Altitude Group (LSE:ALT) — Investor Presentation

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 by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Nikki Stella, CEO, and Graham Feltem, CFO. Good afternoon to you

0:33 both. Thank you, Alessandro. And can you hear me okay? Yeah. Perfectly. Wonderful. Well, we're really pleased to be here today to share our results, and for the year ended 03/31/2022. And I'm here today with, Graham Feltem, our, CFO, and, this is our presentation team for the day. I've been in the, promo industry for seventeen years in executive letter level leadership roles. And, and I've been on many different, investor presentations, with ALTITUDE GROUP. So I'm going to pass over to Graham because I'd really love for him to be able to give an introduction to him and his background. He was here with us for the interims, but it will be great to refresh everybody.

1:20 He's been a wonderful addition to our team, a wonderful commercial CFO, and, we're thrilled to have him on board. So, Graham, with that, I'll pass over to you. Thank you very much. Thanks, Nikki. So I had the pleasure of joining ALTITUDE, at the end of September

1:38 and, yeah, just in time for the interims. So I've had about ten months with the group, and it's been it's been an exciting, challenging, and and, you know, excellent time to and especially to get the pleasure pleasure working with Nikki, who's who is what she is. She's a ambitious driven and jacked, you know, great CFO great CEO to work with. So, so just a little bit about my past. I'm I'm an experienced AIN PLC CFO and board member. I've I've had experience within tech services within AIM. And then within private equity or trade owned, then that's effort, you know, FMCG and services. I I went through a a transaction with Safety Queen between Warburgs and

2:27 APAC's partners. And and I can't really enjoy that AIM environment as it's dynamic, as you can you can really get involved in the business close to it. And it's always about rolling your sleeves up, which which is really what we're all about. So so yeah. That that that's me qualified with in 2000. But apart from that, you know, that that's me. I'm I'm pretty excited to be part part of the team. And we're really thrilled to have Graham with us and roll up our sleeves we do, And you'll learn more about that as we go through the presentation today, but it has really been a transformational time and maneuvering through the COVID environment into a new era, and we're really excited to share our results and and dig into dig into the year. And so what I'm gonna do is I'm gonna allow, Graham to talk through, the financial highlights, and then we will start

3:25 to really, talk about the performance and and all the different variety of, things that we're doing within the business. So, Graham, go ahead on the, highlights. And and also what we're gonna do right now is we're gonna turn off our cameras so that we can get a bigger, slide for everybody on the webinar today. Excellent. Thanks, Nikki. So, year in a nutshell, it's a COVID year. It's been a COVID year, but a year of recovery. We've increased our revenues. We've replaced the 2,000,000 of PPE

4:00 sales that we had last year with core recurring repeatable revenue. We the growth in our the profitable growth that we we had within the years driven mainly from the underlying core services business, where we where we achieved 17.3% uptick on our year on year services division line of business. The we've also proven out and had a successful evolution of ACS, which is the main driver behind our merchanting side. So

4:36 it's it's really f y twenty two is is is culminated in, you know, delivering it as a platform for growth. It's been a it it started in September 19, and it's, and it's, and it's really now something we can springboard from. So And if I could just add, really briefly too, Graham, is on that COVID PPE, that really showcases the entrepreneurial spirit and the roll up our sleeves that we were just talking about. So, you know, we acted very quickly in order to be able to

5:09 shift gears, continue to drive growth, which we'll talk about in a a few moments of how we've how we've done that through the years. But we were really nose down on making sure that the business continued on its growth trajectory even through the most challenging of times. And with that, I'll hand back over to you, Graham. But I think that's an important, matter to note there that we've been continuing to grow over the years, regardless of the environment that we've been in.

5:34 Absolutely. Thanks, Nikki. The and then just moving on to gross margin then, we've we've we've reflected 51.5% gross margin in this year, which is a which reflects the blend of group revenues that we have. It's an expected reduction from 72.3 as we as we have the uplift of ACS revenues in our mix, which has then driven that driven that down. That's that's an expected and planned solution, so it's not a it's not a surprise. The

6:10 overheads have been consistent year on year, so we've managed the costs on those. And we have achieved a 1,100,000 increase you know, operate adjusted operating profit, an increase of 90%, which then flows through and reflects in our adjusted EPS trend as well. So we're definitely yeah. It just really shows year on year growth that that we've we've we've can show, you know, for the last for the last few years. And I think to to Graham's point is that springboard. Right? And so if you're ready to flip to the next slide Oops. Sorry. I think we both did that. Yeah. Yeah. So I think that that that next slide is really one that's an important one.

7:01 And so go ahead, Graham, with the cash flows and cash balance. Yeah. So we have we have a 1,100,000 operating cash flow before changes in working capital, and we'll come into the cash flow a bit later to go into that a little bit more detail. But that just said that's the flow through from trading. And we do have and then our cash balance as at the year end of naught point nine million soon after that. So we've we've quoted June 30 position here at 1,600,000. That's because we, we receive an awful lot of cash straddling the year end. That's our normal cash cycle. So, that that really, that that can that really pivots around the year end. So it could be, you know, it could be up or down. But the 1.6 is then reflective, following, in the following months after that.

7:54 Yeah. And it just really reflects the the, you know, the services revenue as as we've mentioned, the industry average was 12.1%, for f y for for the calendar year '21. And we we've shown that growing just by 17.3%. So there's an element of recovery, but there's also our growth in our our model showing through there. And the we've had we we tend to have, you know, strong well, we've had strong trading momentum in our last quarter of the financial year, and that's flowed through into our first quarter. So we've continued to we've seen those continued trade momentums, you know, continuing. Sorry. Our trading momentum continuing into the new year. So what I can say is one of the really important factors to see here on that first bullet point, the services revenue grew by 17.3%, so within our network. And and just recently in February 2022, there was an industry report that stated that the average, growth across the industry, was 12.1%.

8:59 So we were really thrilled to see that our services revenue grew ahead of pace. So, you know, ahead of pace across the industry. So that was a really, really good sign for us as we entered into our new, financial year, and we've seen that strong trading momentum. So the the first calendar year of the year, so January, we saw a very robust period, that flowed right into the second quarter of the year, our first financial quarter of the year. And so that, that provides us with further confidence that the current market expectations are at least in line for the full year, and we're looking to to this new year with confidence. And we can flip to the next slide. So just to give some quick background on the industry we serve, I know we have a lot of folks that are probably, very familiar with our marketplace, but we'll run through the supply chain really briefly just to get everybody, else, those who may not know about the industry, the supply chain, and how it works. We can run through that quickly for everyone here today as well.

10:02 So post pandemic, the market for promotional products in The US alone is estimated to be worth more than 23,000,000,000. And so pre COVID, there was an estimated number somewhere in the twenty five to 26,000,000,000. So in the height of COVID, we saw a reduction down to about twenty billion in 2020, but that strong rebound has occurred. It's moved the market back up to that twenty three billion number, and we're anticipating to see continued growth. In years past during recessionary periods or after nine eleven, we saw big balances post those situations. And and and so I think that the promotional products industry is resilient. It is built on entrepreneurial ship, and we typically see, the bounce that's happening right now. So that return to 23,000,000,000 and that increase that we expect to see as the year goes on.

11:00 So it continues to be a large and inefficient market, and we'll talk a bit about this, and a bit about the technology stack and everything as we go through the presentation. But approximately 75% of transactions are still carried off, offline. And so driving efficiency driving efficiency for our our preferred partners, driving efficiency for the distributors that are within our network, these are are high priorities for us and things that we continue to work through. And we'll talk a little bit more about how we've made some advances on our technology and really grown into an open environment with rich with integrations that help to drive efficiency and will help to drive faster ordering online through systems. So and additionally, it's it's very fragmented, which we know provides us with great opportunity to grow, approximately 3,000 suppliers across the market. Of those 3,000 suppliers, I would say somewhere between 200 of them are really your your prior, primary and largest suppliers.

12:02 And there's about 23,000 distributors serving a very broad customer base. So this could be small individual customers, straight through to very large corporates and nonprofit organizations. So it really just spans a very large marketplace across The US, and that's what drives that $23,000,000,000 industry. So this is a little bit about the supply chain and where we fit within the supply chain and how do we serve our network and our preferred partner programs. And so if you look, we'll start from the top this time. So if you look to that yellow column, that shows you your customer, your end buyer. So you may walk into a cafe or you may be in your job, and they hand out either T shirts or baseball caps,

12:53 pens, mugs, travel, travel mugs, all sorts of different products that have that logo, that branded piece on the product itself. And so walking into and in this image, there's a cafe, so we can stick with that cafe premise. If you walk into the cafe and you purchase a T shirt, that cafe owner has called upon their distributor salesperson, and that distributor salesperson in column red quickly goes into action and will process

13:24 orders. So for 500 T shirts for that cafe. Once you've gone through that ordering process, there's it's sort of, something that happens behind the curtain. So that distributor will process an order, and that will go straight through to a supplier. That supplier, we just spoke about. There are thousands of them across The US and UK, and they will have a warehouse that's packed full of product. And that product could range from pens, drinkware pieces, notebooks, pads, petfolios, baseball caps, really anything that you can place that logo on. And so they will pick and pull that from their shelves, and they will decorate that. They have big machinery across their their facilities where they're able to, decorate that product, basically through a printing process, but a printing process that goes onto a three d product versus on print.

14:19 And then if you go back down to the gray column, that's where you see your overseas manufacturer. And that manufacturer could be either in China or in Bangladesh or across the globe, really, where products are being manufactured and shipped into The US and UK markets.

14:39 And so who are we and where do we sit within that supply chain? And that's something we can talk about right now. So we are a technology company. We have developed industry specific marketplace tools that provide design tools, applications, website, pop up stores for promotional product distributors and suppliers. Essentially, we do is we sit between those columns so that we can drive efficiency for our distributors and for our preferred partners. And so previous to the acquisition of AIM, we were solely a technology company. Upon acquisition of AIM, we now have the network of 2,300 distributors or 22 yeah. 2,300 distributors across the globe, 2,100 in The US alone. And so our tech suite adoption has increased to 476 users, a 32 increase, across our market in the year, and we are hosting now 2,646 unique web stores. And our technology, we'll talk about that in just a moment, but it really drives that efficiency, enabling a distributor in our network to process an order with pace and also, fully online to to reduce, actual keystrokes and to drive efficiency. So we're we're moving towards a click environment that drops orders straight through.

15:59 We've also developed a robust ecommerce enabled and scalable trading platform that facilitates the execution of both offline and online promotional product transactions, and it gives us the ability to generate revenue based on the transactional throughput both inside and outside the platform.

16:16 Cool. Oops. If you could back up one, Graham. Thank you so much. So so what have we been up to? We've really driven efficiency through our system that drives that operational gearing. And it's it's really important to to note that over the course of this time period, we've not stopped advancing our systems. So we've continued to advance systems to make sure they are highly attractive across the marketplace so that we can attract

16:43 the 300,000 distributor in our network, in the AIM network, straight through to a $5,000,000 distributor, entering into the network via maybe our ACS program, which we'll talk about in just a moment, or as an AIM member. And so we've moved from what, in the past was a more closed proprietary system to a more, modern and open, environment where we have integrations across our system. And these integrations really drive efficiency for our usership. And not only do they drive efficiency for our distributor,

17:17 members, our AIM members and ACS affiliates, but it also drives efficiency for our our preferred partners as well. So over the course of the last few years, we've integrated with data providers like ASI and Distributor Central. We've helped to, helped our affiliates and members to manage their accounting through QuickBooks and TaxJar integrations. So sales tax in The US is very, very complicated, and our integration with TaxJar helps to to manage the tax the sales tax calculations for our network. Payment processors like CardConnect, PayPal, and authorize.net. And then we sit on a very, very stable platform, Amazon Web Services. We have integrations with shipping partners, supply partners so that those orders can be processed straight into, the systems of our preferred partners as well.

18:12 All of this to drive efficiency and to make for a better, efficiently, driven system where a purchase order can pass straight through very quickly, to a supplier.

18:26 So when you combine the group's technology with the experienced team that we have built over the course of the last couple of years and the proven service offerings, we're able to deliver in industry scalable growth, and also we have the opportunity to expand into adjacent markets. So all of this operational gearing and all of this effort that we've been doing provides us with the springboard there that we're now, able to really see, those growth opportunities.

18:58 And so who are we and how do we enact, within the marketplace? So we deliver products and services in two distinct areas. Our revenues are through two distinct areas and buckets of the business. So first off, we have our services. This is comprised of our technology and software applications, membership subscriptions, preferred partner programs, and our marketing services programs. So all of these drop into the services line, which we'll dig into a bit deeper in just a moment.

19:31 And then to the right of that, we have our merchanting programs, which includes ACS and our adjacent market programs. And these are the programs where we, the group, now act as principal in the sale of promotional products.

19:47 So our services and merchanting programs, how does ALTITUDE make money?

19:54 So first and foremost, our business services, the first line here is our network, our AIM membership. And so what do we do? We provide them with distinct and very beneficial business services. We provide them with preferred partner pricing benefits. We're getting them, the best buying power in the market.

20:15 In The US, as I mentioned previously, we have 2,100, members in the AIM network. And and those in that, they receive preferred partner pricing. They receive really strong freight programs and shipping discounts and other discounts across numerous different vendors. We provide them with community and networking opportunities, educational and professional development, and we also, deliver to them expanded marketing services, products, and tools. And how do we make money here from the business services element? The group derives subscription fees, revenue from providing a broad range of services to our distributor members, and this includes supplier relation services, negotiated group discounts, access to events and exhibitions, catalog programs, artwork services, marketing programs, social media programs.

21:11 Their list really goes on and on. We provide very, very distinct tools and services. And what the goal for us to do and achieve for them is to make that smaller business, the average turn for, annual turnover for them is somewhere from 300 to $500,000 in a year, maybe upwards to a million dollars. That is is really the broad base, and our goal here is to make those smaller businesses look like that Fortune 500 business. So we give them all the tools and services they could ever need to really help them grow and look like a a much bigger business, you know, that's working behind them to provide those tools and services. Excellent. And they also just to chip in, they get the they they have the technology, which can't go without saying. So they have the use of the technology, and they can have more extensive use of that technology with the likes of pop up source pop up stores, etcetera, to give them that bigger presence.

22:07 Absolutely. And we're seeing a big move towards pop up stores across our systems, and that really harkens back to the 2,640 2,646 pop up sites that we have live today. And those shift and change because it's really, really simple through our platform to to initiate a pop up store, have

22:28 that go live. It showcases our preferred vendor partner products so that they can access those, you know, in a very, very quick turn. And then boom, they've got a pop up store, and then they're able to take that down very quickly when they're finished with that that program, or it might stay live for them over the course of of a year or longer.

22:48 So then this kind of drives us right into the preferred partner program. And what do we do within the network to support our preferred vendors? We provide our suppliers and services with to expand their visibility across the sales, to the AIM and ACS community. And why is this really important? So as I mentioned previously, in The US alone, we have 2,100 plus members. Those 2,100 plus members represent nearly 10% of the industry's distributors. So what we're able to do is provide our preferred partners, whether they're suppliers or vendors, visibility and access across the marketplace.

23:28 So what do we do? We drive them to the top of our our search engines. We place them in preferred position positions in our technology. We drive our purchase order straight into their systems so that we have that efficiency so that those orders come through very quickly, moving from keystrokes to click. We we provide them with additional, technology integration opportunities, guaranteed participation in publications, catalogs, merchandise, campaigns. And we also give them visibility at our

24:00 networking events, via our social media, campaigns. Everything that we do. What we do is to drive visibility and access to the AIM and ACS communities on their behalf. And how do we make money in this in this section of the services revenue? We do this through,

24:21 through gross transaction fees on all orders through our supplier partner network and other vendors and service providers in return for providing marketing services, promotion of those suppliers to our distributors, technology integrations, all the things we just spoke about. And revenues from this source reflect the value of resulting purchase orders placed with preferred suppliers by our distributors. And you can see in the year, we had an increase of 17% across our services revenues at £6,300,000.

24:54 So now if we move to our merchanting programs and how do we make money across the merchanting programs? How do we drive usership? How do we increase the growth of the AIM and ACS network? And we do this our merchanting programs are focused on operational gearing that drives efficiency and feeds into our services and our preferred partner programs as well. So all of these things work in tandem in order to grow the business. And so with the our affiliate program, and this is that ACS affiliate services program, that capstone, we've been talking about this program and the launch of this for for a little bit of time. We launched this late twenty nineteen. It was a very soft launch, very quiet soft launch, and really went into, into effect in 2020.

25:43 Unfortunately, COVID was was was breathing down our necks at that time, but we've seen the acceleration of our affiliate program. And so what do we do with ACS? We group, we work to recruit high caliber sales professionals, into our affiliate program. In this program, we are the principal in the sale. The technology use is mandatory, and this is one of the things that it really does drive that efficiency and really drives forth, our efforts in in the promotion of our preferred partners as well. And this provides the group with scalable expansion and growth back to the to the group itself. We provide administrative support that allows sales professionals to focus on what they do best, and that's to to to to drive their sales growth.

26:30 And so how do we make money in this scenario? How does this work on behalf of the group? We derive revenue from the sale of promotional products, which is procured via our affiliates who act as sales agents. And in the year, we can see an increase of 142% across the market, the merchanting programs at 5,600,000 in, pounds in revenue. And we are also working to continue to develop, and this is something that we've talked about in the past, and we're starting to see traction here, our our move into adjacent markets. We are where we're able to, work within noncompetitive spaces, integrating our ecommerce technology as well as our our order management systems. We pair that up with our supply chain know how, and this gives us the opportunity to really enter into adjacent market programs.

27:21 And, and additionally, one of the important things to note is

27:24 that the group was able to secure a financing facility, which we've spoken about this previously in in in trading updates, of 500,000 to support the future growth of both our merchanting programs across adjacent markets as well as our affiliate program. And so how do we make money in adjacent market programs? This is through the integration of our technology and the sale of branded apparel and promotional products in alliance with our adjacent market partners. So we're able to take everything that we do and that we know and

27:55 and can do well and really drive growth via technology and via our our supply chain know how and pair all of that, up and be able to to really, really target some adjacent markets, which we'll talk about, in a little bit. We'll go into that further. And so over the course of the the last couple of years, you know, what have we been up to? Oops. Yeah. Pop back real quick there, Graham. Thank you. And this is a really important slide. And and, Graham, I welcome you to to join in and participate in this. But since since this 2018 year and and you can see in the columns, we cover off 2018, a twelve month period. 2020, it's important to note that that was a fifteen month period, so you can see that.

28:42 And then 2021, where we were really in the depths of COVID across, those two years and then the year, ended March 2022. So you can see that consistent growth. If we were able to slice that fifteen month, year into, you know, into twelve month periods, you would see that continuous, rise, that arc upward. So what have we done during this time period? We've dug out the foundation of the business. We've obtained the, the bank facility to assist us in growing as we go into

29:15 the future. We strengthened our technology through integrations, and we are ready to scale. So that's springboard. We are at that launching point. We're seeing it happen across the business and the growth that we've seen in the year ended of March 2022, and we are continuing to drive forward into the future. And, Graham, I know that there's always points on the slide that you like to to harken and tap into and share. Absolutely. Thank you. Yeah. The the just to just to talk about the bank city. So this is something we've got in place for future growth. We haven't drawn into it.

29:50 It's it's there it's there for us. We have a cash cycle throughout the year, which, which which is not straight flat line. So therefore, that that comes in handy when we've got growth on the cards, or when we are growing. I I really like the adjusted operating profit loss line that goes as an accountant speaking, where you've got the where you can see that trajectory from 2018, 2020, '21, and '22. And, and and that that's really that's really, you know, the acquisition of AIM coming coming to fruition. We've of the 11,900,000, 11,000,000 of it is related to AIM or post AIM business.

30:37 So therefore, the the ACS and adjacent markets piece is being organically funded from from successive services to actually launch those businesses, get the right structure, get the right people in place so then we can then we can move forward and those are our next waves of growth coming forward. So that that's that's really that's what I really take from this from this this this graph. I quite like it. Awesome. Thank you, Graham. And and so, Graham, you can continue to go through the financials and, as we as we can, we we hit the financial highlights, but there may be some important aspects to this that we can run through as well.

31:23 Yeah. I'll I'll I'll be I'll skip because we've kind of we've gone through the highlights, which covers off the key areas, but, just to dwell on a couple of bits. The so overall, it's very positive results. We've achieved a net profit for the first time, I believe, and which is really which is which is great. It was nice to have the that we have been helped a little bit with the share based payments as there's been some credits coming through in the year. So so even though we're on a positive trend, that might not be reflected in the in the in, you know, in the near term in the very near term as such. However, it's really good. And, yeah, we've had the gross profit growth driven from services.

32:13 So we've got that naught point six increase to 6.2. Costs are very light year on year, and we have, you know and and the that's all reflected within the EPS turn from a loss to a profit and the adjusted EPS trend as you can see there. Yeah. Okay. I'm not sure I'll move forward. Mhmm. So segmental performance. That's I think this is probably a good slide to just dig in a little bit into the margins. So the the increase in services, you can see we've got a 91% consistent margin fall through there. So therefore, that that business that activity within our membership and, you know, flowing through to our preferred partners, That really drives immediate scalable growth of of when that comes through. So that that just falls straight through.

33:15 Merchanting, then we've changed we've the mix has changed from 30% gross profit margin to a 7%. So previously, in '21, we would have had PPE coming through there. And also the and ACS would have been our gross profit in effect would have been our our sales figure coming through in the sale in the turnover. And in the year to '22, we are the principal in that trend in those transactions, and therefore, we have the full sale of that those goods and the costs of sales of those goods plus the commission payable to our selling agents, our affiliates. So hence, that's why the the gross profit margin falls to a 7%. And the trajectory of that with with our expansion into adjacent markets, that will come through as a far higher gross profit margin in the way of within that segment.

34:09 So therefore, that usually pro I would about 30%, for example. So therefore, as that grows, then then we we expect our gross profit margin to tend up. However, we're also targeting some real growth in merchanting and ACS. So therefore, the propensity of that to to net off each other over the next couple of years, you'll you'll see that you'll see that play off against each other. Yeah. And I think that, Graham, we see a couple of questions too on the q and a about that that profit that gross profit margin. And so we don't anticipate you know, we anticipate that to to rise. And so it's it's just really a matter of the timing of when some of the adjacent markets and the merchanting, programs started that you're seeing fall through here.

35:04 But I do anticipate, seeing, that that gross margin arise just as Graham alluded to as well. Okay. And then moving towards our balance sheet or financial position. So, we've got a positive net asset move year on year, and that's not driven by, you know, kind of increasing our third tax or anything else. That's driven really by an increase in working cap. And that's from that's fundamentally driven by the trading and services increase and our and our, you know, the the mix between our trade and other receivables and cash falling around the year end is, you know, interplay between cash and trading receivables basically with our with our levels of our receipts around around the year end.

35:57 Apart from that, then it's pretty similar year on year, but it's a it's a move in the right direction. Then in our cash performance, so we've got a strong starting point from our trading. Then what you can see in the movement movement in trade and other receivables is the 1.4 outflow, which is fundamentally driven from the the increase in our expectations for our throughput revenue coming in from our services position. So that's what's driving that outflow, which is actually a positive, a very positive trading impact, and shows that growth and recovery coming through.

36:43 We have, we've had a double, r and d tax credit within a year, so we've managed to speed up our tax returns and, and obtained, two tax cash injections from that point of view, which is always helpful, especially in the environment we've had. And then that that's, you know, we've continued in investing. And that's such a important point. We've managed to continue in investing in our in our tech, and that's been that's been that's been a really important point. We've been able to really develop our road map and push through and, targeting, you know, our customer customers' needs. And and and to that point, Graham, because we you and I have spoken about this.

37:30 I I'm I'm sorry to to have interrupted, but we have talked about this quite a bit, and I think it's an important point to make that so the average AIM member, typically is in that 300 to 800,000. We've seen a shift up now with our AIM membership. So their average turnover today versus the last time I spoke with all of all of the folks here on investor meet has actually increased to 1,300,000. That speaks volumes to the quality of services and the quality of tech systems that we have today. But what's really also very interesting is we're seeing a move from those large distributors coming to us, for the ACS, affiliate services program as well as within the AIM network. And and who's talking to us now, Graham? You and I talked about this previously. You it's the 1,000,000, 3,000,000, 5,000,000, sometimes higher. So we're starting to see some really wonderful traction because of that open environment and the efficiency that we're able to drive through our tech platform, and and the marketplace that we've, built out.

38:31 Absolutely. And that that's where I think probably originally when the when ACS was launched, then it would have been more than $35,500 k kind of, you know, the the tech would have been, you know, suited that, you know, being our sweet spot. And and actually, what we're really seeing now is the markets opened up in in our last quarter of the financial year that we've seen that movement. And those those higher higher values and referrals that we're getting through, you know, the through our through our ACS network is actually really is is really proving out. So that's that's been really that's been very positive and encouraging. You know, a lot of you know, come from a lot of hard work from from Nikki and the team over the last couple of years. I can't take the credit for that.

39:18 So anything else on this slide? Sorry. I think that that that then shows yeah. We that that's basically then falls through to our to our cash outflow, soon to be then, you know, soon after that, then we get a lot of those receivables coming through on our, trading on the receivables. So on the blue sky and market opportunities, and and how do we continue through the operational gearing and everything that we've seen, how do we continue to grow the network, how do we continue to to grow the business and and drive that that exponential growth. And currently, we've exceeded the pre COVID network numbers with more than 2,122 distributors within the North American network, again, representing nearly 10% of the industry distributor companies. But what does 10% mean?

40:11 That means we have 90% to go after as well. So I see that as a very big opportunity for us to continue to grow the AIM network. We saw very little attrition of the AIM network through COVID. However, what we did see is we saw the attrition of the lower value distributors that were ready to either, go into a different profession, maybe they were a hobbyist, and or they retired. And so now what we've done is we bolstered up our network with better quality distributors. That 2122, as I previously mentioned, now we're seeing them, with a higher turnover average of 1,300,000. So I think in years past, when we started, and and had recently acquired the AIM network, we were looking at about a 800 k average turnover. Today, it's 1,300,000.

41:03 Again, the market's highly fragmented, So that, that network of 22, 23,000 distributors, there is a lot for us to be able to go after in terms of recruitment into AIM as well as into ACS. And just understanding that the top five market leaders, distributor organizations, represent a small segment of the marketplace at somewhere around circa 3,000,000,000 sales. Post COVID, the Advertising Institute marked the ongoing resilience of the North American promotional products industry sales. With the total annual revenue rising to 2,300,000,000 in 2021. And again, that's up from the COVID impact of 2020, and we do expect to see that that continue to rise. Historically, the market has surpassed its, mark of pre incident, right? Whether that was 09/11, the recessionary periods of eight or nine and now through COVID. So we would anticipate to see that rise.

42:05 It's wonderful to note that the promotional product industry seems to be, fairly recessionary proof. Those products are important to companies and those companies, that pass along rate and the impact that that promotional products have is an important one in terms of advertising and marketing spend for, corporations. Our ecommerce, we know that this continues to drive sales activity across the industry. Promotional Products Association International reported on June 1, that the share of online sales of promotional products has increased. So up from 17.3% in 2020, it's now sitting at 25.8%. We have robust solutions, to provide our network for ecommerce, and we're working on these things to to drive them and expand them and grow them every single day. So our ecommerce, platforms are strong, and you see that with the 2,600 more than 2,600, sites that we have live today in terms of websites, pop up stores, company stores that we provide to the network membership.

43:14 Coupling this with the size of the untapped addressable promotional untapped promotional park sorry, promotional product market with our robust softwares, we see that the market opportunity for the group is strong. And we also know that there are adjacent markets that we can tap into that we have access to, that they are noncompetitive spaces, and, the print side of of, the adjacent market, 78,900,000,000 marketplace uniform markets, 12,000,000,000 printed signage, 10,600,000,000, and the collegiate markets are 10,000,000,000. So this provides us the expansive, potential to increase our addressable market substantially.

44:00 And so that we know that these are areas and industries where promotional products are sold, and we know that we can integrate through our technology services and to provide, our supply chain know how as well as our, access, into markets to be able to provide services back to these adjacent markets to help drive growth. That's right. It really it really hits our sweet spot of, of our of our tech into playing with our network and our relationships that we have. It's a strong point for us, moving forward. And, and I guess via, ACS has really proven that out. Yeah. And so it's really, you know, one of these things when we talk about operational gearing as the marketplace grows, we grow. So as we add in, these various different opportunities and we're starting to see adjacent market growth, today.

44:54 And so as we continue to tap into these markets, as these markets as our marketplace grows, we grow. And that's a really important aspect to remember. So all of these things will feed back into our preferred partner programs. They feed back via our technology systems and and understanding data trends and being able to offer, you know, the right opportunities and and products and services at the right time. And so our outlook. So our preferred partner service fees tracked 32% over last year, demonstrating recovery and gaining momentum into the new financial year. We spoke about this at the start of the webinar. So but a 32% increase across our preferred partner service fees. That's a really important stat to remember.

45:45 Our merchanting programs are expanding and driving new growth within the promotional products industry and those noncompetitive adjacent markets. We're working really hard on these various different aspects, and we're seeing that start to really grow across the business, and that shows up in the in the year's numbers. The group remains debt free, and we have a credit facility now in place to support the continued growth and expansion of the business. I can tell you for me personally, it was really, really important for us to get through that COVID period to be, to be able to obtain that credit facility if we needed it to to continue to grow the business, and we were able to achieve that. So we were able to achieve, you know, great great things through that COVID period and continue to to drive forward innovation and the, the various different programs of the business so that we could really have that springboard to to jump off of.

46:45 And the board is oh, yeah. Go ahead, Graham. Yeah. Right. Just to add to that, that's, Nick Nick has grown grown the teams, really effectively since from from a team of one, I think, in The US studies. And yeah. So over the last over the last three three three or so years three or four years. So then the and those growth in those in the in the merchanting and the teams below each of the each of the different areas are are there and operation operational. And and that that's where the the when when those growth comes you know, growth growth coming in doesn't doesn't therefore you know, isn't necessarily the therefore, we'll need to get another team to manage it. It's it's there all in place, and they're all working with pipelines.

47:36 So I think that's a little nod to to Nikki having those, you know, really good people in place, you know, leading those areas. And that answer that that actually helps to answer. And, Graham, we can really touch upon this is one of the questions that I see here is operational gearing. Can you talk through the operational gearing of the business? If turnover was to double, how much additional cost would be needed? And what is the incremental drop through? So we've really built out teams. We are we we our teams are ready to scale the business. And I think that that's something that's really important to note that that in our in in the way that we have developed the business that we are are really in a state of of growth and expansion for the business, but not on the operational side of the business, not having to add in a lot of extra cost. And and can you speak to that as well?

48:31 Yeah. I mean, I think it's because we've got different parts of the business, then it then it has different answers to every different part. So it's not as simple it's not as simple, you know, just here's the answer. But but the yeah. So if our services services grew, then we wouldn't have to increase really any, you know, any or much of the team fundamentally. I think that'll be more of a choice if we want to try and go into the go into our membership base a lot more in a lot deeper. But, you know, we don't you know, that that's not that's not something necessarily we need to do. So therefore, that's the services incredibly scalable. The our ACS and merchanting side is there there would be some elements of some step costs over time, but but it's not it's not an it's not a variable uptick with with the increase in that revenue. So you can really see a lot of increase in revenue with very, very low levels of increase in the in in in our overhead. In team cost.

49:31 Yeah. And I I I think that really what that it speaks to is we would not need to as we expand, it's not a a massive investment in staffing. It's really an incremental increase as the business grows. And so then so back to the, remaining, debt free, have a credit facility in place to support the growth and expansion of the business, and that also kinda speaks to that as well. And so where do we sit today? We are confident in the future scalability and success of the business and the executive management team's ability to successfully execute on the group's strategy. We are very, very focused. We are as we mentioned at the start of the program, we are very much in the position where we roll up our sleeves and we do what needs to to to to get the job done. And so we're very much eye on the prize focused on what we need to do to achieve, this year and beyond.

50:32 And I can read through this really quickly. You've probably seen it in our results, but I I can read through it because it's very much, where my heart is and where my focus is on the business. So we, the group experienced a year of strong profitable growth driven by the commitment of our teams and the quality of our programs. I will tell you all, our team is second to none. We we truly have a great, great, class a team. We're also extremely pleased to see last year's strong trading momentum has continued into the first quarter of our new financial year, providing further confidence that the current market expectations are at least in line for the full year. We have continued to be nimble and drive the business forward through the most uncertain times, building a strong foundation and delivering year over year positive growth, whilst remaining debt free and not raising dilutive funds. We retain our high growth ambitions and are confident in our ability to substantially scale and expand the business.

51:32 This is where we are today in the position to be able to substantially scale and expand the business. And so I do see that we have a couple of questions, but I want that to just sort of sink in with everyone. We're we're really feeling, great about where we are today. I will remind everyone that our first quarter of our financial year has just ended. So we really are just getting into our second quarter of the financial year. So as we answer some of these questions, it might be a bit soon for us to jump in and dive into all of the questions that you have, but we really, will work, hard to go through and answer. There's lots of questions here. And we'll also make sure that we answer any questions that we can at the end of the, or, you know, post, post today's event.

52:23 So one of the questions I saw here, Graham, and you could probably speak to this. I I can speak to it, but you'll speak to it a bit more knowledgeably is about the the the the strong dollar against the pound right now. And and can you speak to to that a bit? And I can share that, yes, most of our revenues are in US dollars, so a strong dollar certainly does help us. But but can you share your thoughts on this this question as well? Yeah. Sure. So so we do have we've got a UK cost base as well, and therefore, with the the more amount you know, the higher revenues coming from The US and some costs coming from The US. Therefore, there is a profit in The US.

53:10 And then when that's when that's converted through, then that's, you know, at, you know, rates compared you know, the rate is now favorable for us in this year. So as long as that happens, then that will be positive for us. The yeah. With our with our UK development costs and, you know, some overhead costs there which serves the group, Therefore, that that that actually means that that's a cheaper cost for us as as a you know, with, you know, predominantly US US numbers coming through. Awesome. And then I I I also see in here, questions about ACS and, does it generate service fees and, and some of the, scalability of that program.

54:00 Yes. That program is is highly scalable. It does generate service fees. And I would also say that, as with all of our programs, they all, feed into, each other. So what we aim to achieve and we've got about 65% of our our, 65 or higher of our ACS, purchase orders and everything goes through our preferred vendors. So all of these elements, will help to drive growth across services as well as across the merchanting. So we do see, we do see all of those things, sort of, you know, cogs that help to drive each other for growth of the group.

54:48 And and so it is, one of those things we also have that question too about the the gross margin, which I think we've hit upon. We do anticipate as we as the operational gearing of that program and the additions of addition of the adjacent markets programs that we are working on and that are growing today, all of these things will work to drive, the gross margin on our merchanting, merchanting revenue lines. I think on on the, on the first question, I think, pre submitted one, then then I think we've covered off, the underlying factors for the growth that we see coming forward Where the where the I think it's mentioned something like 18% this year and 40% next year. So that's, you know, that that's fundamentally from from our merchanting arm, but plus plus some further growth within services coming from a mix of recovery and and and growth that, you know, that that outside of just The US economy recovering. And US economy is important because that's where we that's where we operate in under a a lot.

56:04 So so yeah. And that that's actually coming across right now as as relatively buoyant and, know, even in some uncertain times that we we're still in, unfortunately, but that that's coming through as as positive right now. And and I think that we're we're we're just about out of time. So what I will say, I think it's very important to note, the mindset in The US. And then any questions that we may have missed, we will absolutely get back to everyone again post this event. But we've just had a very, very positive jobs report out of, The US. So jobs have now, gotten, up and over where we were pre COVID. So we're we're achieving, pre COVID jobs numbers.

56:55 And I think that in The US, we are seeing very robust trading and a lot of enthusiasm. So so the while there is recessionary concerns, we there's sort of a fifty fifty split across The US about about what will happen in terms of a recession, whether there will be one at all or whether we're in one right now, but it's been it will be a small blip in time and that, and that, you know, The US markets are really, nose down and, all about continuing to scale and grow. So I think that it does remain to be seen in terms of the recessionary, woes in The US, but I I I think that The US overall is extremely upbeat. And, and if there is to be a recession, the the mindset is that it will be very brief, one, quarter, you know, maybe two quarters tops.

57:48 But but I think that everybody's very, very bullish in The US about, growth and especially on the heels of that very positive jobs report that we just received a few days ago. So with that, I will hand back over to Alessandro. Thank you so much for everybody joining us today. If we didn't hit your questions, we certainly will as soon as we possibly can. And and thank you. Thank you for your time and joining us this afternoon. Thank you very much. Nikki, Graham, thank you very much for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure 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, and good afternoon to you all.