REG - Aptitude Software - Audited Preliminary Results
15/03/2022 07:00
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RNS Number : 7479E Aptitude Software Group PLC 15 March 2022
15 March 2022
APTITUDE SOFTWARE GROUP plc
('Aptitude Software' or 'the Group')
Audited Preliminary Results for the Year Ended
31 December 2021
Aptitude Software Group plc (LSE: APTD), the specialist provider of finance
digitization and subscription management software, reports its Audited
Preliminary Results for the year ended 31 December 2021.
Financial Highlights
Year ended 31 December 2021 2020 % Change
Annual Recurring Revenue(1) at year end £41.8m £31.4m(2) 33%
Software revenue £36.9m £30.5m 21%
Services revenue £22.4m £26.8m (16%)
Total Revenue £59.3m £57.3m 3%
Adjusted Operating Profit(3) £9.9m £9.1m 9%
Statutory operating profit £6.5m £8.1m (20%)
Operating cash flow percentage(4) 151% 178% (15%)
Cash and cash equivalents at year end £29.1m £44.8m (35%)
Net funds £16.1m £42.9m (62%)
Adjusted Basic Earnings per Share(3) 14.2p 13.2p 8%
Basic Earnings per Share 9.0p 12.5p (28%)
· Organic growth in Annual Recurring Revenue ('ARR') of 10% on
a constant currency(2) basis
· Software revenue, the strategic focus of the Group, grew 21% to
£36.9 million (2020: £30.5 million), organic growth of 15%, representing 62%
of total revenue (2020: 53%)
· Continued balance sheet strength with cash of £29.1 million
(2020: £44.8 million) and net funds(5) of £16.1 million (2020: £42.9
million) following the MPP Global acquisition in October 2021
Strategic Progress:
· Aptitude Software is well positioned to benefit from the two
recognised strategic growth drivers of finance digitization and subscription
management
· Increased investment accelerates the launch of Fynapse, the
Group's next generation strategic digital finance platform, lowering the
overall total cost of ownership and significantly increasing performance for
our clients whilst opening new markets for Aptitude Software and our partners
· Strategic acquisition of MPP Global, for total consideration of
£39.1 million, provides the Group with differentiated end-to-end revenue
automation capabilities to serve the fast growing subscription economy in
existing and new industry verticals
· The investments provide long-term and non-cyclical growth
opportunities which the Board anticipates will lead to an acceleration in the
growth of both Annual Recurring Revenue and margin in the medium term
Operational Highlights:
· New business success across all the Group's key regions and
verticals
· Continued success with Aptitude Revenue Management including a
growing number of clients in recently identified industry verticals of the
subscription economy
· A number of multi-year agreements signed with insurers in all of
the Group's geographies for the use of Aptitude Insurance Calculation Engine
and Aptitude Accounting Hub to drive regulatory compliance
· Expansion of relationships within the Group's existing client
base, including both the sale of new products and solution management services
· The partner programme, a key source of new business
opportunities in all regions, is demonstrating maturity with further partner
enablement and new go to market propositions developed in the year
Commenting on the results, Jeremy Suddards, Chief Executive Officer, said: -
'The Group made good progress in 2021 with new business success across all key
regions and double digit organic Annual Recurring Revenue growth.
We have accelerated our product investment during the year, resulting in the
launch today of Fynapse, a next generation digital finance product, delivering
significantly higher performance at a lower overall total cost of ownership,
underpinning our leadership in the finance automation market. Meanwhile the
acquisition of MPP Global has also accelerated the creation of a
differentiated end-to-end subscription management solution to meet the fast
growing needs of the subscription economy. As a result of these initiatives,
we now have two complementary platforms for sustained future growth.''
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, Hilary Buchanan, Sam Modlin
020-3405-0205
About Aptitude Software
Aptitude Software helps complex organizations automate and transform their
financial business models. Our core areas of focus are the accelerating
digitization of the finance function, and the global push to deploy and manage
subscription offerings. Aptitude Software also continues to support clients
through complex regulations which often form the catalyst for broader
transformation.
Finance digitization allows finance leaders to improve the speed of their
function, enhance the quality of its outcomes, and do so at a lower cost.
Aptitude Software's products draw data from complex, often siloed systems,
automate its processing through complex accounting calculations, and create a
unified view of finance. Businesses are left with a transparent view of their
data, delivered with extreme performance and at a lower cost of ownership.
Subscription management is an increasingly critical driver for novel and
traditional businesses alike, who need to launch new offerings frequently, in
ways which appeal to their customers and allow them to outperform their peers.
Aptitude Software's products power the acquisition, monetization, and
retention of subscribers straight through to revenue. With Aptitude Software,
businesses can take new subscriptions to market quickly, retain their
high-value recurring revenue, and stay one step ahead of the competition.
Our global client base includes some of the world's largest companies,
typically organisations with complex business models, large volumes of data,
and numerous internal systems. Aptitude Software is headquartered in London,
has a strong and growing North American presence, and is powered by Innovation
Centres in Poland and the North West of England. Sales, support and
implementation services are provided from offices in the United States, the
United Kingdom, Canada, and Singapore. www.aptitudesoftware.com
(http://www.aptitudesoftware.com)
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 2021 results with 2020
results retranslated at the rates of exchange prevailing during 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 2 of the notes to the Financial Statements.
(4 )Operating cash flow percentage is measured by comparing the cash generated
from operations as a percentage of operating profit adjusted for the
non-underlying items with no cash effect
(5) Net funds represents cash and cash equivalents less finance obligations,
which are currently made up of external loan financing and 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
Chairman's Statement
Overview
In 2021 Aptitude Software achieved new business success across all the Group's
portfolio and regions whilst significantly accelerating the Group's product
strategy to meet the market needs.
The Group secured a good number of new business wins and contract expansions
in the insurance and technology, media and telecom ('TMT') sectors, together
with a continued growing number of clients in new industry verticals. These
additions led to organic growth in Annual Recurring Revenue of 10% (2020: 11%)
on a constant currency basis.
A number of strategic milestones were achieved during the course of the year,
these included:
· the acceleration of development to launch Fynapse, the Group's next
generation digital finance platform, ahead of original expectations. Aptitude
Software is already working closely with a major global telecoms client as it
looks to take advantage of this new platform with the wider market launch of
the product brought forward to March 2022. Fynapse provides differentiated
finance digitization capability to a market in which the Group already has
outstanding credentials with the successful Aptitude Accounting Hub; and
· the acquisition of MPP Global which further strengthens Aptitude
Software's capability in subscription management, a fast growing market in
which the Group already has a strong market presence. Integration of the
acquired product is progressing well and expected to conclude in the second
half of 2022 with the intent to deliver a best-of-breed subscription
management solution. The Group is already seeing encouraging interest from the
MPP Global eSuite users in the wider Aptitude Software product set as clients
seek full end-to-end revenue automation.
Fynapse is one of the key drivers to the Group's long-term success. As a
result, the decision has been made to further increase investment in the
Group's product strategy in 2022 and 2023 to ensure the opportunity with this
next generation digital finance platform is fully realised. Fynapse
dramatically lowers the total cost of ownership and significantly increases
performance for users whilst opening new markets for Aptitude Software and our
partners. Following the period of increased investment, the Group expects to
see an acceleration in the growth of both Annual Recurring Revenue and margin
as the benefits of Fynapse are realised.
To support the go to market activities in our two key growth areas, focus has
also been to continue to strengthen the Group's high-quality partner network.
This has been highlighted by the complementary network of MPP Global already
identifying a number of early stage cross-sell opportunities. In addition to
an increase in pipeline generation from partners, 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.
The Board continues to be thankful for the talent, commitment and resilience
of its people. Investment continues in the development of management and the
wider team with a number of initiatives commenced in the year. Aptitude
Software welcomes the MPP Global team to the Group and looks forward to seeing
their careers advance within the business.
In December 2021 the Group moved into new offices in London. The office
supports collaboration through its innovative design and provides an
attractive work environment for the now hybrid working team, an approach that
will be rolled out in due course to the Group's other locations.
Dividend
The Board has proposed a final dividend of 3.60 pence per share (2020: 3.60
pence), making a total ordinary dividend of 5.40 pence per share for the year
(2020: 5.40 pence). Subject to shareholder approval at the Group's Annual
General Meeting in April 2022, the proposed final dividend will be paid on 3
June 2022 to shareholders on the register at 13 May 2022.
Outlook
Aptitude Software's growing portfolio of products, increasing worldwide
presence and mature partner network provides the Group with long term and
non-cyclical growth opportunities as the business increases investment in its
two strategic growth drivers of finance digitization and subscription
management.
Whilst the accelerated investment in the product suite is anticipated to
dampen short term profitability, the Board fully expect to see continual
revenue growth and Annual Recurring Revenue growth throughout this period,
with improving margins delivered from 2024 and beyond. The Board believes this
accelerated strategic investment will create longer term sustainable value for
the Group and our shareholders.
Ivan Martin
Chairman
14 March 2022
Chief Executive Officer's Report
Introduction
Aptitude Software's core areas of long term focus are the accelerating
digitization of the finance function, and the global push to deploy and manage
subscription offerings. Aptitude Software also continues to support clients
through complex regulations which often form the catalyst for broader
transformation.
Finance digitization allows finance leaders to improve the speed of their
function, enhance the quality of its outcomes, and do so at a dramatically
lower total cost of ownership for a modern finance function. Aptitude
Software's products receive data from complex, often siloed systems, automate
its processing through complex accounting calculations, and create a unified
view of business performance. Businesses are left with a transparent view of
their finance data, delivered in a near real time basis and at a lower cost of
ownership.
Subscription management is an increasingly critical driver for new economy and
traditional businesses alike. Aptitude Software's products now power the
acquisition, billing, and retention of subscribers straight through to revenue
reporting. With Aptitude Software, businesses can take new subscriptions to
market quickly, retain their high-value recurring revenue, and stay ahead of
the competition.
Our global client base includes some of the world's largest companies,
typically organisations with complex business models, large volumes of data,
and numerous internal systems. Whilst our products are relevant for all
sectors, the Group has established a strong presence in banking, insurance and
technology, media and telecom ('TMT') complemented by clients in a series of
other new advanced industries.
The business generates revenue from its software through a combination of
licence fees (all annual recurring licences), software maintenance/support,
software subscriptions for its cloud-based offerings and implementation and
other recurring support services including the growing solution management
service. The eSuite product acquired in the year also generates incremental
revenue through charging volume-based usage and financial transaction fees.
Software development, together with a growing number of other services,
continues to be performed at the Aptitude Innovation Centre in Poland, with
the acquisition of MPP Global in 2021 providing a second long-term innovation
centre for the Group at its headquarters in the North West of England. Sales,
support and implementation services are provided from Aptitude
Software's offices in London, North West England, North America and
Singapore.
Corporate Strategy and MPP Global Acquisition
Aptitude Software's strategy is focused on providing innovative finance
digitization and subscription management software serving a growing number of
C-suite stakeholders.
The Group undertook a number of strategic activities during 2021, with details
of these provided in the sections below. These activities are focused on
continuing to drive an acceleration of growth in the software revenues which
now represent 62% of overall revenue (2020: 53%). 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.
MPP Global Acquisition
In the final quarter of 2021, the Group completed the strategic acquisition of
MPP Global Solutions Limited, an international provider of cloud-based
subscription management and billing technology ('eSuite'), for aggregate
consideration of £39.1 million. The acquisition reflects Aptitude Software's
strategy of acquiring businesses which accelerate the Group's product strategy
and support its continued global growth by further strengthening the Group's
subscription management capabilities, a market in which the Aptitude Revenue
Management product set already has a strong presence.
MPP Global was considered a particularly strong acquisition opportunity within
subscription management due to:
· the ability to integrate eSuite and the Group's Aptitude Revenue
Management solution to create a differentiated end-to-end subscription,
billing, and revenue automation solution;
· the complementary nature of eSuite and Aptitude Revenue Management
bringing a number of cross-sell opportunities;
· a shared focus on the largest of companies, typically organisations
with complex business models;
· a high proportion of recurring revenue; and
· a high quality innovation centre in the North West of England.
Integration of Aptitude Software and MPP Global is progressing well as
outlined later within this report.
Finance Digitization
Market Drivers
Quality of data, speed of reporting and cost continue to be the top drivers on
the CFO's agenda as they are increasingly challenged by the demands of
operating in a digital world with growing regulatory and cost pressures. These
demands result in an increase in the complexity, volume and number of sources
of finance data, and the increasing requirement for decision making to move at
the pace of the business in real time. Aptitude Software's product set is well
positioned to address these requirements.
Finance Digitization Products
A key highlight in 2021 is the investment in Fynapse, the Group's next
generation strategic digital finance platform which is being launched to the
market in March 2022. Fynapse provides finance digitization capability to a
market in which the Group already has outstanding credentials with the
successful Aptitude Accounting Hub, a product that continued to secure new
agreements with a number of organisations in the year.
Fynapse
The Fynapse application, Aptitude Software's newest solution, is a modular,
cloud native, high performance platform addressing an organisations' need to
drive finance digitization to continue the transformation of their wider
businesses. The application builds on the successful Aptitude Accounting Hub,
centralising and automating finance, accounting and reporting processes,
creating a deep level of operational intelligence for our clients. It delivers
a brand new user centric interface with a consolidated, yet highly granular,
view of financial data which enhances business insights to assist decision
making. Importantly, Fynapse has been built in cloud native technologies
providing extreme levels of performance but at the lowest total cost of
ownership for finance functions.
Success with the application has already been achieved with the Group working
closely with a global telecoms client as it looks to migrate to this new
platform to take advantage of the new features.
The modular design and ease of integration also allows the market opportunity
to extend beyond our current industries into adjacent verticals, shortening
typically long implementation cycles and allowing our partner network to
implement efficiently, with minimal risk, short time-to-benefit and at a
competitive total cost of ownership.
The platform also offers partners the opportunity to co-create and license
their own IP, further accelerating and differentiating their services, whilst
the application's lower total cost of ownership and scalability of innovative
cloud-native technologies provide the business with greater go to market reach
through the unlocking of new prospect tier opportunities.
Whilst the Aptitude Accounting Hub continues to achieve success, to maintain
clear competitive advantage and differentiation over competing applications
from much larger enterprise focused ERP providers, Aptitude Software has
chosen to bring forward investment in Fynapse. Accordingly, the Group has made
the strategic decision to accelerate investment in Fynapse to capitalize on
the mid-term market opportunity. With direct costs of approximately £1.5
million focused on this new product in 2021, this strategic investment will
approximately double in 2022 as the product's capabilities are further
extended.
Based on its capabilities and the positive feedback received from both our
existing global telecoms client and global partners, the Group has confidence
in the success of Fynapse which is expected to be a key growth driver for the
business in future years.
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 2021. Building on the
new business successes announced earlier in the year within the insurance
market, Aptitude Software secured a number of new agreements in this sector
across all of the Group's geographies in the second half of 2021 including a
significant multi-year SaaS subscription agreement signed with a global
insurer for the use of the Group's IFRS 17 solution. A number of sales were
also achieved for the IFRS 17 "Comply" product, 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.
AICE is a strategic, transformational application 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 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. Demand is expected to
continue in 2022, principally with smaller and medium-sized insurers.
Aptitude Accounting Hub
The Group continued to leverage the capabilities of the Aptitude Accounting
Hub ('AAH') in 2021, securing new agreements with a number of organisations as
they seek to automate and transform their finance functions. A highlight
during the second half of the year was the entry into a significant multi-year
subscription with a fast growing global insurer for the use of AAH
concurrently with the Aptitude Calculation Engine, delivered through SaaS, to
support the foundation for wider group automation as the business expands.
Whilst further sales of AAH will be achieved, particularly when used in
conjunction with our other regulatory focused applications, we do expect that
an increasing number of clients seeking to automate and transform their
finance function will opt for Fynapse in the future.
Subscription Management
Market Drivers
The subscription economy is continuing to expand into new sectors as the
benefits of subscription income are increasingly valued more than traditional
non-recurring revenues. The Group has seen this phenomenon in broader sectors
such as high-tech advanced industries and medical devices. As organisations
move to these business models they require new systems to manage these
subscriptions and require new capabilities to address the complexities of
revenue recognition inherent with subscriptions.
Aptitude Software's products within subscription management are focused on the
needs of the world's largest companies, organisations with highly complex
business models and data processing requirements which generalist providers
are unable to address.
Subscription Management Products
A key highlight in 2021 was the acquisition of MPP Global, bringing the eSuite
platform into the Group.
eSuite
The eSuite platform is a modular, cloud based end-to-end SaaS solution for
large, international, enterprise customers across the media and publishing
sector as well as a growing number of other verticals.
The application is focused on the subscription economy and provides identity
management, CRM, automated billing, payment processing, and churn management
capabilities, enabling businesses to acquire, monetize and optimise customers
subscriptions.
eSuite's ability to manage both physical and digital subscriptions means it is
well positioned to expand Aptitude Software's revenue management offering
into an end-to-end subscription, billing, and revenue automation solution and
is expected to provide further opportunities for automation and growth within
Aptitude Software's existing customer base while also supporting new business
opportunities. Integration of the two platforms is progressing well and is
expected to be completed during the second half of 2022 and there is already
encouraging interest in both the eSuite client base and wider market for this
end-to-end solution. Investment continues being made in broadening the
capabilities of the eSuite platform to access new markets.
Alongside the investment in the product integration between eSuite and
Aptitude Revenue Management, the integration of the eSuite team and the wider
Aptitude Software business is progressing in line with expectations.
Good progress has also been achieved on a number of implementations in the UK
and Europe in the period of the Group's ownership. In addition, the business
is working very closely with a new prestigious global multi-media organisation
as it seeks to further monetise its digital content outside of its home
territory.
Aptitude Revenue Management ('ARM')
The Group's leading revenue management application Aptitude RevStream has
continued to make good progress in 2021. The product continues to achieve
standalone new business success with a highlight being a multi-year agreement
with a publicly traded health care equipment company in California selecting
both ARM alongside the Aptitude Lease Accounting Engine application providing
further evidence of the expansion of the subscription economy into new
industry sectors.
The Aptitude Revenue Management applications enable finance teams to 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.
A number of opportunities within the recently acquired eSuite user base have
been identified which will benefit from this capability once the integration
between the products is complete.
Software-as-a-Service ('SaaS') Progression and Margin Evolution
The Group has continued to successfully leverage its established SaaS
capabilities during 2021 across its entire product portfolio with the adoption
of SaaS being significantly faster than originally anticipated.
As a result, since February 2021 all new clients have chosen to deploy the
Group's software in this way leading to SaaS subscription fees as a proportion
of Annual Recurring Revenue increasing organically to 31% as at 31 December
2021 (2020: 23%). Including the benefit of the MPP acquisition, this
proportion rises to 43%. 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.
The accelerated adoption of cloud technologies impacts margin expectations in
the short term given the cost profile of a number of the Group's products when
deployed as SaaS. The launch of Fynapse, with its cloud-native capabilities,
is expected to enable significantly higher margins on this service to be
achieved.
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.
Due to the Group's long implementation cycles, implementation services revenue
reduced in the year due to the disruption to our key markets, particularly in
2020, related to the pandemic. Demand for implementation services is however
expected to increase in 2022. A key reason for this increased demand is the
continuing support of a number of the implementations for the Aptitude
Insurance Calculation Engine as go-lives approach for this regulatory focused
application in January 2023.
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 2021, a number of new successes
and major renewals were achieved from across the client base.
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.
Partner Network
The growth and development of Aptitude Software's high-quality partner
network, which now includes mature 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 fees faster than its services, leading to
a richer revenue mix. During 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, whilst the acquisition of MPP Global has
accelerated the generation of a number of new partner propositions which can
be leveraged by the wider group.
We expect our partner network to be both deepened and widened through the
launch of Fynapse. The solution is easier to implement and provides a platform
for our partners to co-create assets leading to a differentiated offering for
them against working with more generalist ERP providers.
Aptitude Innovation Centres
Investment continues in the team at the Group's principal, long-established,
Innovation Centre in Poland which remains a material differentiator for the
Group. In addition to software development, the centre is an increasing focal
point for the Group's cloud operations, support activities and growing
solution management services offering. Investment in the Innovation Centre is
expected to be further increased in 2022 as Fynapse is brought to market
despite the inflationary pressures being felt in the region.
As part of the acquisition of MPP Global, the Group now has a second long-term
innovation centre for the Group in the North West of England, focused
principally on the development and integration of the eSuite product. The
Group is continuing with the planned investment in this high-quality operation
to support the growth ambitions for eSuite.
Overall there were 198 individuals at the Innovation Centre in Poland at 31
December 2021 (31 December 2020: 162) with a further 45 employees focused on
design, development, implementation and support based in the North West of
England.
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. The Board also wishes to
welcome the MPP Global team to the Group and looks forward to seeing their
careers advance within the business.
Overall Group headcount increased by 43% in the year to 476 (2020: 332), 17%
excluding the acquisition of MPP Global, as the business continues to invest
in the evolution of our technology and strengthen a number of other teams.
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 working
environment that recognises diversity, supporting everyone to thrive. 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 carries on attracting and retaining the most talented of
individuals, the business has continued to build on the investments in our
people. A particular highlight of this programme is the strengthening of the
Group's training and enablement function and the roll out of a new learning
management system to support our employees, clients and partners, initiatives
which are also being integrated into the MPP Global business. The Group has
also strengthened its strategy and innovations teams with senior executives
joining from the big four consulting partnerships and the financial services
sector.
With the recent return to a more normal working environment and following
extensive consultation with its employees, the business continues to adopt a
hybrid way of working. This combines 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.
Conflict in Ukraine
Whilst the Group has no clients, operations or employees located in either
Ukraine or Russia, the Board is actively monitoring the developing situation
and is mindful of the potential for escalation. The Group's largest innovation
centre is in the western part of Poland. The Group is providing appropriate
support to our Polish colleagues at this difficult time including the support
of their charitable and volunteering endeavours in relation to the crisis.
Furthermore, the Group is assessing contingency plans should there be an
escalation of the situation.
Focus areas for 2022
The Group is focused on delivery against its three go-to-market pillars:
finance digitization, subscription management and partner enablement,
supported by our ongoing focus on people excellence and financial confidence.
Within finance digitization we are launching alongside our charter client our
new Fynapse offering and committing to increase investment in 2022 and 2023.
Within subscription management, key activities will centre on the integration
of our products to support cross sales into our extended customer base whilst
building opportunities for the future in the adjacent industry sectors we have
identified. Underpinning this, partner relationships will continue to deepen
as we add further advisory and technology partners to support and market our
solutions. Supplementing these pillars, we will continue to invest in our
people, seeking to retain and grow our teams, with an ethos of diversity and
inclusion.
We are confident the combination of all these activities will see, following
the period of increased investment, an acceleration in both the growth of
Annual Recurring Revenue and the Group's margins.
Jeremy Suddards
Chief Executive
Officer
14 March 2022
Group Financial Performance and Chief Financial Officer's Report
Revenue
Software Revenues
Annual Recurring Revenue ('ARR') for the core Aptitude Software business
(excluding MPP Global's contribution) grew by 10% on a constant currency basis
in the year to £34.4 million at 31 December 2021 (31 December 2020: £31.4
million, 30 June 2021: £32.6 million, both restated for the prevailing
exchange rates at 31 December 2021). Including the benefit of the MPP Global
acquisition total ARR at 31 December 2021 was £41.8 million, overall growth
of 33% in the year.
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. During the year
there was an acceleration towards SaaS deployment with all new clients after
February 2021 choosing this approach. As a result of this dynamic the
proportion of clients deploying software using SaaS has continued to grow with
SaaS subscription fees accounting for 31% of the total ARR at 31 December 2021
for the core Aptitude Software business (2020: 23%), 43% including the benefit
of the MPP Global acquisition.
Highlighting both the strength of our client relationships and the quality of
our product suite, net retention from the core Aptitude Software business in
the year was 102% (2020: 102%) (measured by the total value of on-going ARR at
the year-end from clients in place at the start of the year as a percentage of
the opening ARR from those clients on a constant currency basis).
Software revenues recognised in 2021 increased by 21% to £36.9 million (2020:
£30.5 million), organic growth of 15% excluding the benefit of the MPP Global
acquisition. These now represent 62% of overall revenue (2020: 53%). 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 despite the growing SaaS element of software
and the accompanying infrastructure and servicing costs.
Implementation and Solution Management Services
Services revenue totalled £22.4 million for the year ended 31 December 2021
(2020: £26.8 million) of which 86% (2020: 89%) is attributable to the
implementation of our software with the balance of 14% (2020: 11%) generated
from solution management services which, whilst not included in the Group's
Annual Recurring Revenue, are typically recurring in nature. Due to the
Group's long implementation cycles, implementation services revenue reduced in
the year due to the disruption to our key markets, particularly in 2020,
related to the pandemic. Included within the total services revenue for 2021
is £0.4 million relating to MPP Global for the period of the Group's
ownership.
Research and Development Expenditure
Total expenditure on product management, research and development increased in
the year ended 31 December 2021 to £10.6 million (2020: £8.5 million) as the
Group continues to invest in order to realise the opportunities across its two
growth drivers of finance digitization and subscription management. Growth in
expenditure focused on Aptitude Software's products was 15%, excluding the
£0.8 million investment by MPP Global in its eSuite product during the period
of the Group's ownership.
Overall expenditure on product management, research and development is
expected to increase significantly in 2022 by approximately 55%, growth of 35%
after adjusting for the investment in MPP Global, which is principally driven
by the strategic decision to accelerate investment in Fynapse to capitalize on
the mid-term market opportunity. The Group is also continuing with the planned
investment in eSuite to support the growth ambitions of the application.
The Board has continued to determine that none of the internal research and
development costs incurred during 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 on a statutory basis for the year ended 31 December
2021 was in line with management expectations at £9.9 million (2020: £9.1
million). Adjusted Operating Margin for the period increased marginally
against 2020 levels to 17% (2020: 16%) despite the Group continuing to
prioritise essential investment across a number of functions. Operating profit
on a statutory basis was £6.5 million (2020: £8.1 million).
In the short term, the accelerated adoption of cloud technologies impacts
margin expectations given the cost profile of a number of the Group's products
when deployed as SaaS. The launch of Fynapse, with its cloud-native
capabilities, is expected to enable higher margins on this service to be
achieved.
In addition to the increased research and development activities in 2022 the
Group, as with many technology businesses, is experiencing increased
inflationary pressures within its cost base. Inflation is particularly strong
in Poland at 9%, the location of the Group's principal Innovation Centre,
however, inflation is elevated in all the Group's locations. Whilst pay rises
are made within the business early in the year there is typically a delay of
potentially over 12 months before increased costs can be passed to clients.
Whilst client contracts allow for inflationary increases to be applied to
fees, typically services' day rates cannot be increased during the initial
implementation for a client. Furthermore, the timing of a client's invoice for
their typically annually in advance software fee can also contribute to a
delay in inflationary pressures being passed to clients.
Acquisition of MPP Global
In the final quarter of 2021, the Group acquired MPP Global for total
consideration of £39.1 million, for which cash consideration and associated
deal costs totalled £37.4 million. The acquisition has enhanced the Group's
level of recurring revenue, driving growth in both ARR and software revenue, a
strategic focus for the business whilst accelerating the Group's product
strategy and supporting the continued global growth of the business. These
strategic capabilities underpin the Group's recognition of £22.2 million of
goodwill and a further £20.3 million of intangible assets on acquisition.
MPP Global generated £2.3 million of revenue with an operating loss of £0.3
million since completion of the acquisition by Aptitude.
Foreign Exchange
With 51% (2020: 52%) 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 2020 revenue and Adjusted Operating Profit would have been
reported at £56.0 million and £8.7 million respectively on a constant
currency basis (compared to actual result of £57.3 million and £9.1
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 increased significantly from prior year levels to £3.4
million (2020: £1.0 million) principally due to the £2.0 million of deal
costs incurred on the MPP Global acquisition. The remaining amount is in
relation to intangible amortisation (£1.4 million), with the uplift of £0.6
million from 2020 levels resulting from the amortisation of intangible assets
recognised on acquisition.
Taxation
The total tax charge before adjusting for the impact of non-underlying and
other sundry items of £1.6 million (2020: £1.6 million) represents 17.1% of
the Group's profit before tax (2020: 18.1%), with the reduction against the
United Kingdom corporate tax rate of 19% due to the Group's ability to receive
additional tax relief on its research and development expenditure.
Statutory Results
The Group reported a profit for the year attributable to equity shareholders
of £5.1 million (2020: £7.0 million).
Earnings per Share
Adjusted Basic Earnings per Share increased by 8% to 14.2 pence (2020: 13.2
pence). As a result of the significant non-underlying costs incurred, Basic
Earnings per Share was 9.0 pence (2020: 12.5 pence).
Dividend
A final ordinary dividend of 3.60 pence per share is proposed (2020: 3.60
pence), making a total ordinary dividend of 5.40 pence per share for the year
(2020: 5.40 pence).
Balance Sheet
The Group continues to have a strong balance sheet with net assets at 31
December 2021 of £57.2 million (2020: £50.6 million), including cash of
£29.1 million (2020: £44.8 million) and net funds of £16.1 million (2020:
£42.9 million) following the £37.4 million of cash consideration and
associated deal costs incurred on the MPP Global acquisition. Trade
receivables (net) have increased to £8.8 million (of which £7.6 million was
in respect of the Aptitude core business) due to the timing of receipt of
annual licence fee and subscription invoices issued in the final months of the
year (2020: £5.9 million). The growth in the Group's recurring revenues
resulted in deferred income increasing to £30.9 million at 31 December 2021
(2020 £25.7 million). The Group's cash collection disciplines remain strong
with DSO (debtor days) at 31 December 2021 of 37 (2020: 40).
Philip Wood
Deputy Chief Executive Officer and Chief Financial Officer
14 March 2022
Group Income Statement
for the year ended 31 December 2021
Year Ended 31 Dec 2021 Year Ended 31 Dec 2020
Notes Before Non-underlying items Before non-underlying items Non-underlying items
non-underlying
items Total
Total
Continuing operations £000 £000 £000 £000 £000 £000
Revenue 1 59,330 - 59,330 57,266 - 57,266
Operating costs 2 (49,430) (3,439) (52,869) (48,155) (964) (49,119)
Operating profit 9,900 (3,439) 6,461 9,111 (964) 8,147
Finance income 6 - 6 61 - 61
Finance costs (238) - (238) (100) - (100)
Net finance costs (232) - (232) (39) - (39)
Profit before income tax 9,668 (3,439) 6,229 9,072 (964) 8,108
Income tax expense 3 (1,634) 479 (1,155) (1,585) 514 (1,071)
Profit for the year 8,034 (2,960) 5,074 7,487 (450) 7,037
Earnings per share
Basic 4 9.0p 12.5p
Diluted 4 8.9p 12.3p
group statement of comprehensive income
For the year ended 31 December 2021
Year ended Year ended
31 Dec 2021 31 Dec 2020
£000 £000
Profit for the year 5,074 7,037
Other comprehensive expense
Items that may be reclassified to profit or loss:
Fair value (loss)/gain on hedged instruments (222) 45
Currency translation difference (225) (988)
Other comprehensive income from discontinued operations - -
Other comprehensive expense for the year, net of tax (447) (943)
Total comprehensive income for the year 4,627 6,094
Group Balance Sheet
For the year ended 31 December 2021
As at As at
31 Dec 2021 31 Dec 2020
Notes £000 £000
ASSETS
Non-current assets
Property, plant and equipment including right-of-use assets 6 4,261 2,394
Goodwill 7 46,006 23,787
Intangible assets 8 24,502 5,640
Other long-term assets 1,354 1,472
Income tax assets - 642
Deferred tax assets 115 448
76,238 34,383
Current assets
Trade and other receivables 9 10,775 7,782
Financial assets - derivative financial instruments - 62
Current income tax assets 1,168 1,161
Cash and cash equivalents 29,064 44,822
41,007 53,827
Total assets 117,245 88,210
LIABILITIES
Current liabilities
Financial liabilities
- borrowings 10 (313) -
- derivative financial instruments (293) (133)
Trade and other payables 11 (40,284) (33,652)
Capital lease obligations 12 (273) (881)
Current income tax liabilities (353) (247)
(41,516) (34,913)
Net current (liabilities)/assets (509) 18,914
Non-current liabilities
Financial liabilities - borrowings 10 (9,573) -
Capital lease obligations 12 (2,777) (972)
Provisions 13 (379) (441)
Deferred tax liabilities (5,811) (1,236)
(18,540) (2,649)
NET ASSETS 57,189 50,648
Group Balance Sheet
For the year ended 31 December 2021
As at As at
31 Dec 2021 31 Dec 2020
Notes £000 £000
SHAREHOLDERS' EQUITY
Share capital 14 4,194 4,143
Share premium account 11,946 7,828
Capital redemption reserve 12,372 12,372
Other reserves 33,902 34,124
Accumulated losses (3,346) (6,165)
Foreign currency translation reserve (1,879) (1,654)
TOTAL EQUITY 57,189 50,648
Group Statement of changes in shareholders' equity
for the Year Ended 31 December 2021
Share capital Share premium Accumulated losses Foreign currency translation reserve Capital redemption reserve Other reserves£000 Total
£000 £000 £000 £000 £000 Equity
£000
At 1 January 2021 4,143 7,828 (6,165) (1,654) 12,372 34,124 50,648
Profit for the year - - 5,074 - - - 5,074
Cash flow hedges - net fair value losses in the year - - - - - (222) (222)
Currency translation difference - - - (225) - - (225)
Total comprehensive income for the year - - 5,074 (225) - (222) 4,627
Transactions with owners in their capacity as owners
Shares issued under share option schemes 15 953 - - - - 968
Share consideration on acquisition 36 3,165 - - - - 3,201
Share options - value of employee service - - 612 - - - 612
Deferred tax on share options - - 190 - - - 190
Dividends to equity holders of the company - - (3,057) - - - (3,057)
Total Contributions by and distributions to owners of the company recognised 51 4,118 (2,255) - - - 1,914
directly in equity income
At 31 December 2021 4,194 11,946 (3,346) (1,879) 12,372 33,902 57,189
Group Cash Flow Statement
for the Year Ended 31 December 2021
Year ended Year ended
31 Dec 2021 31 Dec 2020
Notes £000 £000
Cash flows from operating activities
Cash generated from operations 15 11,890 16,238
Interest paid (238) (100)
Income tax received 262 281
Net cash flows generated from operating activities 11,914 16,419
Cash flows from investing activities
Purchase of property, plant and equipment, excluding right-of-use assets (1,232) (232)
Acquisition of subsidiary, net of cash acquired (33,112) -
Interest received 6 61
Net cash used in from investing activities (34,338) (171)
Cash flows from financing activities
Net proceeds from issuance of ordinary share capital 968 183
Dividends paid to company's shareholders 5 (3,057) (3,044)
Payment of capital lease obligations (756) (924)
Drawdown of loan, net of arrangement fee 9,880 -
Net cash generated from/(used in) financing activities 7,035 (3,785)
Net (decrease)/increase in cash and cash equivalents (15,389) 12,463
Cash, cash equivalents and bank overdrafts at beginning of year 44,822 32,965
Exchange rate losses on cash and cash equivalents (369) (606)
Cash and cash equivalents at end of year 29,064 44,822
Notes to the Audited preliminary results for the year ended 31 December 2021
1. Segmental analysis
Business segments
The Board has determined the operating segments based on the reports it
receives from management to make strategic decisions.
The only business segment for both periods was Aptitude Software and therefore
no segmental analysis is provided for this period.
The principal activity of the Group throughout 2020 and 2021 was the provision
of business-critical software and services.
1 (a) Geographical analysis
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
Year ended Year ended Year ended Year ended
31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020
£000 £000 £000 £000
United Kingdom 32,265 32,096 11,353 9,571
Rest of World 27,065 25,170 47,977 47,695
59,330 57,266 59,330 57,266
2. Non-underlying items
31 Dec 2021 31 Dec 2020
£000 £000
Amortisation of intangibles 1,418 846
Acquisition and associated reorganisation costs 2,021 118
3,439 964
3. Income tax expense
Year ended Year ended
31 Dec 2021 31 Dec 2020
Analysis of charge in the year £000 £000
Current tax:
- tax charge on underlying items (1,005) (1,114)
- tax credit on non-underlying items - 22
- adjustment to tax in respect of prior periods (256) 132
- adjustment to tax in respect of prior periods on non-underlying items 134 255
Total current tax (1,127) (705)
Deferred tax:
- tax charge on underlying items (354) (274)
- tax credit on non-underlying items 346 237
- adjustment to tax in respect of prior periods (20) (329)
Total deferred tax (28) (366)
Income tax expense (1,155) (1,071)
The adjustment to tax in respect of prior periods on non-underlying items
totalling £134,000 (2020: £255,000) has been created through the benefit
from additional research and development relief. The net adjustment to tax in
respect of prior periods on underlying items totalling £276,000 (2020:
£197,000) relates to the reduction in the assumed benefit from research and
development relief in the UK.
The total tax charge of £1,155,000 (2020: £1,071,000) represents 18.54%
(2020: 13.21%) of the Group profit before tax of £6,229,000 (2020:
£8,108,000). The increase against 2020 levels is due to the disallowable deal
costs incurred on the MPP Global acquisition, see note 16 for details.
After adjusting for the impact of non-underlying items, change in tax rates,
share based payment charge and prior year tax charge, the tax charge for the
year of £1,652,000 (2020: £1,643,000) represents 17.10% (2020: 18.11%),
which is the tax rate used for calculating the adjusted earnings per share.
At 31 December 2021, the Group had unused tax losses totalling £1,029,000
available for offset against future profits. No deferred tax asset has been
recognised in respect of these losses due to the unpredictability of future
profit streams.
The difference between the total tax charge and the amount calculated by
applying the effective United Kingdom corporation tax rate of 19.00% (2020:
19.00%) to the profit on ordinary activities before tax is as follows:
Year ended Year ended
31 Dec 2021 31 Dec 2020
£000 £000
Profit before tax 6,229 8,108
Tax at the United Kingdom corporation tax rate of 19.00% (2020: 19.00%) (1,184) (1,540)
Effects of:
Adjustment to tax in respect of prior periods (142) 58
Adjustment in respect of foreign tax rates (35) (138)
Expenses not deductible for tax purposes (12) (27)
Non-underlying expenses not deductible for tax purposes (384) -
Other 105 (29)
Research and development tax relief 408 618
Recognition of tax losses not recognised as a deferred tax asset 160 -
Tax losses not recognised as a deferred tax asset (84) -
Change in future tax rates 13 (13)
Total taxation (1,155) (1,071)
United Kingdom corporation tax is calculated at 19.00% (2020: 19.00%) of the
estimated assessable profit for the year. Taxation for other jurisdictions is
calculated at the rates prevailing in the respective jurisdictions.
4. Earnings per share
To provide an indication of the underlying operating performance per share,
the adjusted profit after tax figure shown below excludes non-underlying items
and has a tax charge using the effective rate of 17.10% (2020: 18.11%).
Year ended Year ended
31 Dec 2021 31 Dec 2020
£000 £000
Profit before tax and non-underlying items 9,668 9,072
Tax charge at a rate of 17.10% (2020: 18.11%) (1,652) (1,643)
8,016 7,429
Prior years' tax charge (142) 58
Non-underlying items net of tax (2,960) (450)
Recognition of tax losses not recognised as a deferred tax asset 160 -
Profit on ordinary activities after tax 5,074 7,037
2021 2020
Number Number
(thousands) (thousands)
Weighted average number of shares 56,675 56,339
Effect of dilutive share options 432 780
57,107 57,119
2021 2021 2020 2020
Basic Diluted Basic Diluted
EPS EPS EPS EPS
Pence pence pence pence
Earnings per share 9.0 8.9 12.5 12.3
Non-underlying items net of tax 5.2 5.2 0.8 0.8
Prior years' tax charge/(credit) 0.3 0.2 (0.1) (0.1)
Recognition of tax losses (0.3) (0.3) - -
Adjusted earnings per share 14.2 14.0 13.2 13.0
Adjusted earnings per share are calculated using adjusted profit after tax.
5. Dividends
2021 pence per share 2020 pence per share 2021 2020
£000 £000
Dividends paid:
Interim dividend 1.80 1.80 1,019 1,015
Final dividend (prior year) 3.60 3.60 2,038 2,029
5.40 5.40 3,057 3,044
Proposed but not recognised as a liability:
Final dividend (current year) 3.60 3.60 2,059 2,031
The proposed final dividend for the current year was approved by the Board on
14 March 2022 but was not included as a liability as at 31 December 2021, in
accordance with IAS 10 'Events after the Balance Sheet date'. If approved by
the shareholders at the Annual General Meeting this final dividend will be
payable on 3 June 2022 to shareholders on the register at the close of
business on 13 May 2022.
6. Property, plant and equipment including right-of-use assets
31 Dec 2021 31 Dec 2020
£000 £000
Opening net book value 1 January 2,394 3,207
Additions 3,831 775
On acquisition of subsidiary (note 16) 237 -
Net disposals (1,037) (41)
Exchange movements 15 26
Depreciation (1,179) (1,573)
4,261 2,394
Net disposals in the year principally relate to the amendment and subsequent
derecognition of one of its property leases as it met the criteria of a
short-term lease.
7. Goodwill
31 Dec 2021 31 Dec 2020
£000 £000
Opening net book value 1 January 23,787 23,787
On acquisition of subsidiary (note 16) 22,219 -
46,006 23,787
The acquisition of subsidiary totalling £22.2 million represents the amount
of goodwill allocated to the MPP Global business. The value is attributable to
the benefits expected to arise from combining the eSuite offering with
Aptitude's current Revenue Management application to enable the Group to
provide a new best-of-breed end-to-end subscription management solution.
8. Intangible assets
31 Dec 2021 31 Dec 2020
£000 £000
Opening net book value 1 January 5,640 6,486
On acquisition of subsidiary (note 16) 20,280 -
Amortisation (1,418) (846)
24,502 5,640
9. Trade and other receivables
31 Dec 2021 31 Dec 2020
£000 £000
Trade receivables 8,833 5,881
Less: provision for impairment of receivables (21) -
Trade receivables - net 8,812 5,881
Other receivables 330 499
Prepayments 1,110 791
Accrued income 523 611
10,775 7,782
Within the trade receivables balance of £8,833,000 (2020: £5,881,000), of
which £1,262,000 is in respect of the acquired MPP Global business, there are
balances totalling £1,544,000 (2020: £1,453,000) including £518,000 from
MPP Global which, at 31 December 2021, were overdue for payment. Of this
balance £1,341,000 (2020: £1,432,000) has been collected at 14 March 2022
(2020: 9 March 2021).
10. Financial liabilities
31 Dec 2021 31 Dec 2020
£000 £000
Bank loan 9,886 -
The borrowings are repayable as follows:
Within one year 313 -
In the second year 1,250 -
In the third to fifth years inclusive 8,437 -
10,000 -
Unamortised prepaid facility arrangement fees (114) -
At 31 December 9,886 -
On 14 October 2021, the Group and Company entered into a loan agreement with
Bank Of Ireland consisting of a £10 million term loan in addition to a
revolving credit facility of £10 million. The term loan is repayable over
five years with an initial 12-month repayment holiday followed by annual
capital repayments of £1,250,000. At the end of the term, a bullet payment of
£5 million is due. The loan is denominated in Pound Sterling and carries
interest at SONIA plus 1.75%. The Group entered into an interest swap on 2
November 2021, effectively fixing the interest rate at 2.95% over a five-year
period.
11. Trade and other payables
31 Dec 2021 31 Dec 2020
£000 £000
Trade payables 1,290 600
Other tax and social security payable 1,216 2,020
Other payables 405 166
Accruals 6,462 5,163
Deferred income 30,911 25,703
40,284 33,652
12. Capital lease obligations
31 Dec 2021 31 Dec 2020
£000 £000
Amounts payable under capital lease agreements:
Within one year 387 908
Within two to five years 1,624 1,084
After five years 1,632 -
Total 3,643 1,992
Less: future finance charges (593) (139)
Present value of lease obligations 3,050 1,853
Less: Amount due for settlement within 12 months (shown under current (273) (881)
liabilities)
2,777 972
31 Dec 2021 31 Dec 2020
£000 £000
The present value of financial lease liabilities is split as follows:
Within one year 273 881
Within two to five years 1,287 972
After five years 1,490 -
3,050 1,853
13. Provisions for other liabilities and charges
Provisions
31 Dec 2021 31 Dec 2020
£000 £000
At 1 January 441 375
(Credited)/charged to income statement (142) 69
On acquisition of subsidiary (note 16) 89 -
Foreign exchange movement (9) (3)
At 31 December 379 441
£334,000 (2020: £386,000) of the total provision at 31 December 2021 of
£379,000 (2020: £441,000) relates to the cost of dilapidations in respect of
its occupied leasehold premises. All of the non-current provision is expected
be utilised within 2 to 5 years (2020: £441,000).
14. Share capital
Ordinary shares of 7 1/3p each Number £000
Issued and fully paid:
At 1 January 2021 56,428,967 4,143
Issued under share option schemes 277,944 15
Equity consideration on acquisition 492,537 36
At 31 December 2021 57,199,448 4,194
15. Cash flows from operating activities
Reconciliation of profit before tax to net cash generated from operations:
Year ended Year ended
31 Dec 2021 31 Dec 2020
£000 £000
Profit before tax for the year 6,229 8,108
Adjustments for:
Depreciation 1,179 1,573
Amortisation 1,418 846
Share-based payment expense 612 337
Finance income (6) (61)
Finance costs 238 100
Changes in working capital excluding the effects of acquisition:
(Increase)/decrease in receivables (1,561) 1,917
Increase in payables 3,930 3,484
Increase in provisions (149) (66)
Cash generated from operations 11,890 16,238
16. Acquisitions
MPP Global Solutions Limited ('MPP Global')
On 9 October 2021 the Group acquired the entire share capital and voting
rights of MPP Global Solutions Limited for consideration of £39.1 million,
which included £2.3 million of cash. Of the consideration, £35.4 million was
payable in cash at completion, £3.2 million was satisfied by the issue of
492,537 new ordinary shares with a fair value of 650 pence on date of
acquisition with the balance being settled by way of tax relief consideration
totalling the R&D credit receivable by the business for the 12 month
period ending 30 June 2021 on submission of the UK tax return. The New
Ordinary Shares issued will be subject to a twelve-month lock-in.
The net assets acquired in the transaction and the intangibles arising, are as
follows:
Carrying values pre acquisition
Fair value adjustments Provisional fair value
£000 £000 £000
Net assets acquired
Property, plant and equipment including right-of-use assets 237 - 237
Intangible assets - 20,280 20,280
Trade and other receivables 1,314 - 1,314
Cash and cash equivalents 2,314 - 2,314
Current income tax assets 426 - 426
Trade and other payables (1,467) - (1,467)
Deferred income (830) - (830)
Capital lease obligations (279) - (279)
Provisions (89) - (89)
Deferred tax liabilities - (5,070) (5,070)
1,626 15,210 16,836
Goodwill 22,219
Total consideration 39,055
Satisfied by
Cash paid 35,426
Equity consideration 3,201
Tax relief consideration 428
39,055
The intangible assets acquired as part of the acquisition of MPP Global can be
analysed as follows:
Software IPR and in process R&D 12,860
Customer relationships 7,420
20,280
17. Statement by the directors
The preliminary results for the year ended 31 December 2021 are prepared in
accordance with UK adopted International Accounting Standards (IAS) and
interpretations by the IFRS Interpretations Committee applicable to companies
reporting under UK adopted IFRS. They do not include all the information
required for full annual statements and should be read in conjunction with the
2021 Annual Report. The accounting policies adopted in this preliminary
announcement are consistent with the Annual Report for the year ended 31
December 2021.
The comparative figures for the financial year 31 December 2020 have been
extracted from the Group's statutory accounts for that financial year. The
2020 financial statements, which were prepared with international accounting
standards in conformity with the requirements of the Companies Act 20226 and
IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union, have been reported on by the Group's auditors and delivered to
the registrar of companies. There are no differences for the Group in applying
each of these accounting frameworks.
The financial information set out in this preliminary announcement does not
constitute the Company's statutory accounts for the years ended 31 December
2021 or 31 December 2020. The Annual Report for 2021 will be delivered to the
Registrar of Companies in due course. The auditors' report on those accounts
was unqualified and neither drew attention to any matters by way of emphasis
nor contained a statement under either section 498(2) of Companies Act 2006
(accounting records or returns inadequate or accounts not agreeing with
records and returns), or section 498(3) of Companies Act 2006 (failure to
obtain necessary information and explanations).
The Board of Aptitude Software Group plc approved the release of this audited
preliminary announcement on 14 March 2022.
The Annual Report for the year ended 31 December 2021 will be posted to
shareholders in due course and will be delivered to the Registrar of Companies
following the Annual General Meeting of the Company. The report will also be
available on the investor relations page of our web site
(www.aptitudesoftware.com). Further copies will be available on request and
free of charge from the Company Secretary at 8(th) Floor, 138 Cheapside,
London, EC2V 6BJ.
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