PHD.L Regulatory News (PHD)

1 Jun 2006 08:01

PROACTIS Holdings PLC01 June 2006 Embargoed until 08.01 on 1 June 2006 Not for release, distribution or publication in whole or part in or into the United States, Australia, Canada, Japan or South Africa PROACTIS Holdings PLC ("PROACTIS" or the "Company") FIRST DAY OF DEALINGS AND ADMISSION TO TRADING ON AIM PROACTIS, the specialist Spend Control software provider, announces thatadmission to trading on AIM will become effective, and dealings in the Ordinaryshares of the Company will start, at 8.00am today, 1st June 2006, under theticker symbol 'PHD'. Highlights • The placing price is 43p per Placing Share (the "Placing Price") • At the Placing Price Proactis will, on the commencement of dealings on AIM, have a market capitalisation of approximately £13m • The amount of new money raised for the Company will be approximately £4 million, gross • PROACTIS creates, sells and maintains specialist software which enables organisations to streamline, control and monitor all internal and external expenditure, other than payroll. This helps organizations to automate many procedures, to ensure the use of preferred suppliers, to monitor spend against budget and to reduce maverick spending • PROACTIS' software is already used in over 70 organisations in the UK from the commercial, public and not-for-profit sectors. These include HMV, Wickes, Virgin Holidays, The Law Society, Scottish Borders Council, English Sports Council, NSPCC, Amnesty International and National Trust Scotland • For the year to 31 July 2005 PROACTIS more than doubled revenues to £1.9 million. For the first 8 months of the current year, to 31 March 2006, Proactis achieved turnover of £1.8 million. For the year to 31 July 2005 PROACTIS achieved a pre-tax profit of £43,000 (2004: loss of £200,000). For the first 8 months of the current year, to 31 March 2006, PROACTIS achieved a pre-tax profit of £252,000 • Teather and Greenwood is Nominated Advisor and Broker to PROACTIS Rod Jones, Chief Executive, commented:"PROACTIS is a profitable, cash generative business. The listing will enable usto speed up our growth through the development of our sales force and channelsto market. We look forward to taking advantage of the very excitingopportunities available to us in the commercial, public and not-for-profitsectors. "PROACTIS has received a strong reception from investors and we are delighted tobe listing on AIM." -ends - Enquiries: PROACTIS 01904 481 999Alan Aubery, Non-Executive ChairmanRod Jones, Chief Executive Teather & Greenwood Limited 0207 426 9000Robert NaylorHarry Nicholas Weber Shandwick Square Mile 0207 067 0700Nick OborneJohn Moriarty Notes to Editors Introduction PROACTIS creates, sells and maintains specialist software under the brandPROACTIS P2P, which enables organisations to streamline, control and monitor allinternal and external expenditure, other than payroll. PROACTIS P2P is alreadyused in over 70 organisations in the UK from the commercial, public andnot-for-profit sectors. 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. Product PROACTIS P2P can be deployed across an entire organisation, giving all users ameans of ordering goods or services online from an approved catalogue and at thesame time directing them toward preferred suppliers. PROACTIS P2P has thefollowing key benefits: • Internal cost reduction; PROACTIS P2P automates many key administrative processes thereby reducing cost within the finance and procurement departments of organisations deploying it. • Low integration costs, maintenance costs and inexpensive upgrades; PROACTIS P2P is a 'zerofootprint''application. This means it is installed on central servers and users access it through Microsoft Internet Explorer. It is not installed on the desktop so maintaining and upgrading are inexpensive and simple to achieve. • Preferred suppliers and best value; PROACTIS P2P allows user organisations to enforce internal procedures and supports best practice by leading users to preferred suppliers therefore promoting best value suppliers. • Visibility of incurred and committed cost against budget; the PROACTIS P2P suite of software enables an organisation to have a real time visibility of its spend against budget by combining a detailed analysis of its committed future spend along with a detailed analysis of incurred spend. Visibility of committed cost pipeline is an important element of business for all organisations, when seeking to adhere to budgets. • Enforcing internal control: PROACTIS P2P supports commitment accounting regardless of the existing financial systems in place, by providing budget checking before the order is placed, not after the goods have been received. This reduces the risk of maverick spend. Although the internet has created an opportunity for organisations to simplify and improve their procurement process, it has also substantially increased the risk of maverick spending in organisations. PROACTIS P2P assists organisations to address the risk of maverick spend. Customers PROACTIS P2P is already used in over 70 organisations in the UK. The Directorscategorise customers into three sectors being; commercial, public andnot-for-profit. Examples of customers in each sector include: • Commercial: HMV, Wickes, Hoyer, Virgin Holidays, National Car Rental, Teletext, KBC Financial Products, Mercer HR and Waste Recycling Group. • Public: The Law Society, Scottish Borders Council, Cumbria County Council, Caerphilly (Caerffili) County Council, The University of Birmingham, Greater Manchester Public Transport Executive and English Sports Council. • Not-for-profit: NSPCC, Refugee Council, Amnesty International, National Trust Scotland, Disability Rights Commission and Peabody Trust. Technology The Group is a Microsoft Gold Partner and has developed PROACTIS P2P as aMicrosoft application. For end users this means a stable application that israpidly deployable and complementary to most existing back-office systems suchas financial management, payroll, HR and document management systems. ForAccredited Channel Partners, this means a product with a secure future, that iseasy to integrate and has industry standard features and functions that areendorsed by Microsoft. PROACTIS P2P can be implemented on a standalone basiswithin an organisation or integrated into back-office financial or ERP systems. Business revenue model The Group's business model can be analysed into three phases; licence delivery,implementation services and maintenance. • Licence delivery: Licence codes and copy software are delivered to the user on receipt of an order. • Implementation services: Professional services are deployed during the implementation process. Service revenues are initially targeted by the Group to be 50 per cent. of new licence revenues. However, the Directors believe there is an opportunity to significantly increase the level of service revenues. • Maintenance: Customers pay for maintenance through annual contracts paid for in advance. Route to market PROACTIS employs two principal routes to market: Direct selling and AccreditedChannel Partners. • Direct selling: Currently, direct selling is predominant in the Group's sales to the UK public sector and PROACTIS recognises that the customers in this sector prefer to deal with the author of the software rather than Accredited Channel Partners. The size of the Group's current direct sales force is small but the Directors believe expansion of this direct sales force will increase the number of customers both within and outside the UK public sector. • Accredited Channel Partners: The Group has 11 Accredited Channel Partners and is seeking to appoint additional Accredited Channel Partners in the short to medium term. Market overview The Directors believe the Group's market can be broken down into the followingthree sectors: • Commercial: In this sector the Group principally targets medium to large corporates who would have an overall revenue of circa £20 million for a medium corporate and circa £1 billion for a large corporate. The Directors estimate there are approximately 10,000 organisations in the commercial sector in the UK which are potential customers for PROACTIS P2P. The Directors will target the commercial sector primarily through existing and new Accredited Channel Partners. • Public: The Directors believe that the public sector opportunity is driven by legislative guidelines for the adoption of new working practices such as those set out in the EU Procurement Directive and the e-Government Directive. There are some 1,200 publicly funded organisations including Local Authorities, NHS trusts, Higher Education Colleges, Universities, Government Offices and Police Authorities. There is a need to control significant spend budgets in these organisations. The public sector spends over £100 billion each year on procuring goods and services. The government have set out efficiency targets for the public sector which are aimed at achieving significant savings. One of the areas where cost savings are being sought is in the procurement of goods and services. The Directors believe PROACTIS P2P is well placed to benefit from this drive to improve and control the procurement process in the public sector. The Directors will target the public sector primarily through the direct sales force. • Not-for-profit: There are over 100 not-for-profit organisations in the UK of a size which the Directors believe could be potential users of PROACTIS P2P. A number of these organisations are also required to follow similar guidelines to those for the public sector, namely the EU Procurement Directive and the e-Government Directive and many of the remainder may, as a matter of good practice, follow such guidelines. The Directors will target the not-for-profit sector primarily through existing and new Accredited Channel Partners. Strategy The Directors have developed a core strategy which is focused on the followingkey elements: • The Group capitalising on its early stage penetration into the UK public sector: The Directors believe that, under current UK government legislative guidelines for the public sector and as a result of the 2004 report by Sir Peter Gershon entitled ''Releasing resources to the front line - an independent review of public sector efficiency'', which sets out target based cost savings, the Group is ideally placed to take advantage of its early stage penetration into this sector. Expansion of the direct sales force should facilitate further penetration of the public sector market. • Targeting mid-sized corporates for growth in customer base: The Directors believe that there is significant opportunity for PROACTIS to increase its presence in the mid-size corporate market with PROACTIS P2P. • Entry into new geographic markets: The Directors believe that the multi site, multi currency and multi language capability of PROACTIS P2P combined with its low cost and low risk Accredited Channel Partner route to market, leaves the Group well placed to access new geographic markets. • Market consolidation: The Directors believe that the Group is well placed to take advantage of the significant opportunity for consolidation in the software sector to complement the Group's activities. Summary financial information The following financial information has been extracted from the Accountants'Report on PROACTIS Group Limited for the three years ended 31 July 2005 and forthe 8 months ended 31 March 2006 in Part IV of this document and should be readin conjunction with the full text of this document. Investors should not relysolely on the summarised information. 8 months Year ended Year ended Year ended ended 31 July 31 July 31 July 31 March 2003 2004 2005 2006 £ £ £ £ __________________________________________________________________ Turnover 1,188,003 907,786 1,858,537 1,787,944EBITDA 88,355 (122,748) 62,032 258,113EBIT 97,505 (139,510) 51,597 250,961PBT (19,249) (200,511) 42,794 252,544 Since 31 March 2006 the Group has continued to trade in line with Directors'expectations. Directors and employees The Board consists of eight Directors for whom brief biographies are set outbelow. Alan Aubrey (aged 45), Non-Executive Chairman Mr Aubrey is the Chief Executive Officer of IP Group plc, an AIM listed company that specialises in commercialising intellectual property originating from research intensive institutions. He is also a non executive director of Syntopix Group plc, an AIM listed company that develops new therapeutics for dermatology markets. Mr Aubrey is a fellow of the Institute of Chartered Accountants of England and Wales. Rod Jones (aged 54), Chief Executive Officer Appointed Chief Executive in 2002, Mr Jones has held senior management roles in a number of global technology companies. These include; European Vice President at Cincom Systems Inc., International Director of Western Data Systems Inc. and President of NASDAQ listed Ross Systems Inc. Terry Wilcox (aged 51), Commercial Director Appointed Commercial Director in 2003, Mr Wilcox's previous roles include; Sales and Marketing Director of CODA Group plc, Vice President of Kana Inc. and Chief Executive of Silknet Europe Limited. Tim Sykes (aged 36), Chief Financial Officer Mr Sykes is a qualified Chartered Accountant and a director of Penta Financial Direction Limited, his own business advisory practice which specialises in providing accounting services to small businesses. Prior to establishing Penta Financial Direction Limited, Mr Sykes was Commercial Director at Mountain Warehouse Limited and prior to that he was an associate director within KPMG's transaction services group. Mr Sykes was appointed as a Director in 2006. Kevin Chidlow (aged 43), Chief Technical Officer Mr Chidlow is the principal architect of the PROACTIS P2P product set and is the head of product strategy and development. Prior to joining PROACTIS in 1997, he worked as an implementation and software development manager with international software developer IBS and as a Local Government systems accountant. Mr Chidlow is a member of the Chartered Institute of Public Finance and Accountancy (IPFA) and he was appointed as a Director of PG in 2001. Sean McDonough (aged 45), Director of Professional Services Mr McDonough joined the Group as Director of Professional Services in 2005 from Azolve Limited. He was previously Director of Professional Services for the CODA Group plc, Silknet Europe Limited and Kana Inc. and he was appointed as a Director in 2006. Rodney Potts (aged 61), Non-Executive Director Mr Potts was appointed a Director of PG in 1997. Mr Potts was one of the founders and former Chief Executive of CODA Group plc, the global provider of accounting systems. He is a director of a number of technology ventures. Berenice Smith (aged 43), Non-Executive Director Ms Smith has been Finance and Commercial Director of the University of Leeds since 1996. Prior to this, Ms Smith's other roles included senior finance positions for; Dixons Stores Group plc., Gillette Inc. and Wickes plc. Ms Smith is a member of the Chartered Institute of Management Accountants. Ms Smith was appointed as a Director in 2006. Reasons for the Placing and Admission The Company intends to raise approximately £3.3 million net of expenses pursuantto the Placing. The net proceeds of the Placing will be used by the Company to: • further develop the Accredited Channel Partners route to market to sell the Group's products to a wider market; • increase the direct sales force with the intention of widening the Group's presence as a preferred supplier in the public sector in the UK; • raise the profile of the Group by implementing a marketing and public relations program; • pursue appropriate acquisition opportunities; and • strengthen the balance sheet to increase the credibility of the Group when negotiating with larger organisations. This information is provided by RNS The company news service from the London Stock Exchange