Proactis signs ‘strategic’ three-year contract in North America
(PHD ) has 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.
Proactis will deliver its sourcing and supplier management requirements to the client, which provides coil tubing needs to oil drilling companies across six locations in North America.
The Company recently adopted a new go-to market strategy for each of its US, France and Germany territories designed to replicate that of the UK and the Netherlands. The Company detailed that this contract builds upon the contracts signed in France and Germany.
In its FY20 results released in October 2020, Proactis said it had made ‘substantial headway’ after seeing the first sales of its mid-market single platform solution in Germany and France.
"We are delighted to have been selected following our successes in France and in Germany. We have now demonstrated that our go to market strategy, our positioning and our solutions are relevant for our target market segment in each of the territories that we operate in.
Whilst conscious that the pandemic continues to impact the pace of our progression, we grow more confident in our assessment that the market opportunity for Proactis the US, France and Germany is as great as it is in the UK and the Netherlands,” said CEO, Tim Sykes.
Importantly for investors, this marks entry into a new significant territory, which is a stated objective for the Company. According to Data Bridge Market Research, the global spend analytics market is expected to rise to an estimated value of $5.66bn by 2026, with a healthy CAGR in the forecast period of 2019-2026. Shares in Proactis have increased by nearly 40% in value over the past three months to open up 2.49% higher this morning at 51.5p following the announcement.
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.
Compelling Valuation Metrics
While it remains undetermined of how much today’s contract could generate, consultancy firm, PMH Capital, highlighted to investors that “we would guess a firm like Experbuy might generate £50k-£100k pa for Proactis – dependent on transactional volumes.”
It added, “Plus, multiply this a few 100x, & you end up with a substantial, high margin & very valuable, recurring revenue stream. bePayd has the potential to be enormous, given its 1st mover advantage in providing cash flow benefits to SMEs within this ‘low value’ space.”
Furthermore, research from PMH Capital suggests 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.
Fig 1: Current Year EV/Sales
[Source; PMH Capital]
Figure 2: Current Year EV/Sales Vs CY1 Revenue Growth
[Source: PMH Capital]
Paul Hill of PMH Capital wrote that, “If it can ultimately generate LFL top line growth of 10%+ pa, then I would value the stock at a minimum of 4x EV/turnover, or >150p/share.”
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