REG - Aptitude Software - Audited Results for Year Ended 31 December 2022
21/03/2023 07:00
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RNS Number : 5894T Aptitude Software Group PLC 21 March 2023
21 March 2023
APTITUDE SOFTWARE GROUP plc
('Aptitude' or 'the Group')
Audited Results for the Year Ended
31 December 2022
Aptitude Software Group plc (LSE: APTD), the specialist provider of finance
digitalization and subscription management software, reports its Audited
Results for the year ended 31 December 2022.
Financial Highlights
Year ended 31 December 2022 2021 % Change
Annual Recurring Revenue(1) ('ARR') at year end £51.6m £45.0m +15%
- ARR Growth 15%
- ARR Growth (Constant Currency(2)) 9%
Total Revenue £74.4m £59.3m +25%
- Recurring Revenue(3) £50.5m £40.1m +26%
- Non-Recurring Services Revenue £23.9m £19.2m +24%
Cash and cash equivalents at year end £29.2m £29.1m -
Net Funds(4) £15.9m £16.1m -1%
Adjusted Operating Margin(5) 10% 17% -7%
Adjusted Operating Profit(5) £7.5m £9.9m -24%
Statutory Operating Profit £3.7m £6.5m -43%
Basic Earnings per Share 4.5p 9.0p -50%
Final Ordinary Dividend per Share 3.6p 3.6p -
Full Year Ordinary Dividend per Share 5.4p 5.4p -
· Annual Recurring Revenue ('ARR') growth of 15% in absolute terms and 9% on a
Constant Currency basis
· Total Revenue grew by 25% to £74.4 million in line with market expectations
(2021: £59.3 million), Organic Growth(6) of 14%
· Recurring Revenue, the strategic focus of the Group, grew 26% to £50.5
million (2021: £40.1 million), Organic Growth of 11% representing 68% of
total revenue (2021: 68%)
· In line with expectations and the Group's previously communicated investment
plans, the increased investment in the Group's two strategic growth drivers of
finance digitalization and subscription management has tempered Adjusted
Operating Profits which reduced to £7.5 million (2021: £9.9 million)
consequentially impacting adjusted operating margin
· Balance sheet strong with year-end cash of £29.2 million (2021: £29.1
million) following £3.8 million net corporate cash flows. Net Funds(4) of
£15.9 million (2021: £16.1 million)
Strategic Progress:
· The Group's suite of products which is aligned to long-term and non-cyclical
strategic drivers of finance digitalization and subscription management, is
expected to drive an acceleration in growth of Annual Recurring Revenue and
margin
· Fynapse, the Group's next generation strategic digital finance platform,
launched in March 2022 is already contributing to Aptitude's success
· the signing of a major new partnership agreement with Microsoft. Fynapse will
be the only product with its capability to be deeply integrated with Microsoft
Dynamics 365 Finance and operate on the Microsoft Azure cloud platform
· the successful delivery of Fynapse to Aptitude's charter client in the US
telco market and their subsequent commitment to a multi-year subscription
agreement
· continued strong interest in this new higher margin offering from existing
clients, prospects and partners
· MPP Global, acquired in October 2021, is now fully integrated positioning
Aptitude to fully realise the opportunity within the subscription management
market
Business Highlights:
· Multiple Aptitude Accounting Hub new business successes in banking and
insurance, demonstrating that the Group is successfully pivoting away from
compliance to meet a growing broader need for finance automation
· Landmark win for eSuite to provide subscription management capability to one
of the largest global broadcasters and media content owners
· Further eSuite new business success achieved through both the well-developed
channel partners as well as direct sales in both traditional and emerging
markets demonstrating the breadth of the product's capabilities
· Continued demand for AREV, Aptitude's revenue management platform, including a
multi-year agreement with a US analytics software provider
Outlook:
· The Group remains focused on delivery against three go-to-market pillars:
finance digitalization, subscription management and partner execution
· Within finance digitalization the focus is on securing new Fynapse clients,
the development of the strategically promising Microsoft partnership and the
upcoming go-live of Fynapse's charter client
· Within subscription management, key activities will centre on executing on a
number of exciting opportunities with the existing product set and unlocking
volume subscriptions in new clients signed in 2022
· We are confident that these activities will lead to an acceleration in the
growth of Annual Recurring Revenue which, as the higher margin recurring
revenue grows as a proportion of overall revenue, will lead to increases in
the Group's overall margins.
Commenting on the results, Jeremy Suddards, Chief Executive Officer, said: -
'Aptitude made strong progress in 2022, cementing its position as a leading
technology provider supporting organisations in their finance digitalization
and subscription management transformations. We are confident these drivers
will provide the Group with long term growth.
Strategic highlights for the year include the release of Fynapse to our
charter client in the US whose project is progressing well and expected to
go-live as planned in mid-2023, whilst the global strategic partnership with
Microsoft provides the Group with the opportunity to significantly accelerate
the market adoption of Fynapse in both new markets and geographies. In what
has been a transitional year, the Group has achieved a good level of new
business success with the existing product portfolio across all our regions.
Overall, we are pleased with both the operational and strategic progress
achieved in 2022 and, whilst watchful of the global economic environment, the
Board is confident that the Group's performance for 2023 will be in line with
its expectations.'
Contacts
Aptitude Software Group plc
Ivan Martin,
Chairman
020-3687-3200
Jeremy Suddards, Chief Executive Officer
Philip Wood, Deputy Chief Executive Officer
Mike Johns, Acting Chief Financial Officer
Alma PR
Caroline Forde / Hilary Buchanan
020-3405-0205
About Aptitude
Aptitude helps complex organizations automate and transform their financial
business models. Our core areas of focus are the accelerating digitalization
of the finance function, and the cross-industry drive to deploy and manage
subscription offerings at scale. Aptitude also continues to support clients
through complex regulations which often form the catalyst for broader finance
transformation.
Finance digitalization enables finance leaders to automate legacy manually
intensive processes, improve the speed of their function, enhance the quality
of its outcomes, and do so at a dramatically lower cost. Aptitude's products
draw data from complex, often siloed systems, delivering high levels of
automatic processing of complex accounting calculations, and creating a
unified view of finance. Businesses are left with a transparent view of their
data, delivered at extreme performance and at a significantly lower cost of
ownership improving their finance functions' ability to support their business
objectives.
Subscription management is a rapidly increasingly critical driver for new and
traditional businesses alike, who want to move to or launch a recurring
revenue model, in ways which appeal to their customers and allow them to
outperform their peers. Aptitude's products power the acquisition,
monetization, and retention of subscribers straight through to complex revenue
reporting. With Aptitude, businesses can take new subscription-models to
market quickly, retain their high-value recurring revenue, and stay one step
ahead of the competition. Whilst business to consumer (B2C) subscription
models are increasing all the time, Aptitude also specialises in business to
business (B2B) subscriptions which are undergoing significant business model
shifts post pandemic, increasing volume and complexity which the Group is able
to manage ahead of its peers.
Our global client base includes some of the world's largest companies,
typically organisations with complex business models, large volumes of data,
and many legacy internal systems. Aptitude is headquartered in London, has a
strong and growing North American and Asian presence, and is powered by Global
Technology 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's 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, at that point in time, are being received but are
known to be terminating in the future. Included in ARR, for the first time,
are recurring revenues from the Group's solution management services,
comparatives have been adjusted to include such recurring revenue contracts.
The ARR at 31 December 2022 from solution management services was £4.5
million (31 December 2021: £3.4 million).
2 Constant Currency is calculated by comparing the 2022 results with 2021
results retranslated at the rates of exchange prevailing during 2022.
3 Recurring Revenue includes, for the first time (classified as non-recurring
services revenue in 2021), revenues from the Group's solution management
services, comparatives have been adjusted accordingly. The 2022 revenue from
solution management services was £3.8 million (2021: £3.1 million).
4 Net Funds represents cash and cash equivalents less finance obligations,
which includes capital lease obligations and a loan.
5 Adjusted Operating Profit and Adjusted Operating Margin 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.
6 Organic Growth excludes the contribution from MPP Global in both 2022 and
2021, the year of its acquisition.
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
Aptitude has made good strategic progress in the year, particularly with
Fynapse, the new platform at the heart of the Group's plans for finance
digitalization. Launched in March 2022, Fynapse provides clients with next
generation digital finance capabilities, while its open architecture allows
partners to build practices using Fynapse's core capabilities and cloud native
technologies, providing competitive differentiation.
Highlights since the launch of the platform include:
· the signing of a global partnership agreement with Microsoft to deeply
integrate Fynapse with Microsoft Dynamics 365 Finance and to market together
the combined solution
· the successful delivery of Fynapse to Aptitude's charter client in the US
telco market and their subsequent entry into a multi-year subscription
agreement
· strong positive interest in this new higher margin offering from existing
clients, prospects and partners
This excellent progress provides confidence that, going forward, Fynapse will
lead to an acceleration in the growth of Annual Recurring Revenue and enhanced
gross margins for the Group.
Aptitude has also completed the full integration of the MPP Global business
which was acquired in October 2021. eSuite, the platform brought into the
Group with the acquisition, together with our long-standing revenue management
platforms provide the Group with strong capability to address the growth
driver of subscription management. Several new business successes in the year,
together with the benefits arising from the integration, provide confidence
that sustained growth can be achieved with this product set to meet growing
market demand.
The technology partnership with Microsoft represents a very exciting
opportunity for the Group and has the potential to provide a material
acceleration in the adoption of Fynapse. With the Group continuing to invest
in its high-quality partner network, several new clients have been secured
directly by partners in each of the Group's two strategic growth drivers.
As set out in our trading update of 24 January 2023, notwithstanding this good
progress, the Board is monitoring the wider economic environment and its
potential impact on our clients' and prospects' procurement decisions. As
ever, but particularly given the current economic environment, the Board is
carefully managing investment levels in the business, whilst maintaining
momentum on Fynapse and other strategic priorities.
The Board is considerate of the impact on employees in areas where investment
is being moderated, as well as on the wider team. It is therefore important
that the Group continues to invest in the support of its talented and
committed team. The appointment of a Chief People Officer in April 2022 has
led to several initiatives and programmes being launched with a focus on the
further development of leadership capabilities and the Group's proposition to,
and connection with, its employees. Aptitude remains focused on promoting
equality, diversity and inclusion among its workforce with a number of
improvements in these areas achieved in the year outlined within the Chief
Executive Officer's report.
Board changes
As previously announced, Philip Wood, Deputy Chief Executive Officer and
previously Chief Financial Officer, will be retiring from the Board in July
2023. Philip joined the Board in 2007 and after 16 years with the Group is
planning a career sabbatical to spend more time with his young family. The
Board is very grateful for his key role in transforming the Group to focus on
the Aptitude brand and the expansion of the product range, laying the
foundations for Fynapse and the addition of revenue and subscription
management.
Having previously held a senior finance position within the Group, Mike Johns
has stepped up to the role of Acting Chief Financial Officer whilst a formal
selection process is conducted. Philip will continue his responsibilities as
Deputy Chief Executive Officer until his departure in July.
Dividend
The Board has proposed an unchanged final dividend of 3.60 pence per share
(2021: 3.60 pence), making a total ordinary dividend of 5.40 pence per share
for the year (2021: 5.40 pence). Subject to shareholder approval at the
Group's Annual General Meeting on 17 May 2023, the proposed final dividend
will be paid on 16 June 2023 to shareholders on the register at 26 May 2023.
Outlook
The Group is well positioned in its two strategic markets of finance
digitalization and subscription management. The milestones achieved with
Fynapse in particular provide the Group with confidence in growth and
profitability for future years.
Ivan Martin
Chairman
20 March 2023
Chief Executive Officer's Report
Introduction
Aptitude's core areas of long-term focus are the accelerating digitalization
of the finance function within enterprises, and the global push towards
recurring revenue managed through subscription offerings. Aptitude also
continues to support clients through complex regulations which often form the
catalyst for broader business transformation. The Group's main strength is the
ability of its technology and people to handle the complexity other solutions
are unable to, put simply "where others see complexity, we see opportunity".
Finance digitalization enables finance leaders to automate legacy manually
intensive processes, improve the speed of their function, enhance the quality
of its outcomes, and do so at a dramatically lower cost. Aptitude's products
draw data from complex, often siloed systems, delivering high levels of
automatic processing of complex accounting calculations, and creating a
unified view of finance. Businesses are left with a transparent view of their
data, delivered at extreme performance and at a significantly lower cost of
ownership improving their finance functions' ability to support their short,
medium and long term business objectives.
Subscription management is rapidly becoming a strategic imperative for new and
traditional businesses alike as they move to or launch a recurring revenue
model. Aptitude's products power the acquisition, monetization, and retention
of subscribers straight through to complex revenue reporting. With Aptitude,
businesses can take new subscription-models to market quickly, retain their
high-value recurring revenue, and stay one step ahead of the competition.
Whilst the prevalence of business to consumer (B2C) subscription models is
increasing, Aptitude also specialises in business to business (B2B)
subscriptions with the inherent complexity which the Group is able to manage
ahead of its peers.
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 "Assure". The eSuite product 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 Global Technology Centres in Poland
and in the North West of England. Sales, support and implementation services
are provided from Aptitude's offices in London, North West England, North
America and Singapore.
Corporate Strategy
Aptitude's strategy is focused on providing innovative finance digitalization
and subscription management software serving a growing number of C-suite
stakeholders.
The Group progressed a number of strategic activities during 2022, with
details of these provided in the sections below. These activities are focused
on continuing to drive an acceleration of growth in recurring revenues which
represent 68% of overall revenue (2021: 68%). 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.
Aptitude is fully focused on its two strategic growth drivers of finance
digitalization and subscription management and does not anticipate any
corporate activity to broaden its product portfolio in the short term.
Notwithstanding this, the Group may, in the future, identify small bolt-on
acquisition opportunities to deepen its existing capabilities which Aptitude
would be well positioned to progress given its existing cash resources.
Finance Digitalization
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's product set is well
positioned to address these requirements.
Finance Digitalization Products
Fynapse, the Group's next generation digital finance platform, was launched in
March 2022 with significant milestones achieved in the year. New business
success also continues to be achieved with the established Aptitude Accounting
Hub and Aptitude Insurance Calculation Engine applications.
The finance digitalization product set, the largest contributor to the Group's
recurring revenue base, delivered particularly strong growth in Annual
Recurring Revenue in the year with a balanced performance between new business
additions and the growth of existing clients through up-sell and price
increases. This robust performance underlines the strength of the long-term
opportunity with Fynapse for which we continue to see strong pipeline
generation across our key industries of banking, insurance and technology,
media and telecom.
Fynapse
Fynapse is a modular, cloud native, high performance finance platform
addressing an organisations' need to drive finance digitalization to underpin
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. The capabilities of the
product enable even greater automation of manual accounting processes,
reducing on-going operational costs and driving an improved total cost of
ownership for the finance function.
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 and delivering a faster time to
value.
A strategic global partnership with Microsoft, signed in December 2022, is
expected to be a material contributor to the success of Fynapse globally in
the medium and long term across all industry sectors. Under this agreement
Fynapse will be the only product with its capabilities to be deeply integrated
with Microsoft Dynamics 365 Finance and operate on the Microsoft Azure cloud
platform. This combined solution will provide Aptitude and Microsoft clients
with the ability to unify data from various financial systems to increase
scalability, gain the agility to rapidly adopt new regulations, automate
manual processes whilst delivering better business insights and reducing the
cost of the finance function.
In addition to the Microsoft partnership there is strong interest from
consultancies who are attracted to the open design of Fynapse. This open
design provides partners with the opportunity to co-create and license their
own IP built on the Fynapse platform, further accelerating and differentiating
their services. It is pleasing to report that this capability is proving an
attractive proposition for the Big-4 accountancy firms and is highly
differentiated from the more generalist providers in the market.
Fynapse has been successfully delivered to the charter client in the US telco
market and a multi-year subscription agreement is now in place. The
implementation project with the charter client is progressing well and is
expected to go-live in mid-2023 as planned. Additionally, there are a number
of pipeline opportunities progressing positively and the Group is looking
forward to announcing new users to the platform in 2023.
The strategic investment continues to grow the capabilities of Fynapse with
development performed at the Aptitude Global Technology Centre in Wroclaw,
Poland. The overall cost of our investment in Fynapse increased in 2022 to
£4.9 million (2021: £1.5 million) all of which is expensed. 2023 will see
modest growth in investment in Fynapse, with Aptitude's overall research &
development expenditure expected to be consistent with 2022.
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
Aptitude Insurance Calculation Engine ('AICE') is a strategic,
transformational application providing value to an insurer beyond addressing
the requirements of IFRS 17 (effective for accounting periods commencing 1
January 2023). Beyond compliance the application enables data insights and
decision support delivering long-term business benefits.
Whilst the expected modest level of new business success was achieved in 2022
with AICE, several existing clients opted to contract for Aptitude's Assure
managed services offering. Assure provides clients with additional services
beyond Aptitude's standard offering with its revenues recurring in nature and
included within the Group's Annual Recurring Revenue for the first time.
Whilst further new business success may be achieved in 2023, a key focus will
be upgrading AICE users to Assure. Projects to implement AICE clients continue
with a number expected to complete in the first half of the year in line with
the effective date of the IFRS 17.
Aptitude Accounting Hub
The Aptitude Accounting Hub ('AAH') is the Group's established product which
centralises and automates finance, accounting and reporting processes,
creating a deep level of operational intelligence for our client. It also
delivers a consolidated, yet highly granular, single view of financial data
which enhances business insights to assist decision making.
The Group continued to achieve new business success in 2022 with AAH, both on
a standalone basis as well as in conjunction with the sale of the Aptitude
Insurance Calculation Engine.
A material new contract with an US headquartered gift and payments company was
successfully signed early in the year. Working closely with one of our
partners, the opportunity was secured by demonstrating a more configurable and
finance enabled solution than our competitors, while also conveying our strong
expertise and proven track record at scale in the accounting hub space.
In the second half of the year a material multi-year agreement for the
Aptitude Accounting Hub was signed with one of Australia's largest banks to
replace their in-house finance data warehouse and underpin their finance
transformation programme. Additionally, a contract was secured with a large US
insurer prior to the end of 2022 to support their finance digitalization
programme.
These clients, together with the European bank contracted in the opening
months of 2023, have opted for this product to access existing capabilities in
AAH.
Subscription Management
Market Drivers
The subscription economy is continuing to expand into new sectors as the
benefits of subscription based recurring 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, medical devices and
automotive. 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 complex subscriptions.
Aptitude's products 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
Whilst good levels of new business success and growth of existing accounts was
achieved in 2022, overall Annual Recurring Revenue growth was subdued due to
an unusually high level of churn in 2022. Impacting all products within
subscription management there are several underlying reasons for the elevated
level of terminations, including business failure and corporate events
(especially clients being acquired) which are more prevalent in the markets
particularly targeted by the subscription management product set. Whilst 2022
has seen a negative impact from the dynamic nature of the markets that are the
focus of the subscription management product set, this dynamism has
historically delivered, and is expected to do so again in the future, strong
organic growth opportunities within the existing client base.
eSuite
eSuite 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 such as automotive.
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. Now integrated with the Group's revenue management offering,
Aptitude can offer an end-to-end subscription, billing & revenue
management automation solution which is expected to provide further
opportunities for automation and growth within the existing customer base
while also supporting new business opportunities. Conversations are continuing
with an existing eSuite client to adopt AREV, Aptitude's leading revenue
management product, to address their revenue management requirements.
A key highlight for eSuite in the period was the landmark win to provide
subscription management capability to one of the largest global broadcaster
and media content owners with potential for considerable expansion in Annual
Recurring Revenue once the offering is fully launched in 2023. Contributing to
securing this new contract was the earlier success achieved with a leading
broadcaster and media content owner in the United Kingdom, a project that
successfully went live in the first half of the year.
Several new business clients were also secured in the second half of the year
across various sectors and regions demonstrating the strength and flexibility
of the product. The revenue model for this product is heavily weighted towards
usage charges, as a result the addition of these new contracts to Annual
Recurring Revenue in the year was insufficient to fully mitigate the impact of
the contract cancellations received in the year.
The eSuite team is now fully integrated and benefitting from the expertise and
processes of the wider Group. This, together with the pipeline of new eSuite
opportunities and the Annual Recurring Revenue generated once the recently
secured clients go-live, is expected to lead to an improved performance from
this product in 2023.
Aptitude Revenue Management ('ARM')
The ARM 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 in the business to business
space. 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 major new business successes were achieved in 2022, a particular
highlight being a multi-year agreement for AREV with a very large
privately-owned US analytics software provider.
As with eSuite, a higher number of cancellations have been received in 2022
than we had experienced in prior years thereby subduing growth in Annual
Recurring Revenue for ARM products. In addition to cancellations arising from
corporate activity, the current economic climate has led to a higher level of
scrutiny by a very small number of clients of their project pay back periods
or external spend resulting in their wider transformation programmes being
paused or suspended. Discussions with the small number of affected clients are
on-going to agree the basis of cancellation.
Software-as-a-Service ('SaaS') Progression and Margin Evolution
As expected, growth in SaaS Annual Recurring Revenue ('ARR') has accelerated
at the faster Constant Currency growth rate of 15% (total ARR Constant
Currency growth of 9%) and now represents 44% of ARR (2021: 41%). Whilst all
products sold in the year are capable of being deployed by SaaS, for
principally regulatory reasons a very small number of clients continue to opt
to deploy our technology on their own infrastructure. On-premise ARR grew on a
Constant Currency basis by 4%.
Our on-premise clients currently drive the highest gross margins. As
previously reported, margins have been impacted by the accelerated adoption of
cloud technologies on our traditional solution portfolio given the cost
profile of the Group's established products when deployed as SaaS. The launch
of Fynapse, with its cloud-native capabilities, is expected to enable
significantly higher margins on this solution to be achieved compared to the
Group's existing SaaS deployed products and will also enable the migration of
the current on-premise clients to this higher margin offering in the medium
term.
Solution Management Services ('Aptitude Assure')
This service extends the responsibilities of Aptitude 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 across the
majority of the Group's applications.
With several Aptitude Insurance Calculation Engine clients contracting in the
year, Constant Currency growth of 32% in the Annual Recurring Revenue ('ARR')
was achieved. ARR from this service, now included within the Group's overall
ARR and recurring revenues, is £4.5 million (31 December 2021: £3.4
million). With further AICE clients approaching go-live further opportunities
exist to continue the successful growth in this service in the year ahead.
Implementation Services
Aptitude 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 and its
partners. The Group's services are provided by a significant pool of highly
skilled individuals, providing deep domain and technical expertise which is
highly valued by our clients and provide a differentiator compared to our
competitors. Demand for implementation services from the Group's on-going
projects has been strong in 2022, with clients frequently requesting
additional services.
The business continues to expand the enablement of its partner network to
facilitate their ability to implement Aptitude'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 our largest clients who wish
to receive our services directly.
Partner Network
The growth and development of Aptitude's high-quality partner network
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 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.
A Big-4 accountancy firm was appointed as charter partner for Fynapse at the
time of its launch and has led to a global launch of our partnership to its
internal partner community with the development of dedicated centres of
excellence for integration capability. We are also enjoying interest from a
number of additional partners in the capabilities of Fynapse. A further
highlight has been the agreement to provide finance automation to a Big-4
accountancy firm's mergers and acquisitions practice enabling them to
accelerate the post-acquisition integration of their clients' finance
functions leading to multiple new client engagements.
Whilst the Big-4 accounting firms have global reach, for specific applications
in specific jurisdictions it can be beneficial to work closely with more
specialised partner organisations. The benefits of this approach are
demonstrated by the success the Group is having with its eSuite partners in
markets which would be challenging to unlock without the assistance of our
partners such as Japan, Middle East and also central Europe.
The technology and go to market partnership with Microsoft is outlined in the
section on Fynapse above and provides the Group with a real opportunity to
accelerate the adoption of our new platform.
Aptitude Global Technology Centres
Investment continues in the Group's two technology centres in Poland and the
North West of England. Overall there were 244 employees at the Global
Technology Centre in Poland at 31 December 2022 (31 December 2021: 198) with a
further 52 employees (31 December 2021: 45) focused on design, development,
implementation and support based in the North West of England. Investment
remains focused on both Fynapse and eSuite in these two centres.
The Group's capabilities in Poland provides the Group with continuing cost
advantages, however, wage inflation has been significantly higher in this
territory than elsewhere within the Group given both the competitiveness of
the employment market for technologists in Poland as well as the country's
underlying inflation. To help address these pressures, the Group has invested
in both local senior management and in the people and talent team to support a
number of initiatives to optimise recruitment and retention. The Group's
initiatives on retention have been largely successful with employee attrition
within the technology centre in Poland during the course of 2022 reducing to
15% (2021: 20%).
Our People
Aptitude's continued progress has been achieved through the talent, commitment
and incredible hard work of its people. The Board wishes to thank its
employees for both their outstanding commitment and the continued excellent
support they provide to the business, clients and partners.
Overall Group headcount increased by 11% in the year to 527 (2021: 476) as the
business continued to invest in the evolution of our technology and the
strengthening of a number of other teams.
Aptitude remains fully committed to promoting equality, diversity and
inclusion among its workforce, and to driving continuous improvements in these
areas. During 2022 the Group established a Diversity & Inclusion SteerCo,
which is formed of 18 employees across 5 countries. Key milestones and areas
of focus for 2022 included the formulation and adoption of a new Equality,
Diversity and Inclusion Policy, raising awareness through activities and
events and that promote inclusivity, and the launch of a Women in Leadership
initiative. The SteerCo has also identified a forward-looking programme of
events and objectives for 2023 and beyond.
To ensure the Group carries on attracting employees to work on its strategic
priorities, and retaining the most talented of individuals, the business has
continued to build on the investments in our people. Particular highlights
include:
· introduction of a leadership career framework that defines leadership skills
and development at all levels of the organisation from early careers to senior
leaders; and
· investment in learning solutions that allow our people, who are operating in a
hybrid world, to benefit from more flexible development through investment in
learning platforms
Focus Areas for 2023
The Group remains focused on delivery against three go-to-market pillars:
finance digitalization, subscription management and partner execution,
supported by our ongoing focus on people excellence and financial confidence.
Within finance digitalization we are focused on securing new Fynapse clients,
the development of the strategically promising Microsoft partnership and the
upcoming go-live of Fynapse's charter client. Within subscription management,
key activities will centre on executing on a number of exciting opportunities
with our existing product set and unlocking volume subscriptions in our 2022
new clients. Underpinning this, our wider partner relationships will continue
to deepen as we add further 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 capabilities, with an ethos of diversity and
inclusion.
We are confident that these activities will lead to an acceleration in the
growth of Annual Recurring Revenue which, as the higher margin recurring
revenue grows as a proportion of overall revenue, will lead to increases in
the Group's overall margin.
Outlook
Overall, we are pleased with both the operational and strategic progress
achieved in 2022 and, whilst watchful of the global economic environment, the
Board is confident that the Group's performance for 2023 will be in line with
its expectations.
Jeremy Suddards
Chief Executive
Officer
20 March 2023
Group Financial Performance
Revenue
Total revenue grew by 25% to £74.4 million (2021: £59.3 million), organic
growth of 14%.
Recurring Revenues
Annual Recurring Revenue ('ARR') grew by 9% on a Constant Currency basis in
the year to £51.6 million at 31 December 2022 (31 December 2021: £47.5
million, 30 June 2022: £49.2 million, both restated for the prevailing
exchange rates at 31 December 2022).
ARR is the key financial metric for the Group. Included within ARR are
Aptitude's annual licence fees and maintenance for its on-premise clients and
subscription fees for the Group's SaaS clients. In addition, and included for
the first time in 2022, are the Group's revenues from its Solution Management
Service offering ('Aptitude Assure'), this offering contributed ARR at 31
December 2022 of £4.5 million (31 December 2021: £3.4 million). Comparatives
have been updated accordingly.
Net Retention Rate in the year was 102% (2021: 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). The Group benefitted from standard inflationary clauses
within the majority of its contracts, however, as previously outlined, there
were an unusually higher number of cancellations and reductions (e.g. clients
reducing their expenditure by removing incremental services) that reduced the
benefit of these increases.
Recurring revenues recognised in 2022 increased by 26% to £50.5 million
(2021: £40.1 million), representing Organic Growth of 11%. eSuite, the
product brought into the Group in 2021 through the acquisition of MPP Global
contributed recurring revenue in the year of £8.3 million (2021: £1.9
million).
Recurring revenues, a strategic focus for the Group, continue to grow and
represent 68% of overall revenue (2021: 68%). It is a key part of the Group's
strategy to increase this percentage whilst maximising the growth rate of
Aptitude's ARR, a strategy which in due course will lead to growth in
operating margin given the margin differential between recurring and
non-recurring revenues despite the growing SaaS element and the accompanying
infrastructure and servicing costs.
Non-Recurring Revenue
Non-recurring revenue, comprising implementation services and software
development, totalled £23.9 million for the year ended 31 December 2022
(2021: £19.2 million) representing 24% overall growth and 21% Organic Growth.
In addition to the benefit of the 2021 acquisition of MPP Global, services
revenues grew in the year due to 2021 non-recurring revenue being negatively
impacted by the disruption to our key markets related to the pandemic.
Included within the total non-recurring revenue for 2022 is services revenue
generated by eSuite of £1.0 million (2021: £0.4 million).
Research & Development Expenditure
Total expenditure on product management, research & development increased
in the year ended 31 December 2022 to £17.0 million (2021: £10.6 million).
Of the increase, £3.5 million is attributable to the full year costs of the
eSuite team which was brought into the Group as part of the MPP Global
acquisition in October 2021. The remaining increase of £2.9 million is
principally attributable to the growing investment in Fynapse as well as the
impact of the high rate of inflation currently experienced in Poland. Whilst
the growth in 2023 of the Group's investment in Fynapse will be modest, the
careful management of investment in the broader product set is expected to
result in Aptitude's overall research & development expenditure being
consistent with 2022, despite the continued inflationary pressures.
The Board has continued to determine that none of the internal research &
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 for the year ended 31 December 2022 was in line with
expectations at £7.5 million (2021: £9.9 million). Adjusted Operating Margin
reduced in line with expectations to 10% (2021: 17%) as the Group increased
investment in both Fynapse and the integration of eSuite and Aptitude Revenue
Management. Operating profit on a statutory basis was £3.7 million (2021:
£6.5 million).
In addition to the increased investment outlined above, 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 enhance
margins.
As with many technology businesses, the Group has experienced increased
inflationary pressures within its cost base with inflation particularly strong
in Poland, averaging 14% in 2022 (United Kingdom 9%, United States 8%). Whilst
the majority of client contracts allow for inflationary increases to be
applied to recurring fees, there are a number of exceptions to this including
the recently acquired client bases where a project is on-going to move those
clients onto the Group's standard inflationary clauses where possible.
Furthermore, services' day rates typically can only be increased after the
initial implementation for a client has concluded. Overall elevated inflation
does not benefit the Group and is one of the contributing factors to the need
to carefully manage investment levels across the business whilst ensuring
momentum is maintained on the Group's strategic priorities.
Foreign Exchange
With 42% (2021: 51%) 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's 2021 revenue and Adjusted Operating Profit would have been reported
at £59.8 million and £10.5 million respectively on a Constant Currency basis
(compared to actual result of £59.3 million and £9.9 million). Constant
Currency is calculated by comparing the 2022 results with 2021 results
retranslated at the rates of exchange prevailing during 2022.
Non-Underlying Items
Non-underlying items of £3.8 million (2021: £3.4 million) are principally
related to the £0.4 million (2021: £2.0 million) of final deal and
integration costs incurred on the MPP Global acquisition and intangible
amortisation of £3.4 million (2021: £1.4 million). The increase in
intangible amortisation is attributable to the full year cost relating to the
MPP Global acquisition completed in October 2021.
Taxation
The total tax charge before adjusting for the impact of non-underlying and
other sundry items of £1.4 million (2021: £1.6 million) represents 19.6% of
the Group's profit before tax (2021: 17.1%), broadly in line with the United
Kingdom corporate tax rate of 19%.
Statutory Results
The Group reported a profit for the year attributable to equity shareholders
of £2.6 million (2021: £5.1 million).
Earnings per Share
Adjusted Basic Earnings per Share decreased, as expected due to the planned
investment in the business, by 30% to 9.9 pence (2021: 14.2 pence). As a
result of both this investment and an increase in non-underlying costs
incurred, Basic Earnings per Share reduced to 4.5 pence (2021: 9.0 pence).
Dividend
A final ordinary dividend of 3.60 pence per share is proposed (2021: 3.60
pence), making a total ordinary dividend of 5.40 pence per share for the year
(2021: 5.40 pence).
Balance Sheet
The Group continues to have a strong balance sheet with net assets at 31
December 2022 of £60.5 million (2021: £57.2 million). Following net
corporate cash outflows (dividends and loan payments) of £3.8 million in the
year, cash at 31 December 2022 was £29.2 million (31 December 2021: £29.1
million) and net funds of £15.9 million (31 December 2021: £16.1 million).
Cash conversion was below the prior year's exceptional performance with the
collection of some recurring revenue invoices extending into the new
year. Trade receivables at 31 December 2022 increased to £10.1
million (2021: £8.8 million) of which £4.1 million (2021:
£1.5 million) were overdue for payment at the year end. Of these overdue
balances £2.8 million has been collected at 17 March 2023 with £1.3
million remaining outstanding, of which £1.2 million is either impaired or
deferred. DSO (debtor days) increased to 46 at 31 December 2022 (2021:
37).
Notwithstanding the increase in Annual Recurring Revenue, the Group's deferred
income at 31 December 2022 reduced to £29.6 million (2021: £30.9 million)
due to a number of factors including the timing of a small number of invoices
through the year end and multi-year advance payments of Annual Licence Fees by
a small number of clients in prior years, resulting in reduced deferred income
from these clients at 31 December 2022. No multi-year advance payments were
received in 2022.
Philip Wood
Deputy Chief Executive Officer
20 March 2023
Group Income Statement
for the year ended 31 December 2022
Year ended 31 Dec 2022 Year ended 31 Dec 2021
Note Before non-underlying items Non- underlying items Total Before non-underlying items Non- underlying items Total
Continuing operations £000 £000 £000 £000 £000 £000
Revenue 1 74,394 - 74,394 59,330 - 59,330
Operating costs 2 (66,887) (3,822) (70,709) (49,430) (3,439) (52,869)
Operating profit 7,507 (3,822) 3,685 9,900 (3,439) 6,461
Finance income 18 - 18 6 - 6
Finance costs (498) - (498) (238) - (238)
Net finance costs (480) - (480) (232) - (232)
Profit before income tax 7,027 (3,822) 3,205 9,668 (3,439) 6,229
Income tax expense 3 (1,481) 871 (610) (1,634) 479 (1,155)
Profit for the period 5,546 (2,951) 2,595 8,034 (2,960) 5,074
Earnings per share
Basic 4 4.5p 9.0p
Diluted 4 4.5p 8.9p
group statement of comprehensive income
for the year ended 31 December 2022
Year ended 31 Dec 2022 Year ended 31 Dec 2021
£000 £000
Profit for the year 2,595 5,074
Other comprehensive income/(expense)
Items that will or may be reclassified to profit or loss:
Cash flow hedges reclassified to income statement 187 -
Gain/(loss) on effective cash flow hedges 1,445 (222)
Deferred tax on cash flow hedges (335) -
Currency translation difference 1,972 (225)
Other comprehensive income/(expense) for the year, net of tax 3,269 (447)
Total comprehensive income for the year 5,864 4,627
Group Balance Sheet
for the year ended 31 December 2022
As at As at
31 Dec 2022 31 Dec 2021
Notes £000 £000
ASSETS
Non-current assets
Property, plant and equipment including right-of-use assets 6 5,103 4,261
Goodwill 7 46,006 46,006
Intangible assets 8 21,120 24,502
Other long-term assets 1,307 1,354
Deferred tax assets 423 115
73,959 76,238
Current assets
Trade and other receivables 9 12,297 10,775
Financial assets - derivative financial instruments 1,339 -
Current income tax assets 1,352 1,168
Cash and cash equivalents 29,245 29,064
44,233 41,007
Total assets 118,192 117,245
LIABILITIES
Current liabilities
Financial liabilities
- borrowings 10 (1,250) (313)
- derivative financial instruments - (293)
Trade and other payables 11 (38,146) (40,284)
Capital lease obligations 12 (553) (273)
Current income tax liabilities (119) (353)
Provisions 13 (114) -
(40,182) (41,516)
Net current assets/(liabilities) 4,051 (509)
Non-current liabilities
Financial liabilities - borrowings 10 (8,347) (9,573)
Capital lease obligations 12 (3,196) (2,777)
Provisions 13 (202) (379)
Deferred tax liabilities (5,724) (5,811)
(17,469) (18,540)
NET ASSETS 60,541 57,189
Group Balance Sheet
for the year ended 31 December 2022
As at As at
31 Dec 2022 31 Dec 2021
£000 £000
SHAREHOLDERS' EQUITY
Share capital 14 4,204 4,194
Share premium account 11,959 11,946
Capital redemption reserve 12,372 12,372
Other reserves 35,199 33,902
Accumulated losses (3,286) (3,346)
Foreign currency translation reserve 93 (1,879)
TOTAL EQUITY 60,541 57,189
Group Statement of changes in shareholders' equity
for the year ended 31 December 2022
Attributable to owners of the Parent
Share capital Share premium Accumulated losses Foreign currency translation reserve Capital
redemption Other Total
reserve reserves equity
£000 £000 £000 £000 £000 £000 £000
Group
Balance at 1 January 2022 4,194 11,946 (3,346) (1,879) 12,372 33,902 57,189
Profit for the year - - 2,595 - - - 2,595
Cash flow hedges
Cash flow hedges reclassified to income statement - - - - - 187 187
Gain on effective cash flow hedges - - - - - 1,445 1,445
Deferred tax on cash flow hedges - - - - - (335) (335)
Exchange rate adjustments - - - 1,972 - - 1,972
Total comprehensive income for the year - - 2,595 1,972 - 1,297 5,864
Shares issued under share option schemes 10 13 - - - - 23
Share options - value of employee service - - 695 - - - 695
Deferred tax on share options - - (137) - - - (137)
Dividends to equity holders of the company - - (3,093) - - - (3,093)
Total Contributions by and distributions to owners of the company recognised 10 13 (2,535) - - - (2,512)
directly in equity
Balance at 31 December 2022 4,204 11,959 (3,286) 93 12,372 35,199 60,541
Group Cash Flow Statement
for the year ended 31 December 2022
Year ended Year ended
31 Dec 2022 31 Dec 2021
Note £000 £000
Cash flows from operating activities
Cash generated from operations 15 5,272 11,890
Interest paid (498) (238)
Income tax (paid)/received (1,597) 262
Net cash flows generated from operating activities 3,177 11,914
Cash flows from investing activities
Purchase of property, plant and equipment, excluding right-of-use assets (831) (1,232)
Acquisition of subsidiary, net of cash acquired - (33,112)
Interest received 18 6
Net cash used in investing activities (813) (34,338)
Cash flows from financing activities
Net proceeds from issuance of ordinary shares 23 968
Dividends paid to company's shareholders 5 (3,093) (3,057)
Repayments of loan (313) -
Repayment of capital lease obligations (405) (756)
Drawdown of loan, net of arrangement fee - 9,880
Net cash generated (used in)/from financing activities (3,788) 7,035
Net decrease in cash and cash equivalents (1,424) (15,389)
Cash, cash equivalents and bank overdrafts at beginning of year 29,064 44,822
Exchange rate gains/(losses) on cash and cash equivalents 1,605 (369)
Cash and cash equivalents at end of year 29,245 29,064
Notes to the Audited preliminary results for the year ended 31 December 2022
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 and therefore no
segmental analysis is provided for this period.
The principal activity of the Group throughout 2021 and 2022 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 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021
£000 £000 £000 £000
United Kingdom 39,329 32,265 15,809 11,353
Rest of World 35,065 27,065 58,585 47,977
74,394 59,330 74,394 59,330
2. Non-underlying items
31 Dec 2022 31 Dec 2021
£000 £000
Amortisation of intangibles 3,382 1,418
Acquisition and associated reorganisation costs 440 2,021
3,822 3,439
3. Income tax expense
Year ended Year ended
31 Dec 2022 31 Dec 2021
Analysis of charge in the year £000 £000
Current tax:
- tax charge on underlying items (1,051) (1,005)
- tax credit on non-underlying items - -
- adjustment to tax in respect of prior periods (344) (256)
- adjustment to tax in respect of prior periods on non-underlying items - 134
Total current tax (1,395) (1,127)
Deferred tax:
- tax charge on underlying items (111) (354)
- tax credit on non-underlying items 871 346
- adjustment to tax in respect of prior periods 25 (20)
Total deferred tax 785 (28)
Income tax expense (610) (1,155)
The net adjustment to tax in respect of prior periods on underlying items
totalling £319,000 (2021: £276,000) relates to the reduction in the assumed
benefit from research and development relief in the UK.
The total tax charge of £610,000 (2021: £1,155,000) represents 19.0% (2021:
18.54%) of the Group profit before tax of £3,205,000 (2021: £6,229,000).
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 £1,375,000 (2021: £1,652,000) represents 19.57% (2021: 17.10%),
which is the tax rate used for calculating the adjusted earnings per share.
At 31 December 2022, the Group had unused tax losses totalling £1,029,000
(2021: £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 2022 31 Dec 2021
£000 £000
Profit before tax 3,205 6,229
Tax at the United Kingdom corporation tax rate of 19.00% (2021: 19.00%) (610) (1,184)
Effects of:
Adjustment to tax in respect of prior periods (319) (142)
Adjustment in respect of foreign tax rates (138) (35)
Expenses not deductible for tax purposes - (12)
Non-underlying expenses not deductible for tax purposes (45) (384)
Other (303) 105
Research and development tax relief 561 408
Recognition of tax losses not recognised as a deferred tax asset 214 160
Tax losses not recognised as a deferred tax asset - (84)
Change in future tax rates 30 13
Total taxation (610) (1,155)
United Kingdom corporation tax is calculated at 19.00% (2021: 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 19.57% (2021: 17.10%).
Year ended Year ended
31 Dec 2022 31 Dec 2021
£000 £000
Profit before tax and non-underlying items 7,027 9,668
Tax charge at a rate of 19.57% (2021: 17.10%) (1,375) (1,652)
5,652 8,016
Prior years' tax charge (320) (142)
Non-underlying items net of tax (2,951) (2,960)
Recognition of tax losses not recognised as a deferred tax asset 214 160
Profit on ordinary activities after tax 2,595 5,074
2022 2021
Number Number
(thousands) (thousands)
Weighted average number of shares 57,288 56,675
Effect of dilutive share options 819 432
58,107 57,107
2022 2022 2021 2021
Basic EPS pence Diluted EPS pence Basic EPS pence Diluted EPS pence
Earnings per share 4.5 4.5 9.0 8.9
Non-underlying items net of tax 5.2 5.1 5.2 5.2
Prior years' tax charge/(credit) 0.6 0.6 0.3 0.2
Recognition of tax losses (0.4) (0.4) (0.3) (0.3)
Adjusted earnings per share 9.9 9.8 14.2 14.0
Adjusted earnings per share are calculated using adjusted profit after tax.
5. Dividends
2022 pence per share 2021 pence per share 2022 2021
£000 £000
Dividends paid:
Interim dividend 1.80 1.80 1,032 1,019
Final dividend (prior year) 3.60 3.60 2,061 2,038
5.40 5.40 3,093 3,057
Proposed but not recognised as a liability:
Final dividend (current year) 3.60 3.60 2,064 2,059
The proposed final dividend was approved by the Board on 20 March 2023 but was
not included as a liability as at 31 December 2022, 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 16 June 2023 to
shareholders on the register at the close of business on 26 May 2023.
6. Property, plant and equipment including right-of-use assets
31 Dec 2022 31 Dec 2021
£000 £000
Opening net book value 1 January 4,261 2,394
Additions 1,660 3,831
On acquisition of subsidiary - 237
Net disposals (8) (1,037)
Exchange movements 322 15
Depreciation (1,132) (1,179)
5,103 4,261
7. Goodwill
31 Dec 2022 31 Dec 2021
£000 £000
Opening net book value 1 January 46,006 23,787
On acquisition of subsidiary - 22,219
46,006 46,006
The acquisition of a subsidiary totalling £22.2 million in 2021 represents
the amount of goodwill allocated to MPP Global business which was acquired on
9 October 2021.
8. Intangible assets
31 Dec 2022 31 Dec 2021
£000 £000
Opening net book value 1 January 24,502 5,640
On acquisition of subsidiary - 20,280
Amortisation (3,382) (1,418)
21,120 24,502
9. Trade and other receivables
31 Dec 2022 31 Dec 2021
£000 £000
Trade receivables 10,091 8,833
Less: provision for impairment of receivables (421) (21)
Trade receivables - net 9,670 8,812
Other receivables - 330
Prepayments 1,513 1,110
Accrued income 1,114 523
12,297 10,775
Within the trade receivables balance of £10,091,000 (2021: £8,833,000) there
are balances totalling £4,057,000 (2021: £1,544,000) which, at 31 December
2022, were overdue for payment. Of this balance £2,841,000 (2021:
£1,341,000) has been collected at 17 March 2023 (2021: 14 March 2022).
The increase in the provision for impairment of receivables is in respect of
outstanding invoices from a client which has ceased the implementation of the
Group's products. Further information is provided within note 16.
10. Financial liabilities
31 Dec 2022 31 Dec 2021
£000 £000
Bank loan 9,597 9,886
The borrowings are repayable as follows:
Within one year 1,250 313
In the second year 8,438 1,250
In the third to fifth years inclusive - 8,437
9,688 10,000
Unamortised prepaid facility arrangement fees (91) (114)
At 31 December 9,597 9,886
On 15 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 loan is secured on all the
assets of the Group. Operating covenants are limited to the Group's net debt
leverage and interest cover. The term loan is repayable over three years with
an initial 12-month repayment holiday followed by annual capital repayments of
£1,250,000. The Group can request a further one-year extension to the loan.
At the end of the term, a bullet payment for the remaining balance of the loan
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 the term of the loan.
11. Trade and other payables
31 Dec 2022 31 Dec 2021
£000 £000
Trade payables 826 1,290
Other tax and social security payable 1,370 1,216
Other payables 204 405
Accruals 6,183 6,462
Deferred income 29,563 30,911
38,146 40,284
31 Dec 2022 31 Dec 2021
£000 £000
Amounts payable under capital lease agreements:
Within one year 642 387
Within two to five years 2,284 1,624
After five years 1,387 1,632
Total 4,313 3,643
Less: future finance charges (564) (593)
Present value of lease obligations 3,749 3,050
Less: Amount due for settlement within 12 months (shown under current (553) (273)
liabilities)
3,196 2,777
12. Capital lease obligations
31 Dec 2022 31 Dec 2021
£000 £000
The present value of financial lease liabilities is split as follows:
Within one year 553 273
Within two to five years 1,897 1,287
After five years 1,299 1,490
3,749 3,050
13. Provisions for other liabilities and charges
Provisions
31 Dec 2022 31 Dec 2021
£000 £000
At 1 January 379 441
Credited to income statement (76) (142)
On acquisition of subsidiary - 89
Foreign exchange movement 13 (9)
At 31 December 316 379
£273,000 (2021: £334,000) of the total provision at 31 December 2022 of
£316,000 (2021: £379,000) relates to the cost of dilapidations in respect of
its occupied leasehold premises. The remaining £43,000 (2021: £45,000) is in
relation to Poland pension provisions.
14. Share capital
Ordinary shares of 7 1/3p each Number £000
Issued and fully paid:
At 1 January 2022 57,199,448 4,194
Issued under share option schemes 138,163 10
At 31 December 2022 57,337,611 4,204
15. Cash flows from operating activities
Reconciliation of profit before tax to net cash generated from operations:
Year ended Year ended
31 Dec 2022 31 Dec 2021
£000 £000
Profit before tax for the year 3,205 6,229
Adjustments for:
Depreciation 1,132 1,179
Amortisation 3,382 1,418
Share-based payment expense 695 612
Finance income (18) (6)
Finance costs 498 238
Changes in working capital excluding the effects of acquisition:
Increase in receivables (1,485) (1,561)
(Decrease)/increase in payables (2,137) 3,930
Decrease in provisions - (149)
Cash generated from operations 5,272 11,890
16. Contingent liabilities
The implementation of the Group's products are frequently part of wider
finance transformation programmes involving a number of different suppliers
and partners. This environment can result in project scope changes, resulting
in timeline extensions and budgetary demands. In this background, two clients
have ceased the implementation of the Group's products and provided the Group
with correspondence terminating their multi-year agreement alleging
contractual breaches by Aptitude and claiming damages. The Group has rejected
both the purported termination of the two agreements and claim for damages and
has notified the clients of the charges due to Aptitude under the minimum
terms of their agreements. The Group has assessed that they do not consider
that it will be probable that there will be a cash outflow and therefore no
provision has been recognised at 31 December 2022. The Group expects the
matter to be resolved in the next year.
17. Statement by the directors
The preliminary results for the year ended 31 December 2022 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
2022 Annual Report. The accounting policies adopted in this preliminary
announcement are consistent with the Annual Report for the year ended 31
December 2022.
The comparative figures for the financial year 31 December 2021 have been
extracted from the Group's statutory accounts for that financial year. The
2021 financial statements, which were prepared in accordance with UK adopted
international accounting standards and company law, have been reported on by
the Group's auditors and delivered to the registrar of companies.
The financial information set out in this preliminary announcement does not
constitute the Company's statutory accounts for the years ended 31 December
2022 or 31 December 2021. The Annual Report for 2022 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 20 March 2023.
The Annual Report for the year ended 31 December 2022 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 8th Floor, 138 Cheapside, London,
EC2V 6BJ.
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