TIDMAPTD

RNS Number : 3891U

Aptitude Software Group PLC

29 July 2020

29 July 2020

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

INTERIM RESULTS

FOR THE SIX MONTHSED 30 JUNE 2020

Aptitude Software Group plc (LSE: APTD), a specialist provider of powerful financial management software to large global businesses, reports its unaudited results for the six months ended 30 June 2020.

Financial Highlights

 
    Six months ended 30 June                                     2020       2019(1)     % Change 
    Annual Recurring Revenue ("ARR") (2) 
     at 30 June                                                GBP30.9m   GBP27.9m(3)     +11% 
                                                              ---------  ------------  --------- 
    Revenue                                                    GBP29.1m    GBP28.8m       +1% 
                                                              ---------  ------------  --------- 
 
       *    Software and subscription revenue                  GBP14.7m    GBP14.1m       +4% 
                                                              ---------  ------------  --------- 
 
       *    Implementation and solution management services 
            revenue                                            GBP14.4m    GBP14.7m       -2% 
                                                              ---------  ------------  --------- 
    Adjusted Operating Profit(4)                               GBP5.1m      GBP5.1m        - 
                                                              ---------  ------------  --------- 
    Statutory operating profit                                 GBP4.5m      GBP4.6m       -2% 
                                                              ---------  ------------  --------- 
    Cash and cash equivalents(5)                               GBP30.9m    GBP23.5m       +31% 
                                                              ---------  ------------  --------- 
    Adjusted Basic Earnings per Share(4)                         6.7p        6.0p         +12% 
                                                              ---------  ------------  --------- 
    Basic Earnings per Share                                     6.0p        5.5p         +9% 
                                                              ---------  ------------  --------- 
    Interim ordinary dividend per share                          1.8p        1.8p          - 
                                                              ---------  ------------  --------- 
 
   -- Year on year growth in ARR of 11% on a constant currency3 basis driven by new business wins and add-on sales to 
      existing clients 
 
   -- In line with the Group's strategic focus, software and subscription revenue now represents 51% of total revenue 
      (H1 2019: 49%) with growth of 4% to GBP14.7 million for the six months ended 30 June 2020 (H1 2019: GBP14.1 
      million) 
 
   -- Strong balance sheet with cash of GBP30.9 million (H1 2019: GBP23.5 million 5 ), net funds6 of GBP29.2 million 
      (H1 2019: GBP21.0 million 5 ) and no bank loans. This financial strength provides confidence to our clients and 
      prospects whilst positioning the business well for potential acquisition opportunities 
 
   -- Based on the Group's solid financial and operational performance in the period and the expectation that the 
      business will remain comfortably profitable and cash generative in the period expected to be impacted by 
      COVID-19, the Board maintains its interim dividend at 1.8 pence per share (H1 2019: 1.8 pence per share) 

Strategic and Operational Highlights:

   -- Continued progress with the strategic Aptitude Accounting Hub application, which provides our clients with the 
      foundation for their digital finance transformation, including a new sale to the retail arm of a leading European 
      bank 
 
   -- Significant Software-as-a-Service ('SaaS') subscription sale for Aptitude Revenue Management to a North American 
      technology company 
 
   -- Launch of Aptitude RevStream, one of the Group's two Aptitude Revenue Management applications, to meet demand in 
      the APAC and European regions. This launch provides the Group with a further growth opportunity as the 
      application had previously only been focused on the North American market 
 
   -- Strengthening of the go-to-market and global partner network, most notably with the expansion of the partner 
      network into Japan providing access to tier one prospects in the region. This new partner will be initially 
      responsible for the sale and implementation of Aptitude RevStream in Japan, a new market for the Group. 
 
   -- Sales cycles in the insurance sector remain extended in line with the Board's previously revised expectations as 
      prospects continue to focus on short term priorities and manage their capital prudently as a response to the 
      impact of COVID-19, coupled with the confirmed delay to the introduction of IFRS 17. Activity with these 
      prospects is expected to increase as the revised regulatory deadline of 1 January 2023 approaches 
 
   -- Investment continues across a number of functions including in those products which support clients as they 
      undertake their digital finance transformation, a significant growth opportunity for the Group 

Response to COVID-19:

   -- Successful implementation of business continuity plans in response to the threat of COVID-19 with all business 
      functions, including those directly servicing our diverse client base, being provided without disruption 
 
   -- As a result of the challenges presented by COVID-19, the Group's pre-existing focus on cost control tightened 
      further with all discretionary expenditure closely reviewed and a number of savings already actioned 

Commenting on the Interim Results, Jeremy Suddards, Chief Executive Officer, said: -

'The Group continued to make strategic and operational progress in the first half of 2020 with a number of new business wins across the globe despite the challenges arising from COVID-19.

Aptitude Software benefits from a focused portfolio of product and service offerings, a growing SaaS capability, increasing worldwide presence and a strengthening partner network. These assets and capabilities position the Group to be able to fully realise the significant opportunity ahead, particularly as the impact of COVID-19 has reinforced the need for clients to drive further automation in their finance functions.'

Contacts

Aptitude Software Group plc

Ivan Martin, Chairman 020-3687-3200

Jeremy Suddards, Chief Executive Officer

Philip Wood, Deputy Chief Executive Officer and Chief Financial Officer

Alma PR

Caroline Forde, Sam Modlin 020-3405-0205

About Aptitude Software

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

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

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

www.aptitudesoftware.com

Throughout this announcement:

(1) H1 2019 numbers presented in the table exclude the results of the Microgen Financial Systems business which was disposed of on 28 June 2019 and presented as a discontinued operation

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

(3) Constant currency is calculated by comparing the 2020 results with 2019 results retranslated at the rates of exchange prevailing during 2020. Items within the Financial Highlights table indicated by this superscript reference are calculated on a constant currency basis.

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

(5) Cash and cash equivalents at 30 June 2019 is net of the proposed return of cash to shareholders of GBP46.4 million as part of the disposal of the Microgen Financial Systems business. The return was completed in September 2019.

(6) Net funds represents cash and cash equivalents less finance obligations, which are currently limited to capital lease obligations

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

Overview

Aptitude Software has continued to make strategic and operational progress in the first half of the year.

The Group has enjoyed a good number of new customer wins and contract expansions in the Banking and Technology, Media and Telecom ('TMT') sectors demonstrating the strength of the Group's product portfolio and sector diversity. These additions have led to Annual Recurring Revenue increasing to GBP30.9 million representing year on year growth of 11% on a constant currency basis (31 December 2019: GBP29.5 million, 30 June 2019: GBP27.9 million, both restated for the prevailing exchange rates at 30 June 2020).

Aptitude Software successfully implemented its business continuity plans in response to COVID-19. All business functions, including those servicing our diverse client base, have operated without disruption during the period. As described in the Group's Trading Update in April 2020, the impact of COVID-19 has resulted in sales cycles in the insurance sector being extended lowering the Board's original new business sales performance expectations for the year. As a result, the Group has moderated and re-phased its investment plans in the business and is applying a greater focus on costs to mitigate the financial impact of COVID-19 to the business.

In the medium term, the Board considers that the impact of COVID-19 will result in increased demand for Aptitude Software's technologies as organisations seek further automation of their finance functions and greater data-led insight into their businesses. This dynamic further underpins the investment being made in those products and services that support a client undertaking a transformation of their finance function, frequently referred to as a digital finance transformation.

Outlook

Aptitude Software continues to benefit from a focused portfolio of product and service offerings, a growing SaaS capability, increasing worldwide presence and a strengthening partner network. These assets and capabilities, together with the Group's robust set of financials, provide the Board with confidence in Aptitude Software's prospects once the short-term impact of COVID-19 has passed.

Corporate Strategy

Aptitude Software's strategy is focused on providing powerful financial management software to large global businesses.

The Group executed on a number of strategic activities during the first half of 2020 which are expected to drive an acceleration of growth in its software and subscription revenues which now represent 51% of overall revenue (H1 2019: 49%). The growth in the proportion of such revenues in the business will, in due course, lead to an increase in operating margins given the higher margins achievable from these recurring revenues.

Global Partner Network

A strategic priority for the Group continues to be the growth and development of Aptitude Software's high-quality partner network as highlighted by our deepening relationships with the Big 4 accounting firms. Whilst many prospects are sourced directly by the Group's own sales and marketing teams, the global reach of partners and the depth of their relationships with large global businesses provide Aptitude Software with an increasing number of opportunities and market intelligence. In addition to the new business benefits provided by the partner network, the implementation expertise and capabilities of our partners supports the Group's drive to increase the proportion of software and subscription revenues. Our partner management teams in North America, Europe and APAC have been strengthened with a number of senior appointments. A highlight in the year to date has been the expansion of the partner network into Japan, focused initially on Aptitude RevStream.

Investment in Digital Finance Opportunity

Investment is also increasing in the Group's applications and services focused on digital finance transformation.

What is digital finance?

Finance functions of large global organisations are increasingly being challenged by the demands of operating in a more digital world whilst continuing to address ever growing regulatory pressures and the need to reduce costs. The digital era has seen an increase in the complexity, volume and number of sources of finance data, and the growing requirement for decision making to move at the pace of the business. These growing pressures and demands present finance functions with both an opportunity and a challenge, which they can address by digitising and transforming the organisations' accounting processes.

The demands of digital finance will see new and emerging technologies being used to maximise the efficiency of the finance team, give greater financial agility and control, provide improved operational intelligence and enable strategic foresight. In this way, digital finance will empower organisations to drive competitive differentiation, increase market value and deliver sustainable growth.

Digital finance transformations are expected to accelerate due to the impact of COVID-19 as finance functions seek further automation to remove manual dependencies in their organisations highlighted by the lockdown whilst also addressing the increased demand for advanced visibility into revenue and cost performance, increased levels of financial scenario simulation and a move to higher frequency reporting.

Delivering digital finance

The Aptitude Accounting Hub ('AAH') with its ability to handle data at a highly granular level is increasingly being considered a strategic foundation for finance organisations as they undertake the necessary transformation to meet these new challenges. AAH, with its highly functional accounting rules engine and sub-ledger, centralises and automates finance, accounting and reporting. It delivers a consolidated, yet highly granular, single view of financial data. With the Aptitude Accounting Hub at its core, a finance function can progressively transform and be simplified.

To fully realise the opportunity for AAH, investment is accelerating in the product with several areas of enhanced functionality and capability identified for future development. These include the development of new modules to extend AAH's capabilities and the incorporation of modern technologies. We will also utilise the flexibility of cloud architectures to facilitate increased ease of initial deployment and future upgrades to the platform.

This evolution of AAH's functionality and capability in the coming years is designed to ensure that Aptitude Software capitalises on the future needs of the finance market. Digital finance provides Aptitude Software with a larger market opportunity which is continuing and non-cyclical in nature and is expected to strengthen software revenue growth. This growth, combined with an increased ease and speed of deployment and the continued deepening of our partner relationships, is expected to lead to software revenues growing as a proportion of overall revenue and lead to higher margins.

Potential for Acquisitions

Whilst our focus is currently the organic growth of software and subscription revenues, the Group's robust financial position provides the Board with confidence to continue to progress with the analysis of potential acquisitions. Any acquisition will need to meet our strict criteria of comprising complementary technologies focused on Aptitude Software's product suite.

Key Product Overview

Aptitude Accounting Hub

A key highlight in the first six months of the year has been the entry into a strategic contract to licence AAH to the retail arm of an existing large European banking client. Our technology will be a core component of a five-year finance transformation programme automating the bank's finance processes, demonstrating once again Aptitude Software's capabilities over and above smart compliance. The contract provides for future growth in ARR as AAH is deployed to countries beyond the initial deployment.

The opportunity for AAH remains significant across all our key industries and is central to Aptitude Software's approach to addressing the digital finance opportunity as previously outlined.

Aptitude Revenue Management

The Group's two revenue management applications, collectively Aptitude Revenue Management ('ARM'), have continued to make progress in the first half of the year. Included within the new business contracts signed in the first half of the year was a material subscription agreement for Aptitude RevStream with a large North American technology business. Complementing these new business successes was the expansion of an agreement with a North American telco for the use of the Aptitude Revenue Recognition Engine in a previously un-licenced division of their wider group, demonstrating our ability to sell and implement additional software to existing clients.

A further highlight in the year to date has been the launch of Aptitude RevStream ('AREV') into the APAC and European market, with the product previously being focused on North America. As part of the launch of AREV into these new markets we have signed our first software reseller agreement with a partner targeting the Japanese market.

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

Aptitude Insurance Calculation Engine

The Aptitude Insurance Calculation Engine ('AICE') allows an insurer to make strategic, transformational investment providing value beyond compliance, enabling data insights and decision support delivering long-term business benefits. Demonstrating the capabilities of AICE, during the first half of the year Aptitude Software was recognised as a category leader in "IFRS 17 Technology Solutions: Market and Vendor Landscape 2020", a Chartis Research report that assesses leading vendors of IFRS 17 and LDTI solutions.

As previously announced, during the first half of the year the Group has seen sales cycles lengthening with a number of its insurance prospects as organisations focus on new short-term priorities arising from COVID-19. This has been made possible for insurers as a result of the now-confirmed delay to the introduction of IFRS 17 (which will now become effective for accounting periods commencing 1 January 2023). The Group remains confident that these opportunities will be realised in the medium term as the effective date of IFRS 17 adoption moves closer.

Whilst all existing client implementations of AICE are continuing successfully, the Group has seen a small number of clients seek to reduce their professional services expenditure in response to both the impact of COVID-19 and the one-year delay of the implementation of IFRS 17. Whilst reducing professional services revenue in the short-term, this is expected to result in increased revenue from these clients in future years as a number of the projects are now expected to extend until 2023 following the delay to the effective date of the accounting standard.

Our services

Implementation Services

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

Whilst utilisation has been resilient in the first half of the year, as flagged in our April 2020 Trading Update the impact of COVID-19 on sales opportunities in the insurance sector is expected to have a significant impact on 2021 services revenue, due to the time lag between the signing of new business contracts and the resulting projects reaching peak levels of activity. The Group benefits from some flexibility in its resourcing model in APAC and Europe through its balance of employee and contractor consultants.

Solution Management Services

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

Adoption of Solution Management Services is now expected to accelerate following the first half appointment of an experienced leader to drive the go-to-market strategy for this offering.

COVID-19 update

Aptitude Software successfully implemented its business continuity plans in response to COVID-19. All business functions, including those servicing our diverse client base, have operated without disruption during the period.

The Group has taken several actions to protect the business. These actions include an increased focus on discretionary expenditure, the cancellation of 2020 pay rises and the moderation and re-phasing of investment plans, in addition to material travel cost savings. The business has not utilised the furlough scheme in the United Kingdom or other equivalent schemes in countries where it operates.

People and Organisation

Our People

The exceptional quality of our people has ensured all business functions have continued successfully despite the impact of COVID-19. The team is very talented, committed and works incredibly hard. The Board wishes to thank its employees in these difficult and unprecedented times both for their outstanding commitment and the excellent support and dedication they are providing to the business and to our clients whilst working remotely and supporting their families.

Aptitude Innovation Centre

The Aptitude Innovation Centre, our long-established integrated centre of excellence in Poland, at which a growing number of activities are performed, continues to be a material differentiator for the Group. The Aptitude Innovation Centre encompasses the development of the Group's entire product suite whilst also becoming an increasing focal point for the Group's cloud operations and support activities. This single integrated centre improves the collaboration between our teams as they provide software or associated services to our clients. The migration of activities, previously performed in the Group's higher cost locations, to the Aptitude Innovation Centre is increasing the efficiency of our business providing Aptitude Software with a competitive advantage.

Financial performance

Revenue

Aptitude Software's overall revenue for the six months ended 30 June 2020 has increased to GBP29.1 million (H1 2019: GBP28.8 million).

Software and Subscription Revenues

Aptitude Software's ARR at 30 June 2020 totalled GBP30.9 million (31 December 2019: GBP29.5 million, 30 June 2019: GBP27.9 million, both restated for the prevailing exchange rates at 30 June 2020), representing year on year growth of 11% on a constant currency basis.

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

Software and subscription revenues recognised in the first half of 2020 increased by 4% to GBP14.7 million (H1 2019: GBP14.1 million). Software and subscription revenues now represent 51% of overall revenue (H1 2019: 49%). It is a key part of the Group's strategy to increase this percentage whilst maximising the growth rate of Aptitude Software's ARR, a strategy which in due course will lead to growth in operating margin percentage given the higher margins achievable from software and subscriptions revenues.

Implementation and Solution Management Services

Implementation and solution management services revenue totalled GBP14.4 million for the six months ended 30 June 2020 (H1 2019: GBP14.7 million) with the reduction consistent with the Group's strategic focus of growing software and subscription revenues. Additionally, a small number of clients have chosen to adjust the current rate of their services expenditure to allow them to deal with other short-term business priorities arising from COVID-19.

Operating Profit and Margins

Adjusted Operating Profit for the six months ended 30 June 2020 was in line with the prior period at GBP5.1 million (H1 2019: GBP5.1 million on a constant currency basis and as reported). Operating profit on a statutory basis was GBP4.5 million (H1 2019: GBP4.6 million). Adjusted Operating Margin for the six month period to 30 June 2020 was therefore aligned with the prior year at 18% (H1 2019: 18%) despite the Group continuing to prioritise essential investment across a number of functions including in our products which support clients as they address the requirements of digital finance transformation. The Group continues to monitor the balance between investment in the opportunity facing the business and the growth in Aptitude Software's operating margins.

Foreign Exchange

With 53% (H1 2019: 52%) of the Group's revenues being generated from North American clients, the majority of which are invoiced in US Dollars, the business is impacted by changes in the US dollar exchange rate. Aptitude Software's H1 2019 revenue and Adjusted Operating Profit would have been reported at GBP29.0 million and GBP5.1 million respectively on a constant currency basis (compared to actual result of GBP28.8 million and GBP5.1 million). Constant currency is calculated by comparing the 2020 results with 2019 results retranslated at the rates of exchange prevailing during 2020.

Research and Development Expenditure

Total expenditure on product management, research, development and support in the six months ended 30 June 2020 was GBP4.2 million (H1 2019: GBP4.4 million) of which GBP3.2 million (H1 2019: GBP3.0 million) was incurred at the Aptitude Innovation Centre. This reduction in expenditure is in line with the Board's expectations following the transfer of development activities from California to Poland for the Aptitude RevStream product, improving cost competitiveness along with providing a fully centralised centre of excellence. The Board has continued to determine that none of the internal research and development costs incurred during the first half of the year meet the criteria for capitalisation. Consequently, these have been expensed as incurred through the income statement.

Non-Underlying Items

Non-underlying items of GBP0.6 million (H1 2019: GBP0.4 million) principally comprise intangible amortisation (GBP0.4 million), with the remaining amount in relation to the continued separation costs incurred as part of the disposal of the Microgen Financial Systems business in 2019.

Taxation

The total tax charge of GBP1.1 million (H1 2019: GBP1.1 million) represents 24% of the Group's profit before tax (H1 2019: 24%), with the increase against the United Kingdom corporate tax rate of 19% due to the proportion of profits generated in overseas territories which have higher prevailing tax rates, principally the USA.

Statutory Results

The Group reported a profit for the period attributable to equity shareholders of GBP3.5 million (H1 2019: GBP25.8 million). The profit in H1 2019 includes GBP22.4 million from discontinued operations in respect of the Microgen Financial Systems business disposed of on the 28 June 2019.

Earnings per Share

As a result of the return of capital in September 2019 and accompanying share consolidation, Adjusted Basic Earnings per Share and Basic Earnings per Share from continuing operations increased to 6.7 pence and 6.0 pence (H1 2019: 6.0 pence and 5.5 pence), growth of 12% and 9% respectively.

Dividend

An interim dividend of 1.80 pence per share is proposed (2019: 1.80 pence). The interim dividend will be payable on 28 August 2020 to shareholders on the register at the close of business on 7 August 2020.

Balance Sheet

The Group continues to have a strong balance sheet with net assets at 30 June 2020 of GBP48.3 million (H1 2019: GBP88.4 million), including cash of GBP30.9 million (H1 2019: GBP23.5(5) million), net funds of GBP29.2 million (H1 2019: GBP21.0(6) million) and no bank loan. Trade receivables (net) have reduced to GBP10.7 million (H1 2019: GBP12.3 million), a decrease of GBP1.6 million due to the timing of receipt of annual licence fee and subscription invoices issued. The growth in the Group's recurring revenues resulted in deferred income increasing to GBP22.2 million at 30 June 2020 (H1 2019: GBP21.2 million). The Group's cash collection disciplines remain strong with like for like DSO (debtor days) at 30 June 2020 of 60 consistent with prior periods.

Statement on Principal Risks and Uncertainties

Pursuant to the requirements of the Disclosure Guidance and Transparency Rules the Group provides the following information on its principal risks and uncertainties. The Group considers strategic, operational and financial risks and identifies actions to mitigate those risks. These risk profiles are updated at least annually. The Group's 2019 Annual Report did identify COVID-19 as a principal risk, however the timing of the report being submitted in early March 2020 meant that any impact of COVID-19 had not been realised. Given the global impact since this date, the Group has updated both the risks and mitigating actions surrounding COVID-19. This is detailed in the table below.

 
 Principal risks and Uncertainties   Explanation                           Mitigating Action 
 The effect of COVID-19              The Group's existing                  The business continuity 
  impacts new business                client base and sales                 plans have been successfully 
  activities, the implementation      prospects could delay                 implemented with the 
  of our software and our             sales cycles/ongoing                  necessary technology 
  support provision along             implementations as clients            and infrastructure in 
  with the collection of              focus on short-term priorities        place to facilitate home 
  client monies.                      arising from COVID-19.                working for all employees 
                                                                            to allow all business 
                                      In addition, the global               functions to be provided 
                                      travel restrictions in                without disruption to 
                                      place may slow down the               our clients. 
                                      agreement of new revenue 
                                      opportunities further                 The Group continues to 
                                      whilst the ongoing implementations    monitor developments 
                                      are often completed through           across its client base 
                                      our consultants' attendance           and prospects through 
                                      at client sites around                its various engagement 
                                      the world. These sites                teams and partners. The 
                                      could be impacted in                  majority of our client 
                                      the short to medium term              contracts include force 
                                      as clients and prospects              majeure clauses which 
                                      work remotely as part                 should provide the Group 
                                      of their business continuity          with protection if there 
                                      plans.                                is any contractual non-performance 
                                                                            due to the impact of 
                                      Furthermore, clients'                 COVID-19. 
                                      own cash flow positions 
                                      could become impacted                 The Group operates a 
                                      as a result of being                  closely controlled collection 
                                      negatively impacted from              policy with constant 
                                      COVID-19 increasing the               communication with engagement 
                                      risk around non-payment               teams reducing any potential 
                                      of licence fees and services.         exposure of non-payment. 
                                                                            The Group only has minimal 
                                                                            exposure to those industries 
                                                                            which were most affected 
                                                                            by COVID-19 such as travel, 
                                                                            retail and leisure. 
                                    ------------------------------------  ------------------------------------ 
 

All other principal risks and uncertainties detailed within the Group's 2019 Annual Report remain applicable for the first six months of the financial year. The Group's 2019 Annual Report is available from the Aptitude Software website: https://www.aptitudesoftware.com/investor-relations/reports-presentations/

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

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

For the six months ended 30 June 2020

 
                                Unaudited six months ended                   Unaudited six months ended                   Audited year ended 31 Dec 
                                        30 Jun 2020                                 30 Jun 2019*                                     2019* 
                                Before                                       Before                                       Before 
                        Non-underlying   Non-underlying              Non-underlying   Non-underlying              Non-underlying   Non-underlying 
                 Note            items            items      Total            items            items      Total            items            items      Total 
 Continuing 
 operations                     GBP000           GBP000     GBP000           GBP000           GBP000     GBP000           GBP000           GBP000     GBP000 
 Revenue          5             29,129                -     29,129           28,831                -     28,831           59,652                -     59,652 
 Operating 
  costs          5/6          (24,034)            (563)   (24,597)         (23,772)            (423)   (24,195)         (49,150)          (1,559)   (50,709) 
                       ---------------  ---------------  ---------  ---------------  ---------------  ---------  ---------------  ---------------  --------- 
 Operating 
  profit         5/6             5,095            (563)      4,532            5,059            (423)      4,636           10,502          (1,559)      8,943 
 Finance 
  income                            50                -         50               55                -         55              158                -        158 
 Finance costs                    (42)                -       (42)            (278)                -      (278)            (326)                -      (326) 
                       ---------------  ---------------  ---------  ---------------  ---------------  ---------  ---------------  ---------------  --------- 
 Profit before 
  income 
  tax                            5,103            (563)      4,540            4,836            (423)      4,413           10,334          (1,559)      8,775 
 Income tax 
  expense         7            (1,225)              135    (1,090)          (1,161)              102    (1,059)          (2,403)              370    (2,033) 
                       ---------------  ---------------  ---------  ---------------  ---------------  ---------  ---------------  ---------------  --------- 
 Profit from 
  continuing 
  operations                     3,878            (428)      3,450            3,675            (321)      3,354            7,931          (1,189)      6,742 
 Profit from 
  discontinued 
  operations      17                 -                -          -            2,664           19,769     22,433            2,549           19,881     22,430 
 Profit for 
  the period                     3,878            (428)      3,450            6,339           19,448     25,787           10,480           18,692     29,172 
                       ===============  ===============  =========  ===============  ===============  =========  ===============  ===============  ========= 
 Earnings per share from continuing 
  operations 
 Basic            8                                           6.0p                                         5.5p                                        11.2p 
                                                         ---------                                    ---------                                    --------- 
 Diluted          8                                           5.9p                                         5.2p                                        11.0p 
                                                         ---------                                    ---------                                    --------- 
 Earnings per 
 share 
 Basic            8                                           6.0p                                        42.2p                                        48.4p 
                                                         ---------                                    ---------                                    --------- 
 Diluted          8                                           5.9p                                        40.2p                                        47.7p 
                                                         ---------                                    ---------                                    --------- 
 
   * Amounts displayed within the prior periods have been restated for the disposal of Microgen Financial 
   Systems on 28 June 2019 which met the criteria of being presented as a discontinued operation. See note 
   17 for details. 
 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2020

 
                                                   Unaudited     Unaudited   Audited 
                                                  six months    six months      year 
                                                       ended         ended     ended 
                                                      30 Jun        30 Jun    31 Dec 
                                                        2020          2019      2019 
                                                      GBP000        GBP000    GBP000 
 
 Profit for the period                                 3,450        25,787    29,172 
                                                ------------  ------------  -------- 
 Other comprehensive income/(expense) 
 Items that may subsequently be reclassified 
  to profit or loss: 
 Fair value gain/(loss) on hedged 
  financial instruments                                  210            88     (186) 
 Currency translation difference                          30         (167)     (415) 
 Other comprehensive income from 
  discontinued operations                                  -            22        22 
                                                ------------  ------------  -------- 
 Other comprehensive income/(expense) 
  for the period, net of tax                             240          (57)     (579) 
                                                ------------  ------------  -------- 
 
   Total comprehensive income for the 
   period                                              3,690        25,730    28,593 
                                                ============  ============  ======== 
 
 Total comprehensive income for the period 
  arises from: 
 Continuing operations                                 3,690         3,275     6,141 
 Discontinued operations                                   -        22,455    22,452 
                                                ------------  ------------  -------- 
                                                       3,690        25,730    28,593 
                                                ============  ============  ======== 
 

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

As at 30 June 2020

 
                                                 Unaudited   Unaudited    Audited 
                                                     as at       as at      as at 
                                                    30 Jun      30 Jun     31 Dec 
                                          Note        2020        2019       2019 
 ASSETS                                             GBP000      GBP000     GBP000 
 Non-current assets 
 Property, plant and equipment            11         2,558       3,653      3,207 
 Goodwill                                           23,787      23,787     23,787 
 Intangible assets                                   6,063       6,909      6,486 
 Other long-term assets                              1,886       1,729      1,746 
 Income tax assets                                       -           -        944 
 Deferred tax assets                                   703         819      1,198 
                                                    34,997      36,897     37,368 
                                                ----------  ----------  --------- 
 Current assets 
 Trade and other receivables              12        13,031      15,404      9,659 
 Financial assets 
 - derivative financial instruments                    121         176          4 
 Current income tax assets                           1,555         980      1,155 
 Cash and cash equivalents                          30,887      69,897     32,965 
                                                ----------  ----------  --------- 
 Total current assets                               45,594      86,457     43,783 
                                                ----------  ----------  --------- 
 Total assets                                       80,591     123,354     81,151 
                                                ----------  ----------  --------- 
 
 LIABILITIES 
 Current liabilities 
 Financial liabilities 
  - derivative financial instruments                  (28)        (19)      (120) 
 Trade and other payables                 13      (28,641)    (29,642)   (30,122) 
 Capital lease obligations                14         (479)       (865)      (835) 
 Current income tax liabilities                      (206)       (316)      (485) 
 Provisions                               15          (38)           -       (38) 
                                                  (29,392)    (30,842)   (31,600) 
                                                ----------  ----------  --------- 
 Net current assets                                 16,202      55,615     12,183 
                                                ----------  ----------  --------- 
 
 Non-current liabilities 
 Capital lease obligations                14       (1,122)     (1,676)    (1,288) 
 Provisions                               15         (404)       (291)      (337) 
 Deferred tax liabilities                          (1,358)     (2,142)    (1,502) 
                                                ----------  ----------  --------- 
                                                   (2,884)     (4,109)    (3,127) 
                                                ----------  ----------  --------- 
 NET ASSETS                                         48,315      88,403     46,424 
                                                ==========  ==========  ========= 
 

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

As at 30 June 2020

 
            Unaudited     Unaudited     Audited 
                as at         as at       as at 
               30 Jun        30 Jun      31 Dec 
     Note        2020          2019        2019 
                             GBP000      GBP000 
 
 
 SHAREHOLDERS' EQUITY                   GBP000 
 Share capital                    16     4,140    3,994      4,128 
 Share premium account            16     7,720    6,492      7,660 
 Capital redemption reserve             12,372   12,372     12,372 
 Other reserves                         34,289   34,353     34,079 
 (Accumulated losses)/retained 
  earnings                             (9,570)   31,610   (11,149) 
 Foreign currency translation 
  reserve                                (636)    (418)      (666) 
                                      --------  -------  --------- 
 TOTAL EQUITY                           48,315   88,403     46,424 
                                      ========  =======  ========= 
 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2020

 
                                                                         Foreign 
                                              Share                     currency       Capital 
                                   Share    premium   Accumulated    translation    redemption       Other 
                                 capital    account        losses        reserve       reserve    reserves     Total 
                                  GBP000     GBP000        GBP000         GBP000       GBP'000      GBP000    GBP000 
 
 Total equity as at 
  1 January 2020                   4,128      7,660      (11,149)          (666)        12,372      34,079    46,424 
                             -----------  ---------  ------------  -------------  ------------  ----------  -------- 
 Comprehensive income 
 Profit for the period                 -          -         3,450              -             -           -     3,450 
 Cash flow hedges 
  - net fair value 
   gains                               -          -             -              -             -         210       210 
 Exchange rate adjustments             -          -             -             30             -           -        30 
                             -----------  ---------  ------------  -------------  ------------  ----------  -------- 
 
 Total comprehensive 
  income for the period                -          -         3,450             30             -         210     3,690 
                             -----------  ---------  ------------  -------------  ------------  ----------  -------- 
 Shares issued under 
  share option schemes                12         60             -              -             -           -        72 
 Share options - value 
  of employee service                  -          -           159              -             -           -       159 
 Dividends to equity 
  holders of the company               -          -       (2,030)              -             -           -   (2,030) 
 
 Total contributions 
  by and distributions 
  to owners of the company 
  recognised directly 
  into equity                         12         60       (1,871)              -             -           -   (1,799) 
                             -----------  ---------  ------------  -------------  ------------  ----------  -------- 
 Balance at 30 June 
  2020 (unaudited)                 4,140      7,720       (9,570)          (636)        12,372      34,289    48,315 
                             ===========  =========  ============  =============  ============  ==========  ======== 
 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2019

 
                                                                           Foreign 
                                                  Share                   currency       Capital 
                                       Share    premium    Retained    translation    redemption       Other 
                                     capital    account    earnings        reserve       reserve    reserves     Total 
                                      GBP000     GBP000      GBP000         GBP000       GBP'000      GBP000    GBP000 
 
 Total equity as at 
  1 January 2019                       3,958      6,488       8,010          (273)        12,372      34,265    64,820 
                                 -----------  ---------  ----------  -------------  ------------  ----------  -------- 
 Comprehensive income 
 Profit for the period                     -          -      25,787              -             -           -    25,787 
 Cash flow hedges 
  - net fair value 
   gains                                   -          -           -              -             -          88        88 
 Exchange rate adjustments                 -          -           -          (145)             -           -     (145) 
                                 -----------  ---------  ----------  -------------  ------------  ----------  -------- 
 
 Total comprehensive 
  income for the period                    -          -      25,787          (145)             -          88    25,730 
                                 -----------  ---------  ----------  -------------  ------------  ----------  -------- 
 Shares issued under 
  share option schemes                    36          4           -              -             -           -        40 
 Share options - value 
  of employee service                      -          -         528              -             -           -       528 
 Dividends to equity 
  holders of the company                   -          -     (2,715)              -             -           -   (2,715) 
 
 Total contributions 
  by and distributions 
  to owners of the company 
  recognised directly 
  in equity                               36          4     (2,187)              -             -           -   (2,147) 
                                 -----------  ---------  ----------  -------------  ------------  ----------  -------- 
 Balance at 30 June 
  2019 
  (unaudited)                          3,994      6,492      31,610          (418)        12,372      34,353    88,403 
                                 ===========  =========  ==========  =============  ============  ==========  ======== 
 
 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

For the six months ended 30 June 2020

 
                                                                      Unaudited          Unaudited       Audited 
                                                                                                            year 
                                                               six months ended   six months ended         ended 
                                                        Note        30 Jun 2020        30 Jun 2019   31 Dec 2019 
                                                                         GBP000             GBP000        GBP000 
 Cash flows from operating activities 
 Cash generated from operations                            9                925              6,992        18,420 
 Interest paid                                                             (42)              (307)         (326) 
 Income tax paid                                                          (439)            (1,199)       (2,077) 
 
 Net cash flows generated from operating activities                         444              5,486        16,017 
                                                              -----------------  -----------------  ------------ 
 
 Cash flows from investing activities 
 Purchase of property, plant and equipment                                (131)              (429)         (828) 
 Disposal of subsidiaries, net of cash disposed           17                  -             47,152        47,152 
 Interest received                                                           50                 57           158 
 Net cash (used in)/generated from investing 
  activities                                                               (81)             46,780        46,482 
                                                              -----------------  -----------------  ------------ 
 
 Cash flows from financing activities 
 Net proceeds from issuance of ordinary shares            16                 72                 40         1,368 
 Dividends paid to company's shareholders                 10            (2,030)            (2,715)       (3,859) 
 Repayment of capital lease obligations                                   (489)              (607)       (1,127) 
 Return of value to shareholders                                              -                  -      (46,420) 
 Expenses relating to return of value                                         -                  -         (600) 
 Repayment of loan                                                            -            (8,000)       (8,000) 
 Net cash used in financing activities                                  (2,447)           (11,282)      (58,638) 
                                                              -----------------  -----------------  ------------ 
 
 Net (decrease)/increase in cash and cash 
  equivalents                                                           (2,084)             40,984         3,861 
 Cash and cash equivalents at beginning of period                        32,965             29,186        29,186 
                                                                              6              (273)          (82) 
 Exchange rate gains/(losses) on cash and cash equivalents 
 Cash and cash equivalents at end of period                              30,887             69,897        32,965 
                                                              =================  =================  ============ 
 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

   1.       General information 

Aptitude Software Group plc (the 'Company') and its subsidiaries (together, the 'Group') is a specialist provider of powerful financial management software to large global businesses.

The Company is a public limited company incorporated and domiciled in England and Wales with a primary listing on the London Stock Exchange. The address of its registered office is Old Change House, 128 Queen Victoria Street, London, England, EC4V 4BJ.

These condensed consolidated interim financial statements were approved for issue on 28 July 2020.

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2019 were approved by the Board of directors on 10 March 2020 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

The interim results for the six-month period ended 30 June 2020 and the comparatives for 30 June 2019 are unaudited, yet have been reviewed by the independent auditors. A copy of the review report is included at the end of this report.

   2.       Basis of preparation 

These condensed consolidated interim financial statements for the six months ended 30 June 2020 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. These condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with IFRSs as adopted by the European Union.

After reviewing the Company's forecasts and projections, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. In particular, these forecasts considered the future impact on Aptitude Software Limited of COVID-19. The Company therefore continues to adopt the going concern basis in preparing its financial statements.

A scenario testing exercise was also performed for the three years 2020, 2021 and 2022, with several different sets of assumptions modelled including some more pessimistic than current indications may suggest. In all scenarios Aptitude Software remains comfortably profitable and cash generative in the years under review, although below the Director's expectations set prior to the impact of COVID-19. Financial performance in 2020 is not expected to be materially impacted due to the visibility over services revenue from existing clients and the benefits of the Aptitude Software Group's recurring revenue business model. The recurring revenues, representing over 50% of total revenue, are resilient given the nature of the Group's enterprise applications which are typically heavily integrated and central to clients' mission-critical long-term financial reporting processes, underpinned by minimum contractual terms of up to six years at inception.

The modelled lengthening of sales cycles, principally with insurance prospects in 2020 is, however, expected to have a more significant impact on 2021 services revenue due to the time lag between the signing of new business contracts and the resulting projects reaching peak levels of activity. Profitability is expected to return towards earlier expectations in 2022 on the assumption that a more normal business environment has returned in 2021.

At this time of economic uncertainty caused by COVID-19 the Directors are reassured that the Aptitude Software Group is financially robust benefitting from a cash balance at 30 June 2020 of GBP30.9 million and no bank loans. Additionally, the Group is cash generative and profitable, reporting Adjusted Operating Profit in the six months ended 30 June 2020 of GBP5.1 million.

The Group continues to monitor the collection of monies from clients with no material delays in payment being cited.

   3.       Accounting policies 

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

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

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

   4.       Estimates 

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2019, with the exception of changes in estimates that are required in determining the provision for income taxes.

Fair value estimation

Financial instruments not measured at fair value

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

Financial instruments measured at fair value

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

 
                                                                     Level 2 inputs 
                                                                  Unaudited      Unaudited 
                                                                 six months     six months 
                                                                      ended          ended 
                                                                30 Jun 2020    30 Jun 2019 
                                                                    GBP'000        GBP'000 
 Financial assets 
 Derivative financial assets (designated hedge instruments)             121            176 
                                                                        121            176 
                                                              =============  ============= 
 
 
 Financial liabilities 
 Derivative financial liabilities (designated hedge instruments)    (28)   (19) 
                                                                    (28)   (19) 
                                                                   =====  ===== 
 

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

   5.       Segmental information 

Business segments

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

Geographical segments

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

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

 
                             Sales revenue by origin      Sales revenue by destination 
                              Unaudited      Unaudited        Unaudited       Unaudited 
                             six months     six months       six months      six months 
                                  ended          ended            ended           ended 
                            30 Jun 2020    30 Jun 2019      30 Jun 2020     30 Jun 2019 
                                 GBP000         GBP000           GBP000          GBP000 
 Continuing operations 
 United Kingdom                  16,050         15,363            4,729           4,764 
 Rest of World                   13,079         13,468           24,400          24,067 
                                 29,129         28,831           29,129          28,831 
                          -------------  -------------  ---------------  -------------- 
 
   5.       Segmental information (continued) 

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

 
 
 Continuing operations 
 
 Unaudited six months ended 30 June 2020 
                               Software related 
                                    revenue             Services related revenue 
                               UK      RoW    Total         UK       RoW     Total    Total 
                           GBP000   GBP000   GBP000     GBP000    GBP000    GBP000   GBP000 
 Revenue from external 
  clients                   2,615   12,080   14,695      2,114    12,320    14,434   29,129 
                          =======  =======  =======  =========  ========  ========  ======= 
 
 Unaudited six months ended 30 June 2019 
                               Software related 
                                    revenue             Services related revenue 
                               UK      RoW    Total         UK       RoW     Total    Total 
                           GBP000   GBP000   GBP000     GBP000    GBP000    GBP000   GBP000 
 Revenue from external 
  clients                   2,444   11,688   14,132      2,320    12,379    14,699   28,831 
                          =======  =======  =======  =========  ========  ========  ======= 
 

All of the revenue displayed in the above table is recognised over time in line with the Group's accounting policy detailed on pages 78 to 80 of the Aptitude Software Group plc 2019 Annual Report and has been generated from contracts with clients.

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

 
                        Carrying amount of 
                         non-current assets           Capital expenditure 
                       Unaudited      Unaudited      Unaudited      Unaudited 
                      six months     six months     six months     six months 
                           ended          ended          ended          ended 
                     30 Jun 2020    30 Jun 2019    30 Jun 2020    30 Jun 2019 
                          GBP000         GBP000         GBP000         GBP000 
 
 United Kingdom           17,417         17,682             55            309 
 Rest of World            16,877         18,396             76            120 
                          34,294         36,078            131            429 
                   -------------  -------------  -------------  ------------- 
 

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

   6.       Non-underlying items 
 
                                                   Unaudited            Unaudited              Audited 
                                                  six months           six months                 year 
                                           ended 30 Jun 2020    ended 30 Jun 2019    ended 31 Dec 2019 
                                                      GBP000               GBP000               GBP000 
 
 Continuing operations 
 Amortisation of acquired intangibles                    423                  423                  846 
 Restructuring and separation costs                      140                    -                    - 
 Overseas taxation provision                               -                    -                  713 
                                                         563                  423                1,559 
 
   7.       Income tax expense 

Income tax expense is recognised based on management's estimate of the weighted average income tax rate expected for the full financial year of 24% (the estimated tax rate for the six months ended 30 June 2019 was 24%). The increase against the United Kingdom corporation tax rate of 19% is due to the proportion of profits in overseas territories with higher prevailing tax rates, principally in the USA. The weighted average income tax rate applied to discontinued operations for the six months ended 30 June 2019 was 20%.

 
 8. Earnings per share                                Unaudited 
                                  Unaudited six      six months        Audited 
                                   months ended    ended 30 Jun     year ended 
                                    30 Jun 2020            2019    31 Dec 2019 
                                          pence           pence          pence 
 
 Earnings per share 
 Basic 
 From continuing operations                 6.0             5.5           11.2 
 From discontinued operations                 -            36.7           37.2 
                                 --------------  --------------  ------------- 
                                            6.0            42.2           48.4 
 
 Diluted 
 From continuing operations                 5.9             5.2           11.0 
 From discontinued operations                 -            35.0           36.7 
                                 --------------  --------------  ------------- 
                                            5.9            40.2           47.7 
 
 
 
 8. Earnings per share (continued) 
 
                                                      Unaudited 
                                  Unaudited six      six months        Audited 
                                   months ended    ended 30 Jun     year ended 
                                    30 Jun 2020            2019    31 Dec 2019 
 Adjusted earnings per 
  share                                   pence           pence          pence 
 Basic 
 From continuing operations                 6.7             6.0           12.8 
 From discontinued operations                 -             4.1            4.2 
                                 --------------  --------------  ------------- 
                                            6.7            10.1           17.0 
 Diluted 
 From continuing operations                 6.6             5.7           12.5 
 From discontinued operations                 -             4.0            4.2 
                                 --------------  --------------  ------------- 
                                            6.6             9.7           16.7 
 

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

 
                                                     Unaudited 
                                 Unaudited six      six months        Audited 
                                  months ended    ended 30 Jun     year ended 
                                   30 Jun 2020            2019    31 Dec 2019 
                                         pence           pence          pence 
 
 Basic earnings per share                  6.0            42.2           48.4 
 Non-underlying items                      0.7          (32.1)         (31.0) 
 Prior years' tax credit                     -               -          (0.4) 
 Adjusted earnings per share               6.7            10.1           17.0 
                                --------------  --------------  ------------- 
 
   9.       Cash generated from operations 
 
                                                                     Unaudited        Audited 
                                                      Unaudited     six months           year 
                                               six months ended          ended          ended 
                                                    30 Jun 2020    30 Jun 2019    31 Dec 2019 
                                                         GBP000         GBP000         GBP000 
 
 Profit before tax for the period 
  from: 
 Continuing operations                                    4,540          4,413          8,775 
 Discontinued operations                                      -         22,964         22,961 
                                             ------------------  -------------  ------------- 
 Profit before tax including discontinued 
  operations                                              4,540         27,377         31,736 
 
 Adjusted for: 
   Depreciation                                             823          1,012          1,844 
   Overseas taxation provision                                -              -            713 
   Amortisation                                             423            963          1,392 
   Share-based payment expense                              159            528          1,033 
   Gain on sale of subsidiary                                 -       (20,309)       (23,657) 
   Finance income                                          (50)           (57)          (158) 
   Finance costs                                             42            307            326 
 
 Changes in working capital: 
 (Increase)/decrease in receivables                     (3,512)        (3,549)          1,493 
 (Decrease)/increase in payables                        (1,518)            721          3,900 
 Increase/(decrease) in provisions                           18            (1)          (202) 
 
 Cash generated from operations                             925          6,992         18,420 
                                             ==================  =============  ============= 
 
   10.     Dividends 

The interim dividend of 1.8 pence per share (2019: 1.8 pence per share) was approved by the Board on 28 July 2020. It is payable on 28 August 2020 to shareholders on the register at 7 August 2020. This interim dividend has not been included as a liability in this interim financial information. It will be recognised in shareholders' equity in the year to 31 December 2020. A final dividend of GBP2,030,000 was paid in May 2020 and relates to the year ending 31 December 2019 (2019: final dividend GBP2,715,000).

   11.      Property, plant and equipment 
 
                                                           Unaudited               Unaudited 
                                                          six months              six months 
                                                               ended                   ended 
                                                         30 Jun 2020             30 Jun 2019 
                                                              GBP000                  GBP000 
 Opening net book amount 1 January                             3,207                   5,417 
 Additions                                                       131                     429 
 Disposal of subsidiary                                            -                 (1,213) 
 Net disposals                                                     -                    (13) 
 Exchange movements                                               43                      45 
 Depreciation                                                  (823)                 (1,012) 
 Closing net book amount 30 June (unaudited)                   2,558                   3,653 
                                                  ==================  ====================== 
 
 

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

   12.     Trade and other receivables 
 
                                                         Unaudited           Unaudited 
                                                        six months          six months 
                                                             ended               ended 
                                                       30 Jun 2020         30 Jun 2019 
                                                            GBP000              GBP000 
 Trade receivables - net                                    10,724              12,331 
 Other receivables                                             672               1,012 
 Prepayments                                                 1,171                 656 
 Accrued income                                                464               1,405 
 Closing net book amount 30 June (unaudited)                13,031              15,404 
                                                  ================  ================== 
 

Contract assets and contract liabilities only comprise accrued and deferred income respectively.

Within the trade receivables balance of GBP10,724,000 (30 June 2019: GBP12,331,000) there are balances totalling GBP2,385,000 (30 June 2019: GBP2,217,000) which, at 30 June 2020 were overdue for payment. During July 2020, significant receipts totalling GBP3,900,000 have been collected against the total receivables balance.

   13.     Trade and other payables 
 
                                                           Unaudited           Unaudited 
                                                          six months          six months 
                                                               ended               ended 
                                                         30 Jun 2020         30 Jun 2019 
                                                              GBP000              GBP000 
 Trade payables                                                  620                 941 
 Other tax and social security 
  payable                                                      1,311               1,024 
 Other payables                                                  128                 882 
 Accruals                                                      4,347               5,589 
 Deferred income                                              22,235              21,206 
 Closing net book amount 30 June (unaudited)                  28,641              29,642 
                                                  ==================  ================== 
 
   14.     Capital lease obligations 
 
                                                                  Unaudited 
                                                    Unaudited    six months 
                                                   six months         ended 
                                                        ended        30 Jun 
                                                  30 Jun 2020          2019 
                                                       GBP000        GBP000 
 Amounts payable under capital 
  lease arrangements: 
 Within one year                                          531           948 
 Within two to five years                               1,096         1,473 
 After five years                                         114           344 
 Total                                                  1,741         2,765 
 Less: future finance charges                           (140)         (224) 
                                                -------------  ------------ 
 Present value of lease obligations                     1,601         2,541 
 Less: Amount due for settlement within 12 
  months (shown under current liabilities               (479)         (865) 
                                                               ------------ 
 As at 30 June                                          1,122         1,676 
                                                -------------  ------------ 
 
 
 
                                                                       Unaudited 
                                                         Unaudited    six months 
                                                        six months         ended 
                                                             ended        30 Jun 
                                                       30 Jun 2020          2019 
 The present value of financial lease liabilities 
  is split as follows:                                      GBP000        GBP000 
 Within one year                                               479           865 
 Within two to five years                                    1,008         1,343 
 After five years                                              114           333 
                                                     -------------  ------------ 
                                                             1,601         2,541 
                                                     =============  ============ 
 
   15.     Provisions 
 
                                                                     Unaudited 
                                              Unaudited             six months 
                                       six months ended                  ended 
                                            30 Jun 2020            30 Jun 2019 
                                                 GBP000                 GBP000 
 At 1 January                                       375                    424 
 Charged to income statement                         60                      - 
 Disposal of subsidiary                               -                  (132) 
 Exchange movements                                   7                    (1) 
                                  ---------------------  --------------------- 
 At 30 June                                         442                    291 
                                  =====================  ===================== 
 
 

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

 
                      Unaudited      Unaudited 
                     six months     six months 
                          ended          ended 
                    30 Jun 2020    30 Jun 2019 
                         GBP000         GBP000 
 Current                     38              - 
 Non-current                404            291 
 At 30 June                 442            291 
                  =============  ============= 
 
 

GBP 377,000 of the total provision at 30 June 2020 of GBP 442,000 relates to the cost of dilapidations in respect of its occupied leasehold premises (30 June 2019: GBP242,000).

   16.     Share capital 
 
                                           Unaudited               Unaudited 
                                        six months ended        six months ended 
                                          30 Jun 2020             30 Jun 2019 
 Ordinary share capital at 
  7 1/3 pence (30 June 2019:             Number   Ordinary       Number   Ordinary 
  6 3/7 pence) each                   of shares     Shares    of shares     Shares 
                                            000     GBP000          000     GBP000 
 Issued and fully paid: 
 Opening balance as at 1 January         56,218      4,128       61,173      3,932 
 Shares issued under share 
  option schemes                            160         12          555         36 
 At 30 June (unaudited)                  56,378      4,140       61,728      3,968 
                                    -----------  ---------  -----------  --------- 
 
 Shares to be issued 
 Deferred equity consideration 
  on acquisition                              -          -          399         26 
                                    -----------  ---------  -----------  --------- 
 Closing balance as at 30 June 
  (unaudited)                            56,378      4,140       62,127      3,994 
                                    ===========  =========  ===========  ========= 
 
 
   16.     Share capital (continued) 

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

Employee share option scheme options exercised during the period to 30 June 2020 resulted in 159,992 shares being issued (30 June 2019: 554,710), with exercise proceeds of GBP72,000. The related weight average share price at the time of exercise was GBP3.93 per share.

Share premium

 
                                                                      Unaudited 
                                                        Unaudited    six months 
                                                       six months         ended 
                                                            ended        30 Jun 
                                                      30 Jun 2020          2019 
                                                           GBP000        GBP000 
 Opening balance as at 1 January                            7,660         6,488 
 Movement in relation to share options exercised               60             4 
 Closing balance as at 30 June (unaudited)                  7,720         6,492 
                                                    =============  ============ 
 
   17.     Discontinued operations 

On 28 June 2019, the Group completed the disposal of Microgen Financial Systems Limited and is reported in the prior year as a discontinued operation. Financial information relating to the discontinued operation for the period to the date of disposal along with the gain on disposal are presented within note 28 of the Aptitude Software Group plc 2019 Annual Report.

   18.     Related party transactions 

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

During 2020, the Group entered into transactions with a subsidiary of FDM Group (Holdings) plc, a company for which Peter Whiting (non-executive Director of Aptitude Software Group plc) is currently a non-executive Director. FDM Group (Holdings) plc provided consultancy services to the Group during the six-month period ended 30 June 2020 at a cost of GBP164,000 (Six months ended 30 June 2019: GBP219,000).

   18.     Related party transactions (continued) 

During the prior year, the Group entered into transactions with Phoenix Johnson Ltd, a company for which Naomi Johnson (an experienced facility management professional), the wife of Tom Crawford who was at that point a Director of Aptitude Software Group plc, is both the sole shareholder and an employee. Phoenix Johnson Ltd provided consultancy services to Aptitude Software Group plc during the six-month period ended 30 June 2019 at a cost of GBP28,000. These services ceased on 1 November 2019.

There were no other related party transactions during the six-month period ended 30 June 2020 (30 June 2019: GBPnil), as defined by International Accounting Standard No 24 'Related Party Disclosures', except for key management compensation. The related party transactions for the year ended 31 December 2019 as defined by International Accounting Standard No 24 'Related Party Disclosures' are disclosed in note 33 of the Aptitude Software Group plc Annual Report for the year ended 31 December 2019.

   19.     Statement of directors' responsibilities 

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

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

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

The Directors of Aptitude Software Group plc are listed in the Aptitude Software Group plc Annual Report for 31 December 2019. A list of current directors is maintained on the Aptitude Software Group plc website: www.aptitudesoftware.com/investor-relations/

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

By order of the Board

P Wood

28 July 2020

Deputy Chief Executive Officer and Chief Financial Officer

Independent review report to Aptitude Software Group plc

Report on the condensed consolidated interim financial statements

We have reviewed Aptitude Software Group plc's condensed consolidated interim financial statements (the "interim financial statements") in the Interim Results of Aptitude Software Group plc for the 6 month period ended 30 June 2020 which comprises;

   --    the condensed consolidated interim balance sheet as at 30 June 2020; 

-- the condensed consolidated interim income statement and condensed consolidated interim statement of comprehensive income for the period then ended;

   --    the condensed consolidated interim statement of cash flows for the period then ended; 

-- the condensed consolidated interim statement of changes in equity for the period then ended; and

   --    the explanatory notes to the interim financial statements. 

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors.

The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express a conclusion to the company on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

The impact of uncertainties arising from the UK exiting the European Union on our review

Our review of the condensed set of financial statements in the half-yearly financial report requires us to obtain an understanding of all relevant uncertainties, including those arising as a consequence of the effects of Brexit. Such reviews assess and challenge the reasonableness of estimates made by the Directors and the related disclosures and the appropriateness of the going concern basis of preparation of the financial statements. All of these depend on assessments of the future economic environment and the company's future prospects and performance.

Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty, with the full range of possible outcomes and their impacts unknown. We applied a standardised firm-wide approach in response to these uncertainties when assessing the Company's future prospects and performance. However, no review of interim financial information should be expected to predict the unknowable factors or all possible future implications for a company associated with a course of action such as Brexit.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

This report is made solely to the Company, as a body, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company as a body, for our review work, for this report, or for the conclusion we have formed.

Grant Thornton UK LLP

Statutory Auditor, Chartered Accountants

London

28(th) July 2020

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.

END

IR KKFBQABKDPOB

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July 29, 2020 02:00 ET (06:00 GMT)