PHD.L Regulatory News (PHD)

10 Oct 2006 07:00

PROACTIS Holdings PLC10 October 2006 For immediate release 10 October 2006 PROACTIS Holdings PLC ("PROACTIS", the "Group" or the "Company") Preliminary Results for the 12 months to 31 July 2006 PROACTIS Holdings PLC, the specialist Spend Control software provider, is todayissuing its preliminary results for the 12 month period to 31 July 2006, itsmaiden results following the successful admission of its shares to AIM on 1 June2006. Highlights: •Successful flotation on AIM in June 2006, via a placing, raising £3.3m net •Turnover increased by 56.3% to £2.9m (2005: £1.9m) •Operating profit (before exceptional items) increased eightfold to £479,000 (2005: £52,000) •Substantial improvement in margins, reflecting better sales mix and leverage of cost base •Earnings per share (before exceptional items) of 2.5p (2005: 0.8p) •Net cash at 31 July 2006 of £3.8m (2005: £0.2m) •Continued strong growth in customer base across all target markets Commenting on the Group's preliminary results, Alan Aubrey, Chairman said:"The preliminary results we report today show that we have delivered growthacross all our markets - commercial, public sector and not for profit. We havealso made inroads into extending our geographic reach by signing up newaccredited channel partners in both mainland Europe and the US. Our customerbase continues to grow and our core product is used by more than 80organisations." Rod Jones, Chief Executive Officer of PROACTIS, said:"I am delighted to report record results for the Group. These reflect both thestrength of our products and the capability of our team and our accreditedchannel partners to sell, implement and maintain those products for ourcustomers. I am confident that we can continue to deliver significant growth andshareholder value in the future." - ends - Enquiries: PROACTIS 01904 481 999Rod Jones, Chief Executive Officer Weber Shandwick Square Mile 0207 067 0700Nick Oborne / John Moriarty / James White Notes to Editors: PROACTIS creates, sells and maintains specialist software which enablesorganisations to streamline, control and monitor all internal and externalexpenditure, other than payroll. PROACTIS' software is already used by more than80 organisations in the UK from the commercial, public and not-for-profitsectors. PROACTIS is a profitable, high growth business operating from York. It is asales led organisation with a marketing strategy involving a mix of sellingdirect and selling through a number of accredited channel partners. PROACTISdevelops all of its own software with its own in-house team of developers. Chairman's Statement Listing on AIM I am delighted to report our maiden results following the Company's successfulAdmission and Placing on the AIM market of the London Stock Exchange plc on 1June 2006. These results cover the twelve month period from 1 August 2005 to 31July 2006. In our Admission document we set out our key reasons for the Placing. Thesewere: - Developing the accredited channel partner route to market; - Increasing the direct sales force; - Implementing a marketing and public relations programme; and - Pursuing an acquisition strategy Since Admission I am pleased to report that we have made good progress againstall of these objectives and the Chief Executive Officer's Report explains thisprogress. Annual results The year to 31 July 2006 saw PROACTIS deliver its strongest performance to date,with record revenues of £2.9 million (2005 : £1.9 million) and record operatingprofit (before the costs of the Placing) of £0.5 million (2005 : £0.1 million).The operating loss after the costs of the placing was £0.1m (2005: profit£0.1m). Cash performance has also been good. The placing of 30% of the enlargedshare capital raised £3.3 million net of expenses and at 31 July 2006 the Grouphad cash of £3.8 million. Having repaid debt of £0.2 million since the Placing,the Group is now debt free. This growth has been achieved through both direct sales and our accreditedchannel partners, and across all our markets; commercial, public sector and notfor profit. We have also made inroads into extending our geographic reach,signing up new accredited channel partners in both mainland Europe and the US.Our customer base continues to grow with our core product being used by morethan 80 organisations. In addition, we have also sold our new applications intosome of our existing customers. Early performance and feedback on the newapplications are very encouraging. The Board and Corporate Governance Three new Directors have joined the Board during the Placing process; BereniceSmith as Senior Independent Non-Executive Director, Sean McDonough asProfessional Services Director and Tim Sykes as Chief Financial Officer. Iwelcome all three to the Board and look forward to working with them over theyears ahead. Employees and accredited channel partners I would like to thank all management and staff at PROACTIS for their dedicationand commitment without which, of course, the progress would not have beenpossible. I would also like to thank our accredited channel partners whocontinue to contribute to our success. Outlook PROACTIS has made excellent progress in the year just ended. I look forward withconfidence to further good growth over the next twelve months and to deliveringvalue to our shareholders. A AubreyChairman9 October 2006 Chief Executive Officer's Report Business overview I am pleased to report that the Group has achieved a record performance withrevenues of £2.9 million for the year (2005: £1.9 million) - a 56% increase -delivering an operating profit (before exceptional costs related entirely to ourAdmission to AIM and the Placing) of £0.5 million (2005: £0.1 million) - a morethan eightfold increase. The operating loss after the costs of the placing was£0.1m (2005: profit £0.1m). These results reflect the combination of the relative strength of our productsagainst our competitors and the capability of our team to sell, implement andmaintain those products for our customers. We also recognise the valuable inputof our accredited channel partners to this performance. With the successful Admission to AIM during the year and the progress that hasbeen made in all areas throughout the business, this truly has been a year oftransformation for PROACTIS. Strategy The Placing raised £3.3 million net of expenses and has allowed the Company toexecute its strategy from a position of financial strength. Key achievementsduring the year ended 31 July 2006 and in the period since include: Developing the accredited channel partner route to market - we have increasedour accredited channel partners by 5, including 3 new international accreditedchannel partners in the US, Russia and the Commonwealth of Independent Statescountries and the Benelux respectively. Increasing the direct sales force - we have increased the number of our directsales team to 5 (2005: 2) including one specifically designated for channeldevelopment in the EMEA markets. Implementing a marketing and public relations programme - we have a detailedschedule of events over the coming year to raise the profile of the PROACTISbrand including eWorld Purchasing & Supply, GOVNET EXPO and t-Gov Procurement. Pursuing an acquisition strategy - since the Admission to AIM we have drawn up alist of potential acquisition targets. An ideal acquisition profile is acompetitor which has a complementary product and a customer base that offersgood opportunity for conversion to PROACTIS. Markets We are fortunate to operate in three major sectors; the Public sector, Not forProfit and Charities and the Commercial Services sector. Each of these sectors,whilst having specific challenges, have a truly global nature and offersignificant opportunities for our go-to-market strategy, namely a mixture ofdirect and indirect selling in the UK and indirect selling for the rest of theworld. Public sector - As the UK's eGovernment programme moves forward, localauthorities are under pressure to improve efficiency by embracing newtechnologies. eProcurement is recognised as one of the key pillars of asuccessful eGovernment strategy, seen by most as an effective way to reducepurchase costs, drive new efficiencies and promote collaboration across localgovernment. PROACTIS has a vision for implementing eProcurement that addresses everydayissues and offers real value across and beyond the local governmentorganisation. Our significant client base in this sector attests to our prowessand leaves us well placed to take advantage of the buoyant conditions. At 9October 2006, we had 24 (1 August 2005: 17) customer organisations usingPROACTIS in the Public sector. Not for Profit and Charities sector - Organisations face multiple pressures asthey seek to maximise donations, whilst delivering against obligations made tobeneficiaries, donors and employees and demonstrating efficient use of funds andgrants. PROACTIS has become a cornerstone for Not for Profit organisations and Charitiesas they move into a new era, offering them eProcurement and Spend Control,whilst promoting corporate governance with efficient and effective reporting toall stakeholders. At 9 October 2006, we had 18 (1 August 2005: 14) customerorganisations using PROACTIS in the Not for Profit and Charities sector.Commercial Services sector - Our offering is applicable to virtually allcommercial enterprises and we are particularly strong in the financial andprofessional services sectors. Spend control has become a recognised term for good procurement practice.Increasingly the control of spend on overheads has become a boardroom issue asthe old fashioned buying office has evolved into the strategic procurementdepartment. The realisation that spend control can markedly improveprofitability and streamline many outdated processes has led many managementteams to embark on this as a competitive strategy. PROACTIS has completed over 110 projects in the spend control and eProcurementspace and our reputation for high quality permeates through our completeoffering: from software, through implementation and into support during liveoperation. At 9 October 2006, we had 38 (1 August 2005: 27) customerorganisations using PROACTIS in the Commercial Services sector. Routes to market The basis for our approach is very simple: every organisation in the worldshould be able to buy and use our products. This means that our products supportlocal languages, currencies and companies where appropriate. We deliver ourproducts through a mixture of direct and indirect selling organisations, withthe indirect being dominant outside the UK. Our Accreditation and Certificationclasses have been designed specifically to provide the necessary in-builtquality that has become our hallmark over the last four years. Our unique method of working has meant that our accredited channel partners workhand-in-hand with our direct sales team to maximise value to our customerswhilst removing channel conflict. Products and product development Our core product is our "purchase to pay" spend control system which is used bymore than 90 organisations and has many modules within it to provide a tailoredsolution to suit any customer's requirements or budget. During the year, we havesold elements of our new applications a hosted, Sourcing, Supplier RelationshipManagement and eCommerce into 5 customer organisations. During the year to 31July 2006, we have spent approximately 10% of our revenue on improving anddeveloping our products (2005: 16%) and we will continue to invest at similarlevels to maintain and improve our competitive advantage. Prospects With the continued strengthening of the products and the team, I am confidentthat we can continue to deliver significant growth and shareholder value thisyear and in the future. Rod JonesChief Executive Officer9 October 2006 Chief Financial Officer's Report Results for the year Revenues increased by 56.3% to £2.9m from £1.9m and operating profit (beforeexceptional items related to the Admission to AIM and the Placing) increased to£0.5m from £0.1m. The quality of these earnings is strong in terms of sustainability and cash torevenue match. At 31 July 2006, we had net cash received in advance of revenuesto be taken during the following financial year of £0.6m (2005: £0.4m),principally being advance maintenance contract payments. Further, our recurringmaintenance revenue stream increased to £0.7m (2005: £0.4m) which coveredapproximately 58.8% of our administrative cost base (2005: 43.8%). Operating margins before exceptional items increased to 16.5% from 2.8% due to amix shift of revenues toward higher margin sales through our direct route tomarket and better leverage of the cost base. Revenue per head increased toapproximately £145,000 (2005: £116,000). Our continuing investment in research and development of our product increasedto £371,000 (2005: £298,000). The operating loss after the costs of the placing was £0.1m (2005: profit£0.1m). Taxation There was no tax charge during the year because trading losses from priorperiods have been utilised. There are approximately £2.0m of trading lossesstill available for further utilisation as and when profit is earned. Earnings Earnings per share before exceptional items increased to 2.5p (2005: 0.8p).Basic (and diluted) earnings per share were negative 0.5p (2005: positive 0.8p). Impact of the Placing and Admission to AIM and exceptional items The placing of approximately 9.3m shares at 43p per share raised £4.0m. After£0.7m of associated costs, the net cash inflow was £3.3m. At 31 July 2006, £0.4mwas still outstanding and this has now been settled. £0.3m of the fees has beenwritten off against the share premium account and £0.4m has been charged withinexceptional items. Cash flow The Group has reported an operating cash outflow of £0.2m (2005: inflow £0.3m).This cash outflow arises from a combination of exceptional items and short termtiming differences in relation to revenues in the latter part of the year beingsettled in the early part of the new year. I am pleased to inform you that thisshort term effect has already reversed at the date of this report. Treasury The Group continues to manage the cash position in a manner designed to maximiseinterest income, while at the same time minimising any risk to these funds.Surplus cash funds are deposited with commercial banks that meet credit criteriaapproved by the Board, for periods between one and six months. At 31 July 2006,the Group had £3.6m on short term deposits (2005: £0.3m). The Group repaid the Small Firms Loan Guarantee loan of £0.2m following thePlacing. Merger accounting The Group has applied merger accounting rules as required by FRS6 'Mergers andAcquisitions'. This has created a merger reserve of £0.6m at 31 July 2006 whichreflects the deficit of the nominal value of the share capital issued againstthe share capital and reserves (excluding the profit and loss account) of theacquired subsidiary at time of the share exchange. As required by FRS6, theGroup has then presented comparatives as if the Group had always been inexistence. International Financial Reporting Standards ("IFRS") conversion PROACTIS must prepare its financial statements under IFRS for the year ending 31July 2008. A project, with the objective of ensuring compliance withInternational Accounting Standards (as adopted by the EU), is underway. Tim SykesChief Financial Officer9 October 2006 Consolidated Profit and Loss Account for the year ended 31 July 2006 2006 2005 £000 £000 Turnover 2,905 1,859Cost of sales (1,261) (938) -------------- --------------Gross profit 1,644 921Administrative costs (1,747) (869) -------------- --------------_______________________________________________________________________________Operating profit before exceptional items 479 52Exceptional items (582) -_______________________________________________________________________________ -------------- --------------Operating (loss) / profit (103) 52 Interest receivable 29 6Interest payable (9) (15) -------------- --------------(Loss) / profit on ordinary activities before taxation (83) 43Taxation - 10 -------------- --------------(Loss) / profit on ordinary activities after taxation (83) 53 -------------- --------------Earnings per ordinary share :- Basic and diluted (0.5)p 0.8p -------------- --------------- Basic excluding exceptional items 2.5p 0.8p -------------- -------------- There is no material difference between the profit / (loss) on ordinaryactivities before taxation and the profit / (loss) for the financial yearsstated above, and their historical cost equivalents. All of the above activities are continuing. There were no recognised gains or losses other than the loss for the financialyear. Group and Company Balance Sheets as at 31 July 2006 Group Company 2006 2005 2006 £000 £000 £000Fixed assetsTangible assets 18 18 -Investments - - 2,046 Current assetsDebtors 1,105 368 909Cash at bank and in hand 3,764 365 3,519 ------------- ------------- ------------- 4,869 733 4,428Creditors - amounts falling due within one year (1,237) (762) (535) ------------- ------------- -------------Net current assets / (liabilities) 3,632 (29) 3,893 ------------- ------------- -------------Total assets less current liabilities 3,650 (11) 5,939Creditors - amounts falling due after more than one year - (146) - ------------- ------------- -------------Net assets / (liabilities) 3,650 (157) 5,939 ------------- ------------- ------------- Capital and reserves Called up share capital 3,012 639 3,012Share premium account 2,735 - 2,735Merger reserve 556 1,746 -Profit and loss account (2,653) (2,542) 192 ------------- ------------- -------------Shareholders' funds / (deficit) 3,650 (157) 5,939 ------------- ------------- ------------- Consolidated Cash Flow Statement for the year ended 31 July 2006 2006 2005 £000 £000 £000 £000Net cash (outflow) / inflow from operating activities (202) 295 Returns on investments and servicing of financeInterest received 20 6Interest paid (9) (15) ----------- -----------Net cash inflow / (outflow) from returns on investment and servicing of finance 11 (9) Taxation 10 7 Capital expenditure and financial investmentPurchase of tangible fixed assets (11) (8) Management of liquid resourcesCash used to increase short term deposits (3,265) (215) ----------- -----------Cash flow before use of financing (3,457) 70 FinancingProceeds from the placing 4,000 -Costs of the Placing (335) -Shares issued from employee share option schemes 97 -Loans repaid (171) (25) ----------- -----------Net cash inflow / (outflow) from financing 3,591 (25) ----------- -----------Increase in cash 134 45 ----------- ----------- Reconciliation of net cash flow to movement in net funds 2006 2005 £000 £000Increase in cash 134 45Loans repaid 171 25Management of liquid resources 3,265 215 ----------- -----------Increase in net funds from cash flows and movement in net cash in the year 3,570 285 Net cash / (debt) at 1 August 194 (91) ----------- -----------Net cash at 31 July 3,764 194 ----------- ----------- Notes 1. The financial information set out herein does not constitute the Group's statutory accounts for the years ended 31 July 2006 or 31 July 2005 but is derived from those financial statements. The statutory accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies following the Annual General Meeting. The comparative information in respect of the period ended 31 July 2005 has been derived from the statutory accounts of PROACTIS Group Limited for the period ended on that date, and upon which an unqualified audit opinion was expressed, and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. Copies of the Company's financial statements will be sent to shareholders in due course and copies will be made available at the Company's registered office: Holtby Manor, Stamford Bridge Road, York, YO19 5LL. 2. Exceptional items represent the professional and other fees related to the Admission to AIM and the Placing. 3. Basic and diluted loss per ordinary share The calculation of earnings per ordinary share is based on the profit or loss for the period and the weighted average number of equity voting shares in issue. The number of shares in issue has been restated to reflect the merger accounting of PROACTIS Group Limited. Therefore the number of shares in the comparative period is the aggregate of the weighted average number of shares of the combined entities, adjusted to equivalent PROACTIS Holdings PLC shares and for shares issued during the year. 2006 2005 Earnings (£000) (83) 53Exceptional items (£000) 582 -Taxation on exceptional items (£000) (95) - ------------- -------------Earnings before exceptional items (£000) 404 53 ------------- -------------Weighted average number of shares (number '000) 16,265 6,389 ------------- -------------Basic and diluted (loss) / earnings per ordinary share (pence) (0.5p) 0.8p ------------- -------------Earnings before exceptional items per ordinary share (pence) 2.5p 0.8p ------------- ------------- 4. Net cash (outflow) / inflow from operating activities 2006 2005 £000 £000Group :Operating (loss) / profit (103) 52Depreciation of tangible fixed assets 11 10(Increase) / decrease in debtors (738) 57Increase / (decrease) in creditors 628 176 ------------- -------------Net cash (outflow) / inflow (202) 295 ------------- ------------- £535,000 of the increase in creditors relates to the professional fees and othercharges related to the Admission to AIM and the Placing. This information is provided by RNS The company news service from the London Stock Exchange