30 Sep 2009 07:00
PROACTIS Holdings PLC
Preliminary Results for the year to 31 July 2009
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 2009.
Highlights:
Revenue growth of 7% to £7.0m (2008: £6.6m)
44 new client wins in the year (2008: 45) and 52 upgrade deals from existing clients (2008: 41)
Secured "Best-in-class" status in Gartner's e-Procurement industry report
Underlying operating profit of £1.1m (2008: £0.9m)
Reported operating profit increased to £0.9m (2008: loss £0.6m)
Cash generated from operating activities improved to £1.6m (2008: £0.7m), representing 177% of operating profit
Net cash at year end of £2.4m (2008: £1.2m)
Earnings per share 3.2p (2008: loss 1.4p)
Proposed maiden dividend of 1p per share
Visible and recurring support revenues increased to £3.1m (2008: £2.6m) and healthy pipeline of opportunities
Rod Jones, CEO commented:
"PROACTIS delivered an exceptional performance despite the global financial crisis that existed for most of the year. The restructuring programme we undertook last year combined with our growing reputation in the marketplace stands us in good stead for the future. With a spend control product validated as "Best-in-Class", good visibility on forward revenues and a continued concentration on cost control, the Group is well positioned for 2010."
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
Weber Shandwick Financial 020 7067 0700
Nick Oborne / John Moriarty / James White
Daniel Stewart & Company plc 020 7776 6550
Simon Leathers / Stewart Dickson
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
We are pleased to report that the Group has achieved record revenues of £7.0m for the year, up 7% against £6.6m for 2008 whilst the operating profit for the Group was £931,000 (2008: loss £556,000). The Group delivered an operating profit before non-recurring, one-time administrative expenses, customer related intangible amortisation and share based payment charges of £1,093,000 (2008: £961,000), a 14% increase. The Group also delivered an excellent result on cash with £1.6m generated from operations and £2.4m of net cash at 31 July 2009.
We have seen substantial growth in our US subsidiary with revenues of £0.7m (2008: £0.3m). New licence revenue sold overseas was 18.4% (2008: 15.4%) of total new licence revenue.
During the year Gartner, the leading IT analyst, produced an independent report on the eProcurement industry, examining the critical capabilities of the leading 14 products worldwide. PROACTIS scored excellently, achieving the highest overall rating, the "best-in-class" status in the eProcurement category and securing a top-5 ranking in all usage scenarios outlined in the report. This, when combined with our success in delivering solutions to some major international companies over the course of the year, validates our belief that PROACTIS is well positioned to become a market leader.
These results reflect a tremendous effort, particularly when considered within the exceptionally challenging general trading environment.
Strategy
Our strategy and focus remain the same and we continue to execute our plans to grow the business. Key achievements during this financial year include:
Increasing our customer base - we achieved some 44 new deals in the year; with additional revenue coming from a further 52 upgrade sales to existing clients.
Developing the Accredited Channel Partner route to market - we have chosen to refine and streamline our Accredited Channel Partner programme by selecting specialists for each major operating platform. By selecting only the most committed and well resourced partners for this new initiative, this move will enable us to work seamlessly together to offer an even better service to our clients.
Developing the direct sales force - greater direct sales revenues from a team which is approximately the same size as previous years by increasing our focus in certain key markets and improving our market awareness.
Software Products - the latest version of software continues to improve our end-to-end solution for e-Procurement and Spend Control. The solution is available in many languages as a collection of innovative "plug and play" modules that can be deployed in a variety of ways.
Projects - embarking on some impressive software deployment projects with large multi-nationals including Europcar (worldwide roll-out); Bauer (European roll-out); CB Richard Ellis (e-Invoicing initiatives); APCOA (European roll-out) and Oldcastle Materials Group, Inc. (pan-US roll-out).
Markets
Our chosen markets have shown resilience in the current economic environment. We have also seen the nature of our opportunities change, with bigger deals coming from our direct sales team and a reduction in deal numbers from our Channel Partners.
Public sector - Proactis has added 15 new name accounts in this sector, taking our Public Sector client base to some 105 accounts in total (2008: 90).
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 9 new name clients in this sector taking the total to 43 (2008: 34).
Commercial Services sector - Our offering has been extremely well received in this sector. We remain particularly strong in financial and professional services and have continued our success in oil and gas, where our solutions offer many competitive advantages. Proactis has added a further 20 clients in this sector during 2009, taking our total to 109 clients (2008: 89).
Routes to market
We continue to deliver our products through a mixture of direct and indirect selling organisations. We have streamlined our Channel Partner Programme to promote a tighter working relationship with partners and ensure greater focus. Although this has meant terminating some established but less efficient relationships, the early signs are that this will deliver higher and more profitable revenues for the Group. Our Channel Partners have performed admirably under difficult trading conditions and our thanks go out to the many people that worked extremely hard to help us deliver a strong performance.
Products and product development
Our product suite is now very comprehensive and affords many more opportunities to sell to potential and existing clients alike. Equally important is our flexible deployment methodology, allowing customers to choose from Hosted, Self Managed, SaaS, Rented, or indeed a combination of methods. We have again invested in our product with approximately 8% of our revenue being allocated to development (2008: 10%). We are beginning to reap the benefits of our historic investment as revenues start to accelerate faster than our need to re-invest.
People
We are delighted that Mark McCarthy joined our Board as Sales and Marketing Director during the year and he has had an excellent first year in post. Mark's energy and enthusiasm have been mirrored across the Group and out to our business partners and this has resulted in a very pleasing performance. We believe we now have a solid and talented team in place to deliver our strategic objectives.
Prospects
PROACTIS delivered an exceptional performance despite the global financial crisis that existed for most of the year. The restructuring programme we undertook last year combined with our growing reputation in the marketplace stands us in good stead for the future. With a spend control product validated as "Best-in-Class", good visibility on forward revenues and a continued concentration on cost control, the Group is well positioned for 2010.
Alan Aubrey Rod Jones
Chairman Chief Executive Officer
30 September 2009
Chief Financial Officer's Report
Results for the year and key performance indicators
Revenues increased by 7% to £7.0m from £6.6m and gross profit delivered increased to £5.0m from £4.5m. Gross margin increased to 71.3% from 68.3% representing a marginal shift back toward direct licence revenues from indirect channel licence revenues. We expect this trend to continue as our product and sales functions develop.
A successful restructuring programme was undertaken during the third quarter of the prior financial year. This resulted in the total operational integration of the acquired businesses and a reduction in the costs of the Board. This exercise reduced overhead by a total of £1.4m including non-recurring and one-time administrative expenses, leaving an annualised committed overhead spend of £3.5m.
We leveraged that business model during the year and have reported an operating profit of £931,000 against our loss of £556,000 in the prior year, and an underlying operating profit of £1,093,000 against £961,000 last time.
Proactis has continued to invest in product and the cash cost of internal software development was £0.6m (2008: £0.7m) of which £0.4m was capitalised (2008: £0.4m). The income statement includes a total charge for software development of £0.5m (2008: £0.3m).
US performance
Our US operations continued to develop, contributing positively on £0.7m revenues (2008: £0.3m).
Taxation
There was a small net tax credit in the income statement for the year arising principally from the net effect of a charge relating to intangible assets being offset by the recognition of a deferred tax asset in relation to share based charges. The Group has approximately £0.2m in cash value of losses available to it for offset against future profits.
Earnings per share
Basic earnings per share returned to 3.2p (2008: loss per share 1.4p).
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 21 December 2009, a final dividend of 1p per Ordinary share is proposed and will be paid on or before 24 January 2010 to shareholders on the register at 4 January 2010. 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.
Cash flow
The Group has reported a net cash inflow from operating activities of £1.6m (2008: £0.7m) which is ahead of the reported operating profit of the Group of £0.9m (2008: loss £0.6m) following an excellent performance in working capital management in the final quarter. The Group increased net cash by £1.2m to leave the Group with £2.4m (2008: £1.2m).
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. Clearly, the emphasis has been toward security rather than return in recent times.
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 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
30 September 2009
Consolidated Income Statement for the year ended 31 July 2009
| 2009 | 2008 | ||
| Notes | £000 | £000 | |
| Revenue | 7,001 | 6,553 | |
| Cost of sales | (2,006) | (2,079) | |
| ------------- | ------------ | ||
| Gross profit | 4,995 | 4,474 | |
| Administrative costs | (4,064) | (5,030) | |
| ------------- | ------------ | ||
| Operating profit before non-recurring & one-time items & share based payment charges | 1,093 | 961 | |
| Non-recurring administrative expenses | 3 | - | (928) |
| One-time administrative expenses | 4 | - | (447) |
| Amortisation of customer related intangible assets | (120) | (120) | |
| Share based payment charges | (42) | (22) | |
| ------------- | ------------ | ||
| Operating profit / (loss) | 931 | (556) | |
| Finance income | 33 | 47 | |
| Finance expenses | (14) | (19) | |
| ------------- | ------------ | ||
| Profit / (loss) before taxation | 950 | (528) | |
| Taxation | 46 | 100 | |
| ------------- | ------------ | ||
| Profit / (loss) for the year | 996 | (428) | |
| ------------- | ------------ | ||
| Earnings per ordinary share : | |||
| - Basic | 5 | 3.2p | (1.4)p |
| ------------- | ------------ | ||
| - Diluted | 5 | 3.2p | (1.4)p |
| ------------- | ------------ |
Consolidated Statement of Changes in Equity for the year ended 31 July 2009
| Share capital | Share premium | Merger reserve | Capital reserve | Foreign exchange reserve | Retained earnings | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| At 1 August 2007 | 3,018 | 2,735 | 556 | - | - | (1,300) |
| Shares issued as consideration for business combinations | 59 | 316 | - | - | - | - |
| Share options issued 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) |
| Shares issued pursuant to exercising of options under employee share option schemes | 5 | - | - | - | - | (2) |
| Arising during the period | - | - | - | - | (28) | - |
| Result for the period | - | - | - | - | - | 996 |
| Share based payment charges | - | - | - | - | - | 42 |
| ------------- | ------------- | ------------- | ------------- | ------------- | ------------- | |
| At 31 July 2009 | 3,082 | 3,051 | 556 | 449 | (28) | (670) |
| ------------- | ------------- | ------------- | ------------- | ------------- | ------------- |
Consolidated Balance Sheet as at 31 July 2009
| 2009 | 2008 | ||
| £000 | £000 | ||
| Non-current assets | |||
| Property, plant & equipment | 108 | 133 | |
| Intangible assets | 6,338 | 6,377 | |
| ------------- | ------------ | ||
| 6,446 | 6,510 | ||
| ------------- | ------------ | ||
| Current assets | |||
| Trade and other receivables | 1,506 | 1,826 | |
| Income taxes | - | 40 | |
| Cash and cash equivalents | 2,626 | 1,587 | |
| ------------- | ------------ | ||
| 4,132 | 3,453 | ||
| ------------- | ------------ | ||
| Total assets | 10,578 | 9,963 | |
| ------------- | ------------ | ||
| Current liabilities | |||
| Bank loans and borrowings | 167 | 167 | |
| Trade and other payables | 938 | 1,225 | |
| Deferred income | 1,611 | 1,478 | |
| Income taxes | 18 | 60 | |
| ------------- | ------------ | ||
| 2,734 | 2,930 | ||
| ------------- | ------------ | ||
| Non-current liabilities | |||
| Bank loans and borrowings | 83 | 251 | |
| Deferred tax liabilities | 1,321 | 1,355 | |
| ------------- | ------------ | ||
| 1,404 | 1,606 | ||
| ------------- | ------------ | ||
| Total liabilities | 4,138 | 4,536 | |
| ------------- | ------------ | ||
| Net assets | 6,440 | 5,427 | |
| ------------- | ------------ | ||
| Equity attributable to equity holders of the Company | |||
| Called up share capital | 3,082 | 3,077 | |
| Share premium account | 3,051 | 3,051 | |
| Merger reserve | 556 | 556 | |
| Capital reserve | 449 | 449 | |
| Foreign exchange reserve | (28) | - | |
| Retained earnings | (670) | (1,706) | |
| ------------- | ------------ | ||
| Total equity | 6,440 | 5,427 | |
| ------------- | ------------ |
Consolidated Cash Flow Statement for the year ended 31 July 2009
| 2009 | 2008 | ||
| £000 | £000 | ||
| Operating activities | |||
| Profit / (loss) for the year | 996 | (428) | |
| Amortisation of intangible assets | 449 | 257 | |
| Depreciation | 60 | 60 | |
| Net finance income | (19) | (28) | |
| Income tax credit | (46) | (100) | |
| Share based payment charges | 42 | 22 | |
| ------------- | ------------ | ||
| Operating cash flow before changes in working capital | 1,482 | (217) | |
| Movement in trade and other receivables | 320 | 674 | |
| Movement in trade and other payables | (184) | 346 | |
| ------------- | ------------ | ||
| Cash flow from operations | 1,618 | 803 | |
| Finance income | 33 | 47 | |
| Finance expense | (14) | (18) | |
| Income tax (paid) / received | 12 | (90) | |
| ------------- | ------------ | ||
| Net cash flow from operating activities | 1,649 | 742 | |
| ------------- | ------------ | ||
| Investing activities | |||
| Purchase of plant and equipment | (35) | (53) | |
| Development expenditure capitalised | (410) | (446) | |
| Acquisition of subsidiaries | - | (341) | |
| ------------- | ------------ | ||
| Net cash flow from investing activities | (445) | (840) | |
| ------------- | ------------ | ||
| Financing activities | |||
| Proceeds from issue of shares | 3 | - | |
| Proceeds from bank borrowing | - | 500 | |
| Repayment of bank borrowing | (168) | (82) | |
| ------------- | ------------ | ||
| Net cash flow from financing activities | (165) | 418 | |
| ------------- | ------------ | ||
| Net increase / (decrease) in cash and cash equivalents | 1,039 | 320 | |
| Cash and cash equivalents at the beginning of the year | 1,587 | 1,267 | |
| ------------- | ------------ | ||
| Cash and cash equivalents at the end of the year | 2,626 | 1,587 | |
| ------------- | ------------ |
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 2009.
The consolidated financial statements of the Group for the year ended 31 July 2009 be 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 2009 or 2008 but is derived from those financial statements. Statutory financial statements for 2008 have been delivered to the registrar of companies and distributed to shareholders, and those for 2009 will be respectively delivered and distributed on or before 30 November 2009. The auditors have reported on those financial statements; 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 237(2) or (3) of the Companies Act 1985, in respect of the financial statements for 2008 nor a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the financial statements for 2009.
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
| 2009 | 2008 | |
| £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.
4. One-time administrative expenses
| 2009 | 2008 | |
| £000 | £000 | |
| Non-recurring administrative expenses from Board restructure | - | 447 |
| ------------- | ------------- |
One-time administrative expenses relate principally to termination costs incurred in undertaking the restructuring programme and integration of the acquired businesses.
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.
| 2009 | 2008 | |
| Earnings (£000) | 996 | (428) |
| ------------- | ------------- | |
| Weighted average number of shares (number '000) | 30,718 | 30,550 |
| Fully diluted number of shares (number '000) | 31,382 | 30,550 |
| ------------- | ------------- | |
| Basic earnings / (loss) per ordinary share (pence) | 3.2p | (1.4)p |
| Diluted earnings / (loss) per ordinary share (pence) | 3.2p | (1.4)p |
| ------------- | ------------- |