eg solutions

HOLD

18/08/2011 Ben Jaglom

Back office software specialist eg solutions (EGS) has unveiled an encouraging trading update ahead of its results for the six months to July.

The AIM-quoted venture reported that sales were up 10% against the same period last year, with profits described as having increased 'substantially' amidst the 'growth of the business and improved margins'. Net cash rose from £770,000 to £920,000 with the company noting that it expects to meet market expectations.

In an interview with Growth Company Investor chief executive officer Elizabeth Gooch remarked the period had seen some 'big product wins and some new clients' noting that the improvement in profitability was driven by a reduction in its cost base.

Looking forward she added that despite the gloom the company was 'fortunate to be in a position whereby we offer a product that saves people money' insisting that its core market of banks and other financial services customers now looking to spend money of its services.

Analysts at house broker Arbuthnot are forecasting pre-tax profits of £600,000 (EPS: 3.5p) on sales of £5.9m.

Growth Company Investor last rated shares in eg as a hold at 87p this February and they have since sunk to 63.5p. The company's niche offerings should win it further clients in the short-term although the shares have come under considerable pressure in recent months. We therefore see little reason to change our existing rating.