an abridged version of the financial statements for that year which were audited and reported upon without qualification by Baker Tilly and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. Abbreviated financial statements for that year were delivered to the Registrar of Companies as the Company was entitled to do before its flotation. 3. Adjusted profit and adjusted operating profit Prior to its admission to trading on AIM on 6 June 2005, the Company operated in a private environment and substantially all its trading profits were distributed in the form of remuneration to the Chief Executive Officer, who was also its founder and principal shareholder. On admission the Chief Executive Officer's remuneration was reduced to £150,000 per annum, a level appropriate for a public company at the stage of development of eg solutions. The adjusted profit and operating profit figures have been calculated for illustrative purposes only to give shareholders an indication of what the performance of the Company would have been if the Chief Executive Officer's present remuneration arrangements had been in place since 1 February 2004, as follows: Year ended to Year to 31 January 31 January 2006 2005 £'000 £'000 Profit for the financial year 530 70Add actual salary paid 622 1,046Deduct new salary (150) (150) Adjusted profit for the financial year 1,002 966 Adjusted operating profit is calculated as follows: Year ended to Year to 31 January 31 January 2006 2005 £'000 £'000 Operating profit 738 101Add actual salary paid 622 1,046Deduct new salary (150) (150) Adjusted operating profit 1,210 997 4. Earnings per share Basic earnings per share is calculated by dividing earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period excluding those held by the employee trust which are treated as cancelled for earnings per share calculation purposes. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares, which comprise employee share options. Adjusted earnings per share is calculated based on the adjusted profit for the period as defined in note 3. Year ended Year ended 31 January 31 January 2006 2005 £'000 £'000 Weighted average number of shares:Basic 12,102,067 10,176,200Diluted 12,376,067 10,176,200 5. Notes to the cash flow statement Reconciliation of operating profit to net cash flow from operating activities: Year ended Year ended 31 January 31 January 2006 2005 £'000 £'000 Operating profit 738 101Depreciation 52 30Share option charge 72 -(Increase)/decrease in stocks (3) 16(Increase)/decrease in debtors (1,159) 75Increase in creditors 90 354Cash (outflow)/inflow from operating activities (210) 576 Analysis of cash flows for headings netted in the cash flow statement Year ended Year ended 31 January 31 January 2006 2005 £'000 £'000 Returns on investments and servicing of finance Interest received 50 1Interest paid (19) (11) Net cash outflow for returns on investment and servicing of finance 31 (10) Capital expenditure and financial investment Purchase of tangible fixed assets 118 29Purchase of own shares 1,000 - Net cash outflow for capital expenditure and financial investment 1,118 29 Year ended 31 Year ended 31 January January 2006 2005 £'000 £'000FinancingIssue of ordinary share capital 3,500 -Share issue costs (554) -Debt due within one year:- increase in short term borrowings 1,000 -Loan repayments (1,000) - Net cash inflow from financing 2,946 - Analysis of changes in net cash: At At 31 January 31 January 2005 Cash flows 2006 £'000 £'000 £'000 Cash at bank and in hand 410 1,625 2,035Bank overdraft (24) 24 - Net funds 386 1,649 2,035 6. AGM The Annual General Meeting will be held on 6 June 2006. This information is provided by RNS The company news service from the London Stock Exchange