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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Alternative Net | LSE:AN. | London | Ordinary Share | GB00B05KXX82 | ORD 0.125P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 333.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMAN.
RNS Number : 0172P
Alternative Networks plc
03 June 2015
3(rd) June 2015
Alternative Networks plc
Interim Results for the six months ended 31 March 2015
Alternative Networks plc, ('the Company' or 'the Group'), a leading provider of IT managed services and independent business-to-business communications, reports its Interim Results for the six months ended 31 March 2015.
HIGHLIGHTS
-- Robust trading performance, with year on year growth in reported and proforma^ revenue, gross profit and adjusted EBITDA,
-- Strong cash performance, with cash conversion of adjusted EBITDA at 93% (2014:86%),
-- Market share gains notably in Advanced Solutions with significant increases in revenue, gross profit and signed backlog,
-- Integration of ControlCircle and Intercept IT well advanced, with cross sell pipeline at all-time high and office moves complete,
-- Progressive dividend policy reiterated:
o Interim dividend of 5.5p payable on 15 July 2015, up 12% year on year,
o Full year dividend to grow by no less than 10% year on year with a longer term target of 15% growth
-- On track to meet our full year expectations with positive outlook for second half
KEY FINANCIAL INFORMATION
Unaudited results for the 6 months 2015 2014 Change ended 31 March GBP'000 GBP'000 % Revenue 73,965 62,991 17% Adjusted Operating profit* 9,037 7,476 21% Adjusted EBITDA* ** 10,270 8,260 24% Adjusted Profit before taxation* 8,338 7,178 16% Adjusted Earnings per share*** - basic 13.0 12.2p 7% - diluted 12.7 12.0p 6% Interim dividend per share 5.5p 4.9p 12% Operating profit 6,301 4,888 29% EBITDA ** 9,635 6,873 40% Profit before tax 5,601 4,590 22% Earnings per share - basic 9.4p 7.5p 25% - diluted 9.3p 7.4p 26%
* Adjusted profits are stated before intangible asset amortisation excluding software, exceptional items and share based payments.
** Earnings before interest, taxation, depreciation and amortisation.
*** Adjusted earnings per share are based on profits as set out in Note 5.
^ Proforma statements are based on the Group being in its current structure from 1 October 2013
Edward Spurrier, Chief Executive Officer of Alternative Networks, commented:
"Alternative Networks has delivered another strong performance. The comprehensive service offering which we are now able to offer to customers is proving compelling. We have been able to increase the number of services we provide them, and are also better placed to attract new customers across a broader cross-section of the market, covering the entire communications and IT spectrum.
"At the same time, we have upgraded our physical and technical infrastructure, a seamless and controlled process which is enhancing all functions of our business, both internal and customer-facing. This was an important development and the fact that it was conducted so professionally reflects well on our entire organisation.
"We have never been better placed to exploit the market as it continues to evolve. It has always been our strategy to understand the dynamics of the market, anticipate its direction and be ready to meet the requirements of customers and that strategy is now delivering significant benefits. Our long term growth prospects are therefore very favourable."
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
Pelham Bell Pottinger 07802 442486
Archie Berens
CHAIRMANS STATEMENT
Introduction
Alternative Networks has continued to perform strongly and has again demonstrated our ability to integrate value adding acquisitions to create a stronger and more diversified offering. The first half of the year has also seen a significant reconfiguration of the Group's physical infrastructure, creating a more streamlined organisation, better suited to the needs of both customers and staff.
Results
A robust trading performance for the six months ended 31 March 2015 has delivered growth at all levels: reported and proforma revenue, gross profit and adjusted EBITDA have all increased. Total group revenues were up 17% to GBP74.0m (2014: GBP63.0m), with organic revenues excluding the contributions of the businesses acquired in 2014 up 7%. Mobile and Advanced Solutions grew revenues respectively by 9% underlying and by 52% on a reported basis (9% and 13% on an underlying or proforma basis respectively). The businesses acquired in January 2014, Intercept IT and ControlCircle, have been fully integrated into the Group. They made a full contribution in the first half of the current financial year but only a two month contribution to the comparative period, which explains the difference between reported and pro forma revenues. Adjusted operating profits were GBP9.0m, up 21% compared with the first six months of the previous year (2014: GBP7.5m).
Cash and Dividends
Net debt as at 31 March 2015 was GBP30.1m, (GBP29.3m at 30 September 2014), in line with the Board's expectations, and down from the peak of GBP40.8m in January 2014.
The net debt figure is after one-off capital expenditure of GBP2.4m on the Group's new London office space and IT infrastructure and payment of the FY14 final dividend of GBP4.6m. Since the end of the half year, proceeds of GBP3.8m from the sale of our former London office have been received. The Group remains strongly cash generative and the Board is targeting a reduction in net debt to below GBP20m by the end of the current financial year.
The Board has declared to pay an interim dividend of 5.5 pence per share which will be paid on 15 July 2015 which is a 12% increase on the interim dividend of 4.9 pence per share paid in 2014, and in line with the Company's progressive dividend policy. The Board has confirmed its intention to pay a total dividend for the year at least 10% ahead of the prior year. Going forward, the Group intends to progress the annual dividend growth towards 15%.
Trading Performance
A key factor underpinning the Group performance has been the successful integration of the acquisitions made last year. ControlCircle and Intercept IT have enabled the Group to provide a broader range of services, making the total proposition more attractive to newer and larger customers, and presenting greater opportunities for cross-selling products to our existing customer base. This can be seen in two important metrics: the average monthly spend of large customers in the first half of the year increased by 12% and the proportion of customers taking 5 or more products has increased from 16% to 18%, demonstrating the Group's increasing ability to cross-sell.
Advanced Solutions includes the two businesses acquired in 2014. The momentum in this area is at record levels, with several large contracts secured during the period and a strong backlog of orders. Revenue growth was achieved from all core products, and new orders have been received across a broad range of industry verticals. Margins were also higher, with growth of higher margin products such as professional services and managed hosting.
Mobile has again performed strongly, with further market share gains evidenced by an increase of 11% in subscriptions. Churn has remained low, helped by high quality service levels supported by the Synapse portal, and average data per user has increased dramatically, a trend we expect to continue as customers increasingly use mobile devices to consume more and more data. Mobile now accounts for 30% of total revenues
Our revenues in Fixed Voice has, as expected, continued to decline, with revenues 10% lower than the comparative period. This is in line with the dynamics of the market, as the increasing use of email and mobile as the primary forms of communication reduce the use of fixed line telephony, and regulatory price reductions and lower call volumes to mobiles also impact on revenues.
Growth Strategy
We continue to pursue a twin track growth strategy, combining organic growth with strategic acquisitions. Our track record of making value-adding acquisitions has been further enhanced by the successful ongoing integration into the business of Intercept IT and ControlCircle. Both businesses have filled gaps that had previously existed in our product portfolio and now enable us to cover all of a customer's communications and connectivity requirements from individual devices through networks to data centres. This is proving highly compelling, and the cross-selling of this entire collection of services is a key feature of our organic growth strategy. In the last year alone, there has been a significant uplift in the number of cross-selling opportunities that have been generated and developed. Several significant contracts with larger organisations have been won or are in the process of being finalised. This shows the scale of the opportunity in front of us.
We will continue to develop our product set, ensuring that customer service remains at the highest possible standards. Our Synapse portal remains the leading customer service tool of its type in the market, setting an industry benchmark. We recognise, though, that it needs to be continually maintained and enhanced in order to retain its competitive advantage.
With regards to future acquisitions, our strategy remains unchanged, although the immediate focus is ensuring that, having fully integrated Intercept IT and ControlCircle, we maintain the momentum that the addition of these businesses has created. Nevertheless, the Board will always consider other strategic acquisitions which complement the existing business, or, where appropriate, bolt-ons. The strict criteria of fit, value-add and price, that has served us so well thus far, will continue to be applied.
Board Changes
We have announced separately today that Edward Spurrier, Chief Executive Officer ("CEO") of Alternative Networks, is to step down as both CEO and as a director of the Company on 30 September 2015, being the end of the Company's financial year. Edward has previously notified the Board of his intention to retire at a point when an appropriate successor was appointed.
Edward has been a driving force behind the development, growth and success of Alternative Networks. As a director, he has led our strategy of organic and acquisitive expansion, which has transformed the business from a telecommunications reseller, into a thriving technology managed service provider. He has helped build a strong business with a great future and we are incredibly grateful for the contribution he has made.
After a careful selection process, the Board has now decided to appoint Mark Quartermaine as CEO from 1 October 2015. Mark Quartermaine is currently Chief Operating Officer of Alternative Networks, a position he has held for over 12 months, having previously been a non-executive director of the Company. I am pleased that the Board has been able to appoint an internal candidate of Mark's calibre and given his intimate knowledge of both the company and the industry, I am confident of a seamless transition.
Outlook
The first half of the year was a period of great change, as we moved from our old offices to new premises more centrally located in London. We also took the opportunity to upgrade our own IT infrastructure, and made several changes in senior management. Against this backdrop the Group was also able to deliver increased revenues and profits and this is testament not only to the strength of the business model, but also to the quality of our staff and I would like to thank them for their support during this time.
Having taken the opportunity to effect these changes, we are now better placed than ever to maintain our growth trajectory and even accelerate it. With new premises and a business structure aligned to the needs of our target market, we now have an outstanding opportunity to sell our full portfolio of products and services across a broader customer base. The second half of the year is expected to be stronger than the first, with a similar weighting as in 2014. Our confidence is supported by high levels of backlog, a strong pipeline and with a number of new clients signed up in new verticals offering considerable additional opportunities.
James Murray
Executive Chairman
Business & Strategic Overview
The Group's strategy remains unchanged, to become the leading IT managed services provider for UK businesses via organic and acquisitive growth.
Business performance
The Group has performed well in the first six months of the financial year, building on a successful prior year. The two businesses acquired in 2014, Intercept IT and ControlCircle, are now fully integrated into the Group, including all sales, operations and back office functions. The individual brands of the acquisitions ceased to operate in April 2015 and all sales activities are now managed under the Alternative brand. The Group is seeing clear benefits of the enlarged group including opening new market verticals and a broadening of the cross sales pipeline. This is evidenced by increases in reported revenues, gross profit and adjusted EBITDA compared with the prior period and on a proforma basis. Orders signed in the period were also up 18% across the Group. Cash generation was once again strong.
The 2014 acquisitions are included in Advanced Solutions which now represents 50% of the Group's revenue. Advanced Solutions revenue was 13% ahead of the prior year on a proforma basis. Momentum remains strong with proforma orders 17% higher than the prior year, continuing the progress seen in 2014. Stripping out the acquired businesses, revenue at GBP23.6m was up 31% and orders signed 39% above the level in the equivalent prior year period. This has resulted in a high level of backlog at the end of the half which gives confidence for the full year. In the current period the acquisitions good gross profit growth on a proforma basis, up 17%, with strong improvements in gross margin, +990bps ahead. This is as a result of improved product mix and represents an improvement in quality of earnings. ControlCircle has reported reduced revenues versus the prior year equivalent period. However, there were two specific reasons for this: deliberate reduced focus on low margin hardware sales and a strategic review by two of its largest customers who temporarily ceased new project implementations but have since resumed orders in the second half. Intercept IT has delivered proforma revenue growth of 7% in the period, which was also impacted by the deliberate reduction in low margin hardware and software revenue. Overall hosted solutions across the acquisitions are expected to make good progress in the second half of the year and the cross selling pipeline continues to grow.
The margin in Advanced Solutions is ahead of the prior year at 39% (2014: 37%) as a result of growth in higher margin services such as professional services and managed hosting.
The Mobile business has once again delivered a strong performance in the period, gaining market share with an 11% increase in connections year on year, and underlying revenues (which exclude the effect of revised commercial arrangements with suppliers) growing 9% to GBP22.4m. Mobile revenue now represents 30% of the Group's overall revenue.
Fixed Voice revenues were 10% below the prior year, in line with the market and the Board's expectations. Gross profit was more resilient at 5% behind the prior year due to the positive impact of new commercial agreements signed in the period. The key focus remains the migration of the fixed line base to SIP channels which have grown notably and nearly doubled year on year. Overall the Fixed Voice business now represents only 20% of the Group's revenue down from 26% in the equivalent prior period.
Platform for growth
The first half of 2015 has been a significant period of organisational and operational change in the Group's history. Major changes revolve largely around the Group's office space portfolio and IT infrastructure. The latter has focussed on migrating our infrastructure and applications to our datacentre facilities and therefore improving resilience.
The Group has transformed it's London office space, with the exit of 4 leases and the sale of one property for GBP3.8m shortly after the period end. This will lead to a net cash contribution of GBP3.0m to be recognised in the year. London operations are now concentrated in the Group's new headquarters in Southwark which showcases the Group's ability to create a fully modern connected environment.
These combined investments will not only improve our service offerings to customers, but will also increase productivity and collaboration amongst our people and allow easier integration of future acquisitions.
The Board is intent on building a broader and stronger platform for growth. We have set out our vision to be the leading IT managed services provider of choice to UK businesses. We are spending GBP0.75m developing the new infrastructure required to provide the services which customers need to bridge private and public cloud services. The technical strategy is focussed on three elements:
-- Significantly enhanced Synapse customer portal to include IT services and extend to public cloud services in due course;
-- On demand services - to be accessed through the portal and consumed per user per month (e.g. Email or Unified Communications ("UC")) or per unit of compute (e.g. storage); and
-- Infrastructure services - we will develop our ability to support on site services
The ControlCircle infrastructure and hosting services are critical to the delivery of this strategy and we are launching a hosted UC "as a Service" as well as a significantly enhanced "Desktop as a Service" later this year.
Strategically, we are positioning ourselves to continue to support our customers to consume business critical applications via a variety of communication methods, and this will support our growth aspirations going forward.
Organic growth
The Group continues to build successfully on the following four key areas of focus to deliver continued organic growth:
-- Winning larger customers in the SME space and targeting Enterprise customers;
-- Using improved customer service and Synapse, combined with the acquired portals to drive improved customer retention across the wider product set;
-- Cross and up selling of products across our customer base; and -- Product development and innovation to increase value to our customer base.
Our target customers are in the mid Enterprise market, particularly those customers with multi-sites and with 80 to 1000 employees. With a broadened product base, there are multiple entry points to these customers and an increased ability to sell the original Alternative Networks portfolio.
We continue to focus on winning larger customers (a 'large' customer being defined as having a monthly spend in excess of GBP1,000). At the period end the Group had 1,189 large customers, (31 March 2014: 1,228) and the average monthly spend of large customers increased 12% to GBP7,118 (2014: GBP6,383) reflecting a significant increase in the size of new customers to the Group.
The number of customers taking more than one product year on year has been maintained at 46% and the proportion taking 5 or more products has increased from 16% to 18%, demonstrating the success of the cross sell and upsell strategy. This is in line with the Group's stated strategy of growing the average size of the customers, via higher enterprise sales and cross sales. Whilst we experience a continued low level of overall churn of the customer base, this is higher amongst our small customers.
A key part of our organic growth strategy is to exploit cross selling opportunities within the Group, to improve product penetration and sell more high value products to new and existing customers. Since the acquisitions of ControlCircle and Intercept IT we have generated almost 300 cross sell opportunities, of which we have won 54, and are further developing 156 more. Included in these opportunities are two large deals close to completion which involve selling both Intercept and ControlCircle's products to existing Alternative Networks customers.
Portal development
The Group's portal Synapse, offers customers significant service and flexibility benefits. During the period, the Group has continued with the planned development of Synapse and the wider Group portal systems covering the Group's device to datacentre portfolio.
These developments have included both additional functionality and enhancing stability and reliability. Functional improvement has principally involved the addition of bolt-on management across the Mobile portfolio, allowing customers to control their tariff and estates fully, remotely and independently, thereby delivering user efficiencies. New users can now also benefit from enhanced assistance via the use of a new wizard, and more seamless control over initial set up and option setting.
As part of the wider transformation of our office and infrastructure estate the Group portal systems have been moved into a fully virtualised environment, alongside our other internal IT application suite, in order to ensure maximum viability and Mobility.
Product development
We have always aligned our technical strategy with our customers' needs and have now successfully transitioned the Group into IT managed services. We are now looking at new products to further support customers and align their IT with the needs of the end user, and to deliver bespoke IT solutions for our customers from the device to the datacentre. As a result we are well positioned to take increasing amounts of market share with new services, most importantly PaaS (Platform as a Service) and DaaS (Desktop as a Service) in which our products are innovative and market leading.
Growth by acquisition
The main focus remains on strategic acquisitions that complement the existing product set and can be seamlessly integrated, although the Group also considers bolt on acquisitions. Whilst the Group is currently focused on completing the integration of the 2014 acquisitions, maximising the cross sell opportunities and reducing debt levels, it will continue to be opportunistic in regards to acquisitions. We remain well placed to take advantage of any opportunities as they arise applying our usual strict selection criteria.
Results & Trading Overview
The Group has traded well, with strong continued growth in Advanced Solutions and Mobile telephony products and services, which together now account for 80% of Group revenues (75% H1 2014), and further reduced dependency on Fixed Voice services, which is in managed decline.
Advanced Solutions Mobile Fixed Voice Proforma Acquired Six Six months months Six months Six months to Change to Change to Change to Change 31 March 31 March 31 March 31 March 2015 % 2015 % 2015 % 2015 % GBPm GBPm GBPm GBPm Revenue 37.2 +13% 13.6 -8% 22.4 0% 14.4 -10% - Recurring 21.9 +5% 10.4 -2% - Non-recurring 15.3 +21% 3.3 -21% Gross profit 14.4 +21% 6.4 +17% 9.9 +8% 6.6 -5% Margin 38.9% +260bps 47.2% +990bps 44.2% +320bps 45.6% +250bps
Total reported revenue increased 17% to GBP74.0m (2014: GBP63.0m). Advanced Solutions business was significantly up, by 51% (GBP12.6m). Reported revenue in Mobile was in line with the prior year, underlying revenue (revenue earned directly from network providers based on sales volumes, which ceased during the prior year following the redrafting of relevant commercials), in Mobile grew 9% (GBP1.7m). Growth was partially offset by the managed decline in the Fixed Voice business, which was down 10% (GBP1.7m). On a proforma basis the Group would have grown 4% on the equivalent period in the prior year and 6% on an organic basis.
The businesses acquired in 2014 have been integrated into the broader Group. Intercept IT has seen good revenue growth of 7% on a pro-forma basis, whilst ControlCircle was 13% below as two key customers of undertook strategic reviews in the period placing new business orders on hold. This has now abated and growth for the second half is promising. Both acquisitions have delivered strong improvements in profitability with double digit gross profit growth reflecting the improved quality of revenue.
Reported gross profit increased by 23% (GBP5.8m), from GBP25.1m to GBP30.9m, with GBP3.6m (representing 10% growth) of the increased profit being derived from the acquired companies and with a further GBP2.2m from the organic business. Gross profit was 9% up on the prior year on an organic basis and 10% up on a pro-forma basis. Gross Margin increased by 200 basis points from 39.8% to 41.8% due to improved margins in Fixed Voice and the acquisitions. Further analysis is detailed below by product.
Adjusted EBITDA at GBP10.3m was up GBP2.0m (24%) on a reported basis and GBP0.6m (8%) ahead on an organic basis. During the period the Group has introduced a group-wide sales commission scheme encouraging higher margin and longer term sales growth, which has had a one off impact, increasing commission costs by GBP0.3m that will not recur.
Adjusted EBITDA is stated before non-cash intangible asset amortisation of GBP2.0m (H1 2014: GBP1.2m), IFRS2 share option costs of GBP0.7m (H1 2014: GBP0.1m), non-recurring charges relating to the acquisitions of GBP1.2m and non-recurring income relating to the property moves of GBP1.2m. Property charges comprised rent during fit out periods and income comprised lease exit incentives and non-refundable completion deposits on the property that was sold in early April 2015.
The Group's reported cash conversion was 93% (2014: 82%) of adjusted EBITDA, with all parts of the Group contributing positively, and improving the Group debtor days to below 30 days, following successful integration of the acquisitions.
Advanced Solutions*
12 months 6 months to 6 months to to 31 March 2015 31 March 2014 30 September 2014 Revenue Reported Organic Reported Organic Reported Non-Recurring Hardware / Software 12.1 10.7 8.2 6.6 21.1 Professional Services 3.3 1.3 1.8 1.1 5.9 Subtotal 15.4 12.0 10.1 7.7 27.0 Recurring Maintenance 5.6 5.6 5.4 5.4 10.7 Connectivity/WAN 3.9 3.9 2.9 2.9 6.3 Colocation 0.8 - 0.4 - 1.6 Managed Hosting 9.5 - 3.8 - 13.1 Billing 2.0 2.0 2.0 2.0 4.0 Subtotal 21.8 11.5 14.5 10.3 35.7 Total 37.2 23.5 24.6 18.0 62.7 Gross Margins Hardware / Software 25% 26% 23% 27% 23% Professional Services 53% 78% 54% 73% 59% Recurring 44% 36% 42% 37% 45% Advanced Solutions 39% 34% 36% 36% 39%
* In order to facilitate understanding of business performance, the Group splits out its operating KPIs, both financial and non-financial into three distinct revenue groupings. These are Advanced Solutions, Mobile and Fixed Voice. These enable the Group's performance to be benchmarked against competitors and allow the Board to control more clearly the underlying drivers to the Group's business. The acquisitions of ControlCircle and Intercept IT are reported in Advanced Solutions and have no impact on Mobile or Fixed Voice. For avoidance of doubt, the business does not operate separate trading divisions but sells a converged product offering, with teams of sales and service organised according to customer size. Going forward as both ControlCircle and Intercept IT are fully integrated into the Group there results will not be split out.
Advanced Solutions revenues increased by 52% to GBP37.2m on a reported basis and 13% to GBP37.2m over the previous period on a proforma basis. Furthermore the organic business revenue growth was 12% up on the second half of 2014, which had already experienced record growth over H1 2014 of 17%.
This momentum continues with signed orders at record levels, 17% ahead of the equivalent prior period on a pro-forma basis. This has resulted in a high level of backlog at 31 March 2015 which gives confidence in the continuing momentum in the second half.
Revenue and sales growth arose from all product types, and new orders have been generated across all industry verticals. Notable contract wins with larger customers included a wide scale networking contract for the London Internet Exchange and Homeserve for wide scale WAN and hosted voice migration.
The margin in Advanced Solutions is higher than prior year at 39% (2014: 37%) as a result of growth in higher margin services including professional services and managed hosting.
Hardware & Software
Hardware and Software revenues comprise all individual non-recurring direct sales, and increased 46% on a reported basis. Sales increased 62% on an organic basis, as ControlCircle and Intercept IT experienced lower non-recurring sales as they integrate within the group and shift strategically towards higher margin business. Organic sales growth reflects large new deals signed in the latter parts of 2014.
Professional Services
Professional services revenue, which is heavily orientated towards IT solution design, increased from GBP1.8m to GBP3.3m. Organic sales grew by 18% as a result of recent large project wins, generating a margin of 78%, and reflecting the high quality of service offered by the Group's technical experts. ControlCircle and Intercept IT contributed GBP1.9m of sales (2014: GBP0.7m) justifying the strategic focus on this high margin business. The full group margin has stabilised, following an initial fall resulting from duplication with the acquisitions and there is now a combined professional services function.
Maintenance
Maintenance revenues were broadly in line year on year as the Group continues to offer this service as an ongoing component of longer term contracts. Margins are also consistent year on year as the group has been able to renew contracts at historical pricing levels due to the service quality available to clients, and proactively churn any that involve lower pricing.
Connectivity/WAN
Connectivity revenues increased 35% to GBP3.9m in the period. This growth is generated from data connectivity sales and from SIP solutions for both existing and new customers. Sales growth has arisen from a number of key wins, including the UK-wide contract with Menzies Distribution signed in 2014. Margins have risen slightly year on year.
Colocation
Colocation revenue arises from recurring provision of datacentre hosting services to customers wishing to outsource and create a more flexible cost base. This revenue stream is a customer entry point to our data centre services and the focus is on then migrating that revenue to more added value managed hosting services.
Managed Hosting
Managed hosting encompasses the Group's managed services offerings in all hosting, cloud and utility services. Growth in this area is a key focus with both existing and new customers. High margins in this area represent the added value nature of the services provided.
Billing
Billing Services revenues and margins are in line with the prior year. The sales pipeline as at March 2015 is at record levels and has the potential to secure some larger customer wins in H2 2015.
Telephony Services - Mobile
6 months 12 months to to 30 September 6 months to 31 March 2014 Mobile 31 March 2015 2014 Revenue (GBPm) 22.4 22.4 43.8 Mobile Bonus revenue 0.6 2.3 2.8 Gross Profit (GBPm) 9.9 9.2 19.0 Gross Margin % 44.2% 40.9% 43.3% Subscribers 95,260 85,701 91,391 Gross new connections 13,899 12,252 25,089 Recurring revenue 84% 87% 89% Mobile KPIs Monthly ARPU (GBP) 39 39 39 Monthly ADPU (Mb) 143 84 99 Monthly average contract length 24m 24m 24m Network churn 14% 13% 14% Customer churn by value 10% 10% 11% % Subscribers in-contract 73% 75% 73%
Underlying Mobile revenues grew 9% year on year in the period (excluding the effect of bonus reductions), and furthermore reported and underlying revenues grew 5% over the second half of 2014. Mobile gross margins have increased to 44% from 41% (43% for the full year to 30 September 2014), with the key factor underpinning the improvement being the benefits of the commercial arrangements signed in 2014. Significant trends in the period were as follows:
-- The subscriber base has grown 4% organically to 95,260 since 30 September 2014, and 11% organically since 31 March 2014.
-- ARPU on the entire contracted base is in line with prior periods at GBP39 (periods ending March and September 2014: GBP39). The drivers of this include increased data usage with the ongoing shift from voice to data, in particular across Rest of World territories, tempered by the trend toward bundled data revenues.
-- The growth in data continues, and ADPU is up 70% to 143MB per month year on year. With the predominance of smart phones and the expansion of 4G networks we expect this will continue to grow rapidly.
-- Mobile churn remains at low levels, reflecting our ongoing focus on service and the quality of the Synapse portal. Network churn levels have increased slightly in the period resulting from churn of smaller billing customers, as evidenced by the relatively low churn by value of 10% (30 September 2014: 11%). Customer re-sign levels, especially in higher billing customers, have remained high and the number of subscribers in contract remains good at 73% (30 September 2014: 73%) reflecting value seen in the Groups service offering.
Telephony Services - Fixed Voice
6 months 6 months 12 months to to to 31 March 31 March 30 September Fixed Voice 2015 2014 2014 GBPm GBPm GBPm Revenue (GBPm) 14.4 16.1 31.3 Gross Profit (GBPm) 6.6 6.9 13.7 Gross Margin % 46% 43% 44% Outbound Monthly ARPU (GBP) 1,368 1,443 1,421 Number of lines/channels (inc. SIP) 71,985 75,573 72,027 SIP lines 10,196 5,222 7,424 Average customer contract length (months) 23m 25m 24m
Fixed Voice revenues declined 10% year on year in the period due to a combination of customer churn and reduction in call volume to mobiles, regulatory price reductions and the continuing move to email and mobile. Gross profit decline has been more resilient in the period compared to previous periods, at 5%, owing to the signing of new Inbound commercial agreements. This has led to gross margins rising to 46% from 43% in the prior year. Significant trends in the period were as follows:
-- The Group continues to proactively migrate the Fixed Voice base to SIP based telephony. The migration to SIP lines has increased the number of SIP Channels by 37% in the period to over 10,000.
-- The gross margin on this product set has grown again in the period, from 43% to 46% year on year, but with the revenue decline, total gross profit has reduced 5% year on year. The growth in gross margin is as a result of improved commercial arrangements from key suppliers.
-- Outbound revenues have decreased by 13% to GBP10.8m. Outbound call revenues were down 16% from GBP6.4m to GBP5.4m, due principally to the mobile termination rates reductions being passed onto customers and the ongoing migration to SIP with the equivalent lower rental charges to customers. Inbound revenues decreased by 2% from GBP4.0m in 2014 to GBP3.7m in the current period as a result of the loss of one of the larger Inbound customers (GBP0.2m).
-- The average revenue per customer per month ('ARPU') has fallen by 5% versus the prior year, as a result of a general reduction in spend resulting from the shift to mobile and data communications, tempered by an increase arising from the signing of new, larger, customers and churn of smaller customers.
Changes to property portfolio
As part of the integration of the Group, during the period the Group has rationalised its property portfolio and has reduced the number of properties around London from five to two, significantly enhancing the quality and increasing total space by 10% to accommodate future expansion. The Group has moved to a fully leased model, taking a 15 year lease on new headquarters in Southwark; this reduces interest charge but increasing rental charge.
In doing this one property was sold for GBP3.85m, completing in April 2015 and four leases were exited with no penalty and an exit incentive paid to the Group on one property. The overall rental charge increases by GBP0.5m in the current financial year and on a full year ongoing basis by GBP0.8m. The net pre-tax cash benefit in the current financial year will be around GBP3.0m with the majority arising in the second half of the financial year.
Cash flow and net debt
The Group continues to benefit from access to a GBP38.5m syndicated bank loan facility (a GBP43m facility reduced by GBP4.5m of term loan repayments), of which the average margin payable throughout the 2015 financial year is expected to be below 2.5%. In the 2015 financial year there are two payments against the term loan of GBP2.5m, one of which has been paid in January 2015 and the next is due in July 2015.
The period end net debt balance was GBP30.1m, (GBP29.3m at 30 September 2014), in line with the Board's expectations, and includes non-recurring capital expenditure of GBP2.4m on the Group's new London office space and relocation of IT infrastructure and payment of the FY14 final dividend of GBP4.6m. Post period end, the Group has received net proceeds GBP3.2m of cash related to the sale of a London property. The pre-tax net cash benefit of all of the property moves will be GBP3.0m.
Capital expenditure
Capital expenditure in the period was GBP4.1m compared to GBP0.7m in the six months to 31 March 2014, largely due to the addition of non-recurring investment, including office fit out costs of GBP2.0m, GBP0.4m of datacentre relocation costs in order to standardise and improve back office functionality and GBP0.4m of spares and tooling equipment as part of the signing of a large hardware and maintenance deal. The remaining GBP1.3m was in line with previous periods being further expenditure in respect of IT development, including the Synapse Portal.
Earnings per share and taxation
Adjusted basic earnings per share was up 7% to 13.0 pence, from 12.2 pence in the first half of 2014. The adjustments to earnings relate to non-recurring costs associated with property in the period, amortisation of acquired intangibles and share based payments which have been deducted in full from profits for these earnings calculations.
Basic earnings per share was at 9.4p, up from 7.5p in 2014. The weighted average shares in issue increased by 0.4m shares to 48.1m over the comparative period.
The estimated effective tax rate, before adjusting items, used for the period to 31 March 2015 is 18.9% as compared to 22.0% in the prior period. The rate is lower than the prior year due to a further reduction in the standard rate of corporation tax (from 22.0% to 20.5%) and the recognition of prior year R&D credits that have been received in the current year.
Going concern
After considering the Group's financial projections, available borrowing facilities, covenants on borrowing facilities and other relevant financial matters, the Board is satisfied that on the date of approving the financial statements, there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the Directors continue to adopt the going concern basis in preparing the financial statements.
Dividend
The Group's strong financial performance and cash generation has enabled the Board to maintain its progressive dividend policy. The Board has declared an interim dividend of 5.5 pence per share on 15 July 2015 which is a 12% increase on the interim dividend of 4.9 pence per share paid in 2014. The Board has confirmed its intention to pay a total dividend for the year at least 10% ahead of the prior year. The interim dividend will be paid on 15 July 2015 to shareholders on the register at 19 June 2015. Going forward, the Group intends to progress the dividend growth towards 15%.
Edward Spurrier
Gavin Griggs
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 March 2015
Six months Six months Year ended to to 31 March 31 March 30 September 2015 2014 2014 Note GBP'000 GBP'000 GBP'000 Revenue 10 73,965 62,991 137,767 Cost of sales (43,066) (37,878) (80,951) ----------------------------------- ---- Gross profit 30,899 25,113 56,816 Operating costs (24,598) (20,225) (45,276) ----------------------------------- ---- ---------- ---------- ------------ Operating profit 6,301 4,888 11,540 Operating profit - analysed: Adjusted operating profit 5 9,037 7,476 17,593 Share based payments (663) (92) (510) Amortisation of intangible assets (excluding computer software) 7 (2,026) (1,201) (3,496) Restructuring and other costs (1,217) (1,295) (2,047) Income from property exit 1,170 - - ---------- ---------- ------------ Operating profit 6,301 4,888 11,540 ----------------------------------- ---- ---------- ---------- ------------ Finance income 3 22 25 Finance costs (703) (320) (1,202) ----------------------------------- ---- Profit before taxation 5,601 4,590 10,363 Taxation 6 (1,059) (1,009) (2,285) ----------------------------------- ---- Profit and comprehensive income for the year 4,542 3,581 8,078 ----------------------------------- ---- ---------- ---------- ------------ Attributable to: Owners of the company 4,542 3,581 8,078 4,542 3,581 8,078 ----------------------------------- ---- ---------- ---------- ------------ Earnings per ordinary share: Basic 4 9.4p 7.5p 16.9p Diluted 4 9.3p 7.4p 16.6p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 March 2015 31 March 2014 30 September 2014 Note GBP'000 GBP'000 GBP'000 ASSETS Non-current assets Intangible assets 7 74,715 79,130 76,745 Property, plant and equipment 5,164 3,849 2,319 Deferred tax asset 1,230 2,195 1,446 Property deposits 281 153 154 81,390 85,327 80,664 ----------------------------- ---- ----------------- ------------------------ ------------------------ Current assets Asset held for sale 1,401 - 1,401 Inventories 266 245 327 Trade and other receivables 28,567 28,249 26,788 Cash and cash equivalents 9 4,568 4,616 3,793 34,802 33,110 32,309 ----------------------------- ---- ----------------- ------------------------ ------------------------ Total assets 116,192 118,437 112,973 ----------------------------- ---- ----------------- ------------------------ ------------------------ EQUITY AND LIABILITIES Equity Called up share capital 62 62 62 Share premium 6,593 6,563 6,563 Capital redemption reserve 8 8 8 Merger reserve 2,749 2,749 2,749 Retained earnings 28,452 25,259 27,728 ----------------------------- ---- Total equity 37,864 34,641 37,110 ----------------------------- ---- ----------------- ------------------------ ------------------------ Current liabilities Borrowings 9 6,640 3,867 5,111 Current tax liabilities 1,591 1,250 1,146 Trade and other payables 38,307 38,213 37,079 46,538 43,330 43,336 ----------------------------- ---- ----------------- ------------------------ ------------------------ Non-current liabilities Borrowings 9 28,010 35,455 27,970 Deferred tax liabilities 3,780 5,011 4,557 31,790 40,466 32,527 ----------------------------- ---- ----------------- ------------------------ ------------------------ Total liabilities 78,328 83,796 75,863 ----------------------------- ---- ----------------- ------------------------ ------------------------ Total equity and liabilities 116,192 118,437 112,973 ----------------------------- ---- ----------------- ------------------------ ------------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share premium Capital redemption Merger reserve Profit Total capital reserve and loss Equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Balance at 1 October 2013 62 6,534 8 2,749 25,783 35,136 Shares issued - 29 - - - 29 IFRS 2 share based payments - - - - 69 69 Deferred tax on share options - - - - 20 20 Comprehensive income for the period - - - - 3,581 3,581 Dividends paid (note 3) - - - - (4,194) (4,194) ---------------------------- ------------ ------------- ------------------ -------------- ------------ ------- Balance at 31 March 2014 62 6,563 8 2,749 25,259 34,641 IFRS 2 share based payments - - - - 350 350 Deferred tax on share options - - - - (8) (8) Comprehensive income for the period - - - - 4,497 4,497 Dividends paid (note 3) - - - - (2,370) (2,370) ---------------------------- ------------ ------------- ------------------ -------------- ------------ ------- Balance at 30 September 2014 62 6,563 8 2,749 27,728 37,110 Shares issued - 30 - - - 30 Reissue of shares held in trust - - - - 277 277 IFRS 2 share based payments - - - - 494 494 Deferred tax on share options - - - - 55 55 Comprehensive income for the period - - - - 4,542 4,542 Dividends paid (note 3) - - - - (4,644) (4,644) Balance at 31 March 2015 62 6,593 8 2,750 28,452 37,864 ============================ ============ ============= ================== ============== ============ =======
CONSOLIDATED statement OF Cash flowS
Six months to Six months to Year ended Notes 31 March 2015 31 March 2014 30 September 2014 GBP'000 GBP'000 GBP'000 ----------------------------------- ----- ----------------------------- ------------- ------------------------ Cash flows from operating activities Cash generated from operations 8 9,545 5,675 16,167 Income tax paid (923) (266) (1,376) Net cash from operating activities 8,622 5,409 14,791 ----------------------------------- ----- ----------------------------- ------------- ------------------------ Cash flows from investing activities;- Purchases of property, plant and equipment (3,602) (196) (846) Purchase of intangible assets (software) (468) (542) (1,230) Interest received 3 22 25 Purchase of subsidiary undertakings (net of cash acquired) - (51,372) (50,880) Net cash used in investing activities (4,067) (52,088) (52,931) ----------------------------------- ----- ----------------------------- ------------- ------------------------ Cash flows from financing activities;- Interest paid (703) (320) (1,070) Dividends paid 3 (4,644) (4,194) (6,564) Proceeds from issue of share capital - 30 29 Borrowings received/(repaid) 1,567 37,849 31,608 Net cash used in financing activities (3,780) 33,365 24,003 ----------------------------------- ----- ----------------------------- ------------- ------------------------ Increase / (decrease) in cash and cash equivalents 775 (13,314) (14,137) Cash and cash equivalents at start of period 3,793 17,930 17,930 Cash and cash equivalents at end of period 4,568 4,616 3,793 ----------------------------------- ----- ----------------------------- ------------- ------------------------
NOTES TO THE FINANCIAL INFORMATION
1. Basis of preparation
The financial information contained in this interim statement does not constitute financial statements as defined by section 434 of the Companies Act 2006. The interim report has been neither audited nor reviewed by the Group's auditors. The financial information for the year ended 30 September 2014 is derived from the statutory accounts for that period that have been delivered to the Registrar of Companies and included an audit report, which was unqualified and did not contain any statement under section 498 of the Companies Act 2006.
Alternative Networks plc's consolidated financial statements and this interim financial information have been prepared in accordance with IFRS and International Accounting Standards (IAS) as adopted by the European Union (EU). The accounting policies applied are consistent with those described in the Annual Report and Financial Statements 2014 except as described below. The Interim Report has been prepared in accordance with IAS 34 'Interim Financial Reporting' and should be read in conjunction with the 2014 Annual Report and Financial Statements.
New standards and interpretations not yet adopted and not relevant to the Group's operations
A number of new standards and amendments to standards and interpretations are effective for the annual periods beginning after 1 October 2014, and have not been applied in preparing these consolidated financial statements. None of these will materially impact the consolidated financial statements of the Group.
IFRS 10, 'Consolidated Financial Statements'
IFRS 11, 'Joint Arrangements'
IFRS 12, 'Disclosure of Interests in Other Entities'
IAS 27, 'Separate Financial Statements' (revised 2011)
IAS 28, 'Investments in Associates and Joint Ventures' (revised 2011)
Amendment to IAS 32, 'Financial Instruments: Presentation, on offsetting financial assets and financial liabilities'
Amendments to IFRS 10, 'Consolidated Financial Statements', IFRS 11 'Joint Arrangements' and IFRS 12 'Disclosure of Interests in Other Entities'
Amendment to IFRS 10, 'Consolidated Financial Statements' and IFRS 12 and IAS 27 for investment entities
Amendments to IAS 39, 'Financial Instruments: Recognition and measurement'
The Group plans to adopt and implement IFRS 15 'Revenue from Contracts with Customers' following endorsement by the EU.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
The interim results were approved by the Board on 2 June 2015.
In preparing the interim financial statements the Directors have considered the Group's financial projections, borrowing facilities and other relevant financial matters, and the Board is satisfied that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the Directors continue to adopt the going concern basis in preparing the financial statements.
2. Accounting policies
The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 September 2014, as described in those annual financial statements except as noted above. Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
3. Dividends
The reported dividend in these statements represents the 2014 proposed final dividend of 9.60 pence per GBP0.00125p ordinary share, which was paid on 30 January 2015 (2014: represents the 2014 proposed and paid final dividend of 8.60 pence per GBP0.00125p ordinary share). The amount of dividend paid was GBP4,644,000 (2014: GBP4,194,000).
The directors propose an interim dividend of 5.5 pence per GBP0.00125p ordinary share (2014: 4.9 pence), with a total payment value of GBP2,660,000 (2014: GBP2,435,000). The proposed 2015 interim dividend was approved on 2 June 2015, and has not been accrued in the financial statements. It will be paid on 15 July 2015 to shareholders on the register on 19 June 2015. The ex-dividend date is 18 June 2015.
4. Earnings per share
The calculation of basic and fully diluted earnings per ordinary share is based on the profit attributable to equity holders of the Company divided by the weighted average number of ordinary shares in issue during the year.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive ordinary shares. The Group has one category of potential dilutive shares, being those share options granted to employees where the exercise price is less than the average price of the Company's ordinary share during the year.
The profit and weighted average number of shares used in the calculations are set out below:
Basic and fully diluted earnings Profit attributable Weighted average Per share per share to shareholders of GBP0.00125 amount ordinary shares GBP'000 Number Pence --------------------------------- ------------------------- ---------------- --------- For the 6 months to March 2015 Earnings per share - basic 4,542 48,071,601 9.4 Potentially dilutive shares - 860,202 (0.1) Earnings per share - diluted 4,542 48,931,803 9.3 --------------------------------- ------------------------- ---------------- --------- For the 6 months to March 2014 Earnings per share - basic 3,581 47,657,368 7.5 Potentially dilutive shares - 881,093 (0.1) Earnings per share - diluted 3,581 48,538,461 7.4 --------------------------------- ------------------------- ---------------- --------- For the year to September 2014 Earnings per share - basic 8,078 47,709,701 16.9 Potentially dilutive shares - 888,307 (0.3) Earnings per share - diluted 8,078 48,598,008 16.6 --------------------------------- ------------------------- ---------------- ---------
The adjusted EPS is based on the adjusted profit after tax as set out in note 5, and the weighted average number of shares as described above.
Basic and fully diluted adjusted Profit attributable Weighted average Per share earnings per share to shareholders of GBP0.00125 amount ordinary shares GBP'000 Number Pence --------------------------------- ------------------------- ---------------- --------- For the 6 months to March 2015 Earnings per share - basic 6,232 48,071,601 13.0 Potentially dilutive shares - 860,202 (0.3) Earnings per share - diluted 6,232 48,931,803 12.7 --------------------------------- ------------------------- ---------------- --------- For the 6 months to March 2014 Earnings per share - basic 5,813 47,657,368 12.2 Potentially dilutive shares - 881,093 (0.2) Earnings per share - diluted 5,813 48,538,461 12.0 --------------------------------- ------------------------- ---------------- --------- For the year to September 2014 Earnings per share - basic 12,852 47,709,701 26.9 Potentially dilutive shares - 888,307 (0.5) Earnings per share - diluted 12,852 48,598,008 26.4 --------------------------------- ------------------------- ---------------- ---------
The calculation of the weighted average number of shares in issue excludes 1,626,403 shares held by the Alternative Networks Employee Benefit Trust (EBT) (2014: 3,034,090).
There were 49,714,010 shares in issue at 31 March 2015 (2014: 49,685,544 shares). The weighted average number of shares during the 6 months to March 2015 was 48,071,601 (2014: 47,657,368).
5. Reconciliation to adjusted performance Reconciliation of profit before tax to 31 March 31 March 30 September adjusted EBITDA 2015 2014 2014 GBP'000 GBP'000 GBP'000 --------------------------------------------- --------------- -------- ------------ Profit before tax 5,601 4,590 10,363 Adjustments Amortisation of purchased customer contracts and other intangibles (excluding computer software) 2,026 1,201 3,496 Share based payments 663 92 510 Income from property exit (1,170) - - Restructuring and other costs 1,217 1,295 2,047 --------------------------------------------- Adjusted profit before tax 8,337 7,178 16,416 Finance income (3) (22) (25) Finance costs 703 320 1,202 --------------------------------------------- --------------- -------- ------------ Adjusted operating profit 9,037 7,476 17,593 Add: Depreciation of property, plant and equipment 763 431 1,208 Add: Amortisation of software (intangibles) 470 353 790 Adjusted EBITDA 10,270 8,260 19,591 --------------------------------------------- --------------- -------- ------------ Reconciliation of adjusted profits for 31 March 31 March 30 September earnings per share 2015 2014 2014 GBP'000 GBP'000 GBP'000 --------------------------------------------- ------------- --------- ------------- Adjusted profit before tax (see above) 8,337 7,178 16,416 Less: Share based payments (663) (92) (510) Less: Taxation per consolidated statement of comprehensive income (1,059) (1,009) (2,285) Less: Taxation on amortisation of purchased customer contracts and other intangibles (excluding computer software) (383) (264) (769) Adjusted profit after tax 6,232 5,813 12,852 --------------------------------------------- ------------- --------- -------------
Adjusted EPS is calculated on adjusted earnings after deduction of share option costs.
This analysis is provided as the Group considers it provides a more appropriate reflection of the underlying performance of the business.
6. Taxation on profit on ordinary activities
Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full year. The effective tax rate for the period to 31 March 2015 is 18.9% (period ended 31 March 2014: 22%).
The effective tax rate used in the current period is lower than the prior period due to a further reduction in the standard rate of corporation tax for the year (from 22.0% to 20.5%) and the recognition of prior year R&D credits that have been successfully received in the current year.
The actual effective tax rate for the full year ending 30 September 2015 may be higher following the successful sale of property in the second half of the year.
7. Intangible assets Group Purchased Computer Customer Trade Technology Goodwill Total customer software contracts names contracts and relationships GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------- ---------- --------- ------------------ ------- ---------- -------- ------- Cost At 1 October 2013 1,662 3,363 11,231 757 1,007 19,560 37,580 Additions - 1,230 - 1,230 Acquisitions - 461 21,203 - 890 32,345 54,899 ------------------------- ---------- --------- ------------------ ------- ---------- -------- ------- At 1 October 2014 1,662 5,054 32,434 757 1,897 51,905 93,709 Additions - 468 - - - - 468 Acquisitions - - - - - - - At 31 March 2015 1,662 5,522 32,434 757 1,897 51,905 94,177 ------------------------- ---------- --------- ------------------ ------- ---------- -------- ------- Accumulated amortisation At 1 October 2013 1,662 2,208 7,089 736 985 - 12,680 Charge for year - 790 3,286 21 189 - 4,286 ------------------------- ---------- --------- ------------------ ------- ---------- -------- ------- At 1 October 2014 1,662 2,998 10,375 757 1,174 - 16,966 Charge for period - 470 1,915 - 111 - 2,496 At 31 March 2015 1,662 3,468 12,290 757 1,285 - 19,462 ------------------------- ---------- --------- ------------------ ------- ---------- -------- ------- Net book amount At 31 March 2015 - 2,055 20,144 - 612 51,905 74,715 ------------------------- ---------- --------- ------------------ ------- ---------- -------- ------- At 30 September 2014 - 2,056 22,061 - 723 51,905 76,745 ------------------------- ---------- --------- ------------------ ------- ---------- -------- ------- At 1 October 2013 - 1,155 4,142 21 22 19,560 24,900 ------------------------- ---------- --------- ------------------ ------- ---------- -------- -------
Goodwill arising on the subsidiaries acquired in January 2014 has not been adjusted and the 12 month review period ended in the current period.
8. Cash generated from operations Six months Six months Year ended to to 31 March 2015 31 March 2014 30 September 2014 GBP'000 GBP'000 GBP'000 ----------------------------- ------------------------- ---------------------------- --------------------------- Operating profit 6,301 4,888 11,540 Adjustments for Depreciation of property, plant and equipment 763 431 1,208 Amortisation of intangible fixed assets 2,495 1,554 4,286 Employee share scheme charges 663 69 419 Profit on sale of tangible assets - - 2 Movements in working capital Inventories 61 (62) (144) Trade and other receivables 609 (1,261) 95 Trade and other payables (1,347) 56 (1,239) Cash generated from operations 9,545 5,675 16,167 ============================== ========================= ============================ =========================== 9. Analysis of movement in net debt As at As at 1 October Cash flow 31 March 2015 2014 GBP'000 GBP'000 GBP'000 Net Cash: Cash at bank and in hand 3,793 775 4,568 -------------------------- ------------------- --------- ------------- Debt Debt due within one year (5,111) (1,529) (6,640) Debt due after one year (27,970) (40) (28,010) --------- ------------- Total debt (33,081) (1,569) (34,650) -------------------------- ------------------- --------- ------------- Net debt (29,288) (794) (30,082) -------------------------- ------------------- --------- -------------
10. Segmental information
Per IFRS 8, operating segments require identification on the basis of internal reporting about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance.
The chief operating decision maker has been identified as the Board. The Board review the Group's internal reporting in order to assess performance and allocate resources. The operating segments are Telephony Services and Advanced Solutions which are reported in a manner consistent with the internal reporting to the Board. The Board assesses the performance of the operating segments based on revenue, gross profit, net profit and EBITDA.
Telephony Services consists of two revenue streams, fixed voice and mobile. Advanced Solutions includes the installation and maintenance of telephone systems, the integration of computer networks, the provision of managed hosting solutions and the provision of billing facilities.
For six months ended 31 March Telephony Advanced 2015 Services Solutions Total GBP'000 GBP'000 GBP'000 ----------- ----------- -------- Total segment revenue 36,777 37,317 74,094 Inter segment revenue - (129) (129) Revenue from external customers 36,777 37,188 73,965 ------------------------------------ ----------- ----------- -------- Gross Profit 16,476 14,423 30,899 ------------------------------------ ----------- ----------- -------- Operating profit 5,706 595 6,301 Finance income 1 2 3 Finance costs (703) - (703) Taxation (912) (147) (1,059) Profit / (loss) after tax for the year 4,092 450 4,542 ----------- ----------- -------- EBITDA 6,216 3,344 9,560 ------------------------------------ ----------- ----------- -------- Other information Additions to non current assets (other than financial instruments and deferred tax assets) 2,838 1,232 4,070 Depreciation and amortisation 510 2,748 3,258 ------------------------------------ ----------- ----------- -------- For six months ended 31 March Telephony Advanced Total 2014 Services Solutions GBP'000 GBP'000 GBP'000 ---------- ---------- ------- Total segment revenue 38,498 24,771 63,269 Inter segment revenue - (278) (278) Revenue from external customers 38,498 24,493 62,991 ----------------------------------- ---------- ---------- ------- Gross Profit 16,118 8,995 25,113 ----------------------------------- ---------- ---------- ------- Operating profit 5,376 (488) 4,888 Finance income 11 11 22 Finance costs (313) (7) (320) Taxation (1,132) 123 (1,009) Profit after tax for the year 3,942 (361) 3,581 ---------- ---------- ------- EBITDA 6,061 812 6,873 ----------------------------------- ---------- ---------- ------- Other information Additions to non current assets (other than financial instruments and deferred tax assets) 537 201 738 Depreciation and amortisation 685 1,300 1,985 ----------------------------------- ---------- ---------- ------- For the year ended 30 September Telephony Advanced Total 2014 Services Solutions GBP'000 GBP'000 GBP'000 ---------- ---------- ------- Total segment revenue 75,114 63,215 138,329 Inter segment revenue - (562) (562) Revenue from external customers 75,114 62,653 137,767 ----------------------------------- ---------- ---------- ------- Gross Profit 32,603 24,213 56,816 ----------------------------------- ---------- ---------- ------- Operating profit 11,384 156 11,540 Finance income 13 12 25 Finance costs (1,190) (12) (1,202) Taxation (1,790) (495) (2,285) Profit after tax for the year 8,417 (339) 8,078 ---------- ---------- ------- EBITDA 12,669 4,365 17,034 ----------------------------------- ---------- ---------- ------- Other information Additions to non current assets (other than financial instruments and deferred tax assets) 1,282 794 2,076 Depreciation and amortisation 1,285 4,209 5,494 ----------------------------------- ---------- ---------- -------
Assets and liabilities are not disclosed by segment as they are not reported to the chief operating decision maker.
Transactions with the largest customer of the Company are less than 10% of Group revenue and do not require disclosure for either 2014 or 2015.
All sales have taken place within the United Kingdom and those between segments are all carried out on arm's length basis.
All non-current assets are located within the United Kingdom.
11. Post balance sheet events
Subsequent to the year end the Group has exited two of its London properties, with the sale of one property for a total consideration of GBP3.8m.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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