Altitude Group (LSE:ALT) — Interim Results Investor Presentation

0:02 Good afternoon, ladies and gentlemen, and welcome to the ALTITUDE GROUP PLC Interim Results Investor Presentation. Throughout this 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. Just simply type in your question in the box below and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. These will be made available via your investment company dashboard, and we will

0:33 send you an email to notify you when they're ready for you to review. Before we begin, we would like to submit the following poll. And if you could give your attention to that, we'd be most grateful. I'd also like to remind you that this presentation is being recorded. I'd now like to hand over to Nikki Stella, CEO, and Graham Cottortrier, CFO of ALTITUDE GROUP. Good afternoon to you both. Thank you, Mark. Good afternoon. And, we're really, pleased to be with everyone here today. What we'll do is we'll start off, with a quick introduction. My name, as Mark mentioned, is Nikki Stella, Nicole Stella. I am the CEO of ALTITUDE GROUP, and I'll I'll quickly click to the next slide. So, I've been involved in the promotional products industry for the past sixteen years.

1:21 My previous role was with, promo marketing as president of the promo marketing media group, and I have extensive experience in working with suppliers, distributors, and service providers throughout the industry. And then with that, I'll pass over to Graham real quickly, and he can talk a little bit about his background, and then we'll continue on with the presentation. Yeah, good afternoon. My name's Graham Couturier. I'm the chief financial officer of ALTITUDE GROUP PLC. I've been in the business three years now.

1:54 I'm a chartered accountant by trade, and my background includes board level finance positions at various entrepreneur owned and private equity backed businesses, all of them sort of high growth, fast scaling businesses. I also have a background in information technology, having spent a number of years implementing large scale systems for Accenture. Wonderful. Thank you, Graham. And so briefly, I know that we have, quite a few holders with us today, but there are, those that might not know about our industry. So I'd like to give a little bit of background on the marketplace that we serve. That way everybody is at an understanding of who we are, the industry that we work within, and and what we do within that industry. So the promotional product industry is one where we have

2:47 and let me do the same. I will switch off my screen so that you can see, better. So it's a highly fragmented market. And basically, the focus of this industry is any product that you can place a logo or personalization or customization on. So things like baseball caps, t shirts, embroidered, polos, notepads, all sorts of different products where you can corporations and educational institutions can place a logo or some sort of a customized indicator of who they are on there. And so, the perceived, largest player in the industry is for imprint, holding less than 3% of the market share of the industry. So that's an important point to note. So The US market is a $23,000,000,000 market, and it's highly, highly fragmented, elongated supply chain. And I can push over to this next slide that really shows you the supply chain. So it is a legacy supply chain where you have your manufacturers in China or Bangladesh overseas that are actually producing those products.

3:55 Then you have your suppliers, and those suppliers may be located either in The US or in The UK. And essentially, they house products. So they have warehouses filled with baseball caps, pens, hand sanitizer, all sorts of different products where they can be personalized, customized, and logos placed on those to showcase a company's name or their indicators on that product. From there, you've got your sales force, and that sales force of the product is distributors. And those are the folks that go out to end buyer companies. They are working with Google, they're working with Amazon, they're working with main street businesses, plumbers, electrician companies, accounting firms, law firms, financial institutions, contractors, industry that you can think of and business that you can think of that would want to market their business with product.

4:49 So that is your distributor. They are the folks that are going out to schools and other institutions to sell product. And then you've got your end buyers, and those end buyers are customers that, as I mentioned, Google, Amazon, very large multinational companies straight down to small businesses on Main Street. And where ALTITUDE GROUP lives within that is a service provider to that marketplace where we provide technology services, patented technology services to distributors that help them manage this elongated supply chain. We combine that with e commerce platform where they can have a website as well as their CRM to create efficiency in their ordering.

5:36 And so this provides them with a way to track and really grow and have that online presence in the industry and be able to sell to their clients. From there and we can switch this back in 2019, as you're aware, we acquired the AIM Smarter business and what this did is it allowed us access to a $2,200,000,000 pipeline. So in 2019, when we acquired the business, there were nineteen seventeen members. One of the things that I think is really important to note today that even through COVID-nineteen and we'll dig in deeper into where we are today in terms of the COVID-nineteen impact, but we have maintained and actually grown our membership since 2019 to 2,085 members.

6:27 And so these members of AIM distributors in the industry, and quickly if we go back to this previous slide, they sit in this center of this third circle of distributors, and those distributors are those that sell, and you can see in the bottom column there the AIM member customers to Google, Microsoft, Cisco, Discovery, Levi's, Turner Classics, New York Yankees. So they they have, large scale multinational customers as well as those small mainstream customers too. And so the average gross revenue of that distributor is 1,000,000 plus. That has actually increased from the time of acquisition in 2019 from 974,000 annual turnover per distributor to somewhere around a million plus average distributor sales revenue.

7:20 And then we have that supplier base, which we'll talk about as we go further into the presentation. 175 preferred vendors in our VIP supplier program. And those suppliers, have stayed with us. So that's one of the things that we'll talk about. We've had 100% retention of our preferred vendors in the program even in this COVID-nineteen environment. And so one of the most important points to touch upon today is the recovery because I've been hearing a lot about the recovery of the promotional product industry in these days of COVID. And so I was able to, through one of the media partners in the industry, find this depictive slide. So this came from Advertising Specialty Institute in their 2020 State of the Industry report.

8:13 And so if you look at over the course of the last years of the 2000s, where we've seen economic impact from outside forces. So, in 2001 to 2002, from nineeleven, the recessions of 2008 into 2009, and now with the COVID-nineteen economic impact that we've seen, the industry has rebounded. And this is one of the most important things that we can talk about today is the rebound of the industry. So while we have seen downturns across the promotional products marketplace, this rebound that has occurred over the years actually takes the industry beyond where it was previously. So what we would anticipate now with 2020 is that when we see events starting to happen again, football games, concerts, corporate events, all of those things, that downturn that we've seen in 2020, we would anticipate once we return to some economic normalcy and life as we all know it, being able to be, out and about again in a much more normal fashion, we anticipate the promotional products industry to rebound as well.

9:31 And so, what are our AIM members talking about in terms of recovery? And when we go back to, that previous slide where we show the supply chain, that showcases the manufacturers, the suppliers, the distributors and the end buyers. Our AIM members at that point of acquisition in 2019, they were that $2,200,000,000 pipeline that we discussed,

9:55 they had that average turnover of $9.74 ks. And so what has happened is we've surveyed our members throughout this COVID-nineteen time period to find out what do they expect in terms of recovery and where do they see things, returning so that they can be selling back to the New York Yankees at the same level as they were back in 2019. So nearly 30% of AIM members in our network expected recovery to begin in January 2021. So this was just prior to the new year that we did this survey back to our members. Nearly 47% of the distributors in our network expect recovery in March 2021, and 18% reported being back at work and doing well now. And we can talk a little bit about why that is. There are certain sectors of the industry that are doing well that are strong: healthcare, education, professional services, construction those are markets that continue to do well despite COVID-nineteen.

10:55 And then, but also that move to PPE. And so one of the things that we saw during the COVID-nineteen crisis back in February of last year, we knew, and we could see through our data insights and through our systems, there was this rise in searches for hand sanitizer. And in that, we also were able to talk with our supplier network, and those suppliers were reporting those same things back to us. So we saw that something was occurring. And in that, then in March 2020, the lockdown happened and we knew that something was going to change. We saw this bottleneck and we were able to work within our distributor network and our suppliers to help them be able to sell PPE products, whether that be face masks, hand sanitizers, a whole myriad of different products.

11:48 So many of those, that 18% that are reporting to being back and doing well now, were nimble, they shifted, they pivoted with the times, and they were able to continue to sell to their clients in this, strange new environment that we've all been in. And with that, I will let Graham take over. He can run through some of the financial highlights, and then I'll dig back in for you to talk a little bit about more of what we did during this COVID-nineteen time period, our position with PPE, how we helped our distributors through the network be able to provide these products, as well as our future facing, you know, what are our goals and what are some of the programs that we are working on today. With that, Graham, I'll let you take over.

12:35 Thank you, Nikki. Group revenue from continuing operations increased by 1,000,000, or 36% to 4,400,000 in the period, and underlying that, AIM US revenues increased to 3,900,000 versus 2,200,000 in H1 twenty nineteen. So this was assisted by the GROUP PY program in The US and delivered an adjusted US operating profit of 500,000. So the 1,700,000 increase in US revenues includes approximately 2,000,000 of new revenues from the GROUP PY program. So in the early stages of COVID-nineteen, personal protective equipment was in very high demand and difficult for our distributor members to source. Using the AIM preferred supplier network, AIM Smarter was able to arrange PPE purchases for the AIM membership.

13:27 So whilst group buy activities are expected to continue in the future, the situation in April, May, and June 2020 was quite unique, and we don't envisage undertaking group buy activities of this scale again in the near term. So the group's throughput related revenues were significantly lower than our pre COVID-nineteen expectations, and reflect a significant reduction of more than 50% in promotional products activity across the industry in the quarter to June 2020.

13:58 Whilst industry activity has recovered during the latter half of 2020, it remains significantly lower than the prior year, and we expect COVID-nineteen related disruption to continue to impact the group's revenues throughout 2021. However, the recovery is coming, as Nikki said, and our distributor members keep telling us that things are getting better. Just then to briefly touch on the fact that we've got a 1,700,000 increase in US revenues, but only a 1,100,000 increase in group revenue. This reflects lower revenues in The UK in the period to September, and is comprised of broadly even split between timing differences on revenues related to catalog groups and the impact of COVID-nineteen.

14:44 So the timing differences relate to recognition of advertising revenues from the Envoy and Spectrum catalog groups, which the group operates in The UK. Both of these catalogs ship in the first quarter of the calendar year, hence there's no advertising revenue contribution in the period to 09/30/2020. The remainder of the delta is directly due to the impact of COVID-nineteen and comprises lower search and throughput related revenues and the impacts of discounts, license reductions, and or temporary suspension of services across the group's software portfolio. Again, this is another area where we're now beginning to see sustained recovery, with people adding back users and licenses as businesses come out of having furloughed their staff. So the AIM core gross margin was maintained at twenty nineteen levels, when we exclude the impact of the group buy program.

15:38 So I'm sure people have done the calculations, and our group percentage gross margin dropped from 91% in H1 twenty nineteen to 57% in H1 twenty twenty. This is essentially driven by those Group Buy activities, which, whilst contributing significantly to revenue, have a much lower percentage margin than the group's other revenue streams, which typically have little in the way of directly attributable costs of sales, reflecting the SaaS type nature of the services that we typically deliver. So the group achieved an adjusted operating profit of 300,000, despite the significant impact of COVID-nineteen. This is really due to a combination of innovative thinking to create alternative revenue streams and tight control of costs.

16:24 So on the cost side, we instituted temporary salary reductions of 20% across the executive team, and reduced working hours across all other employees. Our total administrative expenses for the period were 3,100,000, including the benefit of point four million of paycheck protection funding. So the Paycheck Protection Programme was instituted in The US to protect jobs during the worst lockdowns of the COVID-nineteen pandemic, and we've received confirmation the group has met all the conditions required for full forgiveness of the Paycheck Protection funding, and this has been accounted for in accordance with IAS 20, government grants, and offset against the expenditure it's intended to cover, which in this case is payroll costs.

17:11 All this gives an adjusted profit before taxation of 200,000. So I've just switched on to the next slide. So adjusted basic and diluted earnings from continuing operations per share of 0.3p, and cash inflow from continuing operations before changes in working capital of 200,000. The most positive news I think I can sort of highlight to everybody in all of this is that as of September 30, the group was debt free with net cash of 1,200,000, and as of January 22, we had net cash of 1,300,000. And against this background, our cash inflows are expected to increase over the next couple of months, reflecting the settlement of annual agreements.

17:57 So the background to this is a significant portion of the group's revenue is earned under agreements which run January to December and are settled on an annual basis. Hence, the group's lowest cash position has always been forecast to occur in January 21. So we continue to be prudent in cash conservation, and are confident that, subject to the continuation of the steady recovery that we've seen, ALTITUDE has sufficient financial resources and liquidity to trade through to more normalized market conditions. I'll hand you back to Nikki at that point. Great. Thank you so much, Graham. And so what we'll do is we're going to go through the overview of the business update right now for where we are today, and I think that it's really wildly important to note, number one, we have been working tirelessly.

18:47 So, when we saw that there were going to be lockdowns imposed, we immediately responded, and we immediately reacted to this. And as Graham noted, we were innovative, we pivoted, and we saw the needs that were happening across The United States in terms of the bottlenecks for PPE, and so we very, very quickly jumped into action. We were on the phone with our trusted supplier network. We were working with them to be able to give access, first and foremost, because we were able to see from the insights that we had in terms of searches just skyrocketing with PPE need, with people looking for hand sanitizer, with them looking for masks and all of these other products. And so we jumped to that charge, and that's where we were innovative and we were able to create the group buys program to be able to pivot and continue to be able to trade within the network, remain resilient and relevant to our membership, and that's where you see our ability to hold membership steady at 2,085 in a time period where we know that businesses were completely, completely shut down across The US, furloughs on supplier side, in that March, April, May time period. So we really jumped the charge, and we were working tirelessly throughout that period. And so, that shows in our results that we traded profitably during this time period, enacting immediate and effective response to the COVID-nineteen pandemic and subsequent lockdowns.

20:16 We also started to put together some, and I'll show you these in just a moment, the COVID-nineteen business relief program, where we were working with our membership to help them to learn about not only were we able to access the government payroll protection plan ourselves, but we were able to put this into place to help our members gain access to this as well, and we were able to put together packages and programs to help them stay in business, know what was happening within the industry, know what was happening with trusted suppliers, access PPE throughout this entire time period. So, we had a robust performance in H1, resulting in the adjusted operating profit of $300,000 And then we were trading within our existing cash resources, so that we were able to remain debt free and with a current cash balance of 1,300,000 So we were very, very prudent in protecting the business and making sure that we took great care of the company, but also enacting different things and pivoting so that we could respond to the time period that we were in.

21:24 And again, our AIM membership through all of these efforts remained stable at 2,085 members.

21:33 And again, we've retained 100% participation levels with our preferred partners. So, some of this was through the group buys activity, but additionally we locked arms and we worked together with them to make sure that we were providing relevant information to the marketplace. And we all know that this is a period in time this too shall pass COVID-nineteen. And so we are seen in the marketplace as an innovator, as a company that works collaboratively with our suppliers, and we have stood by them and they have stood by us. So we've been able to retain that 100% participation level. And then recovery. So as I showed to you in that previous slide, so very important to note that we do anticipate once we've seen, some relaxation of imposed regulations around COVID-nineteen and restaurants beginning to open up again and concerts happening and corporate events happening, we do expect recovery.

22:32 And so right now, as we watch through our systems, we've been able to see a progressive improvement up to circa 70% of the original volume expectations since the steepest point of decline in April 2020. So we saw that drop happening through our systems. We could see what happened in, late March, April, and May. And we are also seeing that steady progression of orders coming back through up to 70% of where we were. And then, that other focus and something that we had launched in August 2019, we had a beta program that we launched very carefully AIM Capital Solutions program. So this is the sort of capstone premium enhanced membership program that allows our members to access various services.

23:20 It requires full system order processing, so it's mandatory that they utilize all of our systems to process their orders. They receive our innovative technology and website access so that they have that online e commerce capability. They receive administrative support and supply chain finance services to help them grow their business, and we'll talk a little bit more about that as we go forward. But then, just to drive home what we have been doing, we have been working tirelessly during this time period of COVID-nineteen and we worked immediately, moved to a virtual work environment with zero impact on teams and our ability to work with our members and our suppliers. So, no impact or interruption to the way that we run our business.

24:09 We launched our group buys program to provide members with access to personal protective equipment and this drove significant revenues in Q2 and Q3. And we assisted and educated our members in how to access PPP, government grant funds. We ran webinars and all sorts of informational sessions for them to access so that they too could tap into these programs. We had real time information regarding supplier closures, delays, and product availability. We provided COVID appropriate marketing tools, which I'll be able to show you a little bit today, and we shifted to all virtual events because we know that one of the most important things for our membership is that ability to network, that ability to speak with one another, and to speak with suppliers so that we can continue that virtual cycle of success where they're able to tap into our supplier base, they can continue to tap into marketing tools, and they can continue to converse with their customers.

25:02 A lot of the questions that we had from them was how do we approach our client base at this time? And we were able to work with them and help them learn about how to interact with their clients with empathy, and with care, but still transact and trade within this environment.

25:24 And so one of the additional things and most important things is our business model, our routes to revenue growth, and how do we capture revenue from our programs and services. And so this clearly sets that out for everyone. That first pillar is the AIM membership, that base AIM membership that we talk about when we acquired the business back in 2019. And who are they? Small businesses across The United States that are promotional products distributors, print brokers, uniform distributors, office supplies sometimes. They have a myriad of different services that they provide to their clients. And what do they receive by being an AIM member? They receive discounted pricing, access to elite services, our SaaS technology tools to drive efficiency online, their marketing services, supply chain management,

26:21 and then that community that we spoke about, that networking, that ability to learn more about what's happening in the industry. Because all too often, our members and distributors as a whole are on an island and they don't have a full view, so we allow them to be a part of a community to collaborate with us and have access and understanding of what's going on in the marketplace around them. And what do they pay for this? They have a monthly subscription fee, elite services

26:49 and those fees, the supplier partner transaction fees, and then business to business partner fees that we are able to to, glean from those business to business partners. And then if we shift all the way to the right hand column, you can see our VIP supplier partners, and we've spoken about this in our b to b partners as well. And so those are your promotional product suppliers. When we harken back to that supply chain slide that I showed at the beginning of the presentation, they sit after manufacturers, those overseas manufacturers, then you have your supplier base, and they have inventory in The States. So they are large facilities that are warehousing product that is sitting on a shelf and ready to be printed where that logo is going to be placed on that product.

27:39 And then our b to b partners, so whether that's shipping partners or other business enterprise partners. And we promote these folks. So again, it's that virtual cycle of success. We promote them to our members so that our members have

27:53 access to the best pricing through these partners. And what do our VIPs, partners, receive back in place for this? Top placement in our product search. Priority placement in all of our elite member programs, marketing exposure, in the publications that we produce, our newsletters, our catalogs, social media posts, webinars. They also receive access to the members at live and virtual events, priority opportunities in the group buy programs that we produce, access to our monthly member list, a listing in our directory, merch box placement. And these are some of the products that I'll share with you a little in a little in just a moment. And then what do we receive back from them?

28:39 Transaction fees on all of the members' orders and also the ACS affiliate orders, which we'll talk about in just a moment. So we're receiving transaction fees across all orders And then also, we receive fees from events and sponsorships. And so then when you take a look at that center column, this is that new launch, and we've been talking about this for some time. We did that beta launch in 2019 and now we've gone live with this. And our customer in this instance is the, is the small, business promotional product distributor with an average turnover of anywhere from 500 to 1.2, 1,500,000 in turnover, sometimes higher, sometimes lower, but that's really the sweet spot that we see.

29:24 And what do they receive for this? They receive working capital support, back office administrative support, where sales tax this is a big issue in The States for them to be able to navigate that. So we offer all of that back office administrative support to be able to handle that. It requires mandatory use of our order management system and our marketing services, strategic business development, freight programs, access to our freight programs, supply chain management, and then access to specific community and professional development geared just towards their business to help them grow. And how do we capture routes to revenue here? We charge a transaction fee on every order that the distributor places through our systems.

30:10 We also receive fees through our supplier partners and then our business to business partners. So when we acquired the AIM business, we have that pipeline, that 2,200,000,000 pipeline, where we work to be able to tap in, to monetize, and to be able to

30:28 capture fees across the pipeline. And so as we have grown and matured, we're able to navigate this and to be able to tap into fees across the various different programs as we've been able to launch them. And so essentially, it's the very focused routes to revenue growth through various different programs. And what we have initiated within our offices internally is corporate continuous improvement programs and agile initiatives with our technology. So we are always constantly looking at how do we improve what we do, how do we do these in micro moves so that we continue to move the needle with frequency. These aren't things that are happening over long stretches. We're able to, through agile initiatives, continue to move the chains all the time.

31:19 So, we're always looking at how we can improve what we do and get better and better every single day. And so, continued development of our preferred partner network. We're always reviewing them, we're always looking at them, We're always taking a look at to see through data insights who should we be including into our network as a preferred vendor. Continued growth of the AIM membership of high quality promotional products distributors. So, what's really important here to note is that we were able to increase the average value of the distributor that is in the AIM network going from 974,000 turnover per year to over 1,000,000. And that's really important to note that, particularly during the time of COVID, did we have

32:02 some attrition of members? We did, but we saw that across some of the smaller companies out there that decided that they were either going to close-up shop and retire or some of those sort of things, but we replaced them with higher value, higher quality distributors in the marketplace that were able to maintain and grow our membership levels from that 1900, from when we initially acquired the AIM membership or the AIM company to that 2,085 where we are today. And then continuing to deliver added value services, leveraging our existing applications, our technology, our resources, and expertise to be able to help our members and our supplier partners grow their businesses throughout the AIM purchase pipeline, develop and sell additional added value services through our applications and marketing expertise, and then continue to innovate our technology to drive efficiency, increase order value, and help both our suppliers and distributors grow.

33:09 And then, Graham, if you wanted to go through the financial review?

33:14 Yes, sure. I'll just pop that on a slide. So I'll keep this bit quite brief, because I think we've touched on a lot of these points already in the financial highlights slide. So significant revenue growth of 33% to 4,400,000, assisted by the Group program. Recapping from earlier, US revenues increased by 1,700,000, driven by the new Group Buy activities. UK revenues were 600,000 lower than H1 twenty nineteen, comprising timing differences on catalog group advertising revenues and the impact of COVID-nineteen on software and throughput related revenues. So gross profit was down 17% to $2,500,000 This was due to significantly reduced throughput related revenues, which are typically high margin revenue streams, and the lower margins or group buy activities generated in response to COVID PPE demands.

34:11 Our adjusted operating costs of £2,200,000 include the benefits of £400,000 paycheck production funding that has been accounted for in line with IAS 20 government grants and netted off payroll expenses in the period. All this gives an adjusted operating profit of 300,000 and a loss before taxation of 600,000 despite significant impact from COVID-nineteen during the period. Moving on to the balance sheet. Our intangible assets comprise acquired customer relationship assets and capitalized software development costs. In total, there is 1,600,000 of acquired customer relation assets in AIM Smarter LLC, the company which acquired the AIM membership group in January 2019.

35:00 The remainder is capitalized software development costs, which sits in Customer Focused Software Limited, The UK company which primarily develops the software that's used across the group's different activities.

35:13 The 300,000 increase in goodwill reflects completion of a purchase price allocation report by a third party valuations expert. This was conducted as part of our FY19 audit procedures.

35:31 So, I mean, this is effectively a theoretical split of the £5,000,000 that was paid for the end membership group, where we didn't acquire any physical assets. So a number of years ago, that would simply have been accounted for as goodwill, but under IFRS, we're now required to consider what portion of that excess consideration is in relation to buying a customer relationship.

35:57 The 1,600,000 of inventory at the end of H1 twenty nineteen relates to ad products. Obviously, it's now nil at the end of H1 twenty twenty, as we've disposed of that business. The receivables balance includes accrued income in respect of our AIM Smarter Preferred Supplier program. So as we previously mentioned, certain revenue streams are settled on quarterly and annual cycles. And for that reason, the group will always have accrued revenue balance at each period end, with the magnitude of that balance fluctuating depending on where we are in a calendar year. Cash of 1,200,000 at September 30. And the only other thing worth mentioning, I think, is the non current liabilities of 1,300,000 primarily comprised of liabilities recognised in respect of office leases under IFRS 16, where under IFRS 16 companies recognise right of use assets on their balance sheet and liabilities relating to the leases on those office assets.

37:04 There was very little in the way of non current lease liabilities at the end of H1 twenty nineteen, as all of the group's leases were coming up for renewal within the next twelve month period. So moving on to the cash flows during the period. The investment in working capital reflects growth in AIM Capital Solutions funding, so the AIM Capital Solutions business does require an element of working capital, and that will grow as we expand that

37:35 business. To date, that's been funded out of our own cash resources, Getting funding to supercharge the growth of that business is something that we are currently working on. The intangible asset purchases shown comprise expenditure on capitalized software development.

37:56 Tangible assets purchased in H1 twenty nineteen comprises purchase of new machinery to expand the ad products production capability. Obviously, with COVID, we have rained in all expenditure on any kind of tangible assets unless absolutely necessary. One of the questions people had had was what the repayment of borrowings was. So the repayment of borrowings cash outflows reflect settlement of higher purchase agreements in respect of machinery, which was sold as part of the disposal of our products. So as soon as that subsidiary was disposed of, we needed to settle those higher purchase agreements. Finally, cash inflows from shares issued in twenty one-nineteen represent the fundraise to acquire AIM and provide the working capital scale up of US operations.

38:47 H1 twenty twenty one cash inflow simply represents the inflow of shares issued in respect of employee exercising options. Sorry, one second. Okay, I think I'll hand over back to Nikki again at that point. Yeah, thank you Graham. And so I see one of the questions and I think you did address this earlier, but I think it might be important to note once again real quickly here is have we passed the lowest point in terms of net cash position? And you did note that, that we expected January to always be our lowest point in terms of our cash position. Yes, that's absolutely correct. The way our cash flow cycles work is that we have a number of revenue streams where payments are made either quarterly or annually, and those agreements typically run across a calendar year, so ending December 31, and we would then expect to collect the cash in respect of those agreements over the next three to four months.

39:54 Certainly through 2020, that was particularly challenging with a lot of businesses delaying payments and having staff furloughed, making it difficult for them to operationally run their businesses. But the business will always have a fairly significant accrued revenue balance at the end of each quarter, and that balance will be at its maximum at the end of the December quarter. So to that point, January is our you know, that is the point. So as we go through the remainder of the first quarter, through this first quarter of the year, our cash position will continue to grow. So that is something important for us to note with everyone today. Sorry, because the other point, Nikhil, is our net cash position at the end of January also represents there's about $750,000 there of working capital tied up in AIM Capital Solutions, which would be freed up if I can put an appropriate funding mechanism in place for that business going forward.

41:01 That's obviously been very difficult over 2020, with all the disruption caused by COVID and people delaying payment as much as possible to conserve their own cash. As we trade through into 2021 and things become more normalised, I've got very strong views that that is something that is eminently fundable. Exactly, and we're working on that every day. To that point, the ACS program is a very sticky one where we're able to capture transaction fees from both sides of the purchase. So not only do we receive that transaction fee from our supplier partner, but we also capture that from our distributor who's participating in that program. And again, it's very sticky and helps them to grow their business. So it's one that we are focused on.

41:53 And so, finally, in terms of the slide deck, I wanted to really, discuss this outlook. So this has been probably the most challenging business environment. I'm sure that everybody who's joined us today can attest to this, the most challenging business environment in modern times. And so, the board, myself, Graham, I know that we are truly pleased with the resilience, the effort, and performance of the team and the business during this time period. We have worked tirelessly. And so what positioned us to be able to navigate this time period so effectively has been that digging out the foundation since the acquisition in 2019 and to build out the strategy of the business. And so through COVID and despite COVID, we were able to drive significant profit and growth through this time period.

42:45 And so the pre pandemic effort and our ability to act quickly and pragmatically in navigating the challenges have ensured our ability to trade profitably during the unprecedented period of disruption, as well as protect and position the group for sustainable future growth. So while there is still uncertainty about COVID-nineteen and as we emerge and every single day, especially here in The States, we see things starting to, an improvement in terms of the overall numbers, We don't know precisely what will happen, but we do know that this too shall pass and that we have a sustainable position for future growth. So our growth trajectory and strong position in the marketplace remains. And so through all of this effort, we have remained resilient, front facing with our suppliers, front facing with our membership, front facing with our distributors who are participating in the ACS program, as well as in the marketplace as a whole.

43:44 Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen, but just while the company take a few moments review those investor questions submitted already, I'd like to remind you that a recording of this presentation along with the slides and the published Q and A can be accessed via your Investor Meet company dashboard. And you'll be sent an email notification when that's ready for you to review. Importantly, I'd like to remind you that your feedback is important to the company and immediately after the presentation has ended, you'll be redirected to the opportunity to provide feedback in order that the company can better understand your views and expectations. Nikki, Graham, we received a number of pre submitted questions from investors and I know you've received a number through the live event, but perhaps I could just start with these and perhaps I can leave it to you attach who answers which question. But the first one is, when is FinCap, the company's broker, expected to release forecasts to the market?

44:42 Thanks, Mark. I'll take that one. So we don't currently have a timescale for working with FinCap to release a new set of forecasts. As I'm sure everybody's aware, the impact of COVID-nineteen continues to be severe, and we don't really know how long it's going to continue for. So imagine to you, it's not currently possible to forecast with sufficient accuracy for us to put numbers out into the market in compliance with the regulatory framework that we have to abide by as an A listed business. As soon as we feel comfortable that we can put something out that's sufficiently accurate, we will work with FinCap to do so. That's brilliant. Thank you, Graham. There's two further questions.

45:28 The first being, this meeting is welcome evidence of the management's wish to continue to communicate with its shareholders. Please can the call on Graham commit to issuing trading updates at least every six months in advance of the close period before results and to meetings with investors on platforms also twice a year? Do want me to take that one, Nikki, or? Sure, Graham. Okay, so in respect of trading updates, obviously we are an aimless business and required to operate within the regulatory framework that AIM sets down. Training updates will be released as and when it's appropriate to do so, or when there is any information that is required to be disclosed. We like to try and update as much as possible.

46:16 I think it's been very difficult to do that during 2020, when it's been very unclear as to the magnitude and duration of the impact from COVID. And so going forward, I expect we should be able to update more regularly. And Graham, I think it's also important to note, to remind everyone, that we are on a March 31 end of year, so our year does not end in December. It ends in March 31. So it's just one important, thing to remember in terms of reporting timetables, when many companies are on a December year end. You. Thank you, Nicky. Thanks very much. The final question, and I think this is for you, Nicky. In the results statement, Nicole said that our preferred partners remain unchanged at 175.

47:08 What is the ideal number of preferred partners that she is targeting? And what is the target number of AIM members compared to the 2,085 currently in The US and just 146 in The UK? So I think that it's important to consider the suppliers that we invite into the marketplace and to invite them into working with us. So, we vet them very carefully, and so right now, we are working with the industry's best of the best, and that's one thing that is important. What we do is, through data insights, through information that we have through our systems, we're always looking to see who those priority suppliers should be and always reaching out to those. So, if we find that a supplier is working within the AIM membership, and they have significant impact in terms of sales through our membership, then we're always in talks with those folks to bring them into the AIM universe, and so we gauge that, but right now, we currently work with the industry's best of the best, and we do add in additional suppliers as we see them come in and appropriately add them into the AIM universe.

48:21 That's brilliant. Thank you very much indeed. Mindful of time, obviously we're coming up to the hour, but you've had a number of questions that have been submitted during the live event. Perhaps if it's possible, can I ask you ahead of us then diverting investors to give you feedback, can I ask you to read out the questions and who it's from, where it's appropriate? And obviously, I'll pick up from you at the end, and as I say, divert investors for feedback. Yeah, and I did see one in here, and I'm trying to locate it really quickly, but something about recovery. And that's why I brought the slide back up because I wanted to make sure, that we did hit upon what did we anticipate with, in terms of recovery in the industry. And so, I talked about this a little bit, but I thought it was important to harken back to it. The industry is one that is resilient.

49:11 The distributors in the marketplace are a resilient group of entrepreneurs, and they are always turning up every rock and stone to be able to transact in the marketplace and drive their revenue forward. So it's important to note that the folks that work within the industry are resilient. They work hard. They are strong, and they do come back, and so after nineeleven in 2002, we saw a significant rebound, and as you can see on the slide, the industry grew, and so it grew exponentially post 2002. The same happened in 2009, and we saw our greatest year ever in 2019. We entered 2020 with the wind at our back, and with COVID, the impact of COVID, we saw a lot of that diminish in terms what suppliers and distributors were doing in the marketplace, particularly in March, April, May, and then we're starting to see that tick back up and that recovery starting to happen.

50:13 And as I mentioned earlier in the presentation, at that 70% recovery through our system that we're seeing now. So, we are seeing that come back, and we anticipate that the industry will recover as soon as we get back to a normalized concerts, corporate events, all of those things that we would anticipate seeing, and that will really drive promotional products forward. Thanks, Nikki. I think there's one other question that we can answer quite quickly. Francis E. Had asked, Are there any further disposals of business units envisaged in The UK, or is the ALTITUDE GROUP, as it stands, in a stable shape for the future? So I think the answer to that is we don't envisage any further disposals.

51:03 The group we now have is comprised of our operations in The US and operations in The UK, and they are fairly intrinsically linked in that a lot of the software that underpins the delivery of those services has been developed and built in house in The UK by the team in Sheffield, and we don't see that there would be any benefit to segmenting the business out further. Great. Thanks, Graham. And then I see, what do you see as the greatest risk to the business moving forward from Simon C? And I think that we have navigated probably through the most difficult period, and as I mentioned, the most difficult period for every business in modern times to navigate this, to pivot, and I believe that we have navigated and pivoted in such a way that we really helped, number one, protect the business, remain relevant in the industry, and actually seen as an innovator in the industry, as well as grow the business through the group buys programs and the other initiatives that we've launched. So the greatest risk, I can't say what will happen with COVID-nineteen.

52:19 I do believe, you know, as The US continues to navigate this and The UK continues to navigate this and move through it, that recovery will happen per this slide, and otherwise, we are heels in, focused, and working hard every single day to make sure that we continue to maintain, protect, and grow the business as we go forward. That's brilliant. Thank you very much indeed, Nikki. Assuming that there aren't any other questions that obviously you're going to be able to address during the meeting itself, given we've got only three minutes before the close. I wondered if I could just ask you for a few closing remarks. To investors whose questions have been submitted, thank you very much indeed. And obviously, everything will be presented to the company, and we'll notify you when everything is ready for your review. So perhaps, Nikki, I could just hand back to you for a couple of words, and then I'll redirect investors to give feedback.

53:13 Wonderful. And I think that we go back to the outlook, right? So, honestly, in the face of this difficult time, we have been tireless. We have been working. We have been pivoting. We have done everything that we can do to make sure that we protect, grow the business. And since the acquisition of AIM in 2019, we have developed the foundation and strategy of the business and have driven significant growth in both revenue and profit. So that can be seen since 2019, since that acquisition. The acquisition really, when you look at complementary businesses, the reason businesses come together, is to make sure that you can drive both forward in terms of driving that growth, and we have been able to achieve that, and now it's making sure that we continue to navigate this time, which we have done.

54:02 We've proven that we were able to do that. We've acted quickly, pragmatically, and we will continue to do so and make sure that we position the company again for sustainable future growth. That's very, very kind of you. Thank you indeed to both Nikki and for Graham for their time today. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide feedback? If you access meeting from our website, then the feedback page will appear. If you access this via the link sent to you by email, you'll simply be asked to log back in to submit your feedback. On behalf of the management team of ALTITUDE GROUP PLC, we'd like to thank you for attending today's presentation. That now concludes today's session, and good afternoon to you all. Thank you.