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PROACTIS Holdings A improved new business performance

PROACTIS Holdings plc (LON:PHD), the business spend management solution provider, today announced its interim results for the six-month period ended 31 January 2020.

Key highlights:

·      Reported revenue was £24.5m (31 January 2019: £27.7m) due to high customer churn in prior years

·      Total Contract Value (“TCV”), excluding renewals, signed was £7.5m (H1 FY2019: £6.1m; H2 FY2019: £5.2m), an increase of 44% against H2 FY2019

·      Solid new business deal activity: 29 new name deals (31 January 2019: 34)

·      Strong upsell activity with existing customers: 70 deals in the period (31 January 2019: 54)

·      Annualised recurring revenue3 (“ARR”), excluding heightened risk accounts (“HRAs”), increased to £40.7m (31 July 2019: £39.3m), representing 3.6% organic growth in the core business

·      ARR including HRAs was £43.4m (31 July 2019: £44.3m)

·      Retention in the core business remain normalised and, in the HRAs, was better than expected

·      Adjusted EBITDA1 decreased to £5.6m (31 January 2019: £8.0m) due to high customer churn in prior years, as mentioned above

·      Net bank debt2 decreased to £35.6m (31 July 2019: £36.5m)

·      Net cash flow from operating activities was £5.1m (31 January 2019: £4.4m)

Formal Sales Process (“FSP”):

·      FSP concluded on 4 March 2020 with no acceptable or firm offers being presented to the Board

Post period end highlights:

·      TCV, excluding renewals, signed to date of £10.8m compared with £11.3m for the whole prior financial year

·      Organic growth in buyer ARR has been maintained with a further net £0.4m added to the date of this announcement

·      Retention rates have improved further across the core business and also within the HRAs, including approximately £2.1m ARR from the renewal of contracts with three of the Group’s largest customers

·      Reset banking facilities with HSBC in order to support the Group’s current business plan for the mid-term

·      bePayd deployed live to support Proactis’ UK supplier base with positive supplier response and the pipeline is building

Response to COVID-19:

·      All staff have transitioned to working from home with minimal disruption from the COVID-19 crisis

·      Recurring revenue, long-term contract business model is proving resilient to the short-term market uncertainty during the early stages of the COVID-19 crisis

·      Contingency plans in place

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

2 – Excludes right of use assets recognised under IFRS 16 Leases and unsecured convertible loan notes of £6.5m maturing during July 2022, August 2023 and November 2024.  IFRS 16 Leases was adopted from 1 August 2019

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

Tim Sykes, Proactis Holdings Chief Executive Officer, commented:

“The Group has returned to organic growth of ARR in its core business during the period and to date as a result of improved new business performance and customer retention which, along with a strong pipeline build across all of the geographies that we operate, are clear indicators that the Board’s strategy is working well.

“In addition, the technical progress on our new product, bePayd, has been substantial and it is now ready for market and commercialisation.

“The Group has dealt with the immediate effect of the COVID-19 crisis extremely well and the recurring revenue, long-term contract business model is proving resilient at this stage. Our team is performing well, remaining highly connected and there has been no disruption to customer service. We remain vigilant to any indicators of risk, particularly around staff welfare, deferred pipeline build, reduced volume in transactional-priced contracts and potential delays to implementation projects which may have a more significant impact on the business if the crisis persists.

“”I am encouraged to have fundamentally reset our facilities with HSBC UK, which has demonstrated its ongoing support for the Group.  This is an essential foundation to our financial strategy and the facilities are now in line with the Group’s business plan for the mid-term.

The Group has made substantial progress during the first period of execution of its new strategy and this has continued to improve further after the period end.  Whilst mindful of the wider economic outlook, the Group’s return to organic growth in its ARR coupled with its forward revenue visibility, profitability and solid financial position provides me and the Board with confidence that the Group can now move forward confidently to execute its strategy and realise its potential. Accordingly, at this stage, the Board maintains its guidance for the full year outturn.”

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