PHD.L Regulatory News (PHD)

23 Apr 2008 14:02

PROACTIS Holdings PLC23 April 2008 23 April 2008 PROACTIS Holdings PLC Interim results for the six months ended 31 January 2008 PROACTIS Holdings PLC ("PROACTIS" or the "Company"), the specialist SpendControl software provider, is today issuing its interim results for the sixmonth period to 31 January 2008. KEY POINTS * Revenues increased by 50% year on year to £3.0m (2007 : £2.0m) - Good organic growth in contract wins - 24 new deals (including 5 in the US) (2007: 14 new deals (including Nil in the US) - Strong performance in sales via our indirect channel partner network - Consultancy and recurring support revenues have increased to £1.9m (2007 : £0.8m) - However, direct revenues from the public sector have been slower than anticipated * The cost base increased significantly during the period, largely reflecting the acquisition of Requisoft and Alito. These acquisitions have now been fully integrated and since the period end significant savings have been made. The Company will benefit in full from these synergies in the year ending 31 July 2009. * Operating profit fell to a loss of £194,000 before non-recurring items and share-based payment charges (2007 : profit £51,000) * As a result of the lower than anticipated revenue growth and the high cost base referred to above, there will be a material shortfall to market expectations of revenues and profits for the current financial year. However, we anticipate continued strong growth in revenues and this, coupled with the cost savings referred to above, mean that the Company is confident of a return to profitability in the next financial year. Rod Jones, Chief Executive Officer, commented: "We are confident of continued growth in revenues through our indirect saleschannel. We continue to believe that the Public Sector remains an attractivemarket in the medium term; however, we do not expect sales to the Public Sectorto pick up in the remainder of this financial year. In addition we do not expectthe full synergy benefits from our two acquisitions to flow through until thenext financial year. As a result of these factors, we would anticipate a loss inthe financial year ending 31 July 2008 but a return to profitable growth in theyear ending 31 July 2009. We remain very confident in our product offering andbelieve we are well positioned for sustained growth." Enquiries: PROACTIS Holdings PLC Tel: 01937 545 070Rod Jones, Chief Executive Officer Weber Shandwick Square Mile Tel: 020 7067 0700Nick Oborne / John Moriarty / James White Landsbanki Securities (UK) Limited (Nomad) Tel: 020 7426 9000Gareth Price / Simon Brown 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 is already used in over 250organisations from the commercial, public and not-for-profit sectors. PROACTIS is a high growth business headquartered in Wetherby, West Yorkshire.It develops its own software using an in-house team of developers and sellsthrough both direct and indirect channels via a number of Accredited ChannelPartners. PROACTIS floated on the AIM market of the London Stock Exchange in June 2006. CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S REPORT We report our interim results for the six month period to 31 January 2008. The period has been one of continued good progress within our indirect approachto commercial markets and the development of consultancy and recurringmaintenance revenues. However, sales to the public sector, where we employ adirect sales model, have proved disappointing because this market has grown at aslower rate than we had anticipated. However, although its rate of growth isdifficult to predict, we remain confident that the Public Sector will be a veryattractive market for the Company in the medium term. During the previous financial year we made two acquisitions. In November 2006,we acquired Requisoft and in March 2007 we acquired Alito. In the case ofRequisoft the rationale was to increase our customer base in the commercialsector and to achieve synergies in the cost base. In the case of Alito, therationale was to increase our customer base and our ability to cross-sell in thepublic sector. I am pleased to report that both these acquisitions have now beensuccessfully integrated into the Group. However, this exercise has taken longerand proved more difficult than originally envisaged. As a consequence, the costbase in the period was far too high for the level of revenues generated.Significant cost savings have now been implemented and we would anticipate thatthe full benefits of these cost savings will flow through in the next financialyear. The core elements of PROACTIS' growth strategy remain the same. These are: - Revenue growth * We access the global commercial market indirectly via our accredited channel partner network. We have increased our accredited channel partners by a further 3 during the period taking our total to 26. The potential worldwide reach of our products is being realised with 5 new deals sold through our partners in the US giving a referenceable bridgehead of 12 clients in that country. * We address the UK public sector directly, author to user. Despite the slower than anticipated growth in this market, we will continue this approach. We believe that this market will start to grow rapidly and that we are well positioned to take advantage. - Scalability * Our Commercial Off the Shelf ("COTS") software code model is well proven, minimising support and implementation costs. Following the acquisition of both legacy Alito and Requisoft code bases last year, we have developed the PROACTIS code to deliver the legacy functionality and will be in a position to offer a single solution again by 1 August 2008. Acquisition of Requisoft On 17 November 2006, PROACTIS acquired Requisoft, a recognised brand with anexcellent customer base in the commercial sector. Requisoft is now entirelyintegrated into the PROACTIS group and its existing annual overhead base atacquisition of £0.9m has now been reduced to approximately £0.4m going forward. The total consideration paid was £1.1m and Requisoft delivered £0.9m revenuesand £0.25m operating profit during the nine month earn out period ended 31 July2007. Acquisition of Alito On 29 March 2007, PROACTIS acquired Alito, another recognised brand with anexcellent customer base in the public sector. Whilst headway was made during theyear ended 31 July 2007 with a first cross sell of PROACTIS product into theAlito customer base, further progress with this strategic objective has beenslower than anticipated. During the period we took the opportunity to acceleratethe earn-out payment due to the Vendors. This enabled us to accelerate theintegration of the functions of the business within those of the group. Weanticipate that this will save overhead of approximately £0.5m per annum. The initial consideration paid was £2.3m in cash and shares and Alito hasdelivered £1.3m revenues and £0.33m operating profit during the 10 months ended31 January 2008. Financial overview Revenues increased to £2.98m from £1.96m for the same period last year. The operating loss before non-recurring items and share based payment chargeswas £194,000 (6 months ended 31 January 2007 - profit £51,000). Outlook We are confident of continued growth in revenues through our indirect saleschannel. We continue to believe that the Public Sector remains an attractivemarket in the medium term; however, we do not expect sales to the Public Sectorto pick up in the remainder of this financial year. In addition we do not expectthe full synergy benefits from our two acquisitions to flow through until thenext financial year. As a result of these factors, we would anticipate a loss inthe financial year ending 31 July 2008 but a return to profitable growth in theyear ending 31 July 2009. We remain very confident in our product offering andbelieve we are well positioned for sustained growth. Alan Aubrey Rod JonesChairman Chief Executive Officer 23 April 2008 Consolidated income statement for the six months ended 31 January 2008 Unaudited Unaudited Audited 6 months to 6 months to Year ended 31 Jan 2008 31 Jan 2007 31 July 2007 £000 £000 £000 RestatedRevenue - acquisitions - 227 1,563 - continuing 2,975 1,728 3,777 ------------- ------------- -------------Total revenue 2,975 1,955 5,340 Cost of sales (910) (861) (1,620) ------------- ------------- -------------Gross profit 2,065 1,094 3,720 Administrative costs (2,503) (904) (2,762) ------------- ------------- ------------- Operating profit / (loss) before non recurring items and share based payment charges (194) 51 744Non-recurring administrative income / (costs) (222) 182 300Share-based payment charges (22) (43) (86) ------------- ------------- ------------- Operating profit / (loss) - acquisitions - 20 210 - continuing (438) 170 748 ------------- ------------- -------------Total operating profit / (loss) (438) 190 958 Finance income 23 88 130Finance expenses (2) - - ------------- ------------- -------------Profit / (loss) before taxation (417) 278 1,088 Taxation - 7 (29) ------------- ------------- -------------Profit / (loss) for the period (417) 285 1,059 ------------- ------------- -------------Earnings per ordinary share : - Basic (1.3)p 0.9p 3.5p ------------- ------------- ------------- - Diluted (1.3)p 0.9p 3.4p ------------- ------------- ------------- Consolidated statement of changes in equity as at 31 January 2008 Unaudited Unaudited Unaudited Unaudited Share Share Merger Retained capital premium reserve earnings £000 £000 £000 £000 At 1 August 2006 3,012 2,735 556 (2,441)Result for the period - - - 285Share based payment charges - - - 43 ------------- ------------- ------------- ------------- At 31 January 2007 3,012 2,735 556 (2,113)Shares issued pursuant to exercising of options under employee share option schemes 6 - - (4)Result for the period - - - 774Share based payment charges - - - 43 ------------- ------------- ------------- -------------At 1 August 2007 3,018 2,735 556 (1,300)Shares issued as deferred 59 316 - - consideration for acquisition Result for the period - - - (417)Share based payment charges - - - 22 ------------- ------------- ------------- -------------At 31 January 2008 3,077 3,051 556 (1,695) ------------- ------------- ------------- ------------- Consolidated balance sheet as at 31 January 2008 Unaudited Unaudited Audited As at 31 Jan As at 31 Jan As at 31 July 2008 2007 2007 £000 £000 £000 RestatedNon-current assetsProperty, plant & equipment 153 30 140Intangible assets 6,364 1,947 6,273 ------------- ------------- ------------- 6,517 1,977 6,413 ------------- ------------- -------------Current assetsTrade and other receivables 2,019 1,187 2,500Cash and cash equivalents 1,081 2,950 1,267 ------------- ------------- ------------- 3,100 4,137 3,767 ------------- ------------- -------------Total assets 9,617 6,114 10,180 ------------- ------------- -------------Current liabilitiesBank loans (167) - -Trade and other payables (1,450) (726) (2,346)Deferred income (1,176) (688) (1,260)Corporation tax liabilities (55) - (118) ------------- ------------- ------------- (2,848) (1,414) (3,724) ------------- ------------- -------------Non-current liabilitiesBank loans (333) - -Deferred tax liabilities (1,447) (510) (1,447) ------------- ------------- ------------- (1,780) (510) (1,447) ------------- ------------- -------------Total liabilities (4,628) (1,924) (5,171) ------------- ------------- -------------Net assets 4,989 4,190 5,009 ------------- ------------- -------------Equity attributable to equity holders of the CompanyCalled up share capital 3,077 3,012 3,018Share premium account 3,051 2,735 2,735Merger reserve 556 556 556Retained earnings (1,695) (2,113) (1,300) ------------- ------------- -------------Total equity 4,989 4,190 5,009 ------------- ------------- ------------- Consolidated cash flow statement for the six months ended 31 January 2008 Unaudited Unaudited Audited 6 months to 6 months to Year ended 31 Jan 2008 31 Jan 2007 31 July 2007 £000 £000 £000 RestatedOperating activitiesProfit / (loss) for the period (417) 285 1,059Amortisation of intangible assets 65 106 212Depreciation 41 8 25Net finance income (21) (88) (130)Income tax credit - (7) 29Share based payment charges 22 43 86 ------------- ------------- ------------- (310) 347 1,281Operating cash flow before changes in working capital Movement in trade and other receivables 88 76 (994)Movement in trade and other payables (224) (550) 237 ------------- ------------- -------------Operating cash flow from operations (446) (127) 524Interest received 23 88 130Interest paid (2) - -Income tax received / (paid) (62) 7 6 ------------- ------------- -------------Net cash flow from operating activities (487) (32) 660 ------------- ------------- -------------Investing activitiesPurchase of plant and equipment (44) (20) (103)Development expenditure capitalised (155) (139) (273)Acquisition of subsidiaries - (623) (2,508) ------------- ------------- -------------Net cash flow from investing (199) (782) (2,884) activities ------------- ------------- -------------Financing activitiesCosts of the Placing - - (275)Proceeds from issue of shares - - 2Proceeds from new bank borrowing 500 - - ------------- ------------- -------------Net cash flow from financing activities 500 - (273) ------------- ------------- -------------Net decrease in cash and cash (186) (814) (2,497) equivalentsCash and cash equivalents at the 1,267 3,764 3,764 beginning of the period ------------- ------------- -------------Cash and cash equivalents at the end 1,081 2,950 1,267 of the period ------------- ------------- ------------- Notes to the half yearly financial information Basis of preparation This consolidated half-yearly financial information for the half year ended 31January 2008 has been prepared in accordance with IAS 34, 'Interim financialreporting' as adopted by the European Union. The half-yearly consolidatedfinancial report should be read in conjunction with the annual financialstatements for the year ended 31 July 2007, which have been prepared inaccordance with IFRS as adopted by the European Union. The financial information contained in the interim report does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985.Statutory accounts for the year ended 31 July 2007 have been filed with theRegistrar of Companies. The auditors' report on those accounts was unqualifiedand did not contain a statement made under Section 237(2) or Section 237(3) ofthe Companies Act 1985. There were no recognised gains or losses in the six month period ended 31January 2008 other than the loss for the period and therefore no statement ofrecognised income and expenses is presented. The Board confirms that to the best of its knowledge : * The condensed set of financial statements has been prepared in accordance with IAS34 'Interim Financial Reporting' as adopted by the EU; * 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. The interim report was approved by the Board of Directors on 23 April 2008. Accounting policies The accounting policies adopted are consistent with those of the annualfinancial statements for the year ended 31 July 2007, as described in thoseannual financial statements. During the six months ended 31 January 2008, a £500,000 bank loan was taken outby the Group, over a term of three years. 585,023 new shares were issued during the six months ended 31 January 2008, aspart of the deferred consideration for the acquisition of Alito (UK) Limited. Explanatory notes to the adjustments from UK GAAP to IFRS The year ended 31 July 2007 was the first year the Group presented itsconsolidated financial statements under IFRS and this is the first consolidatedhalf-yearly financial information prepared under IFRS. In preparing its comparative information for the six months to 31 January 2008,the Group has adjusted amounts previously reported in the half yearly financialinformation prepared in accordance with UK GAAP. An explanation of how thetransition from UK GAAP to IFRS has affected the Group's financial position andfinancial performance, not previously reported in the annual financialstatements for the year ended 31 July 2007, is set out in the tables below. Theadjustments have been required to comply with the following reporting standards: IFRS2 'Share based payment' requires the fair value cost of providing employeeshare ownership plans to be charged to the income statement over the estimatedlife of the share ownership plans. In 2006 under UK GAAP, such charges wereaccounted for on a different basis under UITF 17. IFRS3 'Business combinations' requires goodwill to be capitalised and subjectedto an annual impairment test rather than amortised by way of equally annualcharges as required by UK GAAP. The standard also requires separable,identifiable, intangible assets arising on acquisition to be capitalised at fairvalue and amortised over their estimated useful economic lives. IAS12 'Income taxes' requires that deferred taxation be provided in respect ofthe share based payment charges and acquisition related intangible assets. IAS38 'Intangible assets' requires that development expenditure meeting certaincriteria be capitalised and amortised over its useful economic life. Under UKGAAP all such development expenditure was expensed as incurred. Non-recurring administrative expenses relate to the costs prior to and the costsof termination of employees acquired with Alito (UK) Limited and Requisoft plc. Reconciliation of profit - six months ended 31 January 2007 Unaudited Unaudited Unaudited UK GAAP Effect of IFRS transition to IFRS £000 £000 £000 Revenue 1,955 - 1,955 Cost of sales (861) - (861) ------------- ------------- -------------Gross profit 1,094 - 1,094 Share-based payment charges - (43) (43)Administrative costs (894) 33 (861) ------------- ------------- -------------Operating profit 200 (10) 190 Finance income 88 - 88 ------------- ------------- -------------Profit before taxation 288 (10) 278 Taxation 7 - 7 ------------- ------------- -------------Profit for the period 295 (10) 285 ------------- ------------- ------------- Earnings per ordinary share :- Basic 1.0p 0.9p ------------- -------------- Diluted 0.9p 0.9p ------------- ------------- The £43,000 charge relates to the impact of the adoption of IFRS2 'Share-basedpayment'. The £33,000 credit relates to the impact of the adoption of IAS 38'Intangible assets' and reflects the net capitalisation of software developmentcosts. Reconciliation of equity as at 31 January 2007 Unaudited Unaudited Unaudited UK GAAP Effect of IFRS transition to IFRS £000 £000 £000Non-current assetsProperty, plant & equipment 30 - 30Intangible assets 1,192 755 1,947 ------------- ------------- ------------- 1,222 755 1,977 ------------- ------------- -------------Current assetsTrade and other receivables 1,187 - 1,187Cash and cash equivalents 2,950 - 2,950 ------------- ------------- ------------- 4,137 - 4,137 ------------- ------------- -------------Total assets 5,359 755 6,114 ------------- ------------- -------------Current liabilitiesTrade and other payables (726) - (726)Deferred income (688) - (688) ------------- ------------- ------------- (1,414) - (1,414) ------------- ------------- -------------Non-current liabilitiesDeferred tax liabilities - (510) (510) ------------- ------------- ------------- - (510) (510) ------------- ------------- -------------Total liabilities (1,414) (510) (1,924) ------------- ------------- -------------Net assets 3,945 245 4,190 ------------- ------------- -------------Equity attributable to equityholders of the CompanyCalled up share capital 3,012 - 3,012Share premium account 2,735 - 2,735Merger reserve 556 - 556Retained earnings (2,358) 245 (2,113) ------------- ------------- -------------Total equity 3,945 245 4,190 ------------- ------------- ------------- The £245,000 adjustment relates to the impact of the adoption of IAS38'Intangible assets'. The £510,000 adjustment relates to the impact of the adoption of IFRS3 'Businesscombinations'. Separately identifiable customer related intangibles wereidentified within the fair value of assets acquired as part of the acquisitionof Requisoft Plc. The £510,000 is the associated deferred tax liability. This information is provided by RNS The company news service from the London Stock Exchange