Software firm looks to benefit from cuts

The Wetherby-based firm, which designs and licenses software for businesses and organisations to cut the cost of procurement, hopes to benefit from the looming UK spending review as it forces public sector bodies to cut costs.

The AIM-listed firm also revealed it is planning expansion into Australia to tap the increasing appetite for cost-cutting technology in the region.

Chief executive Rod Jones said: "There's been no common sense in the public sector for years. The public sector can make huge gains.

"If you take five per cent (of an organisation's budget) out they will carry on doing what they are doing. If you take 25 per cent out, they cannot. They have got to change."

The UK Government is wrestling with cutting the cost of procurement and publishes its spending review on Wednesday, which is expected to slash some departmental budgets by up to 25 per cent.

The public sector now accounts for a quarter of Proactis's sales and it added eight new accounts in its last financial year to give it 113 public sector customers.

Mr Jones said the high cost of orders in the public sector meant belt-tightening councils were still licensing its software, despite it costing upwards of 200,000.

"The cost of a (public sector paper) order, regardless of the goods that are on it, is about 75. You are placing that order in a very inefficient way. You are tying gold bars around an order.

"It's about 10 per cent of that if you trade electronically. You get payback in less than six months."

Its software is used by all staff within an organisation, streamlining the number of orders and suppliers, negotiating the best prices, and allowing big companies to use their buying clout more effectively.

Proactis already has sales offices in Wetherby, South Wales and the United States. Its software supports 14 different languages in 70 countries. During the next six months the group plans to add an office in Australia, initially with a handful of staff, targeting the Asia Pacific region.

"If we get it right there we will do India and China exactly the same," said Mr Jones.

The group, which employs about 65 staff, recently reported another year of growth despite the global recession. Sales increased by 5.4 per cent to 7.4m in the year to the end of July, while pre-tax profits grew 14 per cent to 1.1m

Proactis has more than 350 customers across the public, private and not-for profit sectors. Its clients include global law firm Clifford Chance, business recovery group Begbies Traynor and commercial property giant CB Richard Ellis.

Proactis ended July with cash assets of 3.5m and no debt. It plans to spend about 10 per cent of its revenues on upgrading its software this year.

Mr Jones said that despite competing with giant multinational software firms such as Oracle he believes the company punches above its weight.

The firm's procurement software was named best in class earlier this year by industry giant Gartner.

How Proactis's fortunes revived

Proactis was founded in York in 1996.

In 2002 chief executive Rod Jones was parachuted in to rescue what was then a business on the brink of receivership, with just 45 days' cash left.

He succeeded, and in June 2006, Proactis floated on the London Stock Exchange's Alternative Investment Market. Chief technical officer Kevin Chidlow is the main architect of its software and leads product development.

Its chairman is Alan Aubrey, who is also chief executive of IP Group, a group that turns university research into business and has stakes in Yorkshire spin-outs including Tracsis and Avacta.

Mr Jones said while Proactis's expansion opportunities, debt-free nature and cash-generating qualities make it attractive to potential buyers, the company is not for sale.

"You do not graft to build a business to then give it away," he said. "I want to grow the business."