ALTITUDE GROUP PLC
("Altitude", the "Company" or the "Group")
Annual Report and Accounts
Altitude announces that the annual report and accounts for the year ended 31 December 2014 (the "Annual Report") will today be posted to shareholders and be available on the website at www.altitudeplc.com. The Annual Report contains notice of the annual general meeting which will be held on 30 June 2015.
On 28 April 2015 (following the announcement of the final results on 1 April 2015), the Company announced certain changes to the Board, including the appointment of Richard Sowerby as Executive Chairman. The Chairman's Statement included in the Annual Report is set out below.
"Chairman's Statement
Throughout 2014 we have continued to make good progress both operationally and strategically while investing significant time and resources in reshaping the Group. The business now has a clearly defined strategy, management structure and has invested in the people and our core technology in order to deliver this.
The principal highlights of the year were:
• Revenue up 6%
• Loss before tax of £1.49 million before share based payment charges (2013: £2.05 million)
• Net cash at 31 December 2014 of £1.28 million (2013: £0.45 million)
• Receipt of £2.0 million in cash from the redemption of the vendor loan note outstanding from the sale to the MBO team in 2011 of the Promotional Marketing Division
• Successful embedding of the new management structure and processes
Strategic update and market review
The Group has reviewed its strategic objectives for the near term and remains positive on the outlook for the software-as-a-service ("SaaS") business and our related product offerings, particularly in North America, the UK and Canada where we believe there are considerable opportunities.
This is supported by a research study by Goldman Sachs who forecast global SaaS revenues to exceed $106 billion in 2016, an increase of 21% over projected 2015 spending levels with spending on cloud computing infrastructure and platforms growing at a 30% CAGR from 2013 through to 2018 compared with 5% growth for the overall enterprise IT. Specifically, IBIS World, the industry research provider noted that in the US, the promotional products industry has rebounded from steep recessionary losses to become a $13.8 billion market in 2014, as rising US corporate profit rates boosted advertising budgets and newly formed businesses turned to industry operators to help endorse their brand, service or products. The majority of industry revenue is generated through the distribution of specialty advertising on everyday items like mugs, magnets, calendars and t-shirts. These findings are encouraging for Altitude's SaaS cloud-based offering for the promotional product, print and signage industries, which has both horizontal and vertical components.
We are beginning to see the benefits from the personnel changes made during the year. In addition, the Group invested significantly in the core technology over the past eighteen months with development attention primarily on a number of features for some key clients. Future priorities will be to further enhance the scalability, performance of the solutions and move toward merging functionality onto a single platform.
In the UK, we are also pleased that our exhibition and publication businesses remain industry leading and consistently deliver a good user experience.
Performance review
The Group operating loss before taxation and share based payment charges was £1.49m (2013: £2.05m) on revenues, which increased by 6% to £4.44m (£4.20m). As previously mentioned, in 2014 it was the continued investment in our software and resources, which gave rise to our losses in the period. During the year we have expensed £0.69m (2013 £0.65m) of software development costs in addition to £0.48m (2013: £0.38m) which has been capitalised in the year. In addition we have invested in resources to drive revenues in 2015 and 2016 with headcount rising from 72 in December 2013 to 89 in December 2014 with growth focused on sales and service staff.
Cash flow was positive in the year with the MBO loan settled for £2m in the first half of the year. The Group closed the year with £1.28m of net cash balances.
Technologo
Following a year of investing heavily in key people, sales grew 20% with most of the increase from recurring revenue, which will carry over into 2015. With the sales and service teams now fully trained, a healthy pipeline and a new marketing focus, good growth is expected in 2015 and onwards.
We have also established relationships with potential re-sellers for the Technologo tools to their customer base throughout Europe. This is a relatively new approach that has generated interest from participating service providers. Ours is an add on that makes their services more attractive to their clients and prospects, while at the same time generating revenue from sources that were uneconomical for us to target directly. This provides a low risk opportunity for us and will be explored further in the upcoming year. In 2015 we are going to enhance our offering by integrating Technologo with our HTML5 online designer product, ArtworkTool.
US
The US operation made further progress in 2014 with sales up like for like in USD by 22% and customer numbers increasing by 14%. Key customer relationships were opened up with major distributor groups and the number of suppliers supporting our platforms increased by substantially in the year. This included over 200 new e-commerce sites using our STORE solution sites for a top 40 US based distributor.
SignStore.net was launched in August at the SGIA show and generated interest in a potential US market of 25,000 sign makers.
We invested in enhancing the stability and functionality of our core technology platforms and in April 2014 PromoServe 5.0 was released, an advanced business management system for both distributors and suppliers in the print and promotional products industries. Hosted in Amazon Web Services and accessed via Citrix, Version 5.0 delivered 500 new features and ensured availability and scalability for companies of all sizes.
The team was also strengthened significantly with the appointment of a new President and also a VP of Sales and Marketing later in the year to drive sales into 2015.
UK
Growth in sales has been seen in all three areas of the UK business, technology, publications and exhibitions. Over one third of the promotional products industry now uses one or more of our products or services.
The number of technology customers has grown by 10% during 2014 and the churn rate remained consistently below 1%. As a result the average lifetime value of a customer has increased significantly over the course of the year. There has also been continued investment in additional sales resource to facilitate growth in the ERP software solution.
Despite a downwards trend in the print and publications industry, there has been another increase in sales for the publications section of the business as our publications remain industry leaders. Spectrum catalogue users exceeded 500 again for the third consecutive year.
The 2015 National Show was very successful with revenues and profits increasing for the eighth consecutive year. This has again been followed by a high rebooking rate for the 2016 exhibition.
Innovation
Earlier this year we reported the creation of an incubator function to maximise the opportunities from innovation, a separately defined business unit led by Martin Varley. The incubator function has been focusing on Artworktool.com, a solution that allows users to easily create and share graphics and print-ready artwork using any device with a suitable browser.
People
Whilst there were no changes to the Board during the year, with effect from 28 April 2015 Stephen Yapp resigned from the Board and I was appointed Executive Chairman from that date. I would like to thank Stephen for the support he has given me since I joined the Group. Also on 28 April 2015 Peter Hallett joined the Board as a non-executive director. Peter brings a wealth of experience having served as a director of a number of quoted and entrepreneurial businesses. I feel that he will strengthen our corporate governance as well as help our strategic approach in the future. In addition, Vicky Robinson was appointed to the Board as Managing Director. This appointment ensures that we have a day-to-day leader in the business who has been with the Group in senior management positions for over ten years and has extensive knowledge and experience of our products, markets and customers.
Outlook
With an embedded management team and a clear business roadmap, our SaaS business has begun to make steady progress, whilst the catalogue and exhibition business continues to deliver a solid performance.
Following the changes to the management structure indicated above, we have embarked on a review of our back office operations and have restructured some of our operations accordingly. In May 2015 we moved operations from our Canada office into the USA and UK facilities, making use of existing resource to deliver both savings and an improved customer experience. This structure makes it simpler for customers to buy multiple products from the group through a single point of contact. These initiatives allow us maintain investment in the recruitment and development of our sales force across the Group. This new structure will ensure that we can drive sales in local markets whilst supporting our products and customers globally under a more central, efficient and cost effective structure.
Overall your Group continues to perform in line with expectations, which gives the Board confidence in its ability to deliver shareholder value in the coming years.
Richard Sowerby
Executive Chairman
8 June 2015"
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Enquiries:
Altitude Group plc |
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Richard Sowerby (Executive Chairman) |
Tel: 07525 220876 |
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WH Ireland Limited (Nominated Adviser and Broker) |
Tel: 0113 394 6600 |
Tim Feather Liam Gribben |
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