eg Solutions PLC Regulatory News (EGS)

eg solutions plc

Interim results for the six months ended 31 July 2014

eg solutions plc (AIM: EGS), the back office optimisation software company is pleased to announce interim results for the six months ended 31 July 2014.

Financial Summary

(*) Prior period restated after moving amortisation from direct costs to overheads

· Strong first half delivering against our strategy with 78% revenue growth

· Major turnaround to profit before tax of £0.6m for the half year (FY 2013/14: (£1.4m))

· Net cash generated from operations of £0.7m (2013: outflow of £0.1m)

· Gross cash of £0.8m

Operational Highlights

· Nine contract wins from new and existing customers demonstrating strong momentum in the market for eg's product suite

· Forward order book of £13m of recurring and repeat contracts (due over the next three to four years) underpins future revenue base

· Strengthened Board structure following the appointment of Duncan McIntyre, John Brougham and Mark Brady

· Continued investment to secure and support global customer wins

Post period update

As reported in the trading statement released 20 August 2014, eg won a material new contract with an existing client, a major third party outsourcing company. Revenues under the initial contract areexpected to be in excess of £1.2m, of which £0.63m will be recognised in the current financial year, and separately, eg will receive a further amount per year in additional annually renewable licence revenues.

Trading in the two months since the half year end has continued to be positive and the Company remains confident of achieving market expectations for the full year.

Duncan McIntyre, Chairman, commented:

"The Company has made a strong start to the financial year, with significant growth in revenue, profits and cash generation. We are making demonstrable progress in the global workforce optimisation market, with multiple new and existing client wins during the first half. This improvement has been achieved with measured enhancements in our operating infrastructure. The Company has a substantial market opportunity and the leading software product. We will continue to invest to ensure we achieve the true growth potential of the Company and remain confident of delivering our full year financial performance in line with expectations."

Ends

CONTACTS

About eg solutions plc

eg solutions is a back office workforce optimisation software company. eg pioneered this new market space and developed the most complete, purpose built workforce optimisation software for back offices - the only solution that manages work, people and end-to-end processes wherever they are undertaken, anywhere in the world.

Our software is now used by leading UK, international and global companies in multiple industry sectors including insurance, retail banking, healthcare, utilities and outsourcing.

Using our forecasting, scheduling, real-time work management and operational analytics capabilities we deliver measureable improvements in service, quality, productivity and regulatory compliance. When supported by our implementation and training services we guarantee return on investment in short timescales.

Regardless of who is serving the customer - call centre, back offices, branches or the field - our solutions provide true insight into the full customer service process and promote world-class operational management capability.

The Company is listed on the Alternative Investment Market ('AIM') of the London Stock Exchange (EGS)

Chief Executive's Statement

Overview

eg's performance for the six months ended 31 July 2014 demonstrates that the strategy we put in place is beginning to gain traction. We have generated a 78% increase in sales and achieved a major turnaround in profit before tax. We have continued to invest in the infrastructure of the Company to strengthen our market proposition and ability to deliver against this opportunity. We will need to continue this investment to both generate and support new sales of our market leading product suite.

There continues to be a number of factors driving the market forward as businesses strive for improved customer service, operational efficiency, cost control and risk management. These factors are driving increased demand for back office workforce optimisation solutions. The Board remains focussed on creating a Company that can maximise this opportunity and grow profitably, with revenue growth in excess of the market.

It has been a period of positive change for the Company and we thank our staff and shareholders for their continued support.

Financial Performance

Total revenue for the period was £3.99m (H1 2013/14: £2.24m). Software licences, maintenance and software services contributed 72 per cent of total revenue (H1 2013/14: 83 per cent, full year 2013/14: 76 per cent) with the balance coming from implementation and training services.

Gross margin has improved to 74 per cent (H1 2013/14: 64 per cent) as new resources employed in the prior year became fully productive. Administrative expenses increased to £2.29m (H1 2013/14: £2.16m) following investment in additional resources to support our growth plans.

As a result of our return to profitability the net cash generated by operations was £0.7m for the period (H1 2013/14: net cash used £0.1m).

Cash as at 31 July 2014 was £0.83m (31 July 2013: £0.41m) including the issue of 10% Convertible Loan Notes of £0.55m in February 2014 and equity issued to Non-Executive Directors of £0.23m in April 2014. Other than the Convertible Loan Notes the Company has no other debt.

Total cash used in investing activities for the period was £0.4m (H1 2013/14: £0.4m) reflecting our continuing investment in Research and Development.

The Board is not proposing the payment of an interim dividend.

Operational Review

During the period nine new contracts were secured with new and existing customers, further penetrating our key global market sectors. As a result revenues increased significantly on H1 2013 with 78% growth. These contracts also led to a 20% increase in the user base for our software both in the UK and globally.

As previously detailed in the 20 August 2014 trading statement, there were a number of large contracts which will mean the full year is likely to be more first half weighted, but the underlying momentum is very encouraging. It is worth noting that during the entire previous financial year the Company generated £4.46m of revenue, and in the first six months of the current year has delivered £3.99m. Following the launch of our Managed Cloud / Hosting Services recurring and repeat revenues have also increased and our future sales are now underpinned by a £13m order book due over the next three to four years.

It is also pleasing to report the major turnaround from the £1.4m loss in the prior full year to £0.6m profit before tax for the half year. This result has been achieved whilst continuing to invest in the structure of the business. We will continue this investment in order to maximise the market opportunity.

When combined with independent industry research our results illustrate that there is a strong market emerging for eg's market leading product suite. Utilising a mix of direct and partner sales channels means the Company is well placed to increase its market penetration and maximise this opportunity.

Board and Management Strength

Following the appointment of Duncan McIntyre, as Non-executive Chairman, John Brougham and Mark Brady were both appointed as independent Non-executive Directors to further strengthen the Board. The eg Board now consists of individuals with substantial current experience of growing listed and private companies in the technology sector, as well as providing high levels of governance. John Brougham now Chairs the Audit Committee and Mark Brady, a former Chairman of the Quoted Company Alliance (the organisation that publishes the Corporate Governance code for Small and Mid-size Quoted Companies), is Chair of the Remuneration Committee.

At an operational management level we have implemented a new management structure and, following a number of senior hires in key areas of the business, have established a platform for growth which will help deliver on our stated strategy. The Company will look to continue its targeted investment programme to ensure that the new business momentum is maintained and customer satisfaction continues.

Awards

In April 2014 the eg operational intelligence® software suite was listed in the Top Ten Contact Centre Technology Awards. Voted for by end users, these awards run annually to recognise the best products in the market and are designed to help Contact Centre managers make informed decisions about the technology they invest in.

As the only back office workforce optimisation vendor in the Top Ten, the award recognised the value our solutions contribute to improving customer experience in both the front and back office.

Current trading and Outlook

The Company has made a strong start to the financial year, with significant growth in revenue, profits and cash generation. We are making demonstrable progress in the global workforce optimisation market, with multiple new and existing client wins during the first half. This improvement has been achieved with measured enhancements in our operating infrastructure. The Company has a substantial market opportunity and the leading software product. We will continue to invest to ensure we achieve the true growth potential of the Company and remain confident of delivering our full year financial performance in line with expectations.

(*) Prior period restated after moving amortisation from direct costs to overheads.

Consolidated Interim Statement of Cash Flows

for the six months ended 31 July 2014

Condensed Consolidated Statement of Changes in Equity

for the six months ended 31 July 2013

 This statement is unaudited

Notes to the Condensed Consolidated Interim Financial Statements

For the six months ended 31 July 2014

1. Basis of Preparation

The interim financial information consolidates the results of the Company and its subsidiary undertakings made up to 31 July 2014. The Company is a limited liability company incorporated and domiciled in England & Wales and whose shares are listed on the Alternative Investment Market.

The financial information contained in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. It does not therefore include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 31 January 2014.

The financial information for the six months ended 31 July 2014 is unaudited. The Group has not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK Groups listed on the Alternative Investment Market (AIM), in the preparation of these interim financial statements.

Full accounts of eg solutions plc for the year ended 31 January 2014 have been delivered to the Registrar of Companies. The report of the auditors on these accounts was unqualified and did not contain a statement under Section 498(2-4) of the Companies Act 2006.

Significant accounting policies

The accounting policies used in the preparation of the financial information for the six months ended 31 July 2014 are in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRS') as adopted by the European Union and are consistent with those that are expected to be adopted in the annual statutory financial statements for the year ending 31 January 2015. These are not expected to differ significantly from those adopted in the financial statements for the year ended 31 January 2014 with the exception of amortisation being moved from direct costs to administrative expenses in the Condensed Consolidated Statement of Comprehensive Income. The Directors believe that it better presents the financial performance of the Group and improves comparability with other companies in the industry.

The interim report for the six months ended 31 July 2014 was approved by the Board of Directors on 17 September 2014.

2. Operating Segments

eg solutions plc provides IT and software support services by operating two distinct companies in the United Kingdom ("EGUK") and in South Africa ("EGSA"). Financial information is reported to the Board for both companies individually with revenue and operating profits split by geographical location. Segment revenue comprises of sales to external customers and excludes finance income. Segment profit reported to the board represents the profit before tax earned by each segment.

For the purposes of assessing segment performance and for determining the allocation of resources between segments, the Board reviews the non-current assets attributable to each segment as well as the financial resources available. All assets and liabilities are allocated to reportable segments. Information is reported to the Board of Directors on a company basis as management believe that each company exposes the Group to differing levels of risk and rewards due to local economic conditions. The segment profit or loss, segment assets and segment liabilities are measured on the same basis as amounts recognised in the financial statements, as set out in the accounting policies.

Segment information about these companies is presented below.

3. Taxation

Domestic income tax is calculated at 21.32% (31/07/13 and 31/01/14: 23.16%) of the estimated assessable profit for the period.

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

4. Dividends

The Board is not proposing the payment of an interim dividend.

5. Earnings per 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 10% Convertible Loan Notes.

6. Intangible assets

Amortisation has been included in administrative expenses in the Condensed Consolidated Statement of Comprehensive Income.

7. Trade and other payables

Trade and other payables are as follows:

8. Availability of announcement

Copies of this announcement are available from the Company's registered office at Dunston Business Village, Stafford Road, Dunston, Stafford, Staffordshire ST18 9AB and from www.eguk.co.uk.