24 Mar 2010 07:00
| FOR IMMEDIATE RELEASE | 24 March 2010 |
eg solutions plc
RESULTS FOR THE YEAR ENDED 31 JANUARY 2010
eg solutions plc ("eg solutions" or "the Company"; LSE-AIM: EGS), the back office optimisation software company, announces its unaudited results for the year ended 31 January 2010.
Financial Highlights:
·; Revenue increased 13 percent to £4.2m (2009: £3.7m)
·; Pre-tax profit of £0.1m (2009: loss of £0.8m)
·; Positive cash generation with net cash at year end of £0.4m (2009: £0.3m)
·; Costs further reduced by £0.4m (9 percent) on prior year
Operational Highlights:
·; New contract wins include Nationwide Building Society, Legal & General, one of the largest Nordic bancassurance groups and the healthcare division of one of South Africa's leading financial services groups
·; Awards won:
- Technology vendor with the 'Most Innovative Financial Services Solution' at the prestigious IFS Financial Innovation Awards 2009; and
- Highly commended in the Best Added Value Project category of the ICT Excellence Awards
·; Post-year end, announced acquisition of XTAQ for up to £0.23m adding blue chip customer base, complementary products with an encouraging sales pipeline
On Current Trading and Outlook, Rodney Baker-Bates, non-executive Chairman stated:
"In recent months new orders signed with existing customers have demonstrated eg's ability to sell more deeply and widely into our existing customer base. We have started this year with a solid order book which, together with contracted recurring revenues, account for over 50 percent of our expected revenues for the year (excluding XTAQ) as at today's date.
"The acquisition of XTAQ should be earnings enhancing in the current year, based on contracted recurring revenues and expected immediate product sales. XTAQ has a significant sales pipeline; if satisfactory progress can be achieved in converting these prospects into firm orders, the potential for the enlarged group is good.
"After a very tough three years, eg is now well placed to deliver growth over the next year and beyond."
CONTACTS
| eg solutions plc | today: 020-7367-8888 |
| Elizabeth Gooch, Chief Executive Officer | thereafter: 01785-715772 |
| www.eguk.co.uk | |
| Bankside | 020-7367-8888 |
| Steve Liebmann, Simon Bloomfield or Andy Harris | |
| Arbuthnot Securities Limited | 020-7012-2000 |
| Tom Griffiths |
About eg solutions plc
eg solutions plc is a global back office optimisation software company. Our software provides historic, real-time and predictive Operational MI. When implemented with our training programme for managers and team leaders to use this intelligence, we guarantee improvements in operational results in short timescales.
The Company, which is listed on the Alternative Investment Market ('AIM') of the London Stock Exchange, is committed to customer satisfaction and the ongoing development of its operations management solutions.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to be able to report on a successful year in which the business has been stabilised and a solid foundation laid for future growth. This represents a turn around from the previous year when the Company's trading was adversely affected by the deepening global financial crisis, especially during the second half of the year.
Having worked our way through one of the most difficult periods for the financial services sector, our core market, the Company has regained its poise; there has been a good flow of new contract wins and recently we were pleased to announce the acquisition of XTAQ Limited.
Results
The year to 31 January 2010 saw steady performance throughout the year with a similar result delivered in both the first and second halves of the year, both of which were profitable following the reduction in costs implemented in both the previous year and the year under review. In comparing performance with the previous year, after a 'same again' first half, the Company achieved a turn-round to profit in the second half from a £0.7 million loss in the comparable period of the prior year.
Total revenue was £4.15 million (2009: £3.67 million) and the profit before tax was £0.10 million (2009: loss before tax of £0.75 million). Earnings per share were 0.7p (2009: loss per share of 5.5p).
Net cash at the year end was £0.4 million (2009: £0.3 million).
The Board will not be recommending a dividend for the year ended 31 January 2010.
Acquisition
Following the year end, we announced the acquisition of XTAQ Limited ("XTAQ"), a developer and supplier of business performance measurement software and associated services. The consideration of up to £233,333 payable by the Company for XTAQ comprises £33,333 in cash and the balance by the issue of up to £150,000 in 5 percent Convertible Unsecured Loan Notes 2012 and up to 90,909 new ordinary shares of 1p each in the Company. The total maximum consideration equates to the approximate level of XTAQ's current contracted maintenance revenues for the 12 months ending 31 March 2011.
XTAQ employs a total of eight people, all of whom are expected to remain with the enlarged group and who are being incentivised by the award of options to subscribe for new shares in eg at the mid-market price immediately prior to the announcement of the acquisition. The vesting of these options is linked, on a sliding scale, to the achievement of sales targets for XTAQ's Nuqleus software products and related services.
XTAQ represents an excellent 'bolt on' acquisition, extending eg's product range and customer base, adding to our development and delivery skills and offering potential for cross-selling across the enlarged customer base. Furthermore, we believe that the sales prospects for Nuqleus will be improved by XTAQ becoming part of a larger company.
Further details of the plans for integrating XTAQ into eg are provided in the Chief Executive Officer's Statement below.
Current Trading and Outlook
In recent months new orders signed with existing customers have demonstrated eg's ability to sell more deeply and widely into our existing customer base. We have started this year with a solid order book which, together with contracted recurring revenues, account for over 50 percent of our expected revenues for the year (excluding XTAQ) as at today's date (2009: 51 percent).
The acquisition of XTAQ should be earnings enhancing in the current year, based on contracted recurring revenues and expected immediate product sales. XTAQ has a significant sales pipeline; if satisfactory progress can be achieved in converting these prospects into firm orders, the potential for the enlarged group is good.
After a very tough three years, eg is now well placed to deliver growth over the next year and beyond.
Rodney Baker-Bates
Non-executive Chairman
23 March 2010
CHIEF EXECUTIVE OFFICER'S STATEMENT
Introduction
The past year has seen eg get back onto an 'even keel' after the difficulties of the previous year which arose from the global financial crisis and deepened rapidly from the autumn of 2008 onwards. Our focus has remained resolutely on our core business of developing and delivering back office optimisation software and associated services which deliver substantial and measurable cost savings for our customers.
Although contract decision times continue to be lengthy, the financial services sector is now seemingly willing to invest in projects for which there is a tangible and positive return. We are proud of our blue chip customer base, both in the UK and internationally. We have demonstrated clearly our ability to develop long-term relationships capable of providing ongoing revenue from support services, additional licences and implementation services - in effect, selling more deeply and widely into our existing customer base - as well as procuring new customers. Nationwide is an excellent example: eg made its first licence sale to Nationwide's Life Assurance division in 2005; this was followed by a succession of additional licence sales to other parts of the business, culminating in Nationwide buying an enterprise-wide licence in December 2009. We have developed a successful business model based on an initial sale to prove the concept followed by additional roll-out sales. This has been achieved with a number of other existing customers in the UK and internationally.
The recent acquisition of XTAQ increases the Company's customer list from 25 to nearly 40 with companies such as Barclaycard, Citibank, GE Capital, Principality Building Society and Royal Bank of Scotland as well as a number of public sector clients.
With renewed confidence and a more stable economic backdrop, eg is well placed to return to growth.
Business review
Cost base
During the year total costs were reduced by a further £0.4m on the prior year representing a 9 percent improvement. Costs have now been reduced by over £1.5m per annum since financial year 2007.
Market and business development
The Company started the year with a strong pipeline of potential sales. Business development activities achieved a solid momentum during the year with a good rate of converting potential sales into signed contracts.
The combination of software licences, software services and maintenance contributed 70 percent of revenue for the full year (2009: 66 percent) with the balance coming from implementation services. Contracted recurring revenues contributed 36 percent of revenue during the year (2009: 40 percent) due to the increased proportion of licence revenues.
New contract wins announced during the year under review included several from Nationwide Building Society (see above), two additional orders from Legal & General (which now has over 2,000 named users), an initial and a follow-on order from one of the largest Nordic bancassurance groups and an initial order from another healthcare division of one of South Africa's leading financial services groups.
Product development & support
Investment in capitalised software development in the year was £0.6 million (2009: £0.5 million) and included both new releases of existing products, as well as significant new product developments.
Development to existing software products included:
·; New major releases of eg work manager® v5.1 and eg operational intelligence® v2.1, improving the efficiency of the key daily user functions;
·; Enhanced custom reporting with a new release of eg operational intelligence® data views.
Development of new software products included:
·; The implementation of a new web based e-learning system enabling eg to offer customers e-learning based training either within a customer's own Learning Management Systems or over the internet;
·; eg work manager® de-sensitisation- a utility product that enables customers to conceal sensitive employee and customer data across eg databases. This product enables customers to enforce increasingly stringent data management policies and data protection legislative requirements.
Acquisition and integration of XTAQ
The acquisition of XTAQ brings together two companies with complementary products and customer bases. XTAQ's Nuqleus 3D product provides real-time data capture and additional dashboard functionality that the Company had been planning to develop for its own product range during 2010.
The combined businesses' active client base will increase to about 40 from 25 for eg, providing increased recurring revenues and opportunities for cross-selling in both directions - with particular opportunities for eg to start selling into the public sector. XTAQ has a number of excellent sales prospects and we believe that there will be a much improved prospect of completing these sales with XTAQ being part of a larger and stronger business.
In addition, XTAQ's sales, development and implementation staff will strengthen the Company's existing team with a number of budgeted new positions now being filled by XTAQ staff. In this way the enlarged group will benefit from the economies of scale resulting from the merger of the two companies.
The integration of XTAQ and eg is already well under way. As with many small IT companies, XTAQ operated from 'virtual premises' - no office or lease commitments were inherited as part of the deal. That said, eg's offices and customer training facilities will provide additional facilities and reassurance to XTAQ's existing and potential customers.
As independent products there is a close fit between the eg operational intelligence® software suite and XTAQ's Nuqleus 3D product. For some time the Company's clients have been requesting real-time data capture and to include data from other, non-operational, sources into dashboards and balanced scorecards. These requests can be fulfilled immediately and it is our intention to fully integrate the combined eg/XTAQ product set over the coming months.
Priorities for the future
Over the past year we have stabilised the Company and built a solid base for future growth. The acquisition of XTAQ will help accelerate our rate of product development and has expanded both our customer base and the teams focussing on sales, delivery and development.
The demand for back office optimisation has increased in recent months as the recession has fuelled firms' desire for tighter operational control. This demand is supported by research carried out during the year on behalf of the Company and is further evidenced by the move by large Workforce Management vendors to the back office market place. The larger number of players in this market place should lead to greater awareness of back office optimisation solutions.
Both eg and XTAQ have strong sales pipelines. With steadier market conditions now being experienced, a stronger product offering and evidence of increased customer demand, we are confident that a base for renewed growth has been created.
Elizabeth Gooch
Chief Executive Officer
23 March 2010
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 JANUARY 2010
| Notes | Year | Year | |
|
|
| ended 31 January 2010 | ended 31 January 2009 |
|
|
| £'000 | £'000 |
|
|
|
|
|
| Revenue | 3 | 4150 | 3666 |
|
|
|
|
|
| Cost of sales |
| (1550) | (1812) |
|
|
|
|
|
| Gross profit |
| 2600 | 1854 |
|
|
|
|
|
| Administrative expenses |
| (2502) | (2646) |
|
|
|
|
|
| Profit / (loss) from operations | 4 | 98 | (792) |
|
|
|
|
|
| Finance income |
| 1 | 39 |
| Profit / (loss) before tax |
| 99 | (753) |
| Tax (charge) / credit |
| (8) | 33 |
| Profit / (loss) after tax |
| 91 | (720) |
| Exchange differences on translation of foreign operations |
| 14 | (28) |
| Total comprehensive income for the year |
| 105 | (748) |
|
|
|
|
|
| Profit / (loss) attributable to equity shareholders of the Parent Company and total comprehensive income |
| 105 | (748) |
|
|
|
|
|
| Earnings / (loss) per share |
|
|
|
| From continuing operations Basic |
5 |
0.7p |
(5.5p) |
| Diluted | 5 | 0.6p | (5.5p) |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 JANUARY 2010
|
| At 31 January 2010 | At 31 January 2009 |
| £'000 | £'000 | |
| ASSETS Non-current assets |
|
|
| Intangible assets | 1705 | 1434 |
| Property, plant and equipment | 50 | 74 |
|
| 1755 | 1508 |
| Current assets |
|
|
| Trade and other receivables | 642 | 539 |
| Inventories | 18 | 17 |
| Current tax receivable | 50 | 258 |
| Cash and short term deposits | 410 | 262 |
|
| 1120 | 1076 |
|
|
|
|
| Total assets | 2875 | 2584 |
| LIABILITIES |
|
|
| Current liabilities |
|
|
| Trade and other payables | 1169 | 1063 |
|
| 1169 | 1063 |
|
|
|
|
| Non-current liabilities |
|
|
| Deferred tax liabilities | 254 | 215 |
|
| 254 | 215 |
| Total liabilities | 1423 | 1278 |
| Net assets | 1452 | 1306 |
|
|
|
|
| EQUITY |
|
|
| Share capital | 143 | 143 |
| Share premium | 2910 | 2910 |
| Share based payment reserve | 208 | 218 |
| Own shares held | (949) | (1000) |
| Retained earnings | (856) | (947) |
| Foreign exchange | (4) | (18) |
| Total equity | 1452 | 1306 |
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 JANUARY 2010
|
| Note | Year | Year |
|
|
| ended | ended |
|
|
| 31 January 2010 | 31 January 2009 |
|
|
| £'000 | £'000 |
| OPERATING ACTIVITIES |
|
|
|
| Cash generated by / (consumed in) operations | 6 | 520 | (77) |
| Income taxes received |
| 208 | - |
|
|
|
|
|
| NET CASH GENERATED FROM / (USED IN) OPERATING ACTIVITIES |
| 728 | (77) |
|
|
|
|
|
| INVESTING ACTIVITIES |
|
|
|
| Purchases of intangible assets |
| (568) | (528) |
| Purchases of property, plant and equipment |
| (19) | (54) |
| Proceeds from sale of property, plant and equipment |
| 4 | 4 |
| Sales of option shares |
| 2 | - |
| Interest received |
| 1 | 39 |
| NET CASH USED IN INVESTING ACTIVITIES |
| (580) | (539) |
|
|
|
|
|
|
|
|
|
|
| NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS |
| 148 | (616) |
|
|
|
|
|
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
| 262 | 878 |
|
|
|
|
|
| CASH AND CASH EQUIVALENTS AT END OF YEAR Bank balances and cash |
| 410 | 262 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
| Share Premium £'000 | Share based payment reserve £'000 |
Own Shares Held £'000 |
Retained Earnings £'000 |
Foreign Exchange £'000 |
Total £'000 |
| Balance at 1 February 2008 (restated) | 2910 | 191 | (1000) | (227) | 10 | 1884 |
| Loss for the year | - | - | - | (720) | - | (720) |
| Other comprehensive losses | - | - | - | - | (28) | (28) |
| Total comprehensive loss | - | - | - | (720) | (28) | (748) |
| Share based payments | - | 27 | - | - | - | 27 |
|
|
|
|
|
|
|
|
| Balance at 31 January 2009 | 2910 | 218 | (1000) | (947) | (18) | 1163 |
| Profit for the year | - | - | - | 91 | - | 91 |
| Other comprehensive losses | - | - | - | - | 14 | 14 |
| Total comprehensive income | - | - | - | 91 | 14 | 105 |
| Share based payments | - | 39 | - | - | - | 39 |
| Shares issued to employees | - | (49) | 51 |
|
| 2 |
|
|
|
|
|
|
|
|
| Balance at 31 January 2010 | 2910 | 208 | (949) | (856) | (4) | 1309 |
The own shares held represent a loan to the ESOP Trust and the Company has de facto control of the shares held by the Trust and bears their benefits and risks.
Notes
1. Basis of Preparation
The accounts for the year ended 31 January 2010 are in the final stages of completion. The auditors anticipate issuing an unmodified opinion.
The information in this preliminary results announcement has been prepared on the basis of the accounting policies set out in the Group accounts for the year ended 31 January 2009 and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Full accounts of eg solutions plc for the year ended 31 January 2009, which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain statements under Section 237(2) of the Companies Act 1985.
The preliminary results announcement for the year ended 31 January 2010 was approved by the Board of Directors on 23 March 2010.
2. Post balance sheet event
On 11 March 2010, the Group announced the acquisition of XTAQ Limited, a developer and supplier of business performance measurement software and associated services, for a consideration of up to £233,333, further details of which are set out below.
Founded in 1993 XTAQ is a privately owned business based in Bristol employing eight people. XTAQ has developed its Nuqleus business performance measurement software which it distributes with support services to deliver improved operational performance and effectiveness. Customers deploy Nuqleus strategically throughout the enterprise or as a point solution to address particular operational management information requirements. XTAQ is currently deploying the latest version of its software product, Nuqleus 3D, and has created long-term relationships with its customers which, typically, use Nuqleus within processing centres, call centres and mobile professional workforces. XTAQ's current customers include Barclaycard, Citibank, GE Capital, Principality Building Society and Royal Bank of Scotland as well as a number of public sector clients.
In the year to 31 March 2009 XTAQ's audited turnover was £0.55 million, on which it incurred a loss before tax of £0.15 million. As at the same date XTAQ had a deficit on net assets of £0.05m.
The consideration payable by the Company for XTAQ comprises: £33,333 in cash and the balance by the issue of up to £150,000 in 5 percent Convertible Unsecured Loan Notes 2012 ("Loan Notes"), and up to 90,909 new ordinary shares of 1p each in the Company ("New Ordinary Shares"). The total maximum consideration equates to the approximate level of current contracted maintenance revenues for the 12 months ending 31 March 2011. The consideration will be adjusted on a £-for-£ basis for any actual increase in the deficit on net assets which has been estimated by XTAQ as at 28 February 2010. On the second anniversary of their issue the Loan Notes are repayable or convertible into New Ordinary Shares at a share price of 82.5p. The Company may require holders to convert if, for at least 20 consecutive business days, the average share price of an ordinary share in the Company shall be 82.5p. No premises or property lease liabilities are being acquired.
Following completion of the acquisition of XTAQ its employees will be granted an aggregate of up to 1,393,938 options to subscribe for new ordinary shares in the Company, at an exercise price of 55p, the closing mid-market price of an ordinary share in the Company on 10 March 2010, being the last business day prior to the acquisition. The number of options that may be exercised will depend, on a sliding scale, on the achievement of pre-determined XTAQ revenue performance in the 12 months ending 31 March 2011 and are subject to a 4 year vesting period from the date of issue.
The Board considers that the acquisition of XTAQ brings together two companies with complementary products and customer bases. XTAQ's Nuqleus 3D product provides real-time data capture and additional dashboard functionality that the Company had been planning to develop for its own product range during 2010. The combined businesses' active client base will increase to about 40 from 25 for eg, providing increased recurring revenues and opportunities for cross-selling. In addition, XTAQ's sales, development and implementation staff will strengthen the Company's existing team.
3. Revenue
An analysis of the Group's revenue is as follows:
|
| Year ended 31 January 2010 £'000 | Year ended 31 January 2009 £'000 |
| Continuing operations: |
|
|
| United Kingdom | 3799 | 3465 |
| South Africa | 351 | 201 |
|
| 4150 | 3666 |
4. Profit / (loss) from operations
This is stated after charging:
|
| Year ended 31 January 2010 £'000 | Year ended 31 January 2009 £'000
|
| Net foreign exchange losses | 10 | 9 |
| Research costs | - | 4 |
| Profit / (loss) on disposal of property, plant and equipment | 1 | (31) |
| Amortisation of development expenditure | 297 | 236 |
| Depreciation |
|
|
| - owned assets | 42 | 63 |
| Staff costs | 2592 | 2587 |
| Operating leases | 237 | 161 |
5. Earnings / (loss) per ordinary share
From continuing operations
| Year ended 31 January 2010
pence | Year ended 31 January 2009
pence | |
| Basic | 0.7p | (5.5p) |
| Diluted | 0.6p | (5.5p) |
EPS has been calculated using the following methodology:
Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders by the number of weighted average ordinary shares during the period. The number of shares excludes shares held by an Employee Benefit Trust.
For diluted earnings per share, the number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees.
When Basic EPS is a negative value the effects of anti-dilutive potential ordinary shares are ignored in calculating diluted EPS.
6. Reconciliation of group profit / (loss) before tax to net cash generated by / (consumed in) operations
|
| 2010 £'000 | 2009 £'000 |
| Profit / (loss) before tax | 99 | (753) |
| Adjustments for: |
|
|
| Depreciation of property, plant & equipment | 42 | 62 |
| (Profit) / loss on disposal of property, plant & equipment | (1) | 31 |
| Amortisation of intangible assets | 297 | 236 |
| Finance income | (1) | (39) |
| Share option charge | 39 | 27 |
| Operating cash flows before movements in working capital | 475 | (436) |
| (Increase) / decrease in receivables | (99) | 258 |
| (Increase) / decrease in stock | (1) | 7 |
| Increase/(decrease) in payables | 145 | 94 |
| Cash generated by / (consumed in) operations | 520 | (77) |
7. Availability of this announcement and Annual Report & Accounts
Copies of this announcement are available on the Company's website: www.eguk.co.uk. The Annual Report & Accounts and Notice of Annual General Meeting will be sent to shareholders in due course and will also be available on the Company's website from the date of posting.