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
IR SEDFWAFUSELL
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