Altitude Group plc

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

Audited Annual Results for the Year Ended 31 March 2023 and Notice of Annual General Meeting

ALTITUDE DELIVERS IN CURRENT YEAR AND LOCKS IN FUTURE GROWTH

Financial Highlights

·      Group revenues increased by £6.9 million to £18.8 million, up 57.2% (2022: £11.9 million)

·      Gross profit increased 39.9% by £2.5 million to £8.6 million (2022: £6.2 million)

·      We are proud to report a record Group adjusted operating profit* growing by 83.4% to £2.0 million (2022: £1.1 million) replacing £0.5m of US Government retention credit with sustainable profitable growth

·      Basic and diluted earnings per share increased by 293% to 0.55p (2022: 0.14p)

·      Cash inflow from operating activities increased by £1.8 million to £1.6 million (2022: outflow £0.2m) driven by significant revenue growth and increased trading activities

·      Cash outflow from investing activities of £1.1 million (2022: £0.9 million)

·      Cash increased by £0.3 million to £1.2 million (2022: £0.9 million)

·      The Group secured a financing facility of $1.7 million to support future substantial growth in Merchanting. The facility remains undrawn and the Group is debt-free

 * Operating profit before share-based payment charges, amortisation of intangible assets, depreciation of tangible assets and exceptional charges

Key corporate developments and operational highlights

·      The Group enjoyed a record year of adjusted operating profit

·      The Group invested in pipeline growth and business development efforts, which have paid off, and driven significant growth across its Merchanting divisions, providing £1.6 million of operating cashflow to drive future growth

·      The US delivered adjusted operating profit growth of 49% reaching $4.1 million (2022: $2.8 million)

·      The Group's adjacent market solution has proven to be disruptive in the sector and is driving hyper-growth across the Group with the signing of high-value multi-year contracts which will all generate revenue in the first half of the current financial year. Further contracts have been signed after the year-end.

·      ACS added significant revenue growth, doubling the annualised expected revenue run-rate from Affiliates in the year

·      Services revenue has grown by 35%, which delivers a 90.6% fall through to gross margin

·      US AIM membership has continued to grow, and currently totals 2,214 global members, up from 1,917 at acquisition, consolidating its position as one of the largest distributor organisations

Please note that percentages are calculated based on unrounded numbers as reported in the primary statements.

Notice of Annual General meeting ("AGM")

The Company also gives notice that its AGM will be held at the offices of Zeus, 125 Old Broad Street, 12th Floor, London, EC2N 1AR on 14 September 2023 at 11 a.m. The Notice of AGM and the Annual Report for the year ended 31 March 2023 will be posted to shareholders and will be available on the Group's website (https://www.altitudeplc.com/reports-results) in due course.

Outlook

·      Preferred Partner service revenues underlyingly grew by 21.5% in the US compared to reported growth of 11.4%-15.6% Industry reported distributor sales growth reflecting a healthy, active membership network. Source (ASI and PPAI).

·      New ACS Merchanting affiliates doubling expected annualised revenue signed during the year with full year impact in FY24

·      Significant new adjacent market contracts won and expected to start transacting by September 2023 with further investment in pipeline for continued scalable growth

·      The Group remains debt free with an increased facility to support growth

·      The Board is confident that the Group will deliver substantial growth for FY24 and win further material contracts for future years

Nichole Stella, Group CEO of Altitude, said:

"This financial year was one of great progress, strong trading and record breaking results. We increased market share in our core markets and proved to be a disruptive force in a new market. As a result, the Group has shown growth across the business far exceeding our original expectations. This performance is a testament to not only the incredible hard work of our dedicated staff and management team but also a testament to the success of the strategy that was put in place when I arrived and renewed with vigour in 2021. I am delighted that we grew the existing business by 57.2% which in itself is no small feat, but to do it on a global basis whilst establishing a new vertical is a great achievement. We have a business that is robust, ambitious and is very well positioned for scalable growth. We look forward to the future, both near term and longer term, with great confidence."

Chairman's Statement

I am pleased to report that the Group has shown strong performance in FY23 and once again delivered revenue growth exceeding 50%.

The management team remained highly focused on operational gearing and delivery of continuous scalable growth despite macro-economic headwinds. This focus proved successful and the Group delivered 57% revenue growth to £18.8 million via the continued delivery of growth in AIM Services and the scaling of our Merchanting programmes. Growth in adjusted operating profit of 83% to £2.0 million has been achieved against the previous year that included a non-recurring £0.5m US Government credit. This is an excellent result and is testament to the continued delivery of our strategy and the power of our business model.

The management team continued development of our technology and marketing platforms to provide our AIM distributors, ACS Affiliates and Preferred Partner suppliers with market leading capabilities. The AIM distribution network continues to grow, with ACS Affiliates doubling their expected annualised revenue. Significant new contracts were signed in our Adjacent Market Programme to further boost revenue in FY24 and build an exciting new growth engine for future years.

Year in Focus

We have seen growth in both our core businesses and our Adjacent Market Programmes outstrip the market.

This is a very positive demonstration of our commitment to provide value to our superb network of excellent suppliers and distributors via exceptional service and the highest standards. Technology innovation and development remain at the core of our business as we continue to gain more expert users and utilise their demands and needs to drive improvement. Our technology partnership with Fully Promoted is a prime example who selected to work with us after carrying out an industry wide review of fit-for-purpose technology. We will continue to invest capital and resource in technology for the benefit of all our stakeholders.

The strategy to develop diversified revenue streams within our Merchanting business has yielded excellent results. In our Adjacent Markets we have won a significant number of material contracts in the education sector in its first year of business development, via our fresh and innovative approach to the sector. The doubling of our revenue base for ACS has resulted from the exceptional support we provide to them to grow their business unencumbered by bureaucracy. The results of this investment in Merchanting can be seen in this report but the full impact will be seen in future years through diversity, growth rate, and significantly enhanced pipeline. The focus of the management team is firmly on delivery and execution of this strategy. They have repeatedly delivered above market expectations during this year, and I have trust in them to continue their excellent performance.

Cash has been managed well during the year generating an additional £0.3 million. Prudently the process was undertaken to extend our existing credit facility from $0.7 million to $1.7 million in anticipation of growth in Adjacent Markets where there is an element of up-front investment in fit out and inventory to service the 5 year contracts. The facility has been secured ahead of time and will be under constant review. The Group remains debt free with the material credit facility in place to support future growth as opportunity arises.

Looking Forward

A business only moves forward though the dedication of its people. On behalf of the Board I'd like to thank all the Altitude Group's employees for their hard work and passion which has delivered another strong set of results.

As we move through 2023 and 2024, we will focus on the world class onboarding of the material contracts won, accelerating acquisition of new contracts, and continuing to develop our technology to expand and enhance our unique promotional goods marketplace. The Management team are under no illusions, the success of our contract wins provides operational challenges to navigate and overcome whilst maintaining the hunger to further improve and win new business. I am confident we have the right team in place under the dynamic and agile leadership of Nichole to continue delivery of our strategy.

We have made significant progress, achieved notable milestones, and positioned ourselves for sustained growth in a dynamic marketplace. We remain committed to listening to and delivering superior value to our stakeholders and look forward to the exciting opportunities that lie ahead.

David Smith

Non-Executive Chairman

24 July 2023

Chief Executive's Statement

The year ended 31 March 2023 ("FY23") has proven to be a breakthrough year for the Group, setting new records and heralding a notable phase of transformation and scalability across the entire organisation. Against a backdrop of macro-economic challenges, the Group has seen strong growth in our promotional products divisions and the rapid advancement and expansion in our Adjacent Markets Programs (AMPs) throughout North America.

Via our AMPs we identified, targeted, and seized a significant opportunity in the higher-education space and successfully launched our Gear Shop solution providing technology & e-commerce solutions, marketing tools, supply chain know-how and innovative retail experiences across the US markets. Throughout the year we expanded our pipeline and collaborated closely with our course material partner. The combination of different specialisms and enhanced services proved disruptive within the Educational/ Collegiate markets. In the year the Group delivered significant multi-year contract wins and maintained an ever-growing pipeline. Continued expansion and delivery of our Gear Shop technology solutions, marketing tools, supply chain know-how and innovative retail experiences across the US markets will remain a primary and growing focus within the Group's business model.

Thanks to the team's unwavering dedication, exceptional performance, and relentless pursuit of growth, the Group has once again achieved a year of outstanding results. Group revenues increased 57.2% to £18.8 million (2022: £11.9 million) and Group adjusted operating profit* increased 83.4% to £2.0 million (2022: £1.1 million). Further, I am pleased to report our above stated growth significantly out-paced the market. The promotional product industry trade association, PPAI, recently released the U.S. promotional products market, which grew by 15.6% over 2022 and reported sales figures to $25.5 billion (2022: $22.1 billion).

Operational Excellence

As a company we are always focused on continuous improvement and heightened operational gearing. We do this by regularly evaluating and implementing new strategies to drive process optimisation, building programmes that focus on economies of scale and improve our technology and systems to increase production efficiency. Over the last year, the Group has made great gains in streamlining operations which have empowered us to invest back in the business to drive pipeline growth and new revenue generating activities. This focus on operational gearing has enhanced our ability to adapt to changing market conditions and take advantage of new opportunities.

Services

During FY23, our Services Revenue demonstrated remarkable growth, increasing 35.1% and reaching £8.5 million (2022: £6.3 million). Simultaneously, our Merchanting Revenue experienced a 81.9% increase, totalling £10.2 million (2022: £5.6 million). These impressive outcomes serve as a testament to the achievements and advancements made by our business in expanding our market presence and diversifying our revenue streams.

Our Services programs have a global reach, with members located in every state in the US, as well as across Canada and the UK. Currently, our global membership stands at 2476, with an impressive aggregate pipeline sales of £2.9 billion and an average individual annual turnover of £1.2 million. Furthermore, we are proud to have established partnerships with over 300 Preferred Partners across the US, Canada, and the UK.

Merchanting

In contrast, our Merchanting programs are exclusively focused in the US, and are steadily expanding across the country. These programmes consist of ACS, where we recruit high-calibre promotional product sales professionals to join ACS. These sales professionals act as our sales agent and in return we provide access to our Preferred Partner network and administrative, accounting and financial assistance. Also within our Merchanting revenue stream is our AMPs, where we provide branded merchandise solutions within adjacent markets. This includes our Gear Shop solution.

In FY23, we doubled our revenue base for ACS, to £9.7 million (2022: £5.4 million). This growth highlights the strong emphasis we place on recruitment of high-quality affiliates and our commitment to maintaining exceptional quality standards.

Additionally, throughout the financial year we invested in our AMPs pipeline. As previously noted, we identified, targeted, and invested in business development and pipeline growth within the higher-education space and successfully launched our Gear Shop solution. This investment proved powerful and disruptive within the sector, and the Group successfully signed multiple new significant contracts. All contracts are expected to begin generating revenue for the Group in the first half of the financial year ending 31 March 2024 ("FY24").

Technology

The core of all our operations, across both the Services and Merchanting segments of our business, is our technology platforms. Operating within an agile and continuous improvement environment, we have consistently invested in enhancing our systems. This ongoing commitment enables us to achieve greater efficiency, leverage valuable data insights, and establish best-in-industry integrations and systems. The result is a streamlined and optimised operation that empowers us to deliver exceptional services to our clients.

As a testament to the power of our technology, in FY23, we continued to attract a growing number of users, including notable partnerships like Fully Promoted. Fully Promoted, a global franchise group, chose our order management platform after conducting a comprehensive industry-wide review of over 20 tech providers.

We are always focused on new technology and have begun to harness the power of AI within the Group. Our core development teams continue to review how we as a Group can maximize AI technology to drive automation and streamline efficiency across all of our platforms and business divisions.

Credit Facility

We were also pleased to report in the financial year that the Group secured an increase in its working capital credit facility (the "Facility") with TD Bank N.A. to $1.7 million, previously $700k. The facility increase was secured from continued successful delivery across all areas of the business. The Facility has no significant financial covenants and will provide access to non-dilutive funding to support the continued execution of the Group's growth strategy. The Facility is currently undrawn.

The Management team continues to be focused on scalable growth in the new financial year and accelerating future growth. We are focused on delivery and committed to achieving our aspirations to build a $100 million business.

Market Opportunities

As noted previously, PPAI's market research estimates the current size of the U.S. promotional products market in 2022, a healthy increase of more than 15% over 2021. Their report further states that the market remains optimistic for 2023 with nearly 70% of the industry's distributors expecting even higher sales in 2023, meaning we could continue to see the industry's momentum continue to gain higher ground. The market remains highly fragmented with a network of 23,000 distributors and the top 5 market-leading distributor organisations representing a small segment of the market at c.$3 billion in sales.

At present, the Group boasts a network of over 2,214 distributors in North America, accounting for approximately 10% of the total distributor companies in the industry. With a highly skilled management team and advanced technology tailored to the industry, we offer comprehensive solutions to suppliers, including pricing benefits, marketing support, finance assistance, and administrative services. This strong foundation positions us optimally to drive business growth through our service programs, namely AIM Membership, our Preferred Partner program, and our merchanting program known as ACS Affiliate Services.

Pairing ongoing industry expansion and the presence of an untapped addressable market, along with our powerful software solutions and programs, we are confident in the Group's continued significant promotional product market opportunity.

Additionally, we are seeing incredible momentum within the Group across identified adjacent markets opportunities. Our primary areas of focus are the print industry with a reported market size of c$79 billion and the higher education service provider sector with a stated $12 billion market size. Currently we are actively and aggressively building our pipeline, closing opportunities and disrupting the higher education adjacent market. Having signed significant multi-year contracts in this financial year, we see this as an important and significant growth area for the Group in the immediate term and future.

Our People & Our Commitment

Our workforce and community form the backbone of our business. We remain dedicated to fostering employee growth and cultivating a welcoming and engaging culture that recognises the achievements and contributions of all employees at every level of the organisation. Throughout the year, we continued to prioritise internal promotions, enabling 12 individuals to advance their careers and expand their skill sets.

Diversity, Equity & Inclusion

Our organisation fully embraces and upholds the values of diversity, equity, and inclusion (DEI). These principles play a vital role in how we form our teams, develop our leaders, and establish collaborative, innovative, and inclusive environments within the Altitude Group and our wider industry. Our inclusive culture fosters a range of perspectives, encourages open and honest discussions, and empowers each individual within our team and the broader communities we serve.

Community Engagement & Giving Back

At Altitude, our commitment to community engagement and giving back is core to who we are and what we believe to be vital for the overall success and well-being of society. We actively participated in a variety of community-based initiatives in the financial year including launching a JustGiving fundraiser with a corporate match for those impacted by the war in Ukraine and the "adoption" of an animal rescue whose mission is to rescue, rehabilitate and educate, as well as providing scholarship funds to students within the campus communities we serve. We know this commitment fosters a strong bond between our company and the communities we operate in, and also increases loyalty and employee satisfaction. Our goal is to be a part of a growing commitment to corporate responsibility that contributes to a more inclusive resilient society that works towards the betterment of all.

Outlook

This financial year was one of great progress, strong trading and record breaking results. We increased market share in our core markets and proved to be a disruptive force in a new market. As a result, the Group has shown growth across the business far exceeding our original expectations. This performance is a testament to not only the incredible hard work of our dedicated staff and management team but also a testament to the success of the strategy that was put in place when I arrived and renewed with vigour in 2021. I am delighted that we grew the existing business by 57.2% which in itself is no small feat, but to do it on a global basis whilst establishing a new vertical is a great achievement. We have a business that is robust, ambitious and is very well positioned for scalable growth. We look forward to the future, both near term and longer term, with great confidence. 

Nichole Stella

Chief Executive

24 July 2023

Chief Operating Officer's Report

We continued to invest strategically in technology development and operational efficiencies during the year. As a result, the Group ended FY23 with significantly greater functionality and infrastructure to support both our Merchanting and Services business segments. This period saw a particular focus on leveraging technology to support increasing volumes and enhance operational efficiency along with continuing advancements to our feature rich member and affiliate Tech Suite solutions.

Product Innovation and Development

Our proprietary e-commerce and marketplace technology suite provides an end-to-end SaaS solution that enables our users to source, showcase and fulfil orders for branded items throughout the US and UK. Technological advancement remains core to our strategy, and we made remarkable progress in developing and launching new functionality to members and affiliates. Our talented in-house research and development team introduced several advancements to the AIM and ACS Tech Suite that address the evolving needs of our users. These innovations have not only driven customer satisfaction but also contributed to our revenue growth, by enabling more efficient platform usage by larger volume affiliates and quicker onboarding of users.

Throughout this period seven planned technology releases were made available to users which included over 25 substantial new user facing features including: API company store order integrations expanding our customer reach; enhancements to our in-built presentation tools to advance users sales capabilities and optimised purchasing capabilities to increase user; and internal order processing efficiencies.

Core to our systems is the accuracy and availability of data that is exchanged between users and Preferred Partners. Access to live inventory, order and shipping information from Preferred Partners allows users to process orders efficiently and in a centralised location, while making communications more efficient for Preferred Partners. The Group now have over 200 integrations exchanging live data between Preferred Partners and Tech Suite users. 

The Group has witnessed an increase in the depth of system usage with a 14.5% growth over 2022 in users processing orders through the Tech Suite platform and a 16% growth in volume of orders processed. There are currently 478 distributors utilising the Tech Suite for search and order creation.

Following the Group's introduction of adjacent market programmes in 2022, IT and system environments including fixed and mobile point-of-sale configurations with shared inventory-based ecommerce websites, were designed to support the groups Merchanting revenues. There are currently 11 point-of-sale locations, 18 ecommerce solutions and complementary pop-up ecommerce stores transactional with a robust operational plan to enable further scaling. 

Operational Excellence

We continued to enhance our operational efficiency and agility through various initiatives. We have initiatives to implement artificial intelligence across different departments, resulting in streamlined processes and greater ability to scale more effectively. We have also implemented greater automation in areas such as data conversion resulting in the capacity to migrate groups of users at greater pace.

Cybersecurity and Data Protection

Safeguarding our systems, data, and customer information is of paramount importance. We have implemented increased cybersecurity measures to protect our digital infrastructure from evolving threats and increased the frequency of employee training on cyber security and related topics. Furthermore, we have reinforced our commitment to data protection, privacy compliance and payment industry standards and rolled this out into our adjacent market operations.

Looking Ahead

As we look ahead, we remain committed to providing best-in-class solutions to our market by embracing customer feedback and emerging trends to support our business strategies. We will continue to invest in research and development, data intelligence and further exploring areas such as artificial intelligence and automation to enhance user experiences and drive scalable growth through operational efficiency.

Deborah Wilkinson

Chief operating Officer

24 July 2023

Chief Financial Officer's Report

Financial Results

Group revenues for the year increased by £6.9 million to £18.8 million (2022: £11.9 million), an increase of 57% with an underlying growth of 41% at constant currency.

FY23 is the year of 'lift off' for Altitude with 35% growth in Services and an 82% growth in Merchanting. Service growth is mainly driven from throughput revenue, derived from membership activity through our VIP Supplier network, surpassing the industry distributor average of 15.6% (as reported in PPAI Research), which reflects our commitment to a high quality distributor membership model. The Merchanting Division has grown from additions to our Affiliate sales network, which is the main driver behind the 82% increase over last year. Importantly, we have also grown our Adjacent Market Programmes ('AMPs') focusing on our Gear Shops within the Educational Sector. Altitude's entrance into a complementary adjacent market provides growth opportunities as well as diversification. As communicated we have secured a number of contracts that will positively impact the results in future years.

Operational gearing is a key area of focus for us with the profitability generated from our Services business model we have invested in the growth of our Merchanting Division. With ACS delivering high levels of revenue growth for lower margin, profitability is sensitive to overhead increases therefore process efficiency and cost control is essential to maximise profit fall through. Within our Gear Shops we assess returns on each contract to measure the appropriate level of investment in a strong central team. The central Gear Shop team will then be equipped to deliver further growth. To ensure scalability in FY24 we are investing in systems and processes.

Gross profit has increased by £2.5 million, a 40% increase, to £8.6 million (2022: £6.2 million). This is mainly driven by an increase in the AIM distributors purchasing through our Preferred Partner network, demonstrating the value of our services to our Preferred Partners.

Gross margin was 45.9% (2022: 51.5%) reflecting the growth in lower margin Merchanting activity, whilst Services retained a consistently high margin. The relationship of the growth in AMPs and our ACS Affiliate model impacts our Gross Profit margin. AMPs deliver a higher gross profit margin than the ACS Affiliate model, which is a volume business. ACS won some larger one-off orders this year, which is testament to our goal of enabling our Affiliates to grow and deliver more activity and value.

Administration expenses before share-based payments, amortisation of intangible assets, depreciation of tangible assets and exceptional charges of £6.6 million (2022: £5.1 million) are ahead of prior year by £1.5 million. This increase has been driven by a prior year one-off US Government Employee Retention Scheme Credit of £0.5 million, a £0.5 million foreign currency translation, with the remaining increase of £0.5 million driven from a mix of additional travel and marketing activities to drive pipeline and people costs.

Adjusted operating profit* increased by 83.4% to £2.0 million (2022: £1.1 million). The statutory profit before taxation was £0.4 million (2022: profit of £0.1 million), whilst the adjusted profit*** before taxation increased by £0.8 million to £0.9 million (2022: £0.1 million). Please see below for constant currency analysis.

Exceptional costs

The Group incurred exceptional costs of £0.1 million (2022: £0.2 million) relating to second-phase finance transformation costs, along with a provision for the historic portion of a VAT reclaim and legal costs.

Development

The Group capitalised £0.9 million of software development (2022: £0.8 million). The commitment to investing in our technology is underpinned by our spend and our close relationship with our Affiliates and members in driving customer focused improvements. This is discussed in more detail in the COO review.

Earnings per share

Basic earnings per share were 0.55p (2022: 0.14p), an increase of 293%.  Adjusted basic earnings per share** was 1.63p (2022: 0.48p), representing an increase of 240%. The calculation for adjusted earning per share has been updated to be consistent with external measures by adding back amortisation on acquired intangibles whereas previously all depreciation and amortisation was added back.

Taxation

The Group is carrying a deferred taxation asset of £458,000 mainly in respect of tax losses carried forward. Based on future forecasts the Directors believe the Group's profits will be sufficient to fully utilise the deferred tax asset within the next four years. The Group was again successful in its application for the R&D tax credit although expect that this will reduce in light of the UK Governments budget resulting in a profit and loss tax credit of £193,000 (2022: £254,000).

Cash flow

Operating cash inflow before changes in working capital was £2.0 million (2022: £1.1 million). Working capital represented an outflow of £0.4 million (2022: £1.5 million) principally driven by an increase in inventory driven by the early start of a significant Merchanting contract. Operating cash inflow therefore increased by £1.8 million to £1.6 million (2022: outflow £0.2 million). Net cash outflow from investing activities of £1.1 million (2022: £0.9 million outflow) is mainly represented by our development spend. Financing activities included the repayment of finance agreements and interest of £0.2 million (2022: £0.2 million). Total net cash inflow was £0.2 million (2022: £1.2 million outflow). The year-end cash balance stood at £1.2 million (2022: £0.9 million) with no debt.

Treasury

The Group continues to manage the cash position in a manner designed to meet the operational needs of the businesses. Cash balances held in foreign currencies reflect the geographies in which the Group operates. There is no policy to hedge the Group's currency exposures arising from the profit translation or the effect of exchange rate movements on the Group's overseas net assets.

The Group has secured an increased credit facility (the "Facility") with TD Bank N.A., to $1.7m (2022: $0.7 million). The Facility has no significant financial covenants and is secured by the assets of the US Group with a parental guarantee from Altitude Group PLC and is senior to the subordinated Intercreditor loans. The Facility will provide access to non-dilutive funding to support the Group in executing its growth strategy. The Facility has a small annual arrangement fee and incurs interest at 1% above the US Prime Rate on drawdown. This Facility remains undrawn at the year end.

Share capital

The number of shares increased by 166,666 to 70,847,830 (2022: 70,681,164).  All of the shares issued in the period were in respect of options exercised by employees and are detailed in the full notes to the Annual Report.

The Company issued share options to senior management of 2,648,000 (2022: 444,444). During the year the number of share options exercised was 166,666 (2022: 213,896) with the number of share options forfeited being 1,211,110 (2022: 2,329,667).  The total number of share options outstanding at the year-end is 6,357,447 (2022: 4,299,445).

Key performance indicators

The Group's key performance indicators as discussed above are:

*Adjusted operating profit is before share-based payment charges, amortisation of intangible assets, depreciation of tangible assets and exceptional charges is a consistently used measure used to show the performance of the revenue generating activities and the related costs involved in the delivery of the revenue for the current year

** Basic adjusted earnings per share is calculated using profit after tax but before share-based payment charges, amortisation of acquired intangible assets and exceptional charges and the weighted average number of equity voting shares in issue and, when relevant, in respect of diluted earnings per share includes the effect of share options that could potentially dilute basic earnings per share. This provides a consistent metric with the Income Statement for underlying performance

***Adjusted profit before tax is profit before tax adjusted for share based charges, exceptional costs and amortisation on acquired intangibles. This metric is to review the performance of the underlying business including the depreciation for development costs.

Significant judgements and estimates

In preparing the financial statements the Directors have made judgements and estimates in applying accounting policies. Details of the most significant areas where judgements and estimates have been made are set out in note 1 to the group financial statements.

Principal risks and uncertainties

The Group's financial and operational performance is subject to a number of risks. The Board seeks to ensure that appropriate processes are put in place to manage, monitor and mitigate these risks. The Board considers the principal risks faced by the Group to be as follows at 31 March 2023:

·    a significant deterioration in economic conditions, particularly in USA affecting SME's, the principal target customers for the Group's technology products

·    significant delays and or cost overruns in developing and delivering products to meet customer requirements in the targeted market sectors

·    a risk of cyber attack that targets our systems causing downtime to end user processing or point of sale

·    predatory pricing or other actions by established competitors in our market sectors

·    the risk of bad debts arising from AIM Capital Solutions

·    a significant, adverse movement in the short-term in the US $ exchange rate compared with GBP

·    the propensity of AIM distributor members to migrate orders to AIM preferred suppliers

·    the propensity of AIM distributor members to upgrade membership to include enhanced marketing and sales support services

·    deteriorating retention of the membership base of the acquired AIM business

·    a risk of under-reported revenue through incomplete visibility of member transactions

In all cases the Group seeks to mitigate these risks wherever possible by continuous marketing initiatives and promotions to stimulate market demand and continuous development of enhanced member services and the promotion of AIM Capital Solutions to high quality distributors with careful attention to credit risk. In addition, we maintain close relationships with all customers with service contracts based on transactional volume, and monitor progress using data sampling and quarterly confirmation. We also manage development projects closely and ensure that we continue to offer services that meet our customer needs. The Group has also expanded its reach and diversified with AMPs and extended into the Education sector.

Historically operations in the USA have been funded from the UK, exposing the group to adverse short-term exchange rate movements. US operations are now self-funding, mitigating the risk from short term exchange rate fluctuations. The US now regularly remits funds back to the UK, generally on a monthly basis at relatively low levels. Management have reviewed the requirement of a formal hedging strategy however this will only be necessary if the funding levels increase. In the meantime, spot rates have been utilised with an outsourced foreign currency firm.

The Board are considering, with the onset of growth and potential utilisation of the US credit facility in FY24, to undertake a review of the primary economic environment that the Group is operating in and re-evaluating the functional for the Group.

AIM is the largest distributor member organisation in the USA, with circa 9% market share in a very fragmented market. We assess the risk of predatory pricing from other established competitors to be low as they do not possess the scale or geographic coverage necessary influence the market as a whole. AIM members are incentivised to order from AIM preferred suppliers through the provision of significant discounts.

Cyber Security processes and controls including reminders and training and regularly provided to all staff to ensure they remain extra vigilant and exercise extreme caution when using email and the internet.

Liquidity

The Group remains debt free with a cash balance of £1.2 million as at the year end.

We have extended our finance facility by $1.0 million to $1.7 million with TD Bank. The facility will support the growth in Merchanting specifically with our AMPs new contract signings into the new year.

Graham Feltham

Chief Financial Officer

24 July 2023

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2023

Consolidated Statement of Changes in Equity

for the year ended 31 March 2023

Consolidated Balance Sheet

as at 31 March 2023

Consolidated Cash Flow Statement

for the year ended 31 March 2023

Notes to the Consolidated Financial Statements

1.  Financial Information

The financial information in this preliminary announcement has been extracted from the audited Group Financial Statements for the year ended 31 March 2023 and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

The Group Financial Statements for 2022 were delivered to the registrar of companies, and those for 2023 will be delivered in due course. The auditor's report on the Group Financial Statements for 2022 and 2023 were both unqualified and unmodified. The auditors' report was signed on 24 July 2023. The Group Financial Statements and this preliminary announcement were approved by the Board of Directors on 24 July 2023

The audited accounts will be posted to all shareholders and will be available on the Group's website (https://www.altitudeplc.com/reports-results) in due course.

Basis of preparation

The group financial statements have been prepared in accordance with UK adopted International Accounting Standards. The Company financial statements have been prepared under FRS 101.

Both financial statements have been prepared on the historical cost basis, with the exception of certain items which are measured at fair value as disclosed in the principal accounting policies set out below. The financial information is presented in Sterling and has been rounded to the nearest thousand (£000).

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources of information. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The Group has consistently applied the accounting policies to all periods presented in these consolidated financial statements.

New standards impacting the Group that have not been adopted in the annual financial statements for the year ended 31 March 2023 are:

·    Classification of Liabilities as Current or Non-current (Amendments to IAS 1)

·    Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

·    Definition of Accounting Estimate (Amendments to IAS 8)

·    Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

·    Non-Current Liabilities with Covenants (Amendments to IAS 1)

Management anticipates that these new standards, interpretations and amendments will be adopted in the financial statements as and when they are applicable and adoption of these new standards, interpretations and amendments, will be reviewed for their impact on the financial statements prior to their initial application.

The following principal accounting policies have been applied consistently to all periods presented in these Group financial statements:

Going concern

The financial statements have been prepared on a going concern basis.

The Group is following a strong growth trajectory despite the macro-economic conditions of high inflation and growing interest rates amidst fears of recession.  The prolonged war in Ukraine and corrections in the Banking industry has created instability and a slowing down in the global economic  recovery. The Promo Industry has continued to grow but at far lower growth rates experienced last year as the Industry came out of the pandemic. With single digit growth reported by the industry bodies in the quarter ending March 2023 there is a degree of caution with some level of churn in distributers expected along with a potential reluctance to change network or affiliation. The Group continues to maintain strong relationships within the AIM network and additionally has entered into strategic partnerships and added diversifying revenues from the AMPs whilst constantly monitoring growth spend and cash forecasts.

The Board is confident that the Group has sufficient liquidity to manage the growth of the company and can flex on overhead spend should any part of the business underperform against our expectations. The financial statements have therefore been prepared on a going concern basis. The directors have taken steps to ensure that they believe the going concern basis of preparation remains appropriate. The key conditions are summarised below:

·    The Directors have prepared cash flow forecasts extending to September 2024. The cash flow forecasts include a mid scenario and sensitised cases.

·    The low scenario assumes reductions in revenue of c12% compared to the mid-scenario.

·    The forecasts assume regular collections and payments in line with the normalised conditions experienced with detailed modelling of growth cash outflows included.

·    The base and sensitised cash flow forecasts do not include any mitigating factors available to management in terms of:

·    discontinuing the development of AIM Capital Services to release working capital

·    reactionary cost reduction programmes in respect of headcount and organisation

·    securing new working capital facilities in respect of any growth of Merchanting business outside of the sensitised forecast.

·    The Group maintains the distributor membership and preferred suppliers throughout the forecast period.

·    The Group continues to develop the product offerings to meet the demands of the market and customers.

·    The Directors have considered the position of the individual trading companies in the Group to ensure that these companies are also able to continue to meet their obligations as they fall due.

·    There are not believed to be any contingent liabilities which could result in a significant impact on the business if they were to crystallise.

Based on the above indications and assumptions, the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis.

The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (its subsidiaries) made up to 31 March each period. Control is achieved when the Company:

·    has the power over the investee

·    is exposed, or has rights, to variable return from its involvement with the investee and

·    has the ability to use its power to affect returns

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements above. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control over the subsidiary.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of net assets of the subsidiary acquired, the difference is recognised directly in the Consolidated Statement of Comprehensive Income.

All intra-group balances and transactions, including unrealised profits arising from intra-group transactions, are eliminated fully on consolidation.

Contract costs

Costs to fulfil a contract are capitalised, amortised and assessed for impairment if they meet the required criteria. If the costs do not meet the criteria they are expensed as incurred.

Costs to fulfil a contract are recognised as an asset only if they:

·    Relate directly to a contract, or to an anticipated contract that can be specifically identified

·    Generate or enhance resources to be used to satisfy performance obligations in future, and

·    Are expected to be recovered.

The policy applies to contracts that are greater than one year in length.

The asset is amortised over the life of the contract once the contract is live.

Revenue recognition

Revenue represents the amounts receivable, excluding sales related taxes, for goods and services supplied during the period to external customers shown net of sales taxes, returns, rebates and discounts.

When assessing revenue recognition against IFRS15, the Group assess the contract against the five steps of IFRS15:

·    Identifying the contract with a customer

·    Identifying the performance obligations

·    Determining the transaction price

·    Allocating the transaction price to the performance obligations

·    Recognising revenue when/as performance obligation(s) are satisfied

This process includes the assessment of the performance obligations within the contract and the allocation of contract revenue across these performance obligations once identified. Revenue is recognised either at a point in time or over time, when, or as, the Group satisfies performance obligations by transferring the promised goods or services to its customers.

The difference between the amount of income recognised and the amount invoiced on a particular contract is included in the statement of financial position as accrued or deferred income. Amounts included in accrued and deferred income due within one year are expected to be recognised within one year and are included within current assets and current liabilities respectively.

The Group has a number of different revenue streams which are described below.

Services Revenue

Includes a range of member and member-related revenues as well as legacy software license revenue.

Member subscription revenues

AIM distributor members pay a monthly subscription fee for basic membership which confers immediate access to a range of commercial benefits at no additional cost to the member. Members may elect to upgrade their membership to access a range of enhanced services provided by AIM in exchange for an increased monthly subscription fee. Subscription revenues are recognised on a monthly basis over the membership period.

Other discretionary services

Certain other services are made available to AIM members on a discretionary usage basis such as artwork processing services, catalogues and merchandise boxes. These revenues are recognised upon performance of the service or delivery of the product. For example, catalogue and merchandise box revenues are recognised on dispatch of the products to members.

Events and exhibitions revenues

AIM promotes and arranges events for AIM members and groups of supplier customers to meet and build relationships. Revenue from these events is recognised once the performance obligations have been satisfied, typically on completion of an event or exhibition.

Preferred Partner revenues

AIM provides services to vendors within the promotional products industry whereby Preferred Partners are actively promoted to AIM members via a variety of methods including utilising the AIM technology platform, webinars, email communications and quarterly publications.

Revenues are variable and depend on the value of purchases made and services utilised by the AIM members from Preferred Partners. Revenue is recognised over time by reference to the value of transactions in the period. Payment for AIM's marketing services is made by Preferred Partner customers on a calendar quarter or annual basis. Revenue is recognised to the extent that it is highly probable that it will not reverse based on historic fact pattern and latest market information.

Software and technology services revenues

Revenues in respect of software product licences and associated maintenance and support services are recognised evenly over the period to which they relate. An element of technology services revenue is dependent on the value of orders processed via the Group's technology platforms. Revenue is accrued based on the value of underlying transactions and the relevant contractual arrangements with the customer. Revenue is constrained to the extent that is that it is highly probable that it will not reverse.

Merchanting revenues

Merchanting revenues arise when group companies contract with customers to supply promotional products. By far the most significant operation that carries out merchanting is within ACS. Over the past 18 months significant investment in our technology and the evolution of contracting with our affiliates along with enforcement of contractual terms has prompted the Directors to re-evaluate the application of IFRS 15. Under the terms of the ACS contract the AIM member affiliates act as independent sales representatives of ACS to secure sales with customers. The contracts have evolved since the inception of ACS along with enforcement, monitoring and control over the substance of the contracts.  All transactions are mandatorily processed through the AIM technology platform and utilise ACS people and know-how to efficiently operate the full end to end process.

ACS bears the risk of the transaction as Principal, provisioning of orders and contracting with the customer, determining the transaction price, provision of fulfilment and supplier contracts and pricing, performing credit control and processing payments. The sale of the promotional products, with the related costs of goods supplied, freight and AIM affiliates selling commission recognised as the cost of goods sold.  The revenue is recognised on the shipment of the goods from the supplier and as notified by the supplier invoice which are raised following shipment. The Directors accept that the technical transfer of risks and rewards to the customer occur on delivery of the goods which are usually delivered within 2-5 days of shipment. The Directors use a proxy of the shipment date as the trigger for recognising revenue.

The Group also sources products directly through its network of Preferred Partners, which it sells to AIM members and adjacent markets, where such sales do not conflict with the interest of either suppliers or the AIM membership. The Group Buy scheme falls under Merchanting and is a facility that supported the sales of Personal Protective Equipment in the prior year.

2.  Segmental information

The chief operating decision maker has been identified as the Board of Directors and the segmental analysis is presented based on the Group's internal reporting to the Board. At 31 March 2023, the Group has two operating segments, North America, and the United Kingdom & Europe along with a Central segment. The Group further analyses performance to Gross Profit by presenting 'Service' and 'Merchanting' as shown. Service revenues are derived from servicing our AIM membership base and generating throughput with our contracted Preferred Partners. Merchanting revenues are sales of promotional products where the Group acts as principal in the underlying transaction.

Segment assets consist primarily of property, plant and equipment, intangible assets, trade and other receivables and cash and cash equivalents. Segment liabilities comprise operating liabilities. Capital expenditure comprises additions to property, plant and equipment and intangible assets, including additions resulting from acquisitions through business combinations. Assets and liabilities at 31 March 2023 and capital expenditure for the period then ended are as follows.

A central cost of £411,000 was previously reported as a cost allocated to North America for FY22 and has been restated to a central cost in the table above within Operating Profit/(Loss) before share-based payment charges, depreciation, amortisation, and exceptional charges. Central costs were previously reported at a loss of £842,000 and North America was a profit of £1,623,000.

3.  Exceptional charges

Exceptional charges principally relate to the second-phase of finance transformation costs, along with a provision for the historic portion of a VAT reclaim. (2022: relates to finance transformation being the recruitment of a new CFO and business modelling, the one-off costs relating to the change of our corporate broker and NOMAD and the write-off of a bad debt). Other exceptional costs principally relates to a reversal of a historic tax prepayment (2022: relates to a bad-debt write-off).

4.  Basic and diluted earnings per ordinary share

The calculation of earnings per ordinary share is based on the profit for the period after taxation and the weighted average number of equity voting shares in issue as follows:

*To be consistent with external metrics and the updated Group's key performance indicators adjusted earnings has been amended to only adjust for amortisation on acquired intangibles and not for depreciation and other amortisation as reported in previous years.

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 has an immaterial impact. We determine potentially dilutive shares as any share which is exercisable on publishing of the Annual Report.