Alternative Networks PLC
Annual Report & Accounts 2015
ALTERNATIVE NETWORKS PLC ANNUAL REPORT & ACCOUNTS 2015 Alternative at a Glance
Strategic Report
Alternative Networks
Annual Report & Accounts 2015
In 2015 Alternative 
celebrated 21 years.
Contents
Strategic Report
Alternative at a Glance 3
Chairman’s Statement 8
Chief Executive Ofﬁcer’s Review 10
Chief Financial Ofﬁcer’s Review 16
Corporate Governance
Directors and Advisers 25
Board of Directors 26
Directors’ Report 28
Corporate Governance Report 31
Remuneration Report 35
Statement of Directors’ Responsibilities 40
Financial Statements
Independent Auditors’ Report 42
Consolidated Statement of Comprehensive Income  44
Consolidated and Company Statement of Financial Position 45
Consolidated Statement of Changes in Equity 46
Company Statement of Changes in Equity  47
Consolidated Statement of Cash Flows 48
Company Statement of Cash Flows 49
Notes to the Financial Statements 50 Alternative enables the 
transformation of businesses 
through technology
We possess a diverse 
product and service portfolio; 
a solid proposition; a large 
database of customers; 
partnerships with world class 
supplier vendors; and a 
strong financial position.
Our Method
Everything we do is aligned 
to our customers’ desired 
business outcomes. Each 
solution is designed with the 
customer, with full visibility 
and control at all times and 
underpinned by end to end 
accountability.
Our Customers
Alternative supports a 
wide variety of customers, 
from legal, professional 
and financial services, 
healthcare, higher education 
and multi-national 
operations, to mission 
critical public services, all 
of which rely on effective 
and dependable technology 
products and solutions.
Our Partners
We have close working 
relationships with many 
world class product and 
service vendors, with 
whom we hold top partner 
accreditations and have 
access to the latest 
technologies, as well as the 
commercial advantages 
presented by having a wide 
choice of suppliers. Our 
partners include Vodafone, 
GS2, Microsoft, Avaya, 
Mitel, NetApp, HP , BT, O2, 
Juniper Networks, Citrix and 
VMWare.
Our products and services 
include: cloud computing, 
virtualisation, managed 
hosting, fixed line voice, 
mobile, systems, IP 
networks and complex 
billing software solutions.
It is our vision to become the 
leading IT managed services 
provider to UK businesses.
Alternative Networks
Annual Report & Accounts 2015
3
Our People
Our greatest asset is our 
people. There are over 600 
staff in the group, with an 
enormous amount of skill in 
a diversity of roles, many of 
whom have been with the 
company for over 10 years.
We provide IT and telecommunications solutions to 
businesses, covering the full spectrum of products 
and services from device to datacentre. Alternative at a Glance
Strategic Report
Alternative Networks
Annual Report & Accounts 2015
4
Highlights
Reported revenue
9% (2014: £134.4m
#
)
£146.8m
Net debt
Target <£20m (2014: £29.3m)
£18.7m
Good growth in revenues and profits and 
strong cash generation alongside significant 
operational enhancements
Reported revenue up 9% to    
£146.8m (2014: £134.4m
#
)
– Pro forma~ revenue up 4%, excluding the 
effect of Mobile bonus reduction^
– Pro forma~ revenue growth in Advanced 
Solutions of 10%
– 5% underlying^ revenue growth in Mobile
#
, 
driven by 9% growth in the subscriber base
– Pro forma~ gross profits up 4% 
Reported adjusted EBITDA increased 13% to 
£22.1m (2014: 19.6m)
– Pro forma~ adjusted EBITDA +10%
Continued strong cash generation
– Operating cash conversion of 99% of adjusted 
EBITDA (2014: 83%)
– Net debt of £18.7m (2014: £29.3m), materially 
ahead of the Board’s target of £20.0m
– Net debt leverage under 1.0 times adjusted EBITDA  Strategic Report
Corporate Governance
Financial Statements
Alternative Networks
Annual Report & Accounts 2015
5
Reported gross profit
10% (2014: £55.3m
# 
)
£60.7m
Adjusted earnings per share*
6% (2014: 26.9p)
28.4p
Dividend per share
13% (2014: 14.5p)
16.4p
Reported adjusted EBITDA**
13% (2014: £19.6m)
£22.1m
Proposed full year dividend increased   
13% to 16.4p
– Reiterate intention to progress dividend 
payments towards 15% annual growth in the 
medium term, anticipating growth of no less 
than 10% per annum
^  Excludes revenue earned directly from network providers based  
 on sales volumes, that has been terminated in 2014, following the  
 amendment to commercial agreements with airtime partners
#  Restated as discussed in note 1
~  Pro forma (like for like) numbers include a full 2014 financial year’s  
 performance for the businesses acquired in January 2014
*  Adjusted earnings per share is based on adjusted profit after tax as  
 set out in note 28
**  Earnings before interest, taxation, depreciation and amortisation
Integration of the 2014 acquisitions now 
complete with the businesses rebranded 
Alternative and all teams now located 
together in new facilities
– Increased breadth of products and services 
facilitating product penetration opportunities 
across the Group
– Companywide systems and processes 
integrated in most business disciplines
Strong order book at period-end and 
healthy pipeline for year ahead Alternative at a Glance
Strategic Report
Alternative Networks
Annual Report & Accounts 2015
6
Alternative focuses on the design and 
provision of enterprise grade technology 
solutions. We ensure that these solutions 
are inherently highly available, resilient, 
highly performing, compliant and secure.
Advanced solutions
Alternative’s Advanced Solutions portfolio has been designed 
to deliver flexibility and choice to customers. We deliver IT and 
Voice solutions via on premise, hybrid cloud and cloud delivery 
models. The portfolio is designed to integrate public, private 
and hybrid cloud solutions unifying the distributed environments 
through unique web based management tools providing visibility 
and control through orchestration, monitoring and correlation of 
customer data, to provide meaningful management information. 
The solutions include, IP Networking (LAN, WLAN, Security), 
Co-Location, Unified Communications, Managed IT Services 
(Storage, Compute, Virtualisation) Unified Communications, 
Application Virtualisation, Wide Area Networks.
Alternative’s cloud solutions offer pre-integrated technology 
stacks to deliver best practice enterprise architecture to the  
mid-market in clear consumption based models. These solutions 
include ITaaS (IT as a Service) and our own UC Platform as 
a Service APaaS (Alternative Platform as a Service). In 2016, 
Alternative will continue to develop and enhance these solutions.
We also help customers take control of expenditure with a 
range of call management and billing solutions, via our billing 
solutions company, Aurora. These solutions include mobile order 
management and tariff bundling, tailored telecoms analysis, 
auditing, procurement cost allocation and expense management, 
for leading telecoms service providers, resellers, systems 
integrators, consulting firms and corporate customers.
Device to datacentre
Our end to end proposition
Alternative’s Device to Datacentre proposition is 
designed to help customers meet the challenge of 
changing competitive landscapes and soaring end-user 
expectations.  Businesses need to securely and reliably 
connect users to the applications and data they need to 
work, irrespective of time of day, location or device. And 
to make this a practical reality, a strong understanding 
of and visibility and control over the entire technology 
ecosystem is required.
We deliver solutions built upon customers’ required 
business outcomes, from the device in a users’ jacket 
pocket to the datacentres that support the delivery and 
storage of the applications and data they need. 
Revenue 
generang 
apps
On-demand
services
Public cloud apps
Private
Shared
Public
VISIBILITY AND CONTROL
USER DEVICE ACCESS Strategic Report
Corporate Governance
Financial Statements
Alternative Networks
Annual Report & Accounts 2015
7
Mobile
Alternative offers an extensive range of mobile workspace 
solutions, enabling companies to enhance their employee 
productivity through the provision of mobile networks, 
smartphones, mobile desktop access, application management, 
email, data and security. We have commercial arrangements 
with Vodafone and O2, as well as strong relationships with all the 
major handset and tablet manufacturers.
We complement our core mobile offering with Mobile Device 
Management (MDM) solutions, allowing customers to achieve the 
highest levels of security, governance and legislative compliance 
across estates of the most popular mobile operating platforms. 
VDI (virtual desktop infrastructure) adds a distinctive element to 
our mobile business proposition.
Fixed Voice
Alternative provides a range of fixed line telephony services that 
allow customers to deliver business critical services and provide 
migration paths to services in the future. Our fixed voice partners 
include BT Openreach, Vodafone and Gamma. We provide 
migration paths to the services they will require in the future, and 
we continue to successfully convert customers from traditional 
voice services, to VoIP (eg SIP).
In providing well managed, low-overhead migrations to IP based 
voice services, customers receive greater flexibility, enhanced 
business continuity and the opportunity to scale channel use to 
enable greater management of costs. Alongside our outbound 
voice portfolio, our inbound solutions, including non-geographic 
numbering (NGN) ranges, enhance our customers’ marketing and 
customer service operations through greater visibility, control and 
business continuity.
Revenue 
generang 
apps
On-demand
services
Public cloud apps
Private
Shared
Public
VISIBILITY AND CONTROL
ACCESS TRANSIT NETWORK PRESENTATION HYBRID DATACENTRES APPLICATION / DATA Alternative Networks
Annual Report & Accounts 2015
8
Strategic Report
Chairman’s Statement
James Murray           
Executive Chairman
Results
Reported revenue for the year ended 30 September 2015 was 
£146.8m, up 9% on 2014. On a pro forma basis, i.e. including a 
full 2014 financial year’s performance for the businesses acquired 
in January 2014, revenues were up 3% year on year and up 4% 
after the effects of the contract changes in Mobile are excluded. 
Gross margins remained steady and adjusted EBITDA at £22.1m 
was up by 13% on a reported basis and by 10% on a pro forma 
basis. 
Cash generation has remained strong across the Group with 
99% of adjusted EBITDA converted to cash. Group net debt 
at 30 September 2015 had reduced to £18.7m (30 September 
2014: £29.3m), comfortably outperforming the £20.0m target we 
outlined in June and down from £41.3m at the time of the 2014 
acquisitions.
Dividend 
The continued financial strength of the Group has enabled 
the Board to declare a final dividend of 10.9 pence per share, 
resulting in a total dividend for the year of 16.4 pence per share, 
an increase of 13%. This is in line with the Board’s commitment 
to grow the dividend by at least 10% each year. The intention 
remains to progress towards 15% growth in the medium term. 
The dividend will be paid on 29 January 2016 to shareholders on 
the register as of 4 January 2016. 
The 2015 financial year has seen Alternative 
make good progress in its stated objective to 
grow the business further. We have continued 
to strengthen our offering, armed with an 
increasing array of market leading products 
and services that can meet customers’ 
communications and data needs.
The investment we have made, both through 
the acquisition of complementary businesses 
and the upgrading of our infrastructure, is 
delivering good results and leaves us well 
positioned for further growth.
Chairman’s Statement Alternative Networks
Annual Report & Accounts 2015
9
Strategic Report
Corporate Governance
Financial Statements
Review of operations
The acquisitions made in 2014 have been integrated into the 
Advanced Solutions division, which now represents more than 
50% of group revenue. Advanced Solutions performed well in the 
financial year, especially in the second half, following a slight lull 
in orders towards the end of the first half, and we closed the year 
with a strong £5.2 million order backlog. The division also enjoyed 
some excellent new client wins, and reinforced its particularly 
strong presence in the higher education sector, signing contracts 
with 14 universities and 33 schools during the year.
Mobile Network Services traded in line with expectations and 
continued to grow its market share, with an increased number 
of subscribers in a competitive market, representing a very 
creditable achievement. Fixed Voice was as expected slightly 
down on the previous year and in line with market trends, and 
the division now represents less than 20% of group revenues. 
Our market leading Synapse portal has continued to be a key 
differentiator, and we continue to drive further enhancements to 
its functionality, stability and reliability. 
The move to our new offices in Blackfriars Road, London, has 
completed successfully. This, combined with an upgrade of 
our entire IT infrastructure and the full integration of the most 
recent acquisitions, means our employees are better equipped 
to deliver our high quality products and services to the market 
more effectively and under a single brand, and has enabled our 
customers to derive maximum benefit from them. 
We announced on 3 June 2015 that Edward Spurrier would be 
stepping down as CEO and as a director of the company and 
that Mark Quartermaine would assume the role of CEO. After a 
four month handover, Ed’s last day with Alternative Networks was 
30 September 2015. We are enormously grateful to Ed for the 
contribution he has made to the growth of Alternative Networks 
from its very earliest days, through to a listing on AIM 10 years 
ago and on to what it has become today.
Growth strategy
Led by the new executive management team, the Group is well 
positioned to continue the growth trajectory seen to date. The 
last year has been one of investment for that purpose, and we are 
well on our way to becoming one of the UK’s leading providers 
of IT managed services to UK businesses. This investment has 
been made to enable the Group to take maximum advantage of 
the expanded portfolio of services it has steadily developed, both 
in-house and through acquisition.
As we look to take advantage of the strong platform we have 
built, we will use our breadth of products and services to establish 
ourselves the long term supplier of choice for a larger customer 
target base and drive organic growth. We continue to remain 
open to acquisition opportunities should they be clearly enhancing 
to shareholder value and fit our product and capability set. In 
addition, we intend to invest further in product development so 
as to remain at the cutting edge of the market and maintain our 
competitive strengths. The growth of our pipeline, the increasing 
number of larger businesses taking more of our services and the 
conversion rate of orders suggest that our strategy is working and 
will continue to deliver value. We therefore remain positive about 
our future prospects.
James Murray
Executive Chairman
8 December 2015
We intend to invest further in 
product development so as to 
remain at the cutting edge of 
the market and maintain our 
competitive strengths. Alternative Networks
Annual Report & Accounts 2015
10
Strategic Report
Chief Executive Officer’s Review
Mark Quartermaine           
Chief Executive Officer
2015 has been a good year, delivering 
solid growth in all key metrics whilst 
completing major integration and operational 
improvement projects, and creating a strong 
platform to support future growth.
Most integration related activities are now 
complete following the London office IT 
platform enhancements and back office 
process integration. This, in addition to 
significant investments, most notably across 
our office portfolio, but also in our sales force 
and in product development, has resulted 
in a Group that it is well placed to increase 
sales and deliver even greater customer 
satisfaction. 
Chief Executive Officer’s Review
Overview
In January 2014 the Group completed two acquisitions, which 
contributed for part of the year in 2014 and for the full year in 
2015, and as such we refer to pro forma (or like for like) results 
in this report where we have included a full year of 2014 results 
for the acquisitions as though we had bought them at the start of 
2014 financial year.
The major highlights of the year were as follows:
– Continued gains in market share in key growth areas:
– Mobile subscribers increased 9% to 99,413 (2014: 
91,391)
– Advanced Solutions pro forma revenues and orders up 
10% and 3% respectively
– Major product development with the release of new 
propositions as well as enhanced versions of existing 
products;
– £1.0m investment in increasing ongoing account 
management resource to drive product penetration across 
the existing customer base;
– Completion of the integration of 2014 acquisitions with the 
businesses rebranded Alternative and all teams now located 
together in new facilities; and
– Shift of all legacy on-premise IT infrastructure and hosted 
services into modern managed secure datacentres. Alternative Networks
Annual Report & Accounts 2015
11
Strategic Report
Corporate Governance
Financial Statements
The new premises and IT infrastructure provide the Group with a 
sound platform for future growth. The Group is better positioned 
to expand both its managed service product portfolio and its 
selling capability to deliver the portfolio to new and existing 
customers more effectively.
Trading and performance overview
In 2015 the Group has continued to build on a successful 2014, 
with momentum seen in 2014 continuing into 2015, and has 
resulted in increases in reported revenues, gross profit and 
adjusted EBITDA, compared with the prior period and on a  
pro forma basis. Group reported revenues at £146.8m were 9% 
ahead of 2014, with pro forma revenues up 3% (2014: £134.4m), 
and up 4% when the reduction in Mobile bonus revenue impact is 
excluded.
Cash generation was once again strong, with operating cash 
conversion of 99% of adjusted EBITDA. As a result, net debt has 
fallen to £18.7m, beating the Group’s £20.0m year-end target and 
bringing it comfortably below one times adjusted EBITDA.  This 
has allowed the Board to propose a final dividend of 10.9 pence 
per share which is 14% up on 2014.
The Advanced Solutions business was 10% ahead of the prior 
year on a pro forma basis. Total orders signed in the year were 
3% higher than the prior year on a pro forma basis, resulting in 
a total backlog of £5.2m at the end of the year for delivery in the 
coming financial year. New orders have been generated across 
the portfolio, with some notable areas of success particularly in 
higher education, where the Group has signed contracts with 14 
universities and 33 schools and colleges during the year. 
Hosted Managed Services and On Demand Services, formerly 
parts of ControlCircle and Intercept IT, are reported in Advanced 
Solutions and are now fully integrated into the Group with all 
teams located in a new, single London office and the businesses 
rebranded as Alternative. Trading performance has been solid, 
with minimal client attrition. As previously reported at our interim 
results, performance in the year was moderately impacted by 
two major customers putting new orders on hold pending internal 
strategic reviews, resulting in lower non-recurring revenues. Of 
these, one customer has returned to its pre-review order profile. 
Now that the acquisitions are fully integrated we are encouraged 
to see improving order trends overall, which we expect to 
continue into the new financial year. 
The Mobile business has once again delivered a strong 
performance in the period, gaining market share with a 9% 
increase in the subscriber base year on year, and a further 
1,300 signed that will connect by the end of the first quarter of 
2016. Underlying revenues (which exclude the effect of revised 
commercial arrangements with suppliers) grew 5% to £39.7m, 
representing 28% of the Group’s overall revenue. 
Fixed Voice revenues were 9% below the prior year, in line with 
expectations. Gross profit was more resilient at 6% behind 
the prior year due to the positive impact of new commercial 
agreements signed in the period. Whilst we continue to manage 
the product set for profitability, the key focus remains the 
migration of the fixed line base to SIP channels which have grown 
almost 50% year on year. Overall the Fixed Voice business now 
represents 19% of the Group’s revenue, down from 23% in 2014.
The Group is better positioned 
to expand both its managed 
service product portfolio and its 
selling capability to deliver the 
portfolio to new and existing 
customers more effectively. Alternative Networks
Annual Report & Accounts 2015
12
Strategy
The Group’s strategy remains to become the leading IT managed 
services provider for UK businesses via both organic and 
acquisitive growth. The Group operates in the UK Telecoms and 
Information Technology (IT) market as an IT Managed Services 
company covering the full spectrum of services and products 
from device to the datacentre. 
The financial performance of the Group, including revenues, profits, 
cash flows and net debt is set out in the Financial Review and a 
discussion of the KPIs of the Group are included in the Trading 
Review, both within the Chief Financial Officer’s Review.
Platform for growth
2015 has been a significant year of organisational and operational 
change. Major changes revolve largely around the Group’s office 
space portfolio, product development and IT infrastructure. The 
latter has focused on migrating our infrastructure and applications to 
our datacentre facilities and therefore improving resilience. 
These combined investments will not only improve our service 
offerings to customers, but will also increase productivity and 
collaboration amongst our people and allow easier integration of 
future acquisitions.
The Board is committed to building a broader and stronger platform 
for growth. We have set out our vision to be the leading IT managed 
services provider of choice to UK businesses. We have invested 
a total of £0.8m non-recurring capital on developing the new 
infrastructure required to provide the services which customers 
need to bridge private and public cloud services, in addition to 
routine recurring capital investments. The technical strategy is 
focused on three elements: 
 − On demand services – to be accessed through the portal 
and consumed per user per month (e.g. Email or Unified 
Communications (“UC”)) or per unit of compute (e.g. storage); 
 − Infrastructure services – in mobile, WAN, voice and hosting; 
and
 − Significantly enhanced Synapse customer portal to include  
IT services and extend to public cloud services.
The Group infrastructure and hosting services are critical to the 
delivery of this strategy and in the second half of 2015 we have 
launched our own UC cloud platform as well as a significantly 
enhanced “Desktop as a Service”. 
Strategically, we are positioning ourselves to continue to support 
our customers to consume business critical applications via a 
variety of communication methods, and this will support our growth 
aspirations going forward.
Organic growth 
The Group continues to build successfully on the following four key 
areas of focus to deliver continued organic growth:
 − Winning larger customers in our target markets;
 − Using improved customer service and Synapse, combined 
with the acquired portals, to drive improved customer retention 
across the wider product set;
 − Improved product penetration across our customer base; and
 − Product development and innovation to increase value to our 
customer base.
Strategic Report
Chief Executive Officer’s Review continued Alternative Networks
Annual Report & Accounts 2015
13
Strategic Report
Corporate Governance
Financial Statements
In 2015 the average spend per client was up 12% on the prior year 
demonstrating the successful implementation of the strategy. At 
the period end, average monthly spend of our ‘large customers’ 
(i.e., those with a monthly spend in excess of £1,000) increased 
10% year on year, reflecting a significant increase in the size of new 
customers to the Group. 
The Group’s ability to win large contracts with new customers 
has been proven once again in 2015 including sizeable deals with 
Homeserve and the London Internet Exchange (LINX) to provide 
multiple services. 
Product penetration statistics continue to show a broadening 
uptake of services from across our customer base, with increases 
in sales per customer showing that our customer service levels 
continue to improve. 
Product penetration across the customer base remains strong, 
with 46% of customers taking more than one product (2014: 
46%) and the proportion taking four or more products increasing 
to 17% (2014:16%). This is in line with the Group’s stated strategy 
of growing the average size of the customers, via enterprise sales 
and driving product penetration in our existing base. 
Product development 
We have always aligned our technical strategy with our 
customers’ needs and have now successfully transitioned the 
Group into IT managed services. We continually look at new 
product offerings to further support customers and align their 
IT with the needs of the end user, and to deliver bespoke IT 
solutions for our customers from the device to the datacentre. 
As a result we are well positioned to take increasing amounts of 
market share with new services, most importantly PaaS (Platform 
as a Service) and DaaS (Desktop as a Service) in which our 
products are innovative and market leading and further similar 
offerings will be launched in 2016.
Portal development
Central to this strategy is the use of Synapse, the Group’s 
dynamic service interface, offering customers significant service 
and flexibility benefits. During 2015 the Group has continued 
developing Synapse as well as continuing the process of 
converging the other, wider Group portal systems into it, providing 
an enhanced interface, covering the Group’s device to datacentre 
portfolio.
As part of the wider transformation of our office and infrastructure 
estate, the Group portal systems have been moved into a fully 
virtualised environment, alongside our other internal IT application 
suite, in order to ensure optimal performance for end users and 
greater service resilience. 
Significant work has also been performed on key internal systems 
to provide the basis for this convergence, with unification of sales 
and CRM systems, and with ticketing to follow, this provides the 
foundations to significantly expand the Group’s portal functionality.
Growth by acquisition
The Group’s cash generative nature has facilitated the significant 
reduction in net debt since the 2014 acquisitions; this, combined 
with the strong balance sheet leaves us well placed to capitalise 
on further opportunities and as such, the Group continues to 
monitor the market proactively for further “right-fit” acquisitions.  
Acquisitions are being targeted to complement the existing 
products and to further expand our capabilities and product set 
in the Advanced Solutions area, with a focus on managed and 
hosted services
During 2015 the Group has continued developing 
Synapse as well as continuing the process of 
converging the other, wider Group portal systems 
into it, providing an enhanced interface, covering 
the Group’s device to datacentre portfolio. Strategic Report
Alternative Networks
Annual Report & Accounts 2015
14
The main focus remains on strategic acquisitions that 
complement the existing product set and can be seamlessly 
integrated, although the Group also considers bolt-on acquisitions 
that would bring a customer base where the Group can capitalise 
on its proven cross sell capability. The Group will continue to be 
opportunistic with regards to acquisitions. We remain well placed 
to take advantage of any opportunities as they arise, applying 
strict selection criteria.
The Group’s long standing and consistently strict criteria for 
acquisitions remains unchanged. Targets must:
 − be successful, growing, highly cash generative, and 
profitable;
 − have customers that provide cross selling opportunities for 
the Group; and
 − be earnings enhancing in the first full year of ownership. 
Outlook
The strategic acquisitions in 2014 and the transformational 
projects in 2015 have resulted in an IT Services business with 
a unified operational structure, a fully invested sales force and 
a market leading product portfolio, able to deliver end-to-end 
solutions to a larger and more receptive customer base. 
In 2016 we plan to continue to expand, upgrade and improve our 
product set, with a full pipeline of new product development. We 
are also planning further investment in the technology we use to 
service customers, resulting in greater efficiency and improved 
service. 
Product penetration statistics continue to show a broadening 
uptake of services from across our customer base, with increases 
in sales per customer showing that our customer service levels 
continues to exceed expectations.  
The improved profit performance in the second half of 2015, 
together with the high recurring revenue levels in the Group, mean 
that the Board approaches 2016 confident that the business can 
continue to generate encouraging levels of growth going forward. 
The first weeks of 2016 show signs that the momentum carried 
through from the fourth quarter is continuing and provides sound 
encouragement.  
Mark Quartermaine
Chief Executive Officer
8 December 2015
Chief Executive Officer’s Review continued Alternative Networks
Annual Report & Accounts 2015
15
Strategic Report
Corporate Governance
Financial Statements
YEAR TO SEPTEMBER 2015 2016 PLANS
Advanced 
Solutions
The Group has continued to drive relationships and capabilities with 
core UC (Unified Communications) vendors with a focus on the 
higher value application services (primarily contact centre) within the 
supplier eco-system, whilst also expanding our Skype for business 
footprint within the online cloud platform. 
In the latter part of the year we launched our own UC cloud platform 
APaaS (Alternative Platform as a Service) utilising the capabilities 
of recent acquisitions to deliver an enterprise grade, per-user-per-
month, voice platform to Group customers. The APaaS offering 
is built on the principle of fast deployment and easy to consume 
services, whilst also providing customers with a migration path with 
hybrid and full cloud options.
Furthermore we have enhanced the technological capability through 
which customer services are managed. This is the first in a number 
of planned developments which allow the Group to provide a 
differentiated service offering through a web-based platform that 
takes feeds from multiple monitoring sources and correlates the 
data to understand how an IT environment is performing. This 
allows Alternative to diagnose and resolve customer issues faster 
and understand the context and impact an IT service interruption or 
performance issue has on a customer business.  
Moving into 2016, further ‘as a Service’ products will be 
launched, and development of the cloud platform will look 
toward public cloud integration.
The Group invested heavily in the online cloud platform 
in 2015 to further enhance its capability, scalability 
and security, providing a foundation from which we will 
build the next generation of services in 2016. The cloud 
platform enjoyed 30% growth in 2015, and combined with 
the 2015 enhancements, provides a robust foundation on 
which the group will develop new services.
Mobile 
Voice
Development in the mobile portfolio has remained focused on 
cost control and device security expanding the portfolio to deliver 
a standalone integrated set of products that allows customers to 
control their mobile data costs and secure the company data held 
on a device. 
In 2016 the portfolio will expand to provide these services 
in a cloud delivery model and integrate the management 
capability into Synapse.
Fixed Voice
With the 2025 date set for the withdrawal of traditional fixed voice 
services, the group has diversified its SIP offering and focused on 
the convergence of voice services with wide area network services 
as ISDN replacement services.
In 2016 the portfolio will expand to incorporate new 
suppliers with unique market capabilities, addressing 
specific customer usage cases and increased 
development of capabilities in Synapse. 
Product penetration statistics 
continue to show a broadening 
uptake of services from across 
our customer base.
Product development  Alternative Networks
Annual Report & Accounts 2015
16
Strategic Report
Chief Financial Officer’s Review
Gavin Griggs            
Chief Financial Officer
Chief Financial Officer’s Review
Trading Review
In 2015 the Group has experienced continued growth in the 
Advanced Solutions and Mobile Voice products and services, and 
continued excellent cash performance. The Advanced Solutions 
and Mobile Voice segments together now account for 81% of 
Group revenues (2014: 77%), with a reduction in the contribution 
from Fixed Voice services, which is in managed decline. 
Total reported revenue increased 9% to £146.8m (2014: £134.4m), 
with pro forma revenue growth of 3%. The Advanced Solutions 
business was significantly up at 24% on a reported basis and 10% 
on a pro forma basis (£77.9m). Reported revenue in Mobile was flat 
year on year, but underlying revenue (revenue earned directly from 
network providers based on sales volumes, which ceased during 
the prior year following the redrafting of relevant commercials) 
grew at 5% (£2.0m). Revenue growth was partially offset by the 
managed decline in the Fixed Voice business, which was down 9% 
(£2.8m). 
Year ended 30 September 2015
  Advanced Solutions – Pro forma Mobile Voice Fixed Voice Group – Pro forma
  Change Change Change Change
  £m % £m % £m % £m %
Revenue 77.9 10% 40.4 - 28.5 -9% 146.8 3%
Recurring 45.0 6% 40.4 - 28.5 -9% 113.9 - 
Non-recurring 32.9 15%      32.9 15% 
Gross profit 29.3 8% 19.0 6% 12.4 -6% 60.7 4%
Margin 37.7% -50bps 47.0% +250bps 43.3% +110bps 41.3% +50bps
In order to facilitate understanding of business performance, the Group splits out its operating KPIs, both financial and non-financial into three distinct revenue groups. These 
are Advanced Solutions, Mobile and Fixed Voice. These enable the Group’s performance to be benchmarked against competitors and allow the Board to control more clearly 
the underlying drivers to the Group’s business. All recent acquisitions are reported in Advanced Solutions and have no impact on Mobile or Fixed Voice. For avoidance of 
doubt, the business does not operate separate trading divisions but sells a converged product offering, with teams of sales and service organised according to customer size.  Alternative Networks
Annual Report & Accounts 2015
17
Strategic Report
Corporate Governance
Financial Statements
Reported gross profit increased by 10% (£5.4m) to £60.7m, and 
4% (£2.4m) on a pro forma basis. Gross margins are level year 
on year, reflecting the effect of good margin growth in Fixed Voice 
and Mobile Voice netted off by some margin pressure across 
Advanced Solutions owing to pricing on some larger hardware and 
maintenance deals. Further analysis is detailed below by product. 
Adjusted EBITDA at £22.1m was up £2.5m (13%) on a reported 
basis and £2.0m (10%) ahead on a pro forma basis. As reported 
in our interim results, during the period the Group has introduced 
a group-wide sales commission scheme encouraging higher 
margin and longer term growth, which has had a one off impact 
on adjusted EBITDA, increasing commission costs by £0.3m. 
Nevertheless, the adjusted EBITDA margin has increased to 
15.0%, up from 14.5% in 2014, reflecting the continued drive on 
operational efficiency and the benefits of integrating the Group, and 
is set to improve further with annualisation of the improvements 
made in 2015.
Advanced Solutions
Advanced Solutions revenues increased by 24% to £77.9m on a 
reported basis and 10% on a pro forma basis over the prior year. 
Growth in the second half of the year was slightly slower than the 
first half, owing to Q3 sales pressure arising from wider economic 
events and strategic reviews resulting in new business suspensions 
from two larger customers, as reported at the interim reporting 
stage.  
Growth has returned to healthy levels in Q4, producing a total sales 
order backlog of £5.2m, and signed orders 3% higher than the 
prior year on a pro forma basis, giving high levels of confidence 
heading into 2016.
New orders have been generated across all industry verticals and 
notable contract wins with larger customers include a wide scale 
networking contract for the London Internet Exchange (LINX) and 
wide scale WAN and hosted voice migration for Homeserve.
The margin in Advanced Solutions is broadly level with the prior 
year at 38% (2014: 39%) as a result of growth in higher margin 
services including professional services, netted against some 
pricing pressure for larger deals involving legacy hardware and 
maintenance solutions. 
Managed services
Managed services encompass the Group’s offerings in all hosting, 
cloud and utility services, including all outsourcing services. Growth 
in this area is a key focus with both existing and new customers. 
High margins in this area represent the added value nature of the 
services provided. The 4% decline in revenue on a pro forma basis 
reflects a decrease in the lower margin pure hosting and colocation 
revenue as the Group encourages clients to move towards higher 
margin, fully managed services.
Online desktop
Online desktop represents the Group’s cloud based Desktop as 
a Service (DaaS) remote access offering, acquired as part of the 
2014 acquisitions. 12% pro forma revenue growth in this product 
has been generated under the Group’s ownership as we seek to 
take a key position in this growing market.
Maintenance 
Maintenance revenues have grown by 8% year on year owing to 
some large wins at the end of the prior year and start of 2015. 
Margins are also consistent year on year as the group has been 
 Advanced Solutions 2015 2014 Change Change
Revenue Reported £m Reported £m Pro forma £m Reported Pro forma
Recurring     
Managed services 17.6 12.4 18.4 42% -4%
Online desktop 3.3 2.2 2.9 50% 12%
Maintenance 11.6 10.7 10.7 8% 8%
Connectivity 8.3 6.3 6.3 32% 32%
Billing 4.2 4.0 4.0 4% 4%
Subtotal 45.0 35.6 42.3 26% 6%
      
Non-Recurring 
 
   
Hardware / software 26.3 21.1 22.5 24% 17%
Professional Services 6.6 5.9 6.1 12% 8%
Subtotal 32.9 27.0 28.6 22% 15%
      
Total 77.9 62.6 70.9 24% 10%
Gross Margins 
 
   
Recurring 44% 45% 43% -100bps +100bps 
Hardware / software 21% 23% 23% -200bps -200bps 
Professional services 59% 59% 59% - - 
      
Advanced Solutions 38% 39% 38% -100bps -  Strategic Report
Alternative Networks
Annual Report & Accounts 2015
18
able to renew contracts at historical pricing levels due to the service 
quality available to clients, and proactively churn any that involve 
lower pricing.
Connectivity
Connectivity revenues increased 32% to £8.3m in 2015. This 
growth was generated from data connectivity sales to both 
existing and new customers. Sales growth has also arisen from a 
number of key wins, including the UK-wide contract with Menzies 
Distribution signed in 2014.
Hardware & software
Hardware and software revenues comprise all individual non-
recurring direct sales across the Group, and increased 24% to 
£26.3m (2014: £21.1m) on a reported basis and 17% on a pro 
forma basis. Gross margins have reduced across the Group due to 
a number of large deals where competitive pricing has been offered 
in order to secure further growth opportunities in higher margin 
products and services with recurring revenue. 
Professional services
Professional services revenue, comprising a mix of IT solution 
design and installation of data hardware, increased 12% from 
£5.9m to £6.6m on a reported basis and 8% on a pro forma 
basis as a result of the high level of hardware orders and also a 
number of more complex projects with higher levels of associated 
installation requirements. Margins have stabilised during the year 
following the integration of the acquisitions and continue to reflect 
the efficiency with which the Group is able to apply the workforce 
to new and existing projects.
Billing services
Billing Services revenues were up 4% to £4.2m (2014: £4.0m). 
This is as a result of further growth in sales to third party customers 
and revenue from providing a hosted managed billing service. 
Gross margins were in line with the prior year at 53%, as the 
Group maintained its high client retention level and delivered more 
consultancy services to clients. 
Telephony Services - Mobile
Headline mobile revenues were flat year on year at £40.4m, whilst 
underlying revenues grew 5% year on year in the period (excluding 
the effect of bonus reductions) as the Group continues to take 
significant market share. Margins have once again risen, from 45% 
in 2014 to 47% in 2015, primarily as a result of the 2014 signed 
commercial agreements. 
There was continued high growth in the contract base with a 
9% increase in subscribers to 99,413 at the end of 2015. Whilst 
this is the result of significant new connections, demonstrating a 
continued ability to win in a flat market, slightly higher churn has 
been seen in the second half of the year as market pressure has 
led to the loss of certain customers where the Group was not 
willing to support lower margins.
Mobile gross margins have increased to 47%, from 45%, mostly 
as a result of annualisation of the benefits of the new commercial 
arrangements signed in 2014, but also other positive factors such 
as the value added from the Synapse service platform. 
Mobile KPIs
The Group uses three principal KPIs to measure the performance 
of Mobile Voice, being “ARPU”, “ADPU” and churn. 
Mobile 2015 2014 Change
£m (Restated)
Revenue
#
40.4 40.4 -
Mobile bonus revenue 0.7 2.8 
Underlying revenue 39.7 37.7 5%
    
Gross profit
#
 19.0 18.0 6%
Gross margin % 47.0% 44.5% 250bps
    
Subscribers 99,413 91,391 9%
Recurring revenue 93% 89% 
    
KPIs 2015 2014 Change
£m (Restated)
Monthly ARPU (£) 34 36 -6%
Monthly ADPU (Mb) 170 99 72%
Network churn 16% 14% 
Customer churn by value 14% 11% 
% Subscribers in-contract 78% 73% 
Monthly average contract 
length
26m 24m 
#
2014 revenue and gross profit has been restated following a reclassification 
of mobile customer credits and other costs, as discussed in note 1.
Chief Financial Officer’s Review continued
TRADING REVIEW BY PRODUCTS Alternative Networks
Annual Report & Accounts 2015
19
Strategic Report
Corporate Governance
Financial Statements
 − “ARPU” represents the average spend in line rental, voice 
and data usage charges per live connection per month in the 
Group’s contracted base of subscribers. ARPU has reduced 
by circa £2 (6%) to £34 in the year, similar to the 2014 decline 
(2014: £2). Underpinning this trend is the reduction in line 
rental charges associated with bundled packages and the 
general trend in reduction in voice usage, partially offset by 
increased data usage (see below). Declines in voice ARPU 
total approximately £2.50 (including rental charges) as a result 
of further regulatory changes. Data usage ARPUs continue to 
rise, 21% in 2015, which is lower than the 72% rise in ADPU 
due to a change in the mix between European and higher 
priced ‘rest of world’ roaming. Growth in data ARPU has 
been dampened somewhat both by general market pressures 
on pricing, where increased bundle allowances have been 
seen and also a slight decrease in wider global travel, where 
we have seen a 100bps drop in ‘rest of world’ roaming as a 
proportion of our total customer base. 
 − “ADPU” represents the average data usage per live connection 
per month in the Group’s contracted base of subscribers.  The 
average ADPU for the period has increased by 72% to 170Mb 
demonstrating the rapid growth in data usage. The growth in 
data usage can be attributed to a number of factors including 
the rise of the smartphone (71% of the subscriber base; up 
from 69% in September 2014) and the ongoing move from 3G 
to 4G networks. The growth seen, combined with the Group’s 
high margin customer base, gives a strong platform to grow 
further in 2016.
 − Churn by value, which illustrates the retention value of all 
contracted customers to the Group, has risen slightly in 2015 
from 11% to 14%, mostly due to loss of certain customers in 
the second half where retention would have led to decreased 
margins that the Group was not prepared to accept. Even at 
14% the Group is setting a market leading benchmark, where 
the broader industry sees churn levels of 20% to 25% and 
demonstrates the value the Group provides to customers. 
Network churn was 16% which is again up slightly on 
2014 (14%), an excellent performance in a very competitive 
marketplace where it is easy to switch between networks. 
The generally high retention is as a result of the overall client 
experience covering the service offering and the benefits of 
Synapse, and as we respond to general market changes with 
sophisticated tariffs we expect this to reduce in 2016. 
Telephony Services - Fixed Voice
The market continues to operate on two-tiers, with legacy fixed 
voice providers seeing network traffic in decline by mid-single digit 
rates, and resellers and service providers migrating their customers 
to IP services at a faster rate with annual revenue reductions in 
the order of low double digit (10-14%). On this basis we consider 
our performance this year to be good given the market context. 
The Group manages its Fixed Voice Services in the context of 
the declining market place whilst improving market share and 
profitability, and continues to retain its customer base via migration 
to SIP based telephony. In the year the number of SIP lines has 
increased by 47% from 7,424 to 10,924. 
Fixed Voice revenues declined 9% in 2015 to £28.5m due to a 
combination of customer churn and reduction in call volume to 
mobiles, regulatory price reductions and the continuing move to 
email and mobile. However the Group has again succeeded in 
the proactive management of this base with further commercial 
gains and active retention, particularly in the Inbound services base 
where year on year gross profits have risen 21%.
 Fixed Voice 2015 2014 Change
 £m (Restated) 
Revenue 28.5 31.3 -9%
Gross profit
#
12.3 13.2 -6%
Gross margin % 43% 42% +110bps
    
KPIs 2015 2014 Change
 £m (Restated) 
Outbound monthly ARPU 
(£)
 1,385 1,421 -3%
Number of lines/channels 
(inc. SIP)
68,388 72,027 -5%
SIP lines 10,924 7,424 47%
Average customer contract 
length (months)
30m 24m +6m
#
2014 gross profit has been restated following a reclassification of other 
costs, as discussed in note 1.
TRADING REVIEW BY PRODUCTS Strategic Report
Alternative Networks
Annual Report & Accounts 2015
20
The gross margin on this product set has continued to grow in 
2015, from 42% to 43%, but with the revenue decline, total gross 
profit has reduced 6% year on year. The growth in gross margin 
is as a result of improved commercial arrangements from key 
suppliers.
Outbound services 
 − Outbound revenues decreased by 11% to £21.3m. The 
underlying performance was in line with industry trends as 
the reduction in call spends to mobiles, due to regulatory 
price reductions, and a move to email, mobile and IP based 
telephony, continues to cannibalise traditional office based 
telephony revenues. 
 − Outbound ARPU has reduced by 3% to £1,385 in 2015 as a 
result of a general reduction in spend resulting from the shift 
to mobile and data communications, tempered by an increase 
arising from the signing of new, larger, customers and churn 
of smaller customers. Average contract periods are now six 
months longer than the prior year increasing the viability of 
future revenues.
 − The number of lines in the estate declined by 5% to 68,388, 
with some of the churn being non or low billing analogue lines 
that we have helped customers identify using Synapse. The 
ongoing transition to SIP has again progressed well with a 
47% rise in SIP lines. 
Inbound services
Inbound services revenue, at £7.3m, was in line with 2014, as 
increases in NGN products compensated for the reduction in 
customer traffic revenues. As a consequence, gross profit was 
21% up on 2014 at £3.7m. 
Gross margins are up significantly year on year, to 51%, due to the 
new commercial terms agreed and increased sales of the higher 
margin NGN product. 
Financial overview
Adjusted and statutory results
In these results we refer to adjusted and statutory results. Adjusted 
results are prepared to provide a more comparable indication of the 
Group’s underlying business performance. Adjusted results exclude 
adjusting items as set out below and in note 28.
Non-recurring items
As a result of the various restructuring activities the Group 
incurred non-recurring charges of £2.4m. This comprised £0.6m 
of redundancy charges, £0.9m of non-cash rent charges on 
unoccupied property during the fit-out phase and £0.9m on 
restructuring and other charges.
As reported at the interim stage, the Group has rationalised its 
property portfolio in 2015, reducing the number of properties 
around London from five to two, involving the sale of one property 
for a gross receipt of £3.8m giving rise to a profit on disposal of 
£2.4m, and the early exit of a leased property yielding a receipt of 
£0.9m, both of which have been recorded as adjusting items. 
Finance costs
Finance costs were £1.3m (2014: £1.1m) driven by the Group’s 
existing debt facilities in place for the whole year. At September 
2015 the margin applied to this facility had fallen to 2.50% over 
LIBOR based on a leverage position of the balance sheet of less 
than 1.0. Throughout 2016 the margin over LIBOR is expected to 
be less than 2.50%. 
Chief Financial Officer’s Review continued
Inbound gross margins are 
up significantly year on year, 
to 51%, due to the new 
commercial terms agreed 
and increased sales of the 
higher margin NGN product. Alternative Networks
Annual Report & Accounts 2015
21
Strategic Report
Corporate Governance
Financial Statements
Taxation
The effective tax rate for the year was 17.0% (2014: 22.0%). The 
effective tax rate in the current period is lower than the prior period 
due to a further reduction in the standard rate of corporation tax for 
the year (from 22.0% to 20.5%) and is lower than the UK statutory 
rate due to the recognition of prior year R&D credits that have 
been successfully received in the current year and profit arising on 
the sale of a property for which indexation allowances have been 
applied.  
Earnings per share 
Basic adjusted earnings per share have increased by 6% from 
26.9p to 28.4p. Fully diluted adjusted earnings per share have 
increased by 5% to 27.8p (2014: 26.4p). Statutory (unadjusted) 
fully diluted earnings per share have increased 40% from 16.6p to 
23.3p.
The weighted average number of shares in the year used for 
calculating the basic earnings per share has increased by 502,918, 
as outlined in note 11. The dilutive share number has increased 
by 52,057, due to the issuance of new long term retention share 
option plans (note 26) netted off by a reduction in shares relating to 
the EBT.
Net debt & bank facilities
The Group continues to benefit from access to a £36.0m 
syndicated bank loan facility split equally between two lenders (a 
£43m facility reduced by £7.0m of term loan repayments), of which 
the average interest margin payable throughout the 2015 financial 
year was below 2.5%. 
The year-end net debt balance was £18.7m, down from £29.3m at 
30 September 2014. This is after £5.3m of total capital expenditure 
and paying dividends of £7.2m. The net debt level is down from a 
peak of £41.3m at the time of the acquisitions, and well ahead of 
the target of £20.0m as set by the Board.
Net debt performance is primarily driven by the strong operating 
cash conversion of the business (see below) which has been 
greatly facilitated by the completion of acquisition integration 
activities. The Group closed the 2015 financial year with an 
impressive financial position, a key part of the platform for growth 
initiative.
Cash flow
Working capital and cash management remains a key priority of 
the Group and once again cash flow has been very strong. Cash 
inflow from operations was £21.9m (2014: £16.2m), compared to 
adjusted EBITDA of £22.1m (2014: £19.6m), representing a cash 
conversion of 99% (2014: 83%). Alongside this the Group debtor 
days have remained below 30 days.
Capital expenditure
Capital expenditure in the period was £5.3m compared to £2.1m 
in 2014, largely due to additional non-recurring investments in the 
Group’s infrastructure totalling £2.7m. This was primarily comprised 
of office fit-out and IT infrastructure, and was funded entirely by the 
sale of a property during the year for a total of £3.8m. There was 
a further £0.5m of spares and tooling equipment acquired as part 
of the signing of a large hardware and maintenance deal in a new 
customer vertical.
The remaining £2.1m of spend was in line with expectations and 
previous periods, and represented further expenditure in respect of 
IT development, including additional investment in a consolidated 
customer portal service, expanding on the existing Synapse 
 Year ended Year ended 
 30 Sept 2015 30 Sept 2014 Change
 £m £m
Cash generated from operations 21.9 16.2 35%
Proceeds from sale of property – non recurring 3.8 - 
Taxation (1.3) (1.4) 
Capital expenditure – underlying (2.1) (2.1) 
Capital expenditure – customer assets (0.5) - 
Capital expenditure – non recurring infrastructure (2.7) - 
Finance cost (net) (1.3) (1.1) 
    
Free cash flow 17.8 11.7  
Free cash flow before non-recurring items 16.7 11.7 43%
    
Dividends (7.2) (6.6) 
Acquisitions (net of cash acquired) - (51.5) 
    
Net cash flow 10.6 (46.4) 
Opening (net debt)/cash (29.3) 17.2 
Closing (net debt) (18.7) (29.3)  Strategic Report
Alternative Networks
Annual Report & Accounts 2015
22
functionality and investments in the existing CRM platform to 
improve our service to customers and reduce operating costs. 
In 2016 we expect capital expenditure to reduce back to routine 
underlying levels, with some additional investment required across 
our product portfolio’s, including software development to ensure 
our unique proposition is consistent across all service lines. 
Dividend per share 
The Board has proposed a final dividend of 10.9 pence per share 
(2014: 9.6 pence per share) making a total ordinary dividend of 
16.4 pence per share for the full year (2014: 14.5 pence per share). 
The dividend will be paid on 29 January 2016 to shareholders on 
the register as of 4 January 2016. 
Principal risks and uncertainties
Managing the financial, operational and reputational risks across 
our business and operations is critical to our success. Below we 
highlight the identified key areas of risk that are monitored on an 
ongoing basis. The Group’s Risk Management Framework requires 
a regular review of the key risks facing the Group.
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, O2 and Vodafone. Both managed service 
agreements run until March 2018.
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. 
Acquisition integration
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. All acquisitions to date have been 
fully integrated, with the exception of Aurora (AKJ Limited) where an 
independent IT infrastructure is essential to its client offering.
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 development 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 customer 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 
Chief Financial Officer’s Review continued
Working capital and cash 
management remains a key 
priority and once again cash 
flow has been very strong. Alternative Networks
Annual Report & Accounts 2015
23
Strategic Report
Corporate Governance
Financial Statements
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 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, usage pricing from fixed to mobile destinations 
and EU Roaming mobile voice and data retail prices have been 
substantially altered. 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 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.
IT environment and control risk 
The Group is increasingly dependent on IT systems for delivering 
its products and services and for retaining customers, as well as 
for running the operations of the Group. To date, the Group has 
used its own internal expertise together with external consultants, 
where necessary, to build its own IT infrastructure and software 
products, and is continuing to invest each year in improving its 
systems and adding more resilience. The Board believes the 
Group mitigates the IT control risks in a number of ways. Firstly, it 
employs a broad range of highly skilled IT personnel and ensures 
that there is a succession and retention plan associated with 
these highly talented individuals. Secondly, the Board directs its 
external auditors to focus on the IT environment in its control 
testing at the annual audit, and also instructs additional internal 
audit where required. Recommendations from both sets of audits 
are tracked through by the Board. Thirdly, the Group operates best 
practise in its adherence with standards issued by the International 
Organisation for Standardisation and the British Standards Institute.  
Currently, the Group has accreditation for: - ISO 27001: Information 
Security Management; ISO9001: Quality Management; ISO 14001: 
Environmental Management; ISO20000 Service Management and 
ISO 22301: Business Continuity Management in the majority of its 
operating divisions. In order to retain these accreditations, the IT 
control environment is regularly reviewed by the British Standards 
Institute.
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.
Gavin Griggs 
Chief Financial Officer
8 December 2015 
This Strategic Report is approved by the Board and signed on its 
behalf by:
Gavin Griggs 
Chief Financial Officer
8 December 2015  Alternative
Networks PLC
CORPORATE GOVERNANCE
Corpor  ate Governance
Directors and Advisers 25
Board of Directors 26
Directors’ Report 28
Corporate Governance Report 31
Remuneration Report 35
Statement of Directors’ Responsibilities 40
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 24 Strategic Report 
Corporate Governance
Financial Statements
Executive Directors
J Murray
G Griggs
M Quartermaine
Non-executive Directors
B Cragg
B Mingay
H Marsh
Company Secretary
G Griggs
Registered office
5th Floor
240 Blackfriars Road
London
SE1 8NW
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
1 Embankment Place
London
WC2N 6RH
Principal bankers
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
Corporate Governance
Directors and Advisors
Alternative Networks
Annual Report & Accounts 2015
25
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 25 Alternative Networks
Annual Report & Accounts 2015
26
Corporate Governance
Board of Directors
James Murray
Executive Chairman
James Murray co-founded Alternative Networks in 1994
following the deregulation of the British telecoms industry and
having worked in both technical and sales roles for a number
of London telecoms businesses. As managing director, CEO
and now Executive Chairman, James has overseen the
growth of the business from start-up, to becoming one of the
leading independent business technology service providers in
the UK, listed on AIM and employing over 600 people
nationwide. James is a previous winner of Ernst and Young’s
“Young Entrepreneur of the Year” Award.
Mark Quartermaine
Chief Executive Officer
Mark has more than 30 years’ experience in the ICT industry
in a variety of executive, sales and marketing roles. He joined
IBM in 1984 and spent 16 years in various roles, including
running the point of sale business for Europe and latterly in
the US as the Worldwide Marketing Director for the Retail
Division. Since leaving IBM in 2001 Mark has served as COO
on the board of NSB Retail and has held various roles at BT
Global Services, including MD of Public Sector as well as the
UK President. He was recently CEO at Azzurri
Communications and a non-executive director at Prologic plc,
which was successfully sold in 2012. Before joining
Alternative, Mark was Vice President of UK & Ireland for
Juniper Networks and sat on Alternative Networks’
non-executive board until January 2014.
Mark was appointed Chief Executive Officer on 1 October 2015.
Gavin Griggs
Chief Financial Officer
Gavin Griggs was appointed to the Board in April 2013.
He joined Alternative from Logica plc, where he was Group
Financial Controller. Prior to that, Gavin held finance director
roles at Sodexo and PepsiCo, and was Head of Group
Finance, Planning and Analysis at SABMiller. In addition to
heading up the finance function, Gavin’s responsibilities also
include the M&A and legal functions within the Group. He is a
Chartered Management Accountant and has Bachelors and
Masters Degrees in Chemical Engineering.
Board of Directors
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 26 Alternative Networks
Annual Report & Accounts 2015
27
Bernard Cragg
Deputy Chairman and 
Senior Independent Non-executive Director
Bernard Cragg has 30 years’ commercial and City
experience. A qualified chartered accountant, he was the
Finance Director and CFO of Carlton Communications plc
from 1987 until 2001. He joined the board of Arcadia in 1999
and became chairman of its audit committee, and Senior
Independent Director until its eventual sale in 2002. He was a
non-executive director of Bank of Ireland UK Financial
Services Limited (including Bristol & West Building Society)
from 2002 until 2007. In 2003 he became Chairman of
business information company, Datamonitor plc where he
served until its eventual sale in 2007.
He is the senior independent director and chairman of the
audit committee of Progressive Media plc and held the same
position with Workspace Group plc until stepping down in
2014. Bernard is a non-executive director of Astro All Asia
Networks Limited, Astro Malaysia Holdings Berhad, Astro
Overseas Limited and Framestore and is Chairman of US
based media company, Psyop LLC.
Ben Mingay
Non-executive Director
Ben Mingay was appointed to the Board in 2011. An
experienced corporate financier, he is a Senior Partner and
co-founder of Smith Square Partners LLP , an independent
corporate advisory business. He was previously a Managing
Director at Credit Suisse First Boston and a Partner of
Hawkpoint Partners. Ben is also a non-executive Director of
HomeServe plc.
Strategic Report 
Corporate Governance
Financial Statements
Henrietta Marsh
Non-executive Director
Henrietta Marsh joined the Board as a non-executive Director
on 6 June 2014. She has significant public company
experience, having served as a non-executive director (and
chairing the Remuneration Committee) at Dods (Group) PLC
from April 2012 to November 2014, been an independent
non-executive director at Acal plc since May 2013 and
chairing the Remuneration Committee since October 2014,
and since January 2014 been a non-executive Director of
Electric World plc where she is appointed by Living Bridge
Equity Partners. She is also a Director of Henrietta Marsh
Consulting Limited. Previously, Henrietta was a director of 3i
plc where she worked as a fund manager and in private
equity for 14 years. She was also a fund manager at Living
Bridge Equity Partners responsible for all AIM investments.
Henrietta was the founder chairman of the AIM VCT
Managers Group and is a member of the London Stock
Exchange’s AIM Advisory Group.
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 27 The Directors present their report and audited financial statements of Alternative Networks plc and its subsidiaries (the “Group”) for the
year ended 30 September 2015.
Principal activities
The principal activity of the Group continues to be provision of IT managed services and independent business-to-business
communications.
As a service provider, the Group supplies a range of services including managed network services, managed hosting, mobile phone and
data services, internet and broadband services, non-geographic number services and a variety of core information technology services.
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 the Company is business communications focused on service provision. The Company registration number is
02888250.
Dividends
The Company paid a 2014 interim dividend of 5.5 pence (2014: 4.9 pence) per 0.125p ordinary share, with a total payment value of
£2,662,000 (2014: £2,370,000). This was paid on 15 July 2015 to shareholders on the register on 19 June 2015.
The Directors are proposing a final dividend in respect of the financial year ended 30 September 2015 of 10.9 pence (2014: 9.6 pence)
per 0.125p ordinary share which will absorb an estimated £5,280,000 (2014 £4,644,000) of shareholders’ funds. It will be paid on
29 January 2016 to shareholders who are on the register of members at 4 January 2016.
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 (resigned as a Director 30 September 2015)
G Griggs
M Quartermaine
B Cragg
B Mingay
H Marsh
Edward Spurrier stepped down as Chief Executive Officer on 30 September 2015 and was replaced by Mark Quartermaine on
1 October 2015. Mark was previously the Chief Operating Officer of the Group, a role that has not been replaced since this change.
The Company purchased and maintained throughout the financial year Directors’ and Officers’ liability insurance in respect of itself and
its Directors.
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 employee 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.
As at 1 December 2015 significant shareholders (those with over 3% shareholding) are as follows:
Substantial shareholdings
                                                                                                                                                                                                                        Percentage
                                                                                                                                                                                                                                                                                                   of issued
Shareholder                                                                                                                                                                                                                                               Holdings              share capital
Chris Wilson                                                                                                                                                 4,122,360              8.3%
Hargreave Hale                                                                                                                                             3,995,409              8.0%
Octopus Investments                                                                                                                                    3,961,789              7.8%
Edward Spurrier                                                                                                                                            3,076,065              6.2%
BlackRock Investment                                                                                                                                  2,822,230              5.7%
Investec Wealth & Investment                                                                                                                       2,771,941              5.6%
James Sewell                                                                                                                                               1,865,899              3.8%
Herald Investment Management                                                                                                                   1,806,520              3.6%
Directors’ shareholdings are shown in the remuneration report. Edward Spurrier resigned as a Director on 30 September 2015.
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, as the business evolves.
Alternative Networks
Annual Report & Accounts 2015
28
Corporate Governance
Directors’ Report
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Annual Report & Accounts 2015
29
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Corporate Governance
Financial Statements
Employees
The Directors believe that the Group’s employees are a source of competitive advantage and recognise that continued and sustained
improvement in the performance of the Group depends on its ability to attract, develop and retain employees of the highest calibre.
The Group is committed to the principle of equality of opportunity in employment and seeks to ensure that no employee or applicant is
treated less favourably on the grounds of age, disability, gender, gender reassignment, pregnancy, maternity, race, sexual orientation,
religion or belief, or because they are married or in a civil partnership or is disadvantaged by conditions or requirements 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 people with disabilities 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 employees are informed of matters concerning their interest as employees and the financial and economic factors affecting the
business. The Company maintains established communication channels: management forums and briefings, conferences, weekly
employee newsletter and the Company intranet as well as team and individual meetings.
The Group strives to create an enjoyable, challenging and progressive employee experience where a healthy work/life balance and
general well-being is encouraged supported by a flexible reward and benefits package.
The Group places great importance upon training and development and has a well-established in-house learning and development
academy which supports career progression and development. Over 57% of Group employees have been promoted into people
management roles internally. 44% of our employees have worked for us for more than five years and 20% for ten years or more.
Effective two-way communication, teamwork and collaboration are also critical in creating an engaging, positive and productive work
environment. The Group informs employees of the activities and performance of the business through annual Group events, face to face
briefings, weekly newsletters and Directors operating an open-door policy. Exit interview feedback and new starter surveys are reviewed
to ensure any potential concerns can be identified and managed at an early stage.
Our environmental commitment
The Group appreciates the importance of sound environmental practice and the need to increase awareness and change behaviour
amongst employees. The Group is certified to ISO 14001:2004 Environmental Management. It aims to share responsibility for improving
the Group’s practices with employees to progressively reduce its environmental impact. As part of our continued improvement
programme we completed the EU commissioned sustainability support programme; through their partner Carbon Smart.
Recycling of unavoidable waste is considered a priority and in 2015 we maintained a steady level of recycling sustaining the
improvements from last year. The Group continues to recycle paper, cans, plastic, cardboard, computer equipment, toner cartridges,
batteries and mobile phones. We have continued to control our energy consumption and have completed “switch it off” initiatives in all
locations.
In transforming our London office space in 2015 we now have almost half of the Group’s employees located in a BREEAM approved
property. BREEAM is the world’s foremost environmental assessment method and rating system for buildings and sets the standard for
best practice in sustainable building design, construction and operation and has become one of the most comprehensive and widely
recognised measures of a building’s environmental performance.
Although some travel to and between offices is inevitable, the Group is committed to reducing the environmental impact of
transportation. The Group’s main offices have continued to develop and extend the use of video-conferencing facilities which reduces
the need to visit other sites. In addition, role permitting, we support home working.
The Group encourages employees to use environmentally friendly transport options by restricting flights between offices, using rail travel
as an alternative to driving wherever practical and has introduced a Ride to Work Scheme. Scheduling of field engineers together with
remote access capability also minimises time spent on the road, and public transport and/or overnight stays (hotels) are encouraged for
engineers where this is an alternative to excessive additional mileage.
Where possible, we source environmentally friendly products and services, including paper made from sustainable resources and energy
efficient appliances. All new Company cars leased by the company continue to have energy saving technologies and carbon emissions
below 120gm.
Community involvement and charitable donations
The Group has chosen to forge links with local charities at each Company location which are coordinated by the Group wide Charity
Committee.
During the year, donations of £18,714 (2014: £13,347) were made to charities. The Group supports its employees’ charitable
endeavours through sponsorship and during the year employees participated in fundraising activities raising additional donations of
£22,470 (2014: £14,021), taking the total to £41,184 (2014: £17,368). The Group actively encourages employees to participate in
charity events by providing time off and paying event registration fees.
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 29 The chosen charities for 2015 were Restless Development, Pilgrims Hospice, When You Wish Upon a Star and Macmillan Cancer
Support.
There were no political donations made in the year (2014: nil).
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 2015 the amount of trade payables shown in the balance sheet represents 57.3 days of
average purchases of the Group (2014: 62.1 days) and 64.5 days for the Company (2014: 60.3 days).
Financial risk management
Financial risk management is disclosed within note 23 of the financial statements.
Share repurchase
The Group began its share buyback scheme 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.
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.
Going concern
After considering the Group’s financial projections, available borrowing facilities, covenants on borrowing facilities and other relevant
financial matters, the Board is satisfied that on the date of approving the financial statements, 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 Chief
Executive’s and Chief Financial Officer’s statements.
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 or she has taken all the steps that he or she ought to have taken as a Director in order to make themselves 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 PricewaterhouseCoopers LLP as auditors of the Group will be submitted to the forthcoming Annual General
Meeting.
By order of the Board.
Gavin Griggs
Company Secretary and Chief Financial Officer
8 December 2015
Alternative Networks
Annual Report & Accounts 2015
30
Corporate Governance
Directors’ Report continued
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Financial Statements
Introduction
The Board of Alternative Networks plc is committed to the highest standards of corporate governance not only in the areas of
accountability and risk management but also as a positive contribution to the business. The Board considers that the Group, whilst
trading on the Alternative Investment Market (‘AIM’), has adopted and complied with those requirements of the UK Corporate
Governance Code 2010 (“the Code”) as best applicable to the Company given its current size.
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, reviews the
strategic direction of the business, reviews annual budgets and progress towards achievement of those budgets and reviews 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 eleven occasions in the current year, in addition to four off-site strategy
meetings.
                                                                                  No. of
                                                                                                                 meetings
                                                                                                                     in year                    JM                    ES                   MQ                    GG                    BC                   HM                    BM
Board                                                                       11            11            11            10            11            10            10            11
Strategy meetings                                                      2              2              2              2              2              2              2              2
Audit Committee                                                        4              0              2              1              4              4              4              4
Remuneration Committee                                          4              4              3              1              3              4              4              4
Nomination Committee                                              1              1               –               –              –             1              1              1
Board balance and independence
The Board of Directors of the Group comprises an Executive Chairman, two Executive Directors and three independent non-executive
Directors. Their biographical details on pages 26 to 27, 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.
All of the non-executive Directors are considered by the Board to be independent of management. All non-executive directors are free
from any business or other relationship which could materially interfere with the exercise of their judgement.
Related party transactions are listed in note 27.
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 their duties as a Director of the
Group.
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.
Corporate Governance
Corporate Governance Report
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 31 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
page 35.
Audit Committee
During the year the membership of the Committee comprised Ben Mingay (Chairman), Bernard Cragg and Henrietta Marsh.
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 system of internal control (including financial, operation and compliance controls and
risk management).
•         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 four occasions during the financial year.
Attendees at Committee meetings held included: Chief Financial Officer, Chief Executive Officer, Group Financial Controller and
representatives of the internal and external auditors. All of these attended at the invitation of the Chairman of the Committee.
On two of the four occasions the Committee met with the Group’s external auditors in the absence of executive management.
Main activities of the Audit Committee in the year to 30 September 2015
The principal issues addressed by the Committee during the year were:
•         The external auditors’ year-end report for 2014, the review of the Group’s preliminary results and annual report disclosures.
•         The external audit plan for the 2015 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 PricewaterhouseCoopers LLP 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.
•         The Group’s internal processes and systems.
•         Risks and Controls of the Group’s recent acquisitions.
•         The appropriateness of the Group’s whistle-blowing policy.
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.
PricewaterhouseCoopers LLP have been the Company’s auditors since 2000, ten years of which has been as auditors of a listed
company (The Group listed in 2005). 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
Alternative Networks
Annual Report & Accounts 2015
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Corporate Governance
Corporate Governance Report continued
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Strategic Report 
Corporate Governance
Financial Statements
recommendation to the Board. The last competitive audit review was in 2008, when PricewaterhouseCoopers LLP 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 auditor.
Non-audit services provided by Auditors
The Group’s external auditors may not provide any non-audit service that pose a significant threat to the auditors’ objectivity or
independence. The Group’s auditors have confirmed that they are independent and do so on an annual basis. During the year, with the
approval of the Audit Committee, the Corporate Finance team of PricewaterhouseCoopers LLP , who are also the Group’s auditors,
provided services into certain non-recurring project work to the Group. The fee in respect of this work was £73,350. An analysis of the
fees paid to PricewaterhouseCoopers LLP during 2015 can be found in note 5 to the financial statements.
Whistle blowing
The Audit Committee has reviewed arrangements for whistle blowing and has put a policy in place. The policy encourages a culture of
openness and seeks to reassure employees that by reporting issues of concern they will not suffer victimisation or detriment. Employees
are required to raise issues in the first instance with their line manager or, if this is a problem, with the Human Resources Director or in
exceptional cases with the Chief Executive Officer or Chairman of the Audit Committee. The Group is committed, whenever appropriate,
to investigate fully any concern raised in a timely manner and where an investigation confirms wrongdoing to take the necessary
disciplinary or legal action. The Group will, wherever possible and without infringing confidentiality, keep the “whistleblower” informed of
the outcome of enquiries and decisions taken with regard to the matter. Guidance is also given to raising matters externally.
Nomination Committee
During the year, the membership of the Committee comprised: Bernard Cragg (Chairman), Henrietta Marsh and Ben Mingay.
The members of the Committee are considered by the Board to be independent non-executive Directors.
During the year, the Committee met on one occasion and the Executive Chairman was invited to attend. 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.
The Group has a small internal audit function whose responsibilities include ensuring that internal controls are complied with. The
Group’s internal controls framework is reinforced by subsidiaries having successful certification to ISO27001:2013 Information Security
Management, ISO9001:2008 Quality Management, ISO 22301:2012 Business Continuity Management, ISO 20000:2011 IT Services
Management, ISO14001:2004 Environmental Management, and CHAS a nationally recognised Health & Safety accreditation. During the
year twenty two external ISO audits were conducted by the British Standards Institute.
The Group’s 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 2016, the Board will continue to review
its risks and implement the necessary mitigating steps as those risks evolve and change.
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 33 Financial reporting
A review of the performance and financial position of the Group is included in the Financial Review on pages 18 to 25. 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 the development of the business are released to the
market by way of Stock Exchange announcements.
The Board is responsible for ensuring that dialogue with shareholders takes place and is based on a mutual understanding of
objectives. A series of meetings and presentations take 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.
Bernard Cragg
Senior Independent Director and Deputy Chairman
8 December 2015
Alternative Networks
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Financial Statements
Scope of the report
The Remuneration Report summarises the Remuneration Committee’s activities during the year, the outcomes for Directors’
remuneration and the Group’s remuneration policy. 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 the 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. 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 Henrietta Marsh (Chairman), Bernard Cragg, Ben Mingay. The members
of the Committee are considered by the Board to be independent non-executive Directors.
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.
During the year the Committee met on four occasions.
To assist the work of the Committee, the views of the Chairman, the Chief Executive Officer, Chief Financial Officer and Human
Resources Director are also invited where appropriate. These individuals did not however participate in any decision related to their own
remuneration.
Where appropriate, the Committee seeks the advice of its remuneration consultants, Kepler Associates and if significant changes to
policy are proposed, larger shareholders are consulted. During the year a new share scheme, the Long Term Retention Plan was
implemented which is described in greater detail below. Prior to this, larger shareholders were consulted, and as a result of comments
received, a number of additional disclosures are being made in this report.
During the year, the Committee also considered the terms relating to the resignation of the CEO and the appointment of his successor.
These are set out in greater detail below.
Director Remuneration Outcomes
Directors’ remuneration
                                                                                                                       Salary and                Bonus paid
                                                                                                                     fees paid or                              or                     Pension                         Other
                                                                                                                        receivable                  receivable             contributions                     benefits                 2015 total                  2014 total
                                                                                                                                     £                               £                               £                               £                               £                               £
James Murray                                                                  299,800                       –                       –                3,180            302,980            321,973
Edward Spurrier                                                               410,008                       –            50,000                4,015            464,023            674,613
Gavin Griggs                                                                    238,000            120,929              22,800                2,763            384,492            401,981
Mark Quartermaine                                                           285,000              48,903              27,500                3,105            364,508            180,859
Ben Mingay                                                                        37,723                       –                       –                    –              37,723              34,675
Henrietta Marsh                                                                  34,000                       –                    –                    –            34,000              10,723
Bernard Cragg                                                                   50,000                       –                    –                    –            50,000              50,000
Totals                                                                             1,354,531            169,832            100,300              13,063         1,637,726         1,674,824
Edward Spurrier stepped down as Chief Executive Officer on 30 September 2015. In addition to the amounts in the table an additional
amount of £302,209 was paid following the year ended 30 September 2015 in respect of bonus for the year and other compensatory
payments.
Directors’ share options in Alternative Networks plc
                                                  Option           Options at               Awarded               Options                  Options              Options at        Option                     Exercise                          Performance
                                                scheme            30/09/14                  in year            Exercised                 Forfeited                 30/09/15           price                         dates                                  Criteria
                                                                           Number                Number              Number                  Number                  Number                £
Edward Spurrier        LTIP     139,366                 –                –                  –        139,366         nil        7 Feb 16               EPS/OCF
Edward Spurrier        LTIP       91,721                 –                –         91,721                   –         nil      31 Dec 16               EPS/OCF
Edward Spurrier       LTRP                –        96,000                –         96,000                   –         nil        4 Feb 18   EBITDA/FCF/EPS
Mark Quartermaine    LTIP       43,536                 –                –                  –          43,536         nil      11 Jun 17               EPS/OCF
Mark Quartermaine  LTRP                –        67,000                –         26,130          40,870         nil        4 Feb 18   EBITDA/FCF/EPS
Gavin Griggs              LTIP       34,920                 –                –                  –          34,920         nil      17 Jun 16               EPS/OCF
Gavin Griggs              LTIP       52,412                 –                –                  –          52,412         nil      31 Dec 16               EPS/OCF
Gavin Griggs              LTIP       15,000                 –                –                  –          15,000         nil      11 Jun 17               EPS/OCF
Gavin Griggs            LTRP                –        55,000                –         21,450          33,550         nil        4 Feb 18   EBITDA/FCF/EPS
Zero options vested during the year and the aggregate amount of gains made by directors on the exercise of share options was £nil
(2014: £nil). There were no directors (2014: none) who exercised share options during the year.
Corporate Governance
Remuneration Report
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 35 A description of the LTIP and LTRP schemes is given on page 39. The LTIP options granted in 2013 have performance criteria based on
adjusted EPS growth and adjusted operating cash flow over the 3 years to 30 September 2015. Based on performance during that
period, 98% of the options will be exercisable on the relevant date.
The LTRP options granted in 2015 can be exercised three years after the grant date if the option holder is still an employee of the
Group and performance criteria relating to adjusted EBITDA and adjusted free cash flow have been met. The adjusted EBITDA
performance range for 2015 was £20.1m to £26.0m and the adjusted free cash flow range (adjusted for strategic capital expenditure)
was £12.0m to £18.4m. Options granted to executive directors are shown above, and an additional adjusted EPS underpin criteria
exists, equal to 4% compound growth over 3 years from 2014’s base level of 26.9p. If the EPS and employment criteria are met, 59%
of the options will vest based on 2015 performance, as shown in the table above.
Non-executive Directors’ remuneration
The remuneration of the non-executive Directors is determined by the Board on the recommendation of the Executive Chairman on an
annual basis and takes into account market rates based on independent advice, as required. The non-executive Directors concerned
do not participate in this process.
Ben Mingay and Henrietta Marsh have fixed one year appointments until the Company AGM in January 2017. Bernard Cragg has a
fixed three year appointment until the Company AGM in January 2019. The appointments may be terminated by either party giving three
months’ notice at any time without compensation.
Henrietta Marsh receives a fee of £40,000 per annum with no pension, bonus, benefits or share options, Ben Mingay receives a fee of
£45,000 per annum with no pension, bonus, benefits or share options and Bernard Cragg receives a fee of £60,000 per annum with no
pension, bonus, benefits or share options. The non-executive Directors do not participate in any incentive, pension or benefit scheme.
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. If significant changes to the
remuneration policy are proposed, larger shareholders will be consulted and shareholders will be informed if significant changes are
implemented.
The Company operates in large competitive markets with areas of significant growth potential. The Directors believe that in this
environment, the Group’s employees are a key source of competitive advantage and they recognise that continued and sustained
improvement in the performance of the Group depends on its ability to attract, develop and retain employees of the highest calibre.
Alternative Networks
Annual Report & Accounts 2015
36
Corporate Governance
Remuneration Report continued
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 36 Alternative Networks
Annual Report & Accounts 2015
37
Strategic Report 
Corporate Governance
Financial Statements
The key features of remuneration and the policy for each element of the packages for Executive Directors are shown in the table.
Remuneration policy table
Element of
remuneration Purpose and link to strategy Policy and approach Opportunity 2015/16 Change of policy in 2015?
No N/A Company car allowance,
private medical insurance, life
insurance and income
protection.
Complements basic salary in
providing market competitive
benefits to attract and retain
executives.
Benefits
No CEO/CFO: Company
contribution of up to 10% of
basic salary.
Executive Chairman:
None
Company contributes to a
defined contribution pension
scheme, or pays a cash
allowance in lieu of pension.
To attract and retain
executives, by providing an
opportunity to build up a
provision for income on
retirement.
Pension
No CEO/CFO: Up to 110% of
base salary.
Executive Chairman:
None
Three year retention period.
All awards vest based on
adjusted EBITDA, adjusted
cash flows over a one year
period and adjusted EPS over
the three year period.
Awards lapse if the executive
leaves as a ‘bad leaver’.
Aligns executives’ interests
with shareholders to
encourage long term value
creation and to motivate and
retain executives.
Long Term
Retention Plan
No Basic salaries for executive
directors were reviewed with
effect from 1 October 2015
and now stand at £299,800
for James Murray, £330,000
for Mark Quartermaine and
£245,000 for Gavin Griggs.
Increases for the CEO and
CFO reflected the changes in
roles following the change of
CEO. The next review is
expected to be no earlier than
1 October 2016.
Typically, reviewed no more
than annually.
Salary increases will normally
be in line with pay review levels
across the whole company
unless reviews referencing
companies of similar size and
complexity suggest increases
are required.
To pay a competitive level of
fixed remuneration, taking into
account experience and
personal contribution to the
Company’s strategy.
Intended to attract and
retain the talent
required to execute the
strategy.
Base Salary
No CEO/CFO: On target bonuses
range from 50% to 75% of
base salary with a maximum
of 100%.
Executive Chairman:
None
Performance metrics, targets
and weightings are reviewed
and agreed annually, with due
regard to market conditions
whilst ensuring targets are
sufficiently stretching. The
primary performance measure
is adjusted EBITDA.
Performance is
assessed by reference
to Group financial
performance.
To motivate executives to
maximise short term
performance and drive
specific initiatives which
support long-term value
creation.
Annual Bonus
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 37 Shareholding guidelines
The Company does not have formal shareholding guidelines for executive directors, given the substantial holding of the Executive
Chairman and his family. Nevertheless, the executive directors have increased their holdings during the year as set out below.
Directors’ interests in the ordinary shares of Alternative Networks plc
                                                                                                                                                                                                                                                                       2015                         2014
                                                                                                                                                                                                                                                             Number of                 Number of
                                                                                                                                                                                                                                                                    shares                       shares
James Murray and family                                                                                                                                                  14,344,488       15,016,823
Mark Quartermaine and family                                                                                                                                                    2,803                       –
Gavin Griggs and family                                                                                                                                                             3,831                3,495
Bernard Cragg and family                                                                                                                                                         35,000              35,000
The market value of the company’s ordinary shares at 30 September 2015 was 522p (2014: 473p) and the range of market prices
during the year was 420p to 541p (2014: 380p to 600p).
Maximum dilution limits
The Company’s policy is that dilution to shareholders from the awards made since February 2013 under any share scheme should not
exceed 10%. The dilution that arises from such awards is shown in the chart below, split between director and staff contributions.
Outstanding options by scheme:
                                                                                                                                                                                               Exercise                     Exercise          30 September           30 September
Date of Grant                                                                                                                                        Scheme              price (pence)                       period                         2015                         2014
18 January 2006                                                                                               EMI                102.5        2008-2016                       –              10,326
17 January 2007                                                                                               EMI                150.5        2009-2017              18,388              35,711
3 July 2008                                                                                                       EMI                135.5        2011-2018                7,380                7,380
8 February 2013                                                                                     LTIP 2013                      nil        2016-2026            139,366            139,366
18 June 2013                                                                                         LTIP 2013                      nil        2016-2026              82,539              82,539
12 June 2014                                                                                         LTIP 2014                      nil        2017-2027            366,469            458,190
4 February 2015                                                                                  CSOP 2015                490.0        2018-2025              18,510                       –
4 February 2015                                                                                    LTRP 2015                      nil        2018-2025            468,990                       –
26 March 2015                                                                                    CSOP 2015                479.0        2018-2025              29,360                       –
26 March 2015                                                                                      LTRP 2015                      nil        2018-2025              89,840                       –
                                                                                                                                                                                           1,220,842            733,512
5,000,000
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
09/2013 09/2014 09/2015 09/2016 09/2017 09/2018 09/2019 09/2020 09/2021 09/2022
Non directors
Directors
10% Dilution
Alternative Networks
Annual Report & Accounts 2015
38
Corporate Governance
Remuneration Report continued
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 38 Alternative Networks
Annual Report & Accounts 2015
39
Strategic Report 
Corporate Governance
Financial Statements
Employee Benefit Trust (‘EBT’)
An EBT was established in the year ended 30 September 2005, when three former directors were each awarded interests in 638,400,
0.125p ordinary shares in the Company held by the EBT. These shares were held on trust subject to the trustees obligation to settle the
loan from the Company used to acquire the shares (equivalent to £277,000 each). During the year Edward Spurrier settled his loan due
to the Company and the associated 638,400 shares were transferred to him.
Share option plans
During the year the Company has set up a new HMRC-approved all employee Share Incentive Plan (SIP). Employees may purchase
new shares with the award of free matching shares under a two to one ratio up to a maximum of £1,800 total contribution per annum.
Matching Shares are subject to a three year holding period and may be forfeited in certain circumstances during this time. The executive
directors are eligible to participate in the 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 Enterprise Management Incentive regime and also unapproved options may be granted.
An EMI scheme was established on 18 January 2006 (EMI 2006). As at 30 September 2015, options were outstanding over nil ordinary
shares (2014: 10,326) under this scheme.
A second EMI scheme was established on 17 January 2007 (EMI 2007). As at 30 September 2015, options were outstanding over
18,388 ordinary shares (2014: 35,711) under this scheme.
A third EMI scheme was established on 3 July 2008 (EMI 2008). As at 30 September 2015, options were outstanding over 7,380
ordinary shares (2014: 7,380) under this scheme.
As at 30 September 2015 options were outstanding over a total of 25,768 ordinary shares (2014: 53,417) under all three EMI schemes.
Options under the EMI 2006 scheme are currently exercisable based on the conditions that the option holder is still an employee of the
Group and that 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 2015, there were
5,008 options exercised (2014: 9,905) and 5,318 options lapsed (2014: nil).
Options under the EMI 2007 scheme are currently exercisable based on the conditions that the option holder is still an employee of the
Group and the Group has 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 2015, there were
16,823 options exercised (2014: 15,972) and 500 options lapsed (2014: 2,145).
Options under the EMI 2008 scheme are currently exercisable based on the conditions that the option holder is still an employee of the
Group and certain performance criteria have been met 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 2015, there were nil options exercised (2014:
nil) and nil options lapsed (2014: 14,760).
A long term incentive plan (“LTIP”) was established on 8 February 2013. Under the plan, nil cost options are typically awarded annually
and they can be exercised three years after the grant date if the option holder is still an employee of the Group and certain performance
criteria have been met. On 12 June 2014, the Group issued further options as part of the long term incentive plan (LTIP 2014). There
were 588,374 outstanding at 30 September 2015 (2014: 680,095). Options granted to executive directors are shown above.
On 4 February 2015 the Group granted a series of 22,830 shares under a newly formed Company share option plan (“CSOP 2015”)
followed by a further series of 29,560 options on 26 March 2015. The options can be exercised three years after the grant date if the
option holder is still an employee of the Group and certain performance criteria have been met. There were 47,870 CSOP 2015 options
outstanding at 30 September 2015 (2014: nil). Options granted to executive directors are shown above.
On 4 February 2015 the Group granted a series of 589,670 shares under its newly formed long term retention plan (“LTRP 2015”)
followed on 26 March 2015 by a further series of 90,440 options. The options can be exercised three years after the grant date if the
option holder is still an employee of the Group and certain performance criteria have been met . There were 558,830 LTRP 2015
options outstanding at 30 September 2015 (2014: nil).
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 at least six months’ notice in writing at any time. If the Group terminates the contract by notice, other than 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.
Signed by and approved on behalf of the Board
Henrietta Marsh
Chairman of the Remuneration Committee
8 December 2015
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 39 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 (IFRSs) 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 year. 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.
Gavin Griggs
Company Secretary and Chief Financial Officer
8 December 2015
Alternative Networks
Annual Report & Accounts 2015
40
Corporate Governance
Statement of directors’ responsibilities in respect of the annual report and the financial statements
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 40 Alternative
Networks PLC
FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 SEPTEMBER 2015
Financial Statements
Independent Auditor’s Report 42
Consolidated Statement of Comprehensive Income 44
Consolidated and Company Statements of Financial Position 45
Consolidated Statement of Changes in Equity 46
Company Statement of Changes in Equity 47
Consolidated Statement of Cash Flows 48
Company Statement of Cash Flows 49
Notes to the Financial Statements 50
166685 Alternative Networks Pt2_166685 Alternative Networks Pt2  21/12/2015  13:12  Page 41 Alternative Networks
Annual Report & Accounts 2015
42
Financial Statements
Independent auditor’s report to the members of Alternative Networks plc
Report on the group financial statements
Our opinion
In our opinion:
•         Alternative Networks plc’s group financial statements and company financial statements (the “financial statements”) give a true
and fair view of the state of the group’s and of the company’s affairs as at 30 September 2015 and of the group’s profit and the
group’s and the company’s cash flows for the year then ended;
•         the group financial statements have been properly prepared in accordance with International Financial Reporting Standards
(“IFRSs”) as adopted by the European Union;
•         the company financial statements have been properly prepared in accordance with IFRSs 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.
What we have audited
The financial statements comprise:
•         the consolidated and company statements of financial position as at 30 September 2015;
•         the consolidated statement of comprehensive income for the year then ended;
•         the consolidated and company statements of cash flows for the year then ended;
•         the consolidated and company statements of changes in equity for the year then ended; and
•         the notes to the financial statements, which include a summary of significant accounting policies and other explanatory
information.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as
adopted by the European Union and, as regards the company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of
significant accounting estimates. In making such estimates, they have made assumptions and considered future events.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Other matters on which we are required to report by exception
Adequacy of information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•         we have not received all the information and explanations we require for our audit; or
•         adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received
from branches not visited by us; or
•         the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration
specified by law are not made. We have no exceptions to report arising from this responsibility.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 40, 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 and express an opinion on the financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland) (“ISAs (UK & 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.
166685 Alternative Networks Pt3_166685 Alternative Networks Pt3  21/12/2015  13:13  Page 42 Alternative Networks
Annual Report & Accounts 2015
43
Strategic Report  
Corporate Governance
Financial Statements
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). 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 the 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.
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own
judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a
reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Julian Jenkins (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
8 December 2015
166685 Alternative Networks Pt3_166685 Alternative Networks Pt3  21/12/2015  13:13  Page 43 Alternative Networks
Annual Report & Accounts 2015
44
Financial Statements
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2015
                                                                                                                                                                                                                                                                        Year ended                Year ended
                                                                                                                                                                                                                                                                    30 September          30 September
                                                                                                                                                                                                                                                                                    2015         2014 (Restated)
                                                                                                                                                                                                                                                  Note                         £’000                        £’000
Revenue                                                                                                                                                                          3            146,816            134,413
Cost of sales                                                                                                                                                                     4             (86,113)            (79,101)
Gross profit                                                                                                                                                                                     60,703              55,312
Operating costs                                                                                                                                                                4             (45,603)            (43,772)
Operating profit                                                                                                                                                              5              15,100              11,540
Operating profit – analysed:
Adjusted operating profit                                                                                                                                                 28              19,194              17,593
Share based payments                                                                                                                                                   26               (1,309)                 (510)
Amortisation of intangible assets (excluding computer software)                                                                                     12               (3,698)              (3,496)
Income from property exit                                                                                                                                               28                3,299                       –
Restructuring, acquisition and associated costs                                                                                                             28               (2,386)              (2,047)
Operating profit                                                                                                                                                                                 15,100              11,540
Finance income                                                                                                                                                                7                       3                     25
Finance costs                                                                                                                                                                   8               (1,297)              (1,202)
Profit before taxation                                                                                                                                                                     13,806              10,363
Taxation                                                                                                                                                                            9               (2,339)              (2,285)
Profit and total comprehensive income for the year                                                                                                                  11,467                8,078
Earnings per ordinary share:
Basic                                                                                                                                                                              11                23.8p                16.9p
Diluted                                                                                                                                                                            11                23.3p                16.6p
The notes on pages 50 to 70 are an integral part of these consolidated financial statements.
The Company has elected to take the exemptions under section 408 of the Companies Act 2006 not to present the Parent
Company’s statement of comprehensive income. The Parent Company’s profit for the financial year was £7,301,000
(2014: £8,331,000).
166685 Alternative Networks Pt3_166685 Alternative Networks Pt3  21/12/2015  13:13  Page 44 Alternative Networks
Annual Report & Accounts 2015
45
Consolidated and Company Statements of Financial Position
As at 30 September 2015
Strategic Report  
Corporate Governance
Financial Statements
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                            Notes                        £’000                        £’000                        £’000                        £’000
ASSETS
Non-current assets
Intangible assets                                                                                                          12              73,166              76,745                3,251                3,436
Property, plant and equipment                                                                                     13                4,917                2,319                2,877                   563
Investments                                                                                                                 14                       –                       –              78,599              78,599
Deferred tax asset                                                                                                       15                   559                1,446                       –                   337
Property deposits                                                                                                                                280                   154                       –                       –
                                                                                                                                                      78,922              80,664              84,727              82,935
Current assets
Asset held for sale                                                                                                       16                       –                1,401                       –                1,401
Inventories                                                                                                                   17                1,293                   327                       –                       2
Trade and other receivables                                                                                         18              28,288              26,788              10,782              13,152
Cash and cash equivalents                                                                                          19                2,362                3,793                   467                   720
                                                                                                                                                      31,943              32,309              11,249              15,275
Total assets                                                                                                                                110,865            112,973              95,976              98,210
EQUITY AND LIABILITIES
Equity
Called up share capital                                                                                                20                     62                     62                     62                     62
Share premium                                                                                                                                 6,600                6,563                6,600                6,563
Capital redemption reserve                                                                                                                      8                       8                       8                       8
Merger reserve                                                                                                                                 2,749                2,749                       –                       –
Retained earnings                                                                                                                          33,249              27,728              33,392              32,314
Total equity                                                                                                                                   42,668              37,110              40,062              38,947
Current liabilities
Borrowings                                                                                                                  22                6,598                5,111                6,598                5,111
Current tax liabilities                                                                                                                         2,211                1,146                1,371                   679
Trade and other payables                                                                                            21              41,201              37,079              33,206              25,503
                                                                                                                                                      50,010              43,336              41,175              31,293
Non-current liabilities
Borrowings                                                                                                                  22              14,500              27,970              14,500              27,970
Deferred tax liabilities                                                                                                   15                3,687                4,557                   239                       –
                                                                                                                                                      18,187              32,527              14,739              27,970
Total liabilities                                                                                                                              68,197              75,863              55,914              59,263
Total equity and liabilities                                                                                                         110,865            112,973              95,976              98,210
The notes on pages 50 to 70 are an integral part of these consolidated financial statements.
The Company registration number is 02888250.
The financial statements on pages 44 to 70 were approved by the Board of Directors on 8 December 2015 and were signed on its
behalf by:
Mark Quartermaine
Chief Executive Officer
8 December 2015
166685 Alternative Networks Pt3_166685 Alternative Networks Pt3  21/12/2015  13:13  Page 45 Alternative Networks
Annual Report & Accounts 2015
46
Financial Statements
Consolidated Statement of Changes in Equity
                                                                                                                                     Called up                                                         Capital
                                                                                                                                           share                        Share                redemption                      Merger                    Retained                           Total
                                                                                                                                         capital                    premium                      reserve                      reserve                    earnings                        equity
                                                                                                                                                 a)                               b)                               c)                               d)
                                                                                                                                          £’000                        £’000                        £’000                        £’000                        £’000                         £’000
Balance at 30 September 2013                                                      62                6,534                       8                2,749              25,783              35,136
Shares issued                                                                                       –                     29                       –                       –                       –                     29
IFRS2 share based payments                                                               –                       –                       –                       –                   419                   419
Deferred tax on share options                                                              –                       –                       –                       –                     12                     12
Profit for the year and total comprehensive income                              –                       –                       –                       –                8,078                8,078
Dividends paid                                                                                      –                       –                       –                       –               (6,564)              (6,564)
Balance at 30 September 2014                                                      62                6,563                       8                2,749              27,728              37,110
Shares issued                                                                                       –                     37                       –                       –                       –                     37
Reissue of shares by the trust                                                              –                       –                       –                       –                   277                   277
IFRS2 share based payments                                                               –                       –                       –                       –                1,078                1,078
Deferred tax on share options                                                              –                       –                       –                       –                       4                       4
Profit for the year and total comprehensive income                              –                       –                       –                       –              11,467              11,467
Dividends paid                                                                                      –                       –                       –                       –               (7,305)              (7,305)
Balance at 30 September 2015                                                      62                6,600                       8                2,749              33,249              42,668
The notes on pages 50 to 70 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, Aurora
Kendrick James Limited, Scalable Communications plc and The Telecom Centre Limited. This represents the difference
between the value of the shares acquired (nominal value plus related share premium) and the nominal value of the shares
issued.
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Financial Statements
Company Statement of Changes in Equity
Strategic Report  
Corporate Governance
Financial Statements
                                                                                                                                                                       Called up                                                         Capital
                                                                                                                                                                             share                        Share                redemption                    Retained                          Total
                                                                                                                                                                           capital                    premium                      reserve                    earnings                        equity
                                                                                                                                                                            £’000                        £’000                        £’000                        £’000                        £’000
Balance at 30 September 2013                                                                               62                6,534                       8              30,116              36,720
Share issued                                                                                                                  –                     29                       –                       –                     29
IFRS2 share based payments                                                                                        –                       –                       –                   419                   419
Deferred tax on share options                                                                                        –                       –                       –                     12                     12
Profit for the year and total comprehensive income                                                        –                       –                       –                8,331                8,331
Dividends paid                                                                                                               –                       –                       –               (6,564)              (6,564)
Balance at 30 September 2014                                                                               62                6,563                       8              32,314              38,947
Share issued                                                                                                                  –                     37                       –                       –                     37
IFRS2 share based payments                                                                                        –                       –                       –                1,078                1,078
Deferred tax on share options                                                                                        –                       –                       –                       4                       4
Profit for the year and total comprehensive income                                                        –                       –                       –                7,301                7,301
Dividends paid                                                                                                               –                       –                       –               (7,305)              (7,305)
Balance at 30 September 2015                                                                               62                6,600                       8              33,392              40,062
The notes on pages 50 to 70 are an integral part of these consolidated financial statements.
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Financial Statements
Consolidated Statement of Cash Flows
For the year ended 30 September 2015
                                                                                                                                                                                                                                                                        Year ended                Year ended
                                                                                                                                                                                                                                                                   30 September           30 September
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                Notes                        £’000                        £’000
Cash flows from operating activities
Cash generated from operations                                                                                                                                     24              21,879              16,167
Income tax paid                                                                                                                                                                                 (1,247)              (1,376)
Net cash generated from operating activities                                                                                                                                     20,632              14,791
Cash flows from investing activities
Purchase of property, plant and equipment                                                                                                                    13               (4,020)                 (846)
Purchase of intangible assets                                                                                                                                         12               (1,295)              (1,230)
Proceeds from sale of property, plant and equipment                                                                                                                         3,800                       –
Interest received                                                                                                                                                                                         3                     25
Purchase of subsidiary undertakings (net of cash acquired)                                                                                                                        –             (50,880)
Net cash used in investing activities                                                                                                                                                   (1,512)            (52,931)
Cash flows from financing activities
Interest paid                                                                                                                                                                                       (1,298)              (1,070)
Dividends paid                                                                                                                                                                10               (7,305)              (6,564)
Proceeds from issue of share capital                                                                                                                                                        37                     29
Transaction costs in relation to loan facility                                                                                                                                                 –                  (724)
Proceeds from borrowings                                                                                                                                                                         –              35,000
Repayments of borrowings                                                                                                                                                              (11,985)              (2,668)
Net cash (used in)/received from financing activities                                                                                                                         (20,551)             24,003
Decrease in cash and cash equivalents                                                                                                                                       (1,431)            (14,137)
Cash and cash equivalents at start of year                                                                                                                     19                3,793              17,930
Cash and cash equivalents at end of year                                                                                                                19                2,362                3,793
The notes on pages 50 to 70 are an integral part of these consolidated financial statements.
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Financial Statements
Company Statement of Cash Flows
For the year ended 30 September 2015
Strategic Report  
Corporate Governance
Financial Statements
                                                                                                                                                                                                                                                                        Year ended                Year ended
                                                                                                                                                                                                                                                                   30 September           30 September
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                Notes                        £’000                        £’000
Cash flows from operating activities
Cash generated from operations                                                                                                                                     24              20,573              20,789
Income tax paid                                                                                                                                                                                    (773)              (1,129)
Net cash generated from operating activities                                                                                                                                     19,800              19,660
Cash flows from investing activities
Purchase of property, plant and equipment                                                                                                                    13               (2,558)                 (378)
Purchase of intangible assets                                                                                                                                         12                  (766)              (1,081)
Proceeds from sale of property, plant and equipment                                                                                                                         3,800                       –
Interest received                                                                                                                                                                                         3                     25
Purchase of subsidiary undertakings (net of cash acquired)                                                                                                                        –             (51,773)
Net cash received from/(used in) investing activities                                                                                                                               479             (53,207)
Cash flows from financing activities
Interest paid                                                                                                                                                                                       (1,295)              (1,070)
Dividends paid                                                                                                                                                                10               (7,305)              (6,564)
Proceeds from issue of share capital                                                                                                                                                        37                     29
Transaction costs in relation to loan facility                                                                                                                                                 –                  (724)
Proceeds from borrowings                                                                                                                                                                         –              35,000
Repayments of borrowings                                                                                                                                                              (11,969)              (2,094)
Net cash (used in)/received from financing activities                                                                                                                         (20,532)             24,577
Decrease in cash and cash equivalents                                                                                                                                          (253)              (8,970)
Cash and cash equivalents at start of year                                                                                                                     19                   720                9,690
Cash and cash equivalents at end of year                                                                                                                19                   467                   720
The notes on pages 50 to 70 are an integral part of these consolidated financial statements.
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Financial Statements
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 5th Floor, 240 Blackfriars Road, London SE1 8NW. The shares of the Company are listed on the Alternative
Investment Market.
2 Accounting policies
Statement of compliance and basis of preparation
The Group’s 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 consolidated financial statements have been prepared on a going concern basis. Further detail is included within
the Report of the Directors.
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 Group’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.
The functional currency of the Company is Pounds Sterling (GBP) as that is the currency of the primary economic environment in which
the Group operates. These financial statements are presented in Pounds Sterling (GBP).
The Group offers discounts to Mobile customers which have previously been treated as adjustments to cost of sales due to the nature
of the incentive written into contractual agreements. In light of changes in the contractual agreements these amounts are now treated
as adjustments to revenue. This change has resulted in a reduction in revenue and a corresponding reduction in cost of sales in the
current year of £4.3m. Separately, in order to bring reported margins in the Telephony Services segment in line with the Advanced
Solutions segment, certain costs have been reclassified from operating costs to cost of sales, resulting in an increase in cost of sales in
the current year of £1.4m.
In order to aid the comparability of amounts included in these financial statements, adjustments to revenue and cost of sales of £3.4m
and £1.5m have been applied to the comparative year for discounts to customers and cost reclassification respectively. Accordingly,
operating costs have been reduced by £1.5m. There are no earnings per share or equity impacts arising from these adjustments in any
period presented in these financial statements.
New and amended standards adopted by the Group
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year that had a material impact on the
Group.
New standards and interpretations not yet adopted and not relevant to the Group’s operations
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after
1 October 2015, and have not been applied in preparing these consolidated financial statements. None of these will materially impact
the consolidated financial statements of the Group.
IFRS 10, ‘Consolidated Financial Statements’
IFRS 12, ‘Disclosure of Interests in Other Entities’
IFRS 15, ‘Revenue from Contracts with Customers’
IAS 27, ‘Separate Financial Statements’ (revised 2011)
IAS 28, ‘Investments in Associates and Joint Ventures’ (revised 2011)
Amendment to IAS 32, ‘Financial Instruments: Presentation, on offsetting financial assets and financial liabilities’
Amendments to IFRS 10, ‘Consolidated Financial Statements’, IFRS 11 ‘Joint Arrangements’ and IFRS 12 ‘Disclosure of Interests in
Other Entities’
Amendment to IFRS 10, ‘Consolidated Financial Statements’ and IFRS 12 and IAS 27 for investment entities
Amendment to IAS 39, ‘Financial Instruments: Recognition and measurement’ and IFRS 9 ‘Financial Instruments’
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the
Group.
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.
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Financial Statements
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 statement of comprehensive income 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, is recognised in the income statement at the time the call is made. Calls made in
the year, but not billed by year end are accrued within receivables as accrued income.
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 despatch.
Connection commissions received from mobile network operators are recognised when the customer is connected or on anniversary of
connection 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.
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.
Hardware revenue and related expenditure is recognised upon despatch for the sale of equipment. Installation revenue and related
expenditure is recognised upon completion of work for systems installations. Maintenance income in respect of systems is recognised
evenly over the period to which it relates.
Connection revenue received from customers is recognised when the customer is connected to the network.
Corporate support revenue (discretionary bonuses received from network providers in relation to a new connection) is recognised in line
with the recognition of the associated hardware allowance/account credit in cost of sales i.e. the revenue is recognised on the date of
connection and is partially deferred in proportion to the deferred element of hardware allowance/account credit.
Revenue from customer management services is recognised in the same month as revenue for the managed services (e.g. usage, line
rental, connections). Where Alternative Networks carries credit risks, gross fees received from customers are recognised in revenue with
fees passed to the network provider being recognised in expenses. Where the network provider carries credit risks, only net
management fees are recognised in revenue.
Revenue from compensation for breach of contract is recognised when it is paid by the customer.
Billing services income and related costs are recognised in the month of service.
Revenue earned from consultancy is recognised upon the percentage of completion of the project.
Foreign currencies
Transactions denominated in foreign currency are translated at exchange rates prevailing at the transaction date. Monetary assets and
liabilities are translated at exchange rates prevailing at the year-end date. Any gains or losses arising on exchange are reflected in the
statement of comprehensive income.
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.
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Financial Statements
Notes to the Financial Statements continued
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 impairment.
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 contracts, relationships, technology, order backlog 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.
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 contracts and relationships acquired on acquisitions 7-10 years
Technology 4 years
Trade name 3 years
Purchased customer contracts 3-5 years
Computer software 3-5 years
Order backlog (included within customer contracts and relationships) 1 year
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 initially recognised at fair value and subsequently held at amortised cost.
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
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Financial Statements
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 Company are recorded at their nominal value. Proceeds received, net of direct issue costs, is split
between share capital and share premium.
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 3 of the financial statements.
Current taxation
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in
the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
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.
Termination 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
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Financial Statements
Notes to the Financial Statements continued
demonstrably committed to a termination 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 Employee Benefit Trust (“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.
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 revenue 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 IFRS2 ‘Share based payments’ and has adopted the Black-Scholes model for the purposes of computing ‘fair
value’ for the EMI schemes.
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
soon as the customer is entitled to start drawing down on these subsidies, normally when the customers’ services commence or a fixed
period after commencement, unless otherwise specified in the contract.
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 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 the proceeds (net of transaction costs) and the redemption value is recognised in the income statement
over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that
some or all of the facility will be drawn down. To the extent there is no evidence that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are
measured at the directors’ best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to
present value where the effect is material.
Exceptional items
Exceptional items are items of income or expense that are disclosed separately in the financial statements where it is necessary to do
so to provide further understanding of the financial performance of the group due to the significance of their nature or amount.
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Significant accounting judgements, estimates and assumptions
The key assumptions concerning the present and future 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 (CGU) and also to choose a suitable
discount rate in order to calculate the present value of those cash flows. Sensitivity analysis is undertaken on the weighted average cost
of capital and the future growth assumptions for the individual CGU’s.
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. Refer to note 15 where the impact of the change in tax rates is considered.
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 Segmental information
IFRS 8, “Operating Segments” requires identification of the Group’s segments on the basis of the internal reporting about components
of the Group that is regularly reviewed by the chief operating decision maker to allocate resources and to assess performance.
The chief operating decision maker has been identified as the Board. The Board reviews the Group’s internal reporting in order to
assess performance and allocate resources. The Board assesses the performance of the operating segments based on revenue and
gross profit. The reportable segments of the Group are Telephony Services and Advanced Solutions.
Telephony Services consists of the Group’s Fixed Voice and Mobile Voice services. Advanced Solutions includes the installation and
maintenance of telephone systems, the integration of computer networks, the provision of managed hosting solutions and the provision
of billing facilities.
For the year ended 30 September 2015
                                                                                                                                                                                                                                          Telephony                  Advanced
                                                                                                                                                                                                                                            Services                   Solutions                         Total
                                                                                                                                                                                                                                                £’000                        £’000                        £’000
Total segment revenue                                                                                                                                             68,941              78,189            147,130
Inter segment revenue                                                                                                                                                      –                  (314)                 (314)
Revenue from external customers                                                                                                                     68,941              77,875            146,816
Gross Profit                                                                                                                                                           31,368              29,335              60,703
Operating costs                                                                                                                                                                                                         (45,603)
Finance income                                                                                                                                                                                                                   3
Finance costs                                                                                                                                                                                                              (1,297)
Profit before taxation                                                                                                                                                                                              13,806
Adjusted EBITDA                                                                                                                                                                                                     22,051
For the year ended 30 September 2014 (restated)
                                                                                                                                                                                                                                          Telephony                  Advanced
                                                                                                                                                                                                                                            Services                   Solutions                          Total
                                                                                                                                                                                                                                                £’000                        £’000                        £’000
Total segment revenue                                                                                                                                             71,760              63,215            134,975
Inter segment revenue                                                                                                                                                      –                  (562)                 (562)
Revenue from external customers                                                                                                                     71,760              62,653            134,413
Gross Profit                                                                                                                                                           31,099              24,213              55,312
Operating costs                                                                                                                                                                                                         (43,772)
Finance income                                                                                                                                                                                                                 25
Finance costs                                                                                                                                                                                                              (1,202)
Profit before taxation                                                                                                                                                                                              10,363
Adjusted EBITDA                                                                                                                                                                                                     19,591
Assets and liabilities, operating profit, finance income, finance costs and taxation are not disclosed by segment as they are not reported
to the chief operating decision maker.
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Annual Report & Accounts 2015
56
Financial Statements
Notes to the Financial Statements continued
Transactions with the largest customer of the Company are less than 10% of Group revenue.
All sales have taken place within the United Kingdom and those between segments are all carried out on arm’s length basis.
All non-current assets are located within the United Kingdom.
4 Analysis of gross profit and operating costs
                                                                                                                                                                                                                                                                   30 September           30 September
                                                                                                                                                                                                                                                                                   2015          2014 (Restated)
                                                                                                                                                                                                                                                                                  £’000                        £’000
Revenue                                                                                                                                                                                          146,816            134,413
Cost of sales                                                                                                                                                                                    (86,113)            (79,101)
Gross profit                                                                                                                                                                                       60,703              55,312
Selling and distribution costs                                                                                                                                                            (15,966)            (14,025)
Administrative expenses                                                                                                                                                                   (29,637)            (29,747)
Operating profit                                                                                                                                                                                 15,100              11,540
5 Operating profit
Operating profit is stated after charging:
                                                                                                                                                                                                                                                                   30 September           30 September
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                                                  £’000                        £’000
Depreciation of property, plant and equipment                                                                                                                                    1,681                1,208
Amortisation of intangible assets                                                                                                                                                         4,874                4,286
Income from property exit                                                                                                                                                                   3,299                       2
Operating lease charges – land and buildings                                                                                                                                     1,230                   918
Operating lease charges – motor vehicles                                                                                                                                                55                    54
                                                                                                                                                                                                                                                                                  £’000                        £’000
Auditors’ remuneration:
– fees payable to the Company’s auditors for the audit of Parent Company and consolidated financial statements                                 89                   103
Fees payable to the Company’s auditors and associates for other services:
– fees payable to the Company’s auditors for the audit of the Company’s subsidiaries pursuant to legislation                                         82                     82
Total audit fees                                                                                                                                                                                       171                   185
– services relating to taxation                                                                                                                                                                   11                     31
– corporate finance services                                                                                                                                                                     73                   116
– all other services                                                                                                                                                                                    48                     38
Total non-audit fees                                                                                                                                                                                132                   185
During the year, with the approval of the Audit Committee, the Corporate Finance team of PricewaterhouseCoopers LLP , who are also
the Group’s auditors, performed corporate finance work on certain non-recurring projects. The fee in respect of this work was £73,350.
6 Key management costs and employee information
Key management is defined as members of the Group’s Executive Board, plus selected other senior managers.
                                                                                                                                                                                                                                                                   30 September           30 September
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                                                  £’000                        £’000
Key management compensation
Short term employee benefits                                                                                                                                                             2,043                1,917
Post employment benefits                                                                                                                                                                        83                     54
Share based payments                                                                                                                                                                       1,078                   419
                                                                                                                                                                                                           3,204                2,390
                                                                                                                                                                                                                                                                   30 September           30 September
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                                                  £’000                        £’000
Directors’ aggregate emoluments
Short term employee benefits                                                                                                                                                             1,525                1,712
Other benefits                                                                                                                                                                                          13                     71
Post employment benefits                                                                                                                                                                      100                     74
                                                                                                                                                                                                           1,638                1,857
The amounts set out above include remuneration in respect of the highest paid director of £414,023 (2014: £636,113). The highest paid
director also received £50,000 (2014: £38,500) of money purchase pension scheme contributions and exercised nil (2014: nil) share
options during the year.
Edward Spurrier resigned as Chief Executive Officer on 30 September 2015. In addition to the amounts in the table an additional
amount of £302,209 was paid following the year ended 30 September 2015 in respect of bonus and other compensatory payments.
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Strategic Report  
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Financial Statements
During the year three directors (2014: five) accrued retirement benefits under money purchase pension schemes.
The aggregate amount of gains made by directors on the exercise of share options was £nil (2014: £nil). No directors (2014: nil)
exercised share options during the year.
The average monthly number of persons (including executive Directors) employed by the Group and Company during the year was:
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015          2014 (Restated)                         2015                         2014
                                                                                                                                                                                                          Number                     Number                    Number                     Number
By activity
Selling and distribution                                                                                                                        377                   346                   158                     95
Administration                                                                                                                                     233                   224                   100                   181
                                                                                                                                                           610                   570                   258                   276
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Staff costs
Wages and salaries                                                                                                                        34,390              31,296              12,846              11,482
Social security costs                                                                                                                         4,172                3,772                1,850                1,581
Employee share scheme charges                                                                                                     1,078                   419                1,078                   419
Other pension costs – defined contribution plans                                                                                867                   762                   402                   356
                                                                                                                                                      40,507              36,249              16,176              13,838
7 Finance income
                                                                                                                                                                                                                                                                   30 September           30 September
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                                                  £’000                        £’000
Interest receivable on bank deposits                                                                                                                                                          3                     25
8 Finance costs
                                                                                                                                                                                                                                                                   30 September           30 September
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                                                  £’000                        £’000
Interest cost on bank loans                                                                                                                                                                 1,297                1,202
9 Taxation
                                                                                                                                                                                                                                                                   30 September           30 September
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                                                  £’000                        £’000
Current tax:
Tax on profit in year                                                                                                                                                                             3,101                2,261
Adjustments in respect of prior years                                                                                                                                                    (784)                   (43)
Total current tax                                                                                                                                                                               2,317                2,218
Deferred tax:
Origination and reversal of timing differences                                                                                                                                            22                     67
Total deferred tax credit                                                                                                                                                                       22                     67
Total tax charge                                                                                                                                                                                2,339                2,285
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58
Financial Statements
Notes to the Financial Statements continued
The current tax assessed for the year of 17.0% (2014: 22.1%) is lower (2014: higher) than the average rate of corporation tax in the UK
of 20.5% (2014: 22%) applied to the profits before tax for the year due to a further reduction in the standard rate of corporation tax for
the year (from 22.0% to 20.5%), the recognition of prior year R&D credits that have been successfully received in the current year and
profit arising on the sale of a property for which certain indexation allowances have been applied. The differences are explained below:
                                                                                                                                                                                                                                                                   30 September           30 September
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                                                  £’000                        £’000
Profit before taxation                                                                                                                                                                     13,806              10,363
Profit on ordinary activities multiplied by average rate of corporation tax in the UK of 20.5% (2014: 22%)                                          2,830                2,280
Effects of:
Amounts not deductible                                                                                                                                                                         379                1,441
Deduction in relation to exercise of share options                                                                                                                                 (255)                 (393)
Share option charge not deductible                                                                                                                                                       221                     92
Indexation allowance on sale of property                                                                                                                                               (219)                      –
Utilisation of losses                                                                                                                                                                                 167               (1,092)
Adjustments in respect of prior years R&D                                                                                                                                            (784)                   (43)
Total tax charge                                                                                                                                                                                2,339                2,285
The standard rate of corporation tax in the UK changed from 21% to 20% with effect from 1 April 2015. Accordingly, the Group’s profits
for this accounting period are taxed at an effective rate of 20.5%. Further changes to the UK Corporation tax system were announced
in the 8 July 2015 Budget Statement. These include reductions to the main rate to 19% from 1 April 2017 and to 18% from 1 April
2020. As these changes had not been substantively enacted at the balance sheet date their effects are not included in these financial
statements.
10 Dividends
                                                                                                                                                                                                                                                                   30 September 30 September
                                                                                                                                                                                                                                                                                   2015 2014
                                                                                                                                                                                                                                                                                  £’000 £’000
2014 Final Paid – 9.60p (2013: 8.60p) per 0.125p ordinary share                                                                                                       4,643 4,194
2015 First Interim Paid – 5.50p (2014: 4.90p) per 0.125p ordinary share                                                                                            2,662 2,370
                                                                                                                                                                                                           7,305 6,564
The 2014 proposed final dividend of 9.60 pence per 0.125p ordinary share (2013: 8.60 pence) was paid on 30 January 2015. The
amount of dividend paid was £4,643,000 (2014: £4,194,000).
The Company paid a 2015 interim dividend of 5.50 pence per 0.125p ordinary share (2014: 4.90 pence), with a total payment value of
£2,662,000 (2014: £2,370,000). This was paid on 15 July 2015 to shareholders on the register on 19 June 2015.
In addition, the Directors are proposing a final dividend in respect of the financial year ended 30 September 2015 of 10.9 pence per
0.125p ordinary share (2014: 9.60 pence) which will require an estimated £5,280,000 of shareholders’ funds (2014: £4,644,000).
Assuming it is approved by the shareholders at the Annual General Meeting on 27 January 2016, it will be paid on 29 January 2016 to
shareholders who are on the register of members at 4 January 2016 with an “ex-dividend” date of 31 December 2015.
11 Earnings per share
The calculation of basic and fully diluted earnings per ordinary share is based on the profit attributable to owners 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 to              of £0.00125                   Per share
Basic and fully diluted earnings per share                                                                                                                               owners of the company          ordinary shares                      amount
                                                                                                                                                                                                                                                £’000                     Number                        Pence
2015 Earnings per share – basic                                                                                                                             11,467       48,212,619                  23.8
Potentially dilutive shares                                                                                                                                                  –            940,364                   (0.5)
2015 Earnings per share – diluted                                                                                                                           11,467       49,152,983                  23.3
2014 Earnings per share – basic                                                                                                                               8,078       47,709,701                  16.9
Potentially dilutive shares                                                                                                                                                  –            888,307                   (0.3)
2014 Earnings per share – diluted                                                                                                                             8,078       48,598,008                  16.6
The adjusted EPS is based on the adjusted profit after tax as set out in note 28, and the weighted average number of shares as
described above.
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                                                                                                                                                                                                                                                               Weighted average
                                                                                                                                                                                                                                                                        of £0.00125 Per share
Basic and fully diluted earnings per share                                                                                                                                              Adjusted profit          ordinary shares amount
                                                                                                                                                                                                                                     after taxation                     Number Pence
2015 Earnings per share – basic                                                                                                                             13,681       48,212,619 28.4
Potentially dilutive shares                                                                                                                                                  –            940,364 (0.6)
2015 Earnings per share – diluted                                                                                                                           13,681       49,152,983 27.8
2014 Earnings per share – basic                                                                                                                             12,852       47,709,701 26.9
Potentially dilutive shares                                                                                                                                                  –            888,307 (0.5)
2014 Earnings per share – diluted                                                                                                                           12,852       48,598,008 26.4
Share option costs included within adjusted profit attributable to owners of the company are reducing the earnings per share in 2015 by
2.7p (2014: 1.1p).
There were 49,729,817 shares in issue at 30 September 2015 (2014: 49,688,544). The weighted average number of shares during the
year was 48,212,619 (2014: 47,709,701).
12 Intangible assets
                                                                                                 Purchased                                                    Customer
                                                                                                   customer                  Computer            contracts and
Group                                                                                      contracts                    software              relationships             Trade names                Technology                     Goodwill                          Total
                                                                                                        £’000                        £’000                        £’000                        £’000                        £’000                         £’000                        £’000
Cost
At 1 October 2013                                               1,662                3,363              11,231                   757                1,007              19,560              37,580
Additions                                                                     –                1,230                       –                       –                       –                        –                1,230
Acquisitions                                                                 –                   461              21,203                       –                   890              32,347              54,901
At 30 September 2014                                        1,662                5,054              32,434                   757                1,897              51,907              93,711
Additions                                                                     –                1,295                       –                       –                       –                        –                1,295
Acquisitions                                                                 –                       –                       –                       –                       –                        –                       –
At 30 September 2015                                      1,662                6,349              32,434                   757                1,897              51,907              95,006
Accumulated amortisation
At 1 October 2013                                               1,662                2,208                7,089                   736                   985                        –              12,680
Charge for the year                                                     –                   790                3,286                     21                   189                        –                4,286
At 30 September 2014                                        1,662                2,998              10,375                   757                1,174                        –              16,966
Charge for the year                                                     –                1,175                3,476                       –                   223                        –                4,874
At 30 September 2015                                      1,662                4,173              13,851                   757                1,397                        –              21,840
Net book amount
At 30 September 2015                                             –                2,176              18,583                       –                   500              51,907              73,166
At 30 September 2014                                               –                2,056              22,059                       –                   723              51,907              76,745
At 30 September 2013                                               –                1,155                4,142                     21                     22              19,560              24,900
Amortisation has been charged through the income statement within operating costs.
                                                                                                                                                                                                       Purchased
                                                                                                                                                                                                         customer                  Computer
Company                                                                                                                                                                                     contracts                    software                    Goodwill                          Total
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Cost
At 1 October 2013                                                                                                                              759                3,894                1,763                6,416
Additions                                                                                                                                                 –                1,081                       –                1,081
At 30 September 2014                                                                                                                        759                4,975                1,763                7,497
Additions                                                                                                                                                 –                   766                       –                   766
Acquisitions                                                                                                                                             –                       –                       –                       –
At 30 September 2015                                                                                                                     759                5,741                1,763                8,263
Accumulated amortisation
At 1 October 2013                                                                                                                              759                2,454                       –                3,213
Charge for the year                                                                                                                                 –                   848                       –                   848
At 30 September 2014                                                                                                                        759                3,302                       –                4,061
Charge for the year                                                                                                                                 –                   951                       –                   951
At 30 September 2015                                                                                                                     759                4,253                       –                5,012
Net book amount
At 30 September 2015                                                                                                                          –                1,488                1,763                3,251
At 30 September 2014                                                                                                                            –                1,673                1,763                3,436
At 30 September 2013                                                                                                                            –                1,440                1,763                3,203
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60
Financial Statements
Notes to the Financial Statements continued
The carrying amounts of goodwill by reportable segment are as follows;
                                                                                                                                                                                                            Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Telephony Services                                                                                                                           5,685                5,685                1,436                1,436
Advanced Solutions                                                                                                                       46,222              46,222                   327                   327
                                                                                                                                                      51,907              51,907                1,763                1,763
Each operating segment is deemed to be a Cash Generating Unit (CGU), being the lowest level for which cash flows are separately
identifiable. Goodwill is attributed to each CGU and reviewed for the purposes of the annual impairment review as this is the level that
management monitors goodwill. The Group’s operating segments to which goodwill has been allocated are Mobile Voice and Advanced
Solutions.
During the year goodwill in respect of each cash generating unit was tested for impairment in accordance with IAS 36. All CGUs were
assessed to have a value in use in excess of their respective carrying values, and hence no impairments 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 2016-2018 financial years. Management
believes the forecasts are reasonably achievable based on market performance and its expectations of market developments. The
directors consider that the key metric in the forecasts is earnings before interest, tax and amortisation. Subsequent cash flows were
extrapolated using a 1.0% (2014: 1.0%) growth rate reflecting an approximate forecasted long term growth rate for the UK economy,
the Group’s principal market.
The pre-tax discount rate used to assess the carrying value of goodwill is 9.7% (2014: 10.0%) which approximates the Group’s
weighted average cost of capital. This discount rate has been calculated on a consistent basis.
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. The Group undertakes sensitivity analysis based on reasonably possible
changes in assumptions by increasing the weighted average cost of capital and reducing future growth expectations in the model. The
results of this analysis show no indication of impairment.
13 Property, plant and equipment
                                                                                                                                                                       Land and                  Leasehold                   Plant and
Group                                                                                                                                                           buildings           Improvements                 equipment           Motor Vehicles                          Total
                                                                                                                                                                            £’000                        £’000                        £’000                        £’000                        £’000
Costs
At 1 October 2013                                                                                                  1,646                   640                3,877                       8                6,171
Additions                                                                                                                        –                     60                   784                       –                   844
Acquisitions                                                                                                                   –                       –                1,809                       –                1,809
Disposals                                                                                                                       –                    (19)                 (460)                      –                  (479)
Transfer to asset held for sale                                                                                (1,646)                      –                       –                       –               (1,646)
At 30 September 2014                                                                                                  –                   681                6,010                       8                6,699
Additions                                                                                                                        –                2,189                2,114                       –                4,303
Disposals                                                                                                                       –                  (450)                   (12)                      –                  (462)
At 30 September 2015                                                                                                –                2,420                8,112                       8              10,540
Accumulated Depreciation
At 1 October 2013                                                                                                     227                   573                3,086                       8                3,894
Charge for the year                                                                                                      18                     28                1,162                       –                1,210
Disposals                                                                                                                       –                    (19)                 (460)                      –                  (479)
Transfer to asset held for sale                                                                                   (245)                      –                       –                       –                  (245)
At 30 September 2014                                                                                                  –                   582                3,788                       8                4,380
Charge for the year                                                                                                        –                   146                1,535                       –                1,681
Disposals                                                                                                                       –                  (424)                   (12)                      –                  (436)
At 30 September 2015                                                                                                –                   304                5,311                       8                5,623
Net book amount
At 30 September 2015                                                                                                –                2,116                2,801                       –                4,917
At 30 September 2014                                                                                                  –                     99                2,222                       –                2,319
At 30 September 2013                                                                                           1,419                     67                   791                       –                2,277
Included within leasehold additions in 2015 is £0.3m of non-cash dilapidation provisions relating to the new property leases entered into
during the year at 240 Blackfriars Road and 1 The Crescent Surbiton.
Depreciation has been charged through the income statement within operating costs.
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                                                                                                                                                                       Land and                  Leasehold                   Plant and
Company                                                                                                                                                    buildings           Improvements                 equipment           Motor Vehicles                          Total
                                                                                                                                                                            £’000                        £’000                        £’000                        £’000                        £’000
Costs
At 1 October 2013                                                                                                  1,646                   576                2,851                       8                5,081
Additions                                                                                                                        –                       –                   378                       –                   378
Disposals                                                                                                                       –                    (19)                 (311)                      –                  (330)
Transfer to asset held for sale                                                                                (1,646)                      –                       –                       –               (1,646)
At 30 September 2014                                                                                                  –                   557                2,918                       8                3,483
Additions                                                                                                                        –                2,184                   657                       –                2,841
Disposals                                                                                                                       –                  (450)                      –                       –                  (450)
At 30 September 2015                                                                                                –                2,291                3,575                       8                5,874
Accumulated Depreciation
At 1 October 2013                                                                                                     227                   535                2,450                       8                3,220
Charge for the year                                                                                                      18                     10                   244                       –                   272
Disposals                                                                                                                       –                    (19)                 (308)                      –                  (327)
Transfer to asset held for sale                                                                                   (245)                      –                       –                       –                  (245)
At 30 September 2014                                                                                                  –                   526                2,386                       8                2,920
Charge for the year                                                                                                        –                   126                   375                       –                   501
Disposals                                                                                                                       –                  (424)                      –                       –                  (424)
At 30 September 2015                                                                                                –                   228                2,761                       8                2,997
Net book amount
At 30 September 2015                                                                                                –                2,063                   814                       –                2,877
At 30 September 2014                                                                                                  –                     31                   532                       –                   563
At 30 September 2013                                                                                           1,419                     41                   401                       –                1,861
14 Investments in subsidiary undertakings
                                                                                                                                                                                                                                                                                                              Company
                                                                                                                                                                                                                                                                                                                    £’000
1 October 2014                                                                                                                                                                                                          78,599
30 September 2015                                                                                                                                                                                                  78,599
The following is a full list of subsidiary undertakings of the Group:
Subsidiary undertakings Country of incorporation Class of holdings Principal activities                               Holding Company %
Echo Communications Limited England & Wales Ordinary Dormant                                                   100%
Aurora Kendrick James Limited England & Wales Ordinary Billing Services                                         100%
Scalable Communications plc England & Wales Ordinary Network Integrator                                   100%
Intercept IT Limited England & Wales Ordinary IT services provider                                  100%
Control Circle Limited England & Wales Ordinary IT services provider                                  100%
Alternative Cloud Services Ltd England & Wales Ordinary Dormant                                                   100%
The Directors believe that the carrying value of the investments is supported by their underlying net assets and future expected cash
flows.
15 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 un-
recognised amounts of deferred tax at 30 September 2015 (2014: none).
The movement in the deferred tax during the year was as follows:
                                                                                                                                                                                                             Capital
                                                                                                                                                                                                      allowances
                                                                                                                                                                                                        temporary              Share based                            Tax
Asset                                                                                                                                                                                           differences                  payments                        losses                          Total
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Group
1 October 2013                                                                                                                                   335                     63                       –                   398
Acquisitions                                                                                                                                         114                       –                1,736                1,850
Credited/(charged) to income statement                                                                                             195                     83               (1,092)                 (814)
Credited to equity                                                                                                                                    –                     12                       –                     12
30 September 2014                                                                                                                            644                   158                   644                1,446
Credited/(charged) to income statement                                                                                             (479)                  232                  (644)                 (891)
Credited to equity                                                                                                                                    –                       4                                                4
30 September 2015                                                                                                                          165                   394                       –                   559
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Financial Statements
Notes to the Financial Statements continued
                                                                                                                                                                                                             Capital
                                                                                                                                                                                                      allowances
                                                                                                                                                                                                        temporary              Share based                            Tax
Asset                                                                                                                                                                                           differences                  payments                        losses                          Total
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Company
1 October 2013                                                                                                                                   244                     63                       –                   307
Credited/(charged) to income statement                                                                                               (65)                    83                       –                     18
Credited to equity                                                                                                                                    –                     12                       –                     12
30 September 2014                                                                                                                            179                   158                       –                   337
Acquisitions                                                                                                                                                                                                                         –
Credited/(charged) to income statement                                                                                             (812)                  232                       –                  (580)
Reclassifed to Deferred Tax Liability                                                                                                    239                                                 –                   239
Credited to equity                                                                                                                                                             4                       –                       4
30 September 2015                                                                                                                         (394)                  394                       –                       –
                                                                                                                                                                                                                                                                                                   Intangible assets
Liability                                                                                                                                                                                                                                                                                                       Total
                                                                                                                                                                                                                                                                                                                    £’000
Group
1 October 2013                                                                                                                                                                                                              (885)
Acquisition of subsidiary                                                                                                                                                                                              (4,419)
Credited to income statement                                                                                                                                                                                          747
30 September 2014                                                                                                                                                                                                     (4,557)
Credited to income statement                                                                                                                                                                                          870
30 September 2015                                                                                                                                                                                                   (3,687)
The deferred tax on capital allowances temporary differences arises mainly from leasehold additions in the year where the tax written
down value varies from the net book value. The deferred tax liability in the Company has presented within deferred tax assets in the
Group, as these amounts are likely to be realised over a similar period of time.
Deferred tax assets and liabilities are analysed as follows:
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Deferred tax assets
Deferred tax assets to be recovered after more than 12 months                                                         698                   444                     73                   212
Deferred tax assets to be recovered within 12 months                                                                        100                1,002                     43                   125
Asset at 30 September                                                                                                                    798                1,446                   116                   337
Deferred tax liabilities
Deferred tax liabilities to be recovered after more than 12 months                                                  (2,817)              (3,818)                 (239)                      –
Deferred tax liabilities to be recovered within 12 months                                                                    (870)                 (739)                      –                       –
Asset at 30 September                                                                                                                (3,687)              (4,557)                 (239)                      –
16 Asset held for sale
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Property                                                                                                                                                  –                1,401                       –                1,401
The Company entered into a binding agreement on 6 August 2014 to sell its freehold interest at Chatfield Court and completed the
transaction in April 2015 for gross proceeds of £3.8m resulting in a gain on disposal of £2.4m.
17 Inventories
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Finished goods                                                                                                                                 1,293                   327                       –                       2
The amount of inventories recognised as an expense and charged to cost of sales during the year was £18,942,000 (2014:
£13,458,000).
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Corporate Governance
Financial Statements
18 Trade and other receivables
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Trade receivables                                                                                                                           12,893              12,095                4,154                3,759
Amounts owed by Group undertakings                                                                                                   –                       –                       –                2,677
Prepayments                                                                                                                                    7,881                6,723                1,527                1,174
Accrued income                                                                                                                               7,433                7,870                5,023                5,445
Other receivables                                                                                                                                  81                   100                     78                     97
                                                                                                                                                      28,288              26,788              10,782              13,152
The amounts noted above represent the fair value of trade and other receivables.
At 30 September 2015, trade receivables of £332,000 (2014: £739,000) were impaired and fully provided for. The Group is satisfied that
the majority of its clients are of sound creditworthiness. This view is further supported by the willingness of our credit insurers to provide
cover in the majority of cases. The ageing of the trade receivables which are past due and not impaired is as follows:
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
31-60 days                                                                                                                                       1,416                2,693                     15                   442
61-90 days                                                                                                                                          418                   267                   112                     79
Over 90 days                                                                                                                                       844                   296                   461                     14
                                                                                                                                                        2,678                3,256                   588                   535
Movement of the Group provision for impairment of trade receivables is as follows:
                                                                                                                                                                                                                                                                                  Group                  Company
                                                                                                                                                                                                                                                                                  £’000                        £’000
At 1 October 2013                                                                                                                                                                                 505                   234
Provision acquired                                                                                                                                                                                  818                       –
Receivable written off during the year as uncollectible                                                                                                                           (842)                   (67)
Unused amounts reversed                                                                                                                                                                     (280)                 (130)
Provision for receivables impairment                                                                                                                                                       538                   215
At 30 September 2014                                                                                                                                                                           739                   252
Receivable written off during the year as uncollectible                                                                                                                             (83)                   (83)
Unused amounts reversed                                                                                                                                                                     (511)                   (42)
Provision for receivables impairment                                                                                                                                                       187                   134
At 30 September 2015                                                                                                                                                                        332                   261
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.
19 Cash and cash equivalents
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Cash                                                                                                                                                2,362                3,793                   467                   720
20 Called up share capital
                                                                                                                                                                                                                                                                         Group and                 Group and
                                                                                                                                                                                                                                                                           Company                  Company
                                                                                                                                                                                                                                                                   30 September           30 September
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                                                  £’000                        £’000
Authorised
80,000,000 (2014: 80,000,000) ordinary shares of 0.125p (2014: 0.125p) each                                                                                    100                   100
Issued fully paid up
49,729,817 (2014: 49,688,544) ordinary shares of 0.125p (2014: 0.125p) each                                                                                      62                     62
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Financial Statements
Notes to the Financial Statements continued
Movement in shares in issue
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                                               Shares                       Shares
Ordinary shares of 0.125p each
At 1 October                                                                                                                                                                              49,688,544       49,662,667
Issued under share option schemes                                                                                                                                                  23,673              25,877
Matching shares under SIP scheme                                                                                                                                                  17,600                       –
At 30 September                                                                                                                                                                        49,729,817       49,688,544
During the year 23,673 shares were issued under share option schemes as follows;
5,008 issued at 102.5p resulting in a share premium of £5,127
18,665 issued at 150.5p resulting in a share premium of £28,067
17,600 issued at nil cost resulting in a share premium of nil. These share relate to the Company’s new SIP scheme (note 26).
21 Trade and other payables
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Trade payables                                                                                                                               13,018              13,764                6,143                6,988
Amounts owed to group undertakings                                                                                                     –                       –              14,196                9,262
Other taxation and social security costs                                                                                           3,862                2,877                1,738                1,626
Other payables                                                                                                                                 1,196                   882                   987                   656
Accruals and deferred income                                                                                                        23,125              19,556              10,142                6,971
                                                                                                                                                      41,201              37,079              33,206              25,503
Secured payables
Included in trade payables are the following secured balances:
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Telefonica UK Limited                                                                                                                       2,384                2,518                2,384                2,518
Vodafone Limited                                                                                                                             1,255                   985                1,255                   985
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 Telefonica UK Limited, in respect of
£100,000. The guarantee is secured on a fixed and floating charge on the assets of the Company, registered on 19 December 2002.
22 Borrowings
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Current
Bank loans – secured                                                                                                                              –                   666                       –                   666
Bank loans – unsecured                                                                                                                   6,598                4,445                6,598                4,445
Current borrowings                                                                                                                          6,598                5,111                6,598                5,111
Non-current
Bank loans – unsecured                                                                                                                 14,500              27,970              14,500              27,970
Non-current borrowings                                                                                                                 14,500              27,970              14,500              27,970
Further details of borrowings are disclosed in note 23. The secured bank loan in the prior year related to the Group’s mortgage over the
property at Chatfield Road which was subsequently sold in April 2015 (note 16).
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Financial Statements
23 Financial instruments
The Group’s financial instruments comprise cash, bank loans, bank facilities 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 Pound Sterling.
The fair value of financial assets and liabilities is approximately equal to their book values.
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                                         Loans and                 Loans and
Group at 30 September                                                                                                                                                                                                                      receivables                receivables
                                                                                                                                                                                                                                                                                  £’000                        £’000
Financial assets per balance sheet
Trade and other receivables (less prepayments)                                                                                                                                20,406              20,065
Cash and cash equivalents                                                                                                                                                                 2,362                3,793
                                                                                                                                                                                                         22,768              23,858
                                                                                                                                                                                                                                                                                   2015                         2014
                                                                                                                                                                                                                                                                         Loans and                 Loans and
Company at 30 September                                                                                                                                                                                                               receivables                receivables
                                                                                                                                                                                                                                                                                  £’000                        £’000
Financial assets per balance sheet
Trade and other receivables (less prepayments)                                                                                                                                  9,255              11,978
Cash and cash equivalents                                                                                                                                                                    467                   720
                                                                                                                                                                                                           9,722              12,698
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 Sterling. Management monitors the
creditworthiness of financial institutions where cash and cash equivalents are held on a regular basis.
                                                                                                                                                                                                              2015                         2014
                                                                                                                                                                                                                                                                         Loans and                 Loans and
Group at 30 September                                                                                                                                                                                                                      receivables                receivables
                                                                                                                                                                                                                                                                                  £’000                        £’000
Financial liabilities per balance sheet
Trade and other payables (less deferred income and statutory liabilities)                                                                                           26,428              25,367
Secured bank loans                                                                                                                                                                                    –                   666
Unsecured bank loans                                                                                                                                                                       21,097              32,415
                                                                                                                                                                                                         47,525              58,448
                                                                                                                                                                                                              2015                         2014
                                                                                                                                                                                                                                                                         Loans and                 Loans and
Company at 30 September                                                                                                                                                                                                               receivables                receivables
                                                                                                                                                                                                                                                                                  £’000                        £’000
Financial liabilities per balance sheet
Trade and other payables (less deferred income and statutory liabilities)                                                                                           31,194              23,455
Secured bank loans                                                                                                                                                                                    –                   666
Unsecured bank loans                                                                                                                                                                       21,098              32,415
                                                                                                                                                                                                         52,292              56,536
On 23 January 2014, the Group entered into a £43m senior term and revolving facility to support the Group’s acquisition strategy. This
was split between a £23m term loan facility and a £20m revolving credit facility.
The term loan is repayable in half-yearly instalments over a 3 year period commencing July 2014. The revolving facility is due for renewal
on 23 January 2018. Interest is calculated on LIBOR plus a margin dependent on the value of the Leverage covenant.
Secured bank loans had fixed charges over the long leasehold property at Chatfield Court. During the year the property was sold and
the proceeds partially used to extinguish the secured loans.
The Group’s borrowings are subject to financial covenants tested quarterly. The principal financial covenants under the facility are:
maximum net debt to EBITDA of 2.5 times, progressively dropping to 2.0 times in the final year of the facility; minimum interest cover of
5 times; and minimum cash flow to debt service of 1.0 times. At 30 September 2014 and 2015 all of these covenants were achieved.
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 exposed to minimal foreign exchange risk as the Group operates almost wholly within the
United Kingdom. In addition, substantially all of the Company assets and liabilities are held in Pound Sterling so sensitivity
analysis is deemed unnecessary regarding foreign exchange risk.
b)        Interest rate risk – The Group has no significant interest-bearing assets but is exposed to interest rate risk as it borrows funds at
floating interest rates. As at 30 September 2015 the only floating rate to which the Group was exposed was LIBOR. The Group
did not enter into any hedging transactions during the year (2014: none).
c)        Credit 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
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66
Financial Statements
Notes to the Financial Statements continued
exposure to any individual counterparty is subject to a limit, which is reassessed at least annually. The Group also insures all
debts greater than £2,500 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.
d)        Liquidity risk – The group has developed an appropriate liquidity risk 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.
For the foreseeable future, the Group is expected to be in a net borrowings position. The table below analyses the Group’s
financial liabilities into relevant maturity groupings based on the balance remaining at the period to the contractual maturity date.
These amounts disclosed in the table are the contracted undiscounted cash flows.
Group
Year ended 30 September 2015                                                                                                             Within 1 year                  1-2 years                  2-5 years  More than 5 years
                                                                                                                                                                                             £’000                        £’000                        £’000                        £’000
Borrowings                                                                                                                          6,598                9,000                5,500                       –
Trade and other payables (less deferred income and statutory liabilities)                            26,428                       –                       –                       –
Year ended 30 September 2014                                                                                                               Within 1 year                   1-2 years                   2-5 years     More than 5 years
                                                                                                                                                                                             £’000                        £’000                        £’000                        £’000
Borrowings                                                                                                                          5,111                7,000              20,970                       –
Trade and other payables (less deferred income and statutory liabilities)                            25,367                       –                       –                       –
Company
Year ended 30 September 2015                                                                                                             Within 1 year                  1-2 years                  2-5 years  More than 5 years
                                                                                                                                                                                             £’000                        £’000                        £’000                        £’000
Borrowings                                                                                                                          6,598                9,000                5,500                       –
Trade and other payables (less deferred income and statutory liabilities)                            31,194                       –                       –                       –
Year ended 30 September 2014                                                                                                               Within 1 year                   1-2 years                   2-5 years     More than 5 years
                                                                                                                                                                                             £’000                        £’000                        £’000                        £’000
Borrowings                                                                                                                          5,111                7,000              20,970                       –
Trade and other payables (less deferred income and statutory liabilities)                            23,455                       –                       –                       –
The outflow of financial liabilities will not be earlier than the periods stated and neither will they be significantly different to those
indicated.
A summary of the undrawn facilities the Group has at its disposal to further reduce liquidity risk is shown below.
                                                                                                                                                                                            Group                        Group                 Company                  Company
                                                                                                                                                                              30 September           30 September          30 September           30 September
                                                                                                                                                                                              2015                         2014                         2015                         2014
                                                                                                                                                                                             £’000                        £’000                        £’000                        £’000
Undrawn facilities
Unsecured bank loan                                                                                                         14,500                8,000              14,500                8,000
                                                                                                                                          14,500                8,000              14,500                8,000
The revolving facility is due for renewal on 23 January 2018.
e)        Capital risk – 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 capital structure of the Group consists of net debt, which includes borrowings
(note 22) and cash and cash equivalents, and equity attributable to owners of the parent, comprising issued share capital (note
20), 19 other reserves and retained earnings. See above for details of the Group’s borrowing facilities arranged in 2014.
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24 Cash generated from operations
                                                                                                                                                                                                                                                                        Year ended                Year ended
                                                                                                                                                                                                                                                                   30 September           30 September
Group                                                                                                                                                                                                                                                                      2015                         2014
                                                                                                                                                                                                                                                                                  £’000                        £’000
Operating Profit                                                                                                                                                                              15,100              11,540
Adjustments for
Depreciation of property, plant and equipment                                                                                                                                    1,681                1,208
Amortisation of intangible assets                                                                                                                                                         4,874                4,286
Employee share scheme charges                                                                                                                                                        1,309                   419
(Profit)/loss on sale of tangible assets                                                                                                                                                 (2,399)                      2
Movements in working capital
Inventories                                                                                                                                                                                             (966)                 (144)
Trade and other receivables                                                                                                                                                               (1,594)                    95
Trade and other payables                                                                                                                                                                    3,874               (1,239)
Cash generated from operations                                                                                                                                                 21,879              16,167
                                                                                                                                                                                                                                                                        Year ended                Year ended
                                                                                                                                                                                                                                                                   30 September            30 September
Company                                                                                                                                                                                                                                                               2015                          2014
                                                                                                                                                                                                                                                                                  £’000                         £’000
Operating Profit                                                                                                                                                                              10,634              11,300
Adjustments for
Depreciation of property, plant and equipment                                                                                                                                       501                   272
Amortisation of intangible assets                                                                                                                                                            951                   848
Employee share scheme charges                                                                                                                                                        1,309                   419
(Profit)/loss on sale of tangible assets                                                                                                                                                 (2,399)                      2
Movements in working capital
Inventories                                                                                                                                                                                                  3                       1
Trade and other receivables                                                                                                                                                                   130                  (564)
Trade and other payables                                                                                                                                                                    9,444                8,511
Cash generated from operations                                                                                                                                                 20,573              20,789
                                                                                                                                                                                                                                                                   30 September            30 September
Consolidated movement of net debt:                                                                                                                                                                                                       2015                          2014
                                                                                                                                                                                                                                                                                  £’000                         £’000
Net decrease in cash and cash equivalents                                                                                                                                       (1,431)            (14,137)
Capitalisation of loan fees                                                                                                                                                                           –                   724
Net decrease/(increase) in borrowings                                                                                                                                               12,183             (32,955)
Total cash flows in net debt                                                                                                                                                               10,752             (46,368)
Amortisation of loan fees                                                                                                                                                                       (198)                 (132)
Net debt at beginning of year                                                                                                                                                           (29,289)             17,211
Net debt at end of year                                                                                                                                                                 (18,735)            (29,289)
25 Other commitments
At 30 September 2015 the Group and Company had minimum future lease commitments under non-cancellable operating leases as
follows:
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Land and buildings
Expiry date:
Within one year                                                                                                                                   504                   628                   280                   413
Between one and two years                                                                                                             1,733                   580                1,509                   410
Between two and five years                                                                                                             4,898                   946                4,469                   523
                                                                                                                                                        7,135                2,154                6,258                1,346
                                                                                                                                                                                                             Group                        Group                 Company                  Company
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £’000                        £’000                        £’000                        £’000
Motor vehicles
Expiry date:
Within one year                                                                                                                                     32                     47                       –                       –
Between one and two years                                                                                                                    2                     32                       –                       –
Between two and five years                                                                                                                     –                       2                       –                       –
                                                                                                                                                             34                     81                       –                       –
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68
Financial Statements
Notes to the Financial Statements continued
During the year the Group entered into property lease contracts at 240 Blackfriars Road and 1 The Crescent Surbiton. As a result of a
rent free period on the property at 240 Blackfriars Road, the commitment within one year is zero.
26 Share based payments
Share option plans
During the year the Company has set up a new HMRC-approved all employee Share Incentive Plan (SIP). Employees may purchase
new shares with the award of free matching shares under a two to one ratio up to a maximum of £1,800 total contribution per annum.
Matching Shares are subject to a three year holding period and may be forfeited in certain circumstances during this time. The executive
directors are eligible to participate in the 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 Enterprise Management Incentive regime and also unapproved options may be granted.
Options under the EMI 2006 scheme are currently exercisable based on the conditions that the option holder is still an employee of the
Group and that 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 2015, there were
5,008 options exercised (2014: 9,905) and 5,318 options lapsed (2014: nil).
Options under the EMI 2007 scheme are currently exercisable based on the conditions that the option holder is still an employee of the
Group and the Group has 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 2015, there were
16,823 options exercised (2014: 15,972) and 500 options lapsed (2014: 2,145).
Options under the EMI 2008 scheme are currently exercisable based on the conditions that the option holder is still an employee of the
Group and certain performance criteria have been met 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 2015, there were nil options exercised (2014:
nil) and nil options lapsed (2014: 14,760).
A long term incentive plan (“LTIP”) was established on 8 February 2013. Under the plan, nil cost options are typically awarded annually
and they can be exercised three years after the grant date if the option holder is still an employee of the Group and certain performance
criteria have been met. On 12 June 2014, the Group issued further options as part of the long term incentive plan (LTIP 2014). There
were 588,374 outstanding at 30 September 2015 (2014: 680,095). Options granted to executive directors are shown above.
On 4 February 2015 the Group granted a series of 22,830 shares under a newly formed Company share option plan (“CSOP 2015”)
followed by a further series of 29,560 options on 26 March 2015. The options can be exercised three years after the grant date if the
option holder is still an employee of the Group and certain performance criteria have been met. There were 47,870 CSOP 2015 options
outstanding at 30 September 2015 (2014: nil). Options granted to executive directors are shown above.
On 4 February 2015 the Group granted a series of 589,670 shares under its newly formed long term retention plan (“LTRP 2015”)
followed on 26 March 2015 by a further series of 90,440 options. The options can be exercised three years after the grant date if the
option holder is still an employee of the Group and certain performance criteria have been met . There were 558,830 LTRP 2015
options outstanding at 30 September 2015 (2014: nil).
Outstanding options by scheme;
Date of Grant                                                                                                                                                   Scheme                     Exercise                     Exercise          30 September           30 September
                                                                                                                                                                                                    price (pence)                       period                         2015                         2014
18 January 2006                                                                                                        EMI                102.5        2008-2016                       –              10,326
17 January 2007                                                                                                        EMI                150.5        2009-2017              18,388              35,711
3 July 2008                                                                                                                EMI                135.5        2011-2018                7,380                7,380
8 February 2013                                                                                              LTIP 2013                      nil        2016-2026            139,366            139,366
18 June 2013                                                                                                  LTIP 2013                      nil        2016-2026              82,539              82,539
12 June 2014                                                                                                  LTIP 2014                      nil        2017-2027            366,469            458,190
4 February 2015                                                                                           CSOP 2015                490.0        2018-2025              18,510                       –
4 February 2015                                                                                             LTRP 2015                      nil        2018-2025            468,990                       –
26 March 2015                                                                                             CSOP 2015                479.0        2018-2025              29,360                       –
26 March 2015                                                                                               LTRP 2015                      nil        2018-2025              89,840                       –
                                                                                                                                                                                                    1,220,842            733,512
Details of the Group’s Share Option Schemes are contained in the Remuneration Report on page 35.
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Annual Report & Accounts 2015
69
Strategic Report  
Corporate Governance
Financial Statements
A reconciliation of option movements over the year to 30 September 2015 is shown below:
                                                                                                                                                                                                               2015                         2015                         2014                         2014
                                                                                                                                                                                                                          Weighted average                                       Weighted average
                                                                                                                                                                                                          Number         exercise price                     Number            exercise price
Outstanding at 1 October                                                                                                             783,512                  9.5p            401,361                32.8p
Granted                                                                                                                                        734,500                34.8p            508,190                      nil
Forfeited                                                                                                                                     (223,339)               12.6p           (100,162)               23.2p
Exercised                                                                                                                                      (23,673)             140.3p             (25,877)             132.1p
Outstanding at 30 September                                                                                                   1,271,000                21.1p            783,512                  9.5p
Exercisable at 30 September                                                                                                         23,926              145.9p              53,417              139.1p
The total charge for the year relating to employee share based payment plans was £1,309,000 (2014: £510,000) including a provision
for employers national insurance contributions of £231,000 (2014: £91,000), all of which related to equity-settled share based payment
transactions.
27 Related party transactions
Key management is defined as members of the Group’s Executive Board, plus selected other senior managers.
Sales made between Group entities are eliminated in the Group financial statements. The amount of revenue and expense recognised in
the Company and subsidiaries financial statements are as follows.
Revenue Expenses
                                                                                                                                                                                               30 September           30 September          30 September           30 September
                                                                                                                                                                                                               2015                         2014                         2015                         2014
                                                                                                                                                                                                              £'000                        £'000                        £'000                        £'000
Alternative Networks plc                                                                                                                                                   –                   225                   224
Aurora Kendrick James Limited                                                                                                           314                   562                                                 –
                                                                                                                                                           314                   562                   225                   224
No dividends were declared and paid to the Company by its subsidiaries during the current or prior year.
Amounts payable to and receivable from Group undertakings are unsecured, repayable on demand and subject to a notional interest
charge calculated at 0.8% per annum (2014: 0.8%). These amounts are disclosed in note 21.
During the prior year Edward Spurrier settled a loan due to the Employee Benefit Trust for £277,000, which in turn repaid the Company.
This related to the award of 638,400 shares to Edward Spurrier, which were being held by the trust.
28 Reconciliation to adjusted performance
                                                                                                                                                                                                                                                                   30 September           30 September
(a) Reconciliation of adjusted EBITDA                                                                                                                                                                                                      2015                         2014
                                                                                                                                                                                                                                                                                  £'000                        £'000
Profit before tax                                                                                                                                                                              13,806              10,363
Adjustments
Amortisation of purchased customer contracts and other intangibles (excluding computer software)                                                  3,698                3,496
Share based payments and associated social security expense                                                                                                          1,309                   510
Income from property exit                                                                                                                                                                  (3,299)                      –
Restructuring, acquisition and associated costs (c)                                                                                                                             2,386                2,047
Adjusted profit before tax                                                                                                                                                             17,900              16,416
Finance income                                                                                                                                                                                         (3)                   (25)
Finance costs                                                                                                                                                                                      1,297                1,202
Adjusted operating profit                                                                                                                                                              19,194              17,593
Add: Depreciation of property, plant and equipment                                                                                                                            1,681                1,208
Add: Amortisation of computer software                                                                                                                                             1,176                   790
Adjusted EBITDA                                                                                                                                                                            22,051              19,591
                                                                                                                                                                                                                                                                   30 September           30 September
(b) Reconciliation of adjusted profits for earnings per share                                                                                                                                                           2015                         2014
                                                                                                                                                                                                                                                                                  £'000                        £'000
Adjusted profit before tax (see above)                                                                                                                                         17,900              16,416
Less: Share based payments                                                                                                                                                             (1,309)                 (510)
Less: Taxation per consolidated statement of comprehensive income                                                                                                (2,339)              (2,285)
Less: Taxation on amortisation of purchased customer contracts and other intangibles (excluding computer
software) and exceptionals                                                                                                                                                                    (571)                 (769)
Adjusted profit after tax                                                                                                                                                                     13,681              12,852
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.
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Annual Report & Accounts 2015
70
                                                                                                                                                                                                                                                                   30 September           30 September 
(c) Restructuring, acquisition and associated costs consist of the following                                                                                                                          2015                         2014
                                                                                                                                                                                                                                                                                  £'000                        £'000
Direct costs of acquisitions                                                                                                                                                                         –                1,263
Restructuring costs                                                                                                                                                                             1,823                       –
Redundancy costs                                                                                                                                                                                 563                   784
                                                                                                                                                                                                           2,386                2,047
Financial Statements
Notes to the Financial Statements continued
166685 Alternative Networks Pt3_166685 Alternative Networks Pt3  21/12/2015  13:15  Page 70 Alternative at a Glance
Strategic Report
Alternative Networks
Annual Report & Accounts 2015
In 2015 Alternative 
celebrated 21 years.
Contents
Strategic Report
Alternative at a Glance 3
Chairman’s Statement 8
Chief Executive Ofﬁcer’s Review 10
Chief Financial Ofﬁcer’s Review 16
Corporate Governance
Directors and Advisers 25
Board of Directors 26
Directors’ Report 28
Corporate Governance Report 31
Remuneration Report 35
Statement of Directors’ Responsibilities 40
Financial Statements
Independent Auditors’ Report 42
Consolidated Statement of Comprehensive Income  44
Consolidated and Company Statement of Financial Position 45
Consolidated Statement of Changes in Equity 46
Company Statement of Changes in Equity  47
Consolidated Statement of Cash Flows 48
Company Statement of Cash Flows 49
Notes to the Financial Statements 50 Alternative Networks PLC
Annual Report & Accounts 2015
ALTERNATIVE NETWORKS PLC ANNUAL REPORT & ACCOUNTS 2015