Proactis Share Discussion Threads

[p1nkfish] 12/10/2017 10:39

There will be turbulence but in worse case Perfect and Proactis can run in parallel for a while. I do believe the anticipated cost savings. Proactis knows all about saving costs.

Waiting until all is clear and fog lifted is great but don't expect the price to be where it is now by then.

Risk without Reward exists but NOT Reward without Risk.

It's all a balance of probabilities and I expect upside probability is the more likely outcome.

[deltrotter] 11/10/2017 20:28

Of course they have to execute, but I reckon the market more often than not underestimates these types of acquisitions and they turn out far better than predicted, e.g. Taptica and attraqt.....

I am holding and buying.

[martinthebrave] 11/10/2017 19:48

Pauly Pilot take on todays results -

He is cautious but gives an share price range of 205p to 274p as fair value.

Proactis Holdings (LON:PHD)

Share price: 163.5p (down 4.4% today)
No. shares: 92.7m
Market cap: £151.6m

Preliminary results - for the year ended 31 Jul 2017. This is an acquisitive group of companies focused on spend control software and services.

The problem we have in analysing the figures, is that a significant acquisition (Millstream) was made during the year. Then a huge acquisition was made just after the year end (Perfect Commerce LLC) - which was classified as a reverse takeover due to its size (involving a £70m placing at 165p, and £45m of new debt facilities).

Therefore the composition of the group as things stand today, is very different to how it was during the year end 31 Jul 2017 - rendering the historic figures to be almost meaningless.

I can't even rely on EPS calculations, as this is obviously based on the average number of shares in issue during the year, being 48.8m on a fully diluted basis. Here we are, just a few months later, and the share count has almost doubled to 92.7m. Therefore earnings have to almost double this year, to achieve the same EPS.

The acquisition of Perfect was justified by the expectation of £5.0m in group cost savings.

Balance sheet - looks very weak. Although substantial new equity was raised after the year end, in a £70m placing at 165p, this was used to part fund the Perfect acquisition. So the next set of accounts will probably also look weak - with intangibles getting larger with every acquisition.

FinnCap has published a new note today (available on Research Tree), in which it forecasts balance sheet NAV of £99.4m at 07/2018. However, intangible assets is £138.7m within that, meaning that NTAV would be negative at -£39.3m. Personally I don't normally invest in any company with negative NTAV. So for me, the balance sheet is a deal-breaker here, hence I wouldn't invest.

Earnings forecasts - FinnCap forecasts adjusted EPS of 11.4p in the current year 07/2018, and an increase to 13.7p in 07/19. Assuming we can rely on those figures, the next question is what level of PER does the group deserve? I would have thought a PER of 15-20 would make sense. Therefore that targets a share price of 205p to 274p. This compares with the current share price of 163.5p - so there's some upside if things proceed according to plan, but it doesn't look madly exciting to me. Plenty could go wrong along the way, as the growth is nearly all coming from acquisitions & restructuring - fraught with risk.

My opinion - I tend to steer clear of highly acquisitive groups - there's just too much scope for something to go wrong. Also, I don't like the weak balance sheet here - with significantly negative NTAV forecast. So overall it's not for me, but I wish shareholders well, and hope things work out for the company.

I note that a highly-regarded tech analyst has raised question marks over the wisdom of the Perfect acquisition. That's another reason which is adding to my caution here. I think I'd like to revisit this in a year's time, once we have a full year's trading of the enlarged group.

[walbrock82] 11/10/2017 13:43

Having looked at the results, here are my thoughts

Proactis is a SaaS provider by giving solutions for finance and procurement (read more about it here)
The results were pretty good as it recorded sales of £25.4m, an increase of 31% with normalised EPS increasing to 9p per share.
With a cash balance of £4.3m, it has proposed an increase in dividend to 1.4p.
Meanwhile, it reported a fall in reported operating loss of £2.6m, compared to adjusted profits of £5.25m. The blame lies on “non-recurring” admin. Expenses of £6.8m, up from last year £0.58m.
The expenses shouldn’t be non-recurring! IMO
As a subscription-based business, its deferred income represents 45%, down from 49%. You can assume this to be “recurring revenue” at the date of the balance sheet.
Meanwhile, Cash earnings down slightly to £4.5m from £5m.
HOWEVER, the company’s financial statement will change dramatically after acquiring Perfect Commerce.

Looking Ahead and acquisition of Perfect
The results ignored the “PERFECT” acquisition which resulted in the company acquiring it for $127.5m.
Perfect has reported turnover of $39.7m (£30m) and EBITDA of $6.4m (£4.8m).
Proactis acquired this through raising £70m in share placing and £28m debt from £45m Debt facility.

Valuation
Proactis Holdings is a fairly valued business at 20 times PE.

Final Thoughts
An interesting software business that is going places. I like this company, but it requires more research.

For further results and analysis on other companies result, click

[rivaldo] 11/10/2017 11:47

Results are good, outlook good, and encouraging to see such a high percentage of the promised acquisition synergies achieved already.

Given the size of the reverse acquisition and the extent of the transformation, perhaps the market is adopting a "wait and see" approach until the next set of results.

This is a smaller position for me at present, but at the right time I will probably add. Just a question of patience and hopefully timing!

Here's Techmarketview's summary:



"Wednesday 11 October 2017

PROACTIS looks to have Perfect pitch

Full year results of spend control solutions provider PROACTIS showed revenue up 31% to £25.4m (+9% organically), with EBITDA ahead 49% to £7.9m. These figures however do not include Perfect Commerce, the US-HQ’d business acquired in July.

The new financial year has begun with a group doubled in size, with 85% recurring revenue and the prospect of £5m in cost synergies to get the wider group to around PROACTIS’s 30% EBITDA margin benchmark.

The two companies have known each other for several years. Consequently there should be few surprises as they combine to build on their momentum in the crowded and competitive market for spend control and eProcurement. The two businesses are complementary in more than their geographical reach. Perfect has more resonance in Tier 1 customers, while PROACTIS had been more successful in the mid-market and public sector which offer significant opportunity in the US. They will be looking to deepen their market penetration, encouraging cross-selling and increasing share of wallet as they roll out more sophisticated analytics, procurement and reporting tools. The Business Network, connecting the ERP and procurement systems of buyers and suppliers, and acquired through Perfect’s purchase of French company Hubwoo, should also drive growth and reinforce customer relationships.

PROACTIS management, reinforced by Perfect’s CEO moving to Group CEO, will be looking to bed the latest deal in over the coming year. However, further acquisitions will be on the cards. The enlarged group should be seen as a credible and successful sector consolidator as customers look for scale-advantage, reach and financial stability in their supply chain partners.

Management targets for the year focus on matching the sector’s 10% growth rate, delivering 30% EBITDA and continuing the progress in customer acquisition, but there is potential for even better performance medium term."

[deltrotter] 11/10/2017 10:17

Fin cap reiterate their 250p target

[deltrotter] 11/10/2017 09:30

I am buying this weakness... Growth to come IMO

[martinthebrave] 10/10/2017 12:38

Decided to join you 166.7p. share price now below 7th July when "Transformational acquisition, significantly accelerating PROACTIS' strategy" was announced. Good luck to all holders tomorrow!!

[chasbas] 10/10/2017 09:43

Bought ahead of results tomorrow at 169.4p. There seems to have been a lot of stock around for some time. Acquisition of Perfect Commerce funded by placing at 165p. Good trading update on 22 Aug. Finncap (corporate) has target price of 250p. N+1 Singer has target price of 226p. GLA

[p1nkfish] 08/10/2017 00:30

Well written and decent overview. Some risks but that's always the case anyway.

Now playing with the big boys and can punch some weight, especially if they don't lose sight of where they have come from - Yorkshire - tight as a ducks etc.



Very useful reading on synergies and overlaps of offerings.

[lewis winthorpe] 07/10/2017 20:29

The who will be significant this time

[p1nkfish] 07/10/2017 20:12

Even bigger Lewis?
Hard to Trump the last one in terms of size.

[lewis winthorpe] 07/10/2017 19:50

I don't think it will be the last M&A we will see. Expecting another in next 3 to 6 months.

[p1nkfish] 07/10/2017 18:44

I averaged up.
Unusual modus operandi for me when my average price is so low but it looked worthwhile.

My concerns are:

1) Extreme care needed at PHD during the current phase of integration, easy to drop the ball as now in the big league. Largest acquisition to date.

2) New CEO - had great respect for Rod Jones and his capable hands. Hope the new man fits the shoes.

3) Influence of Tim Sykes needs to be maintained as he was a good part of the Jones -Sykes double act and very capable CFO.

It needs a couple of years to mature and with good execution this could at least double imho. It should prosper in inflationary or deflationary times and be able to scale up without massive fixed cost base increase.

[deltrotter] 07/10/2017 12:14

Actually a few delayed large trades showing up over the last couple of days...

[deltrotter] 06/10/2017 15:33

Bit more volume today in the lead up to results next Wednesday

[deltrotter] 03/10/2017 09:58

Added again. Lovely quiet thread this. Usually a positive!

[deltrotter] 29/9/2017 14:14

Tx Rivaldo

I have added on this dip. Interims on October 11th.

[rivaldo] 25/9/2017 15:21

FYI the Proactive presentation is publically available here:

http ://www.proactiveinvestors.co.uk/upload/SponsorFile/File/2017_09/1505380650_Proactis---Corporate-Presentation-2017.pdf

[eagle eye] 18/9/2017 09:46

p1nkfish,
If I hadn't seen the presentation last Wednesday, I wouldn't have understood the aspiration of the new Proactis.
Hamp Wall and Tim Sykes see the industry consolidating and Proactis being a big part of that. I think they have sold the vision to the city boys which is why new institutions have come on board.
I've obtained a PDF of the presentation from the evening, so can email it over if you wish. Read that and I think you will have a better idea of the bigger picture.

If anyone would like a copy, please post your email address here. When I've received it, I'll let you know so it can be deleted.
Cheers
Eagle Eye

[nimrod22] 17/9/2017 16:21

PHD is one of the few shares that I'm hanging on to (having moved quite a bit back in to cash. It looks quite a candidate for a bounce back. Should find support at the 200 dma.

[deltrotter] 15/9/2017 20:31

Tx Eagle Eye.

[p1nkfish] 15/9/2017 20:28

Thank you eagle.

I think it's not impossible to see a breakdown to 160p as Wednesday hasn't engendered a perky price and its teetering at the current resistance level. Massive opportunity towards 160p and well worth adding sub 170p.

Their acquisitions to date have all been very enhancing but I wonder if the low hanging fruit is used up and the law of diminishing returns might begin to kick in. The low hanging fruit idea was alluded to by Rod Jones a while back.