Endless Solutions.
One Alternative.
Review of the year
01 Highlights
02 We are a leading mobile, 
systems and data integrator
04 Chairman’s Statement
06	 Chief	Executive	O fficer’s	Review
12	 Financial	and	Business	Review
20 Board of Directors
Corporate governance
22	 Directors’	Report
26	 Corporate	Govern ance	Report
30	 Remuneration	Re port
33 Statement of Directors’ 
Responsibilities
Financial statements
35	 Independent	Auditors’	Report
36 Consolidated Statement 
of	Comprehensive	Income
37	 Consolidated	and	Company	
Statements of Financial Position
38 Consolidated Statement 
of Changes in Equity
39	 Compa n y	Statem ent	of	Changes	
in Equity 
40 Consolidated Statement 
of	Cash	Flows
41 C ompany 	 Statement 	 of 	 Cash 	 Flows
42 Notes to the Financial Statements
68	 Directors	and	Advisers
Alternative Networks is one of the leading providers 
of communications products and services to the UK 
business sector.
Who we are
We offer a complete communications portfolio of fixed line, mobile, 
voice, data, systems and billing, either as individual products, or as 
fully converged solutions.
Who we do it for
We support the critical business communications for over 5,000 small, 
medium and large enterprise companies across the UK. Our client base 
includes organisations from all areas of the public and private sectors, 
including Channel 4, Swinton Insurance, London Ambulance Service, 
Office Depot, Menzies Distribution and Macmillan Cancer Care.
Who we partner with
As an independent telecoms provider, we enjoy close working partnerships 
with world-class suppliers, such as Avaya, BT Openreach, Cable & Wireless, 
Mitel, Opal (part of the TalkTalk Group), O
2
, RIM and Vodafone. With these 
vendors we set out to provide the very best in consultancy, service 
and provision.  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
01
96.2 2010
89.7 2009
2008 93.7
72.1 2007
66.0 2006
11.5 2010
9.0 2009
2008 10.4
8.0 2007
6.3 2006
•  Revenues increase by 7% to £96.2m. Organic growth of 4%, excluding 
new Aurora Kendrick James Limited (AKJ) revenues for eleven months.
•  Gains in market share:
 •  Mobile subscribers increased 12% to 62,136 (2009: 55,299); and
 •  Fixed line customers’ lines/channels increased 18% to 79,862 
(2009: 67,587). Fixed line revenues grew 12% year on year in H2.
•  Improving profitability – gross margins up from 35% to 36% 
and adjusted operating profit margins up from 10% to 12%.
•  Strong balance sheet and excellent cash generation:
 •  Free cash flow of £10.9m (2009: £7.9m);
 •  Strong cash conversion at 112% adjusted EBITDA (2009: 110%); and
 •  Net cash funds of £11.1m at 30 September 2010 (2009: £8.1m). 
•  Proposed full year normal dividend increase of 20% to 6.1p excluding 
3.0p special paid in April 2010 supported by strong cash flow and higher 
earnings growth (2009: 5.1p).
•  Strategic acquisition of IP networks integrator, Scalable, achieved 
October 2010.
•  Vodafone and O
2
 service provider licences each extended to 
December 2012 and July 2013 respectively.
Results for the year to 30 September 2010
Strong momentum produces record performance
   2010  2009 Change 
Statutory performance  £’000  £’000  %
Revenue   96,242   89,676  7%
Operating profit   9,143   7,031  30%
EBITDA*   11,165   8,907  25%
Profit before taxation   9,236   7,115  30%
Earnings per share
– basic  15.7p 12.0p 31%
– diluted  14.5p 11.6p 25%
Dividend per share****  9.1p 5.1p 78%
 
Underlying performance
Adjusted EBITDA**   12,143   9,642  26%
Adjusted profit before tax   11,598   9,070  28%
Adjusted operating profit**   11,505   8,986  28%
Adjusted earnings per share***  
– basic  18.0p 14.4p 25%
– diluted  16.7p 13.9p 20%
 * Earnings before interest, taxation, depreciation and amortisation. 
 **  Adjustments for operating profit (and EBITDA) relate to amortisation of acquired intangible assets, 
share option costs and impairment to freehold property, as set out in Note 31.
 *** Adjusted earnings per share is based on profits as set out in Notes 13 and 31.
 ****  Dividend per share is the interim dividend paid and the final dividend proposed, divided by the 
number of shares in issue at the year end. In 2010, this included a special dividend paid of 
3p per share.
Highlights
Record results for the Group: highest recorded sales, profits, 
cash levels and dividends.
Revenue (£’m)
£96.2m
+£6.5m
Adjusted operating 
profit (£’m)
£11.5m
+£2.6m
Free cash flow (£’m)
£10.9m
+£3m
+ 38%
Dividend per share
9.1p
+4.0p
+ 78% annual report and 
accounts 2010
 02
We are a leading mobile, systems 
and data integrator.
Mobile
We provide a wide variety of mobile solutions, including mobile email, data, broadband, 
applications and working group tariffs via partnerships with Vodafone, O
2
, RIM, Nokia, 
HTC and Windows Mobile.
Recently we have become one of the first Vodafone service providers to be accredited 
to sell iPhone, which has broadened our portfolio of smartphones and associated applications.
+4%
£43.3m
sales (2009: £41.6m)
Fixed Line Network Services
We provide fixed line telephony and broadband services partnering with BT Openreach, 
Cable & Wireless, Opal and Verizon. We ensure that tariffs are tailored to each organisations’ 
needs and can be managed through our customer portal.
Non-geographic numbering (NGN) ranges enable clients to route calls effectively, 
maximise sales and marketing, improve customer service and retention both in 
contact centre environments and for business continuity situations.
+9%
£36.9m
sales (2009: £33.8m)
Advanced Solutions (including billing services)
With premier partner status with some of the world’s biggest systems suppliers including 
Mitel and Avaya and strong relationships with HP and Cisco, Alternative is able to provide 
advanced solutions in all aspects of telephone systems. We design, install and support 
including IP telephony, unified communications, contact centre and multi-site solutions.
Our market leading WAN connectivity proposition through world class suppliers such 
as Exponential-e and Opal allows us to supply businesses with a wide range of managed 
connectivity products for home worker broadband, Ethernet First Mile, Ethernet, MPLS and 
VPLS networks. We continue to satisfy growing demand for high speed, high performance 
and next generation IP connectivity.
Having gained accreditation to install wi-fi networks through our partnership with Trapeze 
(a subsidiary of Juniper), we are now able to provide secure wireless coverage, asset 
tracking and radio frequency firewalls.
+11%
£15.9m
sales (2009: £14.3m) annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
03
How we add value
Expert consultancy – We use our technological, industry and regulatory 
expertise to help clients choose the best solution for their business. 
As an independent supplier, we are able to take a complete view of 
an organisation’s needs and can offer impartial advice on a range 
of industry‑leading operators.
Service excellence – From customising a solution and managing the 
installation, through to training and additional support, Alternative offers 
a complete service package for customers. Day‑to‑day enquiries are 
handled by our client support team and dedicated client managers 
provide tailored, strategic advice.
Customised solutions – Converging voice, data and multimedia 
applications allows clients to do more with less: reducing overheads, 
raising productivity and improving customer service. Alternative offers 
a wide range of technological convergence products and services, from 
fixed-to-mobile solutions to SIP integration with digital networks. Our 
highly trained pre‑sales experts design a bespoke solution to meet and 
exceed specific business needs, giving clients a real competitive edge.
Reporting and business intelligence – Our exclusive web-based billing and 
management application, Your Alternative Portal, has been designed to 
put clients right at the heart of their essential communications. In one 
place, clients can monitor costs, analyse call traffic and run reports on 
all aspects of their telecoms. Usage alerts can be set and information 
is ready just 24 hours after a call has been made.
Your Alternative Portal also includes online case management, giving 
clients the ability to raise and track faults, orders and queries online. 
A robust development roadmap for the next 18 months is already in 
place to provide further functionality such as online ordering, network 
monitoring and asset management.
Cost saving – We help clients to use technology in smarter and more 
effective ways to help control their costs. Our significant buying power 
means that we can pass on competitive rates and can structure pricing 
to meet clients’ needs. By using Alternative Networks to deliver a single 
supplier solution, the client also reduces administration time, lowers 
costs and simplifies telecoms management. annual report and 
accounts 2010
 04
Chairman’s Statement
Tony Caplin
Alternative Networks’ performance this year has been impressive 
and I thank all our employees for their continued commitment. Sales 
grew by 7%, but an increase in operating margins saw a 25% rise in 
EBITDA, from £8.9m to £11.2m. On a like for like basis, revenues 
were up 4% and Telephony Services, being fixed line and mobile, 
recorded 7% organic growth.
Cash generation has continued to be very strong. Cash inflow from 
operations was £13.6m, representing 112% of adjusted EBITDA. 
Free cash flow was £10.9m, compared with £7.9m in 2009, and the 
Group ended the year with cash of £12.0m, 34% higher than a year 
previously. Given that £4.3m of cash was spent on the AKJ 
acquisition, and £4.1m of cash was also returned to shareholders 
by way of dividends and share buy-backs, this underlines the 
strength of the Group’s performance.
The strong cash position and confidence in the momentum of the 
business has enabled the Board to increase the proposed final 
dividend by 17% to 4.1p, making a total for the year of 9.1p, including 
a special dividend of 3.0p per share. Excluding the special dividend, 
the total dividend for the year was 6.1p, an increase of 20% over 2009,  
in line with our progressive dividend policy.
In addition to the strong financial performance, Alternative Networks also made 
significant progress in its strategy of transforming itself from a traditional fixed and 
mobile telephony reseller into a leading mobile systems and data integrator. T wo 
strategic acquisitions were completed in less than a year to support this objective. 
The first, AKJ, allowed the Group to accelerate the development of a customer 
portal to support converged services, as well as a market leading integrated 
billing platform. The portal is web-based and converges billing, reporting, 
ordering and support. The service was launched in October 2010, ahead 
of schedule, and has already delivered tangible efficiency benefits both to 
ourselves and to our clients. We believe this is unique in the market and it is 
a key component in delivering the highest levels of customer service and it 
will underpin our drive to achieve greater levels of cross selling. 
The second acquisition, which was completed since the year end, was of 
Scalable Communications plc (Scalable), an IP networks integrator. Scalable 
will rapidly enable the Group to fulfil its objective of delivering converged voice 
and data products in a market where telephony is increasingly based on IP .  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
05
Cross selling is a fundamental part of the Group’s strategy to deliver 
long-term growth. The Group has steadily increased the number of 
customers taking at least three services. 59% of our larger customers 
now take three or more services. Two years ago, the proportion of 
such customers was only 44%. Moreover, our customer profile is 
evolving as we increasingly target larger companies in the small 
and medium enterprises (SME) space, resulting in higher spend per 
customer. The Group has pursued a considered and highly effective 
strategy of organic growth combined with strategic acquisitions. Further 
acquisition opportunities are being sought, but they have to meet the 
Group’s strict criteria and complement our existing product base.
The outlook for the Group continues to be positive. The strategic 
initiatives put in place by the management team have created a 
strong platform, meaning the Group is well placed to capitalise on 
the fast moving business communications market of today. Market 
conditions, whilst still challenging, have stabilised and demand for 
the Group’s converged product base, which has been enhanced 
by the acquisitions that have been made, is growing. We therefore 
look forward to a continued period of success and to delivering 
long-term growth for our shareholders. 
Tony Caplin
Non-executive Chairman
3 December 2010
Tony Caplin
Non-executive Chairman
The Group is 
well placed to 
capitalise on the 
fast moving business 
communications 
market of today.
In addition to the strong financial 
performance, Alternative Networks 
also made significant progress 
in its strategy of transforming itself 
from a traditional fixed and mobile 
telephony reseller into a leading 
mobile systems and data integrator.
59% of our larger customers now 
take three or more services. This 
is up 15% from two years ago.
Our customer profile is evolving as we 
increasingly target larger companies 
in the SME space, resulting in higher 
spend per customer. annual report and 
accounts 2010
 06
Overview
This has been an excellent year on a number of fronts.
Firstly, we have delivered record results for the Group, with the 
highest recorded sales, profits, cash levels and dividends in our 
16 year history. The return to organic top line growth in a market 
where our peers generally recorded further declines in revenues 
was especially pleasing as a validation of our strategy, our 
success in cross selling and our employees’ commitment 
through a difficult period.
Secondly, the acquisition of AKJ performed ahead of expectations. 
The development of the Group’s portal is on target and this strategic 
acquisition has opened up new potential revenue streams for the 
Group, as evidenced by two significant deals recently signed and 
detailed below.
Finally, we finished the year securing the acquisition of Scalable, 
which is the right fit data acquisition we have looked to deliver and 
which gives us a strong platform on which to offer a fully converged 
mobile, systems and data suite of products to our core market and 
to allow us to target larger enterprises.
Financial results
Group sales increased 7% to £96.2m (2009: £89.7m). The differing product sets’ 
results are analysed further below. AKJ has contributed £3.1m of revenue in the 
eleven months since acquisition. Group sales increased 4% on a like for like basis. 
Gross profit margins have increased to 35.8% (2009: 35.0%). AKJ, with their higher 
margin product portfolio, has contributed to this rise. Underlying margins have 
held firm and margins per product set are reviewed in more detail below.
Adjusted operating profits of the Group increased by 28% to £11.5m (2009: £9.0m). 
Share option costs increased to £1.0m (2009: £0.6m) due to an amendment to 
the 2008 Long-T erm Incentive Plan (LTIP), the introduction of the 2010 LTIP and 
provisions made for related taxes.
On a statutory basis, pre-tax profits increased 30% from £7.1m to £9.2m, 
with operating profits also increasing by 30% from £7.0m to £9.1m.
Cash generation continues to be very strong. Net cash generated from operations 
was £13.6m (2009: £10.6m) which was 112% of adjusted EBITDA in the period 
(2009: 110%). Free cash flow was £10.9m (2009: £7.9m), enabling the Group to 
return a further £0.4m to shareholders during the year through a general share 
buy-back programme and end the year with £12.0m cash (2009: £9.0m). 
Adjusted earnings per share increased 25% and 20% in basic and diluted 
earnings to 18.0p and 16.7p respectively. Statutory earnings per share rose 
31% from 12.0p to 15.7p. A detailed reconciliation is set out below in the 
Financial and Business Review. 
The Board has proposed a final dividend of 4.1p (2009: 3.5p), making a total 
of 9.1p for the year (2009: 5.1p), in line with our progressive dividend policy. 
The current year includes a special 3.0p dividend paid out to shareholders. 
Excluding the special dividend, total dividends increased by 1.0p to 6.1p.
Chief Executive Officer’s Review
James Murray  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
07
Strategy 
The Group has continued its successful twin strategy of organic and 
acquisitive growth to become the preferred converged communications 
partner of choice for the UK’s SME business market.
Acquisitions
Since 30 September 2009, the Group has made two acquisitions 
less than twelve months apart. 
1. Acquisition of Aurora Kendrick James Limited 
(AKJ)
On 30 October 2009, we acquired the entire share capital of AKJ, our 
billing services partner, for a maximum consideration of £5.50m; the 
initial consideration consisting of £3.75m cash and £0.80m through 
the issue of 707,076 ordinary shares. The deferred consideration 
was a maximum of £0.95m and this was agreed in August 2010 to 
be settled at £0.66m, meaning a final total consideration of £5.21m. 
The early settlement of the earn-out has permitted accelerated 
development of the portal.
The AKJ group is based in Chatham, Kent and employed approximately 50 staff 
on acquisition, of which 25 were IT developers. In the year ended 31 July 2009, 
AKJ increased sales by 4% to £3.6m and the group made a pre-tax profit of 
£0.3m and underlying EBITDA of £0.6m. AKJ’s results for the eleven months 
ended 30 September are set out further below.
The deal was relatively small but nonetheless strategically important for the 
Group. The rationale for the acquisition was threefold: 
•  principally to accelerate development of the Group’s portal, which has since 
been launched on 18 October 2010; 
•  secondly, to secure and build on the exclusive use and development 
of a market leading billing solution; and finally
•  to expand their business by targeting larger customers and by exploiting AKJ’s 
relationships with its 75 customers to promote additional services to them. 
Since the year end, AKJ has delivered two important new contracts to the 
Group. The first is for the management of approximately 2,000 mobiles for 
RSM T enon. The services include enhanced billing reporting services as well 
as ordinary services. The second is an exciting new billing and provisioning 
services contract with a major mobile network operator, worth an estimated 
£0.4m in the first year and over £1.0m in total, relating to their fixed line services 
and the provisioning of WLR3 connections to BT Openreach.
James Murray 
Chief Executive Officer
The Group has continued 
its successful twin strategy of 
organic and acquisitive growth 
to become the preferred converged 
communications partner of choice 
for the UK’s SME business market.
The acquisition of Scalable is key 
to the Group’s plans to deliver 
converged voice and data 
products in an IP world.
The group continues to expand its 
product range to enable it to take a 
wider share of its customers’ spend 
on communications and providing 
a wider range of products with 
which to engage new customers.
We successfully launched the portal 
in October 2010 to converge billing, 
reporting, ordering and support.
We have delivered 
record results for  
the Group, with the 
highest recorded  
sales, profits, cash 
levels and dividends  
in our 16 year history. annual report and 
accounts 2010
 08
Chief Executive Officer’s Review
continued
Acquisitions continued
2. Acquisition of Scalable
On 2 October 2010 we announced the acquisition of Scalable 
for approximately £10.0m. The consideration was £7.5m cash, 
with up to £4.0m deferred based on performance in the two years 
to 31 December 2011. If Scalable was to achieve its own target, 
delivering compound annual growth of EBITDA over two years 
of 40%, the estimated deferred consideration would be £2.5m. 
The first £1.0m of the deferred element is to be paid in shares.
Scalable is an IP networks integrator based in Buckinghamshire 
and London. With just over 50 staff, it is a major partner of Juniper, 
Extreme, Mitel and F5 and targets the larger SME and enterprise 
business customers. It consults, builds, installs and maintains IP 
configured voice and data networks, also supplying security and 
a number of other bespoke solutions. Typical clients include 
Charles Russell, Liverpool Women’s NHS Foundation Trust, 
Fulham Football Club, and it has recently won significant 
accounts with Carillion and Freshfields. It operates directly 
with clients and also with system integrators and has recently 
invested in a modern Network Operating Centre (NOC) in its head office, 
so it can constantly monitor and support its customers remotely.
In the year to 31 December 2009, Scalable reported revenues of £12.5m and 
EBITDA of £0.9m. Gross assets at 31 December 2009 were £5.6m. On acquisition, 
management were expecting revenues to grow to £15.0m and EBITDA to 
increase to £1.4m for the year to 31 December 2010. 
The acquisition of Scalable is key to the Group’s plans to deliver converged 
voice and data products in an IP world. Scalable already understands the needs 
of the Group’s larger customers and are experienced in delivering converged 
solutions. Critically, as traditional telephony products migrate to Session 
Initiated Protocol (SIP), Scalable’s is already a leading player in those products.
The acquisition brings enormous opportunities to cross sell as there is limited existing 
cross over in both Scalable and Alternative’s larger client lists and product sets. 
 
The Group continues proactively to monitor the market looking for further 
acquisitions that have the right fit. Our criteria remain that targets need to be 
successful, growing and profitable and have similar sets of customers to the 
Group. Further bolt-on acquisitions to complement the existing products are 
being considered, as well as targeting businesses in adjacent product sets. 
Organic growth 
Review of organic growth factors – 
update on key performance indicators
The four key organic growth factors supporting our strategy remain:
Focus on larger customers in SME space
We continue to target the mid enterprise market, particularly those customers 
with multi-sites and employees ranging from 80 to 1,000. 
At 30 September 2010, there were 1,249 customers with spends over £1,000 
per month. This is the same as at 30 September 2009. However, the average 
spends of these customers is increasing as more products are added and 
larger customers replace smaller ones in this category. The average spends 
of these customers increased 5% to £4,765 per month in September 2010 
from £4,535 in September 2009.
Scalable’s Network Operations Centre (NOC) annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
09
Chief Executive Officer’s Review
continued
At 30 September 2010, the number of higher spending business 
customers who take more than three products from the Group 
increased to 734 from 722 at 30 September 2009, representing 59% 
of the larger client base (2009: 58%). These customers’ average 
spend increased 6% to £5,506 per month in September 2010 from 
£5,180 in September 2009.
Key customers are highlighted in the products results sections.
Channel 4 and BPP are good examples of clients which have been 
with either Alternative or Echo for some time and have significantly 
increased the number of services they take from us in 2010. In 
Channel 4’s case, they have been a longstanding fixed and mobile 
services client and we have added IP PBX. and support. BPP was an 
Echo maintenance client and we have added outbound services, more 
support revenues and delivered new IP hardware solutions. 
The success of cross selling products into our existing smaller 
customers so that smaller customers become larger ones, can also 
be measured as below.
Cross selling 
A key part of our organic growth strategy remains to sell more products to 
new and existing customers. During the period we have had further success 
substantially increasing the product penetration in our customer base. The 
number of customers taking more than one product is 46% (up from 40% in 
September 2009). This has been helped by the number of multi-product new 
customers. In the larger customer base (i.e. those spending over £1,000) we 
have seen a continued increase in product penetration, with the number of large 
customers buying more than one product up to 78% (75% in September 2009). 
Reduction in churn
The Group has continued to experience low churn levels across all products 
(mobile churn is covered separately below). Unsurprisingly, churn remains lower 
in customers who take more than one product and are users of the Alternative 
Portal (see overleaf).
Product development
The Group continues to expand its product range to enable it to take a wider 
share of its customers spend on communications and to provide a wider range 
of products with which to engage new customers. Summarised below are the 
major developments in each product group in the year:
•  Mobile: The year saw the launch of Android handsets from HTC and Samsung. 
We also welcomed the BlackBerry Bold 9700 and, more recently, the touch 
screen Torch 9800, which is the first of a new range of handsets featuring 
BlackBerry operating system version 6. These were supported by a BlackBerry 
Enterprise Server Express product, which was a cheaper function-lite product, 
and also the new BlackBerry Advantage premium support package.
•  Fixed line voice: Alternative launched a business-grade SIP Trunking service, 
providing an IP business grade product alternative to ISDN, for the larger 
customer. Our service provides quality and security through ensuring that all 
aspects of customer hardware, connectivity and numbering are compatible 
and supplying additional hardware and bespoke services where required.
  We continued to develop our traditional voice products by migrating our analogue 
line rental customers to the WLR3 product. This was easily facilitated by AKJ 
who is a BT Openreach Third Party Integrator. Our ISDN migration to WLR3 
will be complete early in the new year 2011. These developments provide us 
with access to a wider range of “equivalent” products from BT Openreach, 
including resilience solutions and temporary lines.
Case study – Firmdale Hotels
Award-winning Firmdale Hotels is one of the 
most innovative and respected boutique 
hotel operators in the UK. Its six London 
hotels, as well as Crosby Street in New York, 
showcase Firmdale Hotels’ uncompromising 
approach to quality, commitment to 
excellence and putting customers first.
At the outset
Firmdale wanted the ability to constantly 
improve upon the level of service and 
quality they gave to their customers. 
They also wanted to link their hotels 
and head office to make it simple to 
contact all members of staff at all times. 
Initially Alternative migrated all sites to 
a Mitel 3300 IP based system, improving 
service, contactability and making inter-site 
calls, even for the New York site, free.
How Alternative grew the account
Alternative now manage and supply the 
Group’s mobile fleet using both O
2
 and 
Vodafone networks. We also developed 
the SIP integration to the call logging and 
voicemail application, which simplified the 
line connection and reduced running costs. 
By upgrading the operator consoles for IP 
versions, we dramatically improved efficiency 
and provided a flexible environment for the 
front desk/concierge functions. 
Summary
Firmdale now enjoys zero call costs 
when calling inter hotel and can identify 
the internal caller before answering the 
call. We have moved them from digital 
to IP and have reduced the amount of 
hardware and associated floor space within 
the communications area of each hotel, 
which in turn has reduced running costs. annual report and 
accounts 2010
 10
Chief Executive Officer’s Review
continued
Organic growth continued
Review of organic growth factors – 
update on key performance indicators continued
Product development continued
•  Advanced solutions: The Group continued to strengthen its connectivity 
portfolio by launching corporate Multiprotocol Label Switching (MPLS) and 
high speed data connections from Opal (part of the TalkTalk Group). These 
utilise unbundled broadband and Ethernet to deliver a competitive advantage 
over traditional forms of connectivity.
  We also gained accreditation to install and support Trapeze (recently acquired 
by Juniper) wi-fi networks. This allows us to deploy secure, voice-quality 
wireless coverage, asset tracking and radio frequency firewalls.
Summarised below is the product 
development expected over the next six months: 
•  Mobile : Alternative was one of the first wave of Vodafone Service Providers 
to have been accredited since our year end to sell the Apple iPhone, further 
widening our choice of smartphones, associated applications and opportunities 
to converge mobile and fixed line.
  We also look forward to launching a range of handsets utilising the new 
Windows 7 Mobile operating system and expanding our Android range 
into a new category with the Samsung Galaxy S tablet.
•  Advanced solutions: We plan to launch Power NGN Plus, a cloud-based 
service from Exponential-e, which gives our clients the ability to analyse and 
control traffic types on business grade internet connections. The service will 
also be effective in preventing illegal file sharing over the corporate network 
in accordance with the emerging Digital Economies Act. 
  Also in development is Alternative Backup (backup as a service) which is an 
online server backup service to SME businesses. This can also be bespoke 
and can offer larger customers a managed backup service, removing many 
of the capital costs and management overhead of an alternative (e.g. tape 
based) backup system. 
  We continue to develop our deployment of both Avaya and Mitel PBX and 
associated applications in a virtualised environment. The Group is now in the 
VMware partner programme and as such is formalising the skills we already 
have in this area.
Your Alternative Portal
We successfully launched the portal in October 2010. This established our 
unique web-based portal that will converge billing, reporting, ordering and support. 
The portal is being developed in-house by Group developers, including several 
drawn from AKJ. The first launch has already delivered efficiency benefits to 
both clients and the Group. This included the launch of online fault reporting 
across all product lines and a new design to rehouse the existing “Clarity
TM
” 
application. This will provide a new central hub on which future services will 
be accessible.
The monthly rate of new subscriptions to the portal has increased by 400%, 
as we attracted new users from within the existing base, i.e. clients who only 
had the Advanced Solutions products and had not previously needed to use 
the application.  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
11
We have assembled a client focus group to help guide and prioritise 
the development of your Alternative Portal. This is made up of 100 key 
and strategic clients, including Swinton Insurance, Macmillan Cancer Care 
and Computer 2000. Using feedback from this group we have formulated 
the next six months’ development plan. 
Key deliverables for the portal for the next nine months are:
•  a new suite of asset management functionality which will make it simple 
for clients to track and manage all of their assets (either with Alternative 
or another supplier) – this will encourage further usage of the portal and 
generate cross sell opportunities;
•  enhancements to the fault reporting service, showing case updates 
and allowing client interaction;
•   allowing clients to place orders and track their progress online;
•  provide full control of the mobile fleet, allowing clients to activate new 
connections, international roaming and add/remove bars; 
•  new reporting to show trends and usage visually and bespoke reports 
to further help clients to control cost; and
•  the new infrastructure will improve marketing to specific clients within the 
portal, based on criteria such as products taken, size and usage patterns.
Outlook
We remain cautiously optimistic for further growth in the year ahead. Scalable 
has traded positively, ahead of target, since acquisition. AKJ has started the 
year well and, most importantly, in our core business we are well set with established 
and experienced sales and operations teams who continue to sell and deliver 
an expanded converged suite of communications products into new and 
existing customers. We are investing nearly £2.0m in developing our sales 
resources and in building the customer portal, to further underpin organic 
growth in the medium term.
Our customers have generally weathered the recession 
well and whilst customer spend has remained relatively 
flat, we hope to see signs of renewed economic 
confidence later in 2011. The market is consolidating 
at a pace, but there remain opportunities for successful 
bolt-on acquisitions across all our core product sets.
James Murray
Chief Executive Officer
3 December 2010 annual report and 
accounts 2010
 12
96.2
89.7
93.7
72.1
66.0
46.4
41.0
35.2
26.4
18.4
2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001
TRADiNg REviEW b Y PRODuCTS
The Group operates three separate entities – Alternative Networks, Echo and AKJ. 
These are separate trading segments whose services are respectively described 
as telephony services, advanced solutions and billing services. T elephony 
services includes both mobile and fixed line network services. In order to assist 
investors, the Group splits out its Key Performance Indicators (KPIs) into three 
distinct revenue groupings, mobile, fixed line and the balance in advanced solutions, 
because these enable users to benchmark performance against competitors and 
understand more clearly the underlying drivers to the Group’s business.
Telephony services
Mobile
•  Group mobile revenues have increased by 4% to £43.3m (2009: £41.6m), with 
continued market share gains and a stable Average Revenue Per User (ARPU).
•  ARPU represents the average spends in line rental and usage charges per 
live connection per month. It has remained stable at £52. In the first six months, 
ARPU was £51.40, being 50p below the previous six months. In the second 
half of 2010, ARPU has increased to £51.90. The reasons for the stability and 
modest growth in ARPU in the second half are:
 •  continued take up of smartphones by customers (now 31%, up from 25% a year 
ago) which on average have higher ARPU than traditional voice only handsets;
 •  increased stability in international traffic revenues, in spite of some EU imposed 
reductions in data and SMS revenues; and
 •  increase in fixed rental products, such as tariff bundles and data tariff bolt-ons, 
is providing less volatility in ARPU, i.e. the fixed rental element of ARPU has 
increased from £20.00 to £22.00.
The ARPU of the managed base is £41.00 and is not included in the ARPU 
calculations above. The managed base was transferred to the Group following 
a tender pitch to a major network operator who transferred over 50 customers 
in October 2009. These 6,537 subscribers are not included in the gross new 
connections in the year to enable a like for like comparison.
•  The business subscriber base for the Group has increased 12% from 55,299 
to 62,136 subscribers:
 •  Net additions in the year were 6,837 (2009: 3,309), reflecting continued 
gains in market share by the Group. Of these, 6,537 were the managed 
base. The remaining 300 is the net growth in the subscriber base over 
the year. As stated in the trading update in 2010, the Group was hindered 
in the second half of the year by not having access to the Apple business 
products (e.g. the newly launched iPhone 4) but this has since been 
remedied and our sales people are now selling the iPhone and related 
mobility services. 
 •  Data connections continued to grow rapidly. They now represent 46.4% 
(2009: 41.9%), of total connections. “Converged devices”, or smartphones, 
continue to gain wider adoption with cheaper BlackBerry services being 
launched this year. The number of converged devices has grown over 25% 
(2009: 40%) in the year to over 19,000 connections (2009: 15,000) and they 
now account for over 30% of all connections. This trend is expected to 
continue over the year ahead. Data-only devices such as “dongles” and 
more recently, netbooks, increased to 9,700, up from over 8,000 last year. 
These continue to dilute ARPU but remain a core part of servicing and 
retaining business customers.
Trading review by products
Mobile
  2010 2009
Revenue (£’m) 43.3 41.6
Gross profit (£’m) 13.9 12.4
Gross margin 32% 30%
Subscribers at  
30 September 2010 62,136 55,299
Monthly ARPU (£) 52 53
Monthly average  
contract length 23 22
Gross new connections  
in year 14,271 16,429
Network churn  19% 20%
Customer  
churn by value  18% 15%
Subscribers  
in-contract  75% 82%
Data connections  
(included in above) 28,817 23,146
Data connections as  
% of total subscribers 46% 42%
group revenue
Ten years (£’m)
Financial and business Review
Edward Spurrier annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
13
•  Churn: Network churn was lower in 2010 at 19% (2009: 20%) 
and remains within our traditional low churn band of 16–20%. 
As in 2009, the second half of the year had higher churn than 
the first half. Network churn was 18% at the interim stage 
(2009 H1: 18%). In the second half, the Group lost three of its 
largest customers in competitive tenders to other networks on 
significantly lower pricing. One common feature to these customer 
losses was that none of these clients took other products from the 
Group and they were larger than the typical Group client being 
won. Otherwise, churn was at low levels for the converged customers. 
The Group has also managed to renew a considerable number 
of contracts in a very busy six month period. 
  Unsurprisingly, due to the high value clients lost, the churn 
measurement by value also increased from 15% to 18%. Again 
it should be noted that the rate has been higher in previous years 
(21% in 2007) and still remains low by industry standards. 
  The churn in the new managed base has averaged 30% over the 
period, but this was less than expected; by the year end over 70% 
of the base is contracted in for the next 18 months and so churn 
rates are expected to fall.
•  Mobile : Gross margins have increased substantially to 32.0% from 29.9% 
in 2009. The increase is due to the new managed base of customers, where 
the revenues in the Group’s accounts are a net commission less hardware 
costs for renewing customers and the margin on these revenues is much higher. 
Underlying margins in the rest of the business are resilient and have held at 
the same rate as last year (29.9%), with margins on traffic and rentals having 
increased 0.2% margin basis points. This gain was then offset by a £0.2m 
increase in the cost of providing hardware and other subsidies to customers 
on entering into new, or renewed contracts. 
Fixed line network services
Group sales have grown strongly and organically by 9% from £33.8m to 
£37.0m. Momentum is growing within the business. In the first half, revenues 
grew 6.5% in the second half, the year on year growth was 12% and the second 
half was 4.0% ahead of the first. This is an industry beating performance, 
as there are very few peers in the sector showing net increases in fixed line 
revenues. These strong gains are due to continued market share gains with wins 
of larger customers, attracted by the bespoke billing and reporting offering from 
our Clarity online platform. Significant new customers include Carpetright, 
Brake Brothers and Royal College of Nursing. 
Gross margins overall were down 1.3%. The reasons for the decline were 
as follows:
•  0.9% was due to a change in outbound sales mix as lower margin fixed 
rentals increased to 46.0% of outbound revenues from 41.0%; and
•  0.4% was due to 2.0% lower margins on inbound products as a result of the 
0870 regulatory changes effected in August 2009.
“Converged devices”, or 
smartphones, continue to gain 
wider adoption. The number of 
“converged devices” has grown 
over 25% in the year to over 19,000 
connections and they now account 
for over 30% of all connections.
Fixed line sales have grown strongly 
and organically and momentum is 
growing within the business. In the 
first half, revenues grew 6.5% and 
in the second half the year on year 
growth was 12% and the second 
half was 4% ahead of the first.
Wholesale line rental (WLR) revenues 
grew 25% to £13.4m from £10.7m. 
The number of lines grew by 12,275, 
representing 18% growth.
Inbound services were stronger than 
expected in 2010 resulting in overall 
growth of 10% to £7.6m.
Edward Spurrier 
Chief Financial Officer
Group mobile  
revenues have 
increased by 4%  
with continued  
market share gains  
and a stable ARPU. annual report and 
accounts 2010
 14
Telephony services continued
Fixed line network services continued
Outbound services – fixed line
Outbound revenues increased 9% to £29.3m (2009: £26.9m). Line rental revenues 
grew 25% to £13.4m and usage revenues were flat, showing a decline of only 1% 
(2009: 16% decline) to £15.9m. This good performance reflected the accretion 
of larger customers with larger telecoms estates, e.g. Carpetright, Menzies 
Distribution and Royal College of Nursing and this is borne out by the monthly 
ARPU increasing 13% to £1,220.
Usage revenues have been reviewed in detail. In summary, average call values 
are declining at a lower rate than previous years and the volume of calls in the 
customer base is increasing, entailing a potential return to usage revenue growth.
•  The number of billed call minutes increased 6% year on year (2009: reduced 
16%) due to an increase in higher usage customers. 
•  Total usage revenues remained flat, with price drops of between 6% and 10% 
depending on call type per minute billed (2009: 15% average decline), more 
than offsetting the 6% increase in call volumes. 
•  In value terms, the largest impact was from calls to mobiles, where average 
revenues per minute were down 8%. This was due to the reduction in mobile 
termination rates being reflected in retail pricing in 2010. 
Wholesale line rental revenues (WLR) grew 25% to £13.4m from £10.7m. 
The number of lines grew by 12,275, representing 18% growth. The net gains 
were slightly stronger in the second half with net gains of 6,300 compared 
to just under 6,000 in the first half. WLR now accounts for 46% of outbound 
revenues (2009: 41%) and at the year end the annualised run rate was just 
over £15.0m of WLR revenues.
Gross margins, ignoring the effect of the sales mix, remained resilient, entrenched 
in the same ranges as 2009. Line rental margins are in the 21–23% range and 
call margins are 40–42%. Looking ahead, changes in the mobile termination 
rates reductions expected in 2011 are likely to help keep margins up and overall 
at similar levels, assuming some modest decline in composite margins due to 
further sales mix changes. 
Inbound services – fixed line
Inbound services were stronger than expected in 2010 resulting in overall growth 
of 10% to £7.6m. Expectations had been muted due to the effective removal of 
0870 “Revenue Share” services by Ofcom in August 2009. Accordingly, it was 
difficult to predict which products would be selected by the major customers to 
replace these 0870 revenue streams and the Board was cautious in outlook and 
therefore happy with the outcome. The key features of the year’s performance were:
Inbound call revenues on 08xx and 03xx ranges grew by over 20%. This was a 
function of three factors – new customer wins, a return to higher levels of economic 
activity in our top five customers’ businesses and customers accepting being 
charged for incoming calls to 0870 numbers, rather than switching to another 
“Revenue Share” product.
“Revenue Share” revenues remained steady at £4.0m. “Revenue Share” revenues 
were expected to be lower than in 2009 but revenues held up due to the addition 
of two large new customers, as well as an estimated one-off beneficial impact 
of £0.1m provided by the Icelandic “Ash Cloud” boosting calls received by our 
clients in the travel and holiday services sector.
Gross margins have fallen back as expected due to the change in products 
and services now offered and due to renewals of large customers’ contracts 
in the period on lower rates. In spite of successful negotiations with suppliers, 
the margin reductions are expected to remain with us as we move to IP based 
products. Guidance for margins going forward is in the 48–52% range rather 
than 53–57% enjoyed in previous years.
Fixed line network services
  2010 2009
Revenue (£’m) 36.9 33.8
Gross profit (£’m) 13.6 12.9
Gross margin  37% 38%
Outbound KPIs  
Monthly ARPU (£)  1,220   1,080 
WLR as a % of total  
outbound revenues 46% 40%
Number of  
lines/channels  79,862   67,587 
Average new customer  
contract length  
in months 20 19
Inbound KPIs 
Revenue (£’m) 7.6 6.9
Gross margin  51% 54%
Financial and business Review
continued annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
15
Advanced solutions (including billing services)
In this year, the results include eleven months of the acquired billing services 
business, AKJ. These revenues have contributed to an overall growth of 11%. 
At the underlying level, the like for like revenues in connection with installing 
IP telephone systems (PBX) and data services were down 10% to £12.8m, 
as in the first six months in particular, sales of new IP PBX were weaker. 
Overall, gross margins were stronger, increasing by 2% points, largely as 
a result of higher margins in the acquired billing services group, as margins 
in the IP PBX and data businesses were maintained. During the year, the 
Group established a new data sales team, a “blue lights” sales team 
and a specialist maintenance support sales team costing in aggregate 
an extra £0.3m. 
Gross profits for 2009 have been restated upwards from £5.5m, as £0.6m costs 
related to customer services have been relocated to administration costs below 
the line. 
Advanced solutions – iP PbX and data services
IP PBX install revenues were down £1.5m year on year from £7.7m. The recession, 
together with the credit crunch, meant that customers have been disinclined to 
invest in new equipment even if they had access to the funds and expectations 
were set low. On top of this, the combined impact of a harsh winter and a general 
election meant that the first half was weak, with only £2.8m sales. The second 
half has been considerably stronger:
•  revenues in the second half have improved to £3.4m, only 6% down on the 
corresponding period last year (2009 H2: £3.6m);
•  the final quarter produced a record £3.2m sales signed, substantially ahead 
of budget; and
•  deferred income, being revenues invoiced but not recognised in the income 
account until completed, finished the year at £1.4m, up from £0.8m at 
30 September 2009, meaning an additional £0.6m is carried into 2011.
This was a good performance relative to the market. The outlook is considerably more 
positive than a year ago. In addition, the new “blue lights” team traded profitably and 
landed some key new accounts, e.g. East Midland Ambulance Service.
Major client deals included Towers Watson and BPP and four out of the top five 
highest billing customers were multi-product deals.
•  Maintenance revenues have remained flat (down 2% to £4.5m). This has been 
a decent performance especially given the pressure on reducing prices for 
existing customers, customers closing sites (responsible for 50% of all churn) 
and the lower level of newly sold hardware. The customer profile has changed 
as mentioned at the interim. There has been an increase in the average revenue 
per customer which has risen to £3,800 (2010 H1: £3,500) as the Group has 
won higher spending new accounts, e.g. Channel 4 and Arqiva and the Group 
has lost some smaller accounts. Net gross margin on support services is solid 
at £2.4m (2009: £2.4m) owing to reduced engineering staff at Alternative Networks 
offsetting higher outsourced contract costs.
•  Data circuit revenues have increased 5% year on year to £2.1m. A new sales 
team was brought in during the period and growth targets for 2011 are to 
increase revenues by over 30%. A number of multi-product deals for new 
customers brought MPLS revenues to the Group but, as noted before, these 
have longer connection timelines.
Advanced solutions
  2010 2009
Revenue (£’m) 15.9 14.3
Gross profit (£’m) 7.1 6.1
Gross margin  45% 43%
Sales breakdown £’m £’m
IP PBX installs 6.2  7.7 
IP PBX support  
(maintenance) 4.5  4.6 
Data circuit rentals 2.1  2.0 
Billing services – AKJ  3.1  — 
   15.9   14.3 
Margins analysis 2010 2009
Gross margins –  
AKJ billing services 56% — 
Gross margins –  
IP PBX and data services 42% 43%
IP PBX support  
gross profit (£’m) 3.9  4.2 
Engineering cost base (£’m) (1.5) (1.8)
Advanced Solutions has seen 
an overall growth of 11%.
AKJ won twelve new customers 
adding annualised revenues of 
£0.4m, bolstering its strong market 
position in the reseller billing services 
market. Since the period end, AKJ 
has also won a significant account 
which will deliver £0.4m in the year 
to September 2011.
IP telephone systems (PBX) 
installs in the final quarter of the 
year produced a record of £3.2m 
sales signed, substantially ahead 
of budget.
Overall gross margins in the IP PBX 
were stronger, increasing by 2%.
“The Blue Lights” emergency 
services team landed some 
key new accounts, including 
East Midlands Ambulance Service.
This was a good performance for 
Advanced Solutions relative to 
market and the outlook is positive. annual report and 
accounts 2010
 16
Advanced solutions (including billing 
services) continued
billing services
Sales in the eleven month period were £3.10m and EBITDA was 
£0.43m. This was after netting out £0.24m intra group services. 
On a stand alone basis, the annualised EBITDA would equate to 
£0.72m compared with £0.58m underlying EBITDA in the twelve 
months to 31 July 2009. 
In the period, AKJ won twelve new customers adding annualised 
revenues of £0.4m, bolstering its strong market position in the 
reseller billing services market. Since the period end, AKJ has also 
won a significant account which will deliver £0.4m in the year to 
30 September 2011. AKJ lost just four clients during the period and 
has received notice that two further clients will be looking to leave at 
some stage next year due to disposals of their businesses. The total 
annualised revenue losses, including £0.1m known at acquisition, 
amounts to £0.3m. In addition, in the first eleven months, AKJ 
renewed existing contracts with annualised revenues of £0.9m. 
The work that AKJ has completed for the Group and the plans for the portal 
are summarised in the Chief Executive Officer’s report.
FiNANCiAL REviEW
Capital investment
The Group invested £0.21m (2009: £0.34m) in tangible fixed assets and 
intangible software assets during the year. As in 2009, the expenditure was 
principally on the Group’s IT infrastructure and client facing software.
Capital expenditure in 2011 is expected to be £0.9m, as the Group looks to 
invest in accelerating the development of our Alternative Portal, which will total 
at least £0.5m. Since the earn-out of AKJ was settled in August 2010, the Group 
has assembled a team of developers to deliver the portal application in three 
phases over 2010 and 2011. Further information will be provided on our web 
site as the portal is upgraded.
Freehold property
As mentioned last year, an unsolicited offer to purchase the freehold property of 
Echo’s former headquarters was received for £725,000. The property was in the 
accounts at this value and the Board sold the property on 17 December 2009, 
booking net proceeds of £719,000.
Cash flow
Cash inflow from operations was very strong, bringing in £13.6m (2009: £10.6m), 
compared to underlying operating profits of £11.5m (2009: £9.0m). This included 
a working capital inflow of £1.8m (2009: £1.0m). 
The additional net working capital inflow is mainly due to increased employee 
bonus accruals of £0.4m and increased VAT creditor following the rise back 
to 17.5% of £0.3m.
Financial and business Review
continued annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
17
Customer debtors and accrued income have increased by £1.5m. However, this 
is not due to extended payment terms. £0.5m of the increase is due to the managed 
mobile customers’ debts, which are recognised in the balance sheet for the first 
time and £0.7m increase is due to changes in the invoicing timetable for IP 
phone system completions and maintenance, with corresponding adjustments 
in deferred income. Essentially, sales invoices are being raised earlier.
The high rates of cash conversion continue to highlight the Group’s strong 
control over working capital. The high cash conversion rate of EBITDA is 
averaging around 106% in the last three years. In 2010, the cash conversion 
is 112% adjusted EBITDA (2009: 110%). The cash conversion of AKJ in its 
first eleven months was over 100%.
The Group has unutilised bank facilities of £12.0m which are set to expire in 
January 2011. Currently, the Board intends to arrange for the £6.0m overdraft 
facility to renew and will continue to monitor when it may be in the Group’s best 
interests to commit to longer term facilities given their associated costs if unutilised.
Tax
The effective tax rate was 27.4% (2009: 28.5%). 
The main reason for the reduced tax rate was a £0.25m reduction in tax 
due to the difference between the tax relief actually arising on the exercise 
of nil cost share options by Alternative Networks’ staff and the release of the 
related deferred tax asset established in prior periods. This was triggered 
by the LTIP of the Executive Board vesting in April 2010. 
In 2009, the charge was 0.5% higher due to the disallowance of the freehold 
property impairment charge.
Share buy-backs
Pursuant to the authority granted at an Extraordinary General Meeting 
(EGM) on 24 July 2008, the Group repurchased 320,000 shares between 
2 and 8 October 2009 for an aggregate sum of £359,100, being 112p on 
average per share and subsequently cancelled them. This authority lapsed 
at the AGM on 25 January 2010. 
At a general meeting on 29 March 2010, the Group was granted further authority 
to repurchase up to 4,436,085 shares before 29 March 2013. To date, the Group 
has not repurchased any shares under that authority. The Directors will continue 
to monitor the level of cash required for the business and determine if further 
repurchases remain in the shareholders’ best interests.
The 1,000,000 shares held in treasury will continue to be held for potential use 
in satisfying share option exercises and equity issued as part of an acquisition.
The Board will continue to monitor levels of cash and, whilst these have 
historically been used for earnings enhancing acquisitions, the possibility of 
returning excess levels of cash to shareholders via a special dividend or further 
share buy-backs will remain under consideration. 
Cash flow
The operating cash flow of the Group was 
applied as follows:
  2010 2009 
  £’m £’m
Net operating inflow 13.6   10.6 
Investment returns  0.1   0.1 
Taxation (2.6) (2.5)
Capital expenditure (0.2) (0.3)
Free cash flow 10.9   7.9 
  
Acquisitions (4.3) — 
Disposals  0.7   0.3 
Dividends (3.8) (2.1)
Equity finance from  
staff options  0.2   0.1 
Loan repayment (0.3) (0.1)
Share buy-backs (0.4) (1.3)
Net cash inflow  3.0   4.8 
Cash at 30 September  12.0   9.0  annual report and 
accounts 2010
 18
Earnings per share 
Fully diluted adjusted earnings per share (EPS) has increased by 26% to 16.7p 
(2009: 13.9p). Basic adjusted earnings per share has increased 25% from 18.0p 
to 14.4p. 
The statutory or unadjusted fully diluted earnings per share has increased 25% 
from 11.6p to 14.5p and the basic statutory earnings per share has increased 
31% from 12.0p to 15.7p.
The impact of the increase in share-based costs (rising from £0.6m in 2009 
to £1.0m in 2010) has been to reduce EPS by approximately 1.3p in 2010 
on a like for like basis. In addition, the 2009 diluted EPS did not account for 
any impact on the 2008 LTIP . Following the strong share performance in 2010 
and the amendment to the scheme in January 2010, this LTIP ultimately resulted 
in approximately 1,000,000 shares being issued in 2010. If these had been 
included in the 2009 diluted EPS calculation, the diluted EPS would have been 
0.3p lower. Accordingly, the total impact of share incentives on diluted EPS is 
1.6p adverse on a comparison basis.
Dividend per share 
The Board has proposed a final dividend of 4.1p per share (2009: 3.5p per share) 
making a total dividend of 9.1p per share for the full year (2009: 5.1p per share). 
Excluding the “special” dividend of 3.0p paid on 1 April 2010, the total dividend 
per share was 6.1p, being an increase of 20% over the previous year. The Board 
remains committed to a progressive dividend policy and constantly monitors 
shareholder return which is considered to include share buy-backs, special 
dividends and ordinary dividend distributions. The dividend will be paid on 
27 January 2011 to shareholders on the register as of 7 January 2011, with 
an “ex-dividend” date of 5 January 2011. 
The trustees of the Alternative Networks plc Employee Benefit Trust (EBT) have 
waived their rights to receive dividends on 2,000,000 shares during the vesting 
period of the Value Creation Plan, which runs until 31 December 2012.
business risk assessment
The Group’s Risk Management Framework requires a regular review of the key 
risks facing the Group. The specific risks thought to affect the Group the most 
in 2011 have not changed substantially from 2010:
Contracts with suppliers: the Group resells the products of its suppliers and, 
whilst many of the Group’s products are supplier agnostic and there exists a 
freedom to substitute various suppliers’ products, the Group acknowledges 
that it has reliance in particular on the contracts with the mobile networks 
O
2
 and Vodafone. These contracts have just been renewed to July 2013 and 
December 2012 respectively.
The Group mitigates this risk by maintaining strong relationships with its suppliers 
at various levels of the business, as well as paying close attention to ensuring 
the expectations of suppliers are met and, where possible, exceeded. 
Financial and business Review
continued
Earnings per share 
Reconciliation of basic EPS 
– statutory to adjusted
  2010 2009 
  pence pence
Reported basic EPS  
at 30 September 15.7  12.0 
Amortisation of acquired  
assets/intangibles (taxed) 2.3  2.0 
Impairment of  
freehold property — 0.4 
Adjusted basic EPS  
at 30 September 18.0  14.4  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
19
Acquisition integration execution: the Group has set out that its strategy 
includes the acquisition of businesses where they are earnings enhancing. 
The Board acknowledges that there is a risk of operational disturbance in the 
course of integrating acquired businesses with existing operations. The Group 
mitigates this risk by careful planning, rigorous due diligence and segregation 
of the target operations where possible. Where there is full integration of acquired 
businesses, the Group receives a report on the effectiveness of the integration 
and variances from business plan.
Technological change: the Group operates in a market of rapid and dynamic 
technology changes and there is a risk that the Group fails to secure the necessary 
contracts to supply its customers with a new technology (disruptive) which 
substitutes existing technology. The Group mitigates this risk by maintaining 
close relationships with its suppliers and by employing a product marketing 
team whose duties include research, review and procurement of appropriate 
new technology products for testing prior to release to our customers. 
Ability to continue to attract and retain key sales and client management 
executives: the Group is a direct sales and marketing business and, whilst 
the revenues of the Group are largely recurring on a monthly basis, the Group 
depends on being able to recruit and retain staff of the right calibre in order 
to win and service key contracts. The Group has sought to mitigate this risk 
by investing in a clear succession and training plan for career development 
and improving the employee benefits and remuneration over the last three 
years, including commissions and, specifically, share options and pension 
contributions. The Board monitors the results of exit interviews, recruitment 
statistics and staff attrition by department on a regular basis.
Regulatory risk: the Group acknowledges that the pricing of products and 
services can be affected by regulatory bodies in the UK and the EU. In recent 
years, pence per minute pricing from fixed to mobile destinations and EU 
roaming mobile voice and data retail prices have been substantially altered 
and this has had an impact on the results of the business. In 2009, there was 
a substantial change to inbound telephony product pricing as 0870 prices were 
regulated. This meant that the revenue stream of a “Revenue Share”, where the 
operators used to pass back a percentage of the call costs to the customer who 
receives the call, was effectively terminated. The Board believes that where the 
pricing regulations are directed at wholesale prices, the Group is more able to 
mitigate the risk through its own buying and pricing policies. Where the regulator 
imposes price caps at the retail level, the Group is more exposed to a reduction 
in margin where the operators do not substantially reduce their wholesale prices. 
The Group mitigates the risks by careful and detailed research on the future 
regulations and has been involved in lobbying where applicable. The Group will 
assess each risk and build it into its forecasts of income as soon as possible and 
will amend its pricing policies accordingly.
The Board is confident that there is a satisfactory framework for monitoring, 
assessing and reporting on these risks. There is also a robust regular 
framework for reporting on predictive KPIs in the business.
Edward Spurrier 
Chief Financial Officer
3 December 2010 annual report and 
accounts 2010
 20
James Murray, 40
Chief Executive Officer
James Murray co-founded Alternative Networks in 1994 following several sales 
and engineering positions within London based telecoms dealers. He held the 
position of Joint Managing Director from 1994 until 2000 when he moved to the 
position of Managing Director. In 2003 he became Chief Executive Officer. 
James was awarded the title of Ernst and Young’s “Young Entrepreneur of the 
Year” Award in 2005.
board of Directors
Jim Sewell, 39
group Sales and Marketing Director
Jim Sewell graduated from Manchester University in 1993 and joined Alternative 
Networks in October 1994. In 1996 he became Sales Manager of one of the 
two sales teams, before setting up and managing the NGN Solutions division 
in 1997. In 1998 he took over management of the Managed Voice Solutions 
sales team and in 1999 joined the Board as Sales Director. Appointed Group 
Sales and Marketing Director in 2004, Jim is now responsible for new sales 
from the network and system sales teams, the telemarketing team and the 
cross selling and client retention undertaken by the client management team. 
Jim is also responsible for the marketing, products and training teams.
Edward Spurrier, 45
Chief Financial Officer
Edward Spurrier joined Alternative Networks as Finance Director in 1999. 
A member of the Institute of Chartered Accountants in England and Wales, 
he trained and qualified at Coopers and Lybrand (now PwC) in London. Prior 
to joining Alternative Networks, he had over twelve years’ experience in public 
practice, with a focus on advising entrepreneurs on managing growth. He led 
the establishment of the billing, finance, legal and business development 
departments within Alternative Networks plc. In addition to heading up the 
finance function, Edward’s day to day responsibilities include M&A, business 
strategy development, IT operations and development, and legal. He is also the 
Group Company Secretary.  annual report and 
accounts 2010
Financial statements
21
Corporate governance Review of the year
ben Marnham, 38 
Chief Operating Officer
Ben graduated from the University of York in 1994 and joined Alternative Networks 
at its inception. His role expanded from Sales Manager in 1996 to include client 
management in 1997. In 1998, he was promoted to Network Resale Director and 
in 1999 Ben joined the Board of Directors as Commercial Director. Appointed 
Chief Operating Officer in 2004, Ben is responsible for our client experience and 
the operational and commercial aspects of Alternative. 
Tony Caplin, 59
Non-executive Chairman
Tony Caplin is currently chairman of Urban Wimax PLC and North West London 
Hospitals NHS Trust and chairs the audit committee of the Medical Research 
Council. In addition he is a non-executive director of Northamber plc. He is also 
a commissioner on the Public Works Loan Board.
Timothy Holland-bosworth, 72
Non-executive Director
Timothy Holland-Bosworth has spent almost his entire working life in the 
financial services industry, including 25 years as a director of corporate finance 
in Kleinwort Benson Limited and five years within the Guinness Mahon Group 
until he retired two years after its acquisition by Investec Bank. He was a chairman 
of Henderson Crosthwaite Corporate Finance and a director of other Henderson 
Crosthwaite group companies, now part of the Investec Group. annual report and 
accounts 2010
 22
Directors’ Report
for the year ended 30 September 2010
The Directors present their report and audited financial statements of Alternative Networks plc and its subsidiaries (the “Group”) for the 
year ended 30 September 2010.
Principal activities
The principal activity of the Group continues to be business communications focused on service provision and systems integration. In addition 
the Group have also started to provide billing services.
As a service provider, the Group supplies a range of services including managed network services, non-geographic number services, 
mobile phone and data services, and internet and broadband service provision. The Group also supplies, installs and maintains business 
telephone systems and associated integrated communications applications. In terms of billing services, the Group provides software and 
consultancy specialising in the telecommunications industry. 
The principal activity of Alternative Networks plc is business communications focused on service provision.
Business review
Please refer to the Chief Executive’s Officer’s Review on pages 6 to 11 and the Financial and Business Review on pages 12 to 19 which 
discuss key performance indicators, principal risks and uncertainties and future outlook.
Dividends
The Company paid a 2010 interim dividend of 2.0p per 0.125p ordinary share, with a total payment value of £888,000 (2009: £705,000). 
This was paid on 1 April 2010 to shareholders on the register on 19 March 2010.
The Directors paid a special second 2010 interim dividend of 3.0p per 0.125p ordinary share, with a total payment value of £1,331,000 
(2009: £nil). This was paid on 1 April 2010 to shareholders on the register on 19 March 2010. 
In addition, the Directors are proposing a final dividend in respect of the financial year ending 30 September 2010 of 4.1p per 0.125p 
ordinary share which will absorb an estimated £1,865,000 (2009: £1,552,000) of shareholders’ funds. It will be paid on 27 January 2011 
to shareholders who are on the register of members at 7 January 2011.
Post balance sheet events
On 1 October 2010 the Group acquired 100% ordinary shares of Scalable Communications plc (Scalable). Scalable is a computer network 
integrator which specialises in delivering converged solutions around IP networks, IP security and IP telephony exclusively to business 
customers. This acquisition will help accelerate cross selling opportunities within the Group as the respective customer bases are highly 
complementary. It also provides a platform for new revenue streams on which to grow managed data networking services. Further details 
are provided in the Chief Executive Officer’s Review.
The Group has extended its contracts to continue supplying O
2
 and Vodafone services until July 2013 and December 2012 respectively.
Directors
The Directors who held office during the year and up to the date of signing these financial statements are given below:
J Murray 
E Spurrier 
J Sewell 
B Marnham 
T Holland-Bosworth 
T Caplin 
K McGeorge (resigned 19 January 2010)
The Company purchased and maintained throughout the financial year Directors’ and officers’ liability insurance in respect of itself and 
its Directors. annual report and 
accounts 2010
23
Financial statements Review of the year Corporate governance
Share schemes
The Directors believe that a key element in attracting, motivating and retaining employees of the highest calibre is employee involvement 
in the performance of the Group through participation in share schemes. By doing so, the Directors believe that employees’ interests will 
be more closely aligned with those of the shareholders. The schemes are described in the Remuneration Report.
Substantial shareholdings
As at the 16 November 2010 significant shareholders (those with over 3% shareholding) are as follows:
           Percentage  
           of issued 
Shareholder         Holdings share capital
BlackRock Investment Management        5,237,969 11.0%
Chris Wilson         4,556,760 9.6%
Alternative Networks EBT         3,915,200 8.1%
Herald Investment Management         2,530,000 5.3%
F&C Asset Management         2,412,200 5.1%
Directors’ shareholdings are shown in the Remuneration Report.
Environmental report
The Directors recognise the importance and responsibility of ensuring that the Group’s businesses are conducted with respect and care for 
the environment. Environmental management is therefore regularly monitored by the Board through internal control risk management process.
Corporate social responsibility (CSR) statement 
The Group is committed to operating in a socially and environmentally responsible manner, and structures its policies, initiatives and 
practices accordingly.
Employee welfare
All employees are afforded equal opportunities in an environment which is free from unlawful or unfair discrimination. We strive to create 
a positive, nurturing and progressive employee experience and offer a flexible reward and benefits package that encourages a healthy 
work/life balance and general well-being.
The Group takes pride in offering outstanding consultation and service and therefore places great importance upon training and development. 
The business has a well-established in-house training academy and over 76% (2009: 89%) of management roles are filled by internal 
applicants. We have recruited a number of external managers in the last twelve months which has further strengthened our existing 
management team.
Effective two-way communication and teamwork is also critical in creating a positive and productive work environment and, in addition to 
conducting team building events and initiatives, we actively encourage regular employee feedback through staff committees. The Group 
also informs employees of the business’ activities and performance through face-to-face briefings, regular bulletins and Directors operating 
an open-door policy. annual report and 
accounts 2010
 24
Directors’ report continued
for the year ended 30 September 2010
Corporate social responsibility (CSR) statement continued
Our environmental commitment
The Group appreciates the importance of sound environmental practice and a structured programme of green campaigns has been 
implemented to increase awareness and change behaviour. Employees share responsibility for improving the Group’s practices and 
our aim is to progressively reduce our environmental impact. As part of this commitment we are now monitoring waste, recycling, energy 
and water consumption. 
Quarterly monitoring of waste shows a reduction of approximately 33% from the beginning of the calendar year. This reduction is the result 
of increased recycling (wider range of materials); producing electronic as opposed to hard-copy communications, using reusable utensils 
instead of disposable items, and operating printing restrictions such as duplex printing. 
Recycling unavoidable waste is of paramount importance. In 2010 the Group recycled in the region of ten tonnes of waste (2009: eight tonnes). 
We have numerous recycling stations and regularly highlight the importance of recycling to employees.
Because travel to and between offices is unavoidable, the Group continues to reduce its reliance on transportation and business travel. 
The business uses web conferencing facilities at all offices and, where possible, employees have the option of flexible hours and remote 
working. We continue to reduce our carbon footprint by operating a ride to work cycle scheme and limiting flights between offices to 
Board-approved emergencies. Field-engineers’ appointments are scheduled to create minimal time on the road.
In addition to concentrating on our environmental record, we inspect our suppliers’ green credentials. By examining the CSR statement of 
prospective suppliers, we ensure we work with companies with comparable environmental and ethical standards. Where possible, we are 
now sourcing environmentally friendly products and services, including recycled paper, energy from renewable sources, energy efficient 
appliances and company vehicles with low CO
2
 emissions 
Community involvement and donations
As a multi-site business, the Group has primarily chosen to form relationships with local charities, with these co-ordinated by the 
Group Charity Committee. Over the financial year, charitable donations of £14,818 (2009: £7,962) were made to our local causes 
and health-related organisations.
In addition to supporting employees’ charitable endeavours through sponsorship, The Charity Committee supports team events and organises 
companywide fundraising events. Through these activities, we raised additional donations of £7,429 for our chosen charities: Wish Upon a Star, 
Our Kids’ Eyes, Robbie the Robot Appeal (Reading and Berkshire District Hospital) and the Royal Hospital for Neuro-disability.
Payment to creditors
The Group has a variety of payment terms with its suppliers. The Group agrees payment terms with its suppliers when it enters into binding 
purchasing contracts for the supply of goods and services. Its suppliers are made aware of these terms. The Group seeks to abide by these 
payment terms when it is satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions. 
At 30 September 2010 the amount of trade payables shown in the balance sheet represents 47.5 days of average purchases of the Group 
(2009: 47.3 days) and 48.5 days for the Company (2009: 50.5). 
Employees
The Directors believe that the Group’s employees are a source of competitive advantage. The Directors recognise that continued and sustained 
improvement in the performance of the Group depends on its ability to attract, motivate and retain employees of the highest calibre. 
The Group is committed to the principle of equal opportunity in employment. It seeks to ensure that no employee or applicant is treated less 
favourably on the grounds of gender, marital status, nationality, race, colour, ethnic or national origin, religion, disability or sexual orientation 
or is disadvantaged by conditions or requirements, including age limits, which cannot be objectively justified. Entry into and progression 
within the Group are solely determined by the application of job criteria, personal attitude and competence.
It is the Group’s policy to apply best practice in the employment of disabled people. Full and fair consideration is given to every application 
for employment from disabled persons whose aptitude and skills can be utilised in the business and to their training and career development. 
This includes, wherever possible, the retraining and retention of staff who become disabled during their employment.
All staff members are informed of matters concerning their interest as employees and the financial and economic factors affecting the 
business. The Company has maintained its established management communication channels and these have been supplemented 
by direct presentations to staff by Directors to explain developments of particular significance. annual report and 
accounts 2010
25
Financial statements Review of the year Corporate governance
Financial risk management
Financial risk management is disclosed within Note 3 of the financial statements.
Share repurchase 
The Group continued its share buyback scheme that it began in 2008. The scheme was entered into as the Group had funds surplus to 
the operational requirements of its continuing activities. In arriving at the level of cash available to be returned to shareholders, the Board 
took into account the levels of funding remaining in the Group to enable it to meet its working capital requirements.
During the financial year the Group bought back 320,000 ordinary shares that each had a nominal value of 0.125p for cancellation (total 
nominal value: £400). These made up approximately 0.7% of shares in issue at the time and were for a total consideration of £359,100.
At a general meeting on 29 March 2010, the Group was granted further authority to repurchase up to 4,436,085 shares before 29 March 2013. 
To date the Group has not repurchased any shares under that authority. The Directors will continue to monitor the level of cash required 
for the business and determine if further repurchases remain in the shareholders’ best interests.
Statement of disclosure of information to auditors
Each Director of the Group, in office at the time of approval of this report, acknowledges that:
•  so far as the Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and
•  he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information 
and to establish that the Company’s auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.
Independent auditors
A resolution to reappoint PwC as auditors of the Group will be submitted to the forthcoming Annual General Meeting.
By order of the Board
Edward Spurrier
Company Secretary and Chief Financial Officer
3 December 2010 annual report and 
accounts 2010
 26
Corporate Governance Report
Introduction
The Board of Alternative Networks plc is committed to the highest standards of corporate governance in so far as it is practical for a Group 
of its size and although not a requirement of the Alternative Investment Market (AIM), the Group has complied with the provisions of the 
Combined Code 2008 (the Code) except as explained in the report below. The Group, though, is not required to adhere to the provisions 
of the Code and this report is a voluntary statement.
The Group has applied the exemption applicable to smaller companies (outside the FTSE 350) in the Code that states that no one 
Non-executive Director should sit on all three principal Board committees simultaneously. In addition, it has also applied the concession 
that smaller companies can have only two Non-executive Directors, rather than Non-executive Directors representing half of the Board. 
Although the Audit Committee does not meet the Code’s requirement to have recent relevant financial experience, a senior representative 
from the finance department attends all Audit Committee meetings by invitation providing advice to the Committee members when required.
Board of Directors
The Board is responsible for the overall management of the Group and is accountable to shareholders for the creation and delivery 
of strong sustainable financial performance and long-term shareholder value.
There is a clear division of the roles and responsibilities of the Chairman and the Chief Executive Officer which are set out in writing 
and have been agreed by the Board.
The Chairman is responsible for leading the Board and ensuring its effectiveness, setting the agenda for and conducting Board meetings, 
ensuring that all Directors receive sufficient, accurate and relevant information on financial business and corporate issues and maintaining 
effective communication with shareholders.
The Chief Executive Officer is responsible for the executive management and performance of the Group’s business, the development, 
recommendation and implementation of the Group’s strategy and budget and setting the overall policy and direction of all business operations.
The Board has a formal schedule of matters reserved for its decisions. The specific issues include the Group’s overall strategy, the Group’s 
acquisition and divestment policy, approval of key suppliers, approval of major capital expenditure projects and significant financing matters 
and all corporate governance and compliance matters. It monitors the exposure to key business risks and reviews the strategic direction 
of the business, annual budgets, progress towards achievement of those budgets and their capital expenditure programmes. The Board 
also considers employee issues and key appointments.
Subject to the matters which it has reserved for itself, the Board has delegated authority for the management of the Group’s business 
to the Chief Executive Officer who exercises this authority through delegation to members of the senior management team.
The Company Secretary is responsible for advising the Chairman and the Board on all matters concerning corporate governance. 
He supports the Chairman in ensuring the provision of accurate and relevant information to the Board and for ensuring that there 
is a flow of information within the Board and its Committees and between senior management and Non-executive Directors.
The Group maintains appropriate insurance cover in respect of Directors’ and officers’ liabilities. This insurance cover does not 
provide cover in the event that the Director is proved to have acted fraudulently or dishonestly. 
The Board, which is scheduled to meet monthly, met on ten occasions in the current year, in addition to three off-site strategy meetings.
    Number of        
    meetings     T Holland-   
    in year J Murray E Spurrier J Sewell B Marnham  Bosworth  T Caplin  K McGeorge
Board   10 9 10 10 10 9 10 1
Audit Committee    2 — 2 — — 2 2 1
Remuneration Committee    9 — — — — 9 9 1
Nomination Committee    2 2 — — — 2 2 —
Board balance and independence
The Board of Directors of the Group comprises a Non-executive Chairman, four Executive Directors and one independent Non-executive Director. 
Their biographical details on pages 20 to 21 demonstrate the range of experience and judgement they bring to bear on Board matters. 
The Board is satisfied that the Executive and Non-executive elements of the Board are well balanced, that no individual or Group is or 
has been in a position to dominate the Board’s decision making and that there is a substantial degree of independence and diversity.
Each of the Non-executive Directors is considered by the Board to be independent of management and free from any business or other 
relationship which could materially interfere with the exercise of his judgement. The Non-executive Directors are up for re-election on 
19 January 2011 and, as part of the re-election process, the Board will consider the independence of Timothy Holland-Bosworth, owing 
to his tenure since May 1999. The Board considers Timothy Holland-Bosworth independent due to never having been an employee of 
the Group and having never received any fees or benefits from the Group other than salaries. annual report and 
accounts 2010
27
Financial statements Review of the year Corporate governance
Related party transactions are listed in Note 29.
Having considered the position of each Non-executive Director, the Board is of the view that no current interests or prior interests of the 
Non-executive Directors will either influence or prejudice their objective and independent judgement or their ability to act in the best interests 
of the Group.
The Board is satisfied that each of the Non-executive Directors commits sufficient time to the fulfilment of his duties as a Director of 
the Group.
Performance evaluation
A performance evaluation of the Board is undertaken annually by the Group’s Business Excellence department using a detailed questionnaire 
and follow up interviews with Board members. The questionnaire includes consideration of the behaviour of the Board and its processes. 
The report on the evaluation of the Board is considered and discussed by the Board and specific actions agreed.
The Board has established a framework for the induction of all newly appointed Directors which includes the provision of corporate information 
and meetings with Directors and members of the senior executive team.
Board committees
The Board has established a number of standing committees and has delegated certain responsibilities to each of those committees. 
The principal Board committees are the Remuneration, Audit and Nomination Committees.
Remuneration Committee
The membership and a summary of the terms of reference of the Remuneration Committee can be found in the Remuneration Report 
on pages 30 to 32.
Audit Committee
During the year the membership of the Committee comprised Tony Caplin (Chairman), Kenneth McGeorge (until resignation) and 
Timothy Holland-Bosworth. The members of the Committee are considered by the Board to be independent Non-executive Directors.
Role of the Audit Committee
The Board has delegated to the Committee responsibility for overseeing, on behalf of the Board, the financial reporting and internal control 
of the Group.
To this end, the Committee is responsible for:
• Reviewing the form and content and monitoring the integrity of the Group’s financial statements.
•  Reviewing the effectiveness of the Group’s internal control system (including financial, operation and compliance controls and 
risk management).
• Reviewing the effectiveness of the Group’s internal audit function.
• Selecting and recommending to the Board the appointment, re-appointment or removal of the external auditors.
• Reviewing the independence and objectivity of the external auditors and the effectiveness of the audit process.
• Approving the remuneration and terms of engagement of the external auditors.
•  Approving and subsequently reviewing a policy of engagement on the appointment of auditors to supply non-audit services.
• Agreeing annually with the auditors the nature and scope of the audit process.
Audit Committee meetings
The Committee met on two occasions during the financial year.
Attendees at Committee meetings held included the Chief Financial Officer, Financial Controller and representatives of the internal 
and external auditors. All of these attended at the invitation of the Chairman of the committee. annual report and 
accounts 2010
 28
Corporate governance report continued
Board committees continued
Audit Committee continued
Main activities of the Audit Committee in the year to 30 September 2010
On one of the two occasions the Committee met with the Group’s external auditors in the absence of executive management.
The principal issues addressed by the Committee during 2009/10 were:
•  The external auditors’ year-end report for 2009, the review of the Group’s preliminary results and annual report disclosures.
•  The external audit plan for the 2010 financial statements which included a review of the audit objectives, scope, timetable, 
deliverables and audit fee.
• The Group’s risk management process.
• The re-appointment of PwC as external auditors.
•  The Group’s internal audit activities and the effectiveness of internal controls, including the consideration of the internal auditors’ findings 
and recommendations and the external auditors’ observations on internal financial controls arising from their annual audit and interim review.
Independence of external auditors
The Committee has adopted a policy on non-audit services designed to ensure that the provision of such services by the external auditors 
does not impair the auditors’ objectivity and independence. The policy is based on the ICAEW Guidance for Audit Committees and defines 
both the type and value of services that require prior authorisation of the Committee and the services that the external auditor is prohibited 
from providing. The Committee annually reviews all non-audit services provided by the external auditors to ensure compliance with the policy. 
The Committee remains satisfied with the objectivity and independence of the Group’s external auditors.
PwC have been the Company’s auditors since 2000. The Audit Committee manages the relationship with the external auditors on behalf of 
the Board. It considers the re-appointment of the external auditors each year, as well as remuneration and other terms of engagement, and 
makes a recommendation to the Board. The last competitive audit review was in 2008, when PwC were re-appointed by the Board on the 
recommendation of the Audit Committee. There are no contractual obligations that restrict the Audit Committee to recommend a particular 
firm for appointment as auditors.
Nomination Committee
During the year, the membership of the Committee comprised Timothy Holland-Bosworth (Chairman) and T ony Caplin. The members of the 
Committee are considered by the Board to be independent Non-executive Directors.
During the year, the Committee met on two occasions and the Chief Executive Officer was invited to attend both times. The Committee meets 
as necessary to make recommendations to the Board on all new Board appointments and to consider Executive and Board succession 
planning. The Committee has written terms of reference which are available from the Company Secretary.
Internal control
The Directors are responsible for the Group’s system of internal controls and for maintaining and reviewing its effectiveness. The Group’s 
systems and controls are designed to safeguard the Group’s assets and to ensure the reliability of information used within the business 
and for publication.
Systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable 
and not absolute assurance against material misstatement or loss. The key features of the internal control systems, which operated 
throughout the period covered by the financial statements and to the date of signing the financial statements, are described below.
The Board has put in place an organisation structure with clearly defined lines of responsibility and delegation of authority to executive 
management. Individuals are formally made aware of their level of authority. The Group appoints experienced and professional staff of 
the necessary calibre to fulfil their allotted responsibilities.
Executive managers are required to produce a business plan for approval by the Board prior to the beginning of each financial year 
and detailed financial forecasts are formally produced during the year and reviewed by the Board.
Management accounts are produced each month and the financial results are measured against the business plan to identify 
any significant variations. The Board discusses financial and operational performance at its monthly meetings. annual report and 
accounts 2010
29
Financial statements Review of the year Corporate governance
The Group has an internal audit function whose responsibilities include ensuring that internal controls are complied with. The Group’s internal 
controls framework is reinforced by the Group’s successful certification to both the ISO27001:2005 international information security standard 
and the ISO9001:2000 international quality management standard. During the year, five external ISO audits were conducted by the British 
Standards Institute and four billing and metering audits were conducted by the British Approvals Board for Telecommunications.
In addition to the above, the Group was also awarded the Metering and Billing certification by the British Approvals Board for 
Telecommunications for mobile services in July 2009.
The Group procedure for approving and controlling capital expenditure and investment appraisal requires approval of initial capital 
expenditure in the budgets by the Board. Approval of budgeted capital expenditure projects is made at various levels of senior 
management including the Board where required.
Throughout the year, the Group conducts an ongoing risk management evaluation process covering both financial and non-financial risks. 
This involves senior management and Executive Directors identifying areas of perceived risk and the existing control mechanisms in place 
to monitor those risks. Through a series of management workshops, attended by all Executive Directors and senior Executives, the Board 
has reached consensus on those risks facing the Group that are considered business critical. The Group has implemented, and continues 
to implement, actions intended to manage and mitigate those key risks. During 2011, the Board will continue to review its risks and implement 
the necessary mitigating steps as those risks evolve and change.
Financial reporting
A review of the performance and financial position of the Group is included in the Financial and Business Review on pages 12 to 19. 
The Board uses this, together with the Chairman’s Statement and the Directors’ Report, to present a balanced and clear assessment 
of the Group’s position and prospects. 
Relations with shareholders
The Board is committed to and recognises the importance of effective communication with shareholders. Ongoing communication 
is achieved mainly through the publication of the annual and interim reports, trading statements, the announcement of significant 
developments within the Group and the Annual General Meeting.
In addition to regular financial reporting, significant matters relating to trading or development of the business are released to the market 
by way of Stock Exchange announcements.
The Board is responsible for ensuring that dialogue with the shareholders takes place and is based on a mutual understanding of objectives. 
A series of meetings and presentations takes place during the year with institutional investors to review the Group’s performance and prospects. 
These presentations are made available via the Company’s website.
The Annual General Meeting provides shareholders with an opportunity to meet the Chairman and other Directors, receive an update on 
the development of the business and to ask questions of the Board. The Annual Report and financial statements and the Notice of Annual 
General Meeting are sent to shareholders at least 21 days prior to the date of the Annual General Meeting. Shareholders have the opportunity 
to vote on each substantially different issue by the proposal of a separate resolution for each item of business. The results of the proxy 
votes received by the Group, including abstentions, are declared at the meeting, following votes by shareholders on a show of hands.
Going concern
After considering the Group’s financial projections, borrowing facilities and other relevant financial matters, the Board is satisfied that on 
the date of approving the financial statements, that there is a reasonable expectation that the Group has adequate resources to continue 
in operational existence for the foreseeable future. For this reason the Directors continue to adopt the going concern basis in preparing 
the financial statements. The Group’s trading performance has been discussed in the Chairman’s and Chief Executive’s statements.
Tony Caplin
Chairman of the Audit Committee
3 December 2010  annual report and 
accounts 2010
 30
Remuneration Report
Scope of the report
The Remuneration Report summarises the Group’s remuneration policy and particularly its application in connection with the Directors. 
The report also describes how the Group applies the principles of good corporate governance in relation to Directors’ remuneration. 
This report is not mandatory for companies listed on AIM but has been voluntarily included as a matter of best practice. 
The Remuneration Committee
The Remuneration Committee is appointed by the Board and comprises only Non-executive Directors, including the Non-executive Chairman. 
The Committee meets regularly to determine, on behalf of the Board, the framework of executive remuneration.
During the year, the membership of the Committee comprised Timothy Holland-Bosworth (Chairman), Kenneth McGeorge (until resignation 
on 19 January 2010) and T ony Caplin. The members of the Committee are considered by the Board to be independent Non-executive Directors.
During the current year, the Committee met on nine occasions, with the attendance of all members.
The Committee’s terms of reference are reviewed regularly and approved by the Board. These are available for inspection at the Group’s 
registered address. The members of this Committee do not have any conflicts from cross-directorships that relate to the business of the 
Committee. The members do not have any day-to-day involvement in the running of the Group. Tony Caplin is the sole member not 
regarded as being independent, as defined by the Combined Code on corporate governance, for the reason that he is the Group’s 
Non-executive Chairman. However, he is considered to be independent by the Board.
T o assist the work of the Committee, the views of the Chief Executive Officer, Chief Financial Officer and Head of Human Resources 
are also invited where appropriate. These individuals did not, however, participate in any decision related to their own remuneration.
Remuneration policy
The Group is committed to the governing objective of maximising shareholder value over time. Each year the remuneration framework 
and the packages of the Directors are reviewed to ensure they continue to achieve this objective.
The Group’s policy is to attract, retain and incentivise Executive Directors to run the Group and meet the expectations of shareholders 
whilst adopting a prudent approach to overall remuneration.
Basic salary and benefits
The Group’s policy for Executive Directors’ salaries is that they should be maintained at competitive levels for those in comparable 
positions, with variations to reflect individual performance, experience and job size. Benefits in kind consist of car allowances, private 
medical and health insurance, employer pension contributions and health club membership.
Employee Benefit Trust (EBT)
An EBT was established during the year ended 30 September 2005 and Jim Sewell, Edward Spurrier and Ben Marnham were each 
awarded interests in 638,400 0.125p shares held by the trust.
These shares are held on trust for them absolutely subject to the trustees retaining a lien on the shares. The lien is in respect of the 
trustees’ obligation to settle the loan from the Company used to acquire the shares (which is equivalent to £277,000 each, £831,000 
being the total loan).
In March 2010 the EBT subscribed to 2,000,000 shares at the nominal price of 0.125p per share. The trust has waived its rights to dividends 
on these shares. James Murray, Jim Sewell, Edward Spurrier and Ben Marnham each have an interest in these shares which could be 
used to settle future entitlements to shares under the Group’s incentive plans.
Directors’ Long Term Incentive Plan (LTIP) (Note 28)
An LTIP was established on 25 April 2008. Under the scheme Jim Sewell, Edward Spurrier and Ben Marnham were each awarded share 
options which are subject to meeting specific performance criteria. During the year there was an amendment to this plan as detailed 
in Note 28. As at 30 September 2010, there were no options outstanding (2009: 1,388,919) under this scheme. annual report and 
accounts 2010
31
Financial statements Review of the year Corporate governance
2010 Value Creation Plan (VCP) (Note 28)
A VCP was established on 24 February 2010. Under the scheme James Murray, Jim Sewell, Edward Spurrier and Ben Marnham were each 
awarded potential share options which are subject to meeting specific performance criteria. As at 30 September 2010, there were no options 
outstanding under this scheme as none had crystallised.
All employee share and share option plans (Note 28)
The Group’s Enterprise Management Incentive (EMI) scheme was adopted on 22 December 2004. Under the Group’s EMI Scheme, 
options which are qualifying options under the EMI regime and also unapproved options may be granted. As at 30 September 2010 
there were no options outstanding for 2004 scheme (2009: nil).
A second EMI scheme was established on 18 January 2006 (EMI 2006). As at 30 September 2010, options were outstanding over 
99,183 ordinary shares (2009: 165,305) under this scheme.
A third EMI scheme was established on 17 January 2007 (EMI 2007). As at 30 September 2010, options were outstanding over 
773,400 ordinary shares (2009: 913,067) under this scheme.
A fourth EMI scheme was established on 3 July 2008 (EMI 2008). As at 30 September 2010, options were outstanding over 
243,018 ordinary shares (2009: 243,018) under this scheme.
At 30 September 2010 options were outstanding over a total of 1,115,601 ordinary shares (2009: 1,321,390) under all four schemes.
Options under the EMI 2006 scheme were eligible to be exercised from 31 December 2008 based on the conditions that the option holder 
is still an employee of the Group and the Group had achieved certain performance criteria in the period 1 October 2005 to 30 September 2008. 
The exercise price is £1.025 per share which was the market value at the date of the grant. During the year ended 30 September 2010, there 
were 56,106 options exercised and 10,016 options lapsed.
Options under the EMI 2007 scheme were eligible to be exercised from 31 December 2009 based on the conditions that the option holder 
is still an employee of the Group and the Group had achieved certain performance criteria in the period 1 October 2006 to 30 September 2009. 
The exercise price is £1.505 per share which was the market value at the date of the grant. During the year ended 30 September 2010, there 
were 71,182 options exercised and 68,485 options lapsed.
Options under the EMI 2008 scheme were eligible to be exercised from 3 July 2011 based on the conditions that the option holder is still 
an employee of Alternative Networks plc and the Group has achieved certain performance criteria in the period 3 July 2008 to 2 July 2011. 
The exercise price is £1.355 per share which was the market value at the date of the grant. During the year ended 30 September 2010, 
there were no options exercised and no options lapsed.
Service agreements
Each of the Executive Directors has a Service Agreement with the Group. These are rolling agreements which can be terminated by either 
party giving not less than six months’ notice in writing at any time. If the Group terminates the contract by notice but other than on giving 
full notice, the Service Agreements provide for the payment of the fixed amount equal to the salary and other contractual benefits for the 
unexpired proportion of the duration of the appointment or entitlement to notice, as the case may be. It is the Committee’s view that they 
should not change the term of the existing Directors’ Service Agreements.
Non-executive Directors’ remuneration
The remuneration of the Chairman and Non-executive Directors is determined by the Board on the recommendation of the Chief Executive Officer 
on an annual basis and takes into account market rates based on independent advice, as required. The Chairman and Non-executive Directors 
concerned do not participate in this process.
T ony Caplin and Timothy Holland-Bosworth have fixed one year appointments until 19 January 2011. The appointments may be terminated 
by either party giving three months’ notice at any time without compensation.
As Chairman, Tony Caplin is entitled to receive a fee of £35,000 per annum with no pension, bonus, benefits or share options.
The Non-executive Directors, other than the Chairman, receive a basic fee of £22,880 per annum. The Non-executive Directors 
do not participate in any incentive, pension or benefit scheme. annual report and 
accounts 2010
 32
Remuneration Report continued
Directors’ remuneration
      Salary and      
      fees paid or Bonus paid Pension Other 2010 2009 
      receivable or receivable contributions benefits total total 
      £ £ £ £ £ £
Kenneth McGeorge      10,164  — — — 10,164 34,320
James Murray      267,713   115,960   14,400   19,759  417,832 327,425
Edward Spurrier     255,347  134,299   12,767   15,939  418,352 306,776
Ben Marnham      190,455   105,582   5,714   15,078  316,829 236,810
Jim Sewell      190,455   105,582   5,714   14,110  315,861 237,089
T ony Caplin      30,960  —  — — 30,960 22,880
Timothy Holland-Bosworth      22,880  —  — — 22,880 22,880
Totals     967,974 461,423 38,595 64,886 1,532,878 1,188,180
Directors’ share options in Alternative Networks plc
     Options at    Options at   
     1 October Awarded Options Options 30 September Option  
    Option 2009  in year  exercised lapsed 2010  price Exercise 
    scheme Number Number Number Number Number £ dates
Ben Marnham   EMI 64,500 — — — 64,500 1.505 31 Dec 09
Edward Spurrier   EMI 64,500 — — — 64,500 1.505 31 Dec 09
Jim Sewell   EMI 64,500 — — — 64,500 1.505 31 Dec 09
     Options at    Options at   
     1 October Awarded Options Options 30 September Option  
    Option 2009  in year  exercised lapsed 2010  price Exercise 
    scheme Number Number Number Number Number £ dates
Ben Marnham   LTIP 462,973 — 339,189 123,784 — 0.125 25 Apr 10
Edward Spurrier   LTIP 462,973 — 339,189 123,784 — 0.125 25 Apr 10
Jim Sewell   LTIP 462,973 — 339,189 123,784 — 0.125 25 Apr 10
Subject to the conditions described in the note on page 30.
In addition the above three Directors also have interests in an EBT as described on page 30. 
During the year James Murray, Edward Spurrier, Ben Marnham and Jim Sewell were provided loans by the Company which were interest free. 
These were all repaid before 30 September 2010. For further information, please see Note 29.
Directors’ interests in the ordinary shares of Alternative Networks plc 
          2010 2009 
          Number  Number 
          of shares of shares
James Murray and family         14,808,105 14,958,105
Edward Spurrier and family         2,837,466 2,498,277
Jim Sewell and family         2,028,380 1,689,191
Ben Marnham and family         1,868,380 1,689,191
Signed by and approved on behalf of the Board
Timothy Holland-Bosworth
Chairman of the Remuneration Committee
3 December 2010  annual report and 
accounts 2010
33
Financial statements Review of the year Corporate governance
Statement of Directors’ Responsibilities
In respect of the Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared 
the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by 
the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a 
true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these 
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
•  state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed 
and explained in the financial statements;
•  prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions 
and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that 
the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and 
the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing 
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Edward Spurrier
Company Secretary and Chief Financial Officer
3 December 2010  annual report and 
accounts 2010
 34
Alternative Networks plc
Financial statements for the year ended 30 September 2010 
 Financial statements
35 Independent Auditors’ Report
36 Consolidated Statement 
of Comprehensive Income
37 Consolidated and Company 
Statements of Financial Position
38 Consolidated Statement 
of Changes in Equity
39 Company Statement of Changes 
in Equity 
40 Consolidated Statement 
of Cash Flows
41 Company Statement of Cash Flows
42 Notes to the Financial Statements
68 Directors and Advisers annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
35
Independent Auditors’ Report
To the members of Alternative Networks plc
We have audited the Group and Parent Company financial statements (the ‘‘financial statements’’) of Alternative Networks plc for the year 
ended 30 September 2010 which comprise the Consolidated and Company Statements of Financial Position, the Consolidated Statement 
of Comprehensive Income, the Consolidated and Company Statements of Cash Flows and the Consolidated and Company Statements of 
Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and 
International Financial Reporting Standards (IFRS) as adopted by the European Union and, as regards the Parent Company financial 
statements, as applied in accordance with the provisions of the Companies Act 2006.
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 33, the Directors are responsible for the preparation of the 
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance 
with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing 
Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for 
any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by 
our prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance 
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether 
the accounting policies are appropriate to the Group’s and Parent Company’s circumstances and have been consistently applied and 
adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the 
financial statements.
Opinion on financial statements
In our opinion: 
•  the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 September 2010 
and of the Group’s profit and Group’s and Parent Company’s cash flows for the year then ended;
•  the Group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union; 
•  the Parent Company financial statements have been properly prepared in accordance with IFRS as adopted by the European Union 
and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent 
with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: 
•  adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received 
from branches not visited by us; 
• the Parent Company financial statements are not in agreement with the accounting records and returns; 
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Nigel Reynolds (Senior Statutory Auditor)
for and on behalf of PwC
Chartered Accountants and Statutory Auditors
London
3 December 2010  annual report and 
accounts 2010
 36
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2010
          Year ended Year ended 
          30 September 30 September 
           2010 2009 
         Notes £’000 £’000
Revenue          4, 5   96,242   89,676 
Cost of sales         5 (61,771) (58,295) 
Gross profit           34,471   31,381 
Operating costs         5 (25,328) (24,350)
Operating profit         6  9,143   7,031 
    
Operating profit – analysed:     
Adjusted operating profit         31  11,505   8,986 
Share-based payments         28 (978) (565) 
Amortisation of purchased customer contracts and other intangibles (excluding computer software)  14 (1,384) (1,220) 
Impairment of freehold property         15 —  (170) 
Operating profit           9,143   7,031 
    
Finance income         8  111   105 
Finance costs         9 (18) (21) 
Profit on ordinary activities before taxation         9,236   7,115 
T axation on profit on ordinary activities        10 (2,532) (2,024) 
Profit on ordinary activities after  
taxation and comprehensive income for the year         6,704   5,091 
Attributable to:     
Equity shareholders of the Company          6,704   5,091 
Minority interest          — —
           6,704   5,091 
Earnings per ordinary share   
Basic        13 15.7p 12.0p
Diluted        13 14.5p 11.6p
The notes on pages 42 to 67 are an integral part of these consolidated financial statements.  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
37
Consolidated and Company 
Statements of Financial Position
As at 30 September 2010 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
       Notes £’000 £’000 £’000 £’000
ASSETS     
Non-current assets     
Intangible assets      14  21,180   17,755   2,271   2,509 
Property, plant and equipment      15  1,888   2,708   1,796   1,939 
Investments      16 —  —   15,905   11,495 
Deferred tax asset      17  1,032   428   667   355 
Property deposits        2   14  —   1 
         24,102   20,905   20,639   16,299 
Current assets     
Inventories      19  96   168   3   2 
Trade and other receivables      20  13,967   12,535   13,146   13,383 
Cash and cash equivalents      21  12,048   9,015   11,895   8,478 
         26,111   21,718   25,044   21,863 
Total assets        50,213   42,623   45,683   38,162 
EQUITY AND LIABILITIES     
Equity     
Called up share capital      22  61   56   61   56 
Share premium        5,019   4,855   5,019   4,855 
Capital redemption reserve        4   4   4   4 
Merger reserve        2,704   1,905  — —
Treasury shares held       (1,422) (1,422) (1,422) (1,422)
Retained earnings        20,312   16,607   20,558   16,462 
Total equity        26,678   22,005  24,220  19,955 
Current liabilities     
Borrowings      24  79   50   51   50 
Current tax liabilities        1,434   1,335   1,281   1,224 
Trade and other payables      23  19,975   17,269   19,308   16,059 
         21,488   18,654   20,640   17,333 
Non-current liabilities     
Borrowings      24  832   874   823   874 
Deferred tax liabilities      17  1,215   1,090  —  — 
         2,047   1,964   823   874 
Total liabilities        23,535   20,618   21,463   18,207 
Total equity and liabilities        50,213   42,623  45,683  38,162 
The notes on pages 42 to 67 are an integral part of these consolidated financial statements.
The financial statements on pages 36 to 67 were approved by the Board of Directors on 3 December 2010 and were signed on its behalf by:
James Murray
Chief Executive Officer
3 December 2010  annual report and 
accounts 2010
 38
Consolidated Statement of Changes in Equity
For the year ended 30 September 2010
     Called up  Capital  Treasury 
     share Share redemption Merger shares 
     capital premium reserve reserve held Retained Total 
     a) b) c) d) e) earnings equity 
     £’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance at 1 October 2008     57   4,721   3   1,905  (1,422)  14,791   20,055 
Shares issued    —   134  —  —  —  —   134 
IFRS 2 share-based payments    —  —  —  —  —   565   565 
Share buy-back    (1) —   1  —   (1,356) (1,356)
Deferred tax on share options    —  —  —  —  —  (396) (396)
Profit for the year and  
total comprehensive income    —  —  —  —  —   5,091   5,091 
Dividends paid    —  —  —  —  —  (2,088) (2,088)
Balance at 30 September 2009    56   4,855   4   1,905  (1,422)  16,607   22,005 
Shares issued     5   164  —   799  —  — 968
IFRS 2 share-based payments    — — — — —  693  693
Share buy-back    — — — — — (359) (359)
Deferred tax on share options    — — — — —  438  438
Profit for the year and  
total comprehensive income    — — — — —  6,704  6,704
Dividends paid    — — — — — (3,771) (3,771)
Balance at 30 September 2010   61 5,019 4 2,704 (1,422) 20,312 26,678
The notes on pages 42 to 67 are an integral part of these consolidated financial statements.
a)  The balance classified as share capital includes the proceeds arising on issue of the Company’s equity share capital, comprising 
0.125p ordinary shares and the cancellation of shares purchased during the year.
b)  Share premium represents the difference between the fair value consideration received and nominal value of shares issued.
c)  Capital redemption reserve arose from the purchase of own share capital.
d)  The merger reserve results from the previous acquisitions of Integrated Communications for Business (UK) Limited and The T elecom 
Centre Limited and represents the difference between the value of the shares acquired (nominal value plus related share premium) 
and the nominal value of the shares issued.
e)  Shares acquired in relation to the employee Share Incentive Plan are held in treasury until such time as the awards vest. 
At 30 September 2010 the number of shares held in treasury was 1,000,000 (2009: 1,000,000). These had a nominal value 
of £1,250 (2009: £1,250) and a market value of £1.92m (2009: £1.04m).  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
39
Company Statement of Changes in Equity 
For the year ended 30 September 2010
      Called up  Capital Treasury 
      share Share redemption shares Retained Total 
      capital premium reserve held earnings equity 
      £’000 £’000 £’000 £’000 £’000 £’000
Balance at 1 October 2008      57   4,721   3  (1,422)  14,140   17,499 
Shares issued     —   134  —  —  —   134 
IFRS 2 share-based payments     —  —  —  —   565   565 
Share buy-back     (1) —   1  —  (1,356) (1,356)
Deferred tax on share options     —  —  —  —  (396) (396)
Profit for the year and total comprehensive income   —  —  —  —   5,597   5,597 
Dividends paid     —  —  —  —  (2,088) (2,088)
Balance at 30 September 2009     56   4,855   4  (1,422)  16,462   19,955 
Shares issued      5   164  —  —  —  169
IFRS 2 share-based payments     —  —  —  —   693  693
Share buy-back     —  —  —  —  (359) (359)
Deferred tax on share options     —  —  —  —   438  438
Profit for the year and total comprehensive income   —  —  —  —   7,095  7,095
Dividends paid     —  —  —  —  (3,771) (3,771)
Balance at 30 September 2010    61 5,019 4 (1,422) 20,558 24,220
The notes on pages 42 to 67 are an integral part of these consolidated financial statements. annual report and 
accounts 2010
 40
Consolidated Statement of Cash Flows
For the year ended 30 September 2010
          Year ended Year ended 
          30 September 30 September  
          2010 2009 
         Notes £’000 £’000
Cash flows from operating activities   
Cash generated from operations        26  13,619   10,605 
Income tax paid         (2,614) (2,458)
Interest paid         (18) (21)
Net cash generated from operating activities         10,987   8,126 
Cash flows from investing activities   
Purchase of property, plant and equipment       15 (177) (170)
Purchase of intangible assets (software)       14 (42) (172)
Proceeds from sale of property, plant and equipment        719   45 
Interest received          111   98 
Purchase of subsidiary undertaking       18 (4,333) (58)
Proceeds from vendors under sale and purchase agreement      —   300 
Net cash (used in)/generated from investing activities       (3,722)  43 
Cash flows from financing activities   
Dividends paid        12 (3,771) (2,088)
Proceeds from issue of share capital         168   134 
Payments made for share buy-backs        (359) (1,356)
Repayments of borrowings        24 (270) (71)
Net cash used in financing activities        (4,232) (3,381)
Increase in cash and cash equivalents         3,033   4,788 
Cash and cash equivalents at start of year       21  9,015   4,227 
Cash and cash equivalents at end of year      21  12,048   9,015 
The notes on pages 42 to 67 are an integral part of these consolidated financial statements. annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
41
Company Statement of Cash Flows
For the year ended 30 September 2010
          Year ended Year ended 
          30 September 30 September  
          2010 2009 
         Notes £’000 £’000
Cash flows from operating activities   
Cash generated from operations        26  14,420   10,938 
Income tax paid         (2,473) (2,311)
Interest paid         (13) (21)
Net cash generated from operating activities         11,934   8,606 
Cash flows from investing activities   
Purchase of property, plant and equipment       15 (139) (154)
Purchase of intangible assets (software)       14 (82) (172)
Proceeds from sale of property, plant and equipment       —   9 
Interest received          126   106 
Purchase of subsidiary undertaking        (4,410) (58)
Proceeds from vendors under sale and purchase agreement      —   300 
Net cash (used in)/generated from investing activities       (4,505)  31 
Cash flows from financing activities   
Dividends paid        12 (3,771) (2,088)
Proceeds from issue of share capital         168   134 
Payments made for share buy-backs        (359) (1,356)
Share expenses         —  — 
Repayments of borrowings         (50) (65)
Net cash used in financing activities        (4,012) (3,375)
Increase in cash and cash equivalents         3,417   5,262 
Cash and cash equivalents at start of year       21  8,478   3,216 
Cash and cash equivalents at end of year      21  11,895   8,478 
The notes on pages 42 to 67 are an integral part of these consolidated financial statements. annual report and 
accounts 2010
 42
Notes to the Financial Statements
1 General information
Alternative Networks plc is a company incorporated and domiciled in the United Kingdom under the Companies Act 2006. The address 
of the registered office is Chatfield Court, 56 Chatfield Road, London SW11 3UL. 
2 Accounting policies
Statement of compliance and basis of preparation
These financial statements have been prepared in accordance with IFRS as adopted by the EU and IFRIC interpretations and the Companies 
Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires 
management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree 
of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed below.
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been 
consistently applied to all the years presented, unless otherwise stated.
Prior year numbers have been reclassified to ensure comparability with current year (see Note 5).
Amendments to published standards effective in 2010
IAS 1 (revised) “Presentation of Financial Statements”. The Group adopted IAS 1 (revised) on 1 October 2009. The Group changed the 
naming of the primary financial statements and added certain new terminology set out in the revised standard.
IAS 23 (revised) “Borrowing Costs”. The Group adopted IAS 23 (revised) on 1 October 2009. The adoption of this standard did not impact 
the Group’s result or financial position.
IAS 27 (revised) “Consolidated and Separate Financial Statements”. The Group adopted IAS 27 (revised) on 1 October 2009. The adoption 
of this standard did not impact the Group’s result or financial position.
IFRS 3 (revised) “Business Combinations”. The Group adopted IFRS 3 (revised) on 1 October 2009. The adoption of this standard has 
reduced profit by £40,000 in the current year as direct costs of acquisition have been classified in administrative expenses.
IFRS 8 “Operating Segments”. The Group adopted IFRS 8 on 1 October 2009. This replaces IAS 14 and requires segmental information 
to be presented on the same basis as that used for internal reporting purposes. This adoption of this standard has had no impact on 
the results or net assets of the Group but has resulted in revised disclosures.
IFRS 2 (amendment) “Share-based Payment”. The Group adopted IFRS 2 on 1 October 2009. This standard has had no impact on the Group.
IFRS 7 (amendment) “Financial Instruments: Disclosures”. The Group adopted IFRS 7 on 1 October 2009. This standard has had no 
impact on the Group.
IAS 32 (amendment) “Financial Instruments: Presentation”. The Group adopted IAS 32 on 1 October 2009. This standard has had no 
impact on the Group.
IAS 39 (amendment) “Financial Instruments: Recognition and Measurement”. The Group adopted IAS39 on 1 October 2009. This standard 
has had no impact on the Group.
IFRIC 12 “Service Concession Arrangements”. The Group adopted IFRIC 12 on 1 October 2009. This standard is not applicable to the Group.
IFRIC 13 “Customer Loyalty Programmes relating to IAS 18”. The Group adopted IFRIC 13 on 1 October 2009. This standard is not 
applicable to the Group.
IFRIC 14 “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”. The Group adopted IFRIC 14 
on 1 October 2009. This standard is not applicable to the Group.
IFRIC 15 “Arrangement for Construction of Real Estates”. The Group adopted IFRIC 15 on 1 October 2009. This standard is not applicable 
to the Group.
IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”. The Group adopted IFRIC 16 on 1 October 2009. This standard is not 
applicable to the Group.
IFRIC 17 “Distribution of Non Cash Assets to Owners”. The Group adopted IFRIC 17 on 1 October 2009. This standard is not applicable 
to the Group.
IFRIC 18 “Hedges of a Net Investment in a Foreign Operation”. The Group adopted IFRIC 16 on 1 October 2009. This standard is not 
applicable to the Group. annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
43
2 Accounting policies continued
Standards, interpretations and amendments which are not yet 
effective and have been early adopted by the Group or Company
The following standards and amendments to current standards have been published and are mandatory for accounting periods beginning 
on or after 1 October 2010, but have been early adopted by the Group or Company:
“IFRS improvement” (endorsed 23 March 2010). It has been adopted in relation to non-disclosure of segment assets under IFRS 8 as they 
are not reported to the chief operating decision maker.
Standards, interpretations and amendments which are not yet  
effective and have not been early adopted by the Group or Company
IAS 24 (amendment) “Related Party Disclosures”.
Standards, interpretations and amendments which are not yet  
effective and not relevant to the Group’s operations
The following interpretations to current standards have been published and are mandatory for accounting periods beginning on or after 
1 October 2010, but are not relevant to the Group’s operations:
IFRS 9 “Financial Instruments”
IFRIC 18 “Transfer of Assets from Customers” 
IFRIC 15 “Agreements for the Construction of Real Estate”
IFRIC 14 (amendment) “Prepayments on a Minimum Funding Requirement”
IFRIC 19 “Extinguishing Financial Liabilities with Equity Instrument”.
Basis of consolidation
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying 
a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable 
or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date 
on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured 
as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly 
attributable to the acquisition are recognised in the income statement as incurred. Identifiable assets acquired and liabilities and contingent 
liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any 
minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded 
as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised 
directly in the income statement.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses 
are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been 
changed where necessary to ensure consistency with the policies adopted by the Group.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and can be reliably measured. 
The following specific recognition criteria must also be met before revenue is recognised:
Revenue from calls, which excludes value added tax and trade discounts, is recognised in the income statement at the time the call is 
made with the exception of international roamed calls which are recognised when the data is supplied by the UK networks. Calls made 
in the year, but not billed by year end, are accrued within receivables as accrued income with the exception of international roamed calls 
as noted above.
Revenue from line rentals is recognised in the month that the charge relates to, commencing with a full month’s charge in the month 
of connection. Revenue and related costs from the sale of handsets are recognised on the date of connection.
Connection commissions received by mobile network operators are recognised when the customer is connected to the mobile network 
after providing for expected future clawbacks. Mobile commissions in respect of average revenue per user are recognised at the end 
of the relevant performance period.
Revenue and related costs from the sale of accessories are recognised when despatched. annual report and 
accounts 2010
 44
Notes to the Financial Statements continued
2 Accounting policies continued
Revenue recognition continued
Revenue arising from the provision of internet and other services is recognised evenly over the periods in which the service is provided 
to the customer.
Income and related expenditure is recognised upon completion of work for systems installations, and maintenance income in respect 
of systems is recognised evenly over the period to which it relates.
Billing services income and related costs are recognised in the month of service.
Income earned from consultancy is recognised upon completion of the project. 
Interest income is recognised on an accruals basis.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. Cost includes the original 
purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. 
Depreciation, down to residual value, is calculated on a straight-line basis over the estimated useful lives of the asset as follows:
Building element of long leaseholds 2% per annum 
Leasehold improvements  over the lease term 
Plant and equipment 20%–33% per annum 
Motor vehicles 25% per annum
The useful economic lives and residual values attributable to each class of asset are reviewed and adjusted if appropriate at each balance 
sheet date.
The carrying values of property, plant and equipment are reviewed for impairment at each balance sheet date and when events or changes 
in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed 
the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount.
An item of property, plant and equipment is removed upon disposal or when no future economic benefits are expected to arise from the 
continued use of the asset. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal 
proceeds and the carrying amount of the item) is included in the income statement in the year the item is derecognised.
Land is not depreciated and is held at historical cost.
Leases
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. 
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.
Intangible assets
Goodwill is accounted for by recognising identifiable assets (including previously unrecognised intangible assets) and liabilities (including 
contingent liabilities and excluding future restructuring) of the acquired business at fair value. Goodwill is initially measured at cost, being 
the excess of the fair value of payments made, assets transferred and future payments, over the Group’s interest in the net fair value of the 
acquiree’s identifiable assets, liabilities and contingent liabilities. The results of the acquired entities are included in the Group’s results 
from the date when control of the Company passes to the Group. Goodwill is valued at cost less accumulated depreciation.
Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value 
of goodwill allocated to a cash-generating unit may be impaired. Impairment is determined by assessing the recoverable amount of the 
cash-generating unit, to which the goodwill relates. Where recoverable amount of the cash-generating unit is less than the carrying amount, 
an impairment loss is recognised. 
Purchased customer contracts are capitalised at cost and amortised on a straight-line basis over their estimated useful economic life, 
from the date of acquisition, as considered reasonable by the Directors.
Software and software licences includes computer software that is not integral to a related item of hardware. These assets are stated 
at cost less accumulated amortisation and any impairment in value. Amortisation is calculated on straight-line basis over the estimated 
useful life of the asset.
Customer relationships and trade names is the fair value determined by the net present value of the future cash flow benefits 
anticipated to arise from the intangible assets less accumulated amortisation and impairment losses. annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
45
2 Accounting policies continued
Intangible assets continued
Amortisation of intangibles is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets. 
Goodwill is tested systematically for impairment at each annual balance sheet date. Other intangible assets are amortised from the date 
that they are available for use. The estimated useful lives are as follows:
Customer relationships 7 years 
Technology 4 years 
Brand name 3 years 
Purchased customer contracts 3–5 years 
Computer software 3–5 years
Investments
All investments are initially recognised at cost, being the fair value of the consideration given and including acquisition charges associated with 
the investment. Investments are tested for impairment at each reporting date or if events indicate that the carrying value has been diminished.
Inventories
Inventories are valued at the lower of cost and net realisable value after making allowance for any obsolete or slow moving items. 
Net realisable value is reviewed regularly to ensure accurate carrying values. Cost is determined on a first-in-first-out basis and 
includes transportation and handling costs.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale.
Financial assets
The Group classifies its financial assets as loans and receivables which comprise “trade and other receivables” and “cash and cash 
equivalents” in the balance sheet. Financial assets are held at amortised cost and management determines the classification of its 
financial assets at initial recognition. The Group assesses at each balance sheet date whether there is objective evidence that financial 
assets are impaired. For loans and receivables categories, the amount of the loss is measured as the difference between the asset’s 
carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred). 
The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement.
Trade and other receivables
Trade receivables, which generally have 14–60 day terms, are recognised and carried at original invoice amount less provision for impairment. 
A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all 
amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will 
enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is 
impaired. The provision is the difference between the asset’s carrying amount and the original invoice amount less bad debts written off. 
The carrying amount of the asset is reduced through the use of the provision and the amount of the loss is recognised in the income statement. 
When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts 
previously written off are credited in the income statement. 
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank, in hand and short-term deposits with a maturity of three months or less. 
Derecognition of financial assets and liabilities
A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.
Trade payables
Trade payables are stated at their nominal value, recognised initially at fair value and subsequently valued at amortised cost.
Share capital
Equity instruments issued by the Group are recorded at proceeds received, net of direct issue costs.
Current taxation
Current income tax expense is recognised based on management’s best estimate of the weighted average annual tax rate expected 
for the full financial year. annual report and 
accounts 2010
 46
Notes to the Financial Statements continued
2 Accounting policies continued
Segmental reporting
Operating segments require identification on the basis of internal reporting about components of the Group that are regularly reviewed 
by the chief operating decision maker to allocate resources to the segments and to assess their performance. For further information, 
see Note 4 of the financial statements.
Deferred taxation
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and 
liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for, if it 
arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction 
affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted 
or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or 
the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the 
temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing 
of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the 
foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax 
liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either 
the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Pensions and other post-employment benefits
The Group operates a defined contribution scheme and contributes to an independent stakeholder pension. Contributions are recognised 
as an expense in the income statement as they become payable in accordance with the rules of the scheme.
Employee benefits
In accordance with IAS 19, the Group provides for accrued holiday benefit. The cost is measured as the additional amount that the Group 
expects to pay as a result of the unused holiday entitlement that has accumulated at the balance sheet date.
The Group contributes to employees defined contribution pension plans. A defined contribution plan is a pension plan under which the 
Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions once 
contributions have been paid. The contributions are recognised as an employee benefit expense when they are due.
The Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit 
attributable to the Company’s shareholders after certain adjustments.
T ermination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee 
accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed 
to a termination and when the entity has a detailed formal plan to terminate the employment of current employees without possibility of withdrawal.
Employee Benefit Trust
The assets and liabilities of the EBT have been included in the Group financial statements. Any assets held by the EBT cease to be recognised 
on the Group balance sheet when the assets vest unconditionally in identified beneficiaries. The costs of purchasing own shares held by the EBT 
are shown as a deduction against equity. The shares held by the EBT are treated as if they are held in treasury. annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
47
2 Accounting policies continued
Share-based payment transactions
The Group’s management awards certain employees bonuses in the form of equity-settled, share-based compensation plans on a discretionary 
basis. These options are subject to between two and three-year vesting conditions. 
The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount 
to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any 
non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions 
about the number of options that are expected to vest. At each balance sheet date, the entity revises its estimates of the number of options 
that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding 
adjustment to equity. In the event of amendments to option schemes the fair value of the scheme is assessed immediately before and after 
the amendment and any change in the fair value is recognised in the income statement over the remaining vesting period.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium 
when the options are exercised.
The Group has applied IFRS 2 “Share-based Payments” and has adopted the Black-Scholes model for the purposes of computing 
“fair value” for the EMI schemes. The LTIP and VCP schemes have been valued using the Monte Carlo model (Note 28).
Deferred tax is also provided based upon the expected future tax deductions relating to share-based payment transactions and 
is recognised over the vesting period of the scheme concerned.
Customer acquisition costs
The Group defines these as subsidised hardware, free hardware and credits which can be used against equipment or rental/usage billing 
which the client is entitled to over the life of their fixed term contract. These costs are booked in full to the income statement as an expense 
on connection.
Impairment of non-financial assets
Assets that have an indefinite useful life such as goodwill are not subject to amortisation and are tested annually for impairment. Assets that 
are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount 
may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable 
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing 
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial 
assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which 
the dividends are approved by the Company’s shareholders.
Borrowings 
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; 
any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the 
period of borrowing using the effective interest method. annual report and 
accounts 2010
 48
Notes to the Financial Statements continued
2 Accounting policies continued
Significant accounting judgements, estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant 
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment of goodwill: The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation 
of the “value in use” of the cash-generating units to which the goodwill is allocated. Estimating a value in use amount requires management 
to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order 
to calculate the present value of those cash flows. 
Deferred tax assets: Deferred tax assets are recognised for timing differences to the extent that it is more likely than not that taxable profit 
will be available against which the timing differences can be utilised. Management judgement is required to determine the amount of deferred 
tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
Share-based payment: The estimation of the fair value of share options and other equity instruments at the date of their grant requires 
management to make estimates concerning the number of employees likely to exercise together with the expected volatility of and 
dividends payable on the underlying shares and the time at which employees are likely to exercise vested options.
Receivables: Receivables are recognised to the extent that they are judged recoverable. Management reviews are performed to estimate 
the level of provision required for irrecoverable debt. Provisions are made specifically against invoices where recoverability is uncertain.
Value of intangibles: The valuation of intangibles on acquisition requires management estimates and judgements in relation to the 
valuation of separately identifiable assets and contingent liabilities.
3 Financial risk management
The Group’s operations expose it to a variety of financial risks. The Group has in place a risk management programme that seeks 
to limit adverse effects on the financial performance of the Group by using a mix of financial instruments.
a)  Foreign exchange risk: The Group is not exposed to foreign exchange risk as the Group operates almost wholly within the 
United Kingdom. The Group has no exposure to foreign currencies as no billing is carried out in foreign currencies. In addition, 
all of the Company assets and liabilities are held in Pounds Sterling so sensitivity analysis is deemed unnecessary regarding 
foreign exchange risk.
b)  Interest rate risk: Although the Group has interest-bearing assets and liabilities, the Group’s income and operating cash flows 
are substantially independent of changes in market interest rates, due to the nature of the underlying business. 
  If interest rates had been 0.5% higher/lower and all other variables were held constant, the Group’s profit for the year would increase/
decrease by £60,000 (2009: £45,000). This is attributable to the Group’s exposure to interest rates on its variable rate borrowings and 
cash deposits.
c)  Credit rate risk: Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to 
the Group. The Group has adopted a policy of only dealing with credit worthy counterparties and this policy has been implemented by 
requiring staff to carry out appropriate credit checks on customers before sales commence. The amount of exposure to any individual 
counterparty is subject to a limit, which is reassessed at least annually. The Group also insures all debts greater than £3,000, where 
accepted, with a leading credit insurance company.
  Trade receivables consist of a large number of customers, spread across diverse industries across the United Kingdom. Ongoing credit 
evaluation is performed on the financial condition of accounts receivable. The Group does not have any significant credit risk exposure 
to any single counterparty or any group of counterparties having similar characteristics. The Group defines counterparties as having 
similar characteristics if they are connected entities.
  Credit risk may also arise from deposits with banks. It is the Group’s policy that deposits are only made with banks that have high credit 
scores and deposits are split between multiple banks. annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
49
3 Financial risk management continued
d)  Liquidity risk: Ultimate responsibility for liquidity risk management rests with the Board of Directors. They have built an appropriate 
liquidity risk management framework for the management of the Group’s short, medium, and long-term funding and liquidity risk 
management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve 
borrowing facilities through cash flow forecasting, acquisition planning and monitoring working capital and capital expenditure 
requirements on an ongoing basis. 
  The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance 
to the contractual maturity date. These amounts disclosed in the table are the contracted undiscounted cash flows. 
           More 
Group
       Within 1 year 1–2 years 2–5 years than 5 years 
Year ended 30 September 2010       £’000 £’000 £’000 £’000
Borrowings        78   61   159   613 
Trade and other payables        15,764  —  —  — 
           More 
        Within 1 year 1–2 years 2–5 years than 5 years 
Year ended 30 September 2009       £’000 £’000 £’000 £’000
Borrowings        50   51   156   667 
Trade and other payables        13,959  —  —  — 
           More 
Company
       Within 1 year 1–2 years 2–5 years than 5 years 
Year ended 30 September 2010       £’000 £’000 £’000 £’000
Borrowings        51   51   159   613 
Trade and other payables        18,489  —  —  — 
           More 
        Within 1 year 1–2 years 2–5 years than 5 years 
Year ended 30 September 2009       £’000 £’000 £’000 £’000
Borrowings        50   51   156   667 
Trade and other payables        15,430  —  —  — 
The outflow of financial liabilities will not be earlier than the periods stated and neither will they be significantly different to those indicated.
e)  Capital risk management: The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going 
concern in order to provide returns to shareholders. The Group defines capital as share capital plus reserves. The Group is not subject 
to any externally imposed capital requirements.
  The Board monitor levels of cash and any excess levels have historically been used for acquisitions. Since 2008 the Group has also 
run a share buy-back programme and within the current year declared a special dividend to continue providing shareholder returns.  annual report and 
accounts 2010
 50
Notes to the Financial Statements continued
4 Segmental information
Per IFRS 8, adopted by the Group on 1 October 2009, operating segments require identification on the basis of internal reporting about 
components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and 
to assess their performance.
The chief operating decision maker has been identified as the Board. The Board review the Group’s internal reporting in order to assess 
performance and allocate resources. The operating segments are telephony services, advanced solutions and billing services which are 
reported in a manner consistent with the internal reporting to the Board. The Board assesses the performance of the operating segments 
based on revenue, net profit for the year and EBITDA.
T elephony services consists of two revenue streams, fixed line and mobile. The maintenance and systems side of the business is advanced 
solutions, while billing services relates to the provision of billing facilities. There are no comparatives for billing services as this only came 
into existence with the purchase of AKJ on 30 October 2009. 
         Telephony  Advanced Billing  
        services solutions services T otal 
For the year ended 30 September 2010       £’000 £’000 £’000 £’000
T otal segment revenue       80,322 12,824 3,366 96,512
Inter segment revenue       —  (27) (243) (270)
Revenue from external customers      80,322 12,797 3,123 96,242
Operating profit        8,716   173   254   9,143 
Finance income        110   1  —   111 
Finance costs       (13) —  (5) (18)
T axation       (2,658)  50   76  (2,532)
Profit after tax for the year        6,155   224   325   6,704 
EBITDA        10,082   436   647   11,165 
Other information    
Additions to non-current assets (other than financial instruments and deferred tax assets)   181   14   24   219 
Impairment charge       —  —  —  — 
Depreciation and amortisation        1,366   262  393  2,021 
         Telephony  Advanced Billing  
        services solutions services Total 
For the year ended 30 September 2009       £’000 £’000 £’000 £’000
T otal segment revenue       75,415 14,286 —  89,701
Inter segment revenue       —  (25) —  (25)
Revenue from external customers      75,415 14,261 —  89,676
Operating profit        6,587   444  —   7,031 
Finance income        95   10  —   105 
Finance costs       (21) —  —  (21)
T axation       (1,882) (142) —  (2,024)
Profit after tax for the year        4,779   312  —   5,091 
EBITDA        8,081   826  —   8,907 
Other information    
Additions to non-current assets (other than financial instruments and deferred tax assets)   328   15  —   343 
Impairment charge        143   27  —   170 
Depreciation and amortisation        1,494   382  —   1,876 
“IFRS improvement” (endorsed 23 March 2010) has been adopted in relation to non-disclosure of segment assets under IFRS 8. Assets and 
liabilities are not disclosed by segment as they are not reported to the chief operating decision maker.
Transactions with the largest customer of the Company are less than 10% of Group turnover and do not require disclosure for either 2009 or 2010.
All sales have taken place within the United Kingdom and those between segments are all carried out on an arm’s length basis.
All non-current assets are located within the United Kingdom.  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
51
5 Analysis of cost of sales, gross profit and administrative expenses 
           Reclassified*  
          30 September  30 September 
          2010  2009 
           £’000 £’000
Total turnover         96,242 89,676
Cost of sales         (61,771) (58,295)
Gross profit         34,471 31,381
Selling and distribution costs         (8,882) (9,319)
Administrative expenses         (16,446) (15,031)
Operating profit         9,143 7,031
*  After a restructure of the client support teams technical support staff costs which were previously included in cost of sales have been included in selling and distribution costs in 2010 
As a result the 2009 comparatives have been restated.
6 Operating profit
Operating profit is stated after charging/(crediting): 
          30 September  30 September 
          2010  2009 
           £’000 £’000
Depreciation of property plant and equipment       352  375 
Amortisation of intangible assets         1,670  1,501 
Profit on disposal of property, plant and equipment       (9) (45)
Operating lease charges – land and buildings        574  581 
Operating lease charges – motor vehicles        60  34 
Auditors’ remuneration:  
– fees payable to the Company’s auditors for the audit of Parent Company and consolidated financial statements  70  68 
– fees payable to the Company’s auditors for the audit of the Company’s subsidiaries pursuant to legislation  42  20 
Fees payable to the Company’s auditors and associates for other services:  
– services relating to taxation         64  —
– all other services         15  5 
7 Key management costs and employee information
Key management is defined as members of the Group’s Operational Board as well as Executive Board members. 
          30 September  30 September 
          2010  2009 
           £’000 £’000
Key management compensation  
Wages and salaries          2,384   1,885 
Social security costs          564   260 
Other pension costs          61   61 
Share-based payments          652   461 
           3,661   2,667 
          30 September  30 September 
          2010  2009 
           £’000 £’000
Directors aggregate emoluments  
Salaries and bonuses          1,429   1,071 
Other benefits          65   79 
Contributions to money purchase pension scheme        39   38 
           1,533   1,188 
The amounts set out above include remuneration in respect of the highest paid Director of £406,000 (2009: £294,000). The highest paid 
Director also received £13,000 (2009: £14,000) of money purchase pension scheme contributions and exercised nil (2009: nil) share 
options during the year.
There were four Directors (2009: four) accruing retirement benefits under money purchase pension schemes.
The aggregate amount of gains made by Directors on the exercise of share options was £1,497,000 (2009: £nil). annual report and 
accounts 2010
 52
Notes to the Financial Statements continued
7 Key management costs and employee information continued
The average monthly number of persons (including Executive Directors) employed by the Group and Company during the year was: 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        Number Number Number Number
By activity    
Selling and distribution        235   216   101   120 
Administration        179   184   170   159 
         414   400   271   279 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
Staff costs    
Wages and salaries        17,533   16,550   10,518   11,021 
Social security costs        1,851   1,791   1,202   1,315 
Employee share scheme charges       978   565   978   565 
Pension costs – defined contribution plans       272   252   182   202 
         20,634   19,158   12,880   13,103 
8 Finance income 
          30 September  30 September 
          2010  2009 
           £’000 £’000
Interest receivable on bank deposits         111   105 
9 Finance costs 
          30 September  30 September 
          2010  2009 
           £’000 £’000
Interest payable on bank loans          18   21 
10 Taxation on profit on ordinary activities 
          30 September  30 September 
          2010  2009 
           £’000 £’000
Current tax  
T ax on profit in the year          2,684  2,413 
Adjustments in respect of prior years        (9) 7 
Total current tax         2,675  2,420 
Deferred tax  
Origination and reversal of timing differences        (143) (396)
Total deferred tax credit         (143) (396)
Total tax charge         2,532  2,024  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
53
10 Taxation on profit on ordinary activities continued
The current tax assessed for the year is lower (2009: higher) than the average rate of corporation tax in the UK of 28% (2009: 28%) applied 
to the profits before tax for the year. The differences are explained below: 
          30 September  30 September 
          2010  2009 
           £’000 £’000
Profit on ordinary activities before tax        9,236  7,115 
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 28% (2009: 28%)   2,586  1,992 
Effects of:  
Expenses not deductible for tax purposes        43  14 
Schedule 23 deduction in respect of share options       (429) (26)
Impairment of freehold property         — 48 
Marginal relief         (6) — 
IFRS 2 share option charge         365  20 
Other timing differences         (18) (31)
Adjustments in respect of prior years        (9) 7 
Total tax charge         2,532  2,024 
A number of changes to the UK corporation tax system were announced in the June 2010 Budget Statement. The Finance Act (No 2) 2010 
is expected to include legislation to reduce the main rate of corporation tax from 28% to 27% from 1 April 2011. Further reductions to the 
main rate are proposed to reduce the rate by 1% per annum to 24% by 1 April 2014. The changes have been substantively enacted at the 
balance sheet date and, therefore, are included in these financial statements.
The proposed reductions of the main rate of corporation tax by 1% per year to 24% by 1 April 2014 are expected to be enacted separately 
each year. The overall effect of the further changes from 27% to 24%, if these applied to the deferred tax liability at 30 September 2010, 
would be to reduce the deferred tax liability by £135,000 (being £45,000 recognised in 2012, £45,000 recognised in 2013 and £45,000 
recognised in 2014).
In addition, if these applied to the deferred tax asset at 30 September 2010, this would reduce the deferred tax asset by £115,000 (being 
£39,000 recognised in 2012, £38,000 recognised in 2013 and £38,000 recognised in 2014).
11 Profit for the financial year
As permitted by Section 408 of the Companies Act 2006, the Parent Company’s income statement has not been shown separately in these 
financial statements. The Parent Company’s profit after taxation for the financial year was £7,095,000 (2009: £5,597,000).
12 Dividends 
          30 September  30 September 
          2010  2009 
           £’000 £’000
2009 final paid – 3.5p (2008: 3.1p) per 0.125p ordinary share       1,552   1,383 
2010 first interim paid – 2.0p (2009: 1.6p) per 0.125p ordinary share       888   705 
2010 special second interim paid – 3.0p (2009: nil) per 0.125p ordinary share      1,331  — 
           3,771   2,088 
The 2009 proposed final dividend of 3.5p per 0.125p ordinary share (2008: 3.1p) was paid on 26 January 2010. The amount of dividend 
paid was £1,552,000 (2008: £1,383,000). 
The Directors paid a 2010 interim dividend of 2.0p per 0.125p ordinary share (2009: 1.6p), with a total payment value of £888,000 
(2009: £705,000). This was paid on 1 April 2010 to shareholders on the register on 19 March 2010.
The Directors paid a special second 2010 interim dividend of 3.0p per 0.125p ordinary share (2009: nil), with a total payment value 
of £1,331,000 (2009: £nil). This was paid on 1 April 2010 to shareholders on the register on 19 March 2010. 
In addition, the Directors are proposing a final dividend in respect of the financial year ending 30 September 2010 of 4.1p per 0.125p 
ordinary share (2009: 3.5p) which will absorb an estimated £1,865,000 of shareholders’ funds (2009: £1,552,000). Assuming it is approved 
by the shareholders at the Annual General Meeting on 25 January 2011, it will be paid on 27 January 2011 to shareholders who are on 
the register of members at 7 January 2011. annual report and 
accounts 2010
 54
Notes to the Financial Statements continued
13 Earnings per share
The calculation of basic and fully diluted earnings per ordinary share is based on the profit attributable to equity holders of the Company 
divided by the weighted average number of ordinary shares in issue during the year.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive 
potential ordinary shares. The Group has one category of potential ordinary shares: those share options granted to employees where the 
exercise price is less than the average price of the Company’s ordinary share during the year.
The profit and weighted average number of shares used in the calculations are set out below: 
        Weighted average  
       Profit attributable  of £0.00125 Per share 
       to shareholders  ordinary shares amount 
Basic and fully diluted earnings per share       £’000  Number Pence
2010 earnings per share – basic      6,704   42,720,001  15.7 
Potentially dilutive shares      —   3,370,847  (1.2)
2010 earnings per share – diluted      6,704   46,090,848  14.5 
2009 earnings per share – basic        5,091  42,541,495  12.0 
Potentially dilutive shares       —   1,292,806  (0.4)
2009 earnings per share – diluted       5,091   43,834,301  11.6 
The adjusted EPS is based on the adjusted profit before tax as set out in Note 31 and the weighted average number of shares as 
described above. 
        Weighted average  
       Adjusted  of £0.00125 Per share 
       profit  ordinary shares amount 
Basic and fully diluted earnings per share       £’000  Number Pence
2010 earnings per share – basic      7,700   42,720,001  18.0 
Potentially dilutive shares       —  3,370,847  (1.3)
2010 earnings per share – diluted      7,700  46,090,848  16.7 
2009 earnings per share – basic        6,113  42,541,495  14.4 
Potentially dilutive shares        —  1,292,806  (0.5)
2009 earnings per share – diluted       6,113  43,834,301  13.9 
Share option costs included within adjusted profit attributable to shareholders are reducing the earnings per share in 2010 by 2.2p (2009: 0.9p).
As in prior periods, the calculation of the weighted average number of shares in issue excludes 1,915,200 shares held by the EBT . 
These shares are then added to the total of extant options when calculating the fully diluted weighted average number of shares. 
During the current year, a further 2,000,0000 shares were subscribed to by the EBT which have also been excluded from the weighted 
average number of shares for both basic and diluted EPS.
There were 48,482,552 shares in issue at 30 September 2010 including 1,000,000 shares held in treasury. On 30 September 2009 there 
were 44,950,621 shares (inclusive of 1,000,000 shares held in treasury). The weighted average number of shares during the year was 
42,720,001 (2009: 42,541,495). annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
55
14 Intangible assets 
     Purchased  
     customer Computer Customer Trade  
     contracts software relationships names Technology Goodwill Total  
Group    £’000 £’000 £’000 £’000 £’000 £’000 £’000
Cost       
At 1 October 2008    1,662  1,469  5,543  322  —  12,974  21,970 
Additions    —  172  —  — —  —  172 
Adjustment to contingent consideration   —  —  —  —  —  (339) (339)
Transfers from tangibles (Note 15)   —  26  —  —  —  —  26 
At 1 October 2009    1,662  1,667  5,543  322  —  12,635  21,829 
Additions    —  42  —  —   —  42 
Acquisitions    —  4  566  178  1,007  3,298  5,053 
At 30 September 2010    1,662  1,713  6,109  500  1,007  15,933  26,924 
Accumulated amortisation       
At 1 October 2008    795  639  886  234  —  —  2,554 
Charge for year    339  281  793  88  —  —  1,501 
Charges on transfer from tangibles (Note 15)   —  19  —  —  —  —  19 
At 1 October 2009    1,134  939  1,679  322  —  —  4,074 
Charge for period    233  286  866  54  231  —  1,670 
Acquisitions    —  —  —  —  —  —  — 
At 30 September 2010    1,367  1,225  2,545  376  231  —  5,744 
Net book amount       
At 30 September 2010    295  488  3,564  124  776  15,933  21,180 
At 30 September 2009    528  728  3,864  —  —  12,635  17,755 
At 1 October 2008    867  830  4,657  88  —  12,974  19,416 
Amortisation has been charged through the income statement within operating costs. Transfers of £26,000, less £19,000 amortisation, relate 
to computer software transferred to intangibles from property, plant and equipment during the prior year. This also applies to the Company 
shown on the next page. The Group also made an adjustment in the prior year of £339,000 to goodwill as a result of the finalisation of the 
contingent consideration relating to the Echo Communications Limited acquisition (Note 16). 
        Purchased  
        customer Computer  
        contracts software Goodwill Total  
Company       £’000 £’000 £’000 £’000
Cost    
At 1 October 2008       759  1,417  1,763  3,939 
Additions       — 172  — 172 
Transfers from tangibles (Note 15)      —  26  — 26 
At 30 September 2009       759  1,615  1,763  4,137 
Additions       — 82  — 82 
At 30 September 2010       759  1,697  1,763  4,219 
Accumulated amortisation    
At 1 October 2008       578  619  — 1,197 
Charge for period       145  267  — 412 
Charges on transfers from tangibles (Note 15)     — 19  — 19 
At 30 September 2009       723  905  — 1,628 
Charge for year       36  284  — 320 
At 30 September 2010       759  1,189  — 1,948 
Net book amount    
At 30 September 2010       — 508  1,763  2,271 
At 30 September 2009       36  710  1,763  2,509 
At 1 October 2008       181  798  1,763  2,742  annual report and 
accounts 2010
 56
Notes to the Financial Statements continued
14 Intangible assets continued
The carrying amounts of goodwill by business segment and cash-generating unit are as follows:
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
T elephony services        5,685   5,685   1,436   1,436 
Advanced solutions        6,950   6,950   327   327 
Billing services        3,298  —  —  — 
         15,933   12,635   1,763   1,763 
During the year the goodwill in respect of each of the cash-generating unit was tested for impairment in accordance with IAS 36. 
All were assessed to have a value in use in excess of their respective carrying values, and hence no other adjustments to goodwill 
were considered necessary.
The key assumptions in the value in use calculations were:
The forecasts were based on pre-tax cash flows derived from approved budgets for the 2010–2011 financial year. Management believes 
the forecasts are reasonably achievable based on market performance and its expectations of market developments.
Subsequent cash flows were increased over the next two years in line with management forecasts and thereafter at 1% for the following 13 years.
The pre-tax discount rate used to assess the carrying value of goodwill is 13.6% (2009: 10.3%) which approximates the Group’s weighted 
average cost of capital. This discount rate has been calculated on a consistent basis to take into account specific factors of the Group.
The review performed at the year end did not result in the impairment of goodwill for any cash-generating unit as the estimated recoverable 
amount exceeded the carrying amount in all cases.
15 Property, plant and equipment 
       Land and Leasehold Plant and Motor  
       buildings  improvements  equipment  vehicles Total 
Group      £’000 £’000 £’000 £’000 £’000
Costs     
At 1 October 2008      1,646  481  2,131  151  4,409 
Additions      — 70  100  — 170 
Disposals      — — (72) (62) (134)
Transfer to intangibles (Note 14)      — — (26) — (26)
Transfer from assets held for sale     900  — — — 900 
At 30 September 2009      2,546  551  2,133  89  5,319 
Additions      — 1  176  — 177 
Acquisitions      — 31  36  — 67 
Disposals      (900) (6) (1) (15) (922)
At 30 September 2010      1,646  577  2,344  74  4,641 
Accumulated depreciation     
At 1 October 2008      137  326  1,663  79  2,205 
Charge for year      24  69  235  47  375 
Disposals      — — (72) (62) (134)
Transfers to intangibles (Note 14)      — — (19) — (19)
Transfer from assets held for sale     14  — — — 14 
Impairment      170  — — — 170 
At 30 September 2009      345  395  1,807  64  2,611 
Charge for year      18  82  232  20  352 
Acquisitions      — — — — —
Disposals      (190) (4) (1) (15) (210)
At 30 September 2010      173  473  2,038  69  2,753 
Net book amount     
At 30 September 2010      1,473  104  306  5  1,888 
At 30 September 2009      2,201  156  326  25  2,708 
At 1 October 2008      1,509  155  468  72  2,204 
The impairment charge in the prior year relates to a freehold property in Burr Road. This property was subsequently sold in December 
2009 for £725,000 and associated legal fees of £6,000.  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
57
15 Property, plant and equipment continued
       Land and Leasehold Plant and Motor  
       buildings  improvements  equipment  vehicles Total 
Company      £’000 £’000 £’000 £’000 £’000
Costs     
At 1 October 2008      1,646  481  1,991  11  4,129 
Additions      — 67  87  — 154 
Transfers to intangibles (Note 14)      — — (26) — (26)
Disposals      — — (53) (3) (56)
At 1 October 2009      1,646  548  1,999  8  4,201 
Additions      — 1  138  — 139 
Disposals      — (6) (1) — (7)
At 30 September 2010      1,646  543  2,136  8  4,333 
Accumulated depreciation     
At 1 October 2008      137  326  1,573  11  2,047 
Charge for year      18  68  204  — 290 
Transfers to intangibles (Note 14)      — — (19) — (19)
Disposals      — — (53) (3) (56)
At 1 October 2009      155  394  1,705  8  2,262 
Charge for year      18  71  192  — 281 
Disposals      — (5) (1) — (6)
At 30 September 2010      173  460  1,896  8  2,537 
Net book amount     
At 30 September 2010      1,473  83  240  — 1,796 
At 30 September 2009      1,491  154  294  — 1,939 
At 30 September 2008      1,509  155  418  — 2,082 
16 Investments in subsidiary undertakings
During the year the Company acquired AKJ. See Note 18 for further details. 
           Company 
           £’000
1 October 2008          11,834 
Finalisation of contingent consideration         (339)
30 September 2009          11,495 
Acquisition of AKJ          4,410 
30 September 2010          15,905 
In the prior year the deferred consideration relating to the acquisition of Echo Communications Limited was finalised and this resulted 
in a £339,000 reduction in goodwill. This was due to earn-out targets not being achieved.
The acquisition of AKJ included the issue of 707,076 shares with a market value of £800,000. These shares have been included above 
at nominal value of £884 and the premium of £799,000 is shown in the merger reserve (see consolidated statement of changes in equity). 
The following are subsidiary undertakings of the Group: 
     Holding Subsidiary 
  Country of Class of  company company 
Subsidiary undertakings  incorporation holdings Principal activities % %
Echo Communication Limited England & Wales Ordinary Telephone systems — 100%
Echo Data Networks Limited England & Wales Ordinary Dormant — 100%
Echo Network Services Limited England & Wales Ordinary Dormant — 100%
Telecom T echnology Maintenance Limited England & Wales Ordinary Dormant — 100%
Telecom Centre Limited England & Wales Ordinary Non-trading 100% —
Aurora Kendrick James Limited England & Wales Ordinary Billing services 100% —
Aurora Kendrick James UK Limited England & Wales Ordinary Billing services — 100%
0800 Numbers Limited England & Wales Ordinary Dormant 100% —
Freeline Communications Limited England & Wales Ordinary Dormant 100% —
The Directors believe that the carrying value of the investments is supported by their underlying net assets.  annual report and 
accounts 2010
 58
Notes to the Financial Statements continued
17 Deferred taxation
Deferred taxation provided for in the financial statements is set out below. Deferred income tax assets are recognised for tax losses carried 
forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. There were no unrecognised 
amounts of deferred tax at 30 September 2010 (2009: £nil).
The movement in the deferred tax during the year was as follows: 
        Accelerated    
        tax Share-based Tax  
        depreciation payments losses Total 
Asset       £’000 £’000 £’000 £’000
Group    
1 October 2008       156  519  —  675 
Credited to income statement       12  137  —  149 
Debited to equity       —  (396) —  (396)
1 October 2009       168  260  —  428 
Acquisitions       —  —  400  400 
Credited/(charged) to income statement      30  (171) (93) (234)
Credited to equity       —  438  —  438 
30 September 2010       198  527  307  1,032 
Company    
1 October 2008       61  519  —  580 
Credited/(charged) to income statement      34  137  —  171 
Debited to equity       —  (396) —  (396)
1 October 2009       95  260  —  355 
Credited/(charged) to income statement      45  (171) —  (126)
Credited to equity       —  438  —  438 
30 September 2010       140  527  —  667 
          Accelerated 
         Intangible tax  
         assets depreciation Total 
Liability        £’000 £’000 £’000
Group   
1 October 2008        (1,337) —  (1,337)
Credited to income statement        247  —  247 
1 October 2009        (1,090) —  (1,090)
Acquisitions        (491) (11) (502)
Credited to income statement        367  10  377 
30 September 2010        (1,214) (1) (1,215)
There is no deferred tax liability (2009: £nil) recognised in the Company.  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
59
17 Deferred taxation continued
Deferred tax assets and liabilities are analysed as follows: 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
Deferred tax assets    
Deferred tax assets to be recovered after more than twelve months    769  90  511  54 
Deferred tax assets to be recovered within twelve months    263  338  156  301 
Asset at 30 September       1,032  428  667  355 
Deferred tax liabilities    
Deferred tax liabilities to be recovered after more than twelve months   (895) (868) —  — 
Deferred tax liabilities to be recovered within twelve months    (320) (222) —  — 
Liability at 30 September       (1,215) (1,090) —  — 
Net deferred tax (liability)/asset      (183) (662) 667  355 
The effect of the changes to be enacted in the Finance Act (No 2) 2010 has reduced the deferred tax asset provided at 30 September 2010 
by £38,000. This £38,000 decrease in the deferred tax asset has decreased profit for the year by £38,000 and decreases other comprehensive 
income by £38,000. This decrease in the deferred tax asset is due to the reduction in the corporation tax rate from 28% to 27% with effect 
from 1 April 2011.
The changes enacted have also decreased the deferred tax liability provided at 30 September 2010 by £45,000. This £45,000 decrease in 
the deferred tax liability would increase profit for the year by £45,000 and increase other comprehensive income by £45,000. This decrease 
in the deferred tax liability is due to the reduction in the corporation tax rate from 28% to 27% with effect from 1 April 2011.
18 Acquisition of Aurora Kendrick James Limited
On 30 October 2009 the Group acquired 100% of the ordinary shares of AKJ and obtained control of the Company. AKJ is a provider of 
software and consultancy specialising in the telecommunications industry. As a result of the acquisition, the Group expects to be provided with 
a platform for potential new revenue streams and to reduce costs through increased Group purchasing power.
The revenue included in the consolidated statement of comprehensive income since 30 October 2009 contributed by AKJ was £3,123,000. 
AKJ also contributed profit after tax of £325,000 over the same period. The following unaudited pro forma summary presents consolidated 
information of the Group as if the business combination had occurred on 1 October 2009. 
Pro forma twelve month ended 30 September 2010 
           Group 
            £’000 
Revenue           96,526 
Profit on ordinary activities after taxation          6,734 
These amounts have been calculated after applying the Group’s accounting policies and adjusting the results of AKJ to reflect the additional 
depreciation that would have been charged assuming the fair value adjustments to tangible fixed assets had been applied from 1 October 2009, 
together with the consequential tax effects.
The following tables summarise the consideration transferred to acquire AKJ and the amounts of identified assets acquired and liabilities 
assumed at the acquisition date. 
Fair value of consideration transferred 
At 30 October 2009           £’000 
Cash           3,750 
Equity instruments (707,076 ordinary shares of Alternative Networks plc)       800 
Contingent consideration arrangement (cash)         660 
Total consideration transferred          5,210  annual report and 
accounts 2010
 60
Notes to the Financial Statements continued
18 Acquisition of Aurora Kendrick James Limited continued
Recognised amounts of identifiable assets acquired and liabilities assumed
  
At 30 October 2009           £’000 
Cash and cash equivalents           77 
Trade and other receivables           674 
Trade names (included in intangibles)          178 
Contractual customer relationships (included in intangibles)        566 
T echnology (included in intangibles)          1,007 
Software licences (included in intangibles)          4 
Property, plant and equipment           67 
Deferred tax assets           400 
Trade and other payables          (301)
Borrowings          (258)
Deferred tax liabilities          (502)
Total identifiable net assets           1,912 
Goodwill           3,298 
Total consideration           5,210 
The fair value of the 707,076 ordinary shares issued as part of the consideration paid for AKJ was determined on the basis of the closing 
market price of Alternative Networks plc’s ordinary shares on the acquisition date (30 October 2009).
The contingent consideration arrangement requires the Group to pay the former owners of AKJ dependent on the growth in AKJ’s recurring 
revenue for the twelve month period ending 31 October 2010. A maximum undiscounted amount of £950,000 (£750,000 cash and £200,000 shares) 
was to be paid if revenue growth has increased by 10% or greater in the twelve months to 31 October 2010 or the date (if any) on which 
the Company and the sellers’ representatives agree the amount of the deferred cash consideration. The potential undiscounted amount 
of all future payments that Alternative Networks plc’s could be required to make under the contingent consideration arrangement was 
between £nil and £950,000.
Subsequent to the agreement above, the contingent consideration was agreed by both parties on 31 August 2010. Contingent consideration 
was agreed at £660,000 (100% cash). This was paid in cash to the former owners of AKJ in September 2010 as a full and final settlement. 
As this settlement was confirmation of fair value of deferred consideration at acquisition date and was agreed before the fair values were 
finalised, the goodwill was adjusted for the incremental value in the final settlement.
The fair value of trade and other receivables is £674,000 and includes trade receivables with a fair value of £565,000. The gross contractual 
amount for trade receivables due is £565,000, of which £nil is expected to be uncollectable.
The residual goodwill of £3,298,000 arising from the acquisition consists largely of the workforce of the acquired business and the significant 
synergies and economies of scale expected from combining the operations of the Group and AKJ.
None of the goodwill recognised is expected to be deductible for income tax purposes.
The Group incurred £40,000 of third-party costs related to this acquisition. These expenses are included in operating costs in the 
Company’s consolidated statement of comprehensive income for the year ended 30 September 2010. 
19 Inventories 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
Finished goods       96 168 3 2 annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
61
20 Trade and other receivables 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
Trade receivables        6,828   5,024   4,322   3,928 
Amounts owed by Group undertakings      — —  3,135   3,223 
Prepayments        1,491   1,532   712   1,037 
Accrued income        5,593   5,937   4,936   5,164 
Other receivables         55   42   41   31 
         13,967   12,535   13,146   13,383 
The amounts noted above represent the fair value of trade and other receivables.
As at 30 September 2010, trade receivables of £1,007,000 (2009: £997,000) were impaired and fully provided for. The Group is satisfied 
that the majority of its clients are of sound creditworthiness. This view is supported by the willingness of our credit insurers to provide cover 
in the majority of cases. The aging of the trade receivables which are past due and not impaired is as follows: 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
31–60 days        1,049   1,031   534   387 
61–90 days        411   506   177   364 
Over 90 days        258   434   27   366 
         1,718   1,971   738   1,117 
Movement of the Group provision for impairment of trade receivables is as follows: 
          Group Company 
          £’000 £’000
At 1 October 2008         1,767  1,516 
Receivable written off during the year as uncollectible       (1,097) (881)
Unused amounts reversed         (180) (164)
Provision for receivables impairment        507  400 
At 1 October 2009         997  871 
Receivable written off during the year as uncollectible       (464) (397)
Unused amounts reversed         (177) (124)
Provision for receivables impairment        651  574 
At 30 September 2010         1,007  924 
The creation and release of a provision for impaired receivables has been included in operating costs in the income statement. Amounts 
charged to the allowance account are generally written off when there is no expectation of recovering additional cash.
Management regularly reviews the outstanding receivables and do not consider that any further impairment is required.
The other asset classes within trade and other receivables do not contain impaired assets. 
21 Cash and cash equivalents 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
Cash        9,048   6,256   8,895   5,719 
Short-term bank deposits        3,000   2,759   3,000   2,759 
         12,048   9,015   11,895   8,478  annual report and 
accounts 2010
 62
Notes to the Financial Statements continued
22 Called up share capital 
          Group and Group and 
          Company Company 
          30 September 30 September 
          2010 2009 
          £’000 £’000
Authorised  
80,000,000 (2009: 80,000,000) ordinary shares of 0.125p (2009: 0.125p) each     100  100 
Issued and fully paid up  
48,482,552 (2009: 44,950,621) ordinary shares of 0.125p (2009: 0.125p) each    . 61  56 
        2010 2009 
Movement in shares in issue       Shares Shares
Ordinary shares of 0.125p each
At 1 October        44,950,621   45,963,355 
Allotted under share option schemes       1,144,855   154,069 
Issued to EBT as part of share options schemes      2,000,000  — 
Issued as consideration on acquisition of AKJ Limited      707,076  — 
Re-purchased and cancelled under buy-back scheme     (320,000) (1,166,803)
At 30 September        48,482,552   44,950,621 
During the year 320,000 shares (representing approximately 0.7% of the issued share capital) were purchased by the Company for £359,100 
at an average cost per share of £1.12.
The effect of the buyback programme is to enhance earnings per share in the current and future years.
During the year 1,144,855 shares were allotted under share option schemes as follows:
56,106 issued at 102.5p resulting in a share premium of £57,439.
71,182 issued at 150.5p resulting in a share premium of £107,040.
The remainder were issued at nil or nominal value cost resulting in no share premium. 
23 Trade and other payables 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
Trade payables         8,038   7,627   7,040   6,937 
Amounts owed to Group undertakings      —  —   4,504   2,539 
Other taxation and social security costs       1,593   947   819   629 
Other payables        445   388   230   244 
Accruals and deferred income        9,899   8,307   6,715   5,710 
         19,975   17,269   19,308   16,059 
Secured payables
Included in trade payables are the following secured balances: 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
O
2
 UK Limited        2,609   2,834   2,609   2,834 
Vodafone Limited        1,256   1,460   1,256   1,460 
On 27 May 2002, the Group granted legal charges to each of the above companies in respect of the balances owing to them under the 
terms of the service provider agreements both dated 27 May 2002.
The legal charges are secured on the subscriber bases of the Group on each network, and the book debts arising thereon, together 
with any amount standing to the credit of the companies in any designated account.
In addition, on 27 May 2009 the Group gave a guarantee to Barclays Bank plc in favour of O
2
 UK Limited, in respect of £100,000. 
The guarantee is secured on the bank’s existing first charge over the freehold of Chatfield Court, 56 Chatfield Road, London SW11 3UL, 
together with a fixed and floating charge on the assets of the Company, registered on 19 December 2002. annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
63
24 Borrowings 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
Non current bank loans – secured       832   874   823   874 
Current bank loans – secured        79   50   51   50 
Total bank loans – secured        911   924   874   924 
After the acquisition of AKJ (see Note 18) the Group repaid all of AKJ’s outstanding loans with HSBC bank totalling £195,000.
25 Financial instruments
The Group’s financial instruments comprise cash, bank loans and various items such as trade and other receivables and trade and other 
payables that arise directly from its operations. All financial instruments are denominated in Pounds Sterling. The main purpose of holding 
cash is to finance the Group’s future growth and operations.
It is (and has been throughout the periods under review) the Group’s policy that no trading in financial instruments shall be undertaken. 
The fair value of financial assets and liabilities is approximately equal to their book values.
Financial risk management is disclosed within Note 3. 
          2010 2009 
          Loans and Loans and 
Group         receivables receivables 
at 30 September         £’000 £’000
Financial assets per balance sheet  
Trade and other receivables (less prepayments)       12,476  11,003 
Cash and cash equivalents         12,048  9,015 
          24,524  20,018 
          2010 2009 
          Loans and Loans and 
Company         receivables receivables 
at 30 September         £’000 £’000
Financial assets per balance sheet  
Trade and other receivables (less prepayments)       12,434  12,346 
Cash and cash equivalents         11,895  8,478 
          24,329  20,824 
The Group’s financial assets include cash at bank and deposits at the year end. Interest is received on cash deposits at variable rates 
primarily based on the relevant bank rate. All cash at bank and cash deposits are held in Pounds Sterling. Management monitors the 
creditworthiness of financial institutions where cash and cash equivalents are held on a regular basis. 
          2010 2009 
          Other financial Other financial 
Group         liabilities liabilities 
at 30 September         £’000 £’000
Financial liabilities per balance sheet  
Trade and other payables (less deferred income and statutory liabilities)     15,764  13,959 
Secured bank loans          911  924 
          16,675  14,883 
          2010 2009 
          Other financial Other financial 
Company         liabilities liabilities 
at 30 September         £’000 £’000
Financial liabilities per balance sheet  
Trade and other payables (less deferred income and statutory liabilities)      18,489   15,430 
Secured bank loans          874   924 
           19,363   16,354  annual report and 
accounts 2010
 64
Notes to the Financial Statements continued
25 Financial instruments continued
Secured bank loans are secured by fixed charges over the long leasehold property at Chatfield Court (cost: £1,646,000). Interest is payable 
at a variable rate of 1.0% per annum over the Bank of England base rate.
The Chatfield Road loan is repayable in quarterly instalments over a 25 year period commencing February 2001. During the year ended 
30 September 2010, £50,000 (2009: £62,000) of capital repayments was made on the loans below. 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
In one year or less       15,843  14,009  18,540  15,480 
In more than one year but not more than two years     60  51  51  51 
In more than two years but not more than five years     159  156  159  156 
In more than five years       613  667  613  667 
        16,675  14,883  19,363  16,354 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
Undrawn facilities    
Secured bank overdraft       6,000  6,000  6,000  6,000 
Secured bank drawdown facility       6,000  6,000  6,000  6,000 
        12,000  12,000  12,000  12,000 
These are both part of a multi-option facility which is due for renewal on 17 January 2011. 
26 Cash generated from operations 
          Year ended Year ended 
          30 September 30 September 
          2010 2009 
Group         £’000 £’000
Operating profit          9,143   7,031 
Adjustments for:  
Depreciation of property, plant and equipment        352   375 
Impairment of freehold property          —  170 
Amortisation of intangible assets          1,670   1,501 
Employee share scheme charges         693   565 
Profit on sale of tangible assets         (9) (44)
Movements in working capital:  
Decrease in property deposits          12  — 
Decrease in inventories          72   214 
(Increase)/decrease in trade and other receivables       (758)  1,915 
Increase/(decrease) in trade and other payables        2,444  (1,122)
Cash generated from operations         13,619   10,605 
          Year ended Year ended 
          30 September 30 September 
          2010 2009 
Company         £’000 £’000
Operating profit          9,641   7,543 
Adjustments for:  
Depreciation of property, plant and equipment        281   290 
Amortisation of intangible assets          320   412 
Employee share scheme charges         693   565 
Profit on sale of tangible assets          —  (8)
Movements in working capital:  
Decrease in property deposits          1   1 
(Increase)/decrease in inventories        (1)  7 
Decrease in trade and other receivables         237   690 
Increase in trade and other payables         3,249   1,438 
Cash generated from operations         14,421   10,938  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
65
27 Other commitments
At 30 September 2010 the Group and Company had minimum future lease commitments under non-cancellable operating leases as follows: 
        Group  Company
        30 September 30 September 30 September 30 September 
        2010 2009 2010 2009 
        £’000 £’000 £’000 £’000
Land and buildings 
Expiry date:    
Within one year         534   532   470   512 
Between one and two years        433   467   366   467 
Between two and five years         240   471   105   471 
         1,207   1,470   941   1,450 
Motor vehicles    
Expiry date:    
Within one year         52   37  —  — 
Between one and two years        12   37  —  — 
Between two and five years        —   6  —  — 
         64   80  —  — 
28 Share-based payments
Share option scheme
The Group’s EMI scheme was adopted on 22 December 2004. Under the Group’s EMI Scheme, options which are qualifying options 
under the EMI regime and also unapproved options may be granted.
On 18 January 2006, the Group granted a series of 429,307 EMI scheme options (EMI 2006). The options can be exercised from 
December 2008 if the option holder is still an employee of the Group and subject to certain performance criteria all of which were 
met. There were 99,183 EMI 2006 options outstanding as at 30 September 2010 (2009: 165,305).
On 17 January 2007, the Group granted a further series of 1,147,907 EMI scheme options (EMI 2007). The options can be exercised 
from December 2009 if the option holder is still an employee of the Group and certain performance criteria have been met. There were 
773,400 EMI 2007 options outstanding as at 30 September 2010 (2009: 913,067).
On 3 July 2008, the Group granted a further series of 243,018 EMI scheme options (EMI 2008). The options can be exercised in July 2011 
if the option holder is still an employee of the Group and certain performance criteria have been met. All 243,018 EMI 2008 options were 
outstanding as at 30 September 2010 (2009: 243,018).
On 25 April 2008, the Group granted a series of 1,388,919 LTIP options (LTIP 2008). The options could be exercised from April 2010 if the 
option holder was still an employee of the Group and certain performance criteria were been met. 55% of these options were dependant 
on the Company achieving total shareholder returns (TSR) of 20%. An amendment was made to this incentive plan in February 2010 to 
allow a pro rata award of these options where a TSR of between 4% and 20% is achieved and this resulted in an additional fair value 
charge of £114,000. There were no options outstanding as at 30 September 2010 (2009: 1,388,919).
On 24 February 2010, the Group announced the VCP . Awards under the VCP have no value at grant but give the participants the opportunity 
to be awarded Company shares proportionate to a percentage of the value created for shareholders over and above a threshold value over a 
three-year period. A fair value of the options was determined at the grant date and is being expensed to the income statement over the term 
of the plan. The main assumptions used to determine the fair value were as follows;
• Expected volatility which is based on historical volatility of the Company share price over the last three years.
• The risk free rate of return which is the yield on zero-coupon UK government bonds of a term consistent with the scheme duration.
• Dividend yield which is based management expectations of dividends to be paid. annual report and 
accounts 2010
 66
Notes to the Financial Statements continued
28 Share-based payments continued
Share option scheme continued
Outstanding options by scheme: 
       Exercise Exercise 30 September 30 September 
Date of grant     Scheme price (pence) period 2010 2009
18 January 2006     EMI 102.5 2008–2016  99,183   165,305 
17 January 2007     EMI 150.5 2009–2017  773,400   913,067 
3 July 2008     EMI 135.5 2011–2018  243,018   243,018 
25 April 2008     LTIP 0.125 2010–2018 —   1,388,919 
          1,115,601   2,710,309 
Details of the Group’s EBT and EMI schemes are contained in the Remuneration Report on page 30. 
A reconciliation of option movements over the year to 30 September 2010 is shown below: 
        2010  2009
         Weighted  Weighted 
         average  average 
        Number exercise price Number exercise price
Outstanding at 1 October        2,710,309  69.2p 2,913,696  71.3p
Forfeited        (449,853) 25.4p (49,318) 150.5p
Exercised        (1,144,855) 14.5p (154,069) 87.0p
Outstanding at 30 September       1,115,601  144.2p 2,710,309  69.2p
Exercisable at 30 September       872,583  145.0p 165,305  102.5p
As no share options were granted in the year the weighted average fair value of options granted in the year was £nil (2009: £nil).
The total charge for the year relating to employee share-based payment plans was £978,000 (2009: £565,000) including employer’s 
national insurance contributions, all of which related to equity-settled share-based payment transactions.
29 Related party transactions
During the year the Company provided Jim Sewell loans of £97,258 and £165,604. All loans were interest free and repayable on demand. 
All loans were repaid during the year.
During the year the Company provided Ben Marnham loans of £97,258 and £165,605. All loans were interest free and repayable on demand. 
All loans were repaid during the year.
During the year the Company provided Edward Spurrier loans of £97,258 and £179,057. All loans were interest free and repayable on demand. 
All loans were repaid during the year.
During the year the Company provided James Murray a loan of £24,984. The loan was interest free and repayable on demand. The loan 
was repaid during the year.
In the opinion of the Board, key management is defined as members of the Group’s Operational Board as well as Executive Board 
members. For further disclosure see Note 7.
30 Post balance sheet events
On 1 October 2010 the Group acquired 100% ordinary shares of Scalable Communications plc (Scalable) and obtained control of the 
Company. Scalable is a computer network integrator and was purchased for a maximum of £11.5m with an initial consideration of £7.5m 
cash. Deferred consideration of £3.0m payable in cash and £1.0m payable in shares will be payable in 2012 subject to certain gross profit 
targets being achieved. Further details of the strategic benefits of this acquisition are provided in the Chief Executive Officer’s Review on 
page 8.
At the date of issue of these financial statements, neither the completion accounts nor the intangible valuations was complete. A full report 
of acquired assets and consideration, including contingent consideration, will be published in the next financial statements. The Group 
had no prior interest in Scalable prior to the acquisition and no minority interest exist following the combination.
In the year to 31 December 2009, Scalable had revenues of £12.5m, EBITDA of £0.9m and gross assets of £5.6m.
The Group has extended its contracts to continue supplying O
2
 and Vodafone services until July 2013 and December 2012 respectively.  annual report and 
accounts 2010
Review of the year Corporate governance Financial statements
67
31 Reconciliation to adjusted performance 
Reconciliation of adjusted EBITDA
          30 September 30 September 
          2010 2009 
          £’000 £’000
Profit before tax         9,236  7,115 
Adjustments:  
Amortisation of purchased customer contracts and other intangibles (excluding computer software)   1,384  1,220 
Share-based payments         978  565 
Add back impairment of freehold property        — 170 
Adjusted profit before tax         11,598  9,070 
Finance income         (111) (105)
Finance costs         18  21 
Adjusted operating profit         11,505  8,986 
Add: depreciation of property, plant and equipment       352  375 
Add: amortisation of software (intangibles)        286  281 
Adjusted EBITDA         12,143  9,642 
Reconciliation of adjusted profits for earnings per share
          30 September 30 September 
          2010 2009 
          £’000 £’000
Adjusted profit before tax (see above)        11,598 9,070
Less: share-based payments         (978) (565)
Less: taxation per consolidated statement of comprehensive income     (2,532) (2,024)
Less:  taxation on amortisation of purchased customer contracts  
and other intangibles (excluding computer software)      (388) (342)
Less: other         — (26)
Adjusted profit after tax          7,700   6,113 
Adjusted EPS is calculated on adjusted earnings after deduction of share option costs.
This analysis is provided as the Group considers it provides a truer reflection of the underlying performance of the business and is 
common practice in the investment analyst community. annual report and 
accounts 2010
 68
Directors
J Murray 
E Spurrier 
J Sewell 
B Marnham
Non-executive Directors
T Holland-Bosworth 
T Caplin
Company Secretary
E Spurrier
Registered office
Chatfield Court 
56 Chatfield Road 
London SW11 3UL
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and 
Statutory Auditors
1 Embankment Place 
London WC2N 6RH
Principal banker
Barclays Bank plc
1 Churchill Place 
Canary Wharf 
London E14 5HP
Principal legal advisors
Bird & Bird LLP
15 Fetter Lane 
London EC4A 1JP
Corporate brokers
Investec
2 Gresham Street 
London EC2V 7QP
Registrar
Capita IRG
7th floor Phoenix House 
18 King William Street 
London EC4N 7HE
Directors and Advisers Endless Solutions.
One Alternative.
www.alternativenetworks.com