Interim Results

Source: RNS
RNS Number : 3891U
Aptitude Software Group PLC
29 July 2020
 

29 July 2020

APTITUDE SOFTWARE GROUP plc ('Aptitude Software' or the 'Group')

INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

Aptitude Software Group plc (LSE: APTD), a specialist provider of powerful financial management software to large global businesses, reports its unaudited results for the six months ended 30 June 2020.

Financial Highlights

Six months ended 30 June

2020

20191

% Change

Annual Recurring Revenue ("ARR")2 at 30 June

£30.9m

£27.9m3

+11%

Revenue

£29.1m

£28.8m

+1%

-      Software and subscription revenue

£14.7m

£14.1m

+4%

-      Implementation and solution management             services revenue

£14.4m

£14.7m

-2%

Adjusted Operating Profit4

£5.1m

£5.1m

-

Statutory operating profit

£4.5m

£4.6m

-2%

Cash and cash equivalents5

£30.9m

£23.5m

+31%

Adjusted Basic Earnings per Share4

6.7p

6.0p

+12%

Basic Earnings per Share

6.0p

5.5p

+9%

Interim ordinary dividend per share

1.8p

1.8p

-

 

  • Year on year growth in ARR of 11% on a constant currency3 basis driven by new business wins and add-on sales to existing clients
  • In line with the Group's strategic focus, software and subscription revenue now represents 51% of total revenue (H1 2019: 49%) with growth of 4% to £14.7 million for the six months ended 30 June 2020 (H1 2019: £14.1 million)
  • Strong balance sheet with cash of £30.9 million (H1 2019: £23.5 million5), net funds6 of £29.2 million (H1 2019: £21.0 million5) and no bank loans. This financial strength provides confidence to our clients and prospects whilst positioning the business well for potential acquisition opportunities
  • Based on the Group's solid financial and operational performance in the period and the expectation that the business will remain comfortably profitable and cash generative in the period expected to be impacted by COVID-19, the Board maintains its interim dividend at 1.8 pence per share (H1 2019: 1.8 pence per share)

 

 

Strategic and Operational Highlights:

  • Continued progress with the strategic Aptitude Accounting Hub application, which provides our clients with the foundation for their digital finance transformation, including a new sale to the retail arm of a leading European bank
  • Significant Software-as-a-Service ('SaaS') subscription sale for Aptitude Revenue Management to a North American technology company
  • Launch of Aptitude RevStream, one of the Group's two Aptitude Revenue Management applications, to meet demand in the APAC and European regions. This launch provides the Group with a further growth opportunity as the application had previously only been focused on the North American market
  • Strengthening of the go-to-market and global partner network, most notably with the expansion of the partner network into Japan providing access to tier one prospects in the region. This new partner will be initially responsible for the sale and implementation of Aptitude RevStream in Japan, a new market for the Group. 
  • Sales cycles in the insurance sector remain extended in line with the Board's previously revised expectations as prospects continue to focus on short term priorities and manage their capital prudently as a response to the impact of COVID-19, coupled with the confirmed delay to the introduction of IFRS 17. Activity with these prospects is expected to increase as the revised regulatory deadline of 1 January 2023 approaches
  • Investment continues across a number of functions including in those products which support clients as they undertake their digital finance transformation, a significant growth opportunity for the Group

 

Response to COVID-19:

  • Successful implementation of business continuity plans in response to the threat of COVID-19 with all business functions, including those directly servicing our diverse client base, being provided without disruption
  • As a result of the challenges presented by COVID-19, the Group's pre-existing focus on cost control tightened further with all discretionary expenditure closely reviewed and a number of savings already actioned

 

Commenting on the Interim Results, Jeremy Suddards, Chief Executive Officer, said: -

'The Group continued to make strategic and operational progress in the first half of 2020 with a number of new business wins across the globe despite the challenges arising from COVID-19.

Aptitude Software benefits from a focused portfolio of product and service offerings, a growing SaaS capability, increasing worldwide presence and a strengthening partner network. These assets and capabilities position the Group to be able to fully realise the significant opportunity ahead, particularly as the impact of COVID-19 has reinforced the need for clients to drive further automation in their finance functions.'  

Contacts

Aptitude Software Group plc

Ivan Martin, Chairman                                                                              020-3687-3200

Jeremy Suddards, Chief Executive Officer

Philip Wood, Deputy Chief Executive Officer and Chief Financial Officer          

 

Alma PR

Caroline Forde, Sam Modlin                                                                     020-3405-0205

 

About Aptitude Software

Aptitude Software's innovative solutions address the growing trend for digital finance transformation complemented by regulatory-focused applications. Our various products take data from complex systems, typically with multiple siloed data sources across multiple business entities, to create a unified view of finance. Our unique combination of deep finance expertise and IP rich technology allows our clients to reap significant benefits including business insights, enhanced control and regulatory compliance.

Our clients include some of the world's largest companies, typically organisations with complex financial data and technology landscapes. Development, together with a growing number of other services, continues to be performed at the Aptitude Innovation Centre in Poland with sales, support and implementation services provided from Aptitude Software's London headquarters and the North American and Singaporean regional businesses.

Aptitude Software has six office locations around the world, with clients across four continents.

www.aptitudesoftware.com

Throughout this announcement:

1 H1 2019 numbers presented in the table exclude the results of the Microgen Financial Systems business which was disposed of on 28 June 2019 and presented as a discontinued operation

2 Annual Recurring Revenue ('ARR') is the value of Aptitude Software's software and subscription recurring revenue at a specific point in time, normalised to a one-year period. ARR includes recurring revenues contracted but yet to commence and excludes recurring revenues which are currently being received but are known to be terminating in the future.

3 Constant currency is calculated by comparing the 2020 results with 2019 results retranslated at the rates of exchange prevailing during 2020. Items within the Financial Highlights table indicated by this superscript reference are calculated on a constant currency basis.

4 Adjusted Operating Profit, Adjusted Operating Margin and Adjusted Basic Earnings per Share excludes 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 Cash and cash equivalents at 30 June 2019 is net of the proposed return of cash to shareholders of £46.4 million as part of the disposal of the Microgen Financial Systems business. The return was completed in September 2019.

6 Net funds represents cash and cash equivalents less finance obligations, which are currently limited to capital lease obligations

Certain non-IFRS financial measures (e.g. Adjusted Operating Profit) are included which assist management in comparing performance on a consistent basis

 

Overview

Aptitude Software has continued to make strategic and operational progress in the first half of the year.

The Group has enjoyed a good number of new customer wins and contract expansions in the Banking and Technology, Media and Telecom ('TMT') sectors demonstrating the strength of the Group's product portfolio and sector diversity. These additions have led to Annual Recurring Revenue increasing to £30.9 million representing year on year growth of 11% on a constant currency basis (31 December 2019: £29.5 million, 30 June 2019: £27.9 million, both restated for the prevailing exchange rates at 30 June 2020).

Aptitude Software successfully implemented its business continuity plans in response to COVID-19. All business functions, including those servicing our diverse client base, have operated without disruption during the period. As described in the Group's Trading Update in April 2020, the impact of COVID-19 has resulted in sales cycles in the insurance sector being extended lowering the Board's original new business sales performance expectations for the year. As a result, the Group has moderated and re-phased its investment plans in the business and is applying a greater focus on costs to mitigate the financial impact of COVID-19 to the business.

In the medium term, the Board considers that the impact of COVID-19 will result in increased demand for Aptitude Software's technologies as organisations seek further automation of their finance functions and greater data-led insight into their businesses. This dynamic further underpins the investment being made in those products and services that support a client undertaking a transformation of their finance function, frequently referred to as a digital finance transformation.

Outlook

Aptitude Software continues to benefit from a focused portfolio of product and service offerings, a growing SaaS capability, increasing worldwide presence and a strengthening partner network. These assets and capabilities, together with the Group's robust set of financials, provide the Board with confidence in Aptitude Software's prospects once the short-term impact of COVID-19 has passed.

Corporate Strategy

Aptitude Software's strategy is focused on providing powerful financial management software to large global businesses. 

The Group executed on a number of strategic activities during the first half of 2020 which are expected to drive an acceleration of growth in its software and subscription revenues which now represent 51% of overall revenue (H1 2019: 49%). The growth in the proportion of such revenues in the business will, in due course, lead to an increase in operating margins given the higher margins achievable from these recurring revenues. 

Global Partner Network

A strategic priority for the Group continues to be the growth and development of Aptitude Software's high-quality partner network as highlighted by our deepening relationships with the Big 4 accounting firms. Whilst many prospects are sourced directly by the Group's own sales and marketing teams, the global reach of partners and the depth of their relationships with large global businesses provide Aptitude Software with an increasing number of opportunities and market 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 drive to increase the proportion of software and subscription revenues. Our partner management teams in North America, Europe and APAC have been strengthened with a number of senior appointments. A highlight in the year to date has been the expansion of the partner network into Japan, focused initially on Aptitude RevStream.

Investment in Digital Finance Opportunity

Investment is also increasing in the Group's applications and services focused on digital finance transformation.

What is digital finance? 

Finance functions of large global organisations are increasingly being challenged by the demands of operating in a more digital world whilst continuing to address ever growing regulatory pressures and the need to reduce costs. The digital era has seen an increase in the complexity, volume and number of sources of finance data, and the growing requirement for decision making to move at the pace of the business. These growing pressures and demands present finance functions with both an opportunity and a challenge, which they can address by digitising and transforming the organisations' accounting processes.  

The demands of digital finance will see new and emerging technologies being used to maximise the efficiency of the finance team, give greater financial agility and control, provide improved operational intelligence and enable strategic foresight. In this way, digital finance will empower organisations to drive competitive differentiation, increase market value and deliver sustainable growth.

Digital finance transformations are expected to accelerate due to the impact of COVID-19 as finance functions seek further automation to remove manual dependencies in their organisations highlighted by the lockdown whilst also addressing the increased demand  for advanced visibility into revenue and cost performance, increased levels of financial scenario simulation and a move to higher frequency reporting.

Delivering digital finance 

The Aptitude Accounting Hub ('AAH') with its ability to handle data at a highly granular level is increasingly being considered a strategic foundation for finance organisations as they undertake the necessary transformation to meet these new challenges. AAH, with its highly functional accounting rules engine and sub-ledger, centralises and automates finance, accounting and reporting. It delivers a consolidated, yet highly granular, single view of financial data.  With the Aptitude Accounting Hub at its core, a finance function can progressively transform and be simplified. 

To fully realise the opportunity for AAH, investment is accelerating in the product with several areas of enhanced functionality and capability identified for future development. These include the development of new modules to extend AAH's capabilities and the incorporation of modern technologies. We will also utilise the flexibility of cloud architectures to facilitate increased ease of initial deployment and future upgrades to the platform.

This evolution of AAH's functionality and capability in the coming years is designed to ensure that Aptitude Software capitalises on the future needs of the finance market. Digital finance provides Aptitude Software with a larger market opportunity which is continuing and non-cyclical in nature and is expected to strengthen software revenue growth. This growth, combined with an increased ease and speed of deployment and the continued deepening of our partner relationships, is expected to lead to software revenues growing as a proportion of overall revenue and lead to higher margins.

Potential for Acquisitions

Whilst our focus is currently the organic growth of software and subscription revenues, the Group's robust financial position provides the Board with confidence to continue to progress with the analysis of potential acquisitions. Any acquisition will need to meet our strict criteria of comprising complementary technologies focused on Aptitude Software's product suite. 

Key Product Overview

Aptitude Accounting Hub

A key highlight in the first six months of the year has been the entry into a strategic contract to licence AAH to the retail arm of an existing large European banking client. Our technology will be a core component of a five-year finance transformation programme automating the bank's finance processes, demonstrating once again Aptitude Software's capabilities over and above smart compliance. The contract provides for future growth in ARR as AAH is deployed to countries beyond the initial deployment.

The opportunity for AAH remains significant across all our key industries and is central to Aptitude Software's approach to addressing the digital finance opportunity as previously outlined.

Aptitude Revenue Management

The Group's two revenue management applications, collectively Aptitude Revenue Management ('ARM'), have continued to make progress in the first half of the year. Included within the new business contracts signed in the first half of the year was a material subscription agreement for Aptitude RevStream with a large North American technology business. Complementing these new business successes was the expansion of an agreement with a North American telco for the use of the Aptitude Revenue Recognition Engine in a previously un-licenced division of their wider group, demonstrating our ability to sell and implement additional software to existing clients.

A further highlight in the year to date has been the launch of Aptitude RevStream ('AREV') into the APAC and European market, with the product previously being focused on North America. As part of the launch of AREV into these new markets we have signed our first software reseller agreement with a partner targeting the Japanese market.

The two applications within ARM enables finance teams to automate and simplify the whole revenue lifecycle, from contract order to revenue recognition, reporting and forecasting. The applications go significantly beyond core IFRS 15 / ASC 606 compliance to allow total control over complex revenue management for all contract types ranging from subscription-based revenue models to complex multi-part or bundled contracts. This capability allows businesses to understand and control centrally the financial impact of all their commercial propositions, the quality of their revenue types as well as providing new and valuable insights to support future business decision making.

Aptitude Insurance Calculation Engine

The Aptitude Insurance Calculation Engine ('AICE') allows an insurer to make strategic, transformational investment providing value beyond compliance, enabling data insights and decision support delivering long-term business benefits. Demonstrating the capabilities of AICE, during the first half of the year Aptitude Software was recognised as a category leader in "IFRS 17 Technology Solutions: Market and Vendor Landscape 2020", a Chartis Research report that assesses leading vendors of IFRS 17 and LDTI solutions.

As previously announced, during the first half of the year the Group has seen sales cycles lengthening with a number of its insurance prospects as organisations focus on new short-term priorities arising from COVID-19. This has been made possible for insurers as a result of the now-confirmed delay to the introduction of IFRS 17 (which will now become effective for accounting periods commencing 1 January 2023). The Group remains confident that these opportunities will be realised in the medium term as the effective date of IFRS 17 adoption moves closer.

Whilst all existing client implementations of AICE are continuing successfully, the Group has seen a small number of clients seek to reduce their professional services expenditure in response to both the impact of COVID-19 and the one-year delay of the implementation of IFRS 17. Whilst reducing professional services revenue in the short-term, this is expected to result in increased revenue from these clients in future years as a number of the projects are now expected to extend until 2023 following the delay to the effective date of the accounting standard.

Our services

Implementation Services

Aptitude Software provides implementation services to its clients, with the scale of such services depending on the nature of the application, the size of the opportunity and the division of responsibilities between Aptitude Software and its partners. It is not a strategic priority of the Group to grow its implementation services revenues, with the business instead focused on making sure that its software is implemented efficiently, with minimal risk, short time-to-benefit and at a competitive total cost of ownership. Investment continues to be made in its products to facilitate lighter more repeatable implementations and the Group continues to invest in the enablement of its partner network to facilitate their ability to implement Aptitude Software's product suite reliably and efficiently.

Whilst utilisation has been resilient in the first half of the year, as flagged in our April 2020 Trading Update the impact of COVID-19 on sales opportunities in the insurance sector is expected to have a significant impact on 2021 services revenue, due to the time lag between the signing of new business contracts and the resulting projects reaching peak levels of activity. The Group benefits from some flexibility in its resourcing model in APAC and Europe through its balance of employee and contractor consultants.

Solution Management Services

Whilst the majority of overall services revenue is associated with the implementation of Aptitude Software's applications, there is a growing percentage of revenues derived from Solution Management Services, with two Aptitude Accounting Hub clients contracting for this service in the first half of the year. This service is expected to further enhance the operation and longevity of applications within major clients and extends the responsibilities of Aptitude Software beyond traditional software maintenance services to include services 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. In turn, clients benefit from the reduced requirement to establish internal technical teams focused on our applications, providing clients with efficiencies and allowing them to focus on their core activities. The long term and recurring nature of solution management services is expected to provide greater certainty and visibility to the Group's services revenues and continues to be a focus of investment in the business.

Adoption of Solution Management Services is now expected to accelerate following the first half appointment of an experienced leader to drive the go-to-market strategy for this offering.

COVID-19 update

Aptitude Software successfully implemented its business continuity plans in response to COVID-19. All business functions, including those servicing our diverse client base, have operated without disruption during the period.

The Group has taken several actions to protect the business. These actions include an increased focus on discretionary expenditure, the cancellation of 2020 pay rises and the moderation and re-phasing of investment plans, in addition to material travel cost savings. The business has not utilised the furlough scheme in the United Kingdom or other equivalent schemes in countries where it operates.

People and Organisation

Our People

The exceptional quality of our people has ensured all business functions have continued successfully despite the impact of COVID-19. The team is very talented, committed and works incredibly hard. The Board wishes to thank its employees in these difficult and unprecedented times both for their outstanding commitment and the excellent support and dedication they are providing to the business and to our clients whilst working remotely and supporting their families.

Aptitude Innovation Centre

The Aptitude Innovation Centre, our long-established integrated centre of excellence in Poland, at which a growing number of activities are performed, continues to be a material differentiator for the Group. The Aptitude Innovation Centre encompasses the development of the Group's entire product suite whilst also becoming an increasing focal point for the Group's cloud operations and support activities. This single integrated centre improves the collaboration between our teams as they provide software or associated services to our clients. The migration of activities, previously performed in the Group's higher cost locations, to the Aptitude Innovation Centre is increasing the efficiency of our business providing Aptitude Software with a competitive advantage.

Financial performance

Revenue

Aptitude Software's overall revenue for the six months ended 30 June 2020 has increased to £29.1 million (H1 2019: £28.8 million).

Software and Subscription Revenues

Aptitude Software's ARR at 30 June 2020 totalled £30.9 million (31 December 2019: £29.5 million, 30 June 2019: £27.9 million, both restated for the prevailing exchange rates at 30 June 2020), representing year on year growth of 11% on a constant currency basis.

ARR is the key financial metric for the Group. Included within ARR are Aptitude Software's annual licence fees or maintenance for its on-premise clients and subscription fees for the Group's SaaS clients.

Software and subscription revenues recognised in the first half of 2020 increased by 4% to £14.7 million (H1 2019: £14.1 million). Software and subscription revenues now represent 51% of overall revenue (H1 2019: 49%). It is a key part of the Group's strategy to increase this percentage whilst maximising the growth rate of Aptitude Software's ARR, a strategy which in due course will lead to growth in operating margin percentage given the higher margins achievable from software and subscriptions revenues.

Implementation and Solution Management Services

Implementation and solution management services revenue totalled £14.4 million for the six months ended 30 June 2020 (H1 2019: £14.7 million) with the reduction consistent with the Group's strategic focus of growing software and subscription revenues. Additionally, a small number of clients have chosen to adjust the current rate of their services expenditure to allow them to deal with other short-term business priorities arising from COVID-19.

Operating Profit and Margins

Adjusted Operating Profit for the six months ended 30 June 2020 was in line with the prior period at £5.1 million (H1 2019: £5.1 million on a constant currency basis and as reported). Operating profit on a statutory basis was £4.5 million (H1 2019: £4.6 million). Adjusted Operating Margin for the six month period to 30 June 2020 was therefore aligned with the prior year at 18% (H1 2019: 18%) despite the Group continuing to prioritise essential investment across a number of functions including in our products which support clients as they address the requirements of digital finance transformation. The Group continues to monitor the balance between investment in the opportunity facing the business and the growth in Aptitude Software's operating margins.

Foreign Exchange

With 53% (H1 2019: 52%) of the Group's revenues being generated from North American clients, the majority of which are invoiced in US Dollars, the business is impacted by changes in the US dollar exchange rate. Aptitude Software's H1 2019 revenue and Adjusted Operating Profit would have been reported at £29.0 million and £5.1 million respectively on a constant currency basis (compared to actual result of £28.8 million and £5.1 million). Constant currency is calculated by comparing the 2020 results with 2019 results retranslated at the rates of exchange prevailing during 2020.

Research and Development Expenditure

Total expenditure on product management, research, development and support in the six months ended 30 June 2020 was £4.2 million (H1 2019: £4.4 million) of which £3.2 million (H1 2019: £3.0 million) was incurred at the Aptitude Innovation Centre. This reduction in expenditure is in line with the Board's expectations following the transfer of development activities from California to Poland for the Aptitude RevStream product, improving cost competitiveness along with providing a fully centralised centre of excellence. 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.

Non-Underlying Items

Non-underlying items of £0.6 million (H1 2019: £0.4 million) principally comprise intangible amortisation (£0.4 million), with the remaining amount in relation to the continued separation costs incurred as part of the disposal of the Microgen Financial Systems business in 2019.

Taxation

The total tax charge of £1.1 million (H1 2019: £1.1 million) represents 24% of the Group's profit before tax (H1 2019: 24%), with the increase against the United Kingdom corporate tax rate of 19% due to the proportion of profits generated in overseas territories which have higher prevailing tax rates, principally the USA.

Statutory Results

The Group reported a profit for the period attributable to equity shareholders of £3.5 million (H1 2019: £25.8 million). The profit in H1 2019 includes £22.4 million from discontinued operations in respect of the Microgen Financial Systems business disposed of on the 28 June 2019.

Earnings per Share

As a result of the return of capital in September 2019 and accompanying share consolidation, Adjusted Basic Earnings per Share and Basic Earnings per Share from continuing operations increased to 6.7 pence and 6.0 pence (H1 2019: 6.0 pence and 5.5 pence), growth of 12% and 9% respectively.

Dividend

An interim dividend of 1.80 pence per share is proposed (2019: 1.80 pence). The interim dividend will be payable on 28 August 2020 to shareholders on the register at the close of business on 7 August 2020.

Balance Sheet

The Group continues to have a strong balance sheet with net assets at 30 June 2020 of £48.3 million (H1 2019: £88.4 million), including cash of £30.9 million (H1 2019: £23.55 million), net funds of £29.2 million (H1 2019: £21.06 million) and no bank loan. Trade receivables (net) have reduced to £10.7 million (H1 2019: £12.3 million), a decrease of £1.6 million due to the timing of receipt of annual licence fee and subscription invoices issued. The growth in the Group's recurring revenues resulted in deferred income increasing to £22.2 million at 30 June 2020 (H1 2019: £21.2 million). The Group's cash collection disciplines remain strong with like for like DSO (debtor days) at 30 June 2020 of 60 consistent with prior periods.

Statement on Principal Risks and Uncertainties

Pursuant to the requirements of the Disclosure Guidance 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 Group's 2019 Annual Report did identify COVID-19 as a principal risk, however the timing of the report being submitted in early March 2020 meant that any impact of COVID-19 had not been realised. Given the global impact since this date, the Group has updated both the risks and mitigating actions surrounding COVID-19. This is detailed in the table below.

Principal risks and Uncertainties

Explanation

Mitigating Action

The effect of COVID-19 impacts new business activities, the implementation of our software and our support provision along with the collection of client monies.

The Group's existing client base and sales prospects could delay sales cycles/ongoing implementations as clients focus on short-term priorities arising from COVID-19.

 

In addition, the global travel restrictions in place may slow down the agreement of new revenue opportunities further whilst the ongoing implementations are often completed through our consultants' attendance at client sites around the world. These sites could be impacted in the short to medium term as clients and prospects work remotely as part of their business continuity plans.

 

Furthermore, clients' own cash flow positions could become impacted as a result of being negatively impacted from COVID-19 increasing the risk around non-payment of licence fees and services.

The business continuity plans have been successfully implemented with the necessary technology and infrastructure in place to facilitate home working for all employees to allow all business functions to be provided without disruption to our clients.

 

The Group continues to monitor developments across its client base and prospects through its various engagement teams and partners. The majority of our client contracts include force majeure clauses which should provide the Group with protection if there is any contractual non-performance due to the impact of COVID-19.

 

The Group operates a closely controlled collection policy with constant communication with engagement teams reducing any potential exposure of non-payment. The Group only has minimal exposure to those industries which were most affected by COVID-19 such as travel, retail and leisure.

All other principal risks and uncertainties detailed within the Group's 2019 Annual Report remain applicable for the first six months of the financial year.  The Group's 2019 Annual Report is available from the Aptitude Software website: https://www.aptitudesoftware.com/investor-relations/reports-presentations/

Related party transactions during the period are disclosed in Note 18.

 

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

For the six months ended 30 June 2020

 

 

 

Unaudited six months ended 30 Jun 2020

 

Unaudited six months ended 30 Jun 2019*

 

Audited year ended 31 Dec 2019*

 

 

Note

Before

Non-underlying items

 

Non-underlying items

 

Total

 

Before

Non-underlying items

 

Non-underlying items

 

Total

 

Before

Non-underlying items

 

Non-underlying items

 

Total

Continuing operations

 

£000

 

£000

 

£000

 

£000

 

£000

 

£000

 

£000

 

£000

 

£000

Revenue

5

29,129

 

-

29,129

 

28,831

 

-

 

28,831

 

59,652

 

-

 

59,652

Operating costs

5/6

(24,034)

 

(563)

(24,597)

 

(23,772)

 

(423)

 

(24,195)

 

(49,150)

 

(1,559)

 

(50,709)

Operating profit

5/6

5,095

 

(563)

4,532

 

5,059

 

(423)

 

4,636

 

10,502

 

(1,559)

 

8,943

Finance income

 

50

 

-

50

 

55

 

-

 

55

 

158

 

-

 

158

Finance costs

 

(42)

 

-

(42)

 

(278)

 

-

 

(278)

 

(326)

 

-

 

(326)

Profit before income tax

 

5,103

 

(563)

 

4,540

 

4,836

 

(423)

 

4,413

 

10,334

 

(1,559)

 

8,775

Income tax expense

7

(1,225)

 

135

 

(1,090)

 

(1,161)

 

102

 

(1,059)

 

(2,403)

 

370

 

(2,033)

Profit from continuing operations

 

3,878

 

(428)

 

3,450

 

3,675

 

(321)

 

3,354

 

7,931

 

(1,189)

 

6,742

Profit from discontinued operations

17

-

 

-

 

-

 

2,664

 

19,769

 

22,433

 

2,549

 

19,881

 

22,430

Profit for the period

 

3,878

 

(428)

 

3,450

 

6,339

 

19,448

 

25,787

 

10,480

 

18,692

 

29,172

Earnings per share from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

8

 

 

 

 

6.0p

 

 

 

 

 

5.5p

 

 

 

 

 

11.2p

Diluted

8

 

 

 

 

5.9p

 

 

 

 

 

5.2p

 

 

 

 

 

11.0p

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

8

 

 

 

 

6.0p

 

 

 

 

 

42.2p

 

 

 

 

 

48.4p

Diluted

8

 

 

 

 

5.9p

 

 

 

 

 

40.2p

 

 

 

 

 

47.7p

 

* Amounts displayed within the prior periods have been restated for the disposal of Microgen Financial Systems on 28 June 2019 which met the criteria of being presented as a discontinued operation. See note 17 for details. 

       

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2020

 

 

 

Unaudited

six months

ended

 

Unaudited

six months

ended

 

Audited

year

ended

 

 

30 Jun

 2020

 

30 Jun

 2019

 

31 Dec

2019

 

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

Profit for the period

 

3,450

 

25,787

 

29,172

Other comprehensive income/(expense)

 

 

 

 

 

 

Items that may subsequently be reclassified to profit or loss:

 

 

 

 

 

 

Fair value gain/(loss) on hedged financial instruments

 

210

 

88

 

(186)

Currency translation difference

 

30

 

(167)

 

(415)

Other comprehensive income from discontinued operations

 

-

 

22

 

22

Other comprehensive income/(expense) for the period, net of tax

 

240

 

(57)

 

(579)

 

Total comprehensive income for the period

 

3,690

 

25,730

 

28,593

 

 

 

 

 

 

 

Total comprehensive income for the period

arises from:

Continuing operations

 

3,690

 

3,275

 

6,141

Discontinued operations

 

-

 

22,455

 

22,452

 

 

3,690

 

25,730

 

28,593

 

 

 

 

 

 

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

As at 30 June 2020

 

 

 

 

Note

Unaudited

as at

30 Jun 2020

 

Unaudited

as at

30 Jun 2019

 

Audited

as at

31 Dec 2019

ASSETS

 

£000

 

£000

 

£000

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

11

2,558

 

3,653

 

3,207

Goodwill

 

23,787

 

23,787

 

23,787

Intangible assets

 

6,063

 

6,909

 

6,486

Other long-term assets

 

1,886

 

1,729

 

1,746

Income tax assets

 

-

 

-

 

944

Deferred tax assets

 

703

 

819

 

1,198

 

 

34,997

 

36,897

 

37,368

Current assets

 

 

 

 

 

 

Trade and other receivables

12

13,031

 

15,404

 

9,659

Financial assets

 

 

 

 

 

 

- derivative financial instruments

 

121

 

176

 

4

Current income tax assets

 

1,555

 

980

 

1,155

Cash and cash equivalents

 

30,887

 

69,897

 

32,965

Total current assets

 

45,594

 

86,457

 

43,783

Total assets

 

80,591

 

123,354

 

81,151

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 - derivative financial instruments

 

(28)

 

(19)

 

(120)

Trade and other payables

13

(28,641)

 

(29,642)

 

(30,122)

Capital lease obligations

14

(479)

 

(865)

 

(835)

Current income tax liabilities

 

(206)

 

(316)

 

(485)

Provisions

15

(38)

 

-

 

(38)

 

 

(29,392)

 

(30,842)

 

(31,600)

Net current assets

 

16,202

 

55,615

 

12,183

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Capital lease obligations

14

(1,122)

 

(1,676)

 

(1,288)

Provisions

15

(404)

 

(291)

 

(337)

Deferred tax liabilities

 

(1,358)

 

(2,142)

 

(1,502)

 

 

(2,884)

 

(4,109)

 

(3,127)

NET ASSETS

 

48,315

 

88,403

 

46,424

 

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

As at 30 June 2020

 

 

 

 

 

 

Note

Unaudited

as at

30 Jun 2020

 

Unaudited

as at

30 Jun 2019

 

Audited

as at

31 Dec 2019

 

 

 

 

£000

 

£000

 

SHAREHOLDERS' EQUITY

 

£000

 

 

 

 

Share capital

16

4,140

 

3,994

 

4,128

Share premium account

16

7,720

 

6,492

 

7,660

Capital redemption reserve

 

12,372

 

12,372

 

12,372

Other reserves

 

34,289

 

34,353

 

34,079

(Accumulated losses)/retained earnings

 

(9,570)

 

31,610

 

(11,149)

Foreign currency translation reserve

 

(636)

 

(418)

 

(666)

TOTAL EQUITY

 

48,315

 

88,403

 

46,424

 

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2020

 

 

 

 

   Share capital

Share
premium account

Accumulated losses

Foreign currency translation reserve

Capital redemption reserve

Other
reserves

Total

 

 

£000

£000

£000

£000

£'000

£000

£000

 

 

 

 

 

 

 

 

 

Total equity as at 1 January 2020

 

4,128

7,660

(11,149)

(666)

12,372

34,079

46,424

Comprehensive income

 

 

 

 

 

 

 

 

Profit for the period

 

-

-

3,450

-

-

-

3,450

Cash flow hedges

 

 

 

 

 

 

 

 

 - net fair value gains

 

-

-

-

-

-

210

210

Exchange rate adjustments

 

-

-

-

30

-

-

30

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

-

-

3,450

30

-

210

3,690

Shares issued under share option schemes

 

12

60

-

-

-

-

72

Share options - value of employee service

 

-

-

159

-

-

-

159

Dividends to equity holders of the company

 

-

-

(2,030)

-

-

-

(2,030)

 

 

 

 

 

 

 

 

 

Total contributions by and distributions to owners of the company recognised directly into equity

 

12

60

(1,871)

-

-

-

(1,799)

Balance at 30 June 2020 (unaudited)

 

4,140

7,720

(9,570)

(636)

12,372

34,289

48,315

 

 

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2019

 

 

 

 

   Share capital

Share
premium account

Retained earnings

 

Foreign currency translation reserve

Capital redemption reserve

Other
reserves

Total

 

 

£000

£000

£000

£000

£'000

£000

£000

 

 

 

 

 

 

 

 

 

Total equity as at 1 January 2019

 

3,958

6,488

8,010

(273)

12,372

34,265

64,820

Comprehensive income

 

 

 

 

 

 

 

 

Profit for the period

 

-

-

25,787

-

-

-

25,787

Cash flow hedges

 

 

 

 

 

 

 

 

 - net fair value gains

 

-

-

-

-

-

88

88

Exchange rate adjustments

 

-

-

-

(145)

-

-

(145)

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

-

-

25,787

(145)

-

88

25,730

Shares issued under share option schemes

 

36

4

-

-

-

-

40

Share options - value of employee service

 

-

-

528

-

-

-

528

Dividends to equity holders of the company

 

-

-

(2,715)

-

-

-

(2,715)

 

 

 

 

 

 

 

 

 

Total contributions by and distributions to owners of the company recognised directly in equity

 

36

4

(2,187)

-

-

-

(2,147)

Balance at 30 June 2019

(unaudited)

 

3,994

6,492

31,610

(418)

12,372

34,353

88,403

 

 

 

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

For the six months ended 30 June 2020

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

six months ended

 

six months ended

 

year

ended

 

Note

 

30 Jun 2020

 

30 Jun 2019

 

31 Dec 2019

 

 

 

£000

 

£000

 

£000

Cash flows from operating activities

 

 

 

 

 

 

 

Cash generated from operations

9

 

925

 

6,992

 

18,420

Interest paid

 

 

(42)

 

(307)

 

(326)

Income tax paid

 

 

(439)

 

(1,199)

 

(2,077)

 

 

 

 

 

 

 

 

Net cash flows generated from operating activities

 

 

444

 

5,486

 

16,017

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(131)

 

(429)

 

(828)

Disposal of subsidiaries, net of cash disposed

     17

 

-

 

47,152

 

47,152

Interest received

 

 

50

 

57

 

158

Net cash (used in)/generated from investing activities

 

 

(81)

 

46,780

 

46,482

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Net proceeds from issuance of ordinary shares

16

 

72

 

40

 

1,368

Dividends paid to company's shareholders

10

 

(2,030)

 

(2,715)

 

(3,859)

Repayment of capital lease obligations

 

 

(489)

 

(607)

 

(1,127)

Return of value to shareholders

 

 

-

 

-

 

(46,420)

Expenses relating to return of value

 

 

-

 

-

 

(600)

Repayment of loan

 

 

-

 

(8,000)

 

(8,000)

Net cash used in financing activities

 

 

(2,447)

 

(11,282)

 

(58,638)

 

 

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

 

(2,084)

 

40,984

 

3,861

Cash and cash equivalents at beginning of period

 

 

32,965

 

29,186

 

29,186

Exchange rate gains/(losses) on cash and cash equivalents

 

6

 

(273)

 

(82)

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

30,887

 

69,897

 

32,965

 

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 powerful financial management software to large global businesses.

The Company is a public limited company incorporated and domiciled in England and Wales with a primary listing on the London Stock Exchange. The address of its registered office is Old Change House, 128 Queen Victoria Street, London, England, EC4V 4BJ.

These condensed consolidated interim financial statements were approved for issue on 28 July 2020.

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 2019 were approved by the Board of directors on 10 March 2020 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.

The interim results for the six-month period ended 30 June 2020 and the comparatives for 30 June 2019 are unaudited, yet have been reviewed by the independent auditors. A copy of the review report is included at the end of this report.

2.       Basis of preparation

 

These condensed consolidated interim financial statements for the six months ended 30 June 2020 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. These condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with IFRSs as adopted by the European Union.

After reviewing the Company's forecasts and projections, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. In particular, these forecasts considered the future impact on Aptitude Software Limited of COVID-19. The Company therefore continues to adopt the going concern basis in preparing its financial statements.

A scenario testing exercise was also performed for the three years 2020, 2021 and 2022, with several different sets of assumptions modelled including some more pessimistic than current indications may suggest. In all scenarios Aptitude Software remains comfortably profitable and cash generative in the years under review, although below the Director's expectations set prior to the impact of COVID-19. Financial performance in 2020 is not expected to be materially impacted due to the visibility over services revenue from existing clients and the benefits of the Aptitude Software Group's recurring revenue business model. The recurring revenues, representing over 50% of total revenue, are resilient given the nature of the Group's enterprise applications which are typically heavily integrated and central to clients' mission-critical long-term financial reporting processes, underpinned by minimum contractual terms of up to six years at inception.

The modelled lengthening of sales cycles, principally with insurance prospects in 2020 is, however, expected to have a more significant impact on 2021 services revenue due to the time lag between the signing of new business contracts and the resulting projects reaching peak levels of activity. Profitability is expected to return towards earlier expectations in 2022 on the assumption that a more normal business environment has returned in 2021.

At this time of economic uncertainty caused by COVID-19 the Directors are reassured that the Aptitude Software Group is financially robust benefitting from a cash balance at 30 June 2020 of £30.9 million and no bank loans. Additionally, the Group is cash generative and profitable, reporting Adjusted Operating Profit in the six months ended 30 June 2020 of £5.1 million.

The Group continues to monitor the collection of monies from clients with no material delays in payment being cited.

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 2019, with the exception of changes in estimates that are required in determining the provision for income taxes.

Fair value estimation

Financial instruments not measured at fair value

Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables, trade and other payables, and loans and borrowings. However, due to their short-term nature and ability to be liquidated at short notice their carrying value approximates to their fair value.

 

Financial instruments measured at fair value

The fair value hierarchy of the financial instruments measured at fair value is provided below.

 

 

Level 2 inputs

 

Unaudited

six months

ended
30 Jun 2020

£'000

Unaudited

six months

ended

30 Jun 2019

£'000

Financial assets

 

 

Derivative financial assets (designated hedge instruments)

121

176

 

121

176

 

Financial liabilities

 

 

Derivative financial liabilities (designated hedge instruments)

(28)

(19)

 

(28)

(19)

 

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

During the first half of 2019 Aptitude Software Group plc operated two businesses, Aptitude Software and Microgen Financial Systems, both of which were considered operating segments based on the reports the Group received from management to make strategic decisions. With the disposal of Microgen Financial Systems on 28 June 2019, the only continuing business segment was Aptitude Software and therefore certain segmental analysis is no longer required for either period.

Geographical segments

The Group has two geographical segments for reporting purposes, the United Kingdom and the Rest of the World.

The following table provides an analysis of the Group's sales by origin and by destination.

 

 

Sales revenue by origin

 

Sales revenue by destination

 

 

Unaudited six months ended

30 Jun 2020

 

Unaudited

six months

ended

30 Jun 2019

 

Unaudited six months ended

30 Jun 2020

 

Unaudited

six months

ended

30 Jun 2019

 

 

£000

 

£000

 

£000

 

£000

Continuing operations

 

 

 

 

 

 

 

 

United Kingdom

 

16,050

 

15,363

 

4,729

 

4,764

Rest of World

 

13,079

 

13,468

 

24,400

 

24,067

 

 

29,129

 

28,831

 

29,129

 

28,831

 

5.       Segmental information (continued)

 

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'):

 

 

 

 

 

 

Continuing operations

 

 

 

Unaudited six months ended 30 June 2020

 

 

 

Software related revenue

Services related revenue

 

 

 

UK

RoW

Total

UK

RoW

Total

Total

 

 

£000

£000

£000

£000

£000

£000

£000

Revenue from external clients

 

2,615

12,080

14,695

2,114

12,320

14,434

29,129

 

 

 

 

 

 

 

 

 

Unaudited six months ended 30 June 2019

 

 

 

Software related revenue

Services related revenue

 

 

 

UK

RoW

Total

UK

RoW

Total

Total

 

 

£000

£000

£000

£000

£000

£000

£000

Revenue from external clients

 

2,444

11,688

14,132

2,320

12,379

14,699

28,831

 

All of the revenue displayed in the above table is recognised over time in line with the Group's accounting policy detailed on pages 78 to 80 of the Aptitude Software Group plc 2019 Annual Report and has been generated from contracts with clients.

 

The following is an analysis of the carrying amount of non-current assets (excluding deferred and income tax assets), and additions to property, plant and equipment and intangible assets (excluding right-of-use asset additions resulting from property lease agreements) and intangible assets, analysed by the geographical area in which the assets are located.

 

 

 

Carrying amount of

non-current assets

 

Capital expenditure

 

 

Unaudited six months ended

30 Jun 2020

 

Unaudited

six months

ended

30 Jun 2019

 

Unaudited six months ended

30 Jun 2020

 

Unaudited

six months

ended

30 Jun 2019

 

 

£000

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

 

 

United Kingdom

 

17,417

 

17,682

 

55

 

309

Rest of World

 

16,877

 

18,396

 

76

 

120

 

 

34,294

 

36,078

 

131

 

429

 

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 2020

 

Unaudited

six months

ended 30 Jun 2019

 

Audited

year

ended 31 Dec 2019

 

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

Continuing operations

 

 

 

 

 

 

Amortisation of acquired intangibles

 

423

 

423

 

846

Restructuring and separation costs

 

140

 

-

 

-

Overseas taxation provision

 

-

 

-

 

713

 

 

563

 

423

 

1,559

 

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 24% (the estimated tax rate for the six months ended 30 June 2019 was 24%). The increase against the United Kingdom corporation tax rate of 19% is due to the proportion of profits in overseas territories with higher prevailing tax rates, principally in the USA. The weighted average income tax rate applied to discontinued operations for the six months ended 30 June 2019 was 20%.

8.          Earnings per share

 

Unaudited six months ended

30 Jun 2020

 

Unaudited six months ended 30 Jun 2019

 

Audited

year ended

31 Dec 2019

 

 

pence

pence

 

pence

 

 

 

 

 

Earnings per share

 

 

 

 

Basic

 

 

 

 

From continuing operations

6.0

5.5

 

11.2

From discontinued operations

-

36.7

 

37.2

 

6.0

42.2

 

48.4

 

 

 

 

 

Diluted

 

 

 

 

From continuing operations

5.9

5.2

 

11.0

From discontinued operations

-

35.0

 

36.7

 

5.9

40.2

 

47.7

 

8.          Earnings per share (continued)

 

 

 

 

 

 

Unaudited six months ended

30 Jun 2020

Unaudited six months ended 30 Jun 2019

 

Audited

year ended

31 Dec 2019

Adjusted earnings per share

pence

pence

 

pence

Basic

 

 

 

 

From continuing operations

6.7

6.0

 

12.8

From discontinued operations

-

4.1

 

4.2

 

6.7

10.1

 

17.0

Diluted

 

 

 

 

From continuing operations

6.6

5.7

 

12.5

From discontinued operations

-

4.0

 

4.2

 

6.6

9.7

 

16.7

 

To provide an indication of the underlying operating performance the adjusted earnings per share calculation above excludes intangible amortisation and other non-underlying items and has a tax charge based on the effective rate.

 

 

Unaudited six months ended

30 Jun 2020

 

Unaudited six months ended 30 Jun 2019

 

Audited

year ended

31 Dec 2019

 

pence

pence

pence

 

 

 

 

Basic earnings per share

6.0

42.2

48.4

Non-underlying items

0.7

(32.1)

(31.0)

Prior years' tax credit

-

-

(0.4)

Adjusted earnings per share

6.7

10.1

17.0

 

 

9.       Cash generated from operations

 

 

Unaudited

six months ended

30 Jun 2020

 

Unaudited

six months ended

30 Jun 2019

 

Audited

year

ended

31 Dec 2019

 

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

Profit before tax for the period from:

 

 

 

 

 

 

Continuing operations

 

4,540

 

4,413

 

8,775

Discontinued operations

 

-

 

22,964

 

22,961

Profit before tax including discontinued operations

 

4,540

 

27,377

 

31,736

 

 

 

 

 

 

 

Adjusted for:

 

 

 

 

 

 

Depreciation

 

823

 

1,012

 

1,844

Overseas taxation provision

 

-

 

-

 

713

Amortisation

 

423

 

963

 

1,392

Share-based payment expense

159

 

528

 

1,033

Gain on sale of subsidiary

 

-

 

(20,309)

 

(23,657)

Finance income

 

(50)

 

(57)

 

(158)

Finance costs

 

42

 

307

 

326

 

 

 

 

 

 

 

Changes in working capital:

 

 

 

 

 

 

(Increase)/decrease in receivables

 

(3,512)

 

(3,549)

 

1,493

(Decrease)/increase in payables

 

(1,518)

 

721

 

3,900

Increase/(decrease) in provisions

 

18

 

(1)

 

(202)

 

 

 

 

 

 

 

Cash generated from operations

 

925

 

6,992

 

18,420

 

10.     Dividends

 

The interim dividend of 1.8 pence per share (2019: 1.8 pence per share) was approved by the Board on 28 July 2020. It is payable on 28 August 2020 to shareholders on the register at 7 August 2020.  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 2020. A final dividend of £2,030,000 was paid in May 2020 and relates to the year ending 31 December 2019 (2019: final dividend £2,715,000).

 

11.      Property, plant and equipment

 

 

 

 

Unaudited
six months ended
30 Jun 2020

 

Unaudited
six months ended
30 Jun 2019

 

 

 

 

£000

 

£000

Opening net book amount 1 January

 

 

 

          3,207

 

          5,417

Additions

 

 

 

               131

 

               429

Disposal of subsidiary

 

 

 

           -

 

           (1,213)

Net disposals

 

 

 

-

 

(13)

Exchange movements

 

 

 

43

 

45

Depreciation

 

 

 

(823)

 

(1,012)

Closing net book amount 30 June (unaudited)

 

2,558

 

3,653

               

 

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 2020

 

Unaudited
six months ended
30 Jun 2019

 

 

 

 

£000

 

£000

Trade receivables - net

 

 

 

          10,724

 

          12,331

Other receivables

 

 

 

             672

 

             1,012

Prepayments

 

 

 

1,171

 

656

Accrued income

 

 

 

464

 

1,405

Closing net book amount 30 June (unaudited)

 

13,031

 

15,404

 

Contract assets and contract liabilities only comprise accrued and deferred income respectively.

 

Within the trade receivables balance of £10,724,000 (30 June 2019: £12,331,000) there are balances totalling £2,385,000 (30 June 2019: £2,217,000) which, at 30 June 2020 were overdue for payment. During July 2020, significant receipts totalling £3,900,000 have been collected against the total receivables balance.

 

 

13.     Trade and other payables

 

 

 

 

Unaudited
six months ended
30 Jun 2020

 

Unaudited
six months ended
30 Jun 2019

 

 

 

 

£000

 

£000

Trade payables

 

 

 

          620

 

          941

Other tax and social security payable

 

 

 

             1,311

 

            1,024

Other payables

 

 

 

               128

 

               882

Accruals

 

 

 

4,347

 

5,589

Deferred income

 

 

 

22,235

 

21,206

Closing net book amount 30 June (unaudited)

 

28,641

 

29,642

 

14.     Capital lease obligations

 

 

 

 

Unaudited
six months ended
30 Jun 2020

 

Unaudited
six months ended
30 Jun 2019

 

 

 

 

 

£000

 

£000

 

Amounts payable under capital lease arrangements:

 

 

 

 

 

 

 

Within one year

 

 

 

531

 

948

 

Within two to five years

 

 

 

1,096

 

1,473

 

After five years

 

 

 

114

 

344

 

Total

 

 

 

1,741

 

2,765

 

Less: future finance charges

 

(140)

 

(224)

 

 

Present value of lease obligations

 

1,601

 

2,541

 

Less: Amount due for settlement within 12 months (shown under current liabilities

 

(479)

 

(865)

 

As at 30 June

 

 

 

1,122

 

1,676

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited
six months ended
30 Jun 2020

 

Unaudited
six months ended
30 Jun 2019

The present value of financial lease liabilities is split as follows:

 

£000

 

£000

Within one year

 

479

 

865

Within two to five years

 

1,008

 

1,343

After five years

 

114

 

333

 

 

1,601

 

2,541

 

 

15.     Provisions

 

 

 

 

 

Unaudited
six months ended
30 Jun 2020

 

Unaudited
six months

ended
30 Jun 2019

 

 

 

 

£000

 

£000

At 1 January

 

 

 

                  375

 

                  424

Charged to income statement

 

 

 

60

 

-

Disposal of subsidiary

 

 

 

-

 

(132)

Exchange movements

 

 

 

7

 

(1)

At 30 June

 

 

 

442

 

291

 

Provisions have been analysed between current and non-current as follows:

 

 

 

 

Unaudited
six months

ended
30 Jun 2020

 

Unaudited
six months ended
30 Jun 2019

 

 

 

 

£000

 

£000

Current

 

 

 

38

 

-

Non-current

 

 

 

404

 

291

At 30 June

 

 

 

442

 

291

 

£377,000 of the total provision at 30 June 2020 of £442,000 relates to the cost of dilapidations in respect of its occupied leasehold premises (30 June 2019: £242,000).

 

16.     Share capital

 

Unaudited
six months ended
30 Jun 2020

Unaudited
six months ended
30 Jun 2019

Ordinary share capital at 7 1/3 pence (30 June 2019: 6 3/7 pence) each

 

Number of shares

 

Ordinary Shares

 

Number

of shares

 

Ordinary Shares

 

000

 

£000

 

000

 

£000

Issued and fully paid:

 

 

 

 

 

 

 

 

Opening balance as at 1 January

 

56,218

 

4,128

 

61,173

 

3,932

Shares issued under share option schemes

 

160

 

12

 

555

 

36

At 30 June (unaudited)

 

56,378

 

4,140

 

61,728

 

3,968

 

 

 

 

 

 

 

 

 

Shares to be issued

 

 

 

 

 

 

 

 

Deferred equity consideration on acquisition

 

-

 

-

 

399

 

26

Closing balance as at 30 June (unaudited)

 

56,378

 

4,140

 

62,127

 

3,994

                   

16.     Share capital (continued)

 

During the second half of 2019, the Group announced a return of value to shareholders of 73 pence per ordinary share amounting to £46.4 million in cash, by way of a 'B' share scheme, which gave shareholders the ability to receive cash in the form of capital. The return of value was approved by shareholders on 23 September 2019. The return of value was accompanied by a 7 for 8 share consolidation to maintain broad comparability of the share price before and after the creation of the 'B' shares. This consolidation of shares resulted in a reduction of 7,948,799 to the number of ordinary shares in issue.

 

Employee share option scheme options exercised during the period to 30 June 2020 resulted in 159,992 shares being issued (30 June 2019: 554,710), with exercise proceeds of £72,000. The related weight average share price at the time of exercise was £3.93 per share.

 

Share premium                                                      

 

 

Unaudited
six months ended
30 Jun 2020

 

Unaudited
six months ended
30 Jun 2019

 

 

£000

 

£000

Opening balance as at 1 January

 

7,660

 

6,488

Movement in relation to share options exercised

 

 60

 

 4

Closing balance as at 30 June (unaudited)

 

7,720

 

6,492

 

17.     Discontinued operations

 

On 28 June 2019, the Group completed the disposal of Microgen Financial Systems Limited and is reported in the prior year as a discontinued operation. Financial information relating to the discontinued operation for the period to the date of disposal along with the gain on disposal are presented within note 28 of the Aptitude Software Group plc 2019 Annual Report.

 

18.     Related party transactions

 

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.

 

During 2020, the Group entered into transactions with a subsidiary of FDM Group (Holdings) plc, a company for which Peter Whiting (non-executive Director of Aptitude Software Group plc) is currently a non-executive Director. FDM Group (Holdings) plc provided consultancy services to the Group during the six-month period ended 30 June 2020 at a cost of £164,000 (Six months ended 30 June 2019: £219,000).

 

18.     Related party transactions (continued)

 

During the prior year, the Group entered into transactions with Phoenix Johnson Ltd, a company for which Naomi Johnson (an experienced facility management professional), the wife of Tom Crawford who was at that point a Director of Aptitude Software Group plc, is both the sole shareholder and an employee. Phoenix Johnson Ltd provided consultancy services to Aptitude Software Group plc during the six-month period ended 30 June 2019 at a cost of £28,000. These services ceased on 1 November 2019.

 

There were no other related party transactions during the six-month period ended 30 June 2020 (30 June 2019: £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 2019 as defined by International Accounting Standard No 24 'Related Party Disclosures' are disclosed in note 33 of the Aptitude Software Group plc Annual Report for the year ended 31 December 2019.

 

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 2019. A list of current directors is maintained on the Aptitude Software Group plc website: www.aptitudesoftware.com/investor-relations/

Copies of this statement are available on the investor relations page of our website (www.aptitudesoftware.com/investor-relations/). 

 

By order of the Board

 

P Wood

28 July 2020

Deputy Chief Executive Officer and Chief Financial Officer

 

 

Independent review report to Aptitude Software Group plc

Report on the condensed consolidated interim financial statements

 

We have reviewed Aptitude Software Group plc's condensed consolidated interim financial statements (the "interim financial statements") in the Interim Results of Aptitude Software Group plc for the 6 month period ended 30 June 2020 which comprises;

 

·    the condensed consolidated interim balance sheet as at 30 June 2020;

·    the condensed consolidated interim income statement and condensed consolidated interim statement of comprehensive income for the period then ended;

·    the condensed consolidated interim statement of cash flows for the period then ended;

·    the condensed consolidated interim statement of changes in equity for the period then ended; and

·    the explanatory notes to the interim financial statements.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors.

The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express a conclusion to the company on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

The impact of uncertainties arising from the UK exiting the European Union on our review

Our review of the condensed set of financial statements in the half-yearly financial report requires us to obtain an understanding of all relevant uncertainties, including those arising as a consequence of the effects of Brexit. Such reviews assess and challenge the reasonableness of estimates made by the Directors and the related disclosures and the appropriateness of the going concern basis of preparation of the financial statements. All of these depend on assessments of the future economic environment and the company's future prospects and performance.

Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty, with the full range of possible outcomes and their impacts unknown. We applied a standardised firm-wide approach in response to these uncertainties when assessing the Company's future prospects and performance. However, no review of interim financial information should be expected to predict the unknowable factors or all possible future implications for a company associated with a course of action such as Brexit.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

This report is made solely to the Company, as a body, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company as a body, for our review work, for this report, or for the conclusion we have formed.

 

Grant Thornton UK LLP

Statutory Auditor, Chartered Accountants

London

28th July 2020

 


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