Interim results for six months to 31 January 2011

5 April 2011

PROACTIS Holdings PLC

Interim results for the six months ended 31 January 2011

PROACTIS Holdings PLC ("PROACTIS" or the "Company") the specialist Spend Control software provider, is today issuing its interim results for the six month period to 31 January 2011.

KEY POINTS

w Uptake of multi-year, transactional priced Cloud solutions is ahead of our expectations - 5 new customers including UTC, DLA Piper and Ahli Bank

w Annualised recurring revenues, including transactional priced, annualised maintenance and hosting revenues increased to £4.3m (2010: £3.4m)

w Deal activity is buoyant with continued strong customer loyalty with 38 upgrades in the period (2010: 42)

w Revenue recognition on Cloud solutions requires a greater proportion of revenue to be deferred to future periods - contracted but unrecognised future revenues from new deals increased to £1.2m (2010: £0.6m)

w Reported revenue decreased by 13% to £3,003,000 (2010: £3,469,000), reflecting transition to Cloud solutions and timing of new customer wins

w Reported operating profit reduced accordingly to a loss of £208,000 (2010: profit £384,000)

w Strong balance sheet with cash balances of £2.6m at 31 January 2011

Rod Jones, Chief Executive Officer, commented:

"I am delighted with the uptake of our multi-year, transactional priced Cloud solutions, specifically in the US where we have signed three new global customers. These contracts are of three years duration, with revenues linked to volume of transactions processed and subject to minimum levels. Whilst the short term recognisable revenue is less on this type of solution, the total value of business contracted compares favourably with our perpetual license products. The transition to this model will give the Company greater revenue visibility for future periods and reduce the volatility that is associated with the perpetual license model. As importantly, there is a long term opportunity and incentive to deliver greater value for these larger customers as they get more spend under control.

"In terms of contract signings in the period, the faster than anticipated take up of Cloud solutions largely balanced some weakness in the UK Public Sector which has been focussed on internal issues such as headcount reductions. However, Cloud solutions require a greater proportion of revenue and profit to be deferred to future periods and this will affect the current year's outcome.

"Strategically, we are focussed on building the recurring revenue base of the business and we have made good progress on this during the period. In the longer term, increasing revenues from our Cloud solutions will help us deliver this."

Enquiries:

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 350 organisations around the world from the commercial, public and not-for-profit sectors.

PROACTIS is head quartered in Wetherby, West Yorkshire. It develops its own software using an in-house team of developers and sells through both direct and indirect channels via a number of Accredited Channel Partners.

PROACTIS floated on the AIM market of the London Stock Exchange in June 2006.

CLOUD COMPUTING is defined as location-independent computing, whereby shared servers provide resources, software, and data to computers and other devices on demand, as with the electricity grid.

CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S REPORT

We report our interim results for the six month period to 31 January 2011.

Proactis' products and solutions remain attractive to all of the markets we serve; Commercial; Not for Profit; and Public sector. In the Commercial market, we have seen good demand from professional services businesses. While we have a strong customer base in the Public Sector, demand in the current period has been more muted as customers prioritise headcount reductions.

Our new multi-year, transactional priced Cloud solutions have had a faster uptake than anticipated. From the same technology base, we offer customers a variety of solutions, and a number of new global clients have taken up the multi-year, transactional priced Cloud solution rather than our traditional perpetual licence product. These solutions remove a significant element of the "Up-front" costs associated with software acquisition and can lead to a stronger and more valuable relationship with our clients.

The Group gets the benefit of greater visibility of revenue in future years, a more regular and predictable cash flow and an upside based on the volume of transactions put through the solution. These benefits are congruent with our customers' goals of getting more spend under control, getting stronger service levels and greater security of supply. A consequence is that revenue is deferred from the current year which affects profitability and cash in the short term. Our financial position is strong but we do now expect turnover and profitability for the full year to 31 July 2011 to be below our previous expectations.

The Group's marketing efforts are delivering good results with strong lead generation and current pipeline. Our latest campaigns are focussed on helping businesses quickly assess their procurement issues and the benefits that can be realised through increased control. These campaigns can be found at www.proactis.com. The Group's US operation has performed well with three globally renowned new clients signed during the period including UTC and DLA Piper. These clients each took the new Cloud solution and we are very excited about the specific expansion opportunities within those clients, with potential for usage by a larger proportion of their employees as well as a larger proportion of their spend. We continue to invest in our service capability and now offer 24/7 support.

New customers

- The calibre of clients is getting bigger and better.

- New customers are showing increased commitment. The Initial Contracted Value ("ICV") of the 13 new name clients signed during the period was £1.5m which compares with £1.2m from the 16 new name clients signed during the comparative period. The average ICV per new name contract increased from £75,000 to £115,000.

- The experience gained over recent times with "hosted" clients has enabled us to transition smoothly to the delivery of multi-year, transactional priced Cloud solutions which has put us in a strong competitive position going forward.

Low cost model

- Our Commercial Off the Shelf ("COTS") software model remains at the heart of our culture; minimising engineering, QA, support and implementation costs. It has been an essential cornerstone for our move to Cloud solutions, allowing us to demonstrate the innovations and quality of our offerings as we have always demonstrated with our traditional perpetual licences.

Flexibility

- Some customers will continue to prefer the traditional perpetual solution. We are equally happy to provide either type of solution, as they are based on the same technical architecture.

Financial overview

Revenues reduced by 13% to £3,003,000 (2010: £3,469,000) due primarily to the transition of our business toward our new multi-year, transactional priced Cloud solutions. Accounting principles require a greater proportion of revenue to be deferred to future periods rather than be recognised on signing of the contract. We have seen broadly consistent levels of deal volumes with 13 new deals in the period (2010: 16) and consistent levels of upgrades with 38 deals in the period (2010: 42). The uptake of the new Cloud based solution has been balanced by a weaker volume of perpetual license sales, particularly in the public sector. These wins occurred late in the period and this has impacted adversely on our implementation services business, where we are behind last year's level of performance.

One of the benefits of the transition to a transaction based revenue model is the increased level of revenue which is contracted for future periods. This enables the Group to get a greater visibility of forward revenue and a smoother, more predictable cash flow profile. Of the £1.5m ICV contracted during the period, £1.2m is deferred to subsequent financial years compared with £0.6m of the ICV in the comparative period.

A separate indicator of inherent value is annualised contracted revenues. Total annualised contracted future revenues have increased to £4.3m (2010: £3.4m).

The deferral of revenue as a result of the shift to the new model has impacted profitability in the period and the Group has reported an operating loss of £208,000 (2010: profit £384,000). Overhead is in line with plan.

The Group's financial position is good with £2.6m cash on the balance sheet. Net cash outflow in the period since 31 July 2010 was £0.8m and includes £0.4m from dividend and other share option based payments, £0.3m from continued investment in our products and solutions and £0.1m into working capital. Working capital remains tightly managed and collection is very strong with debtor days at 39 (2010: 50).

Outlook

Strategically, we are focussed on building the recurring revenue base of the business and we have made good progress on this during the period. In the short term, Cloud solutions require a greater proportion of revenue and profit to be deferred to future periods and further success in this strategic objective will continue to have a short term impact on revenues and profitability. However, the Board is resolute in its belief that this is the best way to continue to build value in the Company.

The second half has started well and, although it is too early to say whether the public sector is now ready to address spend control, it is encouraging that we have recently signed two new local authority customers.

Alan Aubrey Rod Jones

Chairman Chief Executive Officer

4 April 2011

Condensed consolidated income statement for the six months ended 31 January 2011

The profit for the period is wholly attributable to equity holders of the parent Company.

All results arise from continuing operations.Condensed consolidated statement of comprehensive income for the six months ended 31 January 2011

Condensed consolidated statement of changes in equity as at 31 January 2011

Condensed consolidated balance sheet as at 31 January 2011

Total equity is wholly attributable to equity holders of the parent Company.

Condensed consolidated cash flow statement for the six months ended 31 January 2010

Unaudited notes

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 4 April 2011.

The interim financial information for the six months ended 31 January 2011, 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"), including IAS 34 (Interim Financial Reporting), as issued by the International Accounting Standards Board and 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 2010.

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 2010 Annual Report

The financial figures for the year ended 31 July 2010, 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 2010 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.

The Board confirms that to the best of its knowledge:

w The condensed set of financial statements has been prepared in accordance with IAS34 'Interim Financial Reporting' as adopted by the EU;

w The interim management report includes a fair review of the information required by :

- DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

- DTR4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By Order of the Board

Rod Jones Tim Sykes

Chief Executive Officer Chief Financial Officer

4 April 2011