Thursday, 13 August 2009

eg – setting an example

(By Anthony Miller – Thursday 13th August 2009 5:00pm). I doubt our tag “Little British Battler” could be applied any more appropriately than to operations management software player, eg solutions. They’ve been around since 1988 and listed on AIM in June ’05. The past three years have been a real battle, with revenues in steady decline from just under £6m in FY06 to £3.7m in the year to 31st Jan. ’09 and losses in each. Yet meeting founding CEO, Elizabeth Gooch (eg – get it?) as I did today, you come away feeling that not only is the battle still there for the winning, but she aims to win it.

Why I particularly wanted to meet Gooch was to find out more about eg’s ‘offshore excursion’. Hers is a company with barely over 40 employees, yet is making very effective use of offshore resourcing, in South Africa for product development, and in India for finance and accounting. I will tell you exactly how in OffshoreViews soon, but let me whet your appetite with this snippet. eg reduced its finance and accounting staff costs by 70% and now has more timely and accurate management reports. They have also increased their product development headcount at roughly one-third of the cost had they hired onshore.

One other insight that might be useful for other AIM-listed LBB’s. Gooch estimates that the cost of maintaining eg’s listing is around £200k p.a. (see our previous comments on this in IndustryViews Quoted Sector). They recently did some deep soul-searching (i.e. strategic planning) and came away convinced that a public listing was still right for the company. I read this as much as a show of loyalty to patient investors (eg listed at 85p and currently trades at 32p) as a vote of confidence in the product and the market opportunity. We will also be using eg as one of our case studies on how small software companies are handling the transition from an 'on-premise' delivery model to SaaS. So much good stuff from such a small player!

UPDATE – Friday 14th August 8:00 am

eg issued a trading update this morning which brought the somewhat better news that its first half returned to profit (just!). We’ll bring you more towards the end of September.

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