Alternative Networks plc Trading Statement (4861E)

TIDMAN.

RNS Number : 4861E

Alternative Networks plc

10 April 2014

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 2014.

Trading in the first half of the year gives the Board confidence that its full year expectations for the Group will be met. Highlights of the first half of the financial year are:

   --      Continued growth in market share  - good performance across the Group 

-- Strong continued gains in market share in mobile - subscriber base increased 11% year on year, and 5% since September 2013

   --      Good progress on integration of ControlCircle and Intercept IT acquisitions 

-- Continuing strong cash generation resulting in net debt of GBP35.7m, with a target of below GBP30.0m set for 30 September 2014

Trading performance - legacy Alternative business

In Advanced Solutions, orders signed in the first 6 months are 25% higher than last year on a like for like basis, thereby continuing the progress seen in the second half of 2013. New orders have been generated across the portfolio but there has been particular success in Higher Education with new contracts signed with four Universities, new to the Group, and a further three in the public and private health sector. In addition, the Group has recently signed a three year agreement with Menzies Distribution for LAN, WAN, mobile and voice and unified communication services, of which the LAN, WAN and mobile are new services being provided by Alternative. A number of the larger new contracts were signed in the second quarter and are expected to convert to revenues commencing in the second half of the current financial year. Furthermore a number of installations are planned for the summer period (e.g. to accommodate University holidays), resulting in an increase of systems backlog by more than GBP1.0m from September 2013. This phasing will mean a higher weighting of revenue and profits to the second half than previously experienced.

Market share in Mobile Network Services increased in the six month period, with 4,300 net additional connections bringing total mobile subscribers to over 85,700 at 31 March 2014. This represents growth of 11% on a 12 month basis due to both lower subscriber churn and customer wins in the period. In addition, there were more than 1,500 subscribers awaiting connection as at 31 March 2014 that had been won in the second quarter. Mobile revenues in the first half are expected to be up approximately 7% on the prior year comparative period. The success of mobile has enabled the group to renew its agreements with the key suppliers in the period, extending the contract lengths to 2018, and further guidance on the impact of improved commercial terms will be provided with the interim results.

Within Fixed Line Network Services the transition to SIP continues with a 25% increase in the number of channels, resulting in reduced line rental revenues, but overall fixed line revenues are in line with expectations and encouragingly, the trend has not deteriorated from the prior year.

Trading performance - ControlCircle and Intercept IT

Trading from the recent acquisitions, ControlCircle and Intercept IT, has been in line with management expectations. The integration of both businesses is progressing well with the first stage completed across the back office.

The Group has already signed 4 cross-sell contracts with customers, and encouragingly the cross-sell pipeline continues to grow; currently there are more than 100 opportunities being evaluated.

Each company has landed significant "new logo" contracts in the weeks since acquisition: In Control Circle's case a global insurance business, and in Intercept IT, a global law firm. There are signs of positive sales momentum building and similar to the rest of the Group, the financial performance of these businesses will be weighted to the second half of the financial year.

Cash flow

Cash generation remains strong across the Group. In connection with the acquisitions, the Group took on bank facilities of GBP43.0m. The net debt position at 31 March 2014 was approximately GBP35.7m (30 September 2013: Net cash GBP17.2m), down from a peak of GBP40.8m. This is after the GBP54.0m gross expenses of the two acquisitions and paying the final dividend of GBP4.2m for the prior financial year.

The Board has targeted a maximum net debt of GBP30.0m by 30 September 2014.

Dividends

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 2013; and then going forward in 2015 to progress towards a 15% annual growth target.

Interim Results

The results for the half year ended 31 March 2014 are expected to be released on 4June 2014.

Enquiries:

Alternative Networks 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 / Charlotte Stranner

Pelham Bell Pottinger 07802 442486

Archie Berens

This information is provided by RNS

The company news service from the London Stock Exchange

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