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eg solutions* (EGS): New contract shows the full range of eg’s solution (CORP) | Hayward Tyler* (HAYT): Interims highlight significant 2H weighting needed (CORP) | Carclo (CAR): Decent Interim performance – on track for FY (BUY) | Wentworth Resources (WRL): Q3 results (BUY) | Castleton* (CTP): Australian contract win (CORP) | Artilium* (ARTA): Another new MVNO agreement signed (CORP) | Redcentric* (RCN): Appointment of forensic accountants and interim CFO (CORP)
EGS HAYT CAR CTP ARTA RCN WEN
A weak H1 was salvaged by a raft of large contract wins which should drive a strong H2. A strange first half was poor financially (loss-making) but encouraging operationally: three new contracts were won through the renewed JV with the US giant, Aspect Software. These include a ground-breaking deal with the world’s leading Social Network. There has also been a contract from one of the UK’s largest life assurance funds; a proof-of-concept with a major Singapore financial services group; as well as repeat orders from UK BPOs and a large European Investment Bank. With those secured, it is now a matter of delivery to see an exceptional H2. While we cut our FY sales forecasts on these results, management is confident on the earnings and we actually lift EPS expectation due to the H1 tax credits.
EG Solutions
eg’s interim results were impacted by the timing of a number of deals, as described in the June update. Revenue for H1 was £1.1m lower than the prior year, and the group slipped to a £0.9m EBITDA loss. We make modest downgrades to forecasts to reflect the recent challenges, but the refreshed Board is taking steps to address operational weaknesses. The period saw a number of new contract wins, and with the order book standing at over £16m, revenue visibility remains high.
eg solutions has today announced a deal with “a leading social networking corporation”. The deal is material in its own right, it demonstrates the broad applicability of eg’s software, and suggests that the relationship with Aspect is finally beginning to bear fruit. We make no changes to forecasts, but today’s announcement is a major step forward.
EGS confirmed this morning that it expects shortly to be able to announce Nigel Payne’s appointment as its new chairman (subject to NOMAD due diligence), and that four existing board members, including the FD and three non-execs, have resigned. The FD will remain in place and assist an orderly transition to a replacement when found.
eg solutions*: Guidance reiterated but with H2 weighting (CORP) | SacOil*: Malawi licence extension (CORP) | SCISYS*: Recovery continues with return to net cash (CORP) | Best of the Best*: Initiation of coverage – analyst interview (CORP) | Revolution Bars: Initiation of coverage – analyst interview (BUY)
EGS BOTB RBG SAC SSY
Results to end January 2016 confirm delivery against core strategic targets. A £3.1m equity issue in January 2015 funded investment in software, and in-house sales & marketing capabilities. That enabled eg to (a) launch significant enhancements to its product lines in September and (b) grow the order book across the year, with another £0.3m added in the last two months. That was driven primarily by direct sales, but the creation of new 3rd party partner channels is progressing to plan and could potentially contribute significantly to sales over the next two to three years.
eg has announced FY15/16 results in line with the January trading update; revenues had been impacted by a disappointing level of channel sales and, we believe, an immaterial contribution from Aspect. Nevertheless, “core” eg (direct) sales remain robust, the group is modestly profitable and the order book has grown to a phenomenal £17.4m (2.5x annual sales). We realign revenue downwards in line with consensus to reflect caution around channel partnerships, but leave FY17 profit expectations unchanged.
eg solutions (“egs”) shareholder and strategic partner Aspect Software Inc (“Aspect”) has filed for Chapter 11 bankruptcy protection in the US. The filing is a “consensual restructuring” of Aspect’s debt structure and general unsecured creditors will be paid in full. We understand this process is unrelated to business activities undertaken with egs, and egs management have stated they expect no impact on earnings from Aspect’s restructuring.
The above developments do not impact our earnings forecast or view of intrinsic value at c 100p/share. That’s underpinned by a growing order book, improved delivery vs sales targets and an operationally leveraged financial model which will mean higher revenues result in a step up in profit/EPS.
eg is well-positioned to capitalise on growing demand from multiple industries globally for technologies to transform back-office efficiency. It provides industry-leading workforce optimisation (WFO) solutions already used by around 50 global brands and over 100,000 users worldwide. These address an area of high priority as increased business conducted digitally drives up transaction volumes across all channels. eg software helps users optimise back office processes, meet customer demand for prompt, even real-time responses and comply with increasingly stringent regulation.
eg’s recent interim results were in line with the August 2015 trading statement. With underlying performance ahead of our expectations, continuing improvement in the order book (up 19%), and upbeat commentary from management, we are increasing forecasts. We now expect PBT breakeven in FY16. Alongside the results, eg also announced new mobile and forecasting modules for the eg intelligence suite, giving further confidence in the growth outlook.
eg is midway through a second year of strong sales performance which is set to see revenue virtually double in the two years following a change of management bringing the founder back to the helm. £3.8m was raised from equity last year to invest in sales and marketing to take advantage of sustained demand for its leading-edge workforce management solution, notably in the global financial services sector. That was expected to cause a loss this year in exchange for establishing a higher revenue level after years of struggle at <£5m. It now seems that revenue growth is being delivered from lower-than-expected spend, and we are guided to upgrade our forecast to breakeven in FY 2016, from our previous £0.3m adj. LBT.
Today’s trading update from eg confirms that the business is very much on track. The company expects to report revenues of £3.6m for the first half of FY15/16 (+16% YoY), with a pre-tax loss of £0.3m reflecting ongoing operational investment in the business. Revenue visibility remains high, with a £2.5m improvement in the order book to £15.5m. Imminent new product launches, scheduled for Sep-15 should further support future growth. Lastly, with £3.1m net cash, the group’s financial position remains solid.
Management Resource Solutions (MRS.L) – CORP: Suspension | EG Solutions (EGS.L) – H1 update
eg solutions has this morning announced a major Board revamp – four directors have resigned (although Jon Kay will remain for a time until a replacement Finance Director is found). The company expects to appoint Nigel Payne as the new Non-Executive Chairman. We make no changes to estimates, and hope the group is able to move forward under a hopefully functional and forward-looking new Board team in due course.
Back office optimisation software company eg solutions has released an upbeat AGM statement. Trading performance remains strong, with new contract wins being recorded across a number of verticals. Revenues from these contracts will be recognised in the current financial year and management’s positive comment on the outlook gives us further confidence in the full-year outcome.
eg solutions has reported FY2015 results ahead of our forecasts, and confirming the positive momentum flagged in the February trading statement. Improved financial performance is being driven by new contract wins for the operational intelligence suite – 10 during 2015. The result was impressive revenue growth, accompanied by a significant improvement in EBITDA margin, and also in free cash flow. Overall, a strong set of results, which together with the solid balance sheet, give further confidence in eg’s future growth prospects.
Back Office optimisation software company eg solutions has released a trading update for the period ending January 2015. The announcement provides clear evidence of the ongoing momentum in the business, with management confirming that full-year results will be marginally ahead of market expectations. FY2015 revenues will be up some 67% over 2014, ahead of our +62% forecast. In addition, the order book remains strong, standing at £15m to be recognised over the next three to four years.
The addition of new directors, together with the return of the founder Elizabeth Gooch as CEO, have led to a re-focussing of the eg business on core strengths. The benefits of this process are beginning to emerge, with recent results showing strong topline growth, accompanied by significant improvements in profitability and cash generation. eg has a strong platform for growth, and the volume of recent contract wins give confidence in the business’s potential.
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