5th Feb 2010 07:00
Date: 5 February 2010
On behalf of: Avanti Communications Group plc ("Avanti" or "the Company")
Embargoed until: 0700hrs
Avanti Communications Group plc
Interim Report for the 6 months ended 31 December 2009
Avanti Communications Group plc, the broadband satellite operator, announces its Interim Results for the six months ended 31 December 2009.
Key points
·; HYLAS 1 in final testing prior to shipment to launch site
·; HYLAS 2 debt and equity funding secured for launch in H2 2012
·; Strong demand and increase in prices for Ka band capacity
·; Major progress with pre-sales on HYLAS 1
·; HYLAS 2 orders are already under negotiation
Financial highlights
·; Turnover of £3.3m (2008: £3.2m)
·; Operating loss of £0.45m (2008 loss: £1.0m)
·; Cash balances of £24.7m before receipt of £89m placing proceeds
Commenting on the results, John Brackenbury CBE, Chairman said:
"Our order book and sales pipeline for HYLAS 1 is strong with over 14% already committed for the first year of HYLAS 1 operations. We have several new large contracts with major telecommunications customers under negotiation which should enable us to exceed our own internal targets for launch pre-sales. The management team have also been very encouraged by the strength of inbound enquiries resulting from the announcement of HYLAS 2, particularly in the Middle East and have a number of significant contracts under negotiation for that region which we hope to announce during the current financial year. Whilst the launch of HYLAS 1 is the major near term event, the financing of HYLAS 2 greatly strengthens Avanti's market leadership and minimises business risks. With an intercontinental satellite network now fully financed, I have great confidence in our ability to grow shareholder value substantially during 2010."
Enquiries:
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Avanti Communications Group plc |
http://www.avantiplc.com/ |
|
David Williams |
020 7749 1600 |
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Nigel Fox |
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Redleaf Communications Ltd |
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Emma Kane/ Wendy Watherston/ Paul Dulieu |
020 7566 6700 |
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Cenkos Securities |
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Max Hartley / Julian Morse |
020 7397 8900 |
Notes to Editors:
About Avanti Communications
§ Avanti sells satellite broadband services to telecoms companies which use them to supply homes and businesses.
§ Avanti's first satellite, called HYLAS1 is under construction for launch in Q2 2010 and will be the first superfast broadband satellite launched in Europe.
§ Avanti's second satellite, HYLAS 2 will launch in 2012 to provide similar services in EMEA
§ The market for 2Mb satellite broadband products in the Europe, Middle East and Africa markets Avanti serves is estimated at more than 100 million homes and businesses.
§ Avanti currently provides satellite broadband services to customers in Europe using leased satellite capacity which it will transfer to HYLAS 1 on launch.
INTERIM RESULTS
Chairman's Statement
I am pleased to announce results in line with market expectations and to report on a period during which our core business for HYLAS 1 improved significantly and our management team completed an exceptional transaction to raise £283 m to fully fund our second satellite, HYLAS 2.
HYLAS 1 is in its final phase of testing in Bangalore which will be completed in the second quarter prior to its shipment to the launch site in French Guyana. We will update the market further on the precise launch date following the completion of the final round of thermal vacuum testing. As we approach launch it is evident from service providers that demand is increasing and the prices we are able to secure for pre-sales are rising. Because demand particularly in rural broadband is so high, we are confident that capacity will sell quickly after launch and for this reason we have seen some of our earlier customers return to negotiate additional capacity over extended periods in order to lock in prices and availability. We expect this trend to accelerate.
In October we announced a contract and strategic partnership with Hughes Network Services, the World's leading supplier of satellite network services and equipment. Hughes purchased an initial £7.5m of capacity on HYLAS 1 in order to continue to grow its own established enterprise network and broadband business. We have purchased equipment from Hughes for the network control centre and have agreed a framework supply agreement for our customers to purchase dishes and modems at attractive rates. We are also working in partnership with Hughes to sell HYLAS 1 capacity through its extensive distribution base. During the period we completed a trial with a major mobile phone company using satellite capacity for cellular backhaul and are moving forward in negotiations with several such companies for HYLAS capacity. We now expect this to be a major market for us since many rural base stations are capacity constrained for network connectivity and HYLAS 1 and 2 solve this problem. We signed a number of contract amendments with existing customers to increase the size and term of their purchase and also won new contracts taking our total customer list to 54.
Shortly before the end of the reporting period we announced that the Company had secured £194m debt funding for its second satellite, HYLAS 2, involving the US EXIM Bank and COFACE. Further to this, on 6 January 2010, the shareholders approved a placing of 22.3 million shares at 400p to fund the £89 m equity portion of the HYLAS 2 project. Thus, this financing (which is currently proceeding through completion of conditions precedent and other documentation) renders HYLAS 2 fully financed. A good start has been made on the manufacture of the satellite which is expected to launch in the first half of 2012.
We estimate that the addressable market in the Europe, Middle East and African ("EMEA") countries selected to be served by HYLAS 1 and 2 is at least 100 million homes and business. Furthermore, we believe that we will obtain a number of key strategic advantages from the deployment of HYLAS 2: i) we create the security and resilience of back up capacity; ii) by using our spectrum we can deploy services across a wide area to establish significant asset value and create barriers to entry; iii) we will consolidate long term relationships with our customers who value the ability to expand into our new capacity; and iv) an increase in overall capacity will create economies of scale and make better use of overheads.
Results
Revenue for the six months to December 2009 was £3.3 m slightly ahead of the same period last year.
We continue to contain our operating costs and direct overheads and have therefore seen a further fall in our loss from operations to £0.45 m (2008 loss: £1.0m), which also includes other operating income of £1.6 m of liquidated damages from a supplier in respect of schedule delays. This leaves a loss before taxation of £0.44m.
During the period there was extensive budgeted expenditure for HYLAS 1 in property, plant and machinery which increased to £92.4 m (30 June 2009: £51.5 m) with major milestone payments being made to Astrium and Arianespace. In addition there was some initial expenditure (£2.8 m) on HYLAS 2.
However, cash balances remain almost unchanged from the year end at £24.7 m following the receipt of the June placing proceeds of £31.5 m which, in addition to a further milestone receipt from the ESA contract, offset the capital expenditure.
Share incentives
The shareholders at the Extraordinary General Meeting in January 2010 authorised the Company to issue an additional 1.5 million ordinary shares into the Employee Benefit Trust to be set aside for option grants for new staff. These options will have both time lapse and a £10 share price vesting criteria. The first share based payment charge for these new options will arise in the current financial year.
Outlook
As we approach the launch of HYLAS 1 our sales teams are now fully focussed on signing new contracts for HYLAS 1. We expect revenue in the second half to be at similar levels to this period and, with the exception of the share based payment charge, the results for the year to June 2010 will be in line with market expectations.
It is now clear that the demand for Ka band services worldwide will be large. Following the early lead of Avanti customers including the Scottish Government, other governments, such as Australia and France have announced the procurement of such services to address their own digital divide problems. This government action can only serve to increase the demand pressure for services that we are seeing from the commercial market. Given the high barriers to entry and long lead times of this industry, competition in our sector remains low and so the lead generated by Avanti's bold move into Ka band is expected to enable us to quickly fill HYLAS 1 and 2.
Our order book and sales pipeline for HYLAS 1 is strong with over 14% already committed for the first year of HYLAS 1's operations. We have several new large contracts with major telecommunications customers under negotiation which should enable us to exceed our own internal targets for launch pre-sales. The management team have also been thrilled by the strength of inbound enquiries resulting from the announcement of HYLAS 2, particularly in the Middle East, and have a number of significant contracts under negotiation for that region which we hope to announce during the current financial year. Whilst the launch of HYLAS 1 is the major near term event, the financing of HYLAS 2 greatly strengthens Avanti's market leadership and minimises business risks. With an intercontinental satellite network now fully financed, I have great confidence in our ability to grow shareholder value substantially during 2010.
FEJG Brackenbury, CBE
Chairman
5 February 2010
AVANTI COMMUNICATIONS GROUP PLC
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CONSOLIDATED UNAUDITED INCOME STATEMENT FOR THE SIX MONTHS ENDED 31 December 2009 |
||||
|
|
|
|
|
|
|
|
|
Unaudited |
Unaudited |
Audited |
|
|
|
Half year |
Half year |
Year ended |
|
|
|
31 Dec 09 |
31 Dec 08 |
30 Jun 09 |
|
|
Note |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
Revenue |
|
3,263 |
3,223 |
8,041 |
|
Cost of sales |
|
(1,768) |
(1,648) |
(5,068) |
|
Gross profit |
|
1,495 |
1,575 |
2,973 |
|
Operating expenses |
|
(3,705) |
(3,517) |
(7,086) |
|
Other operating income |
7 |
1,760 |
956 |
2,727 |
|
(Loss) from operations |
|
(450) |
(986) |
(1,386) |
|
Financing exchange and derivatives |
8 |
56 |
3,649 |
2,932 |
|
Finance income |
|
32 |
199 |
417 |
|
Finance expense |
|
(78) |
(105) |
(162) |
|
(Loss)/profit before taxation |
|
(440) |
2,757 |
1,801 |
|
Income tax |
5 |
170 |
(786) |
(752) |
|
(Loss)/profit for the period attributable to equity holders of the company |
|
(270) |
1,971 |
1,049 |
|
|
|
|
|
|
|
Basic (loss)/earnings per share (pence) Diluted (loss)/earnings per share (pence) |
|
(0.65p) (0.60p) |
7.10p 6.37p |
3.78p 3.39p
|
|
|
|
|
|
|
|
|
|
|
|
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CONSOLIDATED UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 December 2009
|
|
|
Unaudited |
Unaudited |
Audited |
|
|
|
Half year |
Half year |
Year ended |
|
|
|
31 Dec 09 |
31 Dec 08 |
30 Jun 09 |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
(Loss)/profit for the period |
|
(270) |
1,971 |
1,049 |
|
Comprehensive income/(loss) for the period |
|
- |
- |
-
|
|
Total comprehensive (loss)/income attributable to: - equity holders of the company
|
|
(270) |
1,971 |
1,049 |
The accompanying notes form an integral part of this condensed consolidated interim financial information.
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CONSOLIDATED UNAUDITED BALANCE SHEET AS AT 31 December 2009
|
||||
|
|
|
Unaudited |
Unaudited |
Audited |
|
|
|
31 Dec 09 |
31 Dec 08 |
30 Jun 09 |
|
Note |
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
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Non-current assets |
|
|
|
|
|
Property, plant and equipment 9 |
|
92,447 |
49,625 |
51,534 |
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Intangible assets |
|
16 |
27 |
21 |
|
Deferred tax assets |
|
280 |
144 |
5 |
|
Total non-current assets |
|
92,743 |
49,796 |
51,560 |
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Current assets |
|
|
|
|
|
Inventories |
|
1,525 |
259 |
352 |
|
Unpaid share capital |
|
- |
- |
31,500 |
|
Trade and other receivables |
|
13,958 |
12,923 |
14,584 |
|
Cash and cash equivalents |
|
24,650 |
26,558 |
24,615 |
|
Total current assets |
|
40,133 |
39,740 |
71,051 |
|
Total assets |
|
132,876 |
89,536 |
122,611 |
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
15,250 |
12,069 |
12,164 |
|
Provisions for other liabilities |
|
30 |
39 |
30 |
|
Interest bearing liabilities |
|
275 |
332 |
402 |
|
Total current liabilities |
|
15,555 |
12,440 |
12,596 |
|
Non-current liabilities |
|
|
|
|
|
Trade and other payables |
|
7,228 |
2,899 |
2,899 |
|
Provisions for other liabilities |
|
48 |
100 |
63 |
|
Interest bearing liabilities |
|
45,521 |
39,261 |
42,574 |
|
Total non-current liabilities |
|
52,797 |
42,260 |
45,536 |
|
Total liabilities |
|
68,352 |
54,700 |
58,132 |
|
Equity |
|
|
|
|
|
Share capital |
|
417 |
277 |
417 |
|
Share premium |
|
34,041 |
3,858 |
34,041 |
|
Retained earnings and other reserves |
|
30,066 |
30,701 |
30,021 |
|
Total shareholders' equity |
|
64,524 |
34,836 |
64,479 |
|
Total liabilities and equity |
|
132,876 |
89,536 |
122,611 |
The accompanying notes form an integral part of this condensed consolidated interim financial information.
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CONSOLIDATED UNAUDITED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 December 2009
|
||||
|
|
|
Unaudited |
Unaudited |
Audited |
|
|
|
Half year |
Half year |
Year ended |
|
|
|
31 Dec 09 |
31 Dec 08 |
30 Jun 09 |
|
|
|
£'000 |
£'000 |
£'000 |
|
Cash flow from operating activities |
|
|
|
|
|
Loss from operations before taxation |
|
(450) |
(986) |
(1,386) |
|
Net foreign exchange loss/(gain) |
|
222 |
(956) |
(1,183) |
|
Depreciation of property, plant and equipment |
|
401 |
383 |
768 |
|
Amortisation of intangible assets |
|
5 |
45 |
51 |
|
Provision for impairment of trade receivables |
|
(51) |
12 |
172 |
|
Onerous lease provision |
|
(15) |
(75) |
(123) |
|
Share based payments expense |
|
211 |
237 |
652 |
|
|
|
323 |
(1,340) |
(1,049) |
|
Movement in working capital |
|
|
|
|
|
Decrease/(increase) in inventories |
|
(1,173) |
(10) |
(102) |
|
Decrease/(increase) in trade and other receivables |
|
184 |
(4,267) |
(5,626) |
|
Increase/(decrease) in trade and other payables |
|
7,467 |
(5) |
(4,569) |
|
Cash generated from/(used by) operations |
|
6,801 |
(5,622) |
(11,346) |
|
Interest received |
|
32 |
647 |
951 |
|
Interest paid |
|
(78) |
(83) |
(162) |
|
Net cash generated from/(used by) operating activities |
|
6,755 |
(5,058) |
(10,557) |
|
Cash flows from investing activities |
|
|
|
|
|
Payments for property, plant and equipment |
|
(36,332) |
(5,818) |
(2,850) |
|
Net cash used in investing activities |
|
(36,332) |
(5,818) |
(2,850) |
|
Cash flows from financing activities |
|
|
|
|
|
Proceeds from borrowings |
|
- |
- |
- |
|
Repayment of borrowings |
|
- |
(14) |
(21) |
|
Debt issue cost paid |
|
- |
- |
- |
|
Proceeds from share issue |
|
31,500 |
- |
- |
|
Share issue costs |
|
(1,177) |
- |
- |
|
Proceeds from finance leases |
|
- |
- |
802 |
|
Finance lease paid |
|
(238) |
(283) |
(592) |
|
Net cash received from/(used by) financing activities |
|
30,085 |
(297) |
189 |
|
Effects of exchange rate on the balances of cash and cash equivalents |
|
(473) |
2,490 |
2,592 |
|
Net increase/(decrease) in cash and cash equivalents |
|
35 |
(8,683) |
(10,626) |
|
Cash and cash equivalents at the beginning of the period |
|
24,615 |
35,241 |
35,241 |
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period |
|
24,650 |
26,558 |
24,615 |
The accompanying notes form an integral part of this condensed consolidated interim financial information.
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CONSOLIDATED UNAUDITED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 December 2009 |
|
|
|
|
Share Capital |
Share Premium |
Retained Earnings |
Total Reserves |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 July 2008 |
|
277 |
3,858 |
28,600 |
32,735 |
|
|
|
|
|
|
|
|
Profit for the period |
|
- |
- |
1,971 |
1,971 |
|
Share based payments |
|
- |
- |
237 |
237 |
|
Tax expense taken directly to reserves |
|
- |
- |
(107) |
(107) |
|
|
|
|
|
|
|
|
At 31 December 2008 (Unaudited) |
|
277 |
3,858 |
30,701 |
34,836 |
|
2009
At 1 January 2009 |
|
277 |
3,858 |
30,701 |
34,836 |
|
|
|
|
|
|
|
|
Loss for the period |
|
- |
- |
(922) |
(922) |
|
Premium on shares issued |
|
140 |
30,183 |
- |
30,323 |
|
Share based payments |
|
- |
- |
415 |
415 |
|
Tax expense taken directly to reserves |
|
- |
- |
(173) |
(173) |
|
|
|
|
|
|
|
|
At 30 June 2009 (Audited) |
|
417 |
34,041 |
30,021 |
64,479 |
|
At 1 July 2009 |
|
417 |
34,041 |
30,021 |
64,479 |
|
|
|
|
|
|
|
|
Loss for the period |
|
- |
- |
(270) |
(270) |
|
Share based payments |
|
- |
- |
211 |
211 |
|
Tax credit taken directly to reserves |
|
- |
- |
104 |
104 |
|
|
|
|
|
|
|
|
At 31 December 2009 (Unaudited) |
|
417 |
34,041 |
30,066 |
64,524 |
The accompanying notes form an integral part of this condensed consolidated interim financial information. 1. General Information
Avanti Communications Group plc ('the Company') is a public company incorporated and domiciled in the United Kingdom. The address of its registered office is 74 Rivington Street, London EC2A 3AY. The Company is listed on AIM.
These unaudited condensed consolidated interim financial statements were approved for issue on 5 February 2010.
2. Basis of Preparation
These unaudited condensed consolidated financial statements ("the financial statements") for the six months ended 31 December 2009 have been prepared in accordance with IAS 34, "Interim Financial Reporting". The financial statements should be read in conjunction with the annual financial statements for the year ended 30 June 2009, which have been prepared in accordance with International Financial Reporting Standards ("IFRS's").
The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2009, as described in those annual financial statements.
The financial statements have not been audited or reviewed and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The audited statutory accounts for the year ended 30 June 2009 were approved by the Board of Directors on 24 September 2009 and have been delivered to the Registrar of Companies.
3. Accounting Policies
Except as described below, the same accounting policies, presentation and methods of computation are followed in these condensed consolidated interim financial statements as were applied in the preparation of the Group's annual financial statements for the year ended 30 June 2009.
The condensed consolidated financial information presented does not comply with the full disclosure requirements of all applicable IFRS's.
The Group has adopted IFRS 8, 'Operating segments'. Please refer to note 4 for an explanation of the impact of adopting IFRS 8 on these unaudited condensed consolidated financial statements,
In addition, the following standards and interpretations, issued by the IASB and the International Financial Reporting Interpretations Committee ("IFRIC"), are effective for the first time in the current financial year and have been adopted by the Group with no significant impact on its consolidated results or financial position:
·; IFRS 2 (as amended) - Share-based Payment: Vesting Conditions and Cancellations (effective for financial years beginning on or after 1 January 2009).
·; IAS 1 (as amended) - Presentation of Financial Statements - Capital Disclosures (effective for financial years beginning on or after 1 January 2009).
·; IAS 23 (revised) - Borrowing costs (effective for financial years beginning on or after 1 January 2009).
4. Segmental reporting
The Group has adopted IFRS 8, 'Operating Segments'. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker (the Avanti Executive Board) to allocate resources and assess performance.
All resources are allocated on the basis of satellite services. As a result, Avanti Communications Group plc are disclosing one segment being satellite services.
5. Taxation
Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the year to 30 June 2010 is 28.0% (the estimated tax rate for the six months ended 31 December 2009 was 28.0%).
6. Earnings per share
The calculations of the earnings per ordinary share are based on the profit on the ordinary earnings after taxation and the weighted number of shares in issue in the reporting period.
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half year |
Half year |
Year ended |
|
|
31 Dec 09 |
31 Dec 08 |
30 Jun 09 |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
(Loss)/profit attributable to equity holders |
(270) |
1,971 |
1,049 |
|
Weighted average number of ordinary shares for the purpose of basic earnings per share
|
41,809,357 |
27,751,215 |
27,787,491 |
|
Dilutive effect of share options
|
3,112,708 |
3,170,850 |
3,172,930 |
|
Weighted average number of ordinary shares for the purpose of diluted earnings per share |
44,922,065 |
30,922,065 |
30,960,421 |
|
|
|
|
|
|
Basic (loss)/earnings per share |
(0.65p) |
7.10p |
3.78p |
|
Diluted (loss)/earnings per share |
(0.60p) |
6.37p |
3.39p |
|
|
|
|
|
7. Other operating income
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half year |
Half year |
Year ended |
|
|
31 Dec 09 |
31 Dec 08 |
30 Jun 09 |
|
|
£'000 |
£'000 |
£'000 |
|
Exchange gain on trade receivables and payables |
159 |
956 |
1,355 |
|
Liquidated damages received |
1,601 |
- |
1,372 |
|
Total other operating income |
1,760 |
956 |
2,727 |
Liquidated damages were received from Astrium due to the late delivery of HYLAS. These damages were accrued daily until the contracted date of November 2009. These damages compensate for the additional costs incurred as a result of the late delivery of the satellite.
8. Financing exchange and derivatives
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half year |
Half year |
Year ended |
|
|
31 Dec 09 |
31 Dec 08 |
30 Jun 09 |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Fair value gain on derivatives |
528 |
1,159 |
340 |
|
Financing exchange (loss)/gain |
(472) |
2,490 |
2,592 |
|
|
|
|
|
|
Financing exchange and derivatives |
56 |
3,649 |
2,932 |
9. Property, plant and equipment
During the period, fixed asset additions totalled £40.9 million. The additions relate to capitalised costs associated with the launch and construction of the satellite.
10. Capital commitments
As at 31 December 2009, Avanti Space Limited had contracted for satellite expenditure totalling £21.9 million. Part of the total price amounting to €10.7million, is due to be paid directly from the European Space Agency (ESA) to the satellite contractor, Astrium EADS Limited and €12.5 million to Arianespace thereby reducing the commitment due directly from the Group.
Following the confirmation of the equity placing at the EGM on 6 January 2010, the Group entered into contracts in relation to their new satellite HYLAS 2 for £161.3 million.
11. Post balance sheet event
The Group received £86.8 million, net of fees, on 7January 2010 in payment for 22.25 million shares issued on 6 January 2010.
Related Shares:
AVN.L