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Share Name Share Symbol Market Type Share ISIN Share Description
Proactis Holdings Plc LSE:PHD London Ordinary Share GB00B13GSS58 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.25p -0.85% 29.25p 29.00p 29.50p 29.50p 29.25p 29.50p 129,855 14:34:58
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Software & Computer Services 52.2 3.7 5.4 5.4 27.85

PROACTIS Holdings PLC Interim Results

29/04/2019 7:02am

UK Regulatory (RNS & others)


TIDMPHD

RNS Number : 3213X

PROACTIS Holdings PLC

29 April 2019

 
 Date:              29 April 2019 
 On behalf of:      PROACTIS Holdings PLC ('PROACTIS', the 'Company' 
                     or the 'Group') 
 Embargoed until:   0700hrs 
 

PROACTIS Holdings PLC

Interim results for the six months ended 31 January 2019

PROACTIS Holdings PLC, a global Spend Management and B2B commerce solution provider, today announces its interim results for the six-month period ended 31 January 2019.

Trading performance

-- Total Contract Value signed was GBP6.1m (31 January 2018: GBP5.6m)

-- New business deal activity solid: 34 new name deals (31 January 2018: 34)

-- Strong upsell activity with existing customers: 54 deals in the period (31 January 2018: 49)

Financial performance

-- Reported revenue increased 5% to GBP27.7m (31 January 2018: GBP26.4m)

-- Reported revenue (excluding the benefit of acquisitions) was GBP24.9m (31 January 2018: GBP26.4m)

-- Adjusted EBITDA(1) decreased to GBP8.0m (31 January 2018: GBP8.4m)

-- Adjusted EBITDA(1) (excluding the benefit of acquisitions) was GBP7.2m (31 January 2018: GBP8.4m)

-- Adjusted EPS(1) decreased to 3.5p (31 January 2018: 5.4p)

Net debt

-- Net bank debt(2) increased to GBP39.3m (31 July 2018: GBP29.8m) due largely to the acquisition of Esize Holdings BV ("Esize")

-- Net cash flow from operating activities was GBP4.4m (31 January 2018: GBP1.6m)

-- A comprehensive programme is in place to reduce debt levels which includes the suspension of dividends for the foreseeable future

Revenue visibility

-- Annualised recurring revenue(3) ("ARR") increased to GBP47.6m (31 July 2018: GBP45.1m)

-- Order book(4) was GBP44.6m (31 July 2018: GBP44.6m)

M&A

-- Acquisition of Esize completed on 6 August 2018, a complementary provider of spend management solutions to buyers based in the Netherlands

-- Post-acquisition performance of Esize has been encouraging and is in line with management's expectations with reported revenues for the post acquisition period of GBP2.6m and Adjusted EBITDA of GBP0.8m

Post period end

-- Operational review completed with strategic plan in place

-- Appointment of new CFO announced today

1 - Adjusted EBITDA is stated before non-core net expenditure, amortisation of customer related intangible assets and share based payment charges and Adjusted EPS is stated after the equivalent post tax effects of Adjusted EBITDA

2 - Excludes unsecured convertible loan notes of GBP5.5m maturing during August 2022

3 - Annualised Recurring Revenue is the Group's estimate of the annualised value of revenue of customers currently contracted with the Group

4 - Order Book is the Group's current contracted revenue that is required to be recognised in future accounting periods

Tim Sykes, Chief Executive Officer, commented:

"This set of results is the culmination of a number of the previously reported issues facing the US, French and German parts of the Group, however much work has been undertaken and we are pleased to share the outcome of our review of operations with shareholders today.

"We are focused on executing on our plan and are confident that we have made significant steps in our journey to return the whole of the Group to its attractive core characteristics. We have a proven proposition to address a large and growing market, and we are confident that this will drive growth going forward after a period of stabilisation."

A video overview of the outcome of the review of the Group's US, French and German operations from Chief Executive Officer Tim Sykes is available to watch here: http://bit.ly/phdh12019

For further information, please contact:

 
 PROACTIS Holdings PLC 
 Tim Sykes, Chief Executive Officer      via Alma PR 
 Alma PR 
 Rebecca Sanders-Hewett                  020 3405 0205 
  Hilary Buchanan                         proactis@almapr.com 
  Sam Modlin 
 
 
   finnCap Ltd 
   Stuart Andrews - Corporate Finance 
   Carl Holmes 
   Simon Hicks 
 
   Andrew Burdis - Corporate broking 
   Richard Chambers                       0207 220 0500 
 

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

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 1,000 buy side customers around the world from the commercial, public and not-for-profit sectors. It is the fifth largest independent eProcurement solution provider globally.

PROACTIS is head quartered in the United Kingdom and floated on the AIM market of the London Stock Exchange in June 2006.

CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S REPORT

The Group is the fifth largest procurement solutions business by revenue, globally, and has a solution set and operational and technological capability to serve its customers and grow its business in all of the major global markets.

The Group's performance has been mixed during the period with UK operations performing well alongside the newly acquired Dutch business, Esize. Performance from the Group's US, French and German businesses did not match the Board's expectations with underlying revenues reducing. As a result, whilst the Group reported a revenue increase of approximately 5% this was the result of the additional contribution from Esize.

The level of new business signed during the period was healthy against the comparative period on a like for like basis and the contribution from Esize was solid. However, as previously indicated in the Group's February trading update, the Group's US business unit lost tenders and the French and German business units have experienced deferred decisions. These factors, alongside a higher level of customer churn in those same business units, resulted in the Group adjusting its performance expectations downwards, as previously announced.

The Board believes that this combination of factors has resulted in a level of performance in the period and a short-term outlook for growth that is not reflective of the considerable opportunities available to the Group. Accordingly, the Board is taking corrective action to address this.

Strategy

The Group has a long-term strategy of building a global business focussed on delivering value to its customers through the digital transformation of their procurement systems and processes with the application of technology. The critical success factors in delivering this strategy are a combination of building market relevant solutions supported by strong new business execution teams and customer management processes designed to sustain long-term relationships.

The elements of the Board's strategy are:

-- Adding new customers through the delivery of best in class procurement solutions to buyer customers;

-- Retention and a broadening of relationships with existing customers through a high level of service and an energetic approach to the upselling and cross selling of the Group's broad product portfolio; and

-- Accessing a vast new opportunity through the provision of value-added services to a new customer population, the suppliers of the Group's customers.

Operational review

The Board considers that the Group is well positioned to deliver its strategy and that it is exhibiting these characteristics consistently in its UK and Dutch business units. It has been clear that the Group has struggled to deliver this consistently in its US, French and German business units over the last 12 months and this culminated, on 28 February 2019, in the Board announcing that it would be conducting a comprehensive review of the Group's US, French and German operations ("the Review") following the guidance provided by the Board that it did not expect the Group to meet its then existing growth targets for the year ending 31 July 2019.

The Review is now complete and the Board has identified the changes that need to be made in order to return the Group to growth and to shareholder value creation. The principal focus of the Review was around new business performance in the US, France and Germany, above average customer churn in those same business units and levels of operating expenditure and product development investment in the US.

The steps to address these issues are underway with some leadership team changes and organisational restructuring already been delivered. The changes that will be made over the coming months are set out in more detail below, focusing on:

   --      Target market segment and customer profile definition 
   --      Alignment of product portfolio 
   --      Bolstering new business capabilities 
   --      Focusing on retention 
   --      Driving growth within the existing customer base 
   --      Active management and leadership 
   --      Financial position 

Target market segment and customer profile definition

The Group delivers a significant level of new business in its UK and Dutch business units to a market segment and customer profile that is well defined around the variables of vertical focus, scale, complexity, existing technology stack and the procurement process of the customer. This approach allows for a more efficient go to market strategy with an increased likelihood of success and a lower average cost of sale. This same market segment and customer profile will be adopted for new business opportunities in the Group's US, French and German operations which have, to date, been less targeted on larger scale general corporate and public sector customers.

Alignment of product portfolio

As a result of the Group's multiple business combinations over time, the Group has an extensive product portfolio. Whilst many of these products are complementary and offer substantial cross-selling opportunities within the customer base there is a degree of overlap within the Group's Spend Management products. Following the shift to focus on the same specific market segments as the UK and Dutch business units for all of its global new business opportunities, the Group will be able to better leverage its product portfolio. The wider product set will remain investible and this will allow the Group to be more reactive to existing customers' requirements.

Bolstering new business capabilities

The Group's value proposition is well established however the Board believes that the field marketing resource in the US, French and German territories has varying levels of maturity, capability and has insufficient capacity to deliver a sustainable volume of leads of the right quality targeted at the right market segment and customer profile. The Group is currently recruiting in the marketing and sales functions, specifically into the US and Germany, to build a capability that can align with the Group's value proposition consistently but with the right level of localisation.

Focusing on retention

During the last 12 months, the Group has experienced a higher level of customer churn than the Board anticipated, principally through its US, French and German business units. This has adversely impacted Annual Recurring Revenue ("ARR") over that period and, whilst operational cost savings have mitigated the loss of profitability to some extent, it has not been possible to mitigate the revenue loss entirely.

The Review has identified a number of mitigating actions to reduce the risk of customer churn going forward through:

-- Greater levels of engagement with existing customers both generally and specifically in the US, French and German business units specifically including the application of the Group's existing expert advisory capacity in the digital transformation process;

-- Better structured and informed account management teams with an aligned incentivisation package for its executives;

-- Stronger levels of interaction between the customers and the Group's product management process through the provision of an interactive online tool for customers to propose their product roadmap ideas and for the Group to respond and report on product roadmap progress; and

-- More focussed use of the Group's product management capacity on a product roadmap that is more aligned with existing customers requirements.

Driving growth within the existing customer base

The Board is confident that the existing customer base offers a significant growth opportunity for the Group and the UK and Dutch business units routinely deliver significant additional capabilities into their customer bases. This growth opportunity has not been fully accessed, to date, in the US specifically and, to a lesser degree, in the French and German business units.

The strategic focus of those teams is being re-balanced toward cross-selling to existing customers as well as winning new business and, to this end, training in the Group's wider product portfolio is being delivered to enable the Group's teams to identify customer opportunity and incentive plans are being aligned which will have more balance in performance requirements for retention and cross-selling.

Active management and leadership

Leadership change has already been made at a Group level with the appointment of Tim Sykes as Chief Executive Officer on 9 January 2019. The Board is also pleased to have announced today the appointment of Richard Hughes to the role of Chief Financial Officer who will start work on 20 May 2019. Richard has substantial experience working within and helping to grow publicly-listed companies operating internationally. The Board feels confident that his appointment will bring immediate value to the Group as a whole.

These changes have been supplemented during the period by the appointment of Sophie Tomkins as Senior Independent Non-Executive Director, as announced on 30 October 2018. The Board is committed to the appointment of an additional non-executive director as Chair of the Audit Committee and a suitable candidate is in the process of being identified.

Changes have already been made within the leadership team of the US business unit with a view to bringing greater transparency, rigour and commerciality to decision making. As a temporary measure, the US business unit is being led by the Group's UK Managing Director with close involvement from Tim and the Group's wider, established leadership team.

Financial position

The Group remains profitable and cash generative and has an established long-term, supportive relationship with its bank, HSBC UK Bank plc, that provides the Group with its commercial banking services, its structured debt facilities and also its Accelerated Payment Facility (as announced on 28 February 2019 as an incremental facility to the existing facilities to support a new product through an early adopter programme).

The Board does, however, intend to reduce the level debt in the business, which is higher than originally planned at this point but is fully serviced and within covenants, through a combination of near-term initiatives, namely:

-- The reduction of net operating expenditure where the sourcing of services and the structure of teams or processes is inefficient;

-- The focussing of the Group's investment in product development on a tighter product portfolio and on a customer informed roadmap; and

-- The suspension of the payment of an annual dividend.

The market will be updated on progress in this regard as appropriate.

Acquisition of Esize Holdings BV ("Esize")

On 6 August 2018, the Group acquired Esize, a recognised territory leader in the Netherlands with referenceability in Germany and Belgium. Its solutions cover the full procurement cycle for indirect spend and also provides the Group with additional capabilities in travel and expense management and contract labour management. The Board believes that these capabilities will become increasingly important to its customers going forward. It has approximately 80 customers in the same market segment and with the same customer profile as the Group's UK business unit and approximately 50 employees. The Group has already consolidated its existing operations and is seeing the benefits of a scaled operation in the Netherlands.

Esize has a SaaS-based business model that is consistent with the Group's and which delivers high levels of contracted annual recurring revenue with high retention rates.

Further details are set out in the announcement made at the time of the acquisition.

Performance overview

The Board monitors the Group's growth performance through a combination of several key performance indicators as follows:

 
                              6 months ended   6 months ended      Year ended 
                                  31 January       31 January    31 July 2018 
                                        2019             2018 
---------------------------  ---------------  ---------------  -------------- 
 Total TCV(1) signed                 GBP6.1m          GBP5.6m        GBP12.1m 
 TCV of new name buyer               GBP4.0m          GBP4.5m         GBP8.7m 
  deals 
 Number of new name buyer 
  deals                                   34               34              64 
 TCV of upsell buyer                 GBP2.1m          GBP1.1m         GBP3.4m 
  deals 
 Number of upsell buyer 
  deals                                   54               49             113 
 Reported revenue                   GBP27.7m         GBP26.4m        GBP52.2m 
 Reported revenue growth                  5%             124%            106% 
 CAGR 3-year revenue 
  growth                                 47%              46%             45% 
 Organic revenue growth(2)              (5%)               3%            Nil% 
 Annual Recurring Revenue       (3) GBP47.6m         GBP45.7m        GBP45.1m 
  ("ARR") 
---------------------------  ---------------  ---------------  -------------- 
 

Note 1: Aggregate Total Contract Value

Note 2: Measured in terms of revenue recognised in the income statement excluding the acquisition of Esize

Note 3: Includes GBP4.4m from Esize.

The Board also considers that retention of existing customers is a key performance indicator and the measure of this indicator is included routinely within its internal financial reporting dashboard. The Board acknowledges that this period's performance against this measure has fallen short of the normal levels of retention achieved in its UK and Dutch business units and the plan to mitigate this situation has formed a key part of the Review.

New business performance analysis

The Group's TCV for buyer new deals and buyer upsell deals can be analysed by market segment as follows:

 
                           6 months ended          6 months ended              Year ended 
                          31 January 2019         31 January 2018            31 July 2018 
------------ 
                     TCV of        Number     TCV of       Number        TCV of    Number 
                   new name        of new   new name       of new      new name    of new 
                      deals    name deals      deals   name deals         deals      name 
                                                                                    deals 
------------  -------------  ------------  ---------  -----------  ------------  -------- 
 UK segment         GBP2.4m            25    GBP2.4m           25       GBP5.2m        45 
 EU segment     (1) GBP0.7m         (1) 6    GBP0.4m            2       GBP0.8m         7 
 US segment         GBP0.9m             3    GBP1.7m            7   (2) GBP2.7m    (2) 12 
------------  -------------  ------------  ---------  -----------  ------------  -------- 
 

Note 1: Includes GBP0.5m and 3 from Esize

Note 2: For the year ended 31 July 2018, the US segment includes 7 new name deals (with an TCV of GBP0.8m) from the Group's US based reverse auctions business which was included within the UK segment during the prior year

 
                          6 months ended       6 months ended             Year ended 
                         31 January 2019      31 January 2018           31 July 2018 
------------ 
                     TCV of       Number   TCV of      Number    TCV of       Number 
                     upsell    of upsell   upsell   of upsell    upsell    of upsell 
                      deals        deals    deals       deals     deals        deals 
------------  -------------  -----------  -------  ----------  --------  ----------- 
 UK segment         GBP1.1m           48  GBP1.0m          45   GBP2.5m           99 
 EU segment     (1) GBP0.5m        (1) 4  GBP0.1m           4   GBP0.9m           14 
 US segment         GBP0.5m            2        -           -         -            - 
------------  -------------  -----------  -------  ----------  --------  ----------- 
 

Note 1: Includes GBP0.5m and 3 from Esize

Revenue performance analysis

The Group's revenues can be analysed by market segment and customer type as follows:

 
                                               Buyer revenue 
                               6 months ended   6 months ended     Year ended 
                                   31 January       31 January   31 July 2018 
                                         2019             2018 
 
 
                                   31 January 
                                         2019 
                                         GBPm             GBPm           GBPm 
----------------------------  ---------------  ---------------  ------------- 
 UK segment                               9.4              8.0           16.2 
 EU segment                           (1) 7.5              6.0           12.0 
 US segment                               6.3              7.6           14.6 
----------------------------  ---------------  ---------------  ------------- 
 Note 1: Including GBP2.6m 
  (2018: GBPNil) from Esize              23.2             21.6           42.8 
----------------------------  ---------------  ---------------  ------------- 
                                              Supplier revenue 
----------------------------  ----------------------------------------------- 
                               6 months ended   6 months ended     Year ended 
                                   31 January       31 January   31 July 2018 
                                         2019             2018           GBPm 
                                         GBPm             GBPm 
----------------------------  ---------------  ---------------  ------------- 
 UK segment                               2.0              2.1            4.2 
 EU segment                           (1) 2.5              2.6            5.2 
 US segment                                 -                -              - 
----------------------------  ---------------  ---------------  ------------- 
 Note 1: Including GBPNil 
  (2018: GBPNil) from Esize               4.5              4.7            9.4 
----------------------------  ---------------  ---------------  ------------- 
 Total revenue                           27.7             26.3           52.2 
----------------------------  ---------------  ---------------  ------------- 
 

Revenue visibility

This key performance indicator is the Group's estimate of the annualised run rate of subscription, managed service, support and hosting revenues currently contracted with the Group and is often referred to as Annual Recurring Revenue ('ARR') and can be analysed as follows:

 
                                     As at         As at          As at 
                                31 January    31 January   31 July 2018 
                                      2019          2018 
 
 
                                31 January 
                                      2019 
                                      GBPm          GBPm           GBPm 
----------------------------  ------------  ------------  ------------- 
 UK segment                           19.5          17.7           18.2 
 EU segment                       (1) 17.4          15.9           15.9 
 US segment                           10.7          12.1           11.0 
----------------------------  ------------  ------------  ------------- 
 Note 1: Including GBP4.4m 
  (2018: GBPNil) from Esize           47.6          45.7           45.1 
----------------------------  ------------  ------------  ------------- 
 

Staff costs and other operating expenses

The aggregate of staff costs and other operating expenses (excluding depreciation of property, plant and equipment and amortisation of intangibles assets increased to GBP18.0m (2018: GBP16.0m) with Esize contributing GBP1.4m (2018: GBPNil). Each of the two periods ending 31 January 2019 and 31 January 2018 has included significant items of income or expenditure associated primarily with the Group's acquisition activity and the resultant integration programme (together, "non-core net expenditure"). The Board has estimated the impact of this non-core net expenditure on the aggregate of staff costs and other operating expenses as follows:

 
                                              6 months       6 months   Year ended 
                                              ended 31       ended 31      31 July 
                                          January 2019   January 2018         2018 
                                                  GBPm           GBPm         GBPm 
--------------------------------------  --------------  -------------  ----------- 
 Aggregate of staff costs and 
  other operating expenses (reported)             18.0           16.0         33.0 
 Non-core net expenditure                        (1.3)          (0.9)        (3.6) 
-------------------------------------- 
 Aggregate of staff costs and 
  other operating expenses (excluding 
  non-core net expenditure)                       16.7           15.1         29.4 
--------------------------------------  --------------  -------------  ----------- 
 

Non-core net expenditure can be analysed as follows:

 
                                         6 months  6 months ended   Year ended 
                                         ended 31      31 January      31 July 
                                     January 2019            2018         2018 
                                             GBPm            GBPm         GBPm 
---------------------------------  --------------  --------------  ----------- 
 Expenses of acquisition related 
  activities                                  0.1             0.7          0.7 
 Costs of restructuring Group 
  operations - staff                          0.9             0.3          1.6 
 Costs of restructuring Group 
  operations - other                          0.1             0.5          1.6 
 Legal and professional fees                  0.2             0.1          0.4 
 Fair value movement on forward 
  contract on acquisition of 
  Perfect                                       -           (0.7)        (0.7) 
                                              1.3             0.9          3.6 
---------------------------------  --------------  --------------  ----------- 
 

Reported profit and Group Adjusted profit performance

The Board considers that each of the two periods ended 31 January 2019 and 31 January 2018 have been significantly impacted by non-core net expenditure incurred primarily as part the Group's acquisition activity and the resultant integration programmes. A summary of the various profit measures is set out below.

 
                              6 months ended                         6 months ended      Year ended 
                                  31 January                        31 January 2018    31 July 2018 
                                        2019 
                                    Reported   (1) Adjusted  Reported  (1) Adjusted        Reported   (1) Adjusted 
 Earnings before 
 interest, 
 tax, depreciation                   GBP6.8m        GBP8.0m   GBP7.5m       GBP8.4m        GBP13.6m       GBP17.3m 
 and 
 amortisation ('EBITDA')(1) 
 Operating profit                    GBP1.2m        GBP4.7m   GBP2.9m       GBP6.2m         GBP4.9m       GBP13.1m 
 Profit before tax                   GBP0.4m        GBP4.0m   GBP2.5m       GBP5.7m         GBP3.7m       GBP12.0m 
 Profit after tax                    GBP0.2m        GBP4.2m   GBP2.6m       GBP5.8m         GBP5.4m        GBP9.9m 
 Earnings per share 
  (see note 3)                          0.2p           3.4p      2.6p          5.4p            5.4p          10.6p 
---------------------------  ---------------  -------------  --------  ------------  --------------  ------------- 
 
 

Note 1: See Additional Information - Reconciliation of alternative performance measures

Cash flow

An analysis of the Group Adjusted Free Cash Flow is as follows:

 
                                      6 months ended       6 months   Year ended 
                                     31 January 2019       ended 31      31 July 
                                                       January 2018         2018 
                                                GBPm           GBPm         GBPm 
----  ---------------------------  -----------------  -------------  ----------- 
 Net cash flow from operating 
  activities                                     4.4            1.6          8.4 
       Non-core net expenditure 
        incurred in prior period 
        but paid in current 
 -      period                                   0.6            3.4          3.6 
       Non-core net expenditure 
        charged and paid within 
 -      the same period                          0.7            0.6          3.3 
----  ---------------------------  -----------------  -------------  ----------- 
 Adjusted Net cash flow 
  from operating activities                      5.7            5.6         15.3 
       Purchase of plant and 
 -      equipment                              (0.4)          (0.4)        (1.1) 
       Development expenditure 
 -      capitalised                            (3.8)          (2.3)        (5.7) 
----  ---------------------------  -----------------  -------------  ----------- 
 Adjusted Group Net Free 
  Cash Flow                                      1.5            2.9          8.5 
---------------------------------  -----------------  -------------  ----------- 
 

The total net cash outflow from the acquisition of Esize was approximately GBP8.4m which was paid through the Group's own cash resources with a further draw down against its bank facilities.

The Group had net bank debt of approximately GBP39.3m at 31 January 2019 (31 July 2018: GBP29.8m) with the increase being largely due to the cash element of the acquisition of Esize. Specifically, this net bank debt figure excludes convertible loan notes of approximately GBP5.5m that mature during August 2022.

Summary and Outlook

New business levels have been solid in the Group's UK and Dutch business units but, as announced on 28 February 2019, were slower than expected in its US, French and German business units. When considered alongside a lower level of retention in its US, French and German business units this has impacted adversely on revenue and on earnings for the reporting period.

These factors prompted a review of the US, French and German business units which is now complete and the Board is confident that the plans being established will allow a return to organic revenue growth after a period of stabilisation during the remainder of this and the next financial year. As well as transitioning the go to market strategy in those territories, which will take some time to take effect, these plans include making some adjustments to operating and investment expenses as well as the suspension of a dividend for the foreseeable future and, as a result, the Board expects to be able to drive enhanced profitability and cash flow through into the next financial year.

This enhanced cash flow will assist in the reduction of the Group's net debt which is higher than originally planned at this point but is fully serviced and within covenants.

The Group's forward investment includes further innovation into both the Spend Management and B2B commerce technologies. Specifically, the Board is seeing substantial progress with the Accelerated Payment Facility and looks forward to delivering further news flow on milestone achievements over the coming months as momentum develops.

The Board is confident that the plans will deliver a return to the Group's attractive core characteristics across the whole Group. The Group's target market segments are both substantial and growing and the Group has a proven value proposition and product fit. Alongside this, the Group's successful customer service processes and go to market strategy in its UK and Dutch business units is transferrable into its US, French and German business units with relatively minor adjustments for internationalisation and localisation. With an enthusiastic, motivated and incentivised team, the Group will work closely together to deliver an enhanced level of customer service and a stronger financial performance for the benefit of the Company and its shareholders.

   Alan Aubrey                                                      Tim Sykes 
   Chairman                                                          Chief Executive Officer 

29 April 2019

Consolidated income statement

for the six months ended 31 January 2019

 
                                        Unaudited       Unaudited         Audited 
                                         6 months        6 months      Year ended 
                                               to              to    31 July 2018 
                                       31 January      31 January 
                                             2019            2018 
                                           GBP000          GBP000          GBP000 
 
 Revenue                                   27,688          26,355          52,221 
 
 Cost of sales                            (3,088)         (3,204)         (5,963) 
 Staff costs                             (11,521)        (11,213)        (21,670) 
 Other operating expenses                 (6,481)         (4,754)        (11,332) 
 Depreciation of property, plant 
  and equipment                             (264)           (280)           (511) 
 Amortisation of intangible 
  assets                                  (5,282)         (4,000)         (7,886) 
                                    -------------   -------------   ------------- 
 Operating profit                           1,052           2,904           4,859 
 Finance income                                 5               1               - 
 Finance expenses                           (756)           (453)         (1,110) 
                                    -------------   -------------   ------------- 
 Profit before taxation                       301           2,452           3,749 
 Income tax credit/(charge)                 (256)             107           1,602 
                                    -------------   -------------   ------------- 
 Profit                                        45           2,559           5,351 
                                    -------------   -------------   ------------- 
 Attributable to: 
   Equity holders of the parent                54           2,399           5,042 
   Non-controlling interest                   (9)             160             309 
                                    -------------   -------------   ------------- 
                                               45           2,559           5,351 
                                    -------------   -------------   ------------- 
 Earnings per ordinary share 
  (Note 3) 
   - Basic                                   0.1p            2.6p            5.4p 
                                    -------------   -------------   ------------- 
   - Diluted                                 0.1p            2.6p            5.3p 
                                    -------------   -------------   ------------- 
 

Consolidated statement of comprehensive income

for the six months ended 31 January 2019

 
                                              Unaudited       Unaudited         Audited 
                                               6 months        6 months      Year ended 
                                                     to              to    31 July 2018 
                                             31 January      31 January 
                                                   2019            2018 
                                                 GBP000          GBP000          GBP000 
 
 Profit for the period                               45           2,559           5,351 
 
 Other comprehensive income 
 Items that will never be reclassified 
  to profit or loss 
 Share based payment charges                          -              72               - 
 Items that are or may be reclassified 
  to profit or loss 
 Foreign operations - foreign 
  currency translation differences                (132)             535              27 
                                          -------------   -------------   ------------- 
 Other comprehensive (loss)/gain, 
  net of tax                                      (132)             607              27 
                                          -------------   -------------   ------------- 
 Total comprehensive (loss)/income                 (87)           3,166           5,378 
                                          -------------   -------------   ------------- 
 Attributable to: 
   Equity holders of the parent                    (78)           3,006           5,069 
   Non-controlling interest                         (9)             160             309 
                                          -------------   -------------   ------------- 
                                                   (87)           3,166           5,378 
                                          -------------   -------------   ------------- 
 

Condensed consolidated statement of changes in equity

As at 31 January 2019

 
                     Unaudited       Unaudited       Unaudited       Unaudited       Unaudited       Unaudited       Unaudited       Unaudited         Unaudited       Unaudited 
                         Share   Share premium          Merger         Capital         Foreign          Equity        Retained                   Non-controlling 
                       capital                         reserve         reserve        exchange         reserve        earnings           Total          interest           Total 
                                                                                       reserve                                                                            equity 
                        GBP000          GBP000          GBP000          GBP000          GBP000          GBP000          GBP000          GBP000            GBP000          GBP000 
 
 At 1 August 
  2017                   5,024          17,631             556             449         (1,164)               -              48          22,544                 -          22,544 
 Shares issued 
  during 
  the period             4,243          63,636               -               -               -               -               -          67,879                 -          67,879 
 Share options 
  exercised                 23             156               -               -               -               -               -             179                 -             179 
 Issue of 
  convertible 
  notes                      -               -               -               -               -              80               -              80                 -              80 
 Arising 
  during the 
  period                     -               -               -               -             535               -               -             535                 -             535 
 Arising on 
  acquisition                -               -               -               -               -               -               -               -             2,228           2,228 
 Result for 
  the period                 -               -               -               -               -               -           2,399           2,399               160           2,559 
 Dividend                    -               -               -               -               -               -         (1,299)         (1,299)                 -         (1,299) 
 Share based 
  payment 
  charges                    -               -               -               -               -               -              72              72                 -              72 
                 -------------   -------------   -------------   -------------   -------------   -------------   -------------   -------------     -------------   ------------- 
 At 31 January 
  2018                   9,290          81,423             556             449           (629)              80           1,220          92,389             2,388          94,777 
 Share options 
  exercised                 34              41               -               -               -               -               -              75                 -              75 
 Arising 
  during the 
  period                     -               -               -               -           (508)               -               -           (508)                 -           (508) 
 Arising on 
  acquisition                -               -               -               -               -               -               -               -               338             338 
 Transactions 
  with NCI                   -               -               -               -               -               -         (1,042)         (1,042)           (1,271)         (2,313) 
 Result for 
  the period                 -               -               -               -               -               -           2,643           2,643               149           2,792 
 Share based 
  payment 
  charges                    -               -               -               -               -               -             294             294                 -             294 
 Deferred tax 
  on share 
  options                    -               -               -               -               -               -           (240)           (240)                 -           (240) 
                 -------------   -------------   -------------   -------------   -------------   -------------   -------------   -------------     -------------   ------------- 
 At 1 August 
  2018                   9,324          81,464             556             449         (1,137)              80           2,875          93,611             1,604          95,215 
 Shares issued 
  during 
  the period               129           1,267               -               -               -               -               -           1,396                 -           1,396 
 Share options 
  exercised                 10              17               -               -               -               -               -              27                 -              27 
 Loan note 
  conversion                59             915               -               -               -            (20)              20             974                 -             974 
 Issue of 
  convertible 
  notes                      -               -               -               -               -              90               -              90                 -              90 
 Arising 
  during the 
  period                     -               -               -               -           (132)               -               -           (132)                23           (109) 
 Result for 
  the period                 -               -               -               -               -               -              54              54               (9)              45 
 Dividend                    -               -               -               -               -               -         (1,419)         (1,419)                 -         (1,419) 
 Share based 
  payment 
  charges                    -               -               -               -               -               -             189             189                 -             189 
 IFRS15 
  transition 
  impact                     -               -               -               -               -               -             749             749                 -             749 
                 -------------   -------------   -------------   -------------   -------------   -------------   -------------   -------------     -------------   ------------- 
 At 31 January 
  2019                   9,522          83,663             556             449         (1,269)             150           2,468          95,539             1,618          97,157 
                 -------------   -------------   -------------   -------------   -------------   -------------   -------------   -------------     -------------   ------------- 
 

Consolidated statement of financial position

as at 31 January 2019

 
                                          Unaudited        Unaudited         Audited 
                                           As at 31         As at 31        As at 31 
                                            January          January       July 2018 
                                               2019             2018 
                                             GBP000           GBP000          GBP000 
 Non-current assets 
 Property, plant & equipment                  1,703            1,149           1,499 
 Intangible assets (Note 4)                 163,749          151,458         151,412 
 Deferred tax asset                           1,570              444           1,360 
                                      -------------    -------------   ------------- 
                                            167,022          153,051         153,071 
                                      -------------    -------------   ------------- 
 Current assets 
 Trade and other receivables                 26,524           18,837          21,664 
 Cash and cash equivalents                    7,062           12,670           9,561 
                                      -------------    -------------   ------------- 
                                             33,586           31,507          31,225 
                                      -------------    -------------   ------------- 
 Total assets                               200,608          184,558         185,496 
                                      -------------    -------------   ------------- 
 Current liabilities 
 Trade and other payables                    22,562           18,084          18,023 
 Obligations under finance leases                48              117              77 
 Deferred income                             17,890           17,762          18,705 
 Income taxes                                   732            1,194             507 
 Borrowings                                   3,272            2,983           2,985 
                                      -------------    -------------   ------------- 
                                             44,504           40,140          40,297 
                                      -------------    -------------   ------------- 
 Non-current liabilities 
 Deferred income                                296              357             653 
 Deferred tax liabilities                     9,346            9,703           8,742 
 Loans and borrowings                        48,628           39,534          39,766 
 Obligations under finance leases                33               47              40 
 Provisions                                     644                -             783 
                                      -------------    -------------   ------------- 
                                             58,947           53,397          49,984 
                                      -------------    -------------   ------------- 
 Total liabilities                          103,450           89,781          90,281 
                                      -------------    -------------   ------------- 
 Net assets                                  97,157           94,777          95,215 
                                      -------------    -------------   ------------- 
 Equity 
 Called up share capital                      9,522            9,290           9,324 
 Share premium account                       83,663           81,423          81,464 
 Equity reserve                                 150               80              80 
 Merger reserve                                 556              556             556 
 Capital reserve                                449              449             449 
 Foreign exchange reserve                   (1,269)            (629)         (1,137) 
 Retained earnings                            2,468            1,220           2,875 
                                      -------------    -------------   ------------- 
 Equity attributable to equity 
  holders of the parent                      95,539           92,389          93,611 
 Non-controlling interest                     1,618            2,388           1,604 
                                      -------------    -------------   ------------- 
 Total equity                                97,157           94,777          92,215 
                                      -------------    -------------   ------------- 
 

Consolidated statement of cash flows

for the six months ended 31 January 2019

 
                                                    Unaudited       Unaudited         Audited 
                                                     6 months        6 months      Year ended 
                                                           to              to         31 July 
                                                   31 January      31 January            2018 
                                                         2019            2018 
                                                       GBP000          GBP000          GBP000 
 
 Operating activities 
 Profit for the period                                     45           2,559           5,351 
 Amortisation of intangible assets                      5,282           4,000           7,886 
 Depreciation                                             264             280             511 
 Net finance expense                                      751             452           1,110 
 Movement in fair value of forward 
  contract                                                  -           (724)           (806) 
 Income tax (credit)/charge                               256           (107)         (1,602) 
 Share based payment charges                              189             274             366 
                                                -------------   -------------   ------------- 
 Operating cash flow before changes 
  in working capital                                    6,787           6,734          12,618 
 Movement in trade and other receivables              (2,935)           3,852             859 
 Movement in trade and other payables 
  and deferred income                                   1,545         (8,492)         (4,015) 
                                                -------------   -------------   ------------- 
 Operating cash flow from operations                    5,397           2,094           9,660 
 Finance income                                             5               1               - 
 Finance expense                                        (627)           (445)           (804) 
 Income tax paid                                        (329)            (30)           (492) 
                                                -------------   -------------   ------------- 
 Net cash flow from operating activities                4,446           1,620           8,364 
                                                -------------   -------------   ------------- 
 Investing activities 
 Purchase of plant and equipment                        (371)           (425)         (1,106) 
 Payments to acquire subsidiary undertakings          (8,364)        (94,757)        (93,731) 
 Development expenditure capitalised                  (3,812)         (2,265)         (5,702) 
                                                -------------   -------------   ------------- 
 Net cash flow from investing activities             (12,547)        (97,447)       (100,539) 
                                                -------------   -------------   ------------- 
 Financing activities 
 Proceeds from issue of new shares                         28          68,058          68,133 
 Receipts from bank borrowings                         10,178          43,373          43,660 
 Transaction costs related to loans 
  and borrowings                                            -               -           (288) 
 Acquisition of NCI                                         -               -         (2,313) 
 Repayment of bank borrowings                         (3,348)         (6,400)         (9,942) 
 Finance lease payments                                  (35)            (93)           (151) 
 Dividend payment                                     (1,419)         (1,299)         (1,299) 
                                                -------------   -------------   ------------- 
 Net cash flow from financing activities                5,404         103,639          97,800 
                                                -------------   -------------   ------------- 
 Effects of currency translation on 
  cash and cash equivalents                               198             580           (341) 
 Net (decrease)/increase in cash and 
  cash equivalents                                    (2,697)           7,813           5,625 
 Cash and cash equivalents at the beginning 
  of the period                                         9,561           4,277           4,277 
                                                -------------   -------------   ------------- 
 Cash and cash equivalents at the end 
  of the period                                         7,062          12,670           9,561 
                                                -------------   -------------   ------------- 
 

Unaudited notes

   1.     Basis of preparation and accounting policies 

PROACTIS Holdings PLC is a company incorporated in England and Wales under the Companies Act 2006.

The condensed financial statements are unaudited and were approved by the Board of Directors on 26 April 2019.

The interim financial information for the six months ended 31 January 2019, including comparative financial information, has been prepared on the basis of the accounting policies set out in the last annual report and accounts, with the exception of the amendment to IAS 1 (Presentation of Financial Statements) referred to below, and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may subsequently differ from those estimates.

In preparing the interim financial statements, the significant judgements made by management in applying the Group's accounting policies and key sources of estimation uncertainty were the same, in all material respects, as those applied to the consolidated financial statements for the year ended 31 July 2018.

There is a choice between presenting comprehensive income in one statement or in two statements comprising an income statement and a separate statement of comprehensive income. The Group has elected to present comprehensive income in two statements.

Going concern assumption

The Group manages its cash requirements through a combination of operating cash flows and long-term borrowings.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current lending facilities.

Consequently, after making enquires, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the interim financial statements.

Information extracted from 2018 Annual Report

The financial figures for the year ended 31 July 2018, as set out in this report, do not constitute statutory accounts but are derived from the statutory accounts for that financial year.

The statutory accounts for the year ended 31 July 2018 were prepared under IFRS and have been delivered to the Registrar of Companies. The auditors reported on those accounts. Their report was unqualified, did not draw attention to any matters by way of emphasis and did not include a statement under Section 498(2) or 498(3) of the Companies Act 2006.

   2.     Change in significant accounting policies 

The Company has applied IFRS 15 using the retrospective with cumulative effect method - i.e. by recognising the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance of equity at 1 August 2018. Therefore, the comparative information has not been restated and continues to be reported under IAS 18 and IAS 11. The details of the significant changes and quantitative impact of the changes are set out below.

 
                                                Unaudited       Unaudited       Unaudited 
                                                    Impact of adoption of IFRS15 
                                              As reported     Adjustments        Balances 
                                                                                  without 
                                                                                 adoption 
                                                                                  of IFRS 
                                                                                       15 
                                                   GBP000          GBP000          GBP000 
 
 Balance sheet 
 Trade and other receivables                       26,524             813          25,711 
 Trade and other payables                          22,562             182          22,380 
 
                                            -------------   -------------   ------------- 
 Income statement 
 Revenue                                           27,688           (178)          27,866 
 Cost of sales                                    (3,088)              60         (3,148) 
 
                                            -------------   -------------   ------------- 
 
 Cash flow statement 
 Profit for the period                                849           (118)             967 
 Movement in trade and other receivables            (480)             178           (658) 
 Movement in trade and other payables 
  and deferred income                               (937)            (60)           (877) 
 
                                            -------------   -------------   ------------- 
 
   3.     Basic and diluted earnings per ordinary share 
 
                                                    Unaudited       Unaudited         Audited 
                                                     6 months        6 months      Year ended 
                                                           to              to         31 July 
                                                   31 January      31 January            2018 
                                                         2019            2018 
                                                       GBP000          GBP000          GBP000 
 
 Earnings (GBP000)                                         54           2,399           5,042 
 Post tax effect of non-core net expenditure 
  (GBP000)                                              1,101             947           3,417 
 Post tax effect of customer related 
  intangible assets (GBP000)                            1,759           1,173           3,240 
 Post tax effect of share-based payment 
  charges (GBP000)                                        189             274             366 
 Post tax effect of convertible loan 
  note interest (GBP000)                                   57               -              75 
 Non-recurring tax factors (GBP000)                       116               -         (2,261) 
 Non-controlling interest (GBP000)                        (9)             160               - 
                                                -------------   -------------   ------------- 
 Adjusted post tax earnings (GBP000)                    3,267           4,953           9,879 
                                                -------------   -------------   ------------- 
 Weighted average number of shares 
  (number '000)                                        94,612          91,844          92,893 
 Dilutive effect of share options (number 
  '000)                                                 2,011           2,132           2,243 
                                                -------------   -------------   ------------- 
 Fully diluted number of shares in 
  issue (number '000)                                  96,623          93,976          95,136 
                                                -------------   -------------   ------------- 
 Basic earnings per ordinary share 
  (pence)                                                0.1p            2.6p            5.4p 
 Adjusted earnings per ordinary share 
  (pence)                                                3.5p            5.4p           10.6p 
 Basic diluted earnings per ordinary 
  share (pence)                                          0.1p            2.6p            5.3p 
 Adjusted diluted earnings per ordinary 
  share (pence)                                          3.4p            5.2p           10.4p 
                                                -------------   -------------   ------------- 
 
   4.     Intangible assets 
 
                             Unaudited       Unaudited       Unaudited       Unaudited       Unaudited 
                                              Customer 
                                               related     Development        Software 
                              Goodwill     intangibles           costs         for own           Total 
                                                                                   use 
                                GBP000          GBP000          GBP000          GBP000          GBP000 
 Cost 
 At 31 July 2018               106,672          39,300          22,994           3,688         172,654 
 Transfers                           -               -              70            (70)               - 
 Internally developed                -               -           3,705             107           3,812 
 On acquisitions                 8,710           3,056           2,075              90          13,931 
 Foreign exchange 
  differences                        -               -            (98)             (2)           (100) 
                         -------------   -------------   -------------   -------------   ------------- 
 At 31 January 2019            115,382          42,356          28,746           3,813         190,297 
                         -------------   -------------   -------------   -------------   ------------- 
 Amortisation and 
  impairment 
 At 31 July 2018                     -           6,655          12,146           2,441          21,242 
 Amortisation for 
  the period                         -           1,752           3,098             432           5,282 
 Foreign exchange 
  differences                        -            (14)              38               -              24 
                         -------------   -------------   -------------   -------------   ------------- 
 At 31 January 2019                  -           8,393          15,282           2,873          26,548 
                         -------------   -------------   -------------   -------------   ------------- 
 Carrying amounts 
 At 31 July 2018               106,672          32,645          10,848           1,247         151,412 
                         -------------   -------------   -------------   -------------   ------------- 
 At 31 January 2019            115,382          33,963          13,464             940         163,749 
                         -------------   -------------   -------------   -------------   ------------- 
 
   5.     Acquisitions 

On 6 August 2018, the Group acquired Esize. The provisional fair values of assets and liabilities acquired are set out below.

 
                                                Fair value 
                                                    GBP000 
 
 Property, plant and equipment                         114 
 Customer related intangible assets                  3,056 
 Capitalised development costs                       2,075 
 Software for own use                                   90 
 Trade and other receivables                           771 
 Cash                                                  210 
 Trade and other payables                          (1,042) 
 Deferred revenue                                    (261) 
 Deferred tax                                        (713) 
                                             ------------- 
 Total identifiable net assets acquired              4,300 
                                             ------------- 
 
 

The following table summarises the acquisition date fair value of each major class of consideration transferred.

 
 
                                                     GBP000 
 
 Cash                                                 8,575 
 Ordinary shares issued                               1,396 
 Convertible loan note                                2,680 
 Contingent consideration                               893 
 Settlement of pre-existing relationship              (536) 
                                              ------------- 
 Total consideration transferred                     13,008 
                                              ------------- 
 
   6.     Alternative performance measure - Adjusted EBITDA 

Management has presented the performance measure adjusted EBITDA because it monitors this performance measure at a consolidated level and it believes that this measure is relevant to an understanding of the Group's financial performance. Adjusted EBITDA is calculated by adjusting profit before taxation to exclude the impact of net finance costs, depreciation, amortisation, share based payment charges and non-core net expenditure. The non-core net expenditure includes significant items of income or expenditure associated primarily with the Groups acquisition activity and the resultant restructuring programmes (together, "non-core-net expenditure).

Adjusted EBITDA is not a defined performance measure in IFRS. The Group's definition of adjusted EBITDA may not be comparable with similarly titled performance measures and disclosures by other entities.

 
                                                                      6 months        6 months      Year ended 
                                                                            to              to         31 July 
                                                                    31 January      31 January            2018 
                                                                          2019            2018 
                                                                        GBP000          GBP000          GBP000 
 
 Profit before taxation                                                    301           2,452           3,749 
 Adjustments for: 
 Net finance costs                                                         751             452           1,110 
 Depreciation                                                              264             280             511 
 Amortisation                                                            5,282           4,000           7,886 
 Share based payment charges                                               189             274             366 
 Non-core net expenditure: 
 
   *    Costs of restructuring the Group's operations - staff              855             307           1,638 
 
   *    Costs of restructuring the Group's operations - other              104             948           1,561 
 
   *    Expenses of acquisition related activities                         120             353             732 
 
   *    Legal and professional fees                                        180              73             439 
 
   *    Fair value movement on forward contract for 
        acquisition                                                          -           (735)           (735) 
                                                                 -------------   -------------   ------------- 
 Adjusted EBITDA                                                         8,046           8,404          17,257 
                                                                 -------------   -------------   ------------- 
 R&D capitalised                                                       (3,812)         (2,265)         (5,702) 
                                                                 -------------   -------------   ------------- 
 Adjusted cash EBITDA                                                    4,234           6,139          11,555 
                                                                 -------------   -------------   ------------- 
 

Additional information

Reconciliation of alternative performance measures:

 
                             Reported EBITDA        Adjusted        Adjusted        Adjusted        Adjusted 
                                                      EBITDA       operating          profit          profit 
                                                                      profit          before           after 
                                                                                         tax             tax 
                                      GBP000          GBP000          GBP000          GBP000          GBP000 
 
 Profit after tax                         45              45              45              45              45 
 Add back: 
 Tax charge                              256             256             256             256             256 
 Interest charge                         751             751             751               -               - 
 Share based payment 
  charges                                189             189             189             189             189 
 Depreciation                            264             264               -               -               - 
 Amortisation                          5,282           5,282               -               -               - 
 Non-core net expenditure 
  (note 6)                                 -           1,259           1,259           1,259           1,259 
 Non-recurring interest 
  charged on convertible 
  loan notes                               -               -               -              70              70 
 Amortisation charged 
  on fair value uplift 
  of acquired capitalised 
  development costs                        -               -             502             502             502 
 Amortisation charged 
  on customer related 
  intangible assets                        -               -           1,752           1,752           1,752 
 Non-recurring tax 
  factors                                                                                                116 
 
                               -------------   -------------   -------------   -------------   ------------- 
 Total                                 6,787           8,046           4,754           4,073           4,189 
                               -------------   -------------   -------------   -------------   ------------- 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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