REG - Aptitude Software - Interim Results
25/07/2024 07:00
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RNS Number : 7379X Aptitude Software Group PLC 25 July 2024
25 July 2024
APTITUDE SOFTWARE GROUP plc
('Aptitude Software' or 'the Group')
Interim Results for the six months ended
30 June 2024
Aptitude Software Group plc (LSE: APTD), a market leading provider of AI
Autonomous Finance solutions, providing a differentiated approach to finance
transformation and enabling finance teams to become strategic partners to the
business, reports its unaudited results for the six months ended 30 June 2024.
Financial Highlights
Six months ended 30 June H1 2024 H1 2023 % Change
Annual Recurring Revenue ('ARR') at 30 June
Annual Recurring Revenue(1) £50.8m £49.7m(2) 2%
- Software ARR at 30 June(1) £46.7m £45.2m(2) 3%
- Assure ARR at 30 June(1) £4.1m £4.5m(2) (9%)
Revenue
Total Revenue £35.3m £37.5m (6%)
- Recurring Revenue(3) £27.5m £27.0m 2%
- Implementation Revenue £7.8m £10.5m (26%)
Profit
Adjusted Operating Profit(4) £4.2m £4.2m -
Statutory Operating Profit £2.5m £1.7m 47%
Adjusted Operating Margin(4) 11.9% 11.2% 0.7%
Cash and Balance Sheet
Cash and Cash Equivalents £24.4m £24.5m (0%)
Net Funds(5) £13.8m £12.2m 13%
Interim Ordinary Dividend per Share 1.8p 1.8p -
· Increasing growth in Software ARR of 3% (H1 2023 2%, FY 2023 0%), driven by a
strong new business performance to 30 June 2024, including wins in Fynapse and
Revenue Management.
· Improved performance from the software base, with the software net retention
rate(6) increasing to 99% (H1 2023 96%, FY 2023 96%) reflecting the revised
strategic focus and operational improvements taking effect.
· Recurring revenue accounted for 78% of the Group's total revenue (H1 2023 72%,
FY 2023 71%), and coupled with increasing cost efficiencies, are driving
improving operating margins across the Group.
· Adjusted operating profit maintained at £4.2m (H1 2023 £4.2m) despite
non-recurring implementation revenue reductions.
· Continued balance sheet strength with cash of £24.4 million (30 June 2023:
£24.5 million) and net funds(5) of £13.8 million (30 June 2023: £12.2
million).
· In the first quarter of 2024, the Group commenced a share buy back programme
providing enhanced returns to shareholders.
Strategic and Operational Highlights:
· Two additional Fynapse clients signed in H1 2024, including one win in
partnership with HSO and Microsoft and one with a major existing Aptitude
Accounting Hub client.
· Launch of global insurance industry solution with HSO underpinned by Fynapse
and Microsoft Dynamics 365 demonstrating the increased take up of Fynapse by
partners and clients.
· Growing pipeline of opportunities for Fynapse, driven by our key strategic
partnerships with Microsoft, HSO and a big-4 accounting firm, and our focused
direct sales team.
· Strong new business client wins with Revenue Management in H1 demonstrating
the continued value of Aptitude's compliance suite.
· Ongoing organisational transformation programme to align the organisation to
the Fynapse opportunity is delivering operational improvements and cost
efficiencies across the Group and will be continuing throughout the remainder
of the year.
· The Board remains confident that the Group will meet market expectations for
2024.
Commenting on the results, Alex Curran, CEO, said: -
'The Group has made strong progress in the first half of 2024 across its core
objectives to deliver Fynapse clients, reduce client churn and begin to scale
the organisation through partnerships. The completion of two new Fynapse deals
in the first half of 2024 is starting to demonstrate the adoption of the
platform across existing and new clients, as well as in combined offerings
with our partners.
The robustness of the Group's balance sheet, high levels of recurring revenue
and strong cash generation provide the Group with considerable financial
strength with which to execute on its growth strategy. Our ongoing work to
focus the organisation on the AI Autonomous Finance continues to deliver both
operational improvements and cost efficiencies. This will set the business up
to support the Fynapse opportunity as we continue on our mission to deliver
long-term sustainable growth.'
Contacts
Aptitude Software Group plc
Ivan Martin,
Chairman
020-3687-3200
Alex Curran, Chief Executive Officer
Mike Johns, Chief Financial Officer
Alma Strategic Communications
Caroline Forde / Hilary
Buchanan
020-3405-0205
Throughout this announcement:
(1) Annual Recurring Revenue ('ARR') is the value of Aptitude Software'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 are currently being received but for which
formal termination notice has been received. Included in ARR are recurring
revenues from the Group's solution management services.
(2) Constant currency is calculated by comparing the H1 2024 results with H1
2023 results retranslated at the rates of exchange prevailing during H1 2024.
Items within the Financial Highlights table indicated by this superscript
reference are calculated on a constant currency basis.
(3) Recurring Revenue includes revenues from the Group's solution management
services
(4) Adjusted Operating Profit, Adjusted Operating Margin and Adjusted Basic
Earnings per Share exclude non-underlying operating items, unless stated to
the contrary. Further detail in respect of the non-underlying operating items
can be found within Note 6.
(5) Net funds represents cash and cash equivalents less finance obligations,
which are currently limited to capital lease obligations and a bank loan
(6) Net retention rate is measured by the total value of on-going ARR at the
period-end from clients in place twelve months earlier as a percentage of the
opening ARR from those clients on a constant currency basis. Software net
retention rate is calculated on the same basis but excluding Assure ARR.
Certain non-IFRS financial measures (e.g. Adjusted Operating Profit) are
included which assist management in comparing performance on a consistent
basis
About Aptitude Software
Aptitude Software provides software solutions that deliver fully autonomous
finance to enable its clients to drive sustainable growth and efficiency.
Fynapse is Aptitude's finance data platform designed to unlock the true power
of the finance function by transforming it into an AI-powered strategic and
trusted value creator. Fynapse achieves this in a modular, incremental way,
driving continuous improvement and rapid time to value in stark contrast to
traditional finance transformation.
Strategic Progress
Overview
This is the first six-month reporting period since the Group announced our
revised strategic focus under the formation of a new leadership team and the
initiation of the organisational realignment to deliver the Fynapse
opportunity. This realignment is centred on transitioning the Group from
directly selling regulatory and compliance software to a partner-led platform
organisation delivering AI Autonomous Finance, underpinned by Fynapse.
While the transition is at an early stage, we have already seen positive
progress against our strategic priorities of delivering against the Fynapse
growth opportunity, scaling the organisation through the strength of our key
strategic partnerships and improving client retention.
AI Autonomous Finance
The Fynapse platform enables the expansion of the go-to-market opportunity for
Aptitude, moving from compliance and regulations to AI Autonomous Finance.
Fynapse unlocks the true power of the finance function by transforming it into
an AI-powered strategic and trusted value creator. Fynapse provides a
singular, trusted view of all granular business and finance data. This
improves accuracy, confidence and risk management and enables AI-powered
strategic insights.
Fynapse has a low total cost of ownership, with rapid implementation cycles in
stark contrast to traditional finance transformation, which we believe makes
the platform commercially attractive to a wide range of organisations varying
in size and sector. Fynapse enables organisations to reduce costs, improve
operational efficiency, increase productivity, and deliver business insights.
In the first half of the year, the Group has signed a further two Fynapse
clients across the Financial Services sector, further enhancing the Fynapse
base. One of the new wins was achieved in partnership with HSO and Microsoft,
as part of a combined offering for Fynapse and Microsoft Dynamics 365,
demonstrating the power of our partnerships and underlining the value of
Fynapse to both prospects and partners. The second new win was with a major
existing Aptitude Accounting Hub client, a leading global insurer. This
organisation chose Fynapse due to its ability to provide an alternative and
lower risk approach to supporting their finance transformation requirements.
In each example, both organisations have selected Fynapse to support their AI
Autonomous vision for their finance function.
The new Fynapse wins in the first half of 2024 demonstrate the strength of the
Group's partnerships and existing base of clients. These wins are the start of
our journey to target the delivery of 80% of new Software ARR through partners
and convert a third of existing Aptitude Accounting Hub users to Fynapse by
the end of 2027.
Partner First Go To Market Strategy
Partnerships are the key foundation to Aptitude's scalable growth, and it is a
key priority for the Group to increase the proportion of ARR generated through
a more concentrated group of partners.
The opportunity for Fynapse is expanded by Aptitude's partnership with
Microsoft, which allows both organisations to present an end-to-end solution
to prospects, increasing competitiveness against vendors providing single
stack functionality, as well as strengthening Microsoft's competitive
position. Fynapse is the only platform selected by Microsoft which provides
accounting hub and subledger functionality to support Dynamics 365 and power
Microsoft's AI vision with a granular, trusted and single view of all business
and finance data. Microsoft and Aptitude's Autonomous Finance visions are
complementary and the AI functionality available in Microsoft's platforms
further enable Fynapse's capabilities and market opportunity.
In the first half of 2024, Aptitude and HSO announced the launch of a global
industry solution underpinned by Fynapse and Microsoft Dynamics 365 to support
the Insurance industry. HSO is a key strategic partner, a reseller of
Microsoft Dynamics 365, and provides sector expertise and implementation
services in support of the combined offering. The launch of this combined
offering demonstrates the speed with which partners can work with Fynapse,
improving usability by clients and partners alike.
Aptitude is aiming to achieve 30% of its Software ARR bookings through
partners by the end of 2024 on the journey to deliver 80% of Software ARR
through partners by the end of 2027. In the first half of 2024, Aptitude
signed 38% of new Software ARR through partners, supported by both newer
relationships with HSO and longer relationships with a big-4 accountancy firm
which has developed a managed services offering in partnership with Aptitude
and Microsoft.
The progress achieved in the first half of 2024 is supporting accelerated
momentum in the pipeline of Fynapse opportunities through partners. Fynapse
enables partners to target multiple sectors and tier 1, 2 and 3 organisations,
which in time will support an increase in deal velocity. Fynapse also supports
multiple partner channel types, including co-sell, referral, managed service
and reseller commercial models through its ease of use and short skill up time
required from partners.
Organisational Change and Operational Efficiency
The Group continues to enact necessary organisational change to support the
transition toward AI Autonomous Finance.
The foundations for this change have been placed with a new and refreshed
leadership team and a flattened organisational structure. The Group's new
objectives and key results framework ('OKR's) has helped to drive performance
improvement across all functions in the first half of 2024 in the key areas of
Fynapse delivery, the reduction of client churn and the scaling of the
organisation through the strength of our key strategic partnerships.
The Group has conducted reviews across all functions to deliver the necessary
process changes required as the business transitions away from its traditional
compliance focus and towards a modern, SaaS-centric organisation. These
reviews have highlighted areas for improvement in both effectiveness and
efficiency, and the leadership team is focused on delivering this change
throughout 2024.
The continued focus on efficiency has delivered improved margins in the first
half of 2024, when compared with the first half of 2023. Additionally, the net
retention rate for Software ARR in the year to 30 June 2024 has also increased
to 99% from 96% in the year to 30 June 2023. There is further work to do to
set up the organisation for success with AI Autonomous Finance, but initial
progress has demonstrated that changes can deliver both increased efficiency
and effectiveness.
Products
AI Autonomous Finance and Finance Transformation
AI Autonomous Finance and finance transformation includes both the Fynapse
platform and the Aptitude Accounting Hub ('AAH').
Aptitude's vision for AI Autonomous Finance enables the finance function to
become AI-powered strategic and trusted value creators, powering sustainable
growth and efficiency. This is achieved through a singular, trusted view of
all granular business and finance data, which improves accuracy, confidence
and risk management. This enables AI-powered strategic insights and improved
decision-making and allows finance teams to power sustainable growth and
efficiency.
Fynapse, the Group's finance data management platform delivers on Autonomous
Finance, with a cloud native, highly performant and modular solution that not
only serves operational and regulatory accounting requirements, but also
delivers a granular data fabric upon the extendable Fynapse data cloud.
Fynapse provides the rich foundation for AI tooling, enabling Aptitude's
clients to realise the efficiencies that may be achieved from emerging AI
technologies and the Autonomous Finance function.
Along with the overall Fynapse platform, the Group has initially developed the
accounting rules and subledger engines which build upon the successful AAH
product. AAH is the Group's established heritage product which centralises and
automates finance, accounting and reporting processes, creating a deep level
of operational intelligence for our clients.
Subscription Management
eSuite, Aptitude's subscription management tool, is a modular, cloud based
end-to-end SaaS solution for large, international, enterprise customers. The
application is targeted towards the subscription economy and provides identity
management, CRM, automated billing, payment processing, and churn management
capabilities, enabling businesses to acquire, monetise and optimise customers
subscriptions.
While macroeconomic conditions have had a short-term effect on the
predominantly media and publishing dominated eSuite client base, the Group is
confident in the opportunity for eSuite. Investment levels in eSuite have been
managed to strengthen functionality, minimise churn and position the product
well as macroeconomic conditions improve. The Group will take a targeted
go-to-market approach, prioritising the key media and publishing sectors in
line with eSuite's strengths.
Compliance Suite
The compliance suite includes the Aptitude Insurance Calculation Engine
("AICE"), Aptitude RevStream ("AREV"), the Aptitude Revenue Recognition Engine
("ARRE"), the Aptitude Lease Accounting Engine ("ALAE"), Aptitude Calculate
("AC") and the Aptitude Platform ("APT").
The Group has achieved significant historical success with its suite of
compliance products. The products have generated a sizeable amount of Annual
Recurring Revenue and demonstrated Aptitude's strength and credibility in
serving the office of the CFO and underpin the AI Autonomous Finance vision.
Aptitude's target for the compliance suite is in maintaining client
satisfaction, minimising client churn and cross-selling Fynapse. The Group
will take a selective go-to-market approach and establish investment at
appropriate levels to ensure high levels of client satisfaction.
Assure and Implementation Services
Aptitude Assure is a solution management service from Aptitude's Innovation
Centre in Poland. It extends beyond traditional software maintenance, covering
tasks usually handled by clients' teams, such as release management,
processing support, client enablement and solution optimisation through
performance monitoring. Assure helps clients adopt new product features,
especially beneficial for Fynapse clients as the product evolves. This high
margin, recurring service offers a lower cost of ownership for clients.
Aptitude also provides implementation services, with the scale determined by
the application, opportunity size and the division of responsibilities between
Aptitude and its partners. These services are delivered by highly skilled
individuals with deep domain, technical and functional expertise, setting
Aptitude apart from competitors.
The Group remains committed to maintaining a high-quality delivery capability
to support clients and partners.
People and Locations
Aptitude has office locations across the UK, US, Poland, Singapore, Australia
and Canada, and the Group's two technology centres are based in Poland and the
north-west of England. The Group's presence in Poland continues to generate
cost advantages for Aptitude.
Aptitude targets a high-performance culture, where individuals can achieve
their potential in support of the Group's objectives. The Group regularly
assesses employees on a performance and potential basis, with an aim to invest
in and develop key talent. Through this assessment, the Group is able to
retain and develop key talent in support of succession planning, actively
manage lower performers to a better outcome and increase efficiency.
Overall headcount decreased 14% over the year to 452 (31 December 2023: 472,
30 June 2023: 524). The reduction in headcount is a result of cost reduction
action taken in 2023 and ongoing effectiveness and efficiency reviews in 2024.
The new structure is flatter, with a reduced management layer, and more
efficient. Of the total headcount, 246 (31 December 2023: 281, 30 June 2023:
226) are based at the innovation centres and working on the design,
implementation, and support of the Group's products. The Group continues to
monitor headcount closely, with future roles hired in line with the revenue
opportunity.
In line with Aptitude's approach to diversity and inclusion the Group has
implemented structural processes to ensure fairness in approach to promotions
and compensation in 2024. Additionally, the Group is continuing the Women in
Leadership initiative to help attract a diverse range of talent to its
leadership roles.
Summary
Aptitude has made demonstratable progress against its core objectives of
delivering Fynapse, reducing client churn and scaling the organisation through
partnerships in the first half of 2024.
The Group continues to move through a transitionary phase, away from
regulation and compliance and towards AI Autonomous Finance, which has
required major organisational change. Throughout this period, Aptitude has
continued to deliver growing ARR, increased recurring revenue proportions and
improving margins.
Work continues in 2024 to position the organisation to effectively capitalise
on the AI Autonomous Finance opportunity, building on the firm foundations
delivered in H1.
Financial Performance
The Group delivered a solid performance in the first half of 2024, with
increasing recurring revenues and cost efficiencies driving an improved margin
performance.
The Group's robust balance sheet, high levels of recurring revenue and strong
cash generation provide the Group with considerable financial strength with
which to execute on its growth strategy.
Revenue
Recurring Revenues
Recurring revenues recognised in the six months ended 30 June 2024 increased
by 2% to £27.5 million (H1 2023: £27.0 million). These now represent 78% of
overall revenue (H1 2023: 72%). It is a key part of the Group's strategy to
increase this percentage whilst maximising the growth rate of Aptitude
Software's ARR. This strategy is delivering a growth in operating margin.
Aptitude's ARR at 30 June 2024 totalled £50.8 million (31 December 2023:
£51.2 million, 30 June 2023: £49.7 million both on a constant currency
basis) representing overall year-on-year growth of 2%. Included within ARR is
the value of the Group's recurring solution management services contracts
('Assure') of £4.1 million (31 December 2023: £4.9 million, 30 June 2023:
£4.5 million both on a constant currency basis).
The net retention rate for Software ARR for the 12 months to 30 June 2024 was
99% (H1 2023: 96%) The improvement in the software net retention rate reflects
the increased focus on reducing client churn and improving customer outcomes.
The overall net retention rate in the 12 months to 30 June 2024 was 98% (H1
2023: 98%) and was moderated by expected reductions within Assure. Net
retention rate is measured by the total value of on-going ARR at the
period-end from clients in place twelve months earlier as a percentage of the
opening ARR from those clients on a constant currency basis.
A significant majority of the Group's recurring revenue contracts include the
ability to increase ARR for clients by relevant consumer price index rises
('CPI'). The majority of the Group's renewals fall in the second half of the
year, at which time CPI uplifts are processed, resulting in the larger
proportion of any price increases occurring in H2.
Implementation Services
Non-recurring implementation services revenue totalled £7.8 million for the
six months ended 30 June 2024 (H1 2023: £10.5 million). The reduction in
implementation services revenues reflects the Group's shift to a partner-led
services model and is in line with expectations.
Research and Development Expenditure
Total expenditure on product management, research and development in the six
months ended 30 June 2024 remained level at £8.6 million (H1 2023: £8.6
million). The Group carefully manages its cost base to ensure that it is
operating efficiently and effectively while ensuring that strategic product
development is accelerated.
The Board has continued to determine that none of the internal research and
development costs incurred during the first half of the year meet the criteria
for capitalisation. Consequently, these have been expensed as incurred through
the income statement.
Operating Profit and Margins
Adjusted Operating Profit for the six months ended 30 June 2024 was £4.2
million (H1 2023: £4.2m). Operating profit on a statutory basis was £2.5
million (H1 2023: £1.7 million). Adjusted Operating Margin for the six months
ended 30 June 2024 was 11.9% (H1 2023: 11.2%). The increase in margin reflects
both a transition to higher margin recurring revenues, as well as a continued
focus on cost efficiency.
Foreign Exchange
With 48% (H1 2023: 53%) of the Group's revenues being generated from North
American clients, the majority of which are invoiced in US Dollars, the
financial results are impacted by changes in the US dollar exchange rate.
Aptitude Software's H1 2023 revenue and Adjusted Operating Profit would have
been reported at £37.4 million and £4.2 million respectively on a constant
currency basis (compared to actual result of £37.5 million and £4.2
million). Constant currency is calculated by comparing the 2023 results with
2024 results retranslated at the rates of exchange prevailing during 2024.
Non-Underlying Items
Non-underlying items of £1.7 million (H1 2023: £2.5 million) principally
comprises of intangible amortisation.
Taxation
The total tax charge of £0.5 million (H1 2023: £0.4 million) represents 21%
of the Group's profit before tax (H1 2023: 22%).
Statutory Results
The Group reported a profit for the period attributable to equity shareholders
of £2.0 million (H1 2023: £1.3 million).
Earnings per Share
Adjusted Basic Earnings per Share and Basic Earnings per Share increased to
5.8 pence and 3.5 pence (H1 2023: 5.7 pence and 2.3 pence).
Dividend
An interim dividend of 1.8 pence per share is declared (2023: 1.8 pence). The
interim dividend will be payable on 23 August 2024 to shareholders on the
register at the close of business on 2 August 2024.
Balance Sheet
The Group continues to have a strong balance sheet with net assets at 30 June
2024 of £58.7 million (H1 2023: £59.6 million), including cash of £24.4
million (H1 2023: £24.5 million) and net funds of £13.8 million (H1 2023:
£12.2 million). The reduction in net assets is a result of the continued
amortisation of intangible assets in the period. Trade receivables (net) have
increased to £14.6 million (H1 2023: £11.0 million) due to the timing of
certain annual software invoices. Of the balance of £14.6 million,
collections following the period end have totalled £3.9 million. Deferred
income increased to £27.1 million at 30 June 2024 (H1 2023: £26.7 million).
The Group's cash flow is seasonal due to the timing of the invoicing and
collection of the Group's recurring revenue which, together with a weighting
of a number of other payments in the first half of the year (e.g. bonus),
contribute to a weaker cash performance in the first half of any year. Cash
outflow from operating activities in the first half of the year was £5.5m (H1
2023: £0.8m), as a result of the timing of collection of some larger software
invoices. Given the seasonality of cashflow the Group is confident that full
year operating cash flow conversion for 2024 will return to historic levels.
The Group is currently providing enhanced returns to shareholders through a
£20m buy back programme over a three-year period.
Statement on Principal Risks and Uncertainties
Pursuant to the requirements of the Disclosure and Transparency Rules the
Group provides the following information on its principal risks and
uncertainties. The Group considers strategic, operational and financial
risks and identifies actions to mitigate those risks. These risk profiles
are updated at least annually. The principal risks and uncertainties
detailed within the Group's 2023 Annual Report remain applicable for the first
six months of the financial year. The Group's 2023 Annual Report is
available from the Aptitude Software website:
www.aptitudesoftware.com/investor-relations/
(http://www.aptitudesoftware.com/investor-relations/)
Related party transactions during the period are disclosed in Note 18.
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
For the six months ended 30 June 2024
Unaudited six months ended 30 Jun 2024 Unaudited six months ended 30 Jun 2023 Audited year ended 31 Dec 2023
Note Before non-underlying items Non- underlying items Total Before non-underlying items Non- underlying items Total Before non-underlying items Non- underlying items Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 5 35,260 - 35,260 37,536 - 37,536 74,685 - 74,685
Operating costs 6 (31,060) (1,702) (32,762) (33,300) (2,488) (35,788) (64,959) (4,441) (69,400)
Operating profit 5/6 4,200 (1,702) 2,498 4,236 (2,488) 1,748 9,726 (4,441) 5,285
Finance income 249 - 249 81 - 81 282 - 282
Finance costs (172) - (172) (163) - (163) (527) - (527)
Profit before income tax 4,277 (1,702) 2,575 4,154 (2,488) 1,666 9,481 (4,441) 5,040
Income tax expense 7 (906) 361 (545) (911) 542 (369) (1,786) 871 (915)
Profit for the period 3,371 (1,341) 2,030 3,243 (1,946) 1,297 7,695 (3,570) 4,125
Earnings per share
Basic 8 3.5p 2.3p 7.2p
Diluted 8 3.5p 2.2p 7.1p
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2024
Unaudited six months ended 30 Jun 2024 Unaudited six months ended 30 Jun 2023 Audited year ended 31 Dec 2023
£000 £000 £000
2,030 1,297 4,125
Profit for the period
Other comprehensive (expense)/income
Items that will or may be reclassified to profit or loss:
Cash flow hedges reclassified to income statement (507) (520) (1,242)
(Loss)/gain on effective cash flow hedges (60) 739 1,044
Deferred tax on cash flow hedges 142 (185) 50
Currency translation difference (240) (466) (954)
Other comprehensive (expense) for the period, net of tax (665) (432) (1,102)
Total comprehensive income for the period 1,365 865 3,023
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
As at 30 June 2024
Unaudited as at 30 June 2024 Unaudited as at 30 June 2023 Audited as at 31 Dec 2023
Notes £000 £000 £000
ASSETS
Non-current assets
Property, plant and equipment including right-of-use assets 11 4,030 4,911 4,484
Goodwill 46,006 46,006 46,006
Intangible assets 16,049 19,430 17,739
Other long-term assets 932 1,474 1,016
Deferred tax assets 1,379 423 1,379
68,396 72,244 70,624
Current assets
Trade and other receivables 12 18,248 13,312 12,526
Financial assets - derivative financial instruments 574 1,558 1,141
Current income tax assets 516 1,488 1,037
Cash and cash equivalents 24,360 24,506 34,085
43,698 40,864 48,789
Total assets 112,094 113,108 119,413
LIABILITIES
Current liabilities
Financial liabilities
- borrowings 14 (1,250) (1,250) (1,250)
Trade and other payables 13 (37,573) (35,001) (40,773)
Capital lease obligations 15 (434) (424) (426)
Current income tax liabilities - (74) (1,588)
Provisions 16 (98) - (100)
(39,355) (36,749) (44,137)
Net current assets 4,343 4,115 4,652
Non-current liabilities
Financial liabilities - borrowings 14 (6,538) (7,733) (7,139)
Capital lease obligations 15 (2,374) (2,921) (2,588)
Provisions 16 (282) (211) (268)
Deferred tax liabilities (4,824) (5,909) (4,967)
(14,018) (16,774) (14,962)
NET ASSETS 58,721 59,585 60,314
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
As at 30 June 2024
Unaudited as at 30 June 2024 Unaudited as at 30 June 2023 Audited as at 31 Dec 2023
Notes £000 £000 £000
SHAREHOLDERS' EQUITY
Share capital 17 4,204 4,204 4,204
Share premium account 17 11,959 11,959 11,959
Capital redemption reserve 12,372 12,372 12,372
Other reserves 33,540 35,171 34,989
Accumulated losses (2,253) (3,748) (2,349)
Foreign currency translation reserve (1,101) (373) (861)
TOTAL EQUITY 58,721 59,585 60,314
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2024
Attributable to owners of the Parent
Share capital Share premium Accumulated losses Foreign currency translation reserve Capital redemption reserve Other reserves Total Equity
£000 £000 £000 £000 £000 £000 £000
Group
Balance at 1 January 2024 4,204 11,959 (2,349) (861) 12,372 34,989 60,314
Profit for the period - - 2,030 - - - 2,030
Cash flow hedges reclassified to income statement - - - - - (507) (507)
Loss on effective cash flow hedges - - - - - (60) (60)
Deferred tax on cash flow hedges - - - - - 142 142
Exchange rate adjustments - - - (240) - - (240)
Total comprehensive income for the year - - 2,030 (240) - (425) 1,365
Purchase of own shares - - - - - (1,311) (1,311)
Transfer on exercise of options - - (287) - - 287 -
Share options - value of employee service - - 410 - - - 410
Dividends to equity holders of the company - - (2,057) - - - (2,057)
Total Contributions by and distributions to owners of the company recognised - - (1,934) - - (1,024) (2,958)
directly in equity
Balance at 30 June 2024 (unaudited) 4,204 11,959 (2,253) (1,101) 12,372 33,540 58,721
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023
Attributable to owners of the Parent
Share capital Share premium Accumulated losses Foreign currency translation reserve Capital redemption reserve Other reserves Total Equity
£000 £000 £000 £000 £000 £000 £000
Group
Balance at 1 January 2023 4,204 11,959 (3,286) 93 12,372 35,199 60,541
Profit for the period - - 1,297 - - - 1,297
Cash flow hedges reclassified to income statement - - - - - (520) (520)
Gain on effective cash flow hedges 739 739
Deferred tax on cash flow hedges (185) (185)
Exchange rate adjustments - - - (466) - - (466)
Total comprehensive income for the year - - 1,297 (466) - 34 865
Shares issued under employee benefit trust - - (163) - - (62) (225)
Share options - value of employee service - - 468 - - - 468
Dividends to equity holders of the company - - (2,064) - - - (2,064)
Total Contributions by and distributions to owners of the company recognised - - (1,759) - - (62) (1,821)
directly in equity
Balance at 30 June 2023 (unaudited) 4,204 11,959 (3,748) (373) 12,372 35,171 59,585
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
For the six months ended 30 June 2024
Unaudited six months ended 30 June 2024 Unaudited six months ended 30 June 2023 Audited year ended 31 Dec 2023
Note £000 £000 £000
Cash flows from operating activities
Cash (used in)/generated from operations 9 (3,714) (25) 11,945
Interest paid (172) (163) (316)
Income tax (paid) (1,608) (562) (635)
Net cash flows (used in)/generated from operating activities (5,494) (750) 10,994
Cash flows from investing activities
Purchase of property, plant and equipment, excluding right-of-use assets 11 (72) (495) (601)
Interest received 249 81 282
Net cash generated/(used in) from investing activities 177 (414) (319)
Cash flows from financing activities
Purchase of own shares (1,311) (186) (186)
Dividends paid to company's shareholders 10 (2,057) (2,064) (3,096)
Repayments of loan (625) (625) (1,250)
Extension fee on loan - - (40)
Repayment of capital lease obligations (178) (199) (534)
Net cash generated (used in) financing activities (4,171) (3,074) (5,106)
Net (decrease)/increase in cash and cash equivalents (9,488) (4,238) 5,569
Cash, cash equivalents and bank overdrafts at beginning of period 34,085 29,245 29,245
Exchange rate (losses) on cash and cash equivalents (237) (501) (729)
Cash and cash equivalents at end of period 24,360 24,506 34,085
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. General information
Aptitude Software Group plc (the 'Company') and its subsidiaries (together,
the 'Group') is a specialist provider of AI Autonomous Finance solutions.
The Company is a public limited company incorporated and domiciled in England
and Wales with a primary listing on the London Stock Exchange. The address of
its registered office is 8(th) Floor, 138 Cheapside, London EC2V 6BJ.
These condensed consolidated interim financial statements were approved for
issue on 24 July 2024.
These condensed consolidated interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2023 were approved by
the Board of directors on 20 March 2024 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
2. Basis of preparation
These condensed consolidated interim financial statements for the six months
ended 30 June 2024 have not been audited or reviewed by the auditors. The
interims have been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Services Authority and with IAS 34, 'Interim financial
reporting'. These condensed consolidated interim financial statements should
be read in conjunction with the annual financial statements for the year ended
31 December 2023, which have been prepared in accordance with UK adopted
international accounting standards and company law.
3. Accounting policies
The accounting policies adopted are consistent with those of the previous
financial statements, except as described below.
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual profits.
New and amended standards and interpretations need to be adopted in the first
interim financial statements issued after their effective date. There are no
new IFRSs or IFRICs that are effective for the first time for this interim
period that would be expected to have a material impact on the financial
statements.
4. Estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expense. Actual results may differ from these estimates. In preparing
these condensed consolidated interim financial statements, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those that applied
to the consolidated financial statements for the year ended 31 December 2023,
with the exception of changes in estimates that are required in determining
the provision for income taxes.
Fair value estimation
Financial instruments not measured at fair value
Financial instruments not measured at fair value includes cash and cash
equivalents, trade and other receivables, trade and other payables, and loans
and borrowings. However, due to their short-term nature and ability to be
liquidated at short notice their carrying value approximates to their fair
value.
Financial instruments measured at fair value
The fair value hierarchy of the financial instruments measured at fair value
is provided below.
Level 2 inputs
Unaudited Unaudited
six months six months
ended ended
30 Jun 2024
30 Jun 2023
£'000
£'000
Financial assets
Derivative financial assets (designated hedge instruments) 574 1,558
574 1,558
The derivative financial assets and liabilities have been valued using the
market approach and are considered to be Level 2 inputs. There were no changes
to the valuation techniques used in the year. There were no transfers between
levels during the year.
5. Segmental information
Business segments
The only business segment during both periods presented was Aptitude Software
and therefore certain segmental analysis is not required.
Geographical segments
The Group has two geographical segments for reporting purposes, the United
Kingdom and the Rest of the World.
The following table provides an analysis of the Group's sales by origin and by
destination.
Sales revenue by origin Sales revenue by destination
Unaudited six months ended 30 June 2024 Unaudited six months ended 30 June 2023 Unaudited six months ended 30 June 2024 Unaudited six months ended 30 June 2023
Continuing operations £000 £000 £000 £000
United Kingdom 20,589 19,607 6,315 5,990
Rest of World 14,671 17,929 28,945 31,546
35,260 37,536 35,260 37,536
The Group derives revenue from the transfer of goods and services in the
following major categories and geographical regions, these being the United
Kingdom ('UK') and Rest of the World ('RoW'):
Unaudited six months ended 30 June 2024
Recurring revenue Non-recurring revenue
UK RoW Total UK RoW Total Total
£000 £000 £000 £000 £000 £000 £000
Revenue from external clients 5,065 22,416 27,481 1,250 6,529 7,779 35,260
Unaudited six months ended 30 June 2023
Recurring revenue Non-recurring revenue
UK RoW Total UK RoW Total Total
£000 £000 £000 £000 £000 £000 £000
Revenue from external clients 4,844 22,154 26,998 1,147 9,391 10,538 37,536
All of the revenue displayed in the above table is recognised over time in
line with the Group's accounting policy detailed on pages 86 to 89 of the
Aptitude Software Group plc 2023 Annual Report and has been generated from
contracts with clients.
The following is an analysis of the carrying amount of non-current assets
(excluding deferred tax assets), and additions to property, plant and
equipment and intangible assets (excluding right-of-use asset additions
resulting from property lease agreements) and intangible assets, analysed by
the geographical area in which the assets are located.
Carrying amount of non-current assets Capital expenditure
Unaudited six months ended 30 June 2024 Unaudited six months ended 30 June 2023 Unaudited six months ended 30 June 2024 Unaudited six months ended 30 June 2023
£000 £000 £000 £000
United Kingdom 52,961 56,194 52 91
Rest of World 14,056 15,627 20 404
67,017 71,821 72 495
The Company's business is to invest in its subsidiaries and, therefore, it
operates in a single segment.
6. Non-underlying items
Unaudited six months ended 30 Jun 2024 Unaudited six months ended 30 Jun 2023 Audited year ended 31 Dec 2023
£000 £000 £000
Continuing operations
Amortisation of acquired intangibles 1,690 1,690 3,381
Share repurchase costs 12 - -
Acquisition and associated reorganisation costs - 798 1,060
1,702 2,488 4,441
7. Income tax expense
Income tax expense is recognised based on management's estimate of the
weighted average income tax rate expected for the full financial year of 21%
(the estimated tax rate for the six months ended 30 June 2023 was 22%).
8. Earnings per share
Unaudited six months ended Unaudited six months ended 30 Jun 2023 Audited
30 Jun 2024 year ended
31 Dec 2023
pence pence pence
Earnings per share 3.5 2.3 7.2
Basic
Diluted 3.5 2.2 7.1
Unaudited six months ended Unaudited six months ended 30 Jun 2023 Audited
30 Jun 2024 year ended
31 Dec 2023
pence pence pence
Adjusted earnings per share 5.8 5.7 13.6
Basic
Diluted 5.8 5.5 13.5
To provide an indication of the underlying operating performance the adjusted
earnings per share calculation above excludes intangible amortisation and
other non-underlying items and has a tax charge based on the effective rate.
Unaudited six months ended Unaudited six months ended 30 Jun 2023 Audited
30 Jun 2024 year ended
31 Dec 2023
pence pence pence
Basic earnings per share 3.5 2.3 7.2
Non-underlying items 2.3 3.4 6.2
Prior years' tax credit - - 0.5
Recognition of tax losses - - (0.3)
Adjusted earnings per share 5.8 5.7 13.6
9. Cash generated from operations
Unaudited six months ended 30 Jun 2024 Unaudited six months ended 30 Jun 2023 Audited year ended 31 Dec 2023
£000 £000 £000
Profit before tax for the period 2,575 1,666 5,040
Adjusted for:
Depreciation 518 514 1,049
Amortisation 1,690 1,690 3,381
Share-based payment expense 410 468 125
Finance income (249) (81) (282)
Finance costs 172 163 527
Changes in working capital:
(Increase)/decrease in receivables (5,647) (1,194) 63
(Decrease)/increase in payables (3,195) (3,146) 2,042
Increase/(decrease) in provisions 12 (105) -
Cash (used in)/generated from operations (3,714) (25) 11,945
10. Dividends
The interim dividend of 1.8 pence per share (2023: 1.8 pence per share) was
approved by the Board on 24 July 2024. It is payable on 23 August 2024 to
shareholders on the register at 2 August 2024. This interim dividend has not
been included as a liability in this interim financial information. It will
be recognised in shareholders' equity in the year to 31 December 2024. A final
dividend of £2,057,000 was paid in June 2024 and relates to the year ending
31 December 2023 (2023: final dividend £2,064,000).
11. Property, plant and equipment including right-of-use assets
Unaudited six months ended 30 Jun 2024 Unaudited six months ended 30 Jun 2023
£000 £000
Opening net book amount 1 January 4,484 5,103
Additions 72 495
Disposals - (117)
Exchange movements (8) (56)
Depreciation (518) (514)
Closing net book amount 30 June (unaudited) 4,030 4,911
The Group has not placed any contracts for future capital expenditure which
have not been provided for in the financial statements.
12. Trade and other receivables
Unaudited six months ended 30 Jun 2024 Unaudited six months ended 30 Jun 2023
£000 £000
Trade receivables - net 14,565 10,994
Other receivables 82 62
Prepayments 3,159 1,540
Accrued income 442 716
Closing net book amount 30 June (unaudited) 18,248 13,312
Contract assets and contract liabilities only comprise accrued and deferred
income respectively. Within the trade receivables balance of £14,565,000 (30
June 2023: £10,994,000), there are balances totalling £6,195,000 (30 June
2023: £2,977,000) which, at 30 June 2024 were overdue for payment and not
provided for. During July 2024, receipts totalling £3.9 million were
collected against the total receivables balance at 30 June 2024.
13. Trade and other payables
Unaudited six months ended 30 Jun 2024 Unaudited six months ended 30 Jun 2023
£000 £000
Trade payables 2,607 871
Other tax and social security payable 1,051 1,379
Other payables 67 9
Accruals 6,788 6,009
Deferred income 27,060 26,733
Closing net book amount 30 June (unaudited) 37,573 35,001
14. Financial liabilities - borrowings
Unaudited six months ended 30 Jun 2024 Unaudited six months ended 30 Jun 2023
£000 £000
Bank Loan 7,788 8,983
The borrowings are repayable as follows:
Within one year 1,250 1,250
In the second year 6,562 7,812
7,812 9,062
Unamortised prepaid facility arrangement fees (24) (79)
As at 30 June (unaudited) 7,788 8,983
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 of 2.0 : 1 and interest cover of 4.0 : 1. 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 term loan contains two one-year
extension options, one of which was exercised in 2023. 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.
15. Capital lease obligations
Unaudited six months ended 30 Jun 2024 Unaudited six months ended 30 Jun 2023
£000 £000
Amounts payable under capital lease arrangements:
Within one year 541 538
Within two to five years 1,911 2,091
After five years 726 1,206
Total 3,178 3,835
Less: future finance charges (370) (490)
Present value of lease obligations 2,808 3,345
Less: Amount due for settlement within 12 months (shown under current (434) (424)
liabilities
As at 30 June (unaudited) 2,374 2,921
Unaudited six months ended 30 Jun 2024 Unaudited six months ended 30 Jun 2023
£000 £000
The present value of financial lease liabilities is split as follows:
Within one year 434 424
Within two to five years 1,679 1,781
After five years 695 1,140
2,808 3,345
16. Provisions
Unaudited six months ended 30 Jun 2024 Unaudited six months
ended 30 Jun 2023
£000 £000
At 1 January 368 316
Charged to income statement 15 10
Utilised in the period - (114)
Foreign exchange (3) (1)
As at 30 June (unaudited) 380 211
Unaudited six months ended 30 Jun 2024 Unaudited six months ended 30 Jun 2023
£000 £000
Current 98 -
Non-current 282 211
As at 30 June (unaudited) 380 211
£301,000 of the total provision at 30 June 2024 of £380,000 relates to the
cost of dilapidations in respect of its occupied leasehold premises (30 June
2023: £167,000).
17. Share capital
Unaudited six months ended 30 June 2024 Unaudited six months ended 30 June 2023
Ordinary share capital at 7 1/3 pence each Number of shares Ordinary shares Number of shares Ordinary shares
Issued and fully paid: 000 £000 000 £000
Opening balance as at 1 January 57,337 4,204 57,337 4,204
As at 30 June (unaudited) 57,337 4,204 57,337 4,204
In the year, the Company commenced an on-market share buyback programme, in
line with the newly adopted capital allocation policy. At 30 June 2024, the
Company holds 330,113 shares, recognised as a deduction in equity.
In the prior year, the Company established an Employee Benefit Trust ("EBT")
for the benefit of the Group's employees. At 30 June 2024, the Company holds
558 shares (2023: 17,710) in the Employee Benefit Trust ("EBT"), recognised as
a deduction in equity.
Share
premium
Unaudited six months ended 30 Jun 2024 Unaudited six months ended 30 Jun 2023
£000 £000
Opening balance as at 1 January 11,959 11,959
As at 30 June (unaudited) 11,959 11,959
18. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation.
There were no related party transactions during the six-month period ended 30
June 2024 (30 June 2023: £nil), as defined by International Accounting
Standard No 24 'Related Party Disclosures', except for key management
compensation. The related party transactions for the year ended 31 December
2023 as defined by International Accounting Standard No 24 'Related Party
Disclosures' are disclosed in note 31 of the Aptitude Software Group plc
Annual Report for the year ended 31 December 2023.
19. Statement of directors' responsibilities
The Directors confirm that these condensed interim financial statements have
been prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and that the
interim management report includes a fair review of the information required
by DTR 4.2.7 and DTR 4.2.8, namely:
- an indication of important events that have
occurred during the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
- material related-party transactions in the first six
months and any material changes in the related-party transactions described in
the last annual report.
The Directors of Aptitude Software Group plc are listed in the Aptitude
Software Group plc Annual Report for 31 December 2023. A list of current
directors is maintained on the Aptitude Software Group plc website:
www.aptitudesoftware.com/investor-relations/
(http://www.aptitudesoftware.com/investor-relations/)
Copies of this statement are available on the investor relations page of our
website (www.aptitudesoftware.com/investor-relations/
(http://www.aptitudesoftware.com/investor-relations/) ).
By order of the Board
Michael Johns
24 July 2024
Chief Financial Officer
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