Bag an 8.6 per cent yield with Alternative Networks

Alternative offers mobile and landline telephony, data storage and a range of software, connectivity and cloud-based services. Its shares tumbled in February after management warned that fierce network competition and regulatory cuts to roaming rates would likely lead to flat full-year turnover and a low-double-digit decline in gross profits . But the group actually made strong strides in its half-year trading period to the end of March: recurring revenues rose 5 per cent in the key advanced solutions segment as sales of hosted desktops leapt 16 per cent, and it struck a deal with a healthcare trust to replace the telephones of 3,500 users with an internet solution and provide five years of support.

Although the division's non-recurring revenues fell 8 per cent, that was primarily due to one contract slipping into the second half. Combined with new orders from both new and existing customers, that meant the order backlog swelled to £7.7m; most of that will be recognised in the current half. The group also grew its mobile subscriber base by 9 per cent despite a tough backdrop.

Alternative has successfully targeted larger clients - who spend over £10,000 a month - and sold more products to each customer. Around 57 per cent of first-half revenue stemmed from 181 larger clients, and 32 per cent of its customers took more than three products, up from 30 per cent in 2015. Moreover, strong cash generation drove free cash flow up by more than a quarter to £5m, prompting management to lift the dividend and commit to a full-year increase of at least a tenth. And a raft of new products and upgrades should underpin second-half progress: the group recently updated its flagship Synapse portal, improved its customer service platform and rolled out new mobile workspace products spanning device management, mobile security and data optimisation.

Pro-forma sales rose by a tenth in the advanced solutions segment last financial year, as it signed dozens of new clients and inked large networking contracts with London Internet Exchange and Homeserve.

The mobile business suffered due to regulatory and competitive pressures in the group's first half, but management expects changes to mobile tariffs, new carrier arrangements and cost-cutting to mitigate second-half weakness. Landline sales also fell 7 per cent due to flagging demand, but that business now represents less than a fifth of total turnover.