PHD.L Regulatory News (PHD)

For immediate release 13 October 2015

PROACTIS Holdings PLC

Preliminary Results for the year to 31 July 2015

PROACTIS Holdings PLC ("PROACTIS", the "Group" or the "Company"), the specialist Spend Control software provider, is pleased to announce its audited results for the year ended 31 July 2015.

Financial highlights:

§ Reported revenue increased by 69% to £17.2m (2014: £10.2m)

§ Underlying organic1 growth of 12%

§ Adjusted2 EBITDA increased by 140% to £4.8m (2014: £2.0m)

§ Statutory operating profit increased 700% to £1.6m (2014: £0.2m)

§ Recurring Annualised Revenue3 has increased by 22% to £14.3m (2014: £11.7m)

§ Order Book4 increased by 39% to £19.7m (2014: £14.2m)

§ Adjusted2 earnings per share increased by 126% to 6.1p (2014: 2.7p)

§ Proposed final dividend of 1.2p per share (2014: 1.1p)

Operational highlights:

§ Order intake of £5.2m from 39 new logos (2014: £5.3m on 38 new logos)

§ Continued high levels of upsell and client retention

§ Three key strategic acquisitions fully integrated and realising benefits in their first full year

§ New Spend Analytics solution launched incorporating new, user-defined, alert generating and notification mobile application

§ Supplier networking opportunity and accelerated payment facility now at early adopter stage

§ Appointment of Tim Sykes as full-time Chief Financial Officer, to support the Company through its next phase of growth

Note 1: Weighted average growth of the core Proactis and each of the acquired businesses

Note 2: Before the impact of non-recurring administrative expenses (related to the Group's acquisition during the year and the post-acquisition integration and re-organisation programmes), amortisation of customer related intangible assets and share based payment charges.

Note 3: Recurring Annualised Revenue is the Group's estimate of the annualised value of revenue of customers currently contracted with the Group as at 31 July 2015.

Note 4: Order Book is the Group's current contracted revenue as at 31 July 2015 to be recognised in future accounting periods.

Rod Jones, CEO commented:

"The results we are reporting today illustrate that the Group's market leading proposition is strong and we are realising the benefits of our growth strategy and revised business model. The Group is achieving record levels of growth, both organically and through its M&A strategy, underpinned by high levels of visibility through recurring contracted income and strong operating margins.

"M&A will remain a fundamental part of the Group's growth strategy over the coming year and I look forward to further substantial activity in this area. Alongside this, I am also pleased to report that there is a high level of interest from our client base in realising the substantial efficiencies available to them and their suppliers through the supplier networking capability that the Group has built. The Group is marketing this exciting opportunity to further accelerate growth and I look forward to commercial traction in the short term.

"Operating in a growing global market with leading solutions, the Group is well positioned for the coming year and we look forward to driving further value for our shareholders."

The Company's preliminary results are available on its website www.proactis.com

Enquiries:

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 used in approximately 500 organisations around the world from the commercial, public and not-for-profit sectors.

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

The Group is beginning to realise the benefits of its ambitious strategy to boost its scale and growth rate whilst delivering on revenue visibility and profitability.

Following the Board's strategic decision, several years ago, to shift from a perpetual software licence only model to a blended model offering subscription based software as a service (SaaS) licences, the Group has been able to widen its scope for growth from a solid commercial, operational and financial platform. This strategic move was designed to fulfil the commercial market need at the time whilst also providing an opportunity for investors to participate in a Group capable of delivering the following characteristics:

- High revenue growth rates;

- Security through absolute scale and high levels of recurring income;

- Profitability; and

- Yield through a dividend policy.

Growth strategy

The Group's growth strategy is as follows:

- Drive growth in its businesses through the delivery of best in class procurement solutions for its customers. The rate of intake of new logos remains high and the Group's continued commitment to investment in its solutions supports this;

- Retention of existing clients through high levels of support and service offerings and, with an energetic approach to the cross-selling of the Group's widening range of solutions, an opportunity to create even broader and deeper client relationships;

- Undertake selected M&A based activity with a focus on complementary customer bases, solutions and technology. The Group has completed one acquisition during the financial year and, cumulatively, three within the last two financial years, all now integrated after their first full year within the Group. There remains a healthy pipeline of further exciting opportunities; and

- Open up a vast new opportunity by accessing and offering value added benefits and services to a new customer grouping, the client supplier network, using the technology that is already deployed with the Group's clients. The Group's conservative estimation is that the client supplier network is more than 1 million in number and that annual value traded is more than £50 billion. The Group is now taking this offering to market through its clients and looks forward to commercial commitments in the near future.

Business performance and strategy

The Group's reported revenues increased by 69% to £17.2m (2014: £10.2m) with the Group's acquisitions, all three of which are in their first full year within the Group, contributing £7.7m (2014: two acquisitions for part of the year, contributing £1.7m). The Group's M&A strategy commenced during the prior financial year and Group's reported revenues have increased at a two year cumulative average growth rate of 46%.

Across all businesses, the Group is achieving growth with a weighted average organic growth rate of 12%.

The Group secured 39 new logos (2014: 38) of which 20 (2014: 29) were subscription deals. The aggregate initial contract value sold was £5.2m (2014: £5.3m) of which £1.6m (2014: £1.1m) was recognised during the year. In addition, the Group sold 82 upsell deals (2014: 81) to existing clients.

Whilst the strong volume and value of new business and upgrades are good indicators of market traction, the renewal of subscriptions sold in prior years remains of vital importance to the Group's strategy. It is very encouraging that the Group has maintained its very high levels of retention.

The Proactis business delivered a healthy 13% growth in reported revenue to £9.5m (2014: £8.5m) with order intake from new logos of £3.0m from 28 deals (2014: £4.8m from 33 deals). Order intake was buoyed in the prior year by two individually large deals signed in the United States at Fifth Third Bank and at Blue Cross Blue Shield.

The acquired businesses performed well with strong organic growth of 10% which was, overall, in line with the Group's expectations. Furthermore, order intake was £2.2 million from eleven new logos and there was a strong rate of customer retention during the first full year post-acquisition.

This organic reported revenue growth must be considered in parallel with the growth in the Group's contracted order book which has increased to £19.7m (2014: £14.2m).

The Group's financial progress continues apace and the Group has reported an adjusted EBITDA before non-recurring administrative expenses (related to the Group's acquisition during the year and the post-acquisition integration and re-organisation programmes), amortisation of customer related intangible assets and share based payment charges of £4.8m (2014: £2.0m) with a corresponding margin of 28% (2014: 20%). In addition, the Group has made further operational and synergistic cost reductions across the businesses and, accordingly, expects to see profitability levels improve even further.

Blended perpetual and subscription software licence models

The Group continues to offer the blended model of perpetual and subscription software licences, delivered on its Cloud technology platform, and has strong momentum in the marketplace. The Group's global business partners are achieving sales traction of both licence types and the Group has an exciting opportunity for growth in the United States and in the Asia Pacific region.

Solutions

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, many new features and the introduction of mobile applications. In particular, the Group's new Spend Analytics solution incorporating a new, user-defined, alert generating and notification mobile application was completed during the year and is now being marketed to the client base. The solution suite is regularly recognised within the sector for its capability.

The Group's ongoing investment has enabled it to move ahead of the competition by offering a truly "end-to-end" suite of software. The Group is in a very strong competitive position and will continue to invest to maintain that position.

Markets

The Group offers a true multi-company, multi-currency and multi-language capability and this remains an essential differentiator as the Group's traction increases across more sectors worldwide. During 2015 the Group sold deals to clients operating across several continents and many different sectors.

The Group competes on various levels; local vendors, Enterprise Resource Planning ("ERP") vendors and international procurement vendors and this mix makes for an extremely competitive environment. The Group's "end-to-end" message and tight integration techniques mitigate this and positions PROACTIS as a cost effective solution against both big ticket, consultancy led ERP vendors, international procurement vendors' solutions and potential multi-vendor software led solutions.

M&A strategy and activity

The Group's M&A strategy is to acquire businesses that fit a strict selection criteria based around the following principles:

- Consolidation of complementary customer bases and solutions - the procurement space is sufficiently fragmented to offer significant scope for this;

- Organisations with long term customer relationships, ideally contracted with a proven track record of retention and renewal;

- Technology led solutions and service offerings that are complementary to the Group's existing offering; and

- Technology that is compatible with the Group's existing technology.

Within this framework, the Group made three acquisitions between February 2014 and August 2014 and all have completed their first full year of operation within the Group.

EGS Group Limited ("EGS")

The Group acquired EGS on 7 February 2014. The strategic rationale was to consolidate the Group's position as the largest independent UK public sector eProcurement solution provider and the realisation of significant cost based synergies.

EGS has over 70 clients (principally in the UK public sector) that use its cloud software to control over £2.5 billion of spend through 40,000 active suppliers. The acquisition has further strengthened PROACTIS' footprint in the sector and its position as the largest independent eProcurement solution provider to the UK public sector.

EGS' substantial expertise in Local Government and Higher Education, allied with the complementary nature of PROACTIS' expertise and solutions, enables the delivery of wider and more effective solutions to customers to support their operations, enhance procurement effectiveness and extend collaboration with suppliers. As part of the Group, EGS' customers have access to truly "end-to-end" procurement solutions that are necessary for public sector organisations to make Spend Control processes feasible on a large scale.

EGS delivered revenue of £2.3m (2014: £2.2m annual) and £0.7m (2014: £0.2m annual) of EBIT.

Intesource Inc ("Intesource")

The Group acquired Intesource on 2 June 2014. The strategic rationale was to acquire a customer base delivering a high degree of profitable contracted revenues and to strengthening the Group's presence in the key US market, with significant opportunity for product cross-selling.

Intesource is an established provider of e-auction services (using its own proprietary service delivery know-how and software platform) and has over 25 customers delivering over $4.5 million of recurring annual income profitably. The service offering was recognised by Gartner which classified Intesource as a "cool vendor" in its report during May 2013.

The acquisition provides further scale and profitability and offers strong opportunities to cross-sell its own complementary product suite. Operational savings have been made through the consolidation of elements of the Group's existing operations in the US. Intesource's current e-auction service delivery know-how and the software platform significantly bolsters PROACTIS' offering by accelerating the service offering to customers and saving its own future development costs.

Customers of both PROACTIS and Intesource can look forward to the delivery of broadened services and solutions to support operations, enhance procurement effectiveness and extend collaboration with suppliers.

Intesource delivered revenue of £3.3m (2014: £3.2m annual) and £0.5m (2014: £0.4m annual) of EBIT.

Intelligent Capture Limited ("Intelligent Capture")

The Group acquired Intelligent Capture on 1 August 2014. The strategic rationale was to acquire an established e-Invoicing capability to support the Group's opportunity to access a new customer grouping, the client supplier network, as well as having a strong customer base with significant opportunity for product cross-selling.

Intelligent Capture is one of the UK's leading providers of document scanning and optical character recognition services ("OCR"), and was an existing business partner of PROACTIS. Intelligent Capture has more than 40 clients and generated over £1.5 million of profitable, recurring annual income prior to the acquisition.

Intelligent Capture delivered revenue of £2.1m (2014: £1.5m annual) and £0.7m (2014: £0.2m annual) of EBIT.

The supplier network opportunity

The Group has a strategic objective of accessing and providing value added services to a new customer grouping, the supplier networks of its 500 clients. This strategic objective has been entitled "Activate" through the period that the Group has been formulating its plans to realise the opportunity. The plans are now well advanced and the Group is marketing its new offering through an early adopter group of clients. The opportunity is substantial and could accelerate the Group's rate of growth well beyond that available through its current business model.

The Group has historically only charged clients on the buy side of the buyer/supplier relationship. There are, however, many mutual benefits that both the buyer and supplier can realise through the Group's software, including:

- e-Procurement;

- Near paperless trading;

- Improvement of efficiencies in the administration of supplier records;

- Transparency of the status of a purchase invoice in the approval and payment cycle; and

- Accelerated payments.

The Group's focus is to facilitate all of the above benefits between its client base and their suppliers. This will encourage electronic trading, which is currently poorly adopted, creating efficiencies within the buy/sell transaction process. These efficiencies will be realised by the suppliers through a greater level of convenience in the trading relationship with their customers and significantly reduced costs whilst also creating new commercial opportunities. These benefits and efficiencies will be charged through a non-tariff based, de minimis software support fee.

The Group's software increases transparency of the buyer's invoice processing cycle by providing visibility of invoice status to suppliers as the invoices flow through the approval and payment cycle. This creates an opportunity for a supplier to access an accelerated payment to support its own growth or to cover short-term working capital requirements without disruption of or detriment to the buyer's operations. PROACTIS conservatively estimates that its client base is spending over £50 billion per annum with their suppliers. During the year, the Group collaborated with Ultimate Finance Limited, a subsidiary of Inspired Capital plc, and, with their financial expertise and understanding of the UK SME marketplace, has been able to develop software capable of offering an Accelerated Payment Facility which the Board believes can now be taken to market.

Summary and outlook

The Group has continued to grow substantially during the year, reporting record revenues, order intake and order book. It has delivered strong levels of organic growth in the Proactis business and also through its acquired businesses in their first full year within the Group. Client retention remains high and upsell levels are strong. This revenue is being delivered even more efficiently and the rate of profitability is at the highest level in the Group's history.

Over the coming year, the Group will continue to drive organic growth whilst pursuing its M&A strategy. The Group currently has a healthy pipeline of opportunities which fit within its acquisition criteria.

In concurrence, the Group's opportunity to access and deliver value added services to a new customer grouping, the suppliers of its 500 clients, is now ready for market with a short-term plan to deliver the solution through an early adopter group of clients. The scope for growth of this opportunity is extremely exciting.

We are very pleased with the Group's sustained level of growth and momentum and are confident that we are in a strong position to continue and accelerate even further.

Alan Aubrey

Chairman

Rod Jones

Chief Executive Officer

12 October 2015

Chief Financial Officer's Report

Results for the year and key performance indicators

Performance analysis

Execution of the Group's M&A strategy resulted in three completed acquisitions in the period from February 2014 to August 2014 and this has had a significant positive impact on the scale and growth rate of the Group's operations and financial performance. The current financial year has benefitted from the first full year of contribution from all three of the acquired businesses; EGS Group (acquired 7 February 2014), Intesource (acquired 2 June 2014) and Intelligent Capture (acquired 1 August 2014). The performance of these respective acquired businesses during this financial year, within the Group's performance as a whole, can be analysed as follows:

Note 1: The Organic growth measure reported is calculated by reference to the revenue contributed for the year ended 31 July 2015 and the year ended 31 July 2014 in each of the businesses' local currency.

Note 2: Organic growth rate is calculated on a weighted average basis where combined across different businesses.

Note 3: Before amortisation of customer related intangible assets, share based payment charges and non-recurring administrative expenses (related to the Group's acquisition during the year and the post-acquisition integration and re-organisation programmes).

Reported revenue

Revenue increased 69% to £17.2m from £10.2m last year. Underlying organic growth in the Proactis business was 12.6% compared to 10.3% in the three acquired businesses (on a weighted average basis) and the three acquisitions contributed £7.7m of revenue in their first full year within the Group (2014: two acquisitions contributed £1.7m, both for a part year).

The Group signed 39 new deals (2014: 38) of which 20 (2014: 29) were under the subscription model. Eleven of those new deals were signed by the three acquired businesses, delivering £2.0m order intake, with six of those new deals being under the subscription model.

Revenue from recurring contracted subscriptions, managed service contracts, support and hosting was £13.6m (2014: £7.4m) with the Group's acquisitions contributing £6.8m (2014: £1.5m). The underlying organic growth of this revenue stream in the Proactis business was a healthy 16.9%.

Revenue from consultancy services increased by £0.5m to £2.0m (2014: £1.5m) with a contribution of £0.5m (2014: £0.2m) from the Group's acquisitions.

Revenue visibility

The total initial contract value of the 39 new deals (2014: 38) signed during the year was £5.2m (2014: £5.3m) of which £1.7m (2014: £1.1m) has been recognised during the year, leaving £3.5m (2014: £4.2m) to be recognised in future years.

The total value of subscription, managed service, support and hosting revenue recognised in the year was £13.6m (2014: £7.4m). At 31 July 2015, the annualised run rate of subscription, managed service, support and hosting revenue was £14.3m (2014: £11.7m) which equates to 83.1% (2014: 114.7%) of reported revenues.

The aggregate value, at 31 July 2015, of contracted income that is to be recognised as revenue in future financial periods increased by 38.7% to £19.7m (2014: £14.2m).

Support and hosting revenue is generally renewed annually in advance, and the Group has had low cancellation rates in the past. Because of this, the Group includes these revenues for its annualised run rate (see above). Those revenues are, however, only "contracted" to the extent that each current annual contract remains unfulfilled.

Gross margins and overheads

The Group's business partners and its own direct sales effort sold deals under both the subscription and perpetual business models. Two of the three acquired businesses sell entirely directly to their clients rather than through business partners and, accordingly, the revenue from those businesses delivers comparatively high gross margins. Consequently, and with the full year effect of these businesses within the Group, gross margins improved through the impact of that mix shift. The combined effect of these factors was that the Group reported an improved gross margin over all of 80.4% (2014: 73.6%).

Overhead increased during the year to £12.3m (2014: £7.3m). Underlying overheads, excluding non-recurring administrative expenses (related to the Group's acquisition during the year and the post-acquisition integration and re-organisation programmes), amortisation of customer related intangible assets and share base payment charges, was £10.9m (2014: £6.4m). The three acquisitions contributed £5.1m (2014: £1.2m). The Group's underlying overhead increased by £0.6m.

Accordingly, the Group's adjusted EBITDA before non-recurring administrative expenses (related to the Group's acquisition during the year and the post-acquisition integration and re-organisation programmes), amortisation of customer related intangibles and share based payment charges increased by 140% to £4.8m (2014: £2.0m) and the associated margin increased to 27.8% (2014: 20.1%). The equivalent operating profit increased by 140% to £3.0m (2014: £1.1m) and the associated margin increased to 17.2% (2014: 11.1%).

The statutory operating profit increased by 700% to £1.6m (2014: £0.2m).

Capitalised development costs and costs of software for own use were £2.0m (2014: £1.2m). The income statement includes a total charge for the amortisation of capitalised development costs and costs of software for own use of £1.7m (2014: £0.9m), the increase being driven by the full year effect of the amortisation of capitalised development costs and costs of software for own use of the three acquisitions.

Acquisition of Intelligent Capture

The Group acquired Intelligent Capture on 1 August 2014 for gross consideration of £1.6m, paid in cash at completion as to £1.3m and in new ordinary shares as to £0.3m. The net cash consideration was £1.1m with Intelligent Capture having free cash of £0.2m on its balance sheet at the date of acquisition.

The cash consideration for the acquisition was funded by way of bank debt and the Group's own cash resources. Bank debt was provided by HSBC Bank plc by way of a Term Loan of £1.0m repayable over four years at an interest rate of 2.65% per annum over LIBOR.

The annual revenue of the Intelligent Capture for the year prior to the date of acquisition was approximately £1.5m with an estimated EBITDA of £0.2m. The Group acquired net assets with a book value of £0.2m but, with adjustments of £0.8m to reflect the fair value of customer related intangible assets, the fair value of assets acquired was £1.0m and the Group recognised £0.6m of goodwill.

During the year since the acquisition, Intelligent Capture has performed very strongly, contributing £2.1m revenue and £0.7m of EBITDA.

Cash flow

The Group remains in a strong financial position with cash balances of £3.4m at 31 July 2015 (2014: £3.1m).

The Group generated cash from operating activities of £3.4m (2014: £1.7m) which is higher than the reported operating profit of the Group of £1.6m (2014: £0.2m), mainly due to the amortisation of intangible assets, and the Group drew down on a further term loan from HSBC Bank plc of £1.0 million. The Group invested £2.2m (2014: £1.3m) in capital related expenditure (including internal development costs and costs of software for own use) and utilised £1.1 million (net, and before costs) (2014: £3.9 million) on the acquisition of Intelligent Capture.

The Group had a cash outflow of £0.7m (2014: £Nil) from the servicing of its debt finance and paid a cash dividend of £0.4m (2014: £0.3m) to its equity investors.

Earnings per share

There have been a number of non-recurring administrative expenses and other non-cash expenses related principally to the Group's acquisition related activities. The Group presents an adjusted earnings per share measure to take account of these issues and reports 6.1p per share (2014: 2.7p per share). Basic earnings per share were 5.2p (2014: 1.0p).

Dividend policy

Subject to approval at the General Meeting of Shareholders to be held on 21 December 2015, a final dividend of 1.2p (2014: 1.1p) per Ordinary share is proposed and will be paid on 25 January 2016 to shareholders on the register at 4 January 2016. The corresponding ex-dividend date is 31 December 2015.

Treasury

The Group continues to manage the cash position in a manner designed to maximise interest income, while at the same time minimising any risk to these funds. Surplus cash funds are deposited with commercial banks that meet credit criteria approved by the Board, for periods between one and twelve months.

Key risks

Although the directors seek to minimise the impact of risk factors, the Group is subject to a number of risks which are as follows:

- Loss of key personnel: Loss of key management could have adverse consequences for the Group. While the Group has entered into service agreements with each of its executive directors, the retention of their services or those of other key personnel cannot be guaranteed. The Group has strengthened its key management during the course of the year, through the three acquisitions and the appointment of a full-time Chief Financial Officer.

- Ability to sign up Accredited Channel Partners ("ACPs"): The Group is reliant in part on generating its revenues through agreements with ACPs. While the Group currently has agreements with a number of ACPs, there is no guarantee that further agreements will be reached with appropriate ACPs nor that the existing agreements will be renewed. This could have an adverse impact on the Group's business. The Group is constantly assessing the performance of its ACPs and how the Group supports those ACPs. During the year, the Group has re-organised its operations to provide greater day-to-day support to its ACPs in India and in Asia Pacific with a view to improving performance in those territories.

- Government policy: The Group's strategy is dependent in part on generating revenue from public sector bodies. Any change in the Government's policy of encouraging public sector bodies to develop their e-procurement strategies, including making funds available for such a strategy, could have an adverse impact on the Group's ability to deliver its business strategy. The Group is supportive of the Government's ambitions to bring about the benefits of e-procurement and continues to carry out activities to support its public sector clients in their own e-procurement implementations.

- Competition: Competitors may be able to develop products and services that are more attractive to customers than the Group's products and services. In order to be successful in the future, the Group will need to continue to finance research and development activities and continue to respond promptly and effectively to the challenges of technological change in the software industry and competitors' innovations. An inability to devote sufficient resources to product development activities in order to achieve this may lead to a material adverse effect on the Group's business. The Group continues to invest substantially in the development of its technology and other solutions to enable it to meet the challenge of fast changing market demand and ever increasing levels of technological advancement and is being successful through the rate of sale of new logos and number of upsell transactions with existing clients.

Tim Sykes

Chief Financial Officer

12 October 2015

Consolidated Statement of Comprehensive Income for the year ended 31 July 2015

All of the Group's operations are continuing.Consolidated Balance Sheet as at 31 July 2015

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement for the year ended 31 July 2015

Notes

1. These preliminary results have been prepared on the basis of the accounting policies which are to be set out in PROACTIS Holdings PLC's annual report and financial statements for the year ended 31 July 2015.

The consolidated financial statements of the Group for the year ended 31 July 2015 were prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted for use in the EU ("adopted IFRSs") and applicable law.

The financial information set out above does not constitute the company's statutory financial statements for the years ended 31 July 2015 or 2014 but is derived from those financial statements. Statutory financial statements for 2014 have been delivered to the Registrar of Companies and distributed to shareholders, and those for 2015 will be distributed to shareholders on or before 30 November 2015. The auditors have reported on those financial statements and their reports were:

(i) unqualified;

(ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and

(iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the financial statements for 2014 or 2015.

2. Basis of preparation

The Group financial statements have been prepared and approved by the directors in accordance with adopted IFRSs.

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

3. Non-recurring administrative expenses

4. Taxation

Recognised in the income statement

Note: The Group has benefitted from the receipt of tax rebates in respect of qualifying research and development expenditure incurred by the Group. The Group has substantial operating losses in some of its subsidiary undertakings which have been utilised during the period. Following the acquisition of EGS Group Holdings Limited (formerly EGS Group Limited), the operating performance of that business has improved substantially and this has resulted in a greater level of visibility on future profits. Accordingly, the Group has required that a greater deferred tax asset in respect of tax losses be recognised.

5. 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.

6. Acquisition

On 1 August 2014, the Group acquired the entire issued ordinary share capital of Intelligent Capture Limited. The fair values of assets and liabilities acquired are set out below.

The revenue of Intelligent Capture Limited for the period from the date of acquisition to 31 July 2015 was £2,108,000 and the profit before tax for that period was approximately £650,000. This does not factor in the amortisation of intangible assets that will now be recognised in the Group accounts.