Preliminary Results for the full year ended 31 January 2008

Financial Highlights

• Revenue £4.1million (2007: £5.4 million)
• Pre-Tax Loss excluding one-off costs (£425,000) (2007: £41,000).
• One-off costs incurred of £392,000 in the establishment of overseas operations and the re-organisation of the UK operation.
• Loss per share 5.0 pence per share (2007: 0.0 pence per share)
• Cash balance £0.88 million (2007: cash £2.43 million)
• Gross margin 65.3% (2007: 72.9%), better than the software sector average of 55%

Business Highlights

• Cost base reduced by £900,000 on an annualised basis
• Further development into new international markets – revenues three times the original target for first year of international trading
• £1.24 million invested in research and development (2007: £810,000)
  Of which £716,000 was capitalised (2007: £283,000)
• New versions of eg operational intelligence® software suite launched – now used by over 5,000 users, across 7 companies – total worldwide users of over 40,000
• Major contract win with UK Life & Pensions company plus three further contract wins secured within the first trading month of the 2008 financial year. Clear evidence of continued interest from financial services and other sectors within the UK

“Although 2007 was a tough year, eg continues to be a vibrant and dynamic organisation that is firmly focused on implementing key objectives to return the business to its previous levels of revenue growth and profitability.”

“We fully recognise the importance of nurturing appropriate new business opportunities both within the UK and overseas and will continue to develop this strategy for the foreseeable future.”

Rodney Baker-Bates, Non-Executive Chairman

Full Statement Attached

STATEMENT BY THE NON-EXECUTIVE CHAIRMAN, RODNEY BAKER-BATES

Introduction

As previously stated in our last Annual Report, during 2007 we intended to concentrate on reducing costs and strengthening the fundamentals of our business in order to return to profitable growth. We did not expect to achieve this overnight and, whilst our financial performance has been disappointing, our core objectives have remained on track. There are clear signs of recovery across the Group.

We have also given particular attention to business development within new markets and have made further investment in our core products in order to meet our customers’ requirements of improving operational effectiveness in a global marketplace.

The work we have done will enable us to secure more stable and sustainable growth in the future. With the launch of new and improved versions of our software we have also enjoyed some success in securing a number of new contracts during the period. It is pleasing to note that this new business also reflects our progress in developing international markets.

Financial Review

Financial performance for the full year ending 31 January 2008 was below expectations, but improvements in profitability across the Group during the second half of the year are clearly visible.

The financial year was one of operational transition and margin recovery. We have undertaken initiatives to reduce costs, whilst ensuring that overheads remain under strict control. As a result costs are now below pre-flotation levels.

Although these measures resulted in the Company returning to profit in the closing months of the financial year, revenues from the majority of sales closed in the same period were not recognisable until after the financial year end. Therefore, these sales will contribute towards revenues in the current financial year ending 31 January 2009.

Revenue in the period was maintained at the same level as the previous two half year periods at £4.1 million for the year (down by £1.3 million on the previous year). The Loss before Tax was (£815,000) including one-off investment costs of £392,000 (2007: £41,000). The retained loss for the financial year was (£656,000) (2007: Profit £6,000).

Loss per share was 5.0 pence per share (2007: 0.0 pence per share).

Cash balance was £0.88 million (2007: cash £2.43 million).

Gross margin was 65.3%, which is in line with our target and better than the average for the software sector.

Dividend

The Board will not be declaring a dividend at the full year stage.

People

During the financial year we were very pleased to announce the appointment of Paul Bird as Finance Director and Company Secretary with effect from 3 September 2007. It is therefore very unfortunate that I have to report Paul Bird’s decision to resign from the Board of eg in order to allow him to assume another position elsewhere.

Although Paul will remain with the Company until the end of his contracted notice period in order to execute an efficient ‘hand-over’ to his successor, the Board is fully aware that another personnel change at such a senior level within the Company is far from ideal. The Directors are particularly keen therefore, to reassure shareholders that the process to appoint a suitable replacement is underway and a further announcement will be made as soon as possible.

In November 2007 we also announced the resignation of Jonathan Pyke as Non-Executive Director. Jonathan, who had been with eg since our flotation on AIM in 2005, resigned to pursue a full-time position with another company. He was a valued member of the Board and we extend our very best wishes to him for the future.

We fully acknowledge the important role that Non-Executive Directors have to play in the future growth and development of eg and therefore, we are actively seeking a suitable candidate that will add value to the Company going forward. Shareholders will be updated on any appointment in due course.

Across the Company our offices are well managed and driven by a long serving team of people at operational level, all of whom remain fully committed to the overall success of eg. On behalf of the Board and Shareholders, I would like to take this opportunity to thank all of our staff who have continued to work hard during what has been an arduous year for the Company.

Overview

Although 2007 was a tough year, eg continues to be a vibrant and dynamic organisation that is firmly focused on implementing key objectives to return the business to its previous levels of revenue growth and profitability.

As we have indicated in previous announcements to Shareholders, the full recovery of the business requires 18 to 24 months to complete, and we are reasonably satisfied with progress made to date.

As a Company, we fully recognise the importance of nurturing appropriate new business opportunities both within the UK and overseas and will continue to develop this strategy for the foreseeable future.

Finally, and on an extremely positive note, the Company celebrated its 20th Birthday just before the financial year end in January 2008. This was a significant milestone that clearly reflects the longevity of the business and the high levels of customer satisfaction with which we have become synonymous.

STATEMENT BY THE CHIEF EXECUTIVE OFFICER, ELIZABETH GOOCH

Business Review

The Company has made a number of significant developments during the period under review. Our objectives were to reduce costs, to expand into new international markets and to build our repeatable revenues. At the same time, we needed to continue to enhance our software to meet customer requirements across the globe.

We are pleased to update Shareholders on the following:

Cost Reduction

Our primary focus during the year was to reduce our cost base. The main area of spend in eg is people and the required reduction in headcount needed to be achieved with sensitivity. The cost reduction work was completed in the first half of the year with the actual cost reductions beginning to take effect from June 2007 onwards. In total, cost reductions of £900,000 on an annualised basis have been achieved, bringing our UK cost base below pre-flotation levels. Although the outturn for the full year was still an operating loss, the loss in the second half of the year was £215,000 compared to £682,000 in the first half. In total an operating loss of £897,000 was generated including £392,000 in one-off costs associated with the redundancies, setting up in new markets and the additional cost of an interim finance director required in the first half of the year.

Gross Margin for the year was 65.3% and, although this is below the level achieved in the previous financial year (72.9%), it is in line with our target and well ahead of the sector average.At the same time as reducing our costs, we have continued to focus on developing new international markets in order to reduce revenue concentration on UK financial services. In 2007 we secured clients in three of our five target international markets. Sales revenues of 3 times the original expectations for eg’s first year of international business, have been achieved.

We are pleased with the success of our implementation projects within South Africa, India and the Netherlands which clearly demonstrate the applicability of our solutions in the global marketplace. Our international business has also given us the opportunity to demonstrate the successful application of a Software as a Service (“SaaS”) licence model based on the hosted solution launched earlier in the year.

The continued expansion into these overseas markets will remain a key strategy for the foreseeable future in order to mitigate the risks of over concentration on UK markets.

UK Business Development

In December 2007 we were delighted to secure a significant piece of new business with a major UK Life & Pensions company within our core UK market.

We are providing this client with the new and improved version of eg operational intelligence® software, which was launched in April 2007, together with the eg principles of operational management®. This contract win was an important development as it demonstrates our continued focus and commitment to our very important home market, whilst we also concentrate on international expansion.

eg continues to enjoy high levels of repeat business from existing clients and, as a result of this and other work undertaken throughout the 2007 financial year, we have begun to reduce our exposure to lumpiness’ in our revenues.

We have also significantly reduced any dependency on single clients/projects and worked hard to secure more long-term contractual income, with a particular shift towards securing 3 to 5 year licensing agreements. Together with a high proportion of repeat revenues, these actions reduce our exposure to more unpredictable new business wins.

Product Development

We have invested a further £1.24 million in research and development during the course of the financial year.

The financial year marked a significant milestone in our product offering to clients when, in April 2007, we launched new and improved versions of our eg operational intelligence® software suite, incorporating eg work manager®.

The benefits of these new versions are extensive and include improved functionality covering end-to-end process and milestone measurement, customer experience management (encompassing new service and quality metrics), as well as management across multiple time zones and an overall improved “look and feel” for both users and managers. As a result eg now has the only operational intelligence tool that provides historic, real-time and predictive management information at multiple levels, both within and between businesses, whilst at the same time enabling reporting by customer, channel and process.

Our Research and Development team in South Africa has completed the development of eg activity manager, a new module of our software that enables our clients to track actual processing time in comparison with target processing time on an ongoing basis.

Given the increased pressure for businesses to deliver improved customer service at the lowest possible cost, eg’s leading edge operational intelligence together with training and implementation services that enable companies to achieve guaranteed and sustainable improvements, resonate well with these requirements.

During the year, the new and improved versions of our software have been adopted by over 5,000 users, across 7 companies, bringing our total worldwide users to over 40,000.

Current Trading

Our Clients, across many different markets both in the UK and abroad, continue to confirm that our software, implementation and training services generate the dramatic improvements that we promise. The three new contract wins that we secured within the first trading month of the 2008 financial year are clear evidence of the continued interest in our solutions from a number of sectors within the UK.

Firstly, Nationwide Building Society have commissioned a further implementation in their Specialist Lending Division in Bournemouth. This follows the recent upgrade to the new versions of the eg operational intelligence® software suite that took place between November 2007 and January 2008. In this new project Nationwide will use eg’s software to migrate UCB Homeloans into the Bournemouth operations centre.

At Co-operative Financial Services eg has secured a major software services project to embed the eg operational intelligence® software suite into an integrated solution that will automate the processing of inbound and outbound correspondence. The full solution will be developed in partnership with three other companies; Xerox, Communisis and Exstream. eg will provide the operations management components of the solution including work and process management, and the automatic production of historic, real-time and predictive MI.

Finally, a further new implementation will take place in the Travel and Tour Operator Payments teams of the Co-operative Travel Group. eg’s software was already installed in the Financial Shared Services teams of The Co-operative Group before the retailer merged with United Co-operative last year. This new implementation will take place in the Travel and Tour Operator Payments division of the merged group. The new version of the eg operational intelligence® software suite will be implemented, demonstrating another application of the enhanced functionality of the software outside financial services.

These new contract wins clearly demonstrate that the Company is becoming increasingly better placed to take advantage of the opportunities provided by different sectors and the requirements of global operational management in general.

Future Outlook

Although we have achieved many of our turnaround objectives, we still have work to do on our strategy to further improve sustainability. At the same time the market environment has become extremely unpredictable. We therefore remain cautious in our outlook for 2008.

However, we are pleased that our order book for the forthcoming year is already £3m, 50% higher than at the same point in the 2007 financial year. The sales pipeline is healthy and, on this basis, we will continue to demonstrate continued recovery during 2008.

Shareholders should be aware that during the recession of 2001 to 2003 eg outperformed the rest of the software industry by consistently growing in both revenue and profit during this difficult period.

This positive historical performance demonstrates the continued demand for our products during downturns in the IT market in general and our reduced vulnerability to falls in IT spending amongst our clients.

The Chairman, Chief Executive and senior management team were all in place during the last market downturn and, together with the cost reductions we have made, we believe that we are well placed to repeat our 2001 to 2003 performance in terms of growth and value for Shareholders.

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 JANUARY 2008

	Year ended	Year ended
	31/01/08	31/01/07
	£’000	£’000
Revenue	4123	5472
Cost of sales	(660)	(904)
Development expenditure	(647)	(545)
Amortisation of development expenditure	(124)	(35)
Total cost of sales	(1431)	(1484)
Gross profit	2692	3988
Administrative expenses	(3589)	(4142)
Loss from operations	(897)	(154)
Investment income	82	113
Finance costs
Loss before tax	(815)	(41)
Income tax expense	159	47
Loss after tax	(656)	6
Earnings / (loss) per share	-	-
From continuing operations
Basic	(5.0p)	0.0p
Diluted	(5.0p)	0.0p

CONSOLIDATED BALANCE SHEET

AS AT 31 JANUARY 2008

	At 31 January 2008	At 31 January 2007
	£’000	£’000
ASSETS Non-current assets
Other intangible assets	911	319
Property, plant and equipment	117	132
	1028	451
Current assets
Trade and other receivables	849	520
Current tax receivable	157	99
Cash and cash equivalents	878	2431
	1884	3050
Total assets	2912	3501
LIABILITIES
Current liabilities
Trade and other payables	969	970
Other current financial liabilities	969	970
Non-current liabilities
Deferred tax liabilities	82	92
	82	92
Total liabilities	1051	1062
Net assets	1861	2439

	2008	2007
	£’000	£’000
EQUITY
Share capital	143	143
Share premium	2910	2910
Other reserves	191	123
Own shares held	(1000)	(1000)
Retained earnings	(383)	263
Total equity	1861	2439

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

FOR THE YEAR ENDED 31 JANUARY 2008

	2008	2007
	£’000	£’000
Currency translation differences	10	-
Net income for the year directly recognised in equity
Profit for the year	(666)	9
Total recognised income for the year	(656)	9
Attributable to:
Equity holders of the parent	(656)	9
	(656)	9

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 JANUARY 2008

	Year ended	Year ended
	31/01/08	31/01/07
	£’000	£’000
OPERATING ACTIVITIES
Cash generated from operations	(940)	1094
Income taxes paid	91	(225)
NET CASH FROM/(USED IN) OPERATING ACTIVITIES	(849)	869
INVESTING ACTIVITIES
Purchases of other intangible assets	(716)	(283)
Purchases of property, plant and equipment	(70)	(80)
Interest received	82	113
NET CASH USED IN INVESTING ACTIVITIES	(704)	(250)
FINANCING ACTIVITIES
Dividends paid	-	(223)
NET CASH (USED IN)/FROM FINANCING ACTIVITIES	-	(223)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS	(1553)	396
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	2431	2035
CASH AND CASH EQUIVALENTS AT END OF YEAR Bank balances and cash	878	2431

Notes

1. Explanation of transition to IFRS

2. Earnings / (Loss) per share

This is the first year that the Group has presented its financial statements under IFRS. The following disclosures are required in the year of transition. The last financial statements under UK GAAP were for the year ended 31 January 2007 and the date of transition to IFRS was therefore 1 February 2007.Prior year calculations have been adjusted following the transition to IFRS from GAAP.

From continuing operations:

	Year ended 31/01/08 £	Year ended 31/01/07 £
Basic	(5.0p)	0.0p
Diluted	(5.0p)	0.0p

EPS has been calculated using the following methodology:Profit/(Loss) after Tax

Allotted issued and fully paid share less shares owned by the Employee Benefit Trust.

Diluted EPS has been calculated using the following methodology:Profit / (Loss) after Tax

Allotted issued and fully paid shares less shares owned by the Employee Benefit Trust that are not currently allocated as optionsAs the Basic EPS is a negative value, the effects of anti-dilutive potential ordinary shares are ignored in calculating diluted EPS.Reconciliation of profit / (Loss) before tax to net cash generated by operations3. The Annual General Meeting of the Company will be held at the offices of TLT Solicitors of Sea Containers House 20, Upper Ground Blackfriars Bridge London SE1 9LH on Tuesday 17 June 2008 at 10.30 am4. This preliminary statement, which has been agreed with the auditors, was approved by the Board on 18 March 2008. The financial information set out in this announcement does not constitute the Company’s statutory accounts for the year ended 31 January 2008.The statutory accounts for the year ended 31 January 2008, which will include an unqualified audit opinion, will be delivered to the Registrar of Companies following the Company’s Annual General Meeting on 17 June 2008.

	2008 £’000	2007 £’000
Profit before tax	(897)	(154)
Adjustments for:
Depreciation of property, plant & equipment	85	89
Amortisation of intangible assets	124	35
Share option charge	68	51
Foreign exchange (gains)/losses	10	-
Operating cash flows before movements in working capital	(610)	21
Decrease/(increase) in WIP	(27)	-
Decrease/(increase) in receivables	(302)	990
Increase/(decrease) in payables	(1)	83
Cash generated by operations	(940)	1094

“Although 2007 was a tough year, eg continues to be a vibrant and dynamic organisation that is firmly focused on implementing key objectives to return the business to its previous levels of revenue growth and profitability.

“We fully recognise the importance of nurturing appropriate new business opportunities both within the UK and overseas and will continue to develop this strategy for the foreseeable future.”

Rodney Baker-Bates, Non-Executive Chairman

- Ends -

eg solutions plc
Elizabeth Gooch, Chief Executive Officer
Tel +44 (0) 1785 715772

Brewin Dolphin Brewin Dolphin Ltd (Nominated Adviser)
Richard Evans, Director of Corporate Finance
Tel +44 (0) 845 213 4853

Golley Slater
Katie Dale
Head of Financial PR
Tel +44 (0) 121 384 9743
Mobile +44 (0) 7918 716 754

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