TIDMAN.
RNS Number : 1153K
Alternative Networks plc
14 April 2015
Alternative Networks plc
Trading Statement
Alternative Networks plc ("the Group"), the UK business IT and
communications service provider, today issues the following trading
update for the half year ended 31 March 2015.
Trading in the first half of the year has been robust, giving
the Board confidence that its full year expectations for the Group
will be met. Highlights of the first half of the year were:
-- Strong performance in Advanced Solutions with good growth in
both reported revenues and orders signed
-- Strong performance in Mobile including further gains in
market share, with an 11% increase in the subscriber base year on
year
-- Significant progress on the integration of ControlCircle and Intercept IT acquisitions
o Properties rationalised - 5 London offices to 2 new
locations
o Significant upgrades to IT infrastructure across the Group on
one platform
-- Continuing strong cash generation and operating cash
conversion with closing net debt of GBP30.2m. A target of below
GBP20m set for 30 September 2015
-- Board remains committed to its progressive dividend policy of
no less than 10% growth in the dividend year on year, progressing
towards its longer term target of 15% annual growth in due
course
Trading performance
Advanced Solutions
Performance in the business has been strong. The momentum seen
over the past year has continued, with total orders signed in the
first 6 months at least 15% higher than the prior year on a like
for like (proforma) basis. As a result of this continued momentum
we expect revenue growth of at least 10% in the first half of the
financial year. Cross selling remains a core focus and the Group
has now signed 43 such contracts with customers in 14 months, with
a further 250 opportunities being evaluated. Momentum continues to
build, and evidence of this is expected to be reflected in future
results.
Order backlog has increased substantially in the first half of
the year, up from the record levels at the end of September 2014.
This growth is due to new order growth and larger customer wins
than previously experienced and will result in a higher weighting
of revenue and profits to the second half than in previous years.
New orders have been generated across the portfolio, with two
notable new clients both in new verticals for Alternative. In the
Service Provider vertical, Alternative was chosen as the networking
hardware and support provider for a 5 year contract across
multi-technologies for London Internet Exchange (LINX), and we have
also secured major contract wins in the Defence and Secure
Government markets. These supplement continued progress in the
professional services and education verticals.
ControlCircle's performance has been satisfactory, with minimal
client attrition and a number of client wins. Trading has been
impacted by two major customers putting new business on hold
pending internal strategic reviews, resulting in lower
non-recurring revenues. The remaining business performance has been
encouraging, with new business sales excluding these customers
growing by 4% and the new opportunity lifetime pipeline now worth
over GBP30m at the gross margin level, largely due to increased
interest generated from cross selling to the Group's existing
clients.
Performance at Intercept IT in the first half has been strong,
with double-digit revenue growth and improved margins year on year.
The hosted desktop market continues to grow and encouragingly
Intercept IT has a record level of qualified pipeline to take into
the second half.
Integration of the two businesses has progressed well and is
expected to be completed by the end of the year. Relocation to one
site under combined group management is now complete and integrated
IT systems have been implemented across most of the Group
operations. The whole Group will be branded as Alternative from
April 2015.
Mobile Network Services
Trading in Mobile Network Services is ahead of expectations,
with the Group again increasing market share in the period with
subscriber growth of 11% on an annualised basis. Mobile Network
Services is expected to contribute 30% of Group revenues.
Approximately 4,000 net additional connections were added in the
period, bringing total mobile subscribers to over 95,000 at 31
March 2015. ARPU performance has been supported by continuing
increases indata usage, largely offsetting voice and tariff
erosion. As a result, mobile revenues in the first half are
expected to be broadly in line with the prior year on a reported
basis and approximately 9% ahead on an underlying basis, stripping
out the revenue impact of new commercial arrangements that began in
April 2014. Profit margins remain strong and gross profit for the
six month period is expected to be at least 10% ahead of 2014.
Fixed Line Network Services
Overall performance of fixed line network services was in line
with market performance and our expectations with the product group
now contributing less than 20% of Group revenues. Line rental
revenues continue to decrease, as expected, driven by the
transition to 'SIP', revenues from which are recorded in Advanced
Solutions, with circa 2,800 (representing a 30% increase)
additional channels added in the first half.
New platform for growth
2015 is a year of significant change for the Group which will
enhance its market position. The first half of 2015 has seen a
number of major investments and structural changes for the
Group:
-- The sale of its Battersea headquarters for GBP3.85m completed
on the 9 April 2015;
-- The move from 5 sites (effected with no financial penalties)
in London to a new London headquarters in 240 Blackfriars, and an
improved expanded regional office in Surbiton, both under long
leases, bringing new demo facilities and combining all technical
and sales teams in one space;
-- Shift of all legacy on-premise IT infrastructure and hosted
services into state-of-the-art managed secure datacentres; and
-- Additional GBP0.5m exceptional capital investment to the
Intercept and ControlCircle IT infrastructure, as identified at the
time of acquisition, to improve resilience and enhance all DaaS
(Desktop as a Service) services. This will also provide the
backbone for future on-line cloud services.
The changes have been efficiently implemented with minimum
disruption to trading and apositive response from staff, with very
low levels of attrition. The new premises and IT infrastructure
provide the Group with a sound platform for future growth,
providing more space, more flexibility, more sales opportunities
and an organisation more efficiently resourced.
Cash flow
The board continues to target net debt of below GBP20.0m by 30
September 2015.
Cash generation remains strong across the Group, with good
underlying operating cash conversion and underlying free cash flow
higher than the comparative period. The Group net debt position at
31 March 2015 was GBP30.2m (30 September 2014: net debt GBP29.3m),
in line with the Board's expectations, and includes exceptional
capital expenditure of GBP2.3m on the Group's new London office
space and payment of the FY14 final dividend of GBP4.6m. Post
period end the Group has received GBP3.1m of cash related to the
sale of a London property.
Interim Results
The results for the half year ended 31 March 2015 are expected
to be released on 3 June 2015.
Enquiries:
Alternative Networks plc 0870 190 7444
Edward Spurrier, Chief Executive Officer
Gavin Griggs, Chief Financial Officer
Investec Bank plc - Nominated Adviser and Joint Broker 020 7597 5970
Patrick Robb / Carlton Nelson / Andrew Pinder
finnCap Limited - Joint Broker 020 7220 0565
Stuart Andrews
Pelham Bell Pottinger 07802 442486
Archie Berens
This information is provided by RNS
The company news service from the London Stock Exchange
END
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