Interim Results

RNS Number : 2236H

Eagle Eye Solutions Group PLC

12 March 2015

Eagle Eye Solutions Group PLC

("Eagle Eye", the "Company" or the "Group")

Interim Results

Strong growth and transformational development

Eagle Eye, a leading UK provider of digital consumer engagement solutions to the retail and hospitality industries, is pleased to announce its unaudited interim results for the six months ended 31 December 2014 (the "Period").

Financial highlights:

· Group revenue increased 276% to £2.3m (H1 FY14: £0.6m)

· Organic revenue increased 81% to £1.1m (H1 FY14: £0.6m)

· Gross profit was £1.5m, an increase of 200% (H1 FY14: £0.5m), representing a gross margin of 66%

· Net cash position of £1.4m, ahead of management expectations

Operational and commercial highlights:

· Launch of 3^rd generation Eagle Eye AIR platform with enhanced functionality and reporting, and migration of key clients successfully completed

· Redemption volumes increased to more than 8.0 million, up 196% year-on-year

· Messaging volumes from the acquired 2ergo business up 96% to 23.2 million

· Three industry awards for Greggs Rewards app

Post Period-end developments:

· Major contract award for the deployment of Eagle Eye AIR platform in Asda stores in the UK

· Launch of the M&S Barista stamp card loyalty app

Phill Blundell, Chief Executive Officer of Eagle Eye, said:

"Eagle Eye has delivered continued strong growth in the first half of the year, with a 276 per cent. increase in revenue and a 196 per cent. growth in redemption volumes. This excellent momentum reflects the value that Eagle Eye offers retailers and brands as they embrace the move to digital delivery for the issuance and redemption of promotions, giftcards and rewards in order to reduce costs, improve the shopper experience and innovate ahead of their competitors.

The project with Asda, announced on 9 February 2015, further demonstrates the benefits that the Eagle Eye AIR platform can offer major grocers through the digital reconciliation of coupons, and the value that real-time redemption provides to FMCG brands. This contract provides first mover advantage in the high volume and high value grocery market and adds scale to our market-leading platform.

I am excited by the prospects for the business and confident that our strong operational momentum will continue during the remainder of the financial year."

For further information, please contact:

Eagle Eye

Phill Blundell, Chief Executive Officer

Lucy Sharman-Munday, Chief Financial Officer Tel: 01483 246 426

Panmure Gordon

Hugh Morgan/Fabien Holler/Duncan Monteith, Corporate Finance

Charles Leigh-Pemberton, Corporate Broking Tel: 0207 886 2500

Hudson Sandler

Nick Lyon/Alex Brennan Tel: 0207 796 4133

Information on Eagle Eye

www.eagleeye.com

Eagle Eye is a leading UK provider of digital consumer engagement solutions, enabling the retail and hospitality industries to deliver real-time digital promotions.

The Company provides a digital transaction platform, Eagle Eye AIR, for the secure, real-time, multi-channel issuance, management and redemption of digital offers, vouchers and rewards, replacing previously used paper-based methods. Through the digital engagement module customers can send a plethora of marketing communications like SMS and email using the interactive smart messaging service.

Eagle Eye PROMOTE, a further module of the AIR platform, enables FMCG suppliers to login, set up and monitor their campaigns in real-time.

The coupons, stored value and loyalty-based rewards markets are currently transitioning through substantial change as both retailers and consumers are moving away from paper and plastic to digital offers, vouchers and rewards. These markets, in aggregate, are estimated to be worth £54.8 billion¹, £4.7 billion² and £210 million³ respectively.

The Eagle Eye AIR platform comprises four key components: campaign creation; issuance; redemption and reporting. These components allow the Company's clients to deliver relevant offers, vouchers and rewards to consumers in real-time, in a simple and secure way, across multiple media including email, SMS messaging and loyalty apps. The promotions can be redeemed securely by the consumer through any enabled point of sale channel.

The Company's current customer base comprises leading names in UK retail and hospitality including Asda, Aurora Fashion, Greggs, JD Sports, Ladbrokes, Marks & Spencer, Mitchells & Butlers, Orange, Pizza Express, Tesco and Thomas Pink.

The Group is headquartered in Guildford, Surrey and has an office in Manchester.

_____________

¹ IPM, Size of the UK Promotional Marketing Industry 2013

² UK Gift Card & Voucher Association: Gift Cards & Vouchers in the UK- Summary (2012)

³ Telco 2.0, Digital Commerce (July 2013)

Chairman's Statement

Eagle Eye has delivered strong growth during the Period, recording a 276% increase in revenue to £2.3m (H1 FY14: £0.6m). This growth reflects both the increasing understanding of the value that Eagle Eye's solutions offer to retailers and brands as well as the growing number of customers using our network.

Redemption volumes on our Eagle Eye AIR platform increased by 196% year-on-year to more than 8.0 million vouchers, compared to 2.7 million in the same period last year.

Messaging volumes at the now fully integrated 2ergo business increased significantly to 23.2 million (H1 FY14: 11.8 million), further evidencing the success and value of the acquisition to the Group.

In February, post the Period end, Eagle Eye announced the signing of a minimum two-year contract for the deployment of the Eagle Eye AIR platform in Asda stores. This contract represents a transformational development for Eagle Eye and the Board believes that it gives the Company first mover advantage in the UK grocery market, the largest market segment for its solutions in the UK, worth more than £1.7bn annually (Juniper 2013).

Customers

The Group has continued to make good progress in increasing the number of retailers and brands using the Eagle Eye AIR platform, with more than 110 live customers as at 31 December 2014 (31 December 2013: 40). This momentum reflects the growing awareness and understanding of the significant operational cost savings, enhanced consumer experiences and competitive advantages that Eagle Eye's solutions offer.

Notable new customer projects which went live during the Period included a coupon app for One Stop, the Tesco-owned convenience store chain; a loyalty app for Nicholson's Pubs, which includes a digital stamp card for rewarding frequency of visits; and a barista stamp card app for Marks and Spencer, for rewarding coffee consumption.

Technology & innovation

We continue to innovate and develop our platform to ensure we remain at the forefront of our industry. During the Period we launched the 3^rd generation Eagle Eye AIR platform, combining the support of coupons, stored value and staff incentive programmes with the ability to link all into a single consumer wallet. A number of customers were successfully migrated onto the new technology during the Period including Pizza Express, Ask, Zizzi and JD Sports, and they are already benefitting from the new functionality.

Besides the integration of the white-label app platform into the Eagle Eye AIR platform, research and development activities completed included the development of Eagle Eye PROMOTE to allow brands to self-manage national coupon campaigns, access real-time and dynamic reporting engines, and to allow the integration of additional tools to further enhance the consumer propositions available from the system.

The Group's innovation and leadership were recognised at this year's Retail Systems Awards where Eagle Eye's Greggs Rewards app won in the 'Loyalty Programme of the Year' category. This app was also successful at the Payments Awards in November 2014, winning in both the 'Engagement and Loyalty Scheme of the Year' and 'Overall Winner' categories.

Financial results

Group revenue grew by an excellent 276% to £2.3m (H1 FY14: £0.6m) over the period. Of the total revenue, £1.2m was contributed by the 2ergo business, which was acquired on 16 April 2014. Excluding 2ergo, organic revenue increased by 81% to £1.1m primarily reflecting the growing number of customers using our network.

Revenue generated by transactions over the network and monthly connection fees was £1.8m (H1 FY14: £0.4m), representing 81% of total revenue (H1 FY14: 61%). This strong 20ppts growth reflects the Company's strategy to increase volumes of transactions over the network, driving the recurring operating model.

Gross profit grew 200% to £1.5m (H1 FY14: £0.5m) and the gross margin was 66% (H1 FY14: 83%). The overall margin was impacted by the change in the Company's revenue mix with the acquired campaign manager and messaging business carrying a lower gross margin.

Operating costs of £3.1m (H1 FY14: £0.9m) increased as a result of the 2ergo cost base and incremental headcount. The number of employees at the end of the Period was 49 (H1 FY14: 23).

At the end of the period the Company held a net cash position of £1.4m (H1 FY14: £1.2m).

Post Period Events

On 9 February 2015, Eagle Eye was delighted to announce, in conjunction with Toshiba Global Commerce Solutions, the signing of a minimum two-year contract for the deployment of the Eagle Eye AIR platform within Asda stores in the UK.

This contract, for the digital counting and reconciliation of own brand and supplier brand coupons at point of sale across the entire Asda estate, will eliminate the existing requirement for the manual reconciliation of all types of paper vouchers, resulting in significant cost savings and an improvement in fraud prevention and operational efficiency. The contract will enable the real-time issuance and redemption of coupons and vouchers for Asda-specific campaigns.

The deployment of the Eagle Eye AIR platform will also enable FMCG suppliers to create and manage their national digital programmes for specific redemption in the grocer's stores. Through Eagle Eye PROMOTE, which is part of the AIR platform, FMCG suppliers will be able to create their own campaigns, select specific business features and obtain real-time reporting on the performance of any given campaign.

The contract comes after a one-year development period with Asda and is expected to contribute material revenue to Eagle Eye over the term of the minimum two-year contract period.

Given its strong momentum and the impressive market opportunity, the Company will today announce a placing to raise approximately £4.0m. The proceeds of the placing will be used to accelerate the development of the AIR platform, increase sales and marketing resources to capitalise on the market opportunity and drive international expansion.

Outlook

Retailers and brands are increasingly embracing the structural shift towards the digital issuance and redemption of promotions, giftcards and rewards in order to reduce costs, improve the shopper experience and innovate ahead of their competitors. We are continuing to execute our strategy in this growth market as well as develop further our customer offering to maintain a market-leading position.

Given the Group's strong half-year performance, with revenues and cash ahead of internal expectations, together with significant developments post the Period end, the Board is confident both in the Group's full year outcome as well as its long-term growth opportunities, and as such certain directors intend to participate in the placing to be announced separately today.

Consolidated unaudited interim income statement for the six months ended 31 December 2014

		Unaudited	Audited	Audited
		6 months to	6 months to	Year to
		31 December	31 December	30 June
		2014	2013	2014
	Note	£000	£000	£000
Continuing operations
Revenue		2,273	604	1,835
Cost of sales		(766)	(101)	(395)

Gross profit		1,507	503	1,440
Administrative costs		(3,145)	(937)	(3,183)

Operating loss		(1,638)	(434)	(1,743)
Finance expense		(1)	-	-

Loss before taxation		(1,639)	(434)	(1,743)
Taxation		210	-	143

Loss and total comprehensive loss attributable to owners of the parent for the financial period		(1,429)	(434)	(1,600)

Loss per share

From continuing operations
Basic and diluted	3	(7.10)p	(3.18)p	(10.65)p

Consolidated unaudited interim statement of financial position as at 31 December 2014

	Unaudited	Audited	Audited
	31 December	31 December	30 June
	2014	2013	2014
	£000	£000	£000
Non-current assets
Intangible assets	5,420	634	5,647
Property, plant and equipment	57	16	78

	5,477	650	5,725
Current assets
Trade and other receivables	1,546	474	1,353
Current tax receivable	-	-	61
Cash and cash equivalents	1,354	1,155	2,275

	2,900	1,629	3,689

Total assets	8,377	2,279	9,414

Current liabilities Trade and other payables	(1,732)	(636)	(1,420)
Non-current liabilities Deferred tax liability	(125)	-	(192)

Total liabilities	(1,857)	(636)	(1,612)

Net assets	6,520	1,643	7,802

Capital and reserves attributable to equity holders of the parent
Share capital	201	136	201
Share premium	7,209	-	7,209
Merger reserve	3,278	3,278	3,278
Share option reserve	161	146	197
Retained losses	(4,329)	(1,917)	(3,083)

Total equity	6,520	1,643	7,802

Consolidated unaudited interim statement of changes in equity for the six months ended 31 December 2014

	Share capital	Share premium	Merger reserve	Share option reserve	Retained losses	Total
	£000	£000	£000	£000	£000	£000
Balance at 1 July 2013	136	-	3,278	78	(1,483)	2,009

Loss for the period	-	-	-	-	(434)	(434)
Transactions with owners
IFRS 2 share based payment charge	-	-	-	68	-	68

Balance at 31 December 2013	136	-	3,278	146	(1,917)	1,643
Loss for the period	-	-	-	-	(1,166)	(1,166)
Transactions with owners
Issue of share capital	65	8,181	-	-	-	8,246
Issue costs	-	(972)	-	-	-	(972)
IFRS 2 share based payment charge	-	-	-	51	-	51
Balance at 30 June 2014	201	7,209	3,278	197	(3,083)	7,802

Loss for the period	-	-	-	-	(1,429)	(1,429)
Transactions with owners
Fair value of options lapsed in the period	-	-	-	(183)	183	-
IFRS 2 share based payment charge	-	-	-	147	-	147

Balance at 31 December 2014	201	7,209	3,278	161	(4,329)	6,520

Consolidated unaudited interim statement of cash flows for the six months ended 31 December 2014

	Unaudited	Audited	Audited
	6 months to	6 months to	Year to
	31 December	31 December	30 June
	2014	2013	2014
	£000	£000	£000
Cash flows from operating activities
Loss before taxation	(1,639)	(434)	(1,743)
Adjustments for:
Depreciation	23	8	32
Amortisation	705	75	506
Share based payment charge	147	68	119
Finance expense	1	-	-
Increase in trade and other receivables	(193)	(203)	(520)
Increase in trade and other payables	312	433	300
Income tax received	204	-	-
Net cash flows from operating activities	(440)	(53)	(1,306)

Cash flows from investing activities
Payments to acquire property, plant and equipment	(2)	(4)	(33)
Payments to acquire intangible assets	(478)	(196)	(568)
Interest paid	(1)	-	-
Purchase of business	-	-	(2,500)
Net cash flows from investing activities	(481)	(200)	(3,101)

Cash flows from financing activities
Net proceeds from issue of equity	-	-	5,274
Net cash flows from financing activities	-	-	5,274

Net (decrease)/increase in cash and cash equivalents in the period	(921)	(253)	867
Cash and cash equivalents at beginning of period	2,275	1,408	1,408
Cash and cash equivalents at end of period	1,354	1,155	2,275

Notes to the consolidated unaudited interim financial statements

1. Basis of preparation

The Group's half-yearly financial information, which is unaudited, consolidates the results of Eagle Eye Solutions Group plc and its subsidiary undertakings up to 31 December 2014. The Group's accounting reference date is 30 June. Eagle Eye Solutions Group plc's shares are listed on the Alternative Investment Market of the London Stock Exchange (AIM).

The Company is a public limited liability company incorporated and domiciled in England & Wales. The consolidated financial information is presented in Pounds Sterling (£) which is also the functional currency of the parent.

Eagle Eye Solutions Group plc and its subsidiary undertakings have not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK AIM listed Groups, in the preparation of this half-yearly financial report.

The accounting policies used in the preparation of the financial information for the six months ended 31 December 2014 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 which will be adopted in the annual financial statements for the year ending 30 June 2015.

While the financial information included has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union, these financial statements do not contain sufficient information to comply with IFRS.

The comparative financial information for the period ended 31 December 2013 has been extracted from the admission document of Eagle Eye Solutions Group plc, issued for the admission of the Group's shares to trading on AIM. The comparative financial information for the year ended 30 June 2014 has been extracted from the annual financial statements of Eagle Eye Solutions Group plc. These interim results for the period ended 31 December 2014, which are not audited, do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information does not therefore include all of the information and disclosures required in the annual financial statements.

Full audited accounts of the Group in respect of the year ended 30 June 2014, which received an unqualified audit opinion and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, have been delivered to the Registrar of Companies.

2. Going concern basis

As part of their going concern review the Directors have followed the guidelines published by the Financial Reporting Council entitled "Going Concern and Liquidity Risk Guidance for UK Companies 2009". The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of this half-yearly financial information. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that will prevail over the forecast period.

On the basis of the above projections, the Directors are confident that the Group has sufficient working capital to honour all of its obligations to creditors as and when they fall due. Accordingly, the Directors continue to adopt the going concern basis in preparing this half-yearly financial information.

3. Loss per share

The calculation of basic and diluted loss per share is based on the result attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the period. The weighted average number of shares for the purpose of calculating the basic and diluted measures is the same. This is because the outstanding share options would have the effect of reducing the loss per ordinary share and would therefore not be dilutive under the terms of International Accounting Standard 33.

	Unaudited 2014 Loss per share pence	Unaudited 2014 Loss £000	Unaudited 2014 Weighted average number of ordinary shares	Audited 2013 Loss per share pence	Audited 2013 Loss £000	Audited 2013 Weighted average number of ordinary shares

Basic and diluted loss per share	(7.10)	(1,429)	20,131,152	(3.18)	(434)	13,641,384