23 March 2020
Altitude Group plc
(the "Company" or "Altitude")
Trading Update for the twelve months to 31 December 2019 and Board Change
Altitude Group plc (AIM: ALT), the operator of the leading marketplace for personalised products, provides a trading update for the 12-month period to 31 December 2019 ("2019"). The financial performance up to 31 December 2019 demonstrated that the Company was on target to achieve market expectations for the 15-month period to 31 March 2020.
As stated in the trading update of 18th March, recent indicators show that trading during January and February 2020 was strong. This has inevitably changed in recent weeks as the impact of the COVID-19 outbreak has started to take hold. As a result, it is too early to establish or gauge the impact of COVID-19 in the 3-month period to the 31 March 2020 on the orders to our preferred supply partners and therefore the Directors cannot be certain of the full effect that this will have on trading for the quarter. The Altitude operation is a low overhead model and therefore we run a lean team of circa 45 people in the US and a further 40 in the UK excluding AdProducts. It is important to note, our relationships with both members and supplier partners are strong and we continue to work collaboratively with them throughout this evolving situation.
Given the high level of uncertainty arising from the global pandemic and its unprecedented effect on the markets that we serve, we announced on 18 March that we are unable to give any guidance for the 12 months trading period to the end of March 2021. We will provide further market updates as appropriate.
Overall Trading
Throughout 2019 the Group continued to grow the revenue base of the AIM Smarter business in the United States by focusing on engagement with, and service provision to, both sides of the AIM Smarter marketplace. This resulted in US revenue for the Period growing to $7.1 million, representing a 11-fold increase versus 2018. The fourth quarter represents just the third full quarter of revenue since the acquisition of AIM and delivered in line with management expectations. Group revenue for the Period was £11.3m compared to £6.6 million in the same period last year (these figures include revenue of £3.8m (2018 £3.7m) attributable to AdProducts which, as announced on 18 March 2020, is currently in a sale process which is subject to shareholder approval).
ADP made an EBITDA loss in the period to 31 December, against a backdrop of decreasing margin and falling revenue in an increasingly competitive market following restructuring in 2019. Whilst the loss and management time absorbed by an increasingly non-core business did not significantly change delivery against the market expectations for the business as a whole, it became clear that the disposal of the business was in the best interests of the Company.
Cash & Receivables
Altitude has a current cash balance of £2.5m and receivables due of approximately $1.0m in the US and £0.5m in the UK, with further recurring US supplier revenue for the three months to 31 March 2020 becoming due on 30 April 2020. We estimate that aggregate cash and receivables at 31 March 2020 will be in excess of £5m.
In addition, subject to shareholder approval, the disposal of AdProducts announced on 18 March, will yield a further £0.35m of initial cash consideration on 3 April with further cash inflow from deferred consideration, conditional consideration and retained working capital unwind of between £0.6m and £0.75m falling due at intervals in the following twelve months.
In order to immediately conserve cash in view of the current uncertainty we have reconfigured our marketing activities and identified and are implementing cost saving initiatives, whilst being careful not to compromise the long-term prospects of the business.
Given the cash and receivables position, the strength of the relationships established with our preferred supplier and distributor member customers, our active cost savings initiatives and the rapid progress of the business prior to the COVID-19 crisis, the Board remains confident in the ability of the management team to navigate the business successfully through these difficult times and to protect long-term value for shareholders.
Member Data, Easy Synch & Technology Adoption
The current and continuing growth in the level of purchase orders placed and synched with AIMPro is encouraging with total purchase orders placed on the platform in 2019 totaling $90.4m, with an exit annual run rate of $151m based on Q4 data. This trend has continued into January 2020 with February 2020 in the process of being synched. During the period 693 unique distributors have keyed or synched data onto the system. We are confident that we did not experience a reduction in business during February.
Additionally, adoption and usage of our technology platforms and tools continues to be strong. To date, AIM members are hosting 3,452 live websites via Altitude.
US Supplier Revenue
The preferred supplier base has been expanded to 175 from the 161 suppliers reported as at 30 September 2019, with more suppliers expected to join from 1 April 2020. All current supplier agreements are active 1 January 2020. We continue to receive requests to participate in our supplier program, as AIM Smarter is consistently reported as a top customer by our supplier partners.
With the addition of new suppliers to the preferred program, we will see an increase in the percentage of purchase orders placed with preferred suppliers from 1 January 2020. We have also implemented a new 2020 strategy, to further increase spend with our Preferred Suppliers, this program offers financial incentives to members to source from preferred suppliers participating in our new "VIP Program". The incentives are built into new rates negotiated with VIP preferred suppliers for 2020, who are reporting significantly increased purchase orders from AIM members.
We are therefore confident that the suppliers added are sufficient to meet our revenue growth objectives for 2020/21, subject to the unknown impact that Covid-19 may have on the purchase activities of our AIM members.
AIM Member Revenue and other Progress
AIM membership continues to grow with currently 2,276 members, an increase of 359 (+18%) since acquisition. The Company is being more selective of new members by increasing the minimum revenue requirements and trading history of members. We also estimate aggregate revenue of the current AIM membership is currently $2.26bn, up from $1.9bn (+18.9%) since acquisition.
We now have 141 members with enhanced packages, which has almost doubled since 30 September 2019. This includes the addition of our AIM Capital Solutions program which provides participating SME members with order financing and back office administrative assistance. Participating members pay a percentage of their gross sales for this service.
This program is proving increasingly popular, delivers great value to our members and we believe will be beneficial to members during the COVID-19 crisis.
Outlook
The above key performance indicators for 2019 and 2020 give the Board confidence that the AIM Smarter business is performing successfully, developing strategically as envisaged and is proving that the strategy can build significant shareholder value.
However, the uncertainty created by the coronavirus crisis and its impact on demand for promotional products in the US is currently unknown, which therefore renders accurate or responsible forecasting impossible. Therefore we are withdrawing guidance until there is more clarity.
Board Change
After more than three years as Non-executive Chairman Peter Hallett has decided to step down in favour of Keith Edelman with immediate effect. Peter will stay on as an independent non-executive director.
Peter Hallett said:
"It has been a great pleasure to Chair the business and see it achieving tangible evidence of transformation to a major player in the US promotional products market. I feel that the shareholders will now be best served with Keith taking the helm especially with his broad experience of leading major public companies with significant US operations. I intend to continue as a non-executive director and will do all I can to help navigate the current crisis and give Keith and Nikki my full support."
Keith Edelman said:
"I would firstly like to put on the record the huge contribution that Peter has made in repositioning and guiding Altitude over the last three years. I am excited about the future prospects for Altitude and working more closely with Nikki. These are clearly difficult times for many companies, but I am sure Nikki's leadership and the culture within the Company will ensure we will come through this difficult period even more determined and with enhanced vigour."
Enquiries:
Altitude Group plc Nichole Stella, Chief Executive Officer Graeme Couturier, Chief Financial Officer Peter Hallett, Non-Executive Chairman |
Via Instinctif - 020 7457 2020 |
finnCap ltd Scott Mathieson (Corporate Finance) Charlie Beeson (Corporate Finance) Richard Chambers (ECM) |
020 7220 0500 |
Instinctif Partners (Financial PR) Matthew Smallwood Chantal Woolcock |
020 7457 2020 |
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