22 Sep 2010 07:00
Altitude Group plc
Unaudited Interim results for the six-month period ended 30 June 2010
Altitude Group plc ("Altitude", the "Group" or the "Company"), a marketing, information and promotional products provider, announces its interim results for the six month period ended 30 June 2010.
KEY POINTS
w Group Revenue increased by 10% to £9.92m (H1 2009: £9.04m)
w Adjusted Operating Profit increased by 42% to £0.55m (H1 2009: £0.39m)
w Operating Profit increased by 649% to £0.3m (H1 2009: £0.04m)
w EBITDA increased by 82 % to £0.51m (H1 2009: £0.28m)
w Promotional Marketing Revenue increased by 13% to £7.9m (H1 2009: £7.0m)
w Basic earnings per share increased by 163% to 0.79p (H1 2009: 0.30p)
w Net cash £0.2m: (H1 2009: net debt £0.26m)
Colin Cooke, Chairman, commented:
As indicated in our July trading update, I am pleased to see improved results and importantly a return to sales growth in our Promotional Marketing businesses I am also encouraged that we had positive net cash at the period end, compared to net debt at the same time last year, which is due both to an improved trading performance and to better cash management."
The wider economic climate is still tough but we have seen the return to the market of a number of clients that cut back on spend during 2009. This has delivered growth in the latter part of H1.
Looking forward, we enter the final quarter comfortable that the business is well structured, has an appropriate cost base and a management team that have clear goals and objectives.
We have won some new corporate business in recent months that will have an impact from January 2011, and our order book shows that the revenue growth enjoyed in the 1st half was maintained into early September. As is prudent, we remain cautious as to how the government spending cuts could affect our market over the medium term.
The Information and Exhibitions team have made further progress refining their technology offering, and they continue to explore the substantial opportunity for our software solution in the USA, a market at least 10 times the size of the UK.
The improvement in results, cash management and future opportunities are all as a result of the determined efforts of our whole team, and once again I thank them for all their hard work."
22 September 2010
Enquiries:
| Altitude Group plc |
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| Martin Varley - Chief Executive | Tel: + 44 (0) 7912 599 012 |
| David Smith - Finance Director | Tel: + 44 (0) 7979 535 333 |
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| Daniel Stewart & Co plc | Tel: +44 (0) 20 7776 6550 |
| Oliver Rigby |
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CHAIRMAN'S STATEMENT
I am pleased to report the interim results for the six-month period ended 30 June 2010.
Overview
On increased revenues of £9.9m (2009: £9.0m), the Group produced an adjusted operating profit increase to £0.55m (2009: £0.39m), and profit before taxation rose significantly to £0.3m (2009: £0.04m) despite £200k of non-recurring administrative expenses (2009: £276k).
The Group's cash position was a net cash figure of £0.2m compared to net debt of £0.26m at the same time last year, and shareholders' funds increased by £0.3m from the year-end to £4.7m.
Our first half is traditionally strong due to the timing of our major events and sales of catalogues early in the year. This has continued in 2010 and whilst revenues in the Information and Exhibition business were flat compared to the previous year, this was principally due to the timing of the sales process for these key products, the majority of which took place in the 2nd quarter of 2009, a period that saw many of our trade customers taking a cautious view of marketing expense.
The sales process for the 2011 events and publications is now almost complete and shows a return to sales growth and improved yield in these key areas.
Operational overview
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| Six month period ended | Year ended | Six month period ended |
| 30-Jun-10 | 31-Dec-09 | 30-Jun-09 | |
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| Revenues |
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| Promotional marketing | 7.9 | 13.1 | 7.0 |
| Information & exhibitions | 2.2 | 2.8 | 2.2 |
| Intra-group | (0.2) | (0.6) | (0.2) |
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| ------------ | ------------ | ------------ |
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| 9.9 | 15.3 | 9.0 |
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| ------------ | ------------ | ------------ |
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| Operating profit before non-recurring items, amortisation of customer |
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| related intangibles and share based payment charges |
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| Promotional marketing | 0.2 | 0.4 | - |
| Information & exhibitions | 0.7 | 0.5 | 0.7 |
| Central | (0.4) | (0.6) | (0.3) |
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| ------------- | ------------- | ------------- |
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| 0.5 | 0.3 | 0.4 |
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| ------------ | ------------ | ------------ |
| Operating profit/(loss) after non-recurring items, amortisation of customer |
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| related intangibles and share based payment charges |
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| Promotional marketing | - | (0.1) | (0.1) |
| Information & exhibitions | 0.7 | 0.3 | 0.5 |
| Central | (0.4) | (0.8) | (0.4) |
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| ------------ | ------------ | ------------ |
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| 0.3 | (0.6) | - |
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| ------------ | ------------ | ------------ |
Promotional Marketing
Our Promotional Marketing business includes our largest division by revenue, 'Dowlis', which has a 35-year record of serving corporate customers with their promotional product and corporate gift requirements.
Customers rely on Dowlis to deliver not just the product, but creative, innovative and measurable promotional marketing campaigns alongside fully integrated technical solutions. Dowlis manages the process so that purchasing of these products and services can be achieved with reduced administrative costs for the client, whilst being compliant with all legislation and internationally recognised procurement best practices.
Previously, this type of integrated solution was only available to larger organisations leaving mid market clients unable to leverage the control and cost savings that can be delivered through the use of procurement technology. Our investment in this area has meant that we are able to deliver a bespoke online promotional gift solution within hours, with absolutely no stock risk for either the client, or ourselves but with full management of budgets, brand guidelines and CSR compliance. We believe that this opens up a substantial sector of the market for us to maximise opportunities.
Our lower cost base put in place last year alongside sales growth of almost 13% in the period has delivered improved overall results, but margins have been under some pressure from major clients looking to maximise their own budgets.
New contract wins in the recent months will add further growth from January 2011 and we expect increased sales from our online business now that this has been transferred to our Glasgow customer service facility where they have both the skills and the capacity to manage this growth area.
Within the Promotional Marketing segment is our AdProducts business, which is a company that sources, stocks and personalises products for trade distributors, typically in 3-4 days or less from receiving artwork. AdProducts has grown every year since its inception and has continued this trend in the first half by 12% including sales to group companies.
There is much scope for this business to develop further and extend the product range, margins are comfortable and its market share is still in low single figures.
Information & Exhibitions
The largest part of Information and Exhibitions business is our Trade Only brand, a provider of marketing and technology tools to suppliers and distributors of promotional products. They also organise and manage a number of road shows and exhibitions that connect both sides of the industry at highly popular events.
By using the tools that Trade Only provide, a distributor can establish themselves in business, purchase marketing tools such as physical catalogues, web sites and virtual catalogues, and combine this with data on the source of products and 'trade' prices. In addition they are provided with a comprehensive customer relationship management (CRM) suite of software that enables them to operate highly efficiently, reduce administration costs and enabling them to focus more time on selling to customers. This service offering provides everything that a distributor needs to be in the Promotional Product industry, for a single and very affordable monthly fee.
Visitor numbers for our largest event, The Trade Only National Show, continue to grow. Visitor numbers were ahead of 2009 by 18% and whilst the 2011 event is still over 4 months away, the exhibition space is 97% sold with us expecting a waiting list by the time the show opens on the 26th January.
The catalogue part of this segment, has recovered substantially. These publications are again all but sold out and whilst all the work for these is carried out now, the revenue is not recognised until January when the catalogues are delivered to distributors.
Financial review
The Group has seen reduced gross margins of 38.5% over the comparative period (H1 2009: 42.8%) on increased revenues, which is due to tougher pricing conditions in the promotional product market generally, as well as lower revenues for the period in the Information and Exhibitions business which was affected by challenging business conditions mid 2009 when the selling for major publications takes place.
Adjusted operating profit has increased by 42% over the comparative period to £549k (H1 2009: £387k) as a result of lower overhead costs. Profit before taxation increased by 649% to £307k (H1 209: £41k) after £200k non-recurring administrative expenses (H1 £2009: £276k). The non-recurring costs relate to termination payments made to certain employees as part of the finalisation of the restructuring exercise and the write off of merchandise in relation to one specific purchase where the goods were rejected by our internal quality control process.
The profit for the six-month period to 30 June 2010 has no tax charge as the group has utilised losses incurred in recent years (H1 2009: £78k credit).
Cash performance is in line with expectations with net cash of £0.2m at 30 June 2010 (31 December 2009: net cash £0.8m). The net outflow since the year-end is mainly due to increased spend from large corporate clients for large orders that we pay for before shipment from Asia and typically receive payment within 90 days after delivery, the cash position typically improves substantially in H2 due to the inflow from the information and exhibitions business.
Outlook
We enter the final quarter comfortable that the business is well structured, has an appropriate cost base and a management team that have clear goals and objectives.
We have won some new corporate business in recent months that will have an impact from January 2011, and our order book shows that the revenue growth enjoyed in the 1st half was maintained into early September. We remain cautious as to how the government spending cuts could affect our market over the medium term.
The Information and Exhibitions team have made further progress refining their technology offering, and they continue to explore the substantial opportunity for our software solution in the USA, a market at least 10 times the size of the UK.
Colin Cooke
Chairman
Consolidated income statement
for the six month period ended 30 June 2010
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| Unaudited | Year ended | Unaudited |
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| Six month period ended | 31 Dec 09 | Six month period ended |
| 30 Jun 10 |
| 30 Jun 09 | |
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| £'000 | £'000 | £'000 |
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| Revenue | 9,918 | 15,329 | 9,043 |
| Cost of sales | (6,100) | (9,026) | (5,175) |
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| ------------- | ------------- | ------------- |
| Gross profit | 3,818 | 6,303 | 3,868 |
| Administrative costs | (3,511) | (6,918) | (3,827) |
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| Adjusted operating profit | 549 | 277 | 387 |
| Share based payment charges | (22) | (45) | (29) |
| Amortisation of customer related intangibles | (20) | (64) | (41) |
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Non-recurring administrative expenses | (200) | (783) | (276) |
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| ------------- | ------------- | ------------- |
| Total operating profit / (loss) | 307 | (615) | 41 |
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| Finance income | - | 1 | 1 |
| Finance expenses | (4) | (10) | (6) |
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| ------------- | ------------- | ------------- |
| Profit / (loss) before taxation | 303 | (624) | 36 |
| Taxation | - | 86 | 78 |
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| ------------- | ------------- | ------------- |
| Profit / (loss) for the period | 303 | (538) | 114 |
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| ------------- | ------------- | ------------- |
| Profit / (loss) per ordinary share : - Basic |
0.79p |
(1.41)p |
0.30p |
| - Diluted | 0.78p | (1.41)p | 0.30p |
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 2010
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| Share | Share | Retained |
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| Capital | Premium | Earnings |
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| £'000 | £'000 | £'000 |
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| Opening | 153 | 5,293 | (1,029) |
| Result |
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| 303 |
| Share based payments |
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| 22 |
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| Closing | 153 | 5,293 | (704) |
Consolidated balance sheet
as at 30 June 2010
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| Unaudited | Year ended | Unaudited |
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| 30 Jun 10 | 31 Dec 09 | 30 Jun 09 |
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| £'000 | £'000 | £'000 |
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| Non-current assets |
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| Property, plant & Equipment | 296 | 448 | 583 |
| Customer related intangibles | 144 | 110 | 133 |
| Intangible assets | 2,621 | 2,621 | 2,621 |
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| 3,061 | 3,179 | 3,337 |
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| Current assets |
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| Inventories | 1,514 | 1,337 | 1,601 |
| Trade and other receivables | 3,713 | 2,913 | 3,801 |
| Cash and cash equivalents | 155 | 773 | - |
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| 5,382 | 5,023 | 5,402 |
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| Total assets | 8,443 | 8,202 | 8,739 |
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| Current liabilities |
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| Bank overdrafts | - | - | 261 |
| Trade and other payables | 3,391 | 3,475 | 3,061 |
| Income taxes | 13 | - |
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| 3,404 | 3,475 | 3,322 |
| Long term liabilities |
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| Trade and other payables | - | 13 | 67 |
| Deferred consideration | 297 | 297 | 297 |
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| 297 | 310 | 364 |
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| Total liabilities | 3,701 | 3,875 | 3,686 |
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| Net assets | 4,742 | 4,417 | 5,053 |
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| Share capital | 153 | 153 | 153 |
| Share premium | 5,293 | 5,293 | 5,293 |
| Retained earnings | (704) | (1,029) | (393) |
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| 4,742 | 4,417 | 5,053 |
Consolidated cash flow statement
for the six month period ended 30 June 2010
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| Unaudited | Year ended | Unaudited |
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| 6 month period | 31 Dec 09 | 6 month period |
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| 30 Jun 10 |
| 30 Jun 09 |
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| £'000 | £'000 | £'000 |
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| Operating activities |
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| Profit/(Loss) for the period | 303 | (538) | 114 |
| Depreciation | 162 | 320 | 164 |
| Loss on disposal of fixed assets | - | 4 |
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| Amortisation of intangible assets | 20 | 64 | 41 |
| Net finance income/(expense) | 4 | 9 | 5 |
| income tax charge/(credit) | - | (86) | (78) |
| Share based payment charges | 22 | 45 | 29 |
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| Operating cash flow before changes in working capital | 511 | (182) | 275 |
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| Movement in inventories | (177) | 488 | 224 |
| Movement in trade and other receivables | (800) | 1,052 | 163 |
| Movement in trade and other payables | (74) | (928) | (1,308) |
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| Operating cash flow from operations | (540) | 430 | (646) |
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| Interest received | - | 1 | 1 |
| Interest paid | (4) | (10) | (6) |
| Income tax received/(paid) | 13 | 7 | 0 |
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| Net cash flow from operating activities | (531) | 428 | (651) |
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| Investing activities |
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| Purchase of property, plant & equipment | (9) | (59) | (26) |
| Disposal of property, plant & equipment | - | 8 | - |
| Acquisition of undertakings | (54) | - | - |
| Net cash flow from investing activities | (63) | (51) | (26) |
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| Financing activities |
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| Net proceeds/(payments) of hire purchase contracts | (24) | (35) | (15) |
| Net cash flow from financing activities | (24) | (35) | (15) |
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| Net decrease in cash and cash equivalents | (618) | 342 | (692) |
| Opening cash | 773 | 431 | 431 |
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| Closing cash | 155 | 773 | (261) |
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 2010 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 2010 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)
Notes to the half yearly financial information
1. Basis of preparation
This consolidated half yearly financial information for the half year ended 30 June 2010 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 2010
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 2009 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 2010 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 2010 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 2009, 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 2009.
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 two reportable segments.
- sale of promotional products, business gifts and related marketing services ("Promotional marketing"); and,
- provision of information and exhibitions to the wider industry ("Information & Exhibitions").
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.
The key segmental information is contained within the Chairman's statement.
2. 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.
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| Unaudited |
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| Unaudited |
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| Six month period ended |
| Year ended |
| Six month period ended |
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| 30-Jun-10 |
| 31-Dec-09 |
| 30-Jun-09 | |
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| Earnings (£000) |
| 303 |
| (538) |
| 114 |
| Weighted average number of shares ('000) |
| 38,203 |
| 38,203 |
| 38,203 |
| Fully diluted weighted average number of shares ('000) |
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| 38,679 |
| 38,679 |
| 38,605 | |
| Basic earnings/loss per ordinary share (pence) |
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| 0.79p |
| (1.41p) |
| 0.30p | |
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| ------------- |
| ------------- |
| ------------- |
| Diluted earnings/loss per ordinary share (pence) |
| 0.78p |
| (1.41p) |
| 0.30p |
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| ------------- |
| ------------- |
| ------------- |
Altitude Group (ALT)