TIDMAPTD
RNS Number : 5894T
Aptitude Software Group PLC
21 March 2023
21 March 2023
APTITUDE SOFTWARE GROUP plc
('Aptitude' or 'the Group')
Audited Results for the Year Ended
31 December 2022
Aptitude Software Group plc (LSE: APTD), the specialist provider
of finance digitalization and subscription management software,
reports its Audited Results for the year ended 31 December
2022.
Financial Highlights
Year ended 31 December 2022 2021 % Change
Annual Recurring Revenue (1) ('ARR') at
year end GBP51.6m GBP45.0m +15%
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* ARR Growth 15%
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* ARR Growth (Constant Currency(2) ) 9%
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Total Revenue GBP74.4m GBP59.3m +25%
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* Recurring Revenue(3) GBP50.5m GBP40.1m +26%
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* Non-Recurring Services Revenue GBP23.9m GBP19.2m +24%
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Cash and cash equivalents at year end GBP29.2m GBP29.1m -
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Net Funds(4) GBP15.9m GBP16.1m -1%
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Adjusted Operating Margin(5) 10% 17% -7%
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Adjusted Operating Profit(5) GBP7.5m GBP9.9m -24%
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Statutory Operating Profit GBP3.7m GBP6.5m -43%
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Basic Earnings per Share 4.5p 9.0p -50%
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Final Ordinary Dividend per Share 3.6p 3.6p -
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Full Year Ordinary Dividend per Share 5.4p 5.4p -
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-- Annual Recurring Revenue ('ARR') growth of 15% in absolute terms
and 9% on a Constant Currency basis
-- Total Revenue grew by 25% to GBP74.4 million in line with market
expectations (2021: GBP59.3 million), Organic Growth (6) of 14%
-- Recurring Revenue, the strategic focus of the Group, grew 26% to
GBP50.5 million (2021: GBP40.1 million), Organic Growth of 11%
representing 68% of total revenue (2021: 68%)
-- In line with expectations and the Group's previously communicated
investment plans, the increased investment in the Group's two strategic
growth drivers of finance digitalization and subscription management
has tempered Adjusted Operating Profits which reduced to GBP7.5
million (2021: GBP9.9 million) consequentially impacting adjusted
operating margin
-- Balance sheet strong with year-end cash of GBP29.2 million (2021:
GBP29.1 million) following GBP3.8 million net corporate cash flows.
Net Funds(4) of GBP15.9 million (2021: GBP16.1 million)
Strategic Progress:
-- The Group's suite of products which is aligned to long-term and
non-cyclical strategic drivers of finance digitalization and subscription
management, is expected to drive an acceleration in growth of Annual
Recurring Revenue and margin
-- Fynapse, the Group's next generation strategic digital finance
platform, launched in March 2022 is already contributing to Aptitude's
success
-- the signing of a major new partnership agreement with Microsoft.
Fynapse will be the only product with its capability to be
deeply integrated with Microsoft Dynamics 365 Finance and
operate on the Microsoft Azure cloud platform
-- the successful delivery of Fynapse to Aptitude's charter
client in the US telco market and their subsequent commitment
to a multi-year subscription agreement
-- continued strong interest in this new higher margin offering
from existing clients, prospects and partners
-- MPP Global, acquired in October 2021, is now fully integrated positioning
Aptitude to fully realise the opportunity within the subscription
management market
Business Highlights:
-- Multiple Aptitude Accounting Hub new business successes in banking
and insurance, demonstrating that the Group is successfully pivoting
away from compliance to meet a growing broader need for finance
automation
-- Landmark win for eSuite to provide subscription management capability
to one of the largest global broadcasters and media content owners
-- Further eSuite new business success achieved through both the well-developed
channel partners as well as direct sales in both traditional and
emerging markets demonstrating the breadth of the product's capabilities
-- Continued demand for AREV, Aptitude's revenue management platform,
including a multi-year agreement with a US analytics software provider
Outlook:
-- The Group remains focused on delivery against three go-to-market
pillars: finance digitalization, subscription management and partner
execution
-- Within finance digitalization the focus is on securing new Fynapse
clients, the development of the strategically promising Microsoft
partnership and the upcoming go-live of Fynapse's charter client
-- Within subscription management, key activities will centre on executing
on a number of exciting opportunities with the existing product
set and unlocking volume subscriptions in new clients signed in
2022
-- We are confident that these activities will lead to an acceleration
in the growth of Annual Recurring Revenue which, as the higher
margin recurring revenue grows as a proportion of overall revenue,
will lead to increases in the Group's overall margins.
Commenting on the results, Jeremy Suddards, Chief Executive
Officer, said: -
'Aptitude made strong progress in 2022, cementing its position
as a leading technology provider supporting organisations in their
finance digitalization and subscription management transformations.
We are confident these drivers will provide the Group with long
term growth.
Strategic highlights for the year include the release of Fynapse
to our charter client in the US whose project is progressing well
and expected to go-live as planned in mid-2023, whilst the global
strategic partnership with Microsoft provides the Group with the
opportunity to significantly accelerate the market adoption of
Fynapse in both new markets and geographies. In what has been a
transitional year, the Group has achieved a good level of new
business success with the existing product portfolio across all our
regions.
Overall, we are pleased with both the operational and strategic
progress achieved in 2022 and, whilst watchful of the global
economic environment, the Board is confident that the Group's
performance for 2023 will be in line with its expectations. '
Contacts
Aptitude Software Group plc
Ivan Martin, Chairman 020-3687-3200
Jeremy Suddards, Chief Executive Officer
Philip Wood, Deputy Chief Executive Officer
Mike Johns, Acting Chief Financial Officer
Alma PR
Caroline Forde / Hilary Buchanan 020-3405-0205
About Aptitude
Aptitude helps complex organizations automate and transform
their financial business models. Our core areas of focus are the
accelerating digitalization of the finance function, and the
cross-industry drive to deploy and manage subscription offerings at
scale. Aptitude also continues to support clients through complex
regulations which often form the catalyst for broader finance
transformation.
Finance digitalization enables finance leaders to automate
legacy manually intensive processes, improve the speed of their
function, enhance the quality of its outcomes, and do so at a
dramatically lower cost. Aptitude's products draw data from
complex, often siloed systems, delivering high levels of automatic
processing of complex accounting calculations, and creating a
unified view of finance. Businesses are left with a transparent
view of their data, delivered at extreme performance and at a
significantly lower cost of ownership improving their finance
functions' ability to support their business objectives.
Subscription management is a rapidly increasingly critical
driver for new and traditional businesses alike, who want to move
to or launch a recurring revenue model, in ways which appeal to
their customers and allow them to outperform their peers.
Aptitude's products power the acquisition, monetization, and
retention of subscribers straight through to complex revenue
reporting. With Aptitude, businesses can take new
subscription-models to market quickly, retain their high-value
recurring revenue, and stay one step ahead of the competition.
Whilst business to consumer (B2C) subscription models are
increasing all the time, Aptitude also specialises in business to
business (B2B) subscriptions which are undergoing significant
business model shifts post pandemic, increasing volume and
complexity which the Group is able to manage ahead of its
peers.
Our global client base includes some of the world's largest
companies, typically organisations with complex business models,
large volumes of data, and many legacy internal systems. Aptitude
is headquartered in London, has a strong and growing North American
and Asian presence, and is powered by Global Technology Centres in
Poland and the North West of England. Sales, support and
implementation services are provided from offices in the United
States, the United Kingdom, Canada, and Singapore.
www.aptitudesoftware.com
Throughout this announcement:
1 Annual Recurring Revenue ('ARR') is the value of Aptitude's
recurring revenue at a specific point in time, normalised to a
one-year period. ARR includes recurring revenues contracted but yet
to commence and excludes recurring revenues which, at that point in
time, are being received but are known to be terminating in the
future. Included in ARR, for the first time, are recurring revenues
from the Group's solution management services, comparatives have
been adjusted to include such recurring revenue contracts. The ARR
at 31 December 2022 from solution management services was GBP4.5
million (31 December 2021: GBP3.4 million).
2 Constant Currency is calculated by comparing the 2022 results
with 2021 results retranslated at the rates of exchange prevailing
during 2022.
3 Recurring Revenue includes, for the first time (classified as
non-recurring services revenue in 2021), revenues from the Group's
solution management services, comparatives have been adjusted
accordingly. The 2022 revenue from solution management services was
GBP3.8 million (2021: GBP3.1 million).
4 Net Funds represents cash and cash equivalents less finance
obligations, which includes capital lease obligations and a
loan.
5 Adjusted Operating Profit and Adjusted Operating Margin
exclude non-underlying operating items, unless stated to the
contrary. Further detail in respect of the non-underlying operating
items can be found within Note 2.
6 Organic Growth excludes the contribution from MPP Global in
both 2022 and 2021, the year of its acquisition.
Certain non-IFRS financial measures (e.g. Adjusted Operating
Profit) are included which assist management in comparing
performance on a consistent basis.
Chairman's Statement
Overview
Aptitude has made good strategic progress in the year,
particularly with Fynapse, the new platform at the heart of the
Group's plans for finance digitalization. Launched in March 2022,
Fynapse provides clients with next generation digital finance
capabilities, while its open architecture allows partners to build
practices using Fynapse's core capabilities and cloud native
technologies, providing competitive differentiation.
Highlights since the launch of the platform include:
-- the signing of a global partnership agreement with Microsoft
to deeply integrate Fynapse with Microsoft Dynamics 365 Finance
and to market together the combined solution
-- the successful delivery of Fynapse to Aptitude's charter client
in the US telco market and their subsequent entry into a multi-year
subscription agreement
-- strong positive interest in this new higher margin offering
from existing clients, prospects and partners
This excellent progress provides confidence that, going forward,
Fynapse will lead to an acceleration in the growth of Annual
Recurring Revenue and enhanced gross margins for the Group.
Aptitude has also completed the full integration of the MPP
Global business which was acquired in October 2021. eSuite, the
platform brought into the Group with the acquisition, together with
our long-standing revenue management platforms provide the Group
with strong capability to address the growth driver of subscription
management. Several new business successes in the year, together
with the benefits arising from the integration, provide confidence
that sustained growth can be achieved with this product set to meet
growing market demand.
The technology partnership with Microsoft represents a very
exciting opportunity for the Group and has the potential to provide
a material acceleration in the adoption of Fynapse. With the Group
continuing to invest in its high-quality partner network, several
new clients have been secured directly by partners in each of the
Group's two strategic growth drivers.
As set out in our trading update of 24 January 2023,
notwithstanding this good progress, the Board is monitoring the
wider economic environment and its potential impact on our clients'
and prospects' procurement decisions. As ever, but particularly
given the current economic environment, the Board is carefully
managing investment levels in the business, whilst maintaining
momentum on Fynapse and other strategic priorities.
The Board is considerate of the impact on employees in areas
where investment is being moderated, as well as on the wider team.
It is therefore important that the Group continues to invest in the
support of its talented and committed team. The appointment of a
Chief People Officer in April 2022 has led to several initiatives
and programmes being launched with a focus on the further
development of leadership capabilities and the Group's proposition
to, and connection with, its employees. Aptitude remains focused on
promoting equality, diversity and inclusion among its workforce
with a number of improvements in these areas achieved in the year
outlined within the Chief Executive Officer's report.
Board changes
As previously announced, Philip Wood, Deputy Chief Executive
Officer and previously Chief Financial Officer, will be retiring
from the Board in July 2023. Philip joined the Board in 2007 and
after 16 years with the Group is planning a career sabbatical to
spend more time with his young family. The Board is very grateful
for his key role in transforming the Group to focus on the Aptitude
brand and the expansion of the product range, laying the
foundations for Fynapse and the addition of revenue and
subscription management.
Having previously held a senior finance position within the
Group, Mike Johns has stepped up to the role of Acting Chief
Financial Officer whilst a formal selection process is conducted.
Philip will continue his responsibilities as Deputy Chief Executive
Officer until his departure in July.
Dividend
The Board has proposed an unchanged final dividend of 3.60 pence
per share (2021: 3.60 pence), making a total ordinary dividend of
5.40 pence per share for the year (2021: 5.40 pence). Subject to
shareholder approval at the Group's Annual General Meeting on 17
May 2023, the proposed final dividend will be paid on 16 June 2023
to shareholders on the register at 26 May 2023.
Outlook
The Group is well positioned in its two strategic markets of
finance digitalization and subscription management. The milestones
achieved with Fynapse in particular provide the Group with
confidence in growth and profitability for future years.
Ivan Martin
Chairman
20 March 2023
Chief Executive Officer's Report
Introduction
Aptitude's core areas of long-term focus are the accelerating
digitalization of the finance function within enterprises, and the
global push towards recurring revenue managed through subscription
offerings. Aptitude also continues to support clients through
complex regulations which often form the catalyst for broader
business transformation. The Group's main strength is the ability
of its technology and people to handle the complexity other
solutions are unable to, put simply "where others see complexity,
we see opportunity".
Finance digitalization enables finance leaders to automate
legacy manually intensive processes, improve the speed of their
function, enhance the quality of its outcomes, and do so at a
dramatically lower cost. Aptitude's products draw data from
complex, often siloed systems, delivering high levels of automatic
processing of complex accounting calculations, and creating a
unified view of finance. Businesses are left with a transparent
view of their data, delivered at extreme performance and at a
significantly lower cost of ownership improving their finance
functions' ability to support their short, medium and long term
business objectives.
Subscription management is rapidly becoming a strategic
imperative for new and traditional businesses alike as they move to
or launch a recurring revenue model. Aptitude's products power the
acquisition, monetization, and retention of subscribers straight
through to complex revenue reporting. With Aptitude, businesses can
take new subscription-models to market quickly, retain their
high-value recurring revenue, and stay one step ahead of the
competition. Whilst the prevalence of business to consumer (B2C)
subscription models is increasing, Aptitude also specialises in
business to business (B2B) subscriptions with the inherent
complexity which the Group is able to manage ahead of its
peers.
Our global client base includes some of the world's largest
companies, typically organisations with complex business models,
large volumes of data, and numerous internal systems. Whilst our
products are relevant for all sectors, the Group has established a
strong presence in banking, insurance and technology, media and
telecom ('TMT') complemented by clients in a series of other new
advanced industries.
The business generates revenue from its software through a
combination of licence fees (all annual recurring licences),
software maintenance/support, software subscriptions for its
cloud-based offerings and implementation and other recurring
support services including the growing solution management service
"Assure". The eSuite product also generates incremental revenue
through charging volume-based usage and financial transaction
fees.
Software development, together with a growing number of other
services, continues to be performed at the Aptitude Global
Technology Centres in Poland and in the North West of England.
Sales, support and implementation services are provided from
Aptitude's offices in London, North West England, North America and
Singapore.
Corporate Strategy
Aptitude's strategy is focused on providing innovative finance
digitalization and subscription management software serving a
growing number of C-suite stakeholders.
The Group progressed a number of strategic activities during
2022, with details of these provided in the sections below. These
activities are focused on continuing to drive an acceleration of
growth in recurring revenues which represent 68% of overall revenue
(2021: 68%). The growth in the proportion of such revenues in the
business will, in due course, lead to both an increase in operating
margins, given the higher margins achievable from these recurring
revenues, and even greater future revenue visibility.
Aptitude is fully focused on its two strategic growth drivers of
finance digitalization and subscription management and does not
anticipate any corporate activity to broaden its product portfolio
in the short term. Notwithstanding this, the Group may, in the
future, identify small bolt-on acquisition opportunities to deepen
its existing capabilities which Aptitude would be well positioned
to progress given its existing cash resources.
Finance Digitalization
Market Drivers
Quality of data, speed of reporting and cost continue to be the
top drivers on the CFO's agenda as they are increasingly challenged
by the demands of operating in a digital world with growing
regulatory and cost pressures. These demands result in an increase
in the complexity, volume and number of sources of finance data,
and the increasing requirement for decision making to move at the
pace of the business in real time. Aptitude's product set is well
positioned to address these requirements.
Finance Digitalization Products
Fynapse, the Group's next generation digital finance platform,
was launched in March 2022 with significant milestones achieved in
the year. New business success also continues to be achieved with
the established Aptitude Accounting Hub and Aptitude Insurance
Calculation Engine applications.
The finance digitalization product set, the largest contributor
to the Group's recurring revenue base, delivered particularly
strong growth in Annual Recurring Revenue in the year with a
balanced performance between new business additions and the growth
of existing clients through up-sell and price increases. This
robust performance underlines the strength of the long-term
opportunity with Fynapse for which we continue to see strong
pipeline generation across our key industries of banking, insurance
and technology, media and telecom.
Fynapse
Fynapse is a modular, cloud native, high performance finance
platform addressing an organisations' need to drive finance
digitalization to underpin the transformation of their wider
businesses. The application builds on the successful Aptitude
Accounting Hub, centralising and automating finance, accounting and
reporting processes, creating a deep level of operational
intelligence for our clients. It delivers a brand-new user centric
interface with a consolidated, yet highly granular, view of
financial data which enhances business insights to assist decision
making. The capabilities of the product enable even greater
automation of manual accounting processes, reducing on-going
operational costs and driving an improved total cost of ownership
for the finance function.
The modular design and ease of integration also allows the
market opportunity to extend beyond our current industries into
adjacent verticals, shortening typically long implementation cycles
and allowing our partner network to implement efficiently, with
minimal risk and delivering a faster time to value.
A strategic global partnership with Microsoft, signed in
December 2022, is expected to be a material contributor to the
success of Fynapse globally in the medium and long term across all
industry sectors. Under this agreement Fynapse will be the only
product with its capabilities to be deeply integrated with
Microsoft Dynamics 365 Finance and operate on the Microsoft Azure
cloud platform. This combined solution will provide Aptitude and
Microsoft clients with the ability to unify data from various
financial systems to increase scalability, gain the agility to
rapidly adopt new regulations, automate manual processes whilst
delivering better business insights and reducing the cost of the
finance function.
In addition to the Microsoft partnership there is strong
interest from consultancies who are attracted to the open design of
Fynapse. This open design provides partners with the opportunity to
co-create and license their own IP built on the Fynapse platform,
further accelerating and differentiating their services. It is
pleasing to report that this capability is proving an attractive
proposition for the Big-4 accountancy firms and is highly
differentiated from the more generalist providers in the
market.
Fynapse has been successfully delivered to the charter client in
the US telco market and a multi-year subscription agreement is now
in place. The implementation project with the charter client is
progressing well and is expected to go-live in mid-2023 as planned.
Additionally, there are a number of pipeline opportunities
progressing positively and the Group is looking forward to
announcing new users to the platform in 2023.
The strategic investment continues to grow the capabilities of
Fynapse with development performed at the Aptitude Global
Technology Centre in Wroclaw, Poland. The overall cost of our
investment in Fynapse increased in 2022 to GBP4.9 million (2021:
GBP1.5 million) all of which is expensed. 2023 will see modest
growth in investment in Fynapse, with Aptitude's overall research
& development expenditure expected to be consistent with
2022.
The Group has confidence in the success of Fynapse which is
expected to be a key growth driver for the business in future
years.
Aptitude Insurance Calculation Engine
Aptitude Insurance Calculation Engine ('AICE') is a strategic,
transformational application providing value to an insurer beyond
addressing the requirements of IFRS 17 (effective for accounting
periods commencing 1 January 2023). Beyond compliance the
application enables data insights and decision support delivering
long-term business benefits.
Whilst the expected modest level of new business success was
achieved in 2022 with AICE, several existing clients opted to
contract for Aptitude's Assure managed services offering. Assure
provides clients with additional services beyond Aptitude's
standard offering with its revenues recurring in nature and
included within the Group's Annual Recurring Revenue for the first
time.
Whilst further new business success may be achieved in 2023, a
key focus will be upgrading AICE users to Assure. Projects to
implement AICE clients continue with a number expected to complete
in the first half of the year in line with the effective date of
the IFRS 17.
Aptitude Accounting Hub
The Aptitude Accounting Hub ('AAH') is the Group's established
product which centralises and automates finance, accounting and
reporting processes, creating a deep level of operational
intelligence for our client. It also delivers a consolidated, yet
highly granular, single view of financial data which enhances
business insights to assist decision making.
The Group continued to achieve new business success in 2022 with
AAH, both on a standalone basis as well as in conjunction with the
sale of the Aptitude Insurance Calculation Engine.
A material new contract with an US headquartered gift and
payments company was successfully signed early in the year. Working
closely with one of our partners, the opportunity was secured by
demonstrating a more configurable and finance enabled solution than
our competitors, while also conveying our strong expertise and
proven track record at scale in the accounting hub space.
In the second half of the year a material multi-year agreement
for the Aptitude Accounting Hub was signed with one of Australia's
largest banks to replace their in-house finance data warehouse and
underpin their finance transformation programme. Additionally, a
contract was secured with a large US insurer prior to the end of
2022 to support their finance digitalization programme.
These clients, together with the European bank contracted in the
opening months of 2023, have opted for this product to access
existing capabilities in AAH.
Subscription Management
Market Drivers
The subscription economy is continuing to expand into new
sectors as the benefits of subscription based recurring income are
increasingly valued more than traditional non-recurring revenues.
The Group has seen this phenomenon in broader sectors such as
high-tech advanced industries, medical devices and automotive. As
organisations move to these business models they require new
systems to manage these subscriptions and require new capabilities
to address the complexities of revenue recognition inherent with
complex subscriptions.
Aptitude's products are focused on the needs of the world's
largest companies, organisations with highly complex business
models and data processing requirements which generalist providers
are unable to address.
Subscription Management Products
Whilst good levels of new business success and growth of
existing accounts was achieved in 2022, overall Annual Recurring
Revenue growth was subdued due to an unusually high level of churn
in 2022. Impacting all products within subscription management
there are several underlying reasons for the elevated level of
terminations, including business failure and corporate events
(especially clients being acquired) which are more prevalent in the
markets particularly targeted by the subscription management
product set. Whilst 2022 has seen a negative impact from the
dynamic nature of the markets that are the focus of the
subscription management product set, this dynamism has historically
delivered, and is expected to do so again in the future, strong
organic growth opportunities within the existing client base.
eSuite
eSuite is a modular, cloud based end-to-end SaaS solution for
large, international, enterprise customers across the media and
publishing sector as well as a growing number of other verticals
such as automotive.
The application is focused on the subscription economy and
provides identity management, CRM, automated billing, payment
processing, and churn management capabilities, enabling businesses
to acquire, monetize and optimise customers subscriptions. Now
integrated with the Group's revenue management offering, Aptitude
can offer an end-to-end subscription, billing & revenue
management automation solution which is expected to provide further
opportunities for automation and growth within the existing
customer base while also supporting new business opportunities.
Conversations are continuing with an existing eSuite client to
adopt AREV, Aptitude's leading revenue management product, to
address their revenue management requirements.
A key highlight for eSuite in the period was the landmark win to
provide subscription management capability to one of the largest
global broadcaster and media content owners with potential for
considerable expansion in Annual Recurring Revenue once the
offering is fully launched in 2023. Contributing to securing this
new contract was the earlier success achieved with a leading
broadcaster and media content owner in the United Kingdom, a
project that successfully went live in the first half of the
year.
Several new business clients were also secured in the second
half of the year across various sectors and regions demonstrating
the strength and flexibility of the product. The revenue model for
this product is heavily weighted towards usage charges, as a result
the addition of these new contracts to Annual Recurring Revenue in
the year was insufficient to fully mitigate the impact of the
contract cancellations received in the year.
The eSuite team is now fully integrated and benefitting from the
expertise and processes of the wider Group. This, together with the
pipeline of new eSuite opportunities and the Annual Recurring
Revenue generated once the recently secured clients go-live, is
expected to lead to an improved performance from this product in
2023.
Aptitude Revenue Management ('ARM')
The ARM applications enable finance teams to automate their
revenue management functions to address the demands of the
subscription economy, with the market opportunity now extending
beyond our current industries into adjacent verticals including
high-tech advanced industries and medical devices.
The applications simplify the whole revenue lifecycle, from
contract order to revenue recognition, reporting and forecasting
and go significantly beyond core IFRS 15 / ASC 606 compliance to
allow total control over complex revenue management for all
contract types ranging from subscription-based revenue models to
complex multi-part or bundled contracts in the business to business
space. This capability allows businesses to understand and control
centrally the financial impact of all their commercial
propositions, the quality of their revenue types as well as
providing new and valuable insights to support future business
decision making such as the introduction of new products in
different markets.
A number of major new business successes were achieved in 2022,
a particular highlight being a multi-year agreement for AREV with a
very large privately-owned US analytics software provider.
As with eSuite, a higher number of cancellations have been
received in 2022 than we had experienced in prior years thereby
subduing growth in Annual Recurring Revenue for ARM products. In
addition to cancellations arising from corporate activity, the
current economic climate has led to a higher level of scrutiny by a
very small number of clients of their project pay back periods or
external spend resulting in their wider transformation programmes
being paused or suspended. Discussions with the small number of
affected clients are on-going to agree the basis of
cancellation.
Software-as-a-Service ('SaaS') Progression and Margin
Evolution
As expected, growth in SaaS Annual Recurring Revenue ('ARR') has
accelerated at the faster Constant Currency growth rate of 15%
(total ARR Constant Currency growth of 9%) and now represents 44%
of ARR (2021: 41%). Whilst all products sold in the year are
capable of being deployed by SaaS, for principally regulatory
reasons a very small number of clients continue to opt to deploy
our technology on their own infrastructure. On-premise ARR grew on
a Constant Currency basis by 4%.
Our on-premise clients currently drive the highest gross
margins. As previously reported, margins have been impacted by the
accelerated adoption of cloud technologies on our traditional
solution portfolio given the cost profile of the Group's
established products when deployed as SaaS. The launch of Fynapse,
with its cloud-native capabilities, is expected to enable
significantly higher margins on this solution to be achieved
compared to the Group's existing SaaS deployed products and will
also enable the migration of the current on-premise clients to this
higher margin offering in the medium term.
Solution Management Services ('Aptitude Assure')
This service extends the responsibilities of Aptitude beyond
traditional software maintenance services to include those that
have typically been performed by the clients' own IT teams. These
include the monitoring of system performance, user administration,
release management and functional enhancements. The team providing
these remote services to our clients is now of critical mass and
able to provide efficiencies to our clients across the majority of
the Group's applications.
With several Aptitude Insurance Calculation Engine clients
contracting in the year, Constant Currency growth of 32% in the
Annual Recurring Revenue ('ARR') was achieved. ARR from this
service, now included within the Group's overall ARR and recurring
revenues, is GBP4.5 million (31 December 2021: GBP3.4 million).
With further AICE clients approaching go-live further opportunities
exist to continue the successful growth in this service in the year
ahead.
Implementation Services
Aptitude provides implementation services to its clients, with
the scale of such services depending on the nature of the
application, the size of the opportunity and the balance of
responsibilities between Aptitude and its partners. The Group's
services are provided by a significant pool of highly skilled
individuals, providing deep domain and technical expertise which is
highly valued by our clients and provide a differentiator compared
to our competitors. Demand for implementation services from the
Group's on-going projects has been strong in 2022, with clients
frequently requesting additional services.
The business continues to expand the enablement of its partner
network to facilitate their ability to implement Aptitude's product
suite reliably and efficiently. Whilst this enablement will lead to
a greater proportion of services being provided by partners, it
remains important to maintain a high-quality delivery capability to
ensure that the Group can continue to support its partners and
provide its expertise to our largest clients who wish to receive
our services directly.
Partner Network
The growth and development of Aptitude's high-quality partner
network continues to be a strategic priority. Whilst many prospects
are sourced directly by the Group's own sales and marketing teams,
the global reach of our partners and the depth of their
relationships with large businesses provide Aptitude with an
increasing number of advanced opportunities, enhanced market
coverage and intelligence. In addition to the new business benefits
provided by the partner network, the implementation expertise and
capabilities of our partners supports the Group's strategic drive
to increase software fees faster than its services, leading to a
richer revenue mix.
A Big-4 accountancy firm was appointed as charter partner for
Fynapse at the time of its launch and has led to a global launch of
our partnership to its internal partner community with the
development of dedicated centres of excellence for integration
capability. We are also enjoying interest from a number of
additional partners in the capabilities of Fynapse. A further
highlight has been the agreement to provide finance automation to a
Big-4 accountancy firm's mergers and acquisitions practice enabling
them to accelerate the post-acquisition integration of their
clients' finance functions leading to multiple new client
engagements.
Whilst the Big-4 accounting firms have global reach, for
specific applications in specific jurisdictions it can be
beneficial to work closely with more specialised partner
organisations. The benefits of this approach are demonstrated by
the success the Group is having with its eSuite partners in markets
which would be challenging to unlock without the assistance of our
partners such as Japan, Middle East and also central Europe.
The technology and go to market partnership with Microsoft is
outlined in the section on Fynapse above and provides the Group
with a real opportunity to accelerate the adoption of our new
platform.
Aptitude Global Technology Centres
Investment continues in the Group's two technology centres in
Poland and the North West of England. Overall there were 244
employees at the Global Technology Centre in Poland at 31 December
2022 (31 December 2021: 198) with a further 52 employees (31
December 2021: 45) focused on design, development, implementation
and support based in the North West of England. Investment remains
focused on both Fynapse and eSuite in these two centres.
The Group's capabilities in Poland provides the Group with
continuing cost advantages, however, wage inflation has been
significantly higher in this territory than elsewhere within the
Group given both the competitiveness of the employment market for
technologists in Poland as well as the country's underlying
inflation. To help address these pressures, the Group has invested
in both local senior management and in the people and talent team
to support a number of initiatives to optimise recruitment and
retention. The Group's initiatives on retention have been largely
successful with employee attrition within the technology centre in
Poland during the course of 2022 reducing to 15% (2021: 20%).
Our People
Aptitude's continued progress has been achieved through the
talent, commitment and incredible hard work of its people. The
Board wishes to thank its employees for both their outstanding
commitment and the continued excellent support they provide to the
business, clients and partners.
Overall Group headcount increased by 11% in the year to 527
(2021: 476) as the business continued to invest in the evolution of
our technology and the strengthening of a number of other
teams.
Aptitude remains fully committed to promoting equality,
diversity and inclusion among its workforce, and to driving
continuous improvements in these areas. During 2022 the Group
established a Diversity & Inclusion SteerCo, which is formed of
18 employees across 5 countries. Key milestones and areas of focus
for 2022 included the formulation and adoption of a new Equality,
Diversity and Inclusion Policy, raising awareness through
activities and events and that promote inclusivity, and the launch
of a Women in Leadership initiative. The SteerCo has also
identified a forward-looking programme of events and objectives for
2023 and beyond.
To ensure the Group carries on attracting employees to work on
its strategic priorities, and retaining the most talented of
individuals, the business has continued to build on the investments
in our people. Particular highlights include:
-- introduction of a leadership career framework that defines leadership
skills and development at all levels of the organisation from
early careers to senior leaders; and
-- investment in learning solutions that allow our people, who
are operating in a hybrid world, to benefit from more flexible
development through investment in learning platforms
Focus Areas for 2023
The Group remains focused on delivery against three go-to-market
pillars: finance digitalization, subscription management and
partner execution, supported by our ongoing focus on people
excellence and financial confidence. Within finance digitalization
we are focused on securing new Fynapse clients, the development of
the strategically promising Microsoft partnership and the upcoming
go-live of Fynapse's charter client. Within subscription
management, key activities will centre on executing on a number of
exciting opportunities with our existing product set and unlocking
volume subscriptions in our 2022 new clients. Underpinning this,
our wider partner relationships will continue to deepen as we add
further partners to support and market our solutions. Supplementing
these pillars, we will continue to invest in our people, seeking to
retain and grow our teams capabilities, with an ethos of diversity
and inclusion.
We are confident that these activities will lead to an
acceleration in the growth of Annual Recurring Revenue which, as
the higher margin recurring revenue grows as a proportion of
overall revenue, will lead to increases in the Group's overall
margin.
Outlook
Overall, we are pleased with both the operational and strategic
progress achieved in 2022 and, whilst watchful of the global
economic environment, the Board is confident that the Group's
performance for 2023 will be in line with its expectations.
Jeremy Suddards
Chief Executive Officer
20 March 2023
Group Financial Performance
Revenue
Total revenue grew by 25% to GBP74.4 million (2021: GBP59.3
million), organic growth of 14%.
Recurring Revenues
Annual Recurring Revenue ('ARR') grew by 9% on a Constant
Currency basis in the year to GBP51.6 million at 31 December 2022
(31 December 2021: GBP47.5 million, 30 June 2022: GBP49.2 million,
both restated for the prevailing exchange rates at 31 December
2022).
ARR is the key financial metric for the Group. Included within
ARR are Aptitude's annual licence fees and maintenance for its
on-premise clients and subscription fees for the Group's SaaS
clients. In addition, and included for the first time in 2022, are
the Group's revenues from its Solution Management Service offering
('Aptitude Assure'), this offering contributed ARR at 31 December
2022 of GBP4.5 million (31 December 2021: GBP3.4 million).
Comparatives have been updated accordingly.
Net Retention Rate in the year was 102% (2021: 102%) (measured
by the total value of on-going ARR at the year-end from clients in
place at the start of the year as a percentage of the opening ARR
from those clients on a Constant Currency basis ) . The Group
benefitted from standard inflationary clauses within the majority
of its contracts, however, as previously outlined, there were an
unusually higher number of cancellations and reductions (e.g.
clients reducing their expenditure by removing incremental
services) that reduced the benefit of these increases.
Recurring revenues recognised in 2022 increased by 26% to
GBP50.5 million (2021: GBP40.1 million), representing Organic
Growth of 11%. eSuite, the product brought into the Group in 2021
through the acquisition of MPP Global contributed recurring revenue
in the year of GBP8.3 million (2021: GBP1.9 million).
Recurring revenues, a strategic focus for the Group, continue to
grow and represent 68% of overall revenue (2021: 68%). It is a key
part of the Group's strategy to increase this percentage whilst
maximising the growth rate of Aptitude's ARR, a strategy which in
due course will lead to growth in operating margin given the margin
differential between recurring and non-recurring revenues despite
the growing SaaS element and the accompanying infrastructure and
servicing costs.
Non-Recurring Revenue
Non-recurring revenue, comprising implementation services and
software development, totalled GBP23.9 million for the year ended
31 December 2022 (2021: GBP19.2 million) representing 24% overall
growth and 21% Organic Growth. In addition to the benefit of the
2021 acquisition of MPP Global, services revenues grew in the year
due to 2021 non-recurring revenue being negatively impacted by the
disruption to our key markets related to the pandemic. Included
within the total non-recurring revenue for 2022 is services revenue
generated by eSuite of GBP1.0 million (2021: GBP0.4 million).
Research & Development Expenditure
Total expenditure on product management, research &
development increased in the year ended 31 December 2022 to GBP17.0
million (2021: GBP10.6 million). Of the increase, GBP3.5 million is
attributable to the full year costs of the eSuite team which was
brought into the Group as part of the MPP Global acquisition in
October 2021. The remaining increase of GBP2.9 million is
principally attributable to the growing investment in Fynapse as
well as the impact of the high rate of inflation currently
experienced in Poland. Whilst the growth in 2023 of the Group's
investment in Fynapse will be modest, the careful management of
investment in the broader product set is expected to result in
Aptitude's overall research & development expenditure being
consistent with 2022, despite the continued inflationary
pressures.
The Board has continued to determine that none of the internal
research & development costs incurred during the year meet the
criteria for capitalisation. Consequently, these have been expensed
as incurred through the income statement.
Operating Profit and Margins
Adjusted Operating Profit for the year ended 31 December 2022
was in line with expectations at GBP7.5 million (2021: GBP9.9
million). Adjusted Operating Margin reduced in line with
expectations to 10% (2021: 17%) as the Group increased investment
in both Fynapse and the integration of eSuite and Aptitude Revenue
Management. Operating profit on a statutory basis was GBP3.7
million (2021: GBP6.5 million).
In addition to the increased investment outlined above, the
accelerated adoption of cloud technologies impacts margin
expectations given the cost profile of a number of the Group's
products when deployed as SaaS. The launch of Fynapse, with its
cloud-native capabilities, is expected to enhance margins.
As with many technology businesses, the Group has experienced
increased inflationary pressures within its cost base with
inflation particularly strong in Poland, averaging 14% in 2022
(United Kingdom 9%, United States 8%). Whilst the majority of
client contracts allow for inflationary increases to be applied to
recurring fees, there are a number of exceptions to this including
the recently acquired client bases where a project is on-going to
move those clients onto the Group's standard inflationary clauses
where possible. Furthermore, services' day rates typically can only
be increased after the initial implementation for a client has
concluded. Overall elevated inflation does not benefit the Group
and is one of the contributing factors to the need to carefully
manage investment levels across the business whilst ensuring
momentum is maintained on the Group's strategic priorities.
Foreign Exchange
With 42% (2021: 51%) of the Group's revenues being generated
from North American clients, the majority of which are invoiced in
US Dollars, the financial results are impacted by changes in the US
dollar exchange rate. Aptitude's 2021 revenue and Adjusted
Operating Profit would have been reported at GBP59.8 million and
GBP10.5 million respectively on a Constant Currency basis (compared
to actual result of GBP59.3 million and GBP9.9 million). Constant
Currency is calculated by comparing the 2022 results with 2021
results retranslated at the rates of exchange prevailing during
2022.
Non-Underlying Items
Non-underlying items of GBP3.8 million (2021: GBP3.4 million)
are principally related to the GBP0.4 million (2021: GBP2.0
million) of final deal and integration costs incurred on the MPP
Global acquisition and intangible amortisation of GBP3.4 million
(2021: GBP1.4 million). The increase in intangible amortisation is
attributable to the full year cost relating to the MPP Global
acquisition completed in October 2021.
Taxation
The total tax charge before adjusting for the impact of
non-underlying and other sundry items of GBP1.4 million (2021:
GBP1.6 million) represents 19.6% of the Group's profit before tax
(2021: 17.1%), broadly in line with the United Kingdom corporate
tax rate of 19%.
Statutory Results
The Group reported a profit for the year attributable to equity
shareholders of GBP2.6 million (2021: GBP5.1 million).
Earnings per Share
Adjusted Basic Earnings per Share decreased, as expected due to
the planned investment in the business, by 30% to 9.9 pence (2021:
14.2 pence). As a result of both this investment and an increase in
non-underlying costs incurred, Basic Earnings per Share reduced to
4.5 pence (2021: 9.0 pence).
Dividend
A final ordinary dividend of 3.60 pence per share is proposed
(2021: 3.60 pence), making a total ordinary dividend of 5.40 pence
per share for the year (2021: 5.40 pence).
Balance Sheet
The Group continues to have a strong balance sheet with net
assets at 31 December 2022 of GBP60.5 million (2021: GBP57.2
million). Following net corporate cash outflows (dividends and loan
payments) of GBP3.8 million in the year, cash at 31 December 2022
was GBP29.2 million (31 December 2021: GBP29.1 million) and net
funds of GBP15.9 million (31 December 2021: GBP16.1 million).
Cash conversion was below the prior year's exceptional
performance with the collection of some recurring revenue invoices
extending into the new year. Trade receivables at 31 December 2022
increased to GBP10.1 million (2021: GBP8.8 million) of which GBP4.1
million (2021: GBP1.5 million) were overdue for payment at the year
end. Of these overdue balances GBP2.8 million has been collected at
17 March 2023 with GBP1.3 million remaining outstanding, of which
GBP1.2 million is either impaired or deferred. DSO (debtor days)
increased to 46 at 31 December 2022 (2021: 37).
Notwithstanding the increase in Annual Recurring Revenue, the
Group's deferred income at 31 December 2022 reduced to GBP29.6
million (2021: GBP30.9 million) due to a number of factors
including the timing of a small number of invoices through the year
end and multi-year advance payments of Annual Licence Fees by a
small number of clients in prior years, resulting in reduced
deferred income from these clients at 31 December 2022. No
multi-year advance payments were received in 2022.
Philip Wood
Deputy Chief Executive Officer
20 March 2023
Group Income Statement
for the year ended 31 December 2022
Year ended 31 Dec 2022 Year ended 31 Dec 2021
Note Before Non- Before Non-
non-underlying underlying non-underlying underlying
items items Total items items Total
Continuing
operations GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 1 74,394 - 74,394 59,330 - 59,330
Operating costs 2 (66,887) (3,822) (70,709) (49,430) (3,439) (52,869)
---------------
Operating profit 7,507 (3,822) 3,685 9,900 (3,439) 6,461
--------------- -------------- --------- --------------- -------------- ---------
Finance income 18 - 18 6 - 6
Finance costs (498) - (498) (238) - (238)
Net finance costs (480) - (480) (232) - (232)
Profit before
income tax 7,027 (3,822) 3,205 9,668 (3,439) 6,229
Income tax
expense 3 (1,481) 871 (610) (1,634) 479 (1,155)
Profit for the
period 5,546 (2,951) 2,595 8,034 (2,960) 5,074
=============== ============== ========= =============== ============== =========
Earnings per
share
Basic 4 4.5p 9.0p
--------- ---------
Diluted 4 4.5p 8.9p
--------- ---------
group statement of comprehensive income
for the year ended 31 December 2022
Year ended
Year ended 31 Dec
31 Dec 2022 2021
GBP000 GBP000
Profit for the year 2,595 5,074
------------- -------------------
Other comprehensive income/(expense)
Items that will or may be reclassified to
profit or loss:
Cash flow hedges reclassified to income statement 187 -
Gain/(loss) on effective cash flow hedges 1,445 (222)
Deferred tax on cash flow hedges (335) -
Currency translation difference 1,972 (225)
------------- -------------------
Other comprehensive income/(expense) for
the year, net of tax 3,269 (447)
------------- -------------------
Total comprehensive income for the year 5,864 4,627
============= ===================
Group Balance Sheet
for the year ended 31 December 2022
As at As at
31 Dec 2022 31 Dec 2021
Notes GBP000 GBP000
ASSETS
Non-current assets
Property, plant and equipment including right-of-use assets 6 5,103 4,261
Goodwill 7 46,006 46,006
Intangible assets 8 21,120 24,502
Other long-term assets 1,307 1,354
Deferred tax assets 423 115
73,959 76,238
------------ ------------
Current assets
Trade and other receivables 9 12,297 10,775
Financial assets - derivative financial instruments 1,339 -
Current income tax assets 1,352 1,168
Cash and cash equivalents 29,245 29,064
------------ ------------
44,233 41,007
------------ ------------
Total assets 118,192 117,245
------------ ------------
LIABILITIES
Current liabilities
Financial liabilities
- borrowings 10 (1,250) (313)
- derivative financial instruments - (293)
Trade and other payables 11 (38,146) (40,284)
Capital lease obligations 12 (553) (273)
Current income tax liabilities (119) (353)
Provisions 13 (114) -
------------ ------------
(40,182) (41,516)
------------ ------------
Net current assets/(liabilities) 4,051 (509)
------------ ------------
Non-current liabilities
Financial liabilities - borrowings 10 (8,347) (9,573)
Capital lease obligations 12 (3,196) (2,777)
Provisions 13 (202) (379)
Deferred tax liabilities (5,724) (5,811)
(17,469) (18,540)
------------ ------------
NET ASSETS 60,541 57,189
------------ ------------
Group Balance Sheet
for the year ended 31 December 2022
As at As at
31 Dec 2022 31 Dec 2021
GBP000 GBP000
SHAREHOLDERS' EQUITY
Share capital 14 4,204 4,194
Share premium account 11,959 11,946
Capital redemption reserve 12,372 12,372
Other reserves 35,199 33,902
Accumulated losses (3,286) (3,346)
Foreign currency translation reserve 93 (1,879)
------------ ------------
TOTAL EQUITY 60,541 57,189
------------ ------------
Group Statement of changes in shareholders' equity
for the year ended 31 December 2022
Attributable to owners of the Parent
Share Share Accumulated Foreign Capital
capital premium losses currency
translation
reserve
redemption Other Total
reserve reserves equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Group
Balance at 1 January
2022 4,194 11,946 (3,346) (1,879) 12,372 33,902 57,189
--------- --------- ------------ ------------- ----------- --------- --------
Profit for the year - - 2,595 - - - 2,595
Cash flow hedges
Cash flow hedges reclassified
to income statement - - - - - 187 187
Gain on effective
cash flow hedges - - - - - 1,445 1,445
Deferred tax on cash
flow hedges - - - - - (335) (335)
Exchange rate adjustments - - - 1,972 - - 1,972
Total comprehensive
income for the year - - 2,595 1,972 - 1,297 5,864
--------- --------- ------------ ------------- ----------- --------- --------
Shares issued under
share option schemes 10 13 - - - - 23
Share options - value
of employee service - - 695 - - - 695
Deferred tax on share
options - - (137) - - - (137)
Dividends to equity
holders of the company - - (3,093) - - - (3,093)
Total Contributions
by and distributions
to owners of the company
recognised directly
in equity 10 13 (2,535) - - - (2,512)
--------- --------- ------------ ------------- ----------- --------- --------
Balance at 31 December
2022 4,204 11,959 (3,286) 93 12,372 35,199 60,541
========= ========= ============ ============= =========== ========= ========
Group Cash Flow Statement
for the year ended 31 December 2022
Year ended Year ended
31 Dec 2022 31 Dec 2021
Note GBP000 GBP000
Cash flows from operating activities
Cash generated from operations 15 5,272 11,890
Interest paid (498) (238)
Income tax (paid)/received (1,597) 262
Net cash flows generated from operating activities 3,177 11,914
------------ -----------------------
Cash flows from investing activities
Purchase of property, plant and equipment, excluding right-of-use
assets (831) (1,232)
Acquisition of subsidiary, net of cash acquired - (33,112)
Interest received 18 6
Net cash used in investing activities (813) (34,338)
------------ -----------------------
Cash flows from financing activities
Net proceeds from issuance of ordinary shares 23 968
Dividends paid to company's shareholders 5 (3,093) (3,057)
Repayments of loan (313) -
Repayment of capital lease obligations (405) (756)
Drawdown of loan, net of arrangement fee - 9,880
Net cash generated (used in)/from financing activities (3,788) 7,035
------------ -----------------------
Net decrease in cash and cash equivalents (1,424) (15,389)
Cash, cash equivalents and bank overdrafts at beginning of year 29,064 44,822
Exchange rate gains/(losses) on cash and cash equivalents 1,605 (369)
Cash and cash equivalents at end of year 29,245 29,064
============ =======================
Notes to the Audited preliminary results for the year ended 31
December 2022
1. Segmental analysis
Business segments
The Board has determined the operating segments based on the
reports it receives from management to make strategic
decisions.
The only business segment for both periods was Aptitude and
therefore no segmental analysis is provided for this period.
The principal activity of the Group throughout 2021 and 2022 was
the provision of business-critical software and services.
1 (a) Geographical analysis
The Group has two geographical segments for reporting purposes,
the United Kingdom and the Rest of the World.
The following table provides an analysis of the Group's sales by
origin and by destination.
Sales revenue by origin Sales revenue by destination
Year ended Year ended Year ended Year ended
31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021
GBP000 GBP000 GBP000 GBP000
United Kingdom 39,329 32,265 15,809 11,353
Rest of World 35,065 27,065 58,585 47,977
74,394 59,330 74,394 59,330
================== ================== ================== =================
2. Non-underlying items
31 Dec 2022 31 Dec 2021
GBP000 GBP000
Amortisation of intangibles 3,382 1,418
Acquisition and associated reorganisation costs 440 2,021
3,822 3,439
============ ============
3. Income tax expense
Year ended Year ended
31 Dec 2022 31 Dec 2021
Analysis of charge in the year GBP000 GBP000
Current tax:
- tax charge on underlying items (1,051) (1,005)
- tax credit on non-underlying items - -
- adjustment to tax in respect of prior periods (344) (256)
- adjustment to tax in respect of prior periods on non-underlying items - 134
Total current tax (1,395) (1,127)
------------- -------------
Deferred tax:
- tax charge on underlying items (111) (354)
- tax credit on non-underlying items 871 346
- adjustment to tax in respect of prior periods 25 (20)
Total deferred tax 785 (28)
------------- -------------
Income tax expense (610) (1,155)
============= =============
The net adjustment to tax in respect of prior periods on
underlying items totalling GBP319,000 (2021: GBP276,000) relates to
the reduction in the assumed benefit from research and development
relief in the UK.
The total tax charge of GBP610,000 (2021: GBP1,155,000)
represents 19.0% (2021: 18.54%) of the Group profit before tax of
GBP3,205,000 (2021: GBP6,229,000).
After adjusting for the impact of non-underlying items, change
in tax rates, share based payment charge and prior year tax charge,
the tax charge for the year of GBP1,375,000 (2021: GBP1,652,000)
represents 19.57% (2021: 17.10%), which is the tax rate used for
calculating the adjusted earnings per share.
At 31 December 2022, the Group had unused tax losses totalling
GBP1,029,000 (2021: GBP1,029,000) available for offset against
future profits. No deferred tax asset has been recognised in
respect of these losses due to the unpredictability of future
profit streams.
The difference between the total tax charge and the amount
calculated by applying the effective United Kingdom corporation tax
rate of 19.00% (2020: 19.00%) to the profit on ordinary activities
before tax is as follows:
Year ended Year ended
31 Dec 2022 31 Dec 2021
GBP000 GBP000
Profit before tax 3,205 6,229
Tax at the United Kingdom corporation tax rate of 19.00% (2021: 19.00%) (610) (1,184)
Effects of:
Adjustment to tax in respect of prior periods (319) (142)
Adjustment in respect of foreign tax rates (138) (35)
Expenses not deductible for tax purposes - (12)
Non-underlying expenses not deductible for tax purposes (45) (384)
Other (303) 105
Research and development tax relief 561 408
Recognition of tax losses not recognised as a deferred tax asset 214 160
Tax losses not recognised as a deferred tax asset - (84)
Change in future tax rates 30 13
Total taxation (610) (1,155)
============= =============
United Kingdom corporation tax is calculated at 19.00% (2021:
19.00%) of the estimated assessable profit for the year. Taxation
for other jurisdictions is calculated at the rates prevailing in
the respective jurisdictions.
4. Earnings per share
To provide an indication of the underlying operating performance
per share, the adjusted profit after tax figure shown below
excludes non-underlying items and has a tax charge using the
effective rate of 19.57% (2021: 17.10%).
Year ended Year ended
31 Dec 2022 31 Dec 2021
GBP000 GBP000
Profit before tax and non-underlying items 7,027 9,668
Tax charge at a rate of 19.57% (2021: 17.10%) (1,375) (1,652)
-------------- --------------
5,652 8,016
Prior years' tax charge (320) (142)
Non-underlying items net of tax (2,951) (2,960)
Recognition of tax losses not recognised as a deferred tax asset 214 160
Profit on ordinary activities after tax 2,595 5,074
============== ==============
2022 2021
Number Number
(thousands) (thousands)
Weighted average number of shares 57,288 56,675
Effect of dilutive share options 819 432
58,107 57,107
============== ==============
2022 2022 2021 2021
Basic EPS pence Diluted EPS pence Basic EPS pence Diluted EPS pence
Earnings per share 4.5 4.5 9.0 8.9
Non-underlying items net of tax 5.2 5.1 5.2 5.2
Prior years' tax charge/(credit) 0.6 0.6 0.3 0.2
Recognition of tax losses (0.4) (0.4) (0.3) (0.3)
Adjusted earnings per share 9.9 9.8 14.2 14.0
================== ==================== ================== ====================
Adjusted earnings per share are calculated using adjusted profit
after tax.
5. Dividends
2022 2021
2022 pence per share 2021 pence per share GBP000 GBP000
Dividends paid:
Interim dividend 1.80 1.80 1,032 1,019
Final dividend (prior year) 3.60 3.60 2,061 2,038
5.40 5.40 3,093 3,057
===================== ===================== ======== ========
Proposed but not recognised as a liability:
Final dividend (current year) 3.60 3.60 2,064 2,059
===================== ===================== ======== ========
The proposed final dividend was approved by the Board on 20
March 2023 but was not included as a liability as at 31 December
2022, in accordance with IAS 10 'Events after the Balance Sheet
date'. If approved by the shareholders at the Annual General
Meeting this final dividend will be payable on 16 June 2023 to
shareholders on the register at the close of business on 26 May
2023.
6. Property, plant and equipment including right-of-use
assets
31 Dec 2022 31 Dec 2021
GBP000 GBP000
Opening net book value 1 January 4,261 2,394
Additions 1,660 3,831
On acquisition of subsidiary - 237
Net disposals (8) (1,037)
Exchange movements 322 15
Depreciation (1,132) (1,179)
5,103 4,261
============ ============
7. Goodwill
31 Dec 2022 31 Dec 2021
GBP000 GBP000
Opening net book value 1 January 46,006 23,787
On acquisition of subsidiary - 22,219
------------ ------------
46,006 46,006
============ ============
The acquisition of a subsidiary totalling GBP22.2 million in
2021 represents the amount of goodwill allocated to MPP Global
business which was acquired on 9 October 2021.
8. Intangible assets
31 Dec 2022 31 Dec 2021
GBP000 GBP000
Opening net book value 1 January 24,502 5,640
On acquisition of subsidiary - 20,280
Amortisation (3,382) (1,418)
------------ ------------
21,120 24,502
============ ============
9. Trade and other receivables
31 Dec 2022 31 Dec 2021
GBP000 GBP000
Trade receivables 10,091 8,833
Less: provision for impairment of receivables (421) (21)
------------ ------------
Trade receivables - net 9,670 8,812
Other receivables - 330
Prepayments 1,513 1,110
Accrued income 1,114 523
12,297 10,775
============ ============
Within the trade receivables balance of GBP10,091,000 (2021:
GBP8,833,000) there are balances totalling GBP4,057,000 (2021:
GBP1,544,000) which, at 31 December 2022, were overdue for payment.
Of this balance GBP2,841,000 (2021: GBP1,341,000) has been
collected at 17 March 2023 (2021: 14 March 2022).
The increase in the provision for impairment of receivables is
in respect of outstanding invoices from a client which has ceased
the implementation of the Group's products. Further information is
provided within note 16.
10. Financial liabilities
31 Dec 2022 31 Dec 2021
GBP000 GBP000
Bank loan 9,597 9,886
=========== ============
The borrowings are repayable as follows:
Within one year 1,250 313
In the second year 8,438 1,250
In the third to fifth years inclusive - 8,437
----------- ------------
9,688 10,000
Unamortised prepaid facility arrangement fees (91) (114)
----------- ------------
At 31 December 9,597 9,886
=========== ============
On 15 October 2021, the Group and Company entered into a loan
agreement with Bank of Ireland consisting of a GBP10 million term
loan in addition to a revolving credit facility of GBP10 million.
The loan is secured on all the assets of the Group. Operating
covenants are limited to the Group's net debt leverage and interest
cover. The term loan is repayable over three years with an initial
12-month repayment holiday followed by annual capital repayments of
GBP1,250,000. The Group can request a further one-year extension to
the loan. At the end of the term, a bullet payment for the
remaining balance of the loan is due. The loan is denominated in
Pound Sterling and carries interest at SONIA plus 1.75%. The Group
entered into an interest swap on 2 November 2021, effectively
fixing the interest rate at 2.95% over the term of the loan.
11. Trade and other payables
31 Dec 2022 31 Dec 2021
GBP000 GBP000
Trade payables 826 1,290
Other tax and social security payable 1,370 1,216
Other payables 204 405
Accruals 6,183 6,462
Deferred income 29,563 30,911
38,146 40,284
============ ============
31 Dec 2022 31 Dec 2021
GBP000 GBP000
Amounts payable under capital lease agreements:
Within one year 642 387
Within two to five years 2,284 1,624
After five years 1,387 1,632
------------ ------------
Total 4,313 3,643
Less: future finance charges (564) (593)
------------ ------------
Present value of lease obligations 3,749 3,050
Less: Amount due for settlement within 12 months (shown under current liabilities) (553) (273)
3,196 2,777
============ ============
12. Capital lease obligations
31 Dec 2022 31 Dec 2021
GBP000 GBP000
The present value of financial lease liabilities is split as follows:
Within one year 553 273
Within two to five years 1,897 1,287
After five years 1,299 1,490
3,749 3,050
============ ============
13. Provisions for other liabilities and charges
Provisions
31 Dec 2022 31 Dec 2021
GBP000 GBP000
At 1 January 379 441
Credited to income statement (76) (142)
On acquisition of subsidiary - 89
Foreign exchange movement 13 (9)
At 31 December 316 379
============ ============
GBP273,000 (2021: GBP334,000) of the total provision at 31
December 2022 of GBP316,000 (2021: GBP379,000) relates to the cost
of dilapidations in respect of its occupied leasehold premises. The
remaining GBP43,000 (2021: GBP45,000) is in relation to Poland
pension provisions.
14. Share capital
Ordinary shares of 7 1/3p each Number GBP000
Issued and fully paid:
At 1 January 2022 57,199,448 4,194
Issued under share option schemes 138,163 10
At 31 December 2022 57,337,611 4,204
=========== =======
15. Cash flows from operating activities
Reconciliation of profit before tax to net cash generated from
operations:
Year ended Year ended
31 Dec 2022 31 Dec 2021
GBP000 GBP000
Profit before tax for the year 3,205 6,229
Adjustments for:
Depreciation 1,132 1,179
Amortisation 3,382 1,418
Share-based payment expense 695 612
Finance income (18) (6)
Finance costs 498 238
Changes in working capital excluding the effects of acquisition:
Increase in receivables (1,485) (1,561)
(Decrease)/increase in payables (2,137) 3,930
Decrease in provisions - (149)
Cash generated from operations 5,272 11,890
============= =============
16. Contingent liabilities
The implementation of the Group's products are frequently part
of wider finance transformation programmes involving a number of
different suppliers and partners. This environment can result in
project scope changes, resulting in timeline extensions and
budgetary demands. In this background, two clients have ceased the
implementation of the Group's products and provided the Group with
correspondence terminating their multi-year agreement alleging
contractual breaches by Aptitude and claiming damages. The Group
has rejected both the purported termination of the two agreements
and claim for damages and has notified the clients of the charges
due to Aptitude under the minimum terms of their agreements. The
Group has assessed that they do not consider that it will be
probable that there will be a cash outflow and therefore no
provision has been recognised at 31 December 2022. The Group
expects the matter to be resolved in the next year.
17. Statement by the directors
The preliminary results for the year ended 31 December 2022 are
prepared in accordance with UK adopted International Accounting
Standards (IAS) and interpretations by the IFRS Interpretations
Committee applicable to companies reporting under UK adopted IFRS.
They do not include all the information required for full annual
statements and should be read in conjunction with the 2022 Annual
Report. The accounting policies adopted in this preliminary
announcement are consistent with the Annual Report for the year
ended 31 December 2022.
The comparative figures for the financial year 31 December 2021
have been extracted from the Group's statutory accounts for that
financial year. The 2021 financial statements, which were prepared
in accordance with UK adopted international accounting standards
and company law, have been reported on by the Group's auditors and
delivered to the registrar of companies.
The financial information set out in this preliminary
announcement does not constitute the Company's statutory accounts
for the years ended 31 December 2022 or 31 December 2021. The
Annual Report for 2022 will be delivered to the Registrar of
Companies in due course. The auditors' report on those accounts was
unqualified and neither drew attention to any matters by way of
emphasis nor contained a statement under either section 498(2) of
Companies Act 2006 (accounting records or returns inadequate or
accounts not agreeing with records and returns), or section 498(3)
of Companies Act 2006 (failure to obtain necessary information and
explanations).
The Board of Aptitude Software Group plc approved the release of
this audited preliminary announcement on 20 March 2023.
The Annual Report for the year ended 31 December 2022 will be
posted to shareholders in due course and will be delivered to the
Registrar of Companies following the Annual General Meeting of the
Company. The report will also be available on the investor
relations page of our web site (www.aptitudesoftware.com). Further
copies will be available on request and free of charge from the
Company Secretary at 8th Floor, 138 Cheapside, London, EC2V
6BJ.
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END
FR VBLFLXXLEBBB
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March 21, 2023 03:00 ET (07:00 GMT)
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