Interim Results

Aptitude Software Group PLC

25 July 2024

 

                25 July 2024

APTITUDE SOFTWARE GROUP plc

('Aptitude Software' or 'the Group')

Interim Results for the six months ended

30 June 2024

Aptitude Software Group plc (LSE: APTD), a market leading provider of AI Autonomous Finance solutions, providing a differentiated approach to finance transformation and enabling finance teams to become strategic partners to the business, reports its unaudited results for the six months ended 30 June 2024.

Financial Highlights

Six months ended 30 June	H1 2024	H1 2023	% Change
Annual Recurring Revenue ('ARR') at 30 June
Annual Recurring Revenue1	£50.8m	£49.7m2	2%
-     Software ARR at 30 June1	£46.7m	£45.2m2	3%
-     Assure ARR at 30 June1	£4.1m	£4.5m2	(9%)
Revenue
Total Revenue	£35.3m	£37.5m	(6%)
-     Recurring Revenue3	£27.5m	£27.0m	2%
-     Implementation Revenue	£7.8m	£10.5m	(26%)
Profit
Adjusted Operating Profit4	£4.2m	£4.2m	-
Statutory Operating Profit	£2.5m	£1.7m	47%
Adjusted Operating Margin4	11.9%	11.2%	0.7%
Cash and Balance Sheet
Cash and Cash Equivalents	£24.4m	£24.5m	(0%)
Net Funds5	£13.8m	£12.2m	13%
Interim Ordinary Dividend per Share	1.8p	1.8p	-

·	Increasing growth in Software ARR of 3% (H1 2023 2%, FY 2023 0%), driven by a strong new business performance to 30 June 2024, including wins in Fynapse and Revenue Management.
·	Improved performance from the software base, with the software net retention rate6 increasing to 99% (H1 2023 96%, FY 2023 96%) reflecting the revised strategic focus and operational improvements taking effect.
·	Recurring revenue accounted for 78% of the Group's total revenue (H1 2023 72%, FY 2023 71%), and coupled with increasing cost efficiencies, are driving improving operating margins across the Group.
·	Adjusted operating profit maintained at £4.2m (H1 2023 £4.2m) despite non-recurring implementation revenue reductions.
·	Continued balance sheet strength with cash of £24.4 million (30 June 2023: £24.5 million) and net funds5 of £13.8 million (30 June 2023: £12.2 million).
·	In the first quarter of 2024, the Group commenced a share buy back programme providing enhanced returns to shareholders.

Strategic and Operational Highlights:

·	Two additional Fynapse clients signed in H1 2024, including one win in partnership with HSO and Microsoft and one with a major existing Aptitude Accounting Hub client.
·	Launch of global insurance industry solution with HSO underpinned by Fynapse and Microsoft Dynamics 365 demonstrating the increased take up of Fynapse by partners and clients.
·	Growing pipeline of opportunities for Fynapse, driven by our key strategic partnerships with Microsoft, HSO and a big-4 accounting firm, and our focused direct sales team.
·	Strong new business client wins with Revenue Management in H1 demonstrating the continued value of Aptitude's compliance suite.
·	Ongoing organisational transformation programme to align the organisation to the Fynapse opportunity is delivering operational improvements and cost efficiencies across the Group and will be continuing throughout the remainder of the year.
·	The Board remains confident that the Group will meet market expectations for 2024.

Commenting on the results, Alex Curran, CEO, said: -

'The Group has made strong progress in the first half of 2024 across its core objectives to deliver Fynapse clients, reduce client churn and begin to scale the organisation through partnerships. The completion of two new Fynapse deals in the first half of 2024 is starting to demonstrate the adoption of the platform across existing and new clients, as well as in combined offerings with our partners.

The robustness of the Group's balance sheet, high levels of recurring revenue and strong cash generation provide the Group with considerable financial strength with which to execute on its growth strategy. Our ongoing work to focus the organisation on the AI Autonomous Finance continues to deliver both operational improvements and cost efficiencies. This will set the business up to support the Fynapse opportunity as we continue on our mission to deliver long-term sustainable growth.'

Contacts

Aptitude Software Group plc

Ivan Martin, Chairman                                                                                   020-3687-3200

Alex Curran, Chief Executive Officer

Mike Johns, Chief Financial Officer   

Alma Strategic Communications

Caroline Forde / Hilary Buchanan                                                                 020-3405-0205

Throughout this announcement:

¹ Annual Recurring Revenue ('ARR') is the value of Aptitude Software's recurring revenue at a specific point in time, normalised to a one-year period. ARR includes recurring revenues contracted but yet to commence and excludes recurring revenues which are currently being received but for which formal termination notice has been received. Included in ARR are recurring revenues from the Group's solution management services.

² Constant currency is calculated by comparing the H1 2024 results with H1 2023 results retranslated at the rates of exchange prevailing during H1 2024. Items within the Financial Highlights table indicated by this superscript reference are calculated on a constant currency basis.

³ Recurring Revenue includes revenues from the Group's solution management services

⁴ Adjusted Operating Profit, Adjusted Operating Margin and Adjusted Basic Earnings per Share exclude non-underlying operating items, unless stated to the contrary. Further detail in respect of the non-underlying operating items can be found within Note 6.

⁵ Net funds represents cash and cash equivalents less finance obligations, which are currently limited to capital lease obligations and a bank loan

⁶ Net retention rate is measured by the total value of on-going ARR at the period-end from clients in place twelve months earlier as a percentage of the opening ARR from those clients on a constant currency basis. Software net retention rate is calculated on the same basis but excluding Assure ARR.

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

About Aptitude Software

Aptitude Software provides software solutions that deliver fully autonomous finance to enable its clients to drive sustainable growth and efficiency. Fynapse is Aptitude's finance data platform designed to unlock the true power of the finance function by transforming it into an AI-powered strategic and trusted value creator. Fynapse achieves this in a modular, incremental way, driving continuous improvement and rapid time to value in stark contrast to traditional finance transformation.

Strategic Progress

Overview

This is the first six-month reporting period since the Group announced our revised strategic focus under the formation of a new leadership team and the initiation of the organisational realignment to deliver the Fynapse opportunity. This realignment is centred on transitioning the Group from directly selling regulatory and compliance software to a partner-led platform organisation delivering AI Autonomous Finance, underpinned by Fynapse.

While the transition is at an early stage, we have already seen positive progress against our strategic priorities of delivering against the Fynapse growth opportunity, scaling the organisation through the strength of our key strategic partnerships and improving client retention.

AI Autonomous Finance

The Fynapse platform enables the expansion of the go-to-market opportunity for Aptitude, moving from compliance and regulations to AI Autonomous Finance. Fynapse unlocks the true power of the finance function by transforming it into an AI-powered strategic and trusted value creator. Fynapse provides a singular, trusted view of all granular business and finance data. This improves accuracy, confidence and risk management and enables AI-powered strategic insights.

Fynapse has a low total cost of ownership, with rapid implementation cycles in stark contrast to traditional finance transformation, which we believe makes the platform commercially attractive to a wide range of organisations varying in size and sector. Fynapse enables organisations to reduce costs, improve operational efficiency, increase productivity, and deliver business insights.

In the first half of the year, the Group has signed a further two Fynapse clients across the Financial Services sector, further enhancing the Fynapse base. One of the new wins was achieved in partnership with HSO and Microsoft, as part of a combined offering for Fynapse and Microsoft Dynamics 365, demonstrating the power of our partnerships and underlining the value of Fynapse to both prospects and partners. The second new win was with a major existing Aptitude Accounting Hub client, a leading global insurer. This organisation chose Fynapse due to its ability to provide an alternative and lower risk approach to supporting their finance transformation requirements. In each example, both organisations have selected Fynapse to support their AI Autonomous vision for their finance function.

The new Fynapse wins in the first half of 2024 demonstrate the strength of the Group's partnerships and existing base of clients. These wins are the start of our journey to target the delivery of 80% of new Software ARR through partners and convert a third of existing Aptitude Accounting Hub users to Fynapse by the end of 2027. 

Partner First Go To Market Strategy

Partnerships are the key foundation to Aptitude's scalable growth, and it is a key priority for the Group to increase the proportion of ARR generated through a more concentrated group of partners.

The opportunity for Fynapse is expanded by Aptitude's partnership with Microsoft, which allows both organisations to present an end-to-end solution to prospects, increasing competitiveness against vendors providing single stack functionality, as well as strengthening Microsoft's competitive position. Fynapse is the only platform selected by Microsoft which provides accounting hub and subledger functionality to support Dynamics 365 and power Microsoft's AI vision with a granular, trusted and single view of all business and finance data. Microsoft and Aptitude's Autonomous Finance visions are complementary and the AI functionality available in Microsoft's platforms further enable Fynapse's capabilities and market opportunity.

In the first half of 2024, Aptitude and HSO announced the launch of a global industry solution underpinned by Fynapse and Microsoft Dynamics 365 to support the Insurance industry. HSO is a key strategic partner, a reseller of Microsoft Dynamics 365, and provides sector expertise and implementation services in support of the combined offering. The launch of this combined offering demonstrates the speed with which partners can work with Fynapse, improving usability by clients and partners alike.

Aptitude is aiming to achieve 30% of its Software ARR bookings through partners by the end of 2024 on the journey to deliver 80% of Software ARR through partners by the end of 2027. In the first half of 2024, Aptitude signed 38% of new Software ARR through partners, supported by both newer relationships with HSO and longer relationships with a big-4 accountancy firm which has developed a managed services offering in partnership with Aptitude and Microsoft.

The progress achieved in the first half of 2024 is supporting accelerated momentum in the pipeline of Fynapse opportunities through partners. Fynapse enables partners to target multiple sectors and tier 1, 2 and 3 organisations, which in time will support an increase in deal velocity. Fynapse also supports multiple partner channel types, including co-sell, referral, managed service and reseller commercial models through its ease of use and short skill up time required from partners.

Organisational Change and Operational Efficiency

The Group continues to enact necessary organisational change to support the transition toward AI Autonomous Finance.

The foundations for this change have been placed with a new and refreshed leadership team and a flattened organisational structure. The Group's new objectives and key results framework ('OKR's) has helped to drive performance improvement across all functions in the first half of 2024 in the key areas of Fynapse delivery, the reduction of client churn and the scaling of the organisation through the strength of our key strategic partnerships.

The Group has conducted reviews across all functions to deliver the necessary process changes required as the business transitions away from its traditional compliance focus and towards a modern, SaaS-centric organisation. These reviews have highlighted areas for improvement in both effectiveness and efficiency, and the leadership team is focused on delivering this change throughout 2024.

The continued focus on efficiency has delivered improved margins in the first half of 2024, when compared with the first half of 2023. Additionally, the net retention rate for Software ARR in the year to 30 June 2024 has also increased to 99% from 96% in the year to 30 June 2023. There is further work to do to set up the organisation for success with AI Autonomous Finance, but initial progress has demonstrated that changes can deliver both increased efficiency and effectiveness.

Products

AI Autonomous Finance and Finance Transformation

AI Autonomous Finance and finance transformation includes both the Fynapse platform and the Aptitude Accounting Hub ('AAH').

Aptitude's vision for AI Autonomous Finance enables the finance function to become AI-powered strategic and trusted value creators, powering sustainable growth and efficiency. This is achieved through a singular, trusted view of all granular business and finance data, which improves accuracy, confidence and risk management. This enables AI-powered strategic insights and improved decision-making and allows finance teams to power sustainable growth and efficiency.

Fynapse, the Group's finance data management platform delivers on Autonomous Finance, with a cloud native, highly performant and modular solution that not only serves operational and regulatory accounting requirements, but also delivers a granular data fabric upon the extendable Fynapse data cloud. Fynapse provides the rich foundation for AI tooling, enabling Aptitude's clients to realise the efficiencies that may be achieved from emerging AI technologies and the Autonomous Finance function.

Along with the overall Fynapse platform, the Group has initially developed the accounting rules and subledger engines which build upon the successful AAH product. AAH is the Group's established heritage product which centralises and automates finance, accounting and reporting processes, creating a deep level of operational intelligence for our clients.

Subscription Management

eSuite, Aptitude's subscription management tool, is a modular, cloud based end-to-end SaaS solution for large, international, enterprise customers. The application is targeted towards the subscription economy and provides identity management, CRM, automated billing, payment processing, and churn management capabilities, enabling businesses to acquire, monetise and optimise customers subscriptions.

While macroeconomic conditions have had a short-term effect on the predominantly media and publishing dominated eSuite client base, the Group is confident in the opportunity for eSuite. Investment levels in eSuite have been managed to strengthen functionality, minimise churn and position the product well as macroeconomic conditions improve. The Group will take a targeted go-to-market approach, prioritising the key media and publishing sectors in line with eSuite's strengths.

Compliance Suite

The compliance suite includes the Aptitude Insurance Calculation Engine ("AICE"), Aptitude RevStream ("AREV"), the Aptitude Revenue Recognition Engine ("ARRE"), the Aptitude Lease Accounting Engine ("ALAE"), Aptitude Calculate ("AC") and the Aptitude Platform ("APT").

The Group has achieved significant historical success with its suite of compliance products. The products have generated a sizeable amount of Annual Recurring Revenue and demonstrated Aptitude's strength and credibility in serving the office of the CFO and underpin the AI Autonomous Finance vision. Aptitude's target for the compliance suite is in maintaining client satisfaction, minimising client churn and cross-selling Fynapse. The Group will take a selective go-to-market approach and establish investment at appropriate levels to ensure high levels of client satisfaction.

Assure and Implementation Services

Aptitude Assure is a solution management service from Aptitude's Innovation Centre in Poland. It extends beyond traditional software maintenance, covering tasks usually handled by clients' teams, such as release management, processing support, client enablement and solution optimisation through performance monitoring. Assure helps clients adopt new product features, especially beneficial for Fynapse clients as the product evolves. This high margin, recurring service offers a lower cost of ownership for clients.

Aptitude also provides implementation services, with the scale determined by the application, opportunity size and the division of responsibilities between Aptitude and its partners. These services are delivered by highly skilled individuals with deep domain, technical and functional expertise, setting Aptitude apart from competitors.

The Group remains committed to maintaining a high-quality delivery capability to support clients and partners.

People and Locations

Aptitude has office locations across the UK, US, Poland, Singapore, Australia and Canada, and the Group's two technology centres are based in Poland and the north-west of England. The Group's presence in Poland continues to generate cost advantages for Aptitude.

Aptitude targets a high-performance culture, where individuals can achieve their potential in support of the Group's objectives. The Group regularly assesses employees on a performance and potential basis, with an aim to invest in and develop key talent. Through this assessment, the Group is able to retain and develop key talent in support of succession planning, actively manage lower performers to a better outcome and increase efficiency.

Overall headcount decreased 14% over the year to 452 (31 December 2023: 472, 30 June 2023: 524). The reduction in headcount is a result of cost reduction action taken in 2023 and ongoing effectiveness and efficiency reviews in 2024. The new structure is flatter, with a reduced management layer, and more efficient. Of the total headcount, 246 (31 December 2023: 281, 30 June 2023: 226) are based at the innovation centres and working on the design, implementation, and support of the Group's products. The Group continues to monitor headcount closely, with future roles hired in line with the revenue opportunity.

In line with Aptitude's approach to diversity and inclusion the Group has implemented structural processes to ensure fairness in approach to promotions and compensation in 2024. Additionally, the Group is continuing the Women in Leadership initiative to help attract a diverse range of talent to its leadership roles.

Summary

Aptitude has made demonstratable progress against its core objectives of delivering Fynapse, reducing client churn and scaling the organisation through partnerships in the first half of 2024.

The Group continues to move through a transitionary phase, away from regulation and compliance and towards AI Autonomous Finance, which has required major organisational change. Throughout this period, Aptitude has continued to deliver growing ARR, increased recurring revenue proportions and improving margins.

Work continues in 2024 to position the organisation to effectively capitalise on the AI Autonomous Finance opportunity, building on the firm foundations delivered in H1.

Financial Performance

The Group delivered a solid performance in the first half of 2024, with increasing recurring revenues and cost efficiencies driving an improved margin performance.

The Group's robust balance sheet, high levels of recurring revenue and strong cash generation provide the Group with considerable financial strength with which to execute on its growth strategy.

Revenue

Recurring Revenues

Recurring revenues recognised in the six months ended 30 June 2024 increased by 2% to £27.5 million (H1 2023: £27.0 million). These now represent 78% of overall revenue (H1 2023: 72%). It is a key part of the Group's strategy to increase this percentage whilst maximising the growth rate of Aptitude Software's ARR. This strategy is delivering a growth in operating margin.  

Aptitude's ARR at 30 June 2024 totalled £50.8 million (31 December 2023: £51.2 million, 30 June 2023: £49.7 million both on a constant currency basis) representing overall year-on-year growth of 2%. Included within ARR is the value of the Group's recurring solution management services contracts ('Assure') of £4.1 million (31 December 2023: £4.9 million, 30 June 2023: £4.5 million both on a constant currency basis).

The net retention rate for Software ARR for the 12 months to 30 June 2024 was 99% (H1 2023: 96%) The improvement in the software net retention rate reflects the increased focus on reducing client churn and improving customer outcomes. The overall net retention rate in the 12 months to 30 June 2024 was 98% (H1 2023: 98%) and was moderated by expected reductions within Assure. Net retention rate is measured by the total value of on-going ARR at the period-end from clients in place twelve months earlier as a percentage of the opening ARR from those clients on a constant currency basis.  

A significant majority of the Group's recurring revenue contracts include the ability to increase ARR for clients by relevant consumer price index rises ('CPI'). The majority of the Group's renewals fall in the second half of the year, at which time CPI uplifts are processed, resulting in the larger proportion of any price increases occurring in H2.

Implementation Services

Non-recurring implementation services revenue totalled £7.8 million for the six months ended 30 June 2024 (H1 2023: £10.5 million). The reduction in implementation services revenues reflects the Group's shift to a partner-led services model and is in line with expectations.

Research and Development Expenditure

Total expenditure on product management, research and development in the six months ended 30 June 2024 remained level at £8.6 million (H1 2023: £8.6 million). The Group carefully manages its cost base to ensure that it is operating efficiently and effectively while ensuring that strategic product development is accelerated.

The Board has continued to determine that none of the internal research and development costs incurred during the first half of the year meet the criteria for capitalisation. Consequently, these have been expensed as incurred through the income statement.

Operating Profit and Margins

Adjusted Operating Profit for the six months ended 30 June 2024 was £4.2 million (H1 2023: £4.2m). Operating profit on a statutory basis was £2.5 million (H1 2023: £1.7 million). Adjusted Operating Margin for the six months ended 30 June 2024 was 11.9% (H1 2023: 11.2%). The increase in margin reflects both a transition to higher margin recurring revenues, as well as a continued focus on cost efficiency.

Foreign Exchange

With 48% (H1 2023: 53%) of the Group's revenues being generated from North American clients, the majority of which are invoiced in US Dollars, the financial results are impacted by changes in the US dollar exchange rate. Aptitude Software's H1 2023 revenue and Adjusted Operating Profit would have been reported at £37.4 million and £4.2 million respectively on a constant currency basis (compared to actual result of £37.5 million and £4.2 million). Constant currency is calculated by comparing the 2023 results with 2024 results retranslated at the rates of exchange prevailing during 2024.

Non-Underlying Items

Non-underlying items of £1.7 million (H1 2023: £2.5 million) principally comprises of intangible amortisation.

Taxation

The total tax charge of £0.5 million (H1 2023: £0.4 million) represents 21% of the Group's profit before tax (H1 2023: 22%).

Statutory Results

The Group reported a profit for the period attributable to equity shareholders of £2.0 million (H1 2023: £1.3 million).

Earnings per Share

Adjusted Basic Earnings per Share and Basic Earnings per Share increased to 5.8 pence and 3.5 pence (H1 2023: 5.7 pence and 2.3 pence).

Dividend

An interim dividend of 1.8 pence per share is declared (2023: 1.8 pence). The interim dividend will be payable on 23 August 2024 to shareholders on the register at the close of business on 2 August 2024.

Balance Sheet

The Group continues to have a strong balance sheet with net assets at 30 June 2024 of £58.7 million (H1 2023: £59.6 million), including cash of £24.4 million (H1 2023: £24.5 million) and net funds of £13.8 million (H1 2023: £12.2 million). The reduction in net assets is a result of the continued amortisation of intangible assets in the period. Trade receivables (net) have increased to £14.6 million (H1 2023: £11.0 million) due to the timing of certain annual software invoices. Of the balance of £14.6 million, collections following the period end have totalled £3.9 million. Deferred income increased to £27.1 million at 30 June 2024 (H1 2023: £26.7 million).

The Group's cash flow is seasonal due to the timing of the invoicing and collection of the Group's recurring revenue which, together with a weighting of a number of other payments in the first half of the year (e.g. bonus), contribute to a weaker cash performance in the first half of any year. Cash outflow from operating activities in the first half of the year was £5.5m (H1 2023: £0.8m), as a result of the timing of collection of some larger software invoices. Given the seasonality of cashflow the Group is confident that full year operating cash flow conversion for 2024 will return to historic levels. The Group is currently providing enhanced returns to shareholders through a £20m buy back programme over a three-year period.

Statement on Principal Risks and Uncertainties

Pursuant to the requirements of the Disclosure and Transparency Rules the Group provides the following information on its principal risks and uncertainties.  The Group considers strategic, operational and financial risks and identifies actions to mitigate those risks.  These risk profiles are updated at least annually.  The principal risks and uncertainties detailed within the Group's 2023 Annual Report remain applicable for the first six months of the financial year.  The Group's 2023 Annual Report is available from the Aptitude Software website: www.aptitudesoftware.com/investor-relations/

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

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

For the six months ended 30 June 2024

		Unaudited six months ended 30 Jun 2024						Unaudited six months ended 30 Jun 2023						Audited year ended 31 Dec 2023
	Note	Before non-underlying items		Non- underlying items		Total		Before non-underlying items		Non- underlying items		Total		Before non-underlying items		Non- underlying items		Total
		£000		£000		£000		£000		£000		£000		£000		£000		£000
Revenue	5	35,260		-		35,260		37,536		-		37,536		74,685		-		74,685
Operating costs	6	(31,060)		(1,702)		(32,762)		(33,300)		(2,488)		(35,788)		(64,959)		(4,441)		(69,400)
Operating profit	5/6	4,200		(1,702)		2,498		4,236		(2,488)		1,748		9,726		(4,441)		5,285
Finance income		249		-		249		81		-		81		282		-		282
Finance costs		(172)		-		(172)		(163)		-		(163)		(527)		-		(527)
Profit before income tax		4,277		(1,702)		2,575		4,154		(2,488)		1,666		9,481		(4,441)		5,040
Income tax expense	7	(906)		361		(545)		(911)		542		(369)		(1,786)		871		(915)
Profit for the period		3,371		(1,341)		2,030		3,243		(1,946)		1,297		7,695		(3,570)		4,125
Earnings per share
Basic	8					3.5p						2.3p						7.2p
Diluted	8					3.5p						2.2p						7.1p

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2024

		Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023		Audited year ended 31 Dec 2023
		£000		£000		£000
Profit for the period		2,030		1,297		4,125
Other comprehensive (expense)/income
Items that will or may be reclassified to profit or loss:
Cash flow hedges reclassified to income statement		(507)		(520)		(1,242)
(Loss)/gain on effective cash flow hedges		(60)		739		1,044
Deferred tax on cash flow hedges		142		(185)		50
Currency translation difference		(240)		(466)		(954)
Other comprehensive (expense) for the period, net of tax		(665)		(432)		(1,102)
Total comprehensive income for the period		1,365		865		3,023

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

As at 30 June 2024

		Unaudited as at 30 June 2024		Unaudited as at 30 June 2023		Audited as at 31 Dec 2023
	Notes	£000		£000		£000
ASSETS
Non-current assets
Property, plant and equipment including right-of-use assets	11	4,030		4,911		4,484
Goodwill		46,006		46,006		46,006
Intangible assets		16,049		19,430		17,739
Other long-term assets		932		1,474		1,016
Deferred tax assets		1,379		423		1,379
		68,396		72,244		70,624
Current assets
Trade and other receivables	12	18,248		13,312		12,526
Financial assets - derivative financial instruments		574		1,558		1,141
Current income tax assets		516		1,488		1,037
Cash and cash equivalents		24,360		24,506		34,085
		43,698		40,864		48,789
Total assets		112,094		113,108		119,413
LIABILITIES
Current liabilities
Financial liabilities
- borrowings	14	(1,250)		(1,250)		(1,250)
Trade and other payables	13	(37,573)		(35,001)		(40,773)
Capital lease obligations	15	(434)		(424)		(426)
Current income tax liabilities		-		(74)		(1,588)
Provisions	16	(98)		-		(100)
		(39,355)		(36,749)		(44,137)
Net current assets		4,343		4,115		4,652
Non-current liabilities
Financial liabilities - borrowings	14	(6,538)		(7,733)		(7,139)
Capital lease obligations	15	(2,374)		(2,921)		(2,588)
Provisions	16	(282)		(211)		(268)
Deferred tax liabilities		(4,824)		(5,909)		(4,967)
		(14,018)		(16,774)		(14,962)
NET ASSETS		58,721		59,585		60,314

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

As at 30 June 2024

		Unaudited as at 30 June 2024		Unaudited as at 30 June 2023		Audited as at 31 Dec 2023
	Notes	£000		£000		£000
SHAREHOLDERS' EQUITY
Share capital	17	4,204		4,204		4,204
Share premium account	17	11,959		11,959		11,959
Capital redemption reserve		12,372		12,372		12,372
Other reserves		33,540		35,171		34,989
Accumulated losses		(2,253)		(3,748)		(2,349)
Foreign currency translation reserve		(1,101)		(373)		(861)
TOTAL EQUITY		58,721		59,585		60,314

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2024

	Attributable to owners of the Parent
	Share capital	Share premium	Accumulated losses	Foreign currency translation reserve	Capital redemption reserve	Other reserves	Total Equity
	£000	£000	£000	£000	£000	£000	£000
Group
Balance at 1 January 2024	4,204	11,959	(2,349)	(861)	12,372	34,989	60,314
Profit for the period	-	-	2,030	-	-	-	2,030
Cash flow hedges reclassified to income statement	-	-	-	-	-	(507)	(507)
Loss on effective cash flow hedges	-	-	-	-	-	(60)	(60)
Deferred tax on cash flow hedges	-	-	-	-	-	142	142
Exchange rate adjustments	-	-	-	(240)	-	-	(240)
Total comprehensive income for the year	-	-	2,030	(240)	-	(425)	1,365
Purchase of own shares	-	-	-	-	-	(1,311)	(1,311)
Transfer on exercise of options	-	-	(287)	-	-	287	-
Share options - value of employee service	-	-	410	-	-	-	410
Dividends to equity holders of the company	-	-	(2,057)	-	-	-	(2,057)
Total Contributions by and distributions to owners of the company recognised directly in equity	-	-	(1,934)	-	-	(1,024)	(2,958)
Balance at 30 June 2024 (unaudited)	4,204	11,959	(2,253)	(1,101)	12,372	33,540	58,721

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2023

	Attributable to owners of the Parent
	Share capital	Share premium	Accumulated losses	Foreign currency translation reserve	Capital redemption reserve	Other reserves	Total Equity
	£000	£000	£000	£000	£000	£000	£000
Group
Balance at 1 January 2023	4,204	11,959	(3,286)	93	12,372	35,199	60,541
Profit for the period	-	-	1,297	-	-	-	1,297
Cash flow hedges reclassified to income statement	-	-	-	-	-	(520)	(520)
Gain on effective cash flow hedges						739	739
Deferred tax on cash flow hedges						(185)	(185)
Exchange rate adjustments	-	-	-	(466)	-	-	(466)
Total comprehensive income for the year	-	-	1,297	(466)	-	34	865
Shares issued under employee benefit trust	-	-	(163)	-	-	(62)	(225)
Share options - value of employee service	-	-	468	-	-	-	468
Dividends to equity holders of the company	-	-	(2,064)	-	-	-	(2,064)
Total Contributions by and distributions to owners of the company recognised directly in equity	-	-	(1,759)	-	-	(62)	(1,821)
Balance at 30 June 2023 (unaudited)	4,204	11,959	(3,748)	(373)	12,372	35,171	59,585

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

For the six months ended 30 June 2024

		Unaudited six months ended 30 June 2024		Unaudited six months ended 30 June 2023		Audited year ended 31 Dec 2023
	Note	£000		£000		£000
Cash flows from operating activities
Cash (used in)/generated from operations	9	(3,714)		(25)		11,945
Interest paid		(172)		(163)		(316)
Income tax (paid)		(1,608)		(562)		(635)
Net cash flows (used in)/generated from operating activities		(5,494)		(750)		10,994
Cash flows from investing activities
Purchase of property, plant and equipment, excluding right-of-use assets	11	(72)		(495)		(601)
Interest received		249		81		282
Net cash generated/(used in) from investing activities		177		(414)		(319)
Cash flows from financing activities
Purchase of own shares		(1,311)		(186)		(186)
Dividends paid to company's shareholders	10	(2,057)		(2,064)		(3,096)
Repayments of loan		(625)		(625)		(1,250)
Extension fee on loan		-		-		(40)
Repayment of capital lease obligations		(178)		(199)		(534)
Net cash generated (used in) financing activities		(4,171)		(3,074)		(5,106)
Net (decrease)/increase in cash and cash equivalents		(9,488)		(4,238)		5,569
Cash, cash equivalents and bank overdrafts at beginning of period		34,085		29,245		29,245
Exchange rate (losses) on cash and cash equivalents		(237)		(501)		(729)
Cash and cash equivalents at end of period		24,360		24,506		34,085

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1.        General information

Aptitude Software Group plc (the 'Company') and its subsidiaries (together, the 'Group') is a specialist provider of AI Autonomous Finance solutions.

The Company is a public limited company incorporated and domiciled in England and Wales with a primary listing on the London Stock Exchange. The address of its registered office is 8^th Floor, 138 Cheapside, London EC2V 6BJ.

These condensed consolidated interim financial statements were approved for issue on 24 July 2024.

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2023 were approved by the Board of directors on 20 March 2024 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

2.       Basis of preparation

These condensed consolidated interim financial statements for the six months ended 30 June 2024 have not been audited or reviewed by the auditors. The interims have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting'. These condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2023, which have been prepared in accordance with UK adopted international accounting standards and company law.

3.       Accounting policies

The accounting policies adopted are consistent with those of the previous financial statements, except as described below.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profits.

New and amended standards and interpretations need to be adopted in the first interim financial statements issued after their effective date. There are no new IFRSs or IFRICs that are effective for the first time for this interim period that would be expected to have a material impact on the financial statements. 

4.       Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2023, with the exception of changes in estimates that are required in determining the provision for income taxes.

Fair value estimation

Financial instruments not measured at fair value

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

Financial instruments measured at fair value

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

	Level 2 inputs
	Unaudited six months ended 30 Jun 2024 £'000	Unaudited six months ended 30 Jun 2023 £'000
Financial assets
Derivative financial assets (designated hedge instruments)	574	1,558
	574	1,558

The derivative financial assets and liabilities have been valued using the market approach and are considered to be Level 2 inputs. There were no changes to the valuation techniques used in the year. There were no transfers between levels during the year.

5.       Segmental information

Business segments

The only business segment during both periods presented was Aptitude Software and therefore certain segmental analysis is not required.

Geographical segments

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

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

	Sales revenue by origin				Sales revenue by destination
	Unaudited six months ended 30 June 2024		Unaudited six months ended 30 June 2023		Unaudited six months ended 30 June 2024		Unaudited six months ended 30 June 2023
Continuing operations	£000		£000		£000		£000
United Kingdom	20,589		19,607		6,315		5,990
Rest of World	14,671		17,929		28,945		31,546
	35,260		37,536		35,260		37,536

The Group derives revenue from the transfer of goods and services in the following major categories and geographical regions, these being the United Kingdom ('UK') and Rest of the World ('RoW'):

Unaudited six months ended 30 June 2024
		Recurring revenue						Non-recurring revenue
		UK		RoW		Total		UK		RoW		Total		Total
		£000		£000		£000		£000		£000		£000		£000
Revenue from external clients		5,065		22,416		27,481		1,250		6,529		7,779		35,260
Unaudited six months ended 30 June 2023
		Recurring revenue						Non-recurring revenue
		UK		RoW		Total		UK		RoW		Total		Total
		£000		£000		£000		£000		£000		£000		£000
Revenue from external clients		4,844		22,154		26,998		1,147		9,391		10,538		37,536

All of the revenue displayed in the above table is recognised over time in line with the Group's accounting policy detailed on pages 86 to 89 of the Aptitude Software Group plc 2023 Annual Report and has been generated from contracts with clients.

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

	Carrying amount of non-current assets				Capital expenditure
	Unaudited six months ended 30 June 2024		Unaudited six months ended 30 June 2023		Unaudited six months ended 30 June 2024		Unaudited six months ended 30 June 2023
	£000		£000		£000		£000
United Kingdom	52,961		56,194		52		91
Rest of World	14,056		15,627		20		404
	67,017		71,821		72		495

The Company's business is to invest in its subsidiaries and, therefore, it operates in a single segment.

6.       Non-underlying items

		Unaudited six months ended 30 Jun 2024			Unaudited six months ended 30 Jun 2023		Audited year ended 31 Dec 2023
			£000		£000		£000
Continuing operations
Amortisation of acquired intangibles			1,690		1,690		3,381
Share repurchase costs			12		-		-
Acquisition and associated reorganisation costs			-		798		1,060
			1,702		2,488		4,441

7.       Income tax expense

Income tax expense is recognised based on management's estimate of the weighted average income tax rate expected for the full financial year of 21% (the estimated tax rate for the six months ended 30 June 2023 was 22%).

8.       Earnings per share

	Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023		Audited year ended 31 Dec 2023
	pence		pence		pence
Earnings per share Basic	3.5		2.3		7.2
Diluted	3.5		2.2		7.1

	Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023		Audited year ended 31 Dec 2023
	pence		pence		pence
Adjusted earnings per share Basic	5.8		5.7		13.6
Diluted	5.8		5.5		13.5

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

	Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023		Audited year ended 31 Dec 2023
	pence		pence		pence
Basic earnings per share	3.5		2.3		7.2
Non-underlying items	2.3		3.4		6.2
Prior years' tax credit	-		-		0.5
Recognition of tax losses	-		-		(0.3)
Adjusted earnings per share	5.8		5.7		13.6

9.       Cash generated from operations

		Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023		Audited year ended 31 Dec 2023
		£000		£000		£000
Profit before tax for the period		2,575		1,666		5,040
Adjusted for:
Depreciation		518		514		1,049
Amortisation		1,690		1,690		3,381
Share-based payment expense		410		468		125
Finance income		(249)		(81)		(282)
Finance costs		172		163		527
Changes in working capital:
(Increase)/decrease in receivables		(5,647)		(1,194)		63
(Decrease)/increase in payables		(3,195)		(3,146)		2,042
Increase/(decrease) in provisions		12		(105)		-
Cash (used in)/generated from operations		(3,714)		(25)		11,945

10.      Dividends

The interim dividend of 1.8 pence per share (2023: 1.8 pence per share) was approved by the Board on 24 July 2024. It is payable on 23 August 2024 to shareholders on the register at 2 August 2024.  This interim dividend has not been included as a liability in this interim financial information.  It will be recognised in shareholders' equity in the year to 31 December 2024. A final dividend of £2,057,000 was paid in June 2024 and relates to the year ending 31 December 2023 (2023: final dividend £2,064,000).

11.      Property, plant and equipment including right-of-use assets

					Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023
					£000		£000
Opening net book amount 1 January					4,484		5,103
Additions					72		495
Disposals					-		(117)
Exchange movements					(8)		(56)
Depreciation					(518)		(514)
Closing net book amount 30 June (unaudited)					4,030		4,911

The Group has not placed any contracts for future capital expenditure which have not been provided for in the financial statements.

12.      Trade and other receivables 

					Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023
					£000		£000
Trade receivables - net					14,565		10,994
Other receivables					82		62
Prepayments					3,159		1,540
Accrued income					442		716
Closing net book amount 30 June (unaudited)					18,248		13,312

Contract assets and contract liabilities only comprise accrued and deferred income respectively. Within the trade receivables balance of £14,565,000 (30 June 2023: £10,994,000), there are balances totalling £6,195,000 (30 June 2023: £2,977,000) which, at 30 June 2024 were overdue for payment and not provided for. During July 2024, receipts totalling £3.9 million were collected against the total receivables balance at 30 June 2024.   

13.      Trade and other payables

					Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023
					£000		£000
Trade payables					2,607		871
Other tax and social security payable					1,051		1,379
Other payables					67		9
Accruals					6,788		6,009
Deferred income					27,060		26,733
Closing net book amount 30 June (unaudited)					37,573		35,001

14.      Financial liabilities - borrowings

					Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023
					£000		£000
Bank Loan					7,788		8,983
The borrowings are repayable as follows:
Within one year					1,250		1,250
In the second year					6,562		7,812
					7,812		9,062
Unamortised prepaid facility arrangement fees					(24)		(79)
As at 30 June (unaudited)					7,788		8,983

On 15 October 2021, the Group and Company entered into a loan agreement with Bank of Ireland consisting of a £10 million term loan in addition to a revolving credit facility of £10 million. The loan is secured on all the assets of the Group. Operating covenants are limited to the Group's net debt leverage of 2.0 : 1 and interest cover of 4.0 : 1. The term loan is repayable over three years with an initial 12-month repayment holiday followed by annual capital repayments of £1,250,000. The term loan contains two one-year extension options, one of which was exercised in 2023. At the end of the term, a bullet payment for the remaining balance of the loan is due. The loan is denominated in Pound Sterling and carries interest at SONIA plus 1.75%. The Group entered into an interest swap on 2 November 2021, effectively fixing the interest rate at 2.95% over the term of the loan.

15.      Capital lease obligations

					Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023
					£000		£000
Amounts payable under capital lease arrangements:
Within one year					541		538
Within two to five years					1,911		2,091
After five years					726		1,206
Total					3,178		3,835
Less: future finance charges					(370)		(490)
Present value of lease obligations					2,808		3,345
Less: Amount due for settlement within 12 months (shown under current liabilities					(434)		(424)
As at 30 June (unaudited)					2,374		2,921
					Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023
					£000		£000
The present value of financial lease liabilities is split as follows:
Within one year					434		424
Within two to five years					1,679		1,781
After five years					695		1,140
					2,808		3,345

16.      Provisions

					Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023
					£000		£000
At 1 January					368		316
Charged to income statement					15		10
Utilised in the period					-		(114)
Foreign exchange					(3)		(1)
As at 30 June (unaudited)					380		211

					Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023
					£000		£000
Current					98		-
Non-current					282		211
As at 30 June (unaudited)					380		211

£301,000 of the total provision at 30 June 2024 of £380,000 relates to the cost of dilapidations in respect of its occupied leasehold premises (30 June 2023: £167,000).

17.      Share capital

	Unaudited six months ended 30 June 2024				Unaudited six months ended 30 June 2023
Ordinary share capital at 7 1/3 pence each	Number of shares		Ordinary shares		Number of shares		Ordinary shares
Issued and fully paid:	000		£000		000		£000
Opening balance as at 1 January	57,337		4,204		57,337		4,204
As at 30 June (unaudited)	57,337		4,204		57,337		4,204

In the year, the Company commenced an on-market share buyback programme, in line with the newly adopted capital allocation policy. At 30 June 2024, the Company holds 330,113 shares, recognised as a deduction in equity.

In the prior year, the Company established an Employee Benefit Trust ("EBT") for the benefit of the Group's employees. At 30 June 2024, the Company holds 558 shares (2023: 17,710) in the Employee Benefit Trust ("EBT"), recognised as a deduction in equity. 

Share premium                                                           

					Unaudited six months ended 30 Jun 2024		Unaudited six months ended 30 Jun 2023
					£000		£000
Opening balance as at 1 January					11,959		11,959
As at 30 June (unaudited)					11,959		11,959

18.      Related party transactions

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

There were no related party transactions during the six-month period ended 30 June 2024 (30 June 2023: £nil), as defined by International Accounting Standard No 24 'Related Party Disclosures', except for key management compensation. The related party transactions for the year ended 31 December 2023 as defined by International Accounting Standard No 24 'Related Party Disclosures' are disclosed in note 31 of the Aptitude Software Group plc Annual Report for the year ended 31 December 2023.

19.      Statement of directors' responsibilities

The Directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

-             an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and 

-           material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The Directors of Aptitude Software Group plc are listed in the Aptitude Software Group plc Annual Report for 31 December 2023. A list of current directors is maintained on the Aptitude Software Group plc website: www.aptitudesoftware.com/investor-relations/

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

By order of the Board

Michael Johns

24 July 2024                          

Chief Financial Officer

 

END