PHD.L Regulatory News (PHD)

For immediate release 26 September 2012

PROACTIS Holdings PLC

Preliminary Results for the year to 31 July 2012

PROACTIS Holdings PLC ("PROACTIS", the "Group" or the "Company"), the specialist Spend Control software provider, announces its preliminary results for the year to 31 July 2012.

Highlights:

Ø Reported revenue £7.5m (2011: £6.2m)

Ø Operating profit £0.1m (2011: loss £0.6m)

Ø Total Initial Contract Value signed on 28 new deals of £3.5m (2011: £2.6m on 30 new deals) with £1.7m (2011: £0.9m) recognised in the year

Ø Annualised visible revenue increased to £5.1m (68% of reported revenue) (2011: £4.3m; 68%)

Ø Total contracted but not recognised multi-year revenue increased to £5.1m (2011: £3.8m)

Ø Cash at 31 July 2012 £2.7m (2011: £2.1m), the Group is debt free

Ø Earnings per share 0.5p (2011: loss per share 1.8p)

Ø Dividend of 0.75p per share (2011: 0.55p)

Rod Jones, CEO commented:

"PROACTIS has significantly increased its revenues in continued difficult market conditions. It has returned to profitability and the level of cash generation has been strong. It continues to progress with its transition to a blended SaaS/Perpetual business model and has further improved its visibility over future revenue. The Board is confident that the Group is well placed to deliver growth for the foreseeable future."

The Company's Preliminary Results are available on its website www.proactis.com

- ends -

Enquiries:

PROACTIS 019 3754 5070

Rod Jones, Chief Executive Officer

Tim Sykes, Chief Financial Officer

finnCap Limited 020 7220 0500

Marc Young / Charlotte Stranner

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 over 300 organisations in the UK from the commercial, public and not-for-profit sectors.

Chairman's and Chief Executive Officer's Report

Business overview

The Group has reported revenue of £7.51m for the year, an increase of 20.4% against £6.24m reported for 2011.

In continued tough selling conditions for application software, the Group sold 28 new name deals (2011: 30) of which 10 (2011: 14) were SaaS model deals that result in revenue being recognised in future periods. Total Initial Contract Value sold was £3.48m (2011: £2.63m) of which £1.68m (2011: £0.86m) was recognised during the year. Further, the Group sold 75 upgrade deals (2011: 79) to existing clients.

The Group continues to invest ahead of the curve in its product and its selling territories. The cash spend on product development was £1.01m (2011: £0.92m) and the total charge to the income statement was £0.96m (2011: £0.79m). In addition, whilst both the US and Asia Pacific teams contributed to deal count, the growth opportunity in those territories is significant and the Group anticipates a better a return from these relatively new teams in future periods.

The Group returned to profitability and delivered an operating profit of £0.26m before amortisation of customer related intangible assets and share based payment charges (2011: loss £0.46m). The statutory operating profit was £0.08m (2011: loss £0.63m).

Net cash generation was very strong and the Group closed with cash balances of £2.67m (2011: £2.14m).

Strategy

Route to market

The Group continues to focus on combining direct with indirect routes to market through business partners. The Group has invested in dedicated teams to better energize and support business partners in getting traction in an efficient manner. This type of organisational structure is deployed globally and is supplemented with the Group's direct sales team being deployed principally to UK based opportunities only. The Board believes that it will give the Group the best opportunity to maximise international market penetration and enhance international business. The Group's reseller partners have performed solidly during the year.

The US and Asia Pacific teams are in place and are working with regional business partners. The US team contributed with several major clients including Bridgewater Associates and DLA Piper that are now live. It also won CATSA (Canadian Air Traffic) as a new name deal during the year. The Asia Pacific team made an encouraging start in its first year of operation, delivering three new names in the period, including Australian Customs & Border Control, through two new reseller partners.

Product

The Group's aim of being a leading "best in class" spend control and eProcurement organisation has been further enhanced by the addition of new pricing and licensing options. Software solutions are available to customers as SaaS or Cloud based contracts or perpetual licenses in a variety of models including transactional, user/seat based and enterprise levels, according to customer requirements.

The Group's investment over the last two years in developing its products has given it a real competitive advantage and, having deployed the products in several, referenceable, global organisations as true SaaS solutions delivered over the Cloud, they are fully validated.

The Group is in the best position possible - its product suite is complete, is widely regarded as the best in class, is deployable in many different ways and has testimonials from many clients as to its suitability. The Group will continue to invest in further improving and developing its core offering to ensure that it remains competitive.

The Group is ever mindful of a changing competitive landscape and is developing its offering to suit emerging needs. It is at a very early stage of product development in point solution business applications for generic mobile devices with agnostic host environments. Further, and in addition, the Group is looking at new ways of monetising its core enterprise class application software as a platform for customers requiring offshore outsourced procurement services.

Markets

PROACTIS' product offers true multi-company, multi-currency and multi-language functionality and this is essential to deliver solutions worldwide across many different sectors allowing the Group to participate in markets less affected by recession. In 2012 the Group sold deals into four continents across many different sectors.

Competition is mixed and consistsof local players that compete largely on price, international procurement specialists with a functionally competitive product and Enterprise Resource Planning vendors that compete on product functionality and tight integration.

The Group analyses the market into three broad categories.

Public sector - formed a significant proportion of the Group's new name deals this year and included London Borough of Merton, Kingston Hospital NHS and Australian Customs & Border Control from the Group's Asia Pacific team. The SaaS model with Cloud based deployment continues to attract interest.

Not for Profit and Charities sector- continues to be challenging, due to the economic climate and the need to balance fund raising and expenditure, but remains a significant market that is of interest and included new name deals of Cancer Research UK and Anthony Nolan Trust.

Commercial Services sector- has many verticals within it and all of them have different pressures, but generally has been positive with Oil and Gas, Legal, Financial and Professional Services offering good opportunities with new names including Boden, Clarins, Weir Group, Dana Petroleum, BIS and Betclic.

In addition, the existing customer base continues to offer the Group significant opportunity.  Support revenue continues to grow and, alone, represented some 47% (2011: 55%) of total revenue for the year. In addition and just as importantly clients continue to buy additional software and extra users and are capitalising on their existing investment.

Routes to market and market outlook

The profile and nature of our business partners is changing. Whilst the Group remains committed to its existing Resellers, it is necessarily developing other types of partner relationship. These include Business Process Outsourcing partners where the Group's software is at the heart of their proposal, and niche software authors that wish to promote the Group's software alongside their own.

Prospects

PROACTIS has significantly increased its revenues in continued difficult market conditions. It has returned to profitability and the level of cash generation has been strong. It continues to progress with its transition to a blended SaaS/Perpetual business model and has further improved its visibility over future revenue. The Board is confident that the Group is well placed to deliver growth for the foreseeable future.

Alan Aubrey Rod Jones

Chairman Chief Executive Officer

25 September 2012

Chief Financial Officer's Report

Results for the year and key performance indicators

Reported revenue

Revenue increased by 20.4% to £7.51m from £6.24m last year. The transition to a blended SaaS/perpetual licence business model continues and Group revenues have benefitted from deals signed in the prior year for which revenue has been recognised during this year.

The Group signed 28 new deals (2011: 30) of which 10 (2011: 14) were under the SaaS model. The mix of SaaS and perpetual deals has a significant effect on reported revenue:

- the higher number of new and upgrade perpetual deals signed during the year has increased revenue against the prior year by approximately £0.29m; and

- the compounding effect of the SaaS deals signed in the prior year has increased revenue against the prior year by approximately £0.26m.

The Group also benefitted from a stronger opening order book for its professional services and this increased revenue by approximately £0.53m.

Revenue from Support and Hosting has increased by approximately £0.19m to £4.08m (2011: £3.89m). The Group has experienced a larger than usual attrition of its user base with an annualised loss of approximately £0.25m due principally to M&A activity and public sector organisational restructuring.

Revenue visibility

The SaaS model was introduced primarily to satisfy shifting market demand but also to enable the Group to increase the visibility of future revenue. The total initial contract value of the 28 new deals (2011: 30) signed during the year was £3.48m (2011: £2.63m) of which £1.68m (2011: £0.86m) has been recognised during the year, leaving £1.80m (2011: £1.77m) deferred for future years.

The total value of SaaS, Support and Hosting revenue recognised in the year was £4.49m (2011: £4.04m). At 31 July 2012, the annualised run rate of SaaS, Support and Hosting revenue was £5.05m (2011: £4.25m) which equates to 68% of reported revenues (2011: 68%).

Support and Hosting revenue is generally renewed annually in advance and the Group has had very low cancellation rates in the past. Because of this, the Group includes these revenues as "visible" for its annualised run rate (see above). Those revenues are, however, only "contracted" to the extent that each current annual contract remains unfulfilled. The total value of multi-year contracted income that, at 31 July 2012, was deferred for future years was £5.14m (2011: £3.76m).

Gross margins and overheads

The 10 deals (2011: 14) sold under the SaaS model were principally sold by the Group's direct sales team and the remaining 18 (2011: 16) deals sold under the perpetual model were principally sold by the Group's business partners. This would normally result in reduced gross margins but, after the beneficial effect on gross margin from the contribution of SaaS model deals sold in the prior year, revenue mix shifted back toward direct business and gross margins improved to approximately 68.5% (2011: 66.9%).

Overhead increased by £0.27m to £5.07m (2011: £4.80m) primarily through its early stage investment in the Asia Pacific region and through an increased charge to the income statement for previously capitalised product development costs. Inflationary salary increases in the UK and US have been offset by natural efficiency savings.

The Group has continued to invest in product and the cash cost of internal software development was £1.01m (2011: £0.92m) of which £0.75m was capitalised (2011: £0.69m). The income statement includes a total charge for software development of £0.96m (2011: £0.79m).

The Group has returned to profitability in its second year of transition to the blended SaaS/perpetual model and it has reported an operating profit of £0.26m before amortisation of customer related intangibles and share based payment charges (2011: loss £0.46m). The statutory operating profit was £0.08m (2011: loss £0.63m).

Cash flow

The Group is in a strong cash position with a very strong performance in cash generation during the year and the Group's net cash balance increased by £0.53m to £2.67m at 31 July 2012 (2011: £2.14m). This was due primarily to a very strong working capital position supported by a return to profitability and tax related matters. These positive factors offset a dividend payment of £0.17m. The Group has reported a cash inflow from operations of £1.44m (2011: outflow £0.09m) which is better than the reported operating profit of the Group of £0.08m (2011: loss £0.63m).

Earnings per share

Basic earnings per share was 0.5p (2011: loss per share 1.8p).

Dividend

The Directors are keen to ensure that shareholders benefit from the trading performance of the Group through a dividend policy. Subject to approval at the Annual General Meeting of Shareholders to be held on 17 December 2012, a final dividend of 0.75p per Ordinary share is proposed and will be paid on or before 25 January 2013 to shareholders on the register at 4 January 2013. The corresponding ex-dividend date is 2 January 2012. The payment of future dividends is subject to availability of distributable reserves whilst maintaining an appropriate level of dividend cover and having regard to the need to retain sufficient funds to finance the development of the Group's activities.

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.

- Ability to sign up Accredited Channel Partners: The Group is reliant in part on generating its revenues through agreements with Accredited Channel Partners. While the Group currently has agreements with a number of Accredited Channel Partners, there is no guarantee that further agreements will be reached with appropriate Accredited Channel Partners nor that the existing agreements will be renewed. This could have an adverse impact on the Group's business.

- 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.

- 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.

Tim Sykes

Chief Financial Officer

25 September 2012Consolidated Income Statement for the year ended 31 July 2012

Consolidated Statement of Changes in Equity

Consolidated Balance Sheet as at 31 July 2012

Consolidated Cash Flow Statement for the year ended 31 July 2012

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 2012.

The consolidated financial statements of the Group for the year ended 31 July 2012 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 2012 or 2011 but is derived from those financial statements. Statutory financial statements for 2011 have been delivered to the Registrar of Companies and distributed to shareholders, and those for 2012 will be respectively delivered and distributed on or before 27 November 2012. 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 2011 or 2012.

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. 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.