21st Sep 2016 07:00
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 |
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The Accounting policies used in the preparation of the financial information for the six months ended 31 July 2016 |
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are in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRS') |
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as adopted by the European Union and are consistent with those that are expected to be adopted in the annual statutory |
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financial statements for the year ending 31 January 2017. These are not expected to differ significantly from those adopted |
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in the financial statements for the year ended 31 January 2016. |
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The interim report for the six months ended 31 July 2016 was approved by the Board of Directors on 21 September 2016. |
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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 |
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Unaudited six | Unaudited six | Audited |
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months to | months to | Year ended |
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31 July | 31 July | 31 January |
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2016 | 2015 | 2016 |
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Weighted average number of shares in issue | 22,682,938 | 22,570,088 | 22,612,445 |
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Weighted average number of shares held by the Employee Benefit Trust | (1,514,285) | (1,514,285) | (1,514,285) |
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Weighted average number of shares for the purposes of basic earnings per share | 21,168,653 | 21,055,803 | 21,098,160 |
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Effect of dilutive potential ordinary shares |
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- Share options | 950,464 | 404,087 | 1,434,822 |
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Weighted average number of shares for the purposes of diluted earnings per share | 22,119,117 | 21,459,890 | 22,532,982 |
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Unaudited six | Unaudited six | Audited |
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months to | months to | Year ended |
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31 July | 31 July | 31 January |
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2016 | 2015 | 2016 |
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£'000 | £'000 | £'000 |
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Basic earnings attributable to equity shareholders | (1,159) | (142) | 167 |
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Earnings for the purposes of diluted earnings per share | (1,159) | (142) | 167 |
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Unaudited six | Unaudited six | Audited |
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months to | months to | Year ended |
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31 July | 31 July | 31 January |
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2016 | 2015 | 2016 |
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Basic earnings per share | (5.5p) | (0.7p) | 0.8p |
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Diluted earnings per share | (5.2p) | (0.7p) | 0.7p |
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EPS has been calculated using the following methodology:
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· 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.
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· 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.
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· 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. |
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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 |
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finnCap Ltd |
+ 44(0) 207 220 0500 |
Julian Blunt or Emily Watts (corporate finance) Tony Quirke (corporate broking) |
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Yellow Jersey PR Limited |
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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).
Related Shares:
eg Solutions PLC