Altitude Group Regulatory News (ALT)

Altitude Group plc

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

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2016

Altitude Group plc (AIM: ALT), the provider of innovative technology solutions for small to medium sized businesses, announces its interim results for the six month period ended 30 June 2016.

Highlights:

· Adjusted operating profit* increased by £0.5m to £0.7m

·  Gross profit maintained at £2.4m

·  Gross margin of 78.9%, increased by 3.7%

· Administrative expenses* reduced by £0.5m to £1.7m, a decrease of 23.4%

· Net cash inflow from operating activities improved by £1.1m to £0.3m

· Group remains free of bank borrowing, with net cash resources increasing by £0.05m to £0.4m since the year end

· Two major USA Technology Partnership Agreements announced for our 'Click to Ship' solution in H1

· Strong pipeline of opportunities

* before amortisation of intangible assets, share-based payments, exceptional charges and non-recurring administrative expenses.

Non-Executive Chairman, Peter Hallett, commented:

"The Group has a portfolio of proprietary software applications which have now been successfully developed and integrated into a compelling and potentially structurally changing solution for the $22 billion US personalised and promotional products, signage and printed wearables market.

"We have announced two significant agreements with Aprinta Group and AI Mastermind which will see our 'Click to Ship' solution rolled out to a significant number of personalised product resellers commencing in Q4 of this year. In addition, we have a strong pipeline of opportunities with similar enterprise level partners.

"Combined with the profitable and cash generative Exhibitions and Publications business, the Group is in a strong position to deliver planned growth and well placed to enhance shareholder value."

Enquiries:

Chairman's Statement

I am pleased to present the interim results for the six months ended 30 June 2016, which saw the business deliver a profit before tax of £0.4m (H1 2015 loss of £0.7m, Full year 2015 loss of £1.2m), and increase net cash inflow to £0.1m (H1 2015 outflow of £1.0m).

This turnaround has been achieved as a result of the substantial restructuring of the business which commenced in April 2015, and which removed approximately £1.8m of recurring operating cost. It is pleasing to see the evidence of the action undertaken by the Board in 2015 so clearly reflected in the Company's results.

Customer Focus Technology

In my last report to shareholders I referenced that the Company was increasingly focusing on opportunities provided by the integrated offering of our proprietary software applications which was attracting increased customer interest.

We were delighted to announce two major contracts in the current financial year. On 14 June we announced an enterprise level technology agreement with Aprinta Group ("Aprinta") of Rochester New York USA, a leader in the provision of screen printing and promotional product supply to approximately 40,000 US distributor. This was followed on 5 August 2016 with the announcement of a technology partnership agreement with AI Mastermind, a leading US buying group serving more than 1,000 large promotional product resellers in the US (together the "Agreements").

The Agreements provide the Company with immediate access to large numbers of distributors in the highly fragmented personalised and promotional product, signage and printed wearables industry within the USA, a market estimated to be worth approximately $22 billion per annum.

As a result of these enterprise level agreements, Altitude is able to provide its unique and comprehensive "Click to Ship" online trading platform to large numbers of distributors through a single point of relationship. Such distributors have historically been reluctant to make the significant investment required to establish such a comprehensive online capability. We believe the Group's ability to provide a combination of bespoke integrated, hierarchical (grandparent, parent, child) websites, product catalogues, product visualisation and production-ready artwork functionality and a CRM/ERP solution, to these users, with no upfront charge, is compelling and potentially market changing.

In addition to the potential for increasing both the supplier's and the distributor's business, the operational efficiencies which the "Click to Ship" model delivers, also encourage the acceptance of Altitude being remunerated on a rebated or commission based share of throughput revenue. This basis of trading is the strategic priority of the Company, and the two Agreements are the first of a pipeline of similar opportunities we are exploring.

We are currently beta testing the first batch of "Click to Ship" website solutions, and expect the first customer site to go live towards the end of October 2016. We expect the sites to be earnings enhancing from customer activation, however the initial scale and speed of roll out will be carefully managed and evaluated.

We believe that the "Click to Ship" model can be adopted for the UK market, where we already have a solid presence, which whilst a smaller opportunity than the US, is still potentially significant for the Company.

Trade Only Exhibitions & Publications

On 15 April 2016, following an increase in the Company's share price, the Group was obliged to disclose the existence of early stage discussions for the disposal of the Exhibitions and Publications business. On 15 July, the Company subsequently announced that the discussions had ended

Our Exhibition and Publications business continues to perform well. The January 2016 National Show at the Ricoh Stadium, Coventry, showed another strong performance with increased profitability. Re-bookings for the 2017 show and trading in the publications business are in line with expectations and we expect another good performance from this business in 2017.

With over 4,000 delegates attending the main event in January each year, all being involved in the print, promotional and personalised gift sectors, the potential to drive additional sales of our SaaS products in the UK remains strong and adds further value to the Group.

The business is highly profitable, cash generative and provides a strong platform for the UK SaaS business and the Board is happy to retain it within the Group. 

Results

Revenue was 4.2% lower at £3.0m (H1 2015 £3.1m) with the reduction primarily in the Exhibitions and Publications business, however, gross profit was maintained at £2.4m (H1 2015 £2.4m) as gross margin improved across the business increasing to 78.9% (H1 2015 76.1%) driven by a strong performance in the restructured technology business.

Administration expenses (before amortisation of intangible assets, share-based payments, exceptional charges and non-recurring administrative expenses) decreased by £0.5m, or 23.4%, to £1.7m (H1 2015 £2.2m), largely as a result of cost reductions effected through restructuring undertaken last year. If we include the items classed as non recurring expenses in 2015, the adjusted decrease is £0.8m or 30.9%.

Adjusted operating profit* of £0.7m (H1 2015 £0.2m) increased by £0.5m largely due to the restructuring which has resulted in a much reduced overhead base. Exceptional charges of £0.1m (principally the redundancy costs of the former Managing Director of Customer Focus) were £0.3m lower (H1 2015 £0.4m) and also amortisation of intangible assets reduced by £0.1m as assets capitalised in 2011 became fully amortised.

Included within administrative costs are software maintenance and development costs of £0.4m, (H1 2015 £0.4m), as the Group has maintained its support and development of its proprietary software assets. In addition, the Group capitalised £0.2m of software development costs (H1 2015 £0.1m). The current level of expensed and capitalised development costs is representative of an adequate maintenance level of expenditure and continuous improvement of proprietary software assets including artworktooltm.

The resulting operating profit and profit before tax for the period was £0.4m (H1 2015 loss of £0.7m), reflecting a turnaround of £1.1m.

Basic earnings per share were 0.96p (H1 2015 loss per share 1.63p) and fully diluted earnings per share were 0.87p (H1 2015 loss per share 1.63p).

Net cash inflow from operating activities was £0.3m (H1 2015 outflow of £0.8m) and investment in intangible assets increased by £0.1m to £0.2m (H1 2015 £0.1m) producing an increase in net cash for the period since the last financial year end of £0.1m (H1 2015 decrease of £1.0m).

The Group remains debt free and has cash resources of £0.4m (H1 2015 £0.3m, 2015 year end £0.4m), which are sufficient for the Group's current requirements. Cashflow is historically and seasonally stronger during the second half of the year, when deposits are taken ahead of the January 2017 Exhibition and revenue from the publications business is received.

* before amortisation of intangible assets, share-based payments, exceptional charges and non-recurring administrative expenses

Board Changes

On 28 January 2016, I agreed to become Non-Executive Chairman, with Richard Sowerby becoming Non-Executive Director, and Martin Varley appointed as Chief Executive Officer.

On 28 January Shaun Parker was appointed to the Board as Chief Operating Officer effectively replacing Vicky Robinson, former MD of Customer Focus.

There were no further changes during the year and the Board currently comprises two executive and two non-executive directors.

Outlook

The Group has a portfolio of proprietary software applications which are now successfully developed and integrated into a compelling and potentially structurally changing solution for the $22 billion US market for personalised and promotional products, signage and printed wearables.

We have announced two significant agreements with Aprinta Group and AI Mastermind which will see the our "Click to Ship" solution rolled out to a significant number of promotional product distributors commencing in Q4 of this year. In addition, we have a strong pipeline of opportunities with similar enterprise level partners and are seeing encouraging signs of acceptance and enthusiasm for our solutions.

Combined with the profitable and cash generative Exhibitions and Publications business, the Group is in a strong position to deliver planned growth and well placed to enhance shareholder value.

Peter J Hallett

Non ExecutiveChairman

Consolidated income statement for the six month period ended 30 June 2016

Consolidated statement of changes in equity for the six month period ended 30 June 2016

Consolidated balance sheet as at 30 June 2016

Consolidated cash flow statement for the six month period ended 30 June 2016

Notes to the half yearly financial information

1. Basis of preparation

This consolidated half yearly financial information for the half year ended 30 June 2016 has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2015.

The consolidated half yearly report was approved by the Board of directors on 19 September 2016.

The financial information contained in the interim report does not include all of the information and disclosures required for complete financial statements. The financial information in the interim report does not constitute statutory accounts as defined by Section 434 of the Companies Act 2006 and has not been audited or reviewed.

The financial information relating to the year ended 31 December 2015 is an extract from the latest published financial statements on which the auditor gave an unmodified report that did not contain statements under Section 498 (2) or (3) of the Companies Act 2006 and which have been filed with the Registrar of Companies.

2. Accounting policies

The condensed, consolidated financial statements in this half-yearly financial report for the six months ended 30 June 2016 have been prepared in accordance with the AIM Rules for Companies and on a basis consistent with the accounting policies and methods of computation set out in the Annual Report and financial statements for the year ended 31 December 2015. The Group has chosen not to adopt IAS 34 'Interim Financial Statements' in preparing these interim financial statements and therefore the Interim financial information is not in full compliance with International Financial Reporting Standards.

In preparing the condensed, consolidated financial statements, management are required to make accounting assumptions and estimates. The assumptions and estimation methods are consistent with those applied to the Annual Report and financial statements for the year ended 31 December 2015. Additionally the principal risks and uncertainties that may have a material impact on activities and results of the Group remain materially unchanged from those described in that Annual Report.

3. Operating Segments

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

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.

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 divided by the weighted average number of equity voting shares in issue.

5. Interim Report

The Interim Report is available to download from the Company's website at www.altitudeplc.com.