3rd Sep 2007 07:02
Alternative Networks plc03 September 2007 3 September 2007 Alternative Networks plc Acquisition of The Telecom Centre Ltd, trading as Echo Communications The Board of Alternative Networks plc ("Alternative Networks" or the "Group"), aleading independent business-to-business telecoms reseller, is pleased toannounce the acquisition of The Telecom Centre Ltd, trading as EchoCommunications ("Echo"), and its subsidiaries for a maximum consideration of£14.3 million (the "Acquisition"). The initial consideration of £12.0 millionis payable in cash of £11.0 million and through the issue of 590,882 newordinary shares in Alternative Networks to principal shareholders in Echo(representing approximately 1.3% of the Group's current issued share capital).The cash element of the initial consideration will be funded through the Group'sexisting cash resources. The initial cash consideration of £12.0 million is subject to adjustment (up ordown) once Echo's net asset position at completion has been determined.Together with other agreed adjustments, the maximum additional cashconsideration payable by Alternative Networks is approximately £0.6 million. Deferred consideration of up to £2.3 million is payable one year from completionof the Acquisition based on the performance of key divisions within Echo overthe next 12 months. Approximately £2.1 million of the deferred consideration ispayable in cash. The balance of approximately £0.2 million of deferredconsideration will be paid to the principal shareholders of Echo by the issue tothem of up to 113,809 new ordinary shares (representing a further 0.2% of theCompany's current issued share capital). In certain circumstances AlternativeNetworks may pay cash rather than issue shares in respect of deferredconsideration. All new ordinary shares issued as consideration will be credited as fully paidand will rank pari passu with the existing ordinary shares. It is expected thatadmission of the initial consideration shares will become effective on Friday 7September 2007. The Echo shareholders who will receive shares have agreed thatthey will not dispose of any such shares for one year after Completion. About Echo Established in 1987, Echo sells a converged suite of telecom and data productsranging from digital and IP based Private Branch eXchanges ("PBX") through tofixed line and mobile services. Based in Earlsfield, London, Echo employs 120people, including 30 sales based staff and 45 engineers. Similar to AlternativeNetworks, Echo has invested in its own direct sales force and client managersselling to mid market Enterprise businesses and Small and Medium Enterprises. Echo's latest audited accounts for the financial year ended 31 March 2007reported turnover of £15.4 million, with pre-exceptional EBITA of £1.1 million.At 31 March 2007, Echo had net assets of £2.0 million. Currently, Echo has netassets in excess of £1 million. On March 27 2007, Echo acquired for £1 millionthe contracted customer base of a competing London based PBX maintenance andnetwork services provider, including 200 customers, which made no contributionto revenues or profits in the period. Echo focuses on PBX sales and maintenance, which represented nearly two thirdsof turnover in the year ended 31 March 2007, and the deferred consideration of£2.3 million is dependent on these revenues and profits. Echo has attained thehighest possible accreditation from its key suppliers and is a Platinum resellerfor both Mitel and Avaya. Echo also provides maintenance services to customerswith Alcatel, Ericcson and Panasonic PBX Systems. Maintenance services arerecurring revenues with long term contracts and were £3.2 million in the yearjust ended. The remaining third of the business includes Fixed and mobile voice and dataproducts such as fixed line services, WLR, data circuits and services, andmobile, where it is a reseller of O2 and Vodafone network products. Fixed linerevenues last year were £3 million. Within this figure, WLR revenues were only10%, compared to 25% for Alternative Networks, showing room for growth. Echo'smobile revenues of £2 million were generated by approximately 2,100 connections. Echo has a long established business customer base across the UK. Customersnumber approximately 1600 in total and include Augusta Westland, BPP, WatsonWyatt Worldwide, Henderson Global Investors, and Diesel Clothing. The founder director and majority shareholder Richard Bampfylde will remain withthe business, as will sales director Simon Turner and operations director RayWilliams. Rationale for the acquisition After a comprehensive and careful search for an acquisition to enhanceAlternative Networks' position in the market, the Board is confident that theacquisition of Echo will add significantly to the Company's scale andexperience, improving its market position. Echo's strong relationships with Avaya and Mitel and their broader experience inSystems complements Alternative Networks' existing smaller presence and,combined with Alternative Networks' strength in their Networks and Mobileofferings, creates a more balanced Group with a much broader offering in AdvanceSolutions. The Board of Alternative Networks believes future growth lies inconverged mobile products and in a new suite of fixed line products convergedwith broadband access; and the Board is confident that this acquisition willensure the Group is better placed to take advantage of that evolution. In addition there are a number of key benefits: • An excellent customer fit in the small/mid enterprise market of 50 to500 employees, with clear cross-selling opportunities particularly in Mobiledata and WLR where Echo is sub scale. • A broader product range in PBX and data enabling the Group to servicea wider group of customers and to sell a broader range of solutions to theirexisting customers, which is expected to reduce customer attrition across thebase. • Echo has a successful track record in selling, installing andmaintaining larger Systems for small corporate customers and, more recently, thepublic sector, both of which present new opportunities for the Group. • The similarities between Echo and Alternative Networks in itscultures, direct sales methods, geographical locations and customer profiles,are expected to facilitate rapid integration and provide a sound platform onwhich to accelerate growth. • The acquisition is expected to be earnings enhancing for the yearended 30 September 2008. James Murray, CEO of Alternative Networks, commented: "Acquisitions are a key part of our growth strategy and we are extremely pleasedthat our thorough search of many potential acquisitions over the past 18 monthshas delivered such an excellent opportunity. We believe Echo's 20 yearexperience in systems, will enhance our offerings and make this a perfect fitfor the business as we consolidate our position in this niche market. Followingthis acquisition, we will be able to sell more products to an expanded SMEcustomer base, and in time, a wider, more complex telephony switch to a broadercustomer set. I see this acquisition as a cornerstone in building acomprehensive converged product offering, and it will put us in a powerfulposition as the PBX and mobile phone become interoperable and convergencebecomes a reality." Richard Bampfylde, founding director and majority shareholder of Echo commented: "I and the Board of Echo are very excited by this transaction. As a seriouscompetitor, we've been watching Alternative Network's progress with interestover the years and the opportunity to combine our complementary skill sets wastoo good for us to turn down. Given the synergies between the two companies, wefeel that the combination of Echo and Alternative Networks will enhance both ourofferings and present a higher quality of service to clients as well as offerplenty of exciting growth opportunities for the enlarged group." As trading continues in line with expectations the Board retains the positiveoutlook it expressed at the Interim results and believes the Group will meet itsexpectations for the current year. -ends- EnquiriesAlternative Networks plc 0870 190 7444James Murray, Chief Executive OfficerEd Spurrier, Chief Financial Officer Financial Dynamics 020 7831 3113Juliet Clarke/Hannah Sloane Notes to Editors About Alternative Networks Alternative Networks is a UK business-to-business communications reseller. TheGroup offers a full range of fixed line, mobile, voice and data products.Launched in 1994, Alternative Networks has achieved a track record ofconsistently profitable growth and in February 2005 listed on the AlternativeInvestment Market. Strategic relationships have been developed with the UKs leading voice networksincluding BT, Cable and Wireless and Verizon. As specialists in bespoke mobilevoice and data solutions, Alternative Networks are one of the largestindependent mobile service providers in the UK for both O2 and Vodafone,including membership of the exclusive O2 Data Centre of Excellence. Goldaccredited reseller status has also been awarded by Mitel and Avaya. Alternative Networks specialises in larger SMEs and smaller corporate customersin the UK and has over 4,000 business customers including JC Decaux, Channel 4,Miele and Securitas. The Group has grown rapidly over the past 13 years, now employing over 300people across four UK sites. At the last financial results in 2006, AlternativeNetworks reported pre-tax profits of £6.8 million on revenues of £66 million. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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