12th Jun 2006 07:01
Alternative Networks plc12 June 2006 Alternative Networks plc Interim results for the six months to 31 March 2006 Alternative Networks plc, a leading independent business-to-business telecomsreseller, today reports interim profits before taxation up 65%, driven byorganic and acquisitive growth. Unaudited six months to 31 March 2006 2005 Change £000 £000Underlying performance*Turnover 32,097 22,386 43%EBITDA 3,350 2,086 61%Operating profit 3,143 1,892 66%Profit before taxation 3,163 1,922 65%Earnings per share - basic 5.0p 3.2p 56%- diluted 4.8p 3.1p 55% Statutory performanceTurnover 32,097 22,386 43%EBITDA 3,224 1,942 66%Operating profit 2,752 1,704 62%Profit before taxation 2,772 1,734 60%Free Cash Flow *** 1,966 (322) N/A Dividend per share ** 0.77 0.44 75% Earnings per share - basic 4.4p 2.9p 52% - diluted 4.2p 2.8p 50% * Results before intangible fixed asset amortisation and other exceptionalitems. ** Calculated by taking the interim paid or proposed in each period and dividingby the shares currently ranking for dividend *** Operating cash inflow less interest less taxation less capital expenditureon tangible fixed assets. Operational highlights • Substantial increase in the scale of the Group's operations, following the acquisition of Integrated Communications for Business (UK) Limited ("ICB") in October. • Successful renegotiation of remaining earn-out in the acquisition of ICB, reducing consideration for the acquisition from £11 million to £6.2 million. • Sales up 43%, with ICB contributing £7 million; and excluding acquired operations, underlying sales increased by 12%. • Underlying operating profits growth of 66%, with over a third of the profits growth being organic. • Operational gearing improving with underlying operating margins up from 8.5% to 9.8% • Corporate mobile subscribers have more than doubled to 37,589 (2005: 17,518) Excluding acquired operations' customers, the base grew 35% to 23,642. • Mobile Churn has been significantly reduced to 16% from 24% (FY2005) ; • Fixed line operations (Networks Services) returned to growth, with Wholesale Line Rental ('WLR') revenues up over 200% to £1.9 million (2005: £0.6 million). • Interim Dividend up 75% to 0.77p. • Acceleration in the Group's one-stop-shop strategy to exploit convergence of business customer products through IP. James Murray, Chief Executive Officer commented: "We are delighted to announce our third successive set of strong financialresults since our admission to AIM and we remain confident of prospects for thefull year. Today's results prove that our growth strategy is delivering results,both organically and through value-enhancing acquisitions such as ICB. Ourindependent approach and broad product offerings position us strongly in amarket where convergence and complexity are increasing. They enable us to pursuean attractive business model based on consistent growth in revenues, profits anddividends." 12 June 2006 Enquiries: Alternative Networks plcJames Murray, Chief Executive Officer 0870 190 7444Edward Spurrier, Chief Financial Officer College HillCarl Franklin/Corinna Dorward 020 7457 2020 Chairman's Statement I am very pleased to report continued strong growth and profitability, for thetwelfth successive year, in our interim results for the six months ended 31March 2006. Results summary The Group reports sales increases of 43% to £32.1 million. Profits before taxhave increased by 60% to £2.8 million (2005: £1.7 million) with underlyingprofits up 65% to £3.2 million (2005: £1.9 million). Basic earnings per share onfully diluted basis has increased 50% to 4.2 pence per share (FY2005: 2.8p),with Adjusted fully diluted EPS up 55% to 4.8p (2005: 3.1p). Cash generation was very strong with operating cash inflow of £2.8 million(2005: £0.25 million), and Free Cash inflow was £2 million (2005: outflow of£0.3 million), reflecting the "capex lite" business model of the Group. Underlying sales (excluding acquired operations) grew 12%. The engine for newsales growth continues to be our business mobile proposition, with mobilesubscriptions excluding ICB up 35%. Meanwhile, our fixed line business hasreturned to organic growth, as we predicted at the time of our IPO. In additionto this, we have seen encouraging progress with cross selling of products intolarger customers, with over a third of customers spending over £1,000 per monthnow taking three products or more from the Group. Gross margins have performed in line with the board's expectation. Overall,margins have reduced due to the continued change in sales mix, as lower marginmobile and fixed line rental sales increase their share of our revenues, notleast due to the acquisition of ICB with a higher mobile presence. Theunderlying operating margins of the Group have risen from 8.5% to 9.8%, due toefficiency gains with the increase in scale of the business. The integration and re-branding of ICB is complete and has been successful. Weare pleased with the performance since acquisition on 10 October 2005 producingrevenues of £7 million and underlying operating profits of £0.86 million. Asrecently announced, we have accelerated the integration process by settling thedeferred consideration at £0.2 million, meaning a total deal cost of £6.2million rather than the maximum £11 million originally announced. The tworemaining founding directors of the business have resigned and we are now ableto fully integrate the telesales, sales and client management operations withinour Group structure. The Group will pay an interim dividend of 0.77 pence per share (2005: 0.44pence) on 7 July, an increase of 75%. Strategy and Outlook Our growth strategy is delivering strong results, and has delivered asignificant increase in the scale of the Group year on year. The strategy hastwo distinct strands: Our organic growth is driven by a near-unique multi-product offering sold by adirect sales force in the UK. In the last 24 months the key driver for thisgrowth has been corporate mobile voice and data products, which now represent50% of Group sales. Our growth by acquisition is geared around bolting on similar business customerbases and driving operational efficiencies to increase profits, as well asincrease sales across the Group, by adding additional products into the acquiredcustomers' portfolios. In the second half of the year, we will be focusing ondelivering further benefits from our acquisition of ICB. Looking ahead, our prospects are exciting over the next two years. As thebusiness customer increasingly sees the advantages of converged products invoice and data, both mobile and fixed, we believe the Group is in a very strongposition to benefit. The Group is already one of very few telecom businesseswhose own employees are already successfully selling, advising, installing, andmaintaining the converged voice and data products, on both mobile and fixednetworks. In February 2006, we renewed our Vodafone service provider agreementfor a further two years, and we remain a service provider to O2. Due to our multi-product skill sets and our close relations with our businessclients, we expect to be in a leading position to drive sales of new technologyproducts for our key partners, being the major fixed and mobile networkoperators, as the UK communications backbone changes to IP and fully convergedproducts come on-stream in the business market. Kenneth McGeorge Chief Executive's Review We are delighted to report a further period of accelerated profits and salesgrowth. This is a testament to the success of our dynamic growth strategy. Organic Growth We are passionately focussed on our organic growth. There are four specificareas the management team has prioritised to help deliver these successfulresults, and promote further growth: Focus on larger customers in SME space We now have 4,649 business customers in the Group as at 31 March 2006. Our nichein the market is centred on the business customers who spend between £1,000 and£10,000 per month. During this period we have continued to focus on maximisingthe numbers of customers who spend more than £1,000 on telecoms whether this isone product or multi-product. At 31 March 2006, there were 1,236 customers spending over £1,000, being over aquarter of our total customer base. Excluding the new ICB customers we saw anincrease of 53 net new customers in this category from 30 September 2005. Cross selling of products At 31 March 2006, 35% of our customer base took more than one product from us.This is up from 30% reported in the year ended 30 September 2005, and reflectsthe success of selling wholesale line rental (as a separate product) and moremobile services into our customer base. At 31 March 2006, 65% of larger customers who spend more than £1,000 per monthwith us took more than one product, and 35% took three products or more. Wetreat mobile services as one product, whether data, voice or ancillary services. We see this as clear evidence of the Group's successful track record in sellingconverging products, whilst illustrating there is scope for progress, as over athird of our larger customer base only takes one product. Reduction in churn We have had a successful period bringing mobile churn (client attrition) undercontrol at 16% (FY 2005: 24%), and the board expects this to remain in the16-20% band. Mobile sales were 50% of Group sales in the period so theimportance to the Group of managing this is paramount. Network services and Data offerings remain vulnerable to churn either due toproducts becoming either commoditised or substituted by new technology, and wehave worked hard on offering value added services as well as being at theforefront of the technology changes. Our investment in CRM detailed in ourtrading update is expected to contribute significantly in delivering these tothe client. Product strategy In our niche business market space, our focus is on offering bespoke clientdriven services, and building our clients' trust to advise them on developingtechnology, as the market changes. To this end we have since 30 September 2005: • Launched a new on-line multi-product billing analysis tool, known as Clarity; • Delivered phase 1 of our CRM solution, an enhanced new customer database; • Reviewed the "Hosted" and "Direct" Voice over IP (VoIP) solutions in the marketplace and are currently trialling a VoIP solution for larger customers; • Launched a new suite of Inbound Call Solutions, including call recording. We are also selectively adding a number of products to our portfolio such as MSWindows Mobile which will be a viable option as an alternative to Blackberry formany businesses who currently do not have the data infrastructure or skills inhouse to host the Blackberry product. Growth by Acquisition In the period under review, we acquired ICB, our most significant acquisition todate. We have successfully achieved rapid integration of its key clientinterfacing operations as set out below, and the results to date have continuedto be above or in line with a broad range of key targets set at the time of theacquisition. The principle benefits from the acquisition have been to date: • Increased operating profits. • New sales opportunities for the Group - For example three IP office systems (hardware) have already been sold to ICB customers, worth £0.1 million. • Product enhancement - the migration of the ICB billing system has helped develop and enhance the Clarity analysis tool. • Technical skills - ICB had a greater experience of mobile data integration and implementation and are now assisting Group clients. We are satisfied that the success of the ICB deal supports our ongoing strategyand the Group is now well placed to seek out further opportunities as theyarise. Results Our excellent track record continues with accelerated sales and profits growth.The highlights are: • Sales are up 43% to £32.1 million. Organic growth has seen sales increase 12% from £22.4 million to £25.1 million, with mobile sales growing organically by 29% from £8.5 million to £11.0 million. • The other product groupings both made solid progress, but were slightly constrained by price erosion. This price erosion is partially reflected in the fall in gross margin from 40% in 2005 to 36.1%, most of which was affected by change in sales mix and the inclusion of ICB's business at lower gross margins, as expected. • The ICB business produced sales of £7 million, and the benefits of integration are already being seen as underlying operating profits for the 25 weeks at £0.86 million was substantially ahead of the full year's profit in 2005 of £0.5 million. ICB generated £0.4 million operating cash inflow for the Group, even after exceptional restructuring costs. • Cash conversion (conversion of cash from EBITDA) remained high at 85% (FY 2005: 83%) and the net operating cash inflow was £2.8 million (2005: £0.25 million) in spite of £0.3 million relative cash outflow caused by a key supplier changing its invoicing dates. Network Services • Headline sales were up 21% to £11.3 million. This product Group also returned to organic growth as we predicted at the time of our IPO, with sales, excluding ICB, increasing by 2%. • In the first half of 2005, some of the Ofcom generated price cuts in calls to mobiles had not been passed on to the customers. This is illustrated by the high margins last year at 45% - margins have now returned to the level they were in 2004. • Without the unwinding of the late price cuts, we estimate the underlying sales growth in Network Services, excluding ICB, to have been at least 5% in the period, with significant advances in WLR revenues being responsible for the growth. AN ICB Group AN only 6 months to 6 months to 6 months to 6 months to 31/3/2006 31/3/2006 31/3/2006 31/3/2006 Sales £m £9.5m £1.8m £11.3m £9.3m GPM % 39% 44% 40% 45% WLR % of revenues 18% 12% 17% 8% AN = Alternative Networks legacy business • Average revenue per customer per month ('ARPU') increased 2% to £1,115 (2005: £1,096) reflecting the bolting on of WLR revenues and increase in larger customers, offsetting the impact of the price erosion. • Average contract lengths are now 14 months for both WLR and the carrier pre-select ('CPS') revenues (FY2005 : WLR 14 months; CPS 7 months), as customers increasingly accept longer term contracts, in return for sole supplier service and competitive rates. Mobile AN ICB Group AN only 6 months to 6 months to 6 months to 6 months to 31/3/2006 31/3/2006 31/3/2006 31/3/2006 Sales £m £11.0m £5.0m £16.0m £8.5m GPM % 30% 30% 30% 28% • Sales have increased 88% to £16 million. Organic growth was 29% from £8.5 million to £11.0 million. Mobile data products, such as Blackberry and 3G Data cards continue to make strong advances with 50% growth in subscribers, and were a third of all net new connections. • Gross margins have remained strong gaining 2% to 30%. The increase reflects additional network funding due to lower churn levels and successful growth in a highly competitive market. • Business subscribers have increased to 37,589 (2005: 17,516), of which 23,642 were AN, with acquired operations totalling 13,947. In the six months, AN has added 3,542 (2005 : 3,200) new corporate subscribers, growing the base by 35%. • ARPU has now settled down at £63 (2005: £74), due to the dilutive effect of adding ICB's connections at lower ARPU's and continued growth in blackberry and 3G data connections. Data connections now represent over 18% total base, with 1,152 new data connections in the period. • Churn has been significantly reduced from 24% (FY2005) to 16%. As highlighted in the 2005 annual report this has been a key focus for senior management, with improved service levels and enhanced billing features helping to retain customers, resigning them onto longer contracts - the average newly signed, or re-signed, contract period was 19 months (FY2005: 17 months) - and ensuring customer contracts are refreshed. At 31 March 2006, the base was 84% in contract (82% at 30 September 2005). Advanced Solutions • These include Inbound telephony, data connections and IP System sales and maintenance. Sales have increased 8% to £4.9 million. ICB has contributed £0.3 million, and underlying sales were unchanged year on year, with growth in IP system sales being offset by modest losses in data connectivity revenues, as the impact of price erosion and broadband product substitution continues. • Inbound telephony services remains the largest of these product areas and total sales increased 7% to £3 million. The market for new sales of these services has been quiet while Ofcom deliberated the changes to 0870/0845 revenue share products. Customer interest in taking on these services has increased in the last quarter, as the prospects for the market have become clearer. • Gross margins in have fallen from 53% to 47%. Of this, half the decline is due to the low margins of ICB data revenues. On a like for like basis margins were 3% lower at 50%. Some of this fall was due to the re-signing of the two largest customers at lower prices towards the end of the period last year. The remainder is due to the lower margins in the IP systems business as the sales mix changed with larger systems being sold at lower margins. • On 1 October, as previously flagged, the business of the installation and maintenance of IP telephony systems was transferred at net book value to Alternative Networks TS Limited ("ANTS"), a 100% wholly owned subsidiary. On 1 January the business of data connectivity, being principally private and leased circuits, LAN and WAN, and broadband products, was also transferred at net book value to ANTS. Trading under its own separate identity has been encouraging to date, with contracts won being ahead of management expectations in the period under review. Summary We are very pleased that our employees have delivered an interim performanceahead of the Board's expectations and confident that our strategy will continueto generate growth across the group. This is an exciting time for the businesscommunications market; as new technologies become available, companies areincreasingly looking to source their communications from single suppliers and webelieve that we are in an excellent position to serve all their needs. Our orderbook continues to strengthen and our management and sales teams are committed todelivering further growth. James Murray CONSOLIDATED PROFIT & LOSS ACCOUNTFOR THE PERIOD ENDED 31 MARCH 2006 Audited Unaudited Unaudited Year to 30 Six months to Six months to September 2005 31 March 2006 31 March 2005 £000 Notes £000 £000Turnover:Continuing operations 25,084 22,266 46,110Acquired operations 4 7,013 120 294Total continuing operations 32,097 22,386 46,404 Cost of sales (20,494) (13,429) (28,202)Gross profit 11,603 8,957 18,202Operating costs (8,851) (7,253) (14,394)Operating profit:Continuing operations 2,111 1,628 3,613Acquired operations 4 641 76 195Total continuing operations 2,752 1,704 3,808 Total operating profit - analysed:Operating profit before operating 3,143 1,892 4,174exceptional items and amortisation ofintangible fixed assetsOperating exceptional items in respect of (93) (146) (246)share schemesOperating exceptional item in respect of (33) - -redundancy costs of acquired operationsAmortisation of intangible fixed assets 5 (265) (42) (120)Total operating profit 2,752 1,704 3,808 Interest receivable and similar income 54 71 199Interest payable and similar charges (34) (41) (73)Profit on ordinary activities before 2,772 1,734 3,934taxationTaxation on profit on ordinary activities (861) (532) (1,207)Profit on ordinary activities for the 1,911 1,202 2,727financial periodEarnings per ordinary share:Basic 4.4p 2.9p 6.5pDiluted 4.2p 2.8p 6.1p The Group has no gains or losses other than the profit above and therefore noseparate statement of total recognised gains and loss has been presented. There is no difference between the profit on ordinary activities before taxationand the retained profit for the years stated above and their historical costequivalents. CONSOLIDATED BALANCE SHEETAS AT 31 MARCH 2006 Unaudited Unaudited Audited 31 March 2006 31 March 2005 30 September 2005 Notes £000 £000 £000Fixed assetsIntangible assets 4,5 6,335 710 632Tangible assets 2,326 2,221 2,317Total fixed assets 8,661 2,931 2,949 Current assetsStock - finished goods 109 119 99Debtors 13,050 10,117 9,315Cash at bank and in hand 3,253 3,729 6,211 16,412 13,965 15,625Creditors: amounts falling due within one (13,852) (9,764) (9,803)yearNet current assets 2,560 4,201 5,822Total assets less current liabilities 11,221 7,132 8,771Creditors: amounts falling due in more (1,039) (1,069) (1,055)than one yearProvisions for liabilities - - (41)Net assets 10,182 6,063 7,675Capital and reservesCalled up share capital 6 57 55 55Share premium 6 4,116 4,123 4,116Merger reserve 6 968 - -Profit and loss account 6 5,041 1,885 3,504Total equity shareholders' funds 6 10,182 6,063 7,675 CONSOLIDATED CASH FLOW STATEMENTFOR THE PERIOD ENDED 31 MARCH 2006 Unaudited Unaudited Audited Six months to 31 Six months to 31 Year ended 30 Notes March 2006 March 2005 September 2005 Net cash inflow from operating activities 7 2,757 252 3,570Returns on investments and servicing offinanceInterest received 47 71 199Interest paid (34) (41) (73)Net cash inflow from returns on 13 30 126investments and servicing of financeTaxationUK corporation tax paid (656) (519) (1,159)Capital expenditure and financialinvestmentPurchase of tangible fixed assets (151) (85) (369)Proceeds from sale of tangible fixed 3 - 9assetsNet cash outflow for capital expenditure (148) (85) (360)and financial investmentFree cash inflow/(outflow) 1,966 (322) 2,177Acquisitions and disposalsPurchase of subsidiary undertaking 4,5 (5,247) - -Cash acquired with subsidiary 838 - -Net payments to acquire customer - (724) (723)contractsNet cash outflow from acquisitions and (4,409) (724) (723)disposalsEquity dividends paid 3 (497) (200) (200)Net cash (outflow)/inflow before (2,940) (1,246) 1,254financingFinancingIssue of ordinary share capital - 4,000 4,000Share issue costs - (750) (757)Purchase of own shares - (4,432) (4,432)Capital element of loan repayments (18) (13) (24)Net cash outflow from financing (18) (1,195) (1,213)(Decrease)/increase in net cash 8 (2,958) (2,441) 41 NOTES TO THE ACCOUNTS 1. Principal accounting policies The financial information contained in this interim statement does notconstitute accounts as defined by section 240 of the Companies Act 1985. Theinterim report has been neither audited nor reviewed by the Group's auditors.The financial information for the year ended 30 September 2005 is derived fromthe statutory accounts for that period that have been delivered to the Registrarand included an audit report, which was unqualified and did not contain anystatement under section 237 of the Companies Act 1985. The interim financial information has been prepared on the basis of theaccounting policies set out in the statutory accounts for the year ended 30September 2005, except for the adoption of FRS 21 "Events after the balancesheet date". The effect of this change in accounting policy is set out in notes3 and 6. The interim financial information has also been prepared on the basisof the accounting policies expected to apply in the next annual statutoryaccounts. Fixed annual charges are apportioned to the interim period on the basis of timeelapsed. Other expenses are accrued in accordance with the same principles usedin the preparation of the annual accounts, as modified by the introduction ofnew accounting standards. The interim results were approved by the Board on 9 June 2006. 2. Earnings per share Earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of shares in issue during asix month period. The weighted average number of shares in issue during the sixmonths to 31 March 2006 was 43,258,000 (six months to 31 March 2005: 41,457,000;year to 30 September 2005: 41,944,000). The potentially dilutive number of share options was 2,637,000 during the sixmonths to 31 March 2006 (six months to 31 March 2005: 2,012,000; year to 30September 2005: 2,474,000). For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. Unaudited Unaudited Audited Six months to Six months to Year to 31 March 2006 31 March 2005 30 September 2005 Earnings Per share Earnings Per share Earnings Per share amount amount amount £000 pence £000 pence £000 penceBasic EPSEarnings attributable to 1,911 4.4 1,202 2.9 2,727 6.5ordinary shareholdersAmortisation of intangible 265 0.6 42 0.1 120 0.3fixed assetsExceptional items 126 0.3 146 0.4 246 0.6Tax effect of above (119) (0.3) (56) (0.2) (113) (0.3)adjustmentsAdjusted earnings 2,183 5.0 1,334 3.2 2,980 7.1 Diluted EPSEarnings attributable to 1,911 4.2 1,202 2.8 2,727 6.1ordinary shareholdersAmortisation of intangible 265 0.6 42 0.1 120 0.3fixed assetsExceptional items 126 0.3 146 0.4 246 0.6Tax effect of above (119) (0.3) (56) (0.2) (113) (0.3)adjustmentsAdjusted earnings 2,183 4.8 1,334 3.1 2,980 6.7 Adjusted basic and diluted EPS have been calculated to exclude the after taxeffect of amortisation of intangible fixed assets and operating exceptionalitems in order that the effect of these items on reported earnings can be fullyappreciated. 3. Dividends As a result of the introduction of FRS 21 there has been a change in theaccounting treatment of proposed dividends. Dividends are now reported in theperiod when the shareholder's right to receive payment is established, whichwill normally be after the relevant board meeting or shareholders meeting.Consequently, proposed "interim" or "final" dividends will normally fall to beaccounted for in the immediately ensuing accounting period. The reported dividend in these statements represents the 2005 proposed finaldividend of 1.1 pence per £0.00125p ordinary share, which was paid on 27 January2006 (2005: represents the 2005 proposed and paid interim dividend of £14.60pper £0.05p ordinary share, equivalent to 0.4 pence per £0.00125p ordinaryshare). The amount of dividend paid was £497,000 (2005: £200,000). The directors propose a dividend for the 2006 interims of 0.77 pence per£0.00125p ordinary share, with a total payment value of £347,000. This will bepaid on 7 July 2006 to shareholders on the register on 23 June 2006. Theex-dividend date is 21 June 2006. 4. Acquisitions On 10 October 2005 the Group acquired Integrated Communications for Business(UK) Limited, a mobile and fixed line telecommunications service provider forcash consideration of £5,087,000 including costs of £87,000, issue of shares inthe Group of £1,000,000 and estimated deferred consideration of £160,000. Netassets of £455,000 were acquired and there were fair value adjustment decreasesof £182,000. Adjustments due to changes in accounting policy result in anincrease in net assets of £6,000. The goodwill on acquisition is beingamortised on a straight-line basis over 15 years which is the anticipated lifeof the asset. The balance sheet of Integrated Communication for Business (UK) Limited onacquisition was as follows;- Book Value at Fair value Consistent Fair value at 10 October adjustments accounting policy acquisition 2005 £'000 £'000 £'000 £'000 Tangible assets 69 169 (100)Intangible assets - 75 (75)Debtors (637) 2,542 3,186 (7)Cash 838 838Creditors due within 1 643 (3,170)year (3,813)Net assets acquired 6 279 455 (182)Goodwill 5,968Consideration 6,247 Satisfied by;-Cash consideration 5,087Issue of shares 1,000Estimated deferred 160consideration 6,2475. Intangible fixed assets Purchased customer contracts Goodwill Total £000 £000 £000 CostAt 1 October 2005 759 - 759Additions - 5,968 5,968At 31 March 2006 759 5,968 6,727AmortisationAt 1 October 2005 127 - 127Charge for period 79 186 265At 31 March 2006 206 186 392Net book amountAt 31 March 2006 553 5,782 6,335At 30 September 2005 632 - 632 The goodwill on acquisition is being amortised on a straight-line basis over 15years which is the anticipated life of the asset. 6. Movements in share capital and reserves Share Share Merger Profit and capital premium reserve loss Total £000 £000 £000 £000 £000 Balance at 1 October 2005 as previously 55 4,116 - 3,004 7,175reportedPrior year adjustment - FRS 21 - - - 500 500Balance at 1 October 2005 restated 55 4,116 - 3,504 7,675Shares issued 2 - 998 - 1,000Realisation of merger reserve - - (30) 30 -Adjustment in respect of employee share - - - 93 93schemesRetained profit for financial period - - - 1,911 1,911Dividends paid - - - (497) (497)Balance at 31 March 2006 57 4,116 968 5,041 10,182 On 10 October 2005 the Group acquired Integrated Communications for Business(UK) Limited which included the issue of 872,000 ordinary shares of £0.00125 apremium of £1.146 per share. The premium on issue of shares is posted to themerger reserve. On 18 January 2006 qualifying options have been granted under the AlternativeNetworks EMI scheme in accordance with the Enterprise Management Incentiveregime. The total outstanding are 406,000 at an exercise price of the higher of£1.025p per share and the market value at the date of grant. 7. Reconciliation of operating profit to net cash inflow from operating activities Unaudited Unaudited Audited Six months to Six months to Year to 31 March 2006 31 March 2005 30 September 2005 £000 £000 £000 Operating profit 2,752 1,704 3,808Depreciation on tangible fixed assets 210 194 377Amortisation of intangible fixed assets 265 42 120Profit on disposal of tangible fixed assets (3) - (4)Decrease/(increase) in stocks 12 (42) (23)Decrease/(increase) in trade debtors 248 (634) (53)Increase in prepayments, accrued income and (1,498) (442) (221)other debtorsIncrease/(decrease) in trade creditors 623 (586) 92Decrease in other taxation and social (197) (232) (202)securityIncrease/(decrease) in other creditors, 252 217 (449)accruals and deferred incomeAdjustment in respect of employee share 93 31 125schemesNet cash inflow from operating activities 2,757 252 3,570 8. Reconciliation of net cash flow to movement in net funds Unaudited Unaudited Audited Six months to Six months to Year to 31 March 2006 31 March 2005 30 September £000 £000 2005 £000 (Decrease)/increase in cash in the period (2,958) (2,441) 41Decrease in loans 18 13 24(Decrease)/increase in net funds in the period (2,940) (2,428) 65Net funds at beginning of the period 5,126 5,061 5,061Net funds at end of the period 2,186 2,633 5,126 9. Analysis of movement of net funds Audited Unaudited As at Cash flow As at 1 October £000 31 March 2005 2006 £000 £000Net Cash:Cash at bank and in hand 6,211 (2,958) 3,253 DebtDebt due within one year (30) 2 (28)Debt due after one year (1,055) 16 (1,039)Total debt (1,085) 18 (1,067) 5,126 (2,940) 2,186 10. Reconciliation to underlying performance Acquired Continuing Total Operations Operations Six months to Six months to Six months to 31 March 2006 31 March 2006 31 March 2006 £000 £000 £000 Operating profit 641 2,111 2,752Operating exceptional item in respect of share schemes - 93 93Operating exceptional item in respect of redundancy 33 - 33costs of acquired operationsAmortisation of intangible fixed assets 186 79 265 Underlying operating profit (before interest, taxation 860 2,283 3,143and amortisation)Depreciation 24 183 207Underlying EBITDA * 884 2,466 3,350Net interest received 5 15 20Underlying profit before taxation 865 2,298 3,163 * Earnings before interest, taxation, depreciation and amortisation This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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