Source - RNS
RNS Number : 3821K
EG Solutions plc
21 September 2016
 

21 September 2016

 

eg Solutions plc

("eg" or the "Company" or the "Group")

 

Interim Results for the six months ended 31 July 2016

 

Strong platform for future growth

 

eg solutions plc (AIM: EGS), the back office optimisation software company, announces its interim results for the six months ended 31 July 2016.

 

Highlights:

 

§ The Company has ended the first half of the financial year securing a number of new contract wins together with a particularly strong forward order book of £16.2m, providing good visibility of future revenues

 

§ Significant contract wins include:

 

−   Three new contracts delivered by the Company's US partner Aspect Software Inc, including a major contract with a leading social networking corporation

−   A new contract with the UK's largest consolidator of closed life assurance funds

−   A successful proof of concept project with a major financial services group in Singapore

−   Repeat contracts secured with a UK Business Process Outsourcer and a European investment bank

 

§ New senior executives appointed to support the Board's growth aspirations

Final results:

 

Figures in £m

Unaudited Six months ended 31 July


2016

2015

Revenues

£2.50m

£3.60m

Gross profit

£1.34m

£2.38m

Gross margin %

53.6%

66.0%

Adjusted EBITDA*

(£0.89m)

£0.10m

Adjusted PBT*

(£1.33m)

(£0.26m)

Profit / (loss) before tax

(£1.51m)

(£0.33m)

Net cash

£1.66m

£3.06m

Earnings per share - diluted

(5.2p)

(0.7p)

4 Year order book

£16.2m

£15.5m

 

*adjusted for Share Option Charges, non-recurring legal fees and redundancy costs in current year and Share Option Charges in prior year.

Chief Executive's Review

 

Whilst the early part of the year has yielded revenue and EBITDA below our expectations, the board is encouraged by the increase in contract wins towards the end of the first half together with a strong pipeline of new business.

 

During the latter part of the period, the Board conducted a review of its business involving a critical assessment of its product, the market the business operates in and the quality, depth and scale of its internal resources.

 

In terms of product, the review concluded that the Company has an industry leading product suitable for UK and international markets which is fit for purpose and can comfortably accommodate the Board's significant growth aspirations over the next few years.

 

In terms of the marketplace, the review concluded that the back office workforce optimisation market continues to develop well, both within the UK and internationally. More than ever businesses are seeking to continuously improve their end-customer experience and better utilise their resources to drive efficiencies. The Board concluded that the Company has clear visibility of the market and is ideally placed to satisfy customer needs with its market-leading product.

 

The findings of the review have been supported by the significant increase in new contracts secured in recent weeks and the strong current order book. New contracts secured in the Asia-Pacific region are particularly encouraging given our short time operating in this market.  

 

Partner channel relationships continue to be an exciting prospect for the Company and a major strategic platform for growth. Aspect Software Inc. has delivered three new contract wins in the period, including a significant new contract with a leading social networking corporation.  This landmark contract win by Aspect demonstrates the capability of the Company's software in this new market segment.

 

However, the Board's review also concluded that the breadth and depth of the Company's sales resources and channels are insufficient to fulfil the Board's growth objectives for the forthcoming years. Accordingly a restructure has been implemented within the management team to increase focus on revenue generation and recruit the required management skills to support growth. These structural changes are almost complete and set the Company in a strong position going into the second half of the financial year and beyond.

 

Financial Review

 

The Board is pleased with margin earned on its contracted sales for the period. Whilst there has been some gross margin decline, this does not reflect pricing pressure but is related to lower overall volume throughput. The Company has continued to invest in developing its Software and Client Implementation teams in preparation for the busy period ahead. Increased revenues in the second half are expected to return overall margin to normalised levels.

 

The non-recurring expenditure relates to legal costs and redundancies following the restructure.

 

In a period of investing for future growth, we are satisfied with our cash balance and the forecast future cash balance for the remainder of the financial year.

 

Following the referendum on 23 June 2016, the Board has reassessed its business in terms of foreign exchange risk. The Board has concluded that there is minimal risk as a result of pre-agreed prices that protect the GBP price.

 

Outlook

 

The Board has set a medium term target of growing revenues to £12m over the next two financial years and is focused on ensuring that the company's infrastructure is right-sized to meet this objective. The Company's business model provides a high degree of operating leverage such that approximately 30% of incremental sales are expected to flow through to EBITDA.

 

Notwithstanding the previously announced slow start to the current financial year, the Board takes confidence from recent new contract wins and the strength of the order book. As a result of improved operational efficiency, the year-end EBITDA outturn is anticipated to be in line with market expectations on lower revenues.

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

                            


Consolidated Statement of Comprehensive Income









For the Six Months Ended 31 July 2016













Unaudited


Unaudited


Audited





six months


six months


Year ended





ended 31 July


ended 31 July


31 January





2016


2015


2016



Note


£'000


£'000


£'000

Revenue




2,498


3,601


7,595

Cost of sales




(1,158)


(1,224)


(2,122)

Gross Profit




1,340


2,377


5,473

Administrative expenses




(2,227)


(2,321)


(4,666)

Adjusted EBITDA




(887)


56


807

Amortisation




(436)


(312)


(691)

Depreciation




(13)


(7)


(19)

Non-recurring expenditure




(150)


-


-

Share Option Charge




(27)


(71)


(98)

(Loss)/Profit from operations




(1,513)


(334)


(1)

Finance Income




4


6


10

Finance Charges




-


-


-

(Loss)/Profit before tax




(1,509)


(328)


9

Tax credit


3


350


186


158

(Loss)/Profit for the period




(1,159)


(142)


167

Other comprehensive income:









Exchange differences on translation of foreign operation




(4)


(15)


(5)

Total comprehensive (expense)/income for the period



(1,163)


(157)


162

(Loss)/Profit and total comprehensive (expense)/income attributable to equity shareholders of the Parent Company




(1,163)


(157)


162

Earnings per share









From continuing operations









Basic


5


(5.5p)


(0.7p)


0.8p

Diluted


5


(5.2p)


(0.7p)


0.7p










 

 

 

 

Consolidated Statement of Financial Position









as at 31 July 2016




Unaudited


Unaudited


Audited





six months


six months


Year ended





ended 31 July


ended 31 July


31 January





2016


2015


2016



Note


£'000


£'000


£'000

Assets









Non-current assets









Intangible assets


6


3,798


3,076


3,507

Property, plant and equipment




90


73


80





3,888


3,149


3,587

Current assets









Trade and other receivables


7


1,259


2,034


1,692

Current tax receivable




416


266


323

Cash and cash equivalents




1,663


3,056


3,195





3,338


5,356


5,210

Total assets




7,226


8,505


8,797

Liabilities









Current liabilities









Trade and other payables


8


2,011


2,471


2,259





2,011


2,471


2,259

Non-current liabilities









Deferred tax liabilities




117


219


304





117


219


304

Total Liabilities




2,128


2,690


2,563

Net Assets




5,098


5,815


6,234

Equity









Share capital




227


226


227

Share premium




7,924


7,852


7,924

Share-based payment reserve




813


773


786

Own shares held




(1,149)


(1,149)


(1,149)

Retained earnings




(2,612)


(1,776)


(1,453)

Foreign exchange




(105)


(111)


(101)

Total equity




5,098


5,815


6,234



 

Consolidated Interim Statement of Cash Flows







For the Six Months Ended 31 July 2016









Unaudited


Unaudited


Audited



six months


six months


Year ended



ended 31 July


ended 31 July


31 January



2016


2015


2016



£'000


£'000


£'000

Operating activities







(Loss)/Profit before tax


(1,509)


(328)


9

Adjustments for:







Depreciation of property, plant & equipment


16


7


19

Amortisation of intangible assets


436


312


691

Finance income


(4)


(6)


(10)

Share option charge


27


71


98

Decrease/(Increase) in receivables


433


(1,276)


(934)

(Decrease)/Increase in payables


(248)


604


392

Cash (used in)/generated by operations


(849)


(616)


265

Income taxes received


70


-


-

Net cash (used in)/generated by operating activities


(779)


(616)


265

Investing activities







Purchases of intangible assets


(727)


(587)


(1,396)

Purchases of property, plant and equipment


(26)


(29)


(49)

Net cash used in investing activities


(753)


(616)


(1,445)

Financing activities







Proceeds from exercise of warrants


-


-


73

Interest received


4


6


10

Net cash generated by financing activities


4


6


83

Net (decrease) in cash and cash equivalents


(1,528)


(1,226)


(1,097)

Cash and cash equivalents at beginning of period


3,195


4,297


4,297

Effect of foreign exchange rates


(4)


(15)


(5)

Cash and cash equivalents at end of period


1,663


3,056


3,195

 


 

Consolidated Statement of Changes in Equity

















For the Six Months Ended 31 July 2016
















Total amounts

















Attributable to







Share - based


Own








equity holders



Share


Share


payment


shares


Retained


Foreign


Other


of the parent



capital


premium


reserve


held


earnings


exchange


reserves


company



£'000


£'000


£'000


£'000


£'000


£'000


£'000


£'000

Balance at 31 January 2015


226


7,852


702


(1,149)


(1,634)


(96)


-


5,901

Loss for the period


-


-


-


-


(142)


-


-


(142)

Other comprehensive expense


-


-


-


-


-


(15)


-


(15)

Total comprehensive expenses


-


-


-


-


(142)


(15)


-


(157)

Share-based payments


-


-


71


-


-


-


-


71

Balance at 31 July 2015


226


7,852


773


(1,149)


(1,776)


(111)


-


5,815

Profit for the year


-


-


-


-


309


-


-


309

Other comprehensive expense


-


-


-


-


-


10


-


10

Total comprehensive expense


-


-


-


-


309


10


-


319

Share-based payments


-


-


13


-


14


-


-


27

Transactions with owners in their capacity as owners:

















Shares issued on conversion of warrants


1


72


-


-


-


-


-


73

Balance at 31 January 2016


227


7,924


786


(1,149)


(1,453)


(101)


-


6,234

Loss for the period


-


-


-


-


(1,159)


-


-


(1,159)

Other comprehensive expense


-


-


-


-


-


(4)


-


(4)

Total comprehensive expense


-


-


-


-


(1,159)


(4)


-


(1,163)

Share-based payments


-


-


27


-


-


-


-


27

Balance at 31 July 2016


227


7,924


813


(1,149)


(2,612)


(105)


-


5,098


















This statement is unaudited

















 


 

1. Notes to the Group Condensed Consolidated Interim Financial Statements




for the six months ended 31 July 2016




















ACCOUNTING POLICIES









The interim financial information consolidates the results of the Company and its subsidiary undertakings


made up to 31 July 2016 are unaudited.




















The company is a limited liability company incorporated and domiciled in England 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 2016






















The financial information for the six months ended 31 July 2016 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 financial statements.
















Full accounts of eg solutions plc for the year ended 31 January 2016 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 (2-3) 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 2016


 

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 2017. These are not expected to differ significantly from those adopted

 

in the financial statements for the year ended 31 January 2016.






 













 

The interim report for the six months ended 31 July 2016 was approved by the Board of Directors on 21 September 2016.

 

 



 

2. OPERATING SEGMENTS






















In prior periods, eg solutions plc has disclosed Financial information on two operating segments.

Following a review, eg now report Financial information to the Chief Executive Officer in one segment.

 


3. TAXATION









Unaudited


Unaudited


Audited



six months


six months


Year ended



ended 31 July


ended 31 July


31 January



2016


2015


2016



£'000


£'000


£'000

Current tax:







United Kingdom


(162)


(156)


(253)

Tax in respect of prior years


(1)


(52)


(12)



(163)


(208)


(265)

Deferred tax:







Origination and reversal of temporary differences


(187)


22


107

Tax receivable by the Group and its subsidiaries


(350)


(186)


(158)








Domestic income tax is calculated at 20.00% (2016: 20.17%) of the estimated assessable loss for the year.



The change in applicable tax rate is due to the reduction in UK Corporation tax rates.













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














Unaudited


Unaudited


Audited



six months


six months


Year ended



ended 31 July


ended 31 July


31 January



2016


2015


2016



£'000


£'000


£'000

The credit for the period can be reconciled to the loss per the Statement of Comprehensive Income as follows:







(Loss)/Profit before tax


(1,509)


(328)


9

Tax at the applicable domestic income tax rate 20.00% (2016: 20.17%)


(302)


(66)


2

Tax effects of expenses that are not deductible in determining taxable profit


31


31


83

Share-based payments


5


(30)


(5)

Research and development enhanced relief


(165)


(138)


(290)

Losses surrendered for R&D tax credit


61


69


99

Prior year items


(1)


(52)


(12)

Other movements


21


-


(35)

Tax credit


(350)


(186)


(158)

Effective tax rate for the period


-23%


-57%


-1756%


4. DIVIDENDS










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







 



 

5. EARNINGS PER ORDINARY SHARE







From Continuing Operations







 



Unaudited six


Unaudited six


Audited

 



months to


months to


Year ended

 



31 July


31 July


31 January

 



2016


2015


2016

 

Weighted average number of shares in issue


22,682,938


22,570,088


22,612,445

 

Weighted average number of shares held by the Employee Benefit Trust


(1,514,285)


(1,514,285)


(1,514,285)

 

Weighted average number of shares for the purposes of basic earnings per share


21,168,653


21,055,803


21,098,160

 

Effect of dilutive potential ordinary shares







 

- Share options


950,464


404,087


1,434,822

 

Weighted average number of shares for the purposes of diluted earnings per share


22,119,117


21,459,890


22,532,982

 








 



Unaudited six


Unaudited six


Audited

 



months to


months to


Year ended

 



31 July


31 July


31 January

 



2016


2015


2016

 



£'000


£'000


£'000

 

Basic earnings attributable to equity shareholders


(1,159)


(142)


167

 

Earnings for the purposes of diluted earnings per share


(1,159)


(142)


167

 








 



Unaudited six


Unaudited six


Audited

 



months to


months to


Year ended

 



31 July


31 July


31 January

 



2016


2015


2016

 

Basic earnings per share


 (5.5p)


 (0.7p)


 0.8p

 

Diluted earnings per share


 (5.2p)


 (0.7p)


 0.7p

 

 

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.

 

 

·        At 31 July 2016 there were 1,397,821 (2015: 2,619,198) share options outstanding that could potentially dilute basic EPS in the future, but are not included in the calculation of diluted EPS because they are anti-dilutive for the periods presented.

 



 

6. INTANGIBLE ASSETS
















Development


Intellectual


Total



costs


property


intangibles



£'000


£'000


£'000

Cost







At 1 February 2015


6,100


498


6,598

Acquisitions - internally developed


587


-


587

At 1 August 2015


6,687


498


7,185

Acquisitions - internally developed


809


-


809

At 1 February 2016


7,496


498


7,994

Acquisitions - internally developed


727


-


727

At 31 July 2016


8,223


498


8,721

Amortisation and Impairment







At 1 February 2015


3,307


489


3,796

Amortisation for the period


304


8


312

At 1 August 2015


3,611


497



Amortisation for the period


378


1


379

At 1 February 2016


3,989


498


4,487

Amortisation for the period


436


-


436

At 31 July 2016


4,425


498


4,923

Carrying amount







At 31 July 2016


3,798


-


3,798

At 1 February 2016


3,507


-


3,507

At 1 August 2015


3,076


1


3,077

At 1 February 2015


2,793


9


2,802

 



 

7. TRADE AND OTHER RECEIVABLES






























Unaudited six


Unaudited six


Audited



months to


months to


Year ended



31 July


31 July


31 January



2016


2015


2016



£'000


£'000


£'000

Trade receivables


794


1,019


1,098

Less provision for impairment


-


-


(5)

Net trade receivables


794


1,019


1,093

Prepayments and accrued income


465


1,015


599



1,259


2,034


1,692








Ageing analysis of trade receivables past due but not impaired:












Unaudited six


Unaudited six


Audited



months to


months to


Year ended



31 July


31 July


31 January



2016


2015


2016

Up to 30 days overdue


55


173


234

31 - 90 days overdue


591


366


724

Over 91 days overdue


-


6


15



646


546


973








No provision has been made for impairment losses.





 



 

8.TRADE AND OTHER PAYABLES







Trade and other payables are as follows:
















Unaudited six


Unaudited six


Audited



months to


months to


Year ended



31 July


31 July


31 January



2016


2015


2016



£'000


£'000


£'000

Trade payables


469


458


368

Other tax and social security


71


270


413

Grants received


196


165


199

Accruals and deferred income


1,275


1,578


1,279



2,011


2,471


2,259

 



 

9. AVAILABILTY OF ANNOUNCEMENT
















Copies of this announcement are available from the Group's registered office at Dunston Business Village,


Stafford Road, Dunston, Stafford Staffordshire, ST18 9AB and from www.egsplc.com.












**ENDS**

 

 

CONTACTS

 

eg solutions plc

+44 (0) 1785 715772

Elizabeth Gooch, Chief Executive Officer

 

 

 

 

finnCap Ltd

 

+ 44(0) 207 220 0500

Julian Blunt or Emily Watts (corporate finance)

Tony Quirke (corporate broking)

 

 

Yellow Jersey PR Limited

 

Felicity Winkles       

Joe Burgess

Josh Cole

+44 (0) 7748 843 871

+44 (0) 7769 325 254

+44 (0) 7542 514 121

 

About eg solutions plc

 

eg solutions is a back office workforce optimisation software Group. 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.

 

eg solutions' software is now used by leading UK, international and global companies in multiple industry sectors including financial services, healthcare and utilities. Using its forecasting, scheduling, real-time work management and operational analytics capabilities, eg delivers measureable improvements in service, quality, productivity and regulatory compliance.  When supported by eg's implementation and training services eg guarantee a return on investment in short timescales.

 

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

 

The Group is listed on AIM, the London Stock Exchange's international market for smaller growing companies (EGS).

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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