30 Sep 2008 07:00
PROACTIS Holdings PLC
Unaudited Preliminary Results for the year to 31 July 2008
PROACTIS Holdings PLC ("PROACTIS", the "Group" or the "Company"), the specialist Spend Control software provider, announces its unaudited preliminary results for the year to 31 July 2008.
Highlights:
Revenue growth of 23% to £6.6m (2007: £5.3m)
45 new client wins in the year (2007 : 48) and 41 upgrade deals from existing clients (2007 : 30)
Restructuring programme completed with committed overhead base covered by margin from visible revenues
Adjusted operating profit was £0.8m (2007: profit £0.7m)
Cash generated from operating activities was £0.7m (2007 : £0.7m)
Cash in hand of £1.6m (2007: £1.3m)
Loss before tax of £0.5m (2007 : profit £1.1m)
Earnings per share fell to negative 1.4p (2007: positive 3.5p)
Rod Jones, CEO commented:
"PROACTIS performed well from many perspectives; namely strong revenue growth of more than 20% and the reduction of the acquired overhead base and restructuring of its operations. A strong final quarter of new and upgrade business delivery confirms the continued desirability of PROACTIS' product and this gives me confidence for the forthcoming year and a strong belief that we will return to delivering shareholder value."
The Company's Unaudited Preliminary Results are available on its website www.proactis.com
- ends -
Enquiries:
PROACTIS Holdings PLC 019 3754 5070
Rod Jones, Chief Executive Officer
Tim Sykes, Chief Financial Officer
Daniel Stewart & Company plc 020 7776 6550
Lindsay Mair / Tom Jenkins
Weber Shandwick Financial 020 7067 0700
Nick Oborne / John Moriarty / James White
PROACTIS creates, sells and maintains specialist software which enables organisations to streamline, control and monitor all internal and external expenditure, other than payroll. PROACTIS is already used in over 200 organisations in the UK from the commercial, public and not-for-profit sectors.
Chairman's and Chief Executive Officer's Report
Business overview
We are pleased to report that the Group has achieved record revenues of £6.6m for the year, up 23% against £5.3m for 2007 and delivered an operating profit before non-recurring, one-time administrative expenses and share based payment charges of £0.8m (2007: £0.7m). Following the cost reduction programme undertaken during the Spring of this year, where we were able to cut out £1.4m of the reported overhead, the Group is in a very strong position going forward. The statutory operating loss was £0.6m (2007: profit £1.0m).
These results reflect a tremendous effort, particularly in the second half, with both of our routes to market contributing positively. We have extended our Accredited Channel Partner profile in the US and entered Southern Africa and Asia Pacific, with an encouraging start in each of these geographies. Our business in the US achieved a creditable breakeven position in its first full year.
Strategy
Our strategy and focus remain the same and we continue to execute our plans to grow the business, following our acquisitions. Key achievements during this financial year and in the period since include:
Increasing our customer base - we achieved some 45 new deals in the year, with additional revenue coming from a further 41 upgrade sales to existing clients.
Developing the Accredited Channel Partner route to market - we have increased the number of our Accredited Channel Partners by four, including two major new partners in the US, one in Asia Pacific and one in Southern Africa.
Investing in the direct sales force - the size of the team remains similar to last year, with key accounts and markets being addressed by dedicated sales staff.
Consolidated and extended software products - the latest version of software completes our end-to-end solution for e-Procurement and Spend Control. The solution is available as a collection of "plug and play" modules that can be deployed in a variety of ways and, as planned at the time of the acquisitions, now includes all functionality and flexibility of the acquired code.
Markets
Our chosen markets are continuing to be buoyant and the counter cyclical nature of spend control means that, whilst having specific challenges, these markets continue to provide opportunities through both our direct and indirect channels.
Public sector - PROACTIS has added 15 new name accounts in this sector, taking our client base to some 90 accounts in total (2007: 75). More importantly, following the delivery of our 2008 release, we have many more opportunities to sell in to these accounts as our clients seek to complete their end-to-end spend control and procurement systems.
Not for Profit and Charities sector - Spend control and procurement remains attractive to this sector and provides valuable evidence that the officers and staff are demonstrating fiscal prudence and achieving best value when spending the hard won money and grants that the sector relies on. PROACTIS has added six new name clients in this sector taking the total to 34 (2007: 28).
Commercial Services sector - Our offering has been extremely well received in this sector. We remain particularly strong in financial and professional services and have made significant steps in oil and gas, where our solutions offer many competitive advantages. PROACTIS has added a further 24 clients in this sector during 2008, taking our total to 89 clients (2007: 65).
Routes to market
We continue to deliver our products through a mixture of direct and indirect selling organisations. Our Accredited Partners continue to perform well and our thanks go out to the many people that worked extremely hard to establish PROACTIS as a brand that can be trusted all round the world. We are now able to offer the PROACTIS software in 9 languages, and through our Accredited Partners, are now selling in 6 continents with users in some 70 countries.
Products and product development
Our flagship product PROACTIS P2P (the "purchase to pay" spend control system) continues to do well across the globe. It has been joined by several other key products that started life in Requisoft and Alito, but has now been delivered as new modules in the PROACTIS 2008 release. We now offer Sourcing, Supplier Relationship Management, Electronic Invoicing, Cataloguing and Marketplaces. Our unique approach to deployment of the solutions in the most flexible, plug-and-play or pick-and-mix manner is a key differentiator from our competitors. Our clients can now add facilities to their existing solutions, thus maximising their original investment. During the year to 31 July 2008, we have spent approximately 10% of our revenue on further improving and developing our products (2007: 10%) and we will continue to invest at similar absolute levels to maintain and further our competitive advantage.
Prospects
PROACTIS performed well from many perspectives: namely strong revenue growth of more than 20% and the reduction of the acquired overhead base and restructuring of its operations. A strong final quarter of new and upgrade business delivery confirms the continued desirability of PROACTIS' product and this gives us confidence for the forthcoming year and a strong belief that we will return to delivering shareholder value.
Alan Aubrey Rod Jones
Chairman Chief Executive Officer
29 September 2008
Chief Financial Officer's Report
Results for the year and key performance indicators
Revenues increased by 23% to £6.6m from £5.3m and gross profit delivered increased to £4.5m from £3.7m. Gross margin slipped to 68.3% from 69.7% representing a marginal shift to indirect channel licence revenues from direct licence revenues, following a disappointing period of performance of the direct route to market during the third quarter.
A successful restructuring programme was undertaken during the early part of the second half of this financial year. This resulted in the total operational integration of the acquired businesses with the associated ongoing overhead reduction and a reduction in the costs of the Board. This exercise has taken out £1.4m of non-recurring and one-time administrative expenses, leaving an annualised committed overhead spend of £3.5m, which is at or around the level of margin to be earned from "visible" revenues. This is a solid financial platform for the group to operate from going forward.
Operating profit before non-recurring, one-time administrative expenses and share based payment charges increased to £0.8m (2007: £0.7m). The statutory operating loss was £0.6m (2007: profit £1.0m).
PROACTIS has continued to invest in product and the cash cost of internal software development increased to £0.7m (2007: £0.6m) of which £0.4m was capitalised (2007: £0.3m). The release of PROACTIS 2008 completes the strategy to include the entire acquired functionality of the Alito and Requisoft product within the more robust PROACTIS code base, along with an advancement of the core PROACTIS functionality. The Group expects that an element of development cost will not recur and is redeploying resource to direct revenue generating activities.
US performance
Our US operations reported a creditable first year performance, breaking even on £0.3m revenues.
Taxation
There was a small net tax credit in the income statement for the year arising principally from the release of an element of the deferred tax liability following the change in future anticipated rate of income taxes.
Earnings per share
Basic earnings per share fell to negative 1.4p (2007: 3.5p).
Dividend
The payment of dividends will be 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. In the short term it is the Directors' intention to re-invest funds into the Company rather than fund the payment of dividends. Accordingly, the Directors do not recommend the payment of a dividend.
Cash flow
The Group has reported a net cash inflow from operating activities of £0.7m (2007: £0.7m) which is well ahead of the reported operating loss of the Group of £0.6m (2007: profit £1.0m) as a result of some strong working capital management. A small net outflow of £0.1m after capital expenditure and capitalised internal software development costs was offset by a net £0.4m inflow from financing activities to leave the Group with £1.6m cash (2007: £1.3m).
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 six months. At 31 July 2008, the Group had £1.2m on short term deposits (2007: £0.8m).
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 can 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 current 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 research and development activities in order to achieve this may lead to a material adverse effect on the Group's business.
Tim Sykes
Chief Financial Officer
29 September 2008
Consolidated Income Statement for the year ended 31 July 2008
| 2008 | 2007 | |||
| Notes | £000 | £000 | ||
| Revenue | 6,553 | 5,340 | ||
| Cost of sales | (2,079) | (1,620) | ||
| ------------- | ------------ | |||
| Gross profit | 4,474 | 3,720 | ||
| Administrative costs | (5,030) | (2,762) | ||
| ------------- | ------------ | |||
| Operating profit before non-recurring and one-time administrative expenses and share-based payment charges | 841 | 744 | ||
| Non-recurring administrative expenses | 3 | (928) | - | |
| One-time administrative (expenses) / income | 4 | (447) | 300 | |
| Share-based payment charges | (22) | (86) | ||
| ------------- | ------------ | |||
| Operating (loss) / profit | (556) | 958 | ||
| Finance income | 47 | 130 | ||
| Finance expenses | (19) | - | ||
| ------------- | ------------ | |||
| (Loss) / profit before taxation | (528) | 1,088 | ||
| Taxation | 100 | (29) | ||
| ------------- | ------------ | |||
| (Loss) / profit for the year | (428) | 1,059 | ||
| ------------- | ------------ | |||
| Earnings / (loss) per ordinary share : | ||||
| - Basic | 5 | (1.4p) | 3.5p | |
| ------------- | ------------ | |||
| - Diluted | 5 | (1.4p) | 3.4p | |
| ------------- | ------------ | |||
Consolidated statement of changes in equity for the year ended 31 July 2008
| Share capital | Share premium | Merger reserve | Capital reserve | Retained earnings | |
| £000 | £000 | £000 | £000 | £000 | |
| At 1 August 2006 | 3,012 | 2,735 | 556 | - | (2,441) |
| Shares issued pursuant to the exercising of options under employee share option schemes | 6 | - | - | - | (4) |
| Result for the period | - | - | - | - | 1,059 |
| Share based payment charges | - | - | - | - | 86 |
| ------------- | ------------- | ------------- | ------------- | ------------- | |
| At 31 July 2007 | 3,018 | 2,735 | 556 | - | (1,300) |
| Shares issued during the year as consideration for business combinations | 59 | 316 | - | - | - |
| Share options granted as consideration for business combinations | - | - | - | 449 | - |
| Result for the period | - | - | - | - | (428) |
| Share based payment charges | - | - | - | - | 22 |
| ------------- | ------------- | ------------- | ------------- | ------------- | |
| At 31 July 2008 | 3,077 | 3,051 | 556 | 449 | (1,706) |
| ------------- | ------------- | ------------- | ------------- | ------------- |
Consolidated Balance Sheet as at 31 July 2008
| 2008 | 2007 | ||
| £000 | £000 | ||
| Non-current assets | |||
| Property, plant & equipment | 133 | 140 | |
| Intangible assets | 6,377 | 6,273 | |
| ------------- | ------------ | ||
| 6,510 | 6,413 | ||
| ------------- | ------------ | ||
| Current assets | |||
| Trade and other receivables | 1,826 | 2,500 | |
| Income taxes | 40 | - | |
| Cash and cash equivalents | 1,587 | 1,267 | |
| ------------- | ------------ | ||
| 3,453 | 3,767 | ||
| ------------- | ------------ | ||
| Total assets | 9,963 | 10,180 | |
| ------------- | ------------ | ||
| Current liabilities | |||
| Borrowings | 167 | - | |
| Trade and other payables | 1,225 | 2,346 | |
| Deferred income | 1,478 | 1,260 | |
| Income taxes | 60 | 118 | |
| ------------- | ------------ | ||
| 2,930 | 3,724 | ||
| ------------- | ------------ | ||
| Non-current liabilities | |||
| Borrowings | 251 | - | |
| Deferred taxation | 1,355 | 1,447 | |
| ------------- | ------------ | ||
| 1,606 | 1,447 | ||
| ------------- | ------------ | ||
| Total liabilities | 4,536 | 5,171 | |
| ------------- | ------------ | ||
| Net assets | 5,427 | 5,009 | |
| ------------- | ------------ | ||
| Equity attributable to equity holders of the Company | |||
| Called up share capital | 3,077 | 3,018 | |
| Share premium account | 3,051 | 2,735 | |
| Merger reserve | 556 | 556 | |
| Capital reserve | 449 | - | |
| Retained earnings | (1,706) | (1,300) | |
| ------------- | ------------ | ||
| Total equity | 5,427 | 5,009 | |
| ------------- | ------------ |
Consolidated Cash Flow Statement for the year ended 31 July 2008
| 2008 | 2007 | ||
| £000 | £000 | ||
| Operating activities | |||
| (Loss)/profit for the period | (428) | 1,059 | |
| Amortisation of intangible assets | 257 | 212 | |
| Depreciation | 60 | 25 | |
| Share based payment charges | 22 | 86 | |
| Net finance income | (28) | (130) | |
| Income tax credit | (100) | 29 | |
| ------------- | ------------ | ||
| Operating cash inflow before changes in working capital | (217) | 1,281 | |
| Movement in trade and other receivables | 674 | (994) | |
| Movement in trade and other payables | 346 | 237 | |
| ------------- | ------------ | ||
| Operating cash inflow from operations | 803 | 524 | |
| Finance income received | 47 | 130 | |
| Finance expense payable | (18) | - | |
| Income tax (paid) / received | (90) | 6 | |
| ------------- | ------------ | ||
| Net cash flow from operating activities | 742 | 660 | |
| ------------- | ------------ | ||
| Investing activities | |||
| Purchase of plant and equipment | (53) | (103) | |
| Development expenditure capitalised | (446) | (273) | |
| Acquisition of subsidiaries | (341) | (2,508) | |
| ------------- | ------------ | ||
| Net cash flow from investing activities | (840) | (2,884) | |
| ------------- | ------------ | ||
| Financing activities | |||
| Net (outflow) / inflow from the Placing | - | (275) | |
| Proceeds from issue of shares | - | 2 | |
| Proceeds from bank borrowings | 500 | - | |
| Repayment of bank borrowing | (82) | - | |
| ------------- | ------------ | ||
| Net cash flow from financing activities | 418 | (273) | |
| ------------- | ------------ | ||
| Net increase in cash and cash equivalents | 320 | (2,497) | |
| Cash and cash equivalents at the beginning of the year | 1,267 | 3,764 | |
| ------------- | ------------ | ||
| Cash and cash equivalents at the end of the year | 1,587 | 1,267 | |
| ------------- | ------------ | ||
Notes
The financial information set out herein does not constitute the Group's statutory accounts for the year ended 31 July 2008 or the year ended 31 July 2007 but is derived from those accounts. The 2008 statutory accounts have not been finalised but this preliminary announcement has been prepared by the Directors based on the results and position which they expect will be reflected in the statutory accounts. The comparative information in respect of the year ended 31 July 2007 has been derived from the audited statutory accounts for the year ended on that date upon which an unqualified audit opinion was expressed and which did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The audited accounts will be posted to all shareholders in due course and will be available on request by contacting the Company Secretary at the Company's Registered Office.
Basis of preparation
The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the European Union.
In the current year, the Group has adopted IFRS7 "Financial Instruments: Disclosures" for the first time. As IFRS7 is a disclosure standard, there is no impact of that change in accounting policy on the financial results presented for the year ended 31 July 2007. Full details of the change will be disclosed in the statutory accounts for the year ended 31 July 2008.
The preparation of financial statements in conformity with IFRS 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.
| 2008 | 2007 | |
| £000 | £000 | |
| Non-recurring administrative expenses of acquired businesses | 928 | - |
| ------------- | ------------- |
Non-recurring administrative expenses relate principally to employment and other operating costs which, following the restructuring programme and integration of the acquired businesses, will no longer be incurred.
| 2008 | 2007 | |
| £000 | £000 | |
| Non-recurring administrative expenses from Board restructure | 447 | (300) |
| ------------- | ------------- |
One-time administrative expenses relate principally to termination costs incurred in undertaking the restructuring programme and integration of the acquired businesses. The £300,000 one-time administrative income represents a release of a provision made at the time of the Admission.
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.
| 2008 | 2007 | |
| Earnings (£000) | (428) | 1,059 |
| ------------- | ------------- | |
| Weighted average number of shares (number '000) | 30,550 | 30,134 |
| ------------- | ------------- | |
| Basic (loss) / earnings per ordinary share (pence) | (1.4p) | 3.5p |
| Diluted (loss) / earnings per ordinary share (pence) | (1.4p) | 3.4p |
| ------------- | ------------- |