Unaudited Preliminary Results

RNS Number : 9553O

Altitude Group PLC

17 March 2009

 



Altitude Group plc

Unaudited Preliminary Results for the year to 31 December 2008

Altitude Group plc ('Altitude', the 'Group' or the 'Company') announces its unaudited preliminary results for the year to 31 December 2008.

Highlights:

• Underlying operating profit £0.8m (2007: £0.2m)

• Profit before tax of £0.3m (2007: loss £0.4m), in line with market expectations

• Account wins in all business units despite challenging economic climate

• Cash generated from operations £0.2m

• Closing net cash of £0.4m

• Earnings per share 1.22p (2007: loss 1.02p)

Colin Cooke, Chairman commented:  

'I am delighted that the Group has returned to profitability and that the restructuring programme has realised significant cost reductions in 2008. Our information and exhibitions businesses have started 2009 ahead of plan but it has become difficult to predict the level of demand that we will experience from corporate customers in our promotional marketing businesses. We continue to monitor our cost base ready to react quickly to any further softening in our markets to preserve profitability and cash.'

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

- ends -

Enquiries:

Altitude Group plc                              019 3234 3453

Craig Slater, Chief Executive Officer    077 7058 3768

Tim Sykes, Chief Financial Officer       077 3470 8385

Daniel Stewart & Company plc         020 7776 6550

Lindsay Mair / Simon Starr 

  Chairman's Statement

Performance overview

Group sales reduced by 7.7% to £18.0m (2007: £19.5m). This decline was entirely in the main end user business and the vast proportion is attributable to one major client in the financial sector in the second half of the year. We reacted quickly to this volume reduction with an immediate cost reduction programme and a strong business development initiative resulting in new client wins that we expect to contribute in 2009 and beyond. We can report strong revenue growth in our trade supplier business, AdProducts, and our Information and Exhibitions businesses.

The Group has returned to profitability for the first time in three years with a profit before taxation of £0.3m (2007: loss £0.4m).  Operating profit before non-recurring items, amortisation of customer related intangibles and share based payment charges was £0.8m (2007: £0.2m).

The Group balance sheet remains strong and was debt free at 31 December 2008 with a net cash balance of £0.4m.  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 the supplier pressures resultant from the current general economic situation.

The Company has renewed its banking facilities for a further year and with cash at bank of £0.4m and facilities of £0.9m, the Board considers that the Company is securely funded.

Strategy

The Group's core strategy is simple and is built on three objectives:-

• Information and Exhibitions offers an unrivalled set of tools for the promotional products industry and this will be completed, enhanced and in due course offered outside the UK; 

• Promotional Marketing will further improve customer service and continue to develop more efficient processes in the corporate market; and 

• The Group will continue to pursue and invest in opportunities that provide the highest return for an acceptable risk.

Promotional Marketing

Promotional Marketing made an operating profit before non-recurring items, amortisation of customer related intangibles and share based payment charges of £1.1m in 2008 (2007: £1.2m).  AdProducts and Distinctive Ideas both achieved double digit profit growth in the year. These strong results were offset by weaker results in the main Dowlis Corporate Solutions business where we further rationalised the cost base and operations to bring it under one management team.  With new client wins during the second half, we are planning for this business to return to sales growth during 2009.

Information and Exhibitions

Information and Exhibitions made an operating profit before software development costs, non-recurring items, amortisation of customer related intangibles and share based payment charges of £0.5m in 2008 (2007: £0.2m), with profits in catalogues and exhibitions reinvested in software and the magazine.  Our software, Promoserve, continued to gain market share to become the market leading choice for distributors and suppliers alike.  The Trade Only national exhibition performed exceptionally well in January 2009, continuing the excellent progress that it has made since its inception only 3 years ago.

Corporate activity

Whilst we look at further acquisitions on an opportunistic basis, our focus is primarily on the development and profitability of the existing Group.

We supplemented our own on line business with the acquisition of the trade and selected assets of Silent Kite Limited, a specialist on-line distributor, during September 2008. We paid approximately £0.3m for this opportunity to accelerate our growth in this channel and we are pleased with the progress we have made to date.

The Company changed its name to Altitude Group plc during the year and we believe the underlying businesses are benefitting from the clearer brand identities that this change has allowed.

People

The pace of change in the Group creates many opportunities and also places great demands on our people.  I would like to take this opportunity to thank all of our staff for their hard work and achievements in 2008.

Outlook

I am delighted that the Group has returned to profitability and that the restructuring programme has realised significant cost reductions in 2008. Our information and exhibitions businesses have started 2009 ahead of plan but it has become difficult to predict the level of demand that we will experience from corporate customers in our promotional marketing businesses. We continue to monitor our cost base ready to react quickly to any further softening in our markets to preserve profitability and cash. 

Colin Cooke

Chairman

17 March 2009

  Operating review

Promotional Marketing

	2008 £m	2007 £m
Sales	15.2	18.4
Operating profit before non-recurring items, amortisation of customer related intangibles and share based payment charges	1.1	1.2
Operating profit after non-recurring items, amortisation of customer related intangibles and share based payment charges	0.9	0.7
Net assets	5.4	5.2

Promotional Marketing includes our trade supplier AdProducts, our marketing design consultancy Touchpaper and our end user businesses Dowlis Corporate Solutions, Ross and Distinctive Ideas.  The end user businesses form the largest part of the Group, with £13.6m revenues in 2008 (£16.4m in 2007).

AdProducts grew sales and profits in 2008, expanding its product offering and extending its customer base as planned.  This business now has over 400 active distributor customers out of a total market of approximately 3,500.  The business is managed separately from other activities to avoid competitive conflicts.

The main end user business, Dowlis Corporate Solutions, suffered with declining volumes as the impact of the global economic slow down took its toll but was successful in winning a number of key accounts in the second half that will contribute in 2009.  During 2008, we further rationalised operations and the business is now managed as one unit; previously being split between Byfleet and Manchester. Ross Promotional contributed positively again, and Distinctive Ideas improved on its 2007 performance through volume increases, driving revenues to £1.7m (2007: £1.1m).

In each of these businesses, improved efficiency and additional sales have a powerful effect on profitability.  We are mindful of further volume reductions and are prepared to take the corrective action quickly to maintain profitability as far as is possible.

Cash performance was good overall with the poor performance of Dowlis Corporate Solutions in 2007 being reversed in 2008.  Its business model is inherently cash generative, with strong credit control being a key factor enabling the business unit to invest in inventories to support the growth in AdProducts.  

Information and Exhibitions

	2008 £m	2007 £m
Sales	2.9	2.3
Operating profit before non-recurring items, amortisation of customer related intangibles and share based payment charges	0.5	0.2
Operating profit / (loss) after non-recurring items, amortisation of customer related intangibles and share based payment charges	0.3	-
Net capital employed	(0.2)	(0.4)

Information and Exhibitions offers a collection of tools to the promotional products industry, suppliers and distributors alike.  These tools are inter-related but can be used individually and each one can improve efficiency and increase performance.

The Trade Only national exhibition in 2008 was a success on all counts, improving on its strong performance in 2007.  Exhibitor numbers at more than 200 (2007: 190) and visitor numbers at more than 1,800 (2007: 1,600) respectively, were in line with our challenging expectations and customer feedback on the overall exhibition experience was exceptional.  The exhibition has rapidly become the leading event in the UK industry and has been profitable from since inception, only three years ago.

Spectrum and Envoy catalogues are two of the top four leading offerings in the industry.  With 160 (2007: 176) and 176 (2007: 168) pages and 72 (2007: 72) and 82 (2007: 82) suppliers and with print runs maintained at 130,000 and 50,000 respectively these catalogues offer suppliers and distributors an effective showpiece for their products and creativity.

Promoserve is an ERP software package and Trade Only Search is a linked on-line product search offering.  Promoserve has continued to attract new users, leading to a user base of approximately 450 (2007: 350) at the year-end.  The rental model used by this company leads to a good recurring revenue base, which grew to £70,000 per month (2007: £55,000 per month).  Operations in this business include development, installation and support alongside sales and marketing.

Our magazine, PPD, reaches approximately 8,000 readers and is one of the most widely read publications in the industry. 

Each element of this division grew sales in 2008.  Promoserve reached a break-even position during the second half of the year.  Although they each have a clear cash cycle, leading to capital use at certain times, these businesses are not significant users of our capital.

Financial review

Results for the year and key performance indicators

Group revenues decreased by 7.7% to £18.0m (2007: £19.5m).  Gross margin improved to 42.4% (2007: 35.9%) as a result of a mix shift toward our stronger margin business units.  With total operating costs flat at £7.3m (2007: £7.4m) the Group posted a profit before taxation of £0.3m (2007: loss £0.4m), the first profit that the Group has posted since the 2005 financial year. Operating costs included £0.5m (2007: £0.6m) non-recurring administrative expenses, amortisation of intangible assets and share based payment charges taking operating profit before these costs to £0.8m (2007: £0.2m).

Acquisitions

During the year, the Group acquired the trade and selected assets of Silent Kite Limited, a small on-line distributor, for £0.3m. This business has been subsumed within the on-line operations of the Group and its performance since acquisition has been encouraging.  We have attributed £150,000 of value to customer related intangibles, and have assumed a five year life.  The balance has been recognised as goodwill with no impairment as at 31 December 2008.

Taxation

The Group recorded a tax credit during the year following the release of prior year provisions and our change in accounting policy on revenue recognition of our catalogue business.

Earnings per share

Basic earnings per share improved to 1.22p (2007: loss per share 1.02p).

Cash flow

The Group has reported a net cash inflow from operations of £0.2m which is £0.1m behind the reported operating profit of the Group.  The principal reasons for this difference are an inventory range investment of approximately £0.3m supporting the growth in our trade supplier business, AdProducts, and an increased level of supplier pressure following the difficulties in the general economic environment which we estimate at approximately £0.3m.  Our underlying cash performance has been extremely strong during the year following the cleansing of our trade receivables ledgers.

The Group benefited in the year from only minor capital investment of £0.1m, funded in part by the inception of new hire purchase contracts.

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 2008, the Group had £0.4m on short term deposits (2007: £0.7m).

Prior year restatements

The Group is required to recognise a prior year restatement in respect of three matters. The nature of these matters is set out in detail at Note 3.

Craig Slater                                       Tim Sykes

Chief Executive Officer                     Group Finance Director

17 March 2009  Consolidated Income Statement for the year ended 31 December 2008

			Restated (Note 3)
		2008	2007
	Note	£000	£000
Revenue
- continuing		17,972	19,485
Cost of sales		(10,355)	(12,498)
		-------------	-------------
Gross profit		7,617	6,987
Administrative costs		(7,281)	(7,356)
		-------------	-------------
Operating profit before amortisation of intangible customer related assets, non-recurring administrative expenses and share based payment charges		821	181
Amortisation of intangible customer related assets		(95)	(84)
Non-recurring administrative expenses	4	(346)	(429)
Share based payment charges		(44)	(37)
		-------------	-------------
Operating profit / ( loss)		336	(369)
Finance income		7	2
Finance expenses		(5)	(55)
		-------------	-------------
Profit / (loss) before taxation		338	(422)
Taxation		128	31
		-------------	-------------
Profit / (loss) attributable to the equity shareholders of the Company		466	(391)
		-------------	-------------
Earnings / (loss) per ordinary share attributable to the equity shareholders of the Company :
- Basic	5	1.22p	(1.02p)
- Diluted	5	1.21p	(1.02p)
		-------------	-------------

  Consolidated Balance Sheet as at 31 December 2008

			Restated (Note 3)
		2008	2007
		£000	£000
Non-current assets
Property, plant & equipment		721	942
Customer related intangible assets		175	119
Goodwill		2,553	2,296
		-------------	-------------
		3,449	3,357
		-------------	-------------
Current assets
Inventories		2,051	1,800
Trade and other receivables		4,001	5,093
Current taxes		12	290
Cash and cash equivalents		431	652
		-------------	-------------
		6,495	7,835
		-------------	-------------
Total assets		9,944	11,192
		-------------	-------------
Current liabilities
Trade and other payables		(4,201)	(5,700)
Current taxes		-	(431)
		-------------	-------------
		(4,201)	(6,131)
		-------------	-------------
Non-current liabilities
Trade and other payables		(59)	(20)
Deferred consideration		(297)	(147)
Deferred tax liabilities		(78)	(95)
		-------------	-------------
		(434)	(262)
		-------------	-------------
Total liabilities		(4,635)	(6,393)
		-------------	-------------
Net assets		5,309	4,799
		-------------	-------------
Equity attributable to equity holders of the Company
Called up share capital		153	153
Share premium account		5,293	5,293
Retained earnings		(137)	(647)
		-------------	-------------
Total equity		5,309	4,799
		-------------	-------------

Statement of Changes in Equity

	Share capital	Share premium	Retained earnings
	£000	£000	£000
At 1 January 2007	153	5,293	535
Result for the period (as restated - see note 3)	-	-	(391)
Share based payment charges	-	-	37
	-------------	-------------	-------------
At 31 December 2007	153	5,293	181
Prior year restatement (see note 3)	-	-	(828)
	-------------	-------------	-------------
At 31 December 2007 (as restated)	153	5,293	(647)
Result for the period	-	-	466
Share based payment charges	-	-	44
	-------------	-------------	-------------
At 31 December 2008	153	5,293	(137)
	-------------	-------------	-------------

  Consolidated Cash Flow Statement for the year ended 31 December 2008

			Restated (Note 3)
		2008	2007
		£000	£000
Operating activities
Profit /(loss) for the period		466	(391)
Impairment of goodwill		-	104
Amortisation of intangible assets		95	84
Depreciation		343	241
Net finance expense / (income)		(2)	53
Income tax charge / (credit)		(128)	(31)
Share based payment charges		44	37
		-------------	-------------
Operating cash inflow before changes in working capital		818	97
Movement in inventories		(251)	(116)
Movement in trade and other receivables		1,092	122
Movement in trade and other payables		(1,444)	965
		-------------	-------------
Operating cash inflow from operations		215	1,068
Interest received		7	2
Interest paid		(5)	(55)
Income tax received / (paid)		(72)	229
		-------------	-------------
Net cash flow from operating activities		145	1,244
		-------------	-------------
Investing activities
Purchase of plant and equipment		(122)	(257)
Acquisition of subsidiaries		(283)	(134)
		-------------	-------------
Net cash flow from investing activities		(405)	(391)
		-------------	-------------
Financing activities
Net proceeds / (payments) of hire purchase contracts		39	(22)
		-------------	-------------
Net cash flow from financing activities		39	(22)
		-------------	-------------
Net (decrease) / increase in cash and cash equivalents		(221)	831
Cash and cash equivalents at the beginning of the year		652	(179)
		-------------	-------------
Cash and cash equivalents at the end of the year		431	652
		-------------	-------------

  Notes

• The financial information set out herein does not constitute the Group's statutory accounts for the year ended 31 December 2008 or the year ended 31 December 2007.  The 2008 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 2007 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 237 (2) or (3) of the Companies Act 1985. 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.

• 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.  

In the current year, the Group has adopted IFRS7 'Financial Instruments: Disclosures' for the first time. As IFRS7 is a disclosure standard, there is no impact of that change in accounting policy on the financial results presented for the year ended 31 December 2007. Full details of the change will be disclosed in the statutory accounts for the year ended 31 December 2008.

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.    Prior year restatements

In accordance with IAS8 'Accounting Policies, Changes in Accounting Estimates and Errors', the Group has identified the need to recognise a prior year restatement in respect of three matters. 

		2008
	Note	£000
Duplicated sales invoices	a	146
Unrecognised trade payables	b	79
Revenue recognition	c	603
		-------------
		828
		-------------

• During the year ended 31 December 2007 certain sales invoices were duplicated in error. The impact of this duplication was to increase revenues for the year ended 31 December 2007 by £146,000 and to overstate net assets at that date by £146,000.  

• The net assets at 31 December 2007 did not recognise a liability in respect of trade payables at that date of £79,000. The impact was to overstate net assets as at 31 December 2007 and the profit for the year then ended by £79,000.

• Part of the Group's business includes the provision of certain catalogues for trade distributors. The production of these catalogues incorporates a consolidated effort by a number of different elements of the Group's overall operations. During the year, the Directors identified that the revenue recognition policy adopted by the various different elements of the Group's overall operations was not consistent with some operations recognising revenue during the current accounting period and some deferring revenue to future accounting periods.  The Directors consider that the Group revenue recognition policy should be consistent and that revenue from the provision of the catalogues should be recognised in the accounting period in which the catalogues are actually provided. The impact of this restatement is to reduce net assets by £603,000 as at 31 December 2007 and to reduce profit for the year then ended by £53,000.

          4.    Non-recurring administrative expenses

	2008	2007
	£000	£000
Termination payments	163	142
Goodwill impairment	-	104
Other one-time administrative expenses	-	183
Non-recurring administrative expenses	183	-
	-------------	-------------
	346	429
	-------------	-------------

Non-recurring administrative expenses relate principally to the costs of those terminated employees whilst employed within the Group which, following the restructuring programme will no longer be incurred.

           5.  Basic and diluted loss 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. 

	2008	2007
Earnings (£000)	466	(391)
	-------------	-------------
Weighted average number of shares (number '000)	38,203	38,203
	-------------	-------------
Fully diluted average number of shares (number '000)	38,605	38,488
	-------------	-------------
Basic earnings / (loss) per ordinary share (pence)	1.22p	(1.02p)
Diluted earnings / (loss) per ordinary share (pence)	1.21p	(1.02p)
	-------------	-------------

 

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