Proactis Share Discussion Threads

[p1nkfish] 17/9/2015 20:52

Reckon it's a transfer from Henderson.

[eclair] 17/9/2015 10:20

Well someone's just bought 395,000 shares. By my calculations that's 1% of the company.

[p1nkfish] 16/9/2015 22:59

Get through £1 and I think it will run towards £1.10+.

[gargleblaster] 16/9/2015 03:55

Still traveling quietly under the radar, but now within striking distance of a new high imv!

[p1nkfish] 11/9/2015 23:49

If CBUY doesn't go down now it's only a matter of time imho.

If that does happen PHD might be able to pick up some customers but I'm not all convinced there is a reason to want to buy the company.

It has always given me the vibe of being a bit amateur compared to PHD. A bit too easy to copy. If Amazon look to this market PHD have something of a moat, CBUY looks like it could be gone very quickly.

[oregano] 11/9/2015 10:39

Cbuy might well be the next acquisition, probably from the administrators. they haven't enough cash to get them through the second half.

[eclair] 11/9/2015 10:06

At one point I was thinking about reducing my phd holding in favour of cbuy. Glad I didn't - they seem to have got themselves in a right mess.

[p1nkfish] 11/9/2015 07:43

looks like cbuy are in trouble.

didn't understand their model and always gave me a bad vibe whenever i looked into their material, results, rns's etc.

nomad now resigned.

one less distraction in the market.

[p1nkfish] 07/9/2015 11:45

They already have some police force csutomers.

"Northamptonshire and Staffordshire Police bought batons for their officers costing £82.91 each while South Wales managed to buy them for just £22.99, the study found."

[p1nkfish] 28/8/2015 13:10

Wasn't there suppsed to also be some development collaboartion with Fifth Third Bank?

Recently read that they are one of the better regional US banks and turned-up on a buy list.

Good company to keep.

[p1nkfish] 22/8/2015 16:50

Henderson are the cap and they can dribble into the market for a long time. They played a blinder on this and probably see same upside in short order elsewhere now.
Could see a fallback to mid 80's.

[fergus9] 18/8/2015 16:38

"98p close or above would confirm a breakout"
Let's hope so onwards and upwards.
Fergus 9

[oregano] 18/8/2015 09:08

i guess that explains why they are capped at 95p. the great unknown is how keen Henderson are to sell.

They held over 20% of RCN and have been selling since 120p. the shares hit 180p, so it doesn't necessarily stop strong operating performance being rewarded, but reduces the likelihood of extreme moves to the upside.

[eagle eye] 17/8/2015 17:11

Hi fergus9,
Have always seen PHD as a slow burner, but encouraged to see the company getting more press these days. The chart has been in a good uptrend over the past 12 months and the prospective PER still appears attractive despite the strong price performance. Activate could be a real kicker and there is nothing in the current valuation to reflect it's potential.
Cheers
EE

[fergus9] 17/8/2015 16:02

Hello eagle eye glad to see someone on this board still waiting for a breakout hopefully this week maybe.
Fergus

[eagle eye] 17/8/2015 15:56

Good to see volume picking up in PHD recently.
A few months ago there were days with no trades at all.
Spread today 95-99p, yet trades going through at 95.8p are buys.

[gargleblaster] 14/8/2015 04:27

Shares mag have done an article on e-invoicing. Useful background, but probably doesn't tell us anything we don't already know!

The tech gold rush

E-invoicing land-grab is on

There is big money in supply chain finance. The question is, who’s going to make it? We’ve singled out a couple of UK-listed stocks that represent a good play on the market, though they are very different businesses.

SHARES EXPLAINS

On the tech side is e-procurement provider PROACTIS (PHD:AIM), which is looking to use its tech-based background and customer list to move into supply chain finance. On the other, Tungsten (TUNG:AIM) bought its way into the tech market in order to leverage its management’s expertise in finance.

Despite having origins at different ends of the tech-finance spectrum, both look well placed to benefit from shifts in technology that provide an opportunity to ‘monetise the supply chain’.

What’s new?

The shift from paper to electronically-processed invoices is providing an unexpected opportunity in the hitherto sleepy world of supply chain financing. As well as streamlining accounting administration and procurement, e-invoicing has created a gold mine of standardised electronic contracts which are ripe to be financed.

Approved invoices are a promise-to-pay – not far off a bank note and indistinguishable from a short-term loan. When standardised in electronic format on an e-invoicing platform, they turn into gold nuggets that can be converted into cash in a few clicks of a button.

How does this work? Supply chain finance starts when a supplier sells a product and issues an invoice to its customer. These invoices, once they have been ‘approved to pay’, can take 30, 60, even 90 days before they materialise as cash in the supplier’s bank account.

Suppliers wanting faster access to cash can offer their customer a discount to settle the bill more quickly – known as an early payment discount. Or the invoice can be ‘sold’ to a bank or other finance provider at a slight discount to its total value. The discount enables the financing party to earn a small but relatively safe return – ideal for banks or investors – in exchange for the supplier receiving earlier access to the cash. This is known as invoice financing or factoring.

Sunnyvale, California-based Ariba, which processed $700 billion (£451 billion) of e-invoices last year and is the world’s largest provider, was among the first to recognise the potential. It launched a Dynamic Discounting tool in 2013.

Ariba’s product is closer to the aforementioned early payment discount. There is no third-party finance because buyers are essentially lending to their suppliers directly. It is best described as a buyer-led (as opposed to a supplier-led) financing option.

Supplier-led finance

What if a supplier isn’t offered access to an early payment option from their customer? Tungsten is the first e-invoicing platform to offer a supplier-led product, potentially addressing a much longer tail of suppliers.

Finance entrepreneurs Edmund and Danny Truell saw an opportunity to plug together a financing capability with an e-invoicing platform and create a powerful asset origination engine.

Funded by an October 2013 initial public offering (IPO) on AIM, Tungsten brought e-invoicing network OB10 together with FIBI bank. Ob10, rebranded Tungsten Network, is an e-invoicing network delivering transaction volume of £121 billion a year.

Despite high volume, penetration rates tend to be small: Arriba’s lending product achieved 1.4% penetration in its first year.

Initially, Tungsten planned to fund lending through its Tungsten Bank subsidiary by taking customer deposits. It has since secured third-party funding from Insight Investment Management which has offered to make ‘several billion pounds’ of funding available for invoice discounting.

Tungsten will earn fees for originating these loans – and its product is up-and-running. So far, in the first five months since the product was launched, it has originated £32 million of loans through 38 registered suppliers.

Interestingly, although Tungsten is passing on the invoices to Insight rather than funding them itself, CFO David Williams tells us the use of third-party capital does not significantly reduce the forecast profitability of the lending business.

Playing catch-up

Others are trying to play catch-up. Helsinki-listed Basware (BAS1V:HEL) is another leading e-invoicer and procurement firm in the process of building a lending product.

In the UK, PROACTIS’s 24 February agreement with Inspired Capital (INSC:AIM) to provide funding on the £60-80 billion estimated spend across its 500 buyers and 1 million suppliers marked it out as a potential player too.

Its core business is consistently profitable, so its fortunes hinge less on the financing product being a success.
PROACTIS (PHD:AIM) 97p

For several years, Proactis remained on the fringes of the digital procurement eco-sphere content to remain a relatively small but cash generative and reliable growth company.

In January 2014 management decided the time was right to pursue more aggressive growth avenues, pitching full tilt into the acquisitions space with more than £6 million spent on deals which added clients, grew its US footprint and cranked up recurring revenues.

Shares flagged the stock at 55p back in May 2014, and buyers at that price have been rewarded handsomely, the stock today trading at 97p.

Now PROACTIS is dipping into the financing market through a partnership with Inspired Capital called Activate. Attempting to monetise transactions across some 1 million suppliers on its books, chief executive Rod Jones says the agreement could be ‘transformational’. (SFr)

[eclair] 12/8/2015 11:36

Buys showing as sells today. The trades at 95.8 and 95.45 are definitely buys - that's what I'm being quoted to buy.

[togglebrush] 11/8/2015 06:51

Yesterday was a STANDOUT TRADING DAY with maximum Share Prices and
a close to "One in a Hundred" Daily Volume recorded (1,264,552).
But this is an illiquid share
'
Statistic________Price_______Volume
'
Maximum__________98.00_______16,617,438 Max Vol 12/11/13
One in Hundred___94.50________1,306,513
Q3_______________84.50___________26,806
Median___________77.00____________5,543 Middle of sorted sample
Q1_______________54.38________________0 26% of Volumes were zero
Minimum__________28.00
'
Prices and Volumes as recorded by ADVFN
Prices are based on OHLC values
Share is illiquid with over a quarter of Trading days have the volume = zero
Stats based on 364 trading days since 16 October 2013
'
Note
Maximum Volume was followed by 2 RNS on 13/11/13 which stated holdings in company were:-
ISIS EP LLP having 26% Interest
Henderson Global Investors having 27% Interest

[bluerunner] 10/8/2015 19:30

This could break out this week, particularly with the paper edition of IC out in Friday.

[oregano] 10/8/2015 16:24

thanks Gargle.

[p1nkfish] 10/8/2015 13:41

He's done a good job on that break down. Deterioration in payment terms to SMEs is another macro PHD/INSC can help alleviate.

Acquisitions can take full advantage of the infrastructure PHD has built up that smaller companies would have been unable to do stand alone so more of the purchased revenue can fall through to the bottom line even before duplications in functions are tidied up.

Dare I say that even 117p is a starting point and may not be too ambitious.

Jones and Sykes have said 2020 to £100m market cap, IF NOT SOONER. How about 2018 with the right aquisitions?

[eagle eye] 10/8/2015 13:33

gb, Thanks for the article.
Proactis shares are fairly illiquid, so when it has wind in it's sails, the shares get marked up.
A solid company on a reasonable PER rating...plus in a good uptrend too.

[gargleblaster] 10/8/2015 12:51

Thought I would show the full article, for those who don't have full access!

Procuring growth

I noted with interest the pre-close trading statement from PROACTIS (PHD:93p), a Wetherby-based company that creates, sells and maintains specialist software which enables organisations to streamline, control and monitor all internal and external expenditure, other than payroll.

The company's products and platforms are used by over 500 organisations globally, including commercial, public and not-for-profit sectors, and it is now the largest independent eProcurement solution provider to the UK public sector. PROACTIS develops its own proprietary software using an in-house team of developers and sells through both direct and indirect channels via a number of Accredited Channel Partners.

It's a company that has been on my radar for quite some time after my interest was sparked when it signed a collaboration agreement with one of the constituents of my 2015 Bargain share portfolio, finance lender Inspired Capital (INSC:20p). Specifically, PROACTIS is developing an accelerated payment facility (APF) for UK small and medium-sized enterprises (SMEs) which will enable Inspired to accelerate the settlement of suppliers' pre-qualified invoices. PROACTIS estimates that its own 500-plus blue-chip clients are spending between £60-80bn each year across one million SME suppliers, so offering a significant market opportunity to tap into.

Indeed, research conducted by the Federation of Small Businesses highlights that one in five UK SMEs are being impacted by a 'serious deterioration of payment practices' and buying organisations are increasingly exerting power on their supply chain with SMEs experiencing the adverse effects of extended terms of trade. This trend presents an opportunity for the provision of supply chain finance for SMEs, while allowing buyers to maintain their working capital position. The boards of both PROACTIS and Inspired believe that by offering a solution to cash-pressurised companies the APF will have a high level of take-up within UK SMEs.

This is good example of how the company is monetising its proprietary electronic trading platform, Activate, by offering value added services to its customers' suppliers. Activate increases transparency within the payment cycle for vendors by clearly showing where their purchase invoice is in the invoice processing cycle.



Acquisitions create cross selling opportunities

In order to accelerate the development of Activate, PROACTIS acquired Intelligent Capture, one of the UK's leading providers of document scanning and optical character recognition services, a year ago. Priced on 8 times operating profit, and with recurring revenue accounting for 85 per cent of annual revenue of £1.5m, the £1.55m bolt-on acquisition has proved a shrewd strategic buy. That's because PROACTIS saw potential to cross-sell its existing services to Intelligent Capture's 40 clients.

It's been successful too. For instance, Denbighshire County Council, an organisation that has been using PROACTIS own 'purchase-to-pay' solutions that automate and streamline the entire day-to-day buying process, from request through authorisation, ordering, invoice processing, and payment via accounts payable, has just implemented a managed service using Intelligent Capture.

The Council has implemented a hybrid approach to invoice processing, with paper invoices being scanned and the resultant electronic images being uploaded to the PROACTIS managed service. Once uploaded, the relevant invoice information can be extracted and checked for accuracy, and any information not automatically located can then be resolved by a service clerk. The same managed service process is used for imported PDF invoices that are received by e-mail and a dedicated query desk process is provided that will allow the Council to resolve invoices with queries around data that is missing or invalid, including the ability to easily engage the supplier into the process.

The hybrid service adopted has two significant benefits: the first is that it drives the efficiency and cost reduction agenda; the second is that it opens the door to aspects such as the supplier network and accelerated payments once benefits of the first step have been realised.

PROACTIS is also cross-selling its own complementary product suite to clients of another acquisition, Intesource, an established provider of e-auction services using its own proprietary service delivery and software platform. PROACTIS paid a sensible price too (around five times operating profit on cash-free, debt free basis). The business has more than 25 clients delivering over £3m of recurring annual income and operating profit in excess of £400,000.

The third strategic acquisition the company made in the past 18 months, that of EGS, strengthens its position as the largest independent eProcurement solution provider to the UK public sector, a segment of the market covering 200 organisations controlling over £15bn of public spending across 150,000 suppliers. More than 90 per cent of EGS' clients follow a subscription business model based on three or four year contract terms. At the time of acquisition, EGS was generating annual recurring revenue of more than £1.6m and operating profit of £400,000 from around 70 clients that use its hosted software to control more than £2.5bn of spend through 40,000 active suppliers.

Importantly, all these bolt-on acquisitions have delivered which is why PROACTIS will report a surge in profits and revenues when it releases its full-year results on Tuesday, 13 October 2015. Last week's pre-close trading update confirmed that revenues increased by 69 per cent to £17.2m in the 12 months to end July 2015 to lift cash profits by 130 per cent to £4.6m. After deducting a non-cash charge of £1.7m for amortisation and depreciation, this means that PROACTIS' adjusted pre-tax profit is set to rise from £1.1m to £2.9m. On this basis, expect underlying EPS to more than double from 2.6p to 6.1p and support a 9 per cent rise in the payout per share to 1.2p.

Strong organic growth story

Of course, it's important that there is organic growth coming through too rather than just the profit uplift from some well-timed strategic acquisitions. On this score there are no concerns at all. In the first half to end January 2015, PROACTIS increased its like-for-like revenues by 18 per cent and reported 20 contracts with new customers which had an initial contract value of £2.6m. The company also enjoyed continued strong support from its existing client base with no fewer than 43 client product upgrades in the six month period. The pre-close trading update reveals that it signed a further 19 deals with new customers in the second half and I would expect the closing order book, which increased by 20 per cent on a like-for-like basis to £15.5m in the six months to end January 2015, to have risen sharply since then.

This order backlog is important beacuse PROACTIS is focused on increasing the lifetime value of a customer relationship and improving the visibility of future revenue. As a consequence subscription (or managed service, which have similar characteristics) deals have become an increasing large proportion of the new business across all channels to market. For instance, of the £2.6m of orders placed with new clients in the first half to end January 2015, about £500,000 was booked as revenue in the period.

This means that as new contracts are won the amount of deferred contract revenue is increasing significantly as can be seen by the £6.6m of deferred income on the company's balance sheet at the end of January 2015, up 21 per cent since July 2014. In turn, this improves the quality of PROACTIS' income stream and the earnings multiple investors are willing to value its shares on. The increasing size of the client base, and scope for cross selling, is playing its part too which explains why the number of subscription based deals has exceeded the number of licences in every six month period since the second half of fiscal 2013. Moreover, investors are far more likely to attribute greater value to recurring revenues than one-off licence fees especially as renewal rates across all PROACTIS' business segments remain robust high. This high contract retention rate also highlights the value to potential customers of the product and service offering in terms of the savings and efficiencies they generate.

Another step change in profits

It's worth flagging up too that there is potential upside to analyst earnings estimates for the current financial year to end July 2016. Head of research Andrew Darley at broking house finnCap expects PROACTIS to deliver a 11 per cent increase in revenues to £18.9m, a third rise in cash profits to £6m and pre-tax profits of £3.3m in the 12 month period. On this basis, expect EPS of 6.6p and another hike in the dividend to 1.3p a share.

So after accounting for forecast net funds of £2.2m, worth 5.5p a share, at the end of July 2015, this means that the shares are being priced on 13 times cash adjusted earnings estimates and offer a prospective dividend yield of 1.4 per cent. But these forecasts don't include any contribution from the Inspired collaboration agreement, a conservative assumption in my view. There is scope for uplifts from further bolt-on deals too.

That's because the board outlined at the time of the interim results in March that "it remains committed to further M&A activity and is in an excellent position to provide a platform for further complementary bolt-on acquisitions." I would agree because having run through my cashflow model I reckon that after factoring in anticipated capital expenditure of £2m this fiscal year, then analysts' cash profit forecasts of £5m should result in free cashflow of somewhere between £2m and £2.3m and lead to a doubling of net funds to £4m, or 10p a share, by the end of July 2016. So given the record of PROACTIS' board of making earnings accretive acquisitions, then if only half that cash pile is deployed on sensibly priced bolt-on deals, I reckon there could be scope for 10 per cent earnings upgrades from acquisitions alone.

Importantly, the interests of the insiders are clearly aligned with outside shareholders because chief executive Rod Jones owns 4.96 per cent of the shares, finance director Tim Sykes owns 0.5 per cent and operator officer Sean McDonough has 0.8 per cent. Founder and non-executive director Rodney Potts owns 22.5 per cent of the shares and non-executive chairman Alan Aubrey, who is also the chief executive of FTSE 250 technology fund IP Group (IP:212p), has a 2.6 per cent stake. This adds some comfort that the directors will continue to use the company's cash pile wisely.



Chart break-out imminent

Admittedly, I have been monitoring PROACTIS for quite some time with a view to initiating coverage, but have been holding off until a chart break-out through the 97p share price high, which halted prior rallies in November and May this year, is imminent. I feel that time has come. Techical analysts will note that a confirmed close at 98p or above will clearly signal a triple top break-out on the point-&-figure chart and, in my opinion, pave the way for a return to the 2007 bull market high of 117p.

Furthermore, with a bumper set of full-year results set to be released in a few months time, I can see the shares re-rating in the interim period as investors' cotton onto the organic and acquisitive growth story PROACTIS offers. Trading on a bid-offer spread of 91p to 93p, valuing the company at £36.6m, I rate the Aim-traded shares a strong buy with potentially 25 per cent share price upside on offer to my fair value target price of 117p. At that level they would be rated on a more reasonable rating of 16 times fiscal 2016 cash adjusted earnings estimates. Buy.

[bluerunner] 10/8/2015 12:46

Strong buy tip on IC today with a 117p target price.