Aptitude Regulatory News (APTD)

26 July 2023

APTITUDE SOFTWARE GROUP plc

('Aptitude Software' or 'the Group')

Interim Results for the six months ended

30 June 2023

Aptitude Software Group plc (LSE: APTD), the specialist provider of finance digitization and subscription management software, reports its unaudited results for the six months ended 30 June 2023.

Financial Highlights

Strategic and Operational Highlights:

Commenting on the results, Ivan Martin, Chairman, said: -

'Aptitude is well positioned to realise the opportunities across Finance Digitalization and Subscription Management. The strategic partnership with Microsoft to integrate Fynapse and Dynamics 365, in particular, presents a significant global opportunity for the Group.

Recent changes within the organisation, particularly the appointment of Alex Curran as Acting Chief Executive Officer, will drive the business to execute on the growing opportunity presented by its Fynapse platform. Alex brings a strategic sales focus and long term experience with the Group's clients and partners that provides a strong platform to higher performance.

Recognising the impact of economic uncertainty, the Board took action to reduce cost in the first half of 2023 to underpin its profit expectations for the remainder of the year and increase operational efficiency in future years. Throughout the period, investment was protected in areas of strategic focus, including Fynapse and its go to market capabilities.

The Group has demonstrated resilience against the challenging economic backdrop, continuing to generate new business across each strategic growth driver and in geographically diverse locations. Aptitude remains financially robust and has strong revenue visibility, providing a solid foundation for future growth.'

Contacts

Aptitude Software Group plc

Ivan Martin, Chairman 020-3687-3200

Alex Curran, Acting Chief Executive Officer

Mike Johns, Chief Financial Officer

Alma PR

Caroline Forde / Hilary Buchanan 020-3405-0205

Throughout this announcement:

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

2 Constant currency is calculated by comparing the H1 2023 results with H1 2022 results retranslated at the rates of exchange prevailing during H1 2023. Items within the Financial Highlights table indicated by this superscript reference are calculated on a constant currency basis.

3 Organic growth excludes the contribution from the acquisition of MPP Global in October 2021

4 Recurring Revenue includes, for the first time, revenues from the Group's solution management services, comparatives have been adjusted accordingly

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

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

About Aptitude Software

Aptitude Software helps complex organisations automate and transform their financial business models. Our core areas of focus are the accelerating digitization of the finance function, and the global drive to deploy and manage subscription offerings. Aptitude Software also continues to support clients through complex regulations which often form the catalyst for broader finance transformation.

Aptitude's finance digitization products enable enterprise finance professionals to improve the speed of their function, enhance the quality of its outcomes, and do so at a lower cost. Aptitude draws data from complex, often siloed systems, automate its processing through complex accounting calculations, and create a unified view of finance. Businesses are left with a transparent view of their data, delivered at extreme performance and at a lower cost of ownership improving their finance functions' ability to support their business objectives.

Aptitude's subscription management products are a rapidly increasingly critical driver for new and traditional businesses alike, who need to launch new offerings frequently, in ways which appeal to their customers and allow them to outperform their peers. Aptitude Software's products power the acquisition, monetization, and retention of subscribers straight through to revenue reporting.

Our global client base includes some of the world's largest companies, typically organisations with complex business models, large volumes of data, and numerous internal systems. Aptitude Software is headquartered in London, has a strong and growing North American presence, and is powered by Global Innovation Centres in Poland and the North West of England. Sales, support and implementation services are provided from offices in the United States, the United Kingdom, Canada, and Singapore. www.aptitudesoftware.com

Overview

Aptitude Software showed modest revenue and adjusted operating profit growth in the first half of 2023. The Group maintained investment levels in areas of strategic focus, most notably in its Fynapse platform and go to market capabilities, while driving cost efficiencies to underpin profitability for FY 2023.

Overall, ARR increased year-on-year by 3% on a constant currency basis to £49.8 million on 30 June 2023 (31 December 2022: £50.5 million, 30 June 2022: £48.2 million). As previously announced, ARR growth was moderated by a combination of higher than usual churn continuing into H1 2023, and elongated sales cycles as a result of the uncertainty caused by the wider economic environment and is reflected in the net retention rate of 98% (H1 2022: 103% organic). Despite a difficult economic backdrop and the impact of certain customer consolidation, growth from continuing clients has been strong, particularly through the sale of new Assure contracts. The Group also generated new business success in each of its strategic products.

The recent first go-live of Fynapse at the US Telco charter client represents a key milestone in the development and rollout of the platform, with performance in line with expectations. The Group is confident that Fynapse will accelerate the Group's growth in the medium and long term whilst also generating higher gross margins due to the cloud native technologies on which the platform is built. Fynapse provides differentiated finance digitization capability to a market in which the Group already has outstanding credentials with the successful Aptitude Accounting Hub. The Group continues to expand the capabilities of the platform and is seeing a strengthening pipeline.

The integration of eSuite and the MPP Global team was completed in the early months of 2023, with operational efficiencies generated through the combination of both businesses.

The partnership program continues to develop. The Group has been working with Microsoft in line with its strategic partnership agreement to deeply integrate Fynapse and Dynamics 365 so that both organisations can present an end-to-end solution to prospective customers. In addition, work has been progressing to support and optimise the sale of the combined solution by both parties. Fynapse is now available on both of Microsoft's online marketplaces, AppSource and the Azure Marketplace, enabling Microsoft's other partners to work with the Group to expand customer acquisition opportunities for the product. With firm foundations in place, the Group is confident that the combination of Fynapse's capabilities and the partnership with Microsoft will be a material accelerator for growth in 2024 and beyond.

Investment in product management, research & development in the six months ended 30 June 2023 increased to £8.6 million (H1 2022: £7.9 million), an increase of 9%, which is principally related to Fynapse and the effect of higher inflation on the Group's cost base.

Although headline ARR growth rates have been disappointing in H1 2023, the Board takes confidence in the work performed to underpin the foundations of future growth in the first half of the year and is confident that the performance in 2023 will be in line with its expectations.

Corporate Strategy

Aptitude's strategy is focused on providing innovative finance digitalization and subscription management software to a growing number of C-suite stakeholders in a growing number of clients.

Finance digitization allows finance leaders to improve the operational efficiency of their organisation by streamlining processes and automating manual tasks, enhance the quality of its outcomes, and do so at a dramatically lower total cost of ownership for a modern finance function in organisations that are becoming increasingly complex. Aptitude's products take data from complex, often siloed systems, automate its processing through complex accounting calculations, and create a unified view of business performance. Businesses are left with a transparent view of their finance data, delivered on a near real time basis and at a lower cost of ownership.

Subscription based revenues are an increasingly critical driver for new economy and traditional businesses alike. Aptitude's Subscription Management solutions now power the acquisition, billing, and retention of subscribers straight through to revenue reporting. With Aptitude Software, businesses can take new product subscriptions to market quickly, retain their high-value recurring revenue, and stay ahead of the competition.

Finance Digitization

Market Drivers

Quality of data, speed of reporting and cost continue to be the top drivers on the CFO's agenda as they are increasingly challenged by the demands of operating in a digital world with growing complexity, regulatory and cost pressures. These demands result in an increase in the volume and number of sources of finance data, and the increasing requirement for decision making to move at the pace that the business requires. Aptitude's product set is specifically designed to address these priorities and requirements.

Finance Digitization Products

Fynapse, the Group's next generation digital finance platform, was originally launched in March 2022 with significant milestones achieved since that launch. New business success also continues to be achieved with the established Aptitude Accounting Hub application.

Fynapse is a modular, cloud native, high performance finance platform addressing an enterprise's need to drive finance digitization to underpin the transformation of their wider businesses. The platform builds on the successful Aptitude Accounting Hub, centralising and automating finance, accounting and reporting processes, creating a deep level of operational intelligence for our clients. It delivers a brand-new user centric interface with a consolidated, yet highly granular, view of financial data which enhances business insights to assist decision making. The capabilities of the product drive even greater automation of manual accounting processes, reducing on-going operational costs and driving an improved total cost of ownership for the finance function.

The modular design and ease of integration also allows the market opportunity to extend beyond our current industries into adjacent verticals, shortening implementation cycles and allowing our partner network to implement efficiently, with minimal risk, and delivering a faster time to value for enterprise customers.

Fynapse was successfully delivered to the charter client in the US telco market in 2022 and a multi-year subscription agreement is now in place. The charter client has made good progress with their implementation, with a successful go-live achieved in July 2023. Fynapse is delivering significantly increased processing speeds, efficiency of processing and an enhanced user experience for the charter client. The go-live of Fynapse at the charter client demonstrates the effectiveness of Fynapse and reinforces the Group's confidence in Fynapse's ability to drive future revenue growth.

A strategic global partnership with Microsoft, signed in December 2022, is expected to be a material contributor to the success of Fynapse globally in the medium and longer term across all industry sectors. Under this agreement Fynapse will be the only product available on the market with capabilities deeply integrated with Microsoft Dynamics 365 Finance and operating on the Microsoft Azure cloud platform. This combined solution will provide Aptitude and Microsoft clients with the ability to unify data from various financial systems to increase scalability, gain the ability to rapidly adopt new regulations, automate manual processes whilst delivering better business insights and reduce the cost of the finance function.

In addition to the Microsoft partnership there is a strong interest from large consultancy firms who are attracted to the open design of Fynapse. This open design provides partners with the opportunity to co-create and license their own IP built on the Fynapse platform, further accelerating and differentiating their services. It is pleasing to report that this capability is proving an attractive proposition for the Big-4 accountancy firms and is highly differentiated from the more generalist providers in the market.

The strategic investment continues to enhance the capabilities of Fynapse with development performed at the Aptitude Global Technology Centre in Wroclaw, Poland. Investment levels as a proportion of revenue are expected to peak in 2023 before moderating in future years.

The Group has every confidence in the success of Fynapse which is expected to be a key growth driver for the business in future years.

The Group achieved new business success with the Aptitude Accounting Hub in the first half of 2023, with the signature of a large European bank. Whilst further sales of AAH will be achieved, particularly when used in conjunction with our other regulatory focused applications, we do expect that an increasing number of clients seeking to automate and transform their finance function will opt for Fynapse in the future.

Additionally, successful go-lives have been achieved across 70% of Aptitude's base of clients with the Aptitude Insurance Calculation Engine in the first half of the year following the arrival of the IFRS compliance deadline, with the remaining projects continuing to make good progress. A key focus for the remainder of the year will be upgrading AICE users to Assure, Aptitude's increasing popular solution management service.

Subscription Management

Market Drivers

The subscription economy is continuing to expand into new sectors as the benefits of subscription based recurring revenue are increasingly valued more than traditional non-recurring revenues. The Group has seen this phenomenon in a broader range of sectors such as high-tech advanced industries, medical devices and automotive. As organisations move to these business models they require new systems to manage these subscriptions and require new capabilities to address the complexities of revenue recognition inherent with complex subscriptions.

Aptitude's solutions are focused on the needs of the world's largest companies, organisations with highly complex business models and data processing requirements which generalist providers are unable to address.

Subscription Management Products

Whilst good levels of new business success and growth of existing accounts were achieved, overall Annual Recurring Revenue growth was subdued due to an unusually high level of churn. Impacting all products within Subscription Management there are several underlying reasons for the elevated level of terminations, including business failure of some customers and corporate events which are more prevalent in the markets particularly targeted by the Subscription Management product set. Whilst there has been a negative impact from the dynamic nature of the markets that are the focus of the Subscription Management product set, this dynamism has historically delivered strong organic opportunities within the existing base and is expected to do so again in the future.

In the period, new business success was achieved with the sale of eSuite to a large German publisher. The Group now serves six German publishers with the eSuite platform, with the DACH region a growing focus for new business activity. Further new business success has been achieved with AREV in the period with the signature of a leading consumer products subscription business.

Solution Management Services ('Aptitude Assure')

Aptitude Insurance Calculation Engine clients continued to contract for Aptitude Assure as they reach their go-live dates. These contracts contributed to the year-on-year growth of 18% in the Annual Recurring Revenue derived from Assure to £4.5 million (30 June 2022: £3.8 million).

Implementation Services

Aptitude Software provides implementation services to its clients, with the scale of such services depending on the nature of the application, the size of the opportunity and the balance of responsibilities between Aptitude Software and its partners. The Group's services are provided by a significant pool of highly skilled individuals, providing deep domain and technical expertise which is highly valued by our clients and provide a differentiator compared with our competitors. Demand for implementation services from the Group's on-going projects has been strong in the first half of the year, with clients frequently requesting additional services.

Partner Network 

The growth and development of Aptitude Software's high-quality partner network is a strategic priority. Whilst many prospects are sourced directly by the Group's own sales and marketing teams, the global reach of our partners and the depth of their relationships with large businesses provide Aptitude Software with an increasing number of advanced opportunities, enhanced market coverage and intelligence. In addition to the new business benefits provided by the partner network, the implementation expertise and capabilities of our partners supports the Group's strategic drive to increase software fees faster than its services, leading to a richer revenue mix.

An agreement to provide finance automation to a Big-4 accountancy firm's mergers and acquisitions practice continues to generate strong pipeline. The agreement enables the organisation to accelerate the post-acquisition integration of their clients' finance functions.

Whilst the Big-4 accounting firms have global reach, for specific applications in specific jurisdictions it can be beneficial to work closely with more specialised partner organisations. The benefits of this approach are demonstrated by the success the Group is having with eSuite in the German publishing and Japanese motor manufacturing markets, two markets which would be challenging to unlock without the assistance of our partners. We are engaged with these partners on both on-going projects as well as several additional new business opportunities.

Aptitude Innovation Centres

The Group has maintained the level of investment in its two innovation centres in Poland and the North West of England. Overall there were 226 employees at the Innovation Centre in Poland at 30 June 2023 (30 June 2022: 212) with a further 50 employees (30 June 2022: 47) focused on design, development, implementation and support based in the North West of England. Investment remains focused on both Fynapse and eSuite in these two centres.

The Group's talent acquisition team allows the Group to attract new talent to the business despite increased competition for technologists in both locations. In the current competitive talent market the Group continues to invest in its people, including the initiatives described below.

Our People

The Board wishes to thank its employees for the excellent support and commitment they are providing to the business and to our clients and partners.

Aptitude Software continues to progress its approach to diversity and inclusion with its established advocacy group with representation from across our global team. The business is committed to creating a working environment that recognises diversity, supporting everyone to thrive.

Overall Group headcount has decreased to 524 (31 December 2022: 527, 30 June 2022: 531) with increased investment in Fynapse offset by reductions through cost efficiency action undertaken in the period.

Focus areas

The Group is focused on delivery of the opportunity within finance digitization and subscription management.

The focus of the Group is the ongoing development of the additional capabilities of its Fynapse platform to address the wider market opportunity, both directly and through our Tier 1 partners, whilst continuing to develop and progress demand for our new application. In parallel, the Group will realise the continuing opportunity for Aptitude Accounting Hub for those organisations which have an immediate requirement for the capabilities of this application.

Financial Performance

The Group delivered a solid financial performance in the period with growth of its recurring revenues despite economic headwinds.

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

Revenue

Recurring Revenues

Aptitude Software's Annual Recurring Revenue ('ARR') at 30 June 2023 totalled £49.8 million (31 December 2022: £51.6 million, 30 June 2022: £49.1 million) representing overall year-on-year growth of 1%. On a constant currency basis, overall year-on-year ARR growth was 3% (31 December 2022: £50.5 million, 30 June 2022: £48.2 million). Included within ARR is the value of the Group's recurring solution management services contracts ('Assure') (30 June 2023: £4.5 million, 31 December 2022: £4.3 million, 30 June 2022: £3.8 million).

The value of recurring contracts for the Group's solution management service included within ARR is £4.5 million (31 December 2022: £4.3 million, 30 June 2022: £3.8 million on a constant currency basis).

Net retention in the 12 months to 30 June 2023 was 98% (H1 2022: 103% organic) (measured by the total value of on-going ARR at the period-end from clients in place twelve months earlier as a percentage of the opening ARR from those clients on a constant currency basis). The net retention rate in the period was moderated by higher than usual churn in Subscription, Billing and Revenue Management.

A significant majority of the Group's recurring revenue contracts include the ability to increase ARR for clients by relevant consumer price index rises ('CPI'). There are a small number of contracts with variations to this mechanism which may delay the ability to pass on the full impact of CPI to clients in the short term. While inflation remains high, many of the Group's renewals are weighted toward the second half of the year. The increase attributable to CPI for the period 1 January 2023 to 31 December 2023 is expected to be higher given continued high inflation, but may moderate should inflation fall to target levels before the end of the year.

Recurring revenues recognised in the six months ended 30 June 2023 increased by 11% to £27.0 million (H1 2022: £24.4 million). These now represent 72% of overall revenue (H1 2022: 68%). It is a key part of the Group's strategy to increase this percentage whilst maximising the growth rate of Aptitude Software's ARR, a strategy which in due course will lead to growth in operating margin given the margin differential between software, the largest element of recurring revenue, and implementation services.

Implementation Services

Services revenue totalled £10.5 million for the six months ended 30 June 2023 (H1 2022: £11.7 million) Implementation services revenues continued to benefit from the strong demand from the Group's existing client base.

Research and Development Expenditure

Total expenditure on product management, research and development in the six months ended 30 June 2023 increased to £8.6 million (H1 2022: £7.9 million), an increase of 9%. The increase in research and development relates to the ongoing investment in Fynapse and the effect of higher inflation on the Group's cost base.

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

Operating Profit and Margins

Adjusted Operating Profit for the six months ended 30 June 2023 was £4.2 million (H1 2022: £4.0m). Operating profit on a statutory basis was £1.7 million (H1 2022: £2.1 million). Adjusted Operating Margin for the six months ended 30 June 2023 was 11.2% (H1 2022: 11.1%).

Foreign Exchange

With 53% (H1 2022: 51%) of the Group's revenues being generated from North American clients, the majority of which are invoiced in US Dollars, the financial results are impacted by changes in the US dollar exchange rate. The Group's Annual Recurring Revenue at 30 June 2023 decreased by £1.0 million in the first half by unfavourable exchange rate movements. Aptitude Software's H1 2022 revenue and Adjusted Operating Profit would have been reported at £36.5 million and £4.1 million respectively on a constant currency basis (compared to actual result of £36.1 million and £4.0 million). Constant currency is calculated by comparing the 2022 results with 2023 results retranslated at the rates of exchange prevailing during 2023.

Non-Underlying Items

Non-underlying items of £2.5 million (H1 2022: £1.9 million) comprises intangible amortisation and reorganisation costs.

Taxation

The total tax charge of £0.4 million (H1 2022: £0.4 million) represents 22% of the Group's profit before tax (H1 2022: 19%).

Statutory Results

The Group reported a profit for the period attributable to equity shareholders of £1.3 million (H1 2022: £1.5 million).

Earnings per Share

Increased investment in the business led to Adjusted Basic Earnings per Share and Basic Earnings per Share reducing to 5.7 pence and 2.3 pence (H1 2022: 5.2 pence and 2.6 pence).

Dividend

An interim dividend of 1.8 pence per share is proposed (2022: 1.8 pence). The interim dividend will be payable on 25 August 2023 to shareholders on the register at the close of business on 4 August 2023.

Balance Sheet

The Group has a strong balance sheet with net assets at 30 June 2023 of £59.6 million (H1 2022: £58.7 million), including cash of £24.5 million (H1 2022: £23.6 million) and net funds of £12.2 million (H1 2022: £10.7 million). Trade receivables (net) have decreased to £11.0 million (H1 2022: £14.9 million). Of the balance of £11.0 million, collections following the period end have totalled £4.2 million. Deferred income decreased to £26.7 million at 30 June 2023 (H1 2022: £30.1 million), which was primarily a result of a small number of high value multi-year payments made by clients in 2021 and 2022.

The Group's cash flow is seasonal due to the timing of the invoicing and collection of the Group's recurring revenue which, together with a weighting of a number of other payments in the first half of the year (e.g. bonus), contribute to a weaker cash performance in the first half of any year. Cash outflow from operating activities in the first half of the year was £0.8m (H1 2022: £3.5m), an improvement partly driven through collection of outstanding amounts from the end of 2022. Given the seasonality of cashflow the Group is confident that full year cash flow conversion for 2023 will return to historic levels.

Statement on Principal Risks and Uncertainties

Pursuant to the requirements of the Disclosure and Transparency Rules the Group provides the following information on its principal risks and uncertainties. The Group considers strategic, operational and financial risks and identifies actions to mitigate those risks. These risk profiles are updated at least annually. The principal risks and uncertainties detailed within the Group's 2022 Annual Report remain applicable for the first six months of the financial year. The Group's 2022 Annual Report is available from the Aptitude Software website: www.aptitudesoftware.com/investor-relations/

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

For the six months ended 30 June 2023

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2023

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

As at 30 June 2023

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

As at 30 June 2023

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2023

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2022

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

For the six months ended 30 June 2023

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 finance digitization and subscription management software.

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 8th Floor, 138 Cheapside, London EC2V 6BJ.

These condensed consolidated interim financial statements were approved for issue on 25 July 2023.

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 2022 were approved by the Board of directors on 20 March 2023 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

2. Basis of preparation

These condensed consolidated interim financial statements for the six months ended 30 June 2023 have not been audited or reviewed by the auditors. The interims have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting'. These condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2022, which have been prepared in accordance with UK adopted international accounting standards and company law.

3. Accounting policies

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

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

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

4. Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2022, 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.

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

5. Segmental information

Business segments

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

Geographical segments

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

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

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'):

All of the revenue displayed in the above table is recognised over time in line with the Group's accounting policy detailed on pages 98 to 101 of the Aptitude Software Group plc 2022 Annual Report and has been generated from contracts with clients.

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

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

6. Non-underlying items

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 22% (the estimated tax rate for the six months ended 30 June 2022 was 19%). The increase against H1 2022 levels is due to the increase of the UK income tax rate to 25% from 1 April 2023 from 19% as part of the March 2021 Bill.

8. Earnings per share

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.

9. Cash generated from operations

10. Dividends

The interim dividend of 1.8 pence per share (2022: 1.8 pence per share) was approved by the Board on 25 July 2023. It is payable on 25 August 2023 to shareholders on the register at 4 August 2023. 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 2023. A final dividend of £2,064,000 was paid in June 2023 and relates to the year ending 31 December 2022 (2022: final dividend £2,061,000).

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

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 

Contract assets and contract liabilities only comprise accrued and deferred income respectively. Within the trade receivables balance of £10,994,000 (30 June 2022: £14,901,000), there are balances totalling £2,977,000 (30 June 2022: £3,191,000) which, at 30 June 2023 were overdue for payment. The decrease of £3,907,000 in trade receivables from prior period levels is due to the timing of receipt of annual licence fee and subscription invoices issued. During July 2023, significant receipts totalling £4.2 million were collected against the total receivables balance at 30 June 2023.

13. Trade and other payables

14. Financial liabilities - borrowings