Preliminary Results

For immediate release 6 October 2014

PROACTIS Holdings PLC

Preliminary Results for the year to 31 July 2014

PROACTIS Holdings PLC ("PROACTIS", the "Group" or the "Company"), the specialist Spend Control software provider, announces its audited preliminary results for the year ended 31 July 2014.

Financial highlights:

§ Record reported revenue increased by 26% to £10.2m (2013: £8.0m)

§ Adjusted1 EBITDA increased by 64% to £2.0m (2013: £1.2m)

§ Recurring Annualised Revenue2 has increased by 143% to £13.1m (2013: £5.4 m)

§ Order Book3 at 31 July 2014 increased by 131% to £14.3m (2013: £6.2 m)

§ Adjusted1 earnings per share increased by 59% to 2.7p (2013: 1.7p)

§ Proposed final dividend of 1.1p per share (2013: 1.0p)

Operational highlights:

§ Order intake of £5.3m on 38 new deals including part period (only) for the acquired businesses (2013: £2.8m on 35 new deals)

§ 100% positive record on renewals of subscription deals

§ Completion of three key strategic acquisitions, two within the reporting period

§ £2.9m raised on equity markets, and £2.5m raised through non-dilutive bank debt to support the Group's M&A strategy

§ In pilot with 'Activate', the Group's new Global Trading Network offering

§ Client base has increased by over 60% to approximately 500 (2013: approximately 300)

Note 1: Before the impact of non-recurring administrative expenses, amortisation of customer related intangible assets and share based payment charges.

Note 2: Recurring Annualised Revenue is the Group's estimate of the annualised value of revenue of customers currently contracted with the Group.

Note 3: Order Book is the Group's current contracted revenue as at 31 July 2014 to be recognised in future accounting periods.

Rod Jones, CEO commented:

"PROACTIS is now effectively double the size of a year ago as a result of its three acquisitions and the Group is trading well in advance of today's reported results. Acquisition integration programmes are progressing well, and the opportunities to offer our clients a wider service are being realised. The Board continues to review appropriate M&A opportunities as part of its growth strategy.

"Our core businesses are performing well, with good rates of order intake and levels of profitability. In addition, customer retention, a core element of our strategy, is excellent.

"I am also pleased to report that there is a high level of interest from our customer base in the Group's new Global Trading Network offering, Activate. The Group is working hard on this exciting opportunity to further accelerate growth and I look forward to continuing to update the market with our progress."

The Company's preliminary results are available on its website www.proactis.com

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 used in approximately 500 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

Introduction

The Group is growing rapidly and is at an exciting stage of its development. During 2010, the Board took the decision to shift from a perpetual software licence only model to a blended model, offering subscription based software as a service licences. This strategic move was designed to fulfil the market need at the time in addition to developing the Group's income visibility. The Group is now in a strong position and beginning to exploit the significant growth opportunities available to it.

Growth strategy

The Group's growth strategy is as follows:

- Drive growth through its businesses by the delivery of best in class procurement solutions for its customers. The rate of new deal intake and customer retention remains high and the Group's continued commitment to investment in its solutions supports this;

- Undertake selected M&A based activity with a focus on complementary customer bases, solutions and technology. The Group has completed three acquisitions during the current calendar year and there remains a small pipeline of further exciting opportunities; and

- Access and monetise the Global Supplier Network that the Group provides for its customers by offering additional benefits to the supplier network. The Group does not presently monetise the supply side of its Global Supplier Network but is piloting its 'Activate' programme to assess the opportunity.

Core business performance and strategy

The Group is pleased to report record revenues of £10.2m (2013: £8.0m) with the Group's acquisitions completed during the year contributing £1.7m.

The Group secured 38 new deals (2013: 35) of which 29 (2013: 17) were subscription deals. The total initial contract value sold was £5.3m (2013: £2.8m) of which £1.1m (2013: £1.4m) was recognised during the year. In addition, the Group sold 81 upgrade deals (2013: 66) to existing clients.

Whilst the strong volume and value of new business and upgrades are good indicators of market traction, the renewal of subscriptions sold in prior years remains of vital importance to the Group's strategy. It is very encouraging that the Group has not lost any clients during the period through the renewal process, either in the core business or in the post-acquisition period for the acquired businesses.

The Group's core business delivered a healthy 6% reported revenue growth to £8.5m (2013: £8.0m). This reported revenue growth must be considered in parallel with the growth in the contracted order book of 48% to £9.2m (2013: £6.2m) assisted by new deal order intake of £4.8m from 33 deals (2013: £2.8m from 35 deals). Order intake was buoyed by two large deals signed in the United States with Fifth Third Bank and with Blue Cross Blue Shield.

The acquired businesses performed well and in line with the Group's expectations. £0.5 million of initial contract value was sold from five new deals, and 100% of customers renewed during the post-acquisition period. Each of the acquisitions is discussed in more detail below.

The Group's financial progress continues apace and the Group has reported an adjusted EBITDA (before non-recurring administrative expenses, amortisation of customer related intangible assets and share based payment charges) of £2.0m (2013: £1.2m) with a corresponding margin of 20% (2013: 15%). The Group made substantial cost reductions during the prior year that have had a full year effect during the financial year ended 31 July 2014. In addition, the Group has made further synergistic cost reductions in the acquired businesses and, accordingly, the current run rate of profitability is significantly ahead of that reported.

Blended perpetual and subscription licence models

The Group continues to offer the blended model of perpetual and subscription licences, delivered on its Cloud technology platform, and has strong momentum in the marketplace. The Group's global business partners are achieving sales traction of both licence types and the Group has an exciting opportunity to grow in the United States and in the Asia Pacific region.

Software as a platform for BPO managed services

The application of the Group's software as a platform on which BPO based business partners can provide managed services is established. This area is at an early stage of development and the directors believe it represents a good opportunity for the Group.

Product

The Group's position as a leading "best in class" spend control and eProcurement organisation has been further enhanced by the addition of major new modules, many new features and the introduction of mobile applications. The product suite is regularly recognised within the sector for its capability.

The Group's ongoing investment has enabled it to move ahead of the competition by offering a truly "end-to-end" suite of software. The Group is in a very strong competitive position and will continue to invest in product to maintain this position.

Markets

The Group offers a true multi-company, multi-currency and multi-language capability and this remains an essential differentiator as the Group's traction increases across more sectors worldwide. During 2014 the Group sold deals across several continents and many different sectors.

The Group competes on various levels; local vendors, Enterprise Resource Planning ("ERP") vendors and international procurement vendors and this mix makes for an extremely competitive environment. The Group's "end-to-end" message and tight integration techniques mitigate this and positions PROACTIS as a cost effective solution against both big ticket, consultancy led ERP vendors, international procurement vendors' solutions and potential multi-vendor software led solutions.

M&A activity and strategy

The Group has designed its target selection criteria around the following principles:

- The procurement space is sufficiently fragmented to offer sufficient scope for a small scale consolidation play of complementary customer bases and solutions;

- Customer relationships are generally long term and should be, ideally, contracted with a proven track record of retention and renewal;

- Solutions and service offerings should be complementary to the Group's existing offering; and

- Technology should be compatible the Group's existing technology.

The Group has made three acquisitions during the current calendar year.

EGS Group Limited ("EGS")

The Group acquired EGS on 7 February 2014. The strategic rationale was to consolidate the Group's position as the largest independent public sector eProcurement solution provider to the UK public sector along with the realisation of significant cost based synergies.

EGS is a well-respected competitive solution provider and has over 70 clients (principally in the Public Sector) that use its cloud software to control over £2.5 billion of spend through 40,000 active suppliers. The acquisition has further strengthened PROACTIS' footprint in the sector and its position as the largest independent eProcurement solution provider to the UK Public Sector.

EGS' substantial expertise in the Local Government and Higher Education sector, allied with the complementary nature of PROACTIS' expertise and solutions, enables the delivery of wider and more effective solutions to customers, to support their operations, enhance procurement effectiveness, and extend collaboration with suppliers. As part of the Group, EGS' customers have access to truly "end-to-end" procurement solutions that are necessary for Public Sector organisations to make Spend Control processes feasible on a large scale.

Approximately £0.5 million of annualised cost based synergies have been realised during the post-acquisition period and the business is now contributing approximately £1.0 million annualised EBITDA to the Group.

Intesource Inc ("Intesource")

The Group acquired Intesource on 2 June 2014. The strategic rationale was to acquire a customer base delivering a high degree of profitable contracted revenues and to strengthen the Group's presence in the key US market, with significant opportunity for product cross-selling.

Intesource is an established provider of e-auction services (using its own proprietary service delivery know-how and software platform) and has over 25 customers delivering over $4.5 million of recurring annual income profitably. The service offering was recognised by Gartner which classified Intesource as a "cool vendor" in its report during May 2013.

The acquisition provides further scale and profitability and offers strong opportunities to cross-sell its own complementary product suite. Operational savings are being realised through the consolidation of elements of the Group's existing operations in the United States. Intesource's current e-auction service delivery know-how and the software platform significantly bolsters PROACTIS's offering, by accelerating the service offering to customers and saving forward development costs.

Post balance sheet event

On 1 August 2014, the Company acquired Intelligent Capture Limited ("Intelligent Capture"). The consideration for the acquisition was £1.55 million. The consideration included a cash element of £1.25 million, payable at completion. In addition, the Company issued 511,334 new ordinary shares of 10p each in the capital of the Company ("Ordinary Shares") to the value of £0.3 million.

Intelligent Capture is one of the UK's leading providers of document scanning and optical character recognition services ("OCR"), and was an existing business partner of PROACTIS. Intelligent Capture has more than 40 clients and generates over £1.25 million of profitable, recurring annual income.

The acquisition is strategically important, as it will support the roll-out of the Group's new offering, Activate, to its customer and supplier network.

Activate

Activate is the Group's new offering to its customer and supplier network and marks a significant milestone in the Group's strategy for growth.

The Group has historically only charged its customers on the buy side of the Buyer/Supplier relationship. There are, however, many mutual benefits that both the Buyer and Supplier can release through the Group's development of its software, including:

- e-Procurement;

- Near paperless trading;

- Improvement of efficiencies in the administration of supplier records; and

- Transparency of the status of a purchase invoice in the approval and payment cycle.

Activate's focus is to build a Global Trading Network between PROACTIS' customer base and their suppliers. The Global Trading Network will encourage electronic trading, which is currently poorly adopted, creating efficiencies within the buy/sell transaction process. These efficiencies will be realised by significantly reduced costs for the Group's customers and also for their suppliers, whilst also creating new commercial opportunities for both. These benefits and efficiencies will be charged through a non-tariff based fee structure levied on the supplier network. The Group estimates that there are 1-2 million suppliers that could trade through the Global Trading Network over time.

Activate increases transparency within the payment cycle for suppliers by clearly showing the status of its purchase invoice as it flows through the approval and payment cycle. This creates an opportunity for supplier financing and PROACTIS is currently exploring financing options to accompany the Activate offering to capitalise on this opportunity. PROACTIS estimates that its customer base is spending approximately £60-80 billion per annum with their suppliers.

Summary and outlook

PROACTIS has reported record revenues, order intake and order book. This revenue is being delivered efficiently and the rate of profitability is at the highest level in the Group's history. The core businesses are performing strongly.

Each of the Group's acquisitions is performing well and to the Board's expectations. Customer retention remains high, and synergistic cost savings have been made where appropriate for the Group. The scope to cross sell remains but this is not essential for the acquisitions to be successful. In addition, our progress with the Activate pilot is very exciting and we are working hard to realise this opportunity.

We are very pleased with the Group's increasing momentum and are confident that it is in a strong position for growth.

Alan Aubrey

Chairman

Rod Jones

Chief Executive Officer

6 October 2014

Chief Financial Officer's Report

Results for the year and key performance indicators

Reported revenue

Revenue increased 26% to £10.2m from £8.0m last year. The two acquisitions completed during the year contributed revenue of £1.7m from their respective dates of acquisitions. The Group's core business performed very well, delivering a healthy 6% growth in reported revenues and a substantial 48% increase in its own order book to £9.2m (2013: £6.2m) assisted by new deal order intake of £4.8m (2013: £2.8m).

The Group signed 38 new deals (2013: 35) of which 29 (2013: 17) were under the subscription model. Five of those new deals were signed by EGS, post acquisition, delivering £0.5m order intake, and all five of those new deals were under the subscription model. Intesource did not contribute to new deals during the two month period that it has been part of the Group.

Revenue from recurring contracted subscriptions was £2.1m (2013: £0.7m) and the Group's acquisitions contributed £0.7m of recurring contracted managed service revenue, a new revenue type for the Group.

Revenue from consultancy services increased by £0.1m with a contribution of £0.2m from the Group's acquisitions.

Revenue from support and hosting has increased by £0.2m to £4.7m (2013: £4.5m). This increase is net of the impact of a normalised level of attrition of the Group's user base. The annualised value of support and hosting contracts that were either cancelled or reduced during the year was approximately £0.3m (2013: £0.3m).

There was no contribution during the year from Intelligent Capture, the acquisition being completed on 1 August 2014.

Revenue visibility

The total initial contract value of the 38 new deals (2013: 35) signed during the year was £5.3m (2013: £2.8m) of which £1.1m (2013: £1.4m) has been recognised during the year, leaving £4.2m (2013: £1.4m) deferred for future years. Both of the Group's acquisitions completed during the year have significant proportions of their annual revenue contracted under longer term deals.

The total value of subscription, managed service, support and hosting revenue recognised in the year was £7.4m (2013: £5.2m) with the current run rate being significantly higher than that due to the part year revenue contribution from the acquisitions completed during the year. At 31 July 2014, the annualised run rate of subscription, managed service, support and hosting revenue was £11.7m (2013: £5.4m) which equates to 115% (2013: 68%) of reported revenues and this has advanced further since the acquisition of Intelligent Capture post year end.

The total value of multi-year contracted income that, at 31 July 2014, was deferred for future years was £14.2m (2013: £6.2m).

Support and hosting revenue is generally renewed annually in advance, and the Group has had low cancellation rates in the past. Because of this, the Group includes these revenues as "visible" for its annualised run rate (see above). Those revenues are, however, only "contracted" to the extent that each current annual contract remains unfulfilled.

Gross margins and overheads

The Group's business partners and its own direct sales effort sold deals under both the subscription and perpetual business models. The Group's acquisitions completed during the year sell directly rather than through business partners and, accordingly, the revenue from those businesses delivers relatively high gross margins. Consequently, gross margins improved through the impact of that mix shift and the combined effect of these factors was that the Group reported an improved gross margin over all of 74% (2013: 70%).

Overhead increased during the year to £7.3 million (2013: £5.3 million) due to the impact of the acquisitions completed during the year. These included the non-recurring administrative expenses associated with the transactions themselves and also the running costs of the acquired businesses. The impact of the non-recurring administrative expenses and the amortisation of customer related intangible assets was to increase overhead in the period by £0.9m. The running costs of the acquisitions completed during the year were £1.3m.

The Group's underlying overhead reduced by £0.2m as a result of the full year effect of natural cost reductions implemented in the prior year.

Accordingly, the Group's EBITDA before non-recurring administrative expenses, amortisation of customer related intangibles and share based payment charges increased to £2.0m (2013: £1.2m) and the associated margin increased to 20% (2013: 15%). The equivalent operating profit increased to £1.1m (2013: £0.6m) and the associated margin increased to 11% (2013: 7%).

The statutory operating profit was £0.2m (2013: £0.3m).

Capitalised development costs and costs of software for own use were £1.2m (2013: £1.1m). The income statement includes a total charge for the amortisation of capitalised development costs and costs of software for own use of £0.9m (2013: £0.6m), the increase being driven by the amortisation of capitalised development costs and costs of software for own use of the acquisitions completed during the year.

Acquisitions

The Group acquired EGS and Intesource during the year for a combined gross consideration of £5.2m, paid in cash at completion in both cases. The net cash consideration was £3.9m, both EGS and Intesource had free cash in their respective balance sheets at the date of acquisition.

The cash consideration for the two acquisitions completed during the year was funded by way of a combination of new equity, bank debt and the Group's cash resources. Proceeds of £2.9m were raised through a split placing of 5.8m new ordinary shares of 10p each in the capital of the company ("Ordinary Shares") at a price of 50p per share. Bank debt was provided by HSBC Bank plc by way of a Term Loan of £1.5m repayable over four years at an interest rate of 2.65% per annum over LIBOR.

The annualised revenues of the combined businesses at the date of acquisition were approximately £5.3m with an estimated operating profit of £0.6m. The Group acquired net liabilities with a book value of £1.0m but, with adjustments of £4.5m to reflect principally the fair value of customer related intangible assets and capitalised development costs and costs of software for own use, the fair value of assets acquired was £3.5m and the Group recognised £1.7m of goodwill.

During the period since the acquisitions, EGS and Intesource have performed in line with the Group's expectations. EGS contributed £1.2m revenue and £0.3m of EBITDA (with a run rate of £2.4m and £1.0m respectively) and Intesource contributed £0.5m revenue and £0.2m EBITDA (with a run rate of £3.6m and £0.9m respectively).

Cash flow

The Group remains in a strong financial position with gross cash balances of £3.1m at 31 July 2014 (2013: £2.3m).

The Group generated cash through the split placing of 5.8m Ordinary Shares at a price of 50p per share and through a term loan form HSBC Bank plc but also generated a cash inflow from operating activities of £1.7m (2013: £1.1m) which is higher than the reported operating profit of the Group of £0.2m (2013: £0.3m). The Group's working capital remained in tight control, resulting in a marginal cash inflow (2013: outflow £0.1m).

The Group invested £1.3m (2013: £1.2m) in capital related expenditure (including internal product development costs and costs of software for own use) and £3.9 million (net) on the Group's acquisitions. The Group paid a cash dividend of £0.3m (2013 £0.2m).

Earnings per share

There have been a number of non-recurring administrative expenses and other non-cash expenses related principally to the Group's acquisition related activities. The Group presents an adjusted earnings per share measure to take account of these issues and reports 2.7p per share (2013: 1.7p per share). Basic earnings per share were 1.0p (2013: 1.1p).

Dividend policy

Subject to approval at the Annual General Meeting of Shareholders to be held on 15 December 2014, a final dividend of 1.1p (2013: 1.0p) per Ordinary share is proposed and will be paid on 26 January 2015 to shareholders on the register at 5 January 2015. The corresponding ex-dividend date is 2 January 2015.

Treasury

The Group continues to manage the cash position in a manner designed to maximise interest income, while at the same time minimising any risk to these funds. Surplus cash funds are deposited with commercial banks that meet credit criteria approved by the Board, for periods between one and twelve months.

Key risks

Although the directors seek to minimise the impact of risk factors, the Group is subject to a number of risks which are as follows:

- Loss of key personnel: Loss of key management could have adverse consequences for the Group. While the Group has entered into service agreements with each of its executive directors, the retention of their services or those of other key personnel cannot be guaranteed.

- Ability to sign up Accredited Channel Partners: The Group is reliant in part on generating its revenues through agreements with Accredited Channel Partners. While the Group currently has agreements with a number of Accredited Channel Partners, there is no guarantee that further agreements will be reached with appropriate Accredited Channel Partners nor that the existing agreements will be renewed. This could have an adverse impact on the Group's business.

- Government policy: The Group's strategy is dependent in part on generating revenue from public sector bodies. Any change in the Government's policy of encouraging public sector bodies to develop their e-procurement strategies, including making funds available for such a strategy, could have an adverse impact on the Group's ability to deliver its business strategy.

- Competition: Competitors may be able to develop products and services that are more attractive to customers than the Group's products and services. In order to be successful in the future, the Group will need to continue to finance research and development activities and continue to respond promptly and effectively to the challenges of technological change in the software industry and competitors' innovations. An inability to devote sufficient resources to product development activities in order to achieve this may lead to a material adverse effect on the Group's business.

Tim Sykes

Chief Financial Officer

6 October 2014

Consolidated Statement of Comprehensive Income for the year ended 31 July 2014

All of the Group's operations are continuing.Consolidated Balance Sheet as at 31 July 2014

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement for the year ended 31 July 2014

Notes

1. These preliminary results have been prepared on the basis of the accounting policies which are to be set out in PROACTIS Holdings PLC's annual report and financial statements for the year ended 31 July 2014.

The consolidated financial statements of the Group for the year ended 31 July 2014 were prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted for use in the EU ("adopted IFRSs") and applicable law.

The financial information set out above does not constitute the company's statutory financial statements for the years ended 31 July 2014 or 2013 but is derived from those financial statements. Statutory financial statements for 2013 have been delivered to the Registrar of Companies and distributed to shareholders, and those for 2014 will be distributed to shareholders on or before 25 November 2014. The auditors have reported on those financial statements and their reports were:

(i) unqualified;

(ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and

(iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the financial statements for 2013 or 2014.

2. Basis of preparation

The Group financial statements have been prepared and approved by the directors in accordance with adopted IFRSs.

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

3. Taxation

Recognised in the income statement

4. Basic and diluted loss per ordinary share

The calculation of earnings per ordinary share is based on the profit or loss for the period and the weighted average number of equity voting shares in issue as follows.

5. Acquisitions

On 7 February 2014, the Group acquired the entire issued ordinary share capital of EGS Group Limited. The fair values of assets and liabilities acquired are set out below.

6. On 2 June 2014, the Group acquired the entire issued ordinary share capital of Intesource Inc. The fair values of assets and liabilities acquired are set out below.

The revenue of EGS for the period from the date of acquisition to 31 July 2014 was £1,211,000 and the operating profit for that period was approximately £273,000. If the acquisition had taken place on 1 August 2013, the revenue of EGS to 31 July 2014 would have been approximately £2,386,000 and the operating profit for that period would have been approximately £402,000.

The revenue of Intesource Inc for the period from the date of acquisition to 31 July 2014 was £502,000 and the result for that period was a profit of approximately £93,000. If the acquisition had taken place on 1 August 2013, the revenue of Intesource Inc to 31 July 2014 would have been approximately £3,000,000 and the operating profit for that period would have been approximately £198,000.