being declared by Aptitude Software (LON:APTD) – it should be positive and help to point investors to the company’s potential upside.
This company last reported an annual recurring revenue of 71.5%, with 55% of its sales in the UK and 45% from the rest of the world.
The Business
Investors with good memories may well remember this company under its original name of Microgen, which floated way back in 1983.
It changed its name to Aptitude Software in 2019.
It provides software solutions that deliver fully autonomous finance to enable its clients to drive growth, efficiency and sustainability.
Fynapse, which is Aptitude’s intelligent finance data management and accounting platform, is designed to increase productivity and lower costs for finance teams globally.
This platform provides a single view of finance and business data, unparalleled performance and automation, faster and better insights, user-friendly functionality and market-leading total cost of ownership.
AGM Statement
Chairman Ivan Martin commented that the group’s performance for 2024 will be in line with expectations.
While also noting that ongoing organisational change is delivering positive progress across all functions, accelerating Fynapse readiness and delivery, underpinned by the platform’s strategic partnerships.
Its pipeline is continuing to grow with key opportunities, including new prospects and the migration of existing clients, progressing well.
In particular new business success has been made across the compliance suite and subscription management solutions, with sales of Aptitude Insurance Calculation Engine to a large Canadian insurer and the sale of eSuite to a UK based video production company.
The Board remains confident that the ongoing work across the business continues to position Aptitude well enough to capitalise on the significant growth opportunity presented by Fynapse.
The Equity
There are some 56.97m shares in issue.
Former Microgen Chairman Patrick Barbour holds 5.15% of the equity.
Other large holders include Long Path Partners (15.53%), Schroder Investment Management (13.07%), Mission Trail Capital Management (7.87%), Invesco Asset Management (6.63%), Canaccord Genuity Wealth (6.57%), Herald Investment Management (4.31%), Soros Fund Management (3.90%), Norges Bank Investment Management (2.69%) and BennBridge (2.17%).
Analyst’s View
The trio of analysts at Canaccord Genuity Capital Markets – Kai Korschelt, Hayley Palmer and Minal Patel – rate the group’s shares as a Buy, looking for 470p a share in due course.
Their current year estimates to end December are for £71.0m (£74.7m) sales, while adjusted pre-tax profits could be £10.6m (£9.6m), with earnings of 15.7p (15.0p) per share.
For next year they see £74.4m sales, £12.3m profits and 18.0p of earnings.
For 2026 they have pencilled in £80.3m, £13.4m and 19.6p respectively.
The analysts conclude that
“With an attractive commercial proposition and clear strategy and roadmap for Fynapse, our confidence in the company returning to growth in 2025 is increasing.
The shares’ CY25E 2.5x EV/Sales and 20x P/E (17.7x ex-cash) multiples, in our view, undervalue the business given blue chip customers, mid-teens margins and ~75% of revenues recurring and UK finance software peers on 25x P/E.”
My View
This company is winning new business with some very big names, which inspires both new client and investor confidence.
The shares, which three years ago were trading at almost 700p, were down to 224p by last October.
Since then they have risen steadily, touching 389p at the end of May – they are now just 370p, valuing the group at £212m, and looking very capable of responding positively to further good news.