AVN.L Regulatory News (AVN)

2 Feb 2009 07:00



Date: 2 February 2009

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 2008

Avanti Communications Group Plc, the satellite operator, announces its Interim Results for the six months ended 31 December 2008.

Key points

High demand for Satellite Broadband in Europe

Financial highlights

Commenting on the results, John Brackenbury CBE, Chairman said:

"I am pleased to present our results for the six month period ended 31 December 2008, showing a basic profit per share of 7.10p, and to be able to report further good progress in the development of Avanti's business. 

"We have been building a subscriber base with rented satellite capacity very successfully during the past year. We have now recruited 28 wholesale customers around Europe who will sell to end users, own the accounts and provide service. We have also won several regional government projects whereby government funds the cost of installing a fixed number of rural customers. We expect many more of these projects to proceed in Europe during 2009. The launch of HYLAS is expected in the last quarter of the calendar year 2009, so excitement at Avanti has grown as we move into our launch year.

"Our results were positively impacted by exchange gains this year. We were prudent in 2007 in buying caps to hedge against downside on currency exposures but we retained exposure to upside, which has favoured us. As a business with revenues mainly in Euros, sterling's current rate will continue to benefit us and we have hedged accordingly.

"National and European government agencies have recently announced dramatically increased investment to ensure Universal Broadband Access and this was advanced in the publication last week of the Digital Britain Report. Lord Carter has acknowledged that Avanti's satellite broadband services will be considered as part of the solution to the challenge of delivering the Digital Britain Universal Service target of 2Mb broadband to all homes in the UK. The European Commission announced on 28 January a new source of funding to help the 30% of EU homes that have no access to high speed Internet. As Europe's first broadband satellite operator and given our existing lead in the rural broadband market, Avanti is working closely with national and European agencies on these projects.  We expect to benefit strongly from these government initiatives.

"The outlook for our business is therefore very positive." 

Enquiries:

Avanti Communications Group plc	http://www.avantiplc.com/
David Williams	020 7749 1600
Nigel Fox
Redleaf Communications Ltd	avanti@redleafpr.com
Emma Kane/ Samantha Robbins/ Paul Dulieu	020 7566 6700
Cenkos Securities
Ivonne Cantu / Julian Morse	020 7397 8900

Notes to Editors:

About Avanti Communications

Avanti sells wholesale satellite broadband services to telecoms companies which supply customers in consumer, enterprise and institutional markets.

Avanti's first satellite, called HYLAS is under construction and due for launch in 2009.  It will be the first broadband satellite launched in Europe.

Avanti, which has more than 10 years' experience in the satellite industry, currently provides satellite broadband services to customers in Europe using leased satellite capacity which it will transfer to HYLAS on launch.

The European Commission has set aside funding for rural broadband projects regions across Europe with a total value of €2.8 billion over the next five years and the British government is expected to intervene to ensure that Universal Broadband Internet Access is available at 2Mb in the UK.

  INTERIM RESULTS

Chairman's Statement

I am pleased to present our results for the six month period ended 31 December 2008 and to be able to report further progress in the development of Avanti's business.

We have been building a subscriber base with rented satellite capacity very successfully during the past year. When HYLAS launches these customers will become very profitable and the service will improve dramatically. We have now recruited 28 wholesale customers around Europe who will sell to end users, own the accounts and provide customer support. We have also won several government projects whereby government funds the installation costs of a large number of end user rural customers, who then pay the monthly service charges.  We expect many more of these projects to proceed in Europe during 2009. The launch of HYLAS is expected in the last quarter of the calendar year 2009, so excitement at Avanti grew as we moved into our launch year.

Our results have also been positively impacted by foreign exchange gains. We were highly prudent in hedging dollar and Euro payables and Euro receivables at the exchange rates which were evident a little over a year ago. However the strategies employed allowed us to benefit from upside whilst definitively capping out downside. Events have favoured us and we have generated significant cash savings as a result of sterling's depreciation. Since our revenues are mainly Euro denominated we expect this to continue to favour us and have hedged accordingly."

Results

Revenue for the six months to December is £3.2 million which is a 28% increase over the same period last year. This is in part due to the excellent progress made with our Rural Broadband project with the Scottish Government.

Operating losses increased slightly in line with increased staffing to prepare for the launch of HYLAS. Also the high costs of our leased capacity with which we are building an early subscriber base will be removed after the launch of HYLAS.

The profit for the period has benefitted significantly from our hedging activities that have resulted in an exchange gain of £4.6 million being credited to the income statement. The gains arise from the revaluation of currency receivables which form a natural cash flow hedge against our Euro payables to Astrium, as well as dollar payables which are hedged at $2: £1.

Our balance sheet remains strong with net assets of £34.8 million which includes cash balances of £26.6 million. Our long term debt continues to accrue the quarterly interest and now stands at £39.3 million. During the period we also received a further £1.4 million of the ESA grant increasing the deferred income to £2.9 million. Our balance sheet does not reflect the full value of the HYLAS asset under construction in assets, because a) a portion of the ESA grant is paid directly to the manufacturer, Astrium - this is recorded as a deferred credit; and b) payments from ESA were back ended and approximately €15.5m remains to be paid.

During the period we contracted BT Business to provide satellite network services for HYLAS. BT Business will use its existing Goonhilly satellite uplinking facility to transfer all traffic between the HYLAS satellite and the Internet. Goonhilly is historically one of the most important satellite teleports in the World with more than 40 years of unrivalled experience. Goonhilly is connected via BT Business' highly resilient fibre network to the major internet nodes in London, which gives Avanti access to excellent internet connectivity. The two companies have also agreed to collaborate on certain opportunities to potentially deploy satellite broadband services.

Associated with the transaction, Avanti will also receive £1.5m of funding from the South West Regional Development Agency as a contribution to the planned investment required in operating from the facility in Cornwall and related to the local jobs created and safeguarded through this new venture.

I am pleased to announce that today we promote Matthew O'Connor to Chief Operating Officer and appoint him a Board Director. Matthew has done excellent work to create a strong sales team and to ensure the operational efficiency with which we have deployed the contracts won during the period and adds to our confidence of the strength in depth in our management team.

Outlook

The demand for Satellite Broadband in Europe is strong and growing. At national and European level, government has recognised the need to invest to ensure universal broadband access availability. Lord Carter has acknowledged that Avanti's satellite broadband services will be considered as part of the solution to the challenge of delivering the Digital Britain Universal Service target of 2Mb broadband to all homes in the UK. In addition to the €1.8bn of structural funding announced in March 2007, the European commission announced on January 28th a new source of funding (€1bn) to help the 30% of EU homes which have no access to high speed Internet. As Europe's first broadband satellite operator and given its existing lead in the rural broadband market, Avanti is working closely with national and European agencies on these projects.  

Avanti has won and deployed more rural satellite broadband than any other company in Europe we are therefore strongly positioned to benefit from this increase in spending and we continue to contract with wholesale partners is these regions.

We will complete the Scottish Government Rural Broadband project in the second half of this financial year and will make significant progress with the DETI project in Northern Ireland which will underline the progress the Company continues to make in its target markets.  Our success in recruiting wholesale distribution customers for our current service and HYLAS during the period gives us confidence that we can both access EU Structural Funds in the relevant countries but also generate strong commercial customer bases. 

The manufacturer of HYLAS, Astrium, has now substantially completed payload testing. The system is demonstrated to be working well, and will shortly be shipped for final assembly and integration. This means that we expect to launch HYLAS in the fourth quarter of calendar 2009, within the previously announced launch window, and to begin to provide a much demanded service in early 2010.

With strong results, and excellent funding position, a popular product, a growing market and very little competition the outlook is excellent. 

FEJG Brackenbury, CBE

Chairman

2 February 2009

  

AVANTI COMMUNICATIONS GROUP PLC

CONSOLIDATED UNAUDITED INCOME STATEMENT FOR THE SIX MONTHS ENDED 31 December 2008
		Unaudited	Unaudited	Audited
		Half year	Half year	Year ended
		31 Dec 08	31 Dec 07	30 Jun 08
	Note	£'000	£'000	£'000
Revenue		3,223	2,478	5,921
Cost of sales		(1,648)	(870)	(1,918)
Gross Profit		1,575	1,608	4,003
Operating expenses		(3,517)	(2,729)	(6,450)
Other operating income	6	956	409	589
(Loss) from operations		(986)	(712)	(1,858)
Financing exchange gain and derivatives	6	3,649	-	119
Finance income		199	378	585
Finance expense		(105)	(100)	(201)
Profit /(Loss) before taxation		2,757	(434)	(1,355)
Income tax	4	(786)	124	361
Profit/(Loss) for the period attributable to equity holders of the company		1,971	(310)	(994)
Basic earnings/(loss) per share (pence)		7.10p	(1.12)p	(3.60)p

  

CONSOLIDATED UNAUDITED STATEMENT OF CHANGES IN EQUITY
		Share Capital	Share Premium	Other Reserves	P&L a/c Reserves		Total Reserves
		£'000	£'000	£'000	£'000		£'000
At 1st July 2007		257	-	-	28,431		28,688
(Loss) for the period		-	-	-	(310)		(310)
Issue of share capital		20	-	-	-		20
Premium on shares issued		-	3,858	-	-		3,858
Share based payments		-	-	382	-		382
Tax credit taken directly to reserves		-	-	47	-		47
At 31st December 2007 (Unaudited)		277	3,858	429	28,121		32,685

2008 At 1st January 2008		277	3,858	429	28,121	32,685
(Loss) for the period		-	-	-	(684)	(684)
Issue of share capital		32	-	-	-	32
EBT Treasury shares		(32)	-	-	-	(32)
Share based payments		-	-	489	-	489
Tax credit taken directly to reserves		-	-	245	-	245
At 30th June 2008 (Audited)		277	3,858	1,163	27,437	32,735

At 1st July 2008		277	3,858	1,163	27,437	32,735
Profit for the period		-	-	-	1,971	1,971
Share based payments		-	-	237	-	237
Tax credit taken directly to reserves		-	-	(107)	-	(107)
At 31st December 2008 (Unaudited)		277	3,858	1,293	29,408	34,836

  

CONSOLIDATED UNAUDITED BALANCE SHEET AS AT 31 December 2008
		Unaudited	Unaudited	Audited
		31 Dec 08	31 Dec 07	30 Jun 08
Note		£'000	£'000	£'000
Non-current assets
Property, plant and equipment		49,652	26,423	39,742
Deferred tax assets		144	556	1,037
Total non-current assets		49,796	26,979	40,779
Current Assets
Inventories		259	31	249
Trade and other receivables		12,923	6,308	8,656
Cash and cash equivalents		26,558	40,248	35,241
Total current assets		39,740	46,587	44,146
Total assets		89,536	73,566	84,925
Current liabilities
Trade and other payables		12,069	5,195	13,743
Provisions for other liabilities		39	-	86
Interest bearing liabilities		332	565	545
Total current liabilities		12,440	5,760	14,374
Non-current liabilities
Deferred income		2,899	1,365	1,365
Provisions for other liabilities		100	-	129
Interest bearing liabilities		39,261	33,756	36,322
Total non-current liabilities		42,260	35,121	37,816
Total liabilities		54,700	40,881	52,190
Share capital		277	277	277
Share premium		3,858	3,858	3,858
Other reserves		1,293	429	1,163
Retained earnings		29,408	28,121	27,437
Total equity		34,836	32,685	32,735
Total liabilities and equity		89,536	73,566	84,925

  

CONSOLIDATED UNAUDITED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 December 2008
		Unaudited	Unaudited	Audited
		Half year	Half year	Year ended
		31 Dec 08	31 Dec 07	30 Jun 08
		£'000	£'000	£'000
Cash flow from operating activities
Loss from operations before taxation and interest		(986)	(712)	(1,858)
Unrealised foreign exchange (gain)/loss		(956)	(409)	(589)
Share option charge		237	382	871
Depreciation and amortisation of non-current assets		428	368	744
Write off of fixed assets		-	-	31
Provision for impairment of trade debtors		12	-	188
Onerous lease provision		(75)	-	215
		(1,340)	(371)	(398)
Movement in working capital
(Increase) in stock		(10)	-	(218)
(Increase) in debtors		(4,267)	(1,076)	(1,936)
(Decrease) in trade and other payables		(5)	(647)	(117)
Cash used by operations		(5,622)	(2,094)	(2,669)
Realised exchange gain		2,490	-	-
Interest received		647	226	1,756
Interest paid		(83)	(100)	(201)
Net cash (used in)/generated by operating activities		(2,568)	(1,968)	(1,114)
Cash flows from investing activities
Payments for property, plant and equipment		(5,818)	(2,068)	(7,543)
Net cash used in investing activities		(5,818)	(2,068)	(7,543)
Cash flows from financing activities
Proceeds from borrowings		-	32,000	32,000
Repayment of borrowings		(14)	(273)	(390)
Debt issue cost paid		-	(988)	(988)
Proceeds from share issue		-	4,000	4,000
Share issue costs		-	(122)	(122)
Movement in finance leases		(283)	(281)	(550)
Net cash generated by/(used in) financing activities		(297)	34,336	33,950
Net (decrease)/increase in cash and cash equivalents		(8,683)	30,300	25,293
Cash and cash equivalents at the beginning of the period		35,241	9,948	9,948
Cash and cash equivalents at the end of the period		26,558	40,248	35,241

  Notes to the accounts

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.

This condensed consolidated interim financial statement was approved for issue on 2 February 2009.

2. Basis of Preparation

This condensed consolidated financial statement ("the financial statement") for the six months ended 31 December 2008 has been prepared in accordance with IAS 34, "Interim Financial Reporting". The financial statement should be read in conjunction with the annual financial statements for the year ended 30 June 2008, which has been prepared in accordance with IFRSs.

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2008, 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 240 of the Companies Act 1985. The statutory accounts for the year ended 30 June 2008 were approved by the Board of Directors on 20 October 2008 and have been delivered to the Registrar of Companies. 

3. Accounting Policies

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 July 2008, but are not currently relevant for the group. 

The following new standards, amendments to standards or interpretations have been issued, but are not effective for the financial year beginning 1 July 2008 and have not been early adopted: 

IFRIC 13, 'Customer loyalty programmes', effective for annual periods beginning on or after 1 July 2008. Management is evaluating the effect of this interpretation on its revenue recognition.

4. 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 2009 is 28.0% (the estimated tax rate for the six months ended 31 December 2007 was 28.5%).

5. 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 08	31 Dec 07	30 Jun 08
Profit /(Loss) after taxation	1,971,274	(310,000)	(994,419)
Weighted average number of shares	27,751,215	27,708,503	27,708,503
Dilutive effect of share options	3,170,850	3,213,562	3,213,562
Number of shares for diluted earnings per share	30,922,065	30,922,065	30,922,065
Basic earnings/(loss) per share	7.10p	(1.12)p	(3.60)p

6. Exchange gains

The Company routinely hedges all material currency exposures. The Group has significant Euro receivables arising from the HYLAS project with ESA which form cash flow hedges against future Euro payables to Astrium. The exchange gain on these receivables is recognised in operating results under other operating income. In addition, Avanti hedged the US$ payable to SpaceX. The gain arising on hedging the US$ and derivatives is recognised below the operating results and is separately disclosed.

	Unaudited		Unaudited	Audited
	Half year		Half year	Year ended
	31 Dec 08		31 Dec 07	30 Jun 08
Exchange gain on receivables	956		409	589
		956	409	589
Derivative gain		1,159	-	119
Exchange gain on financing dollars		2,490	-	-
		3,649	-	119
Total exchange gain recognised in the income statement		4,605	409	708

  

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES 

The directors' confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

The directors of Avanti Communications Group plc are listed in the Avanti Communications Group plc Annual Report for 30 June 2008. A list of current directors is maintained on the Avanti Communications Group plc website: www.avantiplc.com.

By order of the Board

David Williams

Chief Executive

 2 February 2009

Nigel Fox

Finance Director

2 February 2009

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