Half Yearly Report

RNS Number : 7006O

Altitude Group PLC

22 September 2011

 



22 September 2011

Altitude Group plc

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

Unaudited Interim results for the six-month period ended 30 June 2011

Altitude Group plc (AIM: ALT), the provider of information and technology services to the promotional products industry, announces its interim results for the six month period ended 30 June 2011. 

Financial Highlights:

·     Revenue from continuing operations increased by 12%  to £2.46m (H1 2010: £2.19m)

·     Gross profit increased 21.5% to £1.69m (H1 2010: £1.39m)

·     Adjusted operating profit* from continuing operations increased by 26% to £0.36m  (H1 2010: £0.28m)

·     Adjusted Basic earnings per share** increased by 53% to 1.21p (H1 2010: 0.79p)

·     Pro forma net cash £1.08m (H1 2010: £0.2m) after £2.17m realised in July from the disposal of the PPD

* before amortisation of intangibles, non-recurring administrative expenses and share-based payment charges

** excluding non-recurring administrative expenses and profit on sale of discontinued operation

Operational Highlights:

·     Disposal of the Promotional Products Division ("PPD") to MBO team for £6.27m (mixture of cash and debt) in June 2011

·     Acquisition and integration of "Technologo" in March 2011, and "The Logo Network" in May 2011

·     Establishment of Trade Only Inc USA Sales and Support facility in place

·     Clear product roadmap in place with significant developments underway

·     Strong growth in USA customer base - first major US client, iPromoteU, on track for 4^th quarter launch

Martin Varley, Chief Executive Officer of Altitude Group plc, commented: "2011 has so far been a crucial year for the Group, with the disposal of the Promotional Products Division transforming Altitude into a purely information and technology services focused company. We continue to move further into the North American market, which offers great potential for the Company. Our trade exhibition, the Trade Only National Show, continues to grow at an impressive rate and the 2011 show in January saw an increase in attendance of 20% on 2010.

"These latest figures show the Company to be moving in the right direction and we are very excited about taking Altitude Group plc to the next level. We are therefore confident of meeting market expectations for the full year."

Enquiries:

Altitude Group plc

Colin Cooke (Chairman)                                                                               Tel: [phone]

Martin Varley (CEO)                                                                                       Tel: [phone] (UK)

                                                                                                                                Tel: [phone] (US)

Merchant Securities (Nominated Adviser and Broker)

Lindsay Mair / Simon Clements                                                                 Tel: [phone]

Walbrook PR

Jack Rich (Media enquiries)                                                                        Tel: [phone]

                                                                                                                                [e-mail]

Paul Cornelius (Investor enquiries)                                                        Tel: [phone]

                                                                                                                                [e-mail]

Chief Executive's Statement

Following the disposal of the Promotional Products Division, we have reviewed the optimum structure for the Group and the resources necessary for the efficient and cost effective management of the business. By way of background, the current premises are the offices in Manchester and Sheffield, with a total of 30 employees, the Toronto facility that houses the Technologo business with 12 employees and the current office in Anaheim, California with 5 employees.

To further simplify the business structure, we have employed a Financial Controller in each of our Manchester and Anaheim offices to manage and report on the results for the UK and North America respectively.

This leaner approach removes the need for a full time Finance Director, during this next phase of the Group's development. As a result, David Smith will step down from the Board at the end of October 2011. However, he will continue to provide assistance to the Board until the end of November 2011.

We would like to take this opportunity to thank David for all his hard work over the past two years. He has made a substantial contribution to the Group and his dedication has helped reshape the Group into a focused information and technology business. We all wish David every success for the future.

Strategy

Whilst the concentration has clearly been on the promotional products area, we are seeing interest for an integrated web store and order management solution for small businesses generally. The USA has around 25 million small businesses, clubs and associations accounting for 51% of GDP and 54% of job creation. Today there are limited low cost options for a fully integrated business management technology solution, and this has encouraged us to explore suitable partnerships to provide us with access to a large number of small business operators.

Irrespective of such partnerships, we plan to launch what we internally call our 'Vanilla' solution later in 2012,  where we will offer a comprehensive 'Cloud' business management solution for small businesses for as little as $49 per month. Our plan is to target an initial selection of ten business sectors and make available a wide choice of templates for each of these. A user that signs up will be able to add his or her own products, instantly publish to a web site, receive orders, manage inventory and use comprehensive marketing tools and CRM to drive sales, all from their iPad or laptop no matter where they are in the world.

Additionally, we are seeing high levels of interest from related niche markets such as Print, Office Supplies and Uniforms. We will continue to explore opportunities in these areas with companies that have ready-made user bases that would benefit from bolting on our solution in exchange for a revenue share arrangement.

Product Development

Our product roadmap for the coming 12 months is well defined and includes a number of enhancements, new features and added functionality. In addition to this, we have now undertaken three new major pieces of development.

1.            Native iPad and iPhone apps. The decision to develop a 'Native' app rather than web apps was taken following extensive research and discussion with key customers and prospects. We have contracted with the same User Experience (UX) company in San Francisco to design this for us that worked on our 'Vision' launch, and this project is under way. We have additionally contracted with one of our existing providers to produce the software that will feed the UX and integrate fully with our 'Cloud' solution. By developing the app in this way, users will be able to manage their whole business with nothing more than a subscription to Trade Only Vision, and an iPad. The app will be released into Beta prior to the year end with a soft launch planned for PPAI Expo, our major marketing push for the year that takes place January 4-6th 2012 in Las Vegas. More than 10,000 visitors are expected to attend.

We expect to commence development of the Native Android app in Q2 2012, and we will monitor the popularity of Blackberry devices within our customer base before making that investment.

2.            Our web solution for distributors, Trade Only 'STORE', is growing in popularity quickly, helped by the easy-to-use management tools that allow drag-and-drop design ensuring that anyone can make changes, add pages, special offers or even a blog. Our analysis of other products on the market encourages us to believe that we have the highest level of functionality in the promotional products niche with the current specification. We do however want to put further distance between our solution and any impersonators, so in the next six weeks we will complete the development that adds full shopping cart checkout facilities to the stores, with integrated Sales Tax calculations and instant FedEx and UPS freight calculations. These functions are currently unavailable as part of an integrated solution, with competing products unable to offer the customer confidence that the price quoted will be the total, including shipping and sales tax, when paying online.

3.            The final piece of additional development is the ability for our solutions to instantly integrate with Quick Books, the leading small business accounting solution in North America. Much like Sage in the UK, Quick Books offers a wide range of accounting packages both as a local client, and online. Many of our prospects are familiar with Quick Books and therefore it is an easier transition for them to maintain this area for their accounting, and integrate this with our Web Site, Product Research, CRM and ERP solution.

The total additional cost for this development is in the region of $750,000 and we expect that the cost of external development in 2012 to be around $1 million and will be funded from cash flow.

Trading

Our first major USA client, iPromoteU (IPU), is on track for a full launch in the 4th quarter with a Beta group set to go live in the next eight weeks. IPU affiliates have an option to subscribe for the basic order management piece at $25 per month, or enjoy the benefits of the integrated product research, web site, CRM and order management elements for an additional payment. More than 300 affiliates opted to upgrade to the premium package while we promoted a special offer of $75 per month for the early adopters. We are continuing to attract additional affiliates with the current pricing of $100 per month per affiliate.

Suppliers are continuing to sign up for the tools that will allow them to add their product data to the portal. We are making excellent progress with this part of the launch as suppliers recognise the potential benefits of operational efficiency gains available from orders being in a more factory ready state when received by their sales department. Our legacy ERP solution, which has been in use in the UK for nine years and is aimed at suppliers and manufacturers, is attracting high levels of interest and has the potential to directly connect the distributors and suppliers from quote to shipping - a major step towards a complete trading platform.

We have recently agreed terms with Press a Print (PaP), an operator in the business opportunities sector of the promotional products market. They have recently explored all alternatives for an integrated solution and chose Trade Only ahead of many more established companies. This deal provides for Trade Only to operate web sites and product research for their 600 current business operators, alongside the installation and implementation of a full CRM/ERP and US GAAP accounting platform for their business.

Within the arrangement, Trade Only are provided access to the current and past PaP operators to share with them the benefit of utilising the complete Trade Only 'Vision' solution to help run their business.

Within the UK, where our market is more established, we have been working to launch the new software platform into our existing customer base and into new prospects. Recent product demonstrations at our roadshow events were well attended and we achieved good levels of sign up on the day.

The catalogue market in the UK continues to mature and we have again grown the user base for our Spectrum product in 2011. We see this as an important component of the overall package that we provide to distributors, along with the business management tools.

Our trade show for the promotional products industry, The Trade Only National Show, continued to see record attendance. January's show broke the attendance record for the fifth straight year, with almost 3,000 people in attendance, an increase of 20% against 2010. For the 2012 show we have extended into the additional halls now available in the IBEX facility in Coventry and we expect good growth on space sold and further increases in visitor numbers. Sales of space are ahead of the same period last year and we expect to sell out before the year end.

General

It has been well documented that we were forced to defend litigation by ASI in relation to our acquisition of certain assets of Toronto based Technologo. This was settled on 6 June 2011 with no payments made by either party. However, the USA legal system resulted in our attorneys plus related costs totalling almost $300,000. ASI continues to use the services of Technologo and is contracted to do so until the end of June 2012 on a normal trading arrangement.

Employees

It seems almost mandatory now in a report of this type to thank everyone for their hard work. We have always done just that, but it minimises in some way the incredible effort that our team has put in that has resulted in us becoming a focused information and technology business with tremendous opportunities. Many of our employees work at a pace that is above and beyond anything that is expected, across time zones spanning 8 hours and often dashing through airports heading for the next 'red-eye'.

We thank you all with the utmost gratitude.

Outlook

We have achieved much in the last 18 months: the business has a clear direction, no channel conflict, our customer base is growing and we have made our first steps in the substantial USA market. We have no doubt at all that the market potential is as large as we could ever have imagined and our most pressing problem going forward is likely to be how we balance these many opportunities and prioritise them appropriately.

2011 has so far been a crucial year for the Company, with the disposal of the promotional products division transforming Altitude into a purely information and technology services focused company. We continue to move further into the US market, which offers fantastic potential for the Company, and our trade exhibition, the Trade Only National Show, continues to grow at an impressive rate.

These latest figures show the Company to be moving in the right direction and we are very excited about taking Altitude Group plc to the next level. We are confident of meeting market expectations for the full year.

Martin Varley

Chief Executive Officer

Consolidated income statement

for the six month period ended 30 June 2011

	Unaudited		Unaudited
	30-Jun-11	31-Dec-10	30-Jun-10
	£'000	£'000	£'000
Revenue	2,456	2,934	2,189
Cost of sales	(764)	(941)	(796)
Gross profit	1,692	1,992	1,393
Administrative costs	(1,630)	(1,835)	(1,131)
Adjusted Operating Profit	358	219	284
Amortisation of customer related intangibles	(79)	0	0
Non recurring administrative expenses	(197)	0	0
Share based payment charges	(20)	(61)	(22)
Total operating profit	63	158	262
Finance income	0	0	0
Finance expenses	0	0	0
Profit before tax	63	158	262
Taxation	0	0	0
Profit from continuing operations	63	158	262
Profit from discontinued operations	307	347	41
Profit for the period	370	505	303
Profit per ordinary Share  (pence):     - Basic	0.88	1.32	0.79
- Diluted	0.87	1.31	0.78
Shares	42,043	38,203	38,203

There were no recognised gains or losses in the period other than the profit for the period and therefore no statement of recognised income and expenses is presented.

Consolidated statement of changes in equity

for the six month period ended 30 June 2011

	Share	Share	Retained
	Capital	Premium	Earnings
	£'000	£'000	£'000
Opening	153	5,293	(463)
Share Issue	15	866
Result			370
Share based payments			20
Closing	168	6,159	(73)

Consolidated balance sheet

as at 30 June 2011

	Unaudited		Unaudited
	30-Jun-11	31-Dec-10	30-Jun-10
	£'000	£'000	£'000
Non-current assets
Property, plant & equipment	79	253	296
Intangibles	1,608	128	144
Goodwill	273	2,550	2,621
Long-Term Loan Receivable	4,000	0	0
	5,960	2,931	3,061
Current assets
Inventories	0	1,284	1,514
Trade and other receivables	2,771	3,111	3,713
Current taxes	0	0	00
Cash and equivalents	0	1,533	156
Total current assets	2,771	5,927	5,382
Total Assets	8,731	8,858	8,443
Current liabilities
Bank overdrafts	(1,120)	0	0
Trade and other payables	(1,354)	(3,691)	(3,384)
Current taxes	(3)	(0)	(20)
	(2,477)	(3,691)	(3,404)
Non current liabilities
Trade and other payables	0	(9)	0
Deferred consideration	0	(176)	(297)
	0	(185)	(297)
Total liabilities	(2,477)	(3,875)	(3,701)
Net assets	6,254	4,983	4,742
Called up share capital	168	153	153
Share premium	6,159	5,293	5,293
Earnings	(73)	(463)	(704)
	6,254	4,983	4,742

Consolidated cash flow statement

for the six month period ended 30 June 2011

	Unaudited		Unaudited
	30-Jun-11	31-Dec-10	30-Jun-10
	£'000	£'000	£'000
Operating activities
Profit for the period	370	505	303
(Profit) on sale of discontinued operations	(59)	0	0
Depreciation	19	287	162
Amortisation intangible assets	79	36	20
(Profit)/Loss on disposal of assets	0	(7)	0
Net finance expense	0	6	4
Share based payment charges	20	61	22
Operating cash flow before changes in working capital	429	888	511
Movement in inventories	(532)	128	(177)
Movement in trade and other receivables	(388)	(198)	(800)
Movement in trade and other payables	(193)	251	(73)
Operating cash flow from operations	(684)	1,069	(539)
Interest paid	0	(6)	(4)
Income taxes	3	0	13
Net Cash Flow from Operating Activities	(681)	1,063	(530)
Investing activities
Purchase of plant and equipment	(34)	(92)	(9)
Disposal of plant and equipment	0	7	0
Payment of deferred consideration	(176)	(50)	0
Disposal of undertakings	(1,004)	0	0
Acquisition of undertakings	(1,627)	(129)	(54)
Net Cash Flow from Investing Activities	(2841)	(264)	(63)
Financing Activities
Proceeds from issue of share capital	877	0	0
Net payments on hire purchase contracts	(8)	(39)	(24)
Net Cash Flow from Financing Activities	869	(39)	(24)
Net Decrease in Cash and Cash Equivalents	(2,653)	760	(617)
Opening cash	1,533	773	773
Closing cash	(1,120)	1,533	156

Responsibility statement

The Board confirms that to the best of its knowledge :

·       The condensed set of financial statements has been prepared in accordance with IAS34 'Interim Financial Reporting' as adopted by the EU;

·       The interim report includes a fair review of the information required by :

DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the six months ended 30 June 2011 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 year; and

DTR4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the six months ended 30 June 2011 that have materially affected the financial position or performance of the entity during that period.

The directors who served during the period are:

Colin Cooke (Non-Executive Chairman)

Keith Willis (Non-Executive Director)

Barry Fielder (Non-Executive Director)

David Dannhauser (Non-Executive Director)

Martin Varley  (Chief Executive Officer)

David Smith (Group Finance Director)

Notes to the half yearly financial information

1.            Basis of preparation

This consolidated half yearly financial information for the half year ended 30 June 2011 has been prepared in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union.

The consolidated half yearly report was approved by the board of directors on 21 September 2011.

The financial information contained in the interim report does not constitute statutory accounts and does not include all of the information and disclosures required for complete financial statements.  Statutory accounts for the year ended 31 December 2010 have been filed with the Registrar of Companies.  The auditors' report on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement made under Section 498 (2) or (3) of the Companies Act 2006.

There were no recognised gains or losses in the six month period ended 30 June 2011 other than the profit for the period and therefore no statement of recognised income and expenses is presented.

The half-year results for the current and comparative period are unaudited.

Accounting policies

The condensed, consolidated financial statements in this half-yearly financial report for the six months ended 30 June 2011 have been prepared using accounting policies and methods of computation consistent with those set out in the Annual Report and financial statements for the year ended 31 December 2010, except as described below.  In preparing the condensed financial statements, management are required to make accounting assumptions and estimates.  The assumptions and estimation methods were consistent with those applied to the Annual Report and financial statements for the year ended 31 December 2010. 

Operating Segments

The Group determines and presents operating segments based on the information that internally is provided to the Board of Directors, which is the Group's chief operating decision maker ("CODM"). 

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components.  An operating segment's operating results are reviewed regularly by the CODM to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

IFRS 8 requires consideration of the CODM within the Group.  In line with the group's internal reporting framework and management structure, the key strategic and operating decisions are made by the Chief Executive Officer, who reviews internal monthly management reports, budget and forecast information as part of this.  Accordingly the Chief Executive Officer is deemed to be the CODM.

Under IFRS 8 "Operating Segments" the Group has determined that it has one reportable segment.

IFRS 8 has been applied to aggregate operating segments on the grounds of similar economic characteristics.  This position will be monitored as the Group develops.

Profit from Discontinued Operations

	Unaudited		Unaudited
	30-Jun-11	31-Dec-10	30-Jun-10
	£'000	£'000	£'000
Revenue	6,441	15,640	7,908
Cost of sales	(4,453)	(10,959)	(5,484)
Gross profit	1,988	4,681	2,424
Administrative costs	(1,737)	(4,327)	(2,379)
Adjusted Operating Profit	267	583	260
Amortisation of customer related intangibles	(15)	(30)	(15)
Non recurring administrative expenses	0	(200)	(200)
Total operating profit	252	353	45
Profit on Sale of Discontinued Operations	59	0	0
Finance expenses	(4)	(7)	(4)
Profit before tax	307	347	41
Taxation	0	0	0
Profit for the period	307	347	41

Basic and diluted earnings per ordinary share

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

	Unaudited				Unaudited
	30-Jun-11		31-Dec-10		30-Jun-10
Earnings (£000)	228		505		303
Weighted average number of shares ('000)	42,043		38,203		38,203
Fully diluted weighted average number of shares ('000)
	42,599		38,679		38,573
Basic earnings per ordinary share (pence)
	0.88p		1.32p		0.79p
	-------------		-------------		-------------
Diluted earnings per ordinary share (pence)	0.87p		1.31p		0.78p
	-------------		-------------		-------------

 

END

 

 

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