eg Solutions PLC Regulatory News (EGS)

3 Oct 2006 07:01

EG Solutions plc03 October 2006 3 October 2006 eg solutions plc Interim revenues increase 36.5% eg solutions plc (AIM: EGS), the IT software and services company, announcesinterim results for the six months ended 31 July 2006. Financial highlights: • Turnover up 36.5% to £3.43m (2005: £2.51m) • Adjusted operating profit* increased 10.5% to £0.63m (2005: £0.57m) • Profit before tax £0.67m (2005: £0.10m) • Adjusted earnings per share** of 4.8p (2005: 5.2p) • Earnings per share were 3.7p (2005: 0.7p) • Interim dividend of 0.6p per share • Strong cash generation of £1.3m • Contracted sales for the year £5.6m (2005: £4.1m) Business Highlights: • Second major general insurer has agreed to roll out following successful pilot • Appointment of Ian Wright as Chief Operating Officer • Hosted application service developed for eg's software suite and first client secured • Investment in additional resources to support fulfilment • International business development progressing in Scandinavia * Adjusted operating profit (see Note 3) ** Adjusted earnings per share (see Note 4) Elizabeth Gooch, Chief Executive Officer, eg solutions said: "We have made good progress since we listed on AIM in June last year with salesup by 36.5% and good growth in profits. "We have built on our strong position in the financial services sector bywinning new contracts and are now taking our software and operations managementmethodology into new sectors and new international markets, both in the UK andScandinavia. We are currently on target to meet our expectations for the fullyear." Enquiries: eg solutionsElizabeth Gooch, Chief Executive Officer Today 020 7457 2020David Blain, Finance Director Thereafter 01785 715772 College Hill 020 7457 2020Carl Franklin/Ben Way About eg solutions eg solutions uses a combination of proprietary software and operationsmanagement methodology to deliver significant improvements in the performance ofits clients. Current operations are focused on the financial services sectorwith clients that include Norwich Union, Portman Building Society andCo-operative Financial Services. Chairman's statement Trading results I am delighted to report that turnover in the six months ended 31 July increasedby 36.5% to £3.43m (2005: £2.51m). Adjusted operating profit, reflecting thechange in the company's pre-listing remuneration policy, increased 10.5% to£0.63m (2005: £0.57m). Adjusted operating margin was 18.4% of turnover,slightly lower than the previous period, primarily as a result of investment in developing new sectors and our overall planned growth. Adjusted pre-tax profit increased 17% to £0.67m (2005: £0.57m). Earnings per share increased to 3.7p (2005: 0.7p). Adjusted earnings per sharewere 4.8p (2005: 5.2p) reflecting the increased profits and also the higherweighted average number of shares in issue as a result of the new shares issuedon flotation. We are paying an interim dividend of 0.6p per share on 11 December 2006 toshareholders on the register on 10 November 2006. Cash flow was strong during the first half with operating cash conversion of237% and cash generation of £1.34m. Net funds at the end of the periodincreased to £3.38m, compared with £2.04m at the end of January 2006. Operating Review The highlights of the period were the growth in both sales and the number ofactive clients, as well as the number of sectors covered. Major clients secured during the period were Co-op Bank and two UK mortgagelending subsidiaries of a US investment bank. New contracts were also securedwith our second large general insurance and our first hosted solution customer. Our market entry strategy for new sectors and international markets is beingdeveloped prior to further expansion. We appointed a regional BusinessDevelopment Manager in Scandinavia and are building a sales pipeline in theregion. In order to improve our fulfilment capacity we increased the number of personnelby 36.8% to 52 (2005: 38). As a result, operating costs have marginallyincreased compared with the first half of 2005. Overheads represent 51.9% ofsales (2005: 50.1%). The appointment of Ian Wright as Chief Operating Officer in April 2006 has beenan important addition to the team. Ian's responsibility for operationalmanagement has enabled Elizabeth Gooch to focus on business development in newsectors and in international markets. Product development has continued during the period with enhancements to supportclients in new sectors. New versions of eg work manager(R) and eg operationalintelligence(R) are being developed for release in 2007. A hosted applicationservice for eg's software suite has also been launched and our first customersecured. Board developments During the period we were pleased to appoint Andrew McRae as a Non ExecutiveDirector. Andrew brings with him a wealth of international business experiencethat is already proving invaluable. Paul Thomas has decided to resign as a Non Executive Director with immediateeffect as a result of developments in his career which mean he cannot devotesufficient time to eg. The Board would like to thank Paul for his contributionto the Company. Current trading and Outlook Our sales pipeline and conversion remains strong with contracted sales to dateof £5.6m up from £4.1m this time last year. We are currently on target toachieve the Board's expectations for the year. Rodney Baker-Bates Chairman eg solutions plc Profit and Loss Account for the six months ended 31 July 2006 Note 6 Months to 6 Months to Year to 31 July 31 July 31 January 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Turnover 3,430 2,513 5,879Cost of sales (1,018) (684) (1,572)Gross profit 2,412 1,829 4,307Administrative expenses (1,782) (1,730) (3,569)Operating profit 630 99 738Other interest receivable 44 7 50Interest payable and similar charges - (4) (19)Profit on ordinary activities before taxation 674 102 769Taxation on profit on ordinary activities (195) (19) (239)Profit for the period attributable to equity shareholders 479 83 530Dividends paid on equity shares (145) - -Retained profit for the period 334 83 530 Basic earnings per share 4 3.7p 0.7p 4.4pAdjusted earnings per share 4 4.8p 5.2p 8.3pDiluted earnings per share 4 3.5p 0.7p 4.3p There are no unrecognised gains or losses for the period. All activities derive from continuing operations. eg solutions plc Balance Sheet as at 31 July 2006 31 July 31 July 31 January 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Fixed assets Tangible assets 147 117 141 147 117 141Current assetsStocks 28 19 27Debtors 1,431 1,362 1,575Cash at bank and in hand 3,378 2,254 2,035 4,837 3,635 3,637CreditorsAmounts falling due within one year (2,040) (1,681) (1,218)Net current assets 2,797 1,954 2,419Total assets less current liabilities 2,944 2,071 2,560 Provisions for liabilities and charges (6) (6) (4)Net assets 2,938 2,065 2,556 Capital and reservesCalled up share capital 143 143 143Share premium account 2,910 2,910 2,910Capital reserve 120 28 72Own shares held (1,000) (1,000) (1,000)Profit and loss account 765 (16) 431Equity shareholders' funds 2,938 2,065 2,556 eg solutions plc Cash Flow Statement For the six months to 31 July 2006 Note 6 months to 6 months to Year to 31 July July 31 31 January 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Cash flow from operating activities 5 1,494 (852) (210) Returns on investments and servicing of financeInterest received 44 7 50Interest paid - (4) (19)Net cash inflow for returns on investments andservicing of finance 44 3 31 Taxation - - - Investing activitiesPurchase of own shares - (1,000) (1,000)Purchase of tangible fixed assets (50) (62) (118) Net cash used in investing activities (50) (1,062) (1,118)Equity dividend paid (145) - -Cash inflow/(outflow) before financing 1,343 (1,911) (1,297) Financing activitiesIssue of ordinary share capital - 3,500 3,500Share issue costs - (554) (554)Increase in loans from banks - 1,000 1,000Loan repayments - (167) (1,000)Net cash from financing activities - 3,779 2,946 Increase in cash in the period 1,343 1,868 1,649 Notes to the financial information 1. Basis of preparation The interim financial information has been prepared on a consistent basis using the accounting policies set out in the report and financial statements for the year ended 31 January 2006. 2. Non statutory accounts In accordance with S240(3) of the Companies Act 1985, the unaudited results do not constitute statutory financial statements of the Company. The six months results for both years are unaudited. The results for the year ended 31 January 2006 are an abridged version of the financial statements for that year which were audited and reported upon without qualification by Baker Tilly and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. The financial statements for the year ended 31 January 2006 have been delivered to the registrar of companies. 3. Adjusted operating profit Prior to its admission to trading on AIM on 6 June 2005, the Company operated in a private environment and substantially all its trading profits were distributed in the form of remuneration to the Chief Executive Officer, who was also its founder and principal shareholder. On admission the Chief Executive Officer's remuneration was reduced to £150,000 per annum, a level appropriate for a public company at the stage of development of eg solutions. The adjusted operating profit figure for 2005 has been calculated for illustrative purposes only to give shareholders an indication of what the operating profits of the Company would have been if the Chief Executive Officer's post admission remuneration arrangements had been in place since 1 February 2004, as follows: 6 months to Year to 31 July 2005 31 January 2006 £'000 £'000 Operating profit 99 738Add actual salary paid 547 622Deduct new salary (75) (150)Adjusted operating profit 571 1,210 4. Earnings per share Basic earnings per share is calculated by dividing earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period excluding those held by the employee trust which are treated as cancelled for earnings per share calculation purposes. Adjusted earnings per share is calculated based on the adjusted operating profit for the period as defined in note 3. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares, which comprise employee share options. Weighted average number of shares: 6 months to 6 months to Year to 31 July 2006 31 July 2005 31 January 2006Basic 13,117,377 11,069,928 12,012,067Diluted 13,531,333 11,250,374 12,376,067 5. Notes to the cash flow statement Reconciliation of operating profit to net cash flow from operating activities: 6 months to 6 months to Year to 31 July 31 July 31 January 2006 2006 2005 £'000 £'000 £'000 (Unaudited) (Unaudited) ) (Audited)Operating profit 630 99 738Depreciation 44 20 52Share option charge 48 28 72(Increase)/decrease in stocks (1) 5 (3)Decrease/(increase) in debtors 144 (946) (1,159)Increase/(decrease) in creditors 629 (58) 90 Cash inflow/(outflow) from operatingactivities 1,494 (852) (210) Analysis of changes in net cash: At 31 January At 31 July 2006 Cash flows 2006 £'000 £'000 £'000 (Audited) (Unaudited) (Unaudited) Cash at bank and in hand 2,035 1,343 3,378Bank overdraft - - -Net funds 2,035 1,343 3,378 6. Copies of this statement will be sent to all shareholders and are available from the Company's registered office: The Roller Mill, Teddesley Road, Penkridge, Staffordshire ST19 5BD This information is provided by RNS The company news service from the London Stock Exchange