15 March 2022
APTITUDE SOFTWARE GROUP plc
('Aptitude Software' or 'the Group')
Audited Preliminary Results for the Year Ended
31 December 2021
Aptitude Software Group plc (LSE: APTD), the specialist provider of finance digitization and subscription management software, reports its Audited Preliminary Results for the year ended 31 December 2021.
Financial Highlights
| Year ended 31 December | 2021 | 2020 | % Change |
| Annual Recurring Revenue1 at year end | £41.8m | £31.4m2 | 33% |
| Software revenue | £36.9m | £30.5m | 21% |
| Services revenue | £22.4m | £26.8m | (16%) |
| Total Revenue | £59.3m | £57.3m | 3% |
| Adjusted Operating Profit3 | £9.9m | £9.1m | 9% |
| Statutory operating profit | £6.5m | £8.1m | (20%) |
| Operating cash flow percentage4 | 151% | 178% | (15%) |
| Cash and cash equivalents at year end | £29.1m | £44.8m | (35%) |
| Net funds | £16.1m | £42.9m | (62%) |
| Adjusted Basic Earnings per Share3 | 14.2p | 13.2p | 8% |
| Basic Earnings per Share | 9.0p | 12.5p | (28%) |
· Organic growth in Annual Recurring Revenue ('ARR') of 10% on a constant currency2 basis
· Software revenue, the strategic focus of the Group, grew 21% to £36.9 million (2020: £30.5 million), organic growth of 15%, representing 62% of total revenue (2020: 53%)
· Continued balance sheet strength with cash of £29.1 million (2020: £44.8 million) and net funds5 of £16.1 million (2020: £42.9 million) following the MPP Global acquisition in October 2021
Strategic Progress:
· Aptitude Software is well positioned to benefit from the two recognised strategic growth drivers of finance digitization and subscription management
· Increased investment accelerates the launch of Fynapse, the Group's next generation strategic digital finance platform, lowering the overall total cost of ownership and significantly increasing performance for our clients whilst opening new markets for Aptitude Software and our partners
· Strategic acquisition of MPP Global, for total consideration of £39.1 million, provides the Group with differentiated end-to-end revenue automation capabilities to serve the fast growing subscription economy in existing and new industry verticals
· The investments provide long-term and non-cyclical growth opportunities which the Board anticipates will lead to an acceleration in the growth of both Annual Recurring Revenue and margin in the medium term
Operational Highlights:
· New business success across all the Group's key regions and verticals
· Continued success with Aptitude Revenue Management including a growing number of clients in recently identified industry verticals of the subscription economy
· A number of multi-year agreements signed with insurers in all of the Group's geographies for the use of Aptitude Insurance Calculation Engine and Aptitude Accounting Hub to drive regulatory compliance
· Expansion of relationships within the Group's existing client base, including both the sale of new products and solution management services
· The partner programme, a key source of new business opportunities in all regions, is demonstrating maturity with further partner enablement and new go to market propositions developed in the year
Commenting on the results, Jeremy Suddards, Chief Executive Officer, said: -
'The Group made good progress in 2021 with new business success across all key regions and double digit organic Annual Recurring Revenue growth.
We have accelerated our product investment during the year, resulting in the launch today of Fynapse, a next generation digital finance product, delivering significantly higher performance at a lower overall total cost of ownership, underpinning our leadership in the finance automation market. Meanwhile the acquisition of MPP Global has also accelerated the creation of a differentiated end-to-end subscription management solution to meet the fast growing needs of the subscription economy. As a result of these initiatives, we now have two complementary platforms for sustained future growth.''
Contacts
Aptitude Software Group plc
Ivan Martin, Chairman 020-3687-3200
Jeremy Suddards, Chief Executive Officer
Philip Wood, Deputy Chief Executive Officer and Chief Financial Officer
Alma PR
Caroline Forde, Hilary Buchanan, Sam Modlin 020-3405-0205
About Aptitude Software
Aptitude Software helps complex organizations automate and transform their financial business models. Our core areas of focus are the accelerating digitization of the finance function, and the global push to deploy and manage subscription offerings. Aptitude Software also continues to support clients through complex regulations which often form the catalyst for broader transformation.
Finance digitization allows finance leaders to improve the speed of their function, enhance the quality of its outcomes, and do so at a lower cost. Aptitude Software's products draw data from complex, often siloed systems, automate its processing through complex accounting calculations, and create a unified view of finance. Businesses are left with a transparent view of their data, delivered with extreme performance and at a lower cost of ownership.
Subscription management is an increasingly critical driver for novel and traditional businesses alike, who need to launch new offerings frequently, in ways which appeal to their customers and allow them to outperform their peers. Aptitude Software's products power the acquisition, monetization, and retention of subscribers straight through to revenue. With Aptitude Software, businesses can take new subscriptions to market quickly, retain their high-value recurring revenue, and stay one step ahead of the competition.
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. Aptitude Software is headquartered in London, has a strong and growing North American presence, and is powered by Innovation 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 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.
2 Constant currency is calculated by comparing the 2021 results with 2020 results retranslated at the rates of exchange prevailing during 2021. Items within the Financial Highlights table indicated by this superscript reference are calculated on a constant currency basis.
3 Adjusted Operating Profit, Adjusted Operating Margin and Adjusted Basic Earnings per Share exclude non-underlying operating items, unless stated to the contrary. Further detail in respect of the non-underlying operating items can be found within Note 2 of the notes to the Financial Statements.
4 Operating cash flow percentage is measured by comparing the cash generated from operations as a percentage of operating profit adjusted for the non-underlying items with no cash effect
5 Net funds represents cash and cash equivalents less finance obligations, which are currently made up of external loan financing and capital lease obligations
Certain non-IFRS financial measures (e.g. Adjusted Operating Profit) are included which assist management in comparing performance on a consistent basis
Chairman's Statement
Overview
In 2021 Aptitude Software achieved new business success across all the Group's portfolio and regions whilst significantly accelerating the Group's product strategy to meet the market needs.
The Group secured a good number of new business wins and contract expansions in the insurance and technology, media and telecom ('TMT') sectors, together with a continued growing number of clients in new industry verticals. These additions led to organic growth in Annual Recurring Revenue of 10% (2020: 11%) on a constant currency basis.
A number of strategic milestones were achieved during the course of the year, these included:
· the acceleration of development to launch Fynapse, the Group's next generation digital finance platform, ahead of original expectations. Aptitude Software is already working closely with a major global telecoms client as it looks to take advantage of this new platform with the wider market launch of the product brought forward to March 2022. Fynapse provides differentiated finance digitization capability to a market in which the Group already has outstanding credentials with the successful Aptitude Accounting Hub; and
· the acquisition of MPP Global which further strengthens Aptitude Software's capability in subscription management, a fast growing market in which the Group already has a strong market presence. Integration of the acquired product is progressing well and expected to conclude in the second half of 2022 with the intent to deliver a best-of-breed subscription management solution. The Group is already seeing encouraging interest from the MPP Global eSuite users in the wider Aptitude Software product set as clients seek full end-to-end revenue automation.
Fynapse is one of the key drivers to the Group's long-term success. As a result, the decision has been made to further increase investment in the Group's product strategy in 2022 and 2023 to ensure the opportunity with this next generation digital finance platform is fully realised. Fynapse dramatically lowers the total cost of ownership and significantly increases performance for users whilst opening new markets for Aptitude Software and our partners. Following the period of increased investment, the Group expects to see an acceleration in the growth of both Annual Recurring Revenue and margin as the benefits of Fynapse are realised.
To support the go to market activities in our two key growth areas, focus has also been to continue to strengthen the Group's high-quality partner network. This has been highlighted by the complementary network of MPP Global already identifying a number of early stage cross-sell opportunities. In addition to an increase in pipeline generation from partners, a number of new organisations have been enabled to implement Aptitude Software's products for the first time, providing our clients with an increasing choice of partners with whom to implement the Group's technology.
The Board continues to be thankful for the talent, commitment and resilience of its people. Investment continues in the development of management and the wider team with a number of initiatives commenced in the year. Aptitude Software welcomes the MPP Global team to the Group and looks forward to seeing their careers advance within the business.
In December 2021 the Group moved into new offices in London. The office supports collaboration through its innovative design and provides an attractive work environment for the now hybrid working team, an approach that will be rolled out in due course to the Group's other locations.
Dividend
The Board has proposed a final dividend of 3.60 pence per share (2020: 3.60 pence), making a total ordinary dividend of 5.40 pence per share for the year (2020: 5.40 pence). Subject to shareholder approval at the Group's Annual General Meeting in April 2022, the proposed final dividend will be paid on 3 June 2022 to shareholders on the register at 13 May 2022.
Outlook
Aptitude Software's growing portfolio of products, increasing worldwide presence and mature partner network provides the Group with long term and non-cyclical growth opportunities as the business increases investment in its two strategic growth drivers of finance digitization and subscription management.
Whilst the accelerated investment in the product suite is anticipated to dampen short term profitability, the Board fully expect to see continual revenue growth and Annual Recurring Revenue growth throughout this period, with improving margins delivered from 2024 and beyond. The Board believes this accelerated strategic investment will create longer term sustainable value for the Group and our shareholders.
Ivan Martin
Chairman
14 March 2022
Chief Executive Officer's Report
Introduction
Aptitude Software's core areas of long term focus are the accelerating digitization of the finance function, and the global push to deploy and manage subscription offerings. Aptitude Software also continues to support clients through complex regulations which often form the catalyst for broader transformation.
Finance digitization allows finance leaders to improve the speed of their function, enhance the quality of its outcomes, and do so at a dramatically lower total cost of ownership for a modern finance function. Aptitude Software's products receive data from complex, often siloed systems, automate its processing through complex accounting calculations, and create a unified view of business performance. Businesses are left with a transparent view of their finance data, delivered in a near real time basis and at a lower cost of ownership.
Subscription management is an increasingly critical driver for new economy and traditional businesses alike. Aptitude Software's products now power the acquisition, billing, and retention of subscribers straight through to revenue reporting. With Aptitude Software, businesses can take new subscriptions to market quickly, retain their high-value recurring revenue, and stay ahead of the competition.
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. The eSuite product acquired in the year 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 Innovation Centre in Poland, with the acquisition of MPP Global in 2021 providing a second long-term innovation centre for the Group at its headquarters in the North West of England. Sales, support and implementation services are provided from Aptitude Software's offices in London, North West England, North America and Singapore.
Corporate Strategy and MPP Global Acquisition
Aptitude Software's strategy is focused on providing innovative finance digitization and subscription management software serving a growing number of C-suite stakeholders.
The Group undertook a number of strategic activities during 2021, with details of these provided in the sections below. These activities are focused on continuing to drive an acceleration of growth in the software revenues which now represent 62% of overall revenue (2020: 53%). 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.
MPP Global Acquisition
In the final quarter of 2021, the Group completed the strategic acquisition of MPP Global Solutions Limited, an international provider of cloud-based subscription management and billing technology ('eSuite'), for aggregate consideration of £39.1 million. The acquisition reflects Aptitude Software's strategy of acquiring businesses which accelerate the Group's product strategy and support its continued global growth by further strengthening the Group's subscription management capabilities, a market in which the Aptitude Revenue Management product set already has a strong presence.
MPP Global was considered a particularly strong acquisition opportunity within subscription management due to:
· the ability to integrate eSuite and the Group's Aptitude Revenue Management solution to create a differentiated end-to-end subscription, billing, and revenue automation solution;
· the complementary nature of eSuite and Aptitude Revenue Management bringing a number of cross-sell opportunities;
· a shared focus on the largest of companies, typically organisations with complex business models;
· a high proportion of recurring revenue; and
· a high quality innovation centre in the North West of England.
Integration of Aptitude Software and MPP Global is progressing well as outlined later within this report.
Finance Digitization
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 Software's product set is well positioned to address these requirements.
Finance Digitization Products
A key highlight in 2021 is the investment in Fynapse, the Group's next generation strategic digital finance platform which is being launched to the market in March 2022. Fynapse provides finance digitization capability to a market in which the Group already has outstanding credentials with the successful Aptitude Accounting Hub, a product that continued to secure new agreements with a number of organisations in the year.
Fynapse
The Fynapse application, Aptitude Software's newest solution, is a modular, cloud native, high performance platform addressing an organisations' need to drive finance digitization to continue 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. Importantly, Fynapse has been built in cloud native technologies providing extreme levels of performance but at the lowest total cost of ownership for finance functions.
Success with the application has already been achieved with the Group working closely with a global telecoms client as it looks to migrate to this new platform to take advantage of the new features.
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, short time-to-benefit and at a competitive total cost of ownership.
The platform also offers partners the opportunity to co-create and license their own IP, further accelerating and differentiating their services, whilst the application's lower total cost of ownership and scalability of innovative cloud-native technologies provide the business with greater go to market reach through the unlocking of new prospect tier opportunities.
Whilst the Aptitude Accounting Hub continues to achieve success, to maintain clear competitive advantage and differentiation over competing applications from much larger enterprise focused ERP providers, Aptitude Software has chosen to bring forward investment in Fynapse. Accordingly, the Group has made the strategic decision to accelerate investment in Fynapse to capitalize on the mid-term market opportunity. With direct costs of approximately £1.5 million focused on this new product in 2021, this strategic investment will approximately double in 2022 as the product's capabilities are further extended.
Based on its capabilities and the positive feedback received from both our existing global telecoms client and global partners, 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
Further progress with the Aptitude Insurance Calculation Engine ('AICE'), the application addressing the requirements of IFRS 17 (effective for accounting periods commencing 1 January 2023), has been achieved in 2021. Building on the new business successes announced earlier in the year within the insurance market, Aptitude Software secured a number of new agreements in this sector across all of the Group's geographies in the second half of 2021 including a significant multi-year SaaS subscription agreement signed with a global insurer for the use of the Group's IFRS 17 solution. A number of sales were also achieved for the IFRS 17 "Comply" product, a simplified and pre-configured package of the existing IFRS 17 solution designed to provide a faster and more efficient path to IFRS 17 compliance.
AICE is a strategic, transformational application providing value to an insurer beyond compliance. It enables data insights and decision support delivering long-term business benefits. Development of the product has continued with a number of new innovative capabilities being added, particularly in the area of simulation and forecasting, these capabilities are expected to expand the footprint with existing accounts. Demand is expected to continue in 2022, principally with smaller and medium-sized insurers.
Aptitude Accounting Hub
The Group continued to leverage the capabilities of the Aptitude Accounting Hub ('AAH') in 2021, securing new agreements with a number of organisations as they seek to automate and transform their finance functions. A highlight during the second half of the year was the entry into a significant multi-year subscription with a fast growing global insurer for the use of AAH concurrently with the Aptitude Calculation Engine, delivered through SaaS, to support the foundation for wider group automation as the business expands. Whilst further sales of AAH will be achieved, particularly when used in conjunction with our other regulatory focused applications, we do expect that an increasing number of clients seeking to automate and transform their finance function will opt for Fynapse in the future.
Subscription Management
Market Drivers
The subscription economy is continuing to expand into new sectors as the benefits of subscription 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 and medical devices. 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 subscriptions.
Aptitude Software's products within subscription management 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
A key highlight in 2021 was the acquisition of MPP Global, bringing the eSuite platform into the Group.
eSuite
The eSuite platform 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.
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.
eSuite's ability to manage both physical and digital subscriptions means it is well positioned to expand Aptitude Software's revenue management offering into an end-to-end subscription, billing, and revenue automation solution and is expected to provide further opportunities for automation and growth within Aptitude Software's existing customer base while also supporting new business opportunities. Integration of the two platforms is progressing well and is expected to be completed during the second half of 2022 and there is already encouraging interest in both the eSuite client base and wider market for this end-to-end solution. Investment continues being made in broadening the capabilities of the eSuite platform to access new markets.
Alongside the investment in the product integration between eSuite and Aptitude Revenue Management, the integration of the eSuite team and the wider Aptitude Software business is progressing in line with expectations.
Good progress has also been achieved on a number of implementations in the UK and Europe in the period of the Group's ownership. In addition, the business is working very closely with a new prestigious global multi-media organisation as it seeks to further monetise its digital content outside of its home territory.
Aptitude Revenue Management ('ARM')
The Group's leading revenue management application Aptitude RevStream has continued to make good progress in 2021. The product continues to achieve standalone new business success with a highlight being a multi-year agreement with a publicly traded health care equipment company in California selecting both ARM alongside the Aptitude Lease Accounting Engine application providing further evidence of the expansion of the subscription economy into new industry sectors.
The Aptitude Revenue Management 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. 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 opportunities within the recently acquired eSuite user base have been identified which will benefit from this capability once the integration between the products is complete.
Software-as-a-Service ('SaaS') Progression and Margin Evolution
The Group has continued to successfully leverage its established SaaS capabilities during 2021 across its entire product portfolio with the adoption of SaaS being significantly faster than originally anticipated.
As a result, since February 2021 all new clients have chosen to deploy the Group's software in this way leading to SaaS subscription fees as a proportion of Annual Recurring Revenue increasing organically to 31% as at 31 December 2021 (2020: 23%). Including the benefit of the MPP acquisition, this proportion rises to 43%. Whilst there are some existing on-premise clients planning to migrate to SaaS, a material movement is not anticipated in the short term given the investment in clients' infrastructure supporting our technology.
The accelerated adoption of cloud technologies impacts margin expectations in the short term 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 enable significantly higher margins on this service to be achieved.
Our Services
Implementation Services
Aptitude Software provides implementation services to its clients, with the scale of such services depending on the nature of the application, the size of the opportunity and the balance of responsibilities between Aptitude Software and its partners. The business continues to expand the enablement of its partner network to facilitate their ability to implement Aptitude Software'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 those clients who wish to receive our services directly.
Due to the Group's long implementation cycles, implementation services revenue reduced in the year due to the disruption to our key markets, particularly in 2020, related to the pandemic. Demand for implementation services is however expected to increase in 2022. A key reason for this increased demand is the continuing support of a number of the implementations for the Aptitude Insurance Calculation Engine as go-lives approach for this regulatory focused application in January 2023.
Solution Management Services
The Group's Solution Management Services ('SMS') continue to grow providing Aptitude Software with managed services revenue which is recurring in nature and typically contracted on multi-year agreements. SMS revenues are currently not included within the Group's Annual Recurring Revenue.
Whilst the majority of overall services revenue is associated with the implementation of Aptitude Software's applications, there is a growing percentage of revenues derived from Solution Management Services, with multiple Aptitude Accounting Hub, Aptitude Insurance Calculation Engine and Aptitude Revenue Management clients contracting for this service across the Group's key sectors and geographies. During 2021, a number of new successes and major renewals were achieved from across the client base.
This service extends the responsibilities of Aptitude Software 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. Clients benefit from the reduced requirement to establish internal technical teams focused on our complex applications allowing them to focus on their core business activities. We expect the service (which continues to be a focus of investment in the business) to enhance the operation and longevity of applications within major clients, while the long term and recurring nature of the associated income is expected to provide greater certainty and visibility to the Group's services revenues.
Partner Network
The growth and development of Aptitude Software's high-quality partner network, which now includes mature relationships with the Big 4 accounting firms, 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 Software 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. During 2021, a number of new organisations have been enabled to implement Aptitude Software's products for the first time, providing our clients with an increasing choice of partners with whom to implement the Group's technology, whilst the acquisition of MPP Global has accelerated the generation of a number of new partner propositions which can be leveraged by the wider group.
We expect our partner network to be both deepened and widened through the launch of Fynapse. The solution is easier to implement and provides a platform for our partners to co-create assets leading to a differentiated offering for them against working with more generalist ERP providers.
Aptitude Innovation Centres
Investment continues in the team at the Group's principal, long-established, Innovation Centre in Poland which remains a material differentiator for the Group. In addition to software development, the centre is an increasing focal point for the Group's cloud operations, support activities and growing solution management services offering. Investment in the Innovation Centre is expected to be further increased in 2022 as Fynapse is brought to market despite the inflationary pressures being felt in the region.
As part of the acquisition of MPP Global, the Group now has a second long-term innovation centre for the Group in the North West of England, focused principally on the development and integration of the eSuite product. The Group is continuing with the planned investment in this high-quality operation to support the growth ambitions for eSuite.
Overall there were 198 individuals at the Innovation Centre in Poland at 31 December 2021 (31 December 2020: 162) with a further 45 employees focused on design, development, implementation and support based in the North West of England.
Our People
Aptitude Software's continued progress has been achieved through the exceptional quality of its people. The team is very talented, committed and works incredibly hard. The Board wishes to thank its employees for both their outstanding commitment and the continued excellent support they are providing to the business and to our clients and partners. The Board also wishes to welcome the MPP Global team to the Group and looks forward to seeing their careers advance within the business.
Overall Group headcount increased by 43% in the year to 476 (2020: 332), 17% excluding the acquisition of MPP Global, as the business continues to invest in the evolution of our technology and strengthen a number of other teams.
Aptitude Software continues to progress its approach to diversity and inclusion and has established an advocacy group with representation from across our global team. The business is committed to creating a working environment that recognises diversity, supporting everyone to thrive. Our Diversity and Inclusion Advocacy Group will be responsible for shaping and supporting our ambition and objectives in this important area.
To ensure the Group carries on attracting and retaining the most talented of individuals, the business has continued to build on the investments in our people. A particular highlight of this programme is the strengthening of the Group's training and enablement function and the roll out of a new learning management system to support our employees, clients and partners, initiatives which are also being integrated into the MPP Global business. The Group has also strengthened its strategy and innovations teams with senior executives joining from the big four consulting partnerships and the financial services sector.
With the recent return to a more normal working environment and following extensive consultation with its employees, the business continues to adopt a hybrid way of working. This combines the successfully implemented remote working framework in place during the pandemic with a level of office presence to ensure we foster both collaboration and social interactions, which are so important both for the sparking of innovations but also the mental well-being of our people.
Conflict in Ukraine
Whilst the Group has no clients, operations or employees located in either Ukraine or Russia, the Board is actively monitoring the developing situation and is mindful of the potential for escalation. The Group's largest innovation centre is in the western part of Poland. The Group is providing appropriate support to our Polish colleagues at this difficult time including the support of their charitable and volunteering endeavours in relation to the crisis. Furthermore, the Group is assessing contingency plans should there be an escalation of the situation.
Focus areas for 2022
The Group is focused on delivery against its three go-to-market pillars: finance digitization, subscription management and partner enablement, supported by our ongoing focus on people excellence and financial confidence. Within finance digitization we are launching alongside our charter client our new Fynapse offering and committing to increase investment in 2022 and 2023. Within subscription management, key activities will centre on the integration of our products to support cross sales into our extended customer base whilst building opportunities for the future in the adjacent industry sectors we have identified. Underpinning this, partner relationships will continue to deepen as we add further advisory and technology 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, with an ethos of diversity and inclusion.
We are confident the combination of all these activities will see, following the period of increased investment, an acceleration in both the growth of Annual Recurring Revenue and the Group's margins.
Jeremy Suddards
Chief Executive Officer
14 March 2022
Group Financial Performance and Chief Financial Officer's Report
Revenue
Software Revenues
Annual Recurring Revenue ('ARR') for the core Aptitude Software business (excluding MPP Global's contribution) grew by 10% on a constant currency basis in the year to £34.4 million at 31 December 2021 (31 December 2020: £31.4 million, 30 June 2021: £32.6 million, both restated for the prevailing exchange rates at 31 December 2021). Including the benefit of the MPP Global acquisition total ARR at 31 December 2021 was £41.8 million, overall growth of 33% in the year.
ARR is the key financial metric for the Group. Included within ARR are Aptitude Software's annual licence fees and maintenance for its on-premise clients and subscription fees for the Group's SaaS clients. During the year there was an acceleration towards SaaS deployment with all new clients after February 2021 choosing this approach. As a result of this dynamic the proportion of clients deploying software using SaaS has continued to grow with SaaS subscription fees accounting for 31% of the total ARR at 31 December 2021 for the core Aptitude Software business (2020: 23%), 43% including the benefit of the MPP Global acquisition.
Highlighting both the strength of our client relationships and the quality of our product suite, net retention from the core Aptitude Software business in the year was 102% (2020: 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).
Software revenues recognised in 2021 increased by 21% to £36.9 million (2020: £30.5 million), organic growth of 15% excluding the benefit of the MPP Global acquisition. These now represent 62% of overall revenue (2020: 53%). 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 given the margin differential between software and services revenues despite the growing SaaS element of software and the accompanying infrastructure and servicing costs.
Implementation and Solution Management Services
Services revenue totalled £22.4 million for the year ended 31 December 2021 (2020: £26.8 million) of which 86% (2020: 89%) is attributable to the implementation of our software with the balance of 14% (2020: 11%) generated from solution management services which, whilst not included in the Group's Annual Recurring Revenue, are typically recurring in nature. Due to the Group's long implementation cycles, implementation services revenue reduced in the year due to the disruption to our key markets, particularly in 2020, related to the pandemic. Included within the total services revenue for 2021 is £0.4 million relating to MPP Global for the period of the Group's ownership.
Research and Development Expenditure
Total expenditure on product management, research and development increased in the year ended 31 December 2021 to £10.6 million (2020: £8.5 million) as the Group continues to invest in order to realise the opportunities across its two growth drivers of finance digitization and subscription management. Growth in expenditure focused on Aptitude Software's products was 15%, excluding the £0.8 million investment by MPP Global in its eSuite product during the period of the Group's ownership.
Overall expenditure on product management, research and development is expected to increase significantly in 2022 by approximately 55%, growth of 35% after adjusting for the investment in MPP Global, which is principally driven by the strategic decision to accelerate investment in Fynapse to capitalize on the mid-term market opportunity. The Group is also continuing with the planned investment in eSuite to support the growth ambitions of the application.
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.
Operating Profit and Margins
Adjusted Operating Profit on a statutory basis for the year ended 31 December 2021 was in line with management expectations at £9.9 million (2020: £9.1 million). Adjusted Operating Margin for the period increased marginally against 2020 levels to 17% (2020: 16%) despite the Group continuing to prioritise essential investment across a number of functions. Operating profit on a statutory basis was £6.5 million (2020: £8.1 million).
In the short term, 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 enable higher margins on this service to be achieved.
In addition to the increased research and development activities in 2022 the Group, as with many technology businesses, is experiencing increased inflationary pressures within its cost base. Inflation is particularly strong in Poland at 9%, the location of the Group's principal Innovation Centre, however, inflation is elevated in all the Group's locations. Whilst pay rises are made within the business early in the year there is typically a delay of potentially over 12 months before increased costs can be passed to clients. Whilst client contracts allow for inflationary increases to be applied to fees, typically services' day rates cannot be increased during the initial implementation for a client. Furthermore, the timing of a client's invoice for their typically annually in advance software fee can also contribute to a delay in inflationary pressures being passed to clients.
Acquisition of MPP Global
In the final quarter of 2021, the Group acquired MPP Global for total consideration of £39.1 million, for which cash consideration and associated deal costs totalled £37.4 million. The acquisition has enhanced the Group's level of recurring revenue, driving growth in both ARR and software revenue, a strategic focus for the business whilst accelerating the Group's product strategy and supporting the continued global growth of the business. These strategic capabilities underpin the Group's recognition of £22.2 million of goodwill and a further £20.3 million of intangible assets on acquisition.
MPP Global generated £2.3 million of revenue with an operating loss of £0.3 million since completion of the acquisition by Aptitude.
Foreign Exchange
With 51% (2020: 52%) of the Group's revenues being generated from North American clients, the majority of which are invoiced in US Dollars, the financial results are impacted by changes in the US dollar exchange rate. Aptitude Software's 2020 revenue and Adjusted Operating Profit would have been reported at £56.0 million and £8.7 million respectively on a constant currency basis (compared to actual result of £57.3 million and £9.1 million). Constant currency is calculated by comparing the 2021 results with 2020 results retranslated at the rates of exchange prevailing during 2021.
Non-Underlying Items
Non-underlying items increased significantly from prior year levels to £3.4 million (2020: £1.0 million) principally due to the £2.0 million of deal costs incurred on the MPP Global acquisition. The remaining amount is in relation to intangible amortisation (£1.4 million), with the uplift of £0.6 million from 2020 levels resulting from the amortisation of intangible assets recognised on acquisition.
Taxation
The total tax charge before adjusting for the impact of non-underlying and other sundry items of £1.6 million (2020: £1.6 million) represents 17.1% of the Group's profit before tax (2020: 18.1%), with the reduction against the United Kingdom corporate tax rate of 19% due to the Group's ability to receive additional tax relief on its research and development expenditure.
Statutory Results
The Group reported a profit for the year attributable to equity shareholders of £5.1 million (2020: £7.0 million).
Earnings per Share
Adjusted Basic Earnings per Share increased by 8% to 14.2 pence (2020: 13.2 pence). As a result of the significant non-underlying costs incurred, Basic Earnings per Share was 9.0 pence (2020: 12.5 pence).
Dividend
A final ordinary dividend of 3.60 pence per share is proposed (2020: 3.60 pence), making a total ordinary dividend of 5.40 pence per share for the year (2020: 5.40 pence).
Balance Sheet
The Group continues to have a strong balance sheet with net assets at 31 December 2021 of £57.2 million (2020: £50.6 million), including cash of £29.1 million (2020: £44.8 million) and net funds of £16.1 million (2020: £42.9 million) following the £37.4 million of cash consideration and associated deal costs incurred on the MPP Global acquisition. Trade receivables (net) have increased to £8.8 million (of which £7.6 million was in respect of the Aptitude core business) due to the timing of receipt of annual licence fee and subscription invoices issued in the final months of the year (2020: £5.9 million). The growth in the Group's recurring revenues resulted in deferred income increasing to £30.9 million at 31 December 2021 (2020 £25.7 million). The Group's cash collection disciplines remain strong with DSO (debtor days) at 31 December 2021 of 37 (2020: 40).
Philip Wood
Deputy Chief Executive Officer and Chief Financial Officer
14 March 2022
Group Income Statement
for the year ended 31 December 2021
|
|
| Year Ended 31 Dec 2021
| Year Ended 31 Dec 2020 |
| ||||
|
| 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 | 59,330 | - | 59,330 | 57,266 | - | 57,266 |
|
| Operating costs | 2 | (49,430) | (3,439) | (52,869) | (48,155) | (964) | (49,119) |
|
| Operating profit |
| 9,900 | (3,439) | 6,461 | 9,111 | (964) | 8,147 |
|
| Finance income |
| 6 | - | 6 | 61 | - | 61 |
|
| Finance costs |
| (238) | - | (238) | (100) | - | (100) |
|
| Net finance costs |
| (232) | - | (232) | (39) | - | (39) |
|
| Profit before income tax |
| 9,668 | (3,439) | 6,229 | 9,072 | (964) | 8,108 |
|
| Income tax expense | 3 | (1,634) | 479 | (1,155) | (1,585) | 514 | (1,071) |
|
| Profit for the year |
| 8,034 | (2,960) | 5,074 | 7,487 | (450) | 7,037 |
|
|
|
|
|
|
|
|
|
|
|
| Earnings per share |
|
|
|
|
|
|
|
|
| Basic | 4 |
|
| 9.0p |
|
| 12.5p |
|
| Diluted | 4 |
|
| 8.9p |
|
| 12.3p |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
group statement of comprehensive income
For the year ended 31 December 2021
|
| Year ended 31 Dec 2021 | Year ended 31 Dec 2020 |
|
| £000 | £000 |
| Profit for the year | 5,074 | 7,037 |
| Other comprehensive expense |
|
|
| Items that may be reclassified to profit or loss: |
|
|
| Fair value (loss)/gain on hedged instruments | (222) | 45 |
| Currency translation difference | (225) | (988) |
| Other comprehensive income from discontinued operations | - | - |
| Other comprehensive expense for the year, net of tax | (447) | (943) |
| Total comprehensive income for the year | 4,627 | 6,094 |
Group Balance Sheet
For the year ended 31 December 2021
|
|
| As at 31 Dec 2021 | As at 31 Dec 2020 |
|
| Notes | £000 | £000 |
| ASSETS |
|
|
|
| Non-current assets |
|
|
|
| Property, plant and equipment including right-of-use assets | 6 | 4,261 | 2,394 |
| Goodwill | 7 | 46,006 | 23,787 |
| Intangible assets | 8 | 24,502 | 5,640 |
| Other long-term assets |
| 1,354 | 1,472 |
| Income tax assets |
| - | 642 |
| Deferred tax assets |
| 115 | 448 |
|
|
| 76,238 | 34,383 |
| Current assets |
|
|
|
| Trade and other receivables | 9 | 10,775 | 7,782 |
| Financial assets - derivative financial instruments |
| - | 62 |
| Current income tax assets |
| 1,168 | 1,161 |
| Cash and cash equivalents |
| 29,064 | 44,822 |
|
|
| 41,007 | 53,827 |
| Total assets |
| 117,245 | 88,210 |
|
|
|
|
|
| LIABILITIES |
|
|
|
| Current liabilities |
|
|
|
| Financial liabilities |
|
|
|
| - borrowings | 10 | (313) | - |
| - derivative financial instruments |
| (293) | (133) |
| Trade and other payables | 11 | (40,284) | (33,652) |
| Capital lease obligations | 12 | (273) | (881) |
| Current income tax liabilities |
| (353) | (247) |
|
|
| (41,516) | (34,913) |
| Net current (liabilities)/assets |
| (509) | 18,914 |
|
|
|
|
|
| Non-current liabilities |
|
|
|
| Financial liabilities - borrowings | 10 | (9,573) | - |
| Capital lease obligations | 12 | (2,777) | (972) |
| Provisions | 13 | (379) | (441) |
| Deferred tax liabilities |
| (5,811) | (1,236) |
|
|
| (18,540) | (2,649) |
| NET ASSETS |
| 57,189 | 50,648 |
Group Balance Sheet
For the year ended 31 December 2021
|
|
|
As at 31 Dec 2021 |
As at 31 Dec 2020 |
|
SHAREHOLDERS' EQUITY | Notes | £000 | £000 |
| Share capital | 14 | 4,194 | 4,143 |
| Share premium account |
| 11,946 | 7,828 |
| Capital redemption reserve |
| 12,372 | 12,372 |
| Other reserves |
| 33,902 | 34,124 |
| Accumulated losses |
| (3,346) | (6,165) |
| Foreign currency translation reserve |
| (1,879) | (1,654) |
| TOTAL EQUITY |
| 57,189 | 50,648 |
Group Statement of changes in shareholders' equity
for the Year Ended 31 December 2021
|
|
|
Share capital £000
|
Share premium £000
|
Accumulated losses £000
|
Foreign currency translation reserve £000
|
Capital redemption reserve £000
|
Other reserves£000
|
Total Equity £000
|
| At 1 January 2021 |
| 4,143 | 7,828 | (6,165) | (1,654) | 12,372 | 34,124 | 50,648 |
| Profit for the year |
| - | - | 5,074 | - | - | - | 5,074 |
| Cash flow hedges - net fair value losses in the year |
| - | - | - | - | - | (222) | (222) |
| Currency translation difference |
| - | - | - | (225) | - | - | (225) |
| Total comprehensive income for the year |
| - | - | 5,074 | (225) | - | (222) | 4,627 |
| Transactions with owners in their capacity as owners |
|
|
|
|
|
|
|
|
| Shares issued under share option schemes |
| 15 | 953 | - | - | - | - | 968 |
| Share consideration on acquisition |
| 36 | 3,165 | - | - | - | - | 3,201 |
| Share options - value of employee service |
| - | - | 612 | - | - | - | 612 |
| Deferred tax on share options |
| - | - | 190 | - | - | - | 190 |
| Dividends to equity holders of the company |
| - | - | (3,057) | - | - | - | (3,057) |
| Total Contributions by and distributions to owners of the company recognised directly in equity income
|
| 51 | 4,118 | (2,255) | - | - | - | 1,914 |
| At 31 December 2021 |
| 4,194 | 11,946 | (3,346) | (1,879) | 12,372 | 33,902 | 57,189 |
Group Cash Flow Statement
for the Year Ended 31 December 2021
|
|
|
|
|
|
|
|
Year ended 31 Dec 2021 |
Year ended 31 Dec 2020 |
|
| Notes | £000 | £000 |
| Cash flows from operating activities |
|
|
|
| Cash generated from operations | 15 | 11,890 | 16,238 |
| Interest paid |
| (238) | (100) |
| Income tax received |
| 262 | 281 |
| Net cash flows generated from operating activities |
| 11,914 | 16,419 |
|
|
|
|
|
| Cash flows from investing activities |
|
|
|
| Purchase of property, plant and equipment, excluding right-of-use assets |
| (1,232) | (232) |
| Acquisition of subsidiary, net of cash acquired |
| (33,112) | - |
| Interest received |
| 6 | 61 |
| Net cash used in from investing activities |
| (34,338) | (171) |
|
|
|
|
|
| Cash flows from financing activities |
|
|
|
| Net proceeds from issuance of ordinary share capital |
| 968 | 183 |
| Dividends paid to company's shareholders | 5 | (3,057) | (3,044) |
| Payment of capital lease obligations |
| (756) | (924) |
| Drawdown of loan, net of arrangement fee |
| 9,880 | - |
| Net cash generated from/(used in) financing activities |
| 7,035 | (3,785) |
|
|
|
|
|
| Net (decrease)/increase in cash and cash equivalents |
| (15,389) | 12,463 |
| Cash, cash equivalents and bank overdrafts at beginning of year |
| 44,822 | 32,965 |
| Exchange rate losses on cash and cash equivalents |
| (369) | (606) |
| Cash and cash equivalents at end of year |
| 29,064 | 44,822 |
Notes to the Audited preliminary results for the year ended 31 December 2021
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 Software and therefore no segmental analysis is provided for this period.
The principal activity of the Group throughout 2020 and 2021 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 2021 | Year ended 31 Dec 2020 | Year ended 31 Dec 2021 | Year ended 31 Dec 2020 |
|
| £000 | £000 | £000 | £000 |
| United Kingdom | 32,265 | 32,096 | 11,353 | 9,571 |
| Rest of World | 27,065 | 25,170 | 47,977 | 47,695 |
|
| 59,330 | 57,266 | 59,330 | 57,266 |
2. Non-underlying items
|
| 31 Dec 2021 | 31 Dec 2020 |
|
| £000 | £000 |
| Amortisation of intangibles | 1,418 | 846 |
| Acquisition and associated reorganisation costs | 2,021 | 118 |
|
| 3,439 | 964 |
3. Income tax expense
|
| Year ended 31 Dec 2021 | Year ended 31 Dec 2020 |
| Analysis of charge in the year | £000 | £000 |
| Current tax: |
|
|
| - tax charge on underlying items | (1,005) | (1,114) |
| - tax credit on non-underlying items | - | 22 |
| - adjustment to tax in respect of prior periods | (256) | 132 |
| - adjustment to tax in respect of prior periods on non-underlying items | 134 | 255 |
| Total current tax | (1,127) | (705) |
| Deferred tax: |
|
|
| - tax charge on underlying items | (354) | (274) |
| - tax credit on non-underlying items | 346 | 237 |
| - adjustment to tax in respect of prior periods | (20) | (329) |
| Total deferred tax | (28) | (366) |
| Income tax expense | (1,155) | (1,071) |
|
|
|
|
The adjustment to tax in respect of prior periods on non-underlying items totalling £134,000 (2020: £255,000) has been created through the benefit from additional research and development relief. The net adjustment to tax in respect of prior periods on underlying items totalling £276,000 (2020: £197,000) relates to the reduction in the assumed benefit from research and development relief in the UK.
The total tax charge of £1,155,000 (2020: £1,071,000) represents 18.54% (2020: 13.21%) of the Group profit before tax of £6,229,000 (2020: £8,108,000). The increase against 2020 levels is due to the disallowable deal costs incurred on the MPP Global acquisition, see note 16 for details.
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 £1,652,000 (2020: £1,643,000) represents 17.10% (2020: 18.11%), which is the tax rate used for calculating the adjusted earnings per share.
At 31 December 2021, the Group had unused tax losses totalling £1,029,000 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 31 Dec 2021 | Year ended 31 Dec 2020 |
|
| £000 | £000 |
| Profit before tax | 6,229 | 8,108 |
|
|
|
|
| Tax at the United Kingdom corporation tax rate of 19.00% (2020: 19.00%) | (1,184) | (1,540) |
| Effects of: |
|
|
| Adjustment to tax in respect of prior periods | (142) | 58 |
| Adjustment in respect of foreign tax rates | (35) | (138) |
| Expenses not deductible for tax purposes | (12) | (27) |
| Non-underlying expenses not deductible for tax purposes | (384) | - |
| Other | 105 | (29) |
| Research and development tax relief | 408 | 618 |
| Recognition of tax losses not recognised as a deferred tax asset | 160 | - |
| Tax losses not recognised as a deferred tax asset | (84) | - |
| Change in future tax rates | 13 | (13) |
| Total taxation | (1,155) | (1,071) |
United Kingdom corporation tax is calculated at 19.00% (2020: 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 17.10% (2020: 18.11%).
|
| Year ended 31 Dec 2021 | Year ended 31 Dec 2020 |
|
| £000 | £000 |
| Profit before tax and non-underlying items | 9,668 | 9,072 |
| Tax charge at a rate of 17.10% (2020: 18.11%) | (1,652) | (1,643) |
|
| 8,016 | 7,429 |
| Prior years' tax charge | (142) | 58 |
| Non-underlying items net of tax | (2,960) | (450) |
| Recognition of tax losses not recognised as a deferred tax asset | 160 | - |
| Profit on ordinary activities after tax | 5,074 | 7,037 |
|
| 2021 Number (thousands) | 2020 Number (thousands) |
| Weighted average number of shares | 56,675 | 56,339 |
| Effect of dilutive share options | 432 | 780 |
|
| 57,107 | 57,119 |
|
| 2021 Basic EPS | 2021 Diluted EPS | 2020 Basic EPS | 2020 Diluted EPS |
|
| Pence | pence | pence | pence |
| Earnings per share | 9.0 | 8.9 | 12.5 | 12.3 |
| Non-underlying items net of tax | 5.2 | 5.2 | 0.8 | 0.8 |
| Prior years' tax charge/(credit) | 0.3 | 0.2 | (0.1) | (0.1) |
| Recognition of tax losses | (0.3) | (0.3) | - | - |
| Adjusted earnings per share | 14.2 | 14.0 | 13.2 | 13.0 |
Adjusted earnings per share are calculated using adjusted profit after tax.
5. Dividends
|
| 2021 pence per share | 2020 pence per share | 2021 £000 | 2020 £000 |
| Dividends paid: |
|
|
|
|
| Interim dividend | 1.80 | 1.80 | 1,019 | 1,015 |
| Final dividend (prior year) | 3.60 | 3.60 | 2,038 | 2,029 |
|
| 5.40 | 5.40 | 3,057 | 3,044 |
|
|
|
|
|
|
| Proposed but not recognised as a liability: |
|
|
|
|
| Final dividend (current year) | 3.60 | 3.60 | 2,059 | 2,031 |
The proposed final dividend for the current year was approved by the Board on 14 March 2022 but was not included as a liability as at 31 December 2021, 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 3 June 2022 to shareholders on the register at the close of business on 13 May 2022.
6. Property, plant and equipment including right-of-use assets
|
| 31 Dec 2021 | 31 Dec 2020 |
|
| £000 | £000 |
| Opening net book value 1 January | 2,394 | 3,207 |
| Additions | 3,831 | 775 |
| On acquisition of subsidiary (note 16) | 237 | - |
| Net disposals | (1,037) | (41) |
| Exchange movements | 15 | 26 |
| Depreciation | (1,179) | (1,573) |
|
| 4,261 | 2,394 |
Net disposals in the year principally relate to the amendment and subsequent derecognition of one of its property leases as it met the criteria of a short-term lease.
7. Goodwill
|
| 31 Dec 2021 | 31 Dec 2020 |
|
| £000 | £000 |
| Opening net book value 1 January | 23,787 | 23,787 |
| On acquisition of subsidiary (note 16) | 22,219 | - |
|
| 46,006 | 23,787 |
The acquisition of subsidiary totalling £22.2 million represents the amount of goodwill allocated to the MPP Global business. The value is attributable to the benefits expected to arise from combining the eSuite offering with Aptitude's current Revenue Management application to enable the Group to provide a new best-of-breed end-to-end subscription management solution.
8. Intangible assets
|
| 31 Dec 2021 | 31 Dec 2020 |
|
| £000 | £000 |
| Opening net book value 1 January | 5,640 | 6,486 |
| On acquisition of subsidiary (note 16) | 20,280 | - |
| Amortisation | (1,418) | (846) |
|
| 24,502 | 5,640 |
9. Trade and other receivables
|
| 31 Dec 2021 | 31 Dec 2020 |
|
| £000 | £000 |
| Trade receivables | 8,833 | 5,881 |
| Less: provision for impairment of receivables | (21) | - |
| Trade receivables - net | 8,812 | 5,881 |
| Other receivables | 330 | 499 |
| Prepayments | 1,110 | 791 |
| Accrued income | 523 | 611 |
|
| 10,775 | 7,782 |
Within the trade receivables balance of £8,833,000 (2020: £5,881,000), of which £1,262,000 is in respect of the acquired MPP Global business, there are balances totalling £1,544,000 (2020: £1,453,000) including £518,000 from MPP Global which, at 31 December 2021, were overdue for payment. Of this balance £1,341,000 (2020: £1,432,000) has been collected at 14 March 2022 (2020: 9 March 2021).
10. Financial liabilities
|
| 31 Dec 2021 | 31 Dec 2020 |
|
| £000 | £000 |
| Bank loan | 9,886 | - |
| The borrowings are repayable as follows: |
|
|
| Within one year | 313 | - |
| In the second year | 1,250 | - |
| In the third to fifth years inclusive | 8,437 | - |
|
| 10,000 | - |
| Unamortised prepaid facility arrangement fees | (114) | - |
| At 31 December | 9,886 | - |
On 14 October 2021, the Group and Company entered into a loan agreement with Bank Of Ireland consisting of a £10 million term loan in addition to a revolving credit facility of £10 million. The term loan is repayable over five years with an initial 12-month repayment holiday followed by annual capital repayments of £1,250,000. At the end of the term, a bullet payment of £5 million 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 a five-year period.
11. Trade and other payables
|
| 31 Dec 2021 | 31 Dec 2020 |
|
| £000 | £000 |
| Trade payables | 1,290 | 600 |
| Other tax and social security payable | 1,216 | 2,020 |
| Other payables | 405 | 166 |
| Accruals | 6,462 | 5,163 |
| Deferred income | 30,911 | 25,703 |
|
| 40,284 | 33,652 |
12. Capital lease obligations
|
| 31 Dec 2021 | 31 Dec 2020 |
|
| £000 | £000 |
| Amounts payable under capital lease agreements: |
|
|
| Within one year | 387 | 908 |
| Within two to five years | 1,624 | 1,084 |
| After five years | 1,632 | - |
| Total | 3,643 | 1,992 |
| Less: future finance charges | (593) | (139) |
| Present value of lease obligations | 3,050 | 1,853 |
| Less: Amount due for settlement within 12 months (shown under current liabilities) | (273) | (881) |
|
| 2,777 | 972 |
|
| 31 Dec 2021 | 31 Dec 2020 |
|
| £000 | £000 |
| The present value of financial lease liabilities is split as follows: |
|
|
| Within one year | 273 | 881 |
| Within two to five years | 1,287 | 972 |
| After five years | 1,490 | - |
|
| 3,050 | 1,853 |
13. Provisions for other liabilities and charges
|
| Provisions | |
|
| 31 Dec 2021 | 31 Dec 2020 |
|
| £000 | £000 |
| At 1 January | 441 | 375 |
| (Credited)/charged to income statement | (142) | 69 |
| On acquisition of subsidiary (note 16) | 89 | - |
| Foreign exchange movement | (9) | (3) |
| At 31 December | 379 | 441 |
£334,000 (2020: £386,000) of the total provision at 31 December 2021 of £379,000 (2020: £441,000) 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 (2020: £441,000).
14. Share capital
| Ordinary shares of 7 1/3p each | Number | £000 |
| Issued and fully paid: |
|
|
| At 1 January 2021 | 56,428,967 | 4,143 |
| Issued under share option schemes | 277,944 | 15 |
| Equity consideration on acquisition | 492,537 | 36 |
| At 31 December 2021 | 57,199,448 | 4,194 |
|
|
|
|
15. Cash flows from operating activities
Reconciliation of profit before tax to net cash generated from operations:
|
| Year ended 31 Dec 2021 | Year ended 31 Dec 2020 |
|
| £000 | £000 |
| Profit before tax for the year | 6,229 | 8,108 |
| Adjustments for: |
|
|
| Depreciation | 1,179 | 1,573 |
| Amortisation | 1,418 | 846 |
| Share-based payment expense | 612 | 337 |
| Finance income | (6) | (61) |
| Finance costs | 238 | 100 |
| Changes in working capital excluding the effects of acquisition: |
|
|
| (Increase)/decrease in receivables | (1,561) | 1,917 |
| Increase in payables | 3,930 | 3,484 |
| Increase in provisions | (149) | (66) |
| Cash generated from operations | 11,890 | 16,238 |
|
|
|
|
16. Acquisitions
MPP Global Solutions Limited ('MPP Global')
On 9 October 2021 the Group acquired the entire share capital and voting rights of MPP Global Solutions Limited for consideration of £39.1 million, which included £2.3 million of cash. Of the consideration, £35.4 million was payable in cash at completion, £3.2 million was satisfied by the issue of 492,537 new ordinary shares with a fair value of 650 pence on date of acquisition with the balance being settled by way of tax relief consideration totalling the R&D credit receivable by the business for the 12 month period ending 30 June 2021 on submission of the UK tax return. The New Ordinary Shares issued will be subject to a twelve-month lock-in.
The net assets acquired in the transaction and the intangibles arising, are as follows:
|
| Carrying values pre acquisition |
Fair value adjustments |
Provisional fair value | |
|
| £000 | £000 | £000 | |
| Net assets acquired |
|
|
| |
| Property, plant and equipment including right-of-use assets | 237 | - | 237 | |
| Intangible assets | - | 20,280 | 20,280 | |
| Trade and other receivables | 1,314 | - | 1,314 | |
| Cash and cash equivalents | 2,314 | - | 2,314 | |
| Current income tax assets | 426 | - | 426 | |
| Trade and other payables | (1,467) | - | (1,467) | |
| Deferred income | (830) | - | (830) | |
| Capital lease obligations | (279) | - | (279) | |
| Provisions | (89) | - | (89) | |
| Deferred tax liabilities | - | (5,070) | (5,070) | |
|
| 1,626 | 15,210 | 16,836 | |
| Goodwill |
|
| 22,219 | |
| Total consideration |
|
| 39,055 | |
|
|
|
|
| |
| Satisfied by |
|
|
| |
| Cash paid |
|
| 35,426 | |
| Equity consideration |
|
| 3,201 | |
| Tax relief consideration |
|
| 428 | |
|
|
|
| 39,055 | |
|
|
|
|
| |
| The intangible assets acquired as part of the acquisition of MPP Global can be analysed as follows: | ||||
|
|
|
|
| |
| Software IPR and in process R&D |
|
| 12,860 | |
| Customer relationships |
|
| 7,420 | |
|
|
|
| 20,280 | |
17. Statement by the directors
The preliminary results for the year ended 31 December 2021 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 2021 Annual Report. The accounting policies adopted in this preliminary announcement are consistent with the Annual Report for the year ended 31 December 2021.
The comparative figures for the financial year 31 December 2020 have been extracted from the Group's statutory accounts for that financial year. The 2020 financial statements, which were prepared with international accounting standards in conformity with the requirements of the Companies Act 20226 and IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, have been reported on by the Group's auditors and delivered to the registrar of companies. There are no differences for the Group in applying each of these accounting frameworks.
The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 December 2021 or 31 December 2020. The Annual Report for 2021 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 14 March 2022.
The Annual Report for the year ended 31 December 2021 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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