PHD.L Regulatory News (PHD)

PROACTIS Holdings PLC

Interim results for the six months ended 31 January 2015

PROACTIS Holdings PLC, a global Spend Control and eProcurement solution provider, today issues its interim results for the six month period ended 31 January 2015.

Financial highlights

w Reported revenue increased by 110% to £8.4m (31 January 2014: £4.0m)

w Adjusted EBITDA increased by 155% to £2.3m (31 January 2014: £0.9m)

w Reported adjusted1 operating profit increased by 207% to £1.4m (31 January 2014: £0.5m)

w Strong balance sheet with gross cash balances of £3.1m (31 July 2014: £3.1m)

Revenue visibility

w Total contracted, deferred multi-year revenue increased by 30% to £15.5m (31 July 2014: £11.9m)

w Annualised contracted revenue increased by 5% to £13.8m (31 July 2014: £13.1m)

Operational highlights

w Total Initial Contract Value signed on new deals was £2.6m (31 January 2014: £1.6m) with £0.5m recognised in the period (31 January 2014: £0.7m)

w Deal activity is buoyant with 20 new name deals (31 January 2014: 15) and continued strong customer loyalty with 43 upgrades in the period (31 January 2014: 39)

w Multi-year, transactional priced Cloud/SaaS solutions is in line with expectations - 11 new customers (31 January 2014: 8)

w 39 from 43 SaaS renewals in the period

w Commercial partnership with Fifth Third Bank extended

Post period highlights

w Collaboration agreement for the development of an Accelerated Payment Facility signed with Inspired Capital plc

w "Activate" technology platform completed

1 - Adjusted operating profit is stated before non-recurring administrative expenses, amortisation of customer related intangible assets and share based payment charges

Rod Jones, Chief Executive Officer, commented:

"I am pleased to report another set of results showing significant increases in revenues, profit and forward order book. The Group's core business is performing well and experiencing strong growth rates as it benefits from the subscription business model.

"Supplementing this, the Group's three acquisitions are bolstering growth. Trading is in line with expectations with performance levels in those businesses being maintained through the integration process. M&A activity remains a core element of the Group's growth strategy and there are a number of potentially attractive opportunities in the pipeline.

"The Group's programme to access the supplier monetisation opportunity, Activate, is progressing well. The technology development is complete and the Group is now building the commercial plan to take the opportunity to market. In addition, the Group intends to enhance the supplier benefits package further with the offer of an Accelerated Payment Facility for suppliers' qualifying invoices and, to that end, I am delighted that the Group has partnered with Inspired Capital plc in the development of this offer.

"Activate is a potentially transformational initiative and, along with further M&A activity and with a continued impressive win rate in the Group's core businesses, I am confident that the Group is poised for a sustained period of substantial growth.

"Finally, Tim Sykes has informed the Board of his intention to step down as Chief Financial Officer of the Group once a suitable replacement is found. I would like to thank Tim for his work with the Group in achieving the success it has had since its IPO in June 2006. I wish him well in his future career."

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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 approximately 500 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 again report record results for the Group. The core business is growing strongly and the Group's recent acquisitions are all contributing at expected levels. The reported revenues for the half year were £8.4m (31 January 2014: £4.0m) and there was a strong order book of £15.5m at 31 January 2015 (31 July 2014: £11.9m) to take into future periods.

The Group has made three acquisitions during the previous twelve months and these acquisitions have all contributed to the Group's results for the whole of the period. Like for like revenues, excluding the effect of the three acquisitions, increased by 18% to £4.7m (31 January 2014: £4.0m) and the like for like order book increased to £8.1m (31 July 2014: £7.1m).

The Group secured 20 new deals in the period of which 11 (31 January 2014: 8) were subscription or managed service deals and 9 were perpetual deals. Total Initial Contract Value sold was £2.6m (31 January 2014: £1.6m) of which £0.5m (31 January 2014: £0.7m) was recognised during the period.

In addition, the Group sold 43 upgrade deals (31 January 2014: 39) 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 the vast majority of customers continue to renew.

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 (or managed service, which have similar characteristics) deals have been a large proportion of the new business across all channels to market during the period.

These subscription or managed service deals reduce reported revenue growth in the period that the deal is signed but increase reported revenue growth in future periods. The mix shift toward subscription deals was prevalent in the comparative period and, consequently, the Group's like for like revenue growth was significant, from 3% during the comparative period to 15% during this current period.

The Group's contracted order book of revenue has again grown substantially during the period and was £15.5m at 31 January 2015. On 1 August 2014, the Group completed its third acquisition, Intelligent Capture Limited, with which it acquired an order book of £1.0m. Accordingly, the like for like growth in order book is 20% against an opening position of £12.9m at 31 July 2014 (including the £1.0m order book acquired with Intelligent Capture Limited).

The Group's rate of profitability has increased significantly with a reported EBITDA (before share based payment charges and non-recurring administrative expenses) of £2.3m (31 January 2014: £0.9m). The statutory operating profit was £0.9m (31 January 2014: £0.3m).

The Group remains in a strong financial position with gross cash balances of £3.1m. Net cash was £0.8m.

Developments in line with growth strategy

Accessing the supplier opportunity ("Activate")

The Group has, to date, monetised its technology through contracting with organisations of significant scale ("Buyers") for the delivery of its software solutions and complementary service offerings. This core business model remains compelling with healthy growth prospects and the Group has a significant competitive advantage in this offering.

Whilst executing this growth strategy, the Group has also been developing its technology to address a key industry issue; the lack of take-up of electronic trading between buyers and suppliers, despite the obvious benefits in cost and efficiency. The Group has developed a technology platform that requires suppliers to trade electronically, enables suppliers to maintain their own records and provides open and transparent information on the status of their invoices as they flow through the Buyer's purchase invoice process toward payment. The Group intends that suppliers will pay for these benefits by means of a small annual administrative charge, rather than tariff based or linked to volume throughput. The Group estimates that its 500 clients are presently trading with approximately 1-2 million suppliers so the opportunity is significant.

In addition, through the Group's recent collaboration agreement with Inspired Capital plc, the Group is looking to provide further benefit to suppliers by way of offering a facility for accelerated payment of suppliers' qualifying invoices. The Group estimates that its 500 clients are presently transacting £60-80 billion of trade per year with those suppliers through the Group's technology platform.

M&A activity

The Group has made three acquisitions within the previous twelve month period; EGS Group Limited, Intesource Inc and Intelligent Capture Limited. Each of these businesses is performing as expected and each is fuelling the Group's overall growth rates. The specific integration plans are well established and largely delivered. The Group remains committed to further M&A activity is in an excellent position to provide a platform for further complementary bolt-on acquisitions.

Blended perpetual and subscription licence models

The Group now has a mature blended business model, offering perpetual and subscription licences to the marketplace. It has delivered on its Cloud technology platform and the take up of this is strong. The Group's global business partners are now achieving good sales traction with 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 Group's own BPO offering of reverse e-auctions, acquired with Intesource Inc during June 2014 is performing well but the application of the Group's software as a platform, on which BPO based business partners can provide managed services, is being taken up more slowly than the opportunity offers. The Group's joint venture with the Mittal family network in India, Proactis Total Procure, has not performed as expected and the Group is in the process of restructuring this arrangement toward a more typical value added reseller partner in that territory.

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 has resulted in a truly "end-to-end" suite of software, placing 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.

Financial overview

Revenues increased by 110% to £8.4m (31 January 2014: £4.0m). This growth has been supplemented by the three acquisitions completed during the previous twelve month period. The impact of the acquisitions can be demonstrated as follows:

The Group has signed 20 new deals (31 January 2014: 15) and 43 upgrade deals (31 January 2014: 39) in the period. Of the 20 new deals, 11 were subscription based (31 January 2014: 8). Again, this includes new deals signed by the three acquired businesses and, on a like for like basis, the Group secured 13 (31 January 2014: 15) new deals, of which 7 were subscription deals.

This mix shift toward subscription revenues in the comparative period means that reported revenue growth slowed in that period (to 3%) but increased in the current period (to 18%).

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 £2.6m (31 January 2014: £1.6m) of total value contracted with new customers during the period, £2.1m (31 January 2014: £0.9m) has been deferred to future financial periods and the total value of contracted forward revenue has increased to £15.5m (31 July 2014: £12.9m, including £1.0m acquired with Intelligent Capture Limited during the current period). Annualised contracted revenue increased to £13.8m (31 July 2014: £13.1m).

In the period, the mix of revenue from new and upgrade deals shifted toward higher margin direct deals, partly through the effect of the acquired businesses that do not utilise business partners as a distribution channel. This, combined with continued strong cost control, has resulted in a significant improvement in profitability with an increased adjusted EBITDA of £2.3m (31 January 2014: £0.9m), adjusted operating profit of £1.4m (31 January 2014: £0.5m) and statutory operating profit of £0.9m (31 January 2014: £0.3m).

The Group's financial position is strong with £3.1m cash on the balance sheet.

Net operating cash inflow in the period since 31 July 2014 was £1.6m before a cash outflow from investing activities of £2.1m and a dividend payment of £0.4m. Additional funding was raised through net new borrowings of £0.7m and from the issue of new equity of £0.1m.

The Group's acquisition of Intelligent Capture created a new funding requirement of approximately £1.3m which was satisfied by a new debt facility of £1.0m and an issue of new equity to the vendor of £0.3m.

The Group's gross debt was £2.2m as at 31 January 2015. The Group's existing term loan of £1.5m was increased by £1.0m to support the acquisition of Intelligent Capture Limited as described above and the Group has repaid £0.3m during the period.

Board changes

Tim Sykes has informed the Board of his intention to step down as Chief Financial Officer of the Group. The Board will commence the process of identifying a suitable replacement and Tim has agreed to remain with the Group until that recruitment is made and to assist through a satisfactory handover period.

The Board would like to thank Tim for his contribution to the Group's success. Tim has been with the Group since its IPO in June 2006 and has been fundamentally involved with the Group's substantial progress since then.

Outlook

PROACTIS is realising the benefits of its organic and M&A based growth strategy reporting record revenues of £8.4m in total which includes £4.7m in its core business, representing like for like growth of 18% with increased profitability. The Group has successfully integrated its acquisitions without disruption to financial performance and has transitioned to a blended perpetual and subscription licence model offering, which it has achieved without requiring any external funding. Visibility of forward revenue has also increased and the Group has grown its order book to £15.5m.

After the period end, the Group announced a collaboration agreement with Inspired Capital plc to develop an Accelerated Payment Facility for suppliers trading through the Group's global network which is on schedule for a release during 2015. Commercial success will depend on the Group's ability to transition its customers to the Activate programme and the Group looks forward to reporting further progress on this over the coming months.

The Board is confident that the Group has further 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

31 March 2015

Condensed consolidated income statement

for the six months ended 31 January 2015

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 2015

Condensed consolidated balance sheet

as at 31 January 2015

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

Condensed consolidated cash flow statement

for the six months ended 31 January 2015

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 30 March 2015.

The interim financial information for the six months ended 31 January 2015, 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 2014.

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 2014 Annual Report

The financial figures for the year ended 31 July 2014, 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 2014 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

31 March 2015