TIDMAN.
RNS Number : 2578R
Alternative Networks plc
08 December 2016
Alternative Networks plc
Results for the year ended 30 September 2016
Alternative Networks plc, ('the Company' or 'the Group'), a
leading provider of IT managed services and business-to-business
communications, reports its Preliminary Results for the twelve
months ended 30 September 2016.
HIGHLIGHTS
Performance in line with revised expectations with growth in
Advanced Solutions recurring revenues and strong cash generation
alongside significant operational enhancements
-- Revenue declined 7.5% to GBP135.8m (2015: GBP146.8m)
o Advanced Solutions recurring revenue growth of 2% offset by
non-recurring revenue decline of 17%, resulting in the overall 6%
Advanced Solutions revenue decline.
o Fixed Line and Mobile revenue declined 11% and 8%
respectively.
-- Adjusted EBITDA decreased 16.6% to GBP18.4m (2015: GBP22.1m)
-- Continued strong cash generation
o Operating cash conversion of 84% of adjusted EBITDA (2015:
99%)
o Net debt of GBP19.1m (2015: GBP18.7m)
o Net debt leverage under 1.1 times adjusted EBITDA
-- No final dividend has been proposed due to the Board
announcement on 21 November 2016 of the recommended offer by Daisy
Intermediate Holdings plc for the entire share capital of
Alternative Networks plc.
KEY FINANCIAL INFORMATION
Audited results for the year 2016 2015 Change
ended 30 September
GBP'000 GBP'000 %
Revenue 135,803 146,816 -8%
Adjusted Operating profit* 15,040 19,194 -22%
Adjusted EBITDA* ** 18,382 22,051 -17%
Adjusted Profit before taxation* 14,077 17,900 -21%
Adjusted Earnings per share***
- basic 23.4 p 28.4 p -18%
- diluted 23.2 p 27.8 p -17%
Dividend per share 6.2 p 16.4 p -62%
Operating profit 10,247 15,100 -32%
Profit before tax 9,284 13,806 -33%
Earnings per share - basic 15.8 p 23.8 p -34%
- diluted 15.6 p 23.3 p -33%
* Profit before intangible assets amortisation excluding
software, exceptional items and share based payments
** Earnings before interest, taxation, depreciation and
amortisation
*** Adjusted earnings per share is based on adjusted profit
after tax as set out in note 11
Mark Quartermaine, Chief Executive of Alternative Networks,
commented:
"2016 has been a challenging year overall, impacted by two
unforeseen events; being the mobile roaming tariff reset and the
uncertainty in the run up to and caused by the result of the United
Kingdom's European Union membership referendum. These events
impacted the financial performance of the Group, but we have
continued to invest in the business and drive improvements in
customer service and operational performance whilst launching new
innovative products.
The improved profit performance in the second half of 2016,
together with the high recurring revenue levels in the Group and
continued robust cash generation, means that the Board is confident
that the business is well placed for the future. The combination
with Daisy will ensure that the Group is best placed to capitalise
on future growth opportunities and remain the provider of choice
for our customers. In particular, the strong complementarity and
strategic fit between Daisy and Alternative Networks will ensure
our competitiveness and benefit our customers through access to a
broader range of unified communications solutions"
Enquiries:
0870 190
Alternative Networks 7444
Mark Quartermaine, Chief Executive
Officer
Gavin Griggs, Chief Financial Officer
Investec Bank PLC - Nominated Adviser 020 7597
and Joint Broker 5970
Patrick Robb / Carlton Nelson /
Andrew Pinder
020 7220
finnCap Limited - Joint Broker 0565
Stuart Andrews
020 3772
Bell Pottinger 2500
Elly Williamson / Anna Legge
CHAIRMAN'S STATEMENT
CHAIRMAN'S STATEMENT
Introduction
The 2016 financial year has seen Alternative Networks' financial
performance impacted by two external events; the UK mobile carriers
new tariffs on rest of world roaming and the impact of the
uncertainty in the run up and immediately after the United
Kingdom's European Union membership referendum. Despite these
events we have made good progress in driving further business
improvements that will benefit customers and help us return to
growth. We have continued to strengthen our offering, adding
further market leading products and services that can meet
customers' communications and data needs. The investments we have
made are delivering good operational results and position us well
for the future.
Results
Reported revenue for the year ended 30 September 2016 was
GBP135.8m, down 8% on 2015. Gross margins remained steady and
adjusted EBITDA at GBP18.4m was 17% below the prior financial
year.
Cash generation has remained strong across the Group with 84% of
adjusted EBITDA converted to cash. Group net debt at 30 September
2016 was reduced to GBP19.1m (30 September 2015: GBP18.7m).
Recommended offer by Daisy Intermediate Holdings
On 21 November 2016, the Board announced a recommended cash
offer by Daisy Intermediate Holdings plc to acquire the entire
issued and to be issued share capital of Alternative Networks
plc.
Review of operations
The acquisitions made in 2014 are fully integrated into the
Advanced Solutions division, which now represents more than 53% of
Group revenue. Revenue in the Advanced Solutions division comprises
multiyear contractual arrangements with customers (recurring) and
one off hardware and other sales (non-recurring). Advanced
Solutions recurring business grew in the financial year, although
both recurring and non-recurring new business performance were
lower over the summer following the United Kingdom's European Union
membership referendum, and we closed the year with a strong GBP5.0
million order backlog (2015: GBP5.2m). The division also enjoyed
some excellent new client wins, and reinforced its particularly
strong presence in the Higher Education sector.
Mobile Network Services was impacted by the mobile roaming
tariff reset in the first half of the financial year but, following
management actions, underlying performance stabilised in the second
half of the year. Despite the challenges we continued to grow
market share, with an increased number of subscribers in a
competitive market, representing a very creditable achievement. As
expected Fixed Voice revenue was down on the previous year and in
line with market trends, and the division now represents less than
20% of Group revenues. Our market leading Synapse portal has
continued to be a key differentiator, and we continue to drive
further enhancements to its functionality, stability and
reliability.
Growth strategy
The last year has been one of investment as we focus on becoming
one of the UK's leading providers of IT managed services to UK
businesses. This investment has been made to enable the Group to
take maximum advantage of the expanded portfolio of services it has
steadily developed, both in-house and through acquisition.
We have built a strong platform, and are positioned to use our
breadth of products and services to establish ourselves as the long
term supplier of choice for a larger customer target base and drive
organic growth. The outlook for the Group and its growth prospects
are positive but it should be recognised that the growth strategy
is subject to execution risk and changes in the market environment.
In this context, the mobile tariff reset and the uncertainty caused
by the outcome of the referendum on the United Kingdom's continued
membership of the European Union were unwelcome developments. As
the Referendum is still relatively recent, the potential longer
term impact on Alternative Networks' future trading performance is
unclear.
We are able to invest further in product development so as to
remain at the cutting edge of the market and maintain our
competitive strengths. The growth of our pipeline, the increasing
number of larger businesses taking more of our services and the
conversion rate of orders, suggest that our strategy is working and
can continue to deliver value. We therefore remain positive about
future prospects for the business.
James Murray
Executive Chairman
7 December 2016
Chief Executive Officer's Review
Overview
Despite the trading challenges, the Group has continued to focus
on operational improvement projects, and investing to create a
strong platform to support future growth. This has resulted in a
business that is well placed to increase sales and deliver even
greater customer satisfaction in the coming years.
The major highlights of the year were as follows:
-- Continued gains in key growth areas;
o Mobile subscribers increased 6% to 105,490 (2015: 99,413)
o Advanced Solutions recurring revenues growth of 2%
-- Major product development with the release of new 'as a
service' consumption based propositions as well as enhanced
versions of existing products. These include;
o OnlineUC; Online Compute and Online Storage which all offer
our customer modern, high functionality solutions that complement
our existing portfolio and drive recurring revenues and margins
-- A significant investment in our customer service
infrastructure that ensures we can now provide a single interface
and improved customer service experience for all customers.
The enhanced product offering and investments in improving
operational performance provide the Group with a solid platform for
future growth. The Group is better positioned to expand both its
managed service product portfolio and its selling capability to
deliver the portfolio to new and existing customers more
effectively.
Trading and performance overview
In 2016 the Group trading performance was below the level seen
in 2015 as two external factors impacted the business: the UK
mobile carriers new tariffs on rest of world roaming and the impact
of the uncertainty in the run up and immediately after the United
Kingdom's European Union membership referendum. This has resulted
in decreases in reported revenues, gross profit and adjusted EBITDA
compared with the prior period. Group reported revenues of
GBP135.8m were 8% below the level of 2015, with gross profit 9%
below and adjusted EBITDA 17% below 2015.
Cash generation was once again strong, with operating cash
conversion of 84% of adjusted EBITDA. As a result, net debt was
GBP19.1m, which was broadly in line with our stated objective of
one times adjusted EBITDA.
The Advanced Solutions business was 6% below the prior year. Non
recurring revenue was impacted by the slowdown in new business
orders over summer 2016 in the run up and immediately following the
United Kingdom's European Union membership referendum and was 17%
below the prior year. Recurring revenue was 2% ahead of the prior
year driven by growth in On Demand Services. Trading performance in
Managed Services has been solid, with minimal client attrition. New
orders have been generated across the portfolio, with some notable
areas of success particularly in Higher Education.
The Mobile business was significantly impacted by new tariffs
introduced in the first half of the financial year by the UK mobile
carriers which reduced the revenue and profitability of rest of
world roaming. Following actions taken by management, performance
has stabilised in the second half of the year with improved gross
margin levels as a direct consequence of management's actions taken
including new carrier arrangements. The underlying performance was
good in the period, gaining market share with a 6% increase in the
subscriber base year on year, and more than 1,700 subscribers
signed that will connect by the end of the first quarter of 2017.
Revenues were 8% below the prior year GBP37.4m, representing 28% of
the Group's overall revenue.
Fixed Voice revenues were 11% below the prior year, in line with
expectations. Gross profit was more resilient at 7% behind the
prior year due to the positive impact of new commercial agreements
signed in the period. Whilst we continue to manage the product set
for profitability, the key focus remains the migration of the fixed
line base to SIP channels which have grown 32% year on year.
Overall the Fixed Voice business now represents less than 19% of
the Group's revenue.
Strategy
The Group's strategy is to become the leading IT managed
services provider for UK businesses, via both organic and
acquisitive growth. The Group operates in the UK Telecoms and
Information Technology (IT) market as an IT Managed Services
company covering the full spectrum of services and products from
device to the datacentre.
The financial performance of the Group, including revenues,
profits, cash flows and net debt is set out in the Chief Financial
Officer's Review together with a discussion of the KPIs of the
Group.
Platform for growth
2016 has been another year of progress and change. Key areas of
investment have been product development and IT application
development focused on providing customers with a further enhanced
experience and improving the Group's operational efficiency. These
combined investments have not only improved our offering to
customers, but will also increase productivity and collaboration
amongst our people and allow easier integration of future
acquisitions.
The Board is committed to 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 have
invested in the development of a platform and products that allow
customers to bridge private and public cloud services, in addition
to routine recurring capital investments. The technical strategy is
focussed on three elements:
o 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);
o Infrastructure services - in mobile, WAN, voice
and hosting; and
o Significantly enhanced Synapse customer portal
to include IT services and extend to public cloud
services.
The Group infrastructure and hosting services are critical to
the delivery of this strategy and in 2016 we have launched our own
UC cloud platform and OnlineCompute, Alternative's cloud
infrastructure platform.
All products are now supported by a group wide rollout of
ServiceNow (a market leading case management system). This provides
us the platform to offer improved customer service and alongside
the integration with our Synapse portal, improved visibility and
control of a customer's infrastructure.
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:
o winning larger customers in our target markets;
o using improved customer service and Synapse to
drive improved customer retention across the
wider product set;
o improved product penetration across our customer
base; and
o product development and innovation to increase
value to our customer base.
In 2016 the average spend per client was up 2.7% on the prior
year demonstrating the successful implementation of the strategy.
At the period end, average monthly spend of our 'large customers'
(i.e., those with a monthly spend in excess of GBP1,000) remained
in line with 2015, reflecting a satisfactory level of customer
service.
The Group's ability to win large contracts with new customers
has been proven once again in 2016 including sizeable deals with
Channel 4 and the North Lincolnshire and Goole NHS Trust.
Product penetration statistics continue to show a broadening
uptake of services from across our customer base, with increases in
sales per customer showing that our customer service levels
continue to improve.
Product penetration across the customer base remains strong,
with 46% of customers taking more than one product (2015: 46%) and
the proportion taking 4 or more products increasing to 18%
(2015:17%). This is in line with the Group's stated strategy of
growing the average size of the customers, via enterprise sales and
driving product penetration in our existing base.
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 continually look at new product
offerings 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 2016 we have added IaaS (Infrastructure
as a Service) and an Online Voice offering.
Year to September 2016 2017 plans
----------- ----------------------------------- -------------------------
Advanced Online Unified Communications Enhancement of
Solutions ("OnlineUC" - formally ApaaS) security portfolio
enhanced to include a broader and services.
set of UC applications including
call recording, contact
centre and call analytics.
OnlineUC enhanced to provide Synapse development
a voiced optimised IaaS focusing on automation
service Hosted UC. of service provision
increasing customer
self service capability
and allowing services
simpler and quicker
to deploy.
OnlineStorage Platform implemented
to provide wider range of
Hybrid IT services.
OnlineBack up platform offering Introduction of
implemented to increase Hyperscale offering
customer capability to manage (public cloud
back and archive data. services) consultancy
and professional
services.
OnlineCompute an enhanced
Managed IaaS platform built
on public cloud technology.
Continued growth of the Introduction of
Online Desktop (DaaS) product software defined
line. WAN capabilities
ECB developed enhancing
portal services and providing
a unique Managed Service
capability. Allowing service
based views.
Enhancement of Synapse service
capability across all product
areas in advanced solutions.
Mobile Introduction of cloud based Integrate our
Voice Mobile security offering. mobile security
offering.
Synapse development
to enhance customer
estate management.
----------- ----------------------------------- -------------------------
Fixed Diversified SIP Carrier SIP Based ISDN
Voice Capability replacement
Introduced International Synapse development
SIP capability to enhance customer
estate management.
----------- ----------------------------------- -------------------------
Portal development
Central to this strategy is the use of Synapse, the Group's
dynamic service interface, offering customers significant service
and flexibility benefits. During 2016 the Group has continued
developing Synapse as well as continuing the process of converging
the other, wider Group portal systems into it, providing an
enhanced interface, covering the Group's device to datacentre
portfolio.
Growth by acquisition
The Group's cash generative nature has facilitated the
significant reduction in net debt since the 2014 acquisitions.
This, combined with the strong balance sheet, leaves us well placed
to capitalise on further opportunities and as such the Group
monitored the market proactively during 2016 for further
"right-fit" acquisitions. Potential opportunities were targeted to
complement the existing products and to further expand our
capabilities and product set in the Advanced Solutions area, with a
focus on managed and hosted services, applying strict selection
criteria.
The Group's long standing and consistently strict criteria for
acquisitions remains unchanged. Targets must:
o be successful, growing, highly cash generative,
and profitable;
o have customers that provide cross selling opportunities
for the Group; and
o be earnings enhancing in the first full year
of ownership.
Outlook
The strategic acquisitions in 2014 and the transformational
projects in 2015 and 2016 have resulted in an IT Services business
with a unified operational structure, a fully invested sales force
and a market leading product portfolio, able to deliver end-to-end
solutions to a larger and more receptive customer base. Product
penetration statistics continue to show a broadening uptake of
services from across our customer base, with increases in average
sales per customer showing that our customer service level
continues to exceed expectations.
The outlook for Group and its growth prospects remain positive;
its growth strategy is subject to execution risk and changes in the
market environment. The dividend payments and dividend policy have
been an important part of the Group's investment case. While the
Board reiterated its intention to deliver annual growth in the
dividend of no less than 10 per cent in the recent trading update
released on 27 September 2016, the Alternative Networks Directors
also believe that, in the longer term, any growth in dividends will
need to reflect the growth in the Group's underlying profits.
The combination with Daisy will ensure that the Group is best
placed to capitalise on future growth opportunities and remain the
provider of choice for our customers. In particular, the strong
complementarity and strategic fit between Daisy and Alternative
Networks will ensure our competitiveness and benefit our customers
through access to a broader range of unified communications
solutions.
Mark Quartermaine
Chief Executive Officer
7 December 2016
Chief Financial Officer's Review
Results & trading overview
In 2016 the Group experienced continued growth in Advanced
Solutions recurring revenues, and continued strong cash
performance. The Advanced Solutions segment now accounts for 54% of
Group revenues (2015: 53%) with a reduction in the contribution
value from Fixed Voice services, which is in managed decline.
Year ended 30 September 2016
Advanced
Solutions Mobile Voice Fixed Voice Group
------------------------------------ ------------------------------------- ------------------------------------- ------------------------------------
Change Change Change Change
GBPm % GBPm % GBPm % GBPm %
Revenue 73.2 -6% 37.3 -7.7 25.3 -11% 135.8 -8%
Recurring 45.9 2% 37.3 -7.7 25.3 -11% 108.5 -
Non-recurring 27.3 -17% - - - - 27.3 -17%
Gross
profit 27.4 -7% 16.7 -12.4% 11.4 -7% 55.5 9%
Margin 37.4% -20bps 44.7% +240bps 45.3% +200bps 40.9% +50bps
In order to facilitate understanding of business performance,
the Group splits out its operating KPIs, both financial and
non-financial into three distinct revenue groups. 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. All recent acquisitions 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.
Group revenue decreased 7.5% to GBP135.8m (2015: GBP146.8m)
largely due to the slowdown in Advanced Solutions non-recurring
revenues, mitigated by the increase in recurring revenues. Coupled
with this, the fall in Mobile revenue of 7.7% (GBP3.0m) meant that
performance was unable to compensate for the managed decline of the
Fixed Voice Business, which fell 11.4% (GBP3.2m).
Gross profit decreased by 8.6% (GBP5.2m) to GBP55.5m. Gross
margins are level year on year, reflecting the effect of good
margin growth in Fixed Voice and margin stability in Advanced
Solutions, netted off by the pressures across Mobile owed to the
new tariffs on roaming rates implemented by the carriers. Further
analysis is detailed below by product.
Adjusted EBITDA at GBP18.4m was down GBP3.7m (16.6%). Throughout
the year the effects of the reduction in gross profits were
mitigated by savings in sales, operational costs and overheads by
GBP1.9m, reflecting the drive in Operational efficiency. The Group
also benefitted from a refund of National Insurance (GBP0.4m).
During the period the Group focused its resources on the
introduction of new products such as OnlineCompute and Hosted
Voice.
Advanced Solutions
Year Year Change
to to
30 September 30 September
2016 2015
GBPm GBPm
Revenue
Non Recurring
Hardware / Software 21.6 26.3 (17.6%)
Professional
Services 5.7 6.6 (13.4%)
Subtotal 27.3 32.9 (16.8%)
Recurring
Managed Services 17.2 17.6 (2.8%)
Online Desktop 4.0 3.3 20.0%
Maintenance 10.9 11.6 (6.1%)
Connectivity 9.4 8.3 13.1%
Billing 4.4 4.2 6.2%
Subtotal 45.9 45.0 1.8%
Total 73.2 77.9 (6.0%)
Gross Margins
Hardware / Software 19% 21% -200bps
Professional
Services 56% 59% -300bps
Recurring 44% 44% -
Advanced Solutions 37% 38% -100bps
Advanced Solutions revenues decreased by 6% to GBP73.2m. Decline
in the second half of the year was steeper than in the first half
as new business performance was lower over the summer following the
United Kingdom's European Union membership referendum.
Reassuringly, new business performance recovered well in August and
September. Growth in recurring products has maintained healthy
levels with GBP0.8m higher recurring income in 2016. New orders
have been generated across all industry verticals and notable
contract wins with new and existing customers.
The margin in Advanced Solutions is broadly level with the prior
year at 37% (2015: 38%) as a result of growth in higher margin
services including Online Desktop and Billing Services, netted
against some pricing pressure for larger deals involving legacy
hardware and maintenance solutions.
Managed services
Managed services encompass the Group's offerings in all hosting,
cloud and utility services, including all outsourcing services.
Growth in the recurring products in is a key focus with both
existing and new customers. High margins in this area represent the
added value nature of the services provided. The 2.8% decline in
revenue in the year reflects a combination of one off credits
following service outages (GBP0.2m), price renegotiation and a
small amount of client churn. Colocation revenue has remained
constant as the Group encourages clients to move towards higher
margin, fully managed services.
Online desktop
Online desktop represents the Group's cloud based Desktop as a
Service (DaaS) remote access offering, acquired as part of the 2014
acquisitions. Revenue growth was 20% as we seek to take a key
position in this growing market.
Maintenance
Maintenance represents work undertaken at customer sites by in
house resource or by third parties. Revenues have remained in line
with 2015. During the year the Group lost one of its key customers
which offset the new business won. Margins are in line 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
Connectivity revenues increased 13% to GBP9.4m in 2016 (2015:
GBP8.3m). This growth was generated from data connectivity sales to
both existing and new customers.
Hardware & software
Hardware and Software revenues comprise all individual
non-recurring direct sales across the Group, and decreased 17.6% to
GBP21.6m (2015: GBP26.3m). Gross margins have reduced slightly
across the Group due to a number of large deals where competitive
pricing has been offered in order to secure further growth
opportunities in higher margin products and services with recurring
revenue.
Professional services
Professional services revenue, comprising a mix of IT solution
design and installation of data hardware, decreased 13.4% to
GBP5.7m (2015 GBP6.6m) largely in reflection of the reduced
hardware sales seen in the year.
Billing services
Billing Services revenues were up 6.2% to GBP4.4m (2015:
GBP4.2m). This is as a result of further growth in sales to third
party customers and revenue from providing a hosted managed billing
service. Gross margins increased by 3.5% points to 56%, as the
Group maintained its high client retention level and delivered more
consultancy services to clients.
Telephony Services - Mobile
Year Year Change
to to
30 September 30 September
2016 2015
GBPm GBPm
Revenue 37.3 40.4 -7.7%
Gross profit 16.7 19.0 -12.4%
Gross margin (%) 45% 47% -240bps
Subscribers 105,490 99,413 6%
Recurring revenue 91% 93%
Mobile KPIs
Monthly ARPU (GBP) 29 34 -15%
Monthly ADPU (Mb) 326 170 92%
Network churn 19% 16%
Customer churn by
value 14% 14%
% Subscribers in-contract 82% 78%
Average contract length
(months) 25 26
Mobile revenues decreased 7.7% to GBP37.3m. Whilst the Group
continues to take significant market share, performance declined as
new tariffs on roaming rates implemented by the carriers adversely
affected gross profit and margins, which decreased 12.4% and 240bps
respectively.
There was continued high growth in the contract base with a 6%
increase in subscribers to 105,490 at the end of 2016. This is the
result of significant new connections, demonstrating a continued
ability to win in a flat market. Churn levels remained in line year
on year.
Mobile KPIs
The Group uses three principal KPIs to measure the performance
of Mobile Voice, being "ARPU", "ADPU" and churn.
-- "ARPU" represents the average spend in line
rental, voice and data usage charges per live
connection per month in the Group's contracted
base of subscribers. ARPU has reduced by circa
GBP5 (4%) to GBP29 in the year. Underpinning
this trend is the reduction in usage charges
associated with bundled packages and the general
trend in reduction in voice usage, partially
offset by increased data usage (see below).
-- "ADPU" represents the average data usage per
live connection per month in the Group's contracted
base of subscribers. The average ADPU for the
period has increased by 92% to 326Mb (2015 growth:
72%) demonstrating the rapid growth in data
usage.
-- Churn by value, which illustrates the retention
value of all contracted customers to the Group,
has remained in line with 2015 at 14%. Network
churn was higher at 19% which is up slightly
from 2015 (16%), an excellent performance in
a very competitive marketplace where it is easy
to switch between networks. The generally high
retention is a result of the overall client
experience covering the service offering and
the benefits of the Synapse portal.
Telephony Services - Fixed Voice
Year Year Change
to to
30 September 30
2016 September
2015
GBPm GBPm
Revenue 25.3 28.5 -11.4%
Gross profit 11.4 12.3 -7.3%
Gross margin % 45% 43% +240bps
Outbound monthly ARPU (GBP) 1,312 1,385 -5%
Number of lines/channels
(inc. SIP) 65,484 68,388 -4%
SIP lines 14,371 10,924 32%
Average customer contract
length (months) 31m 30m +1m
The market continues to operate on two-tiers with legacy fixed
voice providers seeing network traffic in decline by mid-single
digit rates and resellers and service providers migrating their
customers to IP services. The Group manages its Fixed Voice
Services in the context of the declining market place, whilst
improving market share and profitability, and continues to retain
its customer base via migration to SIP based telephony. In the year
the number of SIP lines has increased by 32% from 10,924 to
14,371.
Fixed Voice revenues declined 11.4% in 2016 to GBP25.3m as a
combined result of customer churn and reduction in call volume to
mobiles, regulatory price reductions and the continuing move to
email and mobile. However the Group has again succeeded in the
proactive management of this base with further commercial gains and
active retention.
The gross margin on this product set has continued to grow in
2016, from 43% to 45%, but with the revenue decline, total gross
profit has reduced 7.3% year on year. The growth in gross margin is
as a result of improved commercial arrangements from key
suppliers.
Outbound services
-- Outbound revenues decreased by 12% to GBP18.7m
(2015: GBP21.3m). The underlying performance
was in line with industry trends as the reduction
in call spends to mobiles, due to regulatory
price reductions, and a move to email, mobile
and IP based telephony, continues to cannibalise
traditional office based telephony revenues.
-- Outbound ARPU has reduced by 5% to GBP1,316
in 2016 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.
-- The number of lines in the estate declined by
4% to 65,484, with some of the churn being non
or low billing analogue lines that we have helped
customers identify using Synapse. The ongoing
transition to SIP has again progressed well
with a 32% rise in SIP lines.
Inbound services
-- Inbound services revenue decreased by 10% to
GBP0.7m (2015: GBP7.3m). Gross profit was 5%
down on 2015 at GBP3.5m.
-- Gross margins are up significantly year on year,
to 53.4% (2015: 50.1%), due to the new commercial
terms agreed and increased sales of the higher
margin NGN product.
Financial Overview
Adjusted and statutory results
In these results we refer to adjusted and statutory results.
Adjusted results are prepared to provide a more comparable
indication of the Group's underlying business performance. Adjusted
results exclude adjusting items as set out below and in note 27 to
the financial statements.
Restructuring, acquisition and associated costs
As a result of the various restructuring activities the Group
incurred non-recurring charges of GBP0.9m. This comprised GBP0.3m
of redundancy charges and GBP0.6m on restructuring and other
charges which includes GBP0.1m of refinancing costs, GBP0.1m of
costs associated with the proposed acquisition of the Company and
GBP0.1m of datacentre dual running costs.
Finance costs
Finance costs were GBP1.0m (2015: GBP1.3m) driven by the Group's
debt facilities in place for the whole year. In May 2016 the Group
amended and extended its existing financing facilities and
converted them into a GBP40 million revolving credit facility. At
September 2016 the margin applied to this facility had fallen to
1.35% over LIBOR based on a leverage position of the balance sheet
of less than 1.25.
Taxation
The effective tax rate for the year was 17.5% (2015: 17.0%). The
effective tax rate in the current period is lower than the UK
statutory rate principally due to the recognition of GBP0.1m of
prior year R&D credits that have been successfully received in
the current year and a reduction in the rate of tax at which
deferred tax assets and liabilities are measured.
Earnings per share
Basic adjusted earnings per share have decreased by 18% from
28.4p to 23.4p. Fully diluted adjusted earnings per share have
decreased by 17% to 23.2p (2015: 27.8p). Statutory (unadjusted)
fully diluted earnings per share have decreased 33% from 23.3p to
15.6p.
The weighted average number of shares in the year used for
calculating the basic earnings per share has increased by 300,454,
as outlined in note 11 to the financial statements. The dilutive
share number has decreased by 206,736, due to the fact that a
number of share options have lapsed during the year.
Net debt and bank facilities
In May 2016 the Group amended and extended the outstanding
amount of its incumbent GBP43m credit facility (previously
consisting of both a term and revolving facility) with a GBP40m
revolving credit facility. The principal financial covenants under
the new facility are limited to maximum net debt to EBITDA of 2.5
times (unchanged over the life of the loan) and minimum interest
cover of 5 times. The previous cashflow covenant has been
removed.
The year-end net debt balance was GBP19.1m (2015: GBP18.7m).
This is after GBP4.0m of total capital expenditure and paying
dividends of GBP8.3m. The net debt level is down from a peak of
GBP41.3m at the time of the acquisitions in January 2014.
Net debt performance is primarily driven by the strong operating
cash conversion of the business (see below) which has been greatly
facilitated by the completion of acquisition integration
activities.
Cash flow
Working capital and cash management remains a key priority of
the Group and once again cash flow has been good. Cash inflow from
operations was GBP15.5m (2015: GBP21.9m), compared to adjusted
EBITDA of GBP18.4m (2015: GBP22.1m), representing a cash conversion
of 84% (2015: 99%). Alongside this the Group debtor days stood at
32 days at the year end.
Year ended Year ended
30 September 30 September
2016 2015 Change
GBPm GBPm
Cash generated from operations 15.5 21.9 (29%)
Proceeds from sale of
property - non recurring - 3.8
Taxation (2.6) (1.3)
Capital expenditure -
underlying (4.0) (2.1)
Capital expenditure -
customer assets - (0.5)
Capital expenditure -
non recurring infrastructure - (2.7)
Finance cost (net) (1.0) (1.3)
Free cash flow 7.9 17.8
Free cash flow before
non-recurring items 7.9 16.7 (53%)
Dividends (8.3) (7.2)
Net cash flow (0.4) 10.6
Opening net debt (18.7) (29.3)
Closing net debt (19.1) (18.7)
Capital expenditure
Capital expenditure in the period was GBP4.0m compared to
GBP5.5m in 2015 when additional non-recurring investments in the
Group's infrastructure were made.
The remaining GBP4.0m of spend was in line with expectations and
previous periods, and represented further expenditure in respect of
IT development, including additional investment in a consolidated
customer portal service, expanding on the existing Synapse
functionality and investments in the existing CRM platform to
improve our service to customers and reduce operating costs.
In 2017 we expect capital expenditure to continue at routine
underlying levels, with some additional investment required across
our product portfolio's, including software development to ensure
our unique proposition is consistent across all service lines.
Dividend per share
No final dividend has been proposed due to the Board
announcement on 21 November 2016 of the recommended offer by Daisy
Intermediate Holdings plc for the entire issued and to be issued
share capital of Alternative Networks plc. The interim dividend was
6.2 pence per share (2015: 5.5 pence per share) making a total
ordinary dividend of 6.2 pence per share for the full year (2015:
16.4 pence per share).
Principal risks and uncertainties
Managing the financial, operational and reputational risks
across our business and operations is critical to our success.
Below we highlight the identified key areas of risk that are
monitored on an ongoing basis. The Group's Risk Management
Framework requires a regular review of the key risks facing the
Group.
Contracts with suppliers
The Group resells the products of its suppliers and whilst many
of the Group's products are supplier agnostic and there exists a
freedom to substitute various suppliers' products, the Group
acknowledges that it has reliance in particular on the contracts
with the mobile networks, O2 and Vodafone. Both managed service
agreements run until March 2018 and are subject to various
performance criteria which there is no guarantee will be met.
The Group mitigates these risks by maintaining strong
relationships with its suppliers at various levels of the business,
as well as paying close attention to ensuring the expectations of
suppliers are met, and where possible exceeded.
Technological change
The Group operates in a market of rapid and dynamic technology
changes, and there is a risk that the Group fails to secure the
necessary contracts to supply its customers with a new technology
(disruptive) which substitutes existing technology. The Group
mitigates this risk by maintaining close relationships with its
suppliers, and by employing a product development team whose duties
include research, review and procurement of appropriate new
technology products for testing prior to release to our
customers.
Ability to continue to attract and retain key sales and customer
management executives
Ability to continue to attract and retain key sales and client
management executives - the Group is a direct sales and marketing
business and whilst the revenues of the Group are largely recurring
on a monthly basis, the Group depends on being able to recruit and
retain staff of the right calibre in order to win and service key
contracts. The Group has sought to mitigate this risk by investing
in a succession and training plan for career development, and
improving the employee benefits and remuneration over the last
three years, including commissions, and specifically share options
and pension contributions. The Board monitors the results of exit
interviews, recruitment statistics and staff attrition by
department on a regular basis.
Regulatory risk
The Group acknowledges that the pricing of products and services
can be affected by regulatory bodies in the UK and the EU. In
recent years, usage pricing from fixed to mobile destinations and
EU Roaming mobile voice and data retail prices have been
substantially altered. The Board believes that where the pricing
regulations are directed at wholesale prices, the Group is more
able to mitigate the risk through its own buying and pricing
policies. Where the regulator imposes price caps at the retail
level, the Group is more exposed to a reduction in margin where the
operators do not substantially reduce their wholesale prices. The
Group mitigates the risks by careful and detailed research on the
future regulations, and has been involved in lobbying where
applicable. The Group assesses each risk and builds it into its
forecasts of income as soon as possible and amends its pricing
policies accordingly.
IT environment and control risk
The Group is increasingly dependent on IT systems for delivering
its products and services and for retaining customers, as well as
for running the operations of the Group. To date, the Group has
used its own internal expertise together with external consultants,
where necessary, to build its own IT infrastructure and software
products, and is continuing to invest each year in improving its
systems and adding more resilience. The Board believes the Group
mitigates the IT control risks in a number of ways. Firstly, it
employs a broad range of highly skilled IT personnel and ensures
that there is a succession and retention plan associated with these
highly talented individuals. Recommendations from audits are
tracked through by the Board. Secondly, the Group operates best
practise in its adherence with standards issued by the
International Organisation for Standardisation and the British
Standards Institute. Currently, the Group has accreditation for: -
ISO 27001: Information Security Management; ISO9001: Quality
Management; ISO 14001: Environmental Management; ISO20000 Service
Management and ISO 22301: Business Continuity Management in the
majority of its operating divisions. In order to retain these
accreditations, the IT control environment is regularly reviewed by
the British Standards Institute.
The Board believes that there is a satisfactory framework for
monitoring, assessing and reporting on these risks. There is also a
robust regular framework for reporting on predictive KPIs in the
business.
Gavin Griggs
Chief Financial Officer
7 December 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2016
Year Year
ended ended
30 September 30 September
2016 2015
Note GBP'000 GBP'000
Revenue 135,803 146,816
Cost of sales (80,307) (86,113)
----------------------------------- ----- ---------------------- --------------
Gross profit 55,496 60,703
Operating costs (45,249) (45,603)
----------------------------------- ----- ---------------------- --------------
Operating profit 10,247 15,100
Operating profit - analysed: 7
Adjusted operating profit 15,040 19,194
Share based payments (161) (1,309)
Amortisation of intangible assets
(excluding computer software) 5 (3,698) (3,698)
Income from property exit - 3,299
Restructuring, acquisition and
associated costs (934) (2,386)
----------------------------------- ----- ---------------------- --------------
Operating profit 10,247 15,100
Finance income - 3
Finance costs (963) (1,297)
----------------------------------- ----- ---------------------- --------------
Profit before taxation 9,284 13,806
Taxation (1,629) (2,339)
Profit and total comprehensive
income for the year 7,655 11,467
----------------------------------- ----- ---------------------- --------------
Earnings per ordinary share:
Basic 4 15.8p 23.8p
----------------------------------- ----- ---------------------- --------------
Diluted 15.6p 23.3p
----------------------------------- ----- ---------------------- --------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2016
Group Group
30 September 30 September
2016 2015
Note GBP'000 GBP'000
ASSETS
Non-current assets
Intangible assets 5 70,232 73,166
Property, plant and
equipment 4,792 4,917
Investments - -
Deferred tax asset 536 559
Property deposits 154 280
75,714 78,922
----------------------------- ----- ------------------------ ------------------------
Current assets
Inventories 394 1,293
Trade and other receivables 29,729 28,288
Cash and cash equivalents 4,389 2,362
34,512 31,943
----------------------------- ----- ------------------------ ------------------------
Total assets 110,226 110,865
----------------------------- ----- ------------------------ ------------------------
EQUITY AND LIABILITIES
Equity
Called up share capital 62 62
Share premium 6,608 6,600
Capital redemption
reserve 8 8
Merger reserve 2,749 2,749
Retained earnings 32,878 33,249
Total equity 42,305 42,668
----------------------------- ----- ------------------------ ------------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Called
up Capital
share Share redemption Merger Retained Total
capital premium reserve reserve earnings equity
a) b) c) d) e)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30
September
2014 62 6,563 8 2,749 27,728 37,110
Shares issued - 37 - - - 37
Reissue of
shares
by the trust - - - - 277 277
IFRS2 share
based
payments - - - - 1,078 1,078
Deferred tax
on
share options - - - - 4 4
Profit for the
year and
total
comprehensive
income - - - - 11,467 11,467
Dividends paid - - - - (7,305) (7,305)
--------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- --------
Balance at 30
September
2015 62 6,600 8 2,749 33,249 42,668
Shares issued - 8 - - - 8
IFRS2 share
based
payments - - - - 283 283
Deferred tax
on
share options - - - - (20) (20)
Profit for the
year and
total
comprehensive
income - - - - 7,655 7,655
Dividends paid - - - - (8,289) (8,289)
--------------- ---------------------- --------
Balance at 30
September
2016 62 6,608 8 2,749 32,878 42,305
--------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- --------
a) The balance classified as share capital includes
the proceeds arising on issue of the Company's
equity share capital, comprising 0.125p ordinary
shares and the cancellation of shares purchased
by the Company.
b) Share premium represents the difference between
the fair value consideration received and nominal
value of shares issued.
c) Capital redemption reserve arose from the purchase
of own share capital.
d) The merger reserve results from the previous
acquisitions of Integrated Communications for
Business (UK) Limited, Aurora Kendrick James
Limited, Scalable Communications plc and The
Telecom Centre Limited. This represents the difference
between the value of the shares acquired (nominal
value plus related share premium) and the nominal
value of the shares issued.
e) Retained earnings comprises the profits or losses
made by the Group, credits in connection with
the Group's share based payment charges recognised
in the Consolidated Statement of Comprehensive
Income and the balance of treasury shares owed
by the EBT.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 September 2016
Year ended Year ended
30 September 30 September
2016 2015
Note GBP'000 GBP'000
------------------------------- ----- ------------------------------ ---------------------------------
Cash flows from operating
activities
Cash generated from
operations 6 15,465 21,879
Income tax paid (2,593) (1,247)
Net cash generated from
operating activities 12,872 20,632
------------------------------- ----- ------------------------------ ---------------------------------
Cash flows from investing
activities
Purchase of property,
plant and equipment (1,787) (4,020)
Purchase of intangible
assets (2,194) (1,295)
Proceeds from sale of
property, plant and
equipment - 3,800
Interest received - 3
Net cash used in investing
activities (3,981) (1,512)
------------------------------- ----- ------------------------------ ---------------------------------
Cash flows from financing
activities
Interest paid (963) (1,298)
Dividends paid 3 (8,289) (7,305)
Proceeds from issue
of share capital 8 37
Transaction costs in
relation to loan facility (307) -
Proceeds from borrowings 2,687 -
Repayments of borrowings - (11,985)
Net cash used in financing
activities (6,864) (20,551)
------------------------------- ----- ------------------------------ ---------------------------------
Increase/(Decrease)
in cash and cash equivalents 2,027 (1,431)
Cash and cash equivalents
at start of year 2,362 3,793
Cash and cash equivalents
at end of year 4,389 2,362
------------------------------- ----- ------------------------------ ---------------------------------
NOTES TO THE FINANCIAL STATEMENTS
1 Basis of preparation
Alternative Networks plc is a company incorporated and domiciled
in the United Kingdom under the Companies Act 2006. The address of
the registered office is 5th Floor, 240 Blackfriars Road, London
SE1 8NW. The shares of the Company are listed on the Alternative
Investment Market.
This financial information is abridged and has been extracted
from the Group's full financial statements for the years ended 30
September 2016 and 2015.
The Group's financial statements have been prepared in
accordance with IFRS as adopted by the EU and IFRIC interpretations
and the Companies Act 2006 applicable to companies reporting under
IFRS. The financial statements have been prepared under the
historical cost convention.
Full financial statements for the year ended 30 September 2015
(which received an unqualified audit report) have been filed with
the Registrar of Companies. Financial statements for the year ended
30 September 2016 were approved by the Board of Directors on 7
December 2016 and will be presented to the Members at the
forthcoming Annual General Meeting.
2 Segmental information
IFRS 8, "Operating Segments" requires identification of the
Group's segments on the basis of the internal reporting about
components of the Group that is regularly reviewed by the chief
operating decision maker to allocate resources and to assess
performance.
The chief operating decision maker has been identified as the
Board. The Board reviews the Group's internal reporting in order to
assess performance and allocate resources. The Board assesses the
performance of the operating segments based on revenue and gross
profit. The reportable segments of the Group are Telephony Services
and Advanced Solutions.
Telephony Services consists of the Group's Fixed Voice and
Mobile Voice services. 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 the year ended 30 September
2016
Telephony Advanced
Services Solutions Total
GBP'000 GBP'000 GBP'000
Total segment revenue 62,638 73,341 135,979
Inter segment revenue - (176) (176)
Revenue from external customers 62,638 73,165 135,803
--------------------------------- -------------------------- ----------- ------------------------
Gross Profit 28,112 27,384 55,496
Operating costs (45,249)
Finance income -
Finance costs (963)
Profit before taxation 9,284
--------------------------------- -------------------------- ----------- ------------------------
Adjusted EBITDA 18,382
--------------------------------- -------------------------- ----------- ------------------------
For the year ended 30 September
2015
Telephony Advanced
Services Solutions Total
GBP'000 GBP'000 GBP'000
Total segment revenue 68,941 78,189 147,130
Inter segment revenue - (314) (314)
Revenue from external customers 68,941 77,876 146,816
--------------------------------- ------------------- ----------- ---------
Gross Profit 31,368 29,335 60,703
Operating costs (45,603)
Finance income 3
Finance costs (1,297)
Profit before taxation 13,806
--------------------------------- ------------------- ----------- ---------
Adjusted EBITDA 22,051
--------------------------------- ------------------- ----------- ---------
Assets and liabilities, operating profit, finance income,
finance costs and taxation 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.
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.
3 Dividends
30 September
30 September 2015
2016 GBP'000 GBP'000
2015 Final Paid - 10.90p (2014:
9.60p) per 0.125p ordinary
share 5,276 4,643
2016 First Interim Paid -
6.20p (2015: 5.50p) per 0.125p
ordinary share 3,013 2,662
--------------------------------- ----------------------- -------------
8,289 7,305
--------------------------------- ----------------------- -------------
The 2015 proposed final dividend of 10.9 pence per 0.125p
ordinary share (2014: 9.60 pence) was paid on 29 January 2016. The
amount of dividend paid was GBP5,276,000 (2015: GBP4,643,000).
The Company paid a 2016 interim dividend of 6.20 pence per
0.125p ordinary share (2015: 5.50 pence), with a total payment
value of GBP3,013,000 (2015: GBP2,662,000). This was paid on 8 July
2016 to shareholders on the register on 17 June 2016.
No final dividend is proposed by the Directors in respect of the
financial year ended 30 September 2016 (2015: 10.90 pence).
4 Earnings per share
The calculation of basic and fully diluted earnings per ordinary
share is based on the profit attributable to owners 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
dilutive potential ordinary shares. The Group has one category of
potential ordinary shares: 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:
Profit Weighted
attributable average
to owners of GBP0.00125
of the ordinary Per share
Basic and fully diluted company shares amount
earnings per share GBP'000 Number Pence
----------------------------- ---------------------- ------------------- --------------------
2016 Earnings per share
- basic 7,655 48,513,073 15.8
Potentially dilutive shares - 433,174 (0.2)
----------------------------- ---------------------- ------------------- --------------------
2016 Earnings per share
- diluted 7,655 8,946,247 15.6
----------------------------- ---------------------- ------------------- --------------------
2015 Earnings per share
- basic 11,467 48,212,619 23.8
Potentially dilutive shares - 940,364 (0.5)
----------------------------- ---------------------- ------------------- --------------------
2015 Earnings per share
- diluted 11,467 49,152,983 23.3
----------------------------- ---------------------- ------------------- --------------------
The adjusted EPS is based on the adjusted profit after tax as
set out in note 7, and the weighted average number of shares as
described above.
Weighted
average
Adjusted of GBP0.00125
profit after ordinary Per share
Basic and fully diluted taxation shares amount
earnings per share GBP'000 Number Pence
------------------------- ------------------- ------------------- --------------
2016 Earnings per share
- basic 11,360 48,513,073 23.4
Potentially dilutive
shares - 433,174 (0.2)
------------------------- ------------------- ------------------- --------------
2016 Earnings per share
- diluted 11,360 48,946,247 23.2
------------------------- ------------------- ------------------- --------------
2015 Earnings per share
- basic 13,681 48,212,619 28.4
Potentially dilutive
shares - 940,364 (0.6)
------------------------- ------------------- ------------------- --------------
2015 Earnings per share
- diluted 13,681 49,152,983 27.8
------------------------- ------------------- ------------------- --------------
Share option costs included within adjusted profit attributable
to owners of the company are reducing the earnings per share in
2016 by 0.3p (2015: 2.7p).
There were 49,759,471 shares in issue at 30 September 2016
(2015: 49,729,817). The weighted average number of shares during
the year was 48,513,073 (2015: 48,212,619).
5 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
2014 1,662 5,054 32,434 757 1,897 51,907 93,711
Additions - 1,295 - - - - 1,295
At 30
September
2015 1,662 6,349 32,434 757 1,897 51,907 95,006
Additions - 2,194 - - - - 2,194
-------------- -------------------- --------------- ------------------------ ------------------ ------------------- --------------- --------
At 30
September
2016 1,662 8,543 32,434 757 1,897 51,907 97,200
-------------- -------------------- --------------- ------------------------ ------------------ ------------------- --------------- --------
Accumulated
amortisation
At 1 October
2014 1,662 2,998 10,375 757 1,174 - 16,966
Charge for
the year - 1,175 3,476 - 223 - 4,874
-------------- -------------------- --------------- ------------------------ ------------------ ------------------- --------------- --------
At 30
September
2015 1,662 4,173 13,851 757 1,397 - 21,840
Charge for
the year - 1,430 3,476 - 222 - 5,128
-------------- -------------------- --------------- ------------------------ ------------------ ------------------- --------------- --------
At 30
September
2016 1,662 5,603 17,327 757 1,619 - 26,968
-------------- -------------------- --------------- ------------------------ ------------------ ------------------- --------------- --------
Net book
amount
At 30
September
2016 - 2,940 15,107 - 278 51,907 70,232
-------------- -------------------- --------------- ------------------------ ------------------ ------------------- --------------- --------
At 30
September
2015 - 2,176 18,583 - 500 51,907 73,166
-------------- -------------------- --------------- ------------------------ ------------------ ------------------- --------------- --------
At 30
September
2014 - 2,056 22,059 - 723 51,907 76,745
-------------- -------------------- --------------- ------------------------ ------------------ ------------------- --------------- --------
Amortisation has been charged through the income statement
within operating costs.
The carrying amounts of goodwill by reportable segment are as
follows;
Group Group Company Company
30 September 30 September 30 September 30 September
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
------------------ ------------------------ ------------------------ ------------------------ --------------------
Telephony
Services 5,685 5,685 1,436 1,436
Advanced
Solutions 46,222 46,222 327 327
------------------ ------------------------ ------------------------ ------------------------ --------------------
51,907 51,907 1,763 1,763
------------------ ------------------------ ------------------------ ------------------------ --------------------
Each operating segment is deemed to be a Cash Generating Unit
(CGU), being the lowest level for which cash flows are separately
identifiable. Goodwill is attributed to each CGU and reviewed for
the purposes of the annual impairment review as this is the level
that management monitors goodwill. The Group's operating segments
to which goodwill has been allocated are Mobile Voice and Advanced
Solutions.
During the year goodwill in respect of each cash generating unit
was tested for impairment in accordance with IAS 36. All CGUs were
assessed to have a value in use in excess of their respective
carrying values, and hence no impairments to goodwill were
considered necessary.
The key assumptions in the value in use calculations were:
The forecasts were based on pre-tax cash flows derived from
approved budgets for the 2016-2018 financial years. Management
believes the forecasts are reasonably achievable based on market
performance and its expectations of market developments. The
directors consider that the key metric in the forecasts is earnings
before interest, tax and amortisation. Subsequent cash flows were
extrapolated using a 1.0% (2014: 1.0%) growth rate reflecting an
approximate forecasted long term growth rate for the UK economy,
the Group's principal market.
The pre-tax discount rate used to assess the carrying value of
goodwill is 9.7% (2014: 10.0%) which approximates the Group's
weighted average cost of capital. This discount rate has been
calculated on a consistent basis.
The review performed at the year-end did not result in the
impairment of goodwill for any cash generating unit as the
estimated recoverable amount exceeded the carrying amount in all
cases. The Group undertakes sensitivity analysis based on
reasonably possible changes in assumptions by increasing the
weighted average cost of capital and reducing future growth
expectations in the model. The results of this analysis show no
indication of impairment.
6 Cash generated from operations
Year ended Year ended
30 September 30 September
2016 2015
Group GBP'000 GBP'000
----------------------------------- -------------------------------- --------------
Operating Profit 10,247 15,100
Adjustments for
Depreciation of property, plant
and equipment 1,912 1,681
Amortisation of intangible assets 5,128 4,874
Employee share scheme charges 161 1,309
(Profit)/loss on sale of tangible
assets - (2,399)
Movements in working capital
Inventories 899 (966)
Trade and other receivables (1,315) (1,594)
Trade and other payables (1,567) 3,874
----------------------------------- -------------------------------- --------------
Cash generated from operations 15,465 21,879
----------------------------------- -------------------------------- --------------
Year ended Year ended
30 September 30 September
Consolidated movement of net 2016 2015
debt: GBP'000 GBP'000
----------------------------------- -------------- --------------------------------
Net increase/(decrease) in cash
and cash equivalents 2,027 (1,431)
Capitalisation of loan fees 307 -
(Increase)/decrease in borrowings (2,687) 11,985
----------------------------------- -------------- --------------------------------
Total cash flows in net debt (353) 10,554
Net debt at beginning of year (18,735) (29,289)
----------------------------------- -------------- --------------------------------
Net debt at end of year (19,088) (18,735)
----------------------------------- -------------- --------------------------------
7 Reconciliation to adjusted performance
30 September 30 September
(a) Reconciliation of adjusted 2016 2015
EBITDA GBP'000 GBP'000
------------------------------------- ---------------------------------- --------------
Profit before tax 9,284 13,806
Adjustments
Amortisation of purchased customer
contracts and other intangibles
(excluding computer software) 3,698 3,698
Share based payments and associated
social security expense 161 1,309
Income from property exit - (3,299)
Restructuring, acquisition and
associated costs ( c ) 934 2,386
------------------------------------- ---------------------------------- --------------
Adjusted profit before tax 14,077 17,900
Finance income - (3)
Finance costs 963 1,297
------------------------------------- ---------------------------------- --------------
Adjusted operating profit 15,040 19,194
Add: Depreciation of property,
plant and equipment 1,912 1,681
Add: Amortisation of computer
software 1,430 1,176
Adjusted EBITDA 18,382 22,051
------------------------------------- ---------------------------------- --------------
30 September 30 September
(b) Reconciliation of adjusted 2016 2015
profits for earnings per share GBP'000 GBP'000
-------------------------------------- -------------- --------------
Adjusted profit before tax (see
above) 14,077 17,900
Less: Share based payments (161) (1,309)
Less: Taxation per consolidated
statement of comprehensive income (1,629) (2,339)
Less: Taxation on amortisation
of purchased customer contracts
and other intangibles (excluding
computer software) and exceptionals (927) (571)
Adjusted profit after tax 11,360 13,681
-------------------------------------- -------------- --------------
Adjusted EPS is calculated on adjusted earnings after deduction
of share option costs. This analysis is provided as the Group
considers it provides a truer reflection of the underlying
performance of the business and is common practice in the
investment analyst community.
(c) Restructuring, acquisition and associated costs consist of
the following:
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------------- -------------- --------------
Restructuring costs 565 1,823
Redundancy costs 369 563
--------------------- -------------- --------------
934 2,386
--------------------- -------------- --------------
8 Post Balance Sheet event
On 21 November 2016 the Board announced an agreement on the
terms of a recommended cash acquisition by Daisy Intermediate
Holdings Limited of the entire issued and to be issued ordinary
share capital of Alternative Networks plc. The acquisition values
the entire issued and to be issued ordinary share capital of
Alternative Networks plc at GBP165.3 million on a fully diluted
basis. If the transaction completes as expected the Company will
incur professional advisory fees of GBP2 million which have not
been recognised in these financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FSEESWFMSEDE
(END) Dow Jones Newswires
December 08, 2016 02:00 ET (07:00 GMT)
Alternative Networks (LSE:AN.)
Graphique Historique de l'Action
De Avr 2024 à Mai 2024
Alternative Networks (LSE:AN.)
Graphique Historique de l'Action
De Mai 2023 à Mai 2024