AVN.L Regulatory News (AVN)

31 Jan 2008 07:01

Avanti Communications Group Plc31 January 2008 Date: 31 January 2008On behalf of: Avanti Communications Group plc ("Avanti" or "the Company")Embargoed until: 0700hrs Avanti Communications Group plc Interim Report for the 6 month period ended 31 December 2007 Avanti Communications Group Plc, the satellite operator, announces its InterimResults for the 6 month period ended 31 December 2007. Key points • Announcement of completion of launch insurance policy with sum insured of £89m• Pre-sales of HYLAS capacity on long leases increases revenue backlog to £20m• Pipeline of potential revenue is now £236m (October 2007: £168m)• Satellite procurement on target with satisfactory milestone results Financial highlights • Turnover of £2.5m (2006: £1.5m), up 61%• Operating loss of £1.1m (2006: loss £1.7m)*, down 35 %• Loss before tax of £0.8m (2006: profit £21.9m)• Cash of £40.2m at 31 December 2007 (31 December 2006: £17.9m) *before exceptional gain from forgiveness of inter-company debt on demerger fromAvanti Screenmedia Commenting on the results, John Brackenbury CBE, Chairman said: "I am pleased to present our results for the six month period ended 31 December2007 and to be able to report further good progress in the development ofAvanti's business. As we enter the final year before launch of our firstsatellite, HYLAS, we are delivering against project technical and commercialmilestones, while satellite market conditions are continuing to move in ourfavour with both pricing and demand rising." INTERIM RESULTS Chairman's Statement I am pleased to present our results for the six month period ended 31 December2007 and to be able to report further progress in the development Avanti'sbusiness. Results The financial results of the last year before the launch of HYLAS do not have agreat bearing on our view of the value of HYLAS and our other emerging satelliteprojects. However, I am pleased to report that our interim results are in linewith our expectations. Turnover at £2.5 million is 61% higher than for the same period last year (£1.5million) and reflects additional revenue generated from Consultancy and NetworkServices. Overheads increased by 46% to £2.7 million from £1.9 million and arein line with the expected levels. It is worth noting that maintaining losses atsuch a low level during the pre-launch phase is quite unusual in our industry. With the successful completion of the £32 million PIK Bond Facility and theequity placing of £4 million in July, the Company is adequately funded to seethe HYLAS project through to launch. At 31 December 2007, the Company had cashbalances of £40.2 million (31 December 2006: £17.9 million). We have adopted three new accounting policies in accordance with the new IFRSstandards which have an impact on the results for the period regardingcapitalisation of interest, charges for share options and consolidation of theemployee benefit trust. These are explained in the accounting policies notebelow. PricewaterhouseCoopers LLP were appointed as Auditors to the Company inDecember. We have continued to invest heavily in the management of our satellite andlaunch procurements during the period, which have progressed to oursatisfaction. We are now marketing our capacity widely, seeking to build a large order book ofrevenue through the sale of long term capacity leases. We were pleased toreport during the period the sale of 54Mhz of capacity for 15 years at £900 perMHz per month, a price which exceeded our expectations. The pipeline ofpotential revenues is now £236 milion (October 2007: £168 million) and thebacklog of committed revenues is £20m million (2007: £13 million). Finally I am pleased to announce that yesterday we completed the placement of aninsurance policy which covers the risks of launch and the first year of in-orbitoperation of the HYLAS satellite. We set the sum insured at £89 million so thatthe full extent of the equity and debt invested together with the interestaccrued under our PIK bond are covered. Outlook Globally the satellite industry is beginning to form a consensus that the futureof satellite data services lies with Ka band. We are the first in Europe todeploy this technology and are widely regarded in our industry as market leadersin this area. We are seeking to build on our lead by creating new satelliteprojects in Africa, Middle East and Asia where demand is strong and competitionin Ka band services either light or non-existent. Avanti is participating in aproject recently selected by ESA to establish a reference model for CapacityBuilding initiatives. Avanti in particular will look at the demands andpracticalities of satellite broadband adoption in developing regions such asAfrica. This is a similar approach to the work we undertook prior to startingthe HYLAS project for Europe. Further Avanti satellites will be financed onlywhen there are partners or customers in place for that new capacity and ourstrategy to find such partners is proceeding well. We remain excited by theopportunities arising in our markets. Our confidence in the future prospects of our business has grown strongly duringthe period and we expect to report significant value creating news flow duringthe current financial year. FEJG Brackenbury, CBEChairman31 January 2008 Enquiries: Avanti Communications Group plc http://www.avanti-communications.com/ David Williams 020 7749 1600 Nigel Fox Redleaf Communications Ltd http://www.redleafpr.com/ Emma Kane / Samantha Robbins / Paul Dulieu 020 7822 0200 sr@redleafpr.com Hoare Govett Justin Jones/ Hugo Fisher 020 7678 8000 Notes to Editors: About Avanti Communications • Avanti Communications Group's shares were admitted to AIM on 16 April 2007; • Avanti Communications Group is the only licensed Fixed Satellite Services operator headquartered in the UK (and one of only eight such groups operating in Europe); • Avanti is licensed to provide satellite services using spectrum which provides coverage of Europe, India, The Middle East, Central Asia, Africa and the Americas. • Avanti's first satellite, called HYLAS is under construction and due for launch in 2009; the company plans further satellite projects; • Avanti, which has over 10 years' experience in the satellite industry, currently provides satellite data communications services to customers in Europe using leased satellite capacity which it will transfer to HYLAS on launch; • Its customers include broadband service providers, large businesses, the British and foreign governments, the European Union and the European Space Agency; • The core applications for which Avanti expects HYLAS capacity to be used are broadband, corporate data networks, video distribution and military/ security; • No further funding is required for the HYLAS project following successful completion of a long term debt facility in July 2007. AVANTI COMMUNICATIONS GROUP PLC CONSOLIDATED UNAUDITED INCOME STATEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2007 Unaudited Unaudited Audited Half year Half year Year ended 31 Dec 07 31 Dec 06 30 Jun 07 Note £'000 £'000 £'000 Revenue 2,478 1,539 2,562Cost of sales (870) (1,379) (2,763) Gross Profit/(Loss) 1,608 160 (201)Operating expenses (2,729) (1,874) (3,562)Other operating income 0 23,343 23,343 (Loss)/Profit from operations (1,121) 21,629 19,580Finance income 378 320 715Finance expense (100) (71) (99) (Loss)/Profit before taxation (843) 21,878 20,196Taxation credit 4 238 418 898 (Loss)/Profit for the period attributable to equity holders of parent (605) 22,296 21,094 Basic earnings per share (pence) (2.18)p 86.73p 82.05pDiluted earnings per share (pence) (1.96)p 86.73p 82.05p CONSOLIDATED UNAUDITED STATEMENT OF CHANGES IN EQUITY Share Share Other P&L a/c Total Capital Premium Reserves Reserves Reserves2006 £'000 £'000 £'000 £'000 £'000 At 30th June 2006 0 180 0 7,414 7,594Profit for the period 22,296 22,296Intercompany movement following de-merger 257 (180) 0 (77) 0 At 31st December 2006 (Unaudited) 257 0 0 29,633 29,890 2007 At 1st January 2007 257 0 0 29,633 29,890Profit/(Loss) for the period 0 0 0 (1,202) (1,202) At 30th June 2007 (Audited) 257 0 0 28,431 28,688 At 1st July 2007 257 0 0 28,431 28,688 Profit/(Loss) for the period 0 0 0 (605) (605)Issue of share capital 20 0 0 0 20Premium on shares issued 0 3,858 0 0 3,858Unrealised currency gains on cash flow 0 0 409 0 409hedgesShare based payments 0 0 382 0 382Tax credit taken directly to reserves 0 0 47 0 47 At 31st December 2007 (Unaudited) 277 3,858 838 27,826 32,799 CONSOLIDATED UNAUDITED BALANCE SHEET AS AT 31 DECEMBER 2007 Unaudited Unaudited Audited 31 Dec 07 31 Dec 06 30 Jun 07 Note £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 6 26,423 11,803 20,036Deferred tax assets 1,112 418 823 27,535 12,221 20,859 Current AssetsInventories 31 21 31Trade and other receivables 6,308 5,555 5,764Cash and short term deposits 40,248 17,959 10,651 46,587 23,535 16,446 Total assets 74,122 35,756 37,305 Current liabilitiesTrade and other payables 6,560 4,129 5,933Borrowings 565 431 1,277 7,125 4,560 7,210 Non-current liabilitiesDeferred tax liabilities 442 513 439Borrowings 33,756 793 968 34,198 1,306 1,407 Total liabilities 41,323 5,866 8,617 Called up share capital 277 257 257Share premium 3,858 0 0Other reserves 838 0 0Retained earnings 27,826 29,633 28,431 Total equity 32,799 29,890 28,688 Total liabilities and equity 74,122 35,756 37,305 CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2007 Unaudited Unaudited Audited Half year Half year Year ended 31 Dec 07 31 Dec 06 30 Jun 07 £'000 £'000 £'000Cash flow from operating activities Profit from operations before taxation (1,121) 21,629 19,580Net foreign exchange (gain)/loss 0 0 (1)Share option charge 382 0 0Depreciation and amortisation of non-current assets 368 289 565Net deferred tax 0 0 898 (371) 21,918 21,042 Movement in working capital(Increase) in stock 0 (21) (31)(Increase)/decrease in debtors (1,076) 10,082 7,921(Decrease)/increase in trade and other payables (647) (23,560) 3,076 Cash generated from operations (2,094) 8,419 32,008Interest received 226 320 715Interest paid (100) (71) (100) Net cash (used in)/generated by operating activities (1,968) 8,668 32,623 Cash flows from investing activities Payments for property, plant and equipment (4,421) (1,795) (10,305) Net cash used in investing activities (4,421) (1,795) (10,305) Cash flows from financing activities Proceeds from borrowings 33,365 0 430 Proceeds from equity issue 3,878 0 0 Intercompany movement - following de-merger 0 (348) (24,128) Movement in finance leases (281) (96) (385) Net cash generated by/(used in) Financing activities 36,962 (444) (24,083) Net (decrease)/increase in cash and cash equivalents 30,573 6,429 (1,765)Cash and cash equivalents at the beginning of the financial year 9,675 11,439 11,439Effect of exchange rate changes on the balance of cash held in foreign currencies 0 0 1 Cash and cash equivalents at the end of the financial year 40,248 17,868 9,675 Notes to the Accounts 1. Basis of Preparation These condensed consolidated financial statements ("the financial statements")comprise the financial results of Avanti Communications Group plc for the halfyear ended 31 December 2007 and 2006, together with the audited financialresults for the year ended 30 June 2007. The financial statements have beenprepared in accordance with IAS 34, "Interim Financial Reporting". The financialstatements should be read in conjunction with the annual financial statementsfor the year ended 30 June 2007. Following the demerger in April 2007 the consolidated results for both 2006 and2007 are shown as though the group, in its current form, had always been inexistence and has been consolidated using merger accounting principles.Certain comparative amounts have been restated at 31 December 2006. Thefinancial statements have also been prepared in accordance with the accountingpolicies as set out in the 2007 Annual Report and the new policies adopted inthe period described in 2 below. The financial statements has not been audited or reviewed and do not constitutestatutory accounts within the meaning of Section 240 of the Companies Act 1985.The statutory accounts for the year ended 30 June 2007 were approved by theBoard of Directors on 8 October 2007 and will be delivered to the Registrar ofCompanies. The previous auditors', Kingston Smith LLP, opinion on those accountswas unqualified and did not contain a statement made under Section 237(2) orSection 237(3) of the Companies Act 1985. PricewaterhouseCoopers LLP wereappointed auditors effective 29 November 2007. 2. Accounting Policies The following standards have been adopted with effect from the 1 July 2007. • IAS 23 - "Capitalisation of Borrowing costs". Having raised debt specifically to fund the completion of the HYLAS satellite and launcher, this standard has been adopted. The borrowing costs associated with this loan have been capitalised in full less any interest income earned in the interim. • IFRS 2 - Share based payments. Share options and an LTIP scheme have been introduced since the last financial year end. The fair values of the options have been estimated at the time of the grants, and will be charged to the Income Statement over the vesting periods. The approved and unapproved share options simply vest over time (normally 4years) and the charge is spread over that period. The LTIP, for senior managers,is split into 3 tranches. The first tranche (46%) vests over 7 years. The secondtranche (27%) is only exercisable if the share price reaches £5 before 30 June2010 and the final tranche (27%) is only exercisable if the share price reaches£10 before 30 June 2013. The charges for each of these tranches are spread overthe relevant period. • SIC 12 - Consolidation - special purpose entities. - An Employee Benefit Trust (EBT) was introduced on 9th July 2007. The EBT is controlled by its sponsoring entity (Avanti Communications Group plc) and therefore has been consolidated in the financial statements of the group in accordance with SIC 12. • Cash Flow Hedge Accounting - When a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability or a highly probably transaction, the effective part of any gain or loss on the derivative instrument is recognised directly in equity. The associated cumulative gain or loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged forecast transaction affects the income statement . The ineffective part of any gain or loss is recognised immediately in the income statement, in line with the treatment of the underlying hedged transaction. With the exception of the policies highlighted above, the accounting policiesadopted are consistent with those of the annual financial statements for theyear ended 30 June 2007 as described in those financial statements. 3. Segmental information Business segment Products and services within each business segment The group's primary reporting format for reporting segment information isbusiness segments. For management purposes the group is organised into threemajor operating divisions - consultancy, construction / operation of satelliteand provision for satellite services Consultancy The provision of telecommunication consultancy and engineering services Space Satellite business selling Ku and Ka bandwidth on its HYLAS satellite is expected to be operational in 2009 Network Services The provision of broadband internet access by satellite business using technology which combines high powered DVB-RCS two way satellite receivers Revenue Unaudited Audited 6 months to 12 months to 31 Dec 2007 30 June 2007 £'000 £'000 Space 0 0Network Services 394 503Consultancy 2,084 2,059 Consolidated revenue 2,478 2,562 6 months to 12 months to 31 Dec 2007 30 June 2007Segment results £'000 £'000 Space 0 (1)Network Services (1,048) (1,341)Consultancy 674 (1,805)Central costs (469) 0Exceptional Items 0 23,343 (Loss)/Profit before Tax (843) 20,196Taxation credit 238 898 (Loss)/Profit for the period (605) 21,094 4. Taxation The tax credit of £238,000 is calculated by applying an estimated effective taxrate of the Group's material tax jurisdictions for the year ended 30 June 2008to the half year results. The effective tax rate for the Group as a whole forthe year to 30 June 2008 is estimated to be 28.5%. 5. Earnings per share The calculations of the earnings per ordinary share are based on the profit onthe ordinary earnings after taxation and the weighted number of shares in issuein the reporting period. Unaudited Unaudited Audited Half year Half year Year ended 31 Dec 07 31 Dec 06 30 Jun 07 (Loss)/Profit after taxation £(605,000) £22,296,000 £21,094,000 Weighted average number of shares 27,708,503 25,708,503 25,708,503Dilutive effect of share options 3,213,562 0 0 Number of shares for diluted earnings per share 30,922,065 25,708,503 25,708,503 Basic earnings per share (2.18)p 86.73p 82.05pDiluted earnings per share (1.96)p 86.73p 82.05p 6. Property, plant and equipment The book value of these assets increased by £6.4 million during the period. Thisincluded progress payments to SpaceX for the launcher of £2.6 million andcapitalised interest payments and arrangement fees totalling £2.5 million. This information is provided by RNS The company news service from the London Stock Exchange