PROACTIS Chief Financial Officer, Tim Sykes, discusses the partnership agreement with P&O Ferrymasters
, who have selected the PROACTIS Supplier Network to streamline electronic communications across its supply chain and offer an accelerated payment facility.
Questions for Customers & Partners:
Q1: So today you announced some exciting news with regards to an agreement with P&O Ferrymasters, how does this contract fit in with the PROACTIS strategy?
Sure, well we’re really excited to sign this deal, it’s the third early adopter of our supplier networking opportunity. So PROACTIS’ strategy is to grow through three legs of growth; organic growth, M&A based growth and then the accessing of a new customer group, the supplier networks of our current customers, and so this contract is the third example of that third leg of growth accessing the supplier networks of our customers.
Q2: What does the technology enable P&O Ferrymasters to do?
The technology enables Ferrymasters to trade electronically and invoice electronically with all of their suppliers, not just the larger ones. So PROACTIS has been developing, over the last couple of years, software and technology that enables them to reach out over the web and trade electronically and offer these new capabilities to all of its supply chain not just the largest suppliers.
Q3: What kind of value does this provide for them?
Difficult to put a quantum on the value but certainly the burden of management of supplier details falls away because that’s now self-served by the suppliers through their portals and therefore the cost and efficiencies of running that administrative process disappear. Also they get an opportunity, through the accelerative payment facility (APF) which we offer, to participate in that, in those discounts, and therefore invest their treasury at a very high return. So there’s good value in two ways, cost and efficiency savings and then a new line of income through an APF.
Questions for Investors:
Q4: So on the flip side then, how does revenue accrue to PROACTIS and what are the key drivers that’ll help quantify that?
So the key drivers that drive value into PROACTIS are the number of suppliers that come on board, onto the network, and then the value of spend that take up the accelerated payment facility so PROACTIS gets a de minimis flat fee per annum for every supplier that uses its software to deliver that value through the supplier networks. We charge £50 per supplier so in this case for P&O Ferrymasters, which has nearly 8,000 suppliers, so that equates to an opportunity for PROACTIS of some £400,000 per year just from the supplier networking fees. Then we talk about accelerated payment so what we’re looking to do here is strengthen the supply chain of P&O Ferrymasters by offering early settlement discounts where a supplier might need it for some working capital reasons and the funding that does that obviously creates a discount income for PROACTIS. So difficult to quantify that last one on the APF and we will see through experience how attractive that offer is but those are the two main areas that are really significant for PROACTIS, a real step change in value for the group.
Q5: Finally then, when could an investor expect to see revenue delivered against the contract?
That depends on the roll-out process and the phasing of the project, implementation of P&O Ferrymasters, but we’re looking for fairly fast adoption on the supplier networking side, certainly over the next 2-3 months, so that we should start to see revenue from the supplier networking into Q1 of the next financial year for PROACTIS and then the APF should follow that by a quarter or two I’d say.
To find out more about making supplier interactions faster, easier and more cost effective, visit the PROACTIS Supplier Network page