REG - Altitude Group PLC - Audited Final Results and Notice of AGM

AltitudeAnnouncement

07/09/2021 10:40

RNS Number : 9850K
  
Altitude Group PLC
  
07 September 2021
  
 

7 September 2021
Altitude Group plc
("Altitude", the "Company" or the "Group")
Altitude Group achieves growth in adjusted profit despite COVID-19 
AUDITED ANNUAL RESULTS FOR THE YEAR ENDED 31 MARCH 2021 AND NOTICE OF ANNUAL GENERAL MEETING
Altitude Group plc (AIM: ALT), the operator of a leading marketplace for the global promotional products industry, is pleased to announce its audited annual results for the twelve-month period to 31 March 2021. Comparative figures for 2019/20, unless otherwise stated, comprise the reported trading results for the fifteen-month period ended 31 March 2020.
Financial Highlights

Group revenues increased by £1.1 million to £7.7 million, up 16.7% on a pro-rated basis (2019/20 pro-rated 12 months £6.6m) despite COVID-19 impacting the full year
Gross profit was £5.6 million (2019/20 pro-rated 12 months £6.0m)
Gross margin decreased to 72.3% (2019/20: 89.8%) reflecting lower margins on AIM Smarter Group Buy activities.  This revenue comprised direct product sales to AIM Members, sold at competitive commercial rates. These sales activities offset higher margin revenue lost to COVID-19. Underlying gross margin excluding PPE sales was 91.1% (2019/20 89.8%)
Adjusted operating profit* in the US increased 82.9% to £1.0 million (2019/20 pro-rated 12 months £0.6 million)
Group adjusted operating profit* increased 21.7% to £0.6 million (2019/20 [pro-rated 12 months £0.4 million). In addition, adjusted operating profit before central plc costs increased to £1.3 million (2019/20 pro-rated 12 months 1.2m) 
Adjusted administrative expenses** (including the benefit of £0.4 million of US Paycheck Protection funding) were £5.0 million, a decrease of £0.6 million on a pro-rated basis (2019/20 pro-rated 12 months £5.6 million)
Adjusted basic and diluted earnings per share*** from continuing operations increased to 1.03p (2019/20 0.92p) and 1.01p (2019/20 0.90p) respectively
Cash inflow from operating activities was £0.1 million (2019/20 outflow £2.2 million)
The Group traded within its existing cash resources and remains debt free, with the exception of leases held under IFRS 16, with a year-end net cash balance of £2.1 million (31 March 2020: £2.4m). 

 
*  Operating profit before share-based payment charges, amortisation of intangible assets, depreciation of tangible assets and exceptional charges
** Administration expenses before share-based payment charges, amortisation of intangible assets, depreciation of tangible assets and exceptional charges
*** Basic adjusted earnings per share from continuing operations is calculated using profit after tax but before share-based payment charges, amortisation of intangible assets, depreciation of tangible assets and exceptional charges and the weighted average number of equity voting shares in issue and in respect of diluted earnings per share includes the effect of share options that could potentially dilute basic earnings per share 
 
Key corporate developments and operational highlights

The Group enacted an immediate and effective response to the COVID-19 pandemic and subsequent lockdowns by quickly pivoting its offering, including establishing $2.6 million of direct to member sales of personal protective equipment ("PPE") via its Group Buys programme 
The US AIM Smarter ("AIM") business mobilised quickly utilising its existing technology, services, government programs and strong relationships throughout the supply chain to provide products and services most relevant to our members
AIM has enhanced member services via a full year of the AIM Capital Solutions ("ACS") program, which provides full system order processing, innovative technology, administrative support and supply chain finance services to members
AIM membership remained stable with a total of 2,079 members, up from 1,917 at acquisition, remaining relatively constant throughout the period
Fiscal Q1 2021 quarterly revenue via Preferred Partners has returned to 95% of pre-pandemic levels of fiscal Q1 2019
100% retention of Preferred Partners throughout the pandemic 

 
Outlook

Trading has recovered well in the 1st quarter of the current financial year with quarterly preferred partner service fees returning to 95% of 2019 levels
The Group is accelerating its ACS offering now that cash flow has stabilised, and continues to develop programs and services that will accelerate the growth of its Group Buys activities
As a result, the Board is optimistic for Group prospects as markets begin to recover and remain confident of the ability to respond to these challenging times
Nevertheless, the Board remains focused on cash conservation and ensuring the Group continues to develop product offerings which will be beneficial to the Group's clients
The Board remains confident in the future success of the business and the Group's ability to evolve and respond to these challenging times 

 
Notice of Annual General meeting ("AGM")
The Company also gives notice that its AGM will be held at the offices of Elstree Aviation Centre, Hogg Lane, Borehamwood, WD6 3AN on 30 September 2021 at 2 p.m. The Notice of AGM and the Annual Report for the year ended 31 March 2021 will be posted to shareholders and will be available on the Group's website (https://www.altitudeplc.com/reports-results) later today.  
 
 
Nichole Stella, Group CEO of Altitude, said:
"This financial year tested the resolve and challenged many businesses and I am extremely proud of the resilience and effort of both our staff and management team. We have successfully navigated through these uncertain and unchartered waters and continue to be a profitable and growth-oriented organisation.
 
We remain optimistic as the markets recover, prudent in cash conservation and attentive to the continuing impact of COVID-19 on the markets we serve. We have strengthened the relationships and reinforced the support of our Preferred Partners, members and affiliates, many of whom have expressed gratitude for the assistance and support AIM has provided to them during the crisis.
 
The Board remains confident in the future success of the business and the Group's ability to evolve and respond to these challenging times." 
 




Altitude Group plc
Nichole Stella, Chief Executive Officer
Graeme Couturier, Chief Financial Officer
Keith Edelman, Non-Executive Chairman
 


Via Zeus Capital




Zeus Capital Limited (Nominated Adviser & Broker)
Dan Bate / David Foreman / James Edis (Corporate Finance)
Dominic King (Corporate Broking)


Tel: 0203 829 5000




 
Chairman's Statement
Little did we know when I wrote the Chairman's statement last year that COVID-19 would have such a significant impact on the world's business environment. I am pleased the management team reacted swiftly to both protect and grow the business and delivered growth in profitability in the financial year under extremely difficult trading conditions. Whilst COVID-19 had an impact on our business throughout 2020/21, trading has recovered during the 1st quarter of the new financial year. As COVID-19 continues to have an impact on manufacturing supply chains and businesses within the promotional products sector, it remains difficult to predict the impact it will have across the current financial year. However, the management team remains nimble and quick to respond to both protect and grow the business.
The management team reacted quickly to all opportunities and in the first half of the year the Group profited from sourcing and supplying PPE and also by participating in the US Federal Paycheck Protection Programme, receiving a grant of $0.5 million. In addition, management took clear action to reduce costs to protect the profitability of the business. 
Despite the challenges presented by COVID-19, through supportive services the Group further enhanced relationships with both our distributor members and Preferred Partners as evidenced by the number of partners we enjoy special relationships staying steady and membership numbers remaining strong.
We also spent significant time launching and promoting our AIM Capital Solutions ("ACS") programme, which we believe will become a significant element of our future revenue and profitability.
Through our successful launch of the "Group Buys" programme, which was comprised of direct product sales to AIM members, we have worked on new initiatives to scale this programme through adjacent channels to market not accessible to our industry and are trialling partnerships with national providers. 
Finally, we continue to invest in and significantly improve and automate our software applications which will underpin membership and preferred partner services.
Despite all the challenges of COVID-19 the business delivered growth in profitability, with an adjusted operating profit (before share-based payments, depreciation, amortisation and exceptional charges) of £561k as compared with £460k for the previous 15-month period and we ended the financial year with a cash balance of £2.1 million, demonstrating strong cash management throughout the covid crisis.
Board Changes
The Board was delighted with Martin Varley's return to the Board bringing both his enthusiasm and experience.
As we recently announced Graeme Couturier intends to stand down from the Board in December. Graeme has made a significant contribution and our wishes go with him in his future role We hope to announce the appointment of a new CFO in the near future. 
Outlook
The management have performed superbly in what has probably been the worst business environment ever experienced. They have not only successfully produced and grew adjusted operating profit and protected the cash balances but have also made some important strides in building a strategically stronger business. Despite all the vagaries of the last 12 months the Board remains confident that with the normalisation and continued recovery from the impact of COVID-19 that the Group will continue its trajectory in becoming a highly profitable company. We of course must remain cautious until we have "seen off" COVID-19 but the Board remain excited about the future.
I would like to thank all our shareholders, Preferred Partners, members, and most importantly our management and colleagues who have worked so hard during a very difficult year.
 
 
Keith G Edelman
Non-Executive Chairman
7 September 2021
 
 
 
Chief Executive's Statement
Our new financial year began April 1, 2020, a year fully dominated by the global COVID-19 pandemic. In common with all businesses, the Group experienced material uncertainty and challenges in the wake of global supply chain disruptions, lockdowns, and business closures. However, in the face of global adversity, the Group was focused, decisive, entrepreneurial, and successful in navigating the most difficult business environment in modern history.  
During the period, the AIM business mobilised quickly utilising its existing technology, services, government programs and strong relationships throughout the supply chain to provide products and services most relevant to our members during the COVID-19 pandemic period.  Through these efforts AIM membership numbers remained steady at 2,079 with average distributor revenue increasing to c.$1 million pa and aggregate member revenue rising to c.$2.6 billion per self-certification (both pre-COVID-19). We maintain 100% of our Preferred Partners through the pandemic, remaining unchanged at 175 from our last update.
AIM also played a vital role providing members access to high-demand PPE products from safe and trusted supplier sources and launched our digital AIM "Group Buys" platform, whereby the Group sold products directly to members. In the 2nd and 3rd quarters of 2020 the Company generated $2.6 million in revenue from these Group Buy activities. This program also showcased the Group's ability to act as a direct sales conduit to the AIM network for high-demand products. With the knowledge gained, the Group continues to develop programs and services that will continue to accelerate the growth of this revenue channel. 
This immediate action to protect the business and shift to relevant services resulted in a £1.1 million revenue increase on a pro-rated 12 month basis, resulting in revenue of £7.7 million vs £6.6 million on a pro-rated 12 month basis for 2019/20. As a result, the US business delivered an adjusted operating profit* of £1.0 million (2019/20 pro-rated 12 months £0.6 million) an increase of 82.8%. The business also ended the year with a strong cash position of more than £2 million.  
The Group has remained debt-free, with the exception of leases held under IFRS 16, continues to be cautious in its approach to all discretionary spend and is carefully managing cash whilst adapting programs and services to meet the changing needs of the industry.
*Operating profit before share-based payment charges, amortisation of intangible assets, depreciation of tangible assets and exceptional charges
AIM Smarter Progress and Trading
The financial year 2020 / 2021 marked a full year of AIM's premium enhanced member service marketed as AIM Capital Solutions ("ACS"). ACS requires mandatory use of the full AIM Tech suite and offers technology driven back-office support procurement and supply chain finance, on which the Group charges a service fee based on the gross transaction value. 
The addition of this premium enhanced member service provides the business with significant potential, particularly as the economic recovery from the COVID-19 pandemic continues. Commencing with a small trial member test group in August 2019 and launched January 2020. We have now developed a service offer that we know is competitive in the marketplace. Throughout the pandemic, we have cautiously expanded this business and continue to closely monitor the associated consumption of working capital. AIM retains total discretion on the acceptability of proposed transactions and in addition we are actively engaged with potential external funding partners to accelerate future growth. 
Additionally, based on updated contractual terms with ACS Affiliates, ("Affiliates") and under the guidance set out in IFRS15, ACS is recognized as "Principal" in the underlying transaction. Accordingly, commencing 1 April 2021, we will recognise the revenue and gross margin of the full transaction, including the commission paid to ACS affiliates as a cost of sale. As a result, in future financial reporting our accounting policy for revenue recognition will be appropriately clarified. This will have a material impact on the quantum of revenue and cost of sales recognised in future financial statements. There will be no change in the quantum of reported gross profit per transaction, though the gross margin percentage will be diluted by the adoption of this correct accounting treatment. 
Throughout 2020 / 2021 our focus was on both protecting the business from the impact of the COVID-19 pandemic and equally on continuing to promote our major routes to revenue growth through technology service fees, marketing service fees, subscription fees, and product fees via:

retention and continued growth in the AIM membership of high-quality promotional product distributors;
delivering added value services, leveraging existing applications, technology resources, and expertise, to help selected Preferred Partners grow their share of the total AIM purchase pipeline;
developing and selling additional added value services, leveraging existing applications, technology resources and expertise, to help 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 whole;
continuing to increase member utilisation of the AIM Tech Suite; and
promoting and growing ACS, which completes the Groups current portfolio of services to its AIM members.

 
Today, AIM continues to drive awareness and grow sales for both our Preferred Partners to our AIM members and for our AIM members to their clients. Through our marketing and technology services to our members and Preferred Partners, we are creating an interconnected growth oriented marketplace that benefits all participants and delivers growth for the Group. 
In the financial year 2020 / 2021, despite the COVID-19 pandemic, we have retained 100% of our 175 Preferred Partners throughout the year and have continued to strengthen our relationships in this difficult business environment. To further strengthen and more aggressively drive sales through our preferred network, drive our technology adoption, increase tracking order data and increase efficiency in orders, we launched our VIP Incentive Program, which gives cash back to members when purchasing "in network." This program has proven to be beneficial and purchasing across our VIP network has increased to 15.1%. 
Technology  
In the financial year, the Group utilised its existing technology to introduce an agile development environment, which prioritises team collaboration and delivery speed.  The implementation of this methodology has proven advantageous with the launch of important integrations and features that further automate product search, data management and ordering status. 
Member adoption and usage of our technology solutions continues to grow with 359 distributors adopting the AIM Tech Suite for search and order creation and 2,875 unique websites live to date.
Our People & Our Commitment 
Our people are our strength and the lifeblood of the business. We continue to focus on employee development and the creation of a culture that is welcoming, engaging and recognises the successes and contributions across all employees in every of the business. 
Diversity, Equity & Inclusion 
We embrace and are commited to a culture of diversity, equity and inclusion ("DEI"). This guiding principle is instrumental in how we build our teams, cultivate our leaders and create collaborative, innovative and inclusive environments throughout the AIM network and industry. Our inclusive culture supports diverse perspectives, drives courageous conversations and empowers every individual in the AIM community. Throughout 2020 / 2021 AIM supported efforts to reflect this commitment, through the development of its DEI Advisory Board and educational programs for distributors and suppliers. 
Financial Results 
Group revenues for the year were £7.7 million (2019/20: £8.3 million), a decrease of 7% compared to the 15 month revenues reported in 2019/20. However, pro-rated 12 month revenues increased by £1.1 million or 16.7% (2019/20 pro-rated 12 month revenues £6.6 million). 
Similarly whilst reported gross profit decreased by £1.9 million, or 25%, to £5.6 million (2019/20: £7.5 million), pro-rated 12 months gross profit held steady (2019/20 pro-rated 12 month gross profit £6.0 million).
Gross margin decreased to 72.3% (2019/20: 89.8%) reflecting lower margins on AIM Smarter Group PPE Buy activities offsetting higher margin revenue lost to COVID-19. Gross margin excluding PPE was 91.1%. 
Administrative expenses before share-based payments, amortisation of intangible assets, depreciation of tangible assets and exceptional charges decreased by £2.0m, or 28% to £5.0 million (2019/20: £7.0 million), driven by the 12 month trading period compared to the 15 month period in 2019/20 and the receipt of £0.4 million of US Paycheck Protection funding, which has been offset against payroll expenditure. On a 12-month pro-rated basis, FY19/20 administration expenses were £5.6 million.
Adjusted operating profit* was £0.6 million (2019/20: £0.5 million), an increase of £0.1 million and the loss before taxation was £1.3 million (2019/20: £2.7 million loss).
The segmented adjusted operating loss for the UK of £474k (2019/20 loss £246k) bears the full annual plc central costs of £718k (2019/20 £992k). 
The Company has now established itself in a steady state and exceptional charges fell to £39k for the year compared to £444k for the previous financial period. 
The group capitalised £0.7 million of software development (2019/20: £0.8 million).
The loss from discontinued operations of £0.1 million (2019/20: £3.3 million) arises from final costs incurred from the disposal of Ad Products in the previous financial period.
Basic and diluted loss per share from continuing operations were (1.56p) (2019/20 loss 3.91p) 
Adjusted basic and diluted earnings per share** from continuing operations was 1.03p (2019/20 0.92p) and 1.01p (2019/20 0.90p) respectively; representing an increase of 12.0% and 12.2% respectively.
Operating cash inflow before changes in working capital was £0.1 million (2019/20: £0.7 million outflow). 
The company generated a net cashflow from operations of £0.1 million (2019/20 outflow £2.2 million), following the neutral cashflow impact of working capital in the year. 
Net cash outflow from investing activities was £0.3 million (2019/20: £4.0 million), comprising purchase of intangible assets (software development) of £0.7 million (2019/20: £0.8 million), offset by £0.3 million (2019/20: £0.4 million) of proceeds from the disposal of Ad Products. 
Financing activities included the issue of shares for cash (net of expenses) of £0.1 million (2019/20: £8.6 million) following the exercise of options during the period and IFRS 16 lease payments of £0.1 million (2019/20: £0.3m), repayment of finance agreements and interest of £0.0 million (2019/20: £0.1 million).
Total net cash outflow was £0.3 million (2019/20: £1.9 million inflow).
The year-end cash balance was £2.1 million (2019/20: £2.4 million).
* Operating profit before share-based payment charges, amortisation of intangible assets, depreciation of tangible assets and exceptional charges
** Basic adjusted earnings per share from continuing operations is calculated using profit after tax but before share-based payment charges, amortisation of intangible assets, depreciation of tangible assets and exceptional charges and the weighted average number of equity voting shares in issue and in respect of diluted earnings per share includes the effect of share options that could potentially dilute basic earnings per share 
 
Outlook 
This financial year tested the resolve and challenged many businesses and I am extremely proud of the resilience and effort of both our staff and management team. We have successfully navigated through these uncertain and unchartered waters and continue to be a profitable and growth-oriented organisation.
 
We remain optimistic as the markets recover, prudent in cash conservation and attentive to the continuing impact of COVID-19 on the markets we serve. We have strengthened the relationships and reinforced the support of our Preferred Partners, members and affiliates many of whom have expressed gratitude for the assistance and support AIM has provided to them during the crisis.
 
The Board remains confident in the future success of the business and the Group's ability to evolve and respond to these challenging times. 
 
 
Nichole Stella
Chief Executive
7 September 2021
 
 
 
 
Consolidated Statement of Comprehensive Income 
for the year ended 31 March 2021
 




 


 


2020/21


2019/20




 


 


12 Months


15 Months




 


Note


£000


£000




Revenue


 


 


 




- continuing


 


7,707


8,308




Cost of Sales


 


(2,131)


(851)




Gross Profit


 


5,576


7,457




 


 


 


 




Administrative expenses before share-based payment charges, depreciation, amortisation, and exceptional charges


(5,015)


(6,996)




Operating profit before share-based payment charges, depreciation, amortisation, and exceptional charges


561


461




Share-based payment charges


 


(544)


(1,401)




Depreciation and Amortisation


 


(1,228)


(1,170)




Exceptional charges


5


(39)


(444)




Total administrative expenses


 


(6,826)


(10,011)




Operating loss


 


(1,250)


(2,554)




Finance charges


 


(73)


(112)




Loss before taxation


 


(1,323)


(2,666)




Taxation


 


230


275




Loss attributable to continuing operations


 


(1,093)


(2,391)




Loss on discontinued operation


 


(133)


(3,336)




Loss attributable to the equity shareholders of the Company


(1,226)


(5,727)




Other comprehensive income:


 


 


 




Items that may be reclassified subsequently to profit and loss:


 


 


 




•  Foreign exchange differences


 


(691)


64




Total comprehensive loss for the period


 


(1,918)


(5,663)




Earnings per ordinary share attributable to the equity shareholders of the Company:


 


 


 




- Basic and diluted (pence) - Continuing operations


6


(1.56p)


(3.51p)




- Basic and diluted (pence) - Discontinued operations


6


(0.19p)


(4.90p)




 


 


 


 




 
Consolidated Statement of Changes in Equity 
for the year ended 31 March 2021
 




 


Share Capital

£000


Share Premium

£000


Retained Losses

£000


Foreign

Exchange

Translation

Reserve

£000


Total

£000




 


 


 


 


 


 




At 1 January 2019


219


11,000


(6,897)


(85)


4,237




 


 


 


 


 


 




Adoption of IFRS 16


-


-


(27)


-


(27)




 


 


 


 


 


 




Loss for the period


-


-


(5,727)


-


(5,727)




Foreign exchange differences


-


-


-


64


64




Total comprehensive loss


-


-


(5,727)


64


(5,663)




 


 


 


 


 


 




Transactions with owners recorded directly in equity


 


 


 




Share-based payment charges


-


-


1,401


-


1,401




Shares issued for cash


58


9,080


-


-


9,138




Total transactions with owners


58


9,080


1,401


-


10,539




 


 


 


 


 


 




At 31 March 2020


277


20,080


(11,250)


(21)


9,086




 


 


 


 


 


 




Loss for the period


-


-


(1,226)


-


(1,226)




Foreign exchange differences


-


-


-


(691)


(691)




Total comprehensive loss


-


-


(1,226)


(691)


(1,917)




 


 


 


 


 


 




Transactions with owners recorded directly in equity


 


 


 




Share-based payment charges


-


-


544


-


544




Shares issued for cash


5


71


-


-


76




Total transactions with owners


5


71


544


-


620




 


 


 


 


 


 




At 31 March 2021


282


20,151


(11,932)


(712)


7,789




 
 
 
Consolidated balance sheet as at 31 March 2021
 




 


 


 


Restated




 


 


2020/21


2019/20




 


Note


£000


£000




Non-current assets


 


 


 




Property, plant & equipment


 


115


189




Right of use assets


 


736


957




Intangible assets


 


2,462


2,814




Goodwill


 


2,668


3,108




Deferred tax assets


 


418


456




Total non-current assets


 


6,399


7,524




Current assets


 


 


 




Assets classified as held for sale


 


-


650




Trade and other receivables


 


2,378


2,738




Corporation Tax Receivable


 


220


35




Cash and cash equivalents


 


2,095


2,350




Total current assets


 


4,693


5,773




Total assets


 


11,092


13,297




 


 


 


 




Non-current liabilities


 


 


 




Deferred tax liabilities


 


(382)


(463)




Lease liabilities


 


(665)


(863)




Current liabilities


 


 


 




Trade and other payables


 


(2,256)


(2,885)




Total liabilities


 


(3,303)


(4,211)




Net assets


 


7,789


9,086




 


 


 


 




Equity attributable to equity holders of the Company


 


 


 




Called up share capital


 


282


277




Share premium account


 


20,151


20,080




Retained losses


 


(12,644)


(11,271)




Total equity


 


7,789


9,086




 


 


 


 




 
 
Consolidated cash flow statement for the year ended 31 March 2021
 




 


 


2020/21


2019/20




 


 


12 Months


15 Months




 


 


£000


£000




Cash flows from operating activities


 


 


 




Loss for the period before tax - Continuing operations


 


(1,093)


(2,391)




Loss for the period before tax - Discontinued operations


 


(133)


(3,336)




Amortisation of intangible assets


 


1,032


995




Depreciation


 


196


523




Share-based payment charges


 


544


1,401




Impairment of assets held for sale


 


-


2,207




Taxation


 


(230)


(275)




Interest paid


 


73


112




Exchange differences


 


(313)


82




Operating cash flow before changes in working capital


 


76


(682)




Movement in inventory


 


-


(285)




Movement in trade and other receivables


 


710


(2,166)




Movement in trade and other payables


 


(707)


299




Changes in working capital


 


3


(2,152)




Tax received


 


11


646




Net cash flow from operating activities


 


90


(2,188)




Cash flows from investing activities


 


 


 




Purchase of tangible assets


 


21


(166)




Purchase of intangible assets


 


(659)


(803)




Proceeds on disposal of trade and assets


 


300


350




Net cash outflow from acquisition of trade and assets


 


-


(3,357)




Net cash flow from investing activities


 


(338)


(3,976)




Financing activities


 


 


 




Repayment of borrowings


 


(73)


(402)




Interest paid


 


(10)


(57)




Issue of shares for cash (net of expenses)


 


76


8,553




Net cash flow from financing activities


 


(7)


8,094




Net increase/(decrease) in cash and cash equivalents


 


(255)


1,930




 


 


 


 




Cash and cash equivalents at the beginning of the period


 


2,350


420




Net increase/(decrease) in cash and cash equivalents


 


(255)


1,930




Cash and cash equivalents at the end of the period


 


2,095


2,350




 


 


 


 




Notes to the Consolidated Financial Statements
 
1.  Financial Information
The financial information in this preliminary announcement has been extracted from the audited Group Financial Statements for the year ended 31 March 2021 and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.
The Group Financial Statements for 2019/20 were delivered to the registrar of companies, and those for 2020/21 will be delivered in due course. The auditor's report on the Group Financial Statements for 2019/20 and 2020/21 were both unqualified and unmodified. The auditors' report was signed on 7 September 2021. The Group Financial Statements and this preliminary announcement were approved by the Board of Directors on 7 September 2021
The audited accounts will be posted to all shareholders and will be available on the Group's website (https://www.altitudeplc.com/reports-results) later today.
 
2.  Basis of preparation
The financial information has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) adopted for use in the European Union, including IFRIC interpretations issued by the International Accounting Standards Board, and in accordance with the AIM rules and is not therefore in full compliance with IFRS. The principal accounting policies of the Group have remained unchanged from those set out in the Group's 2020 annual report.
The Accounts have been prepared under the historical cost convention. The Consolidated Financial Statements are presented in Sterling, rounded to the nearest thousand.
The financial statements have been prepared in accordance with International Accounting Standards in conformity with the Companies Act 2006.
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. 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.
In preparing the condensed, consolidated financial statements, management are required to make accounting assumptions and estimates.  The assumptions and estimation methods are consistent with those applied to the Annual Report and financial statements for the period ended 31 March 2020.
Additionally, the principal risks and uncertainties that may have a material impact on activities and results of the Group remain materially unchanged from those described in that Annual Report.
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 year. 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.
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: 
1.   Identifying the contract with a customer
2.   Identifying the performance obligations
3.   Determining the transaction price
4.   Allocating the transaction price to the performance obligations
5.   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 statement of financial position as deferred income. Amounts included in deferred income due within one year are expected to be recognised within one year and are included within current liabilities.
The Group has a number of different revenue streams which are described below.
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.
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.
AIM Capital revenues
AIM Capital Solutions ("ACS") is a premium enhanced membership package which requires mandatory use of the AIM technology platform and offers technology driven back-office support, procurement services, and supply chain finance in return for a service fee. Service fee revenues are variable and are calculated as a percentage of the value of the end customer invoices processed by ACS.
In accordance with ACS contractual arrangements, under IFRS 15 only the service fee is recognised as revenue, as opposed to than the end customer invoice value. Revenue is recognised at the point of delivery of the products to the end customer.
Preferred Partner revenues
AIM provides marketing services to suppliers of promotional products whereby preferred supplier 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 by the AIM members from preferred supplier 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 supplier customers on a calendar quarter or annual basis. 
An element of supplier service revenue is treated as variable consideration under IFRS 15 due to uncertainty over timing and value. Revenue is recognised to the extent that it is highly probable that it will not reverse.
Group buy revenues
Through its network of preferred supplier partners, AIM is able to secure inventory of high demand products, which it sells to AIM members and other 3rd parties, where such sales do not conflict with the interest of either suppliers or the AIM membership. Customer payments are received in advance of the products being shipped and are classified as deferred revenue until the products ship. Upon shipping AIM recognises the revenue from the sale of the products and the associated cost of the products in cost of sales.
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.
 
Going Concern
The financial statements have been prepared on a going concern basis.
The current economic conditions caused by the COVID-19 pandemic have created uncertainty over the level of demand for the company's products and services and over the availability of finance which the directors are mindful of. 
The Board is confident that the Group has sufficient liquidity to trade through to more normalized trading conditions. 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 summarized below:

The Directors have prepared cash flow forecasts extending to March 22 and further to March 2023. The cash flow forecasts include a base scenario and a sensitized revenue scenario.
The base scenario assumes reductions in revenue of 22% and 15% in the current financial year to March 2022 and the year to 31 March 2023 respectively, compared to a pre-COVID annualized 2019/20 comparative. The sensitized scenario assumes reductions in revenue of 30% and 15% respectively, each compared to a pre-COVID annualized 2019/20 comparative.
The forecasts assume continued elongation of credit terms with customers. Collection of receivables during the pandemic has been understandably problematical and in the current climate we are unable to predict with accuracy the timing of future cash receipts and therefore rely on current and past experience to make such judgements. The forecasts assume cash collections in line with what we have experienced since the acquisition of AIM and more recently in the COVID-19 period.
The base and sensitized 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
·      reactionary cost reduction programmes in respect of headcount and organisation
·      securing new working capital facilities in respect of the AIM Capital Solutions business

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.
 
3.  Operating segments
The Group is currently organised as two operating segments:
·      North America
·      United Kingdom
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 Board of directors, who are regarded as the Chief Operating Decision Maker ("CODM") to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The directors have concluded that there are two operating segments on the basis of the information presented to the CODM. The activities undertaken in each segment are substantially similar.
 
4.  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 2021, the Group has two operating segments, North America, and the United Kingdom.
 




 


 


2020/21


2019/20




 


 


12 months
£000


15 months £000




Turnover


 


 


 




North America


6,523


5,856




United Kingdom and Europe


 


1,184


2,452




Total


 


7,707


8,308




Operating Profit/(Loss) before share-based payment charges, depreciation, amortisation, and exceptional charges:


 


 




North America


1,035


707




United Kingdom and Europe


 


(474)


(246)




Total


 


561


461




Operating Profit / (loss):


 


 


 




North America


690


(154)




United Kingdom and Europe


 


(1,940)


(2,400)




Total


 


(1,250)


(2,554)




Depreciation


 


 


 




North America


(139)


(115)




United Kingdom and Europe


 


(57)


(60)




Total


 


(196)


(175)




Amortisation


 


 


 




North America


(167)


(224)




United Kingdom and Europe


 


(865)


(771)




Total


 


(1,032)


(995)




 
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 2021 and capital expenditure for the period then ended are as follows. This information has not been disclosed by reporting segment as the information by segment is not regularly reported to the chief operating decision maker.




 


 


2020/21


2019/20




 


 


£000


£000




Assets


 


11,092


13,297




Liabilities


 


3,304


4,211




Operating Profit / (loss)


 


(1,250)


(2,554)




Capital expenditure


 


638


6,160




 
The Group's revenue from external customers and information about its segment assets (non-current assets excluding financial instruments, deferred tax assets and other financial assets) by geographical location are detailed below:




 


 


Revenue from external customers


Non-current assets




 


 


2020/21


2019/20


2020/21


2019/20




 


 


£000


£000


£000


£000




North America


 


6,523


5,856


4,748


5,124




United Kingdom


 


1,184


2,452


1,651


2,400




Total


 


7,707


8,308


6,399


7,524




 
The Group derives revenue from the transfer of goods and services over time and at a point in time as detailed in the table below.




Timing of Revenue Recognition


At a point

in time


Over time


Total




North America


2,755


3,768


6,523




United Kingdom and Europe


154


1,031


1,184




Total


2,908


4,799


7,707




 


 


 


 




 
Revenues from the sale of goods are in respect of Group Buy activities in the USA. Revenue is recognised on dispatch of goods to the customer. Technology and information revenues are primarily derived from the provision of online services and applications. Revenues are recognised evenly over life of a contract as customers receive/consume the benefits of the software services/applications provided on an ongoing basis. Revenues recognised at a point in time are comprised of variable, throughput related revenues, catalogue advertising revenues, artwork services, and enhanced AIM Member services.
 
5.  Exceptional charges




 


 


2020/21


2019/20




 


 


£000


£000




Employment termination costs


 


-


27




Legal, acquisition and consultancy costs


 


39


392




Other costs


 


-


25




 


 


39


444




 
The exceptional charges comprise legal costs incurred to defend an unfair dismissal claim in the USA.
 
6.  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:




 


2020/21


2019/20




Loss attributable to the equity shareholders of the Company:


 


 


 




Continuing operations (£000)


 


(1,093)


(2,391)




Discontinued operations (£000)


 


(133)


(3,336)




Weighted average number of shares (number '000)


 


69,897


68,125




 


 


 


 




Basic loss per ordinary share (pence)


 


 


 




Continuing operations


 


(1.56p)


(3.51p)




Discontinued operations


 


(0.19p)


(4.90p)




 


 


 


 




 


 


 


 




Diluted loss per ordinary share (pence)


 


 


 




Continuing operations


 


(1.56p)


(3.51p)




Discontinued operations


 


(0.19p)


(4.90p)




 
Disclosure of the number of shares in issue including the effects of share options that could potentially dilute basic loss per share in the future were not included in the table above as the calculation of diluted earnings per share is anti-dilutive for the current period and the previous year.
 
7.  Prior period adjustment
The prior period has been restated due to a classification error identified during the current financial Period relating to FY2019/20.
Lease liabilities falling due after more than one year were erroneously included in current liabilities. The error had no impact on the result for the period or reported net assets.
The impact of the restatement is shown below.
 




 


As previously stated 2020


Increase/

(Decrease)


Restated

2020




Consolidated Balance Sheet (extract)


£000


£000


£000




Non-current liabilities


 


 


 




Lease liabilities


-


863


863




Current liabilities


 


 


 




Trade and other payables


3,748


(863)


2,885




 
 
 
 
 
 
 
 

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