Pricey buys bring home bacon for Alternative Networks...sort of

Sales went through roof but rising costs suffocated profit growth

SuperTim's bacon bounty sarnie

Hauling in a heavy duty sales director and forking out millions for acquisitions has finally got the revenue dial moving in the right direction for AIM-listed Alternative Networks. It's not done the same for profits, though.

The top line had stagnated and operating profits dipped in the previous fiscal year, so the comms-managed services biz hired channel veteran Chris Huggett as group sales director and spent £52.35m on Intercept IT and Control Circle.

For the half year ended 31 March, Alternative revealed sales had jumped 14 per cent to £63m with £6.5m top line contributions from its acquired businesses, leaving organic growth (£1.2m) at a more modest two per cent.

But the corresponding cost of sales went up nearly 12 per cent to £37.8m and operating expenses soared 27 per cent to £20.2m, leaving operating profits standing at £4.8m compared to £5.4m in the same period a year ago.

Perhaps a mini-round of cost-cutting is on the cards. At any rate Alternative has started revving up the cross-selling activities across the two newly acquired entities, with 150 such deals currently being worked on.

A 10 per cent increase in share of the mobile subscriber markets led to an eight per cent spike in revenues to £22.4m.

Fixed Voice Services continued to decline, as expected, down eight per cent to £16.1m. This was due to a reduced level of calls spends to mobiles, regulatory price reductions and the move to email and mobile.

The Advanced Solutions division bounced 43 per cent to £24.5m due to the inclusion of the revenues from its acquired businesses. Organic sales in the unit went from £17.1m to £18m.

Within this AS operation, voice and data hardware revenues went up five per cent to £6.6m, professional services slipped by £100k to £1.1m, data services was up 16 per cent to £2.9m, recurring maintenance was up £100k to £5.4m and AKJ billing services were up £200k to £2m.

From January to March, Control Circle grew sales three per cent to £4.4m, which Alternative said "reflects the limited business signed in the previous six months". Intercept turnover was up 19 per cent in the quarter to £2.1m.

The company – which counts ING, ActionAid and insurance firm Swinton as customers – has rolled out infrastructure-as-a-service with a virtual data centre and has developed a Microsoft Lync service as it beefs up the tech side of the house.

Executive chairman James Murray said in a statement that he expects momentum built in the first six months of fiscal '14 to spill over into H2.

"We have a record order backlog and a full pipeline of new business opportunities," he said, adding the firm will also assessing other acquisitions "on their merits".

In May, Alternative brought on board industry veteran Mark Quartermaine as COO. He had been running Juniper in the UK and Ireland. ®

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