Avanti Communications Group plc
Avanti Communications Group plc
Avanti Communications Group plc
Avanti Communications Group plc
74 Rivington Street
74 Rivington Street
74 Rivington Street
74 Rivington Street
London EC2A 3AY
London EC2A 3AY
London EC2A 3AY
London EC2A 3AY
Tel: +44 (0)20 7749 1600
Tel: +44 (0)20 7749 1600
Tel: +44 (0)20 7749 1600
Tel: +44 (0)20 7749 1600
www.avantiplc.com
www.avantiplc.com
www.avantiplc.com
www.avantiplc.com
Avanti Communicati ons Group plc
Avanti Communicati ons Group plc
Avanti Communicati ons Group plc
Avanti Communicati ons Group plc
Annual Report & Accounts 2010
Annual Report & Accounts 2010
Annual Report & Accounts 2010
Annual Report & Accounts 2010
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AVN2561 AR10 COVER AW05.indd 1
01/12/2010 09:35
We sell wholesale satellite
broadband to service providers.
“For a young company to have two satellites fully fi nanced with
no debt service payments for another two years gives me great
comfort that we are in control of our own desti ny.”
Chairman
John Brackenbury CBE
Chairman’s Statement, page 8
“The successful launch and the bringing into use of our
spectrum undoubtedly creates the signifi cant value we
have been projecti ng for many years.”
Chief Executi ve’s Report, page 9
Chief Executi ve
David Williams
“In July 2010, the company announced a further placing of
16.3 million shares at 430 pence yielding gross proceeds of
£70 million… £54 million was used to repay the PIK bond the
company raised in July 2007”
Finance and Operati ng Review, page 12
Group Finance Director
Nigel Fox
Highlights
Business Profi le
The Year in Review
Chairman’s Statement
Chief Executi ve’s Statement
Finance and Operati ng Review
Governance
Board of Directors
Employees
Corporate Social Responsibility
Directors’ Report
Corporate Governance Report
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Financial Statements
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Statement of Financial Positi on
Company Statement of Financial Positi on
Statement of Cash Flows
Statements of Changes in Equity
Notes to the Financial Statements
Shareholder Informati on
Noti ce of Annual General Meeti ng
Form of Proxy
Offi cers and Professional Advisers
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Offi cers and Professional Advisers
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
Bankers
HSBC Bank Plc
70 Pall Mall
London
SW1Y 5EZ
Solicitors
Osborne Clark
2 Temple Black East
Temple Quay
Bristol
BS1 6EG
Registered Auditors
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RHT
Directors
F E J G Brackenbury CBE
Chairman
D J Williams
Chief Executi ve
D J Bestwick
Chief Technology Offi cer
N A D Fox
Group Finance Director
M J O’Connor
Chief Operati ng Offi cer
D A Foster
Non-Executi ve Director
W P Wyatt
Non-Executi ve Director
C R Vos
Non-Executi ve Director
I C Taylor MBE
Non-Executi ve Director
Secretary
N A D Fox
Registered Offi ce
74 Rivington Street
London
EC2A 3AY
Company Number
6133927
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AVN2561 AR10 FRONT AW12.indd 2
AVN2561 AR10 COVER AW05.indd 2
01/12/2010 08:55
AVN2561 AR10 Back AW11.indd 61
01/12/2010 09:10
01/12/2010 09:35
Highlights
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
HYLAS 1
The successful launch of Avanti ’s fi rst Ka-band satellite, HYLAS 1,
on 26 November 2010 was a monumental achievement for
Avanti . Commercial services will begin in early 2011. HYLAS 1
will serve the European market with satellite broadband and
high speed data services.
HYLAS 1, just
before the launch
HYLAS 2
Announced in December 2009, HYLAS 2 is under constructi on
in the USA. The Ka-band satellite is fully funded and on target
for a Spring 2012 launch. HYLAS 2 will increase Avanti ’s Ka-band
capacity in Europe and introduce new coverage in the Middle
East and Africa.
HYLAS 3
Avanti initi ated the design of its third Ka-band satellite,
HYLAS 3, in July 2010. Avanti aims to secure suffi cient
customer demand to secure effi cient debt fi nancing before
completi ng the procurement.
HYLAS 2
HYLAS 2, Avanti ’s second satellite, is
being built by the Orbital Sciences
Corporati on in the USA. HYLAS 2 will
triple Avanti ’s satellite capacity and
provide 24 Ka-band transponders across
Europe, the Middle East and Africa.
HYLAS 2 is capable of operati ng in both
civil and government frequency bands
and has already att racted signifi cant
pre-launch interest.
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AVN2561 AR10 FRONT AW12.indd 1
01/12/2010 14:18
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
Assets
Infrastructure
Business Model
HYLAS 1 was the fi rst broadband satellite
ever launched outside the USA and puts
Ka-band capacity into Europe. HYLAS 2 is
three ti mes larger and will put capacity
into Europe, the Middle East and Africa.
The HYLAS satellites are supported by a
state-of-the-art dual redundant ground
infrastructure, including Gateway Earth
Stati ons (“GES”) in the UK, Germany,
Cyprus and several other locati ons.
Since 2007, Avanti has refi ned its
operati ng model by delivering satellite
broadband to customers across Europe
using leased satellite capacity. HYLAS 1,
Avanti ’s fi rst Ka-band satellite, will replace
that leased capacity reducing operati ng
costs and improving the range of services
to customers.
Avanti operates a Virtual Network
Operator model. The design of its
satellites, Gateway Earth Stati ons (“GES”),
together with bespoke Avanti proprietary
soft ware means that Avanti ’s customers
can access the Avanti satellite network
themselves to set up their own customers
account, set service level agreements and
characteristi cs and manage, shape and
bill their own traffi c. Thus they gain many
of the benefi ts of behaving like network
operators without the need to make any
capital expenditures at all.
Base stati on at Goonhilly, Cornwall
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AVN2561 AR10 FRONT AW12.indd 2
01/12/2010 14:18
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
1 – Assets | 2 – Strategy | 3 – Achievement
Assets
Customers
Avanti sells its managed satellite
broadband services to telecommunicati ons
companies who sell onto end-users.
Avanti has secured over 60 customers of
its service at launch of HYLAS 1 serving
government, enterprise and consumer
end-users.
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AVN2561 AR10 FRONT AW12.indd 3
01/12/2010 14:18
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
Strategy
Mission
Markets
Future Satellites
Avanti is at the forefront of the expansion
of the UK space industry, which the UK
government assessed will grow to be
worth £30 billion per annum. Avanti
hopes to become the global leader in Ka-
band satellite communicati ons, launching
up to 20 satellites over ti me.
Avanti is working on the procurement
of HYLAS 3 and other satellites. New
satellites will be subject to strict
fi nancing effi ciency tests to minimise
equity diluti on.
Avanti focuses on four core markets:
1. Consumer broadband – Economic
and geographical limitati ons mean
that some 100 million households in
Avanti ’s current coverage area cannot
access good quality 2Mb broadband.
Avanti ’s fi rst two satellites can only
serve 1.3 million of these at peak.
2. Enterprise networks – Businesses
which demand ubiquity, resilience and
security turn to satellite for bespoke
internati onal networks. Avanti supplies,
amongst others, the World’s number 1
in this sector, Hughes, which has a 50%
market share.
3. Insti tuti onal – Government
organisati ons have an increasing
demand for high capacity satellite
services, especially for the management
of batt lefi eld communicati ons.
4. Cellular backhaul – The dramati c rise
in data traffi c across mobile phone
networks leaves many operators in
need of backhaul capacity especially in
rural areas or emerging markets.
Base stati on at Goonhilly, Cornwall
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AVN2561 AR10 FRONT AW12.indd 4
01/12/2010 14:19
Strategy
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
1 – Assets | 2 – Strategy | 3 – Achievement
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AVN2561 AR10 FRONT AW12.indd 5
01/12/2010 14:19
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
HYLAS 1, just before the launch
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AVN2561 AR10 FRONT AW12.indd 6
01/12/2010 14:19
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
1 – Assets | 2 – Strategy | 3 – Achievement
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AVN2561 AR10 FRONT AW12.indd 7
01/12/2010 15:48
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
08
Chairman’s Statement
Avanti now has two satellites fully funded, a
very strong balance sheet with no debt service
payments or cash fl ow covenants falling due unti l
December 2012.
• Successful launch of HYLAS 1
• Valuable spectrum brought
into use
• High cost debt repaid in
July 2010, balance sheet
now very strong
• HYLAS 2 fully fi nanced and
on schedule for launch in
Spring 2012
• Excellent progress with sales
on both satellites
As the Chairman of a company in
possession of an in-orbit satellite I have
great pleasure in presenti ng Avanti
Communicati ons Group plc’s results
for the year ended 30 June 2010. The
achievement of a start up company in
launching a satellite is very rare. Avanti
now has one satellite in-orbit and a
second launching in a litt le over a year, a
very strong balance sheet with no debt
service payments or cash fl ow covenants
falling due unti l December 2012, huge
untapped markets and a quite thrilling
opportunity to create a company of
genuine scale.
During a busy year we completed the
constructi on of our fi rst satellite and
associated ground infrastructure and
made strong progress in signing
customers for its bandwidth around
Europe. We also completed the
fi nancing of HYLAS 2 which involved
faciliti es provided by the US and French
government’s Export Credit Agencies
of £194 million. We have discovered
very high early demand for the capacity
in the Middle East and Africa. Equally
important however was the repayment
of our high yielding PIK bond which was
completed aft er the year end following
a £70 million equity fund raising. For a
young company to have two satellites
fully fi nanced with no debt service
payments for another two years gives
me great comfort that we are in control
of our own desti ny and have everything
we need over the next few years to
create the strong cash fl ows we expect
to generate for shareholders.
I would like to pay tribute to my Chief
Executive David Williams in leading our
team and also to David Bestwick who
has masterminded the construction of
our satellites. I am also pleased that all
of our employees have shares in the
company and so have a full opportunity
to enjoy the financial success which
they play their part in creating.
John Brackenbury CBE
Chairman
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John Brackenbury CBE
Chairman
Partnership
Avanti has entered into a strategic
partnership with Hughes Network
Systems LLC for the supply of Ka-band
earth stati on hubs and customer
terminal equipment. Hughes hubs are
installed in Avanti ’s Goonhilly and Lands
End earth stati ons. Hughes is the global
leader in Ka-band equipment and has
consistently maintained a global
market share of over 50%.
AVN2561 AR10 MIDDLE (1-2) AW19.indd 8
01/12/2010 14:20
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
Chief Executi ve’s Report
The market for our products is evidently strong
and we are confi dent of achieving the target of
selling out HYLAS 1 within three years.
David Williams
Chief Executi ve
Customers
Avanti signed a contract with BT to
supply satellite broadband to rural
customers in Cornwall. This is a perfect
example of the ideal business model
whereby Avanti helps incumbent
telecoms operators to solve problems
at the edge of their network.
The HYLAS 1 satellite
experienced delays in
manufacture and launch but it
is easy to underestimate the
scale of effort which has gone
into this success. It is one of
the most advanced commercial
satellites ever flown and
involved a complex partnership
with the European Space
Agency as well as our suppliers
Astrium and Arianespace.
Introducti on
I am pleased to report results for
the year which exceed expectati ons,
but which are nonetheless relati vely
immaterial in the context of the
successful launch last week of HYLAS 1.
The successful launch and the bringing
into use of our spectrum undoubtedly
creates the signifi cant value we have
been projecti ng for many years. The
market for our products is evidently
strong and we are confi dent of achieving
the target of selling out HYLAS 1 within
three years. With good progress in
fi nancing and building HYLAS 2 and the
commencement of HYLAS 3, the business
changed its scale very dramati cally
during the year.
Financial Review
Our result for the year produced
lower turnover of £5.82m (2009:
£8.04m) resulti ng from our decision
to stop selling our interim service on
rented satellite capacity. The service
sold in 2006-9 on old fashioned Ku-
band television satellite capacity is
comparati vely slow and expensive,
and it makes a loss. It has however
been invaluable in helping us to
validate market assumpti ons and
more importantly to develop and test
in a live environment the control and
management soft ware which will deliver
high quality customer experience and
enable us to maximise the yield of our
HYLAS satellites. The customers on
this system will be migrated to HYLAS 1
in the next few months, and during
2010 we decided that there was no
merit in installing systems which would
be replaced within a few months. The
fi nancially unproducti ve nature of this
acti vity is demonstrated in the gross
profi t line which showed only a marginal
reducti on to £2.68m (2009: £2.97m).
Naturally our costs increased during
the year as recruitment ramped up to
sell our bandwidth and also to manage
three satellite projects instead of one.
The increase in operati ng costs was
off set by receivables in the form of
contractual payments from suppliers
resulti ng from certain manufacturing
delays. Our currency exposures are all
hedged so that there is no cash risk,
but Accounti ng Standards oblige us
to report the noti onal changes in
value of hedging and again this year
it can be seen that our hedging
strategies protected us from losses,
and this manifests itself in a profi t of
£0.97 million (2009: £2.92 million).
09
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AVN2561 AR10 MIDDLE (1-2) AW19.indd 9
01/12/2010 14:21
Groundbreaking
Mobile Trials
Avanti Consulti ng has completed a
project designing and trialling femtocell
technology for use in mobile network
connecti vity. Femtocells provide a
strong indoor signal in mobile phone
“blackspots” by routi ng voice and
data traffi c over a standard broadband
connecti on. In this groundbreaking
trial, codenamed Project Iron, Avanti
demonstrated that satellite broadband
can provide mobile coverage in areas
where no terrestrial broadband access
is available.
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
10
Chief Executi ve’s Report Conti nued
Procurement with HYLAS 2 has proceeded
well. We passed the Criti cal Design Review in
November 2010 and in the fi rst twelve months
of the contract we have not lost a single day
of schedule.
Prudent fi nancial management and cost
control therefore restricted the net loss
for the year to £1.93 million (2009: profi t
£1.05 million).
During the year we raised £89 million
in an equity placing to complement the
Export Credit Agency debt faciliti es of
£194 million which completes the full
fi nancing of the constructi on, launch
and operati on of HYLAS 2. The debt is at
att racti ve interest rates of 5.7% and is
drawn down during the period to launch
then repayable over a seven year period
from December 2012.
Post balance sheet we raised £70 million in
an equity placing to refi nance an expensive
PIK bond which had onerous covenants
and pending interest and principal
payments. Removing this debt gives Avanti
two years in which to generate strong
cash fl ows before we need to make debt
payments so shareholders can draw great
comfort from the stable long term fi nancial
resilience of our company.
Business Overview
Getti ng our fi rst satellite into space
and bringing our spectrum into use are
events which in my opinion crystalise a
huge amount of value, given the rapidly
increasing demand for data worldwide.
We are of the opinion that the World is
beginning to see a data crunch where the
demand for data transmission capacity
will greatly outstrip supply across all
market sectors and geographies, so any
company in possession of long term
rights to use large amounts of spectrum
has a strong future. In parti cular,
the transmission of video across all
platf orms, and the emergence of cloud
computi ng will fundamentally change
consumers bandwidth requirements.
In the enterprise sector, machine to
machine communicati ons looks set to
transform the way many businesses
operate and we are seeing strong
demand in telemetry, banking and retail
for the movement of criti cal real ti me
fi nancial and performance data. We
believe we have a strong role to play
in helping mobile phone companies to
maximise the fl exibility and effi ciency
with which they can support network
growth in rural areas. In the insti tuti onal
market, the automati on of many
operati ons, parti cularly in unmanned
aerial vehicles creates a very signifi cant
opportunity – it is apparent that in the
sector Ka-band beginning to experience
mainstream demand and we are
confi dent of capitalising on this trend.
For the moment we are focussed on
fi lling our fi rst two satellites quickly
since this puts us in a positi on to off er
cash returns to shareholders and
effi ciently fi nance more satellites. I
expect the data crunch to give us
opportunity and demand to fi nance
many satellites in the next decade or so.
We have enough spectrum available to
launch perhaps 20 satellites. Whilst I am
overwhelmingly convinced that the
demand will be there, many
shareholders may wish to maximise the
value of their shares in the cash fl ows
arising from HYLAS 1 and 2 and
therefore would be reluctant to dilute
ownership of those cash fl ows with
speculati ve projects. I have therefore
committ ed to provide signifi cant
pre-sales on any new satellites which
can be used to support effi cient debt
fi nancing. This is the case with HYLAS 3.
We began the design project aft er the
2009 year end and are working hard to
produce an effi cient fi nancing strategy.
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AVN2561 AR10 MIDDLE (1-2) AW19.indd 10
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
11
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During the year we extended our
customer base so that we have sold
capacity to over sixty service providers
in Europe. Given that each customer
typically commits only to enough
bandwidth to serve the business they
can forecast in the short term, we
expect them all to come back to us
to buy more bandwidth to cope with
growth. We would also expect to
sign new customers whose cauti on
prevented them from committi ng prior
to the launch of HYLAS 1.
Procurement with HYLAS 2 has
proceeded well. We passed the Criti cal
Design Review in November 2010 and in
the fi rst twelve months of the contract
we have not lost a single day of schedule,
so we remain on target to launch this
satellite in Spring 2012.
We supported our business during the
development of the HYLAS satellites by
selling an interim broadband service using
rented capacity on an old style television
satellite. We stopped acti vely selling our
interim service over a year ago, since it is
not possible to sell a profi table broadband
service on Ku-band satellites. However,
that acti vity served several purposes in a)
validati ng business model assumpti ons
and b) giving us a live customer base for
which to develop the customer service
soft ware which will be used to manage
and enhance HYLAS performance.
Outlook
HYLAS 1 is one of the most advanced
commercial satellites ever fl own and
involved a complex partnership with
the European Space Agency as well as
our suppliers Astrium and Arianespace.
It is humbling to know that over 1,000
engineers have been involved in bringing
this satellite to life. At Avanti we have a
very long term view of our business and
I believe we have created some enduring
business partnerships which will help
to sustain long term growth, and I
am grateful for the support of all our
suppliers and partners.
Before we begin to put customer traffi c
onto HYLAS 1 aft er Christmas, we will
be working to enhance the revenue
generati ng potenti al of the satellite.
As a result of certain extra acti viti es
during manufacture HYLAS 1 has higher
performance than the original design
provided for, and enables us to off er
certain new services, especially to
insti tuti onal markets. We will analyse
the precise performance characteristi cs
of the satellite in these and other
operati ng modes, along with certain
customers, in order that we are
best able to maximise the revenue
generati ng potenti al of the satellite
through its lifeti me.
Looking forward, the key milestones for
us now relate to the successful sale of
our capacity on HYLAS 1 and HYLAS 2, the
launch and sale of HYLAS 2 capacity and
the project fi nancing of further satellites.
We have set prudent expectati ons for sale
of capacity, with our fi nancing based on
three year fi ll for HYLAS 1 and 5 years for
HYLAS 2. It appears that the markets are
more than strong enough to achieve this
many ti mes over and I hope that we can
fi ll our satellites very quickly and then
fi nance growth in capacity on the back of
success. The successful launch of HYLAS 1
is the fi rst major step for us in creati ng a
business which I hope will lead the World
in Ka-band satellite communicati ons.
David Williams
Chief Executi ve
AVN2561 AR10 MIDDLE (1-2) AW19.indd 11
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
12
Finance and Operati ng Review
In December 2009, the Company announced
that it had agreed debt fi nancing for HYLAS 2
with US EXIM bank and COFACE.
By 31 July 2010, following the approved equity placing
and the repayment of the PIK, shareholder equity stood
at £220 million with no debt outstanding.
Nigel Fox
Group Finance Director
Basis of reporti ng
The Group fi nancial statements in
this report have been prepared in
accordance with Internati onal Financial
Reporti ng Standards (IFRS) and the
associated Internati onal Financial
Reporti ng Interpretati on Council (IFRIC)
interpretati ons each as adopted for use
in the EU.
We have implemented the following
standards in these fi nancial statements:
• The Group has adopted IFRS 8,
‘Operati ng Segments’. IFRS 8 requires
operati ng segments to be identi fi ed
on the basis of internal reports
about components of the Group
that are regularly reviewed by the
Chief Operati ng Decision Maker (the
Avanti Executi ve Board) to allocate
resources and assess performance.
All resources are allocated on the
basis of satellite services. As a result,
Avanti Communicati ons Group plc
are disclosing one segment being
satellite services.
• IAS 23 Borrowing costs (revised) – the
Group early adopted IAS 23(R) as of
1 July 2007.
• The Group has adopted IAS 1
(revised) Presentati on of Financial
Statements. The amendment
aff ects the presentati on of owner
changes in equity and introduces
a ‘’Statement of Comprehensive
Income’’. The Group has elected
to present a single statement of
performance, being the Statement of
Comprehensive Income.
• The amendment to IFRS 2 relates to
vesti ng conditi ons and cancellati ons
for share opti ons. No restatement
of prior period informati on has
been necessary as a consequence of
adopti ng this standard.
• Amendments to IFRS 7: Financial
instruments has been adopted which
gives enhanced disclosures about
fair value measurements of fi nancial
instruments and over liquidity risk.
Since the amendment only impacts
presentati on and disclosure aspects,
there is no impact on the Group’s
results or net assets.
Loss from operati ons before taxati on
Depreciati on and other non-cash movements
Change in working capital and provisions
Net capital expenditure
Operati ng cashfl ow
Net interest received/fi nancing exchange gains
Free cashfl ows
Movements in funding
Increase/(decrease)in net funds
30 June 2010
£’000
30 June 2009
£’000
(2,436)
915
3,804
(108,803)
(106,520)
(512)
(107,032)
116,598
9,566
(1,386)
337
(10,297)
(2,850)
(14,196)
3,381
(10,815)
189
(10,626)
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AVN2561 AR10 MIDDLE (1-2) AW19.indd 12
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
The July 2010 placing facilitated the
repayment of the PIK bond.
Accounti ng policies
The Group has reviewed its accounti ng
policies in accordance with IAS 8
‘Accounti ng Policies, Changes in
Accounti ng Esti mates and Errors’ and
determined that they are appropriate for
the Group.
Operati ng performance
As we approached the launch of
HYLAS 1 we restricted the number of
new customers we installed on our
rented capacity. As a result there was a
planned fall in revenue to £5.8 million
(2009: £8.0 million). Gross margins
on our rented capacity remained at
acceptable levels and yielded a gross
profi t of £2.7 million.
Overheads, which are mainly salary
related, increased by 23% over the prior
period to £8.7 million (£7.1 million). These
overheads are in line with planned levels
as we gear up for the launch.
Other operati ng income
The Company conti nued to receive
liquidated damages from Astrium for
the late delivery of HYLAS. The receipt
of these damages was concluded in
November 2009, however the benefi t
is recognised through the income
statement in line with the additi onal
costs associated with the delay.
An exchange gain of £426,000 (2009:
£1,355,000 gain) arising from revaluati on
of working capital was also recognised
during the period.
Taxati on
The Group tax credit was £24,000 (2009:
£752,000 charge). The rate was negati vely
aff ected by the anti cipated fall in the UK
corporati on tax rate from 28% to 24%,
which has aff ected the brought forward
deferred tax asset values.
The Group currently generates all its
taxable results in the UK. Note 8 to the
fi nancial statements provide details of
the tax charge.
Earnings per share
Basic earnings per share fell to a
loss of 3.68 pence per share (2009:
3.78 pence earnings per share). The
earnings in 2009 were materially
affected by foreign exchange gains.
Note 9 to the financial statements
provides details of these calculations.
Financing and treasury
In December 2009, the Company
announced that it had agreed debt
fi nancing for HYLAS 2 with US EXIM
bank and COFACE. This debt totalled
£194 million which included a drawdown
period through to June 2012, during
which the interest during constructi on
would be capitalised. Thereaft er the debt
is repaid over a maximum of 7 years,
giving an eff ecti ve interest rate of 5.7%.
As at the balance sheet date none of
this debt has been drawn. In conjuncti on
with this debt, the Company raised in
January 2010 and additi onal £86 million
of equity via a placing of 21.5 million shares
at 400p to complete the fi nancing of HYLAS
2. A further 750,000 was subsequently
placed with a major shareholder at the
same 400p price.
In July 2010, the Company announced
a further placing of 16.3 million
shares at 430 pence yielding gross
proceeds £70 million. These proceeds
were received in early July 2010.
£53.6 million was used to repay the
PIK bond the Company raised in July
2007, which had begun to prove
restrictive and expensive. The
balance of the funds are to be
used in relation to two projects.
13
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AVN2561 AR10 MIDDLE (1-2) AW19.indd 13
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
14
Finance and Operati ng Review Conti nued
Net cash received from fi nancing of
£117 million was enti rely uti lised on
payments for fi xed assets.
Firstly, early stage development of
satellite 3, and secondly to facilitate the
re-domicile of the HYLAS 2 assets to
Cyprus. HYLAS 2 covers Eastern Europe,
Middle East, East and Southern Africa.
Cyprus, therefore represents an ideal
base from which to run this business
when we also plan to put one of our
main Ground Stati ons into the same
country. As a secondary consequence
of this move, profi ts arising from the
HYLAS 2 business will be taxed in
Cyprus at the prevailing rates, currently
10%. The Cypriot companies were
incorporated in July 2010.
The Group has signifi cant US dollar
and Euro currency exposures.
The Group’s policy is to hedge all
currency transacti on exposures at the
ti me 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 opti ons and forward
contracts. The Group has chosen not
to adopt hedge accounti ng during the
current or previous year.
The HYLAS 2 companies having raised
debt in US dollars, purchasing assets
predominantly in US dollars, and
anti cipati ng in excess of 50% of their
revenues to arise in US dollars have a
functi onal currency of US dollars. This
will protect the income statement from
any material changes in the US dollar to
sterling exchange rate.
Balance sheet
At the balance sheet date, shareholder
equity was £152.2 million (2009: £64.5
million). By 31 July 2010, following
the approved equity placing and the
repayment of the PIK, shareholder
equity stood at £220 million with no
debt outstanding.
Fixed assets increased during the year
to £170.2 million from £51.5 million.
The vast majority of the additi ons
are in relati on to the satellites under
constructi on and further details are
given in note 11 on page 41.
Current assets excluding cash fell from
£46.4 million to £17.9 million which
is accounted for by the receipt of the
unpaid share capital at June 2009,
received in July 2009.
As noted above the long term loan
shown on the balance sheet and
disclosed in note 21 on page 46 was
repaid for £53.6 million. In additi on
to the accrued interest, the diff erence
is represented by an early repayment
penalty of £2.3 million.
Cash fl ow
Net cash increased by £9.6 million.
Net cash received from financing of
£116.6 million was entirely utilised
on payments for fixed assets. The
net increase in funds therefore arose
from reduced working capital, interest
income offset by a cash outflow of
£1.5 million from operating activities.
Environmental factors
The acti viti es of Avanti are judged
to have a low environmental impact
and are not expected to give rise to
any signifi cant inherent environmental
risks over the next twelve months.
Avanti ’s HYLAS satellites will have their
transmissions powered by solar power.
They therefore produce lower carbon
emissions per customer than other
forms of terrestrial telecommunicati ons.
Principal risks and uncertainti es
HYLAS 1 has now been successfully
launched and the debt fi nance on
HYLAS 1 repaid.
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AVN2561 AR10 MIDDLE (1-2) AW19.indd 14
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
15
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macro-economics may aff ect exchange
rates, debt market prices, credit risks,
liquidity risks and interest rates.
We conti nue to carry a receivable of
$7.6 million, under “other receivables”
which was fi rst recognised in June
2009. This amount is due from Space
Explorati ons Inc (“SpaceX”), who
Avanti originally contracted to launch
HYLAS 1 on their Falcon 9 launch vehicle.
However, as SpaceX had failed to
generate the required launch heritage
Avanti cancelled the launch services, as
provided within the contract, and the
monies previously paid were due to be
refunded. SpaceX have failed to make
the required refund and we took the
dispute to arbitrati on in New York. The
arbitrators are due to give their binding
ruling in the early New Year. The directors
are confi dent that the monies will be
recovered and no provision is necessary.
Criti cal accounti ng policies
Details of our critical accounting
policies are in Note 1 to the
consolidated Annual Report.
Nigel Fox
Group Finance Director
HYLAS 1 is currently undergoing in-orbit
acceptance. Any failure of the satellite
during the fi rst year of operati ons is
covered by the launch insurance policy.
Thereaft er we will take out an annual in-
orbit policy that will cover issues of failure.
The demand for Ka-band services is
now well established. The predicted
market for HYLAS 1 consumer
broadband services over the regions
which it can cover is 100 million
households and SME’s. HYLAS 1 is the
first Ka-band satellite to be deployed
over Europe and can serve just 350,000
end users. In addition, business in
Enterprise, Cellular Backhaul and
Institutional markets can have a
transformational impact on the speed
of saturation. We therefore anticipate
that the risk of failing to sell the
capacity is very small.
Whilst pricing is dynamic we do not
anti cipate price pressure. As stated
above the market is huge and supply
is extremely restricted. Even with
competi ti on, the market will remain
largely unserved and as such normal
supply and demand economics suggests
that prices will not fall. The satellite
industry has experience consistently
rising prices for many years.
HYLAS 2 is due for launch in the second
quarter of 2012. The satellite is fully
funded and the risks are therefore similar
to HYLAS 1. In additi on, given that we
are 18 months from launch there is a
supplementary risk of delay. Delay could
adversely aff ect our revenues, profi tability
and liquidity. The satellite is sti ll on track
for the due launch date.
The global economic environment
remains fl uid. Whilst we do not expect
this to aff ect demand for our services,
AVN2561 AR10 MIDDLE (1-2) AW19.indd 15
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
16
Board of Directors
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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, Trustee
and Director of Springboard UK, Trustee
and Director of Bradfi eld Foundati on,
Trustee and Director of GamCare. John
is the founder Chairman and Chairman
of the Nominati ons Committ ee of Avanti
Communicati ons Group plc.
David Williams
Chief Executi ve
David is a co–founder of the
Company. Prior to this he spent ten
years working in the City fi nancing
telecommunicati ons projects.
David Bestwick
Chief Technology Offi cer
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
applicati ons projects.
Nigel Fox
Finance Director and Secretary
Nigel is a Chartered Accountant and has
held various senior fi nance roles before
joining Avanti Communicati ons in 2007,
including Chief Financial Offi cer of Climax
Group; Group Financial Controller at
ARC Internati onal; Finance Director of
Ruberoid Building Products, and Group
Financial Controller of Ruberoid Plc.
Matt hew O’Connor
Chief Operati ng Offi cer
Matt hew joined Avanti in 2005 having
worked in the telecommunicati ons
industry for 20 years initi ally for BT where
he held a number of sales and marketi ng
roles within the UK and Internati onal
Divisions. He joined Telewest in 1996 as
a Director of its Business Division, where
he was part of the team that grew the
business from a £30m regional business
to a £300m turnover nati onal operati on
in 6 years. He went on to be Managing
Director of the Wholesale Division with
customers that included T-Mobile, 3,
Cable and Wireless, NTL, and many
telecoms re-sellers.
AVN2561 AR10 MIDDLE (2-2) AW15.indd 16
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
William Wyatt * + •
Non-Executi ve
Will is Chief Executi ve Offi cer of
Caledonia Investments plc. He is also a
Non-Executi ve Director on the boards
of Bristow Group Inc, Cobepa, Melrose
Resources plc, REI plc, TGE Marine AG,
and Terrace Hill plc.
Alan Foster+ •
Non-Executi ve
Alan was a senior partner of de Zoete
& Bevan for over twenty years and, on
the creati on of BZW Asset Management,
he was appointed Deputy Chairman. This
company was the forerunner of Barclays
Global Investors. Alan is the Chairman of
the Remunerati on Committ ee of Avanti
Communicati ons Group plc.
Richard Vos*
Non-Executi ve
Richard is a telecommunicati ons and
satellite professional, with internati onal
experience, gained over 40 years working
in the industry. His previous positi ons
included Chairman of SatCom Group
Holdings plc, Inmedia Communicati ons
Ltd. and of Inmarsat Ventures PLC, and
Head of Satellite Investments for Briti sh
Telecommunicati ons plc (BT), serving
as Governor for the UK and Ireland on
the Board of INTELSAT and as Chairman
of the Board. Richard is the Chairman
of the Audit Committ ee of Avanti
Communicati ons Group plc.
Ian Taylor
Non-Executi ve
Ian Taylor was a Member of the UK
Parliament for 23 years unti l deciding to
stand down ahead of the 2010 General
Electi on. Ian was Minister for Science
and Technology at the Department of
Trade and Industry during 1994 - 1997
in a Conservati ve Government. He
subsequently chaired the all-Party
Parliamentary and Scienti fi c Committ ee
which includes the Parliamentary
Engineering Group. Prior to entering
Parliament, Ian had 18 years experience
of providing corporate fi nance and
management advice to companies in the
UK, France and USA.
* Audit committ ee
+ Remunerati on committ ee
• Nominati ons committ ee
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
18
Employees
Drawing experti se from across the globe.
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26 Countries represented
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
20
Corporate Social Responsibility
SOS Children is very glad to have partnered
with Avanti Communicati ons for the last 2 years.
The company’s support of our work is both
committ ed and wide-ranging.
SOS Children’s Villages
Ennerdale, South Africa
This village was the fi rst to be built in South Africa, in 1984,
30km south of Johannesburg. Today it is home to over 150
children in its 15 family homes, as well as a house for reti red
SOS mothers who act as grandmothers for the children.
The adjoining SOS Kindergarten has a capacity to take in
up to 100 children and the SOS Social Centre, which was
opened in 2000, houses a clinic, a day-care centre and an HIV/
AIDS community-based child care and support programme.
The clinic off ers treatment to up to 2,000 pati ents a year
and the day-care centre has a capacity to take in up to 40
children between ages 0-3. HIV/AIDS aff ected families receive
materials, medical support, educati on and counselling and
are supported with income generati ng acti viti es. Moreover,
HIV/AIDS awareness and preventi on campaigns are organised.
Avanti has contributed €3,087 in 2010.
Medlanky, Czech Republic
Within the village there are:
9 family houses for 59 children – a village director’s house
with fl ats for co-workers – a community building which
includes rooms for SOS aunts who support the SOS mothers
and take care of children when the mothers have a day off
– an acti vity house for workshops for children – a multi -
purpose building with rooms for the psychologist and
pedagogue – a recently added playground.
The tenth family house is currently being used as an SOS
Youth Facility for the youngsters from SOS Children’s Village
Chvalcov, who can stay there during their vocati onal training
or higher educati on and prepare for an independent life.
Avanti contributed €3,906 at the beginning
of 2010.
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
Not just a rocket scienti st…
Lucy Edge, Avanti Space System Manager, combines her
internati onal role as a key member of our satellite design,
build and operati ons team with her passion for triathlon.
With Astrophysics MPhys and Space Engineering MSc under
her belt, she found that the Space industry would be both
interesti ng and more than ‘just a job’.
Lucy fi nds that, to balance the training with the demands of
her job, that sport helps her to decompress and gives her
precious thinking ti me before work. With the launch of HYLAS 1
and the rapid progress of HYLAS 2, she’s made training
compromises but performed bett er in races.
“To perform well at anything, you need to
sleep and eat well – training reminds me
to do that and keeps me well for work.”
Avanti is proud to sponsor Lucy,
a member of Team Great Britain.
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
22
Directors’ Report
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The directors have pleasure in submitti ng their annual report together with the audited fi nancial statements for the year ended 30 June 2010.
Principal acti viti es and review of the business
The principal acti vity of the Company is the provision of satellite communicati on services. The services are principally provided
via Ka-band satellite.
Business review and key performance indicators (“KPI’s”)
The Directors are required by the Companies Act to present a business review, reporti ng on the development and performance of
the Group and the Company during the year and their positi ons at the end of the year. The informati on that fulfi ls the requirements
of the business review including likely future developments, can be found in the Chief Executi ve’s report on pages 9 to 11, the
Finance and Operati ng review on pages 12 to 15 and the Corporate Social responsibility report on pages 20 to 21, which are
incorporated in this report by reference. As the company is sti ll the early stages of its strategy with a focus on the future, we do not
currently have a focus on traditi onal KPI’s. Instead our business model is focussed on the launch of the satellite and subsequent
capacity sales. In the Chief Executi ve’s report and Finance and Operati ng Review, we have highlighted key fi nancial stati sti cs such as
revenue and operati ng profi t, however given the nature of the business at the current ti me, we do not consider them to be KPI’s.
The Corporate Governance report on page 26 falls within the scope of this Directors’ report.
Results and dividends
The results for the year ended 30 June 2010 are shown on page 28. No equity dividend was paid in the year ended 30 June 2010
(2009: £nil). No fi nal dividend is proposed at the year-end (2009: £nil). The loss for the year transferred to reserves was £1,932,000
(2009: profi t of £1,049,000).
Financial instruments
A discussion of the Group’s fi nancial risk management objecti ves and policies and the exposure of the group to interest rate,
foreign exchange, credit and liquidity risk is included in Note 22 to the Consolidated Financial Statements. Further discussion is also
included in the Finance and Treasury secti on of the Finance and Operati ng Review on page 13.
Research and development
The Group conti nues to invest in new services and technology through its research and development programs which can lead to
profi table exploitati on 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 profi table business case.
Post balance sheet events
Details of material post balance sheet events are included in Note 31 to the consolidated fi nancial statements.
Directors
The directors who served during the year were as follows:
F E J G Brackenbury CBE
D J Williams
D J Bestwick
M J O’Connor
C R Vos
I C Taylor MBE
N A D Fox
D A Foster
W P Wyatt
Directors’ emoluments
The remunerati on of the directors including the highest paid director and Chairman was as follows:
For the year ended 30 June 2010
Salaries and other short
term employee benefi ts
£
Post employment benefi ts
£
Executi ve
D J Williams
D J Bestwick
N A D Fox
M J O'Connor
Total executi ve
151,047
85,082
158,867
138,218
533,214
103,745
78,841
7,020
6,792
196,398
Total 2010
£
254,792
163,923
165,887
145,010
729,612
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
Non-executi ve
F E J G Brackenbury CBE
D A Foster
W P Wyatt
I C Taylor MBE
C R Vos
Total non-executi ve
For the year ended 30 June 2009
Executi ve
D J Williams
D J Bestwick
N A D Fox
M J O'Connor
Total executi ve
Non-executi ve
F E J G Brackenbury CBE
D A Foster
W P Wyatt
I C Taylor MBE
C R Vos
Total non-executi ve
Salaries and other short
term employee benefi ts
£
Post employment benefi ts
£
60,000
25,000
25,000
25,000
25,000
160,000
–
–
–
–
–
–
Salaries and other short
term employee benefi ts
£
Post employment benefi ts
£
236,128
151,887
140,400
52,433
580,848
60,000
25,000
25,000
25,000
25,000
160,000
19,832
13,928
7,020
2,622
43,402
–
–
–
–
–
–
Total 2010
£
60,000
25,000
25,000
25,000
25,000
160,000
Total 2009
£
255,960
165,814
147,420
55,055
624,249
60,000
25,000
25,000
25,000
25,000
160,000
Directors’ Long Term Incenti ve Plans
Original allocati ons:
D J Williams
D J Bestwick
N A D Fox
M J O'Connor
Total
Core
565,480
350,741
137,501
139,238
1,192,960
Excepti onal
Extraordinary
Total 2010/2009
350,741
209,384
50,000
69,445
679,570
279,884
279,884
50,000
69,445
679,213
1,196,105
840,009
237,501
278,128
2,551,743
The Long Term Incenti ve Plan (LTIP) has been established by the Company with approval from the Remunerati on Committ ee to
reward and incenti vise the Executi ve Directors and senior managers of the Company.
The LTIP allocati ons are in separate sub funds within the EBT and are subject to a discreti onary Trust. The shares are subject to
automati c revocati on if certain criteria (set out below) are not met and conti nue to be revocable for the enti re Trust period.
One additi onal grant was made during the year to a senior manager of 250,000 opti ons split across the three categories. The
exercise criteria of this grant is consistent with the criteria of the existi ng LTIP scheme.
The allocati ons into the LTIP vary for each executi ve. The total allocati on to each executi ve is split into three separate tranches:
i) The core tranche
This element of the grant becomes exercisable in 7 equal instalments. The fi rst instalment was exercisable on grant and the second
on 30 June 2008. The remaining 5 are yearly thereaft er. 4/7ths of this core grant is now exercisable.
23
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
24
Directors’ Report Conti nued
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ii) The excepti onal achievement tranche
This element of the grant was amended during the year. Originally, these opti ons were only exercisable if the average market value
of the share exceeded £5 for a consecuti ve period of six months prior to 30 June 2010. Given the unprecedented market conditi ons
over the previous year, the remunerati on committ ee considered that whilst the executi ves had performed well and that the share
price had outperformed the FTSE 100 and AIM all share index since the LTIPs were granted, the target set in the LTIP rules may sti ll
not be achieved.
In May 2010 the remunerati on committ ee agreed to extend the target date to 31 December 2010 and that the six month average
target price should be increased £5.50.
iii) The extraordinary achievement tranche
This element of the grant is only exercisable if the Market Value of a Share exceeds £10 for a consecuti ve period of six months
before 30 June 2013.
Non-executi ve directors’ unapproved plans
F E J G Brackenbury CBE
D A Foster
C R Vos
Total
Total 2010/2009
62,863
15,000
15,000
92,863
The unapproved scheme was established during 2007. The opti ons are issued for 10 years with 25% vesti ng at the end of years 3,
4, 5 and 6. There are no performance criteria associated with these opti ons and they are exercisable as long as the opti on holder
remains with the Company.
Directors’ share interests
The following Directors held interests in the share capital of the Company:
D J Williams
D J Bestwick
N A D Fox
M O’Connor
F E J G Brackenbury CBE
D A Foster
W P Wyatt
I C Taylor MBE
C R Vos
Fully paid Ordinary Shares of 1p each
30 June 2010
30 June 2009
1,543,905
1,102,264
89,897
144,564
442,891
359,639
11,200
6,300
6,030
1,541,655
1,051,158
70,254
124,673
426,891
339,639
11,200
6,300
6,030
At 29 October, the Company had been noti fi ed, pursuant to the Financial Services Authority’s Disclosure & Transparency Rules, of
the following noti fi able voti ng rights in the Company’s issued ordinary share capital.
M&G Investment Management Ltd
Caledonia Investments plc
Directors & Related and EBT
AEGON Asset Management UK plc
Capital Research Global Investors
London
London
–
Edinburgh
Los Angeles
12,507,850
11,636,965
7,351,939
3,843,800
3,488,372
14.72%
13.70%
8.65%
4.52%
4.11%
In additi on, 2.1 million shares are held under LTIP. Dividend and voti ng rights have been waived.
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
Policy and practi ce on payment of creditors
The Group’s policy and practi ce on payment of creditors is:
•
•
•
To pay all suppliers within the ti me limit agreed at the start of business with that supplier;
To ensure that suppliers are aware of the terms of payment; and
To pay in accordance with the contractual and other legal obligati ons whenever it is sati sfi ed that
the supplier has provided goods and services in accordance with the agreed terms and conditi ons.
At 30 June 2010, the Company did not have any trade creditors (2009: nil).
Politi cal and charitable donati ons
During the year the Group made a politi cal donati on to the Conservati ve party of £5,000. In additi on the Avanti staff made
charitable donati ons to SOS Children of €6,993 as detailed on page 20.
Directors’ and Offi cers’ liability insurance
Avanti Communicati ons Group plc maintains appropriate insurance to cover Directors’ and Offi cers’ liability for itself and its
subsidiaries. At the date upon this report was approved and for the year to 30 June 2010, the Company provided an indemnity in
respect of all of the Company’s Directors.
Directors’ responsibiliti es
The directors are responsible for preparing the Annual Report and the fi nancial statements in accordance with applicable law
and regulati ons.
Company law requires the directors to prepare fi nancial statements for each fi nancial year. Under that law the directors have elected
to prepare the group and parent company fi nancial statements in accordance with Internati onal Financial Reporti ng Standards (IFRSs)
as adopted by the European Union. In preparing these fi nancial statements, the directors have also elected to comply with IFRSs,
issued by the Internati onal Accounti ng Standards Board (IASB). Under company law the directors must not approve the fi nancial
statements unless they are sati sfi ed that they give a true and fair view of the state of aff airs of the group and the company and of the
profi t or loss of the group for that period. In preparing these fi nancial statements, the directors are required to:
•
select suitable accounti ng policies and then apply them consistently;
• make judgements and accounti ng esti mates that are reasonable and prudent;
•
•
state whether applicable IFRSs as adopted by the European Union and IFRSs issued by IASB have been followed, subject to any
material departures disclosed and explained in the fi nancial statements;
prepare the fi nancial statements on the going concern basis unless it is inappropriate to presume that the company will
conti nue in business.
The directors are responsible for keeping adequate accounti ng records that are suffi cient to show and explain the company’s
transacti ons and disclose with reasonable accuracy at any ti me the fi nancial positi on of the company and the group and enable
them to ensure that the fi nancial statements comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the company and the group and hence for taking reasonable steps for the preventi on and detecti on of fraud and
other irregulariti es.
The directors are responsible for the maintenance and integrity of the company’s website. Legislati on in the United Kingdom
governing the preparati on and disseminati on of fi nancial statements may diff er from legislati on in other jurisdicti ons.
In the case of each director in offi ce at the date the directors’ report is approved:
a)
so far as the directors are aware, there is no relevant audit informati on 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 informati on and to establish that the company’s auditors are aware of that informati on.
Approved by the Board of Directors and signed on behalf of the Board.
Nigel Fox
Secretary and Group Finance Director
London
30 November 2010
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
26
Corporate Governance Report
The Group is quoted on AIM. Although the rules of AIM do
not require the Company to comply with the Combined Code
2006 on Corporate Governance (‘the Code’) the Company fully
supports the principles set out in the Code and will seek to
comply wherever practi cal, given both the size and resources
available to the Company. Details are provided below of how
the Company applies those parts of the Code which it believes
to be appropriate.
The board
The Company has appointed non-executive directors to
bring an independent view to the board and to provide a
balance to the executive directors. The board of directors
comprises four executive directors and five 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 committ ees
The Board has established three committ ees: audit,
remunerati on and nominati ons, all having writt en terms
of delegated responsibiliti es. Each is chaired by a diff erent
non-executi ve director. A copy of each committ ee’s terms
of reference can be found at the Avanti website:
www.avanti plc.com
Audit committ ee
The audit committ ee consists of R Vos, W Wyatt , and
J Brackenbury and is chaired by R Vos. It meets at least twice
a year and is responsible for ensuring that the appropriate
fi nancial reporti ng procedures are properly maintained and
reported on and for meeti ng the auditors and reviewing their
reports relati ng to the Group’s accounts and internal control
systems. The committ ee also receives all internal operati onal
review reports.
Remunerati on committ ee
The remunerati on committ ee 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 executi ve directors and other senior executi ves and for
determining appropriate levels of remunerati on.
Nominati ons committ ee
The nominati ons committ ee consists of W Wyatt , J Brackenbury
and A Foster and is chaired by J Brackenbury. It meets as and
when necessary and is responsible for nominati ng candidates
for appointment as Directors to the Board, bearing in mind the
need for a broad representati on of skills across the Board.
Shareholder relati ons
The Company meets with insti tuti onal shareholders and
analysts as appropriate and uses its website to encourage
communicati on with private, existi ng and prospecti ve
shareholders. Avanti Communicati ons Group plc welcomes
feedback from investors about its published reports and
website. Please address your feedback to our investor
relati ons team at Redleaf Communicati ons Limited by email
info@redleafpr.com or in writi ng to Redleaf Communicati ons
Limited, 9-13 St Andrews Street, London EC4A 3AF.
Internal control and risk management
The Group operates a system of internal control and conti nues
to develop and review that system in accordance with the
guidance published by the Insti tute 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 objecti ves. The board is responsible for the system
of internal control and for reviewing its eff ecti veness. It can
only provide reasonable, but not absolute, assurance against
material misstatement or loss.
The board operates a formal process of risk assessment and
reporti ng. Each major business unit carries out formal risk
assessments annually and regularly updates those during the
year. Reports on the assessments and related miti gati on acti ons
of all signifi cant risks are provided to the board.
The Group does not have an internal audit functi on due to
the small size of the Company’s administrati ve functi on, the
high level of director review and authorisati on of transacti ons.
However, the Company undertakes a programme of operati onal
reviews designed to visit all major businesses on a regular basis.
The fi nance director is responsible for that programme and its
reporti ng to the audit committ ee. The board recognises that an
essenti al part of its responsibility is the eff ecti ve safeguarding
of assets, the proper recogniti on of liabiliti es and the accurate
reporti ng of results. The Group has a comprehensive system for
regular reporti ng to the board. This includes an annual planning
and budgeti ng system with budgets approved by the board.
The fi nancial reporti ng system compares against budget and
prior year and reconsiders its fi nancial year forecast on a monthly
basis. The board has established a formal policy of authorisati on
setti ng out matt ers which require its expressed approval and
certain authoriti es delegated to the executi ve directors.
In compliance with AIM rules the Company has established a policy
and share dealing code relati ng to dealing in the Company’s shares
by directors, employees and connected persons.
The Company maintains appropriate insurance cover in
respect of legal acti ons against directors as well as against
material loss or claims against the Group, and reviews the
adequacy of cover regularly.
There were no noti fi able environmental impacts at any Avanti
Communicati ons Group site during the fi nancial year.
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AVN2561 AR10 MIDDLE (2-2) AW15.indd 26
01/12/2010 14:21
Independent Auditors’ Report
to the members of Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
We have audited the group and parent company fi nancial statements (the ‘‘fi nancial statements’’) of Avanti Communicati ons
Group plc for the year ended 30 June 2010 which comprise the consolidated income statement, the consolidated statement
of comprehensive income, the consolidated statement of fi nancial positi on, the company statement of fi nancial positi on, the
statement of cash fl ows , the statement of changes in equity and the related notes. The fi nancial reporti ng framework that has
been applied in their preparati on is applicable law and Internati onal Financial Reporti ng Standards (IFRSs) as adopted by the
European Union and, as regards the parent company fi nancial statements, as applied in accordance with the provisions of the
Companies Act 2006.
Respecti ve responsibiliti es of directors and auditors
As explained more fully in the Directors’ Responsibiliti es Statement set out on page 25, the directors are responsible for the
preparati on of the fi nancial statements and for being sati sfi ed that they give a true and fair view. Our responsibility is to audit the
fi nancial statements in accordance with applicable law and Internati onal Standards on Auditi ng (UK and Ireland). Those standards
require us to comply with the Auditi ng Practi ces Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with
Secti ons 495 and 496 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, 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 writi ng.
Scope of the audit of the fi nancial statements
An audit involves obtaining evidence about the amounts and disclosures in the fi nancial statements suffi cient to give reasonable
assurance that the fi nancial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounti ng policies are appropriate to the group’s and parent company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of signifi cant accounti ng esti mates made by the directors; and
the overall presentati on of the fi nancial statements.
Opinion on fi nancial statements
In our opinion:
•
•
•
the fi nancial statements give a true and fair view of the state of the group’s and of the parent company’s aff airs as at
30 June 2010 and of the group’s loss and group’s and parent company’s cash fl ows for the year then ended;
the group fi nancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the parent company fi nancial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
•
the fi nancial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matt er prescribed by the Companies Act 2006
In our opinion the informati on given in the Directors’ Report for the fi nancial year for which the fi nancial statements are prepared
is consistent with the fi nancial statements.
Matt ers on which we are required to report by excepti on
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if,
in our opinion:
•
•
•
adequate accounti ng records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
the parent company fi nancial statements are not in agreement with the accounti ng records and returns; or
certain disclosures of directors’ remunerati on specifi ed by law are not made; or
• we have not received all the informati on and explanati ons we require for our audit.
J. Booker (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
30 November 2010
27
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AVN2561 AR10 MIDDLE (2-2) AW15.indd 27
01/12/2010 14:21
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
28
Consolidated Income Statement Year Ended 30 June 2010
Revenue
Cost of sales
Gross profi t
Operati ng expenses
Other operati ng income
Loss from operati ons
Financing exchange gain and movement in derivati ve fair value
Finance income
Finance expense
Net fi nance income
(Loss)/profi t before tax
Income tax credit/(expense)
(Loss)/profi t for the year
Att ributable to:
Equity holders of the parent
Basic (loss)/earnings per share (pence)
Diluted (loss)/earnings per share (pence)
Year ended
30 June 2010
£’000
Year ended
30 June 2009
£’000
Notes
2
3
6
7
7
7
7
8
9
9
5,815
(3,140)
2,675
(8,739)
3,628
(2,436)
972
99
(591)
480
(1,956)
24
(1,932)
(1,932)
(3.68p)
(3.68p)
8,041
(5,068)
2,973
(7,086)
2,727
(1,386)
2,932
417
(162)
3,187
1,801
(752)
1,049
1,049
3.78p
3.39p
Consolidated Statement of Comprehensive Income Year Ended 30 June 2010
(Loss)/profi t for the year
Other comprehensive income
Notes
Year ended
30 June 2010
£’000
Year ended
30 June 2009
£’000
(1,932)
1,049
Exchange diff erences on translati on of foreign operati ons
Total comprehensive (loss)/income for the year
13
(1,919)
–
1,049
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AVN2561 AR10 Back AW11.indd 28
01/12/2010 14:20
Consolidated Statement of Financial Positi on as at 30 June 2010
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
Current assets
Inventories
Unpaid share capital
Trade and other receivables
Derivati ve fi nancial instruments
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES AND EQUITY
Current liabiliti es
Trade and other payables
Derivati ve fi nancial instruments
Provisions for other liabiliti es
Interest bearing liabiliti es
Total current liabiliti es
Non-current liabiliti es
Trade and other payables
Provisions for other liabiliti es
Loans and other borrowings
Total non-current liabiliti es
Total liabiliti es
Equity
Share capital
Share premium
Retained earnings and other reserves
Total shareholders’ equity
Total liabiliti es and equity
Notes
30 June 2010
£’000
30 June 2009
£’000
11
12
17
15
16
18
19
20
21
19
20
21
23
24
24
170,231
51,534
11
268
21
5
170,510
51,560
1,398
–
15,993
525
34,181
52,097
352
31,500
14,237
347
24,615
71,051
222,607
122,611
13,460
11,369
–
30
269
795
30
402
13,759
12,596
7,228
33
49,404
56,665
70,424
639
120,496
31,048
152,183
222,607
2,899
63
42,574
45,536
58,132
417
34,041
30,021
64,479
122,611
The fi nancial statements of company number 6133927 on pages 28 to 55 were approved by the Board of Directors on
30 November 2010 and signed on its behalf by:
Nigel Fox
Finance Director
30 November 2010
29
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AVN2561 AR10 Back AW11.indd 29
01/12/2010 14:20
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
30
Company Statement of Financial Positi on as at 30 June 2010
ASSETS
Non-current assets
Deferred tax assets
Investments
Total non-current assets
Current Assets
Trade and other receivables
Derivati ve fi nancial instruments
Unpaid share capital
Total current assets
Total assets
LIABILITIES AND EQUITY
Current liabiliti es
Trade and other payables
Derivati ve fi nancial instruments
Total current liabiliti es
Total liabiliti es
Equity
Share capital
Share premium
Retained earnings and other reserves
Total shareholders’ equity
Total liabiliti es and equity
Notes
30 June 2010
£’000
30 June 2009
£’000
17
13
16
19
23
24
24
62
41,320
41,382
80,234
525
–
80,759
122,141
9
–
9
9
686
120,496
950
122,132
122,141
102
289
391
7,291
347
31,500
39,138
39,529
4,278
795
5,073
5,073
449
34,041
(34)
34,456
39,529
The fi nancial statements of company number 6133927 on pages 28 to 55 were approved by the Board of Directors on
30 November 2010 and signed on its behalf by:
Nigel Fox
Finance Director
30 November 2010
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AVN2561 AR10 Back AW11.indd 30
01/12/2010 14:20
Statement of Cash Flows Year Ended 30 June 2010
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
Group
Company
Year ended
30 June 2010
£’000
Year ended
30 June 2009
£’000
Year ended
30 June 2010
£’000
Year ended
30 June 2009
£’000
Notes
Cash fl ow from operati ng acti viti es
Loss from operati ons before taxati on
Net foreign exchange gain
Depreciati on of property, plant
and equipment
Amorti sati on of intangible assets
Provision for impairment
of trade receivables
Onerous lease provision uti lised
Share based payments expense
3
3
16
20
25
(2,436)
(439)
759
10
13
(30)
602
(1,521)
(1,386)
(1,183)
768
51
172
(123)
652
(1,049)
Movement in working capital
(Increase)/decrease in inventories
(1,047)
(102)
(59)
(285)
–
–
–
–
–
54
(5)
–
–
–
–
–
–
155
(130)
–
(Increase)/decrease in trade
and other receivables
Increase/(decrease) in trade
and other payables
Interest received
Interest paid
Net cash generated from/(used by)
operati ng acti viti es
Cash fl ows from investi ng acti viti es
Investments
Payments for property, plant
and equipment
Net cash used in investi ng acti viti es
Cash fl ows from fi nancing acti viti es
Proceeds from borrowings
Repayment of borrowings
Debt issue cost paid
Proceeds from share issue
Share issue costs
Proceeds from fi nance leases
Finance lease paid
Net cash received from
fi nancing acti viti es
Eff ects of exchange rate on the
balances of cash and cash equivalents
Net increase/(decrease) in cash
and cash equivalents
Cash and cash equivalents at the
beginning of the fi nancial year
Cash and cash equivalents at the
end of the fi nancial year
(1,756)
(5,626)
(72,872)
(1,882)
6,607
2,283
99
(155)
(4,569)
(11,346)
951
(162)
(3,092)
(75,969)
–
–
2,227
(10,557)
(75,969)
–
–
(41,031)
(108,803)
(108,803)
(2,850)
(2,850)
–
(41,031)
–
–
–
120,500
(3,500)
–
(402)
116,598
–
(21)
–
–
–
802
(592)
189
(456)
2,592
9,566
(10,626)
24,615
34,181
35,241
24,615
18
–
–
–
120,500
(3,500)
–
–
117,000
–
–
–
–
2,012
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31
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AVN2561 AR10 Back AW11.indd 31
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
32
Statement of Changes in Equity Year Ended 30 June 2010
Share Capital
£’000
Share premium
£’000
Retained earnings
£’000
Total equity
£’000
277
–
140
–
–
417
417
–
237
(15)
–
–
–
3,858
–
30,183
–
–
28,600
1,049
–
652
(280)
34,041
30,021
34,041
–
86,455
–
–
–
–
30,021
(1,919)
–
–
2,181
602
163
31,048
32,735
1,049
30,323
652
(280)
64,479
64,479
(1,919)
86,692
(15)
2,181
602
163
152,183
639
120,496
Share Capital
£’000
Share premium
£’000
Retained earnings
£’000
Total equity
£’000
309
–
140
–
–
449
449
–
237
–
–
–
3,858
–
30,183
–
–
34,041
34,041
–
86,455
–
–
–
686
120,496
(146)
(14)
–
154
(28)
(34)
(34)
723
–
174
54
33
950
4,021
(14)
30,323
154
(28)
34,456
34,456
723
86,692
174
54
33
122,132
Group
2009
At 1 July 2008
Total comprehensive profi t for the year
Issue of share capital
Share based payments
Tax expense taken directly to reserves
At 30 June 2009
2010
At 1 July 2009
Total comprehensive loss for the year
Issue of share capital
EBT treasury shares
Foreign currency translati on reserve
Share based payments
Tax credit taken directly to reserves
At 30 June 2010
Company
2009
At 1 July 2008
Total comprehensive loss for the year
Issue of share capital
Share based payments
Tax expense taken directly to reserves
At 30 June 2009
2010
At 1 July 2009
Total comprehensive profi t for the year
Issue of share capital
Foreign currency translati on reserve
Share based payments
Tax credit taken directly to reserves
At 30 June 2010
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AVN2561 AR10 Back AW11.indd 32
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Notes to the Accounts Year Ended 30 June 2010
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
1. Accounti ng policies
Statement of compliance
The Group fi nancial statements have been prepared in accordance with Internati onal Financial Reporti ng Standards (IFRS) as adopted
by the EU issued by the Internati onal Accounti ng Standards Board (IASB), and with the Internati onal Financial Reporti ng Interpretati ons
Committ ee (IFRIC), and those parts of the Companies Act 2006 applicable to companies preparing their accounts under IFRS.
The principal accounti ng policies applied in the preparati on of these fi nancial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
Basis of preparati on
The fi nancial statements have been prepared on the historical cost basis, with the excepti on of share based payments and
fi nancial derivati ves, which are incorporated using fair value.
The Company has elected to take the exempti on under secti on 408 of the Companies Act 2006 to not present the parent
company income statement.
New standards applied during the year ended 30 June 2010
The Group has adopted IFRS 8, ‘Operati ng Segments’. IFRS 8 requires operati ng segments to be identi fi ed on the basis of internal
reports about components of the Group that are regularly reviewed by the Chief Operati ng Decision Maker (the Avanti Executi ve
Board) to allocate resources and assess performance. All resources are allocated on the basis of satellite services. As a result, the
Group is disclosing one segment being satellite services.
IAS 23 Borrowing costs (revised) – the Group early adopted IAS 23(R) as of 1 July 2007.
The Group has adopted IAS 1 (revised) Presentati on of Financial Statements. The amendment aff ects the presentati on of owner
changes in equity and introduces a ‘’Statement of Comprehensive Income’’. The Group has elected to present a single statement
of performance, being the Statement of Comprehensive Income.
The amendment to IFRS 2 relates to vesti ng conditi ons and cancellati ons for share opti ons. No restatement of prior period
informati on has been necessary as a consequence of adopti ng this standard.
Amendments to IFRS 7: Financial instruments has been adopted which gives enhanced disclosures about fair value
measurements of fi nancial instruments and over liquidity risk. Since the amendment only impacts presentati on and disclosure
aspects, there is no impact on the Group’s results or net assets.
New standards and interpretati ons
The following new standards, amendments to standards or interpretati ons are mandatory for the fi rst ti me for the fi nancial year
beginning 1 July 2009 but are not currently relevant for the Group, or have had no impact:
IFRS 3 (R) – Business Combinati ons
IAS 27 (R) – Consolidated and Separate Financial Statements
Amendments to various IFRSs and IASs arising from May 2008 Annual Improvements to IFRSs
Amendment to IAS 39 - Eligible hedged items
Amendment to IFRS 5 - Non-current Assets Held for Sale and Disconti nued Operati ons
Amendment to IFRIC 9 and IAS 39: Embedded derivati ves
Amendment to IAS 32 Financial instruments: Presentati on
IFRIC 12, Service concession arrangements
IFRIC 13, Customer loyalty programmes relati ng to IAS 18, Revenue
IFRIC 14 The limit on a defi ned benefi t asset, minimum funding requirements and their interacti on
IFRIC 15 Agreements for the constructi on of real estate
IFRIC 16 Hedges of a net investment in a foreign operati on
IFRIC 17 Distributi ons of Non cash assets to Owners
IFRIC 18 Transfers of assets from customers
The following new standards, amendments to standards and interpretati ons are mandatory for the fi rst ti me for the fi nancial
year beginning 1 July 2010:
Amendments to various IFRSs and IASs arising from 2010:
Annual Improvements to IFRSs (eff ecti ve 1 January 2010)
Amendment to IFRS 2 Share based payments group cash-sett led transacti ons (eff ecti ve 1 January 2010)
IFRS 1 First-ti me Adopti on – Additi onal exempti ons (eff ecti ve 1 January 2010)
Amendment to IAS 32 Financial instruments: Classifi cati on of rights issues (eff ecti ve 1 February 2010)
Amendment to IFRS 1: ‘First ti me adopti on’ – fi nancial instrument disclosures (eff ecti ve 1 July 2010)
IFRIC 19 Exti nguishing fi nancial liabiliti es with equity instruments (eff ecti ve 1 July 2010)
33
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AVN2561 AR10 Back AW11.indd 33
01/12/2010 14:20
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
34
Notes to the Accounts Conti nued
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1. Accounti ng policies conti nued
New standards and interpretati ons
The Directors do not anti cipate that the adopti on of any of the above standards, amendments or interpretati ons will have a
material impact on the Group’s fi nancial statements on initi al applicati on.
The following new standards, amendments to standards and interpretati ons have been issued, but are not eff ecti ve for the
fi nancial year beginning 1 July 2010 and have not been early adopted:
Amendments to various IFRSs and IASs arising from 2010:
Annual Improvements to IFRSs (eff ecti ve 1 January 2011)
Amendment to IAS 24 Related party disclosures (eff ecti ve 1 January 2011)
Amendments to IFRIC 14 Prepayments on a minimum funding requirement (eff ecti ve 1 January 2011)
Phase 1 of IFRS 9 Financial instruments: classifi cati on and measurement (eff ecti ve 1 January 2013)
The Group is currently assessing the impact of the standards on its results, fi nancial positi on and cash fl ows.
The Group conti nues to monitor the potenti al impact of other new standards and interpretati ons which may be endorsed by the
European Union and require adopti on by the Group in future accounti ng periods.
Criti cal accounti ng esti mates and management judgement
The presentati on of fi nancial statements in conformity with IFRS requires the use of certain criti cal accounti ng esti mates. It also
requires management to exercise its judgement in the process of applying the Group’s accounti ng policies.
The esti mates and assumpti ons that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets
and liabiliti es within the next fi nancial year are addressed below.
(a) Income taxes
The Group’s income tax balance is the sum of the total current and deferred tax balances. The calculati on of this, and of the Group’s
potenti al liabiliti es or assets, necessarily involves a degree of esti mati on and judgement in respect of certain items whose tax treatment
cannot be fi nally determined unti l resoluti on has been reached with the relevant tax authority. The amounts recognised or disclosed
are derived from the Group’s best esti mati on and judgement. However, the inherent uncertainty regarding the outcome of these
means eventual realisati on could diff er from the accounti ng esti mates and therefore impact the Group’s results and cash fl ows.
(b) Revenue recogniti on
The group uses the percentage-of-completi on method in accounti ng for its consultancy and space projects. Use of the percentage-of
completi on method requires the group to esti mate the services performed to date as a proporti on of the total services to be performed.
(c) Space Explorati ons Inc (“Spacex”)
The group conti nues to carry a receivable of $7.6 million, under “other receivables” which was fi rst recognised in June 2009. This
amount is due from Spacex, who Avanti originally contracted to launch HYLAS 1 on their Falcon 9 launch vehicle. However, as
Spacex had failed to generate the required launch heritage Avanti cancelled the launch services, as provided within the contract,
and the monies previously paid were due to be refunded. SpaceX have failed to make the required refund and the dispute was
taken to arbitrati on in New York. The arbitrators are due to give their binding ruling in early 2011. The directors are confi dent
that the monies will be recovered and no provision will be necessary.
Going concern
The accounts have been prepared on a going concern basis which assumes that the Group will conti nue in operati onal existence
for the foreseeable future.
Basis of consolidati on
Where the company has the power, either directly or indirectly, to govern the fi nancial and operati ng policies of another enti ty
or business so as to obtain benefi ts from its acti viti es, it is classifi ed as a subsidiary. The fi nancial statements present the
results of the company and its subsidiaries, including the Employee Benefi t Trust (“the group”) as if they formed a single enti ty.
Intercompany transacti ons, 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 acquisiti on.
There are no minority interest in the net assets of the Group, and no goodwill arising on acquisiti on of subsidiaries.
The fi nancial statements of subsidiaries are prepared for the same reporti ng year as the parent company using consistent
accounti ng policies.
Revenue recogniti on
The group currently earns revenue primarily from the sale of satellite broadband services to customers and from providing
consultancy advice connected with the exploitati on of the space assets. Following the launch of HYLAS 1, revenue from the sale
of satellite broadband services will be the key revenue stream of the business with space consultancy contracts being a smaller
proporti on of the total revenues.
AVN2561 AR10 Back AW11.indd 34
01/12/2010 14:20
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
Broadband satellite communicati ons services revenues are recorded on a straight-line basis over the term of the contract
concerned net of discounts, VAT and other similar allowances.
Revenues also include sales of terminals recognised upon installati on when the risks and rewards of ownership have transferred
to the customer.
Revenue from space consultancy and other consultancy contracts connected with the exploitati on of the space assets are
recognised by reference to the stage of completi on of the contract acti vity 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 completi on 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 recognised as an expense in the period they are incurred.
Accrued income represents the diff erence between amounts invoiced and revenues recognised. Deferred income represents any
unearned balances remaining from amounts received from customers pursuant to prepaid contracts.
Appropriate allowances for esti mated irrecoverable amounts are recognised against revenue when there is objecti ve evidence that
trade receivables are impaired. Accounts receivable balances are specifi cally reviewed to assess a customer’s ability to make payments.
Leased assets
Assets acquired under hire purchase or fi nance lease are capitalised in the balance sheet. Those held under hire purchase
and fi nance lease contracts are depreciated over their esti mated useful lives. The interest element of these obligati ons is charged
to the profi t and loss account over the relevant period. The capital element of the future payments is treated as a liability.
Operati ng 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 constructi on of the satellite assets are capitalised during the period of ti me 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 eff ecti ve interest rate methodology, taking into account the principal
amounts outstanding and the interest rates applicable.
Foreign currency
Transacti ons entered into by the group enti ti es in a currency other than the currency of the primary economic environment in
which it operates (the “functi onal currency”) are recorded at the rates ruling when the transacti ons occur. Foreign currency
monetary assets and liabiliti es are translated at the rate ruling at the balance sheet date. Exchange diff erences arising on the
retranslati on of unsett led monetary assets and liabiliti es are similarly recognised immediately in the income statement.
The presentati onal currency of the Group is sterling. The functi onal and presentati onal currency of the parent and its subsidiaries
is sterling (with the excepti on of Avanti Hylas 2 Limited and Avanti Hylas 2 Launch Services Limited which have US dollars as their
presentati onal and functi onal currency).
Pension schemes
Employees have the opti on to establish their own pension scheme to which the Group will match employee contributi ons up to
a maximum amount. There is no on-going liability to the Group beyond the period that the contributi ons are made. The cost of
such contributi ons are charged to the income statement when incurred.
Share based payments
The group operates a number of equity-sett led, share based compensati on plans. The fair value of these employee share opti on
plans, representi ng employee services received in exchange for the grant of the opti ons, is calculated using an opti on-pricing
model. In accordance with IFRS 2 “Share based payment”, the resulti ng cost is charged to the income statement over the vesti ng
period of the opti ons. The amount of the charge is adjusted to refl ect expected and actual levels of opti ons vesti ng.
Current tax
The charge for taxati on is based on taxable profi ts for the year. Taxable profi ts diff er from profi t as reported in the income
statement because it excludes items of income and expenses that are taxable or deducti ble in other years and it further excludes
items that are never taxable or deducti ble.
Current tax assets and liabiliti es are measured at the amount expected to be recovered from or paid to the taxati on authoriti es
based on tax rates that have been enacted or substanti ally enacted by the balance sheet date.
Deferred tax
Deferred tax is recognised on diff erences between the carrying amount of assets and liabiliti es in the fi nancial statements and the
corresponding tax bases used in the computati on of taxable profi t, and is accounted for using the balance sheet liability method.
35
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AVN2561 AR10 Back AW11.indd 35
01/12/2010 14:20
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
36
Notes to the Accounts Conti nued
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1. Accounti ng policies conti nued
Deferred tax conti nued
Deferred tax liabiliti es are generally recognised for all taxable temporary diff erences, and deferred tax assets are generally
recognised for all deducti ble temporary diff erences to the extent that it is probable that taxable profi ts will be available against
which those deducti ble temporary diff erence can be uti lised.
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 suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabiliti es are measured at the tax rates that are expected to apply in the period in which the liability is
sett led or the asset realised, based on tax rates that have been enacted or substanti ally enacted by the balance sheet date. The
measurement of the deferred tax liabiliti es and assets refl ects the tax consequences that would follow from the manner in which
the Group expects, at the reporti ng date, to recover or sett le the carrying amount of its assets and liabiliti es.
Deferred tax assets and liabiliti es are off set when the group has a legally enforceable right to off set current tax assets and
liabiliti es and the deferred tax assets and liabiliti es relate to taxes levied by the same taxati on authority on either the same
taxable group company; or diff erent group enti ti es which intend either to sett le current tax assets and liabiliti es on a net basis,
or to realise the assets and sett le the liability simultaneously, in each future period in which signifi cant amounts of deferred tax
assets or liabiliti es are expected to be sett led or recovered.
Property plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciati on and any accumulated impairment losses.
Depreciati on is provided so as to write off the cost or valuati on of assets, other than assets under constructi on, over their
esti mated useful lives using the straight-line method.
Cost includes the original purchase price of the asset and the costs directly att ributable to bringing the asset to its working
conditi on for its intended use.
Motor vehicles
25% per annum
Plant and machinery
25% per annum
Network assets
20-25% per annum
Leasehold improvements
25% per annum
Fixtures and fi tti ngs
25% per annum
Satellite in constructi on
Nil
The esti mated useful lives, residual values and depreciati on method are reviewed at each year end, with the eff ect of any
changes in esti mate accounted for on a prospecti ve basis. The gain or loss arising on the disposal of assets is charged to the
profi t and loss account and is calculated as the diff erence between the disposal proceeds and the carrying amount of the assets.
Assets held under fi nance 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 constructi on relate to costs (including employee related costs) directly att ributable to the constructi on of the HYLAS
satellites. These assets will be transferred to a space asset category and depreciated over the life of the satellites once they
become operati onal and placed into service. No depreciati on has been charged on these assets. It is anti cipated that the life of
HYLAS 1 will be 15 years and therefore the fi rst annual depreciati on will be in the year ended 30 June 2011 following successful
launch of HYLAS 1.
Research and development costs in relati on to the satellites are capitalised if they meet the conditi ons 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 amorti sed over the expected useful life
of the assets.
Where the conditi ons are not met the costs are expensed through the income statement.
Intangible assets
Intangible assets comprise of computer soft ware and are stated at cost less accumulated amorti sati on and any accumulated
impairment losses. Amorti sati on is provided so as to write off the cost or valuati on of assets, other than assets under
constructi on, over their esti mated useful lives using the straightline method. The amorti sati on rate on computer soft ware is 25%.
Cost includes the original purchase price of the asset and the costs att ributable to bringing the asset to its working conditi on for
its intended use.
The esti mated useful lives, residual values and amorti sati on method are reviewed at each year end, with the eff ect of any
changes in esti mate accounted for on a prospecti ve basis. The gain or loss arising on the disposal of assets is charged to the profi t
and loss account and is calculated as the diff erence between the disposal proceeds and the carrying amount of the assets.
AVN2561 AR10 Back AW11.indd 36
01/12/2010 14:20
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
Impairment of non-fi nancial assets
Assets that are subject to amorti sati on and depreciati on are reviewed for impairment when events or changes in circumstances
indicate that the carrying amount may not be fully recoverable. The impairment review comprises a comparison of the carrying
amount of the fi xed asset with its recoverable amount, which is the higher of fair value less costs to sell and value in use.
Fair value less costs to sell is calculated by reference to the amount at which the asset could be disposed of. Value in use is
calculated by discounti ng the expected future cash fl ows obtainable as a result of the asset’s conti nued use, including those
resulti ng from its ulti mate disposal, at a market-based discount rate on a pre-tax basis.
An impairment loss is recognised in the Income Statement whenever the carrying amount of an asset exceeds its recoverable
amount. The carrying amount will only be increased where an impairment loss recognised in a previous period for an asset either
no longer exists or has decreased, up to the amount that it would have been had the original impairment not occurred.
For the purpose of conducti ng impairment reviews, CGUs are identi fi ed as groups of assets and liabiliti es that generate cash
fl ows that are largely independent of other cash fl ow streams. The assets and liabiliti es include those directly involved in
generati ng the cash fl ows and an appropriate proporti on of corporate assets. For the purposes of impairment review space
segment assets are treated as one CGU.
European Space Agency (ESA) Funding
When payments are made by ESA direct to the satellite contractor EADS Astrium, the group records the transacti on by
capitalising the amount to property, plant and equipment ‘space assets’ and recognising the deferred revenue. Both the satellite
asset and the deferred revenue will be depreciated/released to the income statment over the expected life of the asset. There
are no conti ngencies associated with the ESA funding.
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 locati on and conditi on.
Cost is determined by the fi rst-in fi rst -out method.
Net realisable value is based on esti mated selling price less any further costs expected to be incurred to completi on and disposal.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of directly att ributable issue costs.
Trade receivables
Trade receivables are measured at initi al recogniti on at fair value and are subsequently measured at amorti sed cost using the
eff ecti ve interest rate method where the ti me value of money is material. Appropriate allowances for esti mati ng irrecoverable
amounts are recognised in the Income Statement where there is evidence that the asset is impaired. This impairment would be
recognised within operati ng 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 converti ble into known amounts of cash and are subject to an insignifi cant risk of change in value. For
the purpose of the consolidated cash fl ow statement, cash and cash equivalents are stated net of outstanding bank overdraft s.
Provisions
Provisions are recognised when the Group has a legal or constructi ve obligati on to transfer economic benefi ts arising from past
events and the amount of the obligati on can be esti mated reliably. Provisions are not recognised unless the outf low of economic
benefi ts to sett le the obligati on is more likely than not to occur.
Borrowings
Interest-bearing bank loans and overdraft s are measured initi ally at fair value, net of transacti on costs incurred. Borrowings
are subsequently stated at amorti sed cost; any diff erence between the proceeds and the redempti on value is recognised in the
income statement over the period of the borrowings using the eff ecti ve interest method.
Borrowings are classifi ed as current liabiliti es unless the group has an unconditi onal right to defer sett lement of the liability for at
least 12 months aft er the balance sheet date.
Trade payables
Trade payables are initi ally measured at fair value, and are subsequently measured at amorti sed cost.
Financial instruments and hedging acti viti es
Financial assets and fi nancial liabiliti es are recognised on the Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
37
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AVN2561 AR10 Back AW11.indd 37
01/12/2010 14:20
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
38
Notes to the Accounts Conti nued
1. Accounti ng policies conti nued
Financial instruments and hedging acti viti es conti nued
The group uses derivati ve fi nancial instruments mainly to reduce exposure to foreign exchange risks. The group does not hold
or issue derivati ve fi nancial instruments for trading purposes. Derivati ves are recognised at fair value on the date a contract is
entered into and are subsequently re-measured at their fair value.
Hedge accounti ng is currently not applied. Changes in fair value of derivati ve fi nancial instruments are recognised in the income
statement as they arise.
2. Revenue
As noted in note 1, the group currently earn revenue primarily from the sale of satellite broadband services to customers and
from providing consultancy advice connected with the exploitati on of the space assets. On adopti on of IFRS 8, ‘Operati ng
Segments’, the group concluded that the Chief Operati ng Decision Maker (the Avanti Executi ve Board) manage the business and
the allocati on of resources on the basis of the provision of satellite services, resulti ng in one segment.
Revenue of £5,815,000 (2009: £8,041,000) represents invoiced sales of satellite broadband services provided to external customers,
revenue on space and consultancy contracts recognised on a percentage of completi on basis and the sale of terminals.
The group derived £1,334,000 (2009: £2,597,000) of its turnover from European countries outside the United Kingdom, and
£4,481,000 (2009: £5,444,000) from the United Kingdom.
3. Operati ng expenses
Costs are presented by the nature of the expense to the Group and include the following:
Depreciati on of property, plant and equipment
Amorti sati on of intangible assets
Research and development costs writt en off as incurred
Employee benefi t expense
Operati ng lease expenses
– Minimum lease payments
– Sublease payments
– Onerous lease provision uti lised
– Onerous lease provision released
4. Auditors’ remunerati on
Fees payable to company’s auditor for the audit of parent company and consolidated
fi nancial statements
Fees payable to the company’s auditor for other non audit services:
– The audit of company’s subsidiaries pursuant to legislati on
– Other services pursuant to legislati on
– Tax services
30 June 2010
£’000
30 June 2009
£’000
759
10
15
4,542
408
(50)
(30)
-
768
51
2
3,744
384
(50)
(23)
(99)
30 June 2010
£’000
30 June 2009
£’000
67
20
4
270
361
43
16
6
11
76
£224,000 of the tax services fees relate to the feasibility study and initi al advice regarding the re-domicile of the Hylas 2 assets to
Cyprus. The remaining balance relates to fees for normal ongoing tax advice.
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AVN2561 AR10 Back AW11.indd 38
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5. Employee benefi t costs
The aggregate remunerati on of all employees comprised:
Wages and salaries
Social security costs
Pension costs
Share based payment expense
Less: costs capitalised as satellite in constructi on
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
30 June 2010
£’000
30 June 2009
£’000
4,898
534
229
602
6,263
(1,721)
4,542
4,091
438
113
652
5,294
(1,550)
3,744
Employee numbers
The average monthly number of people (including the Executi ve Directors) employed during the year by category of employment:
Operati ons
Sales and marketi ng
Development and engineering
Administrati on and executi ve
6. Other operati ng income
Exchange gain on trade receivables and payable balances
Liquidated damages received
30 June 2010
No. employees
30 June 2009
No. employees
21
21
21
18
81
17
19
12
17
65
30 June 2010
£’000
30 June 2009
£’000
426
3,202
3,628
1,355
1,372
2,727
Liquidated damages were received from Astrium due to the late delivery of HYLAS 1 in November 2009. These damages
compensate for the additi onal costs incurred as a result of the late delivery of the satellite and are recognised on a straight-line
basis over the additi onal period that the incremental running costs were being incurred. All liquidated damages have now being
recognised in the income statement.
7. Net fi nance income
Finance income
Fair value gain on derivati ves
Financing exchange gain
Interest income on bank deposits
Finance expense
Interest expense on borrowings and loans
Financing exchange loss
Finance lease expense
Net fi nance income
30 June 2010
£’000
30 June 2009
£’000
972
–
972
99
1,071
(88)
(456)
(47)
(591)
480
340
2,592
2,932
417
3,349
(109)
–
(53)
(162)
3,187
39
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a
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m
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AVN2561 AR10 Back AW11.indd 39
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
40
Notes to the Accounts Conti nued
8. Income tax (credit)/expense
Current tax
Adjustment in respect of prior periods
Total current tax
Deferred tax
Originati on and reversal of temporary diff erences
Adjustment in respect of prior periods
Impact of change in UK tax rate
Total deferred tax
Total income tax (credit)/expense
30 June 2010
£’000
30 June 2009
£’000
76
76
(403)
278
25
(100)
(24)
–
–
587
165
–
752
752
The tax on the group’s profi t before tax diff ers from the theoreti cal amount that would arise using the weighted average tax rate
applicable to profi ts of the consolidated enti ti es as follows:
(Loss)/profi t before tax
Tax (credit)/charge at the corporate tax rate of 28% (2009: 28%)
Tax eff ect of non-deducti ble expenses
Adjustment in respect of prior periods
Impact of change in UK tax rate
Income tax (credit)/expense
9. Earnings/(loss) per share
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
30 June 2010
£’000
(1,956)
(548)
145
354
25
(24)
30 June 2009
£’000
1,801
504
83
165
–
752
30 June 2010
pence
30 June 2009
pence
(3.68)
(3.68)
3.78
3.39
The calculati on of basic and diluted (loss)/earnings per share is based on the earnings att ributable to ordinary shareholders
divided by the weighted average number of shares in issue during the year.
30 June 2010
£’000
30 June 2009
£’000
(Loss)/profi t for the year att ributable to equity holders of the parent company
(1,932)
Weighted average number of ordinary shares for the purpose of basic earnings per share
52,430,725
Restricted shares held in the Employee Benefi t Trust (EBT)
3,813,258
Weighted average number of ordinary shares for the purpose of diluted earnings per share
56,243,983
1,049
27,787,491
3,172,930
30,960,421
10. Profi t of the parent company
As permitt ed by Secti on 408 of the Companies Act 2006, the profi t and loss account of the parent Company is not presented
as part of these accounts. The parent company’s profi t aft er tax for the year ended 30 June 2010 amounted to £723,000
(2009: £14,000 loss).
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AVN2561 AR10 Back AW11.indd 40
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
11. Property, plant and equipment
Leasehold
improvements
£’000
Network
assets
£’000
Fixtures and
fi tti ngs
£’000
Plant and
machinery
£’000
Satellites in
constructi on
£’000
Motor
vehicles
£’000
Group
total
£’000
Cost
Balance at 1 July 2008
Additi ons
Disposals
Balance at 1 July 2009
Additi ons
Disposals
234
16
–
250
4
–
3,170
151
–
3,321
2,239
–
Balance at 30 June 2010
254
5,560
Depreciati on
Balance at 1 July 2008
Charge for the year
Disposals
Balance at 1 July 2009
Charge for the year
Disposals
Balance at 30 June 2010
Net book value
Balance at 30 June 2010
Balance at 30 June 2009
130
51
–
181
39
–
220
34
69
1,166
643
–
1,809
618
–
2,427
3,133
1,512
410
108
(3)
515
92
–
607
312
53
–
365
68
–
433
174
150
112
–
(112)
–
–
–
–
112
–
(112)
–
–
–
–
–
–
37,441
12,271
–
49,712
117,094
–
–
112
–
112
27
–
41,367
12,658
(115)
53,910
119,456
–
166,806
139
173,366
–
–
–
–
–
–
–
166,806
49,712
–
21
–
21
34
–
55
84
91
1,720
768
(112)
2,376
759
–
3,135
170,231
51,534
At 30 June 2010 the Group held assets under fi nance lease agreements with a net book value of £416,000 (2009: £747,000).
A depreciati on charge for the year of £331,000 (2009: £331,000) has been provided on these assets. These assets are included
in network assets.
The satellites in constructi on relate to the HYLAS 1 and HYLAS 2 satellites. £103,166,000 relates to the HYLAS 1 satellite,
and £63,640,000 relates to the HYLAS 2 satellite. Included in the satellite in constructi on costs is interest capitalisati on of
£18,159,523 all relati ng to the HYLAS 1 satellite. Interest is charged at 16.5 basis points above LIBOR.
41
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m
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AVN2561 AR10 Back AW11.indd 41
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
42
Notes to the Accounts Conti nued
12. Intangible assets
Cost
Balance at: 1 July 2008
Additi ons
Disposals
Balance at 1 July 2009
Additi ons
Disposals
Balance at 30 June 2010
Amorti sati on
Balance at: 1 July 2008
Charge for the year
Disposals
Balance at: 1 July 2009
Charge for the year
Disposals
Balance at 30 June 2010
Net book value
Balance at 30 June 2010
Balance at 30 June 2009
Computer
soft ware
£’000
418
3
(26)
395
–
–
395
323
51
–
374
10
–
384
11
21
13. Investments
Company
Shares in subsidiary undertakings
Beginning of the year
Capital contributi on
Equity investments in Avanti HYLAS 2 Limited
End of year
30 June 2010
£’000
30 June 2009
£’000
289
15
41,016
41,320
289
–
–
289
In the year ended June 2010, the Company contributed £15,000 (1,500,000 shares at £0.01 each) to the Avanti Employee Benefi t
Trust established in July 2007.
The directors believe that the carrying value of the investments is supported by their underlying net assets.
A full list of the company’s subsidiaries is disclosed in note 14.
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AVN2561 AR10 Back AW11.indd 42
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
14. Subsidiaries
As at the end of the year the group and company held the following investments in subsidiary companies:
Name of subsidiary
Avanti Communicati ons Limited
Avanti Space Limited
Avanti Space 2 Limited
Avanti Space 3 Limited
Avanti Launch Services Limited
Avanti Broadband Limited
Avanti Broadband (Ire) Limited
Avanti (NI) Limited
Avanti Hylas 2 Limited *
Avanti Hylas 2 Launch Services Limited *
Avanti Communicati ons Infrastructure Company Limited
Avanti Caledonian Broadband Limited
Avanti Employee Benefi t Trust
Nature of business
Telecommunicati on consultancy
Satellite services
Satellite services
Satellite services
Management services
Satellite broadband business
Satellite broadband business
Satellite broadband business
Satellite services
Management services
Holding company
Scotti sh satellite business
Employee benefi t trust
All the above enti ti es were incorporated in England & Wales, except for Avanti Launch Services Limited and Avanti Hylas 2 Launch
Services Limited which were incorporated in the Isle of Man. The company holds 100% ownership interest and voti ng power in all
the above enti ti es.
* These enti ti es were incorporated during the 2010 fi nancial year.
Subsequent to year end, the following subsidiary companies have been incorporated:
Name of subsidiary
Avanti Hylas 2 Cyprus Limited
Avanti Hylas 2 Services Limited
Avanti Communicati ons Marketi ng Services
Nature of business
Satellite broadband business
Project management services
Sales and marketi ng
Avanti Communicati ons Marketi ng Services Limited was incorporated in England & Wales, and Avanti Hylas 2 Cyprus Limited and
Avanti Hylas 2 Services Limited were incorporated in Cyprus. The company holds 100% ownership interest and voti ng power in
all the above enti ti es.
15. Inventories
Group
Finished goods
30 June 2010
at cost
£’000
30 June 2009
at cost
£’000
1,398
352
The cost of inventories recognised as an expense during the year was £448,000 (2009: £1,705,000). There have been no
write-downs of inventory during the year.
43
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16
G
o
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F
i
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a
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a
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S
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a
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m
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AVN2561 AR10 Back AW11.indd 43
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
44
Notes to the Accounts Conti nued
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l
Y
e
a
r
i
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R
e
v
i
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w
16
G
o
v
e
r
n
a
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c
e
56
F
i
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a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
S
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a
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16. Trade and other receivables
Trade receivables
Less provision for impairment of trade
receivables
Net trade receivables
Accrued income
Prepayments
Amounts due from group companies
Other receivables
Group
Company
30 June 2010
£’000
30 June 2009
£’000
30 June 2010
£’000
30 June 2009
£’000
611
(3)
608
8,545
1,185
–
5,655
15,993
789
(16)
773
7,484
1,375
–
4,605
14,237
–
–
–
–
6
80,228
–
80,234
–
–
–
–
–
7,291
–
7,291
For discussion of credit risk, refer to Note 22(b).
The other receivable is primarily the $7.6m due from Space Explorati ons Inc (“Spacex”) as disclosed on page 15 of the Finance
and Operati ng Review. This amount has been reclassifi ed from trade receivables to other receivables. The impact of this
reclassifi cati on was to decrease trade receivables by £5,049,000 (2009: £4,600,000) and to increase other receivables by the
same amount.
17. Deferred taxati on
Deferred income tax assets and liabiliti es are off set when there is a legally enforceable right to off set current tax assets against
current tax liabiliti es and when the deferred income taxes relate to the same fi scal authority. The off set amounts are as follows:
The gross movement on the deferred income tax account is as follows:
Non-current
Deferred tax assets
Deferred tax liabiliti es
Balance at 1 July
Income tax (expense)/credit
Tax credited directly to equity
Balance at 30 June
Group
30 June 2010
Tax assets
Provisions and deferred income
Share based payment
Unused tax losses
Total tax assets
Tax liabiliti es
Derivati ve fi nancial asset
Property, plant and equipment
Total tax liabiliti es
Net deferred tax asset/(liability)
Group
Company
30 June 2010
£’000
30 June 2009
£’000
30 June 2010
£’000
30 June 2009
£’000
6,157
(5,889)
268
5
100
163
268
3,617
(3,612)
5
1,037
(752)
(280)
5
62
–
62
102
(73)
33
62
Opening
balance
£’000
Charged
to the income
statement
£’000
Charged
to equity
£’000
817
110
2,690
3,617
–
(3,612)
(3,612)
5
989
29
1,359
2,377
–
(2,277)
(2,277)
100
–
163
–
163
–
–
–
163
102
–
102
88
42
(28)
102
Closing
balance
£’000
1,806
302
4,049
6,157
–
(5,889)
(5,889)
268
AVN2561 AR10 Back AW11.indd 44
01/12/2010 14:20
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
Charged to
the income
statement
£’000
Charged
to equity
£’000
Opening
balance
£’000
446
535
1,794
2,775
(33)
(1,705)
(1,738)
1,037
371
(145)
896
1,122
33
(1,907)
(1,874)
(752)
Opening
balance
£’000
Charged
to the income
statement
£’000
23
79
102
4
(77)
(73)
Opening
balance
£’000
Charged
to the income
statement
£’000
42
46
88
9
33
42
–
(280)
–
(280)
–
–
–
(280)
Charged
to equity
£’000
33
–
33
Charged
to equity
£’000
(28)
–
(28)
Closing
balance
£’000
817
110
2,690
3,617
–
(3,612)
(3,612)
5
Closing
balance
£’000
60
2
62
Closing
balance
£’000
23
79
102
Group
30 June 2009
Tax assets
Provisions and deferred income
Share based payment
Unused tax losses
Total tax assets
Tax liabiliti es
Derivati ve fi nancial asset
Property, plant and equipment
Total tax liabiliti es
Net deferred tax asset/(liability)
Company
30 June 2010
Tax assets
Share based payment
Unused tax losses
Total tax assets
Company
30 June 2009
Tax assets
Share based payment
Unused tax losses
Total tax assets
At 30 June 2010, none of the deferred tax asset of £6.2m (2009: £3.6m) is expected to be recovered in the next 12 months.
At 30 June 2010, none of the deferred tax liability of £5.9m (2009: £3.6m) is expected to be sett led in the next 12 months.
18. Cash and cash equivalents
For the purpose of the cash fl ow statement, cash and cash equivalents include cash in hand and at banks net of outstanding overdraft s.
Cash and cash equivalents at the end of the fi nancial year as shown in the cash fl ow statement can be reconciled to the related
items in the balance sheet as follows:
Group
Cash and bank balances
Short term deposits
Net cash and cash equivalents
30 June 2010
£’000
30 June 2009
£’000
918
33,263
34,181
2,376
22,239
24,615
45
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Y
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w
16
G
o
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e
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a
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56
F
i
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a
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c
i
a
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S
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a
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m
e
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AVN2561 AR10 Back AW11.indd 45
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
46
Notes to the Accounts Conti nued
19. Trade and other payables
Current
Trade payables
Social security and other taxes
Other payables
Amounts due to group companies
Accruals and deferred income
Non-current
Group
Company
30 June 2010
£’000
30 June 2009
£’000
30 June 2010
£’000
30 June 2009
£’000
7,118
177
1,104
–
5,061
13,460
5,416
132
630
–
5,191
11,369
–
–
–
–
9
9
–
Accruals and deferred income
7,228
2,899
20. Provisions for other liabiliti es
Group
Onerous lease provision
Balance at 1 July 2009
Used during the year
Balance at 30 June 2010
Current
£’000
Non-current
£’000
30
–
30
63
(30)
33
–
–
–
3,092
1,186
4,278
–
Total
£’000
93
(30)
63
The Group leases premises at Hoxton Square and sublets the premises to a third party. The amount that the Group pays for the
lease is not covered by the rent received in respect of the premises. As a result, an onerous lease provision has been recorded
and is being released over the life of the committ ed lease period.
During the year, the Group has released £30,000 to the income statement. The remaining £62,500 will be released over the next
25 months.
21. Loans and other borrowings
Secured at amorti sed cost
Bank loans
Finance lease liabiliti es (i)
Current
Non-current
30 June 2010
£’000
30 June 2009
£’000
30 June 2010
£’000
30 June 2009
£’000
–
269
269
–
402
402
49,191
213
49,404
42,093
481
42,574
(i)
Finance lease obligati ons are secured by retenti on of ti tle to the related assets. The borrowings are on fi xed interest rate debt with repayment periods not
exceeding 5 years.
The group 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 1 satellite. As noted in Note 31, in order to avoid further interest charges, the group repaid
this loan of 30 July 2010 prior to its maturity date of 31 March 2014.
In accordance with IAS 23 – Borrowing Costs, qualifying borrowing costs have been capitalised as part of the cost to HYLAS 1,
recognised as Satellite in Constructi on in Note 11.
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16
G
o
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56
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AVN2561 AR10 Back AW11.indd 46
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
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 derivati ve fi nancial instruments to manage these foreign currency risks. The managing of these risks, along with the day-to-
day managing of treasury acti viti es is performed by the Finance team.
All fi nancial instruments have been measured at amorti sed cost, except for derivati ve assets recognised as fair value through
the income statement. As such fi nancial assets being cash and cash equivalents and trade and other receivables are classifi ed as
‘Loans and Receivables’ and fi nancial liabiliti es being trade and other payables and interest bearing liabiliti es have been classifi ed
as ‘Other Financial Liabiliti es’.
a) Market risk
i) Foreign exchange risk management
The Group’s presentati on currency is pounds sterling although some transacti ons are executed in non-sterling currencies,
including Euros and US Dollars. The transacti onal amounts realised or sett led are therefore subject to the eff ect of movements in
these currencies against the pound. When a contract is entered into in a foreign currency the group seeks to enter into a forward
exchange contract or use natural hedging within the group to limit the exposure to foreign currency risk. The risks are assessed
on a conti nual basis.
Financial instruments by currency
30 June 2010
30 June 2009
GBP
£’000
EURO
£’000
USD
£’000
Total
£’000
GBP
£’000
EURO
£’000
USD
£’000
Total
£’000
Financial assets
Cash and short term deposits
32,884
Trade and other receivables
2,233
35,117
Financial liabiliti es
1,198
8,608
9,806
99
34,181
22,718
5,152
15,993
34,103
5,251
50,174
56,821
1,380
7,279
8,659
517
24,615
4,699
46,081
5,216
70,696
Trade and other payables
(8,463)
(4,211)
(786)
(13,460)
(4,377)
(5,290)
(1,939)
(11,606)
Interest bearing liabiliti es
(49,673)
–
–
(49,673)
(42,977)
–
–
(42,977)
(58,136)
(4,211)
(786)
(63,133)
(47,354)
(5,290)
(1,939)
(54,583)
Net fi nancial positi on
(23,019)
5,595
4,465
(12,959)
9,467
3,369
3,277
16,113
At 30 June 2010, if the Euro had weakened/strengthened against the sterling by 5% with all other variables held constant, post
tax profi t would have worsened by £127,000 or improved by £116,000 (2009: post tax profi t would have worsened by £127,000
or improved by £116,000).
At 30 June 2010, if the US Dollar had weakened/strengthened against the sterling by 5% with all other variables held constant,
post tax profi t would have worsened by £44,000 or improved by £49,000 (2008: post tax profi t would have worsened by £44,000
or improved by £116,000).
Management believes that a 5% sensiti vity rate provides an adequate analysis into the expected changes in foreign exchange
rates. This is the assumpti on we used last year and management feel it is sti ll valid.
Cash and deposits earn interest at fl oati ng rates based on banks’ short term treasury deposit rates. Short term trade and other
receivables are interest free.
b) Credit risk management
The Group’s principal fi nancial assets are cash and short term deposits and trade and other receivables. The Group has no
signifi cant concentrati ons of credit risk, with the excepti on of the receivable from Spacex of $7.6 million as described in Note 16.
Cash and cash equivalents are deposited with high-credit quality fi nancial insti tuti ons with a minimum rati ng of A+ and trade
receivables are principally from well established corporati ons. The credit quality of major customers is assessed before trading
commences taking into account its fi nancial positi on, past experience and other factors.
47
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
48
Notes to the Accounts Conti nued
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22. Financial instruments and risk management conti nued
b) Credit risk management conti nued
The ageing of trade receivables which have not been impaired was as follows:
30 June 2010
30 June 2009
Not past due
£’000
89
19
1-30 days
£’000
60
704
31-60 days
£’000
135
36
60+ days
£’000
324
14
Total
£’000
608
773
Movements in the provision for impairment of trade receivables are as follows:
At 1 July 2009
Allowances made in the period
Amounts used and reversal of unused amounts
Bad debts writt en off
At 30 June 2010
30 June 2010
£’000
30 June 2009
£’000
16
58
(34)
(37)
3
188
27
(11)
(188)
16
The provision of £2,906 (2009: £16,267) has been raised against gross trade receivables of £608,000 (2009: £773,000). Every
major customer is assessed on an individual basis and we take a prudent approach when providing for debts. For our smaller
customers we provide for every debt over 60 days and the provision gets charged to Cost of Sales.
Other receivables include accrued revenue of £8,545,000 which, due to their nature, are all current and also amounts due from
Spacex of £5,049,000 which are described in Note 16 and on page 15 of the fi nance and operati ng review.
c) Liquidity risk management
The groups exposure to liquidity risk management is minimillised due to the prudent monitoring of all of the groups liabiliti es.
Cash and cash forecasts are monitored on a daily basis and our cash requirements are met by a mixture of short term cash
deposits, debt and fi nance leases.
The following table analyses the Group’s fi nancial liabiliti es into relevant maturity groupings based on the expected
undiscounted cash fl ows:
Within 1
year
£’000
53,606
299
7,118
–
455
5,416
1 to 2
years
£’000
–
220
–
–
518
–
2 to 5
years
£’000
Over 5
years
£’000
Contractual
amount
£’000
Carrying
amount
£’000
–
–
–
–
–
–
–
–
–
53,606
49,191
–
–
–
–
92,888
92,888
42,093
–
–
–
–
–
–
30 June 2010
Bank loans
Finance leases
Trade Payables
30 June 2009
Bank loans
Finance leases
Trade Payables
The bank loan contractual amount is based on repayment in July 2010 and includes an early repayment penalty. Refer to note 31.
d) Fair value of fi nancial instruments
The directors consider the carrying value of all fi nancial assets and liabiliti es to be approximate to their fair values.
e) Capital risk management
The Group’s objecti ves when managing capital are to safeguard the Group’s ability to conti nue as a going concern in order to
provide returns for shareholders and benefi ts for other stakeholders and to maintain an opti mal capital structure to reduce the
cost of capital.
The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 21, cash and cash
equivalents (note 18) and equity att ributable to equity holders of the parent (notes 23 and 24), comprising ordinary share
capital, share premium, other reserves and retained earnings.
AVN2561 AR10 Back AW11.indd 48
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
23. Share capital – issued and fully paid
At 1 July 2009
Shares issued
Less transacti on costs
Issue of treasury shares to Employee Benefi t Trust
At 30 June 2010
Number of
shares
‘000
44,922
23,750
–
–
68,672
Group
ordinary
shares
£’000
417
237
–
(15)
639
Company
ordinary
shares
£’000
Group and
company
share premium
£’000
449
237
–
–
686
34,041
88,777
(2,322)
–
120,496
On 6 January 2010, the Group issued 22,250,000 shares at £4.00 per share.
On 29 June 2009, the Group issued 14,000,000 shares at £2.25 per share. The shares issued were fully paid on 3 July 2009.
The total authorised number of ordinary shares is 100 million shares (2009: 100 million) at £0.01 each.
Refer to Note 31 for details of shares issued on 12 July 2010.
24. Reserves
Group
2009
At 1 July 2008
Profi t for the year
Issue of share capital
Transacti on costs related to share issue
Share based payments
Tax expense taken directly to reserves
At 30 June 2009
2010
At 1 July 2009
Comprehensive loss for the year
Issue of share capital
Transacti on costs related to share issue
Foreign currency translati on reserve
Share based payments
Tax credit taken directly to reserves
At 30 June 2010
Share
premium
£’000
Retained
earnings
£’000
3,858
–
31,360
(1,177)
–
–
34,041
34,041
–
88,777
(2,322)
–
–
–
120,496
28,600
1,049
–
–
652
(280)
30,021
30,021
(1,919)
–
–
2,181
602
163
31,048
Total
reserves
£’000
32,458
1,049
31,360
(1,177)
652
(280)
64,062
64,062
(1,919)
88,777
(2,322)
2,181
602
163
151,544
49
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AVN2561 AR10 Back AW11.indd 49
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
50
Notes to the Accounts Conti nued
24. Reserves conti nued
Company
2009
At 1 July 2008
Loss for the year
Issue of share capital
Transacti on costs related to share issue
Share based payments
Tax expense taken directly to reserves
At 30 June 2009
2010
At 1 July 2009
Profi t for the year
Issue of share capital
Transacti on costs related to share issue
Foreign currency translati on reserve
Share based payments
Tax credit taken directly to reserves
At 30 June 2010
Share
premium
£’000
Retained
earnings
£’000
3,858
–
31,360
(1,177)
–
–
34,041
34,041
–
88,777
(2,322)
–
–
–
120,496
(146)
(14)
–
–
154
(28)
(34)
(34)
723
–
–
174
54
33
950
Total
reserves
£’000
3,712
(14)
31,360
(1,177)
154
(28)
34,007
34,007
723
88,777
(2,322)
174
54
33
121,446
25. Share based payments
The fair value of share opti ons charged to the income statement in the period was £602,000 (2009: £652,000). The full fair value
of these opti ons is recognised over the vesti ng period for those opti ons. All share based payment plans are equity sett led and
details of these plans are set out below.
The Company has established three share opti on schemes: The Avanti Communicati ons Group plc approved Enterprise
Management Incenti ves Scheme (EMI), the Avanti Communicati ons Group plc Unapproved Share Opti on Plan and a Long
Term Incenti ve Plan (LTIP).
During the year, the Company also established a Save As You Earn (SAYE) opti on scheme. Contributi ons to the scheme
commenced on 1 July 2010 and the fair value charge associated with this scheme will be recognised in the next fi nancial period.
The 2010 charges and weighted average fair value for each of the plans above were as follows:
2010 charge
Weighted average fair value
2009 charge
Weighted average fair value
EMI
£150,000
£2.04
£150,000
£2.04
Unapproved
plan
£47,000
£2.42
£127,000
£1.76
LTIP
£405,000
£2.72
£375,000
£0.67
To date all opti ons have been granted with a strike price of 1 pence.
In July 2007 an Employee Benefi t Trust (EBT) was established. The EBT is managed by Bedell Trustees in Jersey. The results of the
EBT have been consolidated into the Group’s results.
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AVN2561 AR10 Back AW11.indd 50
01/12/2010 14:20
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
The opti ons granted under each scheme are as follows:
Outstanding
at start of year
Granted
during year
Forfeited
in year
Exercised
during the year
Outstanding
at end of year
2010
EMI
Number of opti ons
Weighted average exercise price
Weighted average share price
Unapproved scheme (est. 2007)
Number of opti ons
Weighted average exercise price
Weighted average share price
Unapproved scheme (est. 2010)
Number of opti ons
Weighted average exercise price
Weighted average share price
LTIP
339,505
£0.01
£2.23
107,863
£0.01
£1.86
–
–
–
–
–
–
–
–
–
292,490
£0.01
£4.30
(51,000)
(39,202)
249,303
£0.01
£2.16
£0.01
£2.16
–
–
–
(3,000)
£0.01
£4.30
–
–
–
–
–
–
–
–
–
–
–
–
£0.01
£2.26
107,863
£0.01
£1.86
289,490
£0.01
£4.30
2,762,418
£0.01
£1.67
Number of opti ons
2,512,418
250,000
Weighted average exercise price
Weighted average share price
£0.01
£1.44
£0.01
£3.94
2009
EMI
Outstanding
at start of year
Granted
during year
Forfeited
in year
Exercised
during the year
Outstanding
at end of year
Number of opti ons
Weighted average exercise price
Weighted average share price
Unapproved scheme (est. 2007)
Number of opti ons
Weighted average exercise price
Weighted average share price
LTIP
Number of opti ons
Weighted average exercise price
Weighted average share price
344,932
£0.01
£2.23
107,863
£0.01
£1.86
2,551,743
£0.01
£1.45
–
–
–
50,000
£0.01
£1.86
–
–
–
(4,000)
£0.01
£1.82
(1,427)
£0.01
£2.50
339,505
£0.01
£2.23
–
–
–
–
–
–
(50,000)
107,863
£0.01
£1.86
£0.01
£1.86
(39,325)
2,512,418
£0.01
£1.78
£0.01
£1.44
17,926 of the EMI opti ons, and 170,423 of the LTIP opti ons had vested and were exercisable from 30 June 2010. No Unapproved
Scheme opti ons were exercisable at 30 June 2010.
The exercise price of opti ons outstanding at 30 June 2010 was £0.01 and the weighted average remaining contractual life was
4.6 years.
Each model has slightly diff erent exercise criteria and therefore separate valuati on models were used.
51
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
52
Notes to the Accounts Conti nued
25. Share based payments conti nued
EMI Scheme
The EMI scheme was used to issue opti ons to staff on 24 July 2007 at an exercise price of 1p. The new opti ons are issued
for 10 years with 25% vesti ng at the end of years 3, 4, 5 and 6. Those staff who had previously held unvested opti ons in
the former parent company at the ti me of the de-merger were given a shorter vesti ng period for these new opti ons. There
are no performance criteria associated with these opti ons and are exercisable as long as the opti on 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 volati lity
Expected Life
Risk free rate
Expected dividend yield
£2.16
£0.01
35%
4 years
5.5%
1%
Expected volati lity was determined by calculati ng the actual volati lity of the Group’s share price since fl otati on. The expected
life used in the model has been adjusted, based on management’s best esti mate, for the eff ects of non-transferability, exercise
restricti ons, and behavioural considerati ons.
Unapproved Scheme (est. 2007)
The unapproved scheme was established during 2007. The opti ons are issued for 10 years with 25% vesti ng at the end of
years 3, 4, 5 and 6 (with the excepti on of one former employee who had the ability to exercise in April 2009). There are no
performance criteria associated with these opti ons and are exercisable as long as the opti on holder remains with 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 volati lity
Expected Life
Risk free rate
Expected dividend yield
£1.86
£0.01
35%
3 years
5.5%
1%
Expected volati lity was determined by calculati ng the actual volati lity of the Group’s share price since fl otati on. The expected
life used in the model has been adjusted, based on management’s best esti mate, for the eff ects of non-transferability, exercise
restricti ons, and behavioural considerati ons.
Unapproved Scheme (est. 2010)
The unapproved scheme was established in March 2010. The opti ons are issued for 10 years with 33% vesti ng at the end of years
3, 4 and 5. In order for the vesti ng conditi ons to be met the market value of the shares must be £10.00 or more per share for a
consecuti ve period of six months.
The weighted average inputs to the Black-Scholes model are as follows:
Share price at date of Grant
Weighted average exercise price
Expected volati lity
Expected Life
Risk free rate
Expected dividend yield
£4.33
£0.01
21%
3 years
2.1%
1%
Expected volati lity was determined by calculati ng the actual volati lity of the Group’s share price since fl otati on. The expected
life used in the model has been adjusted, based on management’s best esti mate, for the eff ects of non-transferability, exercise
restricti ons, and behavioural considerati ons.
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AVN2561 AR10 Back AW11.indd 52
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
Long Term Incenti ve Plan
The LTIP has been established by the Company with approval from the Remunerati on Committ ee to reward and incenti vise the
Executi ve Directors and senior managers of the Company.
The LTIP allocati ons are in separate sub funds within the EBT and are subject to a discreti onary Trust. The shares are subject to
automati c revocati on if certain criteria (set out below) are not met and conti nue to be revocable for the enti re Trust period.
One additi onal grant was made during the year to a senior manager of 250,000 opti ons split across the three categories.
The exercise criteria of this grant is consistent with the criteria of the existi ng LTIP scheme.
The allocati ons into the LTIP vary for each executi ve. The total allocati on to each executi ve is split into three separate tranches:
i) The Core Tranche
This element of the grant becomes exercisable in 7 equal instalments. The fi rst instalment was exercisable on grant and the
second on 30 June 2008. The remaining 5 are yearly thereaft er.
ii) The Excepti onal Achievement Tranche
This element of the grant was amended during the year. Originally, these opti ons were only exercisable if the average market
value of the share exceeded £5 for a consecuti ve period of six months prior to 30 June 2010. Given the unprecedented market
conditi ons over the previous year, the remunerati on committ ee considered that whilst the executi ves had performed well and
that the share price had outperformed the FTSE 100 and AIM all share index since the LTIPs were granted, the target set in the
LTIP rules may sti ll not be achieved.
In May 2010 the remunerati on committ ee agreed to extend the target date to 31 December 2010 and that the six month average
target price should be increased £5.50.
iii) The Extraordinary Achievement Tranche
This element of the grant is only exercisable if the Market Value of a Share exceeds £10 for a consecuti ve period of six months
before 30 June 2013.
Number of opti ons:
Executi ve Directors
Senior managers
Core
Excepti onal
Extraordinary
Total
1,153,635
125,000
1,278,635
679,570
62,500
742,070
679,213
62,500
741,713
2,512,418
250,000
2,762,418
The Core Tranche has been modelled using the Black-Scholes model while the Excepti onal and Extraordinary Tranches have been
modelled using the Monte-Carlo model, allowing for the market-based performance conditi ons.
The weighted average inputs to both models are as follows:
Share price at date of Grant
Weighted average exercise price
Expected volati lity
Expected Life
Risk free rate
Expected dividend yield
£1.67
£0.01
34%
5 years
5.1%
1%
Expected volati lity was determined by calculati ng the actual volati lity of the Group’s share price since fl otati on and also taking
into account historic volati lity 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 esti mate, for the eff ects of non-transferability, exercise
restricti ons, and behavioural considerati ons.
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
54
Notes to the Accounts Conti nued
26. Obligati ons under fi nance leases
Leasing arrangements
Finance leases relate to capital equipment with lease terms of 5 years. The Group has the opti on to purchase the equipment for a
nominal value at the conclusion of the lease agreement. The Group’s obligati ons under fi nance leases are secured by the lessor’s
ti tle to the leased assets.
Finance lease liabiliti es
No later than one year
Later than 1 year no later than 5 years
Less future fi nance charge
Minimum lease payments
Present value of lease payments
30 June 2010
£’000
30 June 2009
£’000
30 June 2010
£’000
30 June 2009
£’000
299
220
519
(37)
482
455
518
973
(90)
883
269
213
482
–
482
402
481
883
–
883
30 June 2010
£’000
30 June 2009
£’000
Included in the fi nancial statements as:
Current borrowings
Non-current borrowings
Present value of minimum lease payments
269
213
482
27. Obligati ons under operati ng leases
The Group’s future aggregate minimum lease payments under non-cancellable operati ng leases are as follows:
No later than one year
Within 1 to 5 years
Aft er 5 years
30 June 2010
30 June 2009
Land &
buildings
£’000
345
874
860
2,079
Other
£’000
–
–
–
–
Land &
buildings
£’000
345
954
1,125
2,424
402
481
883
Other
£’000
8
–
–
8
Operati ng lease commitments principally relate to leased offi ce space of the Group’s head offi ce 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 2010 is £100,000
over 2 years (as at 30 June 2009: £150,000 over 3 years).
28. Capital commitments
At 30 June 2010, Avanti Space Limited had contracted for satellite expenditure totalling £22.9million which has yet to be
paid. £5.4 million is refl ected in the year end creditor balance. Part of the total price, amounti ng to €10.6 million, is due to
be paid directly from the European Space Agency (ESA) to the satellite contractor, Astrium EADS Limited and €12.5 million to
Arianespace thereby reducing the commitment due directly from the Group.
Avanti Hylas 2 limited has contracted for satellite expenditure totalling $162.6 million.
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Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
29. Related party transacti ons and directors’ emoluments
Transacti ons with Directors – Group
Details of the Directors’ remunerati on are set out below in aggregate for each of the categories specifi ed in the Companies
Act 2006.
Salaries and other short term employee benefi ts
Post employment benefi ts
30 June 2010
30 June 2009
693
196
889
741
43
784
Pension contributi ons amounti ng to £196,000 (2009: £43,000) were made into personal pension schemes in respect of four
(2009: four) of the Directors.
The emoluments of the highest paid Director totalled £255,000 (2009: £256,000), made up of:
Total emoluments
Salaries and other short term benefi ts
Post employment benefi ts
Total emoluments
30 June 2010
30 June 2009
151
104
255
236
20
256
Transacti ons with Directors and key management personnel – Group and company
Details of the remunerati on of Directors and key management personnel are set out below in aggregate for each of the
categories specifi ed in IAS 24 “Related Party Disclosures”.
Salaries and other short term
employee benefi ts
Post employment benefi ts
Share based payments
Group
Company
30 June 2010
30 June 2009
30 June 2010
30 June 2009
1,053
265
474
1,792
1,051
115
429
1,595
255
–
19
274
264
–
32
296
Other related party transacti ons
Subsidiaries
Intra-group transacti ons are eliminated on consolidati on and are not reported in the group accounts. Transacti ons between the
company and its management fee charged to:
Avanti Communicati ons Limited (‘ACL’)
Avanti Broadband Limited (‘ABL’)
Avanti Space Limited (‘ASL’)
Avanti (NI) Limited
Avanti Caledonian Broadband Limited
30 June 2010
30 June 2009
688
1,368
1,212
1,172
784
5,224
610
1,158
719
186
1,091
3,764
30. Conti ngent liabiliti es
The Group’s bankers have provided guarantees totalling £7 million to certain customers in the event of a failure to operati onally
deploy the HYLAS satellite. The group has arranged launch and in-orbit insurance on HYLAS.
31. Post balance sheet events
On 26 November 2010 the Group successfully launched HYLAS 1.
The Group received £70,000,000 on 30 July 2010 in payment for the 16,279,070 shares issued on 12 July 2010. This is discussed
further in the fi nance and operati ng review on page 13.
In additi on, on 30 July 2010 the Group repaid its long term loan carried at £49,398,000. The loan was repaid earlier than
scheduled as the Group wanted to avoid further interest charges. On sett lement, the Group repaid £53,606,000 including
interest and an early repayment penalty of £2,300,000.
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
56
Noti ce of Annual General Meeti ng
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Noti ce is hereby given that the Annual General Meeti ng of the Company for 2010 will be held on 23 December 2010 at 9.00 am at
74 Rivington Street, London EC2A 3AY, for the following purposes:
Ordinary business
To consider and, if thought fi t pass the following resoluti ons which will be proposed as ordinary resoluti ons:
1.
To receive the accounts for the year ended 30 June 2010, together with the reports of the Directors and Auditors therein.
2.
To re-elect David Williams as a Director of the Company.
3.
To re-elect John Brackenbury as a Director of the Company.
4.
To re-elect Alan Foster as a Director of the Company.
5.
To re-elect PricewaterhouseCoopers LLP as auditors to the Company.
6.
To authorise the Directors to determine the remunerati on of the auditors.
Special business
To consider and, if thought fi t pass the following resoluti ons of which 7 will be proposed as an ordinary resoluti on and 8 will be
proposed as a special resoluti on:
7.
That the Directors are generally and unconditi onally authorised pursuant to secti on 551 of the Companies Act 2006 (The Act”)
(in substi tuti on for all or such existi ng authoriti es which are hereby revoked) to allot shares in the Company, and grant rights to
subscribe for or to convert any security into shares of the Company (such shares, and rights to subscribe for or to convert any
security into shares of the Company being “relevant securiti es”) at such ti mes and to such persons, on such terms and in such
manner as they think fi t, up to an aggregate nominal amount of £60,000, and unless previously renewed, revoked, varied or
extended, this authority shall expire at the earlier of the date which is 18 months from the date of the passing of this resoluti on
and the conclusion of the next annual general meeti ng of the Company except that the Company may at any ti me before such
expiry make an off er or agreement which would or might require relevant securiti es to be allott ed aft er such expiry and the
Directors may allot relevant securiti es in pursuance of such an off er or agreement as if this authority had not expired.
Special resoluti ons
8.
That, in substi tuti on for any equivalent authoriti es and powers granted to the Directors prior to the passing of this
resoluti on, the Directors be and they are hereby empowered pursuant to secti on 570(1) of the Act to allot equity securiti es
(as defi ned in secti on 560(1) of the Act) of the Company wholly for cash pursuant to the authority of the Directors under
secti on 551 of the Act conferred by resoluti on 7 above, and/or where such an allotment consti tutes an allotment of equity
securiti es by virtue of secti on 560(2) of the Act, as if secti on 561(1) of the Act did not apply to such allotment provided that
the power conferred by this resoluti on shall be limited to:
(a)
the allotment of equity securiti es in connecti on with an invitati on or off er of equity securiti es to the holders of ordinary shares
in the capital of the Company (excluding any shares held by the Company as treasury shares (as defi ned in secti on 724(5) of the
Act)) on a fi xed record date in proporti on (as nearly as practi cable) to their respecti ve holdings of such shares or in accordance
with the rights att ached to such shares (but subject to such exclusions or other arrangements as the Directors may deem
necessary or expedient in relati on to fracti onal enti tlements or as a result of legal or practi cal 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 securiti es pursuant to the exercise of any opti ons granted by the Company at the date of this
resoluti on; and
(c)
the allotment, otherwise than pursuant to paragraph (a) above, of equity securiti es up to an aggregate nominal value equal
to £60,000, and unless previously renewed, revoked, varied or extended, and unless previously renewed, revoked, varied or
extended this power shall expire on the earlier of the date which is 18 months from the date of the passing of this resoluti on
and the conclusion of the next annual general meeti ng of the Company except that the Company may before the expiry of
this power make an off er or agreement which would or might require equity securiti es to be allott ed aft er such expiry and
the Directors may allot equity securiti es in pursuance of such off er or agreement as if this power had not expired.
By Order of the Board
Nigel Fox
Secretary
Registered offi ce: 74 Rivington Street, London EC2A 3AY
Registered number: 6133927
30 November 2010
AVN2561 AR10 Back AW11.indd 56
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Notes to Noti ce of Annual General Meeti ng
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
1. Proxies
A member who is enti tled to att end, speak and vote at the Annual General Meeti ng may appoint a proxy to att end, speak and
vote instead of him. A proxy need not be a member of the Company but must att end the meeti ng in order to represent you.
A member may appoint more than one proxy provided each proxy is appointed to exercise rights att ached to diff erent 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 instructi ons on how to appoint the Chairman of the Annual General Meeti ng
or another person as a proxy and how to appoint a proxy electronically. 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 Meeti ng.
2. Documents on display
The following documents are available for inspecti on at the registered offi ce of the Company during the usual business hours
on any weekday (Saturday, Sunday or public holidays excluded) from the date of this noti ce unti l the conclusion of the Annual
General Meeti ng and will also be available for inspecti on at the place of the Annual General Meeti ng from 9:30 a.m. on the day of
the Annual General Meeti ng unti l its conclusion:
(a)
copies of the executi ve directors’ service contracts with the Company and any of its subsidiary undertakings and lett ers of
appointment of the non-executi ve directors; and
(b)
the Register of Directors’ Interests in the share capital of the Company.
3. Right to att end and vote
The Company, pursuant to Regulati on 41 of the Uncerti fi cated Securiti es Regulati ons 2001, specifi es that only those shareholders
registered in the register of members of the Company at 9.00 a.m. on 21 December 2010 (or, if the Annual General Meeti ng is
adjourned, 2 working days before the ti me fi xed for the adjourned Annual General Meeti ng) shall be enti tled to att end and vote
at the Annual General Meeti ng in respect of the number of shares registered in their name at that ti me. In each case, changes
to the register of members aft er such ti me shall be disregarded in determining the rights of any person to att end or vote at the
Annual General Meeti ng.
4. Please note that communicati ons regarding the matt ers set out in this Noti ce of Annual General Meeti ng will not be accepted
in electronic form, other than as specifi ed in the accompanying Form of Proxy.
5. A member that is a company or other organisati on not having a physical presence cannot att end in person but can appoint
someone to represent it. This can be done in one of two ways: either by the appointment of a proxy (described in Note 1 above)
or of a corporate representati ve. Members considering the appointment of a corporate representati ve should check their own
legal positi on, the Company’s arti cles of associati on and the relevant provision of the Companies Act 2006.
Introducti on
Aft er his opening remarks, the Chairman will explain in the detail the procedures for the conduct of the meeti ng, parti cularly for
asking questi ons. The resoluti ons which are set out in the Noti ce of Meeti ng will then be put to the meeti ng.
How to ask questi ons
At the meeti ng, shareholders will be given the opportunity to ask questi ons. Please explain the nature of your questi on and give
your name and address. You may be asked to wait unti l called upon to speak. Please remember to state your name before asking
your questi on.
Time
The doors will open at 8.30 am and the meeti ng will start promptly at 9.00 am.
Cameras, tape recorders etc.
No cameras, video recorders, tape recorders or mobile phones will be allowed into the meeti ng.
Registrati on
To ensure your entrance to the meeti ng is dealt with promptly, please bring your att endance card with you and register at the
registrati on desk inside the building.
Shareholder informati on
If you have any questi ons concerning your shareholding, please speak to Avanti Communicati ons Group plc staff .
Important
If you have questi ons about the meeti ng, or if you need any assistance, please telephone Georgina Campbell-Harris at Avanti
Communicati ons Group plc on 0207 749 1600 during normal working hours.
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ending 30 June 2010
58
Notes to Noti ce of Annual General Meeti ng conti nued
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
150,000-300,000
301,000-500,000
500,001-1,000,000
1,000,001 +
Financial Calendar
23 December 2010
Annual General Meeti ng
Number of shares
Number of shareholders
3,523,575
1,122,508
1,996,122
2,660,027
2,308,961
5,709,797
6,551,173
10,384,492
50,694,480
1,941
74
63
37
19
25
17
16
16
February 2011
Interim results for the six months ended 31 December 2010
September 2011
Preliminary results for the year ended 30 June 2011
Shareholder informati on
Annual General Meeti ng
The Annual General Meeti ng will be held at 74 Rivington Street, London, EC2A 3AY.
Details of the resoluti ons to be proposed at the Annual General Meeti ng are contained in the Noti ce of Annual General Meeti ng
on page 56.
Dividend
The Directors have not recommended the payment of a dividend for the year ended 30 June 2010.
Listi ng
Ordinary shares of Avanti Communicati ons Group plc are traded on AIM.
The share price is available from the Avanti website at www.avanti plc.com and in The Financial Times and The Times.
Registrars
All administrati ve enquiries relati ng to shareholdings should be directed to The Registrar, Neville Registrars Limited, Neville
House, 18 Laurel Lane, Halesowen, West Midlands B63 3BR.
Avanti ’s services
Informati on about Avanti ’s services can be found at www.avanti plc.com
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✂
T
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Form of Proxy for Avanti Communicati ons Group plc
(incorporated and registered in England and Wales under number 6133927) (the ‘Company’)
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
For use by holders of ordinary shares of 1p each in the Company (the ‘Shareholders’) at the annual general meeti ng of the
Company to be held at 74 Rivington Street, London EC2A 3AY at 9.00 am on 23 December 2010 (the ‘AGM’). Please read the Noti ce
of AGM and associated notes.
I/We*
of
being Shareholder(s)* enti tled to att end and vote at meeti ngs of Shareholders, hereby appoint the Chairman of the AGM †
as my/our proxy to att end, speak and vote for me/us and on my/our behalf at the AGM and at any adjournment thereof in relati on
to the resoluti ons specifi ed in the noti ce of the AGM dated 1 December 2010 (the “Resoluti ons”) and any other business (including
adjournments and amendments to the Resoluti ons) 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)
(iii)
initi al the alterati on; and
insert the full name, ti tle 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 Resoluti ons set out in the Noti ce.
Ordinary Resoluti ons
For
Against
Vote
withheld
(note 2)
Discreti onary
(note 2)
To receive the accounts for the year ended 30 June 2010,
together with the reports of the Directors and Auditors therein.
To re-elect David Williams as a Director of the Company.
To re-elect John Brackenbury as a Director of the Company.
To re-elect Alan Foster as a Director of the Company.
To re-elect PricewaterhouseCoopers LLP as auditors to the Company.
To authorise the directors to allot relevant securiti es.
To authorise the Directors to determine the remunerati on of the auditors.
1
2
3
4
5
6
7
Special Resoluti ons
8
To disapply the statutory pre-empti on rights in certain circumstances.
Number of shares:
Class of shares:
This proxy appointment is one of a multi ple proxy appointment (Note 4)
Dates:
Signed:
59
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Avanti Communications Group plc
Annual Report and Accounts for the year ending 30 June 2010
✂
T
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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.
3. 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.
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 terminate automatically.
7. 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.
8. 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.
Please return to the following address in the envelope supplied:
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
West Midlands
B63 3BR
60
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AVN2561 AR10 Back AW11.indd 60
01/12/2010 14:20
We sell wholesale satellite
broadband to service providers.
“For a young company to have two satellites fully fi nanced with
no debt service payments for another two years gives me great
comfort that we are in control of our own desti ny.”
Chairman
John Brackenbury CBE
Chairman’s Statement, page 8
“The successful launch and the bringing into use of our
spectrum undoubtedly creates the signifi cant value we
have been projecti ng for many years.”
Chief Executi ve’s Report, page 9
Chief Executi ve
David Williams
“In July 2010, the company announced a further placing of
16.3 million shares at 430 pence yielding gross proceeds of
£70 million… £54 million was used to repay the PIK bond the
company raised in July 2007”
Finance and Operati ng Review, page 12
Group Finance Director
Nigel Fox
Highlights
Business Profi le
The Year in Review
Chairman’s Statement
Chief Executi ve’s Statement
Finance and Operati ng Review
Governance
Board of Directors
Employees
Corporate Social Responsibility
Directors’ Report
Corporate Governance Report
01
02
08
08
09
12
16
16
18
20
22
26
Financial Statements
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Statement of Financial Positi on
Company Statement of Financial Positi on
Statement of Cash Flows
Statements of Changes in Equity
Notes to the Financial Statements
Shareholder Informati on
Noti ce of Annual General Meeti ng
Form of Proxy
Offi cers and Professional Advisers
27
27
28
28
29
30
31
32
33
56
56
59
61
Offi cers and Professional Advisers
Annual Report and Accounts for the year ending 30 June 2010
Avanti Communicati ons Group plc
Bankers
HSBC Bank Plc
70 Pall Mall
London
SW1Y 5EZ
Solicitors
Osborne Clark
2 Temple Black East
Temple Quay
Bristol
BS1 6EG
Registered Auditors
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RHT
Directors
F E J G Brackenbury CBE
Chairman
D J Williams
Chief Executi ve
D J Bestwick
Chief Technology Offi cer
N A D Fox
Group Finance Director
M J O’Connor
Chief Operati ng Offi cer
D A Foster
Non-Executi ve Director
W P Wyatt
Non-Executi ve Director
C R Vos
Non-Executi ve Director
I C Taylor MBE
Non-Executi ve Director
Secretary
N A D Fox
Registered Offi ce
74 Rivington Street
London
EC2A 3AY
Company Number
6133927
61
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AVN2561 AR10 FRONT AW12.indd 2
AVN2561 AR10 COVER AW05.indd 2
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AVN2561 AR10 Back AW11.indd 61
01/12/2010 09:10
01/12/2010 09:35
Avanti Communications Group plc
Avanti Communications Group plc
Avanti Communications Group plc
Avanti Communications Group plc
74 Rivington Street
74 Rivington Street
74 Rivington Street
74 Rivington Street
London EC2A 3AY
London EC2A 3AY
London EC2A 3AY
London EC2A 3AY
Tel: +44 (0)20 7749 1600
Tel: +44 (0)20 7749 1600
Tel: +44 (0)20 7749 1600
Tel: +44 (0)20 7749 1600
www.avantiplc.com
www.avantiplc.com
www.avantiplc.com
www.avantiplc.com
Avanti Communicati ons Group plc
Avanti Communicati ons Group plc
Avanti Communicati ons Group plc
Avanti Communicati ons Group plc
Annual Report & Accounts 2010
Annual Report & Accounts 2010
Annual Report & Accounts 2010
Annual Report & Accounts 2010
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AVN2561 AR10 COVER AW05.indd 1
01/12/2010 09:35