ALTITUDE GROUP PLC

Earnings Release • May 20, 2016

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RNS Number : 8023Y

Altitude Group PLC

20 May 2016

Altitude Group plc

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

PRELIMINARY UNAUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015

Altitude Group plc (AIM: ALT), the provider of innovative technology solutions for small to medium sized businesses, announces its unaudited preliminary results for the year ended 31 December 2015.

Highlights:

·      Revenue increased by 2.1% to £4.54m (2014: £4.44m) and gross margin maintained at 78.0% (2014 78.1%) during a year of restructuring

·      Radical restructuring was undertaken in the year, removing £1.8m of annualised administrative expenses

·      Adjusted operating profit* increased 164.5% to £0.29m (2014: £0.11m after reclassification of £1.2m of costs as non-recurring)

·      Operating cash inflow from activities, excluding non-recurring and exceptional costs and expenses, £0.52m (2014 £0.50m)

·      Group remains free of bank borrowing, with net cash resources of £0.37m (2014 £1.28m), sufficient for current requirements

·      Strong performance at January 2016 Promotional Product Expo ("PPE") event with solid improvement in profitability.  Bookings for 2017 in line with our expectations

·      Award of USA patent for the artworktooltm application in August 2015

·      Strong pipeline of large enterprise opportunities for technology solutions

*       before amortisation of intangible assets, share-based payments and exceptional expenses and non-recurring costs relating to the restructuring exercise

Non-Executive Chairman, Peter Hallett, commented:

"The Group undertook a radical restructuring process during the year including changes to the Board and senior management.  We are now a much leaner and focused business with clear reporting lines and responsibilities, led by a Chief Executive with the requisite knowledge and experience to develop our proprietary software applications.

"Securing the patent in August 2015 for the artworktooltm solution and the processes it uses to help users create artwork online is a tremendous achievement and the result of three years of hard work and considerable cash investment.  We now have a comprehensive suite of products to leverage using exclusive, unique and protected proprietary applications which can be delivered on a global scale.

"The successful restructuring and the award of the patent has ensured that the Group is in good shape, both financially and commercially.  We have reported an adjusted operating profit, remain free of bank borrowing and retain sufficient cash resources for our current requirements.  The Board is confident that the Group is well placed to deliver growth in shareholder value."

Enquiries:

Altitude Group plc
Peter J Hallett (Non-Executive Chairman)	Tel: 07887 987469
WH Ireland Limited (Nominated Adviser and Broker)
Tim Feather Liam Gribben	Tel: 0113 394 6600

Chairman's Statement

I am delighted to be reporting to you for the first time as Chairman of Altitude, having been appointed as Chairman on 14  January 2016 after joining the Board as a non-executive director on 28 April 2015. 

Restructuring

As reported in our interim results, the Group recognised early in the year that the substantial investment in operational management structure made during 2013 and 2014 was not producing sufficient revenue growth to offset the corresponding increase in overhead.

A comprehensive and urgent restructuring of the business was required and the Group has moved quickly to "right size" the business.  As a technology company leveraging the best solutions to help collaboration and agile development, we recognised that duplicating resources in various locations in the USA was not only expensive but also inefficient and unnecessary.  We have therefore now minimised the number of staff located outside our UK base.

All software maintenance and development is now controlled from the UK, with a continued commitment to outsourcing new development in Eastern Europe, under the day to day control of the Chief Operating Officer, with all changes to development programmes requiring Board sanction.

I am happy to report that the restructuring is now complete, with day to day management being provided by the Chief Operating Officer, leaving the Chief Executive Officer clearly focused on establishing new enterprise relationships and markets, leveraging the Group's proprietary software assets.

Results

Despite the significant operational disruption arising from the restructuring, the Group has grown revenue by 2.1% to £4.54m (2014 £4.44m), and maintained gross margins at 78.0% (2014 78.1%).

The radical restructuring undertaken during the year has removed annualised costs of circa £1.8m.

Adjusted Operating profit* of £0.29m (2014 £0.11m) has increased by 164.5%. However, as a result of the restructuring action taken in 2015, administrative costs in 2014 of £1.12m have been reclassified as non- recurring and exceptional charges, thus increasing the 2014 adjusted operating profit* to £0.11m from the originally reported loss of £1.05m.

Included within administrative costs are software development costs of £0.83m (2014 £0.69m), as the Group has maintained its support and development of its proprietary software assets. In addition, the Group capitalised £0.20m of software development costs (2014 £0.48m). Our new structure enabled us to remove the US based former Chief Technology Officer, with responsibilities being transferred to the UK under the new Chief Operating Officer.

Operating losses amounted to £1.25m (2014 £1.66m), a decrease of 24.4%, after inclusion of amortisation of £0.45m (2014 £0.48m), share based payments credit of £0.04m (2014 charge of £0.17m), and non-recurring and exceptional charges of £1.13m (2014 £1.12m).

Net cash flow from operating activities, excluding non-recurring non-recurring and exceptional charges, was an inflow of £0.52m (2014 £0.50m).

The Group remains free of bank borrowings, and has cash resources of £0.37m (2014 £1.28m), which are sufficient for the Group's current requirements.

*       before amortisation of intangible assets, share-based payments and exceptional expenses and non-recurring costs relating to the restructuring exercise

Customer Focus Technology

Our fundamental technology strategy remains unchanged, as we focus our SaaS offerings largely on SMEs under the Customer Focus brand, both within the UK and increasingly within North America.

During the period, as part of the reorganisation, we combined the sales and customer service operations for our Technologo and artworktooltm products under the Customer Focus brand.  This integrated offering is attracting increased interest and, whilst the product enhances our overall technology offering, the possibilities for the technology are applicable to a much wider market and the opportunity is potentially very large for the Group.

A significant achievement in this area has been the successful application for a patent for artworktooltm, a solution which enables users to easily create and share graphics and print-ready artwork using any device with a suitable browser.

The Group balance sheet incorporates its proprietary intangible software assets at cost, as required under the accounting regulations where the assets are expected to deliver substantial returns.  However, the Board believe that these assets will prove to be of significant value as the Group begins to leverage their potential.

These assets, in particular artworktool, allow the Group to present attractive and profitable solutions to global businesses.  This is evidenced by our relationship with Constant Contact ("CTCT"), a world leader in the provision of email marketing solutions to more than 650,000 businesses.  Under the terms of the agreement, CTCT have embedded artworktooltm functionality into the user accounts of all customers allowing them easily to create engaging graphics to use in email campaigns without the need to purchase expensive specialist software applications.

It is therefore in this area that the Group, and in particular the efforts of the Chief Executive Officer, are focused.

Trade Only Exhibitions & Publications

Our Exhibition and Publications business continues to perform well.  The January 2016 event showed another strong performance with increased profitability.  Bookings for the 2017 show are in line with our expectations and we expect another good performance from this business in 2017 based on booked orders.

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 from the ability to engage so many customers with other products and services.

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.  The discussions are ongoing, and there is no guarantee at this stage that they will lead to a successful conclusion.  If the transaction is agreed, the Directors expect that it would be classified as a fundamental change of business under the AIM Rules for Companies and require the prior approval of shareholders.

Board Changes

As previously reported, the changes made to the board on 28 April 2015 were the catalyst for the comprehensive restructuring of the Group detailed above.

This process saw the appointment of Vicky Robinson as Group Managing Director, myself as Non-Executive Director  and Richard Sowerby moving to Executive Chairman, following the departure of the former Executive Chairman.

On 28 January, I agreed to become Non-Executive Chairman, with Richard Sowerby becoming Non-Executive Director, and Martin Varley appointed as Chief Executive Officer.  Martin has an unrivalled knowledge of the business and in particular the potential of its proprietary software assets and the target markets for their application.  The Board has no doubt that he is the best person for this role.

On 28 January we also appointed Shaun Parker to the Board as Chief Operating Officerand Vicky Robinson left the Group, wishing to take time out with her family after ten years of service.  Shaun brings wide and relevant experience of the technology sector gained through senior management positions in Redstone plc, Hewlett Packard and Compaq amongst others.

The Board now comprises two executive and two non-executive directors.

Outlook

We continue to drive forward with a leaner and more focused structure, centred in the UK, with clear and concise reporting lines and objectives

We are fortunate to have a portfolio of proprietary software and technology assets which the Board is confident has the potential yto generate increasing shareholder value in 2016 and beyond.  In addition, we have a successful Exhibitions and Publications business which provides synergies to our technology business and which we would be very happy to retain should the discussions regarding its potential sale not result in a transaction.

The successful restructuring and the award of the patent for artworktooltm has ensured that the Group is in good shape, both financially and commercially.  We have reported an adjusted operating profit*, remain free of bank borrowing and retain adequate cash resources for our current requirements.  The Board is confident that the Group is well placed to deliver growth in shareholder value.

Peter J Hallett

Non-Executive Chairman

*       before amortisation of intangible assets, share-based payments and exceptional expenses and non-recurring costs relating to the restructuring exercise

Consolidated Statement of Comprehensive Income 

for the year ended 31 December 2015

				2015		2014
		Note		£'000		£'000
				Unaudited		Audited
Revenue				4,535		4,440
Cost of sales				(998)		(971)
Gross Profit				3,537		3,469
Administrative costs before share based payment charges, amortisation, exceptional charges and non-recurring costs				(3,246)		(3,359)
Operating profit before share based payment charges, amortisation, exceptional charges and non-recurring costs				291		110
Share based payment charges				38		(168)
Amortisation				(448)		(478)
Exceptional charges		3		(404)		-
Non recurring costs		4		(729)		(1,119)
Operating loss				(1,252)		(1,655)
Finance income				3		89
Loss before taxation				(1,249)		(1,566)
Taxation				-		-
Loss attributable to the equity shareholders of the Company				(1,249)		(1,566)
Other comprehensive income:
Foreign exchange differences				(1)		-
Total comprehensive loss for the year				(1,250)		(1,566)
Loss per ordinary share attributable to the equity shareholders of the Company
Basic (pence)		5		(2.91)		(3.68)
Diluted (pence)		5		(2.91)		(3.68)

Consolidated Balance Sheet

as at 31 December 2015

		2015	2014
	£'000	£'000
Non-current assets		Unaudited	Audited
Property, plant & equipment		42	105
Intangible assets		937	1,184
Goodwill		564	564
Deferred tax		426	426
		1,969	2,279
Current assets
Trade and other receivables		696	787
Cash and cash equivalents		366	1,280
		1,062	2,067
Total assets		3,031	4,346
Current liabilities
Trade and other payables		(2,038)	(2,065)
Total liabilities		(2,038)	(2,065)
Net assets		993	2,281
Equity attributable to equity holders of the Company
Called up share capital		172	172
Share premium account		6,254	6,254
Retained earnings		(5,433)	(4,145)
Total equity		993	2,281

Consolidated Cash Flow Statement

for the year ended 31 December  2015

	2015	2014
£'000	£'000
	Unaudited	Audited
Operating activities
Loss for the period	(1,249)	(1,566)
Amortisation of intangible assets	448	478
Depreciation	78	102
Net finance credit	(3)	(89)
Share based payment charges	(38)	168
Operating cash outflow before changes in working capital	(764)	(907)
Movement in trade and other receivables	91	222
Movement in trade and other payables	(28)	(52)
Operating cash outflow from operations	(701)	(737)
Interest received	3	89
Net cash flow from operating activities	(698)	(648)
Investing activities
Purchase of tangible assets	(15)	(48)
Purchase of intangible assets	(201)	(474)
Net cash flow from investing activities	(216)	(522)
Financing activities
Loan note repayment received	-	2,000
Net cash flow from financing activities	-	2,000
Net increase in cash and cash equivalents	(914)	830
Cash and cash equivalents at the beginning of the year	1,280	450
Cash and cash equivalents at the end of the year	366	1,280

Consolidated Statement of Changes in Equity

Equity attributable to equity holders of the Company

	Share Capital	Share Premium	Retained Earnings
	£000	£000	£000
As at 1 January 2014	172	6,254	(2,747)
Total comprehensive loss for the year	-	-	(1,566)
Transactions with owners recorded directly in equity:
Share based payment charges	-	-	168
At 31 December 2014	172	6,254	(4,145)
Total comprehensive loss for the year	-	-	(1,250)
Transactions with owners recorded directly in equity:
Share based payment charges	-	-	(38)
At 31 December 2015	172	6,254	(5,433)

Notes

1       Financial information

The financial information set out herein does not constitute the Group's statutory accounts for the year ended 31 December 2015 or the year ended 31 December 2014 within the meaning of section 435 of the Companies Act 2006.  The 2015 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 2014 has been derived from the audited statutory accounts for the year ended on that date upon which an unmodified 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 the Company's website.  A further announcement will be made at that time.

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 2015, that will be set out in the Company's Annual Report and Accounts, and as previously disclosed in the Company's Annual Report and Accounts for the year ended 31 December 2014.

The preparation of financial statements in conformity with IFRS requires management to make judgments, 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 consistent with those made in the financial statements for the year ended 31 December 2014 and 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 judgments 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          Exceptional expenses

	2015	2014
	£'000	£'000
Exceptional expenses incurred in redundancies and terminations	404	-
	404	-

4       Non-recurring administrative expenses

	2015	2014
	£'000	£'000
Non-recurring employment expenses following the restructuring	511	701
Non-recurring costs of locations closed in the year	218	418
	729	1,119

The non recurring expenses include specific payroll and office costs that were incurred to the point that they were terminated as part of the restructuring exercise.  These have been identified and separated to show the impact of the restructuring in the year.  As part of this process we have restated the prior year figures to separate these costs and provide information on a like-for-like basis.

5       Basic and diluted earnings per share

		2015		2014
Earnings £'000		(1,249)		(1,566)
Weighted average number of shares (number '000)		42,908		42,908
Fully diluted average number of shares (number '000)		42,908		42,908
Basic loss per ordinary share (pence)		(2.91)	(3.68)
Diluted loss per ordinary share (pence)		(2.91)	(3.68)

This information is provided by RNS

The company news service from the London Stock Exchange

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