frontcover 10/11/07 3:54 PM Page 1
Avanti Communications plc
74 Rivington Street
London
EC2A 3AY
Tel: +44 (0)20 7749 1600
www.avanti-communications.com
Avanti Co
Annual Report
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contents
officers and professional advisers
chairman's statement
chief executive's report
directors' report
finance and operating review
corporate governance report
statement of directors' responsibilities
independent auditors' report
consolidated income statement
consolidated balance sheet
company balance sheet
consolidated cash flow statement
consolidated statement of changes in equity
notes to the accounts
notice of annual general meeting
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officers and professional advisers
Chairman
Chief Executive
Chief Technology Officer
Group Finance Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Directors
F E J G Brackenbury CBE
D J Williams
D J Bestwick
N A D Fox
M J Desmond
C R Vos
D A Foster
W P Wyatt
Secretary
N A D Fox
Registered office
74 Rivington Street
London
EC2A 3AY
Bankers
HSBC Bank Plc
70 Pall Mall
London
SW1Y 5EZ
Auditors
Kingston Smith LLP
Devonshire House
60 Goswell Road
London
EC1M 7AD
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chairman’s statement
I have great pleasure in presenting Avanti Communications Group plc's
results for the year ending 30 June 2007, a transformational year for
our business. Avanti was de-merged from its former parent company on
16 April 2007 and there is now no corporate connection between the
two companies.
Avanti is now a focused Fixed Satellite Services operator, with
complementary Network Services and Consultancy divisions which will
continue to make a small contribution; but the success of the Company
rests in its exploitation of Space assets.
The results are presented here on a pro-forma basis as if Avanti had traded
independently for the whole period. Pro-forma numbers for 2006 are
presented for comparison.
Key highlights
The Company performed in line with market expectations and met key
milestones. Avanti is currently developing the infrastructure required to
deliver its satellite operator strategy. Although we have small revenue
lines from the Consultancy and Networks Services divisions, our results are
and will continue to be dominated by the Space activities which, as
anticipated, required heavy investment during the year. Our focus is now
on generating a large backlog of contracted revenue for future periods
which will generate profit and cash flow after the launch of HYLAS in March
2009, and we expect to see contracts flow this year.
Revenue
£2.6 million
(2006: £9.7 million)
Profit before tax
£20.2 million*
(2006: £6.3 million)
Profit after tax
£21.1 million*
(2006: £5.7 million)
Closing cash balance
£9.7 million
(2006: £11.4 million)
Since I last wrote to you, the Company has achieved a number of key
milestones:
• It completed a £32m debt financing - the first time a European satellite
operator has raised non-recourse debt for the construction phase of its
first satellite - a real milestone for our industry. This debt gives us long
term security as the cash has been fully drawn down, no interest or
principal payments are due until the end of the seven year term and the
covenant structure in the early phase is light.
• It has successfully managed the satellite procurement programme to
contracted budgets and schedules.
• It secured a launch at advantageous pricing for HYLAS for 31 March 2009.
• It secured the use of two new orbital positions which will enable the
launch of new satellites to provide Ka band data services to cover Africa,
Middle East and Asia.
* includes exceptional credit of £23.3 million.
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chairman’s statement (continued)
• It completed the de-merger with very little disruption to ordinary
trading activities.
• It deployed its DVB-RCS high speed data services (using temporary leased
capacity) into the market with full commercial launch, swiftly securing
significant business.
I should like to pay tribute to our executive team, led by our Chief
Executive, David Williams, for their enormous energy and creativity which
gives the Company an edge over our competitors. I also welcome Nigel Fox,
who joined the Company as Finance Director on 18 June 2007.
It is increasingly clear that the satellite market is exhibiting a shortage of
capacity and rising demand which is well addressed by Avanti's technology
and business model. Satellite businesses are highly scalable, and we expect
the Company to expand significantly during the coming year. We ended
August with £45m cash in the bank and HYLAS fully funded, a promising
sales pipeline, and new opportunities for international growth. I look
forward with excitement to reporting to you again at the end of what I am
sure will be another highly successful period.
John Brackenbury CBE
Chairman
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Avanti:
corporate
data networks
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chief executive’s report
This was a year of
enormous change for
Avanti which has emerged
with a business in
excellent shape to realise
its very high ambitions.
Introduction
This was a year of enormous change for Avanti which has emerged with a
business in excellent shape to realise its very high ambitions. Our
operations suffered no disruption from the intensive corporate finance
activities of the de-merger and subsequent debt fund raising. I am pleased
to report that our financial and operational performance during the year
was consistent with market expectations. We have a team of highly skilled
and motivated staff, who are now implementing a very clear strategy in
market conditions which strongly favour us.
Business overview
The Company consists of three divisions, which are highly complementary:
Space, Network Services and Consultancy.
Space
Space will be the key driver of revenue and profit growth for Avanti. We
own the rights to use mainly Ka band and some Ku band spectrum in areas
across the globe, including Latin America, Europe, Africa, Middle East,
Central Asia and India. We have our first satellite, called HYLAS, under
construction by Astrium, part of EADS. The satellite procurement is
proceeding smoothly, passing a number of key milestones during the year.
We expect this satellite to launch on 31 March 2009. The satellite will use
eight Ka band spot beams and one Ku band pan European beam to deliver
the equivalent of forty 36MHz transponders.
Avanti's target customers are companies which need satellite
bandwidth to transport data from point to point. These fall into four
general categories:
• Wholesale video distribution
• Corporate data networks
• Broadband service providers
• Military and Homeland Security
We have begun the process of selling capacity on HYLAS - whilst it is not
typical in our industry to have a high percentage of a satellite pre-sold
during construction phase, our current pipeline leads us to conclude that
we will generate some significant pre-sales contracts before launch. We
currently have a pipeline of £168m potential HYLAS business. Potential
business is only recorded to the pipeline once an approved proposal is
submitted and negotiations have commenced.
Avanti is deploying disruptive new Ka band satellite technology which
delivers both cost and quality advantages over the existing market. Ka
band is a higher part of the frequency spectrum than has traditionally been
used around the world for television and telecommunications. Our ability
to use Ka band frequency has only emerged recently with advances in
electronics. Avanti's technology lowers the cost of satellite capacity whilst
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also increasing the quality - for example enabling customers to send data
up to the satellite from inexpensive 60cm dishes at 8Mb per second.
The incumbent satellite operators have high investment in fleets of Ku band
technology, so will not change to Ka band quickly. We do expect to see
other companies begin to adopt our technology gradually, but our industry
is relatively conservative and slow to move, so we expect to have a window
of opportunity for long enough to become firmly established around
the world.
Although we have just one satellite under construction to cover Europe, we
recently acquired satellite spectrum in new orbital positions which will
enable us to provide the same products in Latin America, Africa, Middle
East and Asia, in addition to Europe.
Our market opportunity has strengthened since we began the project.
There is clear evidence in market research reports and in the recent public
statements of our competitors that capacity is very scarce and demand is
strong and that as a result pricing is rising. These trends are set to
continue, and given Avanti's technology and price advantage, the Company
is very well positioned.
Network Services
Avanti already offers some data communications services using a small
amount of satellite capacity which it has leased until its first satellite,
HYLAS is launched in 2009. We are doing this for two reasons. Firstly it
gives us an opportunity to understand in relatively small scale the
operational parameters our customers for HYLAS capacity will work with.
Secondly it allows us to build up a base of resellers and agents for some of
our products which can be transferred later to HYLAS with an uplift in
quality and value for money.
Consultancy
Avanti uses some of the scientists and engineers who initiated the HYLAS
programme to offer advice to government and private sector clients on
satellite technology research, development and exploitation. We have a
significant presence within this industry and are currently working on
projects in navigation and earth observation as well as communications.
We expect to grow this cash generative business without the need for
further investment.
Space Strategy
Since our Space group is the driver of future value and operates in an
unfamiliar industry for most observers our strategy merits some detailed
description.
Most Fixed Satellite Service operators (as distinct from Mobile Satellite
Service operators) are infrastructure providers rather than the suppliers of
services to end users. Most telecommunications or television companies do
not own or operate their own satellites. They buy transmission services,
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chief executive’s report (continued)
in the form of long term transponder leases from specialised Fixed Satellite
Service operators, of whom there are only around forty in the world. There
are a number of advantageous market trends which, we believe underpin
the large scale of Avanti's opportunity:
• Satellite spectrum is scarce
There are some physical and regulatory limitations to the amount of
satellite capacity which is potentially available. In that part of the
frequency spectrum which is used mainly in Europe, called Ku band, there
is very little available capacity remaining. This is mainly because Europe's
many different national and language groupings have many different
satellite television offerings, which consume far more satellite capacity
than is seen on continents with larger single language populations. The
demand for satellite data services is also growing very rapidly, spurred on
largely by the increasing complexity of services one can transmit over a
telecoms link, such as real time or downloaded video communications.
• Data customers are being ‘crowded out’
The established customers for television capacity are unlikely to move large
scale existing customer bases to new orbital positions because of the
disruption and cost of re-pointing satellite dishes. Therefore they are less
sensitive to price increases and in the current tight market transponder
prices in those positions used for Direct to Home (DTH) television services
have risen as high as €5m per annum. This, and the knock on effect to
other positions, mean that the customers for data capacity (who typically
are price sensitive and do not have dish inertia) are facing steep price
rises which are not supportable - they are being “Crowded Out” of the
bandwidth market. The Crowding Out effect is also being observed in Asia,
the Middle East and Africa and most satellite operators are reporting high
utilisation rates.
• HYLAS can compete on price and quality
Price advantages for HYLAS are resulting in strong pipeline of potential
sales. However, the unique design of HYLAS also means that it offers much
higher power/data rates than the legacy satellite technology. Thus Avanti
can compete on both price and quality simultaneously. Sales lead times in
the satellite industry are long because of the complexity and high value of
transponder leases, but with almost a year's marketing behind us, we are
confident that pre-sales contracts will flow soon. We expect to sell out the
capacity on HYLAS fairly soon after launch, at which point the creation of
additional capacity would be relatively easy to finance through project
finance debt which maximises the value of equity.
• More satellites will be financed by customer commitments
The advantage that Avanti can seize from the Crowding Out effect is likely
to last for several years, but eventually other operators will deploy larger
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volumes of Ka band satellites. We therefore regard it as essential to
populate our new orbital positions with Ka band capacity as soon as
possible, in order to gain or extend first mover advantage geographically.
In order to do this we are pursuing a variety of customer/partnership
negotiations which if successful will result in large capacity sales which in
turn will help us to efficiently finance more satellites with project finance
debt. We also have what we regard to be “Orphan” Ku band spectrum
over Europe. That is we have access to enough of the highly valued and
very scarce Ku band spectrum to occupy one large satellite, but it is not
core to our business plan or proposition and so we are seeking to
monetise this through partnership to put a Ku band satellite into orbit
as soon as possible.
Outlook
Whilst our financial results for the year are in line with market
expectations, they are relatively immaterial in the context of our business
plan. The milestones we achieved during the year are very significant,
and we now have a very clear strategy and the people and resources to
execute it. Avanti is Europe's first ever Entrepreneur-created Fixed
Satellite Services operator, and having broken into a market dominated by
multinational or quasi-governmental companies, we now have the
corporate structure, focus and resources required to take advantage of
what increasingly looks like an outstanding and rare market opportunity. I
expect the scale and value of that opportunity to be well illustrated during
the coming year with the pre-selling of satellite capacity. This is an
exciting time to work at Avanti Communications and I look forward to
reporting significant progress in delivering our vision next year.
David Williams
Chief Executive
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directors’ report
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The directors have
pleasure in submitting
their annual report
together with the
audited financial
statements for the year
ended 30 June 2007.
Principal activities and review of the business
Avanti Communications Group plc (ACG) was incorporated on 1 March 2007
in order to facilitate the de-merger of the satellite networks business from
its former parent (Avanti Screenmedia Group PLC - ASM). The de-merger
was effected by Avanti Screenmedia declaring a special dividend, equal to
the book value of the Company's shareholding in Avanti Communications
Infrastructure Limited (ACIL), which was satisfied, in specie, by ASM
transferring to ACG the whole of the share capital in ACIL. The de-merger
was concluded on 15 March 2007 and ACG was admitted to AIM on 16 April
2007. The principal activity of the Company is the provision of fixed
satellite services and telecommunication consultancy and engineering.
Business review and key performance indicators
A comprehensive business review is covered in the finance and operating
review on pages 14 and 15.
Results and dividends
The results for the year ended 30 June 2007 are shown on page 24. No
equity dividend was paid in the year ended 30 June 2007 (2006 - £nil). No
final dividend is proposed at the year end (2006 - £nil). The profit for the
year transferred to reserves was £21.1 million (2006 - £5.7 million).
Directors
The directors who served during the year were as follows:
F E J G Brackenbury CBE
D J Williams
D J Bestwick
N A D Fox
D A Foster
M J Desmond
C R Vos
W J Wyatt
appointed 16 April 2007
appointed 14 March 2007
appointed 14 March 2007
appointed 29 June 2007
appointed 16 April 2007
appointed 16 April 2007
appointed 16 April 2007
appointed 16 April 2007
The Board of Directors:
(standing left to right)
Richard Vos, William
Wyatt, Alan Foster, David
Bestwick, Nigel Fox and
Mick Desmond;
(seated) David Williams
and John Brackenbury
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Avanti:
‘everywhere’
broadband
internet access 12
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directors’ report (continued)
Auditors
Kingston Smith LLP were appointed the first auditors and have indicated
their willingness to continue in office and in accordance with the provisions
of the Companies Act 1985 it is proposed that they be re-appointed auditors
to the company for the ensuing year.
Directors' responsibilities
The directors are responsible for preparing the financial statements in
accordance with applicable law and United Kingdom Generally Accepted
Accounting Practice and International Financial Reporting Standards.
Company law requires the directors to prepare financial statements for
each financial year which give a true and fair view of the state of affairs
of the company and of the profit or loss of the company for that period. In
preparing those financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that the financial statements comply
with the Companies Act 1985. They are also responsible for safeguarding
the assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Statement of disclosure to auditor
(a) so far as the directors are aware, there is no relevant audit information
of which the company's auditors are unaware, and
(b) they have taken all the steps that they ought to have taken as directors
in order to make themselves aware of any relevant audit information
and to establish that the company's auditors are aware of that
information.
Approved by the Board of Directors
and signed on behalf of the Board
Nigel Fox
Secretary and Group Finance Director
8 October 2007
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finance and operating review
Accounting Standards - IFRS
The first period for the adoption of International Financial Reporting
Standards (IFRS) was the financial year ended 30 June 2007, reported on
herein. The impact on the Group was limited. The area most affected was
that of deferred taxation where there is now full provision for
the deferred tax asset arising from the operating losses sustained by
the business.
The establishment of share option plans after the year end will mean that
there will be a further impact on the results due to IFRS during the
forthcoming period. It should be emphasised that although the introduction
of IFRS had some impact on the presentation of the primary financial
statements and the results of the Group, it does not change the economics,
risk profile or cash flow of the business itself.
Group trading summary
Revenue
At present the business derives revenues from two of its three divisions,
Network Services and Consultancy. The Space division will derive revenue
once the Hylas satellite has been successfully launched, although we are
now accepting orders.
Revenue from the Network Services division arises from satellite
telecommunications services including broadband, internet access,
corporate data networks and video contribution services. It operates a DVB-
RCS hub and uplink and has a transponder lease on an existing satellite.
Once Hylas has been launched the services using the leased capacity will
be transferred to Hylas.
The business has an established consulting business which provides
technology study and development services to government and European
Agencies. The consulting business is currently engaged in a number of
contracts exploring new applications for satellite technology including
navigation and disaster monitoring.
We currently have an unweighted pipeline of £164 million (weighted £28
million) and a committed backlog of £13 million.
We calculate a “pipeline” of potential sales monthly and will be reporting
this regularly, along with a “backlog” of contracted revenues for future
periods. Potential sales only appear in our pipeline if the transaction has
been the subject of an approved proposal and negotiations have
commenced. We then apply weightings to indicate the probability of
ongoing negotiations to a successful conclusion.
Risks
There are four key risks associated with the HYLAS project: (i) raising
sufficient funds for the completion of the project; (ii) procurement of the
launcher; (iii) placing of insurance and (iv) a successful launch. The project
debt was raised in July 2007 and the contract for the launcher was
concluded with SpaceX in September within budget. Our insurance
programme is well advanced and should be concluded no later than the end
of January 2008. At that point the focus will be on securing sales to utilise
the available capacity.
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finance and operating review (continued)
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Profits
The operating profit for the period was £19.6 million (2006: £5.7 million).
This included an exceptional profit of £23.3 million following the agreed
write off of the amounts owed to Avanti Screenmedia Group.
Excluding the exceptional credit the loss before taxation was £3.1 million
(2006: profit £6.3 million).
Taxation
The exceptional profit arising from the write off of the loan account is
non taxable income. There is therefore a tax credit to the profit and loss
account of £898,000 (2006: charge : £513,000).
Creditor payment policy
The Group endeavours to pay all suppliers within terms.
Shareholder returns
The earnings per share are calculated on a pro-forma basis using the same
weighted average number of shares for both 2006 and 2007 (see note 9).
Post Balance Sheet Events
a. completion of debt financing
Avanti signed a facility agreement with a syndicate of lenders to borrow
£32m over a term of seven years, which completes the financing
requirements for its HYLAS project. Interest is charged at 10.5% above
LIBOR and accrues to be repaid at maturity as a payment in kind. The
facility can be redeemed after 30 months. The syndicate of lenders
comprises funds advised or managed by Avenue Capital Group, funds
advised by JO Hambro Capital Management, Caledonia Investments plc
and Frost City Limited, an entity controlled by Mr Robert Tchenguiz. In
addition, and as part of the overall financing package, funds managed by
Avenue Capital Group will also subscribe for 2,000,000 new ordinary shares,
representing approximately 7.2% of the issued share capital of the
Company, at 200p per share.
b. issue of new shares
In addition to the 2,000,000 shares issued to Avenue Capital Group as part
of the debt facility, the Group issued 3,213,562 shares in July 2007 to its
Employee Benefit Trust. The Trustees of the EBT have waived their rights to
vote and to receive dividends. In accordance with Generally Accepted
Accounting Principles these shares are excluded from the calculation of
earnings per share.
c. establishment of share option plans
At the time of the de-merger the Company indicated its plans to issue staff
with share options following the lapse of previous options over the former
parent. These options were granted during July 2007.
15
Nigel Fox
Group Finance Director
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Avanti:
direct-to-home tv
16
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corporate governance report
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Introduction
The Group is listed on
AIM. Although the rules
of AIM do not require the
Company to comply with
the Combined Code on
Corporate Governance
(‘the Code’) the
Company fully supports
the principles set out in
the Code and will seek to
comply wherever
practical, given both the
size and resources
available to the
Company. Details are
provided below of how
the Company applies
those parts of the Code
which it believes to be
appropriate.
The board
The Company has appointed non-executive directors to bring an
independent view to the board and to provide a balance to the executive
directors.The board of directors comprises three executive directors and
four non-executive directors one of whom is the chairman. The board
considers that each of the non-executive directors is independent within
the meaning of the Code. The board meets at least four times per year
and receives a board pack comprising individual reports from each of the
executive directors and members of the senior management team,
together with any other material deemed necessary for the board to
discharge its duties. The board has responsibility for formulating, reviewing
and approving the Group’s strategy, budgets, major items of expenditure
and acquisitions.
Board committees
The Board has established two committees: audit and remuneration both
having written terms of delegated responsibilities. Each is chaired by a
different non-executive director. A copy of each committee’s terms of
reference can be found at the Company’s website www.avanti-
communications.com
Audit committee
The audit committee consists of W Wyatt, J Brackenbury and R Vos and is
chaired by W Wyatt. It meets at least twice a year and is responsible for
ensuring that the appropriate financial reporting procedures are properly
maintained and reported on and for meeting the auditors and reviewing
their reports relating to the Group’s accounts and internal control systems.
The committee also receives all internal operational review reports.
Remuneration committee
The remuneration committee consists of A Foster, J Brackenbury, and W
Wyatt and is chaired by A Foster. It meets at least twice a year and is
responsible for reviewing the performance of the executive directors and
other senior executives and for determining appropriate levels of
remuneration.
Shareholder relations
The Company meets with institutional shareholders and analysts as
appropriate and uses its website to encourage communication with private,
existing and prospective shareholders. Avanti Communications Group plc
welcomes feedback from investors about its published reports and website.
Please address your feedback to our investor relations team by email to
to Avanti
investor@avanti-communications.com or
Communications Group plc, 74 Rivington Street, London EC2A 3AY.
in writing
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Avanti:
wholesale
video
distribution
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corporate governance report (continued)
Internal control and risk management
The Group operates a system of internal control and intends to develop and
review that system in accordance with the guidance published by the
Institute of Chartered Accountants in England and Wales. The internal
control system is designed to manage rather than eliminate the risk of
failure to achieve business objectives. The board is responsible for the
system of internal control and for reviewing its effectiveness. It can only
provide reasonable, but not absolute, assurance against material
misstatement or loss.
The board operates a formal process of risk assessment and reporting. Each
major business unit carries out formal risk assessments annually and
regularly updates those during the year. Reports on the assessments and
related mitigation actions of all significant risks are provided to the board.
The Group does not have an internal audit function due to the small size
of the Company’s administrative function, the high level of director review
and authorisation of transactions. However, the Company undertakes a
programme of operational reviews designed to visit all major businesses
on a regular basis. The finance director is responsible for that programme
and its reporting to the audit committee.
The board recognises that an essential part of its responsibility is the
effective safeguarding of assets, the proper recognition of liabilities and
the accurate reporting of results. The Group has a comprehensive system
for regular reporting to the board. This includes an annual planning and
budgeting system with budgets approved by the board. The financial
reporting system compares against budget and prior year and reconsiders
its financial year forecast on a monthly basis. The board has established a
formal policy of authorisation setting out matters which require its
expressed approval and certain authorities delegated to the executive
directors.
In compliance with AIM rules the Company has established a policy and
share dealing code relating to dealing in the Company’s shares by directors,
employees and connected persons.
The Company maintains appropriate insurance cover in respect of legal
actions against directors as well as against material loss or claims against
the Group, and reviews the adequacy of cover regularly.
There were no notifiable environmental impacts at any Avanti
Communications Group site during the financial year.
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statement of directors’ responsibilities
United Kingdom company law requires the directors to prepare financial
statements for each financial period which give a true and fair view of the
state of affairs of the Company and Group as at the end of the financial
period and of the profit or loss of the Group for that period. In preparing
these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed; and
• prepare the financial statements on a going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and Group and to enable them to ensure that the financial
statements comply with the Companies Act 1985. They are also responsible
for the Company’s and Group’s system of internal control, for safeguarding
the assets of the Company and Group and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Signed on behalf of the
Board of Directors
20
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independent auditors’ report to the shareholders
of Avanti Communications Group plc
We have audited the group and parent company financial statements of
Avanti Communications Group Plc for the year ended 30 June 2007, which
comprise the Group Income Statement, the Group and Company Balance
Sheets, the Group Statement on Changes in Equity, the Group Cash Flow
Statement, and related notes. These financial statements have been
prepared under the historical cost convention and the accounting policies
set out therein.
This report is made solely to the company's members, as a body, in
accordance with Section 235 of the Companies Act 1985. Our audit work
has been undertaken for no purpose other than to draw to the attention
of the company's members those matters which we are required to include
in an auditor's report addressed to them. To the fullest extent permitted by
law, we do not accept or assume responsibility to any party other than the
company and company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Respective Responsibilities of Directors and Auditors
The Directors' Responsibilities for preparing the Annual Report and the
financial statements in accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union are
set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a
true and fair view and are properly prepared in accordance with the
Companies Act 1985. We also report to you whether in our opinion the
information given in the Directors' Report is consistent with the financial
statements. The information given in the Directors’ Report includes that
specific information presented in the Finance and Operating Review that
is cross referred from the Business Review section of the Directors’ Report.
In addition we report to you if in our opinion the company has not kept
proper accounting records, if we have not received all the information
and explanations we require for our audit, or if information specified by
law regarding directors' remuneration and transactions with the company is
not disclosed.
We read the Directors' Report and consider the implications for our report
if we become aware of any apparent misstatement or material
inconsistencies with the Group financial statements. Our responsibilities do
not extend to any other information.
Basis of Audit Opinion
We conducted our audit in accordance with International Standards on
Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit
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includes examination, on a test basis, of evidence relevant to the amounts
and disclosures in the financial statements. It also includes an assessment
of the significant estimates and judgments made by the directors in the
preparation of the financial statements, and of whether the accounting
policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud
or other irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the financial
statements.
Opinion
In our opinion:
• the group financial statements give a true and fair view, in accordance
with IFRSs as adopted by the European Union, of the state of the group's
affairs at 30 June 2007 and of its profit for the year then ended;
• the company financial statements give a true and fair view, in accordance
with IFRSs as adopted by the European Union, of the state of the
company's affairs at 30 June 2007;
• the financial statements have been properly prepared in accordance with
the Companies Act 1985; and
• the information given in the directors' report is consistent with the
financial statements.
Kingston Smith LLP
Chartered Accountants and Registered Auditors
Devonshire House
60 Goswell Road
London
EC1M 7AD
8 October 2007
22
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Avanti:
military
communications
23
Annual report - 1st half-3.qxd 10/19/07 11:20 AM Page 24
consolidated income statement
year ended 30 June 2007
Year
ended
30 June
2007
£’000
Year
ended
30 June
2006
£’000
2,562
9,720
(2,763)
(1,124)
(201)
8,596
(3,562)
(2,848)
23,343
-
19,580
5,748
715
(99)
20,196
898
21,094
578
(68)
6,258
(513)
5,745
21,094
5,745
82.51p
21.30p
Notes
2
4
6
7
8
9
Revenue
Cost of sales
Gross Profit - continuing activities
Operating expenses
Other operating income
Profit from operations
Finance income
Finance expense
Profit before tax
Income Tax Expense
Profit for the year
Attributable to:
Equity holders of the parent
Basic and diluted earnings per share (pence)
There are no recognised gains or losses other than the profit for the financial year.
The notes on pages 29 to 42 form part of the financial statements.
24
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 25
consolidated balance sheet
As at 30 June 2007
ASSETS
Non-current assets
Property, plant and equipment
Total non-current assets
Current Assets
Inventories
Trade and other receivables
Other assets
Deferred tax assets
Cash and short term deposits
Total current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables
Borrowings
Total Current liabilities
Non-current liabilities
Deferred tax liabilities
Borrowings
Total non-current liabilities
Total liabilities
Equity attributable to equity holders of the
parent company
Share capital
Share premium
Retained earnings
Total equity
Total liabilities and equity
Approved on behalf of the Board of Directors
8 October 2007
25
Notes
10
14
15
16
18
20
17
19
18
19
21
22
22
30 June
2007
£’000
30 June
2006
£’000
20,036
10,296
20,036
10,296
31
1,238
4,526
823
10,651
-
11,061
3,818
-
11,531
17,269
26,410
37,305
36,706
5,933
1,277
27,282
429
7,210
27,711
439
968
513
888
1,407
1,401
8,617
29,112
257
-
28,431
28,688
-
180
7,414
7,594
37,305
36,706
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 26
company balance sheet
As at 30 June 2007
30 June
2007
£’000
257
257
257
257
257
257
Notes
12
ASSETS
Non-current assets
Investment
Total non-current assets
Total assets
LIABILITIES AND EQUITY
Equity attributable to equity holders of the parent company
Share capital
21
Total equity
Total liabilities and equity
Approved on behalf of
the Board of Directors
8 October 2007
26
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 27
consolidated cash flow statement
for the year ended 30 June 2007
Cash flow from operating activities
Profit from operations before taxation
Net foreign exchange (gain)/loss
Depreciation and amortisation of non-current assets
Movement in working capital
(Increase)/decrease in stock
Decrease/(increase) in debtors
(Increase) in other assets
Increase in trade and other payables
Cash generated from operations
Interest received
Net income tax deferred
30 June
2007
£’000
30 June
2006
£’000
Notes
19,580
(1)
565
20,144
(31)
9,526
(1,605)
3,076
31,110
615
898
5,748
-
467
6,215
38
(10,046)
(417)
1,779
(2,431)
510
-
Net cash generated / (used) by operating activities
32,623
(1,921)
Cash flows from investing activities
Payments for property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Intercompany movement - following de-merger
Repayment of borrowings
Net cash used in financing activities
(10,305)
(9,655)
(10,305)
(9,655)
430
(24,128)
(385)
883
22,299
-
(24,083)
23,182
Net (decrease)/increase in cash and cash equivalents
(1,765)
11,606
Cash and cash equivalents at the beginning of the financial year
11,439
(167)
Effect of exchange rate changes on the balance of the cash held
in foreign currencies
1
-
Cash and cash equivalents at the end
of the financial year
20
9,675
11,439
27
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 28
consolidated statement of changes in equity
Year ended 30 June 2007
2006
At 1 July 2005
Profit for the year
At 30 June 2006
2007
At 1 July 2006
Profit for the year
Intercompany movement following de-merger
At 30 June 2007
Share
capital
£’000
Profit and
Share loss account
reserves
premium
£’000
£’000
Total
reserves
£’000
-
-
-
-
-
257
257
180
1,669
1,849
-
5,745
5,745
180
7,414
7,594
180
7,414
7,594
-
21,094
21,094
180
(77)
-
-
28,431
28,688
28
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 29
notes to the accounts
Year ended 30 June 2007
Statement of compliance
The Group financial statements have been prepared in accordance with International Financial Reporting
Standards issued by the International Accounting Standards Board (IASB) and with those parts of the
Companies Act 1985 applicable to companies preparing their accounts under IFRS.
Basis of preparation
The financial statements have been prepared on the historical cost basis. The principal accounting policies
adopted in the preparation of the financial statements are set out below.
Going concern
The accounts have been prepared on a going concern basis which assumes that the Group will continue
in operational existence for the foreseeable future and has no intention of curtailing operations or
reducing activities.
Basis of consolidation
Where the company has the power, either directly or indirectly, to govern the financial and operating
policies of another entity or business so as to obtain benefits from its activities, it is classified as a
subsidiary. The financial statements presents the results of the company and its subsidiaries ("the group")
as if they formed a single entity. Intercompany transactions, balances, income and expenses are therefore
eliminated in full. The results of subsidiaries acquired during the year are included in the consolidated
income statement.
There are no minority interest in the net assets of the Group, and no goodwill arising on acquisition
of subsidiary.
The financial statements of subsidiaries are prepared for the same reporting year as the parent company
using consistent accounting policies.
Following the demerger in April 2007 the consolidated results for both 2006 and 2007 are shown as though
the group, in its current form, had always been in existence and have been consolidating using merger
accounting principles. This treatment has been adopted because following the restructuring there was
no change in the underlying control of the group and it has therefore been treated as a group
reconstruction.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group
and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received or receivable and represents amounts
receivable for goods and services provided in the normal course of business net of discounts, VAT , returns
and other similar allowances.
Consultancy contracts
Where the outcome of a contract can be estimated reliably, revenue and costs are recognised by reference
to the stage of completion of the contract activity at the balance sheet date, measured as the proportion
that contract costs incurred for the work performed to date bear to the estimated contract cost, except
where this would not be representative of the stage of completion.
Where the outcome of a consultancy contract cannot be estimated reliably, contract revenue is recognised
to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are
recognised as an expense in the period in which they are incurred. When it is probable that total contract
costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
Leased assets
Assets acquired under hire purchase or finance lease are capitalised in the balance sheet. Those held under
hire purchase contracts are depreciated over their estimated useful lives. The interest element of these
obligations is charged to the profit and loss account over the relevant period. The capital element of the
future payments is treated as a liability.
29
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 30
Leased assets (continued)
Operating lease payments are recognised as an expense on a straight-line basis over the lease term.
Contingent rentals are recognised as an expense in the period in which they are incurred.
Foreign currency
Transactions entered into by the group entities in a currency other than the currency of the primary
economic environment in which it operates (the "functional currency") are recorded at the rates ruling
when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rate
ruling at the balance sheet date. Exchange differences arising on the retranslation of unsettled monetary
assets and liabilities are similarly recognised immediately in the income statement.
The functional currency and the presentational currency of the Group is sterling.
Pension schemes
The employees have the option to establish their own pension scheme to which the Group will match
employee contributions up to a maximum amount. There is no liability to the group scheme, and there is
no on-going liability to the Group beyond the period that the contributions are made. The cost of such
contributions are charged to the income statement when incurred.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The charge for taxation is based on taxable profits for the year. Taxable profits differ from profit as
reported in the income statement because it excludes items of income and expenses that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to
the taxation authorities based on tax rates that have been enacted or substantially enacted by the balance
sheet date.
Deferred tax
Deferred tax is recognised on differences between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit, and is
accounted for using the balance sheet liability method.Deferred tax liabilities are generally recognised
for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that taxable profits will be available against which
those deductible temporary difference can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of
the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period
in which the liability is settled or the asset realised, based on tax rates that have been enacted or
substantially enacted by the balance sheet date. The measurement of the deferred tax liabilities and assets
reflects the tax consequences that would follow from the manner in which the Group expects, at the
reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when the group has a legally enforceable right to offset current
tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same
taxation authority on either the same taxable group company; or different group entities which intend
either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle
the liability simultaneously, in each future period in which significant amounts of deferred tax assets or
liabilities are expected to be settled or recovered.
30
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 31
notes to the accounts
Year ended 30 June 2007
Intangible Assets
Acquired brands and other intangible assets which are controlled through custody or legal rights and
could be sold separately from the rest of the business are capitalised, where fair value can be reliably
measured. Where intangible assets are regarded as having limited useful economic lives they are
amortised on a straight line basis over those lives. Where they are regarded as having indefinite useful
lives they are not amortised. Impairment reviews are carried out to ensure that intangible assets are not
carried at above their recoverable amounts. Any amortisation or impairment write downs are charged to
the profit and loss account. Amortisation is over a maximum of 20 years.
Property, plant and equipment
Fixtures and fitting are stated at cost less accumulated depreciation and any accumulated impairment
losses. Depreciation is provided so as to write off the cost or valuation of assets, other than assets under
construction, over their estimated useful lives using the straight-line method of four years.
Computer software
Network assets
Fixtures and fittings
Plant and machinery
Motor vehicles
Satellite in construction
25% per annum
25% per annum
25% per annum
25% per annum
25% per annum
Nil
The estimated useful lives, residual values and depreciation method are reviewed at each year end, with
the effect of any changes in estimate accounted for on a prospective basis. The gain or loss arising on
the disposal of assets is charged to the profit and loss account and is calculated as the difference between
the disposal proceeds and the carrying amount of the assets.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as
owned assets or, where shorter, the term of the relevant lease.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises all costs of purchase,
cost of conversion and other costs incurred in bringing the inventories to their present location
and condition.
Net realisable value is based on estimated selling price less any further costs expected to be incurred to
completion and disposal.
Trade receivables
Trade receivables are measured at initial recognition at fair value and are subsequently measured at
amortised cost using the effective interest rate method where the true value of money is material.
Appropriate allowances for estimating irrecoverable amounts are recognised in the Income Statement
where there is evidence that the asset is impaired. This impairment would be recognised within
administrative expenses.
Cash and cash equivalents
Cash and short term deposits in the balance sheet comprise of cash on hand and demand deposits, and
other short term highly liquid investments that are readily convertible into known amounts of cash and are
subject to an insignificant risk of change in value. For the purpose of the consolidated cash flow
statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost.
31
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 32
2 Revenue
Continuing operations
Revenue from the sale of goods
Revenue from the rendering of services
30 June
2007
£’000
30 June
2006
£’000
503
2,059
2,562
460
9,260
9,720
Turnover represents net invoiced sales of services provided and goods sold, net of value added tax.
The company derived £2,059,000, (2006 - £4,302,000) of its turnover from European countries outside
the United Kingdom.
3 Segment information
Business segment
Products and services within each business segment
The group's primary reporting format for reporting segment information is business segments. For
management purposes the group is organised into three major operating divisions - consultancy,
construction / operation of satellite and provision for satellite services.
Space
- satellite business selling Ku and Ka bandwidth on its Hylas satellite which will
be operational in July 2009
Network Services
- the provision of data communications services by satellite
Consultancy
- the provision of telecommunication consultancy and engineering services
Segment revenue
External sales
Inter-segment
Total
30 June
2007
£’000
30 June
2006
£’000
30 June
2007
£’000
30 June
2006
£’000
30 June
2007
£’000
30 June
2006
£’000
Space
Network Services
Consultancy
-
503
2,059
5,000
460
3,582
-
-
-
-
-
678
Consolidated revenue
-
503
2,059
2,562
5,000
460
4,260
9,720
Inter-segment sales are charged at amounts equal to competitive market prices for external sales of
similar goods.
32
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 33
notes to the accounts
Year ended 30 June 2007
Segment results
Continuing operations
Space
Network Services
Consultancy
Exceptional items
Profit/(Loss) before tax
Income tax expense
30 June
2007
£’000
30 June
2006
£’000
(1)
(1,341)
(1,805)
23,343
20,196
898
4,319
(35)
1,974
-
6,258
(513)
Profit/(Loss) for the year from continuing operations
21,094
5,745
Segment assets and liabilities
30 June
2007
£’000
24,516
2,588
17,567
(7,366)
Assets
Liabilities
30 June
2006
£’000
16,199
1,704
20,010
(1,207)
30 June
2007
£’000
(11,485)
(2,911)
(1,587)
7,366
30 June
2006
£’000
(12,295)
(2,028)
(15,996)
1,207
37,305
36,706
(8,617)
(29,112)
Space
Network Services
Consultancy
Inter-company
Consolidated
4 Operating expenses
Operating expenses
Staff costs (see note 5)
Depreciation of property, plant and equipment
Foreign exchange differences
Research and development costs written off as incurred
Operating lease expenses
Auditors’ remuneration - audit
- non audit services
30 June
2007
£’000
30 June
2006
£’000
596
566
(1)
5
-
26
-
247
467
-
-
-
19
-
33
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 34
5 Staff costs
The average number of employees, including the Directors, during the year ended 30 June 2007 was
49 (30 June 2006 - 47). The aggregate remuneration of all employees comprised:
Wages and salaries
Social security costs
Pension costs
The emoluments of the directors were as follows
Remuneration
Pension contributions
30 June
2007
£’000
2,094
204
48
30 June
2006
£’000
1,847
334
43
2,346
2,224
30 June
2007
£’000
30 June
2006
£’000
85
4
89
-
-
-
The emoluments of the highest paid director were £50,000 (2006 - £nil), including pension contributions
of £4,000 (2006 - £nil).
Pension contributions amounting to £4,000 (2006 - £nil) were made into personal pension schemes in
respect of three (2006 - two) of the Directors. The Directors only received emoluments from the time
of the demerger. Emoluments prior to that date are borne by the previous parent.
6 Other operating income
Inter-company debt repayment waived
30 June
2007
£’000
23,343
30 June
2006
£’000
-
Operating income relates to the write back of the inter-company loan due from ASG to ASM. The write
off has no cash flow effect.
7 Finance income
Interest on bank overdraft and loans
Interest on obligations under finance lease
Less: Interest revenue
Bank deposits
Other income
Net finance income
30 June
2007
£’000
30 June
2006
£’000
(60)
(39)
(99)
715
-
616
(58)
(10)
(68)
578
-
510
34
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 35
notes to the accounts
Year ended 30 June 2007
8 Income tax recognised in the profit and loss account
Deferred tax
Income tax on losses for the year
Total current tax asset
Deferred Tax
Deferred tax charge for the period
Tax on loss on operating activities
30 June
2007
£’000
30 June
2006
£’000
(904)
(904)
6
(898)
-
-
513
513
The reasons for the difference between the actual tax credit for the year and the standard rate of
corporation tax in the UK applied to losses for the year are as follows:
Profit from continuing operations
Tax effect on ordinary activities at 30% (2006 - 30%)
Effect of expenses not deductible in determining taxable profits
Effect of revenue that is exempt from taxation
Effect of deferred tax charged for the period
Effect of group relief
Effect of capital allowances in excess of depreciation
Tax losses brought forward
Income tax credit recognised in the profit or loss
9 Earning per share
Basic earnings per share
30 June
2007
£’000
30 June
2006
£’000
20,196
6,059
18
(7,002)
6
-
21
-
(898)
5,413
1,624
18
-
513
(1,130)
(471)
(41)
513
30 June
2007
pence
82.51p
30 June
2006
pence
21.30p
The calculation of basic and diluted earning per share is based on the earnings attributable to ordinary
shareholders divided by the weighted average number of shares in issue during the year. There is no
dilution to the earnings per share calculation required.
30 June
2007
£’000
30 June
2006
£’000
Profit for the year attributable to equity holders of the parent company
21,094
5,745
Weighted average number of ordinary shares for the purpose of
basic earnings per share (all measures)
25,708,503
25,708,503
35
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 36
10 Property, plant and equipment
Leasehold
Improvements
£’000
Computer
Software
£’000
Network
Assets
£’000
Fixtures
and
Fittings
£’000
Cost
Balance at: 1 July 2005
Additions
Balance at: 1 July 2006
Additions
Balance at 30 June 2007
Depreciation
Balance at: 1 July 2005
Charge for the year
Balance at: 1 July 2006
Charge for the year
Balance at 30 June 2007
Net Book Value
Balance at 30 June 2007
Balance at 30 June 2006
76
44
120
106
226
8
24
32
41
73
153
88
357
3
360
14
374
44
92
136
91
227
147
224
558
1,792
2,350
251
2,601
103
201
304
361
665
1,936
2,046
306
37
343
57
400
60
124
184
72
256
144
159
Plant
and
Satellite in
Machinery Construction
£’000
£’000
Total
£’000
1,459
9,655
11,114
-
7,779
7,779
162
-
162
-
9,877
10,305
162
17,656
21,419
136
26
162
-
162
0
0
0
0
0
351
467
818
565
1,383
-
-
17,656
20,036
7,779
10,296
At 30 June 2007 the Company held assets under finance lease agreements with a net book value of £1,424,000
(2006 - £816,000). Depreciation of £225,000 (2006 - £27,000) has been provided on these assets.
11 Profit of the parent company
As permitted by Section 230 of the Companies Act 1985, the profit and loss account of the parent Company is
not presented as part of these accounts. The parent company's profit after tax for the year ending 30 June 2007
amounted to £nil (2006 - £nil).
36
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 37
notes to the accounts
Year ended 30 June 2007
12 Investments
Company
Cost and net book value
As at 30 June 2007
13 Subsidiaries
Shares in
Subsidiary
undertakings
£’000
257
As at the end of the year the company held the following investments in subsidiary companies:
Name of subsidiary
Country of
incorporation
Proportion of
ownership
interest
Proportion of
voting power
held
Avanti Communications Limited
Avanti Space Limited
Avanti Broadband Limited
Avanti Communications Infrastructure
Company Limited
%
100
100
100
100
England
& Wales
England
& Wales
England
& Wales
England
& Wales
%
100
100
100
100
14 Inventories
Finished goods
30 June
2007
£’000
31
30 June
2006
£’000
-
The cost of inventories recognised as an expense during the period was £754,000 (2006 - £30,000).
37
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 38
15 Trade and other receivables
Trade receivables
Amounts owed by former group undertakings
16 Other assets
Prepayments
17 Trade and other payables
Trade payables
Amounts due to former group undertakings
Social security and other taxes
Other creditors
Accruals and deferred income
18 Deferred tax
Balance at 1 July 2006
Accelerated capital allowances
Unused taxable losses
Balance at 30 June 2007
Deferred tax balances are presented in the balance sheet as follows:
Deferred tax asset
Deferred tax liabilities
30 June
2007
£’000
1,238
-
1,238
30 June
2006
£’000
10,764
297
11,061
30 June
2007
£’000
30 June
2006
£’000
4,526
3,818
30 June
2007
£’000
30 June
2006
£’000
836
-
79
331
4,687
5,933
448
24,425
44
365
2,000
27,282
30 June
2007
£’000
30 June
2006
£’000
(513)
74
823
384
823
(439)
384
-
(513)
-
(513)
-
(513)
(513)
38
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 39
notes to the accounts
Year ended 30 June 2007
19 Borrowings
Secured at amortised cost
Bank loans and overdrafts (i)
Other loans
Finance lease liabilities (ii)
Current
Non-current
30 June
2007
£’000
30 June
2006
£’000
30 June
2007
£’000
30 June
2006
£’000
703
24
550
1,277
92
29
308
429
273
21
674
968
-
402
486
888
(i) The bank overdraft and loans are secured by a debenture over all assets of the company both
present and future.
(ii) Finance lease obligations are secured by retention of title to the related assets. The borrowings are
on fixed interest rate debt with repayment periods not exceeding 5 years.
20 Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents include cash in hand and at
banks net of outstanding overdrafts. Cash and cash equivalents at the end of the financial year as
shown in the cash flow statement can be reconciled to the related items in the balance sheet as
follows:
Cash and bank balances
Bank overdraft
Net cash and cash equivalents
30 June
2007
£’000
10,651
(976)
9,675
30 June
2006
£’000
11,531
(92)
11,439
Included in the cash balance is £7 million held in Escrow pending future HYLAS deliverables by the
Company.
39
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 40
21 Share capital
Authorised:
40,000,000 ordinary shares of £0.01 each
Allotted, called up and paid:
25,708,503 fully paid ordinary shares of £0.01 each (i)
2007
£’000
400
257
(i) Avanti Communications Group plc was incorporated on 1 March 2007 as the holding company to
Avanti Communications Limited, Avanti Space Limited and Avanti Broadband Limited. The shares
capital and share premiums of these companies have therefore been eliminated on aggregation in the
year ended 30 June 2007, the resulting value taken to reserves. The consolidated share capital now
consists of that of Avanti Communications Group plc.
22 Reserves
2006
At 1 July 2005
Profit in the year
At 30 June 2006
2007
Share
Premium
£’000
Profit & Loss
Account
Reserves
£’000
180
-
180
1,669
5,745
7,414
Total
Reserves
£’000
1,849
5,745
7,594
At 1 July 2006
Profit for the year
Intercompany movement - see note 21
At 30 June 2007
180
-
(180)
7,414
21,094
(77)
7,594
21,094
(257)
-
28,431
28,431
40
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 41
notes to the accounts
Year ended 30 June 2007
23 Obligations under finance leases
Leasing arrangements
Finance leases relate to capital equipment with lease terms of 5 years. The Group has the option to
purchase the equipment for a nominal value at the conclusion of the lease agreement. The Group's
obligations under finance leases are secured by the lessor's title to the leased assets.
Finance lease liabilities
No later than one year
Later than 1 year not later
than 5 years
Less future finance charge
Present value of minimum
lease payments
Minimum
lease
payments
30 June
2007
£’000
630
720
1,350
(126)
of lease
Minimum Present value Present value
of lease
payments
30 June
2006
£’000
lease
payments
30June
2006
£’000
payments
30 June
2007
£’000
338
508
846
(52)
550
674
1,224
-
308
486
794
-
1,224
794
1,224
794
Included in the financial statements as:
Current borrowings
Non-current borrowings
£’000
£’000
550
674
1,224
308
486
794
24 Obligations under operating leases
As 30th June 2007 the Group was committed to making the following payments during the next year
in respect of operating leases:
30 June
2007
Land and
buildings
£’000
-
-
241
241
30 June
2006
Land and
buildings
£’000
-
-
241
241
Other
£’000
-
38
-
38
Other
£’000
81
-
-
81
Leases expiring
Within 1 year
Within 2 year
After 5 years
41
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 42
25 Post balance sheet events
On 24 July 2007 Avanti signed a facility agreement with a syndicate of lenders to borrow £32 million over
a term of seven years, which completes the financing requirements for its HYLAS project. Interest is
charged at 10.5% above LIBOR and accrues to be repaid at maturity as a payment in kind. The facility
can be redeemed after 30 months. The syndicate of lenders comprises funds advised or managed by
Avenue Capital Group, funds advised by JO Hambro, Capital Management, Caledonia Investments plc and
Frost City Limited, an entity controlled by Mr Robert Tchenguiz. At the same time Avenue Capital
Group subscribed for 2 million new ordinary shares at 200p per share.
On 10 September 2007 Avanti announced that it had signed a contract to purchase launch services
for the launch of HYLAS, on schedule and within budget, from Space Exploration Technologies
Corporation, USA.
26 Contingent liabilities
At 30 June 2007 the bank held a fixed and floating charge over all present and future assets of the
Company. There is also a multilateral guarantee dated 16 April 2007 between all of the companies in the
Group to secure liabilities of each other.
27 Capital commitments
At 30 June 2007, Avanti Space Limited had contracted for satellite expenditure totalling £46.3 million
of which £14.7 million had been paid. Part of the total price, amounting to €19.5 million, is due to be
paid directly from the European Space Agency (ESA) to the satellite contractor, Astrium EADS Limited,
and part of the total price, amounting to €14.7 million, is paid to Avanti by ESA.
28 Related party transactions
a. Costs recharged between Avanti Communications Group Companies and Avanti Screenmedia
All recharges in 2006/2007 were up until 16 April 2007 - there were no recharges post de-merger.
Costs recharged from Avanti Communications Ltd to Screenmedia Ltd
Costs recharged from Avanti Communications Ltd to Screenmedia Group
Cost recharged from Avanti Broadband Ltd to Screenmedia Ltd
1 July 06 to 1 July 05 to
to 16 April 07 30 June 06
£’000
£’000
-
917
278
1,195
390
12,410
76
12,876
Costs recharged from Screenmedia Ltd to Avanti Communications Ltd
5,042
-
b. Costs recharged between Avanti Communications Group Companies
Costs recharged from Avanti Communications Ltd to Avanti Broadband Ltd
Cost recharged from Avanti Communications Ltd to Avanti Space Ltd
Cost charged from Avanti Broadband Ltd to Avanti Space Ltd
355
6,848
(30)
7,173
139
-
-
139
12 months to 12 months to
30 June 07 30 June 06
£’000
£’000
42
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 43
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of the Company for 2007 will be held on 29 November 2007 at
10.30 am at 74 Rivington Street, London EC2A 3AY, for the following purposes:
Ordinary business
1. To receive the accounts for the year ended June 2007, together with the reports of the Directors' and Auditors' therein.
2. To re-elect John Brackenbury CBE as a Director of the Company.
3. To re-elect David Williams as a Director of the Company.
4. To re-elect William Wyatt as a Director of the Company.
5. To re-elect David Bestwick as a Director of the Company.
6. To re-elect Nigel Fox as a Director of the Company.
7. To re-elect Alan Foster as a Director of the Company.
8. To re-elect Mick Desmond as a Director of the Company.
Special business
9. That the Directors are generally and unconditionally authorised pursuant to Section 80 of the Companies Act 1985 (The
"Act") (in substitution for all or such existing authorities which are hereby revoked) to allot relevant securities (as
defined in section 80(2) of the Act) at such times and to such persons, on such terms and in such manner as they think
fit, up to a maximum nominal amount equal to the nominal amount of the authorised but un-issued share capital at the
date of the passing of this resolution, such authority to expire on 28th February 2009 or at the conclusion of the Annual
General Meeting next following the date on which this resolution is passed (whichever is earlier), save that the Company
may before such expiry make any offer or agreement which would or might require relevant securities to be allotted after
such expiry and the Directors may allot relevant securities in pursuance of such offer or agreement as if that authority had
not expired.
Special resolution
10. That, in substitution for any equivalent authorities and powers granted to the directors prior to the passing of this
resolution, the directors be and they are hereby empowered pursuant to section 95(1) of the Act to allot equity securities
(as defined in section 94(2) of the Act) of the Company wholly for cash pursuant to the authority of the directors
conferred by resolution 9 above, and/or where such an allotment constitutes an allotment of equity securities by
virtue of section 94(3A) of the Act, as if section 89(1) of the Act did not apply to such allotment provided that the
power conferred by this resolution shall be limited to:
(a)
(b)
(c)
the allotment of equity securities in connection with an invitation or offer of equity securities to the holders of
ordinary shares in the capital of the Company (excluding any shares held by the Company as treasury shares (as
defined in section 162A(3) of the Act)) on a fixed record date in proportion (as nearly as practicable) to their
respective holdings of such shares or in accordance with the rights attached to such shares (but subject to such
exclusions or other arrangements as the directors may deem necessary or expedient in relation to fractional
entitlements or as a result of legal or practical problems under the laws of, or the requirements of any regulatory
body or any stock exchange in any territory or otherwise howsoever);
the allotment of equity securities pursuant to the exercise of any options granted by the Company at the date of
this resolution; and
the allotment, otherwise than pursuant to paragraph (a) above, of equity securities up to an aggregate nominal
value equal to £90,779.35, and unless previously renewed, revoked, varied or extended, this power shall expire
on the earlier of the date falling 15 months after the date of the passing of this resolution and the conclusion of the
next annual general meeting of the Company except that the Company may at any time before such expiry make
an offer or agreement which would or might require relevant securities to be allotted after such expiry and the
directors may allot relevant securities in pursuance of such an offer or agreement as if this power had not expired.
43
By Order of the Board
Nigel Fox
Secretary
Registered office:
74 Rivington Street, London EC2A 3AY
Registered number: 6133927
Dated: 28 September 2007
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 44
Notes to notice of Annual General Meeting
1. Proxies
Only holders of Ordinary Shares in the Company are entitled to attend and vote at this meeting. A member
entitled to attend and vote may appoint a proxy or proxies who need not be a member of the Company
to attend (and on a poll to vote) instead of him or her. Forms of proxy need to be deposited with the
Company's registrar, at Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West
Midlands B63 3DA, not later than 48 hours before the time of the meeting. Completion of a form of proxy
will not preclude a member attending and voting in person at the meeting.
2. Documents on display
The Register of Directors' Interests in the share capital of the Company, together with copies of service
agreements under which Directors of the Company are employed, are available for inspection at the
Company's registered office during normal business hours from the date of this notice until the date of
the annual general meeting and will be available for inspection at the place of the annual general meeting
for at least 15 minutes prior to and during the meeting.
3. Right to attend and vote
In order to have the right to attend and vote at the meeting (and also for the purpose of calculating how
many votes a person entitled to attend and vote may cast), a person must be entered on the register of
holders of the ordinary shares of the Company by no later than 10.00 am on the 27th November 2007, being
48 hours before the time fixed for this meeting. Changes to the entries on the register after this time
shall be disregarded in determining the rights of any person to attend or vote at the meeting.
Shareholder and contact information
1. The Notice of Meeting is being issued to all shareholders. Enclosed with this notice, you will find an
attendance card, and for shareholders a form of proxy.
2. If you are attending the meeting you should bring the attendance card.
3. A shareholder is entitled to appoint one or more proxies to attend and, upon a poll, vote instead of him.
A proxy need not be a shareholder. If you wish to appoint a proxy, you must complete the enclosed
form of proxy which must be deposited with the Registrars, Neville Registrars Limited, Neville House, 18
Laurel Lane, Halesowen, West Midlands B63 3DA.
4. Copies of the Directors' service contracts, a statement of all transactions of Directors (and of their
family) in the share capital of the Company in the year ended 30 June 2007 and, a copy of the the
Register of Directors' (and their family) interests in the share capital of the Company, will be available
for inspection at the Company's registered office during normal business hours on each day (except
Saturday, Sunday and any public holidays) from the date of the Notice of Meeting until 27th November
2007 and also at the place of the AGM from 10.30 am on the day of the meeting until the conclusion of
the meeting. Copies of the same will also be available on the same day at the offices of the Company's
solicitors, Osborne Clarke, Apex Plaza, Reading WC1R 4JH.
Introduction
After his opening remarks, the Chairman will explain in the detail the procedures for the conduct of the
meeting, particularly for asking questions. The resolutions which are set out in the Notice of Meeting will
then be put to the meeting.
How to ask questions
At the meeting, shareholders will be given the opportunity to ask questions. Please explain the nature of
your question and give your name and address.
You may be asked to wait until called upon to speak. Please remember to state your name before asking
your question.
Time
The doors will open at 10.00 am and the meeting will start promptly at 10.30 am.
Cameras, tape recorders etc.
No cameras, video recorders, tape recorders or mobile phones will be allowed into the meeting.
44
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 45
Notes to notice of Annual General Meeting (continued)
Registration
To ensure your entrance to the meeting is dealt with promptly, please bring your attendance card with you
and register at the registration desk inside the building.
Shareholder information
If you have any questions concerning your shareholding, please speak to Avanti Communications Group
plc staff.
Important
If you have questions about the meeting, or if you need any assistance, please telephone Josie Lawrence
at Avanti Communications Group plc on 0207 749 1600 during normal working hours.
Analysis of Shareholders
Range of holdings
Less than 10,001
10,001 - 20,000
20,001 - 50,000
50,001 - 100,000
100,001 - 150,000
150,001 - 300,000
300,001 - 500,000
500,001 - 1,000,000
1,000,001 +
Financial Calendar
29 November 2007
February 2008
September 2008
Shareholder information
Annual General Meeting
Number of shares
Number of shareholders
1,420,995
488,617
1,207,593
1,260,262
1,047,439
1,917,327
1,972,792
4,636,449
16,970,631
669
33
38
18
8
9
5
7
7
Annual General Meeting
Interim results for the six months ended 31 December 2007
Preliminary results for the year ended 30 June 2008
The Annual General Meeting will be held at 74 Rivington Street, London EC2A 3AY.
Details of the resolutions to be proposed at the Annual General Meeting are contained in the Notice of
Annual General Meeting on page 43.
Dividend
The Directors have not recommended the payment of a dividend for the year ended 30 June 2007.
Listing
Ordinary shares of Avanti Communications Group plc are traded on AIM.
The share price is available from the Avanti website at www.avanti-communications.com and in The
Financial Times and The Times.
Registrars
All administrative enquiries relating to shareholdings should be directed to The Registrar, Neville Registrars
Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA.
Avanti’s services
Information about Avanti's services can be found at www.avanti-communications.com
45
Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 46
Form of proxy for Avanti Communications plc
(incorporated and registered in England and Wales under number 6133927) (the ‘Company’)
For use by holders of ordinary shares of 1p each in the Company (the ‘Shareholders’) at the annual general
meeting of the Company to be held at 74 Rivington Street, London EC2A 3AY at 10.30 am on 29 November
2007 (the ‘AGM’). Please read the Notice of AGM and associated notes.
I/We*
of
(please insert the name of the Shareholder(s)* in full in BLOCK CAPITALS)
(please insert the full postal address of the Shareholder(s)* in full in BLOCK CAPITALS)
being Shareholder(s)* entitled to attend and vote at meetings of Shareholders, hereby appoint
the Chairman of the AGM†
as my/our* proxy to attend and, on a poll, to vote for me/us* on my/our* behalf at the AGM, and
at any adjournment thereof.
† If it is desired to appoint some other person to be your proxy: (i) delete ‘the Chairman of the AGM’;
(ii) initial the alteration; and (iii) insert the full name, title and address of the person you wish to appoint
as your proxy IN BLOCK CAPITALS.
* Delete as appropriate.
Please indicate with an’X’ in the appropriate space how you wish your proxy to vote on the resolutions
set out in the Notice or whether you wish the vote to be withheld (see 1. of Notes to Notice of AGM).
For
Against
Vote
withheld
(cid:2) (cid:2) (cid:2)
(cid:2) (cid:2) (cid:2)
(cid:2) (cid:2) (cid:2)
(cid:2) (cid:2) (cid:2)
(cid:2) (cid:2) (cid:2)
(cid:2) (cid:2) (cid:2)
(cid:2) (cid:2) (cid:2)
(cid:2) (cid:2) (cid:2)
(cid:2) (cid:2) (cid:2)
1. To receive the accounts for the year ended June 2007, together
with the reports of the Directors' and Auditors' therein.
2. To re-elect John Brackenbury CBE as a Director of the Company.
3. To re-elect David Williams as a Director of the Company.
4. To re-elect William Wyatt as a Director of the Company.
5. To re-elect David Bestwick as a Director of the Company.
6. To re-elect Nigel Fox as a Director of the Company.
7. To re-elect Alan Foster as a Director of the Company.
8. To re-elect Mick Desmond as a Director of the Company.
9. That the Directors are generally and unconditionally authorised pursuant to
Section 80 of the Companies Act 1985 (The "Act") (in substitution for all or such
existing authorities which are hereby revoked) to allot relevant securities (as
defined in section 80(2) of the Act) at such times and to such persons, on such
terms and in such manner as they think fit, up to a maximum nominal amount
equal to the nominal amount of the authorised but un-issued share capital at
the date of the passing of this resolution, such authority to expire on 28th
February 2009 or at the conclusion of the Annual General Meeting next following
the date on which this resolution is passed (whichever is earlier), save that the
Company may before such expiry make any offer or agreement which would or
might require relevant securities to be allotted after such expiry and the
Directors may allot relevant securities in pursuance of such offer or agreement as
if that authority had not expired.
10. Disapplication of pre-emption rights.
(cid:2) (cid:2) (cid:2)
Dated
Signed
(cid:2) Annual report - 2nd half.qxd 10/19/07 11:22 AM Page 47
(cid:2)Please Affix Stamp HereNeville Registrars Limited Neville House18 Laurel LaneHalesowenWest MidlandsB63 3DASECOND FOLDTHIRD FOLD AND TUCK INFIRST FOLD frontcover 10/11/07 3:54 PM Page 1
Avanti Communications plc
74 Rivington Street
London
EC2A 3AY
Tel: +44 (0)20 7749 1600
www.avanti-communications.com
Avanti Co
Annual Report
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