RNS Number:9625S
PROACTIS Holdings PLC
23 April 2008
23 April 2008
PROACTIS Holdings PLC
Interim results for the six months ended 31 January 2008
PROACTIS Holdings PLC ("PROACTIS" or the "Company"), the specialist Spend
Control software provider, is today issuing its interim results for the six
month period to 31 January 2008.
KEY POINTS
* Revenues increased by 50% year on year to �3.0m (2007 : �2.0m)
- Good organic growth in contract wins - 24 new deals (including 5 in
the US) (2007: 14 new deals (including Nil in the US)
- Strong performance in sales via our indirect channel partner network
- Consultancy and recurring support revenues have increased to �1.9m
(2007 : �0.8m)
- However, direct revenues from the public sector have been slower than
anticipated
* The cost base increased significantly during the period, largely reflecting
the acquisition of Requisoft and Alito. These acquisitions have now been
fully integrated and since the period end significant savings have been made.
The Company will benefit in full from these synergies in the year ending 31
July 2009.
* Operating profit fell to a loss of �194,000 before non-recurring items
and share-based payment charges (2007 : profit �51,000)
* As a result of the lower than anticipated revenue growth and the high
cost base referred to above, there will be a material shortfall to market
expectations of revenues and profits for the current financial year. However,
we anticipate continued strong growth in revenues and this, coupled with the
cost savings referred to above, mean that the Company is confident of a return
to profitability in the next financial year.
Rod Jones, Chief Executive Officer, commented:
"We are confident of continued growth in revenues through our indirect sales
channel. We continue to believe that the Public Sector remains an attractive
market in the medium term; however, we do not expect sales to the Public Sector
to pick up in the remainder of this financial year. In addition we do not expect
the full synergy benefits from our two acquisitions to flow through until the
next financial year. As a result of these factors, we would anticipate a loss in
the financial year ending 31 July 2008 but a return to profitable growth in the
year ending 31 July 2009. We remain very confident in our product offering and
believe we are well positioned for sustained growth."
Enquiries:
PROACTIS Holdings PLC Tel: 01937 545 070
Rod Jones, Chief Executive Officer
Weber Shandwick Square Mile Tel: 020 7067 0700
Nick Oborne / John Moriarty / James White
Landsbanki Securities (UK) Limited (Nomad) Tel: 020 7426 9000
Gareth Price / Simon Brown
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 already used in over 250
organisations from the commercial, public and not-for-profit sectors.
PROACTIS is a high growth business headquartered 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.
CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S REPORT
We report our interim results for the six month period to 31 January 2008.
The period has been one of continued good progress within our indirect approach
to commercial markets and the development of consultancy and recurring
maintenance revenues. However, sales to the public sector, where we employ a
direct sales model, have proved disappointing because this market has grown at a
slower rate than we had anticipated. However, although its rate of growth is
difficult to predict, we remain confident that the Public Sector will be a very
attractive market for the Company in the medium term.
During the previous financial year we made two acquisitions. In November 2006,
we acquired Requisoft and in March 2007 we acquired Alito. In the case of
Requisoft the rationale was to increase our customer base in the commercial
sector and to achieve synergies in the cost base. In the case of Alito, the
rationale was to increase our customer base and our ability to cross-sell in the
public sector. I am pleased to report that both these acquisitions have now been
successfully integrated into the Group. However, this exercise has taken longer
and proved more difficult than originally envisaged. As a consequence, the cost
base in the period was far too high for the level of revenues generated.
Significant cost savings have now been implemented and we would anticipate that
the full benefits of these cost savings will flow through in the next financial
year.
The core elements of PROACTIS' growth strategy remain the same. These are:
- Revenue growth
* We access the global commercial market indirectly via our accredited
channel partner network. We have increased our accredited channel
partners by a further 3 during the period taking our total to 26. The
potential worldwide reach of our products is being realised with 5 new
deals sold through our partners in the US giving a referenceable
bridgehead of 12 clients in that country.
* We address the UK public sector directly, author to user. Despite the
slower than anticipated growth in this market, we will continue this
approach. We believe that this market will start to grow rapidly and that
we are well positioned to take advantage.
- Scalability
* Our Commercial Off the Shelf ("COTS") software code model is well
proven, minimising support and implementation costs. Following the
acquisition of both legacy Alito and Requisoft code bases last year, we
have developed the PROACTIS code to deliver the legacy functionality and
will be in a position to offer a single solution again by 1 August 2008.
Acquisition of Requisoft
On 17 November 2006, PROACTIS acquired Requisoft, a recognised brand with an
excellent customer base in the commercial sector. Requisoft is now entirely
integrated into the PROACTIS group and its existing annual overhead base at
acquisition of �0.9m has now been reduced to approximately �0.4m going forward.
The total consideration paid was �1.1m and Requisoft delivered �0.9m revenues
and �0.25m operating profit during the nine month earn out period ended 31 July
2007.
Acquisition of Alito
On 29 March 2007, PROACTIS acquired Alito, another recognised brand with an
excellent customer base in the public sector. Whilst headway was made during the
year ended 31 July 2007 with a first cross sell of PROACTIS product into the
Alito customer base, further progress with this strategic objective has been
slower than anticipated. During the period we took the opportunity to accelerate
the earn-out payment due to the Vendors. This enabled us to accelerate the
integration of the functions of the business within those of the group. We
anticipate that this will save overhead of approximately �0.5m per annum.
The initial consideration paid was �2.3m in cash and shares and Alito has
delivered �1.3m revenues and �0.33m operating profit during the 10 months ended
31 January 2008.
Financial overview
Revenues increased to �2.98m from �1.96m for the same period last year.
The operating loss before non-recurring items and share based payment charges
was �194,000 (6 months ended 31 January 2007 - profit �51,000).
Outlook
We are confident of continued growth in revenues through our indirect sales
channel. We continue to believe that the Public Sector remains an attractive
market in the medium term; however, we do not expect sales to the Public Sector
to pick up in the remainder of this financial year. In addition we do not expect
the full synergy benefits from our two acquisitions to flow through until the
next financial year. As a result of these factors, we would anticipate a loss in
the financial year ending 31 July 2008 but a return to profitable growth in the
year ending 31 July 2009. We remain very confident in our product offering and
believe we are well positioned for sustained growth.
Alan Aubrey Rod Jones
Chairman Chief Executive Officer
23 April 2008
Consolidated income statement for the six months ended 31 January 2008
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 Jan 2008 31 Jan 2007 31 July 2007
�000 �000 �000
Restated
Revenue
- acquisitions - 227 1,563
- continuing 2,975 1,728 3,777
------------- ------------- -------------
Total revenue 2,975 1,955 5,340
Cost of sales (910) (861) (1,620)
------------- ------------- -------------
Gross profit 2,065 1,094 3,720
Administrative costs (2,503) (904) (2,762)
------------- ------------- -------------
Operating profit / (loss) before non
recurring items and share based
payment charges (194) 51 744
Non-recurring administrative
income / (costs) (222) 182 300
Share-based payment charges (22) (43) (86)
------------- ------------- -------------
Operating profit / (loss)
- acquisitions - 20 210
- continuing (438) 170 748
------------- ------------- -------------
Total operating profit / (loss) (438) 190 958
Finance income 23 88 130
Finance expenses (2) - -
------------- ------------- -------------
Profit / (loss) before taxation (417) 278 1,088
Taxation - 7 (29)
------------- ------------- -------------
Profit / (loss) for the period (417) 285 1,059
------------- ------------- -------------
Earnings per ordinary share :
- Basic (1.3)p 0.9p 3.5p
------------- ------------- -------------
- Diluted (1.3)p 0.9p 3.4p
------------- ------------- -------------
Consolidated statement of changes in equity as at 31 January 2008
Unaudited Unaudited Unaudited Unaudited
Share Share Merger Retained
capital premium reserve earnings
�000 �000 �000 �000
At 1 August 2006 3,012 2,735 556 (2,441)
Result for the period - - - 285
Share based payment charges - - - 43
------------- ------------- ------------- -------------
At 31 January 2007 3,012 2,735 556 (2,113)
Shares issued pursuant to
exercising of options under
employee share option schemes 6 - - (4)
Result for the period - - - 774
Share based payment charges - - - 43
------------- ------------- ------------- -------------
At 1 August 2007 3,018 2,735 556 (1,300)
Shares issued as deferred 59 316 - -
consideration for acquisition
Result for the period - - - (417)
Share based payment charges - - - 22
------------- ------------- ------------- -------------
At 31 January 2008 3,077 3,051 556 (1,695)
------------- ------------- ------------- -------------
Consolidated balance sheet as at 31 January 2008
Unaudited Unaudited Audited
As at 31 Jan As at 31 Jan As at 31 July
2008 2007 2007
�000 �000 �000
Restated
Non-current assets
Property, plant & equipment 153 30 140
Intangible assets 6,364 1,947 6,273
------------- ------------- -------------
6,517 1,977 6,413
------------- ------------- -------------
Current assets
Trade and other receivables 2,019 1,187 2,500
Cash and cash equivalents 1,081 2,950 1,267
------------- ------------- -------------
3,100 4,137 3,767
------------- ------------- -------------
Total assets 9,617 6,114 10,180
------------- ------------- -------------
Current liabilities
Bank loans (167) - -
Trade and other payables (1,450) (726) (2,346)
Deferred income (1,176) (688) (1,260)
Corporation tax liabilities (55) - (118)
------------- ------------- -------------
(2,848) (1,414) (3,724)
------------- ------------- -------------
Non-current liabilities
Bank loans (333) - -
Deferred tax liabilities (1,447) (510) (1,447)
------------- ------------- -------------
(1,780) (510) (1,447)
------------- ------------- -------------
Total liabilities (4,628) (1,924) (5,171)
------------- ------------- -------------
Net assets 4,989 4,190 5,009
------------- ------------- -------------
Equity attributable to equity holders
of the Company
Called up share capital 3,077 3,012 3,018
Share premium account 3,051 2,735 2,735
Merger reserve 556 556 556
Retained earnings (1,695) (2,113) (1,300)
------------- ------------- -------------
Total equity 4,989 4,190 5,009
------------- ------------- -------------
Consolidated cash flow statement for the six months ended 31 January 2008
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 Jan 2008 31 Jan 2007 31 July 2007
�000 �000 �000
Restated
Operating activities
Profit / (loss) for the period (417) 285 1,059
Amortisation of intangible assets 65 106 212
Depreciation 41 8 25
Net finance income (21) (88) (130)
Income tax credit - (7) 29
Share based payment charges 22 43 86
------------- ------------- -------------
(310) 347 1,281
Operating cash flow before changes
in working capital
Movement in trade and other receivables 88 76 (994)
Movement in trade and other payables (224) (550) 237
------------- ------------- -------------
Operating cash flow from operations (446) (127) 524
Interest received 23 88 130
Interest paid (2) - -
Income tax received / (paid) (62) 7 6
------------- ------------- -------------
Net cash flow from operating activities (487) (32) 660
------------- ------------- -------------
Investing activities
Purchase of plant and equipment (44) (20) (103)
Development expenditure capitalised (155) (139) (273)
Acquisition of subsidiaries - (623) (2,508)
------------- ------------- -------------
Net cash flow from investing (199) (782) (2,884)
activities
------------- ------------- -------------
Financing activities
Costs of the Placing - - (275)
Proceeds from issue of shares - - 2
Proceeds from new bank borrowing 500 - -
------------- ------------- -------------
Net cash flow from financing activities 500 - (273)
------------- ------------- -------------
Net decrease in cash and cash (186) (814) (2,497)
equivalents
Cash and cash equivalents at the 1,267 3,764 3,764
beginning of the period
------------- ------------- -------------
Cash and cash equivalents at the end 1,081 2,950 1,267
of the period
------------- ------------- -------------
Notes to the half yearly financial information
Basis of preparation
This consolidated half-yearly financial information for the half year ended 31
January 2008 has been prepared in accordance with IAS 34, 'Interim financial
reporting' as adopted by the European Union. The half-yearly consolidated
financial report should be read in conjunction with the annual financial
statements for the year ended 31 July 2007, which have been prepared in
accordance with IFRS as adopted by the European Union.
The financial information contained in the interim report does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985.
Statutory accounts for the year ended 31 July 2007 have been filed with the
Registrar of Companies. The auditors' report on those accounts was unqualified
and did not contain a statement made under Section 237(2) or Section 237(3) of
the Companies Act 1985.
There were no recognised gains or losses in the six month period ended 31
January 2008 other than the loss for the period and therefore no statement of
recognised income and expenses is presented.
The Board confirms that to the best of its knowledge :
* The condensed set of financial statements has been prepared in accordance
with IAS34 'Interim Financial Reporting' as adopted by the EU;
* The interim management report includes a fair review of the information
required by :
- DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements,
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
- DTR4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
The interim report was approved by the Board of Directors on 23 April 2008.
Accounting policies
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 31 July 2007, as described in those
annual financial statements.
During the six months ended 31 January 2008, a �500,000 bank loan was taken out
by the Group, over a term of three years.
585,023 new shares were issued during the six months ended 31 January 2008, as
part of the deferred consideration for the acquisition of Alito (UK) Limited.
Explanatory notes to the adjustments from UK GAAP to IFRS
The year ended 31 July 2007 was the first year the Group presented its
consolidated financial statements under IFRS and this is the first consolidated
half-yearly financial information prepared under IFRS.
In preparing its comparative information for the six months to 31 January 2008,
the Group has adjusted amounts previously reported in the half yearly financial
information prepared in accordance with UK GAAP. An explanation of how the
transition from UK GAAP to IFRS has affected the Group's financial position and
financial performance, not previously reported in the annual financial
statements for the year ended 31 July 2007, is set out in the tables below. The
adjustments have been required to comply with the following reporting standards:
IFRS2 'Share based payment' requires the fair value cost of providing employee
share ownership plans to be charged to the income statement over the estimated
life of the share ownership plans. In 2006 under UK GAAP, such charges were
accounted for on a different basis under UITF 17.
IFRS3 'Business combinations' requires goodwill to be capitalised and subjected
to an annual impairment test rather than amortised by way of equally annual
charges as required by UK GAAP. The standard also requires separable,
identifiable, intangible assets arising on acquisition to be capitalised at fair
value and amortised over their estimated useful economic lives.
IAS12 'Income taxes' requires that deferred taxation be provided in respect of
the share based payment charges and acquisition related intangible assets.
IAS38 'Intangible assets' requires that development expenditure meeting certain
criteria be capitalised and amortised over its useful economic life. Under UK
GAAP all such development expenditure was expensed as incurred.
Non-recurring administrative expenses relate to the costs prior to and the costs
of termination of employees acquired with Alito (UK) Limited and Requisoft plc.
Reconciliation of profit - six months ended 31 January 2007
Unaudited Unaudited Unaudited
UK GAAP Effect of IFRS
transition to
IFRS
�000 �000 �000
Revenue 1,955 - 1,955
Cost of sales (861) - (861)
------------- ------------- -------------
Gross profit 1,094 - 1,094
Share-based payment charges - (43) (43)
Administrative costs (894) 33 (861)
------------- ------------- -------------
Operating profit 200 (10) 190
Finance income 88 - 88
------------- ------------- -------------
Profit before taxation 288 (10) 278
Taxation 7 - 7
------------- ------------- -------------
Profit for the period 295 (10) 285
------------- ------------- -------------
Earnings per ordinary share :
- Basic 1.0p 0.9p
------------- -------------
- Diluted 0.9p 0.9p
------------- -------------
The �43,000 charge relates to the impact of the adoption of IFRS2 'Share-based
payment'. The �33,000 credit relates to the impact of the adoption of IAS 38
'Intangible assets' and reflects the net capitalisation of software development
costs.
Reconciliation of equity as at 31 January 2007
Unaudited Unaudited Unaudited
UK GAAP Effect of IFRS
transition to
IFRS
�000 �000 �000
Non-current assets
Property, plant & equipment 30 - 30
Intangible assets 1,192 755 1,947
------------- ------------- -------------
1,222 755 1,977
------------- ------------- -------------
Current assets
Trade and other receivables 1,187 - 1,187
Cash and cash equivalents 2,950 - 2,950
------------- ------------- -------------
4,137 - 4,137
------------- ------------- -------------
Total assets 5,359 755 6,114
------------- ------------- -------------
Current liabilities
Trade and other payables (726) - (726)
Deferred income (688) - (688)
------------- ------------- -------------
(1,414) - (1,414)
------------- ------------- -------------
Non-current liabilities
Deferred tax liabilities - (510) (510)
------------- ------------- -------------
- (510) (510)
------------- ------------- -------------
Total liabilities (1,414) (510) (1,924)
------------- ------------- -------------
Net assets 3,945 245 4,190
------------- ------------- -------------
Equity attributable to equity
holders of the Company
Called up share capital 3,012 - 3,012
Share premium account 2,735 - 2,735
Merger reserve 556 - 556
Retained earnings (2,358) 245 (2,113)
------------- ------------- -------------
Total equity 3,945 245 4,190
------------- ------------- -------------
The �245,000 adjustment relates to the impact of the adoption of IAS38
'Intangible assets'.
The �510,000 adjustment relates to the impact of the adoption of IFRS3 'Business
combinations'. Separately identifiable customer related intangibles were
identified within the fair value of assets acquired as part of the acquisition
of Requisoft Plc. The �510,000 is the associated deferred tax liability.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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