24th Apr 2009 07:00
24 April 2009
Alternative Networks plc
Pre Close Trading Statement
Alternative Networks plc, (AN.L, 'the Company' or 'the Group') the UK business communications service provider, announces its pre close statement for the 6 months ended 31 March 2009. Despite the tough economic conditions having an impact on trading levels, underlying gross margins have performed in line with market expectations and cash generation for the period remained strong.
Net cash in the business increased to £5.5m at 31 March 2009 up from £3.2m at 30 September 2008, even after £2m was returned to shareholders in dividends and share buy backs during the period.
In the face of reduced economic activity, reduced headcount in UK businesses, lower levels of international travel from business customers and a concerted effort by customers to reduce unnecessary spend, daily revenues from customer activity, being voice and data usage, have increasingly come under pressure since December 2008 and call revenues are now running at between 8% and 10% (dependent of product) below management's original expectations for the year. Voice and data calls and usage are approximately 50% of total group revenues in this period. Overall revenues are currently running at between 5% and 8% below management's original forecasts dependent on product.
Our continuous cost improvement program is set to deliver a recurring reduction of £2.4m in annual costs. Progress has been made, with annualised cost savings of £1.2m already effected to date, and with a further £1.2m annualised cost savings expected to arise from actions which have been initiated and which will be complete before the end of this financial year.
On a net connections basis across the main products sets, we have been successful in the retention of customers and winning new business. In mobile services, we have experienced continued growth in customer connections with our subscriber base increasing by more than 2,000 mobile connections from 51,990 at 30 September 2008 to over 54,000 at 31 March 2009. In fixed line network services, the number of fixed lines has increased 7% from 52,000 in September 2008 to approximately 55,700 in March 2009. Maintenance support contract revenues have increased by a similar level over the period.
We have recently won a number of multi product deals which centred around the replacement or upgrade of the telephone systems, and the integration of the Echo sales and engineering specialists was instrumental in the success. These included Macmillan Cancer Support and Weightmans Solicitors, which together are expected to provide £1m new revenues. Notwithstanding these successes, new sales orders in the period were approximately 10% behind the budgets set in summer 2008 across all products and services. In a difficult market environment, this is nonetheless viewed as a solid performance. It is worth noting that although January and February 2009 experienced tougher trading conditions, the quarter finished strongly with networks' sales in March 2009 exceeding management's original budget expectations.
The Group's margins have performed to date in line with the market expectations, which were set at approximately 0.5% lower than margins for the year ended 30 September 2008. A further modest reduction in gross margins, estimated at less than 0.5% may be expected for the full year due to the increasing change in sales mix, because of the lower volume of call and data usage revenues which have higher margins than rental incomes in fixed and mobile network services.
The business continues to be in good shape operationally, and continues to generate strong cash flow. Supported by a strong balance sheet, the Group is well placed to support its customers through a recession. We are still delivering net growth in the numbers of business end users, in spite of lower volumes of traffic. With the underlying margins holding up and with a leaner cost base, we remain confident of steering the business successfully through the next couple of years, and aim to take advantage of any competitor weakness to gain market share. In the meantime, our ability to match or continue to improve the dividend remains secure.
Enquiries:
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Alternative Networks plc |
0870 190 7444 |
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James Murray, Chief Executive Officer |
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Edward Spurrier, Chief Financial Officer |
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Financial Dynamics |
020 7831 3113 |
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Juliet Clarke / Haya Chelhot / Emma Appleton |
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