TIDMALT
RNS Number : 6956D
Altitude Group PLC
30 October 2020
30 October 2020
Altitude Group plc
("Altitude", the "Company" or the "Group")
Unaudited full year results and operational update
Altitude Group plc (AIM: ALT), the operator of a leading
marketplace for personalised products, is pleased to announce its
unaudited results for the 15 month period to 31 March 2020. The
Group will make a further announcement when the audited Annual
Report for the 15 month period ended 31 March 2020 has been
published which is expected to be sent to shareholders in November.
As a result of the delay the company will be posting a copy of this
announcement to shareholders today.
Key corporate developments and operational highlights
-- Successful integration of the AI Mastermind business acquired
in January 2019, renamed AIM Smarter LLC ("AIM")
-- Accelerated US hiring and training process complete across
all divisions; sales, marketing, technology, customer service and
accounting. US Headquarters established in Philadelphia
-- AIM Capital Solutions launched as a premium member package in
August 2019, providing order procurement, technology,
administration and supply chain finance services to members
-- 241 members utilised AIM enhanced services in the period
-- Ad Products business sold for cash consideration of GBP0.65
million, with further contingent deferred consideration of up to
GBP0.15 million. The transaction was approved by shareholders on 3
April and as such has been treated as a discontinued operation in
these financial statements
Financial Highlights
-- Group revenue from continuing operations increased by GBP5.4
million or 188% to GBP8.3 million in the period (2018: GBP2.9
million) following the acquisition and development of AIM
-- AIM revenues increased by a factor of 7x since our acquisition in the 15 month period
-- Gross profit increased by GBP5.3 million or 253% to GBP7.5 million (2018 GBP2.1 million)
-- Gross margin increased to 89.7% (2018: 73.1%) reflecting the
added value services developed within AIM
-- Administrative expenses for the 15 month period were GBP7.0
million, a proportional run rate of administrative expenses GBP5.6
million per annum
-- Adjusted operating profit* of GBP0.5m (2018: loss GBP0.9m), an increase of GBP1.4 million
-- Loss before taxation GBP2.7m (2018: GBP2.7m)
-- Continuing operations generated an operating cash inflow
before changes in working capital of GBP0.7m (2018: GBP1.2m
outflow) an increase of GBP1.9m
-- As of 31 March 2020 Group was debt free and had net cash of
GBP2.4m (2018 GBP0.4 million and at 31 August 2020: GBP1.6
million)
*Operating profit before share-based payment charges,
amortisation of intangible assets, depreciation of tangible assets
and exceptional charges
Post Period End Highlights
-- Current net cash balance GBP1.9 million (as at 28 October 2020)
-- Group remains debt free
-- $2.6 million of PPE sales achieved in the post period end to 31 July 2020
-- AIM membership holding steady at a current total of 2,103
members from 1,917 at acquisition despite the impact of
Covid-19
-- 175 suppliers (H1 2019 161) retained in our Preferred
Supplier Program despite the impact of Covid-19
-- $0.5 million funding received under the US federal Covid-19
related Paycheck Protection Programme. All conditions for the
forgiveness of the funding have been met, and the Group is well
placed to benefit from anticipated future schemes
-- The impact of Covid-19 could still possibly result in revenue
and resulting cash inflows that are less and later than modelled
potentially creating a need to secure additional funding.
Notwithstanding that these factors represent a material uncertainty
that may cast significant doubt about the Group's ability to
continue as a going concern, the Board has a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future.
Nichole Stella, Group CEO of Altitude, said:
" We remain confident in the future prospects of AIM Smarter. We
have adapted quickly and pragmatically in navigating the initial
challenges imposed by the Covid-19 pandemic and subsequent
government lockdown and wish to reassure shareholders that the
Company remains responsive and nimble in the face of the current
crisis and focused on recovery and the future success of the
business.
Additionally, we continue to be very prudent in cash
conservation and are confident that Altitude has sufficient
financial resources and liquidity to see the business through to
more normalised market conditions assuming that the steady recovery
in the promotional products market place as witnessed since June
2020 continues, whilst accepting that there remains material
uncertainty as to the future continuation, rate of recovery and
overall economic impact of Covid-19 on the revenue . We continue to
enjoy the support of our supplier partners and AIM members, many of
whom have expressed gratitude for the assistance and support the
Company has provided to them during the crisis ."
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation 596/2014 of
the Market Abuse Regulation
Enquiries:
Altitude Group plc - via Instinctif Partners 020 7457 2020
Nichole Stella, Chief Executive Officer
Graeme Couturier, Chief Financial Officer
Keith Edelman, Non-Executive Chairman
finnCap Ltd 020 7220 0500
Jonny Franklin-Adams / Charlie Beeson (Corporate
Finance)
Richard Chambers (ECM)
Instinctif Partners 020 7457 2020
Matthew Smallwood
Chantal Woolcock
Chairman's Statement
I am delighted to have been appointed Chairman of the Company at
the end of March 2020 although it coincided with the onset of the
COVID -19 pandemic, the most challenging trading environment I have
ever witnessed in my business career.
The financial period ended 31st March 2020 was notable for the
Group as it successfully completed the acquisition and integration
into the Group of AI Mastermind, now, AIM Smarter LLC ("AIM"). The
Group now provides services across a significant section of the
marketplace. This major strategic shift in focus to integrate, grow
and monetize the acquired AIM business through existing technology
and services through the AIM marketplace, has successfully driven
growth in revenue and profit during the post-acquisition
period.
The disposal of Ad Products in the period also simplifies the
activities and reporting of the Group and emphasises our emergence
as a clearly focused US centric business.
COVID-19
The Group made significant and positive progress in the 15 month
period ending 31st March 2020 until the onset of the Covid-19
pandemic which has adversely impacted the business.
Whilst the pandemic only impacted the last month of the 15 month
period it has had a disproportionate impact on our results. Revenue
can only be recognised when the cash has actually been received or
third-party verification received of the underlying transactions
which provide the basis of charging for the services provided.
Revenue recognition is constrained to the extent that a significant
reversal is unlikely.
Unsurprisingly, Covid-19 has resulted in some accrued revenues
as at 31 December 2019 not being realised due to business failure
and elongation and extension of terms together with Covid-19
impacting the Group's ability to engage and reconcile
transaction-based revenue and necessary commercial decision making
for the benefit of the longer term. Revenues realised in this
period were ultimately GBP0.6m less than estimated.
Additionally, in the first quarter of calendar year 2020 we
accrue revenue in respect of the annual transaction-based service
agreements which run from January 2020 until December 2020. These
accruals were similarly affected as projections across promotional
products sales for 2020 have been dramatically reduced with recent
industry estimates suggesting year on year shortfalls in revenues
of circa 80% over certain periods.
However, anticipating and understanding the widespread impact
the pandemic would have on the business and industry, the Group
reacted rapidly to mitigate these events. Since period-end we have
reduced our headcount, curtailed discretionary expenditure and
applied for and received $0.5 million from the US Federal Paycheck
Protection Program. We have also engaged in the supply of PPE
products thereby demonstrating the importance of our role to both
members and suppliers. During this difficult period , I am pleased
to report that our membership numbers have remained steady at 2,103
and the number of preferred supplier partners has been maintained
at 175.
Results
In the period ended 31 March 2020, the Group achieved revenues
from continuing operations of GBP8.3m (2018: GBP 2.9m) and an
adjusted operating profit (before share-based payment charges,
amortization of intangible assets, depreciation of tangible assets
and exceptional charges) of GBP0. 5 m (2018: GBP 0.9m loss). This
represents an increase in reported revenue of GBP5.4m or 188% and a
GBP1.4m increase in adjusted operating profit*. The operating loss
for the period was GBP2.7m (2018: GBP2.7m).
It should be noted that the full GBP0.6m of underlying
transaction value of amounts due from members in respect of
purchases made on their behalf in the AIM Capital beta launch was
included as revenue in the 12 months to 31 December 2019, however,
we have concluded that under IFRS the correct treatment is to only
record related service fees receivable by AIM Capital as revenue.
Clearly this approach has no impact on our adjusted operating
profit*.
*Operating profit before share-based payment charges,
amortisation of intangible assets, depreciation of tangible assets
and exceptional charges
Strategic Development
As I have stated above the Group was making good progress with
our AIM business in the USA with new initiatives such as our AIM
Capital Solutions ("ACS") programme, hosted buyer events, and
innovative marketing activities. This was improving the saliency of
AIM Smarter to both suppliers and distributors. The Group therefore
decided to focus its efforts on the development in the USA of its
AIM Smarter business resulting in the sale of Ad Products, which
was completed following shareholder approval on 3rd April 2020.
Board Changes
Following the sale of Ad Products to a company connected to
Martin Varley, he decided to step down as a non-executive Director
of Altitude Group Plc. Martin has an extensive knowledge of the
industry coupled with huge enthusiasm and entrepreneurial flair
which will be sadly missed around the Board table. We will though
remain in close contact with Martin as a major shareholder and
supporter of the business. I would, on behalf of the whole board
and all shareholders, wish to put on record the tremendous
contribution Martin has made to both Altitude Group Plc and the
wider industry.
I would also like to thank Peter Hallett for his outstanding
contribution as Chairman. Peter has steered the company from a UK
centric business to a US focused business, the largest market for
promotional products in the world. He has been the glue that has
allowed the Company to maintain the viability of the business
whilst it was transitioning to a new future. In due course it is
our intention to add a further Non-Executive.
Finally, I would like to congratulate Nichole Stella for
recently being named in The Advertising Specialty Institute's
("ASI") Counselor magazine "Power 50" list. ASI serves a network of
25,000 suppliers, distributors and decorators in the $25.8 billion
promotional products industry. ASI's award winning Counselor(R)
magazine provides the most authoritative business content in the
industry. Of the Counselor Power 50, ASI notes, "the 2020 Power 50
[is] an exclusive list that annually spotlights executives from
distributor and supplier companies, as well as industry outsiders,
who wield considerable power and influence in a global
marketplace." Nichole's dedication to the business is evident and
successful navigation of the business during this tumultuous time
has been rightly recognised.
Liquidity
The Group remains debt free with a current cash balance of
GBP1.9 million as at 28 October 2020, and have met all the
requirements for the permanent retention of $0.5m of Covid-19
relief funding received under the US Federal Paycheck Protection
Plan.
We are also engaged in establishing a finance facility for the
AIM Capital Solution business and are monitoring the likelihood of
further US Federal support in the near future. However,
notwithstanding the availability of potential funding from these
sources the Board remains confident that subject to continued
steady recovery in the promotional product market through to 31
March 22, we have sufficient liquidity to trade through to more
normalized levels of trading. I comment on material uncertainty
below.
Outloo k
Clearly the Covid-19 pandemic has disrupted our industry
significantly and will impact our profitability in the coming year.
The impact of Covid-19 could still possibly result in revenue and
resulting cash inflows that are less and later than modelled
potentially creating a need to secure additional funding.
Notwithstanding that these factors represent a material uncertainty
that may cast significant doubt about the Group's ability to
continue as a going concern, the Board has a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future. For these reasons, they
continue to adopt the going concern basis in preparing this
announcement .
Due to the uncertainty it remains too difficult to quantify our
short-term profitability whilst the restrictions due to the
pandemic continue and the rate of prospective market recovery
remains uncertain and therefore we remain unable to give guidance
at this time.
The Group has recourse to substantial mitigating factors not
currently included in the forecast model which supports the
adoption of a going concern basis of preparation.
We remain excited and confident in the prospects for AIM Smarter
and we believe that some of the practices and learnings from this
period will make us stronger in the future. We have maintained our
AIM distributor member base throughout this period representing
circa. 8% of the US promotional products market and we believe that
as soon as Covid-19 is behind us we will rebuild our revenues and
profitability quickly.
Keith G Edelman
Non -executive C hairman
30 October 2020
Chief Executive ' s Statement
In January of 2020 Altitude Plc ' s subsidiary AIM Smarter, LLC
("AIM") was poised for continued growth with the business being
recognised by the industry association PPAI as " among the fastest
growing in the industry. " (Source: PPAI)
We acquired AIM in January 2019 as a leading promotional product
distributor membership group which derived its income primarily
from subscription income received from members in return for a menu
of member benefits, including technology services provided by
Altitude. The acquisition enabled the Company to effect a major
strategic shift in focus to integrate and grow the newly branded
combined platform and membership base, AIM Smarter, utilizing our
existing technology and developing enhanced services throughout the
marketplace. This has successfully driven growth in revenue and
profit in the US, reflected in the Group results for the 15 month
period to 31 March 2020. The acquisition and post integration
strategy has been successful in driving 186% growth in Group
revenue and 224% growth in gross margin. Our post acquisition
progress is summarized below.
The Covid-19 pandemic of 2020 has proven to be the most
challenging time in history for many promotional products
businesses and their customers to navigate and has curtailed and
recalibrated the progress made in 2019. The promotional product
industry has witnessed the global Covid-19 pandemic significantly
slow economies and completely halt robust and major market sectors
like the events, education, hospitality, bar & restaurant,
sports, entertainment and retail industries, sectors directly
correlated with the success of the AIM marketplace and the
suppliers and distributors who trade within it. Fortunately, there
have been some areas of opportunity during the shutdown period,
which the business has seized particularly in the shift to selling
personal protective equipment ("PPE").
To begin with Essential businesses were unable to purchase these
high-demand PPE products. The promotional product industry ' s deep
ties to Far East manufacturing provided the ability to procure this
equipment. Outside PPE sales, the impact and downturn in sales has
been widespread, with the industry experiencing a 44% downturn in
revenue performance across for the 6 month trading period ending 30
June 2020. (Source: ASI)
Decisive and quick action to protect the business was taken with
the understanding that we would be measured on how well we could
support our members and trusted supplier partners during this time
which would in turn determine the platform for recovery and future
success.
COVID-19 Response
As the enormity of the crisis became apparent, we took quick and
decisive action to manage cash resources through the curtailment of
discretionary spend and marketing costs. Additionally, on 23 March,
for the health and welfare of our employees and in accordance with
government guidelines, AIM transitioned quickly and seamlessly to a
remote working model across the UK and US without detriment to its
ability to serve the AIM network. We maintained a high level of
business continuity with all our employees equipped to work
efficiently from home.
During this time, it became clear AIM ' s role would be to
support and guide our community through this crisis. Thus, AIM
quickly pivoted to provide a broad range of educational
information, SME guidance on government programs, supplier business
operations updates and virtual events. Through these efforts,
membership numbers have remained steady at c.2,103 AIM Members,
with average (pre Covid-19) distributor revenue increasing to c.$1m
pa and aggregate historic (pre-Covid-19) member revenue of circa
$2.2 Bn per self-certification. Our VIP supplier partners remain
unchanged at 175 from our last update.
Additionally, AIM 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. In the 2(nd)
and 3(rd) quarters of 2020 the Company generated $2.6 million in
revenue from these Group Buy activities. This program also
showcased our ability to act as a direct sales conduit to members
on high-demand products and the Group Buys program will remain a
focal point of the Company as the economy recovers.
Finally, the Company took quick action to secure and benefit
from US government support programs, receiving $0.5m in funding
under the US Federal Paycheck Protection Program. The Company can
confirm that all conditions for permanent retention of the funding
received under the Program have been met and we expect to be able
to continue to access qualifying government programs as they become
available. We also took the necessary steps in decreasing employee
headcount by 21% across the Company. US headcount is currently 36
and UK headcount is 30 . In addition we instituted a temporary
salary decrease of 20% across the Management team and Executives,
as well as a reduction in working hours across all other employees,
following the cessation of the period covered by the Paycheck
Protection Program in June.
The Group remains debt-free, continues to be cautious in its
approach to all discretionary spend and is carefully managing cash
whilst adapting marketing and sales plans to meet the changing
needs of AIM Members and suppliers.
Recent industry reporting indicates that market transactional
volume improved in July 2020 to 71% of 2019 levels and was steady
in August at 74% of 2019 volumes. Smaller and medium sized
distributors are reported to be faring slightly better in terms of
year on year reductions. The slower rate of improvement in August
has tempered industry expectations and much uncertainty
remains.
AIM Post Acquisition Progress and Trading
On 15 January 2019 the Company acquired the Advertising Industry
Mastermind Group LLC. Pre-Covid-19, the feedback from both members
and Preferred Suppliers in the period reaffirmed confidence in our
business model, the scalability and the commercial attractiveness
of our business offering across the supply chain.
It should be noted that the full period results have been
impacted by the Covid-19 pandemic and the subsequent delay in
payment schedules and collection of annual fees on annual and Q1
2020 quarterly service agreements.
In the US, revenues for the 15 months to 31 March 2020 were $7.5
million. As noted by the Chairman, previously disclosed US revenue
of $7.1 million (2018 $0.6m) for the 12 months to 31 December has
been impacted by the following issues:
-- The period of Covid-19 disruption in the US resulted in total
business shut-downs and widespread furlough across AIM partner
businesses in the second and third quarters of 2020. This
unprecedented disruption of business operations resulted in a
complete inability to engage in the reconciliation of transaction
-based revenue due in respect of 2019 and prompted necessary
commercial decision making for the benefit of the longer term
resulting in a subsequent revenue accrual reduction of $0.6m. In
addition, we estimate that March 20 quarterly revenues were $0.4m
below original expectations due to the impact of Covid-19, through
lower than forecast trading volumes, post period business failures
and associated uncollectible revenue
-- Initial interpretation of IFRS 15 recognised the GBP0.6
million of underlying transaction value of amounts due from members
in respect of purchases made on their behalf in the AIM Capital
Solutions ("ACS") beta launch as revenue in the 4 months post
launch to 31 December 2019, however, on further consideration we
have concluded that it is correct to only recognise ACS service
fees as revenue. Clearly this approach has no impact on our
adjusted Operating Profit*
-- Whilst under IFRS 15 we are unable to include or recognize as
revenue the purchase cost of the underlying transaction, which as
ACS, we are procuring, administering and funding on behalf of the
distributor, it is has demonstrated the potential to grow rapidly
and form an important part of our future business
*Operating profit before share-based payment charges,
amortisation of intangible assets, depreciation of tangible assets
and exceptional charges
ACS, requires mandatory use of the AIM Tech suite and offers
technology driven back-office support procurement and supply chain
finance in return for a service fee based on gross transaction
value due back to AIM.
We believe that the addition of this premium enhanced member
services 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 a full launch in January 2020, we have now
developed a service offer that we know is attractive. We have been
cautiously expanding this business and closely monitoring the
associated consumption of working capital. AIM retains total
discretion on the acceptability of transactions presented for
finance and in addition we are actively engaged in sourcing an
external funding partner for its future development.
In the 15 months to 31 March 2020 Group revenue increased by
188% to GBP8.3m (2018: GBP2.9m. This growth was entirely
attributable to the acquisition and development of AIM. It should
be noted that the historic annual revenue of AIM prior to its
acquisition by the Group was less than $1 million per annum with
revenue achieved during the post-acquisition period showing a
7-fold increase.
Throughout 2019 our focus remained on our major routes to
revenue growth:
-- Continued growth in the AIM membership of high-quality promotional product distributor.
-- 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.
-- Develop and sell additional added value services, leveraging
its existing applications, resources and expertise, to help AIM
distributor members grow their business
-- Continued drive to increase member utilisation of the AIM Tech Suite
-- The addition of ACS to AIM's offering completes the Group's current portfolio of services.
Today, AIM drives awareness and grows sales for both our
Preferred Supplier partners to our AIM members and grows sales for
our AIM members to their clients. By providing marketing and
technology services to our members and Preferred Supplier partners,
we are creating a virtuous growth cycle for the AIM
marketplace.
In 2020, we increased our supplier network to 175 of the
industry ' s top suppliers and added 8 additional suppliers from
ASI's Top 40 industry supplier list. 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 " and the
Group partnered with ASI to utilize their data feed in the AIM Tech
Suite.
Member adoption and usage of our technology solutions continues
to grow with 341 distributors adopting the AIM Tech Suite for
search and order creation and 1,299 unique distributors utilizing
AIM's website and company store technology with more than 2,600
sites live to date.
Enhanced Member Services
We are pleased with the launch of and continued increased
interest shown by our members in the enhanced member services. 241
members have utilised AIM's various paid enhanced services and we
are working on initiatives to increase this number in the current
financial year. The pace of sales on marketing services have
retracted due to Covid-19, however, digital platform sales and our
premium program, AIM Capital Solutions (ACS) has continued to be
developed and grown despite Covid-19 as outlined above.
US Operations
Operationally we had been very active in building our business
and infrastructure in the US:
-- Completed the build-out and move into a new expanded office
-- Recruited and completed staff training to establish a
completely new US management team structure. We are very proud of
how quickly this was put together and became immediately effective.
We successfully targeted recruits of proven expertise within the
industry, who have been instrumental in quickly establishing AIM as
a key and influential player
-- AIM held a hosted buyer event and Virtual Event Series from
which we have had very positive feedback. We have established an
AIM Supplier Advisory Board where 10 high-level senior executives
of major industry suppliers have been invited to collaborate with
AIM to drive innovative programs in our marketplace.
Protection of Intellectual Property
Throughout the Group's history, it has expended great resource
and effort to develop and legally protect its intellectual
property. In 2019, the Group engaged in efforts to protect its
intellectual property rights in multiple instances. These efforts
were successful and resulted in numerous licensing agreements. The
Group will continue to monitor and protect its intellectual
property.
UK Business
The UK business delivered revenue of GBP2.5m in the 15 months to
31 March 2020 versus GBP2.4m in 2018 excluding Ad Products. Whilst
this represented a reduction in like for like terms over 12 months
it was reflective of the discontinuation of the legacy UK trade
show and associated publication in order to streamline focus on AIM
Smarter membership services.
In May 2020, the Company launched the AIM Smarter platform in
the UK. This new launch will provide similar benefits and programs
to UK based distributors and supplier partners. We believe the
disposal of Ad Products removes a perceived conflict of interest
issue which will encourage UK suppliers to participate in the
recently launched AIM Smarter platform in the UK. Following the UK
launch of AIM Smarter, there is currently 54 preferred suppliers in
participation and distributor members have grown 76% from 51 to 90
since launch. Alongside this we continue to provide various
software applications to the promotional industry on a monthly
recurring revenue model.
Having reduced our staffing from 40 prior to the onset of
Covid-19, we currently retain a staff of 30 in the UK predominantly
comprising the AIM Smarter technology research and development team
for the Group's technology platforms and customer service and
finance teams for the provision of the UK services. Following the
discontinuation of the UK trade show and disposal of Ad Products
the UK operations were restructured and consolidated from two
locations, one in Manchester; where the legacy publications and
exhibitions business was historically housed, and a separate
facility in Sheffield housing the technology team, to a single new
office located in Sheffield City Centre which provides better
access to future technology talent.
Disposal of Ad Products
On 18 March 2020, the Company's wholly owned subsidiary Customer
Focus Interactive Imaging Limited ("CFIIL") entered into a
conditional agreement with Product Source Group Limited ("PSG") for
the disposal of the trade and certain assets of Ad Products
("ADP"), the trading name of CFIIL and a UK based trade supplier
and printer of promotional products (the "Disposal") for a total
maximum consideration of GBP0.8 million.
Total maximum consideration of GBP0.8 million made up as
follows:
-- GBP0.35 million in cash on completion;
-- GBP0.3 million receivable in 4 tranches over the 12-month
period following completion, subject to a personal guarantee of
Martin Varley; and
-- GBP0.15 million conditional deferred consideration with
performance criteria based on ADP revenue generation in the
12-month period following completion
PSG was owned and controlled by Joanne Varley, wife of Martin
Varley who was at the time a Non-Executive Director of and a 14.8
percent. shareholder in Altitude. The Disposal, therefore, is
considered a related party transaction for the purposes of the AIM
Rules and a substantial property transaction under the Companies
Act.
The transaction was approved by shareholders in a General
Meeting on 3 April 2020.
Ad Products results for the period are included in the Statement
of Consolidated Income under "Loss from discontinued
operation".
Financial Results
Group revenues for the period increased by GBP5.4m to GBP8.3m
(2018: GBP2.9m), an increase of 188% .
The increase in revenue is due to the 15 month accounting period
versus 12 months in 2018, the first time inclusion of AIM Smarter
and the subsequent introduction of new commercial arrangements,
products and services to the AIM marketplace, forged in the 15
month period. These new arrangements products and services have
served to generate a 7-fold increase in the pre-acquisition
revenues of AIM.
Gross profit increased by GBP 5.3m, or 253%, to GBP7.5m (2018:
GBP 2.1m), with gross margin increasing to 89.8% (2018: 73.1%)
reflecting the 15 month accounting period versus 12 months in 2018,
the first time inclusion of AIM Smarter and the development and
introduction of more added value services to the marketplace.
Administration expenses before share-based payments,
amortization of intangible assets, depreciation of tangible assets
and exceptional charges increased by GBP4.0m, or 131% to GBP7.0m
(2018: GBP 3.0m) driven by a 15 month trading period compared to
the 12 month period in 2018 and the associated scaling up of
operations in the US following the acquisition of the trade and
assets of Advertising Industry Mastermind in January 2019.
The Administrative expenses for the 15 month period of the
business are representative of a proportionate annualized run rate
of GBP5.6m per annum.
Adjusted Operating profit* was GBP0.5m (2018: GBP 0.9m loss), an
increase of GBP1.4m.
Loss before taxation was GBP2.7m (2018: GBP2.7m loss). The group
capitalized GBP0.8m of software development (2018: GBP0.8m).
The loss from discontinued operations of GBP3.3m reflects the
aggregate trading losses and the loss of sale arising from the
disposal of Ad Products.
Operating cash outflow before changes in working capital was
GBP0.1m (2018: GBP1.4m outflow). However, continuing operations
contributed an inflow of GBP0.7m (2018: GBP1.2m outflow) an
increase of GBP1.9m and discontinued operations contributed an
outflow of GBP0.8m (2018: GBP0.2m outflow). Net cash flow from
continuing operations was therefore cash neutral (2018: GBP1.6m
outflow) after funding an increase in working capital growth
investment of GBP0.7m (2018: 0.4m outflow), required to support the
rapid growth in revenue in the US.
Net cash outflow from investing activities resulted in a net
outflow of GBP5.2m (2018: GBP1.1m), reflecting the purchase of AIM
for GBP3.9m, purchase of tangible and intangible assets (software
development) of GBP0.4m (2018: GBP0.3m) and GBP0.8m (2018: GBP0.8m)
respectively.
Financing activities included the issue of shares for cash (net
of expenses) of GBP8.5m (2018: GBP1.6m) to fund the acquisition and
development of AIM, and lease payments (under IFRS 16) of GBP0.3m
(2018: GBPnil), repayment of finance agreements and interest of
GBP0.1m (2018: GBPnil).
Total net cash inflow was GBP1.9m (2018: GBP1.5m outflow).
Current net cash balances stand at GBP1.9m (as at 28 October
2020), compared with GBP1.6m confirmed as at 31 August 2020.
*Operating profit before share-based payment charges,
amortisation of intangible assets, depreciation of tangible assets
and exceptional charges
Outlook
We remain confident in the future prospects of AIM Smarter. We
have adapted quickly and pragmatically in navigating the initial
challenges imposed by the Covid-19 pandemic and subsequent
government lockdown. Given, the presence of material uncertainty
surrounding ongoing impact of Covid-19 the Company remains unable
to give any guidance for the 12 month trading period to the end of
March 2021, but wishes to reassure shareholders that the Company
remains responsive and nimble in the face of the current crisis and
focused on recovery and the future success of the business.
Additionally we continue to be prudent in cash conservation and
are confident that subject to a continuation of the steady recovery
in the promotional products market place as witnessed since June
2020 through to 31 March 2022, Altitude has sufficient financial
resources and liquidity to trade the business through to more
normalised market conditions whilst accepting that there remains
material uncertainty as to the future continuation, rate of
recovery and the overall economic impact of Covid-19 on revenue We
continue to enjoy the support of our supplier partners and AIM
members, many of whom have expressed gratitude for the assistance
and support AIM has provided to them during the crisis.
Nichole Stella
Chief Executive Officer
30 October 2020
Consolidated Statement of Comprehensive Income
for the 15 month period ended 31 March 2020
Audited
Unaudited Restated
2020 2018
Note GBP000 GBP000
Revenue - Continuing Operations 8,308 2,889
Cost of Sales (851) (776)
------------------------------------------------------- ---------- ---------- ------------
Gross Profit 7,457 2,113
Administrative expenses before share-based payment
charges and amortisation of intangible assets, depreciation
of tangible assets and exceptional charges (6,996) (3,026)
Operating Profit/(Loss) before share-based payment
charges, amortisation of
intangibleAssets, depreciation of tangible assets and
exceptional charges 461 (912)
Share-based payment charges (1,401) (736)
Depreciation and Amortisation (1,171) (705)
Exceptional charges 5 (443) (375)
------------------------------------------------------- ---------- ---------- ------------
Total administrative expenses (10,011) (4,841)
------------------------------------------------------- ---------- ---------- ------------
Operating loss (2,554) (2,728)
Finance charges (112) (7)
------------------------------------------------------- ---------- ---------- ------------
Loss before taxation (2,666) (2,735)
Taxation 275 423
------------------------------------------------------- ---------- ---------- ------------
Loss attributable to the equity shareholders
of the Company (2,391) (2,312)
Loss from discontinued operation 7 (3,336) (221)
------------------------------------------------------- ---------- ---------- ------------
Loss for the period (5,727) (2,532)
Other comprehensive income:
Items that may be reclassified subsequently to
profit and loss:
Foreign exchange differences 64 (56)
------------------------------------------------------- ---------- ---------- ------------
Total comprehensive loss for the period (5,663) (2,588)
------------------------------------------------------- ---------- ---------- ------------
Earnings per ordinary share attributable to the
equity shareholders
of the Company:
- Basic and diluted (pence) - Continuing operations 6 (3.51p) (4.31p)
- Basic and diluted (pence) - Discontinued operations (4.90p) (0.41p)
Consolidated Statement of Changes in Equity
for the 15 month period ended 31 March 2020
Share Share Retained
Capital Premium Losses Total
GBP000 GBP000 GBP000 GBP000
At 1 January 2018 203 9,363 (5,129) 4,437
Loss for the year - - (2,345) (2,345)
Prior year adjustment (see Note 7b) (188) (188)
Restated loss for the year - - (2,533) (2,533)
Foreign exchange differences - - (56) (56)
Total comprehensive loss - - (2,589) (2,589)
Transactions with owners recorded directly
in equity:
Share-based payment charges - - 736 736
Shares issued for cash 16 1,637 - 1,653
Total transactions with owners 16 1,637 736 2,389
At 31 December 2018 219 11,000 (6,982) 4,237
Adjustment on adoption of IFRS 16 - - (28) (28)
Loss for the period - - (5,727) (5,727)
Foreign exchange differences - - 64 64
Total comprehensive loss - - (5,691) (5,691)
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 (11,272) 9,085
------------------------------------- --------- --------- --------- --------
Consolidated balance sheet as at 31 March 2020
Audited
Unaudited Restated
2020 2018
GBP000 GBP000
Non-current assets
Property, plant & equipment 80 319
Right of use assets 1,065 -
Intangible assets 2,814 1,108
Goodwill 3,108 564
Deferred tax assets 456 426
-------------------------------------------- ---------- ----------
Total non-current assets 7,523 2,417
Current assets
Inventory - 1,546
Trade and other receivables 2,737 914
Corporation Tax Receivable 35 454
Cash and cash equivalents 2,350 420
-------------------------------------------- ---------- ----------
5,122 3,334
Assets classified as held for sale 650 -
Total current assets 5,772 3,334
Total assets 13,295 5,751
-------------------------------------------- ----------
Non-current liabilities
Deferred tax liabilities (463) -
------------------------------------------- ---------- ----------
Current liabilities
Trade and other payables (3,747) (1,514)
Total liabilities (4,210) (1,514)
-------------------------------------------- ----------
Net assets 9,085 4,237
Equity attributable to the equity holders
of the Company
Called up share capital 277 219
Share premium account 20,080 11,000
Retained losses (11,272) (6,982)
-------------------------------------------- ---------- ----------
Total equity 9,085 4,237
-------------------------------------------- ---------- ----------
Consolidated cash flow statement for the 15 month period ended
31 March 2020
Audited
Unaudited Restated
2020 2018
GBP000 GBP000
Cash flows from operating activities
Loss for the period before tax - Continuing
operations (2,665) (2,734)
Loss for the period before tax - Discontinued
operations (3,336) (221)
Amortisation of intangible assets 948 723
Depreciation 510 67
Share-based payment charges 1,401 736
Impairment of assets held for sale 2,207 -
Corporation tax (R&D) credits received 646 4
Interest charge 112 -
IFRS 16 adjustment & Exchange differences 73 -
Operating cash out ow before changes in working
capital (104) (1,425)
Change in operating assets and liabilities
net of effect from the sale of Ad Products
Movement in inventory (285) 159
Movement in trade and other receivables (2,086) 497
Movement in trade and other payables 378 (1,313)
Net cash flow from operating activities (2,097) (2,082)
Cash flows from investing activities
Purchase of tangible assets (42) (283)
Purchase of intangible assets (801) (769)
Net cash outflow from acquisition of trade
and assets (3,249) -
------------------------------------------------------ ---------- ----------
Net cash ow from investing activities (4,092) (1,052)
------------------------------------------------------- ---------- ----------
Cash flows from financing activities
Repayment of borrowings (390) -
Interest paid (42)
Issue of shares for cash (net of expenses) 8,551 1,591
Net cash ow from financing activities 8,119 1,591
Net increase/(decrease) in cash and cash equivalents 1,930 (1,543)
Cash and cash equivalents at the beginning
of the period 420 1,963
------------------------------------------------------- ---------- ----------
Cash and cash equivalents at the end of the
period 2,350 420
------------------------------------------------------- ---------- ----------
Notes to the Consolidated Financial Statements
1 Financial information
The financial information set out herein does not constitute the
Group's statutory accounts for the 15 months 31 March 2020 or the
year ended 31 December 2018 within the meaning of sections 434 and
435 of the Companies Act 2006. The financial information set out
herein has not been audited or reviewed by the auditors. The
2019/20 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 2018 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 Group's website. A further
announcement will be made at that time.
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.
IFRS 16 has been adopted in the current period. The other principal
accounting policies of the Group have remained unchanged from those
set out in the Group's 2018 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 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 year ended 31 December 2018. The acquisition of AIM in the
US has introduced new revenue streams and in addition, significant
revenue streams have been developed in AIM during the period of
these financial statements, which have been accounted for in
accordance with IFRS 15.
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 except as noted below with regard to the adoption of IFRS
16.
Leases
The Group has adopted IFRS 16 in these financial statements,
with effect from 1 January 2019. IFRS 16 replaces IAS 17 'Leases'
and related interpretations. The standard requires lessees to
recognise right-of-use assets and lease liabilities for all leases
meeting the lease definition set out by the standard unless certain
exemptions are available. Accounting for lessors is largely
unchanged. The Group has adopted the modified retrospective
approach, electing to apply the practical expedient to use
hindsight when determining the lease term. As a result, the Group,
as a lessee, has recognised right-of use assets representing its
rights to use the underlying assets, and lease liabilities
representing its obligation to make lease payments, for all lease
contracts.
Basis of consolidation
On 15 January 2019 the Group acquired the trade and assts of
Advertising Industry Mastermind Group LLC .
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.
Acquired Intangible assets - Business combinations
Intangible assets that are acquired as a result of a business
combination and that can be separately measured at fair value on a
reliable basis are separately recognised on acquisition at their
fair value. Amortisation is charged on a straight-line basis to the
Consolidated Statement of Comprehensive Income over their expected
useful economic lives as follows:
-- Intellectual property up to 5 years
-- Customer relationships 3 to 5 years
Assets that are subject to amortisation are tested for
impairment when events or a change in circumstances indicate that
the carrying amount may not be recoverable.
Intangible assets - Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the net identifiable assets of the acquired
subsidiary at the date of acquisition. Goodwill on acquisition of
subsidiaries is included in intangible assets. Goodwill is tested
annually for impairment and carried at cost less accumulated
impairment losses.
Discontinued operations and assets held for sale
On 23 March 2020 the Ad Products business was classified as
assets held for sale following Board approval of the disposal of Ad
Producst to Product Services Group ("PSG").
As required by IFRS 5, the Group re-measured Ad Products at the
lower of the carrying amount and fair value less costs to sell, as
set out in note 8. The transaction completed on 3 April 2020
following approval by the shareholders in general meeting. The
business was not sold at 31 March 2020 and is therefore classified
as held for sale at this date. In accordance with IFRS 5, assets
and liabilities classified as held for sale are shown as a separate
line on the balance sheet. IFRS 5 also requires that the profit or
loss from a discontinued operation is shown as a single amount on
the face of the income statement and the comparatives and related
notes have been restated accordingly. This represents total
post-tax loss of the disposal group for the whole of the financial
year including any post-tax gain or loss on the measurement of fair
value, as well as the post-tax loss on sale of the disposal group
completed on 3 April 2020. Ad Products is presented as a
discontinued operation for the year ended 31 March 2020.
Further details can be found in note 7.
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 VAT, sales taxes, returns, rebates
and discounts.
When assessing whether to recognise revenue, the Group assess
the contract against the five-step process set out in 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 Group has a number of different revenue streams. Revenue
from customer subscriptions, marketing & technology services,
trade exhibitions, catalogues, promotional products and other
services is recognised when the company has delivered its
obligations to its customers, normally when that service has been
provided to the customer, an exhibition takes place, or the
catalogue or promotional product is delivered to the customer.
Revenues in respect of software product licences and associated
maintenance and support services are typically recognised evenly
over the period to which they relate.
In AIM, distributor members are required to pay a subscription
for basic membership which confers immediate access to a range of
commercial benefits to the member at no additional cost to the
member. The member may then elect to upgrade to a range of enhanced
services provided by AIM via an increased subscription.
Subscription revenues are recognised over time on a monthly basis
over the annual membership period.
Certain other services are made available to members on a
discretionary usage basis such as artwork services, catalogues and
merchandise boxes. These revenues are recognised following
performance of the service or delivery of the product.
AIM trialled a premium enhanced membership package in August
2020 called AIM Capital Solutions ("ACS"). ACS, requires mandatory
use of the AIM Tech suite and offers technology driven back-office
support procurement and supply chain finance in return for a
service fee based on the end user transaction value due back to
AIM. IFRS 15 determines that only the service fee in relation to
the transaction should be recognised as revenue rather than the
gross end user transaction value. This revenue is therefore
recognised as such at the point of delivery of product to the end
user.
AIM also provide marketing services to promotional product
supplier customers, whereby such suppliers are actively promoted to
AIM members utilising the AIM technology platform ("AIM Tech
Suite"). These supplier customers sign annual service agreements
with AIM with revenue based on the transactional volume of
purchases made by the AIM members from the supplier customer. These
revenues are recognised over time by reference to the volume of
transactions in that time period. Payment for such services is made
by the customer on a calendar quarter or annual basis.
An element of the Group's revenue is treated as contingent
revenue under IFRS 15 due to uncertainty over timing and value.
This element has been constrained such that amounts are recognised
as cash is received.
In addition, AIM promotes and arranges events for AIM members
and groups of supplier customers to meet, and also creates
publications in which supplier customers can run special
promotions. Revenue from these events is recognised once the
performance obligations have been satisfied.
In comparative periods, revenue is recognised at the fair value
of the consideration received or receivable for the sale of goods
and services in the ordinary course of business and is shown net of
Value Added Tax and other sales taxes.
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.
Going Concern
The financial statements have been prepared on a going concern
basis. The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the strategic report and Chairman ' s statement
The Financial Reporting Council issued " Going Concern and
Liquidity Risk: Guidance for Directors of UK Companies " in 2009,
and " Guidance on the Going Concern Basis of Accounting and
Reporting on Solvency and Liquidity Risks " in 2016. The Directors
have considered these when preparing these financial
statements.
The current economic conditions caused by the Covid-19 pandemic
have created uncertainty particularly 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 sensitised cash flow forecasts
extending to March 21 and further to March 2022. The cashflows
include a base scenario and a sensitized revenue scenario
-- The base scenario assumes reductions in revenue of 44% and
17% in the current financial year to March 2021 and the year to 31
March 2022 respectively, compared to an annualized 2019/20
comparative. The sensitized scenario assumes reductions in revenue
of 47% and 23% respectively, each compared to an annualized 2019/20
comparative. The model indicates that the Company can trade
throughout the period to 31 March 2022 in either scenario
-- In addition, the forecast assumes 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 judgments. The model assumes cash collections in line
with what we have experienced since the acquisition of AIM and more
recently in the post 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
-- the availability of a second round of Federal support in the
US in the form of the Paycheck Protection Programme
-- 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.
However, the impact of Covid-19 could still possibly result in
revenue and resulting cash inflows that are less and later than
modelled potentially creating a need to secure additional funding.
The Directors consider that such a severe yet plausible scenario
indicates the existence of a material uncertainty which may cast
significant doubt on the Group's ability to continue as a going
concern.
Notwithstanding that these factors represent a material
uncertainty that may cast significant doubt about the Group's
ability to continue as a going concern, the Board has a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. For these
reasons, they continue to adopt the going concern basis in
preparing the Annual Report and Accounts.
The financial statements do not include any adjustments that
would result from the basis of preparation being inappropriate.
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.
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 2020, the
Group has two continuing operating segments, North America and the
United Kingdom.
Restated
2020 2018
GBP000 GBP000
Turnover
North America 5,856 498
United Kingdom and Europe 2,452 2,391
---------------------------------------------------------- --------- ----------
Total 8,308 2,889
Operating Profit/(Loss) before share-based payment
charges, depreciation of tangible assets, amortisation
of intangible assets and exceptional charges
North America 707 (1,007)
United Kingdom and Europe (246) 95
---------------------------------------------------------- --------- ----------
Total 461 (912)
Operating Profit / (loss)
North America (154) (1,050)
United Kingdom and Europe (2,400) (1,677)
---------------------------------------------------------- --------- ----------
Total (2,554) (2,727)
Depreciation
North America (127) (3)
United Kingdom and Europe (60) (12)
---------------------------------------------------------- --------- ----------
Total (187) (15)
Amortisation
North America (224) (39)
United Kingdom and Europe (759) (651)
---------------------------------------------------------- --------- ----------
Total (983) (690)
---------------------------------------------------------- --------- ----------
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 2020 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.
Restated
2020 GBP000 2018 GBP000
Assets 13,295 5,751
Liabilities 4,210 1,702
---------------------- -------------
Operating loss (2,554) (2,727)
---------------------- ------------ -------------
Capital expenditure 6,160 780
---------------------- ------------ -------------
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 Non-current assets
customers
Restated
Restated 2018
2020 GBP000 2018 GBP000 2020 GBP000 GBP000
North America 5,854 498 5,036 97
United Kingdom 2,454 2,391 ,487 2,320
----------------- ------------ ------------- ------------ ---------
8,308 2,889 7,523 2,417
---------------- ------------ ------------- ------------ ---------
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 Over Total
point time GBP000
in time
GBP000 GBP000 GBP000
North America 977 4,877 5,854
United Kingdom and Europe 775 1,679 2,454
------------------------------- --------- ------- --------
Total 1,752 6,556 8,308
------------------------------- --------- ------- --------
5. Exceptional charges
Restated
2020 GBP000 2018 GBP000
Employment termination costs 27 158
Legal, acquisition and consultancy costs 391 149
Other costs 25 68
------------------------------------------- ------------ -------------
443 375
------------------------------------------ ------------ -------------
The exceptional charges relate to the costs of terminating
employment arising from restructuring exercises undertaken. Legal,
acquisition and consultancy costs arise from the acquisition of AI
Mastermind, legal action taken in the US to protect the Group ' s
patents, and a continuation of the restructuring of legacy UK
publications and exhibitions businesses
6. Basic and diluted earnings per ordinary share
The calculation of earnings per ordinary share is based on the
loss for the period after taxation and the weighted average number
of equity voting shares in issue as follows:
2020 Adjusted
GBP000 2018 GBP000
Loss attributable to the equity shareholders of the
Company:
Continuing operations (2,391) (2,312)
--------------------------------------------------------------------------------- -------- -------------
Discontinued operations (3,336) (221)
--------------------------------------------------------------------------------- -------- -------------
Weighted average number of shares
(number '000) 68,125 53,579
--------------------------------------------------------------------------------- -------- -------------
Basic & diluted loss per ordinary
share (pence) Continuing operations (3.51) (4.31)
Basic & diluted loss per ordinary
share (pence) Discontinued operations (4.90p) (0.41p)
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. Disposal of the Ad Products Business
7. (a) Description
On 23 March 2020 the Group announced the disposal of certain
assets and the business undertaking of Ad Products, subject to
shareholder approval, which was obtained in General Meeting after
the period end on 3 April 2020.
The associated assets and liabilities of Ad Products were
consequently presented as held for sale in the 2019/20 financial
statements and is reported in the current period as a discontinued
operation. Financial information relating to the discontinued
operation for the period is set out below.
7. (b) Financial Performance
The financial performance and cash flow information presented
are for the fifteen months ended 31 March 2020 (2019/20 column) and
the year ended 31 December 2018.
2020 Restated
GBP000 2018 GBP000
Revenue 4,460 3,714
--------------------------------------------------- -------------
Cost of sales (2,647) (1,824)
--------------------------------------------------- -------------
Cost of sales - prior year adjustment* - (188)
--------------------------------------------------- -------------
Gross profit 1,813 1,702
Administration expenses before amortisation
of intangible assets, depreciation of tangible
assets and exceptional charges (2,172) (1,815)
--------------------------------------------------- -------- -------------
Operating loss before amortisation of intangible
assets, depreciation of tangible assets and
exceptional charges (359) (113)
Depreciation and Amortisation (332) (86)
Exceptional charges (440) (22)
--------------------------------------------------- -------- -------------
Operating loss before taxation (1,129) (221)
Taxation - -
-------------------------------------------------- -------- -------------
Loss for the period (1,129) (221)
Loss on measurement of assets held for sale
(see 7(c) below) (2,207) -
-------------------------------------------------- -------- -------------
Loss on discontinued operation (3,336) (221)
--------------------------------------------------- -------- -------------
*The prior year adjustment arose from a cut-off error discovered
during the current financial period relating to 2018. An accrual
was erroneously omitted from the 2018 financial statements in
respect of certain goods in transit requiring correction by
increasing cost of sales and purchase accruals respectively by
GBP188k, resulting in retained losses at 31 December 2018 being
increased by GBP188k.
Cash flow from the discontinued operation is as follows:
2020 Restated
GBP000 2018 GBP000
Operating cash outflow before changes in working
capital (797) (169)
Net cash out ow from operating activities (1,235) (497)
Net cash out ow from investing activities (735) (239)
Net cash in ow from financing activities 502 525
--------------------------------------------------- -------- -------------
Net cash outflow from discontinued
operation (1,468) (211)
--------------------------------------------------- -------- -------------
7.(c) Details of the sale of the Ad Products business
The loss on measurement and disposal of assets held for sale is
calculated as follows:
GBP000 2020 GBP000
Disposal Proceeds:
Cash on completion* 350
Unconditional deferred consideration** 300
Additional deferred consideration*** -
---------------------------------------- ------- ------------
Total Consideration 650
Carrying value of assets as at date of
sale:
Fixed assets 692
Inventory 1,819
Trade and other debtors 346 (2,857)
Loss on measurement of assets held for
sale (2,207)
----------------------------------------- ------- ------------
*The cash due on completion of disposal on 3(rd) April 2020 was
prepaid by the purchaser prior to the period end and is included in
the financial statements as deferred income within other
creditors.
**The unconditional deferred consideration is subject to the
personal guarantee of Martin Varley and is receivable under the
following schedule:
-- GBP50,000 on 3 August 2020
-- GBP50,000 on 3 October 2020
-- GBP100,000 on 3 December 2020 and
-- GBP100,000 on 3 March 2021
The Company has received notification from the purchaser seeking
to reschedule the payment profile of the unconditional deferred
consideration due to the impact of Covid-19. The Directors
currently consider the current fair value of the unconditional
deferred consideration to be GBP0.3 million.
*** The additional consideration of GBP150k is payable subject
to the achievement of a revenue target by the disposed business in
the year to 31 March 2021. The Directors consider achievement of
the target revenue to be unlikely given the impact of covid-19 on
the Ad Products business and have therefore estimated the fair vlue
of the additional consideration to be GBPnil.
The following assets and liabilities were reclassified as held
for sale in relation to the discontinued operation as at 31
December 2018:
2020 Restated
GBP000 2018 GBP000
Assets classified as held for sale:
Property, plant, machinery and equipment - -
Promotional products 294 -
Trade debtors 356 -
----------------------------------------- -------- -------------
Total assets of disposal group held
for sale 650 -
----------------------------------------- -------- -------------
8. Acquisition of the Advertising Industry Mastermind Group LLC business
On 15 January 2019 the Group acquired the trade and assts of
Advertising Industry Mastermind Group LLC for a total consideration
of $5.0m, of which $3.5m was payable in cash at completion,
US$0.75m was paid into escrow to be retained for a period of 18
months, of which US$0.5m represented conditional deferred
consideration (based on the achievement of membership retention
targets at six, twelve and eighteen months post completion) and
US$0.25m is held as a contingent fund.
The balance of consideration of $0.75m was satisfied by the
issue of 860,294 consideration shares to the vendor.
Post-acquisition the business trading name was changed to AIM
Smarter ("AIM").
The transaction has been accounted for in the period using the
acquisition method of accounting.
A summary of the fair values of the assets acquired is set out
below:
Book Value Fair Value
of acquired Fair of acquired
assets Value Adjustments assets
GBP000 GBP000 GBP000
------------------------------------------- ------------- ------------------- -------------
Intangible assets: Customer relationships 0 1,852 1,852
Trade receivables 1 1
Deferred tax on identified intangible
assets - (500) (500)
------------------------------------------- ------------- ------------------- -------------
Total assets acquired at fair values 1 1,352 1,353
Consideration
US$4.25m cash consideration (including $0.5m deferred
consideration held in escrow) 3,248
US$0.75m equity consideration (860,294
shares) 587
------------------------------------------- ------------- ------------------- -------------
Total Consideration 3,835
------------------------------------------- ------------- ------------------- -------------
Acquired Goodwill 2,482
------------------------------------------- ------------- ------------------- -------------
9. Post Balance Sheet Events
On 18 March 2020 the Company's wholly owned subsidiary, Customer
Focus Interactive Imaging Limited ("CFIIL"), entered into a
conditional agreement with Product Source Group Limited ("PSG") for
the disposal of the trade and certain assets of Ad Products
("ADP"), the trading name of CFIIL and a UK based trade supplier
and printer of promotional products (the "Disposal").
The Company engaged Sentio Partners, a third-party corporate
finance consultancy to manage and oversee the engagement of all
interested parties, including PSG, a company controlled by Mrs
Joanne Varley, the wife of Martin Varley.
The Independent Directors (being all those save for Martin
Varley) carefully considered all the offers made for the business
together with the advice provided by Sentio Partners and are of the
view that the offer is the best offer available and that the value
potential and market opportunity available to the Company via the
AIM Smarter platform in the US, means that it is in the best
interests of the Company to focus all possible resources on AIM
Smarter.
PSG is owned and controlled by Joanne Varley, the wife of Martin
Varley, a Non-Executive Director of and 14.8 per cent. shareholder
in Altitude, and therefore the Disposal constitutes a related party
transaction for the purposes of Rule 13 of the AIM Rules for
Companies and as a substantial property transaction under the
Companies Act.
For the purposes of the AIM Rules, the Independent Directors,
having consulted with the Company's Nominated Adviser, finnCap Ltd,
consider the terms of the Related Party Transaction to be fair and
reasonable insofar as the Company's Shareholders are concerned.
On 3 April 2020 the transaction was approved by shareholders at
a General Meeting and the disposal was duly completed on 7 April
2020.
Total maximum consideration of GBP 0.8 million is comprised as
follows:
-- GBP0.35 million in cash on completion
-- GBP0.3 million receivable in 4 tranches over the 12-month
period following completion, subject to a personal guarantee of
Martin Varley. The Company has received notification from the
purchaser seeking to reschedule the payment profile of the
unconditional deferred consideration due to the impact of Covid-19.
The Directors currently consider the current fair value of the
unconditional deferred consideration to be GBP0.3 million. ;
and
-- GBP0.15 million conditional deferred consideration with
performance criteria based on ADP revenue generation in the
12-month period following completion. The additional consideration
is payable subject to the achievement of a revenue target by the
disposed business in the year to 31 March 2021. The Directors
consider achievement of the target revenue to be unlikely given the
impact of covid-19 on the Ad Products business and have therefore
prudently provided for full impairment of the additional purchase
consideration reducing the fair value to nil.
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END
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October 30, 2020 03:00 ET (07:00 GMT)
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