Operations in 2008 were in excess of i?? 10m compare to 2007 which reflects the sound financial governance of the company (McGeorge, 2008). In the last few years the company obtained organic and acquisitive growth with increased revenues and profits across the board (McGeorge, 2008). In the last 18 months, the company invested a significant amount behind systems and the management restructure. This investment helps the company to maintain a healthy financial position ((McGeorge, 2008). The company has already selected a number of KPIs to enable a rapid response to major threats (Murray, 2008).Besides, the companies own buying and selling policy is strong enough to mitigate the future risks (Spurrier, 2008). Maintenance of direct sales force, strong credit vetting history & credit insurance help the company to reduce credit risk (Murray, 2008). According to Murray (2008), accounting policies and treatment of the company are most considered in the light of the change of IFRS (Murray, 2008).
The gross profit of the company stays around 35% of its total sales in every year. Weakness From January 2009, the financial conditions of the company started to take downturn slowly.The share price of the company falls around nine percent after telecoms reseller’s issues a cautions trading update, prompting FinnCap to downgrade its rating (Reuters, 2009). In 24th April 2009, it has been reported that the revenue of the company is currently running within 5% to 8% which is below to the amount forecasted by the company (RTT News, 2009). The following factors are identified behind the falls revenues: 1) Increasing change in sales mix 2) Lower volume of call and data usage revenues that have higher margins than rental incomes in fixed and mobile network service (Reuters, 2009).In 2008, the Chief Executive officer of Alternative Network Plc predicted that consistent strategy of the company will enable them to continue to retain key staff and reward investors.
But, in the year 2009, they cuts job at their UK businesses (Srinivasa, 2009). Statistics shows that Earnings Before Interest and Tax of this company is a very low percentage of its revenue. This is described in the part of profit and loss analysis. Opportunities The company anticipated some opportunities may arise from the downturn, such as profit enhancing acquisitions and a weakening competitor position (Murray, 2008).
There are good opportunities to earn significant profit after the acquisitions of Echo Communications Ltd. Competitors weakness is the second most important opportunities for the company. Alternative Network Plc is in a good position in terms of ROA (15. 47%) and ROE (33. 48%) compare to other similar companies such as Xploite plc (ROA -0. 56% ; ROE -2.
3%), FREEDOM4 Communications plc (ROA -10. 90% ; ROE -13. 95%), Cable and Wireless plc (ROA 5. 09% ; ROE 9. 74%), BNS Telecom Group Plc (ROA -6. 72%), Redstone plc (ROA 2.
08% ; ROE 4. 39%), BT Group plc (ROA 6. 50%), Jazztel PLC (ROA -15.68% ; ROE -71.
72%), Keycom Plc(ROA -15. 71% ; ROE -149. 79%) (Google Finance, 2009). The only exception is the Return on Equity of BT Group Plc which is 36. 01%.
Threats The pricing of the product and services of Alternative Network Plc. can be affected by regulatory bodies in United Kingdom and European Union (Spurrier, 2008). Imminent Regulations on 0870 pricing and mobile data pricing can be another threat to the company (Spurrier, 2008). Among the competitors, overlapping services of BT can be potential threat to Alternative Networks (Investors Chronicle, 2007).
RISK FACTORS Operational Risk Rapid and dynamic technology change is very common in the field of telecommunication business. There is a risk that the Alternative Network Plc may fail to provide new technology to its customer on time (Murray, 2008). Inefficiency in recruiting and retaining stuff may lead to revenue reduction as the company use direct sales method (Murray, 2008). The Chief Financial Officer of this company thinks that operational disturbance may arise while integrating acquired businesses with existing operations. Financial RiskAs the company is operating its business within United Kingdom, the company has no exposure to foreign currencies.
That’s why the company is not directly affected by foreign exchange risk (ALN, 2008). Due to the nature of the underlying business, income and operating cash flows of the company are substantially independent of interest rate risk (ALN, 2008). The company has implemented several policies and safeguard against credit risk, liquidity risk and capital risk management. This reflects that the company faced those three risks compare to the other risk.
In order to decrease credit rate risk, the company deal with creditworthy counterparties. SHARE PRICE PERFORMANCE Source: Financial Time, 2009. Alternative Network was floated in May 2008 at 178p (the pricing range having been 160p to 180p in most of the time). And until 15th march 2009, it never falls below 130p. But the situation started to get narrowed from 16th march 2009 when the share price becomes 117p, whereas the previous traded share price was 135p on 9th march. One reason behind the falling of share prices can be disappointment in market as the company’s revenue is falling down recently and its’ expected to fall down.
As of last close on May 01 2009, Alternative Networks closed at 107. 00, 3. 88% above its 52-week low of 103. 00, set on April 27, 2009 (FT, 2009). Volume of trading on 01 May 2009 was 29412. Alternative Network VS FTSE 250, FTSE 100 & FTSE all share Source: London Stock Exchange Alternative Networks outperformed the FTSE 100, FTSE 250, and FTSE All Share in last few months. Overall the relative performance against the index has been mixed during the last year.
Based on this performance, it has been predicted that the share price of this company would reach to 125p in the next year.