Altitude Group Regulatory News (ALT)

23 April 2012

AIM: ALT

Altitude Group plc

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

Unaudited Preliminary Results for the year to 31 December 2011

Altitude announces its unaudited preliminary results for the year to 31 December 2011.

Highlights:

* Underlying operating loss before amortisation of intangible assets, non-recurring administrative expenses and share based payment charges

Colin Cooke, Non-Executive Chairman of Altitude, commented:

"2011 was a transformational year for our Company. The plan to shift management focus onto the higher growth areas of SaaS delivered SME software solutions was facilitated by the disposal of the Promotional Marketing Division to its management.

"The established UK business, which has good visibility of revenue, earnings and cash flow, supports our expansion into the larger USA market. The opportunity to deliver value from supplying the SME market within North American and the UK is substantial and the team is focused on achieving the goal of significant revenue and earnings growth in the medium term."

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

Enquiries:

Chairman's Statement

Group Overview

The Group made excellent progress towards its strategic goals in 2011 of focusing on the Technology and Information Division. It completed the disposal of the Promotional Marketing Division in July 2011, established a corporate presence in the USA market with Trade Only Inc. and has made progress in establishing a solid platform in the USA market. 

Now comprising one core business, the Group is better placed to grow revenues and profitability from our Trade Only branded solutions that provide a valuable information service between suppliers of promotional merchandise and independent distributors and a technology platform on which the parties in the supply chain may transact their business.

Offered as Software as a Service model ("SaaS") the Trade Only technology enables small business customers to access software tools without the need for them to have substantial technical knowledge or expensive hardware resources in-house. Trade Only benefits from recurring license fees that create good revenue predictability for the Group.

Performance Review 

The Group operating loss before non-recurring items, amortisation of intangible assets and share based payment charges was £0.15m (2010: £0.07m) on revenues increased by 21% to £3.54m (2010: £2.93m). The operating loss reflects the anticipated significant set-up costs incurred in establishing the USA operations and also a significant increase in expensed software development expenditure, where £0.43m has been expensed in 2011 (2010: £0.15m).

The Group balance sheet remains strong and was debt free at 31 December 2011 with a net cash balance of £0.29m (2010: £1.53m). The reduction during the year principally reflects the £1.1m invested in the expansion of the Technology and Information opportunities net of the £0.9m raised by way of a share placing in February 2011. The £0.9m net proceeds realised on disposal of the Promotional Marketing Division had largely been offset by its operating cash outflow in the first half of the year. A £4m loan note remained owing to the Group at the year-end under the terms of disposal of the Promotional Marketing Division, due for repayment in 2016, although I am pleased to report that £0.25m has been repaid early in April 2012.

Technology and Information

Overall in 2011, the division made an operating profit before non-recurring items, amortisation of intangible assets and share based payment charges of £0.31m (2010: £0.69m). This result included an increase of £0.28m in software development expenditure over the prior year to £0.43m.

With a clear focus on becoming a leading provider of Cloud-based business management software solutions and information services to small business globally, the Company has invested heavily in software development to deliver optimum functionality and user experience. This resulted in Trade Only being selected in January 2012 by EmbroidMe, the world's leading franchise for embroidered garments and promotional products, to provide our fully integrated point of sale ("POS"), web store, customer relationship manager ("CRM") and order management solution to each of several hundred EmbroidMe franchise stores across the USA, Canada, EMEA and Australia. The launch took place at the UFG World Expo in Las Vegas, Nevada on the 16 April 2012 where Trade Only was a joint sponsor alongside Hewlett Packard.

The similarity in channel marketing between the print and the promotional product sectors encouraged us to integrate with providers of print services that allow online design and ordering. This initiative brings the two markets together for the first time, delivering what we believe to be the first Cloud-based resource that combines print and promotional products in a single shopping solution.

By integrating a print solution into our existing Trade Only VISION¨ web store and order management solution, it will allow promotional product distributors easy access to the $40 billion market for on-demand print without the need for additional software or resources.

The print module will be offered as a simple add-on to the existing Trade Only VISION system to promotional resellers, as well as a complete solution for print resellers requiring market-leading functionality. We are on target to launch this additional service during this year.

Corporate Activity

In March 2011, the Group acquired the business and intellectual property of Technologo, a virtual sampling technology, and in May 2011 it acquired The Logo Network, a provider of marketing programs and marketing websites to the promotional products distributors. These revenue-generating businesses and their technology were integrated into our North American businesses of Trade Only Inc. and Trade Only Technology Services, respectively incorporated in California and Canada respectively. In July 2011, the subsidiaries comprising the Promotional Marketing Division were disposed of to its management.

Following an active 2011, we are primarily focusing our attention on organically growing our businesses in the UK and North America and extracting maximum value from our recent investments. However, we will continue to explore all opportunities that may arise, which may improve shareholder returns. 

Strategy

The Board takes the following points into consideration when setting targets for the senior management team:-

i) The growth potential globally for the Technology and Information Division is substantial.ii) The Board believes that Trade Only offers an unrivalled set of technology tools for the promotional products, print and other similar industries.iii) Continued investment in the expansion of our USA footprint, is key to the creation of meaningful shareholder returns in the medium term.

iv) The Group will continue to investigate potential transactions and structures that would improve shareholder returns over the medium term.

v) We remain focused on being a debt free company.

Focus

Our focus has primarily been on the promotional product sector and we continue to make excellent progress with new customers for our Trade Only VISION solution being added every day. We are confident that the superior user experience and fully integrated "Cloud" delivered solution that are benefits of our technology will continue to encourage migration from legacy providers.

We will launch our print solution offering to a beta group later this year. The web to print market is estimated at $40 billion in the USA alone, and our opportunity is to provide an integrated web store and order management solution for the resellers wishing to access this market. Our revenue will come from two sources, the technology fees paid by subscribers for the advanced solution and from a commission on throughput for the smaller customers that prefer a variable rather than fixed cost.

Our plans for the non-industry specific integrated web store through to CRM package are progressing well. This solution aimed at the SME market in the USA and UK will be launched during towards the end of the year. We believe that the level of functionality targeted to be offered is substantially superior to any other SaaS solution of a similar price. Our marketing and launch plans are being developed and partnership opportunities being explored.

People

The team have responded incredibly well to the additional demands placed on them as a result of our fast paced expansion into additional markets in the USA. Many have only been with Trade Only for a few short months making their efforts even more appreciated.

We have added senior level resource in the California office including our new local CFO, Thomas Burkholder CPA, and I am delighted to welcome him and all of our new team members and to thank them all for their continued hard work, innovation and dedication.

Outlook

We enjoyed another strong performance from our cash generative UK Exhibition and Information business and as a result an 18% increase in visitor numbers for the 2012 Trade Only National Show. We are delighted to have already pre-sold 80% of the space for the 2013 event taking place on 23 and 24 January 2013, giving us excellent visibility to the start of 2013.

Turning to the primary growth strategy, we believe that the market opportunity for integrated SaaS business management systems is substantial. Whilst the initial focus has been on the niches that include promotional products, print and corporate clothing, our longer-term plan is clearly directed towards the estimated 21m and 4.5m small businesses in the USA and UK respectively.

Overall I am pleased with the progress made in the last 18 months. 2012 will be a year of further investment in developing our USA operations and progressing longer-term revenue opportunities, the impact of which will become more evident from 2013. We have a clear strategy, a growing customer base, no net debt and increasing visibility of recurring revenues and I look forward with confidence.

Colin Cooke

Chairman

23 April 2012

Consolidated Income Statement for the year ended 31 December 2011

* Restated for disposals - see Note 4Consolidated Balance Sheet as at 31 December 2011

Statement of Changes in Equity

Consolidated Cash Flow Statement for the year ended 31 December 2011

Notes

1. The financial information set out herein does not constitute the Group's statutory accounts within the meaning of section 435 of the Companies Act 2006 for the year ended 31 December 2011 or the year ended 31 December 2010. The 2011 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 2010 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 2011, as set out in the Company's Annual Report and Accounts, and as previously disclosed in the CompanyÕs Annual Report and Accounts for the year ended 31 December 2010.

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. Non-recurring administrative expenses

4. Discontinued operation

In July 2011, the Group sold its entire Promotional Marketing Division ("PMD"). The division was not a discontinued operation or classified as held for sale at 31 December 2010 and the comparative consolidated statement of comprehensive income has been re-presented to show the discontinued operation separately from continuing operations. The decision to sell the PMD was taken by management in pursuit of the strategy to transform the Group into a focused Technology and Information business.

5. Basic and diluted earnings 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.