Avanti Com
Annual Report and
munications
Accounts
Gro
u
p
2008
plc
Contents
Officers and professional advisers
Chairman's statement
Chief Executive's report
Directors' report
Finance and operating review
Corporate governance report
Independent auditors' report
Consolidated income statement
Consolidated balance sheet
Company balance sheet
Cash flow statements
Statements of changes in equity
Notes to the accounts
Notice of Annual General Meeting
3
4
7
11
15
19
23
27
28
29
30
31
32 to 52
53
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
D A Foster
W P Wyatt
C R Vos
I C Taylor MBE, MP
Secretary
N A D Fox
Registered office
74 Rivington Street
London
EC2A 3AY
Bankers
HSBC Bank Plc
70 Pall Mall
London
SW1Y 5EZ
Auditors
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RH
Avanti Communications
Annual Report 2007 / 2008
3
Chairman’s statement
Key highlights
I have great pleasure in presenting Avanti Communications Group plc's results for
the year ended 30 June 2008. Our results are in line with expectations and reflect a
year in which we have worked hard to prepare technically and commercially for the
launch next year of our first satellite, HYLAS.
During the financial year ended June 2008, the Company has achieved a number of
key milestones. We:
(cid:2) completed a £32m long term debt financing - the first time a European satellite
operator has raised non-recourse debt for the construction phase of its first satellite
and, given capital market circumstances, a real vote of confidence in our business
(cid:2) placed launch and in-orbit insurance on HYLAS which protects investors downside
with a value of £89m
(cid:2) secured a launch at competitive pricing for HYLAS for a window of between 31
March and 31 December 2009
(cid:2) created a distribution network of eighteen partner companies around Europe to sell
the HYLAS satellite broadband products with a strong new business pipeline
(cid:2) secured several important contracts for our interim service using rented capacity,
including a £3m project with the Scottish Government
Our efforts to build distribution for HYLAS have been fruitful this year, with eighteen
partners in ten countries now committed to selling our satellite broadband services with
volume commitments of between £50,000 and £9 million. I believe this is evidence of
the quality of our marketing, but also a testament to the novelty and appeal of our
business model as well as the considerable advantages in price and service levels
bestowed by our unique technology.
It is also apparent that the market for satellite broadband is growing. As we accurately
forecasted in 2005, terrestrial networks leave large populations without broadband –
an estimated 24 million homes in Europe. Broadband has become an essential tool for
modern life both at home and in the office, and we are fortunate to be launching the
first satellite which can address this market properly.
We have assembled a team of highly energetic, creative and skilled colleagues.
Amongst our sixty-three employees, twenty-seven different nationalities are
represented and Avanti employees have on average 1.02 degrees per person. This
vibrant and highly skilled culture is a significant advantage. Avanti is Europe’s first
entrepreneur-created fixed satellite services company and we have only achieved
this through the diversity and quality of our workforce. I want to thank the entire team
this year for the skill and energy with which they continue to drive our business
forward. I also welcome Ian Taylor, MBE MP, who joined the Board as a Non-Executive
Director in 2008.
Continued overleaf (cid:2)
4
Chairman’s statement (continued)
During the year our market has grown and we have been successful in
proving that we can sell our products into it. Preparations are well advanced
to manage the technical and commercial launch of HYLAS in 2009 and our
company continues to offer a very exciting future.
John Brackenbury CBE
Chairman
Avanti Communications
Annual Report 2007 / 2008
5
Avanti:
broadband internet access
anywhere in Europe
6
Chief Executive’s report
Introduction
2008 was our first full year of commercial service of our satellite broadband
products which currently use old fashioned rented satellite capacity. We
operate this service for two reasons: to test our systems and build our
distribution channels prior to the launch of our own broadband satellite,
HYLAS. With this capacity we have been able to demonstrate to our own
satisfaction that the market is strong and growing and the ground
components of our products (modems and software) work well in delivering
customer expectations. We also dedicated a great deal of effort during the
year developing and testing the back office systems which will be required
to manage a rapidly growing customer base. We are therefore confident
that our assumptions on our market, and our ability to exploit it with the more
advanced and lower cost HYLAS capacity are correct and we feel technically
and managerially ready to maximise our opportunity.
Business overview
This has been a year of very tight focus on our core opportunity, which is
selling satellite broadband in Europe. I believe that our strategy has evolved
and clarified, and as a result we are more optimistic than we were a year
ago about our market opportunity.
Production of the satellite is proceeding well, and we remain on schedule to
launch within the previously announced window of March to December 2009.
Broadband satellites (using “Ka-band” frequencies) make it possible for the
first time for satellite broadband to match or exceed both the service quality
and value for money of terrestrial broadband. Via our distribution partners,
end users will be able to buy satellite broadband at prices from as little as €15
per month and at speeds of 8Mb. With a further development on our
modems, due in 2010, HYLAS can provide speeds of up to 200 Mb showing
that broadband satellites can compete head on with any technology.
Avanti serves three core customer segments for satellite broadband in
Europe: Consumer, Enterprise and Wholesale. We serve these markets
through distributors. We design our commercial offering to distributors to
make it as easy as possible for them to enter and grow the nascent satellite
broadband market. The satellite operator market in Europe has traditionally
neglected satellite broadband, because both capacity and ground hardware
were too expensive to grow a large market, and also the incumbent operators
are focussed on selling capacity to the television market.
Our business model is therefore as radical as our technology. We have
borrowed from the mobile phone industry in creating a “Virtual Network
Operator” model through the use of new bespoke software as well as a more
customer focussed commercial approach. Thus a small distributor, or a large
telco with small satellite needs can benefit from the economics and flexibility
of being a network operator without making significant capital expenditure
or staffing up a large operations team. We sell in small and flexible units of
capacity, and bundle the use of our network hardware and second line
customer support. This is a first in the European satellite industry and in our
Continued on page 9 (cid:2)
Avanti Communications
Annual Report 2007 / 2008
7
The SpaceX developed Merlin 1C regeneratively cooled engine
undergoing test firing at the SpaceX test facility in McGregor,
Texas. The Merlin 1C engine successfully launched a Falcon 1
flight in September 2008, and nine of them will power the
upcoming Falcon 9 flights, slated to begin in 2009 from
Cape Canaveral, Florida.
8
Chief Executive’s report (continued)
first full year of service operation, we have signed up distributors in Scotland,
Ireland, England, Spain, Germany, Poland, Czech Republic, Italy, Serbia and
Albania. All of our distributors make commitments to minimum volumes so
each contract adds to our order book. Of course some customers are already
large users of satellite capacity (mainly in the less price sensitive Enterprise
and Government markets) and have committed to large amounts of
bandwidth in order to access the lowest possible rates.
We now have a full team at Avanti which is ready for the launch of HYLAS.
In building this team, we have searched the whole world looking for talent.
The satellite industry has very high barriers to entry, and one of those is the
difficulty in recruiting and retaining skilled staff. I believe that the
entrepreneurial culture of Avanti is very new for the satellite industry, and that
attracts recruits; but also our highly diverse workforce makes for a more
creative and vibrant culture and an environment where creativity flourishes.
During the year we have conducted significant new market research to
support our distribution channels and prioritise our efforts. One of the
conclusions we drew was that in the Consumer segment 11% of European
homes cannot access terrestrial broadband and this equates to a potential
market of £4bn per annum for satellite broadband. Already in the UK,
broadband penetration in rural areas exceeds that of urban areas so we
believe a large part of this market is available to us in the immediate term.
The market we anticipated in 2004 when we first began planning HYLAS
has almost doubled. It is this large un-served market which has prompted the
European Commission to make €1.8bn of Structural Funds available to
accelerate the deployment of rural broadband projects. Given Avanti’s
success in deploying government funded rural broadband projects for the
EU, ESA and British national and regional governments, we are hopeful that
with our new distribution partners in Europe we can win a significant amount
of this business. The Enterprise market shows similar level of growth in
demand for private corporate networks. In Wholesale, there are opportunities
for us to distribute bulk data for terrestrial network operators. During the
year it has become particularly apparent that the expansion of mobile
broadband leaves many base stations, especially outside big cities unable
to cope with the demand for “backhaul” connectivity from the base station to
the network core. Therefore cellular backhaul is an increasingly important
application for our product in the wholesale sector and we hope to announce
significant progress in this market soon.
Outlook
Our financial results for the year are in line with market expectations, and
whilst they are relatively immaterial in the context of our HYLAS business
plan they do reflect the availability of a nascent but flourishing satellite
broadband market. We received a sceptical response in our industry four
years ago but this is no longer the case. It has become axiomatic that satellite
data traffic will move to Ka band and that the new economics and service
quality of Ka band will grow the satellite broadband market dramatically.
Broadband has become a
fundamental personal and business
communication tool worldwide, and we believe it is largely insensitive to
Avanti Communications
Annual Report 2007 / 2008
9
recession should one occur, especially given large scale government investment in
rural broadband. We have a market which is very poorly served by limited
competition and compelling technology advantages.
I am therefore highly optimistic about the market environment in which we operate
and also about our readiness to exploit it. Also the success of the start up Ka band
operators in the USA has pointed the way and shows that we are not trying to do
anything that has not already been achieved elsewhere.
This is an exciting time to work at Avanti Communications and I look forward to
reporting further progress in achieving our goals next year.
David Williams
Chief Executive
10
Directors’ report
The directors have
pleasure in
submitting their
annual report
together with the
audited financial
statements for the
year ended
30 June 2008.
Avanti Communications
Annual Report 2007 / 2008
11
Principal activities and review of the business
The principal activity of the Company is the provision of satellite broadband
internet services.
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
previous parent. The de-merger was concluded on 15 March 2007 and ACG
was admitted to AIM on 16 April 2007.
Business review and key performance indicators
The information that fulfils the requirements of the business review can be
found in the finance and operating review on pages 15 to 17, which are
incorporated in this report by reference.
Results and dividends
The results for the year ended 30 June 2008 are shown on page 27. No
equity dividend was paid in the year ended 30 June 2008 (2007: £nil). No
final dividend is proposed at the year end (2007: £nil). The loss for the year
transferred to reserves was £994,000 (2007: profit of £21.1 million).
Research and development
The Group continues to invest in new services and technology through its
research and development programs which can lead to profitable exploitation
of Avanti’s satellite capacity. These include pure research into new products
as well as developing those services which have been demonstrated to have
a profitable business case.
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 P Wyatt
I C Taylor MBE, MP
resigned 2 May 2008
appointed 16 June 2008
Directors’ share interests
The following Directors held interests in the share capital of the Company:
F E J G Brackenbury CBE
D J Williams
D J Bestwick
P
N A D Fox
D A Foster
C R Vos
W P Wyatt
Interests in voting rights
I C Taylor MBE, MP
Fully paid Ordinary Share of 1p each
30 June 2007
30 June 2008
407,891
1,619,306
1,101,052
50,611
189,199
6,030
11,200
2,885
392,659
1,432,021
1,000,840
-
174,199
1,900
4,000
-
At 14 October, the Company had been notified, pursuant to the Financial Services
Authority’s Disclosure & Transparency Rules, of the following notifiable voting rights
in the Company’s issued ordinary share capital.
Direct
Direct
Indirect
Indirect
No. %
No. %
Caledonia Investments Plc
6,762,845
21.9%
Bedell Trustees Limited
3,170,850
10.3%
Avenue Capital International
2,529,412
8.2%
Kaupthing Bank Luxembourg
1,775,000
5.7%
-
-
-
-
-
-
-
-
David Williams Esq
1,183,333
3.8%
435,973
1.4%
Britel Fund Nominees Limited
1,073,934
3.5%
-
-
David Bestwick Esq
1,000,840
3.2%
100,212
0.3%
In addition, 2.6 million shares are held under LTIP. Dividend and voting rights
have been waived.
Policy and practice on payment of creditors
The Group’s policy and practice on payment of creditors is:
(cid:2) To pay all suppliers within the time limit agreed at the start of business with that supplier;
(cid:2) To ensure that suppliers are aware of the terms of payment; and
(cid:2) To pay in accordance with the contractual and other legal obligations whenever
it is satisfied that the supplier has provided goods and services in accordance
with the agreed terms and conditions.
At 30 June 2008, the Group’s trade creditor days were 133 days (2007: 85 days).
Directors’ and Officers’ liability insurance
Avanti Communications Group plc maintains appropriate insurance to cover
Directors’ and Officers’ liability for itself and its subsidiaries. At the date upon this
report was approved and for the year to 30 June 2008, the Company provided an
indemnity in respect of all of the Company’s Directors.
Auditors
PricewaterhouseCoopers LLP (‘PwC’) were appointed as auditors during the year
and have indicated their willingness to continue as auditors; accordingly a resolution
to reappoint them will be proposed at the forthcoming AGM in accordance with
Section 385 of the Companies Act 1985.
Directors' responsibilities
The directors are responsible for preparing the financial statements in accordance with
applicable law and International Financial Reporting Standards as adapted by the
European Union.
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:
Continued overleaf (cid:2)
12
Directors’ report (continued)
(cid:2) select suitable accounting policies and then apply them consistently;
(cid:2) make judgements and estimates that are reasonable and prudent;
(cid:2) 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.
The Directors are responsible for the maintenance and integrity of the
avantiplc.com website.
Disclosure of information 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.
This confirmation is given and should be interpreted in accordance with the
provisions of S234A of the Companies Act 1985.
Approved by the Board of Directors and signed on behalf of the Board
Nigel Fox
Secretary and Group Finance Director
London
20 October 2008
Avanti Communications
Annual Report 2007 / 2008
13
Test firing of two Merlin 1C engines on 18 January 2008 at the
SpaceX test facility in McGregor Texas. Powered by liquid oxygen
and rocket grade kerosene, the pair of Merlins produced over
181,000 pounds of thrust during the test. A total of nine Merlin
1C engines will power the Falcon 9 rocket.
14
Finance and operating review
Revenue increased
132% to £5.92
million (2007:
£2.56million) and
operating loss from
operations before
exceptional credit* in
2008 reduced by
51% to £1.86 million
(2007: loss £3.76
million). Gross profit
margins in 2008
were 68% compared
to a negative margin
in 2007.
* exceptional credit of
£23.3 million arose on the
forgiveness on an inter-
company debt due from
the previous parent
company
Avanti Communications
Annual Report 2007 / 2008
15
Basis of reporting
The Group financial statements in this report have been prepared in
accordance with International Financial Reporting Standards (IFRS) and the
associated International Financial Reporting Interpretation Council (IFRIC)
interpretations each as adopted for use in the EU.
We have implemented the following standards in these financial statements.
IFRS 2 - “Share based payments”. Share options and an LTIP scheme have
been introduced since the last financial year end. The fair value of the
options have been estimated at the time of the grants, and will be charged
to the Income Statement over the vesting periods (see note 25).
IFRS 7 - “Financial Instruments: Disclosures”, and the complementary
amendments to IAS 1, “Presentation of financial statements - Capital
Disclosures” introduces new disclosures relating to financial instruments (see
note 22). This standard does not have any impact on the classification and
valuation of the group’s financial instruments.
Accounting policies
The Group has reviewed its accounting policies in accordance with IAS 8
‘Accounting Policies, Changes in Accounting Estimates and Errors’ and
determined that they are appropriate for the Group.
Operating performance
Revenue increased 132% to £5.92 million (2007: £2.56 million) and loss from
operations before exceptional credit in 2008 reduced by 51% to £1.86 million
(2007: loss £3.76 million). Gross profit margins in 2008 were 68% compared
to a negative margin in 2007.
The results for the year have been impacted by two fair value adjustments as
required by International Financial Reporting Standards (IFRSs) being share
based payments and financial instruments.
As a result of share options issued to staff and directors during the year,
£0.87 million has been recognised as share based payments expense
representing the current year allocation of the fair value of share options
granted, in accordance with IFRS 2 Share based payments.
A fair value book gain of £0.12 million has been recognised as a financing
gain and a corresponding derivative asset, in accordance with IAS 39
“Financial Instruments: Recognition and Measurement”. The gain represents
the mark to market value of USD currency options outstanding at 30 June
2008 (2007: nil) and will reverse in the following year when these options
mature.
The underlying loss before taxation fell by 57% to £1.36 million (2007: loss
£3.15 million before exceptionals).
Exceptional items
The group separately identifies and discloses any significant one-off or
unusual items (termed “Exceptional items”). This is consistent with the way
that financial performance is measured by management and we believe
assists in providing a meaningful analysis of the trading results of the group.
Exceptional items may not be comparable to similarly titled measures used by other
companies.
Taxation
The tax credit of £0.36 million (2007: credit £0.90 million) represents an effective rate
of 26.7% (2007: 4.5%). The group currently generates all its taxable results in the
UK. Note 9 to the financial statements provide details of the tax charge.
Earnings per share
Basic earnings per share fell to 3.60p loss per share (2007: 82.05p earnings per
share). However, the underlying earnings per share for 2007 excluding the exceptional
credit was 8.8p loss per share. Note 10 to the financial statements provide details of
these calculations.
Financing, cash flow and treasury
In July 2007 the Group concluded its debt financing for HYLAS with the completion of
a £32 million payment-in-kind (‘PIK’) interest toggle bond. The interest accrues on a
quarterly basis at LIBOR +10.5%. The bond has a 7 year bullet repayment with early
repayment allowed from December 2009. At the same time the lead debt provider also
subscribed for 2 million new ordinary shares at 200p per share. All members of the
debt consortium are also equity holders in the Group.
The combination of this and earlier fundraising means that the HYLAS project is fully
financed and there is sufficient headroom to protect the business from cost overruns
and delays. The funding of the business is not at risk from the current turbulence in the
capital markets. The cash balance was £35.2 million at 30 June 2008, with all deposits
now held by HSBC.
Until HYLAS revenues are recognised, both operating and capital cash flows will be
dominated by milestone payments which may cause volatility in the Group cashflows.
Continued overleaf (cid:2)
30 June 2008
£’000
30 June 2007
£’000
(Loss) profit from operations before taxation
(1,858)
Exceptional item in the prior year
Adjusted loss from operations
Depreciation and other non-cash movements
Change in working capital and provisions
Net capital expenditure
Operating cashflow
Net interest received
Free cash flows
Movements in funding
Increase / (decrease) in net funds
-
(1,858)
1,341
(2,152)
(7,543)
(10,212)
1,555
(8,657)
33,950
25,293
19,580
(23,343)
(3,763)
564
11,863
(10,305)
(1,641)
616
(1,025)
(466)
(1,491)
16
Finance and operating review (continued)
The principal use of funds during the year was the procurement of the HYLAS
satellite, the launcher and the associated costs of setting up ground and
control systems for the post launch period. The cash flows associated with
this capital expenditure is determined by the final acceptance of various
milestones. In the year ended 30 June 2008 capital expenditure was £20.5
million (2007: £10.3 million) of which £19.8 million (2007: £9.9 million relates
to HYLAS). £13 million of the £20.5 million capital expenditure was
recognised as creditors or accruals at year end.
The Group has significant US dollar and Euro currency exposures. The
Group’s policy is to hedge all currency transaction exposures at the time of
entering into a contractual commitment. To date the Euro receivables have
formed a natural hedge against euro payables to Astrium for HYLAS. US
dollar payables have been hedged using options and forward contracts. The
group has chosen not to adopt hedge accounting during the current or
previous year.
Environmental factors
The activities of Avanti are judged to have a low environmental impact and
are not expected to give rise to any significant inherent environmental risks
over the next twelve months. Avanti’s HYLAS satellite will have its
transmission powered by solar power. It therefore produces lower carbon
emissions per customer than other forms of terrestrial telecommunications.
Risks
Last year I identified four key risks associated with the HYLAS project:
(cid:2) Raising sufficient funds for the completion of the project;
(cid:2) Procurement of the launcher;
(cid:2) Placing of the insurance; and
(cid:2) A successful launch
I am pleased to confirm that three of these risks have now been successfully
retired and that the remaining key risk is a successful launch. Our focus
now is on securing sales to utilise the available capacity.
Critical accounting policies
Details of our critical accounting policies are in Note 1 to the consolidated
Annual Report.
Pipeline and backlog
We currently have an unweighted pipeline of £127 million (2007: £164
million), which when weighted by reference to the progress through the sales
process and the probability of ongoing negotiations leading to a successful
conclusion, is £20 million (2007: £13 million). The order book at 30
September 2008 was £21 million.
Nigel Fox
Group Finance Director
20 October 2008
Avanti Communications
Annual Report 2007 / 2008
17
18
Corporate governance report
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. Despite the fact that some of the non-
executive directors have share options, the board considers that each of the
non-executive directors is independent. The board meets at least six 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 three committees: audit, remuneration and
nominations, all 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 Avanti website: www.avantiplc.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.
Nominations committee
The nominations committee consists of W Wyatt, J Brackenbury and R Vos
and is chaired by J Brackenbury. It meets as and when necessary and is
responsible for nominating candidates for appointment as Directors to the
Board, bearing in mind the need for a broad representation of skills across
the Board.
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 at Redleaf
Communications Limited by email info@redleafpr.com or in writing to Redleaf
Communications Limited, 9-13 St Andrews Street, London EC4A 3AF.
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.
Avanti Communications
Annual Report 2007 / 2008
19
Internal control and risk management
The Group operates a system of internal control and continues 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.
20
Board of Directors
John Brackenbury CBE*+
Chairman
John was founder Chairman of Pubmaster which was sold in 2003 to Punch
Taverns. He is a leading industrialist with over 40 years experience in the drinks
and leisure sector. He is also President of Business in Sport and Leisure Limited,
a Non-Executive Director of Isle of Capri Casinos Ltd and a Director of
Springboard UK.
David Williams
Chief Executive
David is a co–founder of the Company. Prior to this he spent ten years
working in the City financing telecommunications projects. David was named
Entrepreneur of the Year at the Quoted Company Awards in 2006.
Nigel Fox
Finance Director and Secretary
Nigel is a Chartered Accountant and has held various senior finance roles
before joining Avanti Communications in 2007, including chief financial officer
of Climax Group; group financial controller at ARC International; finance
director of Ruberoid Building Products, and group financial controller of
Ruberoid Plc.
David Bestwick
Chief Technology Officer
David is a co-founder of the Company. David graduated from the University of
Leicester in 1987 with a BSc in Physics with Astrophysics. Following three years
at Marconi Research Centre (MRC), he joined VEGA Group PLC in 1990 where he
worked on a wide range of satellite applications projects.
* Audit committee
+ Remuneration committee
Avanti Communications
Annual Report 2007 / 2008
21
Will Wyatt*+
Non Executive
Will joined Caledonia Investments plc in 1998 and was elected to the board in 2005. He
also serves as non-executive director on the boards of Melrose Resources plc, TGE
Marine AG, Bristow Group Inc and Terrace Hill plc.
Alan Foster+
Non Executive
Alan was a senior partner of de Zoete & Bevan for over twenty years and, on the
creation of BZW Asset Management, he was appointed Deputy Chairman. This
company was the forerunner of Barclays Global Investors.
Richard Vos*
Non Executive
Richard is a telecommunications and satellite professional, with international
experience, gained over 40 years working in the industry.
He is currently Chairman of SatCom Group Holdings plc and a Non-executive Director
of NSSC Operations Ltd. He is a member of the UK Government's Space Advisory
Council and Chairman of their Telecommunications & Navigation Advisory Board as
well as a member of the Institute of Directors.
His previous positions included Chairman of Inmedia Communications Ltd. and of
Inmarsat Ventures PLC and Head of Satellite Investments for British Telecommunications
plc (BT), serving as Governor for the UK and Ireland on the Board of INTELSAT and as
Chairman of the Board.
Ian Taylor MBE MP
Non Executive
Ian is MP for Esher and Walton, entering Parliament in 1987.
He was Minister for Science and Technology at the Department of Trade and Industry
(1994-97). He now chairs the Conservative Party's Policy Task-force on Science,
Technology, Engineering and Mathematics.
Ian is an officer of several all-party Parliamentary committees, including the Office of
Science & Technology, EURIM (European Information Society Group), PITCOM
(Information Technology Committee), APCom (Communications), Corporate Social
Responsibility and co-Chairman of the Space Committee.
Prior to entering Parliament, Ian had 18 years experience of providing corporate finance
and management advice to companies in the UK, France and USA.
22
Independent auditors’ report to the
members of Avanti Communications
Group plc
We have audited the group and parent company financial statements (the
‘‘financial statements’’) of Avanti Communications Group plc for the year
ended 30 June 2008 which comprise the Consolidated income statement,
the Consolidated and Company balance sheets, the Consolidated and
Company cash flow statements, the Consolidated and Company statements
of changes in equity and the related notes. These financial statements have
been prepared under the accounting policies set out therein.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report and Accounts 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 within the Directors’ Report.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland). This report, including the opinion, has been prepared
for and only for the company’s members as a body in accordance with Section
235 of the Companies Act 1985 and for no other purpose. We do not, in giving
this opinion, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the financial statements give a true and
fair view and have been 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.
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 other transactions is not disclosed.
We read other information contained in the Annual Report and consider
whether it is consistent with the audited financial statements. The other
information comprises only the Directors’ Report, the Chairman’s Statement,
the Operating and Financial Review and the Corporate Governance
Statement. We consider the implications for our report if we become aware
of any apparent misstatements or material inconsistencies with the financial
statements. Our responsibilities do not extend to any other information.
Avanti Communications
Annual Report 2007 / 2008
23
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 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 group’s and 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:
(cid:2) 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 as at 30 June 2008
and of its loss and cash flows for the year then ended;
(cid:2) the parent company financial statements give a true and fair view, in accordance with
IFRSs as adopted by the European Union as applied in accordance with the
provisions of the Companies Act 1985, of the state of the parent company’s affairs as
at 30 June 2008 and cash flows for the year then ended;
(cid:2) the financial statements have been properly prepared in accordance with the
Companies Act 1985; and
(cid:2) the information given in the Directors' Report is consistent with the financial
statements.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
London
20 October 2008
24
Drawing expertise from across the globe
Lucy Edge, Control Segment
Manager, visits an orphanage in
Bangalore. David Williams, Chief
Executive, comments: “Avanti
encourages its employees and
business partners to support the
work of SOS Children’s Villages,
the world’s largest orphan charity.”
Avanti does not contribute
corporate funds, however it is
using spare capacity to provide
broadband to orphanages in
markets where Avanti
has business.
Avanti Communications
Annual Report 2007 / 2008
25
26
Consolidated income statement
Year ended 30 June 2008
Notes
2,3
7
8
8
9
Year
ended
30 June
2008
£’000
Year
ended
30 June
2007
£’000
5,921
2,562
(1,918)
(2,763)
4,003
(201)
(5,861)
(3,562)
-
23,343
(1,858)
19,580
704
(201)
503
715
(99)
616
(1,355)
20,196
361
(994)
898
21,094
(994)
21,094
Revenue
Cost of sales
Gross Profit
Operating expenses
Exceptional item
(Loss) / Profit from operations
Finance income
Finance expense
Net financing income
(Loss) / Profit before tax
Income tax credit
(Loss) / Profit for the year
Attributable to:
Equity holders of the parent
Basic and diluted (loss) / earnings per share (pence)
10
(3.60)p
82.05p
The notes on pages 32 to 52 form part of the financial statements.
The Company has elected to take the exemption under section 230 of the
Companies Act 1985 to not present the parent company income statement.
Avanti Communications
Annual Report 2007 / 2008
27
Consolidated balance sheet
As at 30 June 2008
Notes
30 June
2008
£’000
30 June
2007
£’000
11
17
15
16
18
19
20
21
19
20
21
23
24
24
24
39,742
1,037
20,036
384
40,779
20,420
249
8,656
35,241
44,146
84,925
13,743
86
545
14,374
1,365
129
36,322
37,816
52,190
277
3,858
1,163
27,437
32,735
84,925
31
5,764
10,651
16,446
36,866
4,476
-
1,369
5,845
1,365
-
968
2,333
8,178
257
-
-
28,431
28,688
36,866
ASSETS
Non-current assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Current Assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables
Provisions for other liabilities
Interest bearing liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions for other liabilities
Interest bearing liabilities
Total non-current liabilities
Total liabilities
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total shareholders’ equity
Total liabilities and equity
Approved on behalf of the Board of Directors
20 October 2008
28
Company balance sheet
As at 30 June 2008
ASSETS
Non-current assets
Deferred tax assets
Investments
Total non-current assets
Current Assets
Trade and other receivables
Total current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total shareholders’ equity
Total liabilities and equity
Notes
17
13
16
19
23
24
24
24
30 June
2008
£’000
30 June
2007
£’000
88
289
377
5,530
5,530
5,907
1,886
1,886
1,886
309
3,858
93
(239)
4,021
5,907
-
257
257
-
-
257
-
-
-
257
-
-
-
257
257
Approved on behalf of the Board of Directors
20 October 2008
Avanti Communications
Annual Report 2007 / 2008
29
Cash flow statements
For the year ended 30 June 2008
Group
Company
30 June
2008
£’000
30 June
2007
£’000
30 June
2008
£’000
30 June
2007
£’000
Cash flow from operating activities
(Loss) / Profit from operations before taxation
Net foreign exchange (gain)
Derivative financial asset
Depreciation
Write off of fixed assets
Provision for impairment of trade debtors
Onerous lease provision
Share based payments expense
Movement in working capital
(Increase) in inventories
(Increase) / decrease in debtors
Increase in trade and other payables
Notes
4
4
4
4
16
20
25
(1,858)
(589)
(119)
744
31
188
215
871
19,580
(1)
-
565
-
-
-
-
(517)
20,144
(425)
-
(119)
-
-
-
-
71
(473)
(218)
(1,936)
2
(31)
7,921
3,973
-
(5,291)
1,886
Cash (used) / generated from operations
(2,669)
32,007
(3,878)
Interest received
Interest paid
1,756
(201)
715
(99)
-
-
Net cash generated / (used) by operating activities
(1,114)
32,623
(3,878)
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 - de-merger
Repayment of borrowings
Debt issue cost paid
Proceeds from share issue
Share issue costs
Finance lease paid
(7,543)
(10,305)
(7,543)
(10,305)
32,000
-
(390)
(988)
4,000
(122)
(550)
430
(24,128)
(111)
-
-
-
-
-
-
-
-
-
-
4,000
(122)
-
Net cash(received from) / used in financing activities
33,950
(23,809)
3,878
Net increase / (decrease) in cash and cash equivalents
25,293
(1,491)
Cash and cash equivalents at the beginning of the financial year
9,948
11,439
Cash and cash equivalents at the end
of the financial year
18
35,241
9,948
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30
Statements of changes in equity
Year ended 30 June 2008
At 30 June 2008
277
3,858
1,163
27,437
32,735
Group
2007
At 1 July 2006
Profit for year
Intercompany movement
following demerger
At 30 June 2007
2008
At 1 July 2007
(Loss) for the year
Issue of share capital
EBT Treasury shares
Premium on shares issued
Share based payments
Tax credit taken directly to reserves
Share
capital
£’000
-
-
257
257
257
-
52
(32)
-
-
-
Share
premium
£’000
180
-
(180)
-
-
-
-
-
3,858
-
-
Company
2007
At 1 July 2006
Profit for year
Intercompany movement
following demerger
At 30 June 2007
2008
At 1 July 2007
(Loss) for the year
Issue of share capital
Issue of shares to EBT
Premium on shares issued
Share based payments
Tax credit taken directly to reserves
Share
capital
£’000
-
-
257
257
257
-
20
32
-
-
-
Share
premium
£’000
-
-
-
-
-
-
-
-
3,858
-
-
At 30 June 2008
309
3,858
Avanti Communications Group plc
Year ended 30 June 2008
31
Share based
Profit and
payments loss account
reserves
£’000
7,414
reserve
£’000
-
21,094
Total
reserves
£’000
7,594
21,094
-
-
-
-
-
-
-
-
871
292
-
-
-
-
-
-
-
-
71
22
93
(77)
-
28,431
28,688
28,431
(994)
-
-
-
-
-
28,688
(994)
52
(32)
3,858
871
292
Total
reserves
£’000
-
-
257
257
257
(239)
20
32
3,858
71
22
-
-
-
-
(239)
-
-
-
-
-
(239)
4,021
Share based
Profit and
payments loss account
reserves
£’000
-
reserve
£’000
-
Notes to the accounts
Year ended 30 June 2008
1 Accounting Policies
Statement of compliance
The Group financial statements have been prepared in accordance with International Financial Reporting
Standards as adopted by the EU 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.
The principal accounting policies applied in the preparation of these financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The financial statements have been prepared on the historical cost basis, with the exception of share based
payments and financial derivatives, which are incorporated using fair value.
IFRS 2 - “Share based payments”. Share options and an LTIP scheme have been introduced since the last
financial year end. The fair value of the options have been estimated at the time of the grants, and will be
charged to the Income Statement over the vesting periods (see note 25).
IFRS 7 - “Financial Instruments: Disclosures”, and the complimentary amendments to IAS 1, “Presentation
of financial statements - Capital Disclosures” introduces new disclosures relating to financial instruments (see
note 22). This standard does not have any impact on the classification and valuation of the group's financial
instruments.
New standards and interpretations not applied
During the year ended 30 June 2008, the International Accounting Standards Board ('IASB') and the
International Financial Reporting Committee ('IFRIC') have issued the following standards and interpretations
with an effective date after the date of these financial statements.
International Financial Reporting Standards
IFRS 2
IFRS 8
(as amended) Share based payment
Operating Segments
International Financial Reporting Interpretations Committee
IFRIC 11
IFRIC 12
IFRS 2: Group and Treasury Share Transactions
Service Concession Arrangements
IFRIC 13
Customer Loyalty Programmes
IFRIC 14
The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction
Effective for accounting periods
beginning on or after:
1 January 2009
1 January 2009
1 March 2009
1 January 2008
1 July 2008
1 January 2008
The directors do not anticipate that the adoption of any of these standards and interpretations will have a
significant impact on the Group's financial statements.
Critical accounting estimates and management judgement
The presentation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Group’s
accounting policies.
32
Notes to the accounts
Year ended 30 June 2008
1 Accounting Policies (continued)
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 present the results of the company and its subsidiaries, including the Employee Benefit
Trust ("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 from the date of acquisition.
There are no minority interest in the net assets of the Group, and no goodwill arising on acquisition of
subsidiaries.
The financial statements of subsidiaries are prepared for the same reporting year as the parent company
using consistent accounting policies.
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 and space contracts
Consultancy revenues are derived from consultancy contracts. New consultancy projects are now connected
with the exploitation of our satellite assets. The current space segment revenue is derived from the HYLAS
ESA contract.
Where the outcome of a contract can be estimated reliably, revenues are recognised by reference to the
stage of completion of the contract activity at the balance sheet date. The contracts are broken down into key
milestones and work packages which are all judged individually on a percentage of completion basis in
order to ascertain the completeness of an overall project. By its nature these projects require a certain
element of judgement by management. Contract costs are incurred as an expense in the period they
are incurred.
Accrued income represents the difference between amounts invoiced and revenues recognised on a
percentage of completion basis.
Network services
Revenue is earned by selling broadband services and bandwidth to customers over a 12 to 24 month
period. Revenues also include sales of customer premises equipment recognised upon installation. All
services are priced and invoiced on a monthly basis and revenue is recognised in the period in which the
services are provided.
Where a customer pays a fee for exclusive rights or options over the satellite capacity, revenue is only
recognised at the end of the period of exclusivity. If the fee is credited against the final capacity sale, the
fee is recognised over the period of the capacity term.
Segmental reporting
A business segment is a group of assets and operations engaged in providing products or services that are
subject to risks and returns that are different from those of other business segments. A geographical segment
is engaged in providing products or services within a particular economic environment that are subject to risks
and returns that are different from those segments operating in other economic environments. Income and
expenses that are not directly attributable to a particular segment are allocated based on levels of senior
management activity on the basis that this closely reflects the use of the Group's resources.
Avanti Communications
Annual Report 2007 / 2008
33
1 Accounting Policies (continued)
Leased assets
Assets acquired under hire purchase or finance lease are capitalised in the balance sheet. Those held under
hire purchase and finance lease 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.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term.
Interest income and expense
Borrowing costs incurred for the construction of the HYLAS satellite asset are capitalised during the period
of time that is required to complete and prepare the asset for its intended use, in accordance with IAS 23
'Borrowing Costs'. Other borrowing costs are expensed in the Income Statement.
Interest income on cash deposits is recognised on an effective interest rate methodology, taking into account
the principal amounts outstanding and the interest rates applicable.
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 presentational currency of the Group is sterling. The functional and presentational currency of the
parent and all its subsidiaries 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 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.
Share based payments
The group operates a number of equity-settled, share based compensation plans. The fair value of these
employee share option plans, representing employee services received in exchange for the grant of the
options, is calculated using an option-pricing model. In accordance with IFRS 2 “Share based payment”, the
resulting cost is charged to the income statement over the vesting period of the options. The amount of the
charge is adjusted to reflect expected and actual levels of options vesting.
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.
34
Notes to the accounts
Year ended 30 June 2008
1 Accounting Policies (continued)
Deferred tax (continued)
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.
Property, plant and equipment
Property, plant and equipment 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.
Computer software
Network assets
Fixtures and fittings
25% per annum
20% per annum
25% per annum
Plant and machinery
Leasehold improvements
Satellite in construction
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.
Satellite in construction relate to costs directly attributable to the construction of the HYLAS satellite. These
assets will be transferred to a space asset category and depreciated over the life of the satellites once they
become operational and placed into service. No depreciation has been charged on these assets.
Research and development costs in relation to the HYLAS satellite are capitalised if it meets the conditions
set out in IAS 38 'Intangible Assets' which are that development costs are only capitalised once a business
case has been demonstrated as to the technical feasibility and commercial viability. Capitalised development
costs are amortised over the expected useful life of the asset.
Where the conditions are not met the costs are expensed through the income statement.
European Space Agency (ESA) grants
ESA grants relating to property, plant and equipment are included in non-current liabilities as deferred income
and are credited to the income statement on a straight line basis over the expected lives of the related assets.
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.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group
becomes a party to the contractual provisions of the instrument.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of directly attributable
issue costs.
Avanti Communications
Annual Report 2007 / 2008
35
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 time 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 operating expenses.
Cash and cash equivalents
Cash and cash equivalents 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 are stated net of outstanding bank overdrafts.
Borrowings
Interest-bearing bank loans and overdrafts are measured initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds and
the redemption value is recognised in the income statement over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement
of the liability for at least 12 months after the balance sheet date.
Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost.
Derivative financial instruments and hedge accounting
The group uses derivative financial instruments mainly to reduce exposure to foreign exchange risks. The group
does not hold or issue derivative financial instruments for trading purposes. Derivatives are recognised at fair value
on the date a contract is entered into and are subsequently re-measured at their fair value.
Hedge accounting is currently not applied. Changes in fair value of derivative financial instruments are recognised in
the income statement as they arise.
2 Revenue
Continuing operations
Revenue from the sale of goods
Revenue from the rendering of services
30 June
2008
£’000
30 June
2007
£’000
74
5,847
5,921
23
2,539
2,562
Turnover represents net invoiced sales of services provided and goods sold, net of value added tax. The company
derived £1,570,000 (2007: £2,059,000) of its turnover from European countries outside the United Kingdom.
3 Segment information
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
Network Services
- the provision of data communications services by satellite
Consultancy
- the provision of telecommunication consultancy and engineering services
The segment results, assets, liabilities and capital expenditure are listed below.
Inter-segment sales are charged at amounts equal to competitive market prices for external sales of similar
goods. Segment assets consists primarily of property, plant and equipment, inventories, trade and other
receivable and cash and cash equivalents. Unallocated assets comprise largely of deferred tax assets.
36
Notes to the accounts
Year ended 30 June 2008
3 Segment information (continued)
Segment liabilities comprise trade and other payables and other operating liabilities. Unallocated liabilities
comprise largely of external borrowing.
Capital expenditure comprises additions to property, plant and equipment.
30 June 2008
Total segment revenue
Inter-segment revenue
Revenue
Space
£’000
3,391
-
3,391
Segment results
1,470
(2,571)
(425)
(1,858)
Network Consultancy Unallocated
services
£’000
£’000
£’000
978
(18)
960
-
-
-
-
-
-
1,570
-
1,570
(332)
-
-
-
48,014
(11,610)
(19,616)
-
2,449
(1,337)
(575)
(474)
26,303
(2,304)
(122)
(270)
8,159
(36,939)
(169)
-
Network Consultancy Unallocated
services
£’000
503
-
£’000
2,059
-
£’000
-
-
Space
£’000
-
-
-
9,127
9,127
-
-
-
503
967
2,059
12,585
(335)
10,124
-
-
-
-
-
-
24,516
(4,165)
(9,877)
-
2,217
(2,452)
(197)
(328)
9,749
(1,561)
(231)
(237)
-
-
-
-
-
-
-
664
664
-
-
-
384
-
-
-
Group
total
£’000
5,939
(18)
5,921
(1,355)
361
(994)
84,925
(52,190)
(20,482)
(744)
Group
total
£’000
2,562
-
2,562
23,343
19,580
29,196
898
21,094
36,866
(8,178)
(10,305)
(565)
Profit before tax
Income tax benefit
Profit / (loss) for the year
Segment assets
Segment liabilities
Capital expenditure
Depreciation
30 June 2007
Total segment revenue
Inter-segment revenue
Revenue
Exceptional item
Segment results
Profit before tax
Income tax benefit
Profit / (loss) for the year
Segment assets
Segment liabilities
Capital expenditure
Depreciation
Secondary reporting format - geographic segments
The Group mainly operates in one geographic area, being the United Kingdom and Europe. The risk
profile of the customers and assets of the group are considered to be similar across the European
Union region.
Avanti Communications
Annual Report 2007 / 2008
37
4 Operating expenses
Costs are presented by the nature of the expense to the Group.
Depreciation of property, plant and equipment
Write off of fixed assets
Foreign exchange gains
Derivatives gains
Research and development costs written off as incurred
Operating lease expenses
- minimum lease payments
- sublease payments
- onerous lease provision
5 Auditors remuneration
Fees payable to company’s auditor for the audit of parent
company and and consolidated financial statements
Fees payable to the company’s auditor for other non audit services:
- The audit of company’s subsidiaries pursuant to legislation
- Other services pursuant to legislation
- Tax services
30 June
2008
£’000
30 June
2007
£’000
744
31
(589)
(119)
4
320
(50)
215
30
16
4
5
55
565
-
(1)
-
5
312
(50)
-
26
-
-
-
26
6 Employee benefit costs
The average number of employees, including the Directors, during the year ended 30 June 2008 was 49
(30 June 2007: 49). The aggregate remuneration of all employees comprised:
Wages and salaries
Social security costs
Pension costs
Share based payment expense
30 June
2008
£’000
2,215
239
207
871
30 June
2007
£’000
2,094
204
48
-
3,532
2,346
The remuneration of key management personnel, including the directors are disclosed in note 29.
7 Exceptional item
Inter-company debt repayment waived
30 June
2008
£’000
-
30 June
2007
£’000
23,343
The exceptional item in the prior year related to the write back of the inter-company loan due from
Avanti Communications Group to Avanti Screenmedia Group (its previous parent). The write off had no
cash flow effect.
38
Notes to the accounts
Year ended 30 June 2008
8 Net finance income
Interest expense
Borrowings and loans
Lease finance
Interest income
Bank deposits
Fair value gain on derivatives
Net finance income
9 Income tax credit
Current tax
Current tax
Total current tax
Deferred tax
Origination and reversal of temporary differences
Adjustment in respect of prior periods
Impact of change in UK tax rate
Total income tax credit
30 June
2008
£’000
(130)
(71)
(201)
585
119
704
503
30 June
2008
£’000
-
-
(404)
25
18
(361)
30 June
2007
£’000
(60)
(39)
(99)
715
-
715
616
30 June
2007
£’000
-
-
(898)
-
-
(898)
The tax on the group's profit before tax differs from the theoretical amount that would arise using the
weighted average tax rate applicable to profits of the consolidated entities as follows:
(Loss) / Profit before tax
Tax charge at the corporate tax rate of 29.5% (2007: 30%)
Tax effect of non-deductible expenses
Tax effect of non-taxable revenue
Effect of deferred tax charged for the period
Previously unrecognised tax losses
Adjustment in respect of prior periods
Impact of change in UK tax rate
Income tax credit
30 June
2008
£’000
(1,355)
(400)
49
-
-
(53)
25
18
(361)
30 June
2007
£’000
20,196
6,059
18
(7,002)
27
-
-
-
(898)
Deferred tax balances have been re-measured as a result of the change in the UK Corporation Tax rates
from 30% to 28% effective from 1 April 2008. Deferred tax relating to temporary differences which are
expected to reverse after 30 June 2008 is measured at the tax rate of 28% as these are the tax rates
that will apply on reversal.
Avanti Communications
Annual Report 2007 / 2008
39
10 (Loss) / Earnings per share
Basic and diluted (loss)/earnings per share
30 June
2008
pence
30 June
2007
pence
(3.60)
82.05
The calculation of basic and diluted (loss)/earnings 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 basic earnings per share calculation required as any adjustments would be anti-dilutive.
(Loss)/profit for the year attributable to equity holders
of the parent company
30 June
2007
£’000
30 June
2006
£’000
(994)
21,094
Weighted average number of ordinary shares for the purpose of
basic and diluted earnings per share (all measures)
27,587,955
25,708,503
11 Property, plant and equipment
Leasehold
Improvements
£’000
Computer
Software
£’000
Network
Assets
£’000
Fixtures
and
Fittings
£’000
Plant
and
Satellite in
Machinery Construction
£’000
£’000
Cost
Balance at: 1 July 2006
Additions
Balance at: 1 July 2007
Additions
Disposals
Balance at 30 June 2008
Depreciation
Balance at: 1 July 2006
Charge for the year
Balance at: 1 July 2007
Charge for the year
Disposals
Balance at 30 June 2008
Net Book Value
Balance at 30 June 2008
Balance at 30 June 2007
120
106
226
8
-
234
32
41
73
57
-
130
104
153
360
14
374
44
-
418
136
91
227
96
-
323
95
147
2,350
251
2,601
594
(25)
3,170
304
361
665
516
(15)
1,166
2,004
1,936
393
57
450
50
(90)
410
234
72
306
75
(69)
312
98
144
112
-
112
-
-
112
112
-
112
-
-
112
-
-
7,779
9,877
17,656
19,785
-
37,441
-
-
-
-
-
-
Group
Total
£’000
11,114
10,305
21,419
20,481
(115)
41,785
818
565
1,383
744
(84)
2,043
37,441
17,656
39,742
20,036
At 30 June 2008 the Group held assets under finance lease agreements with a net book value of £1,078,000
(2007: £1,424,000). Depreciation of £331,000 (2007: £225,000) has been provided on these assets.
40
Notes to the accounts
Year ended 30 June 2008
12 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 loss after tax for the year
ended 30 June 2008 amounted to £239,000 (2007: £nil).
13 Investments
Company
Shares in subsidiary undertakings
Beginning of year
Capital contribution
End of year
30 June
2008
£’000
257
32
30 June
2007
£’000
257
-
289
257
During the year, the Company contributed £32,000 (3,213,562 shares at £0.01 each) to the Avanti
Employee Benefit Trust established in July 2007.
14 Subsidiaries
As at the end of the year the group and company held the following investments in subsidiary
companies:
Name of subsidiary
Nature of business
Avanti Communications Limited
Telecommunication consultancy
Avanti Space Limited
Avanti Space 2 Limited
Avanti Space 3 Limited
Avanti Launch Services Limited *
Avanti Broadband Limited
Avanti Communications Infrastructure Company
Limited
Avanti Caledonian Broadband Limited *
Avanti Employee Benefit Trust *
Sales of satellite bandwidth
Sales of satellite bandwidth
Sales of satellite bandwidth
Management services
Satellite broadband business
Holding company
Scottish satellite business
Employee benefit trust
All the above entities were incorporated in England & Wales, except for Avanti Launch Services Limited
which was incorporated in the Isle of Man. The company holds 100% ownership interest and voting
power in all the above entities.
* These entities were incorporated during the 2008 financial year.
Avanti Communications
Annual Report 2007 / 2008
41
15 Inventories
Group
Finished goods
30 June
2008
£’000
30 June
2007
£’000
249
31
The cost of inventories recognised as an expense during the period was £720,000 (2007: £754,000).
16 Trade and other receivables
Group
Company
30 June
2008
£’000
245
(188)
57
7,508
872
-
119
100
8,656
30June
2007
£’000
407
-
407
-
4,526
-
-
831
5,764
30 June
2008
£’000
30 June
2007
£’000
-
-
-
-
-
5,411
119
-
5,530
-
-
-
-
-
-
-
-
-
Trade receivables
Less provision for impairment of trade receivables
Net trade receivables
Accrued income
Prepayments
Amounts due from group companies
Derivative asset
Other receivables
For discussion of credit risk, refer to Note 22 (b).
17 Deferred taxation
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.
The offset amounts are as follows:
Non-current
Group
Company
Deferred tax asset
Deferred tax liabilities
30 June
2008
£’000
2,775
(1,738)
1,037
30June
2007
£’000
823
(439)
384
The gross movement on the deferred income tax account is as follows:
Balance at 1 July
Income statement credit
Tax credited directly to equity
Balance at 30 June
384
361
292
1,037
(514)
898
-
384
30 June
2008
£’000
121
(33)
88
-
66
22
88
30 June
2007
£’000
-
-
-
-
-
-
-
42
Notes to the accounts
Year ended 30 June 2008
17 Deferred taxation (continued)
Group
30 June 2008
Tax assets
Provisions and deferred income
Share based payment
Unused tax losses
Total tax assets
Tax liabilities
Derivative financial asset
Property, plant and equipment
Total tax liabilities
Net deferred tax asset
30 June 2007
Tax assets
Unused tax losses
Total tax assets
Tax liabilities
Property, plant and equipment
Total tax liabilities
Net deferred tax asset / (liability)
Company
30 June 2008
Tax assets
Share based payment
Unused tax losses
Total tax assets
30 June 2007
Tax assets
Share based payment
Unused tax losses
Total tax assets
Avanti Communications
Annual Report 2007 / 2008
43
Opening
balance
£’000
Charged
to P&L
£’000
Charged
to equity
£’000
Closing
balance
£’000
-
-
823
823
-
(439)
(439)
384
446
243
971
1,660
(33)
(1,266)
(1,299)
361
-
292
-
292
-
-
-
292
Opening
balance
£’000
Charged
to P&L
£’000
Charged
to equity
£’000
-
-
(514)
(514)
(514)
823
823
75
75
898
-
-
-
-
-
446
535
1,794
2,775
(33)
(1,705)
(1,738)
1,037
Closing
balance
£’000
823
823
(439)
(439)
384
Opening
balance
£’000
Charged
to P&L
£’000
Charged
to equity
£’000
Closing
balance
£’000
-
-
-
20
46
66
22
-
22
42
46
88
Opening
balance
£’000
Charged
to P&L
£’000
Charged
to equity
£’000
Closing
balance
£’000
-
-
-
-
-
-
-
-
18 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:
Group
Cash and bank balances
Short term deposits
Bank overdraft
Net cash and cash equivalents
19 Trade and other payables
Current
Trade payables
Social security and other taxes
Other creditors
Amounts due to group companies
Accruals
Non-current
Deferred income
20 Provisions for other liabilities
Group
Onerous lease provision
Balance at 1 July 2007
Charged during the year
Balance at 30 June
30 June
2008
£’000
1,050
34,191
-
35,241
30 June
2007
£’000
3,651
7,000
(703)
9,948
Group
Company
30 June
2008
£’000
7,169
99
1,672
-
4,803
13,743
30June
2007
£’000
836
79
331
-
3,230
4,476
30 June
2008
£’000
-
-
-
1,886
-
1,886
1,365
1,365
-
Current
£’000
-
86
86
Non-
current
£’000
-
129
129
30 June
2007
£’000
-
-
-
-
-
-
-
Total
£’000
-
215
215
The onerous lease provision has been recognised as a result of the unfavourable lease agreement in
relation to the Hoxton Square premises which is currently above market value. The provision is expected
to be utilised in the next four years.
44
Notes to the accounts
Year ended 30 June 2008
21 Interest bearing liabilities
Group
30 June 2008
Secured at amortised cost
Bank loans
Bank overdrafts
Other loans
Finance lease liabilities (i)
Current
Non-current
30 June
2008
£’000
-
-
21
524
30 June
2007
£’000
92
703
24
550
30 June
2008
£’000
36,172
-
-
150
30 June
2007
£’000
273
-
21
674
545
1,369
36,322
968
(i) 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.
The company entered into a Senior Finance Term Facility Agreement on 29 July 2007 of £32 million.
This money was raised for the sole purpose of funding the HYLAS satellite. The loan bears interest at
LIBOR plus a margin. The debt (including interest) is not repayable until its maturity in 2014. In accordance
with IAS 23 - Borrowing Costs, qualifying borrowing costs have been capitalised as part of the cost to
HYLAS, recognised as Satellite in Construction in Note 11.
22 Financial instruments and risk management
The Group is subject to the risks arising from adverse movements in interest rates and foreign currency.
The Group uses a variety of derivative financial instruments to manage these risks. The managing of these
risks, along with the day-to-day managing of treasury activities is performed by the Finance team.
All financial instruments have been measured at amortised cost, except for derivative assets recognised as
fair value through the income statement. As such financial assets being cash and cash equivalents and trade
and other receivables are classified as 'Loans and Receivables' and financial liabilities being trade and other
payables and interest bearing liabilities have been classified as 'Other Financial Liabilities'.
a) Market risk
i) Foreign exchange risk management
The Group's presentation currency is pounds sterling although some transactions are executed in non-sterling
currencies, including Euros and US Dollars. The transactional amounts realised or settled are therefore
subject to the effect of movements in these currencies against the pound. It is the Group's policy to manage
the exposures arising using currency options. Hedge accounting is not sought for these transactions.
Financial instruments by currency
GBP
Financial assets
£’000
Cash and short term deposits 30,788
1,383
Trade and other receivables
30 June 2008
30 June 2007
Euro
£’000
4
7,263
USD
£’000
4,449
10
Total
£’000
35,241
8,656
GBP
£’000
11,319
1,660
Euro
£’000
(668)
4,104
USD
£’000
-
-
Total
£’000
10,651
5,764
32,171
7,267
4,459
43,897
12,979
3,436
-
16,415
Financial liabilities
Trade and other payables
Interest bearing liabilities
£’000
(6,407)
(36,867)
£’000
(7,129)
-
£’000
£’000
(1,572) (15,108)
- (36,867)
£’000
(959)
(2,337)
£’000
(4,517)
-
£’000
(365)
-
£’000
(5,841)
(2,337)
(43,274)
(7,129)
(1,572)
(51,975)
(3,296)
(4,517)
(365)
(8,178)
Net financial position
(11,103)
138
2,887
(8,078)
9,683
(1,081)
(365)
8,237
Avanti Communications
Annual Report 2007 / 2008
45
22 Financial instruments and risk management (continued)
a) Market risk (continued)
i) Foreign exchange risk management (continued)
At 30 June 2008, if the Euro had weakened/strengthened against the sterling by 5% with all other
variables held constant, post tax loss would have worsened by £5,000 or improved by £5,000 (2007: post
tax profit would have improved by £36,000 or decreased by £40,000).
At 30 June 2008, if the US Dollar had weakened/strengthened against the sterling by 5% with all other
variables held constant, post tax loss would have worsened by £99,000 or improved by £109,000 (2007:
post tax profit would have increased by £12,000 or decreased by £13,000).
ii) Cash flow and interest rate risk
The Group only borrows in pounds sterling at floating rates of interest and does not seek to mitigate the
effect of adverse movements in interest rates.
Cash and deposits earn interest at floating rates based on banks' short term treasury deposit rates. Short-
term trade and other receivables are interest free.
At 30 June 2008, if interest rates were 10 basis points higher/lower, with all other variables held constant,
post tax profit would have decreased/increased by £4,000 (2007: £nil).
b) Credit risk management
The Group's principal financial assets are cash and short term deposits and trade and other receivables.
The Group has no significant concentrations of credit risk. Cash and cash equivalents are deposited with
high-credit quality financial institutions with a minimum rating of A+ and trade receivables are principally
from well established corporations. The credit quality of major customers is assessed before trading
commences taking into account its financial position, past experience and other factors.
The ageing of trade receivables which have not been impaired was as follows:
2008
2007
Not past due
1-30 days
31-60 days
60+ days
6
137
1
44
-
12
50
214
Movements in the provision for impairment of trade receivables are as follows:
At 1 July 2007
Allowances made in the period
Amounts used and reversal of unused amounts
Bad debts written off
At 30 June 2008
30 June
2008
£’000
-
188
-
-
188
Total
57
407
30 June
2007
£’000
-
-
-
-
-
The provision of £188,000 (2007: nil) have been raised against gross trade receivables of £245,000
(2007: £407,000).
46
Notes to the accounts
Year ended 30 June 2008
22 Financial instruments and risk management (continued)
c) Liquidity risk management
The Group has a fully drawn debt facility which provides adequate liquidity.
The following table analyses the Group's financial liabilities into relevant maturity groupings based on
the expected undiscounted cash flows.
Within
1 year
£’000
-
22
563
92
30
703
630
1 to 2
years
£’000
-
-
156
92
22
-
563
2 to 5
years
£’000
-
-
-
170
-
-
157
Over 5 Contractual
amount
years
£’000
£’000
Carrying
amount
£’000
99,453
-
-
11
-
-
-
99,453
22
719
365
52
703
1,350
36,172
21
674
365
45
703
1,224
30 June 2008
Bank loans
Other loans
Finance leases
30 June 2007
Bank loan
Other loans
Bank overdraft
Finance leases
The bank loan contractual amount is based on principal plus interest repayable on maturity in 2014. The
interest repayable has been based on the average LIBOR for the 2008 financial year plus 10.5% margin.
d) Fair value of financial instruments
The directors consider the carrying value of all financial assets and liabilities to be approximate to their fair
values.
e) Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a
going concern in order to provide returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital.
The capital structure of the Group consists of debt, which includes the borrowings disclosed in Note 20,
cash and cash equivalents (note 17) and equity attributable to equity holders of the parent (Note 22 and
23), comprising ordinary share capital, share premium, other reserves and retained earnings.
23 Share capital - issued and fully paid
30 June 2008
At 1 July 2007
Shares issued
Less transaction costs
Treasury shares offset
At June 2008
Number
of shares
’000
25,709
5,213
-
-
30,922
Group
Ordinary
shares
£’000
Company
Ordinary
shares
£’000
257
52
-
(32)
277
257
52
-
-
309
Group and
Company
Share
Premium
£’000
-
3,980
(122)
-
3,858
The total authorised number of ordinary shares is 40 million shares (2007: 40 million) at £0.01 each.
Avanti Communications
Annual Report 2007 / 2008
47
24 Reserves
Group
2007
At 1 July 2006
Profit for the year
Intercompany movement
At 30 June 2007
2008
At 30 June 2007
Loss for the year
Premium on shares issued
Share based payments
Tax credit taken directly to reserves
At 30 June 2008
Company
2007
At 1 July 2006
Profit for the year
Intercompany movement
At 30 June 2007
2008
At 1 July 2007
Loss for the year
Premium on shares issued
Share based payments
Tax credit taken directly to reserves
At 30 June 2008
25 Share-based payments
Share
premium
£’000
Share based
payments
reserve
£’000
Retained
earnings
£’000
Total
reserves
£’000
180
-
(180)
-
-
-
3,858
-
-
3,858
-
-
-
-
-
-
-
871
292
1,163
7,414
21,094
(77)
28,431
28,431
(994)
-
-
-
27,437
7,594
21,094
(257)
28,431
28,431
(994)
3,858
871
292
32,458
Share
premium
£’000
Share based
payments
reserve
£’000
Retained
earnings
£’000
Total
reserves
£’000
-
-
-
-
-
-
3,858
-
-
3,858
-
-
-
-
-
-
-
71
22
93
-
-
-
-
-
(239)
-
-
-
(239)
-
-
-
-
-
(239)
3,858
71
22
3,712
The fair value recognised over the vesting period of share options and award granted 2008 was £871,000
(2007: £nil). All share based payment plans are equity settled and details of these plans is set out below.
The Company has established three share option schemes: The Avanti Communications Group plc
approved EMI scheme, the Avanti Communications Group plc Unapproved Share Option Plan and a Long
Term Incentive Plan (LTIP). The 2008 charges and weighted average fair value for each of the plans
above were as follows:
2008 charge
Weighted average fair value
EMI
£138,000
£2.04
Unapproved Plan
£27,000
£1.06
LTIP
£706,000
£0.67
To date all options have been granted with a strike price of 1 pence.
In July 2007 an Employee Benefit Trust (EBT) was established. The EBT has subscribed for 3,213,562
shares to satisfy the option awards of all three schemes. The EBT is managed by Bedell Trustees in
Jersey. The results of the EBT has been consolidated into the Group's results.
48
Notes to the accounts
Year ended 30 June 2008
25 Share based payments (continued)
The options granted under each scheme are as follows:
EMI
Number of options
Weighted average share price
Unapproved scheme
Number of options
Weighted average share price
LTIP
Number of options
Weighted average share price
Outstanding
at start of
year
Granted
during
year
Forfeited
in year
Exercised Outstanding
at end of
year
during
the year
-
-
-
-
-
-
445,197
£2.16
(96,878)
£1.89
(3,387)
£2.40
344,932
£2.23
107,863
£1.86
2,551,743
£1.45
-
-
-
-
-
-
-
-
107,863
£1.86
2,551,743
£1.45
1,288 of the EMI options are exercisable at 30 June 2008. No Unapproved Scheme or LTIP options are
exercisable at 30 June 2008.
The exercise price of options outstanding at 30 June 2008 was £0.01 and the weighted average remaining
contractual life was 4.3 years.
Each model has slightly different exercise criteria and therefore separate valuation models were used.
EMI Scheme
The EMI scheme was used to issue options to staff on 24 July 2007 at an exercise price of 1p. The new
options are issued for 10 years with 25% vesting at the end of years 3, 4, 5 and 6. Those staff who had
previously held unvested options in the former parent company at the time of the de-merger were given
a shorter vesting period for these new options. There are no performance criteria associated with these
options and are exercisable as long as the option holder remains an employee of the Company.
The weighted average inputs to the Black-Scholes model are as follows:
Share price at date of Grant
Weighted average exercise price
Expected volatility
Expected Life
Risk free rate
Expected dividend yield
£2.16
£0.01
35%
4 years
5.5%
1%
Expected volatility was determined by calculating the actual volatility of the Group's share price since
flotation. The expected life used in the model has been adjusted, based on management's best estimate,
for the effects of non-transferability, exercise restrictions, and behavioural considerations.
Unapproved Scheme
The unapproved scheme was established on 13 September 2007. The options are issued for 10 years with
25% vesting at the end of years 3,4,5 and 6. There are no performance criteria associated with these
options and are exercisable as long as the option holder remains with the Company.
Avanti Communications
Annual Report 2007 / 2008
49
25 Share based payments (continued)
The weighted average inputs to the Black-Scholes model are as follows:
Share price at date of Grant
Weighted average exercise price
Expected volatility
Expected Life
Risk free rate
Expected dividend yield
£1.86
£0.01
35%
4 years
5.5%
1%
Expected volatility was determined by calculating the actual volatility of the Group's share price since
flotation. The expected life used in the model has been adjusted, based on management's best estimate,
for the effects of non-transferability, exercise restrictions, and behavioural considerations.
Long Term Incentive Plan
The LTIP has been established by the Company with approval from the Remuneration Committee to
reward and incentivise the Executive Directors and senior managers of the Company.
The LTIP allocations are in separate funds within the EBT and are subject to a discretionary Trust. The
shares are subject to automatic revocation if certain criteria (set out below) are not met and continue to
be revocable for the entire Trust period.
The allocations into the LTIP vary for each executive. The total allocation to each executive is split into
three separate tranches:
i) The Core Tranche
This element of the grant becomes exercisable in 7 equal instalments. The first instalment was
exercisable on grant and the second on 30 June 2008. The remaining 5 are yearly thereafter.
ii) The Exceptional Achievement Tranche
This element of the grant is only exercisable if the Market Value of a Share exceeds £5 for a consecutive
period of six months before 30 June 2010.
iii) The Extraordinary Achievement Tranche
This element of the grant is only exercisable if the Market Value of a Share exceeds £10 for a consecutive
period of six months before 30 June 2013.
Number of options:
Executive Directors
Senior managers
Total
Core Exceptional Extraordinary
Total
1,053,722
139,238
610,125
69,445
609,768
69,445
2,273,615
278,128
1,192,960
679,570
679,213
2,551,743
The Core Tranche has been modelled using the Black-Scholes model while the Exceptional and
Extraordinary Tranches have been modelled using the Monte-Carlo model, allowing for the market-based
performance conditions.
The weighted average inputs to both models are as follows:
Share price at date of Grant
Weighted average exercise price
Expected volatility
Expected Life
Risk free rate
Expected dividend yield
£1.45
£0.01
35%
5 years
5.5%
1%
Expected volatility was determined by calculating the actual volatility of the Group's share price since
flotation and also taking into account historic volatility of other companies within the same sector who
have been listed for longer periods. The expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
50
Notes to the accounts
Year ended 30 June 2008
26 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
Minimum lease
payments
Present value of lease
payments
No later than one year
Later than 1 year not later than 5 years
Less future finance charge
Present value of minimum lease payments
30 June
2008
£’000
563
156
719
(45)
674
30 June
2007
£’000
630
720
1,350
(126)
1,224
Included in the financial statements as:
Current borrowings
Non-current borrowings
Present value of minimum lease payments
27 Obligations under operating leases
30 June
2008
£’000
524
150
674
-
674
30 June
2008
£’000
524
150
674
30 June
2007
£’000
550
674
1,224
-
1,224
30 June
2007
£’000
550
674
1,224
The Group's future aggregate minimum lease payments under non-cancellable operating leases are as
follows:
Within 1 year
Within 2 years
After 5 years
30 June 2008
30 June 2007
Land &
buildings
£’000
358
1,337
1,389
Other
£’000
8
-
-
Land &
buildings
£’000
241
965
1,064
3,084
8
2,270
Other
£’000
21
8
-
29
Operating lease commitments principally relate to leased office space of the Group's head office located
at 74 Rivington Street, London.
The total of future sub-lease payments expected to be received under non-cancellable sub leases at 30
June 2008 is £200,000 over 4 years (as at 30 June 2007: £250,000 over 5 years).
Avanti Communications
Annual Report 2007 / 2008
51
28 Capital commitments
At 30 June 2008, Avanti Space Limited had contracted for satellite expenditure totalling £67.1 million of
which £28 million had been paid. Part of the total price, amounting to €19.4 million, is due to be paid
directly from the European Space Agency (ESA) to the satellite contractor, Astrium EADS Limited thereby
reducing the commitment due directly from the Group.
29 Related party transactions
Transactions with key management personnel - Group
Key management personnel of the Group are considered to be the Executive and Non-Executive
Directors and three senior executives. Details of their remuneration are set out below in aggregate for
each of the categories specified in IAS 24 “Related Party Disclosures”.
Salaries and other short term employee benefits
Post employment benefits
Share based payments
30 June
2008
£’000
1,137
642
751
2,530
The emoluments of the highest paid director were £968,000 (2007: £50,000), made up of:
Salary
National insurance
Bonus
Post employment benefits (current year)
Current year recurring emoluments
Share based payments
Pension contributions in relation to prior year
Total emoluments
30 June
2008
£’000
215
31
30
165
441
335
192
968
30 June
2007
£’000
203
7
-
210
30 June
2007
£’000
41
5
-
4
50
-
-
50
Pension contributions amounting to £634,000 (2007: £4,000) were made into personal pension schemes
in respect of three (2007: three) of the Directors. The prior year emoluments represent amounts received
from the date of appointment as directors following the demerger.
Other related party transactions
Subsidiaries
Intra-group transactions are eliminated on consolidation and are not reported in the group accounts.
Transactions between the company and its subsidiaries were as follows:
Management fees charged to:
Avanti Communications Limited ('ACL')
Avanti Broadband Limited ('ABL')
Avanti Space Limited ('ASL')
30 June
2008
£’000
556
332
1,200
2,088
30 June
2007
£’000
-
-
-
-
30 Contingent liabilities
The group's bankers have provided guarantees totalling £7 million to certain customers in the event of a
failure to operationally deploy the HYLAS satellite. The group has arranged launch and in-orbit insurance
on HYLAS.
52
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of the Company for 2008 will be held on 26 November 2008
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 30 June 2008, together with the reports of the Directors' and Auditors' therein.
2. To re-elect Ian Taylor MP as a Director of the Company.
3. To re-elect Nigel Fox as a Director of the Company.
4. To re-elect Will Wyatt as a Director of the Company.
5. To re-elect PricewaterhouseCoopers LLP as auditors to the Company.
Special business
6. That the authorised share capital of the Company be increased from £400,000 to £1,000,000 by the creation of
60,000,000 ordinary shares of 1 pence each ranking pari passu in all respects with the existing ordinary shares
of the Company.
7. 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 an aggregate nominal amount of £150,000, such authority to expire on 28th
February 2010 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 resolutions
8. 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)
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);
(b) the allotment of equity securities pursuant to the exercise of any options granted by the Company at the date
of this resolution; and
(c) the allotment, otherwise than pursuant to paragraph (a) above, of equity securities up to an aggregate
nominal value equal to £150,000, 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.
9. That the Articles of Association produced to the meeting and initialled by the Chairman of the meeting for the
purposes of identification be adopted as the Articles of Association of the Company in substitution for, and to
the exclusion of, the existing Articles of Association.
By Order of the Board
Nigel Fox, Secretary
Registered office:
74 Rivington Street, London EC2A 3AY
Registered number: 6133927
Dated: 20 October 2008
Avanti Communications
Annual Report 2007 / 2008
53
Notes to notice of Annual General Meeting
1. Proxies
A member who is entitled to attend, speak and vote at the Annual General Meeting may appoint a proxy to attend,
speak and vote instead of him. A proxy need not be a member of the Company but must attend the meeting in
order to represent you. A member may appoint more than one proxy provided each proxy is appointed to exercise
rights attached to different shares (so a member must have more than one share to be able to appoint more than
one proxy). A Form of Proxy accompanies this document. The notes to the Form of Proxy include instructions
on how to appoint the Chairman of the Annual General Meeting or another person as a proxy and how to
appoint a proxy electronically or by using the CREST proxy appointment service. To be valid the Form of
Proxy must reach the Company's registrar, Neville Registrars at Neville House, 18 Laurel Lane, Halesowen,
West Midlands B63 3DA by at least 48 hours before the Annual General Meeting.
2. Documents on display
The following documents are available for inspection at the registered office of the Company during the usual
business hours on any weekday (Saturday, Sunday or public holidays excluded) from the date of this notice
until the conclusion of the Annual General Meeting and will also be available for inspection at the place of the
Annual General Meeting from 10:00 a.m. on the day of the Annual General Meeting until its conclusion:
(a) copies of the executive directors' service contracts with the Company and any of its subsidiary undertakings
and letters of appointment of the non-executive directors;
(b) a copy of the proposed new articles of association of the Company, to be adopted pursuant to resolution 9; and
(c) the Register of Directors' Interests in the share capital of the Company.
3. Right to attend and vote
The Company, pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, specifies that only
those shareholders registered in the register of members of the Company at 10.30 a.m. on 24 November 2008
(or, if the Annual General Meeting is adjourned, 2 working days before the time fixed for the adjourned Annual
General Meeting) shall be entitled to attend and vote at the Annual General Meeting in respect of the number
of shares registered in their name at that time. In each case, changes to the register of members after such
time shall be disregarded in determining the rights of any person to attend or vote at the Annual General Meeting.
4. Please note that communications regarding the matters set out in this Notice of Annual General Meeting will
not be accepted in electronic form, other than as specified in the accompanying Form of Proxy.
5. In order to facilitate voting by corporate representatives at the Annual General Meeting, arrangements will be put
in place at the Annual General Meeting so that (a) if a corporate shareholder has appointed the chairman of the
Annual General Meeting as its corporate representative to vote on a poll in accordance with the directions of all
of the other corporate representatives for that shareholder at the Annual General Meeting, then on a poll those
corporate representatives will give voting directions to the chairman and the chairman will vote (or withhold a
vote) as corporate representative in accordance with those directions; and (b) if more than one corporate
representative for the same corporate shareholder attends the Annual General Meeting but the corporate
shareholder has not appointed the chairman of the Annual General Meeting as its corporate representative, a
designated corporate representative will be nominated, from those corporate representatives who attend, who
will vote on a poll and the other corporate representatives will give voting directions to that designated corporate
representative. Corporate shareholders are referred to the guidance issued by the Institute of Chartered
Secretaries and Administrators on proxies and corporate representatives (www.icsa.org.uk) for further details
of this procedure. The guidance includes a sample form of appointment letter if the chairman is being appointed
as described in (a) above.
6. New Articles of Association
It is proposed in resolution 9 to adopt new articles of association (the "New Articles") in substitution for and in
order to update the Company's current articles of association (the "Current Articles") primarily to take account of
changes in English company law brought about by the Companies Act 2006. The principal changes introduced
in the New Articles are summarised below. Other changes, which are of a minor, technical or clarifying nature
and also some more minor changes which merely reflect changes made by the Companies Act 2006 have not
been summarised below.
i. Articles which duplicate statutory provisions
Provisions in the Current Articles which replicate provisions contained in the Companies Act 2006 are in the
main amended (to the extent that this is not already the case) to bring them into line with the Companies
Act 2006. Certain examples of such provisions include provisions as to the variation of class rights, the
requirement to keep accounting records and provisions regarding the period of notice required to convene
general meetings. The main changes made to reflect this approach are detailed below.
54
Notes to notice of Annual General Meeting
(continued)
ii. Form of resolution
The Current Articles contain a provision that, where for any purpose an ordinary resolution is required, a
special or extraordinary resolution is also effective and that, where an extraordinary resolution is required, a
special resolution is also effective. This provision is being amended as the concept of extraordinary
resolutions has not been retained under the Companies Act 2006.
The Current Articles enable members to act by written resolution. Under the Companies Act 2006 public
companies can no longer pass written resolutions. These provisions have therefore been removed in the
New Articles.
iii. Variation of class rights
The Current Articles contain provisions regarding the variation of class rights. The proceedings and specific
quorum requirements for a meeting convened to vary class rights are contained in the Companies Act
2006. The relevant provisions have therefore been amended in the New Articles.
iv. Convening extraordinary and annual general meetings
The provisions in the Current Articles dealing with the convening of general meetings and the length of notice
required to convene general meetings are being amended to conform to new provisions in the Companies
Act 2006. In particular an extraordinary general meeting (now called a "general meeting" under the
Companies Act 20060 to consider a special resolution can be convened on 14 days' notice whereas
previously 21 days' notice was required.
v. Votes of members
Under the Companies Act 2006 proxies are entitled to vote on a show of hands whereas under the Current
Articles proxies are only entitled to vote on a poll. The time limits for the appointment or termination of a proxy
appointment have been altered by the Companies Act 2006 so that the articles cannot provide that they
should be received more than 48 hours before the meeting or in the case of a poll taken more than 48
hours after the meeting, more than 24 hours before the time for the taking of a poll, with weekends and
bank holidays being permitted to be excluded for this purpose. Multiple proxies may be appointed provided
that each proxy is appointed to exercise the rights attached to a different share held by the shareholder.
Multiple corporate representatives may be appointed. The New Articles reflect all of these new provisions.
vi. Conflicts of interest
The Companies Act 2006 sets out directors' general duties which largely codify the existing law but with some
changes. Under the Companies Act 2006, from 1 October 2008 a director must avoid a situation where he
has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the company's
interests. The requirement is very broad and could apply, for example, if a director becomes a director of
another company or a trustee of another organisation. The Companies Act 2006 allows directors of public
companies to authorise conflicts and potential conflicts, where appropriate, where the articles of association
contain a provision to this effect. The Companies Act 2006 also allows the articles of association to contain
other provisions for dealing with directors' conflicts of interest to avoid a breach of duty. The New Articles give
the directors authority to approve such situations and to include other provisions to allow conflicts of interest
to be dealt with in a similar way to the current position.
There are safeguards which will apply when directors decide whether to authorise a conflict or potential
conflict. First, only directors who have no interest in the matter being considered will be able to take the
relevant decision, and secondly, in taking the decision the directors must act in a way they consider, in good
faith, will be most likely to promote the company's success. The directors will be able to impose limits or
conditions when giving authorisation if they think this is appropriate.
It is also proposed that the New Articles should contain provisions relating to confidential information,
attendance at board meetings and availability of board papers to protect a director being in breach of duty if
a conflict of interest or potential conflict of interest arises. These provisions will only apply where the
position giving rise to the potential conflict has previously been authorised by the directors.
vii. Notice of board meetings
Under the Current Articles, when a director is abroad he can request that notice of directors' meetings are
sent to him at a specified address and if he does not do so he is not entitled to receive notice while he is away.
This provision has been removed, as modern communications mean that there may be no particular obstacle
to giving notice to a director who is abroad. It has been replaced with a more general provision that a director
is treated as having waived his entitlement to notice, unless he supplies the Company with the information
necessary to ensure that he receives notice of a meeting before it takes place.
Avanti Communications
Annual Report 2007 / 2008
55
viii.Electronic and web communications
Provisions of the Companies Act 2006 which came into force in January 2007 enable companies to
communicate with members by electronic and/or website communications. The New Articles continue to allow
communications to members in electronic form and, in addition, they also permit the Company to take
advantage of the new provisions relating to website communications. Before the Company can communicate
with a member by means of website communication, the relevant member must be asked individually by the
Company to agree that the Company may send or supply documents or information to him by means of a
website, and the Company must either have received a positive response or have received no response within
the period of 28 days beginning with the date on which the request was sent. The Company will notify the
member (either in writing, or by other permitted means) when a relevant document or information is placed
on the website and a member can always request a hard copy version of the document or information.
ix. Directors' indemnities and loans to fund expenditure
The Companies Act 2006 has in some areas widened the scope of the powers of a company to indemnify
directors and to fund expenditure incurred in connection with certain actions against directors. In particular,
a company that is a trustee of an occupational pension scheme can now indemnify a director against liability
incurred in connection with the company's activities as trustee of the scheme. In addition, the existing
exemption allowing a company to provide money for the purpose of funding a director's defence in court
proceedings now expressly covers regulatory proceedings and applies to associated companies.
x. General
Generally the opportunity has been taken to bring clearer language into the New Articles and in some areas
to conform the language of the New Articles.
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.
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 Georgina Campbell-
Harris at Avanti Communications Group plc on 0207 749 1600 during normal working hours.
56
Notes to notice of Annual General Meeting
(continued)
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
Number of shares
Number of shareholders
1,535,941
671,286
1,396,860
1,411,585
803,210
2,476,488
2,844,374
3,286,947
16,495,374
707
43
46
20
7
11
7
5
6
26 November 2008
Annual General Meeting
February 2009
Interim results for the six months ended 31 December 2008
September 2009
Preliminary results for the year ended 30 June 2009
Shareholder information
Annual General Meeting
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 53.
Dividend
The Directors have not recommended the payment of a dividend for the year ended 30 June 2008.
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.avantiplc.com
Avanti Communications
Annual Report 2007 / 2008
57
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 26 November 2008 (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, speak and vote for me/us and on my/our behalf at the AGM and at any adjournment thereof in relation
to the resolutions specified in the notice of the AGM dated 20 October 2008 (the "Resolutions") and any other business (including
adjournments and amendments to the Resolutions) which may properly come before the AGM or 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..
Ordinary Resolutions
1.
To receive the accounts for the year ended 30 June 2008, together with the reports of the
Directors' and Auditors' therein.
2.
3.
4.
5.
6.
To re-elect Ian Taylor MP as a Director of the Company.
To re-elect Nigel Fox as a Director of the Company.
To re-elect William Wyatt as a Director of the Company.
To re-elect PricewaterhouseCoopers LLP as auditors to the Company.
To increase the authorised share capital of the Company from £400,000 to £1,000,000 by the
creation of 60,000,000 ordinary shares of 1 pence each in the capital of the Company.
7.
To authorise the directors to allot relevant securities.
Special Resolutions
8.
To disapply the statutory pre-emption rights in certain circumstances.
9.
To adopt new articles of association of the Company, in substitution for, and to the exclusion
of, the existing articles of association of the Company.
Number of shares:
(Note 3)
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Dated:
Signed:
Class of
shares:
For
Against
Vote
withheld
(note 2)
Discretionary
(note 2)
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1. Only holders of ordinary shares of 1p each in the capital of the Company are entitled to attend, speak and vote at the AGM and may appoint one or more
proxies to attend, speak and vote instead of them.
2. Please indicate by inserting an "X" in the appropriate box how you wish your vote to be cast on the Resolutions. If you mark the box "vote withheld" it will
mean that your proxy will abstain from voting and, accordingly, your vote will not be counted either for or against the relevant resolution. If you mark the box
"discretionary" or fail to select any of the given options, the proxy can vote as he or she chooses or can decide not to vote at all.
If the proxy is being appointed for less than your full entitlement, please indicate above your signature the number and class of shares in relation to which
that person is authorised to act as your proxy. If left blank, your proxy will be deemed to be authorised in respect of your full entitlement.
3.
4. A member may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares (so a member must have more
than one share to be able to appoint more than one proxy). A separate form of proxy must be deposited for each proxy appointed. Further copies of this
form may be obtained by contacting Neville Registrars Limited between 9.00am and 5.00pm (London time) Monday to Friday on 0121 585 1131 from within
the UK or +44 121 585 1131 if calling from outside the UK or you may photocopy this form. If you appoint multiple proxies, please indicate above your
signature the number and class of shares in relation to which the person named on this form is authorised to act as your proxy. Please also indicate by
ticking the box provided if the proxy instruction is one of multiple instructions being given. All forms must be signed and returned to Neville Registrars
Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA together in the same envelope. Where multiple proxies are appointed, failure
to specify the number of shares to which this proxy appointment relates, or specifying a number which exceeds the number held by the member when
totalled with the number specified on other proxy appointments by the same member, will render all appointments invalid.
5. To be valid, this form of proxy together with any power of attorney or other authority under which it is signed or a notarially certified copy of such power or
authority must reach the Company's registrars, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA by no later
than 48 hours before the time of the AGM (or if the AGM is adjourned, 48 hours before the time fixed for the adjourned AGM).
6. The appointment of a proxy will not preclude a member from attending the AGM and voting in person but if he or she does so this proxy appointment will
7.
8.
terminate automatically.
In the case of a company, this form of proxy must be executed under the common seal or signed on its behalf by an officer or attorney of the company.
In the case of joint holders, the proxy appointment of the most senior holder will be accepted to the exclusion of any appointments by the other joint holders.
For this purpose, seniority is determined by the order in which the names are stated in the register of members of the Company in respect of the joint holding.
9. Any alterations made to this form of proxy should be initialled.
10. A member wishing to change his or her proxy instructions should submit a new proxy appointment using the methods set out in note 4 above. A member
who requires another form of proxy should contact Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA. The
time limits for proxy appointments in note 5 also apply to changes to proxy instructions. Any change to proxy instructions received after that time will be
disregarded. If a member submits more than one valid proxy appointment, the appointment received last before the time limit in note 3 will take
precedence.
11. A member wishing to revoke his or her proxy appointment should do so by sending a notice to that effect to the Company's registrars to the address set out
in note 5. The revocation notice must be received by the Company's registrars by the time limit set out in note 5. Subject to note 6, any revocation notice
received after this time will not have effect.
12. Please note that communications regarding the matters set out in this form of proxy will not be accepted in electronic form.
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THIRD FOLD AND TUCK IN
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S
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Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
SECOND FOLD
Please
Affix
Stamp
Here
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Avanti Communications Group plc
74 Rivington Street
London
EC2A 3AY
Tel: +44 (0)20 7749 1600
www.avantiplc.com