TIDMAVN
RNS Number : 0172O
Avanti Communications Group Plc
04 February 2016
4 February 2016
AVANTI COMMUNICATIONS GROUP PLC
2016 First Half Results
Avanti Communications Group plc ("Avanti" or "the Group"), a
leading provider of satellite data communications services in
Europe, the Middle East and Africa, issues the following results
for the six months ended 31 December 2015.
Highlights
-- Second quarter revenue was $17.3m, representing 27.7% growth
versus the first quarter on a constant currency basis, taking first
half revenue to $31.0m with improved year-on-year quality of
revenue
-- $40.0m of contract wins mainly with government and large
telecoms customers in the second quarter which are expected to make
a strong revenue contribution in the second half
-- Strong KPI performance in the period with Top-20 Customer
Bandwidth Revenue Growth increasing 44.0% and Average Fleet
Utilisation moved into the 25% to 30% range in the second
quarter
-- Guidance of 50% continuing business constant currency revenue
growth for the full year to 30 June 2016 supported by the second
quarter order intake and a strong order pipeline
-- Fully funded business plan through to the launches of HYLAS 3
and 4 with period end cash of $162.6m and further undrawn consented
credit capacity of $71.0m
David Williams, Avanti's CEO said:
'Our product delivers the highest quality and flexibility in the
market. As a result we have won some of the best contracts with the
most prestigious customers. These included a contract with Telkom
SA to provide national high speed broadband coverage across South
Africa and in the UK a contract with BT to provide universal high
speed national broadband under the Government's Broadband Delivery
scheme. Our Defence business grew strongly with major contracts
worth more than $30m. Our growth prospects are supported by both
our recent order wins and a very strong pipeline of near term
opportunities that are in advanced stages of negotiation. Avanti is
strongly capitalised with more than adequate cash headroom. In a
pioneering market, the combination of a good product, good
customers and a fully funded model assures us that Avanti has a
successful trajectory ahead.'
For further information please contact:
Avanti: Matthew Springett, +44 (0)207 749 6703
Cenkos Securities: Max Hartley (Nomad) / Julian Morse, +44
(0)207 397 8900
Montfort: Nick Miles / James Olley, +44 (0)203 770 7909
Redleaf: Hannah Nicolas, +44 (0)207 382 4734
Notes to editors
Avanti connects people wherever they are - in their homes,
businesses, in government and on mobiles. Through the HYLAS
satellite fleet and more than 180 partners in 118 countries, the
network provides ubiquitous internet service to a quarter of the
world's population. Avanti delivers the level of quality and
flexibility that the most demanding telecoms customers in the world
seek.
Avanti is the first mover in high throughput satellite data
communications in EMEA. It has rights to orbital slots and Ka band
spectrum in perpetuity that covers an end market of over 1.7bn
people.
The Group has invested $1.2bn in a network that incorporates
satellites, gateway earth stations, datacentres and a fibre
ring.
Avanti has a unique Cloud based customer interface that is
protected by patented technology.
The Group has three satellites in orbit and a further two fully
funded satellites under construction.
Avanti Communications is listed in London on AIM (AVN:LSE).
www.avantiplc.com
Operating review
During the first half, Top-20 Customer Bandwidth Revenue Growth
increased 44.0%, driven by increasing demand from core customers.
This drove an increase in Average Fleet Utilisation into the 25% to
30% range in the second quarter, from the 20% to 25% range in the
first quarter.
Avanti made significant progress in developing its distribution
platform, experiencing strong order intake. Contract wins were
particularly good in the second quarter, with new contracts of
$40.0m all of which began to invoice by January. The Government and
Broadband sectors were strongest, and thus the new business is with
large high quality customers.
The Group also signed significant framework contracts which will
facilitate on-going growth. Whilst Q2 revenues were slightly lower
than we planned, all of the contracts that we expected have indeed
signed, albeit towards the end of the period or into January, and
so we expect to catch up in the financial year to achieve our
target. We also experienced a high flow of tender requests, some of
which are large contracts that are close to completion and are
therefore expected to impact the current year.
The construction of Avanti's key 28GHz HYLAS 4 satellite has
progressed in-line with expectations, with the launch remaining
on-track for the first quarter ending March 2017. The much smaller,
tactical 4 GHz HYLAS 3 is a hosted payload flying on board a
European Space Agency ('ESA') satellite, for which the ESA is
presently declaring a mid-2017 launch.
Crucially, HYLAS 4 will complete Avanti's coverage of EMEA. This
will materially enhance the Group's revenue generation potential,
largely within the existing fixed cost base. We expect to announce
pre-sales customers for HYLAS 4 during the current financial
year.
The 3GHz 'HYLAS 2-B' satellite payload that joined the fleet in
2015 is expected to come on-line and begin to make a financial
contribution during the second half of the current financial
year.
Avanti is now providing national broadband deployments to the
incumbent telecoms companies and governments in its core country
markets of UK, South Africa, Kenya and Tanzania. Avanti leads the
market in innovation in 3G and Wi-Fi backhaul, and has made
significant breakthroughs this year in the defence market, with
multiple Ministry of Defence contract wins. With a strong base of
over 180 customers, pre-launch campaigns for HYLAS 4 are under way
and many customers have expressed enthusiasm for launching service
with Avanti in West Africa.
Outlook
Avanti's expectations for 50% growth in continuing revenue on a
constant currency basis in the full 2016 financial year are
supported by the substantial recent order wins, which will make a
material contribution to revenue in the current half year and a
very strong pipeline of opportunities that are in advanced stages
of negotiation. As revenue builds, Avanti is expected to become
significantly cash generative, due to a combination of the revenue
growth and a largely fixed cash cost base.
As a result of the advanced status of new satellite
procurements, we now have greater clarity over capex timing.
Capital expenditure for the full financial year 2016 is expected to
be in the range of $100m to $110m, falling to approximately $70m in
financial year 2017.
On the basis of our expectation of 50% annual continuing
business revenue growth and Avanti's strong liquidity position, the
Group's business plan is fully funded through to the launches of
HYLAS 3 and 4 in 2017, with positive EBITDA expected from the
second half of the financial year ending 30 June 2016.
Avanti has fixed cost bond finance at 10%, which is not
repayable until October 2019 when we would expect to refinance it
at lower rates. The Group held period end cash of $162.6m and
furthermore has consent to draw down up to a further $71.0m in
credit from multiple facilities. We do not expect to need to use
this, but it does mean that Avanti has surplus cash headroom at the
low point in our own business plan in mid-2018 of over $90 million,
giving us very strong headroom and full confidence in our full
funding to maturity.
Financial Review
Income Statement
Revenue was $31.0m (H1 2015: $31.1m). The year-on-year
comparison was impacted by the translation of Sterling and Euro
revenues into Avanti's reporting currency of US$. In addition to
that, the first half of 2015 contained an element of revenues to
sub-contractors and higher low margin equipment sales than for the
six months ended 31 December 2015. Adjusting for these factors,
underlying revenue grew 18% and strong contract wins during the
period support a stronger full year growth outlook.
Second quarter revenue was $17.3m, representing 27.7% growth
versus the first quarter on a constant currency basis.
Avanti has a largely fixed cash cost base. Costs of sale
excluding satellite depreciation were $18.4m (H1 2015: $19.7m) and
operating expenses excluding depreciation, amortisation and share
based payment charges were $16.8m (H1 2015: $15.5m), with
additional investment in sales and marketing ahead of the launch of
HYLAS 4 being offset by the reduction in the value of Sterling
versus the US$.
EBITDA (before share based payment charges) was negative $3.5m
(H1 2015: negative $3.5m), with the loss significantly reducing in
the second quarter as the revenue increased.
The loss attributable to shareholders was $45.6m (H1 2015:
$48.1m), which included depreciation of $24.1m (H1 2015: $24.5m)
and a net interest expense of $20.3m (H1 2015: $19.6m).
Cash flow
During the period Avanti made capital expenditure payments of
$36.4m (H1 2015: $68.4m), mainly in relation to the HYLAS 4
satellite and interest payments of $27.0m (H1 2015: $26.1m). Cash
balances at the period end were $162.6m (H1 2015: $84.1m). The
working capital outflow during the period is expected to largely
reverse in the second half as cash payments relating to invoices
sent towards the end of the first half are paid.
Balance sheet
For clarity, balance sheet figures are compared with the
equivalents from the end of the prior financial year.
Tangible fixed assets were $730.1m (FY 2015: $691.0m). Additions
were $73.7m, mainly relating to the construction of the HYLAS 4
satellite. Total depreciation was $24.1m with movements in exchange
rates decreasing total NBV by $10.5m.
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Trade and other receivables increased to $44.2m (FY 2015:
$35.5m) as a result of milestones invoiced at the end of Q2 which
should be settled in Q3. Current trade and other payables increased
to $57.4m (FY 2015 $31.9m). Amounts due to suppliers at the end of
the first half include HYLAS 4 milestone payments due. Current
trade and other payables after capex related liabilities remain
stable.
Gross debt was $643.3m (FY 2015: $528.4m) and net debt was
$480.7m (FY 2015: $406.2m).
The Group carries a deferred tax asset on its balance sheet, and
has significant unclaimed capital allowances on the two HYLAS
satellite assets. These are expected to shelter any future tax
liabilities for at least three years.
Backlog
Backlog at the end of the period was $409.6m having grown from
$379.7m at the beginning of the second quarter.
CONSOLIDATED UNAUDITED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 31 DECEMBER 2015
Unaudited Unaudited
Half Half
year year Audited
Year
ended
31-Dec-15 31-Dec-14 30-Jun-15
Note $'m $'m $'m
------------------------------ --- ----- ------------ ------------ ------------
Revenue 31.0 31.1 85.2
Cost of sales (41.2) (42.7) (83.8)
------------ ------------ ------------
Satellite depreciation (22.8) (23.0) (45.8)
Other cost of sales (18.4) (19.7) (38.0)
----------------------------------- ----- ------------ ------------ ------------
Gross (loss)/profit (10.2) (11.6) 1.4
----------------------------------- ----- ------------ ------------ ------------
Operating expenses (18.4) (17.4) (35.6)
Other operating income 0.7 0.7 1.4
Loss from operations (27.9) (28.3) (32.8)
----------------------------------- ----- ------------ ------------ ------------
Finance expense (17.6) (19.7) (40.5)
Loss before taxation (45.5) (48.0) (73.3)
----------------------------------- ----- ------------ ------------ ------------
Income tax - - -
Loss for the year (45.5) (48.0) (73.3)
----------------------------------- ----- ------------ ------------ ------------
Loss attributable to:
Equity holders of the
parent (45.6) (48.1) (73.1)
Non-controlling interests 0.1 0.1 (0.2)
Basic loss per share
(cents) 6 (32.8c) (44.9c) (61.5c)
Diluted loss per share
(cents) 6 (32.8c) (44.9c) (61.5c)
----------------------------------- ----- ------------ ------------ ------------
CONSOLIDATED UNAUDITED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE SIX MONTHS ENDED 31 DECEMBER 2015
Unaudited Unaudited
Half Half
year year Audited
Year
ended
31-Dec-15 31-Dec-14 30-Jun-15
$'m $'m $'m
------------------------------ --- ----- ------------ ------------ ------------
Loss for the year (45.5) (48.0) (73.3)
----------------------------------- ----- ------------ ------------ ------------
Other comprehensive
income:
Exchange differences on translation
of foreign operations and
investments that may be recycled
to the Income Statement 4.2 1.0 0.1
Exchange differences on translation
of foreign operations and
investments that will not be
recycled to the Income Statement (20.1) (26.2) (22.7)
Total comprehensive
loss for the year (61.4) (73.2) (95.9)
----------------------------------- ----- ------------ ------------ ------------
Attributable to:
Equity holders of the
parent (61.5) (73.3) (95.7)
Non-controlling interests 0.1 0.1 (0.2)
----------------------------------- ----- ------------ ------------ ------------
The accompanying notes form an integral part of
this condensed consolidated interim financial information.
CONSOLIDATED UNAUDITED STATEMENT OF FINANCIAL
POSITION
AS AT 31 DECEMBER
2015
Unaudited Unaudited
Half year Half year Audited
Year
ended
31-Dec-15 31-Dec-14 30-Jun-15
Note $'m $'m $'m
------------------------------ ----- ------------ ------------ ------------
ASSETS
Non-current assets
Property, plant and
equipment 730.1 641.5 691.0
Intangible assets 11.0 12.5 11.0
Deferred tax assets 18.4 19.3 19.5
Total non-current
assets 759.5 673.3 721.5
------------------------------ ----- ------------ ------------ ------------
Current assets
Inventories 3.2 3.9 2.6
Trade and other receivables 44.2 39.9 35.5
Cash and cash equivalents 162.6 84.1 122.2
Total current assets 210.0 127.9 160.3
------------------------------ ----- ------------ ------------ ------------
Total assets 969.5 801.2 881.8
------------------------------ ----- ------------ ------------ ------------
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 57.4 29.8 31.9
Loans and other borrowings 7 3.3 3.4 4.7
Total current liabilities 60.7 33.2 36.6
------------------------------ ----- ------------ ------------ ------------
Non-current liabilities
Trade and other payables 14.7 17.3 16.8
Loans and other borrowings 7 640.0 514.2 523.7
Total non-current
liabilities 654.7 531.5 540.5
------------------------------ ----- ------------ ------------ ------------
Total liabilities 715.4 564.7 577.1
------------------------------ ----- ------------ ------------ ------------
Equity
Share capital 2.5 2.0 2.4
EBT shares (0.1) (0.1) (0.1)
Share premium 515.7 415.1 505.3
Retained earnings (229.7) (159.8) (184.4)
Foreign currency translation
reserve (32.3) (19.0) (16.4)
Total parent shareholders'
equity 256.1 238.2 306.8
Non-controlling interests (2.0) (1.7) (2.1)
------------------------------ ----- ------------ ------------ ------------
Total equity 254.1 236.5 304.7
------------------------------ ----- ------------ ------------ ------------
Total liabilities
and equity 969.5 801.2 881.8
------------------------------ ----- ------------ ------------ ------------
The accompanying notes form an integral part
of this condensed consolidated interim financial
information.
CONSOLIDATED UNAUDITED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
31 DECEMBER 2015
Unaudited Unaudited
Half Half
year year Audited
Year
ended
31-Dec-15 31-Dec-14 30-Jun-15
Note $'m $'m $'m
---------------------------------- ----- ------------ ------------ ------------
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Cash flow from operating
activities
Cash absorbed by operations 9 (18.9) (15.0) (10.2)
Interest paid (27.0) (26.1) (52.3)
Net cash absorbed by operating
activities (45.9) (41.1) (62.5)
---------------------------------- ----- ------------ ------------ ------------
Cash flows from investing
activities
Payments for property, plant
and equipment (36.4) (68.4) (102.0)
Net cash used in investing
activities (36.4) (68.4) (102.0)
---------------------------------- ----- ------------ ------------ ------------
Cash flows from financing
activities
Proceeds from bond issue 115.0 - -
Proceeds from share issue 10.5 - 90.6
Payment of finance lease
liabilities (2.2) (2.4) (5.3)
Proceeds from sale and leaseback - 2.7 5.3
Debt issuance costs (0.2) - (0.1)
Net cash received from financing
activities 123.1 0.3 90.5
---------------------------------- ----- ------------ ------------ ------------
Effects of exchange rate on
the balances of cash and cash
equivalents (0.4) (2.0) 0.9
Net increase/(decrease)
in cash and cash equivalents 40.4 (111.2) (73.1)
Cash and cash equivalents at
the beginning of the financial
year 122.2 195.3 195.3
Cash and cash equivalents
at the end of the period 162.6 84.1 122.2
---------------------------------- ----- ------------ ------------ ------------
The accompanying notes form an integral part of
this condensed consolidated interim financial
information.
CONSOLIDATED UNAUDITED STATEMENT OF CHANGES IN
EQUITY
FOR THE SIX MONTHS ENDED
31 DECEMBER 2015
Employee Foreign
benefit currency
Share trust Share Retained translation Non-controlling Total
capital (EBT) premium earnings reserve interests equity
$'m $'m $'m $'m $'m $'m $'m
---------------------- --------- --------- --------- ---------- ------------- ---------------- --------
At 1 July 2014 2.0 (0.1) 415.1 (112.0) 6.2 (1.9) 309.3
Loss for the
year - - - (48.1) - 0.1 (48.0)
Other comprehensive
income - - - - (25.2) - (25.2)
Share based payments - - - 0.3 - - 0.3
As at 31 December
2014 (Unaudited) 2.0 (0.1) 415.1 (159.8) (19.0) (1.8) 236.4
---------------------- --------- --------- --------- ---------- ------------- ---------------- --------
As at 1 January
2015 2.0 (0.1) 415.1 (159.8) (19.0) (1.8) 236.4
Loss for the
year - - - (25.0) - (0.3) (25.3)
Other comprehensive
income - - - - 2.6 - 2.6
Issue of share
capital 0.4 - 90.2 - - - 90.6
Share based payments - - - 0.4 - - 0.4
As at 30 June
2015 (Audited) 2.4 (0.1) 505.3 (184.4) (16.4) (2.1) 304.7
---------------------- --------- --------- --------- ---------- ------------- ---------------- --------
As at 1 July
2015 2.4 (0.1) 505.3 (184.4) (16.4) (2.1) 304.7
Loss for the
year - - - (45.6) - 0.1 (45.5)
Other comprehensive
income - - - - (15.9) - (15.9)
Issue of share
capital 0.1 - 10.4 - - - 10.5
Share based payments - - - 0.3 - - 0.3
As at 31 December
2015 (Unaudited) 2.5 (0.1) 515.7 (229.7) (32.3) (2.0) 254.1
---------------------- --------- --------- --------- ---------- ------------- ---------------- --------
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 20 Black Friars Lane, London
EC4V 6EB. The Company is listed on AIM.
These unaudited condensed consolidated interim financial
statements ("the interim financial statements") were approved for
issue on 4 February 2016.
2. Basis of preparation
These interim financial statements for the six months ended 31
December 2015 have been prepared in accordance with IAS 34,
"Interim Financial Reporting", as adopted by the EU. The interim
financial statements should be read in conjunction with the annual
financial statements for the year ended 30 June 2015, which have
been prepared in accordance with International Financial Reporting
Standards ("IFRSs"), as adopted by the EU.
The accounting policies applied are consistent with those of the
annual financial statements for the year ended 30 June 2015.
The interim 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 2015 were approved by
the Board of Directors on 16 September 2015 and have been delivered
to the Registrar of Companies. The auditor's report on these
accounts was not qualified, did not draw attention to any matter by
way of emphasis and did not contain statements under section 498(2)
or (3) of the Companies Act 2005.
3. Accounting policies
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
2015.
The condensed consolidated interim financial information
presented does not comply with the full disclosure requirements of
all applicable IFRSs.
4. Segmental reporting
The Group currently earn revenue primarily from the sale of
satellite broadband services to customers and from providing
consultancy advice connected with the exploitation of the space
assets. On adoption of IFRS 8, 'Operating Segments', the Group
concluded that the Chief Operating Decision Maker (the Avanti
Executive Board) manage the business and the allocation of
resources on the basis of the provision of satellite services,
resulting in one segment.
5. Income tax
No income tax credit or deferred tax asset has been recognised
in respect of the losses for the six month period to 31 December
2015 (30 June 2015: nil, 31 December 2014: nil). Whilst the company
foresees utilising the losses in future periods, it has not
recognised the income tax credit or deferred tax in this
period.
6. Earnings per share
Audited
Unaudited Unaudited
Half Half Year
year year ended
31-Dec-15 31-Dec-14 30-Jun-15
$'m $'m $'m
Loss for the year attributable
to equity holders of the parent
Company (45.6) (48.1) (73.1)
---------------------------------------------------- ------------ ------------ ------------
Weighted average number of ordinary
shares for the purpose of
basic earnings
per share 138,977,660 107,425,302 118,975,177
---------------------------------- -------------- ------------ ------------ ------------
Basic and diluted
loss per share (32.8c) (44.9c) (61.5c)
---------------------------------- -------------- ------------ ------------ ------------
7. Loans and other borrowings
Unaudited Unaudited Unaudited Unaudited
Half Half Half Half
year year Audited year year Audited
Year Year
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