PHD.L Regulatory News (PHD)

30 Oct 2007 07:00

PROACTIS Holdings PLC30 October 2007 For immediate release 30 October 2007 PROACTIS Holdings PLC Preliminary Results for the year to 31 July 2007 PROACTIS Holdings PLC ("PROACTIS", the "Group" or the "Company"), the specialistSpend Control software provider, announces its preliminary results for the yearto 31 July 2007. Highlights: • Revenue growth of 84% to £5.3m (2006: £2.9m) • Profit before tax increased to £1.1m (2006: loss £0.1m) • Earnings per share increased to 3.5p (2006: loss per share of 0.5p) • 48 new client wins in the year (including Virgin Active, The Tote and United Nations) and 30 paid upgrade deals from existing clients • Five new Accredited Channel Partners, growing our portfolio to 23 (2006: 18) • Successful acquisition of a commercial sector competitor, Requisoft, now fully integrated with £0.3m of annualised overhead savings made • Successful acquisition of Alito, enhancing the Group's strong position in the UK public sector • Successful launch into North America; partner agreements signed and first revenues received (clients including Department of Treasury for Pennsylvania and City of Trenton) • Sponsored development Partnership agreement with Microsoft, supporting entry into US market Rod Jones, CEO commented: "This year, the first full year since our flotation in June 2006, saw excellentprogress for PROACTIS on all fronts. We have achieved another year of recordfinancial performance, made two strategically important acquisitions in the UKand have extended our global reach, particularly in the US, where we have alliedourselves closely to Microsoft. I am confident in our current position andability to grow substantially for the foreseeable future." - ends - Enquiries: PROACTIS 019 3754 5070Rod Jones, Chief Executive OfficerTim Sykes, Chief Financial Officer Weber Shandwick Financial 020 7067 0700Nick Oborne / John Moriarty / James White Landsbanki Securities (UK) Limited 020 7426 9000Gareth Price / Simon Brown PROACTIS creates, sells and maintains specialist software which enablesorganisations to streamline, control and monitor all internal and externalexpenditure, other than payroll. PROACTIS is already used in over 150organisations in the UK from the commercial, public and not-for-profit sectors. PROACTIS is a profitable, high growth business head quartered in Wetherby, WestYorkshire. It develops its own software using an in-house team of developers andsells through both direct and indirect channels via a number of AccreditedChannel Partners. PROACTIS floated on the AIM market of the London Stock Exchange in June 2006. Chairman's and Chief Executive Officer's Report Business overview We are pleased to report that the Group has achieved excellent growth withrevenues of £5.3m for the year (2006: £2.9m) - an 84% increase - delivering aprofit before taxation of £1.1m (2006: loss £0.1m after £0.6m of AIMflotation-related costs) - a 118% increase. These results reflect a tremendous effort in our first full year since admissionto AIM with strong organic growth from our core business and excellentcontributions from our two acquisitions, Requisoft and Alito. Our existingAccredited Channel Partners continue to perform very well and, with several newpartners bringing in deals during the second half of the year, we remainoptimistic about our prospects looking forward. Strategy Our strategy and focus to grow the business remain unchanged and we continue toexecute the plans we set out at the time of our flotation. Key achievements inthe year ended 31 July 2007 and in the period since include: - Increasing our customer base. We achieved some 48 new deals in the year, with additional revenue coming from a further 30 upgrade sales to existing clients. - Developing the Accredited Channel Partner route to market. We have increased our Accredited Channel Partners by five including two major new partners in the UK and another in the USA. We have also cemented a tight relationship with Microsoft and have jointly developed an enhanced solution for delivery initially into the US Public sector. This should open up the substantial Microsoft Channel and assist in the signing of new partners in the region. - Investing in the direct sales force. The size of the organic team remains similar to last year (five), but by virtue of our acquisitions of both Requisoft and Alito, we have added to and become more effective in our chosen markets with dedicated resources selling direct to the UK Commercial and UK Public sectors. - Acquisition strategy. We have made two acquisitions in the year; Requisoft, a competitor in the UK commercial market and Alito, a supplier of Sourcing solutions to the UK Public sector. Both acquisitions have delivered new wins and positive contributions from the date of acquisition. Requisoft is now fully integrated into the core business and Alito will follow. - US expansion. We have commenced our entry into the high opportunity US market which could be a large component of our longer term growth objectives. Initially, we have recruited a small, highly focussed team that has already been successful in taking its first revenues. We are partnering tightly with Microsoft and are encouraged by its sponsored development of our software. - Improved public relations. We have applied ourselves diligently to this exercise and now feature regularly in national computer press, web site blogs, specialist magazines and analyst briefings. This results in far more in-bound activity and makes our partner recruitment and selling process much easier. Markets We are confident that our chosen markets remain open to us and that we canachieve the desired penetration in each. Each of these sectors, whilst havingspecific challenges, are global in their nature and we are finding manyopportunities for our direct and indirect channels. Public sector The UK's e-Government programme continues to provide impetus, with localauthorities under pressure to improve efficiency by embracing new technologies.Our Sourcing, Supplier Relationship and e-Procurement solutions are nowrecognised by many as being the "best-in-class" offering for this sector. Theaddition of Alito, with its public sector focus, has given us a competitiveadvantage and allows us to deliver a true end-to-end solution. PROACTIS has now captured some 75 UK Public sector accounts (2006: 24) and ourAccredited Channel Partners in the US have added several others, including theDepartment of Treasury for Pennsylvania and the City of Trenton. UK governmentpressure is expected to intensify the need for our product type and thisprovides us with a great opportunity for future growth in this sector. Not for Profit and Charities sector Organisations face multiple pressures as they seek to maximise donations whilstdelivering against obligations made to beneficiaries, donors and employees anddemonstrating efficient use of funds and grants. PROACTIS has become a cornerstone for many Not-for-Profit (NfP) and Charityorganisations as they move into a new era offering e-Procurement and SpendControl whilst promoting corporate governance and transparency of information toall stakeholders. PROACTIS has 28 (2006: 18) customer organisations in the NfPand Charities sector. Commercial Services sector Our offering is particularly strong in the financial and professional servicessector, offering many advantages over the traditional solutions and providingflexibility when clients are looking to replace financial management solutions. Our clients have recognised that cost savings made on goods and services dropstraight to the bottom line, making the decision to buy PROACTIS Spend Controlone of the most compelling available to management today. Increasingly thecontrol of spend on overhead is seen as the "quick win" producing an ROI inmonths rather than years, and can be the catalyst for process changes thatprovide the platform for a long term competitive strategy. PROACTIS has 65(2006: 38) customer organisations using PROACTIS in the Commercial sector. PROACTIS has now completed over 200 projects in the spend control ande-Procurement arena and our reputation for supplying high quality systems isbeing widely recognised by end user organisations and consultancies alike. Routes to market The basis for our approach is very simple: every organisation in the worldshould be able to buy and use our software. This means that we must supportlocal languages (we have seven language options available), currencies,companies and customers where appropriate. We deliver our software through amixture of direct and indirect selling organisations, with the indirect beingdominant outside the UK. Our Accreditation and Certification classes have beenbuilt specifically to provide the necessary in-built quality that has become ourhallmark over the last five years. Our unique method of working has meant that our accredited resellers workhand-in-hand with our direct sales organisation to maximise value to our clientswhilst removing channel conflict. Products and product development Our core product is PROACTIS P2P (our "purchase to pay" spend control system)which is established in more than 120 customer organisations. It has manymodules within it to provide a tailored solution to suit any customer'srequirements or budget. We are now converting the Requisoft clients to PROACTISP2P and have been actively promoting our PROACTIS Plaza solutions to existingand new clients alike. The Alito hosted solution is still being marketed to thePublic sector; over time its unique IPR will be moved to the PROACTIS Plazaenvironment making the whole product suite more easily deployable. During theyear to 31 July 2007, we have maintained our level of investment in productdevelopment at 12% of revenues (on an expensed as incurred basis) (2006: 12%)and we will continue to invest at similar levels to maintain and further ourcompetitive advantage. Employees We thank all management and staff of the Group for their dedication andcommitment without which, of course, the progress would not have been possible. Prospects PROACTIS has delivered significant shareholder value over the last year. Withthe continued strengthening of the products and our team, we are confident thatwe will continue to deliver significant growth and shareholder value in thefuture. Alan Aubrey Rod JonesChairman Chief Executive Officer30 October 2007 Chief Financial Officer's Report Results for the year and key performance indicators Revenues increased by 84% to £5.3m from £2.9m and profit before taxationincreased to £1.1m from a loss of £0.1m last time (after charging £0.6m ofexpenses relating to the admission to AIM and the Placing). The quality of these earnings remains strong. At 31 July 2007, net cash receivedin advance of revenues was £1.3m (2006: £0.6m), principally being advancedmaintenance contract payments. Further, our high retention maintenance revenuestream increased to £1.5m (2006: £0.7m) which covered 53% of our administrativeoverhead base (2006: 40%). The cost of the continuing internal software development programme increased to£0.6m (2006: £0.4m). Acquisitions Requisoft and Alito contributed £1.6m to group revenues since their respectiveacquisition dates and both were profitable, delivering £0.2m to operatingprofit. We have removed £0.3m of annualised overheads in Requisoft sinceacquisition and we expect to make more savings as the client base migrates fromold Requisoft code base to PROACTIS' own code base. This means that there isapproximately £0.1m of non-recurring overhead within our reported result. The cumulative cash outflow for these acquisitions is £2.5m. The final consideration payment for the acquisition of Requisoft of £0.3m is duein cash in November 2007 and is provided for within this result. The finalconsideration payment for the acquisition of Alito is due in May 2008. It isvariable, dependent on future performance, but is capped at £1.75m part cash,part shares. £1.25m is provided for within this result. US investment The cumulative net investment in the strategically important US market amountsto approximately £0.2m, all of which has been expensed as incurred. Earlyindications are good with first revenues already taken. Taxation There was a small charge to taxation during the year. We have utilised trading losses from prior periods within the group but post-acquisition profits within the acquired businesses cannot be offset. There remains approximately £1.1m of trading losses still available for further utilisation as and when profit is earned. Earnings per share Basic earnings per share increased to 3.5p (2006: loss per share 0.5p). Dividend The payment of dividends will be subject to availability of distributablereserves whilst maintaining an appropriate level of dividend cover and havingregard to the need to retain sufficient funds to finance the development of theGroup's activities. In the short term it is the Directors' intention tore-invest funds into the Company rather than fund the payment of dividends.Accordingly, the Directors do not recommend the payment of a dividend. Cash flow The Group has reported a net cash inflow from operating activities of £0.7m(2006: £Nil) which is in line with the reported operating profit of the groupbefore non recurring items and share-based payment charges of £0.7m (2006:£0.5m). 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 2007,the Group had £0.8m on short term deposits (2006: £3.6m). IFRS and new accounting issues The Group has adopted the principles of accounting under IFRS earlier than it isrequired. The principle areas that are affected are as follows: - Internal development: Under IAS38 'Intangible Assets' the Group is required to capitalise internally generated intangible development costs. The Group has capitalised only £0.3m of these costs cumulatively within the balance sheet and a net £0.1m during the year ended 31 July 2007; - Acquisitions: Under IFRS3 'Business Combinations' the Group is required to capitalise the separate intangible assets of the acquired businesses along with any associated goodwill and to review this annually for impairment. The Group has capitalised £4.8m of intangible customer related assets, representing the value of customer relationships acquired as part of the Requisoft and Alito acquisitions, and £1.2m of goodwill, principally relating to Alito. The Group has recognised an associated deferred tax liability of £1.4m. The customer related assets will be reviewed annually for impairment; and, - Share based payment: Under IFRS2 'Share based payment' the Group is required to recognise the cost of its share option schemes for employees. The Group has adopted the Black-Scholes model to quantify this charge and it has resulted in a charge of £86,000 for the year ended 31 July 2007 (2006: £44,000). Tim SykesChief Financial Officer30 October 2007 Consolidated Income Statement for the year ended 31 July 2007 2007 2006 Notes £000 £000Revenue- acquisitions 1,563 -- continuing 3,777 2,905 ------------- ------------Total revenue 5,340 2,905 Cost of sales (1,620) (1,261) ------------- ------------Gross profit 3,720 1,644 Administrative costs (2,762) (1,748) ------------- --------------------------------------------------------------------------------------------Operating profit before non recurring itemsand share-based payment charges 744 522Non-recurring administrative income / (expenses) 300 (582)Share-based payment charges (86) (44) ------------- ------------ --------------------------------------------------------------------------------Operating profit- acquisitions 210 -- continuing 748 (104) ------------- ------------Total operating profit / (loss) 958 (104) Finance income 130 29Finance expenses - (9) ------------- ------------Profit / (loss) before taxation 1,088 (84) Taxation (29) - ------------- ------------Profit / (loss) for the year 1,059 (84) ------------- ------------Earnings / (loss) per ordinary share :- Basic 3 3.5p (0.5p) ------------- ------------- Diluted 3 3.4p (0.5p) ------------- ------------ Consolidated Balance Sheet as at 31 July 2007 2007 2006 Notes £000 £000 Non-current assetsProperty, plant & equipment 140 18Intangible assets 6,273 212 ------------- ------------ 6,413 230 ------------- ------------Current assetsTrade and other receivables 2,500 1,105Cash and cash equivalents 1,267 3,764 ------------- ------------ 3,767 4,869 ------------- ------------Total assets 10,180 5,099 ------------- ------------Current liabilitiesTrade and other payables 2,464 838Deferred income 1,260 399 ------------- ------------ 3,724 1,237 ------------- ------------Non-current liabilitiesDeferred taxation 1,447 - ------------- ------------ 1,447 - ------------- ------------Total liabilities 5,171 1,237 ------------- ------------Net assets 5,009 3,862 ------------- ------------Equity attributable to equity holders of theCompany Called up share capital 3,018 3,012Share premium account 2,735 2,735Merger reserve 556 556Retained earnings (1,300) (2,441) ------------- ------------Total equity 4 5,009 3,862 ------------- ------------ Consolidated Cash Flow Statement for the year ended 31 July 2007 2007 2006 £000 £000Operating activitiesProfit for the period 1,059 (84)Amortisation of intangible assets 212 169Depreciation 25 11Net finance income (130) (20)Income tax credit 29 - ------------- ------------Operating cash inflow before changes in working capital 1,195 76Movement in trade and other receivables (994) (738)Movement in trade and other payables 237 628Share based payment charges 86 44 ------------- ------------Operating cash inflow from operations 524 10Net interest received 130 11Income tax received 6 10 ------------- ------------Net cash flow from operating activities 660 31 ------------- ------------Investing activitiesPurchase of plant and equipment (103) (11)Development expenditure capitalised (273) (212)Acquisition of subsidiaries (2,508) - ------------- ------------Net cash flow from investing activities (2,884) (223) ------------- ------------Financing activitiesNet (outflow) / inflow from the Placing (275) 3,665Proceeds from issue of shares 2 97Repayment of bank borrowing - (171) ------------- ------------Net cash flow from financing activities (273) 3,591 ------------- ------------Net increase in cash and cash equivalents (2,497) 3,399Cash and cash equivalents at the beginning of the year 3,764 365 ------------- ------------Cash and cash equivalents at the end of the year 1,267 3,764 ------------- ------------ Notes 1. The financial information set out herein does not constitute the Group's statutory accounts for the year ended 31 July 2007 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 year ended 31 July 2006 has been derived from the audited statutory accounts for the year ended on that date, as restated for the first time adoption of International Financial Reporting Standards ("IFRS") as referred to below, upon which an unqualified audit opinion was expressed and which did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The audited financial statements will be available by contacting the Company Secretary at the Company's Registered Office. 2. Basis of preparation The financial information has been prepared and approved by the directors in accordance with IFRS as adopted by the European Union. The first time adoption of IFRS has impacted on the year's results. The principal changes relate to: - Acquisition of subsidiaries (treatment of goodwill and intangible assets); - Share-based payments; and - Treatment of software development in accordance with IAS38 where certain strict criteria are met. The net impact of the restatement of last year's figures was to increase the loss for the year from a loss of £83,000 to a loss of £84,000. Net assets increased from £3,650,000 to £3,862,000. The rules for first time adoption of IFRS are set out in IFRS1 'First time adoption of international financial reporting standards'. In accordance with IFRS1, the Company has determined its IFRS accounting policies and has applied these retrospectively to determine its opening balance sheet under IFRS. 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 as follows. The number of shares in issue during the prior year was 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 that year. 2007 2006 Earnings (£000) 1,059 (84) ------------- -------------Weighted average number of shares (number '000) 30,134 16,265 ------------- -------------Basic earnings / (loss) per ordinary share (pence) 3.5p (0.5p)Diluted earnings / (loss) per ordinary share (pence) 3.4p (0.5p) ------------- ------------- 4. Reconciliation of movement in shareholders' funds 2007 2006 £000 £000 Profit / (loss) attributable to ordinary shareholders 1,059 (84) Other recognised gains :- Arising on share for share exchange - 129- Arising on the placing - 3,665- Shares issued under employee share option scheme 2 97- Share option charge 86 44 ------------- -------------Addition to shareholders' funds 1,147 3,851Opening shareholders' funds 3,862 11 ------------- -------------Closing shareholders' funds 5,009 3,862 ------------- ------------- This information is provided by RNS The company news service from the London Stock Exchange