REG - Aptitude Software - Interim Results
28 July 2021
APTITUDE SOFTWARE GROUP plc
('Aptitude Software' or 'the Group')
Interim Results for the six months ended
30 June 2021
Aptitude Software Group plc (LSE: APTD), a specialist provider of finance transformation and automation software, reports its unaudited results for the six months ended 30 June 2021.
Financial Highlights
Six months ended 30 June
2021
2020
% Change
Annual Recurring Revenue1 at 30 June
£32.2m
£29.1m2
+11%
- Software and subscription revenue
£16.7m
£14.7m
+14%
- Implementation and solution management services revenue
£10.9m
£14.4m
-24%
Total Revenue
£27.6m
£29.1m
-5%
Cash and cash equivalents
£46.8m
£30.9m
+51%
Adjusted Operating Margin
18.5%
17.5%
+1%
Adjusted Operating Profit3
£5.1m
£5.1m
-
Statutory operating profit
£4.7m
£4.5m
+4%
Interim ordinary dividend per share
1.8p
1.8p
-
· Continued new business success across all the Group's key regions and strategic products driving year on year growth in Annual Recurring Revenue ('ARR') of 11% on a constant currency2 basis
· Software and subscription revenue, the strategic focus of the Group, grew 14% to £16.7 million (H1 2020: £14.7 million), representing 61% of total revenue (H1 2020: 51%) for the six months ended 30 June 2021
· Adjusted Operating Profit of £5.1 million (H1 2020: £5.1 million) ahead of the Board's forecasts for the first half, driven by the strengthening of implementation services revenue above forecast, leading to an increase in profit expectations for the full year of approximately 10%
· Strong balance sheet with cash of £46.8 million (H1 2020: £30.9 million), net funds5 of £45.4 million (H1 2020: £29.2 million5) and no bank loans. This financial strength positions the business well for acquisition opportunities whilst also providing confidence to our clients and prospects
· Interim dividend of 1.8 pence per share (H1 2020: 1.8 pence per share)
Strategic and Operational Highlights:
· A number of multi-year subscription agreements signed with insurers for the use of Aptitude Insurance Calculation Engine and Aptitude Accounting Hub to drive strategic compliance in addition to providing the foundation for wider finance automation
· Continued new business success with Aptitude Revenue Management, a product well positioned to address the demands of the subscription economy; including a growing number of clients in new industry verticals, increasing the size of Aptitude Software's addressable market
· Continued upsell within the client base, including both the sale of new products and Solution Management Services
· Increased levels of activity in all regions, a trend first experienced in North America in Q4 2020, although some sales cycles remain extended due to the impact of the pandemic
· Further growth in the proportion of clients adopting Software-as-a-Service ('SaaS'), capitalising on the increasing stimulus for organisations to undertake finance transformation in the cloud. SaaS subscription fees now account for 26% of the total ARR on 30 June 2021 (30 June 2020: 19%)
· The partner programme, a key source of new business opportunities in all regions, continues to progress with further partner enablement achieved in the first half of the year
· Continued investment in the Aptitude Innovation Centre in Poland, an increasing focus of activity for the Group
Commenting on the results, Jeremy Suddards, Chief Executive Officer, said:
'The Group made continued strategic and operational progress in the first half of 2021 with all key products and regions contributing to a good new business performance, capitalising on the accelerated move to the cloud. Particular success was achieved with the insurance market in both APAC and Europe as a more typical business environment returned in those markets.
Aptitude Software continues to benefit from a focused portfolio of product and service offerings, a now established SaaS capability, increasing worldwide presence and a strengthening partner network. With ever increasing stimuli for organisations to drive greater automation into their finance functions, these assets and capabilities position the Group well to be able to fully realise the growing opportunity ahead in both its existing verticals as well as in new sectors.'
Contacts
Aptitude Software Group plc
Ivan Martin, Chairman 020-3687-3200
Jeremy Suddards, Chief Executive Officer
Philip Wood, Deputy Chief Executive Officer and Chief Financial Officer
Alma PR
Caroline Forde, Sam Modlin 020-3405-0205
About Aptitude Software
Aptitude Software's innovative solutions address the growing trend for finance automation, whether part of a broad digital finance transformation by a client or to address specific regulatory requirements. Our various products take data from complex systems, typically with multiple siloed data sources across multiple business entities, automate complex accounting calculations and create a unified view of finance. This allows our clients to reap numerous benefits including significant efficiencies, business insights, enhanced control and regulatory compliance.
Our clients include some of the world's largest companies, typically organisations with complex financial data and technology landscapes. Development, together with a growing number of other services, continues to be performed at the Aptitude Innovation Centre in Poland with sales, support and implementation services provided from Aptitude Software's offices in London, North America and Singapore.
Throughout this announcement:
1 Annual Recurring Revenue ('ARR') is the value of Aptitude Software's software and subscription recurring revenue at a specific point in time, normalised to a one-year period. ARR includes recurring revenues contracted but yet to commence and excludes recurring revenues which are currently being received but are known to be terminating in the future.
2 Constant currency is calculated by comparing the H1 2021 results with H1 2020 results retranslated at the rates of exchange prevailing during H1 2021. Items within the Financial Highlights table indicated by this superscript reference are calculated on a constant currency basis.
3 Adjusted Operating Profit, Adjusted Operating Margin and Adjusted Basic Earnings per Share exclude non-underlying operating items, unless stated to the contrary. Further detail in respect of the non-underlying operating items can be found within Note 6.
4 Net retention is the total value of on-going Annual Recurring Revenue at the period-end from clients in place twelve months earlier as a percentage of the opening Annual Recurring Revenue from those clients on a constant currency basis
5 Net funds represents cash and cash equivalents less finance obligations, which are currently limited to capital lease obligations
Certain non-IFRS financial measures (e.g. Adjusted Operating Profit) are included which assist management in comparing performance on a consistent basis
Overview
Aptitude Software made both strategic and operational progress in the first half of 2021 as the Group's key markets continued to recover from the disruption caused by the onset of the pandemic in 2020.
The Group achieved a good number of new business wins and contract expansions in the insurance and technology, media and telecom ('TMT') sectors, with all key products and regions contributing. These additions led to Annual Recurring Revenue increasing to £32.2 million on 30 June 2021, representing year on year growth of 11% on a constant currency basis (31 December 2020: £30.9 million, 30 June 2020: £29.1 million, both restated for the prevailing exchange rates on 30 June 2021).
Benefitting from the launch of the Aptitude Accounting Hub and Aptitude Insurance Calculation Engine as SaaS offerings in the second half of 2020, the Group has continued to capitalise on the strategic trend towards SaaS with nearly all new clients now contracting for this service. Supplementing these new business successes is the growth of the Group's Solution Management Services ('SMS') offering which, whilst not included within the Group's Annual Recurring Revenue, are recurring in nature. During the first half of the year a number of multi-year agreements have been secured for this service with existing clients, across all key products and markets.
Continued strengthening of the Group's high-quality partner network has also been achieved. In addition to an increase in pipeline generation from partners, with particular progress in Asia, a number of new organisations have been enabled to implement Aptitude Software's products for the first time, providing our clients with an increasing choice of partners with whom to implement the Group's technology. Whilst future growth in the demand for services is expected to be increasingly fulfilled by the Group's strengthening partner network, revenue generated in 2021 from Aptitude Software's own implementation services capability is expected to increase ahead of previous expectations as demand strengthens, particularly from the existing client base. This strengthening of implementation services revenue is anticipated to increase 2021 profits ahead of the Board's prior expectations by approximately 10%.
Aptitude Software, with its focused portfolio of product and service offerings, increasing worldwide presence and strengthening partner network is well positioned and the Board looks forward to the year ahead with confidence.
Corporate Strategy
Aptitude Software's strategy is focused on providing innovative software to the office of the CFO within large international businesses.
The Group undertook a number of strategic activities during the first half of 2021, with details of these provided in the sections below. These activities are focused on driving an acceleration of growth in the software and subscription revenues which now represent 61% of overall revenue (H1 2020: 51%). The growth in the proportion of such revenues in the business will, in due course, lead to both an increase in operating margins, given the higher margins achievable from these recurring revenues, and even greater future revenue visibility.
Market Drivers and Opportunities
The three market drivers of smart compliance, finance automation and finance transformation in the cloud continue to provide a significant opportunity for the business with the benefits of the Group's technologies being increasingly recognised both in our current industries and in adjacent verticals. The Group's revenue management products in particular are well positioned to address the fast growing subscription economy, a business model that is expanding into a number of new sectors for the first time.
In addition to the opportunity for the Group's technology in new verticals, the addressable market in North America continues to grow. North America is already Aptitude Software's largest source of revenue, and is the market experiencing the fastest move to finance automation and benefitting from the most developed partner network. Given these dynamics, North America will increasingly be a focus for future Go-to-Market investment in the Group.
Software-as-a-Service ('SaaS') Progression
The Group has continued to successfully leverage its established SaaS capabilities during the first half of 2021, securing new multi-year agreements with several organisations. The successes achieved are underpinned by the ability of the business to deploy all its key products as SaaS offerings, capitalising on the accelerated move to the cloud that the industry continues to experience.
Nearly all new clients now choose to deploy the Group's software in this way leading to SaaS subscription fees as a proportion of Annual Recurring Revenue increasing to 26% on 30 June 2021 (H1 2020: 19%). Whilst there are some existing on-premise clients planning to migrate to SaaS, a material movement is not anticipated in the short term given the investment in clients' infrastructure supporting our technology.
Partner Network
The growth and development of Aptitude Software's high-quality partner network, which includes deepening relationships with the Big 4 accounting firms, continues to be a strategic priority. Whilst many prospects are sourced directly by the Group's own sales and marketing teams, the global reach of our partners and the depth of their relationships with large businesses provide Aptitude Software with an increasing number of advanced opportunities, enhanced market coverage and intelligence.
In addition to the new business benefits provided by the partner network, the implementation expertise and capabilities of our partners supports the Group's strategic drive to increase software and subscription fees faster than its services, leading to a richer revenue mix. During the first half of 2021, a number of new organisations have been enabled to implement Aptitude Software's products for the first time, providing our clients with an increasing choice of partners with whom to implement the Group's technology.
Acquisitions
Aptitude Software's corporate strategy is focused on organic growth, however, the Group's strong financial position, together with its experience of successfully identifying and integrating acquisitions, provides the Group with the opportunity to accelerate growth. During the first half of 2021, the business increased its acquisition activity with the development of a pipeline of actively monitored opportunities which fit the criteria of accelerating the product strategy and/or providing entry into adjacent markets for the Group where its core product suite could meet further demand.
Aptitude Innovation Centre
Investment continues in the team at the Aptitude Innovation Centre, our long-established integrated centre of excellence in Poland which continues to be a material differentiator for the Group. As well as now encompassing the development of the Group's entire product suite, the Aptitude Innovation Centre is the Group's technology headquarters having become an increasing focal point for the Group's cloud operations, support activities and growing Solution Management Services offering.
Headcount at the Aptitude Innovation Centre increased by 10% during the first half of 2021 to 178, a trend expected to continue into 2022 and beyond as investment in the evolution of our technology increases to support the evolving market requirements.
In order to facilitate this continued growth and further encourage effective collaboration and innovation, the Group has commenced a search to locate a new modern facility for the Aptitude Innovation Centre close to our existing premises in Wroclaw, Poland.
Our People
Aptitude Software's continued progress has been achieved through the exceptional quality of its people. The team is very talented, committed and works incredibly hard. The Board wishes to thank its employees for both their outstanding commitment and the continued excellent support they are providing to the business and to our clients and partners.
Aptitude Software continues to progress its approach to diversity and inclusion and has established an advocacy group with representation from across our global team. The business is committed to creating a work environment that supports everyone to flourish and our Diversity and Inclusion Advocacy Group will be responsible for shaping and supporting our ambition and objectives in this important area.
To ensure the Group continues to attract and retain the most talented of individuals, the business has continued to build on the investments in our people which were initiated in the prior year. A particular highlight of this programme is the further strengthening of the Group's training and enablement function and roll out of a new Learning Management System to support our employees, clients and partners.
Our employees have shown tremendous resilience during the pandemic and have worked very effectively from home during this period. With restrictions easing or ending in many of our global locations the Group is now looking forward to a more normal working environment. Following extensive consultation with its employees, Aptitude Software is adopting a hybrid way of working, combining the successfully implemented remote working framework in place during the pandemic with a level of office presence to ensure we foster both collaboration and social interactions, which are so important both for the sparking of innovations but also the mental well-being of our people.
Our Products
Aptitude Accounting Hub
The Group continues to leverage the capabilities of the Aptitude Accounting Hub ('AAH'), securing new agreements with a number of organisations as they seek to automate and transform their finance functions.
Supplementing this new business growth was the entry into a strategic contract to licence AAH concurrently with the Aptitude Insurance Calculation Engine to the insurance business of an existing major European banking client.
The opportunity for AAH remains significant across all our key industries and is central to Aptitude Software's approach in addressing our clients need to drive finance automation to continue the transformation of their finance functions. The application centralises and automates finance, accounting and reporting processes, creating a deep level of operational intelligence for our clients. It also delivers a consolidated, yet highly granular, single view of financial data which enhances business insights to enable decision making. AAH can be used on a standalone basis or in conjunction with other Aptitude Software applications. Clients can, and do, choose to implement AAH either before, at the same time, or after the implementation of a specialised accounting calculation engine such as Aptitude Revenue Management.
Aptitude Revenue Management
The Group's two revenue management applications, Aptitude Revenue Recognition Engine and Aptitude RevStream, collectively Aptitude Revenue Management ('ARM'), have continued to make good progress in the first half of 2021. Aptitude RevStream, in particular, continues to achieve new business success with a highlight in the first half of the year being a sale to a North American telco.
The two applications within ARM enable finance teams to further automate their revenue management functions to address the demands of the subscription economy, with the market opportunity now extending beyond our current industries into adjacent verticals including high-tech advanced industries and medical devices.
The applications simplify the whole revenue lifecycle, from contract order to revenue recognition, reporting and forecasting and go significantly beyond core IFRS 15 / ASC 606 compliance to allow total control over complex revenue management for all contract types ranging from subscription-based revenue models to complex multi-part or bundled contracts. This capability allows businesses to understand and control centrally the financial impact of all their commercial propositions, the quality of their revenue types as well as providing new and valuable insights to support future business decision making such as the introduction of new products in different markets.
Aptitude Insurance Calculation Engine
Further progress with the Aptitude Insurance Calculation Engine ('AICE'), the application addressing the requirements of IFRS 17 (effective for accounting periods commencing 1 January 2023), has been achieved in the first half of 2021. In addition to the entry into a licence agreement with the insurance business of a leading European Bank, a multi-year subscription agreement was signed with a global insurer for the use of the Group's IFRS 17 Comply application, a simplified and pre-configured package of the existing IFRS 17 solution designed to provide a faster and more efficient path to IFRS 17 compliance, the first deal of its kind.
AICE is a strategic, transformational investment providing value to an insurer beyond compliance. It enables data insights and decision support delivering long-term business benefits. Development of the product has continued in the first half of year with a number of new innovative capabilities being added, particularly in the area of simulation and forecasting, these capabilities are expected to expand the footprint with existing accounts.
The compliance-focused elements of the application mean that, with the effective date of IFRS 17 adoption moving closer, an acceleration in prospect activity has been seen particularly with small and mid-sized participants who have yet to finalise their plans.
Our Services
Implementation Services
Aptitude Software provides implementation services to its clients, with the scale of such services depending on the nature of the application, the size of the opportunity and the balance of responsibilities between Aptitude Software and its partners. The business continues to expand the enablement of its partner network to facilitate their ability to implement Aptitude Software's product suite reliably and efficiently. Whilst this enablement will lead to a greater proportion of services being provided by partners, it remains important to maintain a high quality delivery capability to ensure that the Group can continue to support its partners and provide its expertise to those clients who wish to receive our services directly.
Whilst below prior year levels, demand for Aptitude Software's own implementation services in the short and medium term is higher than the Board's previously lowered expectations, particularly from the existing client base.
Solution Management Services
The Group's Solution Management Services ('SMS') continue to grow providing Aptitude Software with managed services revenue which is recurring in nature and typically contracted on multi-year agreements. SMS revenues are currently not included within the Group's Annual Recurring Revenue.
Whilst the majority of overall services revenue is associated with the implementation of Aptitude Software's applications, there is a growing percentage of revenues derived from Solution Management Services, with multiple Aptitude Accounting Hub, Aptitude Insurance Calculation Engine and Aptitude Revenue Management clients contracting for this service across the Group's key sectors and geographies. During the first half of 2021, a number of further successes were achieved including the entry into a material multi-year agreement with an Aptitude Lease Accounting Engine client, the first of its kind.
This service extends the responsibilities of Aptitude Software beyond traditional software maintenance services to include those that have typically been performed by the clients' own IT teams. These include the monitoring of system performance, user administration, release management and functional enhancements. The team providing these remote services to our clients is now of critical mass and able to provide efficiencies to our clients. Clients benefit from the reduced requirement to establish internal technical teams focused on our complex applications allowing them to focus on their core business activities. We expect the service (which continues to be a focus of investment in the business) to enhance the operation and longevity of applications within major clients, while the long term and recurring nature of the associated income is expected to provide greater certainty and visibility to the Group's services revenues.
Financial Performance
The Group delivered a strong financial performance in the period, with continued growth in SaaS revenues supported by a greater than anticipated level of implementation services revenue. Customer retention rates remained high and ARR grew despite the disrupted markets.
The strength of the Group's balance sheet, high levels of recurring revenue and strong cash generation provide the Group with considerable financial strength with which to execute on its growth strategy.
Revenue
Software and Subscription Revenues
Aptitude Software's Annual Recurring Revenue ('ARR') at 30 June 2021 totalled £32.2 million (31 December 2020: £30.9 million, 30 June 2020: £29.1 million, both restated for the prevailing exchange rates at 30 June 2021), representing year on year growth of 11% on a constant currency basis. This result, achieved in disrupted markets, provides the Group with confidence of a return to its historically higher growth rate once the effects of the pandemic, particularly experienced in the middle quarters of 2020, are over.
ARR is the key financial metric for the Group. Included within ARR are Aptitude Software's annual licence fees and maintenance for its on-premise clients and subscription fees for the Group's SaaS clients. The proportion of clients deploying software using SaaS has continued to grow with SaaS subscription fees accounting for 26% of the total ARR on 30 June 2021 (30 June 2020: 19%).
Highlighting the expansion of our existing customer relationships, net retention in the 12 months to 30 June 2021 was 102% (H1 2020: 101%) (measured by the total value of on-going ARR at the period-end from clients in place twelve months earlier as a percentage of the opening ARR from those clients on a constant currency basis).
Software and subscription revenues recognised in the six months ended 30 June 2021 increased by 14% to £16.7 million (H1 2020: £14.7 million). These now represent 61% of overall revenue (H1 2020: 51%). It is a key part of the Group's strategy to increase this percentage whilst maximising the growth rate of Aptitude Software's ARR, a strategy which in due course will lead to growth in operating margin given the margin differential between software and services revenues.
Implementation and Solution Management Services
Services revenue totalled £10.9 million for the six months ended 30 June 2021 (H1 2020: £14.4 million) of which 86% is attributable to the implementation of our software with the balance of 14% generated from Solution Management Services which, whilst not included in the Group's Annual Recurring Revenue, are recurring in nature. Implementation services revenues were stronger than the previously lowered expectations due to greater than anticipated demand from the Group's existing client base.
Research and Development Expenditure
Total expenditure on product management, research and development in the six months ended 30 June 2021 increased to £4.4 million (H1 2020: £3.8 million) as the Group continues to invest in the evolution of our technology through the growth in both new and existing product development teams.
The Board has continued to determine that none of the internal research and development costs incurred during the first half of the year meet the criteria for capitalisation. Consequently, these have been expensed as incurred through the income statement.
Operating Profit and Margins
Adjusted Operating Profit for the six months ended 30 June 2021 was ahead of the Board's expectations at £5.1 million, driven by the strengthening of implementation services revenue above forecast (H1 2020: £5.1 million). Operating profit on a statutory basis was £4.7 million (H1 2020: £4.5 million). Adjusted Operating Margin for the period remained resilient at 18.5% (H1 2020: 17.5%) despite the Group continuing to prioritise investment across a number of functions.
Foreign Exchange
With 55% (H1 2020: 53%) of the Group's revenues being generated from North American clients, the majority of which are invoiced in US Dollars, the financial results are impacted by changes in the US dollar exchange rate. Aptitude Software's H1 2020 revenue and Adjusted Operating Profit would have been reported at £28.4 million and £5.0 million respectively on a constant currency basis (compared to actual result of £29.1 million and £5.1 million). Constant currency is calculated by comparing the 2021 results with 2020 results retranslated at the rates of exchange prevailing during 2021.
Non-Underlying Items
Non-underlying items of £0.4 million (H1 2020: £0.6 million) comprises intangible amortisation, with the increased amount in 2020 in relation to the final separation costs incurred as part of the disposal of the Microgen Financial Systems business.
Taxation
The total tax charge of £0.8 million (H1 2020: £1.1 million) represents 17% of the Group's profit before tax (H1 2020: 24%), with the reduction against the United Kingdom corporate tax rate of 19% and H1 2020 levels due to the Group's ability to receive additional tax relief on its research and development expenditure. This additional relief is expected to continue into future years.
Statutory Results
The Group reported a profit for the period attributable to equity shareholders of £3.9 million (H1 2020: £3.5 million).
Earnings per Share
Adjusted Basic Earnings per Share and Basic Earnings per Share increased to 7.3 pence and 6.8 pence (H1 2020: 6.7 pence and 6.0 pence), growth of 9% and 13% respectively.
Dividend
An interim dividend of 1.8 pence per share is proposed (2020: 1.8 pence). The interim dividend will be payable on 27 August 2021 to shareholders on the register at the close of business on 6 August 2021.
Balance Sheet
The Group continues to have a strong balance sheet with net assets at 30 June 2021 of £53.0 million (H1 2020: £48.3 million), including cash of £46.8 million (H1 2020: £30.9 million), net funds of £45.4 million (H1 2020: £29.2 million) and no bank loan. Trade receivables (net) have reduced to £6.3 million (H1 2020: £10.7 million), a reduction of £4.4 million due to the timing of receipt of annual licence fee and subscription invoices issued. The growth in the Group's recurring revenues resulted in deferred income increasing to £24.1 million at 30 June 2021 (H1 2020: £22.2 million). The Group's cash collection disciplines remain strong with DSO (debtor days) improving at 30 June 2021 to 35 (H1 2020: 60).
Statement on Principal Risks and Uncertainties
Pursuant to the requirements of the Disclosure and Transparency Rules the Group provides the following information on its principal risks and uncertainties. The Group considers strategic, operational and financial risks and identifies actions to mitigate those risks. These risk profiles are updated at least annually. The principal risks and uncertainties detailed within the Group's 2020 Annual Report remain applicable for the first six months of the financial year. The Group's 2020 Annual Report is available from the Aptitude Software website: www.aptitudesoftware.com/investor-relations/
Related party transactions during the period are disclosed in Note 17.
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
For the six months ended 30 June 2021
Unaudited six months ended 30 Jun 2021
Unaudited six months ended 30 Jun 2020
Audited year ended 31 Dec 2020
Note
Before
Non-underlying items
Non-underlying items
Total
Before
Non-underlying items
Non-underlying items
Total
Before
Non-underlying items
Non-underlying items
Total
Continuing operations
£000
£000
£000
£000
£000
£000
£000
£000
£000
Revenue
5
27,635
-
27,635
29,129
-
29,129
57,266
-
57,266
Operating costs
5/6
(22,520)
(423)
(22,943)
(24,034)
(563)
(24,597)
(48,155)
(964)
(49,119)
Operating profit
5/6
5,115
(423)
4,692
5,095
(563)
4,532
9,111
(964)
8,147
Finance income
5
-
5
50
-
50
61
-
61
Finance costs
(44)
-
(44)
(42)
-
(42)
(100)
-
(100)
Profit before income tax
5,076
(423)
4,653
5,103
(563)
4,540
9,072
(964)
8,108
Income tax expense
7
(914)
123
(791)
(1,225)
135
(1,090)
(1,585)
514
(1,071)
Profit for the period
4,162
(300)
3,862
3,878
(428)
3,450
7,487
(450)
7,037
Earnings per share
Basic
8
6.8p
6.0p
12.5p
Diluted
8
6.8p
5.9p
12.3p
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2021
Unaudited
six months
ended
Unaudited
six months
ended
Audited
year
ended
30 Jun
2021
30 Jun
2020
31 Dec
2020
£000
£000
£000
Profit for the period
3,862
3,450
7,037
Other comprehensive (expense)/income
Items that may subsequently be reclassified to profit or loss:
Fair value (loss)/gain on hedged financial instruments
(141)
210
45
Currency translation difference
(219)
30
(988)
Other comprehensive (expense)/income for the period, net of tax
(360)
240
(943)
Total comprehensive income for the period
3,502
3,690
6,094
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
As at 30 June 2021
Note
Unaudited
as at
30 Jun 2021
Unaudited
as at
30 Jun 2020
Audited
as at
31 Dec 2020
ASSETS
£000
£000
£000
Non-current assets
Property, plant and equipment including right-of-use assets
11
1,902
2,558
2,394
Goodwill
23,787
23,787
23,787
Intangible assets
5,217
6,063
5,640
Other long-term assets
1,644
1,886
1,472
Income tax assets
-
-
642
Deferred tax assets
448
703
448
32,998
34,997
34,383
Current assets
Trade and other receivables
12
8,606
13,031
7,782
Financial assets
- derivative financial instruments
37
121
62
Current income tax assets
898
1,555
1,161
Cash and cash equivalents
46,759
30,887
44,822
Total current assets
56,300
45,594
53,827
Total assets
89,298
80,591
88,210
LIABILITIES
Current liabilities
Financial liabilities
- derivative financial instruments
(250)
(28)
(133)
Trade and other payables
13
(32,800)
(28,641)
(33,652)
Capital lease obligations
14
(563)
(479)
(881)
Current income tax liabilities
(245)
(206)
(247)
Provisions
15
(240)
(38)
-
(34,098)
(29,392)
(34,913)
Net current assets
22,202
16,202
18,914
Non-current liabilities
Capital lease obligations
14
(786)
(1,122)
(972)
Provisions
15
(196)
(404)
(441)
Deferred tax liabilities
(1,236)
(1,358)
(1,236)
(2,218)
(2,884)
(2,649)
NET ASSETS
52,982
48,315
50,648
Note
Unaudited
as at
30 Jun 2021
Unaudited
as at
30 Jun 2020
Audited
as at
31 Dec 2020
£000
£000
£000
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
As at 30 June 2021
SHAREHOLDERS' EQUITY
Share capital
16
4,156
4,140
4,143
Share premium account
16
8,382
7,720
7,828
Capital redemption reserve
12,372
12,372
12,372
Other reserves
33,983
34,289
34,124
Accumulated losses
(4,038)
(9,570)
(6,165)
Foreign currency translation reserve
(1,873)
(636)
(1,654)
TOTAL EQUITY
52,982
48,315
50,648
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2021
Share capital
Share
premium accountAccumulated losses
Foreign currency translation reserve
Capital redemption reserve
Other
reservesTotal
£000
£000
£000
£000
£'000
£000
£000
Total equity as at 1 January 2021
4,143
7,828
(6,165)
(1,654)
12,372
34,124
50,648
Comprehensive income
Profit for the period
-
-
3,862
-
-
-
3,862
Cash flow hedges
- net fair value losses
-
-
-
-
-
(141)
(141)
Exchange rate adjustments
-
-
-
(219)
-
-
(219)
Total comprehensive income for the period
-
-
3,862
(219)
-
(141)
3,502
Shares issued under share option schemes
13
554
-
-
-
-
567
Share options - value of employee service
-
-
303
-
-
-
303
Dividends to equity holders of the company
-
-
(2,038)
-
-
-
(2,038)
Total contributions by and distributions to owners of the company recognised directly into equity
13
554
(1,735)
-
-
-
(1,168)
Balance at 30 June 2021 (unaudited)
4,156
8,382
(4,038)
(1,873)
12,372
33,983
52,982
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2020
Share capital
Share
premium accountAccumulated losses
Foreign currency translation reserve
Capital redemption reserve
Other
reservesTotal
£000
£000
£000
£000
£'000
£000
£000
Total equity as at 1 January 2020
4,128
7,660
(11,149)
(666)
12,372
34,079
46,424
Comprehensive income
Profit for the period
-
-
3,450
-
-
-
3,450
Cash flow hedges
- net fair value gains
-
-
-
-
-
210
210
Exchange rate adjustments
-
-
-
30
-
-
30
Total comprehensive income for the period
-
-
3,450
30
-
210
3,690
Shares issued under share option schemes
12
60
-
-
-
-
72
Share options - value of employee service
-
-
159
-
-
-
159
Dividends to equity holders of the company
-
-
(2,030)
-
-
-
(2,030)
Total contributions by and distributions to owners of the company recognised directly into equity
12
60
(1,871)
-
-
-
(1,799)
Balance at 30 June 2020 (unaudited)
4,140
7,720
(9,570)
(636)
12,372
34,289
48,315
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
For the six months ended 30 June 2021
Unaudited
Unaudited
Audited
six months ended
six months ended
year ended
Note
30 Jun 2021
30 Jun 2020
31 Dec 2020
£000
£000
£000
Cash flows from operating activities
Cash generated from operations
9
4,212
925
16,238
Interest paid
(44)
(42)
(100)
Income tax received/(paid)
346
(439)
281
Net cash flows generated from operating activities
4,514
444
16,419
Cash flows from investing activities
Purchase of property, plant and equipment
(194)
(131)
(232)
Interest received
5
50
61
Net cash used in investing activities
(189)
(81)
(171)
Cash flows from financing activities
Net proceeds from issuance of ordinary shares
16
567
72
183
Dividends paid to company's shareholders
10
(2,038)
(2,030)
(3,044)
Repayment of capital lease obligations
(548)
(489)
(924)
Net cash used in financing activities
(2,019)
(2,447)
(3,785)
Net increase/(decrease) in cash and cash equivalents
2,306
(2,084)
12,463
Cash and cash equivalents at beginning of period
44,822
32,965
32,965
Exchange rate (losses)/gains on cash and cash equivalents
(369)
6
(606)
Cash and cash equivalents at end of period
46,759
30,887
44,822
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. General information
Aptitude Software Group plc (the 'Company') and its subsidiaries (together, the 'Group') is a specialist provider of innovative software to the finance functions of large global businesses.
The Company is a public limited company incorporated and domiciled in England and Wales with a primary listing on the London Stock Exchange. The address of its registered office is Old Change House, 128 Queen Victoria Street, London, England, EC4V 4BJ.
These condensed consolidated interim financial statements were approved for issue on 27 July 2021.
These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2020 were approved by the Board of directors on 9 March 2021 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
2. Basis of preparation
These condensed consolidated interim financial statements for the six months ended 30 June 2021 have not been audited or reviewed by the auditors. The interims have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. These condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2020, which have been prepared in accordance with IFRSs as adopted by the European Union.
After reviewing the Company's forecasts and projections, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. In particular, these forecasts considered the future impact on the Group of COVID-19 outlined in the overview section. The Company therefore continues to adopt the going concern basis in preparing its financial statements.
A scenario testing exercise was also performed for the three years 2022, 2023 and 2024, with several different sets of assumptions modelled including some more pessimistic than current indications may suggest. In all scenarios Aptitude Software remains comfortably profitable and cash generative in the years under review,
3. Accounting policies
The accounting policies adopted are consistent with those of the previous financial statements, except as described below.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profits.
New and amended standards and interpretations need to be adopted in the first interim financial statements issued after their effective date. There are no new IFRSs or IFRICs that are effective for the first time for this interim period that would be expected to have a material impact on the financial statements.
4. Estimates
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2020, with the exception of changes in estimates that are required in determining the provision for income taxes.
Fair value estimation
Financial instruments not measured at fair value
Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables, trade and other payables, and loans and borrowings. However, due to their short-term nature and ability to be liquidated at short notice their carrying value approximates to their fair value.
Financial instruments measured at fair value
The fair value hierarchy of the financial instruments measured at fair value is provided below.
Level 2 inputs
Unaudited
six months
ended
30 Jun 2021£'000
Unaudited
six months
ended
30 Jun 2020
£'000
Financial assets
Derivative financial assets (designated hedge instruments)
37
121
37
121
Financial liabilities
Derivative financial liabilities (designated hedge instruments)
(250)
(28)
(250)
(28)
The derivative financial assets and liabilities have been valued using the market approach and are considered to be Level 2 inputs. There were no changes to the valuation techniques used in the year. There were no transfers between levels during the year.
5. Segmental information
Business segments
The only business segment during both periods presented was Aptitude Software and therefore certain segmental analysis is not required.
Geographical segments
The Group has two geographical segments for reporting purposes, the United Kingdom and the Rest of the World.
The following table provides an analysis of the Group's sales by origin and by destination.
Sales revenue by origin
Sales revenue by destination
Unaudited six months ended
30 Jun 2021
Unaudited
six months
ended
30 Jun 2020
Unaudited six months ended
30 Jun 2021
Unaudited
six months
ended
30 Jun 2020
£000
£000
£000
£000
Continuing operations
United Kingdom
14,526
16,050
3,912
4,729
Rest of World
13,109
13,079
23,723
24,400
27,635
29,129
27,635
29,129
The Group derives revenue from the transfer of goods and services in the following major categories and geographical regions, these being the United Kingdom ('UK') and Rest of the World ('RoW'):
Unaudited six months ended 30 June 2021
Software related revenue
Services related revenue
UK
RoW
Total
UK
RoW
Total
Total
£000
£000
£000
£000
£000
£000
£000
Revenue from external clients
2,685
14,047
16,732
1,227
9,676
10,903
27,635
Unaudited six months ended 30 June 2020
Software related revenue
Services related revenue
UK
RoW
Total
UK
RoW
Total
Total
£000
£000
£000
£000
£000
£000
£000
Revenue from external clients
2,615
12,080
14,695
2,114
12,320
14,434
29,129
5. Segmental information
All of the revenue displayed in the above table is recognised over time in line with the Group's accounting policy detailed on pages 84 to 87 of the Aptitude Software Group plc 2020 Annual Report and has been generated from contracts with clients.
The following is an analysis of the carrying amount of non-current assets (excluding deferred and income tax assets), and additions to property, plant and equipment and intangible assets (excluding right-of-use asset additions resulting from property lease agreements) and intangible assets, analysed by the geographical area in which the assets are located.
Carrying amount of
non-current assets
Capital expenditure
Unaudited six months ended
30 Jun 2021
Unaudited
six months
ended
30 Jun 2020
Unaudited six months ended
30 Jun 2021
Unaudited
six months
ended
30 Jun 2020
£000
£000
£000
£000
United Kingdom
16,497
17,417
37
55
Rest of World
16,053
16,877
157
76
32,550
34,294
194
131
The Company's business is to invest in its subsidiaries and, therefore, it operates in a single segment.
6. Non-underlying items
Unaudited
six monthsended 30 Jun 2021
Unaudited
six months
ended 30 Jun 2020
Audited
year
ended 31 Dec 2020
£000
£000
£000
Continuing operations
Amortisation of acquired intangibles
423
423
846
Group reorganisation costs
-
140
118
423
563
964
7. Income tax expense
Income tax expense is recognised based on management's estimate of the weighted average income tax rate expected for the full financial year of 17% (the estimated tax rate for the six months ended 30 June 2020 was 24%). The reduction against the United Kingdom corporation tax rate of 19% and H1 2020 levels is due to the Group's ability to receive additional tax relief on its research and development expenditure.
During the six-month period to 30 June 2021, the Group received refunds from the UK tax authority in respect of the benefit it obtained from additional research and development relief and share option deductions in prior periods driving the £346,000 net tax receipt for the period.
8. Earnings per share
Unaudited six months ended
30 Jun 2021
Unaudited six months ended 30 Jun 2020
Audited
year ended
31 Dec 2020
pence
pence
pence
Earnings per share
Basic
6.8
6.0
12.5
Diluted
6.8
5.9
12.3
Unaudited six months ended
30 Jun 2021
Unaudited six months ended 30 Jun 2020
Audited
year ended
31 Dec 2020
pence
pence
pence
Adjusted earnings per share
Basic
7.3
6.7
13.2
Diluted
7.3
6.6
13.0
To provide an indication of the underlying operating performance the adjusted earnings per share calculation above excludes intangible amortisation and other non-underlying items and has a tax charge based on the effective rate.
Unaudited six months ended
30 Jun 2021
Unaudited six months ended 30 Jun 2020
Audited
year ended
31 Dec 2020
pence
pence
pence
Basic earnings per share
6.8
6.0
12.5
Non-underlying items
0.5
0.7
0.8
Prior years' tax credit
-
-
(0.1)
Adjusted earnings per share
7.3
6.7
13.2
9. Cash generated from operations
Unaudited
six months ended
30 Jun 2021
Unaudited
six months ended
30 Jun 2020
Audited
year
ended
31 Dec 2020
£000
£000
£000
Profit before tax for the period
4,653
4,540
8,108
Adjusted for:
Depreciation
648
823
1,573
Amortisation
423
423
846
Share-based payment expense
303
159
337
Finance income
(5)
(50)
(61)
Finance costs
44
42
100
Changes in working capital:
(Increase)/decrease in receivables
(997)
(3,512)
1,917
(Decrease)/increase in payables
(852)
(1,518)
3,484
(Decrease)/increase in provisions
(5)
18
(66)
Cash generated from operations
4,212
925
16,238
10. Dividends
The interim dividend of 1.8 pence per share (2020: 1.8 pence per share) was approved by the Board on 27 July 2021. It is payable on 27 August 2021 to shareholders on the register at 6 August 2021. This interim dividend has not been included as a liability in this interim financial information. It will be recognised in shareholders' equity in the year to 31 December 2021. A final dividend of £2,038,000 was paid in May 2021 and relates to the year ending 31 December 2020 (2020: final dividend £2,030,000).
11. Property, plant and equipment including right-of-use assets
Unaudited
six months ended
30 Jun 2021
Unaudited
six months ended
30 Jun 2020
£000
£000
Opening net book amount 1 January
2,394
3,207
Additions
194
131
Exchange movements
(38)
43
Depreciation
(648)
(823)
Closing net book amount 30 June (unaudited)
1,902
2,558
The Group has not placed any contracts for future capital expenditure which have not been provided for in the financial statements.
12. Trade and other receivables
Unaudited
six months ended
30 Jun 2021
Unaudited
six months ended
30 Jun 2020
£000
£000
Trade receivables - net
6,292
10,724
Other receivables
328
672
Prepayments
1,498
1,171
Accrued income
488
464
Closing net book amount 30 June (unaudited)
8,606
13,031
Contract assets and contract liabilities only comprise accrued and deferred income respectively. Within the trade receivables balance of £6,292,000 (30 June 2020: £10,724,000) there are balances totalling £484,000 (30 June 2020: £2,385,000) which, at 30 June 2021 were overdue for payment. The reduction of £4,432,000 in trade receivables from prior period levels is due to the timing of receipt of annual licence fee and subscription invoices issued. During July 2020, significant receipts totalling £3,900,000 were collected against the total receivables balance at 30 June 2020.
13. Trade and other payables
Unaudited
six months ended
30 Jun 2021
Unaudited
six months ended
30 Jun 2020
£000
£000
Trade payables
713
620
Other tax and social security payable
1,720
1,311
Other payables
128
128
Accruals
6,116
4,347
Deferred income
24,123
22,235
Closing net book amount 30 June (unaudited)
32,800
28,641
14. Capital lease obligations
Unaudited
six months ended
30 Jun 2021
Unaudited
six months ended
30 Jun 2020
£000
£000
Amounts payable under capital lease arrangements:
Within one year
606
531
Within two to five years
838
1,096
After five years
-
114
Total
1,444
1,741
Less: future finance charges
(95)
(140)
Present value of lease obligations
1,349
1,601
Less: Amount due for settlement within 12 months (shown under current liabilities
(563)
(479)
As at 30 June
786
1,122
14. Capital lease obligations (continued)
Unaudited
six months ended
30 Jun 2021
Unaudited
six months ended
30 Jun 2020The present value of financial lease liabilities is split as follows:
£000
£000
Within one year
563
479
Within two to five years
786
1,008
After five years
-
114
1,349
1,601
15. Provisions
Unaudited
six months ended
30 Jun 2021
Unaudited
six monthsended
30 Jun 2020
£000
£000
At 1 January
441
375
Charged to income statement
-
60
Exchange movements
(5)
7
At 30 June
436
442
Unaudited
six monthsended
30 Jun 2021
Unaudited
six months ended
30 Jun 2020
£000
£000
Current
240
38
Non-current
196
404
At 30 June
436
442
£382,000 of the total provision at 30 June 2021 of £436,000 relates to the cost of dilapidations in respect of its occupied leasehold premises (30 June 2020: £442,000).
16. Share capital
Unaudited
six months ended
30 Jun 2021Unaudited
six months ended
30 Jun 2020Ordinary share capital at
7 1/3 pence each
Number of shares
Ordinary Shares
Number
of shares
Ordinary Shares
000
£000
000
£000
Issued and fully paid:
Opening balance as at 1 January
56,429
4,143
56,218
4,128
Shares issued under share option schemes
182
13
160
12
At 30 June (unaudited)
56,611
4,156
56,378
4,140
16. Share capital (continued)
Employee share option scheme options exercised during the period to 30 June 2021 resulted in 182,291 shares being issued (30 June 2020: 159,992). The total net proceeds from the issuance of shares during the period was £567,000 (30 June 2020: £72,000) with £13,000 (30 June 2020: £12,000) of this being recognised within share capital, being the nominal value of shares issued. The remaining amount represents the premium on issue which is detailed in the table below. The related weighted average share price at the time of exercise was £6.74 per share (30 June 2020: £3.73).
Share premium
Unaudited
six months ended
30 Jun 2021
Unaudited
six months ended
30 Jun 2020
£000
£000
Opening balance as at 1 January
7,828
7,660
Movement in relation to share options exercised
554
60
Closing balance as at 30 June (unaudited)
8,382
7,720
17. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.
During 2020, the Group entered into transactions with a subsidiary of FDM Group (Holdings) plc, a company for which Peter Whiting (non-executive Director of Aptitude Software Group plc) is currently a non-executive Director. FDM Group (Holdings) plc provided consultancy services to the Group during the six-month period ended 30 June 2020 at a cost of £164,000. No such transactions have been entered into for the six-month period ended 30 June 2021
There were no other related party transactions during the six-month period ended 30 June 2021 (30 June 2020: £nil), as defined by International Accounting Standard No 24 'Related Party Disclosures', except for key management compensation. The related party transactions for the year ended 31 December 2020 as defined by International Accounting Standard No 24 'Related Party Disclosures' are disclosed in note 31 of the Aptitude Software Group plc Annual Report for the year ended 31 December 2020.
18. Statement of directors' responsibilities
The Directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
· material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The Directors of Aptitude Software Group plc are listed in the Aptitude Software Group plc Annual Report for 31 December 2020. A list of current directors is maintained on the Aptitude Software Group plc website: www.aptitudesoftware.com/investor-relations/
Copies of this statement are available on the investor relations page of our website (www.aptitudesoftware.com/investor-relations/).
By order of the Board
Philip Wood
27 July 2021
Deputy Chief Executive Officer and Chief Financial Officer
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