Buoyant Proactis sees order book leap by 32pc

The Wetherby-based firm said its annual results reflect good uptake of its products, which monitor company expenditure.

The group’s chief executive Rod Jones said the group has seen strong growth, both organically and through mergers and acquisitions.

“Our products are very solid and they work and we have a good sales team. The results demonstrate the group’s successful execution of its strategy.

“Commercial progress has been strong and this is a record year for number of new names and order intake during the year.”

Acquisitions have played an important role in the firm’s success and it said that its latest purchase Due North, which was the group’s fourth acquisition in a two year time frame, is showing an encouraging trading.

The group’s chief financial officer Tim Sykes said the purpose of buying due North was to bring in 300 customers.

“That would have taken us a long time to win on an organic basis,” he said.

“Our objective is to cross-sell and up-sell into that customer base. There are operational synergies we’ve realised and Due North’s technology can be improved.”

Due North has a number of high profile clients including the Bank of England and a number of public sector bodies.

Mr Jones said: “M&A remains a fundamental part of the group’s growth strategy, with a pipeline of opportunities under review, and I look forward to further activity in this area.”

Talking about any possible Brexit fall out, Mr Sykes said: “We don’t feel it affects us particularly. We don’t have offshore suppliers. We feel fairly well insulated from any risk.”

Mr Jones added: “British software companies have never had a good time in France or Germany. Even American companies have struggled.”

Proactis said a new supplier commerce initiative has been adopted by three key clients, Screwfix, Flintshire County Council and P&O Ferrymasters.

“The first revenues have been recognised. There remains a high level of interest from our customer base in realising the substantial efficiencies available to them and their suppliers through the supplier commerce capability that the group has built and I look forward to reporting further progress with the early adopters and new commitments from customers during the coming year,” said Mr Jones, adding that the group is well positioned for the coming year.

Revenue rose 13 per cent to £19.4m in the year to July 31 and adjusted earnings rose 10 per cent to £5.3m.

Analyst Adam Lawson at N+1 Singer said: “Proactis has delivered a strong set of full year results, in line with our expectations and the August trading update. Key highlights include 12 per cent underling organic growth in annualised recurring revenue (up 23 per cent to £16.9m), 46 new name deals (20 subscription) plus 17 from Due North (all subscription), and the receipt of first (albeit nominal) revenues from the supplier commerce opportunity.

“We remain highly excited by prospects for this business given encouraging growth in the core business and the potential for the supply-side strategy to transform the top line. We have left our headline 2017 and 2018 estimates essentially unchanged, introduced a new set of forecasts for 2019 and increased our target price from 153p to 179p to reflect the roll forward of our valuation year and higher peer multiples.”

Analyst Andrew Darley at FinnCap raised his target price to 220p.

“Proactis has delivered prelims for the year to July 2016 in line with August trading update, delivering EBITDA of £5.3m from revenue of £19.4m, in line with expectations,” said Mr Darley.

“With beneficial working capital movement, cash generation was better than expected, leaving net debt of £0.5m compared with estimates of £1.6m.

“All the key performance indicators are positive, showing 18 per cent growth in the total number of new deals, including 45 per cent growth in subscription deals and 16 per cent growth in up-sell deals. Organic revenue growth was boosted by the February acquisition of Due North.”