Last checked at 30 Sep 2009 09:39
Altitude Group plc
Interim results for the six month period ended 30 June 2009
Altitude Group plc ("Altitude", the "Group" or the "Company"); a marketing, information and logistics solutions provider; announces its interim results for the six month period ended 30 June 2009.
KEY POINTS
Gross profit increased 4% to £3.87m (H1 2008 : £3.72m) on Revenue of £9.043m (H1 2008 : £9.047m)
Adjusted operating profit increased by 49% to £387,000 (H1 2008 : £259,000)
Total operating profit decreased by 77% to £41,000 (H1 2008 : £180,000)
Substantial cost reduction program complete, potentially saving £500k in 2010
Strong performance from Information and Exhibitions businesses
Board changes and major restructuring plans virtually complete
Colin Cooke, Chairman, commented:
"This has been a challenging period in our development as spend by major corporate clients has reduced substantially in the last 12 months across the wider promotional marketing sector, resulting in lower revenues for the promotional marketing division. However, following the board changes earlier in the year, we quickly reviewed business levels and the cost base associated with each division and as a result immediately adjusted our plans to ensure we limited any downside risk.
Revenues in this area continue to be soft. I am however encouraged by the results from our Information and Exhibitions businesses which whilst not immune from the economic climate, have managed their costs well to insulate them from any reductions in yield.
The period also saw changes in respect of two senior board members and we are currently in litigation with the previous CEO, Craig Slater. We have made provision for legal costs associated with this and we are further reviewing documents in relation to the financial reporting of the Group during the prior period with the help of a forensic accounting firm.
The new senior management team have shown a level of dedication, hard work and commitment in recent months that deserves thanks from all of us"
30 September 2009
Enquiries:
| Altitude Group plc | Tel: + 44 (0) 844 225 7070 |
| Martin Varley - Chief Executive | Tel: + 44 (0) 7912 599 012 |
| David Smith - Finance Director | Tel: + 44 (0) 7979 535 333 |
| Daniel Stewart & Co plc | Tel: +44 (0) 20 7776 6550 |
| Simon Leathers |
CHAIRMAN'S STATEMENT
I am pleased to report the interim results for the six month period ended 30 June 2009.
Overview
On flat revenues of £9.0m, the Group produced an adjusted operating profit increase to almost £0.4m (2008: £0.3m), profit before taxation fell to £0.04m (2008 : £0.18m) as a result of £276k non-recurring administrative expenses (2008 : £Nil).
The Group's cash position worsened to net debt of £0.3m compared to net cash of £1.1m at the same time last year and shareholders' funds increased by £0.1m over the same period to £5.1m.
Poor revenue generation affected the Promotional Marketing business in the first half resulting in lower sales and a loss at the operating profit level, however strong performance from the Information and Exhibitions business improved overall gross margins as the mix shifted to these higher margin areas. New account wins in the 2nd quarter of the year are starting to deliver some modest improvements.
Operational overview
| Six month period ended | Year ended | Six month period ended | |
| 30 Jun 09 | 31 Dec 08 | 30 Jun 08 | |
| Revenues | |||
| Promotional marketing | 7.0 | 15.9 | 7.7 |
| Information & exhibitions | 2.2 | 2.9 | 1.6 |
| Intra-group | (0.2) | (0.8) | (0.3) |
| ------------ | ------------ | ------------ | |
| 9.0 | 18.0 | 9.0 | |
| ------------ | ------------ | ------------ | |
| Operating profit before non-recurring items, amortisation of customer | |||
| related intangibles and share based payment charges | |||
| Promotional marketing | - | 0.9 | 0.5 |
| Information & exhibitions | 0.7 | 0.3 | 0.2 |
| Central | (0.3) | (0.7) | (0.4) |
| ------------- | ------------- | ------------- | |
| 0.4 | 0.5 | 0.3 | |
| ------------ | ------------ | ------------ | |
| Operating profit/(loss) after non-recurring items, amortisation of customer | |||
| related intangibles and share based payment charges | |||
| Promotional marketing | (0.1) | 0.7 | 0.5 |
| Information & exhibitions | 0.5 | 0.3 | 0.1 |
| Central | (0.4) | (1.0) | (0.4) |
| ------------ | ------------ | ------------ | |
| - | - | 0.2 | |
| ------------ | ------------ | ------------ |
Promotional Marketing
Revenue reductions from some major clients affected the Promotional Marketing business substantially. However, with the new Group board structure in place from May onwards, we immediately moved the focus into the two areas of cash and revenue generation from both inactive older customers and new prospects. The team have risen to the challenge well and there are signs that customers are now recognising the range of financial and efficiency benefits of working with our group.
We have reduced costs in this area by an annualised total of c.£200k. The full benefit will show in 2010 and alongside new account wins and the plans for increased investment in the direct marketing team will leave us well placed to show improved results next year.
Improvements in customer service and a greater marketing focus have led to our AdProducts, business growing in this tough market by 18% compared to reductions in most of its peer group. From the 2nd quarter a clear focus on stock reduction was implemented, resulting in substantial reductions to date. The team are on target to reduce stocks to proper levels by the year-end.
Information & Exhibitions
Following the success of the 2008 event, the 2009 National Show for the promotional product industry achieved a 30% increase in visitor numbers that delighted the exhibitors resulting in 65% rebooking for the 2010 event by the close of the show.
The catalogue and magazine publishing part of the business had a very strong start to the year where the sales are heavily weighted in the first half. There has been some softness in booking for key catalogues for 2010 but cost savings achieved are expected to mitigate any reductions in yield.
We have restructured the software business and redirected the team towards focusing on customer satisfaction as the key indicator of success rather than order intake. To address this issue, discounts are no longer being offered and customers that were paying reduced rates are being moved to higher rates as contract renewals arise.
Financial review
The Group has increased gross margins to 42.8% over the comparative period (H1 2008 : 41.2%) on flat revenues, due to an improved mix of sales from the higher margin Information & Exhibitions business. Adjusted operating profit has increased by 49% over the comparative period to £387k (H1 2008 : £259k) as a result of improved gross profit and lower overhead costs. Profit before taxation fell to £41k (H1 2008 : £180k) as a result of £276k non-recurring administrative expenses (H1 £2008 : £Nil). These costs are a mixture of termination payments and the costs of those terminated employees whilst employed within the Group which, following the restructuring programme, will no longer be incurred.
The profit for the six-month period to 30 June 2009 is after a tax credit of £78k (H1 2008: £25k charge). This represents the recognition of a deferred tax asset which takes into account the cumulative unrelieved tax losses currently held within the Group.
Cash performance has been below expectations with net debt of £0.3m at 30 June 2009 (31 December 2008 : net cash £0.4m). There is a renewed focus on working capital management with a stock reduction plan in place within our Adproducts business and a focussed effort to collect c. £300k of debt within the group which is over 90 days old.
The annual financial statements for the year ended 31 December 2008 included the recognition of certain prior year restatements, and those prior year restatements have been reflected, where appropriate, within the comparative six month period ended 30 June 2008 presented within this half-yearly financial information. The prior year restatements are described within the statutory accounts for the year ended 31 December 2008. The overall affect of the total adjustments was to reduce the profit for the six months period ended 30 June 2008 to £157,000 from £248,000 and total equity and reserves as at 30 June 2008 to £4,953,000 from £5,912,000.
Outlook
With a major cost reduction plan now complete, a management team focused on the strategy and clear on the key tasks needing to be executed, I am comfortable that the period of flux within the business is now behind us and we are well placed to deliver improved results.
Our team are aware of the challenges in the current market, they are clear that cash is the only true measure of success and they are running their business units with this at the forefront of their thoughts and planning.
Colin Cooke
Chairman
Consolidated income statement
for the six month period ended 30 June 2009
| Unaudited | Year ended | Unaudited | |
| Six month period ended | 31 Dec 08 | Six month period ended | |
| 30 Jun 09 | 30 Jun 08 | ||
| As restated | |||
| £'000 | £'000 | £'000 | |
| Revenue | 9,043 | 17,972 | 9,047 |
| Cost of sales | (5,175) | (10,556) | (5,320) |
| ------------- | ------------- | ------------- | |
| Gross profit | 3,868 | 7,416 | 3,727 |
| Administrative costs | (3,827) | (7,451) | (3,547) |
| Adjusted operating profit | 387 | 450 | 259 |
| Share based payment charges | (29) | (44) | (37) |
| Amortisation of customer related intangibles | (41) | (95) | (42) |
| Non-recurring administrative expenses | (276) | (346) | 0 |
|
| ------------- | ------------- | ------------- |
| Total operating profit / (loss) | 41 | (35) | 180 |
| Finance income | 1 | 7 | 3 |
| Finance expenses | (6) | (5) | (1) |
| ------------- | ------------- | ------------- | |
| Profit / (loss) before taxation | 36 | (33) | 182 |
| Taxation | 78 | 140 | (25) |
| ------------- | ------------- | ------------- | |
| Profit / (loss) for the period | 114 | 107 | 157 |
| ------------- | ------------- | ------------- | |
| Profit / (loss) per ordinary share : | |||
| - Basic & Diluted | 0.30p | 0.28p | 0.41p |
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 2009
| Share | Share | Retained | |
| Capital | Premium | Earnings | |
| £'000 | £'000 | £'000 | |
| Opening | 153 | 5,293 | (536) |
| Result | 114 | ||
| Share based payments | 29 | ||
| Closing | 153 | 5,293 | (393) |
Consolidated balance sheet
as at 30 June 2009
| Unaudited | Year ended | Unaudited | |
| 30 Jun 09 | 31 Dec 08 | 30 Jun 08 | |
| £'000 | £'000 | £'000 | |
| restated | |||
| Non-current assets | |||
| Property, plant & Equipment | 583 | 721 | 869 |
| Customer related intangibles | 133 | 174 | 76 |
| Intangible assets | 2,621 | 2,621 | 2,296 |
| 3,337 | 3,516 | 3,241 | |
| Current assets | |||
| Inventories | 1,601 | 1,825 | 1,659 |
| Trade and other receivables | 3,801 | 3,964 | 3,211 |
| Current taxes | 290 | ||
| Cash and cash equivalents | 431 | 1,139 | |
| 5,402 | 6,220 | 6,299 | |
| Total assets | 8,739 | 9,736 | 9,540 |
| Current liabilities | |||
| Bank overdrafts | 261 | ||
| Trade and other payables | 3,061 | 4,392 | 3,885 |
| Income taxes | 434 | ||
| 3,322 | 4,392 | 4,319 | |
| Long term liabilities | |||
| Trade and other payables | 67 | 59 | 36 |
| Deferred consideration | 297 | 297 | 147 |
| Deferred taxation | 78 | 85 | |
| 364 | 434 | 268 | |
| Total liabilities | 3,686 | 4,826 | 4,587 |
| Net assets | 5,053 | 4,910 | 4,953 |
| Share capital | 153 | 153 | 153 |
| Share premium | 5,293 | 5,293 | 5,293 |
| Retained earnings | (393) | (536) | (493) |
| 5,053 | 4,910 | 4,953 |
Consolidated cash flow statement
for the six month period ended 30 June 2009
| Unaudited | Year ended | Unaudited | |
| 6 month period | 31 Dec 08 | 6 month period | |
| 30 Jun 09 | 30 Jun 08 | ||
| £'000 | £'000 | £'000 | |
| Operating activities | |||
| Profit for the period | 114 | 107 | 157 |
| Depreciation | 164 | 343 | 171 |
| Amortisation of intangible assets | 41 | 95 | 42 |
| Net finance income/(expense) | 5 | (2) | (2) |
| income tax charge/(credit) | (78) | (140) | 25 |
| Share based payment charges | 29 | 44 | 37 |
| Operating cash flow before changes in working capital | 275 | 447 | 430 |
| Movement in inventories | 224 | (69) | 97 |
| Movement in trade and other receivables | 163 | 1,129 | 1,882 |
| Movement in trade and other payables | (1,308) | (1,307) | (1,811) |
| Operating cash flow from operations | (646) | 200 | 598 |
| Interest received | 1 | 7 | 3 |
| Interest paid | (6) | (5) | (1) |
| Income tax received/(paid) | 0 | (60) | (32) |
| Net cash flow from operating activities | (651) | 142 | 568 |
| Investing activities | |||
| Purchase of property, plant & equipment | (26) | (122) | (97) |
| Acquisition of trade and assets | 0 | (283) | 0 |
| Net cash flow from investing activities | (26) | (405) | (97) |
| Financing activities | |||
| Net proceeds/(payments) of hire purchase contracts | (15) | 42 | 16 |
| Net cash flow from financing activities | (15) | 42 | 16 |
| Net decrease in cash and cash equivalents | (692) | (221) | 487 |
| Opening cash | 431 | 652 | 652 |
| Closing cash | (261) | 431 | 1,139 |
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 2009 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
DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the six months ended 30 June 2009 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)
Martin Varley (Chief Executive Officer)
David Smith (Group Finance Director)
Craig Slater (Chief Executive Officer) [Resigned 20 April 2009]
Tim Sykes (Group Finance Director) [Resigned 20 April 2009]
Notes to the half yearly financial information
1. Basis of preparation
This consolidated half yearly financial information for the half year ended 30 June 2009 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 16 September 2009
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 2008 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 2009 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 2009 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 2008, 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 2008.
Presentation of financial statements
IAS 1(revised) Presentation of financial statements is mandatory for the first time for the financial year beginning 1 January 2009. The standard requires that all owner changes in equity are presented in the consolidated statement of changes in equity and non-owner changes in equity to be presented in the consolidated statement of comprehensive income. The Group adopts this policy and there is no impact to the financial statements other than presentation. The Group has elected [to present one statement of comprehensive income/separate income statement and statement of comprehensive income].
Comparative information has been re-presented so that it is also in conformity with the revised standard.
Operating segments
IFRS 8 Operating segments is mandatory for the first time for the financial year beginning 1 January 2009. The standard requires that the segments should be reported on the same basis as the internal reporting information that is provided to the chief operating decision maker (CODM). The Group adopts this policy and the CODM has been identified as the Chief Executive Officer. The Chief Executive Officer considers there to be two operating segments, namely, promotional marketing and Information and exhibitions. Internal reports reviewed regularly by the CODM provide information to allow the chief operating decision-maker to allocate resources and make decisions about the operations.
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 | ||
| Six month period ended 30 Jun 09 | Year ended 31 Dec 08 | Six month period ended 30 Jun 08 | |
| Earnings (£000) | 114 | 107 | 157 |
| Weighted average number of shares ('000) | 38,203 | 38,203 | 38,203 |
| Fully diluted weighted average number of shares ('000) | 38,605 | 38,605 | 38,913 |
| Fully diluted profit per ordinary share (pence per share) | 0.3p | 0.3p | 0.4p |
| ------------- | ------------- | ------------- |