US operation holds promise for personalised products specialist

Progress in its US operations will see Altitude Group report better first half revenues, it said in a trading update today.

The AIM-listed Middleton personalised products group was commenting on its six month performance to June 30, during which time the acquisition of US-based Advertising Industry Mastermind LLC (AIM Smarter) was completed.

AIM Smarter, formerly AI Mastermind, has integrated well and continues to grow, adding a further 268 members since the acquisition bringing the total to 2,185 with aggregate revenues of $2.13bn, up from $1.9bn, increases of 14% and 12.1%, respectively.

Altitude expects to report revenue for the period of approximately £5.4m compared with £3.8m for the same period last year, an increase of 42%.

It said it is pleased to announce significant success in increasing US revenue which has grown six-fold to $1.9m, for the quarter ended June 30, compared with $300,000 last year.

Despite this rapid growth in the very short post-acquisition period, overall revenue has not accelerated as quickly as envisaged.

This is primarily due to the scale and complexity of the transition to Altitude’s new business model and means that, despite growing at an historically record pace, quarter three and quarter four revenues will track below expectations and it will take longer to achieve the forecasted levels.

The growth in revenue in the US means that the US business is now self-funding and the group retains current cash resources of approximately £3m and has no bank borrowings.

It said that, while it is very early stage, and having only just received the second quarter data, this data proves that the business model is working, is scalable and is commercially attractive to both sides of the marketplace, evidenced by the significant growth in quarter two revenue compared with the same period in 2018.

Currently, AIM Smarter has 159 preferred supplier partners.

Based on AIM data insights through the end of the period, these partners cover approximately 25% of the AIM Smarter marketplace.

Utilising this data, Altitude has recently accepted 10 select supplier partners.

It said: “We will continue to utilise our data insights to balance the AIM Smarter marketplace and accept applications for additional key suppliers to be considered for our programme in 2020.

“By accepting select additional suppliers into the preferred programme and deploying our marketing expertise to promote preferred suppliers to our members, we can provide a balanced and varied marketplace for our distributor members while driving product awareness and more orders to our supplier partners.

“Preferred supplier feedback is universally positive with key suppliers reporting average growth of 20% since joining the AIM Smarter programme.”

It added: “We are charting new territory for the largest distributor member group for promotional products in the US and believe the strategic execution of the growth plan is being handled well.

“Across the business our products and services are being well received throughout the whole supply chain and there is great enthusiasm by customers for our offering and strategy.”

Chief executive Nichole Stella said: “The acquisition is proving to be transformational, as underlined by the six-fold increase in Q2 US revenue.

“Whilst revenues have not advanced as quickly as we had hoped, the investments made into the supplier partner programs, data insights and new member services offering, allow us to look forward with confidence.

“We have the technology and have successfully built out the necessary team, infrastructure and service offerings to drive a sustainable and growing business far into the future. I remain confident that the potential for the business is greater than originally thought.” ​​​​

The group expects to announce its interim results on September 30.

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