23 Sep 2009 07:00
| FOR IMMEDIATE RELEASE | 23 September 2009 |
eg solutions plc
HALF YEARLY RESULTS FOR THE SIX MONTHS ENDED 31 JULY 2009
eg solutions plc ("eg solutions" or "the Company"; LSE-AIM: EGS), the operations management software company, is pleased to announce its unaudited half yearly results for the six months ended 31 July 2009.
Key points:
Revenue was £2.09 million (H1, 2008: £2.27 million).
Gross margins improved to 63.1% in the first half, up from 50.6% for the year to 31 January 2009.
Profit before tax was £56,000 (H1, 2008: £53,000), representing a turn round after a pre-tax loss of £0.81 million in the second half of last year.
Tight cash management resulted in cash balances of £0.59 million at 31 July 2009, up from £0.26 million as at 31 January 2009.
Contract wins with key clients in UK and international markets included Nationwide Building Society, a major UK life and pensions company and one of the largest bancassurance groups in the Nordic region.
On Outlook, Rodney Baker-Bates, non-executive Chairman stated:
"After the turmoil of past months, there is evidence that our financial services client basis is gradually returning to 'business as usual' in operational terms. Assisted by a number of contract wins during the first half of the year, the Board's expectations for the year as a whole are underpinned by having over 80% of anticipated revenues for the year to 31 January 2010 already under contract.
"We have recently completed some detailed market studies which confirm the potential for growth in our market. Our main task for the remainder of the year is to build on the achievements of the half year and create a platform for a return to growth next year and beyond."
CONTACTS
| eg solutions plc | Today: 020-7367-8888 |
| Elizabeth Gooch, Chief Executive Officer | Thereafter: 01785-715772 |
| Bankside | 020-7367-8888 |
| Steve Liebmann, Simon Bloomfield or Andy Harris | |
| Brewin Dolphin Ltd (Nominated Adviser) | 0845-213-4748 |
| Mark Brady, Director Corporate Finance |
About eg solutions plc
eg solutions plc is a global operations management 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
Over the past twelve months trading conditions within our core market, the financial services sector, have been exceptionally difficult. Against this background we are pleased to report that the Company has returned to profitability in the first half of the current year, having incurred losses during the second half of last year.
Although, at face value, the results look little changed from the comparable period last year, these have been achieved in a declining economy and in the sector worst affected by the credit crunch.
Financials
Revenue for the six months ended 31 July 2009 was £2.09 million. Whilst 8% below the £2.27 million recorded for the comparable period last year, it represented a significant improvement over the £1.40 million for the second half of last year. Our South African business also achieved a 125% increase in first half revenue. During the half year software licences, maintenance and software services contributed 72% of revenues (61% for the comparable period last year and 66% for the full year to 31 January 2009). The balance of 28% was contributed by implementation and training services.
Gross margins improved to 63.1% in the half year, up from 50.6% for the year to 31 January 2009. Reflecting tight control of costs operating profit for the period increased to £55,000, compared to £31,000 in the same period last year on higher revenues, and a turn round from an operating loss of £0.82 million in the second half of last year. The profit before tax was £56,000, up from £53,000 in the first half of last year and a loss of £0.81 million by the second half of last year.
Tight cash management has resulted in a cash inflow of £0.33 million during the first half year with cash balances of £0.59 million as at 31 July 2009 (£0.26 million as at 31 January 2009).
Dividend
The Board will not be declaring a dividend at the half year stage.
Operating review - UK markets
In the aftermath of the financial crisis of last autumn, decision making at the Company's clients in the financial services sector had lengthened. This impacted sales in the latter part of our last financial year and during the early months of the current year. Our clients have also increased their focus on managing costs. On the one hand this has benefited the 'spend to save' nature of the Company's products and services; on the other hand, the Company has had to work hard to achieve sales where customer budgets have been under severe pressure.
During the period under review, a succession of new orders from Nationwide Building Society has extended the Company's reach into the Cheshire and Derbyshire regional brand businesses and the acquired elements of the Dunfermline Building Society as well as into other parts of Nationwide's business. As a result, the total number of users of eg's software within Nationwide has now increased to 1,650.
Towards the end of the half year, the Company received further evidence of the potential for additional sales into our existing client base. An additional contract was signed for software and services with a major UK life and pensions company, adding a further 400 'seats' to take their total to 1,600 across four operating divisions. Our first implementation for this customer was in 2008.
Other client projects have been undertaken to integrate eg operational intelligence® with Xerox ECM and Tibco BPM work management solutions. These projects have further demonstrated the additional value eg's software can bring to incumbent IT platforms.
Operating review - international markets
In April 2009, the Company was pleased to announce a contract with a new customer valued at a minimum of £1.6 million from one of the largest bancassurance groups in the Nordic region. This will be our first implementation within this client and the contract will contribute to revenue this year and for the following four years.
Shortly before the end of the Company's last financial year a new order was announced with Resolution Health in South Africa. This implementation enabled them to increase their client handling capacity without increasing operating costs. The project was completed successfully during the half year.
Products
Progressive development of the Company's software has resulted in upgrades to two existing products which are now ready for general release: eg work manager® v5.1 and eg operational intelligence® v2.1. These new versions incorporate a number of functional enhancements to improve the ability to deliver rapid performance improvements in customer service operations.
People
Without doubt, the past year has been difficult. On behalf of the Board, I would to thank all of the Company's staff for their exceptional commitment and effort.
Current trading and outlook
After the turmoil of past months, there is evidence that our financial services client base is gradually returning to 'business as usual' in operational terms. Assisted by a number of contract wins during the first half of the year, the Board's expectations for the year as a whole are underpinned by having over 80% of anticipated revenues for the year to 31 January 2010 already under contract.
We have recently completed some detailed market studies which confirm the potential for growth in our market. Our main task for the remainder of the year is to build on the achievements of the half year and create a platform for a return to growth next year and beyond.
Rodney Baker-Bates
Non-executive Chairman
22 September 2009
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 31 July 2009
| Unaudited six months ended 31 July 2009 £000 | Unaudited six months ended 31 July 2008 £000 | Audited twelve months ended 31 January 2009 £000 | |
| Revenue | 2,090 | 2,269 | 3,666 |
| Cost of sales | (771) | (929) | (1,812) |
| Gross profit | 1,319 | 1,340 | 1,854 |
| Administrative expenses | (1,264) | (1,309) | (2,646) |
| Operating profit / (loss) | 55 | 31 | (792) |
| Finance income | 1 | 22 | 39 |
| Profit / (loss) before tax | 56 | 53 | (753) |
| Income tax (charge)/ credit | (6) | 1 | 33 |
| Profit / (loss) for the period | 50 | 54 | (720) |
| Profit / (loss) attributable to equity shareholders of the parent company and total comprehensive income | 50 | 54 | (720) |
| Earnings per share - basic | 0.4p | 0.4p | (5.5)p |
| - fully diluted | 0.3p | 0.4p | - |
Condensed Consolidated Statement of Financial Position
As at 31 July 2009
| Unaudited as at 31 July 2009 £000 | Unaudited as at 31 July 2008 £000 | Audited as at 31 January 2009 £000 | |
| Assets | |||
| Non current assets | |||
| Intangible assets | 1,563 | 1,111 | 1,434 |
| Property, plant and equipment | 63 | 90 | 74 |
| 1,626 | 1,201 | 1,508 | |
| Current assets | |||
| Trade and other receivables | 813 | 943 | 539 |
| Inventories | 17 | - | 17 |
| Current tax receivable | 150 | 157 | 258 |
| Cash and cash equivalents | 592 | 1,151 | 262 |
| 1,572 | 2,251 | 1,076 | |
| Total assets | 3,198 | 3,452 | 2,584 |
| Liabilities | |||
| Current liabilities | |||
| Trade and other payables | 668 | 589 | 615 |
| Deferred revenue | 901 | 851 | 448 |
| 1,569 | 1,440 | 1,063 | |
| Non current liabilities | |||
| Deferred tax | 252 | 85 | 215 |
| 252 | 85 | 215 | |
| Total liabilities | 1,821 | 1,525 | 1,278 |
| Net assets | 1,377 | 1,927 | 1,306 |
| Equity | |||
| Issued capital | 143 | 143 | 143 |
| Share premium | 2,910 | 2,910 | 2,910 |
| Share based payment reserve | 239 | 216 | 218 |
| Own shares held | (1,000) | (1,000) | (1,000) |
| Retained earnings | (915) | (342) | (965) |
| Total equity | 1,377 | 1,927 | 1,306 |
Consolidated interim cash flow statement
for the six months ended 31 July 2009
| Unaudited six months ended 31 July 2009 £000 | Unaudited six months ended 31 July 2008 £000 | Audited twelve months ended 31 January 2009 £000 | |
| Operating activities | |||
| Profit / (loss) before tax | 56 | 53 | (753) |
| Adjustments | |||
| Depreciation of property plant and equipment | 25 | 62 | 62 |
| (Profit) / Loss on disposal of property, plant and equipment | (1) | - | 31 |
| Amortisation of intangible assets | 145 | 104 | 236 |
| Share option charge | 21 | 25 | 27 |
| Exchange rate difference | - | (13) | - |
| Working capital adjustments | |||
| (Increase) / decrease in receivables | (276) | (94) | 258 |
| Increase in inventories | - | - | 7 |
| Increase in payables | 507 | 475 | 94 |
| Net cash generated from/ (used in ) operations | 477 | 612 | (38) |
| Investing activities | |||
| Purchases of other intangible assets | (272) | (304) | (528) |
| Purchases of property, plant and equipment | (13) | (35) | (54) |
| Proceeds from sale of property, plant and equipment | - | - | 4 |
| Income tax repayment | 138 | - | - |
| Net cash (used in) / generated from investing activities | (147) | (339) | (578) |
| Net increase/ (decrease) in cash and cash equivalents | 330 | 273 | (616) |
| Cash and cash equivalents at beginning of the period | 262 | 878 | 878 |
| Cash and cash equivalents at end of the period | 592 | 1,151 | 262 |
Condensed Consolidated Statement of Changes in Equity
for the six months ended 31 July 2009
| Share capital | Share premium | Retained earnings | Own shares held | Share based payment reserve | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Balance at 1 February 2008 | 143 | 2,910 | (217) | (1,000) | 191 | 2,027 |
| Total comprehensive income | - | - | 54 | - | - | 54 |
| Share based payments | - | - | - | - | 68 | 68 |
| Foreign exchange difference | - | - | (13) | - | - | (13) |
| Balance at 31 July 2008 | 143 | 2,910 | (176) | (1,000) | 259 | 2,136 |
| Balance at 1 August 2008 | 143 | 2,910 | (176) | (1,000) | 259 | 2,136 |
| Total comprehensive income | - | - | (774) | - | - | (774) |
| Share based payments | - | - | - | - | (41) | (41) |
| Foreign exchange difference | - | - | (15) | - | - | (15) |
| Balance at 31 January 2009 | 143 | 2,910 | (965) | (1,000) | 218 | 1,306 |
| Balance at 1 February 2009 | 143 | 2,910 | (965) | (1,000) | 218 | 1,306 |
| Total comprehensive income | - | - | 50 | - | - | 50 |
| Share based payments | - | - | - | - | 21 | 21 |
| Foreign exchange difference | - | - | - | - | - | - |
| At 31 July 2009 | 143 | 2,910 | (915) | (1,000) | 239 | 1,377 |
This statement is unaudited
Notes to the Condensed Consolidated Interim Financial Statements
For the six months ended 31 July 2009
1. Basis of Preparation
The interim financial information consolidates the results of the company and its subsidiary undertakings made up to 31 July 2009. 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 2009.
The financial information for the 6 months ended 31 July 2009 is unaudited. The Group has not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK Groups, in the preparation of these interim financial statements.
Full accounts of eg solutions plc for the year ended 31 January 2009 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 2009 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 2010. These are not expected to differ significantly from those adopted in the financial statements for the year ended 31 January 2009.
The interim report for the six months ended 31 July 2009 was approved by the Board of Directors on 17 September 2009.
2. Segment Reporting
Business Segments
As of February 1, 2009, the Group has applied the new standard IFRS 8 Operating Segments. The Group's reporting segment is based upon geographic location as this is the most appropriate method to reflect the nature of the Group's operations. The group has two distinct companies operating in different geographical areas with different economic and political conditions and a different maturity of client and client requirements. These are:
EGUK - United Kingdom
EGSA - South Africa
Segment information about these companies is presented below.
| 2. Segment Reporting (continued) | ||||||||||||||
| SEGMENT REPORT | UK | SA | Group | |||||||||||
| Un- audited six months ended 31 July 2009 £000 | Un- audited six months ended 31 July 2008 £000 | Audited twelve months ended 31 Jan 2009 £000 | Un- audited six months ended 31 July 2009 £000 | Un- audited six months ended 31 July 2008 £000 | Audited twelve months ended 31 Jan 2009 £000 | Un- audited six months ended 31 July 2009 £000 | Un- audited six months ended 31 July 2008 £000 | Audited twelve months ended 31 Jan 2009 £000 | ||||||
| Revenue | ||||||||||||||
| External revenue | 1,914 | 2,191 | 3,465 | 176 | 78 | 201 | 2,090 | 2,269 | 3,666 | |||||
| Inter-segment revenue | - | - | 165 | - | - | 128 | - | - | - | |||||
| Total revenue | 1,914 | 2,191 | 3,630 | 176 | 78 | 329 | 2,090 | 2,269 | 3,666 | |||||
| Gross profit | 1,169 | 1,302 | 1,825 | 150 | 38 | 92 | 1,319 | 1,340 | 1,854 | |||||
| Administrative expenses | (1,127) | (1,160) | (2,302) | (153) | (149) | (370) | (1,264) | (1,309) | (2,646) | |||||
| Inter-segment administrative expenses | - | - | (54) | - | - | - | - | - | - | |||||
| Operating profit/(loss) | 42 | 142 | (531) | (3) | (111) | (278) | 55 | 31 | (792) | |||||
| Finance income | 1 | 22 | 39 | - | - | - | 1 | 22 | 39 | |||||
| Profit/(loss) before tax | 43 | 164 | (492) | (3) | (111) | (278) | 56 | 53 | (753) | |||||
| Income tax credit / (expense) | (6) | 1 | 92 | - | - | (54) | (6) | 1 | 33 | |||||
| Profit/(loss) after tax | 37 | 165 | (400) | (3) | (111) | (332) | 50 | 54 | (720) | |||||
| Other segmental information | UK | SA | Group | |||||||||||
| Un- audited six months ended 31 July 2009 £000 | Un- audited six months ended 31 July 2008 £000 | Audited twelve months ended 31 Jan 2009 £000 | Un- audited six months ended 31 July 2009 £000 | Un- audited six months ended 31 July 2008 £000 | Audited twelve months ended 31 Jan 2009 £000 | Un- audited six months ended 31 July 2009 £000 | Un- audited six months ended 31 July 2008 £000 | Audited twelve months ended 31 Jan 2009 £000 | ||||||
| Segment assets | 3,605 | 3,707 | 3,005 | 282 | 250 | 185 | 3,198 | 3,452 | 2,584 | |||||
| Segment liabilities | (1,753) | (1,516) | (1,211) | (757) | (500) | (683) | (1,821) | (1,525) | (1,278) | |||||
| Net assets | 1,852 | (2,191) | 1,794 | (475) | (250) | (498) | 1,377 | 1,927 | 1,306 | |||||
| Capital expenditure | ||||||||||||||
| Property, plant and equipment | 13 | 22 | 51 | 7 | 9 | 3 | 20 | 31 | 54 | |||||
| Intangible assets | 272 | 304 | 528 | - | - | - | 272 | 304 | 528 | |||||
The Group had revenue streams from a small number of customers in the UK segment which made up 10% or more of the Group's turnover. The Group has elected not to disclose the identity of the customers.
| Customer | Unaudited six months ended 31 July 2009 £000 | % of total revenue | Unaudited six months ended 31 July 2008 £000 | % of Total revenue | Audited twelve months ended 31 January 2009 £000 | % of total revenue |
| 1 | 217 | 10% | 416 | 18% | 575 | 16% |
| 2 | 234 | 11% | - | - | - | - |
| 3 | 439 | 21% | - | - | - | - |
| 4 | - | - | 494 | 21% | 632 | 17% |
| 5 | - | - | - | - | 376 | 10% |
3. Taxation
| Unaudited six months to 31 July 2009 £000 | Unaudited six months to 31 July 2008 £000 | Audited twelve months to 31 January 2009 £000 | |
| Current tax: | |||
| Domestic | (31) | - | (119) |
| Adjustments in respect of prior periods | - | - | 17 |
| (31) | - | (102) | |
| Deferred tax: | - | ||
| Current tax | 37 | (1) | 30 |
| Adjustments in respect of prior periods | - | - | 39 |
| Tax attributable to the Group and its subsidiaries | 6 | (1) | (33) |
Domestic income tax is calculated at 28% (31/07/08 and 31/01/09: 28%) of the estimated assessable profit for the year.
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
| Unaudited six months to 31 July 2009 £000 | Unaudited six months to 31 July 2008 £000 | Audited twelve months to 31 January 2009 £000 | |
| The charge for the year can be reconciled to the profit per the income statement as follows: | |||
| Profit / (loss) before tax | 56 | 53 | (753) |
| Tax at the domestic income tax rate 28% (31/07/08 and 31/01/09: 28%) | 16 | 15 | (211) |
| Tax effects of expenses that are not deductible in determining taxable profit | 10 | (32) | 24 |
| Other temporary timing differences | - | 20 | 1 |
| Research and development | (20) | (56) | (86) |
| Tax losses carried forward | - | 52 | - |
| Marginal rate of tax | - | - | 105 |
| Prior year adjustments | - | - | 56 |
| Movement in unprovided deferred tax | - | - | 78 |
| Tax credit | 6 | (1) | (33) |
| Effective tax rate for the year | 11% | 2% | 4% |
4. Dividends
In respect of the current year, the directors propose that no dividend will be paid to shareholders.
5. Earnings / (loss) per Share
From continuing operations
| Unaudited six months to 31 July 2009 £000 | Unaudited six months to 31 July 2008 £000 | Audited twelve months to 31 January 2009 £000 | |
| Basic | 0.4p | 0.4p | (5.5p) |
| Diluted | 0.3p | 0.4p | - |
EPS has been calculated using the following methodology:
Profit / (Loss) after Tax
Allotted issued and fully paid share less shares owned by the Employee Benefit Trust.
Diluted EPS has been calculated using the following methodology:
Profit / (Loss) after Tax
Allotted issued and fully paid shares less shares owned by the Employee Benefit Trust that are not currently allocated as options
The weighted average number of ordinary shares for calculating the diluted loss per share for the period ended 31 January 2009 is identical to those for the basic loss per share. This is because the outstanding share options would have the effect of reducing the loss per ordinary share and would therefore not be dilutive under the terms of International Accounting Standard ("lAS") 33.
For all periods the number of allotted, issued and fully paid ordinary shares of 1p each was 14,293,849 and the number of shares owned by the Employee Benefit Trust was 1,176,470.
6. Intangible Assets
| Development costs £000 | |
| COST | |
| At 1 February 2008 | 1,177 |
| Additions - internally developed | 304 |
| At 1 August 2008 | 1,481 |
| Additions - internally developed | 224 |
| At 1 February 2009 | 1,705 |
| Additions - internally developed | 272 |
| At 31 July 2009 | 1,977 |
| AMORTISATION AND IMPAIRMENT | |
| At 1 February 2008 | 35 |
| Amortisation for the period | 104 |
| At 1 August 2008 | 139 |
| Amortisation for the period | 132 |
| At 1 February 2009 | 271 |
| Amortisation for the period | 143 |
| At 31 July 2009 | 414 |
| CARRYING AMOUNT | |
| At 31 July 2009 | 1,563 |
| At 31 January 2009 | 1,434 |
Amortisation of £143k (31/07/08: £104k) has been charged to costs of sales.