REG - Altitude Group PLC - Final Results <Origin Href="QuoteRef">ALT.L</Origin>

AltitudeAnnouncement

20/05/2016 07:05

RNS Number : 8023Y
Altitude Group PLC
20 May 2016
Altitude Group plc
("Altitude", the "Company" or "Group")
PRELIMINARY UNAUDITED RESULTS FOR THE YEAR ENDED 31DECEMBER 2015
Altitude Group plc (AIM: ALT), the provider of innovative technology solutions for small to medium sized businesses, announces its unaudited preliminary results for the year ended 31 December 2015.
Highlights:
 Revenue increased by 2.1% to 4.54m (2014: 4.44m) and gross margin maintained at 78.0% (2014 78.1%) during a year of restructuring
 Radical restructuring was undertaken in the year, removing 1.8m of annualised administrative expenses
 Adjusted operating profit* increased 164.5% to 0.29m (2014: 0.11m after reclassification of 1.2m of costs as non-recurring)
 Operating cash inflow from activities, excluding non-recurring and exceptional costs and expenses, 0.52m (2014 0.50m)
 Group remains free of bank borrowing, with net cash resources of 0.37m (2014 1.28m), sufficient for current requirements
 Strong performance at January 2016 Promotional Product Expo ("PPE") event with solid improvement in profitability. Bookings for 2017 in line with our expectations
 Award of USA patent for the artworktooltmapplication in August 2015
 Strong pipeline of large enterprise opportunities for technology solutions
* before amortisation of intangible assets, share-based payments and exceptional expenses and non-recurring costs relating to the restructuring exercise
Non-Executive Chairman, Peter Hallett, commented: 
"The Group undertook a radical restructuring process during the year including changes to the Board and senior management. We are now a much leaner and focused business with clear reporting lines and responsibilities, led by a Chief Executive with the requisite knowledge and experience to develop our proprietary software applications.
"Securing the patent in August 2015 for the artworktooltm solution and the processes it uses to help users create artwork online is a tremendous achievement and the result of three years of hard work and considerable cash investment. We now have a comprehensive suite of products to leverage using exclusive, unique and protected proprietary applications which can be delivered on a global scale.
"The successful restructuring and the award of the patent has ensured that the Group is in good shape, both financially and commercially. We have reported an adjusted operating profit, remain free of bank borrowing and retain sufficient cash resources for our current requirements. The Board is confident that the Group is well placed to deliver growth in shareholder value."
Enquiries:
Altitude Group plc

Peter J Hallett (Non-Executive Chairman)
Tel: 07887987469
WH Ireland Limited (Nominated Adviser and Broker)

Tim Feather
Liam Gribben
Tel: 0113 394 6600
Chairman's Statement
I am delighted to be reporting to you for the first time as Chairman of Altitude, having been appointed as Chairman on 14 January 2016 after joining the Board as a non-executive director on 28 April 2015.
Restructuring
As reported in our interim results, the Group recognised early in the year that the substantial investment in operational management structure made during 2013 and 2014 was not producing sufficient revenue growth to offset the corresponding increase in overhead.
A comprehensive and urgent restructuring of the business was required and the Group has moved quickly to "right size" the business. As a technology company leveraging the best solutions to help collaboration and agile development, we recognised that duplicating resources in various locations in the USA was not only expensive but also inefficient and unnecessary. We have therefore now minimised the number of staff located outside our UK base.
All software maintenance and development is now controlled from the UK, with a continued commitment to outsourcing new development in Eastern Europe, under the day to day control of the Chief Operating Officer, with all changes to development programmes requiring Board sanction.
I am happy to report that the restructuring is now complete, with day to day management being provided by the Chief Operating Officer, leaving the Chief Executive Officer clearly focused on establishing new enterprise relationships and markets, leveraging the Group's proprietary software assets.
Results
Despite the significant operational disruption arising from the restructuring, the Group has grown revenue by 2.1% to 4.54m (2014 4.44m), and maintained gross margins at 78.0% (2014 78.1%).
The radical restructuring undertaken during the year has removed annualised costs of circa 1.8m.
Adjusted Operating profit* of 0.29m (2014 0.11m) has increased by 164.5%. However, as a result of the restructuring action taken in 2015, administrative costs in 2014 of 1.12m have been reclassified as non- recurring and exceptional charges, thus increasing the 2014 adjusted operating profit* to 0.11m from the originally reported loss of 1.05m.
Included within administrative costs are software development costs of 0.83m (2014 0.69m), as the Group has maintained its support and development of its proprietary software assets. In addition, the Group capitalised 0.20m of software development costs (2014 0.48m). Our new structure enabled us to remove the US based former Chief Technology Officer, with responsibilities being transferred to the UK under the new Chief Operating Officer.
Operating losses amounted to 1.25m (2014 1.66m), a decrease of 24.4%, after inclusion of amortisation of 0.45m (2014 0.48m), share based payments credit of 0.04m (2014 charge of 0.17m), and non-recurring and exceptional charges of 1.13m (2014 1.12m).
Net cash flow from operating activities, excluding non-recurring non-recurring and exceptional charges, was an inflow of 0.52m (2014 0.50m).
The Group remains free of bank borrowings, and has cash resources of 0.37m (2014 1.28m), which are sufficient for the Group's current requirements.
* before amortisation of intangible assets, share-based payments and exceptional expenses and non-recurring costs relating to the restructuring exercise
Customer Focus Technology
Our fundamental technology strategy remains unchanged, as we focus our SaaS offerings largely on SMEs under the Customer Focus brand, both within the UK and increasingly within North America. 
During the period, as part of the reorganisation, we combined the sales and customer service operations for our Technologo and artworktooltm products under the Customer Focus brand. This integrated offering is attracting increased interest and, whilst the product enhances our overall technology offering, the possibilities for the technology are applicable to a much wider market and the opportunity is potentially very large for the Group.
A significant achievement in this area has been the successful application for a patent for artworktooltm, a solution which enables users to easily create and share graphics and print-ready artwork using any device with a suitable browser. 
The Group balance sheet incorporates its proprietary intangible software assets at cost, as required under the accounting regulations where the assets are expected to deliver substantial returns. However, the Board believe that these assets will prove to be of significant value as the Group begins to leverage their potential.
These assets, in particular artworktool, allow the Group to present attractive and profitable solutions to global businesses. This is evidenced by our relationship with Constant Contact ("CTCT"), a world leader in the provision of email marketing solutions to more than 650,000 businesses. Under the terms of the agreement, CTCT have embedded artworktooltmfunctionality into the user accounts of all customers allowing them easily to create engaging graphics to use in email campaigns without the need to purchase expensive specialist software applications.
It is therefore in this area that the Group, and in particular the efforts of the Chief Executive Officer, are focused.
Trade Only Exhibitions & Publications
Our Exhibition and Publications business continues to perform well. The January 2016 event showed another strong performance with increased profitability. Bookings for the 2017 show are in line with our expectations and we expect another good performance from this business in 2017 based on booked orders.
With over 4,000 delegates attending the main event in January each year all being involved in the print, promotional and personalised gift sectors, the potential to drive additional sales of our SaaS products in the UK remains strong and adds further value to the Group from the ability to engage so many customers with other products and services. 
On 15 April 2016, following an increase in the Company's share price, the Group was obliged to disclose the existence of early stage discussions for the disposal of the Exhibitions and Publications business. The discussions are ongoing, and there is no guarantee at this stage that they will lead to a successful conclusion. If the transaction is agreed, the Directors expect that it would be classified as a fundamental change of business under the AIM Rules for Companies and require the prior approval of shareholders.
Board Changes
As previously reported, the changes made to the board on 28 April 2015 were the catalyst for the comprehensive restructuring of the Group detailed above.
This process saw the appointment of Vicky Robinson as Group Managing Director, myself as Non-Executive Directorand Richard Sowerby moving to Executive Chairman, following the departure of the former Executive Chairman.
On 28 January, I agreed to become Non-Executive Chairman, with Richard Sowerby becoming Non-Executive Director, and Martin Varley appointed as Chief Executive Officer. Martin has an unrivalled knowledge of the business and in particular the potential of its proprietary software assets and the target markets for their application. The Board has no doubt that he is the best person for this role.
On 28 January we also appointed Shaun Parker to the Board as Chief Operating Officerand Vicky Robinson left the Group, wishing to take time out with her family after ten years of service. Shaun brings wide and relevant experience of the technology sector gained through senior management positions in Redstone plc, Hewlett Packard and Compaq amongst others.
The Board now comprises two executive and two non-executive directors.
Outlook
We continue to drive forward with a leaner and more focused structure, centred in the UK, with clear and concise reporting lines and objectives
We are fortunate to have a portfolio of proprietary software and technology assets which the Board is confident has the potential yto generate increasing shareholder value in 2016 and beyond. In addition, we have a successful Exhibitions and Publications business which provides synergies to our technology business and which we would be very happy to retain should the discussions regarding its potential sale not result in a transaction.
The successful restructuring and the award of the patent for artworktooltmhas ensured that the Group is in good shape, both financially and commercially. We have reported an adjusted operating profit*, remain free of bank borrowing and retain adequate cash resources for our current requirements. The Board is confident that the Group is well placed to deliver growth in shareholder value.
Peter J Hallett
Non-Executive Chairman
* before amortisation of intangible assets, share-based payments and exceptional expenses and non-recurring costs relating to the restructuring exercise
Consolidated Statement of Comprehensive Income
fortheyear ended31December 2015

2015
2014
Note
'000
'000
 Unaudited
Audited
Revenue
4,535
4,440
Cost of sales
(998)
(971)
Gross Profit
3,537
3,469
Administrative costs before share based payment charges, amortisation, exceptional charges and non-recurring costs
(3,246)
(3,359)
Operating profit before share based payment charges, amortisation, exceptional charges and non-recurring costs
291
110
Share based payment charges
38
(168)
Amortisation
(448)
(478)
Exceptional charges
3
(404)
-
Non recurring costs
4
(729)
(1,119)
Operating loss

(1,252)
(1,655)
Finance income
3
89
Loss before taxation
(1,249)
(1,566)
Taxation
-
-
Loss attributable to the equity shareholders of the Company
(1,249)
(1,566)
Other comprehensive income:


Foreign exchange differences
 (1)
 -
Total comprehensive loss for the year
 (1,250)
(1,566)
Loss per ordinary share attributable to the equity shareholders of the Company
Basic (pence)
5
(2.91)
(3.68)
Diluted (pence)
5
(2.91)
(3.68)

Consolidated Balance Sheet
asat31December 2015

2015
2014
'000
'000
Non-currentassets
Unaudited
Audited
Property,plant&equipment
42
105
Intangibleassets
937
1,184
Goodwill
564
564
Deferredtax
426
426

1,969
2,279
Currentassets
Tradeandotherreceivables

696
787
Cashandcashequivalents

366
1,280


1,062
2,067
Totalassets

3,031
4,346
Currentliabilities



Tradeandotherpayables

(2,038)
(2,065)
Totalliabilities

(2,038)
(2,065)
Netassets

993
2,281




EquityattributabletoequityholdersoftheCompany



Calledupsharecapital

172
172
Sharepremiumaccount

6,254
6,254
Retainedearnings

(5,433)
(4,145)
Total equity

993
2,281


Consolidated Cash Flow Statement
fortheyear ended31December 2015

2015
2014
'000
'000

Unaudited
Audited
Operatingactivities


Lossfor theperiod
(1,249)
(1,566)
Amortisationof intangibleassets
448
478
Depreciation
78
102
Netnancecredit
(3)
(89)
Sharebasedpaymentcharges
(38)
168
Operatingcashoutflowbeforechangesinworkingcapital
(764)
(907)
Movementintradeandotherreceivables
91
222
Movementintradeandotherpayables
(28)
(52)
Operatingcashoutflowfromoperations
(701)
(737)
Interestreceived
3
89
Netcashowfromoperatingactivities
(698)
(648)
Investingactivities


Purchaseof tangibleassets 
(15)
(48)
Purchaseof intangibleassets
(201)
(474)
Netcashowfrominvestingactivities
(216)
(522)
Financingactivities


Loannoterepayment received
-
2,000
Netcashowfromnancingactivities
-
2,000
Netincreaseincashandcashequivalents
(914)
830
Cashandcashequivalentsatthebeginningof theyear
1,280
450
Cashandcashequivalentsattheendoftheyear
366
1,280
Consolidated Statement of Changes in Equity
Equity attributable to equity holders of the Company

Share
Capital
Share Premium
Retained Earnings

000
000
000




As at 1 January 2014
172
6,254
(2,747)
Total comprehensive loss for the year
-
-
(1,566)
Transactions with owners recorded directly in equity:



Share based payment charges
-
-
168
At 31 December 2014
172
6,254
(4,145)
Total comprehensive loss for the year
-
-
(1,250)
Transactions with owners recorded directly in equity:



Share based payment charges
-
-
(38)
At 31 December 2015
172
6,254
(5,433)
Notes
1 Financial information
The financial information set out herein does not constitute the Group's statutory accounts for the year ended 31 December 2015 or the year ended 31 December 2014 within the meaning of section 435 of the Companies Act 2006. The 2015 statutory accounts have not been finalised but this preliminary announcement has been prepared by the Directors based on the results and position which they expect will be reflected in the statutory accounts. The comparative information in respect of the year ended 31 December 2014 has been derived from the audited statutory accounts for the year ended on that date upon which an unmodified audit opinion was expressed and which did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The audited accounts will be posted to all shareholders in due course and will be available on the Company's website. A further announcement will be made at that time.
2 Basis of preparation
The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the European Union on the basis of the accounting policies adopted for the year ended31 December 2015, that will be set out in the Company's Annual Report and Accounts, and as previously disclosed in the Company's Annual Report and Accounts for the year ended 31 December 2014.
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are consistent with those made in the financial statements for the year ended 31 December 2014 and are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
3 Exceptional expenses
2015
2014
'000
'000
Exceptional expenses incurred in redundancies and terminations
404
-

404
-
 
4  Non-recurring administrative expenses
2015
2014
'000
'000
Non-recurring employment expenses following the restructuring
511
701
Non-recurring costs of locations closed in the year
218
418

729
1,119
The non recurring expenses include specific payroll and office costs that were incurred to the point that they were terminated as part of the restructuring exercise. These have been identified and separated to show the impact of the restructuring in the year. As part of this process we have restated the prior year figures to separate these costs and provide information on a like-for-like basis. 
5 Basic and diluted earnings per share
2015
2014
Earnings '000
(1,249)
(1,566)
Weighted average number of shares (number '000)
42,908
42,908
Fully diluted average number of shares (number '000)
42,908
42,908
Basic loss per ordinary share (pence)
(2.91)
(3.68)
Diluted loss per ordinary share (pence)
(2.91)
(3.68)

This information is provided by RNS
The company news service from the London Stock Exchange
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