Final Results

eg solutions plc

Preliminary results for the year ended 31 January 2015

Transformational growth in all key metrics

eg solutions plc (AIM: EGS), the back office workforce optimisation software Group, is pleased to announce its audited preliminary results for the year ended 31 January 2015.

FINANCIAL SUMMARY

* Prior period restated for reallocation of amortisation from cost of sales to administrative expenses

** Adjusted EBITDA is stated prior to charges in respect of share based payments of £46k (2014: £95k) and before exceptional remuneration costs of £nil (2014: £343k)

· Group revenue increased 69% to £7.54m (2014: £4.46m)

· Profit before tax of £0.40m (2014: loss £1.48m) signalling the Group's return to profitability

· Gross margin up 5% to 70% (2014: 65%)

· Adjusted EBITDA increased to £1.26m (2014: loss of £0.50m)

· Contracted order book for the next 2 years of £7.64m (2014: £6.04m) up 27%

· Contracted order book over the next 4 years at £15.44m up £1.80m since December 2014

· Placing completed pre year end raising £3.19m (before expenses) to support growth together with conversion of £0.55m convertible loan notes issued to equity

OPERATIONAL HIGHLIGHTS

· Ten significant contract wins, including further development of new Utilities vertical and first wins in Telecoms and Local Government

· Strengthened Board and Management Team

Duncan McIntyre, Chairman, commented:

"FY2015 was a transformational year for the Group with record revenues and a significant return to profitability.

Building on the steps we have taken to build a robust platform for growth during the past year, the Board is confident that the Group is well positioned to continue momentum into the coming year. 

We look forward to continuing to deliver value for our customers and excellent results for our shareholders."

Ends

CONTACTS

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.

Our software is now used by leading UK, international and global companies in multiple industry sectors including financial services, healthcare and utilities.

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

CHAIRMAN'S STATEMENT

Overview

FY2015 was a transformational year for the Group with record revenues and a significant return to profitability. When I joined the Board we had limited financial resources, market expectations of £5.00m turnover, a demoralised workforce and management team and lack of appropriate Board structure. However, our key stakeholders - customers, employees and shareholders - continued to be supportive as they believed in the Group and the significant potential of this new and emerging market. The Board would like to thank these stakeholders for their support and patience.

The plan we established at the start of the year built upon the investments made and the product set of the Group and I am delighted that this has delivered an exceptional year of growth in all key metrics. We have achieved 69% growth in turnover, returned to profitability, re-established cash generation, built a strong management team and Board and restored morale within the business. We have also achieved a substantial increase in recurring revenues providing improved visibility and quality of earnings. These are significant achievements given the position the Group was in just a year ago.

The increase in demand for back office workforce optimisation solutions has been triggered by the ongoing global trend of businesses looking to improve customer service, operational efficiency, cost control and risk management. The Group's products deliver guaranteed benefits for its customers in each of these key result areas and it has an enviable track record of successful implementations and customer retention. This market demand, together with our ability to develop and deliver products which meet our customer needs, provides a firm foundation for the Group.

The investments we have made in the Group this year have further strengthened our market position and were underpinned by the placing we completed in January 2015. The successful raise of £3.19m, in addition to the £0.55m of convertible loan notes issued in February 2014, was a strong endorsement of our strategy.

Board Developments

The last financial year also saw the Board strengthened through the appointment of a number of new Directors, alongside myself and Elizabeth, bringing with them extensive relevant experience that is already benefitting the business. Following my appointment as Non-executive Chairman, John Brougham and Mark Brady were both appointed as independent Non-executive Directors, Jonathan Kay was appointed Chief Financial Officer and Elizabeth Gooch was confirmed as the Chief Executive Officer.

Current Trading & Outlook

FY2015 was a year of transformation for the Group. Building on the steps we have taken to build a robust platform for growth during the past year, the Board is confident that the Group is well positioned to continue momentum into the coming year. We will continue to invest in our market leading product, whilst also building the sales and marketing required to enable us to earn our place as the global leader in the market we pioneered. We will also complement organic growth with strategic acquisitions as and when opportunities arise.

We look forward to continuing to deliver value for our customers and excellent results for our shareholders.

CHIEF EXECUTIVE'S STATEMENT

Overview

In FY2015 a number of the strategies that we had invested in prior to the last financial year began to be realised.

Following our acquisition of Xtaq Limited in FY2011 we converted their pilot projects into successful customer implementations. We then invested in these and a number of other pilot projects with global and international customers, all with significantly greater roll-out potential than our traditional UK customer base. In 2012 we secured a strategic partnership with Aspect Software Inc. to support roll-out to these customers as well as distribute our product throughout the world. We also launched our Managed Cloud Services solution.

All of these strategies depressed our financial results during this period but the investments were made with the intention of benefitting our prospects and performance for the future. The challenges and changes during our 2013 financial year created a difficult period, but with renewed focus we have now begun to realise their potential.

I am therefore delighted that in FY2015 each of these investments has contributed to transforming our results:

· We have secured ten significant contract wins in the period, when previously this has been on average three to four, including roll-outs to global customers, partner sales in new territories and contract wins in three new verticals. Customers in these verticals have benefitted from our development strategy of building products that address cross-sector issues. These customers have also achieved the same benefits as those in our traditional markets.

· As a result of our investment in our partnership distribution channel and our global customers, international sales now account for 37% of our turnover and we intend to continue investment in this growth area in the coming years.

· Finally, our Managed Cloud Services solution is gaining traction leading to a significant increase in recurring revenues, a record order book of £15.44m, and improved visibility/quality of earnings.

Our renewed focus on cost control together with the significant increase in revenue has also contributed to the return to profitability and cash generation.

FY2015 has therefore been a year in which we have re-established the fundamentals of the business, delivered strong financial performance including record revenue levels, and laid the foundations for sustainable growth in the future.

Market Development

The emerging back office optimisation market continues to develop. Businesses are seeking to improve the end customer experience across multiple channels, optimise their use of resources across these channels and maintain compliance with regulatory and security requirements.

With the increase in digital business, customer transactions are shifting from the traditional and physical to data centric methods giving rise to an increase in transactions across all channels. At the same time customers now expect near or real-time responses, regardless of how they transact, and a key driver for businesses is to significantly reduce complex back office processing time and achieve real-time insight into the whole customer eco-system.

Investment in the back office has traditionally been a low priority but it can no longer be ignored. It is a major contributor to the success of the customer experience and, according to Frost & Sullivan's recent report, can often be the engine that drives organisational performance from behind the scenes.

Core functionality within the eg operational intelligence® software suite was designed to address these requirements:

· Multi-channel transaction capture to provide a single view of all work regardless of channel.

· Real-time, multi-level, multi-dimensional operational intelligence for customer operations and customer experience management.

· Efficient allocation of work to an increasingly disparate, mobile workforce wherever it is in the world, together with the means to automatically evaluate their performance.

We are therefore well placed to support both the digital and omni-channel requirements of our customers; enabling them to deliver consistent service and optimise performance across all channels regardless of where their workforce is and, at the same time, providing true insight into the end-to-end customer journey.

Customer Base Growth

As a result of the increased need for optimisation tools for complex processing areas, demand from new and existing customers has been strong.

During the period a total of ten significant contract wins were secured, further penetrating our key global market sectors. The Group increased its footprint in existing market verticals such as financial services, but also successfully developed business in new verticals. Major new contracts announced during the period include:

· In February 2014, a contract win with an international telecoms provider

· In March 2014, a contract win with another new utility customer

· In April 2014, a contract win from a global bank (existing client) worth approximately $1.06m

· In August 2014, a contract win with a major third party outsourcing company (existing client) expected to be worth in excess of £1.20m

· In January 2015, a contract win within Local Government worth at least £1.60m over four years.

These contracts also led to a 20% increase in the user base of our software, to over 100,000 licences sold in the UK and globally.

Product Development

We have continued to invest in our market leading software to ensure we can continue to meet customer requirements "out of the box". This has always been a unique selling point for our product, enabling our customers to quickly realise benefits and achieve guaranteed return on investment.

The latest version of the eg operational intelligence® software suite was launched in London on 25 March 2014. This version provides further enhancements to our core products as well as the platform for delivery of eg mobile.  Our mobile product will allow management teams to monitor the operational health of their back office operations in real-time from mobile devices using a rich dashboard and alerting app. This will provide customer operations teams with early visibility into potential service issues as well as better engage the workforce in achieving the organisations objectives.

We have also developed major enhancements to our strategic planning and forecasting module during FY2015. These include improved modelling features enabling planners to model resource forecasts based on complex business scenarios and continuously monitor progress against forecasts or contractual obligations, such as Service Level Agreements, in real-time.

eg mobile and our new Strategic Planning and Forecasting product will be released shortly.

People

In March 2014 Duncan McIntyre agreed to join our Board as Non-Executive Chairman. His experience of building successful international businesses quickly made a positive impact on the Group. He has built a new Board, improved our communications within the City, led our financing activities and re-established a culture of success and support. The eg Board now consists of individuals with substantial experience of growing listed and private companies, as well as providing high levels of governance. The Group has benefited from their deep understanding of technology markets, strong City reputations and passion for developing effective management teams.

Our new management structure includes a number of senior hires in key areas of the business and good progress is being made to build a successful team to deliver our strategy. Over the coming year we will continue to invest further to ensure that business momentum is maintained and customer satisfaction continues.

In October 2014 Paul Hoban advised us of his intention to resign as Group Chief Financial Officer. Paul will leave us in April 2015 having built a strong financial reporting function within the Group and we wish him well with his future endeavours. Jonathan Kay joined us in December 2014 to replace Paul and work alongside me to develop our team to drive profitable growth.

The whole eg team worked extremely hard during the year to deliver excellent results for our customers throughout the world. I would like to thank them for their contribution and continuing commitment.

CHIEF FINANCIAL OFFICER STATEMENT

Financial Results

Revenue for the year ended 31 January 2015 increased 69% to £7.54m (2014: £4.46m). Software licences, maintenance and software services contributed 68% of total revenue (2014: 76%) with the balance coming from implementation and training services. Revenue included one-time licence fees and one-off support services revenue totalling £1.06m.

Particularly pleasing was the fact the Group achieved a profit before tax of £0.41m (2014: loss £1.48m) and Adjusted EBITDA increased to £1.26m (2014: loss of £0.50m).

During the period recurring revenues increased significantly. eg's order book now stands at £15.44m to be recognised over the next 4 years.

Overall gross margin improved 5% to 70% (2014: 65%) as a result of improved utilisation in our Implementation, Training and Professional Services teams. Administrative expenses increased to £4.75m (2014: £4.38m) following investment in management and sales.

As at 31 January 2015 net cash was £4.30m (2014: net debt £0.31m) following investment in research and development of £0.85m (2014: £0.80m), and cash generated from financing activities of £3.76m (2014: £1.24m).

In April a share placing raised £0.23m allowing equity support from the Non-Executive Directors. A further placing was completed in January 2015 raising £3.19m (before expenses) to support growth with conversion of £0.55m convertible loan notes also issued to equity.

Cash generated from operating activities was £1.73m for the period (2014: cash used in operating activities £0.43m).

Earnings per share on a basic and fully diluted basis was 3.6p and 3.5p respectively. In the prior year the basic earnings per share was (8.9p) and on a fully diluted basis (8.9p).

The Group has benefitted from the favourable tax relief given on development expenditure. The effective rate on taxation credit is 33% (2014: effective rate of tax credit 14%).

The Board has decided not to recommend payment of a dividend.

The share-based payment reserve is a reserve to recognise a corresponding entry in relation to amounts recognised in profit or loss in respect of share based payments.

The own shares held reserve shows movements in the shares held in trust by the eg solutions Employee Benefit Trust.

The share premium account contains the aggregate amount of the premiums received on issuing shares after the deduction of attributable expenses and commission.

The amount of transaction costs accounted for as a deduction from equity during the year was £201,000 (2014: £nil).

Retained earnings include the accumulated profits and losses arising from the Consolidated Statement of Comprehensive Income excluding foreign exchange differences on translation of foreign operations.

The foreign exchange reserve comprises all exchange differences arising from the translation of the financial statements of overseas operations.

Other reserves represent the equity component of the convertible loan notes, which is transferred to retained earnings when the instrument is settled or converted.

Notes:

1. BASIS OF PREPARATION

This announcement was approved by the Board of Directors on 24 March 2015.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 January 2015 or 2014, but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts: their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Sections 498(2) or (3) of the Companies Act 2006.

The Group accounts for the year ended 31 January 2015 are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU This financial information has been prepared in accordance with the accounting policies stated in the Group's financial statements for the year ended 31 January 2015. 

7. AVAILABILITY OF THIS ANNOUNCEMENT AND ANNUAL REPORT & ACCOUNTS

Copies of this announcement are available on the Company's website: www.egsplc.com. The Annual Report & Accounts and Notice of Annual General Meeting will be sent to shareholders in due course and will also be available on the Company's website from the date of posting.