TIDMAN.
RNS Number : 7336B
Alternative Networks plc
09 October 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 year ended 30 September 2015.
Highlights of the year were:
-- Good performance in Advanced Solutions with solid growth in both revenues and orders signed
-- Strong performance as expected in Mobile with further gains in market share and an 9% increase in the subscriber
base year on year and 4% since March 2015
-- GBP1.0m investment in increasing account management resource to drive product penetration across the existing
customer base
-- Completion of the integration of 2014 acquisitions with the businesses rebranded Alternative and all teams now
located together in new facilities
-- Continuing strong cash generation with closing net debt materially ahead of target at GBP18.7m (target GBP20m)
down from peak level of GBP41m in January 2014
-- The Board remains committed to its progressive dividend policy and intends to propose a dividend at least 10%
above the level of the ordinary dividend paid in 2014, progressing towards its longer term target of 15% annual
growth in due course
Trading performance
Advanced Solutions
Overall performance in the business has been good with the
momentum seen over recent periods continuing. Total orders signed
in the year were 3% higher than the prior year on a like for like
(proforma) basis, with growth aided by strong growth in the Systems
part of the business in particular.
In keeping with wider market trends, the Group saw a slightly
lower level of orders in the run up to the May General Election,
but in the fourth quarter to September orders signed have returned
to expected levels. As a result of this performance we expect
revenue growth of at least 10% in the financial year and we ended
the year with more than GBP4.0m of order backlog. New orders have
been generated across the portfolio, with some notable areas of
success particularly in Higher Education, where the Group has
signed contracts with fourteen universities and thirty three
schools and colleges during the year.
Hosted Managed Services and On Demand Services, formerly parts
of ControlCircle and Intercept IT, are reported in Advanced
Solutions and are now fully integrated into the Group with all
teams located in a new, combined London office and the businesses
rebranded as Alternative. Trading performance has been
satisfactory, with minimal client attrition. As previously
reported, performance in the year was moderately impacted by two
major customers putting new orders on hold pending internal
strategic reviews, resulting in lower non-recurring revenues. Of
these, one customer has returned to its pre-review order profile.
Now that the businesses are fully integrated we are encouragingly
seeing improving order trends overall, which we expect to continue
into the new financial year.
Mobile Network Services
Trading in Mobile Network Services was as expected, with the
Group increasing market share with subscriber growth of 9% over the
year against a continuing competitive market landscape. Over 4,000
net additional connections were added in the six month period to 30
September 2015 with a further 1,300 signed that will connect in the
first quarter of the financial year, bringing total mobile
subscribers to over 99,400 at 30 September 2015. ARPU performance
has been supported by continuing increases in data usage, largely
offsetting voice and tariff erosion although we saw a change in
data roaming mix away from the rest of the world to the EU over the
summer period. Overall, mobile revenues for the full year are
expected to be up on the prior year on a reported basis and
approximately 8% ahead on an underlying basis after stripping out
the revenue impact of new commercial arrangements that began in
April 2014.
Fixed Voice Network Services
Overall performance of fixed line network services was in line
with market trends and this product group now contributes less than
20% of Group revenues. Line rental revenues continue to decrease,
as expected, driven by the transition to 'SIP' with circa 3,500
(representing a 47% increase) additional channels added in the
year.
Investment
2015 has been a period of investment and change for the Group
which will enhance its future market position. In the year there
have been a number of major investments and structural changes:
-- Investment of circa GBP1m in increasing Account management
resource and Sales capability to improve customer retention and the
cross selling capability of the expanded product portfolio into the
customer base
-- Rebranding all businesses in the Group under the Alternative
name
-- Restructuring of the property portfolio to enable all
Customer facing and technical staff to be located together in new
facilities resulting in GBP2.7m of exceptional capex
-- Shift of all legacy on-premise IT infrastructure and hosted
services into state-of-the-art managed secure datacentres; and
-- GBP0.8m exceptional capital investment in the Hosted Managed
Services and Online Desktop infrastructure, as identified at the
time of acquisition, to improve resilience and enhance all DaaS
(Desktop as a Service) services. This will provide the backbone for
future on-line cloud services and has facilitated the launch of on
demand managed service products.
The new premises and IT infrastructure provide the Group with a
sound platform for future growth, providing the infrastructure to
organically expand the managed service product portfolio and the
selling capability to deliver the portfolio to new and existing
customers more effectively.
Cash flow
Cash generation remains strong across the Group with good
operating cash conversion. The Group net debt position at 30
September 2015 was GBP18.7m (30 September 2014: net debt GBP29.3m),
comfortably surpassing the GBP20m target outlined in June and down
from GBP41m at the time of the acquisitions at January 2014. This
includes exceptional capital expenditure of GBP2.7m on the Group's
new London office offset by GBP3.1m of net cash related to the sale
of a London property.
Dividends
The Board remains committed to its progressive dividend policy
and for 2015 it intends to propose a dividend at least 10% above
the level of the ordinary dividend paid in 2014. Moving forward,
and as previously communicated, the Board intends to move towards
annual dividend growth of 15%.
Preliminary Results
The results for the year ended 30 September 2015 are expected to
be released on 9 December 2015.
Enquiries:
Alternative Networks plc 0870 190 7444
Mark Quartermaine, 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
Bell Pottinger 020 37722573
Elly Williamson/Archie Berens
This information is provided by RNS
The company news service from the London Stock Exchange
END
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