Trading Update

Alternative Networks plc

Trading Statement

Alternative Networks plc ("the Group"), the UK business IT and communications service provider, today issues the following trading update for the year ended 30 September 2014.

Highlights from the financial year include:

· Trading for the year ended 30 September 2014 in line with the Board's expectations for the Group

· Strong performance in mobile with the subscriber base up 12% year on year, and 7% since March 2014

· Good progress on integration of ControlCircle and Intercept IT, with revenue growth of more than 10% since acquisition

· Strong cash generation - net debt at the year-end was reduced to £29.4m. Cash conversion remained high in line with prior years, with an expected stronger second half performance.

Trading performance - The Alternative organic business

Overall revenue performance is in line with the Board's expectations. The organic Alternative business is expected to deliver modest like for like revenue growth for the year and the acquired businesses are expected to deliver revenue growth above 10% for the period since acquisition.

Market share in Mobile Network Services increased in the six month period, with 5,700 net additional connections bringing the total mobile subscriber base to over 91,400 at 30 September 2014. This represents growth of 12% on a 12 month basis and is due to a combination of lower subscriber churn and customer wins in the period. In addition, there were more than 4,500 subscribers awaiting connection as at 30 September 2014. New commercial arrangements with the carriers started in April 2014 which, as previously communicated, have reduced reported revenue growth in the second half, so that full year reported revenue is expected to be approximately 4% up on the prior year versus 9% up on an underlying period. Gross profit in the division is expected to show growth of a minimum of 10% year on year.

In Advanced Solutions, order momentum has continued with orders in the second half 6% ahead of the equivalent prior year's period and 13% ahead of those achieved in the first half. The year finished strongly with a record order level at the end of the fourth quarter, which has resulted in a backlog of £3.8m. New orders have been generated across the portfolio but there have been some notable areas of success, particularly in Higher Education, where the Group has signed contracts with fifteen universities and twenty one colleges during the year.

Within Fixed Line Network Services the transition to SIP continues at pace with more than a 60% increase in channels for the full year and a 25% increase in the second half. The increase in SIP channels has, as expected, reduced traditional line rental revenues, resulting in a full year performance in line with the trends experienced in the first half.

Trading performance - ControlCircle and Intercept IT

Trading from the recent acquisitions, ControlCircle and Intercept IT, has been in line with management expectations and the forecasts made at the time of acquisition. Cross selling progress across the group has been buoyed by both acquisitions and we expect this momentum to continue in the current financial year.

Integration

As part of the plan to consolidate it's five London offices into two during 2015, the Group has now entered into a lease for 24,000 sq ft of new office space at 240 Blackfriars Road. This will be the Group's new headquarters and will accommodate Alternative, ControlCircle and Intercept IT businesses all together seated over the two floors. This will allow further integration and cross selling opportunities and will result in the exit of three leased offices and the sale of its freehold building in Battersea during 2015.

Cash flow

Cash generation remains strong across the Group. The Group net debt position at 30 September 2014 was £29.4m (31 March 2014: net debt £35.4m), and so below the £30m target set by the Board at the half year. This was down from a peak of £40.8m in January 2014. This is despite a slight increase in capital expenditure during the period, associated with the two acquisitions. Cash conversion in H2 is expected to be higher than that reported in H1, aided by improved working capital inflows during the period.

Preliminary Results

The results for the full year ended 30 September 2014 are expected to be released on 10 December 2014.

Enquiries:Alternative Networks 0870 190 7444Edward Spurrier, Chief Executive OfficerGavin Griggs, Chief Financial Officer

Investec Bank PLC - Nominated Adviser and Joint Broker 020 7597 5970

Patrick Robb / Carlton Nelson / Andrew Pinder

finnCap Limited - Joint Broker 020 7220 0565

Stuart Andrews/Charlotte Stranner

Pelham Bell Pottinger 07802 442486

Archie Berens