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Aptitude Software   -  APTD   

Audited Preliminary Results

Released 07:00 11-Mar-2020

RNS Number : 6880F
Aptitude Software Group PLC
11 March 2020
 

11 March 2020

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

Audited Preliminary Results for the Year Ended

31 December 2019

Aptitude Software Group plc (LSE: APTD, formerly Microgen plc), a specialist provider of powerful financial management software to large global businesses, reports its audited preliminary results for the year ended 31 December 2019.

Financial Highlights (continuing operations1) 

Year ended 31 December

2019

2018

% Change

Annual Recurring Revenue2 at year end

£28.6m

£23.5m3

+22%3

Revenue

£59.7m

£52.3m

+14%

-     Software and subscription revenue

£28.5m

£24.8m

+15%

-     Implementation and solution management services revenue

£31.2m

£27.5m

+13%

Adjusted Operating Profit4

£10.5m

£8.8m

+20%

Statutory operating profit

£8.9m

£7.7m

+17%

Cash and cash equivalents at year end

£33.0m

£29.2m

+13%

Cash Conversion5

135%

97%

+39%

Adjusted Basic Earnings per Share4

12.8p

10.2p

+25%

Basic Earnings per Share

11.2p

8.9p

+26%

 

·        A good new business performance in the year, driving 22% growth in Annual Recurring Revenue on a constant currency3 basis

·        In line with the Group's strategic focus, software and subscription revenue increased 15% to £28.5 million (2018: £24.8 million), representing 48% of total revenue (2018: 47%)

·        Strong balance sheet with cash of £33.0 million (2018: £29.2 million), net funds of £30.8 million (2018: £17.3 million) and cash conversion5 of 135% in the year (2018: 97%) with the Group benefitting from growing recurring software and subscription revenues with clients typically paying annually in advance

Strategic and Operational Highlights:

·        Strategic milestone achieved with the disposal of Microgen Financial Systems on 28 June 2019 for aggregate cash consideration of £51.4 million. Associated return of value to shareholders of £46.4 million in September 2019

·        The disposal enhances the Group's ability to allocate capital and focus management attention on the higher growth Aptitude Software business

·        Multiple sales of the Aptitude Insurance Calculation Engine including to one of the world's leading insurers as well as to one of the largest insurers in the United Kingdom. Successful entry into the Australian insurance market with a leading life insurer secured as a client. Speculation of a twelve-month extension to the effective date of IFRS 17 has delayed a small number of opportunities

·        Strong sales of the strategic Aptitude Accounting Hub, the application which provides our clients with the foundation for their digital finance transformation, across both the European and North American markets

·        Largest Software-as-a-Service ('SaaS') subscription sale to date for Aptitude Revenue Management with a significant sale also completed to a North American technology company at the start of 2020

·        Investment increased across a number of functions, a trend expected to continue through 2020 as the business scales and specialises to fully realise the growing opportunity for our SaaS solutions and the Aptitude Accounting Hub

Commenting on today's results, Ivan Martin, Chairman, said:

'Excellent strategic progress was achieved in 2019 with the disposal of Microgen Financial Systems significantly repositioning the Group to be solely focused on the Aptitude Software business.

The Group is at the start of this new era with an ambition to be one of the world's leading vendors of powerful financial management software to large global enterprises.

Aptitude Software benefits from its growing portfolio of product and service offerings, a growing SaaS capability, increasing worldwide presence and a well-established partner network. These strengths, together with the new focus achieved in 2019, position the Group to be able to fully realise the significant opportunity ahead as enterprises seek to embark upon their digital finance transformation.

Absent any material adverse impact of Covid-19, the Board looks forward to further progress in 2020.'

 Contacts

Aptitude Software Group plc

 

Ivan Martin, Chairman

020-7496-8196

Philip Wood, Deputy Chief Executive Officer and Chief Financial Officer

 

Alma PR

 

Caroline Forde, Hilary Buchanan, Sam Modlin

020-3405-0212

 

About Aptitude Software

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

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

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

www.aptitudesoftware.com

Throughout this announcement:

1 Continuing operations excludes the results of the Microgen Financial Systems business which was disposed of on 28 June 2019 and presented as a discontinued operation

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

3 Constant currency is calculated by comparing the 2019 results with 2018 results retranslated at the rates of exchange prevailing during 2019. Items within the Financial Highlights table indicated by this superscript reference are calculated on a constant currency basis.

4 Adjusted Operating Profit, Adjusted Operating Margin and Adjusted Basic Earnings per Share excludes non-underlying operating items, unless stated to the contrary. Further detail in respect of the non-underlying operating items can be found within Note 3 of the notes to the Financial Statements.

5 Cash conversion is measured by cash generated from operations as a percentage of operating profit adjusted for the non-underlying items with no cash effect

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 Software made significant progress in the year, delivering a good new business performance whilst completing the Group's transition into a business that is now solely focused on the specialised provision of powerful financial management software to large global enterprises.

New business secured in the year included multiple sales of the Aptitude Insurance Calculation Engine ('AICE'), Aptitude Revenue Management ('ARM') and the Aptitude Accounting Hub ('AAH'). These successes have led to Aptitude Software's Annual Recurring Revenue increasing to £28.6 million representing year on year growth of 22% on a constant currency basis.

Successes with AICE, Aptitude Software's application enabling insurers to comply with the complex accounting requirements of IFRS 17, were achieved on a world-wide basis and included new business contracts with one of the leading global insurers as well as with one of the largest insurers in the United Kingdom. The opportunity with this application remains a focus for the Group into 2020.

In addition to Aptitude Software's credentials in helping organisations comply with complex regulations, there is a material opportunity with the Group's AAH product on a standalone basis as businesses seek to undertake a transformation of their finance function, frequently referred to as a digital finance transformation. The scale of the opportunity was demonstrated during 2019 with several sales achieved across both the European and North American markets. One of these successes includes a global insurance company which has leveraged AAH to centralise and automate its global reporting processes leading to increased operational intelligence combined with an improvement in its overall business risk environment.  

The disposal of Microgen Financial Systems on 28 June 2019 for aggregate cash consideration of £51.4 million was a major milestone in Aptitude Software's long-term strategy and represented the start of a new era which saw the Aptitude Software business become the sole focus of the Group. Following the disposal, the business completed a return of value totalling £46.4 million to shareholders in September 2019.

Board changes

Jeremy Suddards was appointed Chief Executive Officer on 17 January 2020 following a successful six-month transition from his predecessor, Tom Crawford, who retired from the Board on the same day. Jeremy originally joined Aptitude Software in 2018 having previously held senior roles within Hewlett Packard. The Board once again wishes to thank Tom for his exceptional contribution to the Group in recent years and looks forward to his ongoing support as he continues to work with the Group on a part-time basis.

Dividend

Following the disposal of Microgen Financial Systems, and its accompanying profits, the Board reviewed Aptitude Software's dividend policy and determined to maintain dividend cover for 2019. As a result, a final dividend of 3.60 pence per share is proposed (2018: 4.40 pence), making a total ordinary dividend of 5.40 pence per share for the year (2018: 6.60 pence). Subject to shareholder approval at the Group's Annual General Meeting in April 2020, the proposed final dividend will be paid on 29 May 2020 to shareholders on the register at 11 May 2020.

Outlook

Aptitude Software has made good progress in 2019, both strategically and operationally. The Group benefits from a growing portfolio of product and service offerings, an expanding SaaS capability, increasing worldwide presence and a well-established global partner network. With these strengths, and the positive start achieved in the opening months of 2020 with a further significant sale of Aptitude Revenue Management, absent any material adverse impact of Covid-19, the Board looks forward to further progress in 2020.

Ivan Martin

Chairman

10 March 2020

 

Chief Executive Officer's Report

 

Introduction

Aptitude Software is a specialist provider of powerful financial management software to large global businesses.

Our applications provide data and business insight to our global client base enabling them to achieve significant benefits such as greater business insights, enhanced financial control, deeper operational intelligence and regulatory compliance. Our markets are underpinned by strong fundamentals as technological advancement both drives and facilitates an increasingly automated approach to finance operations, augmented by the additional driver of regulatory requirements. Our clients include some of the world's largest companies, typically organisations with complex financial data and technology landscapes. 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 several clients in a series of other industries.

The business generates revenue from its software through a combination of licence fees (primarily annual recurring licences), software maintenance/support, software subscriptions for its cloud-based offerings and implementation and other support services including solution management services. Development, together with a growing number of other services, continues to be performed at the Aptitude Innovation Centre in Poland with sales, support and implementation services provided from Aptitude Software's London headquarters and the North American and Singaporean regional businesses.

Corporate Strategy

The Group executed on a number of strategic activities during the year, most notably the disposal of Microgen Financial Systems. This allows Aptitude Software to focus on its strategy of becoming one of the world's leading vendors of powerful financial management software to large global enterprises.

Aptitude Software has a growing portfolio of product and service offerings, an increasing SaaS capability, a worldwide presence and well-established partner network. These strengths, together with this new focus, position the Group to fully realise the significant opportunity ahead, as enterprises seek to embark upon their digital finance transformation.

Continued progress was made in 2019 against the Group's strategy of growing its software and subscription revenues which increased by 15% during the year to £28.5 million (2018: £24.8 million), representing 48% of overall revenue (2018: 47%). The growth in the proportion of such revenues in the business will, in due course, lead to an increase in operating margins given the higher margins achievable from these recurring revenues. 

Whilst the Group's focus is currently the organic growth of its software and subscription revenues, the Board has commenced the analysis of potential acquisition opportunities which would deliver additional value for shareholders and which meet our strict criteria of comprising complementary technologies focused on Aptitude Software's product suite. As at 31 December 2019, the Group had cash of £33.0 million and net funds of £30.8 million.

Markets and Partners

Market Drivers: Digital Finance and Smart Compliance

Finance functions of large global organisations are increasingly being challenged both by growing regulatory pressures and by the demands of finance in a digital world.

The digital era, the accompanying increase in the volume of data and the need for near real time decisioning provides finance functions with an opportunity, and the accompanying challenge, to deliver enhanced financial control leading to improved operational intelligence and strategic foresight. The Aptitude Accounting Hub ('AAH') with its ability to handle data at a highly granular level is increasingly being considered a strategic foundation for finance organisations as they undertake the necessary transformation which allows them to meet these new challenges.

Aptitude Software is also benefitting from growing regulatory pressures in our markets. New accounting standards are often focused on 'contract-level' accounting requiring new technology solutions that allow organisations to achieve a smarter approach to compliance. Following success with IFRS 15, IFRS 16 and their equivalent standards in the USA, Aptitude Software's current regulatory focus is IFRS 17, a requirement addressed by the Aptitude Insurance Calculation Engine. Changes to the accounting standards for insurers in the USA, Long Duration Targeted Improvements ('LDTI'), are also becoming an increasing opportunity for the Group's North American team.

Go-to-Market

Aptitude Software has built strong sales teams in each of APAC, Europe and North America which leverage our growing partner network to source and influence prospects. These teams are supported by an increasingly powerful marketing function, a team that has received significant investment in 2019.

As the number of both our clients and products increases there is a growing opportunity for add-on sales to existing users. These sales may consist of either increasing the footprint of products already in use by clients or the cross-sell of other Aptitude Software products to an existing user. There are strategic account management teams in each of our regions with a number of successes achieved in 2019 including the entry into an enterprise licence agreement with an existing client (one of the United Kingdom's leading clearing banks). This client's use of AAH in a growing number of its operations led to incremental licencing requirements and further demonstrates the material value the Group's applications can bring to organisations looking to undertake finance transformation.

Partners 

The role Aptitude Software's partners perform in the Group's go-to-market strategy is significant. Whilst many prospects are sourced directly by the Group's own sales and marketing teams, the global reach of partners and the depth of their relationships with large global businesses provide Aptitude Software with an increasing number of opportunities and market intelligence. This global reach was realised during the year through the successful entry into the Australian insurance market with a leading life insurer secured as a client.

Aptitude Software now has agreements with each of the Big 4 accounting firms following the entry into an alliance with PwC in 2019. Dedicated partner management teams in North America, Europe and now APAC co-ordinate the activities of these partners who, in addition to sourcing and influencing prospects, provide certified consulting capability to assist clients with the implementation of Aptitude Software's applications.

Global Presence

Aptitude Software's opportunity is worldwide with an established presence in APAC, Europe and its largest market, North America, which represents 54% of Annual Recurring Revenue ('ARR'). This global reach is supported by the Group's principal offices in London, Boston, Singapore and Poland with other capabilities being provided in Canada and California. Establishment of this local presence complemented with a focused, regionally led management team structure, has seen our clients' global footprint now span across sixteen countries worldwide.

Aptitude Software has traditionally focused on markets in which our specialised sale can be completed in English. In conjunction with partners the Group is now analysing the entry into markets in which it currently has no presence where the partners' local market knowledge, language skills and existing client relationships will be key to success.

Whilst activities in APAC, North America and non-EU European states are unlikely to be impacted by the United Kingdom's withdrawal from the European Union, Aptitude Software performs its development at the Aptitude Innovation Centre in Poland and has a number of on-going implementation projects within European Union states (2019 revenue from European Union states excluding the United Kingdom was £9.4 million). The business is continuing to monitor the still-developing situation, however, whilst there may be some short-term disruption, the Group does not believe that there will be a long-term material impact. Aptitude Software has considerable experience in deploying its highly skilled consultants across the world, and benefits from the flexibility provided by its partner network. The Group also has the option of expanding the consulting capability of the Aptitude Innovation Centre, which is located within the European Union.

The Group is also closely monitoring the impact of COVID-19 (Coronavirus) and is reviewing and updating its business continuity plans accordingly. The potential impact of COVID-19 is difficult to assess at this time however, the Group's client base and sales opportunities are worldwide requiring frequent international travel which could be constrained if the situation deteriorates. Any travel restrictions may slow down the agreement of new revenue opportunities and growth in the Group's ARR. Furthermore, Aptitude Software has a number of on-going implementations requiring our consultants' attendance at client sites around the world, including Hong Kong and South Korea amongst the initially most affected countries. Remote working is frequently possible, however, any inability of consultants to attend client sites may both reduce revenue and potentially delay the implementation of our solutions. Whilst the majority of Aptitude Software office-centred employees have the ability to work from home in the event of a worsening of the situation in our main centres of London, Boston, Poland and Singapore, such a method of working is anticipated to impact a proportion of our employees' productivity.

Key Product Overview

Aptitude Accounting Hub

In 2019 the Aptitude Accounting Hub ('AAH') secured new licences with a number of organisations as they seek to transform their finance functions. In total, the agreements entered during 2019 contributed significantly to the growth in Annual Recurring Revenue ('ARR') in the year.  

The opportunity for AAH is significant and continuing across all of our key industries. AAH allows finance functions to take a leading role in driving the commercial performance of their business and provides the foundation for digital finance transformation. The application centralises and automates finance, accounting and reporting processes, creating a deep level of operational intelligence for our clients. It also delivers a consolidated, yet highly granular, single view of financial data which enhances business insights to assist decision making. AAH can be used on a standalone basis or in conjunction with other Aptitude Software applications. Clients can and do choose to implement AAH either before, at the same time, or after the implementation of a regulatory-focused application such as the Aptitude Insurance Calculation Engine. To fully realise the opportunity for AAH, investment is accelerating in the product with several areas of enhanced functionality and capability identified for future development. This investment includes additional capacity to be brought into the research and development team at the Aptitude Innovation Centre.

Aptitude Insurance Calculation Engine

A current focus of the Group is the opportunity provided by the Aptitude Insurance Calculation Engine ('AICE') in advance of the effective date of IFRS 17. AICE is Aptitude Software's latest regulatory focused application allowing an insurer to perform the calculations required to be compliant with IFRS 17. In conjunction with AAH, AICE allows an insurer to make strategic, transformational investment providing value beyond compliance, enabling data-insights and decision support delivering long-term business benefits.

Global highlights for this application include new business contracts with one of the largest insurers in the United Kingdom as well as with one of the world's leading insurers. Both sales licensed the Group's AICE and AAH solutions concurrently, leveraging the applications' multi-GAAP, multi-currency, multi-valuation architecture complemented by the ability to process high volumes of data at the most granular levels.

Recent speculation that the effective date for IFRS 17 will be extended by twelve months (currently effective for periods commencing on 1 January 2022) caused delays with a small number of sales opportunities in the second half of 2019. These delays have had a minimal impact on revenue recognised for 2019 but have suppressed ARR as at 31 December 2019 from what would otherwise have been achieved.

Aptitude Revenue Management

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

The Group's two revenue management applications, collectively Aptitude Revenue Management, have continued to make good progress in 2019 with a further significant sale completed in the opening months of 2020. The key highlight in 2019 was the largest Software-as-a-Service ('SaaS') subscription to date for ARM to a large North American technology business. As a result of ARM's focus on technology and telecommunications businesses Aptitude Software has experienced higher churn for this product set than encountered by the Group's other products which are focussed towards the more mature banking and insurance sectors. In 2019 ARR growth was moderated by the loss of two clients: one resulting from a merger between two existing clients, and another as a result of it filing for protection under Chapter 11 in the USA.

Our Services

Implementation Services

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

Solution Management Services

Whilst the majority of overall services revenue is associated with the implementation of Aptitude Software's applications, there is a growing percentage of revenues derived from solution management services. This service is expected to further enhance the operation and longevity of applications within major clients and extends the responsibilities of Aptitude Software beyond traditional software maintenance services to include services typically performed by the clients' own IT teams, including for example, the monitoring of system performance, user administration, release management and functional enhancements. In turn, clients benefit from the reduced requirement to establish internal technical teams focused on our applications, providing clients with efficiencies and allowing them to focus on their core activities. The long term and recurring nature of solution management services is expected to provide greater certainty and visibility to the Group's services revenues and continues to be a focus of investment in the business.

Software-as-a-Service

The number of clients subscribed to our Software-as-a-Service ('SaaS') products continues to grow and scaling this service further is a key growth driver for the business.

Whilst the Group's complete product suite is cloud deployable, only a subset of the suite is currently provided as SaaS with users of Aptitude Software's other applications currently preferring to consume our technology on-premise, or in their private cloud, given the nature of these products. Work is being performed at the Aptitude Innovation Centre to ensure all key applications are capable of SaaS delivery in advance of any potential change in clients' buying preference. The continuing movement to SaaS is not a material change in business model for Aptitude Software with the revenue characteristics of SaaS no different from the Group's annual licence fee model which has been in place for many years.

People and Organisation

Our People

Aptitude Software's continued progress has been achieved through the exceptional quality of its people. The team is very talented, committed, works incredibly hard and is achieving great success. Retention remains absolutely key to the business and investment continues in career management, learning and development as we continue to grow the capabilities of the team. The Group continues to strengthen its specialist financial proficiency with accountants now making up over 20% of the global team.  

The business implemented several important organisational changes during the year, most notably the adoption of a regionally led management approach for both go to market and implementation services. The structure is a recognition of the Group's ever-increasing global footprint, strengthening the focus of the business on the strategic development of clients, prospects and the portfolio of solutions we deliver to them.

The Board continues to be very grateful to the Aptitude Software team for its outstanding contribution to the business.

Aptitude Innovation Centre

The Aptitude Innovation Centre, our long-established integrated centre of excellence in Poland, at which a growing number of activities are performed, continues to be a material differentiator for the Group. Modern development methodologies are followed with multi-discipline, highly skilled teams focused on specific applications. Benefitting from this approach, together with a culture of proactive problem solving and collaboration, the teams rapidly and frequently release new functionality, a key requirement given the continuing and evolving requirements of Aptitude Software's client base.

Following the transfer in 2019 of development activities from California to Poland for the Aptitude RevStream product, one of the Group's two Aptitude Revenue Management applications, the Aptitude Innovation Centre now encompasses the development of the Group's entire product suite whilst also becoming an increasing focal point for the Group's cloud operations and support activities. This single integrated centre improves the collaboration between our teams as they provide software or associated services to our clients.

Future investment

As announced on 20 January 2020, following both the re-organisation of the Group and the change in leadership in 2019, opportunities in the market, client base and the business have been identified for additional investment to support our long-term growth strategy.

To fully realise the digital finance transformation opportunity in the market, development is being increased in both functionality and technology in the Aptitude Accounting Hub.

One of the other key areas of investment will be in the enablement and training of our clients and partners as well as our own people; an initiative which will accelerate the use of our products within the existing base, ensure highly successful implementations and, as a result, encourage wider adoption within the market. This investment will be in both people and technology and will also underpin our partner programme where such enablement is a differentiating capability.

Several operational areas of the business will also be strengthened in 2020, allowing the Group to further enhance the services it provides to its clients. These include support, solution management services and its SaaS offering with accompanying cloud capability. The number of clients subscribed to our SaaS or cloud-based offerings continues to grow, and scaling this service further is a key growth driver for the business. Investment will also continue in the professional services organisations responsible for the implementation of the Group's applications in conjunction with our clients and partners.

AptConnect 2019

The business hosted the first ever AptConnect during 2019, an event bringing together our clients, partners and prospects. The conference, held in Boston and attended by over 80 North American delegates, covered a range of topics from the future of technology for the finance department through to demonstrations of the latest developments in our product portfolio. The agenda included speakers from our existing client base detailing their own successful implementation journey of the Aptitude Software product suite along with keynotes from our partners covering the importance of the digital finance journey clients must undertake.

2020 Progress to Date and Outlook

The Group has started 2020 positively with a significant subscription sale of Aptitude Revenue Management to a North American technology enterprise. Further material opportunities are being progressed in all regions for our key applications and the Group looks forward to the new era as a business now solely focused on the specialised provision of powerful financial management software to large global businesses.

Jeremy Suddards

Chief Executive Officer        

10 March 2020

 

Microgen Financial Systems Disposal ('MFS Disposal')

 

MFS Disposal: Overview of transaction

The disposal of Microgen Financial Systems was completed on 28 June 2019 to Moscow Bidco Limited, a newly incorporated private limited company controlled by funds advised by Silverfleet Capital Partners LLP. The aggregate cash consideration for the disposal was £51.4 million with the net cash proceeds arising from the disposal of £48.4 million (£51.4 million cash consideration less fees of £3.0 million incurred in respect of the disposal and demerger process (which was run in parallel with the disposal to fulfil Aptitude Software's commitment to the demerger) with other separation costs of approximately £0.4 million. Cash within the Microgen Financial Systems business at the point of disposal was £4.3 million.

Included within the profit from discontinued operations of £22.4 million (2018: £8.4 million) is the gain on the disposal of Microgen Financial Systems of £20.3 million, calculated after the transaction fees of £3.0 million and £0.4 million of other separation costs.

The disposal is a major milestone in the Group's long-term strategy and represents the start of a new era which sees the Aptitude Software business become the sole focus of the Group.

MFS Disposal: Performance in period

The financial results of Microgen Financial Systems for the period to disposal are included within the profit from discontinued operations of £22.4 million (2018: £8.4 million).

Microgen Financial Systems' revenue in the period from 1 January 2019 to 28 June 2019 was £8.1 million (year ending 31 December 2018: £18.0 million) with Adjusted Operating Profit of £3.2 million (year ending 31 December 2018: £7.0 million). Microgen Financial Systems' statutory operating profit for the period from 1 January 2019 to 28 June 2019, excluding the transaction fees and other de-merger costs of the disposal, was £2.7 million (year ending 31 December 2018: £9.1 million). Microgen Financial Systems' financial performance for 2018 included revenue and statutory operating profit from its Payments business, disposed in July 2018, of £0.8 million and £0.4 million respectively.

MFS Disposal: Return of proceeds to shareholders and share consolidation

Aptitude Software completed the return of £46.4 million to shareholders by way of a 'B' share scheme on 26 September 2019, representing 73 pence for every share held in the Company as at the close of trading on 19 September 2019. As part of the transaction, an associated 7 for 8 share consolidation took place on 30 September 2019 in order to maintain comparability, so far as possible, between the market price per ordinary share before and after the issue of the B shares and the return of value.

Philip Wood

Deputy Chief Executive Officer and Chief Financial Officer 

10 March 2020

 

Group Financial Performance and Chief Financial Officer's Report

 

Revenue

Aptitude Software's overall revenue for the year ended 31 December 2019 has increased by 14% to £59.7 million (2018: £52.3 million).

Software and Subscription Revenues

Aptitude Software's Annual Recurring Revenue ('ARR') at 31 December 2019 totalled £28.6 million (31 December 2018: £23.5 million, restated for the prevailing exchange rates at 31 December 2019), representing year on year growth of 22% on a constant currency basis which is attributable to new business successes across several of the Group's product suite, most notably the Aptitude Insurance Calculation Engine and the Aptitude Accounting Hub.

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

Software and subscription revenues recognised in 2019 increased by 15% to £28.5 million (2018: £24.8 million). Software and subscription revenues now represent 48% of overall revenue (2018: 47%). It is a key part of the Group's strategy to increase this percentage whilst maximising the growth rate of Aptitude Software's ARR, a strategy which in due course will lead to growth in operating margin percentage given the higher margins achievable from software and subscriptions revenues.

Implementation and Solution Management Services

Implementation and solution management services revenue increased by 13% to £31.2 million (2018: £27.5 million), above the Board's expectations, as a result of the profile and weighting of new business projects won towards the first half of the year.

Operating Profit and Margins

Adjusted Operating Profit for the period increased by 20% to £10.5 million (2018: £8.7 million on a constant currency basis and £8.8 million as reported). Operating profit on a statutory basis was £8.9 million (2018: £7.7 million). Adjusted Operating Margin in 2019 was marginally above the prior year at 18% (2018: 17%), despite accelerated levels of investment in a number of areas following the re-organisation of the Group and the change in leadership during the year. The Group continues to monitor the balance between investment in the opportunity facing the business and the growth in Aptitude Software's operating margins.

Foreign Exchange

With 48% of the Group's revenues invoiced in US Dollars to North American clients (2018: 54%), the Group is impacted by changes in the US dollar exchange rate. Aptitude Software's 2018 revenue and Adjusted Operating Profit would have been reported at £53.0 million and £8.7 million respectively on a constant currency basis (compared to actual result of £52.3 million and £8.8 million). Constant currency is calculated by comparing the 2019 results with 2018 results retranslated at the rates of exchange prevailing during 2019.

Research and Development Expenditure

Total expenditure on product management, research, development and support in the year increased to £9.3 million (2018: £8.2 million) of which £6.4 million is incurred at the Aptitude Innovation Centre. The Board has continued to determine that none of the internal research and development costs incurred during the year meet the criteria for capitalisation. Consequently, these have been expensed as incurred through the income statement.

Non-Underlying Items

Non-underlying items of £1.6 million (2018: £1.1 million) principally comprise intangible amortisation (£0.9 million) combined with the establishment of a £0.7 million provision in relation to the Group's overseas taxation.

Taxation

The total tax charge of £2.0 million (2018: £1.8 million) represents 23.2% of the Group's profit before tax (2018: 25.4%), with the increase against the United Kingdom corporate tax rate of 19% due to the proportion of profits generated in overseas territories which have higher prevailing tax rates, principally the USA.

Statutory Results

The Group reported a profit for the period attributable to equity shareholders of £29.2 million (2018: £13.8 million). Profit for the period from continuing operations, which excludes the performance of the Microgen Financial Systems business disposed of on the 28 June 2019, totalled £6.7 million (2018: £5.4 million).

Earnings per Share

As a result of the Group's growth in profit attributable to equity shareholders, Adjusted Basic Earnings per Share and Basic Earnings per Share from continuing operations increased to 12.8 pence and 11.2 pence respectively (2018: 10.2 pence and 8.9 pence), growth of 25% and 26% respectively.

Dividend

With the disposal of Microgen Financial Systems and its accompanying profits the Board reviewed Aptitude Software's dividend for 2019 and determined to maintain dividend cover. As a result, a final ordinary dividend of 3.60 pence per share is proposed (2018: 4.40 pence), making a total ordinary dividend of 5.40 pence per share for the year (2018: 6.60 pence).

Balance Sheet

The Group continues to have a strong balance sheet with net assets at 31 December 2019 of £46.4 million (2018: £64.8 million), including cash of £33.0 million (2018: £29.2 million), and net funds of £30.8 million (2018: £17.3 million). Trade receivables (net) have reduced to £7.2 million (2018: £11.0 million of which £8.8 million was in respect of continuing operations), a decrease of £1.6 million on a like for like basis due to the timing of receipt of annual licence fee and subscription invoices issued in the final months of the year. The growth in the Group's recurring revenues resulted in deferred income increasing on a like for like basis to £22.8 million at 31 December 2019 (2018: £28.3 million of which £19.2 million was in respect of continuing operations). The Group's cash collection disciplines remain strong with like for like DSO (debtor days) at 31 December 2019 of 60 consistent with prior periods.

Cash Generation

Cash generated from both continuing and discontinued operations improved to £18.4 million (2018: £15.0 million), of which £15.3 million is in relation to the continuing business (2018: £8.3 million), representing cash conversion of 135% (measured by cash generated from operations as a percentage of operating profit adjusted for the non-underlying items with no cash effect).

Philip Wood

Deputy Chief Executive Officer and Chief Financial Officer

10 March 2020

 

Group Income Statement

for the year ended 31 December 2019

 

 

 

Year Ended 31 Dec 2019

 

Year Ended 31 Dec 2018

Restated*                          

 

 

Notes

Before

non-underlying

items

Non-underlying items

 

 

Total

Before non-underlying items

Non-underlying items

 

 

 

Total

 

Continuing operations

 

£000

£000

£000

£000

£000

£000

 

Revenue

1

59,652

-

59,652

52,274

-

52,274

 

Operating costs

2

(49,150)

(1,559)

         (50,709)

(43,499)

(1,109)

(44,608)

 

Operating profit

 

10,502

(1,559)

8,943

8,775

(1,109)

7,666

 

Finance income

 

158

-

158

46

-

46

 

Finance costs

 

(326)

-

(326)

(449)

-

(449)

 

Net finance costs

 

(168)

-

(168)

(403)

-

(403)

 

Profit before income tax

 

10,334

(1,559)

8,775

8,372

(1,109)

7,263

 

Income tax expense

3

(2,403)

370

(2,033)

(2,092)

245

(1,847)

 

Profit from continuing operations

 

7,931

(1,189)

6,742

6,280

(864)

5,416

 

Profit from discontinued operations

16

2,549

19,881

22,430

5,956

2,421

8,377

 

Profit for the year

 

10,480

18,692

29,172

12,236

1,557

13,793

 

 

 

 

 

 

 

 

 

 

Earnings per share from continuing operations

 

 

 

 

 

Basic

4

 

 

11.2p

 

 

8.9p

 

Diluted

4

 

 

11.0p

 

 

8.5p

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

Basic

4

 

 

48.4p

 

 

22.6p

 

Diluted

4

 

 

47.7p

 

 

21.5p

 

 

 

 

 

 

 

 

 

 

* Amounts displayed within the prior periods have been restated for the disposal of Microgen Financial Systems Limited on 28 June 2019 which met the criteria of being presented as a discontinued operation, see note 16 for details.

 

group statement of comprehensive income

For the year ended 31 December 2019

 

 

 

Year ended

31 Dec 2019

Year ended

31 Dec 2018

Restated*

 

£000

£000

Profit for the year

29,172

13,793

Other comprehensive (expense)/income

 

 

Items that will or may be reclassified to profit or loss:

 

 

Fair value loss on hedged financial instruments

(186)

(14)

Currency translation difference

(415)

(381)

Other comprehensive income from discontinued operations

22

11

Other comprehensive expense for the year, net of tax

(579)

(384)

Total comprehensive income for the year

28,593

13,409

Total comprehensive income for the year arising from:

 

 

Continuing operations

6,141

5,021

Discontinued operations

22,452

8,388

 

28,593

13,409

 

* Amounts displayed within the prior periods have been restated for the disposal of Microgen Financial Systems Limited on 28 June 2019 which met the criteria of being presented as a discontinued operation, see note 16 for details.

 

 

Group Balance Sheet

For the year ended 31 December 2019

 

 

 

        As at

31 Dec 2019

As at

31 Dec 2018

 

Notes

£000

£000

ASSETS

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

6

3,207

5,417

Goodwill

7

23,787

48,793

Intangible assets

8

6,486

14,186

Other long-term assets

 

1,746

1,581

Income tax assets

 

944

-

Deferred tax assets

 

1,198

1,137

 

 

37,368

71,114

Current assets

 

 

 

Trade and other receivables

9

9,659

14,675

Financial assets - derivative financial instruments

 

4

114

Current income tax assets

 

1,155

1,535

Cash and cash equivalents

 

32,965

29,186

 

 

43,783

45,510

Total assets

 

81,151

116,624

 

 

 

 

LIABILITIES

 

 

 

Current liabilities

 

 

 

Financial liabilities

 

 

 

- borrowings

10

-

(2,040)

- derivative financial instruments

 

(120)

(12)

Trade and other payables

11

(30,122)

(35,484)

Capital lease obligations

12

(835)

(1,109)

Current income tax liabilities

 

(485)

(489)

Provisions

13

(38)

-

 

 

(31,600)

(39,134)

Net current assets

 

12,183

6,376

 

 

 

 

Non-current liabilities

 

 

 

Financial liabilities - borrowings

10

-

(5,818)

Capital lease obligations

12

(1,288)

(2,846)

Provisions

13

(337)

(424)

Deferred tax liabilities

 

(1,502)

(3,582)

 

 

(3,127)

(12,670)

NET ASSETS

 

46,424

64,820

 

 

Group Balance Sheet

For the year ended 31 December 2019

 

 

 

 

                    

As at

31 Dec 2019

 

As at

31 Dec 2018

 

SHAREHOLDERS' EQUITY

Notes

£000

£000

Share capital

14

4,128

3,958

Share premium account

 

7,660

6,488

Capital redemption reserve

 

              12,372

               12,372

Other reserves

 

              34,079

              34,265

(Accumulated losses)/retained earnings

 

(11,149)

8,010

Foreign currency translation reserve

 

(666)

(273)

TOTAL EQUITY

 

46,424

64,820

 

 

Group Statement of changes in shareholders' equity

for the Year Ended 31 December 2019

 

 

 

 

 

Share capital

£000

 

 

Share premium

£000

 

 

Retained earnings/

(accumulated losses)

 £000

 

 

Foreign currency translation reserve

£000

 

 

Capital redemption reserve

£000

 

 

Other reserves£000

 

 

Total

Equity

£000

 

At 1 January 2019

 

3,958

6,488

8,010

(273)

12,372

34,265

64,820

Profit for the year

 

-

-

29,172

-

-

-

29,172

Cash flow hedges - net fair value losses in the year

 

-

-

-

-

-

(186)

(186)

Exchange rate adjustments

 

-

-

-

(393)

-

-

(393)

Total comprehensive income for the year

 

-

-

29,172

(393)

-

(186)

28,593

Shares issued under share option schemes

 

170

1,172

-

-

-

-

1,342

Share options - value of employee service

 

-

-

1,033

-

-

-

1,033

Return of value to shareholders

 

-

-

(46,420)

-

-

-

(46,420)

Expenses in relation to return of value to shareholders

 

-

-

(600)

-

-

-

(600)

Deferred tax on financial instruments

 

-

-

(40)

-

-

-

(40)

Deferred tax on share options

 

-

-

11

-

-

-

11

Corporation tax on share options

 

-

-

1,544

-

-

-

1,544

Dividends to equity holders of the company

 

-

-

(3,859)

-

-

-

(3,859)

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

 

 

 

 

170

1,172

(48,331)

-

-

-

(46,989)

At 31 December 2019

 

4,128

7,660

(11,149)

(666)

12,372

34,079

46,424

 

 

Group Cash Flow Statement

for the Year Ended 31 December 2019

 

 

 

 

 

 

 

Year ended

31 Dec 2018

 

Notes

£000

Cash flows from operating activities

 

 

Cash generated from operations

15

15,042

Interest paid

 

(440)

Income tax paid

 

(3,068)

Net cash flows generated from operating activities

 

16,017

11,534

 

 

 

Cash flows from investing activities

 

 

Purchase of property, plant and equipment, excluding right-of-use assets

 

(985)

Disposal of subsidiary, net of cash disposed

 

6,770

Interest received

 

47

Net cash generated from investing activities

 

46,482

5,832

 

 

 

Cash flows from financing activities

 

 

Net proceeds from issuance of ordinary share capital

 

58

Dividends paid to company's shareholders

5

(3,928)

Repayment of loan

10

(2,000)

Repayment of capital lease obligations

 

(1,314)

Return of value to shareholders

 

-

Expenses relating to return of value

 

-

Net cash used in financing activities

 

(58,638)

(7,184)

 

 

 

Net increase in cash and cash equivalents

 

10,182

Cash, cash equivalents and bank overdrafts at beginning of year

 

19,137

Exchange rate losses on cash and cash equivalents

 

(133)

Cash and cash equivalents at end of year

 

32,965

29,186

 

Notes to the Audited preliminary results for the year ended 31 December 2019

 

1.   Segmental analysis

 

Business segments

The Board has determined the operating segments based on the reports it receives from management to make strategic decisions.

During 2019 Aptitude Software Group plc operated two businesses, Aptitude Software and Microgen Financial Systems, both of which were considered operating segments based on the reports the Group received from management to make strategic decisions. With the disposal of Microgen Financial Systems on 28 June 2019, the only continuing business segment in the year ending 31 December 2019 was Aptitude Software and therefore certain segmental analysis is no longer required to be provided for this period.

The principal activity of the Group throughout 2018 and 2019 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

31 Dec 2019

Year ended

31 Dec 2018

Year ended

31 Dec 2019

Year ended

31 Dec 2018

Continuing operations

£000

£000

£000

£000

United Kingdom

32,194

21,978

8,419

6,037

Rest of World

27,458

30,296

51,233

46,237

 

59,652

52,274

59,652

52,274

 

2.    Non-underlying items

 

31 Dec 2019

31 Dec 2018

 

£000

£000

Continuing operations

 

 

Amortisation of intangibles

846

846

Overseas taxation provision

713

-

Share based payments on share options issued in 2013

                   -

                   101

Acquisition and associated restructuring costs

-

162

 

1,559

1,109

 

 

3.   Income tax expense

 

Year ended

31 Dec 2019

Year ended

31 Dec 2018

Analysis of charge in the year

£000

£000

Current tax:

 

 

- tax charge on underlying items

(3,992)

(3,479)

- tax credit on non-underlying items

125

-

- adjustment to tax in respect of prior periods

145

145

Total current tax

(3,722)

(3,334)

Deferred tax:

 

 

- tax credit on underlying items

722

18

- tax credit on non-underlying items

361

521

- adjustment to tax in respect of prior periods

75

2

- adjustment for change in accounting policies

-

244

Total deferred tax

1,158

785

Income tax expense

(2,564)

(2,549)

 

 

 

Income tax is attributable to:

 

 

Continuing operations

(2,033)

(1,847)

Discontinued operations

(531)

(702)

 

(2,564)

(2,549)

 

The total tax charge of £2,564,000 (2018: £2,549,000) represents 8.08% (2018: 15.60%) of the Group profit before tax of £31,736,000 (2018: £16,342,000). The reduction in effective rate is due principally to the exempt gain on disposal of Microgen Financial Systems Limited.

After adjusting for the impact of non-underlying items, change in tax rates, share based payment charge, prior year tax charge and change in accounting policies, the tax charge for the year of £3,270,000 (2018: £3,509,000) represents 24.17% (2018: 22.93%), which is the tax rate used for calculating the adjusted earnings per share.

At the balance sheet date, the Group has unused tax losses of £4,329,000 (2018: £3,080,000) available for offset against future profits. A deferred tax asset of £742,000 (2018: £76,000) has been recognised in respect of these losses as the Group anticipates being able to utilise these in full in the year ending 31 December 2020 (2018: £455,000 of unused tax losses expected to be utilised in respect of which a deferred tax asset of £76,000 was recognised). In 2018 no deferred asset was recognised in respect of the remaining £2,625,000 due to the unpredictability of future profit streams, these losses were wholly in relation to the Microgen Financial Systems business which was disposed of on 28 June 2019, see note 16 for details. 

 

The difference between the total tax charge and the amount calculated by applying the effective United Kingdom corporation tax rate of 19.00% (2018: 19.00%) to the profit on ordinary activities before tax is as follows:                                                                                                                                                                                                                                                                                                                                                                     

 

 

Year ended

31 Dec 2019

Year ended

31 Dec 2018

 

£000

£000

Profit from continuing operations before tax

8,775

7,263

Profit from discontinued operations before tax

22,961

9,079

 

31,736

16,342

 

 

 

Tax at the United Kingdom corporation tax rate of 19.00% (2018: 19.00%)

(6,030)

(3,105)

Effects of:

 

 

Adjustment to tax in respect of prior periods

271

145

Adjustment for change in accounting policies

-

244

Adjustment in respect of foreign tax rates

(306)

(499)

Expenses not deductible for tax purposes

(186)

-

Exempt gain on disposal

3,894

594

Other

(135)

18

Recognition of tax losses

25

50

Change in future tax rates

(97)

4

Total taxation

(2,564)

(2,549)

           

United Kingdom corporation tax is calculated at 19.00% (2018: 19.00%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. United Kingdom corporation tax rates substantively enacted as part of the Finance Bill 2016 include reductions to the main rate to 19% from 1 April 2017 and a further reduction to 17% from 1 April 2020.

During 2018, the Group adopted a number of new accounting standards on a retrospective basis, the result of which was an adjustment to reserves for the year ending 31 December 2017. The tax impact of these movements was reflected in the deferred tax balance. In accordance with tax legislation in the relevant jurisdictions, adjustments which directly impact the income statement were fully realised in 2018.

 

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 24.17% (2018: 22.93%).

 

 

Year ended

31 Dec 2019  

Year ended

31 Dec 2018

 

£000

£000

Profit on continuing operations before tax and non-underlying items

10,334

8,372

Profit on discontinued operations before tax and non-underlying items

3,196

6,934

Profit on ordinary activities before tax and non-underlying items

13,530

15,306

Tax charge at a rate of 24.17% (2018: 22.93%)

(3,270)

(3,509)

 

10,260

11,797

Prior years' tax charge

220

145

Non-underlying items net of tax

18,692

1,557

Change in accounting policies

-

244

Recognition of tax losses

-

50

Profit on ordinary activities after tax

29,172

13,793

 

 

2019

Number

(thousands)

2018

Number

(thousands)

Weighted average number of shares

60,280

60,922

Effect of dilutive share options

865

3,336

 

61,145

64,258

 

 

2019

Basic

EPS

2019

Diluted

EPS

2018

Basic

EPS

2018

Diluted

EPS

 

Pence

pence

pence

pence

Earnings per share

48.4

47.7

22.6

21.5

Non-underlying items net of tax

(31.0)

(30.6)

(2.5)

(2.4)

Prior years' tax credit

(0.4)

(0.4)

(0.2)

(0.2)

Change in accounting policies

-

-

(0.4)

(0.4)

Tax losses recognised

-

-

(0.1)

(0.1)

Adjusted earnings per share

17.0

16.7

19.4

18.4

Basic earnings per share

 

 

 

 

From continuing operations

11.2

11.0

8.9

8.5

From discontinued operations

37.2

36.7

13.7

13.0

 

48.4

47.7

22.6

21.5

Adjusted earnings per share

 

 

 

 

From continuing operations

12.8

12.5

10.2

9.7

From discontinued operations

4.2

4.2

9.2

8.7

 

17.0

16.7

19.4

18.4

 

Adjusted earnings per share are calculated using adjusted profit after tax.

 

5.    Dividends

 

 

2019 pence per share

2018 pence per share

2019

£000

2018

£000

Dividends paid:

 

 

 

 

Interim dividend

1.80

2.20

1,144

1,340

Final dividend (prior year)

4.40

4.25

2,715

2,588

 

6.20

6.45

3,859

3,928

 

 

 

 

 

Proposed but not recognised as a liability:

 

 

 

 

Final dividend (current year)

3.60

4.40

2,024

2,692

 

The proposed final dividend for the current year was approved by the Board on 10 March 2020 but was not included as a liability as at 31 December 2019, 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 29 May 2020 to shareholders on the register at the close of business on 11 May 2020.

 

6.   Property, plant and equipment

 

 

31 Dec 2019

31 Dec 2018

 

£000

£000

Opening net book value 1 January

5,417

5,543

Additions

925

1,864

On disposal of subsidiary (note 16)

(1,213)

(51)

Net disposals

(67)

(76)

Exchange movements

(11)

6

Depreciation

(1,844)

(1,869)

 

3,207

5,417

 

7.   Goodwill

 

 

31 Dec 2019

31 Dec 2018

 

£000

£000

Opening net book value 1 January

48,793

52,801

On disposal of subsidiary (note 16)

(25,006)

(4,008)

 

23,787

48,793

 

8.   Intangible assets

 

 

31 Dec 2019

31 Dec 2018

 

£000

£000

Opening net book value 1 January

14,186

16,124

On disposal of subsidiary (note 16)

(6,308)

-

Amortisation

(1,392)

(1,938)

 

6,486

14,186

 

9.   Trade and other receivables

 

 

31 Dec 2019

31 Dec 2018

 

£000

£000

Trade receivables

7,218

11,258

Less: provision for impairment of receivables

(19)

(229)

Trade receivables - net

7,199

11,029

Other receivables

1,127

1,571

Prepayments

795

917

Accrued income

538

1,158

 

9,659

14,675

 

Within the trade receivables balance of £7,218,000 (2018: £11,029,000, of which £8,785,000 is in respect of continuing operations) there are balances totalling £1,934,000 (2018: £3,718,000, of which £3,148,000 is in respect of continuing operations) which, at 31 December 2019, were overdue for payment. Of this balance £1,313,000 (2018: £3,596,000, of which £2,881,000 is in respect of continuing operations) has been collected at 10 March 2020 (2018: 22 March 2019).

 

10.     Financial liabilities

 

 

31 Dec 2019

31 Dec 2018

 

£000

£000

Bank loan

-

7,858

The borrowings are repayable as follows:

 

 

Within one year

-

2,040

In the second year

-

2,040

In the third to fifth years inclusive

-

3,920

 

-

8,000

Unamortised prepaid facility arrangement fees

-

(142)

At 31 December

-

7,858

 

On 10 May 2019 the Group settled its outstanding term loan facility and accompanying interest swap in full in order to release the charges held over the Group as part of the preparation for the disposal of the Microgen Financial Systems business.

 

11.  Trade and other payables

 

Within the deferred income and accruals balances of £28,276,000 and £3,240,000 at 31 December 2018, £19,198,000

and £2,650,000 are in respect of continuing operations.

 

12.  Capital lease obligations

 

The Group leases various offices and plant and machinery which, following the adoption of IFRS 16, met the criteria set out to be recognised as capital lease agreements.

 

31 Dec 2019

31 Dec 2018

 

£000

£000

Amounts payable under capital lease agreements:

 

 

Within one year

901

1,243

Within two to five years

1,171

2,510

After five years

229

571

Total

2,301

4,324

Less: future finance charges

(178)

(369)

Present value of lease obligations

2,123

3,955

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

(835)

(1,109)

 

1,288

2,846

 

 

31 Dec 2019

31 Dec 2018

 

£000

£000

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

 

 

Within one year

835

1,109

Within two to five years

1,064

2,295

After five years

224

551

 

2,123

3,955

 

13.  Provisions for other liabilities and charges

 

 

Provisions

 

31 Dec 2019

31 Dec 2018

 

£000

£000

At 1 January

424

404

Charged to income statement

90

14

On disposal of subsidiary

(132)

-

Foreign exchange movement

(7)

6

At 31 December

375

424

 

 

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

 

Provisions

 

31 Dec 2019

31 Dec 2018

 

£000

£000

Current

38

-

Non-current

337

424

 

375

424

 

£317,000 (2018: £374,000) of the total provision at 31 December 2019 of £375,000 relates to the cost of dilapidations in respect of its occupied leasehold premises. All of the non-current provision is expected be utilised within 2 to 5 years (2018: £424,000).

 

14.  Share capital

 

     

Ordinary shares of 7 1/3p each (2018: 6 3/7p)

Number

£000

Issued and fully paid:

 

 

At 1 January 2019

61,172,930

3,932

Issued under share option schemes

2,595,321

170

Deferred equity consideration on acquisition

398,518

26

Share reorganisation

(7,948,799)

-

At 31 December 2019

56,217,970

4,128

 

 

 

On 3 September 2019 the 398,518 shares in respect of the deferred equity consideration arising on the acquisition of Aptitude Revstream Inc were issued.

 

On 23 September 2019 the Company performed a 7 for 8 share consolidation resulting in a reduction of 7,948,799 to the number of ordinary shares in issue. This was performed to maintain broad comparability of the share price and return per share of the ordinary shares following the return of value to shareholders by way of a 'B' share scheme, see below for details.

 

'B' shares at 0.001 pence each

Number

£000

Issued and fully paid:

 

 

At 1 January 2019

-

-

Issue of 'B' shares

63,590,392

1

Deferred equity consideration on acquisition

(63,590,392)

(1)

At 31 December 2019

-

-

 

On 24 September 2019, 63,590,392 'B' shares were issued at 0.001 pence each, resulting in a total of £636 being credited to the Company's 'B' share capital account. On 23 September 2019, a dividend of 73 pence per 'B' share was declared and was payable on 10 October 2019. The 'B' shares were subsequently reclassified as Deferred Shares and repurchased by the Company for an aggregate consideration of £636 and then subsequently cancelled and an amount of £636 was deducted from the 'B' share capital account.

 

Return of value to shareholders

During the year ended 31 December 2019, the Group announced a return of value to shareholders of 73 pence per ordinary share amounting to £46.4 million in cash, by way of a 'B' share scheme, which gave shareholders the ability to receive cash in the form of capital. The return of value was approved by shareholders on 23 September 2019. The return of value was accompanied by a 7 for 8 share consolidation to maintain broad comparability of the share price before and after the creation of the 'B' shares. This consolidation of shares resulted in a reduction of 7,948,799 to the number of ordinary shares in issue.

 

15.  Notes to the Group Cash Flow Statement

 

Reconciliation of profit before tax to net cash generated from operations:

 

 

Year ended

31 Dec 2019

Year ended

31 Dec 2018

 

£000

£000

Profit before tax for the year from

 

 

Continuing operations

8,775

7,263

Discontinued operations

22,961

9,079

Profit before tax including discontinued operations

31,736

16,342

Adjustments for:

 

 

   Depreciation

1,844

1,869

   Amortisation

1,392

1,938

   Overseas taxation provision

713

-

   Share-based payment expense

1,033

1,074

   Gain on disposal of subsidiary, excluding direct costs incurred

(23,657)

(3,237)

   Finance income

(158)

(47)

   Finance costs

326

480

Changes in working capital excluding the effects of acquisition:

 

 

   Decrease/(increase) in receivables

1,493

(2,040)

   Increase/(decrease) in payables

3,900

(1,357)

   (Decrease)/increase in provisions

(202)

20

Cash generated from operations

18,420

15,042

 

 

 

Cash generated from operations is from:

 

 

Continuing operations

15,295

8,266

Discontinued operations

3,125

6,776

 

18,420

15,042

16.   Discontinued operations

16(a) Description

On 30 May 2019, the Group announced that it had entered into an agreement to sell the entire issued share capital of Microgen Financial Systems Limited, to Moscow Bidco Limited, a newly incorporated private limited company controlled by Silverfleet Capital Partners LLP, for consideration of £51.4 million. The disposal was approved by Aptitude Software Group plc's shareholders at a General Meeting held on 24 June 2019, with completion of the disposal effective on 28 June 2019 and is reported in the current period as a discontinued operation. Financial information relating to the discontinued operation for the period to the date of disposal is set out below, with the gain on disposal being presented within the profit from discontinued operation (see analysis in 16(b) below).

16(b) Financial information and cash flow information

The financial performance and cash flow information presented are for the period 1 January 2019 to 28 June 2019 along with the year ended 31 December 2018.

 

Period from

1 Jan 2019 to

28 June 2019

Year ended

31 Dec

2018

 

£000

£000

Income statement

 

 

Revenue

8,089

18,012

Operating costs

(4,866)

(11,048)

Adjusted Operating Profit

3,223

6,964

Non-underlying items

(540)

(1,092)

Gain on disposal of subsidiary

-

3,237

Operating profit

2,683

9,109

Finance income

2

1

Finance costs

(29)

(31)

Profit before income tax

2,656

9,079

Income tax expense

(531)

(702)

Profit after tax from discontinued operation

2,125

8,377

Gain on disposal of subsidiary after tax (see (c))

20,305

-

Cash generated from operations

22,430

8,377

 

 

 

Other comprehensive income

 

 

Items that will or may be reclassified to profit or loss

 

 

Currency translation gain

22

11

Total comprehensive income for the year arising from discontinued operations

22,452

8,388

 

 

 

Profit from non-underlying items is generated from:

 

 

Non-underlying operating costs

(540)

(1,092)

Gain on disposal of subsidiary

20,305

3,237

Income tax credit

116

276

 

19,881

2,421

 

 

Period from

1 Jan 2019 to

28 June 2019

Year ended

31 Dec

2018

Cash flow statement

£000

£000

Net cash from operating activities

3,125

6,776

Net cash generated from investing activities (2019 includes an inflow of £47,152,000 from the sale

47,078

6,617

Net cash generated from/(used in) financing activities

554

(14,781)

Net increase/(decrease) in cash generated by the subsidiary

50,757

(1,388)

      

16(c) Details of the sale of the subsidiary

 

Book value

 

£000

Net assets disposed

 

Property, plant and equipment

1,213

Goodwill

25,006

Intangible assets

6,308

Other long-term assets

257

Deferred income tax assets

302

Trade and other receivables

3,267

Cash and cash equivalents

4,259

Trade and other payables

(9,299)

Capital lease obligations

(815)

Current income tax liabilities

(1,298)

Provisions for liabilities and charges

(132)

Deferred tax liabilities

(1,314)

NET ASSETS

27,754

 

 

Consideration received

 

Proceeds received on completion

51,411

Less: direct costs incurred

(3,352)

 

48,059

 

 

Gain on disposal excluding direct costs incurred

23,657

 

 

Gain on disposal

20,305

 

17.  Statement by the directors

The preliminary results for the year ended 31 December 2019 and the results for the year ended 31 December 2018 are prepared under International Financial Reporting Standards as adopted for use in the EU ("IFRS").  The accounting policies adopted in this preliminary announcement are consistent with the Annual Report for the year ended 31 December 2018.

The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 December 2019 or 31 December 2018.  The financial information for the year ended 31 December 2018 is derived from the Annual Report delivered to the Registrar of Companies.  The Annual Report for 2019 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 10 March 2020.

The Annual Report for the year ended 31 December 2019 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 Old Change House, 128 Queen Victoria Street, London, EC4V 4BJ.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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Audited Preliminary Results - RNS