Tech services firm says it will achieve market expectations

Manchester-based Altitude Group, the operator of the leading marketplace for personalised products, says it is on target to achieve market expectations for the 15 month period to March 31, 2020.

In a trading update today it said its most recent update, earlier this month, showed that trading during January and February 2020 was strong.

But it said this has inevitably changed in recent weeks as the impact of the COVID-19 outbreak has started to take hold.

As a result, it said it is too early to establish or gauge the impact of COVID-19 in the three month period to 31 March 2020 on the orders to its preferred supply partners and, therefore, the directors cannot be certain of the full effect that this will have on trading for the quarter.

The group said the Altitude operation is a low overhead model and, therefore, it runs a lean team of around 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,” today’s statement said.

Given the high level of uncertainty arising from the global pandemic and its unprecedented effect on the markets that the business serves, it announced in the March 18 update that it is unable to give any guidance for the 12 months trading period to the end of March 2021. Altitude will provide further market updates as appropriate.

Throughout 2019 the group continued to grow the revenue base of the AIM Smarter business in the US 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 $7.1m, representing an 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 with £6.6m in the same period last year – these figures include revenue of £3.8m (2018 £3.7m) attributable to AdProducts which, as announced on March 18, 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.

While 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.

Altitude has a current cash balance of £2.5m and receivables due of approximately $1m in the US and £500,000 in the UK, with further recurring US supplier revenue for the three months to 31 March 2020 becoming due on 30 April 2020.

Altitude estimates 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 March 18, will yield a further £350,000 of initial cash consideration on April 3, with further cash inflow from deferred consideration, conditional consideration and retained working capital unwind of between £600,000 and £750,000 falling due at intervals in the following 12 months.

In order to immediately conserve cash in view of the current uncertainty Altitude has reconfigured its marketing activities and identified and is implementing cost saving initiatives, while being careful not to compromise the long-term prospects of the business.

The board said it 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.

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. It also estimates aggregate revenue of the current AIM membership is currently $2.26bn, up from $1.9bn (+18.9%) since acquisition.

Altitude, headed by chief executive Nichole Stella, also announced today that, 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.

He 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.”