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eg solutions – shares soar on update emphasising “now real momentum within the business”, what now?

By Steve Moore | Monday 13 February 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Back-office workforce optimisation software company eg solutions (EGS) has issued a “Trading Update & Master Services Agreement Signed” announcement. The following updates with the shares presently soaring higher, to a current approaching 50p, in response.

This is with the announcement noting “record revenues for the six months of not less than £5.69m” and “adjusted EBITDA of over £2m”. However, this follows first half results having shown marked declines – and full-year “adjusted EBITDA of over £1.20m” is anticipated “on revenues of not less than £8.19m”.

The company notes “several major new contracts with global firms in America, Asia and Europe” and a new ‘Master Services Agreement’ with “a leading Business Process Outsourcer… The agreement has already yielded an immediate deployment of licences worth circa £762,000 within the UK's largest energy supplier”.

It adds that there is “a record contracted forward revenue order book” and “now real momentum within the business”.

However, adjusted EBITDA is of course bullshit earnings. Cash is noted to be “at least £2.40m” - this from £1.66 million at the half-year stage and more than £3 million at the commencement of the year.

There does however, following previous scepticism from myself, look to be some encouraging momentum now here. This is sufficient for me to review the full results with interest, with the shares added to the watchlist.

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