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Proactis reports increasing sales traction and growing pipelines

12:10, 24th February 2021
Francesca Morgan
Vox Newswire
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Proactis Holdings (PHD FOLLOW) has described its progression for the six-month period ended 31 January 2021 as “strategically significant” with commercial traction and growing pipelines in its 1H21 Trading Update.

The global spend management solution provider said it has seen encouraging growth across each of its operations in France, Germany and the US under its new go-to-market strategy.

The Company’s new business deal intake for the period was described as ‘strong’ after it delivered a Total Contract Value ("TCV") of £6.7 million, in spite of ‘the persistence of previously announced COVID-19 related headwinds’ (1H20: £7.5m; 2H20: £7.1m).

Proactis also signed its first contracts for its early payment service bePayd under both the buyer-funded and the Proactis-funded models. 

The Group said these milestones validate its strategy and offer confidence of ‘sustainable momentum and progression’ looking ahead.

Proactis will now aim to progress its TCV in 2H21 as it accelerates its pipeline conversion in the US, France and Germany and as COVID-19 deferred contracts from 1H21 come through.

Customer churn for the six-month period was £1.5m (31 January 2020: £2.1m) and in line with the Board's expectations and included £0.3m from Heightened Risk Accounts ("HRAs"). 

Accordingly, the Board said it expects to be able to report ‘further modest progression’ in its underlying ARR, building on that previously reported for the year ended 31 July 2020.

Proactis expects to report revenues for the period of £23.7m (1H20: £24.5m) and Adjusted EBITDA* of £6.2m (1H20: £5.6m), against a comparative period unaffected by COVID-19.

Proactis highlighted to investors that its operating margins have since improved following the restructuring of its management team and operating cost base.

Net bank debt as at 31 January 2021 increased slightly to £39.7m (31 July 2020: £37.1m) due to both cash outflows from upfront costs relating to the recent restructuring and the majority of cash generation usually occurring in the 2H as in previous years.

Outlook

Proactis expects to report performance in line with expectations for the six-month period, despite the ongoing impact of COVID-19, and said it remains confident in its prospects for the mid-term which have been strengthened by the strategic milestones achieved in 1H21.

"I am encouraged by the progress the Group has made during the period as our strategy becomes embedded within our teams across the Group.  We have met every milestone that we needed to in order to validate our strategy for mid-market business spend management solutions and for bePayd and we can now push forward with confidence to pursue the market opportunity we have,” commented Tim Sykes, Chief Executive Officer of Proactis.

The Group currently intends to release its interim results for the six-month period ending 31 January 2021 on 29 April 2021.

Investors will be pleased to hear FY21 guidance being maintained despite the uncertainty around the timing of certain contracts as the markets re-open post lockdown. 2H21 should therefore see further progress, alongside net bank debt falling from £39.7m in Jan’21 to an est £38.4m by July as cash outflow reverses into cash inflows as in previous years. Furthermore, £6.7m of new contract wins implies double digit top line growth is not far away either which should signal a positive re-rating for the shares. At 46p, PHD trades on 1.7x EV/Rev & 6.9x EV/EBITDA vs peer group averages of 4x-6x & >20x for the #Saas sector respectively. The stock has risen by 25% in the past three months and is trading 3.30% higher this morning at 47pin early trading following the update and news of a new contract win reported here. 

PHD price chart

Reasons to Follow PHD

Proactis creates, sells and maintains software and services, which enables organisations to streamline, control and monitor all indirect expenditure. 

Its solutions are used in around 1,100 buying organisations globally from the commercial, public and not-for-profit sectors.

Proactis previously adopted a new go-to market strategy for each of its US, France and Germany territories which is designed to replicate that of the UK and Netherlands. 

In its FY20 results last month, Proactis noted that it had made ‘substantial headway’ after seeing the first sales of its mid-market single platform solution in Germany and France.

The group cited a ‘record year’ in new business total contract value ("TCV") after securing an aggregate of £14.6m (FY19: £11.3m), a 29% increase secured in ‘virtually all markets.’

Proactis said this demonstrates ‘the effectiveness of its strategy, the resilience of the business model and the ability of its teams to deliver despite a change in working practices.’

In recent weeks, the company announced that it has signed a 3-year contract with an unnamed major German DIY retailer to provide its business spend management solution.

The business spend management provider said the win represents ‘a strategically important milestone’ as the second new German customer to sign up under that new strategy.

Proactis, whose solutions are used in around 1,000 global buying organisations from the commercial, public and not-for-profit sectors, said the solution will be deployed in Germany initially before being rolled out into new territories through Central and Eastern Europe.

On 10 February, Proactis said it had signed a three-year contract with an oil and gas services business in North America which it said represents “a strategically important milestone.”

While the name of the customer and value of the contract remain undisclosed, the business spend management solution provider said the contract win is significant because the client is the first in North America to sign up under the Group's new go-to market strategy. The contract marks entry into a new significant territory, which is a stated objective for Proactis.

Compelling Valuation Metrics

Proactis is currently trading at a significant discount to its peers on an EV/Sales multiple of 1.6x, against an average of 6.5x for the sector.

Furthermore, Paul Hill, analyst at PMH Capital suggests bePayd has the potential to be enormous, given its 1st mover advantage in providing cash flow benefits to SMEs within this ‘low value’ space.

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Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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