Trading Update

Alternative Networks plc('the Group' or 'Alternative')

Trading update

Alternative Networks plc, the UK business IT and communications service provider, today issues the following trading update for the half year ended 31 March 2016. The highlights were:

· Advanced Solutions delivered growth in recurring revenues and has ended the half year with strong backlog levels in non-recurring business

· Challenging market conditions in Mobile as announced in February with the impact of new tariffs on roaming rates offsetting further gains in market share with a 9% increase in the subscriber base year on year

· Continued strong operating cash conversion, with closing net debt of £19.0m (FY2015: £18.7m)

· Board remains committed to its progressive dividend policy of no less than 10% growth in the dividend year on year, progressing towards its longer term target of 15% annual growth in due course

Trading performance

Group

The Board's expectations for the period ending 31 March 2016 remain unchanged from those detailed in the recent trading update dated 24 February 2016.

The Group ended the half year with a number of positive indicators including a high level of Advanced Solutions order backlog, rising Fixed Voice margins, new wins in Online Desktop, a healthy pipeline of new business opportunities over the portfolio and a number of new products and offerings that are expected to be launched in the second half of the financial year.

Advanced Solutions

The performance seen over recent periods has continued. Recurring revenue is expected to be approximately 5% ahead of the prior year period, while non-recurring revenue is expected to be approximately 8% below the prior year period due to the phasing of project completions into the second half of the financial year, the Group ended the half year with a good level of non-recurring signed order backlog of circa £8m, up 40% on 30 September 2015. This growth is due to new orders from both new and existing customers and is expected to result in a higher weighting of revenue and profits to the second half than in previous years.

Hosted Managed Services and On Demand Services continue to perform in line with expectations. In particular the hosted desktop market continues to grow and the Group has seen circa 10% revenue growth with our Online Desktop product.

New orders have been generated across the portfolio, with notable new clients in core verticals for Alternative. In the Healthcare vertical, Alternative was chosen by North Lincolnshire & Goole Healthcare Trust to replace the telephony estate with an IP solution covering 3,500 users and to provide a 5 year support contract. In addition the Group has won a number of new Online Desktop and Unified Communications solution customers demonstrating the Group's credentials in this space.

Mobile

The Group added approximately 4,100 net additional connections in the period, representing a 9% increase year on year, bringing total subscribers to over 103,000 at 31 March 2016 with a further 2,000 signed to be connected in the coming months. However as previously announced, trading has been impacted by new carrier roaming tariffs that have compounded a reduction in roaming usage and impacted revenue and profitability. ARPU performance has been impacted and is expected to be around £30, down £5 on the prior year equivalent period. As a result, mobile revenue and gross profit in the first half are expected to be below the level reported in the prior year.

Fixed Voice

The overall performance of Fixed Voice was in line with market performance and our expectations, with margin improvements arising from updated commercial agreements. Line rental revenues continue to decrease in line with recent trends. The transition to SIP continues, with circa 2,500 additional channels (representing a 23% increase) added in the first half.

New developments

Following on from a year of significant change for the Group, the focus of 2016 involves ensuring that the investments made in the Group deliver the associated planned growth. In line with this, the first half of 2016 has seen a number of major initiatives initiated and completed:

· Alternative Platform as a Service, APaaS, has been successfully launched with 7 customers signed on to the platform and a growing pipeline

· In order to further develop the Group's cloud offering, during the second half of the financial year Alternative expects to launch OnlineCompute, a platform designed to provide Infrastructure as a Service (IaaS) for enterprise workloads, complementing existing Hosted Managed Services

· Improvements and consolidation of our Portal functionality, Synapse, continues, with a focus on customer control, automation and management information across all products and services

Cashflow

Cash generation remains strong across the Group, with good operating cash conversion. The Group's net debt position at 31 March 2016 was £19.0m and includes the payment of the FY15 final dividend of £5.3m and is in line with the closing 2015 figure of £18.7m and the Board's expectations.

Interim Results

The results for the half year ended 31 March 2016 are expected to be announced on Wednesday 8 June 2016.

Enquiries:

Notes to Editors

Alternative provides IT and telecommunications solutions to businesses, covering the full spectrum of products and services from device to datacentre. Alternative's products and services include: cloud computing, virtualisation, managed hosting, fixed line voice, mobile, systems, IP networks and complex billing software solutions.

The Group possesses close working relationships with most of the world's leading product and service vendors, providing customers with access to the latest technologies and the commercial advantages of choice.

Alternative is aligned to the business outcomes customers' desire. Each solution is designed with the customer, with full visibility and control at all times and underpinned by end to end accountability. The Group supports a wide variety of customers, from legal, professional and financial services, healthcare, higher education and multi-national operations, to mission public services, all of which rely on effective and dependable technology.

www.alternativenetworks.com