TIDMEGS
RNS Number : 2228R
EG Solutions plc
20 September 2017
20 September 2017
eg solutions plc
("eg" or the "Company" or the "Group")
Interim results for the six months ended 31 July 2017
eg solutions plc (AIM: EGS), the back office optimisation
software company, announces its interim results for the six months
ended 31 July 2017 ('H1 2018').
Financial highlights
-- Revenues for H1 2018 up 105% to GBP5.13m (H1 2017: GBP2.50m)
-- Adjusted EBITDA* for H1 2018 of GBP0.92m (H1 2017: loss of GBP0.89m)
-- Adjusted Profit* Before Tax for H1 2018 of GBP0.4m (H1 2017: loss of GBP1.33m)
-- Cash generated from operations in H1 2018 of GBP0.86m (H1 2017: deficit of GBP0.78m)
-- Cash as at 31 July 2017 of GBP2.35m (H1 2017: GBP1.66m)
-- Earnings per share of 2 pence (H1 2017: loss of 5.2p)
Unaudited Six months ended
Figures in GBPm 31 July
-----------------------------
H1 2018 H1 2017
----------------------------- ------------- --------------
Revenues GBP5.13m GBP2.50m
----------------------------- ------------- --------------
Gross Profit GBP3.52m GBP1.34m
----------------------------- ------------- --------------
Gross margin % 68.7% 53.6%
----------------------------- ------------- --------------
Adjusted EBITDA* GBP0.92m (GBP0.89m)
----------------------------- ------------- --------------
Adjusted Profit / (loss) GBP0.40m (GBP1.33m)
before tax *
----------------------------- ------------- --------------
Profit / (loss) before tax GBP0.30m (GBP1.51m)
----------------------------- ------------- --------------
Net Cash GBP2.35m GBP1.66m
----------------------------- ------------- --------------
Earnings / (loss) per share
- diluted 2.0p (5.2p)
----------------------------- ------------- --------------
4 Year order Book GBP21.4m GBP16.2m
----------------------------- ------------- --------------
*adjusted for Share Option Charges and non-recurring legal fees
in current year and Share Option charges non-recurring legal fees
and redundancy costs in prior year.
Operational highlights:
-- Strong trading in line with target sales growth strategy
-- Significant contracts secured during the period include:
- Contract win through partnership with GCI to distribute eg
operational intelligence(R) software within the public sector
- $2.7m contract with a leading global bank demonstrating
ability to scale and service multi-national companies
-- Five year Master Service Agreement signed post period end
with existing customer adding a minimum of GBP1.4m incremental
revenue
-- Contract wins with new and existing customers supporting
order book growth to GBP21.4m (H1 2017: GBP16.20m)
Post-period end
-- Recommended cash offer (the "Offer") made for the Company by
Verint WS Holdings Limited ("Verint"), a indirectly owned
subsidiary of Verint Systems Inc, a c.$2.3Bn US analytics company
listed on NASDAQ
-- Under the terms of the Offer, each eg shareholder will be
entitled to receive 112.5 pence in cash for each eg share held
-- The Offer values the entire issued and to be issued share
capital of eg at approximately GBP26.30m
Chairman statement
I am pleased to report eg solutions' results for the first half
of FY 2018.
During the period under review, we have delivered robust trading
in line with our targeted growth strategy implementing direct sales
and distribution via our in-house resources and global partners and
thereby better positioning the Company for profitable growth.
Revenues for the period increased 105% to GBP5.13m, which underpins
the strong period we have had. We maintained the strong momentum
gathered in the second half of the previous year, securing multiple
major contracts with global firms for our best in class back office
optimisation software. New contract wins and existing customer
orders have seen our order book of recurring revenue grow to
GBP21.4m.
Post-the period end in September 2017, Verint, a indirectly
owned subsidiary of Verint Systems Inc, a c.$2.3Bn US analytics
company listed on NASDAQ, announced a recommended a cash offer to
acquire all of the issued and to be issued share capital of the
Company.
In the period since 11 August 2017, the Company's mid-market
closing share price has been in excess of the price per share
offered by Verint under the Offer. The Board believe however, that
the increase in the share price prior to the announcement of the
Offer of 5 September 2017 was entirely driven by small volumes of
retail purchases, causing the share price to rise as a result of
the limited liquidity of the Company's shares. In particular, we
believe that the mid-market price prior to 5 September 2017 was not
reflective of a price at which any significant volume of the
Company shares could be bought or sold in the market. The Board
consider that the Company has long suffered from an illiquid
shareholder register which can give rise to volatility in its share
price. Moreover, we understand that, so far as we are aware, prior
to 5 September 2017 the last institutional price at which the
Company's shares traded, was on 23 May 2017 at a price of 71.7
pence, some 40.8 pence (35%) below the Offer price. Between 23 May
2017 and 5 September 2017, the Board do not believe that there were
any institutional trades and the median trade size was only 2,000
shares, with all purchases and sales since that date being driven
by small volume trades. Other than in the period since late July
2017 and before 5 September 2017, so far as we are aware, there
were no trades in the Company shares at a level at or above the
Offer price in the last decade.
Importantly, the Board believe that the level of the Offer
represents an attractive exit price when viewed against the
fundamentals of the business, against the way comparable small
technology companies are currently valued by the market and against
the most recent higher-volume share trades. It also represents an
attractive premium of 53% and 4.1% against the volume weighted
average price of the Company's shares over the six and three month
periods respectively prior to 5 September 2017.
If the acquisition is approved this will see the Company's
market-leading back office optimisation solution marketed to a much
wider global audience. With larger distribution and economies of
scale that Verint can offer, this should see the Company's software
global footprint extended to become a much larger dominant force
within the back office optimisation industry across multiple new
markets and sectors.
For full details of the proposed acquisition please see
https://www.investegate.co.uk/verint-ws-holdings/rns/recommended-cash-offer-for-eg-solutions-plc/201709050700047948P/.
I would like to take this opportunity to thank my fellow Board
members, employees and our shareholders for their continued support
over the period and look forward to updating the market on the
progress of our proposed acquisition by Verint at the appropriate
time.
Nigel Payne
Chairman
Financial review
The Board is pleased with the strong performance in H1 2018. The
Company continues to underpin revenue with a strong order book
which has increased by 32.1% over the last 12 months. Gross margin
has returned to previous levels with the six months ended 31 July
2017 delivering 68.7%, an increase of 15.1% on the same period last
year.
The Company has generated GBP0.86m cash from operations which
has supported the continued investment in product development with
R&D capitalisation of (GBP0.84m) (H1 2017: (GBP0.73m). Cash
remains at a strong level at GBP2.35m, an increase of GBP0.69m from
H1 2017. This is supported by a positive working capital movement
as a direct result of higher revenues. Trade and other receivables
were GBP2.83m (H1 2017: GBP1.26m) predominantly driven by higher
accrued revenue. Trade and other payables were GBP2.85m (H1 2017:
GBP2.01m) driven by higher deferred income.
The Company has continued to benefit from the Research and
Development tax relief with a recognised tax credit of (GBP0.13m)
(H1 2017: (GBP0.13m)) and an effective tax rate of (43%) (H1 2017:
(520%)) in the reporting period.
The non-recurring expenditure in the current year relates to
legal costs relating to the proposed acquisition.
The Company continues to expect minimal impact on revenues as a
result of Brexit and has the relevant polices in place to control
any foreign exchange risk as it arises. However, the Company
continues to believe that increased economic uncertainty will put
pressure on businesses to reduce costs and the Company remains well
positioned to optimise the opportunity this affords.
Consolidated Statement of
Comprehensive Income
For the Six Months Ended
31 July 2017
Unaudited Unaudited Audited
six months six months Year ended
ended 31 ended 31
July July 31 January
2017 2016 2017
Note GBP'000 GBP'000 GBP'000
--------------------------------------- ----- ----------- ----------- -----------
Revenue 5,130 2,498 8,209
Cost of sales (1,608) (1,158) (2,424)
Gross Profit 3,522 1,340 5,785
Administrative expenses (2,598) (2,227) (4,559)
---------------------------------------- ----- ----------- ----------- -----------
Adjusted EBITDA 924 (887) 1,226
Amortisation (501) (436) (891)
Depreciation (21) (13) (30)
Non-recurring expenditure (62) (150) (263)
Share Option Charge (39) (27) (22)
Profit/(Loss) from operations 301 (1,513) 20
Finance Income - 4 5
Finance Charges - - -
----------- ----------- -----------
Profit/(Loss) before tax 301 (1,509) 25
Tax credit 3 130 350 130
---------------------------------------- ----- ----------- ----------- -----------
Profit/(Loss) for the period 431 (1,159) 155
---------------------------------------- ----- ----------- ----------- -----------
Other comprehensive income:
Exchange differences on translation
of foreign operation 1 (4) (4)
----------- ----------- -----------
Total comprehensive income/(expense)
for the period 432 (1,163) 151
---------------------------------------- ----- ----------- ----------- -----------
Profit/(Loss) and total comprehensive
income/(expense) attributable
to equity shareholders of
the Parent Company 432 (1,163) 151
---------------------------------------- ----- ----------- ----------- -----------
Earnings per share
From continuing operations
Basic 5 2.03p (5.5p) 0.7p
Diluted 5 1.95p (5.2p) 0.7p
Consolidated Statement of
Financial Position
as at 31 July 2017 Unaudited Unaudited Audited
six months six months Year ended
ended 31 ended 31
July July 31 January
2017 2016 2017
Note GBP'000 GBP'000 GBP'000
------------------------------- ----- ----------- ----------- -----------
Assets
Non-current assets
Intangible assets 6 4,410 3,798 4,069
Property, plant and equipment 146 90 91
4,556 3,888 4,160
----- ----------- ----------- -----------
Current assets
Trade and other receivables 7 2,825 1,259 2,760
Current tax receivable 381 416 285
Cash and cash equivalents 2,348 1,663 2,410
5,554 3,338 5,455
----- ----------- ----------- -----------
Total assets 10,110 7,226 9,615
-------------------------------- ----- ----------- ----------- -----------
Liabilities
Current liabilities
Trade and other payables 8 2,851 2,011 2,793
2,851 2,011 2,793
----- ----------- ----------- -----------
Non-current liabilities
Deferred tax liabilities 381 117 415
381 117 415
----- ----------- ----------- -----------
Total Liabilities 3,232 2,128 3,208
-------------------------------- -----
Net Assets 6,878 5,098 6,407
-------------------------------- ----- ----------- ----------- -----------
Equity
Share capital 227 227 227
Share premium 7,924 7,924 7,924
Share-based payment reserve 847 813 808
Own shares held (1,149) (1,149) (1,149)
Retained earnings (867) (2,612) (1,298)
Foreign exchange (104) (105) (105)
Total equity 6,878 5,098 6,407
-------------------------------- ----- ----------- ----------- -----------
Consolidated Interim Statement
of Cash Flows
For the Six Months Ended
31 July 2017
Unaudited Unaudited Audited
six months six months Year ended
ended 31 ended 31
July July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
------------------------------------ ----------- ----------- -----------
Operating activities
Profit/(Loss) before tax 301 (1,509) 25
Adjustments for:
Depreciation of property,
plant & equipment 21 16 30
Amortisation of intangible
assets 501 436 891
Finance income - (4) (5)
Share option charge 39 27 22
Decrease/(Increase) in receivables (65) 433 (1,068)
(Decrease)/Increase in payables 58 (248) 534
Cash generated/(used in)
by operations 855 (849) 429
Income taxes received - 70 278
Net cash generated/(used
in) by operating activities 855 (779) 707
------------------------------------- ----------- ----------- -----------
Investing activities
Purchases of intangible assets (842) (727) (1,453)
Purchases of property, plant
and equipment (76) (26) (42)
Net cash used in investing
activities (918) (753) (1,495)
------------------------------------- ----------- ----------- -----------
Financing activities
Proceeds from exercise of
warrants - - -
Interest received - 4 5
Net cash generated by financing
activities - 4 5
------------------------------------- ----------- ----------- -----------
Net (decrease) in cash and
cash equivalents (63) (1,528) (783)
------------------------------------- ----------- ----------- -----------
Cash and cash equivalents
at beginning of period 2,410 3,195 3,195
Effect of foreign exchange
rates 1 (4) (2)
Cash and cash equivalents
at end of period 2,348 1,663 2,410
------------------------------------- ----------- ----------- -----------
Consolidated
Statement of
Changes in
Equity
For the Six
Months Ended Total
31 July 2017 amounts
attributable
to
Share equity
- based Own holders
of the
Share Share payment shares Retained Foreign Other parent
capital premium reserve held earnings exchange reserves company
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- -------- -------- -------- --------- --------- --------- -------------
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
Profit for the
period - - - - 1,314 - - 1,314
Other
comprehensive
expense - - - - - - -
Total
comprehensive
expense - - - - 1,314 - - 1,314
Share-based
payments - - (5) - - - (5)
Balance at 31
January 2017 227 7,924 808 (1,149) (1,298) (105) - 6,407
Profit for the
year - - - - 431 - - 431
-------- -------- -------- --------- --------- --------- -------------
Other
comprehensive
expense - - - - - 1 - 1
Total
comprehensive
expense - - - - 431 1 - 432
---------------- -------- -------- -------- -------- --------- --------- --------- -------------
Share-based
payments - - 39 - - - - 39
---------------- -------- -------- -------- -------- --------- --------- --------- -------------
Balance at 31
July 2017 227 7,924 847 (1,149) (867) (104) - 6,878
1. Notes to the Group Condensed Consolidated Interim Financial
Statements
for the six months ended 31 July 2017
ACCOUNTING POLICIES
The interim financial information consolidates the results of
the Company and its subsidiary undertakings made up to 31 July 2017
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 2017.
The financial information for the six months ended 31 July 2017
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
2017 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 2017 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 2018. These are not expected to differ significantly from
those adopted in the financial statements for the year ended 31
January 2017.
The interim report for the six months ended 31 July 2017 was
approved by the Board of Directors on 20 September 2017.
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 ended 31
July July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
------------------------------- ----------- ----------- -----------
Current tax:
United Kingdom (96) (162) (285)
Tax in respect of prior years (1) 44
-------------------------------- ----------- ----------- -----------
(96) (163) (241)
Deferred tax:
Origination and reversal
of temporary differences (34) (187) 129
Rate change on deferred tax
brought forward (18% - 17%) 0 0 (18)
Tax receivable by the Group
and its subsidiaries (130) (350) (130)
-------------------------------- ----------- ----------- -----------
Domestic income tax is calculated at 19.17% (2017: 20.00%) 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 ended 31
July July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ----------- -----------
The credit for the period
can be reconciled to the
loss per the Statement
of Comprehensive Income
as follows:
Profit/Loss before tax 301 (1,509) 25
--------------------------------- ----------- ----------- -----------
Tax at the applicable domestic
income tax rate 19.17%
(2017: 20.00%) 58 (302) 5
Tax effects of expenses
that are not deductible
in determining taxable
profit 13 31 39
Share-based payments (58) 5 34
Research and development
enhanced relief (165) (165) (316)
Losses surrendered for
R&D tax credit 19 61 108
Prior year items - (1) 44
Other movements 3 21 (44)
Tax credit (130) (350) (130)
--------------------------------- ----------- ----------- -----------
Effective tax rate for
the period -43% -57% -520%
4. DIVIDS
The Board is not proposing the payment of an interim
dividend.
5. EARNINGS PER ORDINARY SHARE
From Continuing Operations
Unaudited Unaudited
six six Audited
months to months to Year ended
31 July 31 July 31 January
2017 2016 2017
Weighted average number
of shares in issue 22,682,937 22,682,937 22,682,937
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 21,168,652 21,168,652 21,168,652
Effect of dilutive potential
ordinary shares
- Share options 900,458 950,464 617,033
Weighted average number
of shares for the purposes
of diluted earnings per
share 22,069,110 22,119,117 21,785,686
------------------------------- ------------ ------------ ------------
Unaudited Unaudited
six six Audited
months to months to Year ended
31 July 31 July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
------------------------------ ------------ ------------ ------------
Basic earnings attributable
to equity shareholders 431 (1,159) 155
Earnings for the purposes
of diluted earnings per
share 431 (1,159) 155
------------------------------- ------------ ------------ ------------
Unaudited Unaudited
six six Audited
months to months to Year ended
31 July 31 July 31 January
2017 2016 2017
------------------------------ ------------ ------------ ------------
Basic earnings per share 2.03p (5.5p) 0.8p
Diluted earnings per share 1.95p (5.2p) 0.7p
------------------------------- ------------ ------------ ------------
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.
At 31 July 2017 there were 1,307,827 (2017: 1,397,821) 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
GBP'000 GBP'000 GBP'000
----------------------------- ------------ ------------- ------------
Cost
At 1 February 2016 7,496 498 7,994
Acquisitions - internally
developed 727 - 727
------------------------------ ------------ ------------- ------------
At 1 August 2016 8,223 498 8,721
Acquisitions - internally
developed 726 - 726
------------------------------ ------------ ------------- ------------
At 1 February 2017 8,949 498 9,447
Acquisitions - internally
developed 842 - 842
------------------------------ ------------ ------------- ------------
At 31 July 2017 9,791 498 10,289
------------------------------ ------------ ------------- ------------
Amortisation and Impairment
At 1 February 2016 3,989 498 4,487
Amortisation for the period 436 436
------------------------------ ------------ ------------- ------------
At 1 August 2016 4,425 498 4,923
Amortisation for the period 455 455
At 1 February 2017 4,880 498 5,378
Amortisation for the period 501 - 501
At 31 July 2017 5,381 498 5,879
Carrying amount
At 31 July 2017 4,410 - 4,410
At 1 February 2017 4,069 - 4,069
------------------------------ ------------ ------------- ------------
At 1 August 2016 3,798 - 3,798
------------------------------ ------------ ------------- ------------
At 1 February 2016 3,507 - 3,507
------------------------------ ------------ ------------- ------------
7. TRADE AND OTHER RECEIVABLES
--------------------------------------------- ---------- -----------
Unaudited Unaudited
six six Audited
-------------------------------- ---------- ---------- -----------
months to months to Year ended
-------------------------------- ---------- ---------- -----------
31 July 31 July 31 January
-------------------------------- ---------- ---------- -----------
2017 2016 2017
-------------------------------- ---------- ---------- -----------
GBP'000 GBP'000 GBP'000
-------------------------------- ---------- ---------- -----------
Trade receivables 808 794 812
--------------------------------- ---------- ---------- -----------
Less provision for impairment - - -
-------------------------------- ---------- ---------- -----------
Net trade receivables 808 794 812
--------------------------------- ---------- ---------- -----------
Prepayments and accrued income 2,017 465 1,948
--------------------------------- ---------- ---------- -----------
2,825 1,259 2,760
---------- ---------- -----------
Ageing analysis of trade receivables past due but not
impaired:
Unaudited Unaudited
six six Audited
months to months to Year ended
31 July 31 July 31 January
2017 2016 2017
----------------------- ---------- ---------- -----------
Up to 30 days overdue 540 55 71
31 - 90 days overdue 99 591 52
Over 91 days overdue 169 - 1
808 646 124
---------- ---------- -----------
No provision has been made for impairment losses.
8.TRADE AND OTHER PAYABLES
Trade and other payables
are as follows:
Unaudited Unaudited
six six Audited
months to months to Year ended
31 July 31 July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
------------------------------- ---------- ---------- -----------
Trade payables 717 469 619
Other tax and social security 137 71 534
Grants received 199 196 199
Accruals and deferred income 1,798 1,275 1,441
2,851 2,011 2,793
---------- ---------- -----------
ENDS
CONTACTS
+44 (0) 1785
eg Solutions plc 715772
Elizabeth Gooch
Michael Woolley
+44 (0)20 7496
N+1 Singer 3000
Shaun Dobson
Alex Price
Yellow Jersey PR Limited
+44 (0) 7748
843871
Felicity Winkles +44 (0) 7769
Joe Burgess 325254
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.
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
END
IR UKORRBWAKAUR
(END) Dow Jones Newswires
September 20, 2017 02:00 ET (06:00 GMT)
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