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PROACTIS Holdings PLC

Interim results for the six months ended 31 January 2014

PROACTIS Holdings PLC, a global Spend Control and eProcurement solution provider, today issues its interim results for the six month period ended 31 January 2014.

Financial highlights

w Reported revenue increased by 3% to £4.03 m (31 January 2013: £3.92m)

w Adjusted operating profit increased by 217% to £454,000 (31 January 2013: £143,000)

w Reported operating profit increased to £316,000 (31 January 2013: £3,000)

w Strong balance sheet with cash balances of £2.4m (31 July 2013: £2.3m)

Revenue visibility

w Total contracted, deferred multi-year revenue increased by 15% to £7.1m (31 July 2013: £6.2m)

w Annualised contracted revenue increased by 6% to £5.7m (31 July 2013: £5.4m)

Operational highlights

w Total Initial Contract Value signed on new deals was £1.6m (31 January 2013: £1.5m) with £0.7m recognised in the period (31 January 2013: £0.8m)

w Deal activity is buoyant with 15 new name deals (31 January 2013: 15) and continued strong customer loyalty with 39 upgrades in the period (31 January 2013: 29)

w Multi-year, transactional priced Cloud/SaaS solutions is in line with expectations - 8 new customers (31 January 2013: 6)

w 100% SaaS renewals in the period

w Indian joint venture signs two new deals with Mittal network

Post period highlights

w Acquisition of EGS Group Limited completed on 7 February 2014

w EGS has signed 3 new name deals since the acquisition

w Synergies of £0.3m per annum realised in line with integration plan with more identified

w Conditional Loan Note Facility of up to £5m signed

Rod Jones, Chief Executive Officer, commented:

"It has been a transformational period for the Group, and I am pleased to report a strong set of results with very encouraging levels of profit. The Group's forward order book has reached record levels at £7.1m and, with a solid increase in reported revenue for the period, this firmly endorses our strategy of moving to a mixed SaaS and perpetual licence model and provides a platform on which to drive further growth.

"Our core UK business is growing well. New deal volumes are positive and sales and marketing activity is high. Complementing that growth, overseas, the Group's Indian operation has made further progress; two new deals were signed with Mittal network companies in the period, with more in the pipeline.

"We are pleased to confirm the Group's commitment to M&A as a core element of its growth strategy following the acquisition of EGS, which will impact our numbers positively in the coming months. The Group has a number of attractive opportunities available to it and will look to exploit these over the year ahead.

"I am confident that the Group is now at an inflection point and the opportunities for growth are substantial. Further M&A opportunities are being reviewed and I am confident that the Group will continue its organic growth and impressive win rate, and that this, combined with an excellent product and strong pipeline, will continue to drive value for stakeholders."

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Notes to editors:

PROACTIS creates, sells and maintains specialist software which enables organisations to streamline, control and monitor all internal and external expenditure, other than payroll. PROACTIS is already used in over 400 organisations around the world from the commercial, public and not-for-profit sectors. It is the largest independent eProcurement solution provider to the UK Public Sector.

PROACTIS is head quartered in Wetherby, West Yorkshire. It develops its own software using an in-house team of developers and sells through both direct and indirect channels via a number of Accredited Channel Partners.

PROACTIS floated on the AIM market of the London Stock Exchange in June 2006.

CLOUD COMPUTING is defined as location-independent computing, whereby shared servers provide resources, software, and data to computers and other devices on demand, as with the electricity grid.

CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S REPORT

Performance overview

I am delighted to report record revenues for the half year of £4.0m (31 January 2013: £3.9m) and strong order book growth to £7.1m (31 July 2013: £6.2m).

The Group secured 15 new deals in the period (31 January 2013: 15) of which 8 (31 January 2013: 6) were subscription deals and 7 (31 January 2013: 9) were perpetual deals.

During 2010, the Group took the decision to offer both subscription and perpetual licences to customers, where previously the Group had offered only perpetual licences. This strategy is part of the Group's plan to increase the lifetime value of a customer relationship and to increase visibility of future revenue. Subscription deals have been a large proportion of new business across all channels to market during the period.

This mix shift toward subscription deals means revenue is recognised in future periods rather than the period in which the deal is signed, and has the impact of reducing headline revenue growth in the current period, but increasing forward visibility of revenues through order book growth. Accordingly, the Group's headline revenue growth was 3% but the Group's contracted order book of revenue has again grown substantially during the period and was £7.1m at 31 January 2014, up 15% against £6.2m at 31 July 2013.

Total Initial Contract Value sold was £1.6m (31 January 2013: £1.5m) of which £0.7m (31 January 2013: £0.8m) was recognised during the period. In addition, the Group sold 39 upgrade deals (31 January 2013: 29) to existing clients.

Whilst the volume and value of new business are good indicators of market traction and performance, the renewal of subscription deals sold in prior years is of critical importance to the Group's strategy. It is very encouraging that, whilst relatively few of those early subscription deals have reached their renewal date so far, all have renewed at or above pre-existing contract values.

The existing customer base continues to offer the Group significant opportunity. Support revenue continues to grow and represented 49% (31 January 2013: 49%) of total revenue for the period. In addition, clients continue to buy additional software and extra users and are capitalising on their existing investment.

The Group also continues to invest in both its product and in its selling territories. The cash spend during the period on product development was £0.5m (31 January 2013: £0.5m). The Group made some commercial progress in both the US and Indian territories whilst Asia Pacific improved profitability despite reduced volumes of new deals.

The Group's financial progress is illustrated by the increase in operating profit (before amortisation of customer related intangible assets and share based payment charges) to £0.5m (31 January 2013: £0.1m). The statutory operating profit was £0.3m (31 January 2013: £Nil). The Group made substantial cost reductions during the second half of the preceding year that have taken effect during this financial year.

I am pleased to report that PROACTIS remains in a strong financial position with cash balances of £2.4m after payment of a £0.3m dividend.

Growth strategy

Blended perpetual and subscription licence models

The Group is now more than three years into its program of introducing the blended model of perpetual and subscription licences to the marketplace. It has delivered on its Cloud technology platform, and the offering continues to be taken up well. The Group's global business partners are now starting to achieve stronger sales traction of the subscription licence model, which is ideally suited to the Source-to-Contract elements of the Group's software suite.

Software as a platform for BPO managed services

The application of the Group's software as a platform, on which BPO based business partners can provide managed services is gaining momentum. The Group's joint venture with the Mittal family network in India, Proactis Total Procure, is now largely self-sufficient and has secured two new name deals in the period.

Geographic expansion

Asia Pacific has rationalised its cost base and is now more profitable on a lower cost base. The US and Asia Pacific teams have contributed to new deal count.

M&A activity

On 10 February 2014, the Group announced the completion of the acquisition of EGS Group Limited. This confirmed PROACTIS as the leading supplier of procurement solutions to the UK Public sector with the acquisition of more than 70 new clients. The combination offers substantial synergistic benefits that are already being realised with £0.3m of annualised overhead removed from the combined businesses to date. The Group is now in an excellent position to provide a platform for further complementary bolt-ons, and is committed to M&A growth.

Product

The Group's position as a leading "best in class" spend control and eProcurement organisation has been further enhanced by the addition of major new modules with many new features. The Group's continued investment offers a truly "end-to-end" suite of software, which places the Group in a very strong competitive position, which should be capitalised on over the next 2-3 years.

Services

During the period, the Group has successfully trialled several new managed service based offerings to complement its software, including supplier engagement and on-boarding, help-desk for supplier registration process, managed auctions and electronic invoicing. Many clients have a skills or resource shortage and the Group's procurement domain expertise provides them with an added value solution. These managed service offerings remain at an early stage of commercial realisation but offer a significant opportunity for growth and this is being pursued aggressively within the business.

Markets

The Group continues to offer true multi-company, multi-currency and multi-language functionality. This remains an essential differentiator as the Group continues to win new business across more sectors worldwide.

The Group competes on various levels; local vendors, ERP vendors and international procurement vendors and this mix creates a highly competitive market. The Group's "end-to-end" message and tight integration techniques mitigate this and position PROACTIS as a cost effective solution against both big ticket, consultancy led ERP and international procurement vendors' solutions and potential multi-Vendor software led solutions.

Routes to market and market outlook

The Group's traditional reseller business partners continued to make a significant contribution during the period, and adoption of the subscription licence model remains encouraging. This will extend the partners reach into the Group's Source-to-Contract product suite, and offers incremental opportunities within their existing and new accounts.

Financial overview

Revenues increased by 3% to £4.0m (31 January 2013: £3.9m). The Group has seen broadly consistent levels of deal volumes with 15 new deals in the period (31 January 2013: 15) and 39 upgrade deals in the period (31 January 2013: 29). Of the 15 new deals, 8 were subscription based (31 January 2013: 6). This mix shift toward subscription revenues in the period means that reported revenue growth in the period slowed (to 3%) but order book, largely driven by revenue on subscription deals being recognised in future periods, grew substantially by 15% to £7.1m (31 July 2013: £6.2m).

A beneficial consequence of the transition toward a more subscription based revenue model and the long term non-cancellable support contracts for perpetual licence deals is the increased level of contracted revenue to be recognised in future periods. This gives the Group greater visibility of forward revenue and a more predictable cash flow profile. Of the £1.6m (31 January 2013: £1.5m) of total value contracted during the period, £0.9m (31 January 2013: £0.7m) has been deferred to future financial periods and the total value of contracted forward revenue has increased to £7.1m (31 July 2013: £6.2m). Annualised contracted revenue increased to £5.7m (31 July 2013: £5.4m).

In the period, the mix of revenue from new and upgrade deals shifted marginally toward higher margin direct deals. This, along with a reduced cost base, has resulted in a significant improvement in profitability with an adjusted operating profit of £454,000 (31 January 2013: £143,000).

The Group's financial position is strong with £2.4m cash on the balance sheet. Net operating cash inflow in the period since 31 July 2013 was £0.8m before a dividend payment of £0.3m and continued capital investment in the Group's products and solutions of £0.5m.

Loan Note Facility

The Group has executed a loan note instrument and entered into a subscription agreement with Henderson Alternative Investment Advisor Limited ("Henderson"), as discretionary investment manager of The Alphagen Volantis Catalyst Fund Limited ("the Fund") whereby Henderson has conditionally agreed, subject to the conditions set out below, to subscribe for up to £5,000,000 fixed rate unsecured loan notes of the Group (the "Loan Notes") (the "Facility"). The Facility will give the Group surety of funding, allowing the Board to pursue acquisition targets.

At any time up to and including 31 July 2014, provided that the Group has first used reasonable endeavours to raise a sum equal to the amount of funds required (or such portion thereof) to fund a particular acquisition and/or to provide working capital in support or furtherance of a particular aspect of the Group's acquisition strategy, the Fund shall, at the request of the Group and subject to certain conditions precedent, subscribe for the Loan Notes in full or in part. The conditions precedent include the satisfaction of the Fund, acting reasonably, as to the due diligence conducted on the acquisition and the working capital requirements of the Group going forward. The Loan Notes shall carry interest at a rate of 6 per cent. per annum. Unless previously redeemed, the Loan Notes shall be repaid at par on the third anniversary of their date of issue, together with accrued interest. Under the terms of the Facility, a commitment fee of £250,000 is payable to Henderson, of which £125,000 is paid upon completion of the Subscription Agreement, and the remaining £125,000 to be paid by 31 March 2014 (the "Commitment Fee").

Related Party Transaction

Henderson Alternative Investment Advisor Limited is a wholly owned subsidiary of Henderson Global Investors. The Alphagen Volantis Catalyst Fund Limited, managed by Henderson Alternative Investment Advisor Limitedis a substantial shareholder in the Company, holding approximately 27% of its voting rights. As such Henderson is a 'related party' of the Company under the AIM Rules for Companies. The entering into of the Facility and the associated payment of the Commitment Fee constitutes a related party transaction pursuant to AIM Rule 13. The directors, having consulted with the Company's nominated adviser, finnCap Limited, consider that the terms of the Facility are fair and reasonable insofar as the Company's shareholders are concerned.

Prospects

PROACTIS has reported record revenues in its core business for the period. The Group continues to successfully transition to its blended perpetual and subscription licence model offering, which it has achieved without requiring any external funding, and is now reaching good rates of profitability. During the period, the Group has grown its order book by 15% to £7.1m from £6.2m at 31 July 2013 and continued to make commercial progress in all of its geographies.

After the period end, the Group announced the completion of the acquisition of EGS Group Limited, which confirmed the Group's commitment to selective M&A as a core element of its growth strategy. This acquisition confirmed PROACTIS as the biggest supplier of Procurement solutions to the UK Public Sector. The pace and ease of the integration process and the substantial level of operational savings available to the combined businesses is encouraging with £0.3m of annualised overhead savings already realised.

The Board is confident that the Group has strengthened its position to continue to exploit the growing Spend and Procurement marketplace and the evolving strategic growth opportunities.

Alan Aubrey Rod Jones

Chairman Chief Executive Officer

3 March 2014

Condensed consolidated income statement

for the six months ended 31 January 2014

The profit for the period is wholly attributable to equity holders of the parent Company.

Condensed consolidated statement of changes in equity

as at 31 January 2014

Condensed consolidated balance sheet

as at 31 January 2014

Total equity is wholly attributable to equity holders of the parent Company.

Condensed consolidated cash flow statement

for the six months ended 31 January 2014

Unaudited notes

Basis of preparation and accounting policies

PROACTIS Holdings PLC is a company incorporated in England and Wales under the Companies Act 2006.

The condensed financial statements are unaudited and were approved by the Board of Directors on 28 February 2014.

The interim financial information for the six months ended 31 January 2014, including comparative financial information, has been prepared on the basis of the accounting policies set out in the last annual report and accounts, with the exception of the amendment to IAS 1 (Presentation of Financial Statements) referred to below, and in accordance with International Financial Reporting Standards ("IFRS"), including IAS 34 (Interim Financial Reporting), as issued by the International Accounting Standards Board and adopted by the European Union.

The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may subsequently differ from those estimates.

In preparing the interim financial statements, the significant judgements made by management in applying the Group's accounting policies and key sources of estimation uncertainty were the same, in all material respects, as those applied to the consolidated financial statements for the year ended 31 July 2013.

There is a choice between presenting comprehensive income in one statement or in two statements comprising an income statement and a separate statement of comprehensive income. The Group has elected to present comprehensive income in two statements.

Going concern assumption

The Group manages its cash requirements through a combination of operating cash flows and long term borrowings.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current lending facilities.

Consequently, after making enquires, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the interim financial statements.

Information extracted from 2013 Annual Report

The financial figures for the year ended 31 July 2013, as set out in this report, do not constitute statutory accounts but are derived from the statutory accounts for that financial year.

The statutory accounts for the year ended 31 July 2013 were prepared under IFRS and have been delivered to the Registrar of Companies. The auditors reported on those accounts. Their report was unqualified, did not draw attention to any matters by way of emphasis and did not include a statement under Section 498(2) or 498(3) of the Companies Act 2006.

The Board confirms that to the best of its knowledge:

w The condensed set of financial statements has been prepared in accordance with IAS34 'Interim Financial Reporting' as adopted by the EU;

w The interim management report includes a fair review of the information required by :

- DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

- DTR4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By Order of the Board

Rod Jones Tim Sykes

Chief Executive Officer Chief Financial Officer

3 March 2014