eg Solutions PLC Regulatory News (EGS)

Half year results for the six months ended 31 July 2012

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

Financial highlights

Key points

·; back office optimisation market growing with increasing demand for eg's products and services

·; H1 focus on implementing initial projects with the potential for roll-outs that could transform eg's financial performance

·; signed OEM and partner agreement with Cicero Inc, replacing data capture functionality for eg operational intelligence® software suite previously provided by another party

·; strong cost control and cash flow management reflected in rising cash balances since the end of the last financial year

On outlook, Rodney Baker-Bates, Non-executive Chairman, stated:

"eg is operating in a positive business environment and, with its market-leading products and services, the order pipeline with new and existing clients is growing strongly. The Board is confident that the Company's financial performance for the full year will match management expectations."

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 response to continuing economic and financial market uncertainty around the world, financial institutions are increasingly giving high priority to improving operational efficiency, cost control and risk management. This is driving the global expansion of the back office optimisation market where the growing recognition of eg's leading position is resulting in increasing demand for its products and services.

eg's financial performance for the six months ended 31 July 2012 was in line with management's expectations and establishes an encouraging platform from which to achieve management forecasts for the full year and further strengthen its leading market position.

During the period, the Company continued to expand its user base, winning new contracts from existing and new customers, whilst implementing projects won towards the end of the last financial year.

A major focus of management and financial resources for the period was on new projects following significant new client wins, including those with the potential to transform eg's financial performance. The Company completed a number of projects, which achieved more than the anticipated benefit targets for clients, with some leading to roll-outs which will contribute to revenue and profit for the second half of the year and beyond.

The investment to support these initial projects during the period is reflected in a short-term reduction in margins and profitability. Improved profitability is expected to be achieved as the second half progresses as revenues from roll-outs begin to flow. It has also led to a deferral of certain business development activities, notably in South Africa, where revenues for the period were below the level achieved in the first half of last year.

Strong cost control and cash flow management are reflected in a 3.5 per cent reduction in administration expenses for the period, positive operating cash flow and a rise in cash balances on the end of the last financial year.

Financial Performance

Total revenue for the period increased by 7.1 per cent to £2.85 million (H1 2011/12: £2.66 million).

Software licences, maintenance and software services contributed 72 per cent of total revenue (H1 2011/12: 81 per cent; full year 2011/12: 82 per cent) with the balance of 28 per cent coming from implementation and training services.

Cost of sales increased by £0.34 million (36.2 per cent) to £1.28 million (H1 2011/12: £0.94 million), reflecting additional investment in initial projects for new clients during the period and increased amortisation on development costs. The combination of these factors resulted in a gross margin of 55.2 per cent (H1 2011/12: 64.7 per cent). Gross margin is expected to improve as roll-outs get under way following successful completion of these initial projects.

Management's continuing focus on cost control resulted in a 3.5 per cent reduction in administration expenses to £1.38 million (H1 2011/12: £1.43 million).

Profit before tax was £0.18 million (H1 2011/12: £0.28 million), the 35.7 per cent decrease reflecting the increase in costs of sales for the period.

Operating cash flow for the period was £0.87 million (H1 2011/12: £1.15 million) with cash at 31 July 2012 of £0.31 million (31 January 2012: £0.06 million; 31 July 2011: £0.92 million) and has continued to improve since the period end.

Total cash used in investing activities for the period was £0.63 million (H1 2011/12: £0.73 million), including the purchase by the eg solutions plc Employee Benefit Trust of eg shares for £0.25 million (H1 2011/12: £0.35 million).

The Board has decided not to declare an interim dividend.

Operational Review

New business won for the eg operational intelligence® software suite during the period includes:

·; BGL Group, a new customer, for a total of 1,000 back office and call centre users (announced in July);

·; a £340,000 contract from an existing enterprise client;

·; two pilot projects from an existing global financial services client; and

·; a roll-out for another existing global financial services client following a successful pilot of the Company's integrated software suite.

eg has recently entered into an OEM and partner agreement with Cicero Inc to provide the data capture functionality for the eg operational intelligence® software suite. The Cicero software replaces the failed component previously provided by another party.

Closed and contracted revenues for the full-year now exceed the full-year revenues for 2011 demonstrating the improved momentum expected on completion of the integrated software development work undertaken over the past 12 months.

Honours and Awards

Elizabeth Gooch, CEO, was awarded an MBE in the Jubilee Honours for services to the financial services sector. In addition to being a well deserved personal honour, the award recognises the efforts of the team at eg who together have contributed to the Company's achievements for its clients over many years.

In July eg won the Technology Provider Award at the Insider Midlands International Trade Awards. The award recognised the international growth eg has achieved over the past few years, which today accounts for approximately a third of its business.

Current Trading and Outlook

eg is operating in a positive business environment and, with its market-leading products and services, the order pipeline with new and existing clients is growing strongly.

Performance in client projects during the period has been in line with the Company's track record of delivering guaranteed benefits for customers, although the timing of roll-outs, particularly for larger projects, is more difficult to predict. There remain a large number of new business opportunities.

The Board is confident that the Company's financial performance for the full-year will match management expectations.

Consolidated Interim Statement of Cash Flows

for the six months ended 31 July 2012

This statement is unaudited

Notes to the Condensed Consolidated Interim Financial Statements

For the six months ended 31 July 2012

1. Basis of Preparation

The interim financial information consolidates the results of the company and its subsidiary undertakings made up to 31 July 2012. 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 2012.

The financial information for the 6 months ended 31 July 2012 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 2012 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 2012 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 2013. These are not expected to differ significantly from those adopted in the financial statements for the year ended 31 January 2012.

The interim report for the six months ended 31 July 2012 was approved by the Board of Directors on 18 September 2012.

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.

During the period the Group had revenues from 2 customers amounting to £805,000 in total that individually made up more than 10% of revenues generated (6 months to 31 July 2011 3 customers amounting to £1,037,000 in total).

3. Taxation

Domestic income tax is calculated at 24% (31/07/11 and 31/01/12: 26%) of the estimated assessable profit for the period.

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

4. Dividends

In respect of the current period, the directors propose that no dividend will be paid to shareholders.

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 5% Convertible Loan Notes.

6. Intangible assets

Amortisation and impairment have been included in cost of sales 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.