Progility : Final Results

7 October 2016 Progility plc ("Progility" or "the Company" or "the Group") Final Results

Progility plc (AIM: PGY) is the holding company of a systems integration and project management services group which has been created to provide a range of project management services including innovative and market leading technology solutions.

Chairman's Statement

I am pleased to present Progility's results for the twelve months to 30 June 2016. Early in the period we reconsidered the basis upon which we reported our results as we evolved into a more stable set of businesses. Although our focus remains to apply our expertise as a broadly based project management services group we are now very focused on achieving efficient and effective operations within three distinct areas - Professional Services, (comprising our training and recruitment businesses), Healthcare (comprising Starkstrom) and Communications (comprising our technology businesses in India and Australia). Wherever possible we will seek to exploit opportunities to combine activities across these segments and across geographies, but during the period under review the focus has been on improving the cost effectiveness and overall efficiency of the separate segments and to instil a much more rigorous approach to all aspects of our business.

During the year we have therefore incurred some additional cost in implementing change, both in reducing Corporate headcount and also in closing certain activities which were not and are no longer expected to generate an acceptable return.

Financial Performance

Overall revenue was £61.6 million from continuing operations, which represented growth of 3%, from continuing operations, over the prior year. Within this we saw a reduction in sales in both Professional Services and Healthcare but strong revenue growth in Communications operations, primarily as a result of consolidating a full year of results from India. An operating loss of £0.1 million from continuing operations, before highlighted items, was clearly disappointing but in arriving at this we have absorbed a significant level of cost in implementing changes to our operational cost base and in headcount reduction.

The overall reported post tax loss for the year was £2.7 million which is after interest charges of £3.0 million, a write down of goodwill in Australia of £0.6 million and a credit of £2.0 million arising from the release of provisions on our Indian acquisition.

Our strategic report contains more detailed commentary on our three business areas.

Management and the Board

During the year we have seen a number of changes to the Board. At the end of July 2015, Donald Stewart left the company, some three years after joining Progility, to pursue his own professional practice and become more involved as a non-executive with a range of companies. Hugh Cawley, our CFO, left the Company at the end of March 2016 after a year with the Group. We have strengthened the finance function within our operating segments and have not therefore considered it necessary to have a CFO on the Board, at this time. We continue to keep this situation under review. We are grateful to both Donald and Hugh for their efforts on behalf of the Group. Outside the Board we have made additions to senior management, in particular in Australia where Campbell Johnson joined in September 2015, and is already making great strides in changing the performance of our Australian activities. He is also providing his expertise elsewhere in the Group, particularly at Starkstrom, to drive efficiencies in the business.

Prospects

The focus will remain, in the year ahead, on embedding greater efficiency into our operating units. We have made the changes to enable this to happen and expect our future performance to improve. We will ensure that future growth is both sustainable and profitable. We believe that there are significant opportunities for our businesses to develop and expect a more positive outcome this year.

Wayne Bos Executive Chairman 7 October 2016

Strategic Report Progility plc - Overview

The Progility Group now comprises three business segments Professional Services, (comprising the training and recruitment businesses), Healthcare (comprising Starkstrom) and Communications (comprising our technology businesses in India and Australia). This move from a historically geographic segment approach reflects our more stable set of businesses. Using this spread of skills and the geographic reach of our businesses it is still the intention, where opportunities arise, to create solutions for both using the skills and resources of our three segments to deliver project management solutions. However, the focus in the period under review has been to implement the necessary changes to our cost base and to our operational practices to achieve more acceptable returns in the future.

The Group will continue to be run as a portfolio, making additions and disposals when the opportunity to generate above average returns arises. The current period saw no acquisitions or disposals.

Principal activity and business review

The principal activities of the Group during the period, as outlined above, are Professional Services, Healthcare and Communications.

Corporate Management and segmental reporting

The group's global headquarters remain in central London to suit the diverse needs of the various businesses within the Group.

Our executive management team comprises highly capable managers within sales, finance and operations. The team has evolved to become an effective operation, able to deliver across their respective geographical client base. Their combined experience covers both large and medium sized entities and includes: systems integration, consulting, business development, sales, classroom and e-learning, digital transformation, financial control and operating in a public company environment. Our executive team are experienced in mergers and acquisitions, business integration and business improvement.

Our business is managed through three business segments to maximize our ability to communicate and to deliver our full range of products and expertise to our key clients' decision makers across the diverse territories and time zones in which we operate. These three segments reflect the management responsibility and accounting arrangements used to manage and report upon the performance of the business.

Key performance indicators (KPI's) for each business are revenue, gross profit margin and earnings before interest, taxation, depreciation and amortisation (EBITDA).

The Group's chief operating decision maker remains the Executive Chairman who reviews and considers these reports at the formal board meetings.

Professional Services As reported As reported Year ended Year ended 30.6.16 30.6.16 30.6.15 30.6.15 £000 £000 £000 £000

Revenue Segment Profit Revenue Segment Profit

Professional Services continuing operations	15,924	1,087	16,882	1,084
Professional Services discontinued operations	824	(268)	344	(239)
Professional Services total	16,748	819	17,226	845

The founding unit of the Group, the Training business, operates under the ILX brand. ILX is a leading provider of training in best practice for programme, project and IT service management, including strategic programme and project management consulting solutions. ILX also develops bespoke training courses for large-scale IT migration and transformation projects. We deliver ILX services from offices in the UK and Dubai and Australia, with partnerships extending into Europe and the US.

TFPL, Sue Hill and Progility Recruitment are our UK-based recruitment services brands. TFPL became part of the Group in July 2014 with Sue Hill joining in November 2014. Together they form a recruitment division which boasts a pool of quality assured candidates trained in project management services, including digital information management candidates. Progility Recruitment was established in January

2014 to offer specific project management recruitment services. Obrar is a consulting-led project management services company, with over 30 years' experience of delivering technology and people solutions in the UK and internationally. Obrar focuses on multimedia- driven contact centres, corporate technology infrastructure and associated operational change management. Woodspeen Training works with individuals and companies across a range of occupational areas, led by an experienced team of advisors and trainers, operating from seven locations across the UK, enhancing young people's skills and helping them into work.

Overall revenue of this segment fell by just under 3%, though we were able to maintain profit margins in line with the previous year, such that the decline in segment profit was also 3%. However, taking into account the closure of the southern operations of Woodspeen, which is treated as a discontinued activity, underlying operating margins have materially improved.

During the year the ILX training business achieved revenue almost in line with the prior year with slightly improved operating margins. This year has been a transitory one for the business with its new Managing Director, who was appointed just before this period, transforming the management team and implementing steps to improve operational efficiency and marketing effectiveness.

The recruitment business, which specialises in both temporary and permanent resources in information management, has had a challenging year with differing performance across the various industry categories of our clients.

Woodspeen, for which this is the first full year under our ownership, has contributed strongly to revenue, but also made only a modest contribution to profit, as a result of the cost of reorganising the business to deliver our learning courses efficiently and effectively. This involved ceasing providing training in the south of the UK, disclosed as discontinued operations above, and in note 11 to the accounts. We see significant opportunities to grow this business which addresses an important area for both government and the wider community in getting people equipped to work.

Healthcare As reported As reported Year ended Year ended 30.6.16 30.6.16 30.6.15 30.6.15 £000 £000 £000 £000

Revenue Segment Profit Revenue Segment Profit

Healthcare 11,148 62 13,688 984

Healthcare comprises the activities of the Starkstrom Group, the operating theatre and critical care business, which delivers and installs advanced medical equipment and is a leading provider of fully integrated solutions, with over 40 years' experience in the UK sector. Starkstrom also exports medical equipment overseas, with a particular focus on the Middle East region.

Although the headline performance was disappointing, with revenue down by 19% and segment profit down by 94%, there are specific factors which underpin this.

The business invested in the establishment of a marketing operation in Dubai to try and enhance the presence of Starkstrom in the Middle Eastern market. The expectations of this new office were not met and it has now been closed. In total this cost the business around £0.7 million during the year. There was also a much greater focus during the year on the gross margin that had to be achieved on contracts that we were bidding for. This resulted in us being unsuccessful on some contracts where the return was unacceptably low.

We have also taken steps to minimise the impact of the decline in the value of sterling following the referendum. We source a number of component items from within the Eurozone countries and are seeking to ensure that the cost of sterling's post referendum valuation is shared by both the supplier and our customers. We have also expanded the range of products that we can supply alongside our core contracts in operating theatres.

We entered the current financial year with our highest recorded order book of almost £6.0 million which, taken together with our recurring maintenance income, gives us greater visibility for the current year.