eg Solutions PLC Regulatory News (EGS)

eg solutions plc ("eg" or "the Company"; LSE-AIM: EGS), the back office optimisation software company, announces its unaudited results for the year ended 31 January 2012.

Financial Summary:

* Costs relating to acquisition £nil (2011: £96,000)

Highlights:

·; Five new financial services customer wins in the UK, South Africa and new territories including a client in a new sector, an investment bank and a business process outsourcer - all with significant roll-out potential.

·; Strong trading in H1 following deployment of Nuqleus 3D (acquired with XTAQ in March 2010) to new customers and expansion of existing customers.

·; The successful re-engineering and pilot projects with the new product suite have resulted in strong demand from existing and new customers in the UK and internationally - since the year end a further contract has been won - the largest in our history from a leading global financial services company.

·; As previously announced, the failure of a third party software component within two XTAQ clients led to our re-engineering the product suite. Although this caused delays in roll-outs, which resulted in revenues for H2 and the full year falling below expectations, we are confident we now have a best in class product.

·; Recurring revenue from maintenance and subscription licence contracts represented 49%; and repeat revenues, i.e. sales to existing customers, represented 79% of total revenues.

 Commenting on current trading and outlook, Rodney Baker-Bates, non-executive Chairman stated:

"The development of the back office optimisation software market is gaining momentum and eg is now reaping the rewards of the significant investment made in its software, products and services. Trading so far this year has been excellent - as demonstrated by the largest contract award in our Company's history - and, with prospects for the remainder of the year looking positive, we are confident that eg will achieve market forecasts."

CONTACTS

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

In September 2011, eg announced interim results reflecting strong trading for the first half of the year based on deployment of the Nuqleus 3D ("N3D") solution (acquired with XTAQ in March 2010) in two new clients and continued expansion of existing eg work manager® clients. The re-engineering of our software platform to integrate eg work manager® and N3D, and to replace the third party component, caused delays to anticipated roll-outs of our solutions, as a result of both the development and the undertaking of pilot projects with the new products. As a consequence, after an encouraging financial performance for the first half of the year, revenue and profit for the second half of 2011/12 fell below market expectations.

By the end of the year to 31 January 2012 wehad successfully completed the re-engineering of our enterprise software platform, significantly enhancing our leading market position and resulting in strong demand for our products and services. At the end of the year we won 5 significant new contracts, from both existing and new customers in the UK and overseas, including an investment bank and a business process outsourcer. All of these contracts have significant potential for further expansion. This was followed in March 2012 by the most significant contract win in the Company's history with a leading global financial services company.

Existing and potential customers have responded very positively both to our existing products and to those we are developing.

Growth in demand for back office optimisation solutions is increasing as financial services and businesses in other sectors seek to improve their effectiveness in challenging global markets. eg is now in an excellent position to take full advantage of the development of this market. The value of our order book is growing, along with our customer and user base, and recent new contracts have already provided a high level of revenue visibility for the current year.

Financial results

Total revenue for the year was £4.71 million (2010/11: £5.15 million). Software licences, maintenance and software services contributed 82 per cent (2010/11: 68 per cent) of total revenue with the balance coming from implementation and training services.

Overall gross margin for the year was maintained at 62.8 per cent (2010/11: 62.6 per cent), reflecting increased product sales and the re-organisation of the sales and delivery teams.

As a result of the delays in new contracts, caused by the failure of the third party software component, profit before tax and exceptional costs fell to £0.15 million (2010/11: £0.45 million).

Profit after tax was £0.13 million (2010/11: £0.48 million).

Our continuing focus on tight cost control contributed to positive operating cash flow of £0.74 million (2010/11: £0.74 million) and, after investment in research and development of £0.86 million (2010/11: £0.65 million), cash at 31 January 2012 was £0.06 million (2010/11: £0.49 million) and is now £0.7 million.

The Board has decided not to recommend the payment of a dividend.

Following the decision of Andrew McRae not to seek re-election at the last AGM because of his increasing international commitments, in May 2011 Phil Lee joined the Board as a Non-Executive Director with Board finance responsibility. We have been fortunate in being able to draw on Phil's extensive experience and knowledge of the financial services industry and, having formerly been an eg client in three previous roles, his knowledge includes a detailed understanding of eg and our products.

Current trading and outlook

The development of the back office optimisation software market is gaining momentum and eg is now reaping the rewards of the significant investment made in its software, products and services. Trading so far this year has been excellent, underpinning our confidence in achieving market forecasts.

Rodney Baker-Bates

Non-executive Chairman

22 March 2012

  CHIEF EXECUTIVE OFFICER'S STATEMENT

Overview

Our two greatest achievements in the last year have been the five new customer wins in the UK and overseas and the successful re-engineering of our back office optimisation software suite. 

eg is the only company to have developed a purpose-built back office optimisation product capable of delivering desktop data capture, combined with real-time work management and standardised & bespoke reporting and analytics. Our functionality now includes forecasting, planning, intra-day and intra-process work allocation, tracking and management, together with real-time management information and dashboards. The development of our back office forecasting product this year, that can forecast at process and task level across multi - stage processes, has significantly boosted eg's leading market position.

The re-engineering of our software suite involved replacing a third party component within the N3D data capture software and integrating this into eg work manager®. This re-engineering was expected to have minimal impact on the outcome for the year ended 31 January 2012. Therefore, it was disappointing that, through the failure of the third party component and the need to undertake pilot projects with the new product suite in order to win new contracts and then finalise client commitment to their roll-out, revenue and profit for last year was lower than expected.

The new software platform has been very well received by both new and existing enterprise clients in the UK and overseas. We are now experiencing strong demand and our sales pipeline is growing rapidly.

We have also continued to maintain tight control over costs which reduced by £0.23 million on the prior year including £0.17 million as the result of a reorganisation of the sales and delivery teams.

Business development and operations

Market development

The emerging back office optimisation software market continues to develop as financial institutions seek to improve operational control and minimise back office costs. This trend was confirmed in May 2011 by Donna Fluss, founder and President of DMG Consulting and recognised thought leader in the workforce optimisation market, at a showcase of the Company's new eg operational intelligence® software suite. DMG Consulting expects that the back office optimisation market will be 3 to 7 times the size of the contact centre workforce optimisation market and could have a value of at least $3 billion over the next few years. Other analysts are also forecasting that demand for new software which continuously monitors and analyses people and processes will grow significantly.

This market opportunity is leading to the entry of new competition with most workforce optimisation vendors claiming to be able to address back office requirements in some way. At the same time, the back office is becoming increasingly complex with a greater variety of work sources including white mail, e-mail, image, SMS and calls as well as from core processing systems. The back office is under ever growing pressure to improve performance leading to an increasing need to understand, control and improve operational activity and reduce costs.

Customer base growth

Following the successful re-engineering of our software platform, demand from new and existing customers has been encouraging.

In the first half work focussed on implementing major contracts won at the end of our last financial year in both the UK and South Africa.

In July 2011 a new contract, worth approximately £660,000, was won from an existing customer in South Africa (a leading investment administration company which provides outsourced healthcare services) to roll-out further users of the eg operational intelligence® software suite. This implementation progressed according to plan and a further licence purchase was one of the 5 orders won at the year end. They continue with their enterprise roll-out. 

In the closing days of the last financial year, we won 5 orders, including 3 from new UK and international customers in the financial services sector and 2 with existing UK and international customers, as follows: 

·; a pilot project for the parent bank of an existing life and pensions client in Europe;

·; a hosted software deployment and services implementation for a UK-based business process outsourcer;

·; a pilot project for an investment bank;

·; the further licence purchase for an existing South African client; and

·; an extension of services for an existing UK client.

In March 2012, we won the most significant contract in eg's history, from a leading global financial services company, for eg operational intelligence® and implementation services. Initially, the contract covers 3,250 users in Europe and India as part of the customer's drive towards cost efficiencies within its Consumer and Corporate Banking divisions. Completion of the initial project is expected by August 2012 with revenue being recognised in the current financial year. The customer has also appointed eg asits preferred supplier of back office optimisation software and entered into a global master agreement for deployment, subject to successful completion of the initial contract, of a minimum of 30,000 software licences across the enterprise.

The recently won contracts have significant potential for further roll-out as well as scope for recurring revenues.

Technology and product development

The objectives of the successful re-engineering of our product suite were fourfold:

·; to integrate eg's products with N3D and replace the third party component to provide real-time data capture functionality that can be deployed as a standard product;

·; to develop strategic planning and forecasting functionality to enable us to meet the expectations and demands of our clients;

·; to develop products capable of rapid, enterprise-wide deployment whilst also allowing for phased deployment to enable customers to achieve early workforce optimisation benefits before deploying full functionality; and

·; to incorporate multi-channel transaction capture and enable rapid integration with in-house systems. This ensures complete data integrity by eliminating the manual keying often associated with back office workforce management solutions.

Following completion of this re-engineering programme, eg now offers the industry's most complete, purpose-built back office optimisation solutions covering:

·; Strategic planning and forecasting (eg forecasting™);

·; Real-time work management (eg work manager®) incorporating multi-channel transaction capture using a variety of integration services, import and data capture solutions

·; Reporting and analytics (eg operational intelligence®)

These developments have strengthened eg's leading competitive position and have resulted in major new orders and further pilot projects from new and existing customers.

People

Our success in meeting the challenges of the past year and positioning eg to optimise the emerging back office optimisation market has relied on the high quality, skill and hard work of our people and I would like to thank them for their contribution to the progress we have made and their continuing commitment.  

Prospects

Our objective is to capitalise on the investment we have made in our products, and seize the opportunities being created by the emerging back office optimisation market, to achieve strong, profitable growth.

eg's market position and opportunity have never been better and we are both excited and confident about our future prospects.

Elizabeth Gooch

Chief Executive Officer

22 March 2012

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 JANUARY 2012

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 JANUARY 2012

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 JANUARY 2012

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

The share based payment reserve is a reserve to recognise those amounts in retained earnings in respect of share based payments.

The own shares held reserve shows movements in the shares held in trust by the eg solutions Employee Benefit Trust.

Retained earnings include the accumulated profits and losses arising from the consolidated statement of comprehensive income excluding foreign exchange differences.

The foreign exchange reserve comprises all exchange differences arising from the translation of the financial statements of overseas operations.

Other reserves represent the equity component of the convertible loan notes.Notes:

1. Basis of Preparation

The accounts for the year ended 31 January 2012 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 which will be set out in the Group accounts for the year ended 31 January 2012 and does 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 2011, 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 498(2) or (3) of the Companies Act 2006.

The preliminary results announcement for the year ended 31 January 2012 was approved by the Board of Directors on 22 March 2012.

2. Revenue

An analysis of the Group's revenue is as follows:

3. Profit from operations

This is stated after charging/(crediting):

4. Earnings per ordinary share

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 and 5% Convertible Loan Notes.

5. Reconciliation of group profit before tax to net cash generated by operations

6. 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.

- ENDS -