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 |
- |
Strategic and Operational Highlights:
Response to COVID-19:
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.
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 subsequentlybe 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 | Accumulated losses | Foreign currency translation reserve | Capital redemption reserve | Other | 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 | Retained earnings
| Foreign currency translation reserve | Capital redemption reserve | Other | 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 £'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 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 |
|
Unaudited |
|
|
|
|
|
£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 |
|
Unaudited |
|
|
|
|
£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 |
|
Unaudited |
|
|
|
|
£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 |
|
Unaudited |
|
|
|
|
|
|
£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 |
|
Unaudited |
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 |
|
Unaudited
ended |
|
|
|
|
£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
ended |
|
Unaudited |
|
|
|
|
£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 |
Unaudited |
|||||||
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 |
|
Unaudited |
|
|
£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