Altitude Group (LSE:ALT) — Interim Results

0:01 Good afternoon, and welcome to the ALTITUDE GROUP PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses as perhaps appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to to Nikki Stella, CEO. Good afternoon.

0:32 Good afternoon, everyone. It's a pleasure to be with you here today, and, we're very, much looking forward to sharing our results with you, this afternoon. We had an excellent, six month period, and, and Graham and I were very much looking forward to having this investor meet session with you today. I am a little bit under the weather just so you're aware, that I may if I call for do something, my apologies. I am, just just in the thick of of a bit of a cold. But I am still thrilled to be here with you today and enthusiastic about all we have to share.

1:13 So just a bit about me. Eighteen years executive experience in the industry. I have a track record of identifying and capitalizing on opportunities, revenue opportunities and business opportunities, and launching those products and services to drive profitable growth. Experienced AIN PLC CEO and board member, and and named to ASI. ASI is the,

1:37 largest trade association in The US for the promotional products industry, and I've been named the most influential list, many years in a row now. And, I'm thrilled to be able to bring that experience and, and expertise to ALTITUDE GROUP. And with that, I can hand off to my my partner in business, Graham Feltem, who will talk about his background. Cool. Thanks. Thank you. So hi, Graham. I've been, I was qualified with Ernst and Young in 2000. I've, had had a lot of experience with, Bellron as ALTITUDE GROUP and then with stat stat pro that went from the traditional software group to a pure cloud, offering and then got taken off, bought bought off AIM.

2:22 And then onwards to Safety Kleen as a private equity owned business and went saw a transaction from Warburgs to APAC's partners.

2:31 And then at Newmark CFO at Newmark Security. And then two and a half years, the pleasure of working very closely with Nikki driving the business and and really getting some growth and some momentum and communicating with our shareholders. So, yeah, thank you.

2:51 Wonderful. So we're gonna be talking to about driving the business at pace. And I will say that is exactly what we've been up to, moving quickly and and working to drive that growth across the business and scalability and efficiency. So in our highlights from the financial, the half year financials, we saw an increase in our revenues, 53.5% to 11,800,000 in group revenue. For gross profit, we rose 24.8% to £4,900,000. Our group adjusted operating profit rose 38.8% to £1,100,000. And our adjusted basic and diluted earnings per share rose 61.4% to point seven one p.

3:41 Net net assets, rose, to £9,900,000. So every KPI metric that we have, we've been really scaling and growing and seeing that growth come through, in our financial results.

3:57 This slide is really, just a quick snapshot on the growth, how we've seen our services are steady, and then we're seeing that scalability across our merchanting lines. And we'll talk a little bit about, services versus, merchanting a little bit later on today. But we did see that that, you know, movement towards of our merchanting programs. And, Graham, did you have anything you wanted to add on the slide this this afternoon? Yeah. Sure. So this this really shows the, this really shows some of our fast evolution and and our and our evolution of our business model. In the f y twenty two, we had 7% of the gross profit margin was was due to merchanting. And now as we move into f y as we're in h y twenty four, that's turned to twenty three percent. So that's in that's increased threefold as a part of our business.

4:50 And just as a reminder, the the significant contracts coming in from the with the university side, the AMP side, then have have really, you know, came in through the year, but mainly towards the end of the half year. So that's actually driven a lot from our affiliate model, and we'll go into that more in a in a little bit late in short time. That's right. Graham Graham notes that, per our last trading update, we assured the market that we would be going live, with all of those AMPS contracts, those gear shop contracts.

5:22 So we we we'd expect that they would all go live by the end of, h y twenty four September, and we indeed deliver on those. And they are all live now, and they are all commercially, trading, in the campuses that they are live at. So, but to Graham's point, our affiliate affiliate model is driving that growth in the early stages of the first half of this, this, financial year, with the contracts of the campuses really going live in August late August and September. So you're seeing a small bit of that right now, and that will expand as we go through this year. So big growth opportunities, the industry we serve. This is an important one. So our our historical background has always been in the corporate promotional products industry.

6:11 And that industry in The US, is valued at 25,800,000,000 across The US alone. In The UK and in Canada, you see it's about, £1,000,000,000 business vertical in The UK and the same as in the in the Canadian markets. So you see that The US is a very, very big opportunity, at 25,800,000,000. It's a highly fragmented market with approximately 3,000 suppliers. We always talk about that eighty twenty rule applying to the suppliers that 80% of the business is going through 20% of the suppliers. This will become an important factor as we talk about our services business and how we provide those services, to our supply partners. So 3,000 suppliers and then 23 distributors serving a varying broad based customer,

7:03 spanning small businesses, large corporates, and nonprofit organizations, and many, many more. But those 23,000 in that, just to give you an example of what that looks like for Imprint, I'm sure all of you are familiar with for Imprint, is one of 23,000. Our AIM membership program, which sits squarely in this, red column, we have 2,400 global AIM members. And so that represents about 10% in The US market. And so you can see how we have a broad scope of membership through the AIM organization and network. And then we also serve the higher retail collegiate market. This is estimated to be valued at $12,000,000,000 with two primary legacy competitors, and we are proving to be highly disruptive in this space.

7:58 And and you may ask the question, why? Why are we disruptive in the collegiate market? Number one, it is, a very sensible transition that we made into this space. We identified, the opportunity. We saw that the primary legacy competitors were lagging. They had tired spaces. They were not addressing the brand needs of the campus communities. And so with our expertise in branded merchandise, our technology stack, and then our relationship with our supply partners, we were able to come in and create something truly unique across the campus communities. Additionally, we partnered with the number one online textbook provider so that we could take those textbooks out of the spaces that we inhabit. And now you have a modern experience.

8:47 And, and through our textbook partner, students can order their books online, and then they receive a text. They come into the gear shop. They pick up their books, and they come into really what's become a community hub with music, with light and laughter, and incredible branded merchandise, which is truly our area of expertise.

9:08 So combined as an industry, as a group, we have access to industries with an adjustable market size of nearly 40,000,000,000. So we've really risen, the scope of what we can go after now.

9:23 And this slide is a very, important slide. It really shows where we sit within the marketplace and the supply chain. So how does a product move, from one portion of the supply chain to arrive in a customer's hands? And I oftentimes go through this, the supply chain. So bear with me. I'll go through this again for all of, those of you who are new, so that you can learn about where we sit within the supply chain and how a product moves through to an end buyer customer. So in the bottom lower corner, you have that gray column. That is your overseas manufacturer. That overseas manufacturer may exist in China, Bangladesh, Mexico, any country where they're actually producing product really from from start to finish.

10:08 And then you have that blue column. In that blue column is your preferred partner, your supplier company. They are really that product printer. The product comes through. They're shipping in mass quantities from overseas, and then, they're receiving orders from that distribution line, which is the next channel, in the stop with the red column, green column, and purple. They they receive those orders. They pick and pull those products from the shelves. They put that logo on the portfolio, the baseball cap, the hoodie, any products you can imagine under the sun, and then they ship that off. And the Salesforce within the the marketplace is really that distribution channel. You've got your membership, which is the red column, your distributors.

10:53 That's our 23, 2,400 global membership. Then you've got the green column, which is our affiliate model. They are our Salesforce, and receive a commission for their sales from us. And then you've got our gear shops, those collegiate stores, where we are transacting both online through ecommerce hubs as well as on campus, in campus stores. And that product is then purchased, and and delivered to either, corporates or cafes, you can see in that larger yellow column, or to the campus students who are arriving on campus and purchasing those products direct from the gear shop. And if you see the and if you see the blue light blue column and the red column, that's very much our services side of our business. And if you see the green and purple column, that's our affiliate model and our education yeah.

11:50 AMPS AMPS column, which are which constitute our merchanting side of the business. Exactly. And we'll run through that with, a lot more focus as we get through the presentation. But that merchanting side is precisely where we are, the principal on the sale, and the services are where we connect a supplier to distributor through a variety of means, technology, and all sorts of, elements that go into that. So then on this slide, this is a slide that we've made, last year when we were at our year end results, and we wanted to be able to showcase, simply, if we were to win 1% of the smaller profile markets, for for the university campus stores, what would that look like? So this is certainly not a slide that's depicting where we are today.

12:41 It is just, our way of showing you how we could impact that 12,000,000,000 market

12:47 and then drive those sales through, to our Gear Shop solution and then take that growth and go beyond that year after year after year. So, Graham, would you like to run through this slide?

13:01 Sure. Just make sure my mic's unmuted. So this slide, so what we've got is a 12,000,000,000 market size of retail stores. That's made up of 4,000 colleges and university universities. So if you average that out, that's a $33,000,000 average store revenue. Now that's we look at the weighting of the market, then there's a there's a very small large contingent who could be could be anywhere between $1,525,000,000 dollars as a campus store outfit. So therefore, there's quite a long tail of smaller smaller universities and colleges. So so that that's just that 3,000,000 is very much that average.

13:47 And then you've got an enrollment of 19,000,000 19,400,000 students. So, therefore, you get an average per student of $619 per head. So those these these stores are really made up of contracts which could be anywhere between three, seven, three, five, seven, ten years, but on average, probably a five year contract. So if you then say every five years, those contracts come up for renewal. And when they come come up come up for renewal, then depending on what kind of institution that is, whether it's a if it's a state a state university, then they must go through an RFP and a tender process. There's a private institution. They may they may go through a less formalized process, but certainly so you you go through different levels of rigor depending on who who that college or university is.

14:36 Therefore, they will come up for tender, and you'll go through the the pitch process. So every five years, that would be worth a 2,400,000,000 addressable market each year. That's 800 colleges and universities that would come up for tender or open for contract.

14:55 And that's 3,000,000 average you know, sticking with the 3,000,000 average store size, then that would be 3,900,000 enrollment and then staying with $619 per student. So as we are a new entrant into this market and we're you know, with with some, you know, good success in our in our first active year of going of of going out and tendering,

15:21 what we want to this is the same slide we put out at the year end. And this is really saying, what does 1% of the smaller profile of the market, you know, look like, you know, just to just to make it real for everyone? So 1% looks like at about 20,000,020 million annualized annual sales. That's around 27 colleges at a profile of about a $750,000 annual sale amount. That would be to the tune of about 200,000 students, and that's that would be at a lower rate of about a $100 per head depending on, you know, that that smaller kind of profile of university where they may not have the big the big football teams who where where everyone would buy all the all the football

16:13 merchandises, etcetera. So therefore, it can that brings that down. Now it's probably quite a conservative look, but that's just to make just to make that that real. If you look at the if you look to the contract that could be just to give you an idea about how the contracts work. So if you look to the contract that was a million $1,000,000, then that would probably have a gross profit margin to that to itself for about 35%. That would have an EBITDA to the tune of 15 to 20% on that individual contract. There'll be an upfront investment made, which would be all about the inventory, and there would be a a fit out to be done year one or year two. And that that fit out is usually between 510% of the annualized sale, And that inventory would be on an inventory turn sale of about four times. So it'd be about a 160 on the inventory and about a 100 k or 50 to a 100 k on the inventory on the fit out, which would be about 265 k dollars.

17:14 That would that would

17:16 return the return on that investment would break even after about fifteen to twenty months, and then and then it'd be very cash well, it'd be cash generative all the way through for the next three and a half years of that contract. So So that's that's the that's how that contract dynamics work. And and I I can talk a little bit to the pitch season, the sales season, as well. So thank you, Graham, for running through what it looks like once it's been won, that contract has been awarded. It's important to note the seasonality of the sales cycle as well. So and and we've spoken about this before.

17:53 The the autumn months so when you enter in September, October, and November, they're really that RFP season where those those universities go to tender to find, new, new service providers to come in and take over, outsourced programs, particularly like the campus stores. And so that process really rolls through those autumn months, into the early winter. And once, all of these, sort of the selling season, you're laying the seeds and the foundation, to win the award, they're typically awarded sometime late late December, through January and into that early part of the year. Once those contracts are awarded, then it goes to contract to to legal contract for signatures.

18:41 And then we know that, typically,

18:44 we would go live in those spaces in those summer months where there's less activity on campus. There have been incidences where we've gone in early, where we've had requests to move in in in you know, really on the fly in March or April, but typically it happens in that June and July, through August period. So and just as I said, we won tremendous amount of, contracts, last year. And when we went up against those two incumbents, we won 60% of the time. And our reputation in this space is really growing and growing in a

19:18 very positive fashion. So now we're not seeing just smaller, midsize, and some large schools come through. As Graham mentioned, we have very large universities in the space, where they are coming to us to learn more about our programs and how we can service them. So when you hear about, you know, campus programs, you see those very large football schools. And that's what Graham was talking to and speaking to about, you know, a program in one program could literally be a 15 to $20,000,000 program, and where the vast majority are somewhere, you know, smaller than that from from that 1,000,000 to 5,000,000 range. But we are now being seen, and we're having opportunity in a very robust pipeline across all size levels of campuses.

20:09 Just to just to just to cover off a question just now, then we we have 15 contracts with with at least 7,000,000 worth of annualized sales as part of that. Indeed.

20:27 So who we are today, we are a diversified portfolio group, and this is by design. There is protection around being a diversified portfolio group, and it gives us access to a larger addressable market. And when you see opportunity, you must seize it. And that's exactly what we saw in the campus, space where we saw that we had the knowledge, the technology, the supply chain, and the know how to become that marketing arm on behalf of the campus, campus profiles. We're delivering something that's completely new to them

20:59 that they are hungry for. And so today, we're, ALTITUDE is a diversified portfolio group that is the leading end to end solutions provider for branded merchandise across a variety of sectors from corporate promotional products industry and print vertical markets to the higher education market. And you can see the ten year track record of the company and what's happened in the past few years, that growth trajectory.

21:22 When we talk about in the interims, record results for this year, we are anticipating, record results, to beat what we've done last year and continue that scale on that, on that ten year bar graph.

21:38 So as we talked about briefly previously, we divide our revenue into two separate revenue buckets. To the left is our services, and that is when we are a service provider to our distributor members and to our supplier partners. And what do we do for that? We'll run into that with a little more depth, but we deliver technology services. We promote our preferred vendors to the top of of all of our programs. And all of those things that we deliver to help, drive efficiency and drive a knowledge base, in our services program and better pricing. And on the merchanting side, this is where we are the principal in the sale of the promotional product, whether that be through our affiliate program, where they are the sales agent for us, or directly through our gear shops where we have students, families, faculty, professors, everybody, across the campus community coming in to show their pride, and picking up their gear for their university.

22:40 Always, always, always, technology is at our core. It is the heartbeat of who we are as a business. And what do we have? We've got proprietary platforms. We invest in these platforms to ensure that we drive efficiency through the the supply chain. We've got a search engine where we, just like Google, just like other search engines, we are able to help our preferred vendors rise to this top of those searches, and to drive awareness about their products. We've got a second to none order management tool. We recently signed a contract. It was announced last year, with a franchise group called Fully Promoted, where they saw 25 different platforms and selected ours as their platform of choice. We have design applications, ecommerce. Our ecommerce is live across all of our campuses where we're driving those online sales.

23:26 And additionally, we're always looking at innovation and artificial intelligence That presents a great opportunity for us to deliver new tools across art, across efficiency, and in the order process and purchase orders. We're always looking to drive efficiency and scale through new technology. And here we go right into efficiency and scale. How do we make money? So we've talked about the the two buckets of revenue, right, the services, side of this, and this is our membership. So if you harken back to that supply chain, you saw that red column. This is our membership. This is that 2,400 member strong network that is across The US and The UK. And what do we deliver to them? Preferred partner, pricing benefits, freight programs and shipping discounts, community networking opportunities, education, professional development, expanded marketing services that we have as upsell products and and tools.

24:24 And so how do we make money? We make money through subscription fees, and, we also make money through, that upsell into bigger programs with us. And then you have our preferred partners. And our preferred partner program, that is our supplier partners. Those are the folks, as you see in that blue column, that are the pure procures of the products. They're warehousing these products, and they are actually doing all the imprinting of those products. And what do we deliver for them? We deliver top visibility across our marketplace, our search engine. So when a one of our members comes in and they click to look for a pen or a T shirt or a mug, they are finding our preferred vendors first. They get our preferred vendors get a preferred technology integration opportunities, guaranteed participation in all of our marketing collateral, catalogs, educational product programs, and merchandise campaigns, and expanded access to our community so that they can spend time, network, and meet through our events and really, really be a part of the community hub that we've developed. And how do we make money here? We derive a percentage of the revenue for all of the orders that are pushed through to our preferred vendors by our distributor network, that red column. Every time they place an order, we are collecting anywhere from three to 6% back from our supplier partners. And you'll see how that our affiliate program really layers in that percentage, to to capture a greater portion of the sale, when we get to our our merchanting

25:55 slides. And here it is. So our merchanting, our affiliates, who are they? These are high caliber sales professionals who want to focus on selling. They do not want to focus their time on administrative, duties like invoicing and sales tax. Really, what they wanna be doing is out there talking to their clients and driving new sales. And our solution in our affiliate program really does drive that. So they make the sale, we pay them a commission, and we take a portion of that sale back for us. And so what happens in that is we collect anywhere from 6 to 12 back from the affiliate on every sale that they transact. And so when you layer that on top of the supply chain, portion, that three to 66%, now we're able to capture a greater port portion of margin across, across a singular promotional product purchase.

26:55 And then you have our adjacent markets program. And Graham mentioned before, we capture anywhere from 35 to 40% margin in our gear shop locations. And this is where we really provide that specialty expertise on the brand merchandise, driving that marketing arm for our campuses, providing ecommerce tools, as well as innovative spaces to drive that university's brand awareness. And we have that specialized partnership, with the textbook provider. So you can see in the bottom right hand corner the 2021, twenty twenty two, twenty three straight up through that bar graph to h y twenty four where you see that 100% growth across our merchanting programs. I will say to you that the majority of that growth right now is happening from the run rate on our affiliate program through the that merchanting arm because that really had that run rate going into this new financial year. Whereas our gear shops just went live, really all of them, sometime through August and September.

27:57 So as we get through this year and as we progress through this year, you're going to see that bar continue to rise, and then you'll also see, the gross margins, as they come together and blend more of a blended rate, you'll see those margins rise as well. And then finally, we collect, SaaS fees for our technology. Again, this is at our core, driving efficiency, driving effectiveness. We have the experience in the space, and we have the trust. And this is an area where we are continuing to see potential partnerships, grow, whether they be in The UK markets or in The US markets. So expansion and innovation. What have we been up to? What have we been spending, these past six months on and and and prior to that? It really has not changed.

28:48 And, Graham, you can tick that next slide up. Strong financial health. That is a priority for us as a business. I always talk to our teams about protecting what we have, innovating, and growing where we can. So building a strong, trust and track record for future growth. Two years ago, we had a $700,000, line of credit with our bank. Last year, we were able to grow that to 1,700,000. And as we go through this, this season, we will be working with our bank to support our growth as we go into the future. So building that strong financial health to ensure that we've got a good business, for for success into the future. Investment in great people, building talent and teams that are geared for expansion.

29:35 We've been very fortunate, to find the talent that we have to be able to launch those gear shops, 15 of those across the country in a very short period of time. And then we've got that core team, that continues to build our services and our merchanting arms, across the business. We are truly, truly lucky to have such a talented and committed team. Investment in our pipeline and partnerships. All of this growth that we've seen in this year has been driven on, the organic growth of the business. We've been able to invest back into our own growth, and so building prospects and pipeline for mar market to grow market share, for the future. As I mentioned, our pipeline on the Gear Shop side of the business and that AMP side of the business is strong and growing. It's really, something to see as we build our brand reputation, the new mix of universities that are coming to talk to us, and that potential growth, in in this year compared to last year.

30:31 But we're also seeing pipeline growth across all areas of our business, particularly in our tech across, the globe as well as in our AIM network. And then we're gearing for greater efficiency. Anytime you're scaling a business, especially at the rate that we've been scaling, it is vitally important to ensure that we've got the systems and the ability to ensure that we've got great efficiency in everything that we're doing. So we're always looking at efficiency and operational gearing. And then strengthening our core relationships, maintaining those relationships that we've built through the years, and ensuring that we can, utilize that core relationship to help us grow into the future. All of this effort I'm sorry. Go back one second. Thank you so much, Graham. All of this effort is really what's driving that 53% increase in revenue to 11,800,000 in the year. And you can see in h y twenty three, really that bar, that line that sits across at the half year last year and where we are today showing that, that great growth that we've experienced.

31:40 So all of these elements we've talked about, we can really round these up very quickly and then move on to the next slide. But pipeline and partnerships and priorities, we are continuing to invest in our pipeline. We are continuing to extend our relationships and partnerships across the industries that we serve, and we are really looking at operational efficiency and gearing, so that we can be efficient in the markets that we serve. Growing that ACS affiliate model, we delivered 10% growth in the ACS affiliate growth to reach 15,000,000 in annualized sales that happened in the six month period as well as that organic growth of 13% from our existing affiliates that we have on deck. We delivered all of those contracts exactly as we promised to do, transitioning those programs on time, hiring regional managers. You'll see why we need those now as we show you the map of where we are across The states, central operations team, and a procurement team, and we are now live across 15 contracts, at that circa 7,000,000 gross annualized revenue.

32:42 And then finally, our services have grown. We've grown 7% from the membership. We saw a big boost last year. That was really a massive, massive, recovery from COVID. This year, we're seeing that right now, that 7% growth that we've experienced, actually outstrips the market. The market grew anywhere from three to 4%, and we grew seven percent. And we expect that growth to continue through, through 2020, financial year 2024. We delivered phase one of our fully permitted, contract, which I spoke to you about, and we've now expanded our technology services into Canada. So every aspect and every division of the business is churning and producing. These are just some visuals across the campus stores that we're serving right now, Kern out of California, ACU out of Texas, and Saint John Fisher out of New York.

33:40 And this is the map that I was talking to you about. So you can see we've got a stronghold in the Northeast from Vermont and Massachusetts down through Philadelphia area and Maryland. And and then we've got Upstate New York, Michigan, Indiana, South Arkansas, Texas, California. We are really expanding across The US, and my hope is that the next time that we have, a map that we're sharing with you that we'll be able to show you many more speckled dots across the country. And these are a selection of the brand partners that we have within our gear shops. We talked to you, earlier in the year, or last year about our partnership with Apple as a reseller, in the higher education space. This is meaningful for us, and and it is a great competitive advantage for us. We also have relationships, for the procurement of Nike, Under Armour, Adidas, MB Sports, Champion for those athletic teams when we're, talking with athletic teams and delivering those athletic apparel pieces as well as many other, brand partners that you see on this page and that we have also that we're not showing you today.

34:51 And so, Graham, I'll pass over to you to talk about how we performed. Thanks, Nikki. So within the, group performance for the year, we have, revenue increased by 53.5%, and that's 59.3% on a constant with the the the FX rate swinging a different way this year. Gross profit increased by 1,000,000 with a mix effect of gross profit margin to 41.8%, and we'll go over that more in the next slide. Adjusted EBITDA increased by 38.8% to 1,100,000, and adjusted PBT up 94% to 500,000.

35:37 Adjusted EPS up 61% to 0.71 p, which is nice to grow from a positive, you know, for half year and half year. So, basically, what this slide will say is we're growing fast. Indeed. And we have in our segmental performance, we can see services are growing by 7%, and that's as as opposed to the 4% industry rate of growth over the same period. That's an average over the two quarters. And and, yeah, and and doing very well. The merchanting side made up of the has grown up by a 100%, made up of the two distinct parts, the affiliate model, which if I just step away from the numbers for a second.

36:25 So at the beginning of last year, we had just under 7,000,000 annualized I mean, $77,000,000 annualized dollars. We've doubled that to just under 14,000,000. At the beginning of this year, we've grown it another 10%, circa 15,000,000. And then we've also experienced about a 13% organic growth rate. So from that expected annualized, then they're performing higher than that by about 13%. So that's that's some really positive moves from the in the in our affiliate model. And then on the flip side of that, then we have the AMP side as well. So that's had an impact. That's grown eight times since h y twenty three to h y twenty four from a low base, but still, it's it's making an impact. You can see that in the gross profit margin. So, I mean, as as opposed to the services model, which runs at about 92.5%, 93.5%, and it kind of varies only really to do with the the if we have events or we have catalogs where there's a bit more cost coming through on the on the cost of sales.

37:30 So that that that's that holds around that level. Whereas the merchanting level has started up with 9% in h y twenty three driven fundamentally by that affiliate model margin. So high it's a it's a scalable volume play in the market compared to our universe compared to our AMP contracts, which which then have impacted positively the gross profit margin to 14.6. That's 5.6 percentage points, which, yeah, as I mentioned earlier, runs at about 35% gross margin. So you can see that's where that would tend to. Overall, the impact on our group gross profit margin is a downward is a downward trend because we've got a higher margin of that merchanting value coming through. So that's a that comes from 51.4% to 41.8% delivering really that value, which is, you know, which can be seen falling through in our you know, from increase to gross profit overall by a million.

38:30 We have kept central costs flat year on year for the half year. In our cash performance, so I'll walk you through this and some of the key areas. So the increase in trading activity is get provided with us with a with an immediate uptick at the top line. And then, well, I'll I'll go through this and just pick out the investment in the amps that we've made in this six months. So we have an increase in inventory, which is the naught 700,000. And then if you go down to the net cash flow from investing activities where you see the outflow of a million, of that million, we have development costs of about circa naught 0.5. We have some other other other, you know, equipment, usually laptops, etcetera.

39:19 Have the investment in intangible assets, the contract assets, and also equipment for the stores. So that's and they total naught 0.4. So the naught 0.7 plus naught 400,000, that's $1.01 point 110,000 million investment in our AMP's contracts. The net cash outflow for the year is naught point seven. So if you added back the 1,100,000, that's cash generation of naught point four from the rest of the business. So So that just shows the impact in the investment we're making. Now we're not expecting to then double that inventory in the next six months. That's actually getting your inventory at the front end of the contract, and you also set up your contracts at the beginning too. So therefore, that's where the contract assets come into play. So therefore, you wouldn't expect that to repeat in the second half at all unless we suddenly won a lot very quickly, and they wanted it in us in straight away.

40:12 So so therefore, which is unlikely to happen given the seasonality of the con of the of the tender tender process. And, Graham, it's fair to say that we're capturing the first six months of the year, that snapshot, just after having gone live. Right? So just after having made that investment, in getting those gear shops live and really only having, you know, eight weeks under our belt or or six to eight weeks under our belt with a a go live commercial, you know, commercial, commercially trading business. So, what we're seeing here in our half year is a very fast snapshot of go live, and the team's efforts to get us there. Absolutely. And and that leaves us at the end of September with an undrawn facility of $1,400,000. The the reason why we have the facility originally is for two reasons, twofold. It's the growth in the affiliate model, and secondly, a way of smoothing out cash flows from our supplier revenues and the services services as they can they can be quite lumpy.

41:12 So, therefore, those are the two reasons. We've funded the growth of our universe of our Amps contracts within you know, from our from from that financing. And we still have some headroom, which then sees us through for the remainder of the year to operate within, you know, to smooth out that cash the lumpy cash of the services. So therefore, that that sees us through in our existing model. Now additional growth will therefore need further financing. And we have an annual renewal with our bank with which we've been talking to and working with for for the last couple of months. So it's well well well through that process, and then we'll we'll be expecting to to then, you know, enter the enter the new new year, as in calendar year, then with a with a renewed facility, and then the ability to grow from that.

42:03 If we become particularly if we if we grow in our in our wins, then we will then look at what what our financing, you know, options are for that. And that would be a mix of bank. And then if we're particularly successful with some with some whales of contracts, then we will then go and look at to the market and look at other ways of of of financing along with that banking facility as well. So So there's there's a that that that's that's the options ahead of us. And we'll we'll any really as we go through that that awards award of 10 of of our pipeline is when we'll really identify that and then be able to then take action appropriately, which will be will really be funding our growth into the future, which is an exciting time for us.

42:52 Absolutely. And we've covered off most of the points here. The net assets have grown from 9.5 to 9,900,000, and we've we've covered off all the really all the all the areas that we had. Had a naught point two, you know, pounds delve into the facility at this point in time. So building on strength, and and that really is the outlook is is that we remain very bullish, and we are driving the business forward. We have a very talented group of people that are are working on behalf of the business that have traveled the country, to get these gearshops up and live. And then we have those divisional leaders across the business who are really watching the ship and making sure that we are continuing to grow across all areas of the business. There so there is focus on every single segment of the business with no balls being dropped.

43:49 We remain focused on scaling through new contract awards and gearing the business for long term success. We're very, very focused in on that efficiency, and operational gearing. And so we are we're happy with the results of where we are today, and we're well placed for continued accelerated future growth, and the board is confident in the long term success of the business. It's really, really pleasing to note the momentum that we've had, and actually the momentum that we are picking up right now within our our our contract pipeline phase. And we're really looking forward to when we can update the market, on how the season the tender season has gone for us. And so with that, I think that we can, take a look, to answer some questions.

44:37 Nikki Graham, thank you very much for your presentation this afternoon. And if I may just bring back up your cameras. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab situated on the top right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. As you can see, we have received a number of questions throughout today's presentation. But please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Wonderful. And we'll answer as many as we can here today. And if we need to follow-up post event, we always do that to answer any questions that that we may not have time for or we may not have the answers to for you at this moment.

45:23 One of the easiest ones that we can answer, have you managed to convert 100% of the major new contracts announced in March 23 into revenue earners in h one as suggested in the trading update? Yes. That's very simple. We can say yes. We mentioned that in our trading update. We had a core team of people that traveled across the country. They were in Texas. They were in California. They were in Michigan. They were in the Boston region, standing up all of these gear shops, making sure that we had the technology aligned and the ecommerce sites built out. And so, yes, yes, yes, we have converted those. And then we also have our business development team that is out there pounding the pavement to bring in new business, and we're going through that tender season right now.

46:12 Gear shops look to be an exciting business. Can you outline projections for growth of the business, please? In particular, what are your plans and aspirations to recruit more colleges? And what are the revenue projections year on year for this business? I think that that that is one well, I can harken back to, our full year presentation last year, where our aspirations and this is not just for the gear shops, but our aspirations for the business was to build a $100,000,000 business. That has not changed. That continues, and we are each and every six months, we're closer and closer to our goal, and we are relentless in our efforts to get, to that point to building a $100,000,000 business. What are our plans to recruit more colleges? We have a team on the ground, that are recruiting, that are going, and they're visiting campuses. They're responding to RFPs.

47:02 They're pitching. I go in, and I work with them as well, to go into universities to talk to them when we have bigger opportunities. And so it's all hands on deck, to help grow this business. So we are very much on top of that. And the revenue projections, it really does depend on the size and scope of the universities that we bring in. So, we do have some modeling that we've done internally, but it really just varies on on the size. We'll see as this comes through this tender season, and we'll be able to inform you, across the board on how successful we have been. But we we can say that our pipeline this year is larger than what it was last year. So we are really going after the business, with with with Gusto. We're going after it to really drive it and, and to bring it home.

47:51 Absolutely. And there's also some, there's also some organic growth that's expected within the within the the new contracts. As you grow with the experience of the con of the contract and building that relationship with the university, getting in tune with all the timelines of the programs, who who who are the right contacts, what are what are the initiatives that are happening and when, and then introducing new lines from from our experience with other contracts, then you can see, actually, this would really help that university. Then you can grow that relationship. And that's that's the normal nature of these kind of contracts. And so so there's a first get in, get the profile in, operate it, and then build. So so that that's that's what we're expecting with the with our with our existing and then our future future profile of contracts.

48:38 Indeed. Indeed. And I am just, looking through. Are you comfortable with the cash reserves for, to fund the Gear Shop expansion and roll out the medium term? I think we addressed this, and we talked about, the strength of our banking partnership. We do have a very good relationship with our banking partner. And, and if we were to, to win a very large contract or many large contracts, we would be talking, to the market and, and working through a variety of plans on how we would go about scaling that that the the growth. But we are currently, I think we're comfortable, Graham. We're comfortable with where we are right now. And so Yeah. I mean, he's probably the more important guy to ask that question to. So if he's comfortable, we're I saw the question, so I I did decided to go on a bit more of a diatribe earlier.

49:28 Exactly. So thank you for that question, and and, hopefully, we've answered that for you, and and given you clarity on that piece. Plans for scaling the companies for growth, we're doing that now. We're doing that every single day, and I think we spoke a bit to that. We do have that $100,000,000 aspiration. We have teams on the ground, sales teams on the ground, not only in the gear shop space, but across all of the the corporate promotional side where we are working to increase companies that we're working with, drive new partnerships, bring in new universities, bring in new agreements. We are are we don't stop. So we are continuing to be a sales a strong sales organization, that is going to drive revenue growth. Let's see. And with with Go ahead. Yeah. How's your how's your investor reaction been? You mentioned the last presentation you're going on the road.

50:23 We're we're whenever it comes to results time, we're always on the road. And so we're we're we're brought this this meeting in the middle of that so that then we're we're having meetings and meetings, and and and it's sandwiched sandwiched across many meetings. So we're we're meeting a lot of existing and new and building those relationships with those bigger institutions who are keeping an eye on us and wanting to understand what's going on. So those are the kind that that's that's that's been the ever since we've come out with the with the with numbers in the market from March 22, that's that's been that's been certainly the way we've been, we've been communicating in a open, and hopefully, you see that, regular basis. Exactly. And then there's the, question approximately.

51:09 How many colleges, universities are coming up for tender during the next calendar year, and what percentage do you anticipate winning from these renewing contracts? I would say that last year's season, we won 60% of the time, that we went out to, and pitched, the universities. So we won't know exactly who's going to tender, until those RFPs are released. Right now, we are, in that season, and we're seeing them come across. And, we have we have folks on the road today that are meeting with the campuses to learn more about their programs and how we can how we can work more closely with them. So as I mentioned previously, our pipeline this year, comparatively to last year, is a much larger pipeline that we are developing and growing, and, hopefully, we'll see those seeds result in in a success.

51:59 And we're starting to benefit from referrals now as well. So that's where the referrals referrals come back into the RFP season and, and, you know, from from other from from from universities who we serve now. Exactly. And then we had a question. Given the universities you have signed so far, what is your understanding of phases, timings of the sales cycle, and what reasoning for saying next new wins will be q '2 next year? I think I ran through this, and and I will run through it briefly again. There is a very specific sales cycle, within the, campus communities. So this is across all higher education. The norm is that they would go to tender in, September, October, November, sometimes even in December.

52:48 They'll make their decisions, December, January, February, and then we announce sometime in March. Now there is always the chance that we'll win some throughout the season, be notified of those. And and if that's something that, we would wanna come to the market with on on a significant win, we would certainly inform you of that. But we are knee deep in that tender season right now where we're out there and we're talking to universities, and we are just, really ticking through, all the RFPs that have come across our way, building those out, and then presenting to those universities. Does the management foresee any acquisitions in the near to midterm? We do get this question.

53:35 And if so, how would any acquisition be funded? I think we touched on this too earlier, Graham. Right? We are very focused. We've got such organic growth coming our way, and we are we are growing through all of that organic growth phasing right now. If the proper company, some an opportunity came our way, we would certainly not turn away from it. But and that's something that we would come, you know, if there was an opportunity that could not be passed up, that we would probably come to the market to talk about. But right now, we are very, very highly focused on the business at hand of scaling, through the gear shops and through our other, business avenues right now. Absolutely. It's a it's a question of priorities, really, at the at the moment. So there there are things out there. There are things we could go for.

54:23 But the but the priorities and the and the and the win, really, the value proposition for us is really looking at growing that university university model. Yes. And there's one last question that I'll answer. Today, I believe we've hit just about everything else. On the number of employees, with the business and would it require a much larger sales force, I don't believe so. I think we're essentially, we're very well situated in in the scale of the business. We do see, student help at at some of the facilities that we have. So we do bring in in students to to work amongst, in the in the store setting. But we don't see that we're gonna have to add massive, massive teams to to the gear shops, aside from from bringing in part time staff.

55:12 Do you have any other thoughts on that, Graham, that we would share? Yeah. No. It's it's all it's all about the gearing side operational gearing side. And certainly on the services, it's it's it's been it's been up and running and running well. And so that and then on on the the affiliates model, also, that's that's all about scale and growth and bringing on those new affiliates. And then with the we've we've done we've done the investment in people for, you know, the court the key members and those key key key experts in various different roles within the AMPs area. And so, therefore, when whenever there's a building of growth, then it would be an expansion, but then not necessarily so much of those key roles, but within the within the teams to be able to manage the volume. So so, therefore, it'll just be, you know, incremental as required. Yeah. Yeah.

56:10 Wonderful. Well, everyone, thank you so much for your time in joining us today. If there's any questions we've missed, we can we can hop on those, and and try to provide you answers to those. And and thank you for joining us, and we're looking forward to to updating you in the near future. Yeah. And thanks, Edward. Delighted you're shareholder too. So yeah. Great. Yes. Thank you. Indeed. Nikki, Graham, thank you. And I think you've addressed all those questions you can from investors. And, of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet company platform. Before redirecting investors to provide you with their feedback, which you know is particularly important to the company, Nikki, could I please just ask you for a few closing comments? Well, as as I mentioned in our outlook, we are we are pleased with the progress of the business in the first six months, and we are looking to continue to grow and scale the business, in all areas of the company across all divisions.

57:10 And the board are confident. We are confident in the long term success of the business, and the growth potential. So we hold those $100,000,000,000 aspirations for the business, and we're work working hard to achieve them. Nikki, Graham, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback order that the management team can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of ALTITUDE GROUP PLC, we'd like to thank you for attending today's presentation. Good afternoon to you all.