AVN.L Regulatory News (AVN)

AVANTI COMMUNICATIONS GROUP PLC

Q3 2016 Trading Update

Quarterly growth momentum continues

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 trading update for the period ended 31 March 2016.

Highlights

· Third quarter revenue was $19.5m representing 14.7% growth versus the second quarter on a constant currency basis

· Full year guidance re-affirmed and underpinned by strong contract win momentum

· Period end cash balance was $122.4m

· HYLAS 4 remains on target for launch with early pre-sales already signed

Trading overview

Third quarter revenue was $19.5m, representing sequential growth over the previous quarter of 14.7% on a constant currency basis. EBITDA was $0.4m due to the growth in revenue above the Group's largely fixed cash cost base.

Order wins were strong in the third quarter, with all material customer renewals completing. In addition, Avanti won an important new contract to provide connectivity to 4G cellular base stations in the UK with EE, post the quarter end. This demonstrates that in the highest resilience and quality end of the market Avanti has clear advantages. Our backhaul proposition is gaining significant traction now with several new major networks around EMEA with early stage projects installed or contracting with Avanti.

Market demand for High Throughput Ka band satellite capacity across EMEA is strong. Avanti continues to secure new high quality customers, particularly in the large telco and government sectors, where sales cycles are long but contract value is high. This success is being driven by either migration from more expensive and lower capability legacy systems; or the ability of high quality Ka band networks to grow the market for new satellite applications. As a result, the sales pipeline for the current fleet is strong and is expected to result in ongoing increases in the utilisation of those satellites.

Marketing of Avanti's new capacity is also progressing well. The investment that Avanti has made in improving and expanding the sales force to prepare for the new launches is beginning to generate strong returns. The first pre-sales on HYLAS 4 were achieved in the third quarter to existing customers and sales discussions with key target customers in new markets are well advanced; both with existing customers expanding into new markets and new customers buying for the first time.

Top-20 Customer Bandwidth Revenue Growth was 59.0% on a constant currency basis. This metric helps to track Avanti's growth trajectory from core service sales, excluding non-recurring items. It is calculated by comparing the revenues from Avanti's current leading customers on a last 12 month basis to the 12 months preceding that.

Average Fleet Utilisation was within the 25% to 30% range during the third quarter, having entered into this range during the second quarter. This metric helps to track capacity uptake and gives an indication of revenue potential when Avanti's fleet is mature. It is calculated by dividing average utilised forward capacity by total available capacity for the fleet of in-service satellites.

Contracted backlog was $402.0m, having been impacted by the translation of Sterling and Euro based contracts into the Group's reporting currency. This metric does not capture the expected growth from Avanti's many framework contracts.

Fleet expansion

Avanti's capacity expansion programme is progressing in accordance with expectations. The 3GHz HYLAS 2-B steerable beam is expected to enter into service during the current financial year, offering enhanced coverage of Central Europe.

Avanti's HYLAS 4 satellite remains on-track for launch in the first calendar quarter of 2017. This large satellite will more than triple our fleet capacity with no material increase in cost base. Early signs from the pre-sales campaign are positive. We have taken several orders for HYLAS 4 capacity and demand in West Africa appears strong across all sectors. HYLAS 4 is key to Avanti because it completes coverage of Africa, and our customers are increasingly multinational and many want a scaled international offering from a single provider. It also uses new technology to generate more efficiency, which will continue to increase value for money for customers. Work on the smaller HYLAS 3 satellite, which is a hosted payload on a European Space Agency space craft, is progressing, with Avanti's payload substantially finished, awaiting the completion of the spacecraft.

Balance sheet

Period end cash was $122.4m. Avanti has additional consented credit capacity of $71.0m. As planned, the Group has made good progress towards securing additional liquidity. Several different facilities have been offered and the most attractive is in documentation.

Current trading and outlook

Guidance for approximately 50% growth in continuing business revenue on a constant currency basis in the full 2016 financial year is re-affirmed. This guidance is underpinned by the strong and ongoing contract win momentum, with an element of revenue that we had expected to be recognised in the third quarter, moving into Q4.

The medium-term outlook is positive, with in-service capacity due to increase by more than threefold before the end of the next financial year. A combination of increasing utilisation on the existing fleet, revenues from the new capacity and Avanti's largely fixed cash cost base is expected to result in very strong cash generation as the business matures.

David William's, Avanti's CEO said:

"Avanti is making good progress. We are seeing significant sales momentum on our existing fleet from the best quality customers. We are now months away from the launch of HYLAS 4. Avanti is currently carrying the costs associated with this large new satellite, both in terms of corporate overhead and debt on the balance sheet, with the corresponding revenue benefit to flow in 2017. HYLAS 4 will triple the satellite capacity of the company and so it should have a transformational effect on the business. We are intensely focused on increasing utilisation of our existing capacity and driving sales on HYLAS 4, such that we will see a very significant growth in revenue in the medium-term with a de minimis increase in Avanti's cash cost base."

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