Tuesday, 7 April 2009

Proactis back into profit

The spend control software house Proactis has today announced its interim results for the first half-year after its restructure last year.

The company appears to have brought its cost base back into line with its revenue, reducing costs by 24%, and as a result has returned in a half-year profit of £362k (vs. a loss of £438k for the same 6 months last year), on revenue up 6.7% year-on-year. Reassuringly, the business has returned to being cash generative, despite capitalisation of £207k of R&D expenditure in the period.

As I’ve
noted previously, whilst Proactis does sell directly (e.g. to the UK Public Sector), they have wisely focussed on building their network of accredited resellers, and have diversified their offerings away from just pure e-procurement and spend control. It would appear that Proactis has strengthened its relationship with Agresso, where I suspect Agresso will use the better functionality of the Proactis products to help it compete against the likes of Civica and others who have stronger offerings than Agresso's in the procurement area.

As I noted last year, with its move into other markets, and international coverage, Proactis will, I believe, survive and, once we move into a more positive financial environment, should thrive as companies look to replace outdated back office systems. However, I believe that there is a strong chance that Proactis will be acquired by a bigger player (see my
post from last year for the names of some potential candidates).

Proactis’ share price is up 2p at 19.5p this morning, giving a market cap of £6M – in my view, in the current financial environment, a fair valuation for a company turning over c £7M per annum and with a half-year EPS of 1.3p.

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