PHD.L Share News (PHD)

Cloud computing - remote access to applications and data - is the coming thing in the business world but the move to a pay-as-you-go model is causing short-term sales declines for software providers such as procurement solutions specialist Proactis Holdings.The company announced a 13% fall in its half year reported revenues to £3.0m, citing the transition to cloud solutions and the timing of new customer wins as the reasons for the fall.Contracts for cloud solutions are transactional based, that is to say that clients pay on the basis of use, as opposed to the perpetual licence model. As such, this has resulted in a significant increase in the amount of revenue deferred to future earnings periods, which in turn has affected profitability. The upside to the software as a service (SaaS) model is that it tends to boost repeat revenue, and this looks like it could be the case with Proactis, where total annualised contracted future revenues have increased to £4.3m (2010: £3.4m).Proactis management are keen on the new model as it will give the company greater revenue visibility for future periods and reduce the volatility that is associated with the perpetual licence model.The deferral of revenue as a result of the shift to the new model has dented profitability in the period and the group has reported an operating loss of £208,000 (2010: profit £384,000). Loss before tax in the six months to 31 January was £0.21m, versus a profit the year before of £0.38m.On a positive note, the firm assures investors that the calibre of clients is getting bigger and better, deal activity is buoyant with continued strong customer loyalty - there were 38 upgrades in the period, down from 42 in the corresponding period a year earlier - and new customers are showing increased commitment. The company has indicated that the second half has started well and, although it is too early to say whether the public sector is now ready to address spend control, "it is encouraging that we have recently signed two new local authority customers."The company has not declared a dividend. ab