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enabling real-time digital promotions

Eagle Eye Solutions Group plcINTERIM REPORT 2015

MISSION

To create the universal digital transaction network connecting consumers, brands and retailers allowing secure delivery and redemption of offers, vouchers and rewards.

CONTENTS

OVERVIEW_____________________________________

03 | Highlights04 | What we do

STRATEGIC REPORT_____________________________________

06 | Chairman's statement

FINANCIAL STATEMENTS_____________________________________

08 | Consolidated unaudited interim income statement 09 | Consolidated unaudited interim statement of financial position10 | Consolidated unaudited interim statement of changes in equity11 | Consolidated unaudited interim statement of cash flows12 | Notes to the consolidated unaudited interim financial statements

SHAREHOLDER INFORMATION_____________________________________

13 | Company Information

HIGHLIGHTS

276%GROWTH

IN REVENUE REDEMPTIONS IN THE PERIOD

2014

2.7m

REDEMPTIONS IN THE PERIOD

2015

>8m

FINANCIAL

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

Launch of 3rd 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 forGreggs 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

ORGANIC REVENUE £mOrganic revenue increased 81% to £1.1m (H1 FY14: £0.6m)

GROUP REVENUE £mGroup revenue increased 276% to £2.3m (H1 FY14: £0.6m)GROUP REVENUE £mGroup revenue increased by160% to £1.8m (2014: £0.7m)

ORGANIC REVENUE £mOrganic revenue increased by101% to £1.4m (2014: £0.7m)

GROSS PROFIT £mGross profit was £1.4m, an increase of 155% (2014: £0.6m), representing a gross margin of 78%

EBITDA £mGroup-adjusted EBITDA loss for the period of £0.8m (2014: loss £0.4m)

NET ASSETS £mRobust balance sheet with net assets of £7.8m, includingcash and cash equivalents of £2.3m

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0.002014 2015

GROUP REVENUE £mGroup revenue increased by160% to £1.8m (2014: £0.7m)





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

NET CASH POSITION £mNet cash position of £1.4m, ahead of management expectations






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0.002014 2015

INTERIM REPORT 2015 | 3

EAGLE EYE AIR DEPLOYED IN ASDA



EAGLE EYE AIR


OVERVIEW

4 | INTERIM REPORT 2015

What we do

How

Eagle Eye enable 4 core solutions through its platform:

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.

Why

We help brands and retailers to reduce costs, improve their customer offer and accelerate their innovation.

Specific business benefits include: Elimination of fraudulent activity associated with

coupons, vouchers and gift cards

Lower operational costs such as electronic counting and reconciliation of paper vouchers

Customer tracking and data capture

Increased return on marketing investment

Increased redemption rates

Increased brand spend in store

Increased multi-channel engagement

AIR DashboardCustomer care

MANAGEMENT API

Distribute

Report

Analyse

Basket

Wallet

Web

Point of sale

Mobile

Self check out

REDE

MPT

ION

API

Prom

otio

ns

Stor

edva

lue

Staf

fin

cent

ives

Loya

lty

ISSU

ANCE

API

/ CO

NSUM

ER A

PI

Reporting and analytics

Service configuration

User / role management

CRM

Email

SMS

Apps

WiFi

Beacons

Coupon at till

eReceipts

21LOYALTY The delivery of offersand rewards to a uniquecustomer ID3

STORED VALUEThe delivery of a digitaltoken that can be usedas payment

PROMOTIONSThe delivery of a digitaltoken in the form of anoffer or reward

4 DIGITAL MESSAGINGAcross SMS, email, app & social Media channels

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 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.

CHAIRMAN’S STATEMENT

6 | INTERIM REPORT 2015 INTERIM REPORT 2015 | 7

81%TRANSACTIONAL

REVENUE

150%GROWTH IN

RETAILER & BRAND CUSTOMERS

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 3rd 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.

STRATEGIC REPORT STRATEGIC REPORT

276% INCREASE IN REVENUE(H1 FY14: £0.6m).

Eagle Eye has delivered strong growth during the Period, recording a

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.

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.

“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.”

CONSOLIDATED UNAUDITED INTERIM STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014

FINANCIAL STATEMENTS


CONSOLIDATED UNAUDITED INTERIM INCOME STATEMENTFOR THE SIX MONTHS ENDED 31 DECEMBER 2014



Unaudited6 months to

31 December2014

Audited6 months to

31 December2013

AuditedYear to

30 June2014

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

Unaudited31 December

2014

Audited31 December

2013

Audited30 June

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 CASH FLOWSFOR THE SIX MONTHS ENDED 31 DECEMBER 2014



CONSOLIDATED UNAUDITED INTERIM STATEMENT OF CHANGES IN EQUITYFOR 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)


Issue of share capital 65 8,181 - - - 8,246

Issue costs - (972) - - - (972)


Balance at

30 June 2014 201 7,209 3,278 197 (3,083) 7,802

Loss for the period - - - - (1,429) (1,429)


Fair value of options lapsed in the period - - - (183) 183 -


Balance at

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

Unaudited6 months to

31 December2014

Audited6 months to

31 December2013

Auditedyear to

30 June2014

£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

COMPANY INFORMATION

SHAREHOLDER INFORMATION

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. (see table below)

4. AVAILABILITY OF THIS INTERIM ANNOUNCEMENT____________________________________________

Copies of this announcement are available on the Company’s website, www.eagleeye.com.

NOTES TO THE CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS



Unaudited December

2014 Loss

per share pence

Unaudited December

2014 Loss £000

Unaudited December

2014 Weighted

average number of

ordinary shares

Audited December

2013 Loss

per share pence

Audited December

2013 Loss

£000

Audited December

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

LOSS PER SHARE


DIRECTORS

Bob WillettPhill BlundellSteve RothwellLucy Sharman-MundayWilliam CurrieSir Terry LeahyDrew ThomsonMalcolm Wall

SECRETARY

Lucy Sharman-Munday

COMPANY NUMBER

8892109

REGISTERED OFFICE

5 New Street Square London EC4A 3TW

NOMINATED ADVISER AND BROKER

Panmure Gordon (UK) Limited One New Change London EC4M 9AF

BANKERS

HSBC plc 87 George Street Richmond Surrey TW9 1HG

SOLICITORS

Taylor Wessing LLP 5 New Street Square London EC4A 3TW

INDEPENDENT AUDITOR

Baker Tilly UK Audit LLP Chartered Accountants Third Floor One London Square Cross Lanes Guildford GU1 1UN

CORPORATE COMMUNICATIONS

Hudson Sandler 29 Cloth Fair London EC1A 7NN

REGISTRARS

Equiniti Aspect House Spencer Road Lancing West Sussex BN99 6DA

3000 Cathedral Hill Guildford Surrey GU2 7YB

Customer service enquiries:Tel: 0844 824 3699

Sales and general enquiries:Tel: 0844 824 3686

Email: [email protected]: www.eagleeye.com

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