Macroeconomic uncertainty and tightening budgets have piled pressure on organisations to control their outflows and manage their suppliers more efficiently. Strong demand for electronic procurement and spend-control software drove adjusted cash profit at Proactis (PHD) up 4 per cent to £2.4m in the first half of its 2016 financial year. But a sharp slowdown in revenue growth prompted investors to send its shares down 8 per cent.
Proactis inked 23 contracts with an initial value of £3.7m in the period. More importantly, 14 of those were multi-year subscription or managed services deals, meaning the order book swelled by a fifth to about £24m. However, management's focus on longer-term contracts meant sacrificing short-term sales growth.
The group also signed 45 extension or upgrade deals, partly reflecting past acquisitions that expanded its product range. That trend is likely to continue: it acquired rival software supplier Due North in February, expanding its overall customer base from 500 to 800. And it recently signed a five-year contract extension with Flintshire County Council for a range of solutions including supplier engagement and record management software.
Broker finnCap expects pre-tax profit of £3.5m in the year to 31 July, giving EPS of 6.7p, up from £2.9m and 5.7p in FY2015.
| PROACTIS (PHD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 128p | MARKET VALUE: | £51m | |
| TOUCH: | 126-130p | 12-MONTH HIGH: | 143p | LOW: 70p |
| DIVIDEND YIELD: | 0.9% | PE RATIO: | 26 | |
| NET ASSET VALUE: | 29p* | NET CASH: | £3m | |
| Half-year to 31 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 8.4 | 0.9 | 2.8 | nil |
| 2016 | 8.7 | 1.0 | 2.5 | nil |
| % change | +3 | +6 | -11 | - |
*Includes intangible assets of £16.5m, or 41p a share | ||||
