REG - Altitude Group PLC - Audited Annual Results and Notice of AGM
30/07/2024 07:00
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RNS Number : 2880Y Altitude Group PLC 30 July 2024
Altitude Group plc
("Altitude", the "Company" or the "Group")
Audited Annual Results for the Year Ended 31 March 2024 and Notice of Annual
General Meeting
ALTITUDE CONTINUES TO DELIVER RECORD BREAKING RESULTS
Financial Highlights
· Adjusted basic earnings per share increased by 60.1% to 2.61p
(2023: 1.63p)
· Basic earnings per share increased by 78.2% to 0.98p (2023:
0.55p)
· Group revenues increased by £5.2 million to £24.0 million,
33.0% at constant currency (2023: £18.8 million)
· Gross profit increased 25.1% at constant currency by £1.8
million to £10.4 million (2023: £ 8.6 million)
· We are proud to report a record Group adjusted operating profit*
growing by 30.2% at constant currency to £2.4 million (2023: £2.0 million)
· Cash inflow from operating activities increased by £0.6 million
to £2.1 million (2023: inflow £1.6m) driven by significant revenue growth
and increased trading activities
· Cash remained robust at £1.2 million (2023: £1.2 million)
following increased levels of investment, highlighting our financial
stability.
· The Group increased its total financing facilities to $3.5
million (2023: $2.0 million) to support working capital fluctuations and
future substantial growth in Merchanting. The facility is undrawn at the year
end.
*Operating profit before share-based payment charges, amortisation of
intangible assets, depreciation of tangible assets and exceptional charges
Key corporate developments and operational highlights
· The Group enjoyed another record year, doubling revenues since
FY22 and increasing adjusted operating profit* by 2.25 times in the same
two-year period
· The Group's investment in Merchanting growth is the significant
growth driver supported by the Services division which continued to outpace
the greater promo industry
· The US delivered adjusted operating profit growth before central
costs of 17% reaching $4.8 million (2023: $4.1 million)
· The Group's disruptive collegiate Gear Shop solution continued to
expand with 7 new contracts since HY24 and continues to have a strong pipeline
of opportunities this financial year
· UGS has 19 campus programmes at 22 locations, with a total
lifetime contract value of c$45 million and $9 million (2023: 5 active
contracts of $1 million) annualised average expected revenues
· ACS continued to add significant revenue growth, further growing
annualised expected revenues by 32% to $18 million (2023: $13.6 million) from
both recruitment and organic growth
· ACS has started FY25 of with an additional $2 million of wins to
reach $20 million annualised expected revenue
· Services revenue has grown by 5.6%, delivering 90.5% gross margin
· US AIM membership has continued to grow, and currently totals
2,262 members, up from 1,917 at acquisition, consolidating its position as one
of the largest and strongest distributor organisations, recently being named
a top distributor by the industry trade association PPAI
Please note that percentages are calculated based on unrounded numbers as
reported in the primary statements.
Notice of Annual General meeting ("AGM")
The Company also gives notice that its AGM will be held at the offices of
Zeus, 125 Old Broad Street, 12th Floor, London, EC2N 1AR on 23 September 2024
at 11 a.m. The Notice of AGM and the Annual Report for the year ended 31 March
2024 will be posted to shareholders and will be available on the Group's
website (https://www.altitudeplc.com/reports-results
(https://www.altitudeplc.com/reports-results) ) in due course.
Nichole Stella, Group CEO of Altitude, said:
"FY24 was a continuation of the accelerated growth we achieved in FY23, and
once again we achieved record-breaking results for the Group. It was a year
that required intense focus on delivery in new markets and ensuring continued
scale within our core industry. FY25 has started strongly, with commercial
growth in Merchanting and with Services continuing to outperform the wider
industry. We remain excited about our growth potential, and continue to trade
in line with market expectations."
Altitude Group plc Via Zeus
Nichole Stella, Chief Executive Officer
Graham Feltham, Chief Financial Officer
Zeus (Nominated Adviser & Broker) Tel: +44 (0) 203 829 5000
Dan Bate / James Edis (Investment Banking)
Dominic King (Corporate Broking)
Chairman's Statement
I am pleased to report that the Group has shown strong performance in FY24 and
once again delivered excellent revenue growth.
The management team have continued to deliver on our growth strategy and have
built out a diversified offering in strategically attractive markets. The
delivery of a large number of Gear Shop contracts and substantial growth in
our ACS affiliates in the last financial year complements our traditional
strengths in servicing the promotional products industry. The Group delivered
28% revenue growth to £24.0 million (2023: £18.8 million). Highlighting the
importance of our Merchanting division, the Group grew gross profit by £1.8
million to £10.4 million (2023: £8.6 million) with £1.6 million of the
growth being driven by Merchanting. The high margin service division remains a
material contributor to the Group's adjusted operating profit, which increased
by 23% to £2.4 million (2023: £2.0 million), almost 10% ahead of market
expectations. This is an excellent result and is testament to the continued
delivery of our strategy and the power of our business model.
We continue to invest in the development of our technology and marketing
platforms to provide our AIM distributors, ACS Affiliates and Preferred
Partner suppliers with market leading capabilities. In addition, we have
invested in our Gear Shops to expand our reach and in the underlying systems
and processes of the Group to drive benefits in operational gearing as we
scale.
Year in Focus
Establishing a strong foothold within the Collegiate market whilst growing our
Affiliates and outperforming the market in the Promotional Products Industry
has taken effort and places us well for future growth.
In January 2023 we launched our third physical Gear Shop and by the end of
March 2024 we landed with 16 live contracts. We also improved the quality
within that number exiting 2 'online only' small stores but replacing with 13
more strategic contracts. Going live at 15 locations mostly in March to August
is an extraordinary achievement and I commend the team on its delivery. FY25
has started with a further 7 contract wins and churn of 3 contracts in a
season which is still open to win more contracts as we progress through the
year.
Our ACS Affiliates, after doubling in annualised expected revenues during the
prior year, has again grown by 32% from a mix of Affiliate recruitment and
organic growth. We are seeing the material revenue growth arising from the
prior year's wins and we look forward to securing additional Affiliates to ACS
in FY25.
The promotional products industry, as reported by ASI Research, showed a
slowdown in growth throughout FY24 with September to December 2023 being flat
year on year. This brought industry growth rates for the calendar year 2023 to
1.2% (Calendar 2022: 11.4%) with our own underlying Services growth rate
achieving 5.6% in FY24. Our ability to exceed the industry benchmark is
testament to our compelling offer, high-quality membership and partner
network. We will continuously strive to grow further in a competitive and
fragmented market.
In a year where the business model of the Group has substantially evolved we
have managed our cash position highly effectively. Delivering net increase in
cash and cash equivalents of £0.1 million (2023: increase £0.2 million) in a
year where we increased capital investment by 62.5% to £1.8 million (2023:
£1.1 million), whilst building in organic growth is a significant
achievement. We extended our existing credit facility from $1.5 million to
$3.0 million which supports the up-front investment in fit out and inventory
for our Gear Shop contracts and other routine working capital fluctuations.
The facility has been secured ahead of time and will be under constant review
at each annual renewal. The Group has utilised its facility during the year,
but is debt free at the year end and the facility remains in place to support
future growth as opportunity arises.
Management have outperformed in what has been a transformative year for the
Group. They have delivered above market expectations for the second year
running, and I have confidence in them continuing to deliver excellent
performance.
Looking Forward
A business only moves forward though the skills and dedication of its people.
On behalf of the Board, I would like to thank all the Altitude Group's
employees for their hard work and passion which has delivered another strong
set of results.
As we move through 2024 and 2025, we will focus on increasing profitability
and strengthening our position within the Collegiate market. Continued focus
on promotional products strategic partnerships within AIM and scaling our
Affiliate model are further priorities.
The Management team have overcome many operational challenges to deliver the
business we have today and retain the hunger to further improve and win new
business. I am confident we have the right team in place under the dynamic and
agile leadership of Nichole to continue delivery of our strategy.
Despite the slowdown in the promotional products market, we have delivered
excellent growth in revenues and profits for the third consecutive year. We
will continue to execute on our strategy to ensure we provide sustainable
performance year on year. As ever we remain committed to listening to and
delivering superior value to our stakeholders and look forward to the exciting
opportunities that lie ahead.
David Smith
Non-Executive Chairman
29 July 2024
Chief Executive's Statement
Financial year 2024 ("FY24") saw a continuation of Altitude's accelerated
organic scale, expansion and delivery of more Group record-breaking results.
We reported growth across our services divisions and affiliate program,
outstripping the wider promotional product industry in YOY growth, which
industry body PPAI reported grew by 2.24% in 2023 and reported sales figures
of $26.1 billion (2022: $25.5 billion). Additionally, the Group's reputation
within the specialty education market continues to grow with the nationwide
launch and delivery of our newly contracted Gear Shops.
Our teams focus on performance and relentless pursuit of growth, once again
delivered a year of outstanding results for the Group. For FY24, we delivered
an increase in revenues of 33.0% at constant currency to £24 million (2023:
£18.8 million) and Group adjusted operating profit* increased by 30.2% at
constant currency to £2.4 million (2023: £2 million). The US operations
delivered an adjusted operating profit before central costs increase of 17% to
$4.8 million (2023: $4.1 million), which has powered our ability to scale the
business organically.
Operational Excellence
We prioritise continuous improvement and operational efficiency by utilising
strategies for process optimisation, scaling programs, and enhancing
technology. Recent operational streamlining has enabled reinvestment in our
business, fuelling pipeline growth and new revenue opportunities. This focus
enhances our agility in adapting to market changes and seizing new
opportunities. Examples include optimising supply chain logistics and
upgrading production systems for increased efficiency.
Services & Merchanting
In FY24 the Group delivered growth across both its Global Services programmes
and its US based Merchanting programmes. The Global Services division
delivered continued growth of 5.6% at constant currency reaching £8.7 million
(2023: £8.5 million). Whilst tempered following the post-covid boom of FY
2023, our Services programmes continue to deliver high gross margins and
support our organic growth strategies. Simultaneously, our Merchanting Revenue
experienced a 55.8% at constant currency increase, totalling £15.3 million
(2023: £10.2 million). These results are evidence of our business's
accomplishments in expanding market influence and broadening our revenue
sources.
Our services programs have a worldwide presence, encompassing members in all
US states, Canada, and the UK. At year end, our global membership totals 2,509
(2023: 2,476), representing an estimated share of the promotional products
aggregate sales figure of $3.0 billion (2023: $2.9 billion) and an average
annual turnover per member of $1.2 million (2023: $1.2 million). Additionally,
we continue to have strong supply partners with more than 300 Preferred
Partners spanning the US, Canada, and the UK.
In contrast, our Merchanting programs are exclusively focused in the US, and
are steadily expanding across the country. Our specialty education Gear Shops
have grown exponentially in the year achieving 600% growth in the year. We
have built on both our live contracts and learnings in a new market - adding
stronger campus partners and releasing small online low yield contracts.
Additionally, the team has built a solid reputation within the market and we
anticipate continued scaling in this market. With our team's growing
knowledge, we are able to be more selective in the campus programs we agree to
serve and can approach larger institutions with confidence as we continue to
compete against the large legacy providers.
Our affiliate programme, ACS, continues to mature and gain brand recognition.
The division continues to recruit high-calibre promotional product sales
professionals to join ACS. These sales professionals act as our sales agent
and in return we provide access to our Preferred Partner network and
administrative, accounting and financial assistance. ACS grew by 32%,
highlighting the strong emphasis we place on recruitment of high-quality
affiliates and our commitment to maintaining exceptional quality standards.
Technology
Our technology is the heart of our operations, spanning both the Services and
Merchanting segments of our business. We continue to work within an agile
framework focused on continuous improvement. In the year we have maintained a
steadfast investment in enhancing our systems through integrations, and
systematic systems and feature upgrades. This focus empowers us to
consistently deliver exceptional services to our clients and attract larger
members, affiliates and campus clients.
Last year we introduced notable partnerships like Fully Promoted, a global
franchise group, that chose our order management platform after conducting a
comprehensive industry-wide review of over 20 tech providers. Today, we
continue to grow with Fully Promoted serving more than 90 franchisees in the
US and now Canada. Additionally, we are now the exclusive technology provider
for all new Franchisees and have recently been named 'Vendor of the Year' at
the Fully Promoted 'World Expo'.
Credit Facility
We were also pleased to report in the financial year that the Group secured an
increase in its facilities (the "Facilities") with TD Bank N.A.
totalling $3.2 million, previously $1.7m. The facilities increase was secured
from continued successful delivery across all areas of the business. The
Facilities have no significant financial covenants and will provide access to
non-dilutive funding to support the continued execution of the Group's growth
strategy. The main Facility was undrawn at the year end and is renewed
annually.
Trading Progress
Services
Throughout the financial year our focus remained squarely on driving
efficiency, investing in and expanding our pipelines and promoting growth
across our major routes to revenue growth through our services programs,
including our Preferred Partner Program, technology service fees, marketing
service fees, subscription fees, and product fees via:
· Driving growth for our Preferred Partners;
· Retention and continued growth in the AIM membership of high-quality
promotional product distributors;
· Helping selected Preferred Partners grow their share of the total AIM
purchase pipeline;
· Supporting AIM distributor members grow their business to end-user
clients and driving the end-users to purchase through preferred vendors and
programs, all of which drives revenue and profits to AIM and benefits the
Group as a whole; continuing to increase member utilisation of the AIM Tech
Suite.
Merchanting
The financial year saw growth across its Merchanting segments via:
· The Group's Gear Shop division won significant contracts, delivered
the national launch of the new contracts on time and benefited from these wins
in FY24. As a new and disruptive service provider in the space, we have
garnered attention and entered into new partnerships that accelerated growth
in FY24 and will continue to drive growth of the division in FY25 and beyond.
In addition, we began efforts to provide longer term efficiencies in supply
logistics and inventory management which will benefit the Group in FY25 and
beyond.
· AIM's premium enhanced member service marketed as ACS requires
mandatory use of the full AIM Tech suite and offers technology driven
back-office support, procurement utilising our supply chain relationships, on
which the Group is the principal in the sale and pays the sales agent a
commission.
Market Opportunities
We continue to see notable momentum within our Group as we explore promising
opportunities in adjacent markets. Specifically, our key areas of interest
within the higher education service provider sector. Within the estimated $12
billion higher education market, our Gear Shop solution has proven to be
disruptive and has garnered much interest. We remain intensively focused on
expanding our pipeline, securing deals, and innovating within this adjacent
market. With additional multi-year contracts already signed this financial
year, we view this as a crucial area for substantial growth in both the short
and long term for our Group.
At present, the Group continues to boast a network of 2,262 distributors in
North America, accounting for approximately 10% of the total distributor
companies in the industry. As noted previously, PPAI's market research
estimates the current size of the U.S. promotional products market in 2023,
experienced tempered growth in the year of 2.24% to a market size of $26.1
billion. Their report further noted, "While another milestone, this
represents a net negative for the industry. The growth rate for 2023 was
2.24%, failing to outpace inflation, which has not dipped below 3% since March
2021." While the industry experienced slower growth rates in the year, 63% of
distributors are bullish on growth for the new year. The Group, with our
Services and ACS affiliate division of Merchanting, easily outstripped the
wider market growth in its market share gains down to both affiliate
recruitment as well as from our existing affiliates and we anticipate this
accelerated growth continuing through this new financial year.
We have a highly skilled management team and advanced technology tailored to
the markets we serve. Pairing our ongoing industry expansion and our
successful entrance into the higher education market we are confident in the
Group's continued significant opportunities.
Our People & Our Commitment
Our workforce and community are the cornerstone of our organisation. We are
committed to nurturing employee development and cultivating a supportive and
inclusive culture that celebrates the accomplishments and contributions of
every team member, from entry-level to executive positions. We prioritise
creating an environment where individuals can thrive and grow professionally,
fostering a sense of belonging and engagement. Our dedication to recognising
and rewarding achievements ensures that each employee feels valued and
motivated, enhancing overall morale and productivity across the organisation.
Throughout the year, we continued to prioritise internal promotions, enabling
16 individuals to advance their careers and expand their skill sets.
Diversity, Equity & Inclusion
Our organisation fully embraces and upholds the values of diversity, equity,
and inclusion (DEI). These principles play a vital role in how we form our
teams, develop our leaders, and establish collaborative, innovative, and
inclusive environments within the Altitude Group and our wider industry. Our
inclusive culture fosters a range of perspectives, encourages open and honest
discussions, and empowers each individual within our team and the broader
communities we serve.
Community Engagement & Giving Back
At Altitude, we are a forward-thinking organisation that integrates ESG
principles into our everyday operations. Our commitment to community
engagement and giving back is core to who we are and what we believe to be
vital for the overall success and well-being of society. We view our
commitment to community engagement not just as corporate duty but a defining
core value of the business. Our goal is to represent positive change and
commitment to corporate responsibility that contributes to a more inclusive
resilient society that works towards the betterment of all.
A notable initiative launched in FY23 and expanded in FY24 is our Gear Shop
division's Educational Giving Back (EGB) scholarship program, in which we
donate financial scholarships to students in need. The Gear Shop division is a
growing area for our business and thus our pledged scholarships will continue
expanding as the division expands. Our EGB scholarship program is national
throughout the campus communities we serve. We empower students' equitable
outcomes by providing financial support in order to access educational
programs and course materials. Additionally, we extend our impact in higher
education through student internship and ambassador programs. These
initiatives further equip students with practical skills and a future
competitive edge when they enter the job market. We are committed to today's
students, nurturing their talent for successful outcomes and futures and thus
provide a positive contribution to society.
Altitude Group continues its social responsibility efforts and "adopted"
Arthur's Acres Animal Sanctuary (AAAS), reflecting dedication to animal
welfare and sustainability. Our initiatives align with the sanctuary's mission
of rescue, rehabilitation, and education for a sustainable and cruelty-free
world. In FY24, in partnership with one of our Gear Shop university clients,
we paired (AAAS) with the university's architectural program, for a semester
long project to redesign a new rehabilitation barn for animals with special
needs. Additionally, we provide donations and allow employees to participate
in various volunteer efforts in support of this program.
Outlook
FY24 was a continuation of the accelerated growth we achieved in FY23, and
once again we achieved record-breaking results for the Group. It was a year
that required intense focus on delivery in new markets and ensuring continued
scale within our core industry. FY25 has started strongly, with commercial
growth in Merchanting and with Services continuing to outperform the wider
industry. We remain excited about our growth potential, and continue to trade
in line with market expectations.
Nichole Stella
Chief Executive
29 July 2024
Chief Operating Officer's Report
During FY24 we continued to invest strategically in technology development to
gear our Services and Merchanting operations for further growth, our dual
focus on innovation and operational excellence has bolstered our ability to
deliver superior services to our members, affiliates and clients providing
several technologically driven advancements that have enabled contract wins
across all divisions.
Product Innovation and Development
We continued to advance our proprietary Tech Suite, providing an end-to-end
SaaS solution that enables our users to source, showcase, and seamlessly
fulfil orders for branded items across the US, UK and Canada. Our commitment
to technological innovation remains at the forefront of our strategy.
Throughout the year, our highly skilled and knowledgeable in-house research
and development team introduced several core enhancements to the AIM and ACS
Tech Suite, addressing the evolving needs of our users and providing increased
efficiency for internal processing teams to support growing volumes of orders
being processed.
Key achievements included:
Eight Technology Releases: This year focussed largely on increasing
operational efficiencies within our order management solution, with growing
order volumes processed through our Merchanting divisions, 35 major
technological advancements were made to enable efficient scalability through
technological solutions. These advancements provided enhancements to platform
users, internal order processing and account management teams and end-buyers.
MerchBook™ was developed and launched, a proprietary and fully customisable
online publication solution that enables users to upload logos directly to
interactive merchandise catalogues, driving forward a digital approach to
industry publications.
Canadian Market: Specialised development was completed to Tech Suite which has
enabled the introduction of a Canadian product catalogue and specific Canadian
system operations resulting in the successful onboarding of AIM's first
Canadian based promotional product distributors.
Strengthened Supplier Relations: Now with over 335 integrations (FY23: 220)
that facilitate live data exchanges between Preferred Partners and Tech Suite
users, continued effort was placed on enhancing and strengthening these
relationships through deeper electronic processes centred around the seamless
exchange of passage of product, inventory, art and order data.
Data Intelligence
Data intelligence is now integral to our strategic approach, driving informed
decision-making and uncovering valuable insights across Services, Merchanting
and campus operations. By leveraging advanced analytics and Amazon Web
Services data processing power, we have developed a robust internal business
intelligence platform that tracks key performance indicators (KPIs) throughout
the group. This platform enables us to monitor and optimise various aspects of
our business, from operational efficiencies to user behaviour and market
trends. The actionable insights derived from our data intelligence efforts and
dedicated team empower our teams to make data-driven decisions, enhancing
productivity, manage cost bases and ultimately improve user and buyer
experiences, this is key to our sustained growth and competitive edge in the
industry.
Operational Excellence
We continued to enhance our operational efficiency and agility through various
initiatives. By implementing deeper automation of processes across various
departments including data processing, account management, finance, system
development and quality assurance we have and continue to streamline processes
and improve our scalability.
Cybersecurity and Data Protection
Cybersecurity remains a top priority as we safeguard our digital
infrastructure and protect our customers' data. During FY24, we have
implemented additional advanced cybersecurity measures to defend against
evolving threats, ensuring robust protection for our systems and sensitive
information. Our proactive approach includes regular updates to our security
protocols and the deployment of cutting-edge technologies to detect and
mitigate potential vulnerabilities. Additionally, we have implemented targeted
dedicated employee training on cybersecurity best practices, fostering a
culture of vigilance and awareness throughout the organisation.
Our commitment to data protection, privacy and payment compliance, and
adherence to industry standards is unwavering, as we strive to maintain the
highest levels of trust and security for our members, affiliates, clients and
partners.
Looking Ahead
Looking ahead, we remain committed to providing best-in-class solutions to our
market by integrating customer feedback and emerging trends into our business
strategies. We will continue to invest in research, development, and data
intelligence with a core focus on delivering internal scalability and
best-in-class solutions.
Deborah Wilkinson
Chief Operating Officer
29 July 2024
Chief Financial Officer's Report
Financial Results
Group revenues for the year increased by an underlying £6.2 million despite
an adverse foreign exchange variance of £1.0 million to arrive at reported
revenues of £24.0 million (2023: £18.8 million), an underlying increase of
33.0%.
FY24 was the year of 'locking in' successful Collegiate contract wins and
reaffirming our position as a key player in the Promotional Products
Industry. We have achieved our revenue growth from new contract wins in our
Merchanting division and performing well in Services which was impacted by an
industry-wide slower growth year when compared against 2022, which was boosted
by being the first full year post-pandemic.
Our underlying Service revenue growth of 5.6% is mainly driven from throughput
volume, derived from membership activity through our VIP Supplier network,
surpassing the industry 2023 calendar year distributor average of 1.2%
(2023:11.2%) as reported by ASI Central. This reflects our commitment to a
high quality distributor membership model.
The Merchanting Division has grown from further expansion in our Affiliate
sales network with year-end expected annualised run-rate revenues growing by
32% to $18 million (2023: $13.6 million) from a mix of 18% recruitment and 14%
organic growth. Following the year end we have signed additional Affiliates
comprising a further approximately $2 million in potential annual revenue to
reach the $20 million milestone in annualised expected revenue run rates.
Our Adjacent Market Programme ('AMP') focusing on our Collegiate Gear Shops
within the Educational Sector has seen underlying revenue growth of 600%,
ending the year with 16 (2023: 5) contracts of over $7 million (2023: $1
million) expected aggregate annualised revenues. During FY24 we gained 13
contracts and exited 2 small online only contracts. Altitude's now firm
foothold into the complementary Collegiate adjacent market provides growth
opportunities as well as diversification. We commence FY25 with 6 newly
awarded programmes and 3 churned contracts to reach 19 contracts comprising
approximately of $9 million annualised average expected revenues with an
active near term pipeline of opportunities to go for. We have recently
expanded our reach by developing further strategic partnerships. We cannot
underplay how much we believe our expansion and market positioning positively
impacts the outlook for the Group as we continue to learn and grow in this
exciting space.
Operational gearing is a key area of focus for us with our Affiliate model
delivering high levels of revenue growth for lower margin, profitability is
sensitive to overhead increases. Therefore process efficiency and cost control
is essential to maximising profit realisation. Within our Gear Shops we
measure expected returns on each contract to assess the appropriate level of
investment in a strong central team. The central Gear Shop team will then be
equipped to deliver further growth. In Merchanting as a whole we have
implemented improved processes throughout the year and have now gone live with
a new ERP with integrated inventory management within our AMP's programmes.
Year ended Year ended Impact of currency translation Underlying change Total change
31 March 31 March
2024 2023
£'000 £'000
Group Group Group Group Group Group Group
Turnover
Services 8,690 8,523 (313) 480 5.6% 167 2.0%
Merchanting 15,319 10,238 (637) 5,718 55.8% 5,081 49.6%
Total 24,009 18,761 (950) 6,198 33.0% 5,248 28.0%
Gross Profit
Services 7,862 7,718 (287) 431 5.6% 144 1.9%
Merchanting 2,512 887 (104) 1,729 195.0% 1,625 183.2%
Total 10,374 8,605 (391) 2,160 25.1% 1,769 20.6%
Gross Profit Margin
Services 90.5% 90.6%
Merchanting 16.4% 8.7%
Total 43.2% 45.9%
Gross profit has increased by £2.2 million, a 25.1% underlying increase, to
£10.4 million (2023: £8.6 million) despite an adverse currency variance of
£0.4 million.
Gross margin is relatively stable at 43.2% (2023: 45.9%). Whilst Services
retained a consistently high margin of 90.5%, Merchanting gross margin grew to
16.4% (2023: 8.7%) being driven from the delivery of won contracts in the
Collegiate sector which delivers a substantially higher gross margin than the
Affiliate model. The graduation regalia sales that mainly occur between March
and May with an element in December have a mix of store sales and commission
sales which occur when we utilise an online supplier sales channel as is
customary in the Industry.
Administration expenses before share-based payments, amortisation of
intangible assets, depreciation of tangible assets and exceptional charges of
£8.0 million (2023: £6.6 million) are ahead of prior year by £1.3 million
or £1.6 million at underlying rates. This increase has been driven from the
roll out and delivery of the Collegiate contracts of £1.0 million from store
employees, central procurement and operations. Volume-related increases driven
by transaction levels with administrative support staff c£0.4 million
countered by a reduction in incentives of £0.4 million. Inflationary wage
rises and costs increases have been estimated at impacting c£0.2 million.
Adjusted operating profit* increased by 30.2% at underlying rates and at
actual exchange rates by 23.0% to £2.4 million (2023: £2.0 million). The
statutory profit before taxation was at break even (2023: profit of £0.2
million), whilst the adjusted profit*** before taxation increased by £0.2
million to £1.2 million (2023: £0.9 million). Please see below for constant
currency analysis.
Exceptional costs
The Group incurred exceptional costs of £0.3 million (2023: £0.1 million)
relating to re-organisations within Sales, introducing a Global Head of Sales,
along with continued Finance transformation including a system project to make
stepped changes to support the fast changing nature of the Group.
Development
The Group capitalised £1.3 million of software development (2023: £0.9
million). The commitment to investing in our technology is underpinned by our
spend and our close relationship with our Affiliates and members in driving
customer focused improvements. Included within Internally generated
development is £0.2 million related to the ERP system implementation. This is
discussed in more detail in the COO review.
Earnings per share
Basic earnings per share were 0.98p (2023: 0.55p), an increase of 78.2%.
Adjusted basic earnings per share** was 2.61p (2023: 1.63p), representing an
increase of 60.1%. The calculation for adjusted earnings per share was updated
in the prior year to be consistent with external measures by adding back
amortisation on acquired intangibles whereas previously all depreciation and
amortisation was added back.
Taxation
The Group is carrying a deferred taxation asset of £0.7 million (2023: £0.5
million) reflecting the recognition of tax losses carried forward. Based on
future forecasts the Directors believe the Group's profits will be sufficient
to fully utilise the deferred tax asset within the next four years. The Group
was again successful in its application for the R&D tax credit resulting
in a profit and loss tax credit of £0.1 million (2023: £0.2 million).
Cash flow
Operating cash inflow before changes in working capital was £2.4 million
(2023: £2.0 million). Working capital represented an outflow of £0.1 million
(2023: £0.4 million) from an increase in collegiate store inventory countered
by earlier receipts from supplier revenues and less receivables outflow due to
timing of orders around the year end and lower accruals. Net cash flow from
operating activities increased by £0.6 million to £2.1 million (2023: £1.6
million inflow). Net cash outflow from investing activities of £1.8 million
(2023: £1.1 million outflow) is mainly represented by our development spend,
investments in our retail operations and system change. Financing activities
included the repayment of finance agreements and interest of £0.3 million
(2023: £0.2 million). Total net cash inflow was £0.1 million (2023: £0.2
million inflow). The year-end cash balance stood at £1.2 million (2023: £1.2
million) with no debt at the balance sheet date.
Treasury
The Group continues to manage the cash position in a manner designed to meet
the operational needs of the businesses. Cash balances held in foreign
currencies reflect the geographies in which the Group operates. There is no
policy to hedge the Group's currency exposures arising from the profit
translation or the effect of exchange rate movements on the Group's overseas
net assets.
The Group has secured an increase in its main credit facility (the "Facility")
with TD Bank N.A., to $3.0 million (2023: $1.5 million). The Facility has no
significant financial covenants and is secured by the assets of the US Group
with a parental guarantee from Altitude Group PLC and is senior to the
subordinated Intercreditor loans. The Facility will provide access to
non-dilutive funding to support the Group in executing its growth strategy.
The Facility has a small annual arrangement fee and incurs interest at 1%
above the US Prime Rate on drawdown. This Facility remains undrawn at the year
end. The Group has other operational facilities of $0.5 million (2023:
$0.5million).
Share capital
The number of shares increased by 287,900 to 71,135,730 (2023: 70,847,830).
All of the shares issued in the period were in respect of deferred bonus share
awards and are detailed in note 5 with further disclosures related to
Directors' interests in note 4.
The Company issued share options to senior management of nil (2023:
2,648,000). During the year the number of share options exercised was nil
(2023: 166,666) with the number of share options and warrants lapsed being
1,636,000 (2023: 1,211,110). The total number of share options outstanding
at the year-end is 4,741,447 (2023: 6,357,447).
Key performance indicators
The Group's key performance indicators as discussed above are:
Year ended Year ended Impact of currency translation Underlying change Total change
31 March 31 March
2024 2023
£'000 £'000
Revenue 24,009 18,761 (950) 6,198 33.0% 5,248 28%
Gross profit 10,374 8,605 (391) 2,160 25.1% 1,769 21%
Gross margin 43% 46%
Adjusted operating profit* 2,407 1,957 (141) 591 30.2% 450 23%
Adjusted profit before tax*** 1,152 915 (24) 261 28.5% 237 26%
Statutory profit/(loss) before tax (5) 152 (9) (148) - (157) -
Other KPI definitions used in the report
"Annualised expected revenue" is used in the context of ACS annualised revenue
expectations. When a potential affiliate goes through an extensive vetting
process with the team prior to signing their contract the annual expected
sales levels are identified and selling commissions are agreed upon based on
these levels. The expected level of sales generated is then measured against
the actual performance of the affiliate and updated annually according to
experienced performance, adjusting for one off large orders and other
influencing factors. As the sales are usually non-contractual then they are
called "expected".
"Annualised expected average revenue" is used in the context of our Gear Shop
contracts. On tendering for a contract during the Request for Proposal ("RFP")
the institution will usually release revenue histories which form a basis for
the tender process. The quality of this information can vary, and management
will review and take a prudent view of the expected contract size. It is
usually expected that the year 1 revenues generated will be under the expected
and that at some point during a 5-year contract the revenues may exceed the
original view therefore management call the expected annualised sales as
"average". The expected value will be reviewed annually and updated as
appropriate.
*Adjusted operating profit is before share-based payment charges, amortisation
of intangible assets, depreciation of tangible assets and exceptional charges
is a consistently used measure used to show the performance of the revenue
generating activities and the related costs involved in the delivery of the
revenue for the current year
** Basic adjusted earnings per share is calculated using profit after tax but
before share-based payment charges, amortisation of acquired intangible assets
and exceptional charges and the weighted average number of equity voting
shares in issue and, when relevant, in respect of diluted earnings per share
includes the effect of share options that could potentially dilute basic
earnings per share. This provides a consistent metric with the Income
Statement for underlying performance
***Adjusted profit before tax is profit before tax adjusted for share based
charges, exceptional costs and amortisation on acquired intangibles. This
metric is to review the performance of the underlying business including the
depreciation for development costs
Significant judgements and estimates
In preparing the financial statements the Directors have made judgements and
estimates in applying accounting policies. Details of the most significant
areas where judgements and estimates have been made are set out in note 1 to
the group financial statements.
Principal risks and uncertainties
The Group's financial and operational performance is subject to a number of
risks. The Board seeks to ensure that appropriate processes are put in place
to manage, monitor and mitigate these risks. The Board considers the principal
risks faced by the Group to be as follows at 31 March 2024:
· a significant deterioration in economic conditions, particularly in
USA affecting SME's, the principal target customers for the Group's technology
products
· significant delays and or cost overruns in developing and delivering
products to meet customer requirements in the targeted market sectors
· a risk of cyber attack that targets our systems causing downtime to
end user processing or point of sale
· significant AMPs wins requiring investment over and above our cash
resources
· predatory pricing or other actions by established competitors in our
market sectors
· the risk of bad debts arising from AIM Capital Solutions
· a significant, adverse movement in the short-term in the US $
exchange rate compared with GBP
· the propensity of AIM distributor members to migrate orders to AIM
preferred suppliers
· the propensity of AIM distributor members to upgrade membership to
include enhanced marketing and sales support services
· deteriorating retention of the membership base of the acquired AIM
business
· a risk of under-reported revenue through incomplete visibility of
member transactions
In all cases the Group seeks to mitigate these risks wherever possible by
continuous marketing initiatives and promotions to stimulate market demand and
continuous development of enhanced member services and the promotion of AIM
Capital Solutions to high quality distributors with careful attention to
credit risk. In addition, we maintain close relationships with all customers
with service contracts based on transactional volume, and monitor progress
using data sampling and quarterly confirmation. Growth in our AMPs contracts
require investment in inventory at the onset of the contract and fit out
usually at the end of the first year of the contract. Management review
funding requirements depending on pipeline wins to assess this risk and work
closely with the Board on major contract tenders. The COO manages development
projects closely and works with the Executive team to ensure that we continue
to offer services that meet our customer needs.
US operations are self-funding, mitigating the risk from short term exchange
rate fluctuations. The US now regularly remits a funds back to the UK,
generally on a monthly basis at relatively low levels. Management have
reviewed the requirement of a formal hedging strategy however this will only
be necessary if the funding levels increase. In the meantime, spot rates have
been utilised with an outsourced foreign currency firm.
AIM is the largest distributor member organisation in the USA, with a 9-11%
estimated member share of the promotional products aggregate sales figures
in a very fragmented market. We assess the risk of predatory pricing from
other established competitors to be low as they do not possess the scale or
geographic coverage necessary influence the market as a whole. AIM members are
incentivised to order from AIM preferred suppliers through the provision of
significant discounts.
Cyber Security processes and controls including reminders and training and
regularly provided to all staff to ensure they remain extra vigilant and
exercise extreme caution when using email and the internet.
Liquidity
The Group remains debt free as at the year end with a cash balance of £1.2
million.
We have extended our finance facilities to $3.2 million from $1.7 million with
TD Bank. The facility has supported the growth in Merchanting and was utilised
during the year to manage the peaks and troughs in our working capital cycle.
Graham Feltham
Chief Financial Officer
29 July 2024
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2024
Year to Year to
31 March 31 March
Notes 2024 2023
£'000 £'000
Revenue 2 24,009 18,761
Cost of sales (13,635) (10,156)
Gross profit: 10,374 8,605
Administrative expenses before share-based payment charges, depreciation, (7,967) (6,648)
amortisation, and exceptional charges
Operating profit before share-based payment charges, depreciation, 2,407 1,957
amortisation, and exceptional charges
Share-based payment charges (708) (511)
Depreciation and Amortisation (1,325) (1,131)
Exceptional charges 3 (295) (101)
Total administrative expenses (10,295) (8,391)
Operating profit 79 214
Finance charges (84) (62)
(Loss)/profit before taxation (5) 152
Taxation 702 238
Profit attributable to operations 697 390
Other comprehensive income:
Items that may be reclassified subsequently to profit and loss:
Foreign exchange differences (174) 425
Total comprehensive income for the year 523 815
Earnings per ordinary share attributable to the equity shareholders of the
Company:
- Basic (pence) 4 0.98p 0.55p
- Diluted (pence) 4 0.96p 0.55p
Consolidated Statement of Changes in Equity
for the year ended 31 March 2024
Share Share Retained Foreign exchange translation Total
capital premium losses reserve equity
£'000 £'000 £'000 £'000 £'000
Group
At 31 March 2022 283 20,194 (11,962) (410) 8,105
Profit for the period - - 390 - 390
Foreign exchange differences - - - 425 425
Total comprehensive income - - 390 425 815
Transactions with owners recorded directly in equity
Share-based payment credit - - 511 - 511
Total transactions with owners - - 511 - 511
At 31 March 2023 283 20,194 (11,061) 15 9,431
Profit for the period - - 697 - 697
Foreign exchange differences - - - (174) (174)
Total comprehensive income - - (174) 523
697
Transactions with owners recorded directly in equity
Share-based payment charge - - 708 - 708
Shares issued 2 - (2) - -
Total transactions with owners 2 - 706 - 708
At 31 March 2024 285 20,194 (9,658) (159) 10,662
Consolidated Balance Sheet
as at 31 March 2024
As at As at
31 March 31 March
2024 2023
Notes £'000 £'000
Non-current assets
Goodwill 2,881 2,934
Intangible assets 3,089 2,652
Property, plant and equipment 326 202
Right of use assets 270 471
Deferred tax assets 668 458
Total non-current assets 7,234 6,717
Current assets
Inventory 1,044 361
Trade and other receivables 4,882 5,521
Corporation Tax Receivable 115 91
Cash and cash equivalents 1,220 1,173
Total current assets 7,261 7,146
Total assets 14,495 13,863
Liabilities
Current liabilities
Trade and other payables (3,642) (3,699)
(3,642) (3,699)
Net current assets 3,619 3,447
Non-current liabilities
Deferred tax liabilities - (347)
Lease liabilities (191) (386)
(191) (733)
Total liabilities (3,833) (4,261)
Net assets 10,662 9,431
Equity attributable to equity holders of the Company
Called up share capital 285 283
Share premium account 20,194 20,194
Retained losses and foreign exchange (9,817) (11,046)
Total equity 10,662 9,431
Consolidated Cash Flow Statement
for the year ended 31 March 2024
Year to Year to
31 March 31 March
2024 2023
£'000 £'000
Operating profit 79 214
Amortisation of intangible assets 1,071 901
Depreciation 254 230
Share-based payment charges 708 511
Exceptional items 295 101
Operating cash flow before changes in working capital and exceptionals 2,407 1,957
Movement in inventory (694) (339)
Movement in trade and other receivables 540 (1,532)
Movement in trade and other payables 23 1,404
Changes in working capital (131) (467)
Net cash flow from operating activities before exceptional items 2,276 1,490
Exceptional items (263) (84)
Net cash flow from operating activities after exceptional items 2,013 1,406
Income tax received 121 144
Net cash flow from operating activities 2,134 1,550
Cash flows from investing activities
Purchase of tangible assets (223) (119)
Purchase of intangible assets (1,573) (986)
Net cash flow from investing activities (1,796) (1,105)
Cash flows from financing activities
Repayment of lease borrowings (174) (163)
Lease interest paid (33) (47)
Other interest paid (50) (15)
Issue of shares for cash (net of expenses) - -
Net cash flow from financing activities (257) (225)
Net increase in cash and cash equivalents 81 220
Cash and cash equivalents at the beginning of the period 1,173 902
Effect of foreign exchange rate changes on cash and cash equivalents (34) 51
Net increase in cash and cash equivalents 81 220
Cash and cash equivalents at the end of the period 1,220 1,173
Notes to the Consolidated Financial Statements
1. Accounting policies
The financial information in this preliminary announcement has been extracted
from the audited Group Financial Statements for the year ended 31 March 2024
and does not constitute statutory accounts within the meaning of section 434
of the Companies Act 2006.
The Group Financial Statements for 2023 were delivered to the registrar of
companies, and those for 2024 will be delivered in due course. The auditor's
report on the Group Financial Statements for 2023 and 2024 were both
unqualified and unmodified. The auditors' report was signed on 29 July 2024.
The Group Financial Statements and this preliminary announcement were approved
by the Board of Directors on 29 July 2024.
The audited accounts will be posted to all shareholders and will be available
on the Group's website (https://www.altitudeplc.com/reports-results
(https://www.altitudeplc.com/reports-results) ) in due course.
Basis of preparation
The group financial statements have been prepared in accordance with UK
adopted International Accounting Standards. The Company financial statements
have been prepared under FRS 101.
Both financial statements have been prepared on the historical cost basis,
with the exception of certain items which are measured at fair value as
disclosed in the accounting policies set out below. The financial information
is presented in Sterling and has been rounded to the nearest thousand (£000).
The preparation of financial statements in conformity with IFRSs 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 of information. 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.
New standards impacting the Group that are not yet effective and have not been
adopted in the annual financial statements for the year ended 31 March 2024
are:
· Supplier Finance Arrangement (Amendments to IAS 7 and IFRS 7)
· Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
· Classification of Liabilities as Current or Non-Current (Amendments
to IAS 1)
· Non-Current Liabilities with Covenants (Amendments to IAS 1)
These new standards, interpretations and amendments will be adopted in the
financial statements as and when they are applicable and adoption of these new
standards, interpretations and amendments, will be reviewed for their impact
on the financial statements prior to their initial application but are not
currently expected to have a material impact.
The following material accounting policies have been applied consistently to
all periods presented in these Group financial statements:
Going concern
The financial statements have been prepared on a going concern basis.
The Group is following a strong growth trajectory despite the macro-economic
conditions of high inflation and interest rates. The conflicts in Ukraine
and Israel have continued to create instability however the initial signs of a
reduction in inflation with signs that interest rates will be reducing in the
shorter term is encouraging for global economic recovery. The Promo Industry's
growth has unsurprisingly slowed compared to the post-covid recovery year of
2022 which resulted in a flat calendar Q4 in 2023 and a marginal decline in Q4
2024 as reported by ASI central. This is not surprising with the significant
growth experienced post covid to then have a period of normalisation. The
Group continues to deliver diversified growth by maintain strong relationships
within the AIM network, growing ACS Affiliate recruitment and delivered
significant AMPs contracts whilst generating cashflow.
The Board is confident that the Group has sufficient liquidity to manage the
growth of the company and group and can flex on overhead spend should any part
of the business underperform against our expectations. The financial
statements have therefore been prepared on a going concern basis. The
directors have taken steps to ensure that they believe the going concern basis
of preparation remains appropriate. The key conditions are summarised below:
· The Directors have prepared cash flow forecasts extending to July
2025. The cash flow forecasts include a mid scenario and sensitised cases.
· The low scenario assumes reductions in revenue of c5% compared to the
mid-scenario.
· The forecasts assume regular collections and payments in line with
the normalised conditions experienced with detailed modelling of growth cash
outflows included.
· The base and sensitised cash flow forecasts do not include any
mitigating factors available to management in terms of:
· discontinuing the development of AIM Capital Services to release
working capital
· reduced tendering activities for AMPs to avoid investment in working
capital, fit out and set up costs along with exiting contracts to recover
inventory value
· reactionary cost reduction programmes in respect of headcount and
organisation
· securing new working capital facilities in respect of any growth of
Merchanting business outside of the sensitised forecast.
· The Group maintains the distributor membership and preferred
suppliers throughout the forecast period.
· The Group continues to develop the product offerings to meet the
demands of the market and customers.
· The Directors have considered the position of the individual trading
companies in the Group to ensure that these companies are also able to
continue to meet their obligations as they fall due.
· There are not believed to be any contingent liabilities which could
result in a significant impact on the business if they were to crystallise.
Based on the above indications and assumptions, the Directors believe that it
remains appropriate to prepare the financial statements on a going concern
basis.
The financial statements do not include any adjustments that would result from
the basis of preparation being inappropriate.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and the entities controlled by the Company (its subsidiaries) made
up to 31 March each period. Control is achieved when the Company:
· has the power over the investee
· is exposed, or has rights, to variable return from its involvement
with the investee and
· has the ability to use its power to affect returns
The Company reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements above. Consolidation of a subsidiary begins when the Company obtains
control over the subsidiary and ceases when the Company loses control over the
subsidiary.
The acquisition method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued, and liabilities incurred
or assumed at the date of exchange. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date, irrespective
of the extent of any minority interest. The excess of the cost of acquisition
over the fair value of the Group's share of the identifiable net assets
acquired is recorded as goodwill. If the cost of acquisition is less than the
fair value of net assets of the subsidiary acquired, the difference is
recognised directly in the Consolidated Statement of Comprehensive Income.
All intra-group balances and transactions, including unrealised profits
arising from intra-group transactions, are eliminated fully on consolidation.
Contract costs
Costs to fulfil a contract are capitalised, amortised and assessed for
impairment if they meet the required criteria. If the costs do not meet the
criteria they are expensed as incurred.
Costs to fulfil a contract are recognised as an asset only if they:
· Relate directly to a contract, or to an anticipated contract that
can be specifically identified
· Generate or enhance resources to be used to satisfy performance
obligations in future, and
· Are expected to be recovered.
The policy applies to contracts that are greater than one year in length.
The asset is amortised over the life of the contract once the contract is
live.
Revenue recognition
Revenue represents the amounts receivable, excluding sales related taxes, for
goods and services supplied during the period to external customers shown net
of sales taxes, returns, rebates and discounts.
When assessing revenue recognition against IFRS15, the Group assess the
contract against the five steps of IFRS15:
· Identifying the contract with a customer
· Identifying the performance obligations
· Determining the transaction price
· Allocating the transaction price to the performance obligations
· Recognising revenue when/as performance obligation(s) are satisfied
This process includes the assessment of the performance obligations within the
contract and the allocation of contract revenue across these performance
obligations once identified. Revenue is recognised either at a point in time
or over time, when, or as, the Group satisfies performance obligations by
transferring the promised goods or services to its customers.
The difference between the amount of income recognised and the amount invoiced
on a particular contract is included in the balance sheet as accrued or
deferred income. Amounts included in accrued and deferred income due within
one year are expected to be recognised within one year and are included within
current assets and current liabilities respectively.
The Group has a number of different revenue streams which are described below.
Services Revenue
Includes a range of member and member-related revenues as well as legacy
software license revenue.
Member subscription revenues
AIM distributor members pay a monthly subscription fee for basic membership
which confers immediate access to a range of commercial benefits at no
additional cost to the member. Members may elect to upgrade their membership
to access a range of enhanced services provided by AIM in exchange for an
increased monthly subscription fee. Subscription revenues are recognised on a
monthly basis over the membership period.
Other discretionary services
Certain other services are made available to AIM members on a discretionary
usage basis such as artwork processing services, catalogues and merchandise
boxes. These revenues are recognised upon performance of the service or
delivery of the product. For example, catalogue and merchandise box revenues
are recognised on dispatch of the products to members.
Events and exhibitions revenues
AIM promotes and arranges events for AIM members and groups of supplier
customers to meet and build relationships. Revenue from these events is
recognised once the performance obligations have been satisfied, typically on
completion of an event or exhibition.
Preferred Partner revenues
AIM provides services to vendors within the promotional products industry
whereby Preferred Partners are actively promoted to AIM members via a variety
of methods including utilising the AIM technology platform, webinars, email
communications and quarterly publications.
Revenues are variable and depend on the value of purchases made and services
utilised by the AIM members from Preferred Partners. Revenue is recognised
over time by reference to the value of transactions in the period. Payment for
AIM's marketing services is made by Preferred Partner customers on a calendar
quarter or annual basis. Revenue is recognised to the extent that it is highly
probable that it will not reverse based on historic fact pattern and latest
market information.
Software and technology services revenues
Revenues in respect of software product licences and associated maintenance
and support services are recognised evenly over the period to which they
relate. An element of technology services revenue is dependent on the value of
orders processed via the Group's technology platforms. Revenue is accrued
based on the value of underlying transactions and the relevant contractual
arrangements with the customer. Revenue is constrained to the extent that is
that it is highly probable that it will not reverse.
Merchanting revenues
Merchanting revenues arise when group companies contract with customers to
supply promotional products, branded merchandise, graduation regalia,
non-textbooks course materials and supplies, food and beverage items and
personal care.
ACS sells promotional products via AIM member affiliates who act as
independent sales representatives of ACS to secure sales with customers. All
transactions are mandatorily processed through the AIM technology platform and
utilise ACS people and know-how to efficiently operate the full end to end
process.
ACS bears the risk of the transaction as Principal, provisioning of orders and
contracting with the customer, determining the transaction price, provision of
fulfilment and supplier contracts and pricing, performing credit control and
processing payments. The sale of the promotional products, with the related
costs of goods supplied, freight and AIM affiliates selling commission
recognised as the cost of goods sold. The revenue is recognised on the
shipment of the goods from the supplier and as notified by the supplier
invoice which are raised following shipment. The Directors accept that the
technical transfer of risks and rewards to the customer occur on delivery of
the goods which are usually delivered within 2-5 days of shipment. The
Directors use a proxy of the shipment date as the trigger for recognising
revenue.
The Group also sources products directly through its network of Preferred
Partners, which it sells to AIM members and adjacent markets, where such sales
do not conflict with the interest of either suppliers or the AIM membership.
AMPs, "Gear Shops", contracts sell branded merchandise, graduation regalia,
non-textbooks course materials and supplies, food and beverage items and
personal care. The majority of sales are either store sales or promotional
product sales as described above. Graduation regalia sales are made in
coordination with specialist graduation regalia providers. A subsection of
graduation regalia are sold via the providers online store in which a
commission is derived from this sale for the Group that are recognised at the
time of sale. The online sales usually occur after the Group performs
graduation events, fairs, in-store selling and marketing to drive any
latecomers to the online solution so that students still have an opportunity
to obtain their graduation regalia.
2. Segmental information
The chief operating decision maker has been identified as the Board of
Directors and the segmental analysis is presented based on the Group's
internal reporting to the Board. At 31 March 2024, the Group has two operating
segments, North America, and the United Kingdom & Europe along with a
Central segment. The Group further analyses performance to Gross Profit by
presenting 'Service' and 'Merchanting' as shown. Service revenues are derived
from servicing our AIM membership base and generating throughput with our
contracted Preferred Partners. Merchanting revenues are sales of promotional
products where the Group acts as principal in the underlying transaction.
Segment assets consist primarily of property, plant and equipment, intangible
assets, trade and other receivables and cash and cash equivalents. Segment
liabilities comprise operating liabilities. Capital expenditure comprises
additions to property, plant and equipment and intangible assets, including
additions resulting from acquisitions through business combinations. Assets
and liabilities at 31 March 2024 and capital expenditure for the period then
ended are as follows.
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2024 2024 2024 2024
£'000 £'000 £'000 £'000
North America UK and Europe Central Group
Turnover
Services 7,540 1,150 - 8,690
Merchanting 15,319 - - 15,319
Total 22,859 1,150 - 24,009
Cost of Sales
Services (651) (177) - (828)
Merchanting (12,807) - - (12,807)
Total (13,458) (177) - (13,635)
Gross Profit
Services 6,889 973 - 7,862
Merchanting 2,512 - - 2,512
Total 9,401 973 - 10,374
Operating Profit/(Loss) before share-based payment charges, depreciation, 3,824 (57) (1,360) 2,407
amortisation, and exceptional charges
Share-based payment charges - - (708) (708)
Depreciation (193) (61) - (254)
Amortisation (231) (840) - (1,071)
Management fees (2,273) 1,104 1,169 -
Exceptional charges (200) (36) (59) (295)
Finance charges (74) (6) (4) (84)
Segmental profit before income tax 853 104 (962) (5)
Assets* 11,486 2,366 643 14,495
Liabilities* (3,390) (393) (352) (4,135)
Net Assets 8,096 1,973 291 10,360
*external balances disclosed for segmental purposes
Capital expenditure
Intangible assets (303) (1,270) - (1,573)
Property, plant and equipment (203) (13) (7) (223)
Right of use assets - - - -
Capital Expenditure (506) (1,283) (7) (1,796)
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2024 2024 2024 2024
£'000 £'000 £'000 £'000
North America UK and Europe Central Group
Timing of Revenue Recognition
At a point in time 16,380 90 - 16,470
Over time 6,479 1,060 - 7,539
Total Revenue 22,859 1,150 - 24,009
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2023 2023 2023 2023
£'000 £'000 £'000 £'000
North America UK and Europe Central Group
Turnover
Services 7,155 1,368 - 8,523
Merchanting 10,238 - - 10,238
Total 17,393 1,368 - 18,761
Cost of Sales
Services (582) (223) - (805)
Merchanting (9,351) - - (9,351)
Total (9,933) (223) - (10,156)
Gross Profit
Services 6,573 1,145 - 7,718
Merchanting 887 - - 887
Total 7,460 1,145 - 8,605
Operating Profit/(Loss) before share-based payment charges, depreciation, 3,426 170 (1,639) 1,957
amortisation, and exceptional charges
Share-based payment charges - - (511) (511)
Depreciation (171) (59) - (230)
Amortisation (168) (733) - (901)
Management fees (2,397) 778 1,619 -
Exceptional charges (65) (14) (22) (101)
Finance charges (41) (21) - (62)
Segmental profit before income tax 584 121 (553) 152
Assets* 11,187 2,368 308 13,863
Liabilities* (3,475) (462) (495) (4,432)
Net Assets 7,712 1,906 (187) 9,431
*external balances disclosed for segmental purposes
Capital expenditure
Intangible assets (99) (887) - (986)
Property, plant and equipment (91) (26) (2) (119)
Right of use assets - - - -
Capital Expenditure (190) (913) (2) (1,105)
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2023 2023 2023 2023
£'000 £'000 £'000 £'000
North America UK and Europe Central Group
Timing of Revenue Recognition
At a point in time 11,216 186 - 11,402
Over time 6,177 1,182 - 7,359
Total Revenue 17,393 1,368 - 18,761
3. Exceptional charges
Analysis of exceptional items:
Year ended Year ended
31 March 31 March
2024 2023
£'000 £'000
Legal, professional and consultancy costs 109 84
Other exceptional costs 186 17
295 101
Exceptional charges principally relate to acquisition projects, a strategic
restructure of the sales organisation and new ERP system. (2023: to
second-phase finance transformation costs, along with a provision for the
historic portion of a VAT reclaim). Other exceptional costs principally relate
to restructuring costs, other costs associated with the strategic review and
bad debt, offset by a historical VAT reclaim (2023: relates to a reversal of a
historical VAT reclaim).
4. Basic and diluted earnings per ordinary share
The calculation of earnings per ordinary share is based on the profit for the
period after taxation and the weighted average number of equity voting shares
in issue as follows:
Year ended Year ended
31 March 31 March
2024 2023
Profit attributable to the equity shareholders of the Company (£000) 697 390
Weighted average number of shares (number '000) 70,972 70,813
Fully diluted weighted average number of shares (number '000) 72,621 71,198
Basic profit per ordinary share (pence) 0.98p 0.55p
Diluted profit per ordinary share (pence) 0.96p 0.55p
Adjusted profit per ordinary share (pence)
Profit attributable to the equity shareholders of the Company (£000) 697 390
add back:
Share based payments 708 511
Amortisation on acquired intangibles 154 151
Exceptional charges 295 100
Adjusted earnings 1,854 1,152
Adjusted basic earnings per ordinary share (pence) 2.61p 1.63p
Adjusted diluted earnings per ordinary share (pence) 2.55p 1.62p
We determine potentially dilutive shares as any share which is exercisable on
publishing of the Annual Report.
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