Half Yearly Report

eg solutions plc

Interim results for the six months ended 31 July 2015

eg solutions plc (AIM: EGS), the back office optimisation software Company, is pleased to announce its interim results for the six months ended 31 July 2015.

STRONG PLATFORM FOR GROWTH

· Full Year expectations improved to break even position.

· Increased & strengthened forward visibility compared to same time last year.

· Order book of multi-year contracts up 19% to £15.5m (2014: £13.0m).

· Results for the period reflect six months of significant investment.

· New products launched today, eg forecastingTM and eg mobileTM.

· Strong balance sheet with cash of £3.1m.

FINANCIAL SUMMARY

*an increase of 16% on the £3.1m underlying revenues (excluding one-off deals) for the equivalent period in 2014.

**adjusted EBITDA is stated prior to changes in respect of share based payments of £71k (6 months to 31 July 2014:£100k).

***after investment of £0.4m.

OPERATIONAL HIGHLIGHTS

· Increased investment in sales and marketing to support global expansion.

· Multiple contract wins with new and existing customers in a range of verticals and territories.

· Appointment of Bob Krakauer as Non-Executive Director.

Duncan McIntyre, Chairman, commented:

"The business has developed in line with our strategy of driving growth and further enhancing our market position in the expanding back office optimisation market. We have invested in both sales and marketing as well as developing two flagship products. These products will extend our market leading position and the Board is excited about the opportunities they present.

"We have strong visibility and a building order book and look forward with confidence to the rest of 2015 with full year expectations now ahead of previous guidance."

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).

CHIEF EXECUTIVE'S STATEMENT

Overview

eg has made further commercial progress in the first half, with underlying growth up as a result of several contract wins from new and existing customers and strong recurring revenues. Forward visibility for the full year is at a higher level than at the same time last year and our order book of multi-year contracts increased by almost 20% compared to the same period last year.

Financial Performance

Revenues for the period were £3.6m, an increase on the £3.1m underlying revenues (excluding one-off deals) for the equivalent period in 2014.

The loss before tax of £0.3m reflects the significant investment undertaken since the £3.2m placing completed in January 2015.

Gross margin is slightly reduced at 66% (2014: 74%) reflecting investment in Service Delivery resources ahead of increased revenues expected in the second half.

Cash at the end of the period stood at £3.1m.

Software revenues now represent 85% of the total (2014: 72%) reflecting the increased recurring revenues and licence sales in the period.

Software professional services revenue has also increased as a result of customers seeking to upgrade to our latest versions and integrate the eg operational intelligenceTM software suite into their core IT platforms using our Multi-Channel Work Capture Tools.

Forward visibility is now at a stronger level than at the same time last year and the Company's order book of multi-year contracts, to be recognised over the next 3-4 years, has increased to £15.5m (2014: £13.0m).

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

Operational Review

Further to the fundraising completed in January 2015, significant investment has been made during the period into sales and marketing and we are already beginning to see tangible benefits come through.

A number of deals were signed with existing and new customers across a range of verticals and territories, including:

· A licence extension at a major European bank to include Collections and Fraud teams

· A licence extension at a global bank to include Commercial & Investment Banking

· Further deployments with an international Telecoms provider and a new customer win in mortgage lending in the USA, through the Aspect partnership

· Further roll-outs for a major UK third party outsourcing company

· Two new banking sector pilots in Europe and Australia with significant roll-out potential

· Major upgrade for a UK banking customer

Following the Company securing its first contract within Local Government in January 2015, deployment within 18 further local authorities around the UK has also been undertaken.

Product Development

Following the placing in January 2015, the Company also invested significantly in accelerating product development. Investment in R&D is up 70% on the corresponding period in the previous year. As a result of this investment two new products; eg forecastingTM and eg mobileTM, will be launched in London at The View from The Shard this evening, 23 September 2015.

The development of eg forecastingTM was part-funded by Innovate UK, the UK's innovation agency, through its Smart scheme. Innovate UK offers funding to small and medium-sized enterprises to engage in R&D projects in the strategically important areas of science, engineering and technology.

The new eg mobileTM product is an extension of the eg operational intelligence® software suite and is designed to enable work to be allocated to and then the performance monitored of mobile or remote workers. It also provides alerts and notifications for operational managers on the move on KPI's that affect performance such as approaching SLA deadlines and breaches. With these new developments we are completing our product suite with advanced forecasting and capacity planning capability, as well as extending the reach of our software to planning teams, mobile workers and remote operational managers. Our software ensures work can be allocated and performance can be optimised regardless of business channel and wherever work takes place in the world.

Board and Management Strength

In August, Bob Krakauer was appointed Non-Executive Director, replacing Spence Mallder on the Board as a representative of Aspect Software UK Ltd., a major shareholder in eg. Bob has substantial experience in senior finance and operational roles, primarily within companies in the technology sector. He is currently CFO of Aspect Software and his experience in the workforce and customer experience management sector will be particularly beneficial to the eg Board.

Current Trading and Outlook

We have encouraging levels of visibility going into the second half and, with an improved order book and new products about to enter the market, we are well positioned to continue to capitalise on the increasing global demand for back office optimisation software. The Board looks forward to the rest of the year with confidence and now expects full year performance ahead of current expectations at the PBT level.

1. Notes to the Group Condensed Consolidated Interim Financial Statements for the six months ended 31 July 2015

ACCOUNTING POLICIES

The interim financial information consolidates the results of the Company and its subsidiary undertakings made up to 31 July 2015.

The company is a limited liability company incorporated and domiciled in England and whose shares are listed on the Alternative Investment Market (AIM).

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 2015.

The financial information for the six months ended 31 January 2015 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 2015 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 2015 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 2016. These are not expected to differ significantly from those adopted in the financial statements for the year ended 31 January 2015.

The interim report for the six months ended 31 July 2015 was approved by the Board of Directors on 23 September 2015.

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 geographic 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.

Transactions between EGUK and EGSA are accounted for on an "arms length" basis.

Segment information about these companies is presented below:

*£618k impairment of intercompany loan recognised in the UK in FY15 however removed from group on consolidation.

During the period the Group had revenues from 3 customers amounting to £2,115k (six months to 31 July 2014 2 customers amounting to £1,474k in total) in total that individually made up more than 10% of revenues generated.

A current eg client uses our software within a number of separate entities on a variety of discrete client contracts. The software is embedded in those contracts and consequently risk is spread across these contracts and not concentrated in the ultimate holding entity.

Our second largest customer in the current financial year is an existing client who has expanded its current eg suite resulting in additional licences purchased. Our third largest customer in the current financial year is a partner channel rebilling our software and services to a number of further customers in markets outside of the UK, risk is with those customers and not with the partner.

Domestic income tax is calculated at 20.17% (2015: 21.32%) of the estimated assessable profit 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.

4. DIVIDENDS

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

EPS has been calculated using the following methodology:

Basic earning 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.

Warrants issued on 13 January 2015 totaling 112,850 ordinary shares have been exercised and issued to AIM on 22 September 2015.

No provision has been made for impairment losses.

A memorandum of charge held to secure the UK credit card facility with Handelsbanken was satisfied in May 2015.

10. 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.