TIDMPHD
RNS Number : 2811M
PROACTIS Holdings PLC
12 October 2016
For immediate release 12 October 2016
PROACTIS Holdings PLC
Preliminary Results for the year to 31 July 2016
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
2016.
Financial highlights:
-- Reported revenue increased by 13% to GBP19.4m (2015:
GBP17.2m)
-- Underlying organic(1) growth of 7%
-- Annualised Contracted Revenue(2) has increased by 23% to
GBP17.6m (2015: GBP14.3m)
-- Order Book(3) increased by 32% to GBP26.1m (2015:
GBP19.7m)
-- Adjusted(4) EBITDA increased by 10% to GBP5.3m (2015:
GBP4.8m)
-- Statutory operating profit increased 19% to GBP1.9m (2015:
GBP1.6m)
-- Adjusted(4) earnings per share increased by 20% to 7.3p
(2015: 6.1p)
-- Cash balances of GBP3.6m (2015: GBP3.4m)
-- Net debt of GBP0.5m (2015: net cash GBP1.5m)
-- Proposed final dividend increased to 1.3p per share (2015:
1.2p)
Strategic highlights:
-- Strategic acquisition of Due North, completed 2 February
2016
-- Supplier commerce opportunity and accelerated payment
facility in project with early adopters and first revenues
recognised
Commercial highlights:
-- Order intake of GBP6.9m from 46 new names (2015: GBP5.2m on
39 new names)
-- 17 further new names from Due North
-- Continued high levels of upsell and client retention
-- New Spend Analysis solution launched and live in early
adopters
Note 1: Weighted average growth of all the companies within the
Proactis Group at 1 August 2015 (the "Existing Group").
Note 2: Annualised Contracted Revenue is the Group's estimate of
the annualised value of revenue of customers currently contracted
with the Group as at 31 July 2016.
Note 3: Order Book is the Group's current contracted revenue as
at 31 July 2016 to be recognised in future accounting periods.
Note 4: 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.
Rod Jones, CEO commented:
"The results demonstrate the Group's successful execution of its
strategy, the result of which is strong growth, both organically
and through M&A, underpinned by high levels of forward
visibility through recurring contracted income and strong operating
margins. Commercial progress has been strong and this is a record
year for number of new names and order intake during the year.
"Due North was the Group's fourth acquisition in a two year
timeframe and its post-acquisition performance has been
encouraging. M&A remains a fundamental part of the Group's
growth strategy, with a pipeline of opportunities under review, and
I look forward to further activity in this area.
"I am also pleased to report that the Group has met its
objectives with its exciting new supplier commerce initiative. We
have three early adopter sites; Screwfix, Flintshire County Council
and P&O Ferrymasters, and first revenues have been recognised.
There remains a high level of interest from our customer base in
realising the substantial efficiencies available to them and their
suppliers through the supplier commerce capability that the Group
has built and I look forward to reporting further progress with the
early adopters and new commitments from customers during the coming
year.
"The Group is well positioned for the coming year and I look
forward to driving further value for our shareholders."
The Company's preliminary results are available on its website
www.proactis.com.
The information communicated in this announcement is inside
information for the purposes of Article 7 of regulation
596/2014.
Enquiries:
PROACTIS Holdings PLC
Rod Jones, Chief Executive Via Redleaf Communications
Officer
Tim Sykes, Chief Financial
Officer
Redleaf Communications
Rebecca Sanders-Hewett 0207 382 4730
Sarah Fabietti PROACTIS@redleafpr.com
Sam Modlin
finnCap Ltd
Stuart Andrews/Carl Holmes/Emily
Watts - Corporate Finance
Stephen Norcross - Corporate
Broking 0207 220 0500
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.
Strategic Report
The Group continues to deliver on its ambitious strategy to
boost its scale and growth rate whilst maintaining its strong
performance on revenue visibility and profitability.
Following the Board's 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 through the solid
commercial, operational and financial platform that has been
created. This strategic shift was designed to fulfil the commercial
market need at the time, and that is still here today, but it also
provided 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 remains unchanged and 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 names remains high and the Group's continued commitment to
investment in its solutions supports this;
- Retain existing customers 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, four within the last three financial years, all now
integrated 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
customer supply chain, using the technology that is already
deployed with the Group's customers. The Group's conservative
estimate is that the customer supply chain is more than 1 million
in number and that annual value traded is more than GBP100 billion.
The Group is now taking this offering to market through its
customers and has taken early stage revenues during the year.
Business performance and strategy
The Group's reported revenues increased by 13% to GBP19.4m
(2015: GBP17.2m) with the Group's acquisition, Due North,
contributing GBP1.0m in the six months since completion. The
Group's longer term growth performance remains strong with a
historic three year revenue cumulative average growth rate of 34%.
In the year, the Group's annualised contracted revenues grew 23%
and are now GBP17.6m (2015: GBP14.3m) and total forward contracted
order book, to be delivered principally over the next five years,
grew by 32% and now stands at GBP26.1m (2015: GBP19.7m).
Substantial organic growth was achieved at a rate of 7% on its
reported revenues and grew its organic annualised contracted
revenues by 12% and its organic order book by 24%.
The Group secured 46 new names (2015: 39) of which 29 (2015: 20)
were subscription deals. The aggregate initial contract value sold
was GBP6.8m (2015: GBP5.2m) of which GBP2.2m (2015: GBP1.6m) was
recognised during the year.
In addition, Due North contributed 17 new names in the six month
period since completion, all of which were subscription deals.
The number of upsell deals to existing customers increased to 95
(2015: 82) and the Group expanded its breadth of solutions within
existing customers with 8 cross-sell deals (2015: Nil).
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 renewal.
The Group's financial progress continues apace reporting
Adjusted EBITDA (Note: definition below) of GBP5.3m (2015:
GBP4.8m), in line with expectations, maintaining margin at 27%
(2015: 28%). The Group continues to realise operational and
synergistic cost reductions from its post-acquisition integration
plans across the Group and, accordingly, expects to see
profitability levels improve. Statutory operating profit was
GBP1.9m (2015: GBP1.6m).
Blended perpetual and subscription software licence and services
models
The Group continues to offer the blended model of perpetual and
subscription software licences, delivered on its Cloud technology
platform, and services and has strong momentum in the marketplace.
Its global business partners are achieving sales traction of both
licence types and PROACTIS is seeing good traction in the United
States.
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 new Spend
Analysis solution incorporating a new, user-defined, alert
generating and notification mobile application has achieved early
stage traction in the customer base. The solution suite is
regularly recognised within the sector for its capability.
Ongoing investment has enabled PROACTIS 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
PROACTIS 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 2016 deals were sold to customers
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 "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 has made four acquisitions
between February 2014 and February 2016 and all are integrated as
products or services within the Group's solution portfolio.
The Group has a healthy pipeline of acquisition opportunities
which are currently under review.
Due North
The Group acquired Due North, a provider of pre-award
eProcurement solutions, on 2 February 2016. The acquisition
delivered more than 300 customers and enhances the Group's position
as the leading provider of eProcurement systems to the UK market,
now serving over 800 customers. The customer base offers a
substantial cross-selling opportunity for PROACTIS' wider portfolio
of solutions. Its customers use Due North's hosted software to
control an estimated GBP100 billion of spend through approximately
200,000 active suppliers by approximately 20,000 procurement
professionals.
Its post-acquisition performance has been encouraging with 17
new names and GBP1.0m of revenue. Due North operates a subscription
based revenue model and this contributes approximately GBP1.6m of
recurring annualised contracted revenues. Additionally, the Group
has realised approximately GBP0.4m of annualised cost synergies
post acquisition and there is potential for further operational
efficiencies to be realised over the longer term.
The successful integration of Due North, as well as the Group's
three other acquisitions since February 2014, is testament to the
Group's ability to identify, execute and integrate strategic and
accretive acquisitions that generate shareholder value.
The supplier commerce opportunity
The Group has a strategic objective of accessing and providing
value added services to a new customer group, being the supply
chains of its 800 customers. The Group has delivered on its
objectives in this exciting new growth opportunity with three
customer commitments from Screwfix, Flintshire County Council and
P&O Ferrymasters. The opportunity is substantial and could
accelerate the Group's rate of growth well beyond that available
through its current business model.
Historically, PROACTIS has only charged customers 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.
Through its innovative technology, the Group's focus is to
facilitate all of the above benefits for its customers and their
suppliers. It will encourage electronic trading, which is currently
poorly adopted, creating efficiencies within the buy/sell
transaction process and 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, low
cost software subscription.
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, enabling the supplier to understand its forward cash flow.
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, if required by it, without disruption of or
detriment to the buyer's operations. PROACTIS conservatively
estimates that its client base is spending over GBP100 billion per
annum with their suppliers.
Summary and outlook
The Group has continued to execute its strategy and has grown
substantially with a strong rate of organic growth across reported
revenue, annualised contracted revenue and order book. It has
delivered further inorganic growth through its acquisition of Due
North which has performed encouragingly post completion and the
Group has delivered operational efficiencies and synergistic cost
savings which will improve financial performance next year with
further efficiencies to be realised in the longer term.
Client retention remains high and the Group's solutions are
being deployed more deeply and widely within the customer base
through an impressive rate of upsell and cross-selling activity.
This revenue is being delivered efficiently and the rate of
profitability remains very strong with high operating margins.
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 under review 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 800 clients, has moved forward substantially and in line with
its plan. The scope for growth of this opportunity is extremely
exciting and we look forward to updating the market with further
developments in due course.
The Board is 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
11 October 2016
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 four
completed acquisitions in the period from February 2014 to February
2016 and this has had a significant positive impact on the scale
and growth rate of the Group's operations and financial
performance. Three of the four have contributed to the Group's
results for the whole of the current and previous financial year
and are included within the 'Existing Group' in the table below.
The fourth acquisition, Due North, was acquired on 2 February 2016
and has contributed to the Group's result since that date during
this financial year. This performance can be analysed as
follows:
New deals Revenue (1) Organic (2) Adjusted (3) Adjusted
growth EBITDA EBITA
No. GBP000 % GBP000 GBP000
----------- ---------- -------- ------------ ------------- -------------
Existing
Group 46 18,352 6.6% 4,975 2,926
Due North 17 1,022 9.0% 325 304
63 19,374 7.1% 5,300 3,230
----------- ---------- -------- ------------ ------------- -------------
Definitions:
Note 1: The Organic growth measure reported is calculated by
reference to the revenue contributed for the year ended 31 July
2016 and the year ended 31 July 2015 (or six month period ended 31
July 2016 and 2015 in the case of Due North), unadjusted for
currency fluctuations.
Note 2: Adjusted EBITDA is statutory operating profit before
depreciation, amortisation, share based payment charges and
non-recurring administrative expenses (related principally to the
Group's acquisition activities and consequent post-acquisition
integration and re-organisation programmes). This measure is
considered to be relevant because it allows industry comparison as
an indicator of recurring cash profit before discretionary capital
expenditure.
Note 3: Adjusted EBITA is statutory operating profit before
amortisation of customer related intangible assets, share base
payment charges and non-recurring administrative expenses (related
principally to the Group's acquisition activities and consequent
post-acquisition integration and re-organisation programmes).
Reported revenue
Revenue increased 13% to GBP19.4m from GBP17.2m last year.
Underlying organic revenue growth in the Existing Group was 6.6%
compared to 9.0% in Due North. Due North contributed GBP1.0m of
revenue in the six month period since the date of completion, 2
February 2016.
The Group signed 46 new deals (2015: 39) of which 29 (2015: 20)
were under the subscription model. The aggregate initial contract
value sold was GBP6.8m (2015: GBP5.2m) of which GBP2.2m (2015:
GBP1.6m) was recognised during the year. In addition, Due North
contributed 17 new names in the six month period since completion,
all of which were subscription deals.
Revenue from recurring contracted subscriptions, managed service
contracts, support and hosting was GBP15.7m (2015: GBP13.6m)
including a contribution of GBP0.8m (2015: GBPNil) from Due North.
The underlying organic growth of this revenue stream in the
Proactis business was a healthy 9.3%.
Revenue from consultancy services increased by GBP0.4m to
GBP2.4m (2015: GBP2.0m) including a contribution of GBP0.2m (2015:
GBPNil) from Due North.
Revenue visibility
The total initial contract value of the 46 new deals (2015: 39)
signed during the year was GBP6.8m (2015: GBP5.2m) of which GBP2.2m
(2015: GBP1.6m) has been recognised during the year, leaving
GBP4.6m (2015: GBP3.5m) to be recognised in future years. The 17
new names signed through Due North contributed incrementally to
that.
The total value of subscription, managed service, support and
hosting revenue recognised in the year was GBP15.7m (2015:
GBP13.6m). More importantly, at 31 July 2016, the annualised
contracted revenue, being the run rate of subscription, managed
service, support and hosting revenue, increased by 23.1% to
GBP17.6m (2015: GBP14.3m) which equates to 90.7% (2015: 83.1%) of
reported revenues.
At 31 July 2016, the total multi-year contracted order book that
is to be recognised as revenue in future financial periods
increased by 32.5% to GBP26.1m (2015: GBP19.7m).
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 within its
annualised contracted revenue (see above). Those revenues are,
however, only "contracted" to the extent that each current annual
contract remains unfulfilled.
Gross margin
The presentation of the Group's reported results has been
changed to remove the sub-total of gross profit to better reflect
the reality of the Group's operational performance. However, gross
margin is a relevant measure of performance when considered as
revenues less cost of goods and services.
The Group's business partners and its own direct sales effort
sold contracts under both the subscription and perpetual business
models. Three of the four acquired businesses, including Due North,
sell entirely directly to their clients rather than through
business partners and, accordingly, the revenue from those
businesses delivers comparatively high gross margins. Consequently,
gross margins have continued to improve through the mix shift
toward direct selling. The combined effect of these factors was
that the Group reported an improved gross margin (on the basis
described above) over all of 82.4% (2015: 80.4%).
Overhead (defined as the aggregate of staff costs, other
operating expenses but excluding depreciation of property, plant
and equipment, amortisation of intangibles assets, share based
payment charges and non-recurring administrative expenses) remained
flat during the year at GBP10.7m (2015: GBP10.8m). Due North
contributed GBP0.6m (2015: GBPNil).
Accordingly, the Group's Adjusted EBITDA increased to GBP5.3m
(2015: GBP4.8m) and the associated margin remained flat at 27.3%
(2015: 27.9%). The equivalent Adjusted EBITA increased to GBP3.2m
(2015: GBP3.0m) and the associated margin was maintained at 16.6%
(2015: 17.2%).
The statutory operating profit increased to GBP1.9m (2015:
GBP1.6m).
Capitalised development costs and costs of software for own use
were GBP2.1m (2015: GBP2.0m). The income statement includes a total
charge for the amortisation of capitalised development costs and
costs of software for own use of GBP1.8m (2015: GBP1.7m).
Acquisition of Due North
The Group acquired Due North on 2 February 2016 for gross
consideration of GBP4.5m, paid in cash at completion. The net cash
consideration was GBP4.4m with Due North having free cash of
GBP0.1m 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 GBP3.0m
repayable over four years at an interest rate of 1.85% per annum
over LIBOR.
The annual revenue of the Due North for the year ended 30
November 2014 was approximately GBP2.0m with an estimated EBITDA of
GBP0.5m. The Group acquired net liabilities with a book value of
GBP0.6m but, with adjustments of GBP0.6m to reflect the fair value
of customer related intangible assets, the fair value of net
liabilities acquired was approximately GBPNil and the Group
recognised GBP4.5m of goodwill. The goodwill relates to the skilled
labour force within Due North. The value of the skilled labour
force was not recognised as a separate intangible asset on the
basis that it could not be separated from the value generated from
the business as a whole. In addition, the goodwill relates to the
future potential to realise cross-selling opportunities and
operational cost synergies.
During the year period since acquisition, Due North has
performed in line with expectations, contributing GBP1.0m revenue
and GBP0.3m of EBITDA.
Cash flow
The Group remains in a strong financial position with cash
balances of GBP3.6m at 31 July 2016 (2015: GBP3.4m).
The Group generated cash from operating activities of GBP5.2m
(2015: GBP3.4m) which is higher than the reported operating profit
of the Group of GBP1.9m (2015: GBP1.6m), mainly due to the
amortisation of intangible assets. The Group invested GBP2.5m
(2015: GBP2.2m) in capital related expenditure (including internal
development costs and costs of software for own use) and GBP4.4m
(net, and before costs) on the acquisition of Due North (2015:
GBP1.1m on the acquisition of Intelligent Capture) which was
supported by a further term loan from HSBC Bank plc of GBP3.0
million.
The Group had a cash outflow of GBP0.9m (2015: GBP0.7m) from the
servicing of its debt finance and paid a cash dividend of GBP0.5m
(2015: GBP0.4m) to its equity investors.
Taxation
The Group has, again, reported a significant net credit in its
income statement of GBP0.7m (2015: GBP0.5m).
Losses in its foreign operations (2015: UK operations)
recognised as deferred tax assets during the year were GBP0.3m
(2015: GBP0.3m) and reductions in forward UK tax rates that were
substantively enacted during the year have reduced forward deferred
tax liabilities by GBP0.2m (2015: GBPNil). In addition, the Group
has recognised a benefit from the deferred tax treatment of its
share options of GBP0.2m (2015: GBP0.3m) following a further
significant increase in share price during the year. All of these
items have been adjusted for in the Group's presentation of its
adjusted earnings per share calculation because they are
non-recurring.
The Group has benefitted from a change in the tax base in the
Group's foreign operations during the year and this has resulted in
a substantial proportion of profits being untaxed in the year.
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 7.2p per share (2015: 6.1p per share). Basic earnings
per share was 6.3p (2015: 5.2p).
Dividend policy
Subject to approval at the General Meeting of Shareholders to be
held on 19 December 2016, a final dividend of 1.3p (2015: 1.2p) per
Ordinary share is proposed and will be paid on 23 January 2017 to
shareholders on the register at 30 December 2016. The corresponding
ex-dividend date is 29 December 2016.
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 names and number of upsell transactions with
existing customers.
Tim Sykes
Chief Financial Officer
11 October 2016
Consolidated Statement of Comprehensive Income for the year
ended 31 July 2016
Notes 2016 2015
GBP000 GBP000
Revenue 19,374 17,219
Cost of sales (3,401) (3,378)
Staff costs (8,447) (8,467)
Other operating expenses (2,925) (1,351)
Depreciation of property,
plant and equipment (224) (153)
Amortisation of intangible
assets (2,495) (2,288)
------------- -------------
--------------------------------------- ----- ------------- -------------
Operating profit before non-recurring
administrative expenses, amortisation
of customer related intangibles
and share based payment charges 3,227 2,866
Non-recurring administrative
expenses 3 (579) (520)
Amortisation of customer related
intangible assets (648) (618)
Share based payment charges (118) (146)
------------- -------------
--------------------------------------- ----- ------------- -------------
Operating profit 1,882 1,582
Finance income 6 11
Finance expenses (87) (72)
------------- -------------
Profit before taxation 1,801 1,521
Income tax credit 4 684 495
------------- -------------
Profit 2,485 2,016
------------- -------------
Other comprehensive income
Items that will never be reclassified
to profit or loss
Share based payment charges 118 146
Items that are or may be reclassified
to profit or loss
Foreign operations - foreign
currency translation differences (792) (258)
------------- -------------
Other comprehensive income,
net of tax (674) (112)
------------- -------------
Total comprehensive income 1,811 1,904
------------- -------------
Earnings per ordinary share:
- Basic 5 6.3p 5.2p
------------- -------------
- Diluted 5 5.9p 4.9p
------------- -------------
All of the Group's operations are continuing.
Consolidated Balance Sheet as at 31 July 2016
2016 2015
GBP000 GBP000
Non-current assets
Property, plant & equipment 391 364
Intangible assets 21,613 16,613
Deferred tax asset 500 154
------------- -------------
22,504 17,131
------------- -------------
Current assets
Trade and other receivables 4,182 3,274
Cash and cash equivalents 3,595 3,424
------------- -------------
7,777 6,698
------------- -------------
Total assets 30,281 23,829
------------- -------------
Current liabilities
Trade and other payables 2,769 2,087
Deferred income 7,929 5,533
Income taxes 270 295
Borrowings 1,393 650
------------- -------------
12,361 8,565
------------- -------------
Non-current liabilities
Deferred income 473 225
Deferred tax liabilities 1,819 2,304
Borrowings 2,656 1,263
------------- -------------
4,948 3,792
------------- -------------
Total liabilities 17,309 12,357
------------- -------------
Net assets 12,972 11,472
------------- -------------
Equity attributable to equity
holders of the Company
Called up share capital 3,983 3,941
Share premium account 5,962 5,840
Merger reserve 556 556
Capital reserve 449 449
Foreign exchange reserve (1,073) (281)
Retained earnings 3,095 967
------------- -------------
Total equity 12,972 11,472
------------- -------------
Consolidated Statement of Changes in Equity
Foreign
Share Share Merger Capital exchange Retained
capital premium reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 31 July
2014 3,825 5,477 556 449 (23) (766) 9,518
Shares issued
during the
period 116 363 - - - - 479
Dividend
payment
of 1.1p per
share - - - - - (429) (429)
Arising
during
the period - - - - (258) - (258)
Result for
the
period - - - - - 2,016 2,016
Share based
payment
charges - - - - - 146 146
------------- ------------- ------------- ------------- ------------- ------------- -------------
At 31 July
2015 3,941 5,840 556 449 (281) 967 11,472
Shares issued
during the
period 42 122 - - - - 164
Dividend
payment
of 1.2p per
share - - - - - (475) (475)
Arising
during
the period - - - - (792) - (792)
Result for
the
period - - - - - 2,485 2,485
Share based
payment
charges - - - - - 118 118
------------- ------------- ------------- ------------- ------------- ------------- -------------
At 31 July
2016 3,983 5,962 556 449 (1,073) 3,095 12,972
------------- ------------- ------------- ------------- ------------- ------------- -------------
Consolidated Cash Flow Statement for the year ended 31 July
2016
2016 2015
GBP000 GBP000
Operating activities
Profit for the year 2,485 2,016
Amortisation of intangible
assets 2,495 2,288
Depreciation 224 153
Net finance expense 81 61
Income tax credit (684) (495)
Share based payment charges 118 146
------------- -------------
Operating cash flow before
changes in working capital 4,719 4,169
Movement in trade and other
receivables (530) (678)
Movement in trade and other
payables and deferred income 1,229 (141)
------------- -------------
Operating cash flow from operations 5,418 3,350
Finance income 6 11
Finance expense (87) (72)
Income tax (paid)/received (145) 120
------------- -------------
Net cash flow from operating
activities 5,190 3,409
------------- -------------
Investing activities
Purchase of plant and equipment (169) (229)
Purchase of intangible assets (304) -
Proceeds from sale of plant
and equipment - 9
Payments to acquire subsidiary
undertakings (4,370) (1,101)
Development expenditure capitalised (2,075) (1,985)
------------- -------------
Net cash flow from investing
activities (6,918) (3,306)
------------- -------------
Financing activities
Payment of dividend (475) (429)
Proceeds from issue of shares 164 179
Receipts from bank borrowings 3,000 1,000
Repayment of bank borrowings (864) (588)
Finance lease payments - (17)
------------- -------------
Net cash flow from financing
activities 1,825 145
------------- -------------
Effect of exchange rate movements
on cash and cash equivalents 72 52
Net increase in cash and cash
equivalents 99 300
Cash and cash equivalents
at the beginning of the year 3,424 3,124
------------- -------------
Cash and cash equivalents
at the end of the year 3,595 3,424
------------- -------------
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 2016.
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 2016 or 2015 but is derived from those financial statements.
Statutory financial statements for 2015 have been delivered to the
Registrar of Companies and distributed to shareholders, and those
for 2016 will be distributed to shareholders on or before 27
November 2016. 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
2015 or 2016.
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
2016 2015
GBP000 GBP000
Costs to closure of the Group's
re-organisation programmes 65 240
Costs of restructuring the Group's
operations 354 214
Expenses of acquisition related
activities 160 66
------------- -------------
579 520
------------- -------------
4. Taxation
Recognised in the income statement
2016 2015
GBP000 GBP000
Current tax
Current year 230 244
Adjustment in respect of prior
periods (83) (1) (151)
------------- -------------
Total current tax 147 93
Deferred tax
Released during the current year (230) (315)
Recognised in current year (601) (273)
------------- -------------
Total deferred tax (831) (588)
------------- -------------
Total tax in income statement (684) (495)
------------- -------------
Note 1: This item relates includes the effect of tax reliefs in
respect of qualifying governmental tax incentives.
Note 2: The Group has substantial operating losses in some of
its subsidiary undertakings which have been utilised during the
period.
Note 3: Intesource Inc has made a voluntary transition of the
tax base of its revenue from a cash basis to an accruals basis and
this has had the effect of deferring tax payable on cash received
in advance of revenue is recognised.
Note 4: Following the acquisition of Intesource Inc, the
operating performance of this business has improved substantially
and this has resulted in a greater level of visibility on future
profits. Accordingly, the Group has recognised a greater deferred
tax asset in respect of tax losses that are expected to be
utilised.
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.
2016 2015
Earnings (GBP000) 2,485 2,016
Effect of non-recurring administrative
expenses 507 400
Effect on customer related intangible
assets 508 559
Effect of share based payment
charges 118 146
Non-recurring tax factors (751) (739)
------------- -------------
Adjusted Earnings (GBP000) 2,867 2,382
------------- -------------
Weighted average number of shares
(number '000) 39,746 39,071
Dilutive effect of share options
(number '000) 2,440 2,171
------------- -------------
Fully diluted number of shares
(number '000) 42,186 41,242
------------- -------------
Basic earnings per ordinary share
(pence) 6.3p 5.2p
Adjusted earnings per ordinary
share (pence) 7.2p 6.1p
Basic diluted earnings per ordinary
share (pence) 5.9p 4.9p
Adjusted diluted earnings per
ordinary share (pence) 6.8p 5.8p
------------- -------------
6. Acquisition
On 2 February 2016, the Group acquired the entire issued
ordinary share capital of Due North Limited. The fair values of
assets and liabilities acquired are set out below.
Fair value
GBP000
Property, plant and equipment 82
Customer related intangible
assets 583
Trade and other receivables
(net of impairment of GBP9,000) 328
Cash 130
Trade and other payables (1,156)
-------------
Net liabilities acquired (33)
Goodwill 4,533
-------------
4,500
-------------
Purchase consideration
Cash 4,500
Cash acquired (130)
-------------
Net cash outflow on acquisition 4,370
-------------
The revenue of Due North Limited for the period from the date of
acquisition to 31 July 2016 was GBP1,022,000 and the profit before
tax for that period was approximately GBP304,000. This does not
factor in the amortisation of intangible assets that will now be
recognised in the Group accounts.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BCBDGBXBBGLB
(END) Dow Jones Newswires
October 12, 2016 02:00 ET (06:00 GMT)
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