2010 Unaudited Preliminary Results

RNS Number : 0858D

Altitude Group PLC

17 March 2011

 



For immediate release                                                                                                                17 March 2011

AIM:  ALT

Altitude Group plc

("Altitude", the "Group" or the "Company")

Unaudited Preliminary Results for the year to 31 December 2010

Altitude announces its unaudited preliminary results for the year to 31 December 2010.

Highlights:

·           Underlying Operating Profit* increased by 292% to £808k (2009: £277k)

·           PBIT increased by £1,126k to £511k (2009: £615k loss)

·           Group revenues up 18% to £18.0 million (2009: £15.3 million) 

·           Revenues in Promotional Marketing division up by 20%

·           Cash generated from operations £1.1m (2009: £0.4m)

·           Closing cash of £1.5m (2009: £0.8m) with no net debt

·           Substantial Progress made with USA launch of Trade Only Cloud software solution

* Underlying operating profit before amortisation of intangible customer related assets, non-recurring administrative expenses and share based payment charges

Colin Cooke, Non-Executive Chairman of Altitude commented:

"The Company has made great progress since the Board restructuring in early 2008, is well positioned, profitable and cash generative, and despite the substantial improvements in the last 18 months, we believe that opportunities exist to advance the business performance further in the coming year. We enter 2011 with a number of opportunities, a dedicated management team, an appropriately structured cost base and a strong balance sheet."

 The Company's Unaudited Preliminary Results are available on its website www.altitudeplc.com

Enquiries:

Altitude Group plc Colin Cooke (Non-Executive Chairman) Martin Varley (Chief Executive)	Tel:  [phone] Tel:  [phone]
Merchant Securities Limited Lindsay Mair / Bidhi Bhoma	Tel:  [phone]

Notes:

Altitude Group plc has two distinct but related businesses. The Promotional Marketing division is one of the UK's leading suppliers and distributors of promotional merchandise to corporate and trade customers

The Technology and Information division (Trade Only) provides a range of Cloud-based Ecommerce, Enterprise Resource Planning, Customer Relationship Management and web-based solutions to both suppliers and distributors operating in the promotional merchandise industry. Trade Only also provides information services to the industry including product data flow between suppliers and independent distributors, and the UK's largest trade show for promotional merchandise industry.

Chairman's Statement

Group Overview

The Group made solid progress in 2010, not only achieving significant growth in revenues and profits, but also ending the year with a strong balance sheet and substantial cash balances.

The challenging trading conditions of 2009 turned more positive from the 2nd quarter of 2010 and as a result we enjoyed sales growth in the Promotional Marketing division of around 20% in the full year, the growth being higher in the 2nd half of the year.  Technology and Information revenues were similar to those in 2009 but generated improved profitability, despite substantial investment in the USA expansion.

In our preliminary results announcement dated 30 April 2010 we mentioned that we would explore the potential to unlock substantial value in the Group by "considering alternative strategies".

We have continued to review the activities of the Group and consider where the greatest potential might exist for additional improvement in shareholder returns. Against the background of better results from both business divisions, we remain convinced that there are further opportunities for increases in shareholder returns by narrowing our focus further. With this strategy in mind, we are taking further steps to separate the areas of our business into two separate divisions, thereby benefiting from clear distinct strategic objectives, management structures and improved business analysis of operating goals and results. Much of this organisational separation has been completed and we will report on the two divisions of Promotional Marketing and Technology and Information in greater detail from now onwards.

The Technology and Information division, through its Trade Only and PromoServe brands, provides a valuable information service between suppliers of promotional merchandise and independent distributors and has a clear strategic goal of becoming a leading provider of Cloud-based business software solutions and information services to the promotional merchandise industry globally.

Following its recently announced acquisition of Technologo, it also offers easy to use web-based virtual sample technology, which can help customers enhance operational efficiency. Operating in a SaaS model (software as a service) Trade Only enables its customers to access the technology and solutions without the need for them to have substantial technical knowledge or hardware resources in-house. Trade Only in turn benefits from annually recurring license fees creating valuable revenue predictability.

Turning to the current trading environment, since the close of 2010 our Technology and Information business has enjoyed a strong start to the year, when historically, the majority of the Trade Only annual revenues are achieved in January due to the timing of the National Show.  The 2011 event was very successful with visitor numbers reaching record levels and growing by 18% compared to the event held in January 2010. Bookings for the January 2012 event are already at 80% of the 2011 levels indicating sustained momentum and recognition of the show's leading status in the UK industry.

Since announcing the entry into a cloud software supply agreement with iPROMOTEu in the USA last November, the Trade Only business has made further progress with the acquisition of Technologo described above. The plans for operational integration are at an advanced stage in anticipation of closing the transaction.  The Board expects that the transaction will be earnings enhancing in the first full year while at the same time accelerating Trade Only's market penetration substantially.

Our Promotional Marketing businesses are trading in line with management expectations. Account wins from 2010 are showing promise for 2011, costs are well controlled and there are opportunities for further growth from existing customers who are likely to continue to increase their marketing spend.

We used the proceeds of our February 2011 placing (which raised £916,800 before expenses) plus existing cash resources to acquire the Technologo assets. Despite this investment the Board expects to be able to maintain cash and liquidity levels sufficient to support anticipated growth within the Group's two divisions.

It is now several years since we joined AIM, and I would like to take this opportunity to thank Keith Willis and Barry Fielder two of our Non-Executive Directors for their tremendous support and service to the Group over that time. Both Keith and Barry have indicated their intent to step down from the Board following the AGM in May of this year and we wish them both well in their retirement. It is our intention to review our Board composition over the next few months and I will provide an update as soon as this is agreed.

Performance Review

Group sales increased by 18% to £18.0m (2009: £15.3m), as previously active clients returned to the market following a reduction in spend during 2009. Results were also boosted by new account wins and a good performance from AdProducts.com, our trade supply business. Revenues in the Trade Only division were at a similar level to 2009, a credible performance given that sales are generated at least a year in advance, and sales for the 2010 events and publications were taking place in the 1st half of 2009, a difficult period for most companies. The Trade Only business enjoyed much improved profitability thanks to the reorganisation carried out late 2009 from which it benefitted from a full year's impact.

The Group has returned to profitability for the first time in three years with a profit before taxation of £0.5m (2009: loss £0.6m).  Operating profit before non-recurring items, amortisation of customer related intangibles and share based payment charges was £0.8m (2009: £0.3m).

The Group balance sheet remains strong and was debt free at 31 December 2010 with a net cash balance of £1.5m (2009: £0.8m).  Underlying cash flow before capital investment and taxation cash outflows was in line with operating profitability.  The Group's working capital profile has remained strong despite increased supplier pressures as a result of the general economic situation.

Strategy

The Group's strategy is to drive substantial value creation from the two distinct business areas. This will be further helped by the efficient separation of the two distinct area of business such that management team can be measured, targeted and incentivised against metrics that are appropriate for the sector they operate in.

The Board takes the following points into consideration when setting targets for the business management teams:-

·    The growth potential for the Technology and Information business is substantial on a global basis. The Board believes that Trade Only offers an unrivalled set of tools for the promotional products and other similar industries. They are delivering growth in recurring revenues, which have a high level of predictability. The on-going investment in the USA which is the single biggest market for promotional products, is an important step towards value creation.

·    The overall Promotional Marketing market is returning to growth, which will serve as an added benefit following the reorganisation of our companies that operate in this sector. The division is well placed with the resources and efficient operations that can support further meaningful revenue growth.

·    The Group will continue to investigate potential transactions and structures that would improve shareholder returns over the medium term.

·    We wish to remain focussed on being a debt free business.

Promotional Marketing

The Promotional Marketing division made an operating profit before non-recurring items, amortisation of customer related intangibles and share based payment charges of £0.9m in 2010 (2009: £0.4m). The Non Stop Promotions business acquired in the year made an immediately profitable impact and has benefitted from the wider resources of the Group from a systems and purchasing perspective.

Within this division, our trade supply business AdProducts.com achieved revenue growth and double-digit profit growth in the year, whilst growing the number of live customers. Further investment was made in new product ranges to support further growth in 2011 and the drive to become a more complete resource for trade customers. Modest capital expenditure will increase capacity in the year and improve operating margins modestly through efficiency gains. The Board believes that the potential for growth in this division is substantial and returns on investment and working capital are amongst the best in the Group.

There are a number of initiatives underway to grow profitable revenue from the Promotional Marketing businesses.  We have a number of new client opportunities to explore and we continue to innovate ways to serve customers in the most efficient way that will reduce their costs and improve their overall buying experience.

Technology and Information

Overall in 2010, the division made an operating profit before non-recurring items, amortisation of customer related intangibles and share based payment charges of £0.7m in 2010 (2009: £0.5m).

Under the brand of Trade Only, this division has a strategic goal of becoming a leading provider of Cloud-based business software solutions and information services to the promotional merchandise industry globally. The Company provides a valuable information service between suppliers of promotional merchandise and independent distributors.

As described above, in November 2010 Trade Only agreed terms with iPROMOTEu.com, Inc. to supply iPROMOTEu and its distributors with Trade Only's cloud based software solution.

iPROMOTEu, which is based in Boston, Massachusetts, was established in 1999 and has over 550 independent distributor affiliates as a part of its network. Trade Only provides a software as a service (SaaS) product for which customers pay on a monthly basis, providing them with a complete customer relationship management and business management suite. Users should benefit from greater efficiency, increased sales, and an improved customer experience.

The implementation phase is currently ahead of plan, we are still working to a go live timescale of the summer of this year, with some of the sales and marketing elements of the solution being provided to affiliates of iPROMOTEu from early April this year.

This agreement with iPROMOTEu provides a number of revenue streams for Trade Only. Three of these are; 1) The provision of the main ERP/CRM system for the head office to efficiently manage and process around 2,000 new orders a week. 2) The provision of a basic order entry cloud solution for individual affiliates for a modest monthly fee. 3) The provision of enhanced tools including web site and product research resources for the affiliates for a premium monthly subscription.

The nature of the tools and services that we provide to distributors and suppliers of promotional products are software tools which mean that we typically end up being their primary provider of these services. Our monthly rental model is now providing good visibility to the revenues and profit of the division and within the UK, we are extending our market leadership position.

Corporate activity

We continue to explore opportunities to improve shareholder returns, we remain focussed on development and growth of the existing divisions of the Company, but remain convinced that the constituent parts of the Group have the potential to unlock substantial value under alternative structural scenarios.

People

Overall the Group is now in its strongest position for three years. This is almost entirely due to the efforts and enthusiasm of all of our team, who have advanced overall profitability, innovated service improvements and developed solutions for customers that will result in further performance benefits this year.

Outlook

I am delighted that the Group has returned to profitability and its best performance for three years. This is as a result of revenue growth and the benefits of the 2009 restructuring programme that we enjoyed a full year of in 2010.  We enter 2011 with a number of new opportunities, a strong and dedicated management tem, an appropriately structured cost base and a strong balance sheet.

Colin Cooke

Chairman

17 March 2011

Operating Review

Promotional Marketing

	2010 £m	2009 £m
Sales	15.6	13.1
Operating profit before non-recurring items, amortisation of customer related intangibles and share based payment charges	0.9	0.4
Operating profit/(loss) after non-recurring items, amortisation of customer related intangibles and share based payment charges	0.6	(0.1)
Net assets	4.7	4.4

Promotional Marketing comprises of our trade supplier AdProducts.com, and our distributor business Dowlis Corporate Solutions, Ross Promotional and Non Stop Promotions. Forming a significant part of the Group, the Promotional Marketing business delivered revenue of £15.6m in 2010 (£13.1m in 2009). As part of this, the trade supply business AdProducts grew sales again in 2010 through an extended product range and a successful customer acquisition program. We made further modest investments in production equipment and through improved stock forecasting and planning reduced stock levels by 15%

The challenging trading conditions of 2009 turned more positive from the 2nd quarter of 2010 and as a result we enjoyed sales growth in the promotional product business of around 20% in the full year, the growth being higher in the 2nd half of the year.

As a result, the Promotional Marketing division made an operating profit before non-recurring items, amortisation of customer related intangibles and share based payment charges of £0.9m in 2010 (2009: £0.4m). The Non Stop Promotions business acquired in the year made an immediate profitable impact and has benefitted from the wider resources of the Group from a systems and purchasing perspective.

Technology and Information

	2010 £m	2009 £m
Sales	2.9	2.8
Operating profit before non-recurring items, amortisation of customer related intangibles and share based payment charges	0.7	0.5
Operating profit after non-recurring items, amortisation of customer related intangibles and share based payment charges	0.7	0.3
Net capital employed	(0.1)	0.2

The business made great progress again in 2010. Record visitor numbers for the 4th consecutive year at the January Trade Only National Show has resulted in early rebooking for the 2012 event reaching 80% of the 2011 level within just two weeks of the show closing.

Our PromoServe business had a landmark year in 2010. We made a number of changes in 2009 that transformed the performance and enabled the business to produce cash throughout the year. Just prior to the end of December, we announced the acquisition of the 20% minority interests in PromoServe Business Systems Ltd from the previous management for a total sum of £225,000; this was funded from cash resources. For the full year 2010, PromoServe made an operating PBIT (before Plc management charges) of £0.3m (2009: £0.2m loss).

On the 25 November 2010, we announced a strategically important deal that Trade Only had agreed to terms with iPROMOTEu.com, Inc. to supply iPROMOTEu and its distributors with Trade Only's cloud based software solution.

Within the Trade Only business, we provide a number of more traditional tools for suppliers and distributors to work closely with each other; these include comprehensive product catalogues featuring best sellers from all leading suppliers. Sales for the 2011 edition improved over 2010 for the market leading 'Spectrum' catalogue and are showing good results from the soon to be published 'Envoy' catalogue which is based on a geographically limited distribution so that no two distributors in the same region use the catalogue.

Readership of PPD magazine that we have now been publishing for almost 5 years continues to grow, it enjoys the largest distribution of any trade publication for this sector.

Financial review

Results for the year and key performance indicators

Group revenues increased by 18% to £18.0m (2009: £15.3m).  Gross margin reduced to 37% (2009: 41%) as a result of the significant sales growth in the lower margin business units together with tougher pricing conditions within this market.  With total administrative costs reduced to £6.2m (2009: £6.9m) the Group posted a profit before taxation of £0.5m (2009: loss £0.6m).  Operating costs included £0.3m (2009: £0.9m) of non-recurring administrative expenses, amortisation of intangible assets and share based payment charges taking operating profit before these costs to £0.8m (2009: £0.3m).

Acquisitions

On 31 March 2010 the Group acquired the trade and certain assets of Versatilia Limited for £54,000.  The trade of this business has been absorbed into the PromoServe business.  The Group also acquired the stock and trade and certain assets of Non Stop Promotions and Marketing Limited from its administrators on 18th February 2010.  The total purchase price was £75,000.

The Group also agreed to purchase the remaining 20% of PromoServe Business Systems Limited at the year end.  The total purchase price was £225,000 which represents a £71,000 reduction in the deferred consideration accrued in the accounts for the year ended 31 December 2009.  This transaction was concluded in early January 2011.   

Taxation

There was no corporation tax charge or credit in the year due to the utilisation of tax losses in the period and an increase in deferred taxation assets that are not recognised in the financial statements.

Earnings per share

Basic earnings per share were 1.32p (2009: loss per share 1.41p).

Cash flow

The Group has reported a net cash inflow from operations of £1.1m, which is £0.6m ahead of the reported operating profit of the Group.  Cash flow reflects a £0.2m increase in trade receivables and a £0.3m increase in trade payables due mainly from the trading volumes in the year, and a further £0.1m reduction in inventories due to active management control in this area.  The Group benefited in the year from only minor capital investment of £0.1m.

Treasury

The Group continues to manage the cash position in a manner designed to maximise interest income, whilst at the same time minimising any risk to these funds.  Where there are surplus cash funds, these are deposited with commercial banks that meet credit criteria approved by the Board.  At 31 December 2010, the Group had £1.5m on short-term deposits (2009: £0.8m).

Martin Varley Chief Executive Officer 17 March 2011

David Smith Group Finance Director

Consolidated Income Statement for the year ended 31 December 2010

		2010	2009
	Note	£000	£000
Revenue
- continuing		18,044	15,329
Cost of sales		(11,371)	(9,026)
Gross profit		6,673	6,303
Administrative costs		(6,162)	(6,918)
Operating profit before amortisation of intangible customer related assets, non-recurring administrative expenses and share based payment charges		808	277
Amortisation of intangible customer related assets		(36)	(64)
Non-recurring administrative expenses	3	(200)	(783)
Share based payment charges		(61)	(45)
Operating profit/(loss)		511	(615)
Finance income		-	1
Finance expenses		(6)	(10)
Profit / (loss) before taxation		505	(624)
Taxation		-	86
Profit/(loss) attributable to the equity shareholders of the Company		505	(538)
Earnings/(loss) earnings per ordinary share attributable to the equity shareholders of the Company :
-  Basic	4	1.32	(1.41p)
-  Diluted	4	1.31	(1.41p)

Consolidated Balance Sheet as at 31 December 2010

		2010	2009
		£000	£000
Non-current assets
Property, plant & equipment		253	448
Customer related intangible assets		128	110
Goodwill		2,550	2,621
		2,931	3,179
Current assets
Inventories		1,284	1,337
Trade and other receivables		3,110	2,913
Cash and cash equivalents		1,533	773
		5,927	5,023
Total assets		8,858	8,202
Current liabilities
Trade and other payables		(3,875)	(3,475)
		(3,875)	(3,475)
Non-current liabilities
Trade and other payables		-	(13)
Deferred consideration		-	(297)
		-	(310)
Total liabilities		(3,875)	(3,785)
Net assets		4,983	4,417
Equity attributable to equity holders of the Company
Called up share capital		153	153
Share premium account		5,293	5,293
Retained earnings		(463)	(1,029)
Total equity		4,983	4,417

Statement of Changes in Equity

	Share capital	Share premium	Retained earnings
	£000	£000	£000
At 1 January 2009	153	5,293	(536)
Result for the period	-	-	(538)
Share based payment charges	-	-	45
At 31 December 2009	153	5,293	(1,029)
Result for the period	-	-	505
Share based payment charges	-	-	61
At 31 December 2010	153	5,293	(463)

Consolidated Cash Flow Statement for the year ended 31 December 2010

		2010	2009
		£000	£000
Operating activities
Profit/(loss) for the period		505	(538)
Amortisation of intangible assets		36	64
Depreciation		287	320
(Profit)/loss on disposal of fixed assets		(7)	4
Net finance expense		6	9
Income tax (credit)		-	(86)
Share based payment charges		61	45
Operating cash inflow before changes in working capital		888	447
Movement in inventories		128	488
Movement in trade and other receivables		(198)	1,052
Movement in trade and other payables		251	(928)
Operating cash inflow from operations		1069	430
Interest received		-	1
Interest paid		(6)	(10)
Income tax received		-	7
Net cash flow from operating activities		1063	428
Investing activities
Purchase of plant and equipment		(92)	(59)
Disposal of plant and equipment		7	8
Payment of deferred consideration		(50)	-
Acquisition of subsidiaries		(129)	-
Net cash flow from investing activities		(264)	(405)
Financing activities
Net (payments) of hire purchase contracts		(39)	(35)
Net cash flow from financing activities		(39)	(35)
Net increase in cash and cash equivalents		760	342
Cash and cash equivalents at the beginning of the year		773	431
Cash and cash equivalents at the end of the year		1,533	773

Notes

1.       The financial information set out herein does not constitute the Group's statutory accounts for the year ended 31 December 2010 or the year ended 31 December 2009.  The 2010 statutory accounts have not been finalised but this preliminary announcement has been prepared by the Directors based on the results and position which they expect will be reflected in the statutory accounts.  The comparative information in respect of the year ended 31 December 2009 has been derived from the audited statutory accounts for the year ended on that date upon which an unqualified audit opinion was expressed and which did not contain a statement under section 498 (2) or (3)of the Companies Act 2006 .  The audited accounts will be posted to all shareholders in due course and will be available on request by contacting the Company Secretary at the Company's Registered Office.

2.       Basis of preparation

The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the European Union. 

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.  The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

3.       Non-recurring administrative expenses

	2010	2009
	£000	£000
Damaged stock	200	-
Termination payments	-	80
Non-recurring salary costs	-	424
Closure of divisions	-	217
Other	-	62
	200	783

4.       Basic and diluted earnings per ordinary share

          The calculation of earnings per ordinary share is based on the profit or loss for the period and the weighted average number of equity voting shares in issue as follows.

	2010	2009
Earnings (£000)	505	(538)
Weighted average number of shares (number '000)	38,203	38,203
Fully diluted average number of shares (number '000)	38,573	38,679
Basic earnings/(loss) per ordinary share (pence)	1.32p	(1.41p)
Diluted earnings/(loss) per ordinary share (pence)	1.31p	(1.41p)

 

END

 

 

FR DKADPPBKDNND