eg solutions issues profit warning despite new orders

STAFFORDSHIRE financial software supplier eg solutions has warned full year revenues and profits are likely to be “significantly below” expectations due to re-engineering work on a new product suite.

The profit warning came despite the firm issuing a statement saying that in the run-up to the end of its financial year it had secured five new orders.

The announcement had an immediate impact on the AIM-listed firm with shares falling almost 17% in early trading.

In a statement, eg solutions said: “Due to undertaking pilot projects with the new product suite in order to win new contracts, as well as finalising client commitment to their roll-out, revenue and profit before tax for the financial year ended January 31, 2012 is expected to be significantly below market expectations at £4.6m (2011: £5.1m), with profit before tax expected to be significantly below the £0.5m achieved last year.”

The re-engineering work involved replacing a third party component within the Nuqleus data capture software – acquired with XTAQ in March 2010 – and integrating this into its eg work manager® product.

The firm, based at Dunston Business Village, said the new orders were the result of the re-engineering of its products and an investment in sales.

The orders include three new customers in the financial services sector in the UK and new territories as well as expansion within its existing UK and international clients.

The firm, whose financial year ends January 31, said the majority of the revenue from the new orders would be recognised within the current financial year. Each contract has significant potential for further roll-out and scope for recurring revenue, it added.

The firm said the re-engineering was expected to have minimal impact on the outcome for the year ended January 31, 2012, adding the software developments had been well received by both new and existing enterprise clients.  

It said current trading was strong and this reflected demand for its re-engineered software products from both new and existing enterprise clients.

“We start the year with an excellent UK and international order book, which already constitutes 50% of market expectations for revenue for the current year and continues to grow,” it said.

Elizabeth Gooch, eg’s chief executive, said she was disappointed by the performance but was confident of the long-term outcome.

The company will announce its final results March 22.