Final Results

RNS Number : 1656I

Altitude Group PLC

28 May 2014

 



Altitude Group plc

Final results FOR the year ended 31 december 2013

Altitude Group plc ("Altitude" or the "Group"), the provider of information and technology services, announces its results for the year ended 31 December 2013.

A year of significant change

Since the last update in September 2013, the strategic focus has continued to be:

•     Establishing the new management structure

•     Investing in our core technology

•     Improving the visibility of the long term funding of the Group

•     Strengthening resources to position the Group for growth

The Group has made significant progress in all these areas.

As part of the above strategic priorities for  2013, the principal highlights were:

•     Group restructured into core geographical "sales and service" operations with separate central technology development team and defined resource to explore and develop new markets and opportunities for our existing technologies

•     Finalising the vendor loan note outstanding from the sale of the Promotional Marketing Division to an MBO team in 2011.  Post the year end, a deal has been agreed that will result in the redemption of the loan note with the Group receiving a final £2m from the MBO team expected by the end of June 2014 with a £400,000 reduction taken to secure this 

•     Net cash at 31 December 2013 of  £0.5m

•     Adjusted loss before tax from continuing operations of £0.84m before non-recurring items, amortisation and share based payment charges

Stephen Yapp, Executive Chairman commented

"The Group has demonstrated its ability to adapt to significant change in 2013.  These changes, together with a good cash position and the continued investment in our people alongside our product and technology offering, will enable the Group to innovate and meet our customers' evolving needs.

"The year has started well with all businesses performing ahead of expectations and the Board remains confident in the Group's growth prospects."

Enquiries:

Altitude Group plc
Stephen Yapp (Executive Chairman) Richard Sowerby (Chief Financial Officer)	Tel: [phone]  Tel: [phone]
WH Ireland Limited (Nominated Adviser and Broker)
Tim Feather	Tel: [phone]

Chairman's statement

2013 will be noted as a year of significant change for our Group.  Since the last update in September 2013, the strategic focus has continued to be:

•      Establishing the new management structure

•      Investing in our core technology

•      Improving the visibility of the long term funding of the Group

•      Strengthening resources to position the Group for growth

We have made significant progress in all these areas.

As part of the above strategic priorities for  2013, the principal highlights were:

•      Group restructured into core geographical "sales and service" operations with separate central technology development team and defined resource to explore and develop new markets and opportunities for our existing  technologies

•      Finalising the vendor loan note outstanding from the sale of the Promotional Marketing Division to an MBO team in 2011.  Post the year end, a deal has been agreed that will result in the redemption on the loan note with the Group receiving a final £2m from the MBO team expected by the end of June 2014 with a £400,000 reduction taken to secure this

•      Net cash at 31 December 2013 of  £0.5m

•     Adjusted loss before tax from continuing operations of £0.84m before non-recurring items, amortisation and share based payment charges

Our new management structure was established in the fourth quarter of 2013 and we are beginning to see the benefits of the revisions to the roles and responsibilities.  Each business manager has clear targets with performance monitored by key indicators and close budget control.  The key members of the management team are driven by performance measures and, following the EMI option awards last year, are incentivised to substantially increase shareholder value.  The results for the year include a non-recurring charge of £0.1m arising from the changes made to this scheme

The strategy of providing a low cost "enterprise level technology" for the small business on a Software as a Service ("SaaS")  model continues to gain traction in the key verticals for which the technology was initially developed.  We have particular functionality benefits in comparison with legacy providers in niches that involve elements of product personalisation in the marketing services sector such as promotional, print and signage products.  We continue to invest in our core technology to ensure we meet our existing and potential customers' evolving technology requirements.  In this respect we invested over £1m in the year to enhance the delivery of optimal customer experience and will invest further in 2014 to ensure that we remain at the forefront of technology trends.  We have identified a number of features and processes within new product offering that we have invested in patent protection, currently in the 'pending' stage.

We have funded our geographical and technology investment in 2012 and 2013 from the cash generative UK exhibitions and publishing businesses and from capital re-payments of the loan from the MBO team following the sale of the promotional merchandising business in 2011.  The terms of this loan call for repayment by June 2016 with no fixed repayment terms.  Whilst we continue to have good visibility of the cash flows of the MBO team's business, a key focus of our strategy therefore, has been to remove any risk from this position.  I am happy to report that the MBO team has successfully re-financed their business and we expect to receive £2m of the £2.4m in the first half of 2014.  We have agreed a £400,000 reduction to achieve this which was required as both an early payment incentive and to assist with the legal and professional fees of the MBO team to restructure their funding.  We have included in the agreement a provision for the Group to receive a further £200,000 if the MBO team exits the business in the near future.  To this end we have taken an impairment of the asset in the results for 2013 as a non-recurring item.  I am delighted we have completed this transaction which helps ensure we achieve our objectives and provides excellent visibility of funding for the period in which we continue this investment phase.

In order to prevent management time being diverted by litigation, we also resolved the dispute with a competitor in the USA resulting in a non-recurring charge of £268,000 in the year, mainly arising from legal costs.

Strategic update and performance review

The Group remains confident that the most promising growth opportunities primarily lie in providing "enterprise level technology" for small businesses on a SaaS model in North America, where there are over 25,000 promotional product distributors of which 96% have sales of less than $2.5 million, Canada and the UK markets where the SME opportunities are considered to be the greatest.  To be best placed to meet these opportunities the new structure announced in September 2013 separated the business into geographic operations focused on sales and customer service with centralised technology resources and another 'incubator' team focused on identifying additional markets and opportunities for our technology.

The Group operating loss before non-recurring items, amortisation of intangible assets and share based payment charges was £0.84m (2012: £0.4m) on revenues which increased by 3% to £4.2m (£4.07m).  Our continued investment in our software as well as the continued development of our US operations has given rise to our losses in the period.  During the year we have expensed £0.65m (2012 £0.47m) of software development costs in addition to £0.4m which has been capitalised in the year.

Technologo

Technologo performed well in 2013 with revenues up 20% and the business is well placed for further growth.  Significant technological developments were made to upgrade the existing software and improve the user experience services, primarily moving to HTML which has more flexibility for customisation and requires no software downloads on the part of the user.

The management team has been strengthened with the appointment of a VP of Sales aimed at simplifying and shortening the sales process which, together with the hiring of outbound field and telesales resources is providing us with a solid pipeline of new prospects.

US

The US operation continued to make steady progress managing to double its customer base in the year despite some exceptional, previously reported unforeseen challenges. 

We have made good progress in the early part of 2014 with new contracts with multi-user companies, which, along with our strengthening sales resource, gives us confidence that the foundations for growth are now in place.

UK

The UK division saw growth in sales in all three areas of technology, publications and exhibitions where we have a strong market leadership position.  Investment in additional sales and support resource was made during the latter part of 2013 to help drive the sales growth for all of the technology solutions. 

Our publications enjoyed an excellent year with the industry magazine PPD increasing to a monthly frequency.  Our market leading Spectrum Catalogue which forms a key part of our offering to UK Promotional distributors is now used as a primary sales tool with our website solutions by over 500 distributors in the UK and Ireland.

Post the year end, the 2014 National Show was another tremendous success and revenues were again increased for the seventh consecutive year.  This has again been followed by a typically high re-booking rate for the 2015 exhibition which will be its eighth year.

Innovation

To ensure that the Group maximises opportunities from innovation, a new incubator function has been created; separate from the main business with its own defined resources.  This team, led by Martin Varley, will work on a small number of both product and customer facing projects, identifying those that are worthy of greater investment early in the process, and when proven will be allocated to an existing business unit to manage.

Product development and integration

Investments in infrastructure and development resource were made throughout the year; with technology being hosted in Amazon Web Services for increased resilience and additional skilled software programmers being introduced to support the commercial demand for the growing product portfolio.

A key milestone in 2013 for the Group's product portfolio was the creation of an industry focused HTML5 online design tool, "ArtworkTool", which allows users to easily create and share graphics and print-ready artwork using any device with a suitable browser.  Already in use by our customers that benefit from our web store technology, we expect to be making it available to the general market during by the close of 2014.

Integration with B2B brands assists with client adoption of our own solutions, by example the ability for users of our VISION order management platform to continue to use QuickBooks© for their accounting resource while benefitting from the enhanced customer relationship management included as standard with VISION.  We anticipate increasing the investment this year to enable a wider range of B2B technology companies to integrate with our various solutions.

People

There were a number of changes to the Board during the year.  I joined the Company as Chairman in February 2013 in advance of Colin Cooke's retirement in April.  David Dannhauser, having been appointed Chief Financial Officer in March 2013, left the Company in July 2013 and Richard Sowerby was appointed to that position at that time.  My appointment as Executive Chairman in September 2013 coincided with Martin Varley taking the role of Global Commercial Director to concentrate on identifying new markets and opportunities for our products and services.

I would like to thank our staff for all of their hard work and commitment during this challenging year.

The Group's senior management team has industry leading expertise in their respective fields, and in order to facilitate the delivery of our growth strategy, we are investing in further resource across a number of the functions  whilst not yet complete, the benefits are already starting to be seen across the business.

Outlook

The Group has demonstrated its ability to adapt to significant change in 2013.  These changes together with a good cash position and the continued investment in our people alongside our product and technology offering will enable the Group to innovate and meet our customers' evolving needs.

The year has started well, with all businesses performing ahead of expectations and your Board remains confident in the Group's growth prospects.

Stephen Yapp

Executive Chairman

Consolidated Statement of Comprehensive Income for the year ended 31 December 2013

		2013	2012
	Note	£'000	£'000
Revenue		4,201	4,074
Cost of sales		(991)	(822)
Gross Profit		3,210	3,252
Administrative costs		(5,391)	(4,233)
Operating loss before amortisation of intangible assets, non-recurring administrative expenses and share based payment charges		(839)	(398)
Amortisation of intangible assets		(447)	(370)
Non-recurring administrative expenses	3	(767)	(105)
Share based payment charges		(128)	(108)
Operating loss		(2,181)	(981)
Finance income		242	296
Finance expenses		(1)	(3)
Loss before taxation		(1,940)	(688)
Taxation		182	186
Loss attributable to the equity shareholders of the Company		(1,758)	(502)
Other comprehensive income:
Items that may or may not be reclassified subsequently to profit and loss: -       Foreign exchange differences		-	(15)
Total Comprehensive loss for the year		(1,758)	(517)
Loss per ordinary share attributable to the equity shareholders of the Company
-      Basic (pence)	4	(4.10)	(1.17)
-      Diluted (pence)	4	(4.10)	(1.17)

Consolidated Balance Sheet

as at 31 December 2013

		2013	2012
		£000	£000
Non-current assets
Property, plant & equipment		159	222
Intangible assets		1,187	1,248
Goodwill		564	564
Long-term receivable		2,000	3,300
Deferred tax		426	244
		4,336	5,578
Current assets
Trade and other receivables		1,009	1,084
Cash and cash equivalents		450	760
		1,459	1,844
Total assets		5,795	7,422
Current liabilities
Trade and other payables		(2,116)	(2,113)
Total liabilities		(2,116)	(2,113)
Net assets		3,679	5,309
Equity attributable to equity holders of the Company
Called up share capital		172	172
Share premium account		6,254	6,254
Retained earnings		(2,747)	(1,117)
Total equity		3,679	5,309

Consolidated Cash Flow Statement

for the year ended 31 December 2013

	2013	2012
	£'000	£'000
Operating activities
Loss for the period	(1,758)	(502)
Amortisation of intangible assets	447	370
Depreciation	100	76
Net finance credit	(241)	(293)
Impairment of loan note receivable	400
Net foreign exchange losses	-	(6)
Corporation  tax credit	(182)	(186)
Share based payment charges	128	108
Operating cash outflow before changes in working capital	(1,106)	(433)
Movement in trade and other receivables	43	52
Movement in trade and other payables	7	266
Operating cash outflow from operations	(1,056)	(115)
Interest received	242	296
Interest paid	(1)	(3)
Income tax received	31	-
Net cash flow from operating activities	(784)	178
Investing activities
Purchase of tangible assets	(38)	(162)
Purchase of intangible assets	(388)	(286)
Net cash flow from investing activities	(426)	(448)
Financing activities
Issue of new ordinary shares	-	41
Loan note repayment received	900	700
Net cash flow from financing activities	900	741
Net increase in cash and cash equivalents	(310)	471
Cash and cash equivalents at the beginning of the year	760	294
Effect of exchange rate fluctuations on cash held	-	(5)
Cash and cash equivalents at the end of the year	450	760

Statement of Changes in Equity

	Share Capital	Share Premium	Retained Earnings
	£'000	£'000	£'000
As at 1 January 2012	171	6,214	(708)
Total comprehensive loss for the period	-	-	(517)
Transactions with owners recorded directly in equity:
-New shares issued	1	40	-
- Share based payment charges	-	-	108
At 31 December 2012	172	6,254	(1,117)
Total comprehensive loss for the period	-	-	(1,758)
Transactions with owners recorded directly in equity:	-	-	-
- Share based payment charges	-	-	128
At 31 December 2013	172	6,254	(2,747)

Notes

1          Financial information

The financial information set out herein does not constitute the Group's statutory accounts for the year ended 31 December 2013 or the year ended 31 December 2012 within the meaning of section 435 of the Companies Act 2006.  The 2013 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 2012 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 in due course 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 on the basis of the accounting policies adopted for the year ended 31 December 2013, as set out in the Company's Annual Report and Accounts, and as previously disclosed in the Company's Annual Report and Accounts for the year ended 31 December 2012.

The preparation of financial statements in conformity with IFRS requires management to make judgments, 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 judgments 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

	2013	2012
	£'000	£'000
Legal costs regarding dispute in US	268	9
Impairment of loan note receivable	400	-
Employment termination expenses	31	34
Non-recurring employment costs	68	62
	767	105

4          Basic and diluted earnings per share

	2013	2012
Earnings £'000	(1,758)	(502)
Weighted average number of shares (number '000)	42,908	42,791
Fully diluted average number of shares (number '000)	42,908	42,791
Basic loss per ordinary share (pence)	(4.10)	(1.17)
Diluted loss per ordinary share (pence)	(4.10)	(1.17)

 

END

 

 

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