Avanti Communications Group plc
Avanti Communications Group plc
Annual Report & Accounts 2011
New high speed communications
products for high growth markets.
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Avanti Communications Group plc
74 Rivington Street
London
EC2A 3AY
www.avantiplc.com
Avanti Communications Group plc
Avanti Communications Group plc
Annual Report & Accounts 2011
New high speed communications
products for high growth markets.
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Avanti Communications Group plc
74 Rivington Street
London
EC2A 3AY
www.avantiplc.com
Highlights
• Successful launch of our fi rst satellite, HYLAS 1.
• Modest available capacity fi lling fast.
• HYLAS 2 is fully fi nanced and under construction.
• High growth markets in Africa and Asia responding
very well.
This has been a landmark year for Avanti
Communications Group with the successful
launch of our fi rst satellite, HYLAS 1, and the
receipt of the fi rst revenues generated by it.
John Brackenbury CBE, Chairman
Avanti owns scarce, valuable spectrum
and satellite resources, in a lightly competed
sub-sector of a global telecoms market which
is experiencing breakneck growth in data
demand through the increasing use of high
data applications.
David Williams, Chief Executi ve
The shape of the balance sheet has
changed signifi cantly over the last
12 months. The group now has net
assets of £207 million.
Nigel Fox, Group Finance Director
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
01
Business Profi le
Our New Approach
Our Customers
The Year in Review
Chairman’s Statement
Chief Executi ve’s Report
Finance and Operati ng Review
Governance
Board of Directors
Employees
Corporate Social Responsibility
Directors’ Report
Corporate Governance Report
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 Information
Noti ce of Annual General Meeti ng
Form of Proxy
Offi cers and Professional Advisers
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AVN2725 AR11 1 Business profile AW06.indd 1
11/10/2011 16:50
This year we enjoyed the successful
launch of HYLAS 1, Europe’s first
Ka-band satellite.
Our second satellite, HYLAS 2, is fully
financed and under construction. It
is scheduled to launch in Q2 2012.
These satellites will operate for 15
years. Avanti is building a global
business with a very long term view.
Watch the launch of HYLAS 1:
www.avantiplc.com/satellite-fleet/
hylas-1
Avanti’s first satellite, HYLAS 1,
launched on 26 November 2010
and is the first superfast broadband
satellite launched in Europe.
Who we are
What we do
Our satellites
We are bringing a new
approach to the satellite
communications industry
We are 125 people drawn together from space,
telecoms and finance backgrounds bringing a new
approach to the satellite communications industry.
Our operational managers have an average of 7 years
service at Avanti. We have built this company together
from the beginning and have a shared long term
ambition to build a global business of significant scale.
We are headquartered in London but with significant
operations in Cornwall, Cyprus, Germany and the USA.
We are a data
communications provider
Avanti sells satellite data communications services
to telecoms companies which use them to supply
institutional, enterprise and consumer users. Our
technology is new, but so is our flexible business
model which responds to the different needs and
strategies of our service providers in 50 countries.
HYLAS 1
HYLAS 2
HYLAS 3
The first Ka-band satellite in Europe
serves every country between Ireland
and Poland. We enjoyed its successful
launch in November 2010 and target to
have it full by Spring 2014.
HYLAS 2, Avanti’s second satellite, is
being built by the Orbital Sciences
Corporation in the USA. HYLAS 2 will
quadruple Avanti’s satellite capacity
and provide new capacity across
the Middle East and Africa. Thus we
become predominantly an emerging
markets telecoms business. The
business plans seeks to fill it by 2017,
but the pre-sales activity suggests we
will beat this target by a long way.
HYLAS 3 is being financed with very
low cost government funded debt
and customer pre-sales, which over
the long term greatly enhances
shareholder returns. It will put new
capacity into the Americas and Africa.
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
69
Officers and Professional Advisers
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 6RH
Directors
F E J G Brackenbury CBE
Chairman
D J Williams
Chief Executive
D J Bestwick
Managing Director Cyprus
N A D Fox
Group Finance Director
M J O’Connor
Chief Operating Officer
D A Foster
Non-Executive Director
W P Wyatt
Non-Executive Director
C R Vos
Non-Executive Director
M Walker OBE
Non-Executive Director
Secretary
N A D Fox
Registered Office
74 Rivington Street
London
EC2A 3AY
Company Number
6133927
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This year we enjoyed the successful
launch of HYLAS 1, Europe’s first
Ka-band satellite.
Our second satellite, HYLAS 2, is fully
financed and under construction. It
is scheduled to launch in Q2 2012.
These satellites will operate for 15
years. Avanti is building a global
business with a very long term view.
Watch the launch of HYLAS 1:
www.avantiplc.com/satellite-fleet/
hylas-1
Avanti’s first satellite, HYLAS 1,
launched on 26 November 2010
and is the first superfast broadband
satellite launched in Europe.
Who we are
What we do
Our satellites
We are bringing a new
approach to the satellite
communications industry
We are 125 people drawn together from space,
telecoms and finance backgrounds bringing a new
approach to the satellite communications industry.
Our operational managers have an average of 7 years
service at Avanti. We have built this company together
from the beginning and have a shared long term
ambition to build a global business of significant scale.
We are headquartered in London but with significant
operations in Cornwall, Cyprus, Germany and the USA.
We are a data
communications provider
Avanti sells satellite data communications services
to telecoms companies which use them to supply
institutional, enterprise and consumer users. Our
technology is new, but so is our flexible business
model which responds to the different needs and
strategies of our service providers in 50 countries.
HYLAS 1
HYLAS 2
HYLAS 3
The first Ka-band satellite in Europe
serves every country between Ireland
and Poland. We enjoyed its successful
launch in November 2010 and target to
have it full by Spring 2014.
HYLAS 2, Avanti’s second satellite, is
being built by the Orbital Sciences
Corporation in the USA. HYLAS 2 will
quadruple Avanti’s satellite capacity
and provide new capacity across
the Middle East and Africa. Thus we
become predominantly an emerging
markets telecoms business. The
business plans seeks to fill it by 2017,
but the pre-sales activity suggests we
will beat this target by a long way.
HYLAS 3 is being financed with very
low cost government funded debt
and customer pre-sales, which over
the long term greatly enhances
shareholder returns. It will put new
capacity into the Americas and Africa.
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
69
Officers and Professional Advisers
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 6RH
Directors
F E J G Brackenbury CBE
Chairman
D J Williams
Chief Executive
D J Bestwick
Managing Director Cyprus
N A D Fox
Group Finance Director
M J O’Connor
Chief Operating Officer
D A Foster
Non-Executive Director
W P Wyatt
Non-Executive Director
C R Vos
Non-Executive Director
M Walker OBE
Non-Executive Director
Secretary
N A D Fox
Registered Office
74 Rivington Street
London
EC2A 3AY
Company Number
6133927
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
Our New Approach
Our technology has
fundamentally changed the
economics of high speed
data communications in
emerging markets.
AVN2725 AR11 1 Business profile AW06.indd 2
10/10/2011 18:43
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
03
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The high frequency and advanced
power of a Ka-band satellite enables
it to carry at least 8 ti mes more data
than the lower frequency satellites
used mainly for TV. This is bringing a
new generati on of service providers and
end user customers to satellite services.
Satellite capacity is not
a simple commodity.
Every service provider wants
something a litt le diff erent, and every
satellite beam delivers slightly diff erent
characteristi cs. We designed highly
flexible technology which puts the
control of network or product design
into the hands of our service providers –
we don’t just sell a one size fi ts all product.
AVN2725 AR11 1 Business profile AW06.indd 3
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
Our Customers
Our customers sell to users in the
following fi ve main markets:
Avanti sells access
to a cloud to service
providers who then
customise products
to suit their niche.
1
2
Government
Enterprise
networks
High speed data services with
large coverage areas are perfect
for Government applicati ons in
supporti ng overseas missions
and UAV operati ons as well as
homeland security.
Companies which have many
dispersed sites to be connected
with common technology, with
high resilience are increasingly
choosing Ka-band satellites.
AVN2725 AR11 1 Business profile AW06.indd 4
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
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Wireless
backhaul
Rural
broadband
Business internet
conti nuity
Wireless networks need
to move data between core
network and remote base
stati ons. Satellites do this
job well.
In Europe, satellite will
supply at least 2% of
connecti ons, and it may be
much higher. In emerging
markets, satellite is almost
the default choice as
economies leapfrog fi bre
and go directly to wireless.
Avanti has an internati onally
patented back up product which
can restore a broken landline
connecti on and associated IP
addressing instantly. Thus an
SME which relies heavily on its
internet connecti on now has a
reason to consider the use of a
satellite product.
AVN2725 AR11 1 Business profile AW06.indd 5
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
Chairman’s Statement
This has been a landmark year for
Avanti Communications Group with
the successful launch of our fi rst
satellite, HYLAS 1, and the receipt of
the fi rst revenues generated by it.
John Brackenbury CBE
Chairman
Continued success in
the construction and
commercialisation of
HYLAS 2
Signifi cant increase in
the number of signed
customer contracts and
pipeline of customer
enquiries for HYLAS 1
and HYLAS 2
This has been a landmark year for Avanti
Communicati ons Group with the successful
launch of our fi rst satellite, HYLAS 1, and
the receipt of the fi rst revenues generated
by it. As a result, it gives me parti cular
pleasure to present our fi nancial results
for the year ended 30 June 2011. I am
also able to report on conti nued success
in the constructi on and commercialisati on
of HYLAS 2, which remains on target for
launch in Q2, 2012. Given recent fi nancial
markets turmoil it is very sati sfying that the
fi nancing decisions taken in this and the
previous fi nancial years mean that Avanti
has two satellites fully funded with a very
strong balance sheet and products which
are selling on target.
Following the launch of HYLAS 1 and its
introducti on to service, we have seen
a signifi cant increase in the number of
signed customer contracts and also the
pipeline of customer enquiries for HYLAS 1
and HYLAS 2. Having a satellite in service
as opposed to design or constructi on
has considerably improved our profi le
in the market. In additi on, we have seen
conti nued strong demand across all
the geographies we cover in consumer,
enterprise and military sectors. New
applicati ons for our capacity, like digital
cinema, have appeared on HYLAS 1. Avanti
has technological advantages in a number
of areas and in focussing on these we are
holding pricing at good levels. Given that
the HYLAS 1 satellite has relati vely modest
capacity available, we are confi dent that it
will be full within the three years we have
AVN2725 AR11 2 Year in Review AW04.indd 6
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
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Strong demand
for HYLAS 2 capacity
in Africa and the
Middle East
forecast. We have already sold enough
capacity to fi ll the satellite to 36.7% usage
by the end of that three year period, we are
adding new customers every month and
existi ng customers are already returning to
add to their capacity commitments.
Although for most companies the general
economic backdrop probably seems
unhelpful, we see no sign of this in the high
growth markets of Africa and the Middle
East, so I believe we made good strategic
decisions in that, following the launch of
HYLAS 2, 75% of our capacity will address
growth markets. There is strong demand
for HYLAS 2 capacity from commercial
customers in Africa and government
customers in the Middle East and we
expect to convert this demand to further
signifi cant backlog before launch. During
the year we repaid our high yielding PIK
bond following a £70 million equity fund
raising which made our low cost Export
Credit Agency HYLAS 2 fi nancing easier
to operate and generated a signifi cant
fi nancial saving. We completed the placing
of insurance for HYLAS 2 at a premium
which generated a saving of some $15m
against budget, which clearly demonstrates
that our technology and management are
well regarded in the expert space insurance
market. In additi on, we commenced work
on the constructi on of HYLAS 3.
Avanti ’s senior management team has
faced a diffi cult period, as some short
term speculators att acked the share price.
I am concerned that loyal, long term
shareholders, especially private investors
who are not allowed by law to receive the
detailed reports produced by investment
banks, have experienced temporarily
diminished value, perhaps without a clear
understanding of how this has come about.
But it has not changed our approach to
our business model at all. We have set
out a fi ve year business plan to fi ll our
satellites. Our products and geographies
are exhibiti ng very strong demand and I am
sati sfi ed that in the fi rst commercial year of
this plan we are achieving our objecti ves.
It is clear that Avanti owns scarce and
valuable resources in one of the few
lightly competed sub-sectors of the global
telecoms industry which should see us
create very signifi cant value. I see great
opportunity in emerging markets telecoms
and our advantages in these markets are
signifi cant. I am grateful for the resolute
support of our core long term investors.
Pati ence and confi dence in the quite
excepti onal and unique advantages Avanti
has will be rewarded. Our pipeline of new
business gives us confi dence in our ability
to meet expectati ons.
John Brackenbury, CBE
Chairman
AVN2725 AR11 2 Year in Review AW04.indd 7
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
Chief Executive's Report
I am pleased to report results for
the year which include the fi rst
revenues from HYLAS 1, following its
successful launch and introduction
into service during this fi nancial year.
David Williams
Chief Executi ve
The market for our
products remains
strong and is growing
In these volatile
economic times,
shareholders can draw
great comfort from
the stable long term
fi nancial resilience of
our balance sheet
Introducti on
I am pleased to report results for the year
which include the first revenues from
HYLAS 1, following its successful launch
and introduction into service during this
financial year. The satellite launch in
November 2010 was followed by a period
of in orbit testing. As we had expected,
HYLAS 1 passed its tests successfully and
was brought into service in April 2011.
We completed the transfer of our legacy
customer base from its old fashioned
rented Ku-band satellite onto HYLAS 1
with its considerably faster Ka-band
service by May 2011. HYLAS 2 remains on
track for a launch in Q2 2012. The market
for our products remains strong and is
growing and the progress made in sales
for HYLAS 1 and pre-sales for HYLAS 2
means we are confident in achieving our
objective of selling out HYLAS 1 in three
years and HYLAS 2 in five years from
service launch. The growth in market
demand has encouraged us to begin the
early stage work for the construction of
our third satellite, HYLAS 3.
Financial Review
Our result for the year produced turnover
of £5.46m (2010: £5.82m) including the
first two months of HYLAS 1 revenues. In
the run up to the launch of HYLAS 1 we
stopped selling our interim broadband
service on rented satellite capacity which
was highly unprofitable as a result of the
high prices of legacy Ku-band capacity.
We also decided that there was no merit
AVN2725 AR11 2 Year in Review AW04.indd 8
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
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in installing systems which would be
replaced within a few months. It was
however invaluable in developing and
testing in a live environment the control
and management software which is
now being used to deliver a high quality
experience for HYLAS 1 customers.
The consumers on this system were
successfully migrated to HYLAS 1 in
the first two months of service.
As anti cipated, our costs increased during
the year as we recruited more staff to
sell and support our products and also to
manage three satellite projects instead
of one. In additi on we incurred our fi rst
depreciati on on HYLAS 1. 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 £0.11 million (2010: profi t of
£0.97 million). The loss from operati ons
was in line with our expectati ons at
£12.86 million (2010: loss £2.44 million).
During the year we raised £70 million in an
equity placing to refi nance an expensive
PIK bond and fund the early stage design
work for HYLAS 3. In additi on, with the
constructi on of HYLAS 2 underway, we
drew $190.3 million on our Export Credit
Agency debt faciliti es of $328 million. The
debt is at att racti ve fi xed interest rates of
5.5% and is drawn down during the period
up to HYLAS 2’s launch and then repayable
over a seven year period from December
2012. In these volati le economic ti mes,
shareholders can draw great comfort from
the stable long term fi nancial resilience of
our balance sheet.
Business Overview
The successful launch and introducti on
into service of our fi rst satellite has led
to a signifi cant increase in interest from
potenti al customers in buying capacity
on both HYLAS 1 and 2. Ka-band is new
to Europe, but expert customers can now
experience the product before buying it.
As a result we are now recognised as a
credible soluti on for our service providers
as they grapple with increasing and
accelerati ng demands for bandwidth from
corporate, consumer and government
customers. We are benefi tti ng from this
through the successful development of
products across all our markets.
Consumer Broadband
For consumers, the growth in high data
rate applications such as video and cloud
computing, as well as the requirement
to interact on-line with many companies
such as utilities providers means that
fast broadband is now a requirement
rather than a luxury, regardless of
geographic location. Avanti provides
competitively priced products at speeds
of up to 10Mb/s in this market, and the
contractual and technical methods by
which our service providers interact
with us are unique and differentiated.
We have signed a number of contracts
with service providers who are migrating
legacy Ku-band customer bases to HYLAS
which will amount to approximately
25,000 when the migrations are
completed, in addition to the new
business our 75 service providers are
adding every day. I am pleased that the
UK government made specific provision
for satellite to be used in its £800m rural
broadband programme, and we have
already had success in the first tender
to be awarded under this programme in
Kent. Our history of successful projects
in England, Scotland and Ireland should
position us perfectly to benefit further
from this work, and we are now seeing
progress on projects with other European
governments. The smaller companies
proved to be more nimble and made the
earliest commitments to us. However
Avanti now has systems installed with the
rural broadband projects of three of the
largest incumbent telcos in Europe and
progress with those projects could be
very large once in full scale deployment.
Enterprise Networks
In the enterprise sector we are seeing
strong demand for the provision of
both back-up and primary networks.
Our internationally patented back-up
Business Internet Continuity product
AVN2725 AR11 2 Year in Review AW04.indd 9
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10
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Chief Executive's Report continued
is bundled into a telecoms service
provider’s offering as a cost effective
alternative to a second fixed telecoms
line. For primary networks we are seeing
demand amongst corporates for machine
to machine communication such as ATM
networks, telemetry for energy producers
and also companies with multiple remote
locations. We have also begun work
with a project to deploy digital cinema
services to one major cinema operator,
a market that we think is potentially
very large.
Cellular Backhaul
The cellular backhaul market is well
established in emerging markets because
wireless providers struggle to get reliable
cables to connect their remote towers.
We see strong business for HYLAS 2
already in the pipeline. However we
are now actively trialling our backhaul
products on HYLAS 1 with wireless
providers in the UK and expect to
proceed to contracted roll-out soon.
Government
In the military/institutional market, we
successfully completed testing of our
Ka-band spectrum for its suitability for
military applications with excellent results.
Whilst we expect demand for military
applications to be limited for HYLAS 1,
given its largely European footprint, we
expect to see stronger demand for HYLAS
2 with its beam configuration over the
Middle East and Africa. There is currently a
round of tendering taking place in several
NATO countries for Ka-band capacity
and as the only NATO domiciled Ka-band
operator with capacity for sale across the
relevant Middle Eastern countries in 2012
it seems reasonable to expect that Avanti’s
products will be successful in processes
which should conclude before the launch
of HYLAS 2.
Backlog and Pipeline
During the year we extended our customer
base on HYLAS 1 so that we have sold
capacity to over seventy service providers
in Europe. Our customers typically commit
only to enough bandwidth to serve the
business they can forecast in the short
term. Naturally during the first six months
of service, those customers have been
focussing on filling the capacity they
committed to pre-launch. But we have
already seen the first of these successfully
sell all of the capacity they acquired from
us and come back for more. We expect
to continue to sign new customers and
remain very confident that we will sell
out all of the capacity on HYLAS 1 within
3 years of service launch. At present, our
backlog of customer contracts for HYLAS
1 is £141m. Thus the backlog increased
despite taking some of it to P&L in the
six months since service launch. Many of
our customers bought modest capacity
to begin with and we expect them all to
come back to us to buy more bandwidth
to cope with growth. In addition, we are
negotiating with new customers seeking
significant capacity.
Construction of HYLAS 2 is progressing
well and the satellite remains on target
to launch in Q2, 2012. Pre-launch sales
interest has been very strong and we
expect to ink significant deals soon in
Southern and Eastern Africa, Iraq and
Afghanistan. The backlog of customer
contracts for HYLAS 2 is £30m. In addition
the options over capacity (for military
use) increased to £170m. There is strong
interest in Avanti’s military capacity, but
since we are not presently regulated to
sell directly to military organisations, we
sell to service providers who are, and
some of those pay for options to give
them an advantage in bidding processes.
The strong customer interest in our
capacity is illustrated by the pipeline
of new business. These represent
potential contracts where a business
proposal has been made to the customer
and negotiations on that proposal
have commenced. Our pipeline of
new business for HYLAS 1 and 2
stands at £473m.
We provide an expanded definition for
pipeline and backlog, and have re-
introduced the peak fill rate metric in
response to shareholder enquiries.
AVN2725 AR11 2 Year in Review AW04.indd 10
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
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• The HYLAS 1 peak uti lisati on rate
occurring in Year 3 based on current
sales is 36.7%. We are targeti ng a
service launch peak fi ll rate on HYLAS 2
of 25%.
• Pipeline is defi ned as the total potenti al
value of contracts which are currently
under negoti ati on in respect of HYLAS
1 and HYLAS 2, and only includes
projects where detailed technical
informati on and a committ ed price has
been delivered and the customer is
proceeding with work on that basis.
• Backlog includes the total value of
contracts signed for sale of services.
We do not include any value for the
potenti al renewal of the contracts we sign
with service providers beyond the specifi ed
term. We do include in backlog the value of
certain historic conti nuing business:
• The small directly contracted base of
consumer broadband customers in the
UK which was built under government
funded projects prior to HYLAS 1 launch
is assumed to roll forward, since those
customers have conti nued with service
beyond their initi al term.
• We also assume that our small European
consulti ng business which uses HYLAS
1 to create advanced new technologies
for government customers conti nues
to generate the level of turnover it has
averaged in the last fi ve years.
HYLAS 3
We have announced our intention to
construct our third HYLAS satellite and
have already completed the first phase of
design and long lead time item work. We
have received a preferred offer of highly
efficient debt financing to complete the
construction of HYLAS 3. The financing
offer rests upon the successful pre-
sale of significant capacity. We have
conditionally contracted pre-sales of
$120m, and are close to finalising the
balance. In the satellite industry, the long
term planning cycles and construction
schedules can often be frustrating I
know, but this is a business which should
produce extraordinary cash flows over
the long term and it is important that
Avanti makes decisions which maximise
shareholders’ returns rather than
jumping into expensive financing or
poorly priced sales deals for the purpose
of short term momentum. We hope to
update the market on HYLAS 3 very soon.
Competi ti ve Environment
There is presently only one Ka-band
competitor in each of our geographies.
This resembles the competitive
environment in the UK mobile phone
industry in the early 1990s when only BT
and Racal were competing. It does not
represent intense competition and as a
result it is possible to win business with
product differentiation, not price. Every
satellite has different characteristics
which fundamentally affect its suitability
for specific customers such as orbital
position and elevation, power and beam
shapes, radio frequency specifics, and
the design and characteristics of ground
equipment and software. Avanti’s key
advantages are in several areas:
• HYLAS 1 beam coverage give us
advantages in certain areas, such as
very high power over Western Europe,
and the ability for customers to receive
satellite TV and broadband in a single
dish in Iberia, which is unique.
• HYLAS 2 has highly sought aft er military
capacity over the Middle East and military
spectrum whose commercial use is
unusual and we are turning the short term
lead to market advantages into enduring
and loyal business relati onships.
• Being fi rst into certain African countries
is also important because these countries
exhibit growth that is not encumbered by
sovereign debt crises or recession
• Avanti sells a Virtual Network to service
providers which enable them to benefi t
from unique advantages such as:
Moving capacity dynamically
between beams
Modifying all Service parameters
directly – they design their products,
not us
Licensed use of the Avanti
patented Business Internet
Conti nuity (BIC) products
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12
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Chief Executive's Report continued
Avanti has excellent differentiation in its
products and is winning business at good
prices. Our five year business plan is well
poised to deliver exceptional returns to
investors and there is additional upside for
us to be found in completing new projects
financed with very efficient debt. Our
pipeline of new business gives us confidence
in our ability to meet expectations.
David Williams
Chief Executive
• There are also always relationship issues
at play and Avanti’s new fresh approach
helps, but also, of course, competitors in
individual markets usually want to secure
separate supply chains.
Thus in lightly competed markets whose
services are always bespoke, Avanti has
sufficient differentiation to focus on selling
to its strengths.
Trading Update
Avanti signed four contracts on
30 September 2011. The first is a
contract for the sale of HYLAS 2 services
to Bentley Walker for services on HYLAS
2 in Afghanistan. Avanti also added three
new contracts for HYLAS 1 service.
We completed the placement of $328m
of Launch plus first year insurance on
HYLAS 2 at a premium which is $15m under
budget, supporting our view that it is a
well managed and low risk project. We are
grateful for the support of our insurers.
Outlook
Avanti owns scarce and valuable spectrum
resources, in a lightly competed sub-
sector of a global telecoms market which
is experiencing breakneck growth in data
demand through the increasing use of high
data applications in government, business
and consumer sectors and growing
penetration of consumer telecoms usage.
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
13
Finance and Operating Review
The shape of the balance sheet has
changed signifi cantly over the last
12 months. The group now has net
assets of £207 million.
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Group Finance Director
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
2011 saw Avanti generate revenues from
its own satellite for the fi rst ti me. HYLAS 1
was launched in November 2010, however
commercial services were not provided
unti l April 2011 as we fully tested the many
diff erent confi gurati ons of the satellite and
drift ed it through to its fi nal orbit.
Total revenue for the year was £5.5 million
(2010: £5.8 million). Cost of sales, which
include depreciati on of HYLAS 1 for the fi rst
ti me, as well as a full year of the rented
satellite costs, were £7.7 million which
resulted in a gross loss of £2.2 million
(2010 gross profi t: £2.7 million).
We conti nue to carefully manage our
overheads ahead of generati ng any
signifi cant revenues. Total overheads for
the year of £11.3 million were slightly
distorted by the arbitrati on costs associated
with the recovery of the SpaceX receivable
– see below. Staff costs remain our largest
single expenses and our average head
count for the year was 97 (2010: 81) with
a closing headcount of 116.
In additi on there were one off costs
associated with the move to Cyprus of
the HYLAS 2 business of £0.8 million and
a non-cash charge for share based payments
of £0.78 million (2010: £0.60 million).
This has resulted in an EBITDA loss of
£9.7 million (2010: £1.7 million) and a
loss before taxati on of £12.7 million
(2010: loss £2.0 million). This is in line
with our expectati ons for the year.
Other operati ng Income
During the year we were successful in
our arbitrati on proceedings against Space
Explorati ons in recovering monies paid
against the purchase of a Falcon 9 launch
vehicle. Avanti terminated this contract
in June 2009 following SpaceX’s failure to
demonstrate a successful launch heritage in
the required ti meframe. This amount was
shown in full in last year’s Annual Report
and Accounts in note 16 under other
receivables. In May 2011 we recovered
the $7.6 million owed to us together with
interest from the date of the contract
terminati on. This additi onal amount
(£427k) has been shown separately under
other operati ng income. The signifi cant
costs of the arbitrati on have been expensed
in operati ng expenses.
Taxati on
The group tax credit was £3,027,000
(2010: £24,000 credit), resulting in an
effective tax rate of 23.8%. The rate has
been negatively affected by the fall in the
UK corporation tax rate from 28% to 26%,
which has impacted the brought forward
deferred tax asset values.
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Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Finance and Operating Review continued
Loss per share
Basic loss per share was 12.14 pence
(2010: loss 3.68 pence).
contracted for further uplinks in
Germany and Goonhilly (UK).
Financing and treasury
In July 2010 we completed the placing
of 16.3 million shares at 430 pence which
generated gross proceeds of £70 million.
The majority of these funds (£53.6 million)
were used to repay the original HYLAS 1
PIK bond which was raised in July 2007.
We have continued to drawdown the
HYLAS 2 facility from US EXIM and
COFACE. At 30 June 2011 the gross debt
was $190.3 million (£118.5 million). The
total facility is $328 million which will be
fully utilised around the time of the launch
of HYLAS 2 in the first half of 2012.
HYLAS 2 in Cyprus
As I highlighted last year we had begun the
process of moving the HYLAS 2 business to
Cyprus. During the year we established an
office in Limassol and David Bestwick, CTO,
has taken the role of Managing Director of
Avanti HYLAS 2 Cyprus Limited. The Cyprus
companies now directly employ 10 people
and has established outsource contracts
for various arms length services from other
Group companies.
HYLAS 2 will cover Eastern Europe,
Middle East, East and Southern Africa,
and therefore Cyprus represents an ideal
base from which to run this business.
We have already started work on the key
uplink ground station in Cyprus and have
The HYLAS 2 debt, provided by US EXIM
and COFACE, remains with the Cypriots’ UK
parent company, Avanti HYLAS 2 Limited,
and the Cyprus companies have been
equity funded by this company.
All companies within the HYLAS 2 sub
Group have a functional currency of US
dollars since the debt is US dollar based,
the assets are predominantly purchased
in US dollars and we anticipate that a
significant majority of revenues will be
US dollar denominated.
Balance sheet
The shape of the balance sheet has
changed significantly over the last 12
months. Total non-current assets have
increased by £157.4 million in the period.
Expenditure on HYLAS 2 has been
£147 million and £43.4m on HYLAS 1.
Current assets have fallen from £52.1 million
to £48.0 million mainly as a result of the fall
in receivables following the receipt from
SpaceX. Cash balances have increased by
£4.6 million to £38.8 million.
Gross debt has increased from £49.4 million
to £118.7 million. The opening figure
represents the HYLAS 1 PIK bond which was
repaid in the period and the closing balance
is the partial drawdown of the HYLAS 2
facility with US EXIM and COFACE.
Cash flow
The loss from operations of £12.9 million
has significant non-cash items, which when
combined with prudent management
of working capital resulted in a net cash
outflow from operations of £1.0 million
including the receipt of £4.7m from SpaceX
(2010: inflow £2.3 million).
During the year we raised an additional
£70 million of equity, which was partially
used to repay the expensive PIK bond
initially raised in 2007 for HYLAS 1
(repayment of £53.6 million). Furthermore,
we drew down £118.5 million of the EXIM/
COFACE debt facility for HYLAS 2 against
capital expenditure of £119.3 million
(2010: £108.8 million).
Finally in May 2011, after the successful
arbitration proceedings in New York, we
received full settlement of the outstanding
SpaceX receivable of £4.7 million.
Net cash balances increased by £4.6 million
(2010: £9.6 million).
Principal risk and uncertainty
Fill Rates on HYLAS 1 and 2
We have previously stated that we expect
to fill HYLAS 1 and HYLAS 2 in 3 and 5 years
respectively from the start of commercial
service. In respect of HYLAS 1 we are 6
months into the 3 year target and already
have a peak fill rate of 36.7%. We are
therefore ahead of plan in achieving the
three year target. In respect of HYLAS 2
we already have a backlog of £30 million
AVN2725 AR11 2 Year in Review AW04.indd 14
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
15
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and £170 million of opti ons. Furthermore
we have a signifi cant pipeline across both
satellites which leads us to believe our
target fi ll rates are achievable.
Pricing
HYLAS 1 operates in a lightly competed
market place and we conti nue to achieve
pricing in excess of our base case. HYLAS
2 will operate, primarily, in emerging
markets and to date we have not seen any
signifi cant pricing pressures.
HYLAS 2 launch
HYLAS 2 remains on target for a launch
in the second quarter of 2012. We have
reti red most of the signifi cant risks that
could cause any serious delay. HYLAS 2 will
be launched on an Ariane 5 launch vehicle,
which is the most reliable launch vehicle in
the market. We have also completed the
insurance of the HYLAS 2 project for a total
sum insured of $328 million.
Financial asset
We now carry a loan receivable as a
fi nancial asset to a strategic partner. The
loan accrues interest at 7%. We have
assumed that this asset is fully recoverable
over the term of the loan. The Group
has collateral over the balance, which
consti tutes 75% of the equity interest in
the partner, should there be a default.
Global economic environment
Poor macro-economic circumstances,
parti cularly in Greece, Portugal, Spain and
Ireland might be retarding our sales eff orts.
However we do not have a long standing
trend with which to compare. It does
however feel as though companies are
only making commitments to buy services
that they know they can for certain use
or sell on i.e. very few clients are making
highly speculati ve commitments. However,
off setti ng this eff ect are two positi ves.
Firstly, telecoms services appear to remain
non-cyclical. The long held belief that
customers regard telecoms as an essenti al
uti lity has held quite fi rm during the
recession, with churn rates actually falling
in Western Europe during 2010. Secondly,
governments in Europe are spending
money on broadband subsidy, especially as
a result of long planned projects whereby
the funding is in locked up EU budget pots.
Thus it is difficult to show that recession
is affecting our business. We remain
the provider of highly desirable services
where demand is not met by current or
planned supply, with end user consumers
whose purchasing decisions are not
highly price sensitive.
Criti cal accounti ng policies
Details of our criti cal accounti ng policies are
in Note 1 to the consolidated Annual Report.
Nigel Fox
Group Finance Director
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
Board of Directors
John Brackenbury CBE* + •
Chairman
John was founder Chairman of Pubmaster
which was sold in 2003 to Punch Taverns.
He is a leading industrialist with over 40 years
experience in the drinks and leisure sector.
He is also President of Business in Sport
and Leisure Limited, 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
Managing Director Cyprus
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.
AVN2725 AR11 3 Board & Map AW03.indd 16
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
17
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.
Professor Michael Walker OBE FREng
Non-Executi ve
Professor Walker is adviser to Vodafone
Group Technology, having spent 18 years of
his professional career there culminati ng
in the post of Group R&D Director. He is
visiti ng professor at the University of Surrey
and sits on the scienti fi c advisory boards
for the Universiti es of Warwick and Surrey.
He also holds directorships with Alacrity
Foundati on, Glasswall Soluti ons Ltd, Mobile
VCE and Walker and Associates Telecoms
Consultancy Ltd.
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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.
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.
* Audit committ ee
+ Remunerati on committ ee
• Nominati ons committ ee
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Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Employees
Drawing expertise from across the globe.
Director
Finance
Networks
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Annual Report and Accounts for the year ended 30 June 2011
19
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Administrati on
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Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Corporate Social Responsibility
Supporting future careers in space.
This year saw the launch of three new initiatives. These
initiatives are designed to complement one another. Our aim
is to attract new talent into the company whilst encouraging
students to pursue a career in the space industry. By offering
science students invaluable industry experience we believe
we enhance their studies and career prospects.
Avanti Space Scholarship Scheme
The Avanti Space Scholarship Scheme was
launched to support a number of students
from underprivileged backgrounds with
an interest and flair in science to pursue
university studies in relevant space science
degrees. Five Scholarship students have
been selected for the October 2011
university undergraduate intake. All five
students come from low income families and
throughout their university course they will
receive support from Avanti. We believe a
person’s background should not be a barrier
to a career in the Space Industry.
This valuable scheme offers student
support in a number of ways, including an
annual bursary of £3,000; paid summer
internships; coaching and mentoring;
and a six month contract of employment
on completion of their degree. It is
envisaged that once graduated, these
Scholarship students will naturally
progress into a Graduate career at Avanti.
Graduate Recruitment Scheme
The Graduate Recruitment Scheme was
launched to develop graduates with good,
relevant science degrees into talented
engineers within the organisation. The
programme is designed to expose the
graduates to all aspects of the organisation
in order for them to develop their
understanding of how academic theory
can be dovetailed with practical industry
knowledge and commercial focus. Our
first four graduates started work with
Avanti in September and they will have
the opportunity to develop their skills in
all areas of the business over the initial 2
year program. This programme also offers
flexibility for them to develop in the part of
the business where they have flair, whether
that is satellite procurement, sales and
marketing or customer services.
Apprentice Trainee Scheme
The Apprentice Trainee Scheme was
launched this year. Taking advantage of
the Government funded scheme we are
offering young people the opportunity
to gain work experience whilst earning
a salary and working towards nationally
recognised NVQ qualifications.
We take pride in giving young people the
opportunity to learn their key skills on-the-
job and develop their career within Avanti.
These three schemes have been positively
received by students and universities as
well as industry bodies, including the UK
Space Agency and The National Space
Centre. Avanti believes that through this
investment we develop talented, motivated
and knowledgeable individuals to become
the next generation of engineers at Avanti.
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Annual Report and Accounts for the year ended 30 June 2011
21
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SOS Children is very glad to
have partnered with Avanti
Communications for the last
3 years.
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.
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.
The adjoining SOS Kindergarten has the
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
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22
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Directors’ Report
The directors have pleasure in submitting their annual report together with the audited financial statements for the year ended 30 June 2011.
Principal activities and review of the business
The principal activity of the Company is the provision of satellite communication services. The services are principally provided via Ka-band
satellite. The first Avanti satellite, HYLAS 1 was launched in November 2010, and brought into full commercial service in April 2011.
Business review and key performance indicators (“KPI’s”)
The information that fulfils the requirements of the business review can be found in the finance and operating review on pages 13 to 15,
which are incorporated in this report by reference. As the company is still in the early stages of its strategy with a focus on the future, we do
not currently have a focus on traditional KPI’s. Instead our business model is focussed on the launch of the satellite and subsequent capacity
sales. A comprehensive set of KPIs will be introduced next year reflecting a full year of service on Hylas 1. In the Chairman’s statement and
Finance and Operating Review, we have highlighted key financial statistics such as revenue and operating profit, however given the nature of
the business at the current time, we do not consider them to be KPI’s.
Results and dividends
The results for the year ended 30 June 2011 are shown on page 29. No equity dividend was paid in the year ended 30 June 2011 (2010: £nil).
No final dividend is proposed at the year-end (2010: £nil). The loss for the year transferred to reserves was £9,700,000 (2010: loss of £1,932,000).
Qualitative and Quantitative disclosures about interest, foreign exchange, credit and liquidity risks
A discussion of the Group’s financial risk management objectives and policies and the exposure of the group to interest rate, foreign
exchange, credit and liquidity risk is included in Note 23 to the Consolidated Financial Statements.
Research and development
The Group continues to invest in new services and technology through its research and development programs which can lead to profitable
exploitation of Avanti’s satellite capacity. These include pure research into new products as well as developing those services which have
been demonstrated to have a profitable business case.
Directors
The directors who served during the year were as follows:
F E J G Brackenbury CBE
D J Williams
D J Bestwick
N A D Fox
M J O’Connor
D A Foster
C R Vos
W P Wyatt
I C Taylor MBE (resigned 12/04/2011)
M Walker OBE (appointed 19/04/2011)
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
23
Directors’ emoluments
The remunerati on of the directors including the highest paid director and Chairman was as follows:
For the year ended 30 June 2011
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
M Walker OBE
I C Taylor MBE
C R Vos
Total Non-Executi ve
Total
Salaries
Bonus
Other benefi ts
Post employment
benefi ts
Total 2011
300,000
237,329
170,000
160,000
867,329
100,000
35,000
30,000
6,250
30,000
35,000
236,250
1,103,579
144,750
158,000
93,000
98,000
439,750
–
–
–
–
–
–
–
493,750
46,466
5,855
9,593
2,485
64,399
4,498
–
–
–
–
–
4,498
68,897
95,750*
25,674
20,000
20,000
586,966
426,858
292,593
280,485
161,424
1,586,902
–
–
–
–
–
–
–
161,424
104,498
35,000
30,000
6,250
30,000
35,000
240,748
1,827,650
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* During the year ended 30 June 2011, DJ Williams chose to take £58,250 of his bonus as additi onal company pension contributi on.
For the year ended 30 June 2010
Salaries
Bonus
Other benefi ts
Post employment
benefi ts
Total 2010
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
Total
131,630*
83,553*
150,400
135,840
501,423
60,000
25,000
25,000
25,000
25,000
160,000
661,423
–
–
–
–
–
–
–
–
–
–
–
19,417
1,529
8,467
2,378
31,791
2,344
–
–
–
–
2,344
34,135
103,745*
78,841*
7,020
6,792
196,398
–
–
–
–
–
–
196,398
254,792
163,923
165,887
145,010
729,612
62,344
25,000
25,000
25,000
25,000
162,344
891,956
* During the year ended 30 June 2010, DJ Williams and DJ Bestwick made salary sacrifi ces of £97,170 and £75,163 respecti vely which the Company paid into their private pensions.
AVN2725 AR11 4 Govenance AW03.indd 23
10/10/2011 19:02
Total
1,196,105
840,009
237,501
278,128
2,551,743
Total
441,450
380,096
289,286
309,227
24
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Directors’ Report continued
Directors’ Long Term Incentive Plans
Original allocations:
D J Williams
D J Bestwick
N A D Fox
M J O’Connor
Total
Core
Exceptional
Extraordinary
565,480
350,741
137,238
139,238
1,192,697
350,741
209,384
50,000
69,445
679,570
279,884
279,884
50,000
69,445
679,213
Outstanding allocations
Core
Exceptional
Extraordinary
D J Williams
D J Bestwick
N A D Fox
M J O’Connor
Total Executive
161,566
100,212
39,286
39,782
340,846
–
–
–
–
–
279,884
279,884
250,000
269,445
1,079,213
1,420,059
All unvested shares are held in the Employee Benefit Trust (EBT).
The Long Term Incentive Plan (LTIP) has been established by the Company with approval from the Remuneration Committee to reward and
incentivise the Executive Directors and senior managers of the Company.
The LTIP allocations are in separate sub funds within the EBT and are subject to a discretionary Trust. The shares are subject to automatic
revocation if certain criteria (set out below) are not met and continue to be revocable for the entire Trust period.
During the year an additional 200,000 LTIP shares were issued to both Nigel Fox and Matthew O’Connor respectively. These LTIP shares are
subject to automatic revocation if the criteria for the Extraordinary Achievement tranche are not met.
The allocations into the LTIP vary for each executive. The total allocation to each executive is split into three separate tranches:
i) The Core Tranche
This element of the grant becomes exercisable in 7 equal instalments. The first instalment was exercisable on grant and the second on
30 June 2008. The remaining 5 are annually thereafter. 5/7ths of this core grant is not automatically revocable.
ii) The Exceptional Achievement Tranche
This element of the grant was amended during the year. Originally, these options were only exercisable if the average market value of
the share exceeded £5 for a consecutive period of six months prior to 30 June 2010. Given the unprecedented market conditions over
the previous year, the remuneration committee considered that whilst the executives 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 still not be achieved.
In May 2010 the remuneration committee agreed to extend the target date to 31 December 2010 and that the six month average target price
should be increased £5.50.
This benchmark was satisfied in November 2010.
iii) The Extraordinary Achievement Tranche
This element of the grant is only exercisable if the Market Value of a Share exceeds £10 for a consecutive period of six months before 30 June 2013.
AVN2725 AR11 4 Govenance AW03.indd 24
11/10/2011 16:58
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
25
Non-executi ve Directors’ Unapproved Plans
F E J G Brackenbury CBE
D A Foster
C R Vos
Total
2011
31,431
7,500
15,000
53,931
2010
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
C R Vos
M Walker OBE
Fully paid Ordinary Shares of 1p each
30 June 2011
30 June 2010
1,587,092
1,211,648
109,677
154,009
380,432
388,750
25,342
6,030
–
1,543,905
1,102,264
89,897
144,564
442,891
359,639
11,200
6,030
–
G
o
v
e
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c
e
At 31 August, 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.
Caledonia Investments plc
M&G Investment Management Ltd
Directors & Related and EBT
The Capital Group Companies, Inc.
Kames Capital
London
London
–
London/Los Angeles
Edinburgh
12,737,000
12,507,850
7,497,031
3,495,222
3,307,410
In additi on, 1.4 million shares are held under LTIP. Dividend and voti ng rights have been waived.
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 2011, the Company did not have any trade creditors (2010: nil).
AVN2725 AR11 4 Govenance AW03.indd 25
11/10/2011 16:58
26
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Directors’ Report continued
Political and charitable donations
During the year the Group made a political donation to the Conservative party of £4,000 (2010: £5,000).
Directors’ and Officers’ liability insurance
Avanti Communications Group plc maintains appropriate insurance to cover Directors’ and Officers’ liability for itself and its subsidiaries.
At the date upon this report was approved and for the year to 30 June 2011, the Company provided an indemnity in respect of all of the
Company’s Directors.
Directors’ responsibilities
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to
prepare the group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In
preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and
explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions
and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the
financial 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 prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
In the case of each director in office at the date the directors’ report is approved:
a) so far as the directors are aware, there is no relevant audit information of which the company’s auditors are unaware; and
b) they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit
information and to establish that the company’s auditors are aware of that information.
Approved by the Board of Directors and signed on behalf of the Board
Nigel Fox
Secretary and Group Finance Director
London
AVN2725 AR11 4 Govenance AW03.indd 26
10/10/2011 19:02
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
27
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-executi ve directors to bring
an independent view to the board and to provide a balance to
the executi ve directors. The board of directors comprises four
executi ve directors and fi ve non-executi ve directors one of whom
is the chairman. Despite the fact that some of the non-executi ve
directors have share opti ons, the board considers that each of the
non-executi ve directors is independent. The board meets at least
six ti mes per year and receives a board pack comprising individual
reports from each of the executi ve directors and members of the
senior management team, together with any other material deemed
necessary for the board to discharge its duti es. The board has
responsibility for formulati ng, reviewing and approving the Group’s
strategy, budgets, major items of expenditure and acquisiti ons.
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.
G
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AVN2725 AR11 4 Govenance AW03.indd 27
10/10/2011 19:02
28
Avanti Communications Group plc
Annual Report and Accounts for the year ending 30 June 2011
Independent Auditors’ Report
to the members of Avanti Communications Group plc
• the group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union;
• the parent company financial 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 financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for
the financial year for which the financial statements are prepared
is consistent with the financial statements.
Matters on which we are required to report by exception
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 accounting 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 financial statements are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit.
J. Booker (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
30 September 2011
We have audited the group and parent company financial statements
(the ‘‘financial statements’’) of Avanti Communications Group plc
for the year ended 30 June 2011 which comprise the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated statement of financial position, the
company statement of financial position, the consolidated and
company statement of cash flows, the consolidated and company
statement of changes in equity and the related notes. The financial
reporting framework that has been applied in their preparation
is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union and, as regards the parent
company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ Responsibilities
Statement set out on page 26, the directors are responsible for
the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit
the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices 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 Chapter
3 of Part 16 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 writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to
the group’s and parent company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the Avanti
Communications Group plc Annual Report to identify material
inconsistencies with the audited financial statements. If we become
aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the
state of the group’s and of the parent company’s affairs as
at 30 June 2011 and of the group’s loss and group’s and
parent company’s cash flows for the year then ended;
AVN2725 AR11 5 Accounts AW04.indd 28
11/10/2011 17:00
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
29
Consolidated Income Statement year ended 30 June 2011
Revenue
Cost of sales
Gross (loss)/profi t
Operati ng expenses
Other operati ng income
Loss from operati ons
Finance income
Finance expense
Net fi nancing income
Loss before tax
Income tax credit
Loss 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 2011
£’000
Year ended
30 June 2010
£’000
Notes
2
3
6
7
7
8
9
9
5,462
(7,678)
(2,216)
(11,279)
636
(12,859)
428
(296)
132
(12,727)
3,027
(9,700)
(9,700)
(12.14p)
(12.14p)
5,815
(3,140)
2,675
(8,739)
3,628
(2,436)
1,071
(591)
480
(1,956)
24
(1,932)
(1,932)
(3.68p)
(3.68p)
Consolidated Statement
of Comprehensive Income year ended 30 June 2011
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
Loss for the year
Other comprehensive (loss)/income
Exchange diff erences on translati on of foreign operati ons and investments
Total comprehensive (loss)/income for the year enti rely att ributable to the
equity holders of the parent
Year ended
30 June 2011
£’000
Year ended
30 June 2010
£’000
(9,700)
(1,932)
(4,335)
(14,035)
2,194
262
AVN2725 AR11 5 Accounts AW04.indd 29
10/10/2011 18:47
30
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Consolidated Statement
of Financial Position as at 30 June 2011
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other financial assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables
Derivative financial instruments
Provisions for other liabilities
Loans and other borrowings
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions for other liabilities
Loans and other borrowings
Total non-current liabilities
Total liabilities
Equity
Share capital
Share premium
Foreign currency translation reserve
Retained earnings and other reserves
Total shareholders’ equity
Total liabilities and equity
Notes
30 June 2011
£’000
30 June 2010
£’000
11
12
18
13
16
17
23
19
20
23
21
22
20
21
22
24
24
315,390
170,231
3
3,386
9,135
11
268
–
327,914
170,510
1,284
7,916
–
38,829
48,029
375,943
1,398
15,993
525
34,181
52,097
222,607
30,395
13,460
83
30
397
–
30
269
30,905
13,759
18,997
3
118,678
137,678
168,583
849
188,678
(2,141)
19,974
207,360
375,943
7,228
33
49,404
56,665
70,424
686
120,496
2,194
28,807
152,183
222,607
The financial statements of company number 6133927 on pages 29 to 63 were approved by the Board of Directors on 30 September 2011
and signed on its behalf by:
Nigel Fox
Finance Director
30 September 2011
AVN2725 AR11 5 Accounts AW04.indd 30
10/10/2011 18:47
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
31
Company Statement
of Financial Position as at 30 June 2011
ASSETS
Non-current assets
Deferred tax assets
Investments
Total non-current assets
Current assets
Trade and other receivables
Derivati ve fi nancial instruments
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
Foreign currency translati on reserve
Retained earnings and other reserves
Total shareholders’ equity
Total liabiliti es and equity
Notes
30 June 2011
£’000
30 June 2010
£’000
18
14
17
23
20
23
24
24
191
84,728
84,919
105,190
–
105,190
190,109
3
83
86
86
849
188,678
174
322
190,023
190,109
62
41,320
41,382
80,234
525
80,759
122,141
9
–
9
9
686
120,496
174
776
122,132
122,141
The fi nancial statements of company number 6133927 on pages 29 to 63 were approved by the Board of Directors on 30 September 2011
and signed on its behalf by:
Nigel Fox
Finance Director
30 September 2011
F
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t
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AVN2725 AR11 5 Accounts AW04.indd 31
10/10/2011 18:47
32
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Consolidated and Company Statement
of Cash Flows year ended 30 June 2011
Group
Company
Year ended
30 June 2011
£’000
Year ended
30 June 2010
£’000
Year ended
30 June 2011
£’000
Year ended
30 June 2010
£’000
Notes
Cash flow from operating activities
Loss from operations before taxation
Depreciation and amortisation
Provision for impairment of trade receivables
Onerous lease provision
Share based payments expense
Loss on disposal of fixed assets
Movement in working capital
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
"SpaceX" settlement
Cash (absorbed by)/generated from operations
Interest received
Interest paid
Derivative cash received
Net cash (absorbed by)/generated from
operating activities
Cash flows from investing activities
Payments for other financial assets and
investments
Payments for property, plant and equipment
Receipt on sale of motor vehicles
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowing
Proceeds from share issue
Share issue costs
Proceeds from lease and lease back
Finance lease paid
3
17
21
25
22
(9,113)
(1,082)
(12,859)
2,939
50
(30)
776
11
81
3,059
232
4,716
(1,025)
38
(87)
718
(356)
(2,436)
(29)
769
13
(30)
602
–
(1,047)
(1,756)
6,168
–
2,283
99
(155)
–
–
–
–
54
–
25
–
(24,603)
(358)
–
(24,936)
–
–
–
(59)
–
–
–
54
–
(5)
–
(72,872)
(3,092)
–
(75,969)
–
–
–
2,227
(24,936)
(75,969)
(8,857)
(119,261)
3
–
(43,409)
(41,031)
(108,803)
–
–
–
–
–
(128,115)
(108,803)
(43,409)
(41,031)
118,475
(53,606)
70,000
(1,655)
567
(448)
–
–
120,500
(3,500)
–
(402)
–
–
70,000
(1,655)
–
–
–
–
120,500
(3,500)
–
–
Net cash received from financing activities
133,333
116,598
68,345
117,000
Effects 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 financial year
Cash and cash equivalents at the
end of the financial year
(214)
4,648
34,181
38,829
(456)
9,566
24,615
34,181
19
–
–
–
–
–
–
–
–
AVN2725 AR11 5 Accounts AW04.indd 32
11/10/2011 15:29
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
33
Consolidated and Company Statement
of Changes in Equity year ended 30 June 2011
Group
2010
At 1 July 2009
Loss for the year
Other comprehensive income
Issue of share capital
Share based payments
Tax credit taken directly to reserves
At 30 June 2010
2011
At 1 July 2010
Loss for the year
Other comprehensive loss
Issue of share capital
Share based payments
Tax credit taken directly to reserves
At 30 June 2011
Share Capital
£’000
Share premium
£’000
Retained earnings
£’000
Foreign currency
translati on reserve
£’000
Total equity
£’000
449
–
–
237
–
–
686
686
–
–
163
–
–
849
34,041
–
–
86,455
–
–
29,974
(1,932)
–
–
602
163
–
–
2,194
–
–
–
64,464
(1,932)
2,194
86,692
602
163
120,496
28,807
2,194
152,183
120,496
–
–
68,182
–
–
28,807
(9,700)
–
–
776
91
2,194
–
(4,335)
–
–
–
152,183
(9,700)
(4,335)
68,345
776
91
188,678
19,974
(2,141)
207,360
£47,000 has been adjusted between opening reserves and Group share capital in respect of shares held in the Employee Benefi t Trust.
Company
2010
At 1 July 2009
Profi t for the year
Other comprehensive income
Issue of share capital
Share based payments
Tax credit taken directly to reserves
At 30 June 2010
2011
At 1 July 2010
Loss for the year
Other comprehensive income
Issue of share capital
Share based payments
Tax expense taken directly to reserves
At 30 June 2011
Share Capital
£’000
Share premium
£’000
Retained earnings
£’000
Foreign currency
translati on reserve
£’000
Total equity
£’000
449
–
–
237
–
–
686
686
–
–
163
–
–
849
34,041
–
–
86,455
–
–
120,496
120,496
–
–
68,182
–
–
188,678
(34)
723
–
–
54
33
776
776
(504)
–
–
54
(4)
322
–
–
174
–
–
–
174
174
–
–
–
–
–
34,456
723
174
86,692
54
33
122,132
122,132
(504)
–
68,345
54
(4)
174
190,023
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AVN2725 AR11 5 Accounts AW04.indd 33
10/10/2011 18:47
34
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts
1 Accounting Policies
Statement of compliance
The Group financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the
EU "IFRS", International Financial Reporting Interpretations Committee (IFRIC) Interpretations, and the Companies Act 2006 applicable
to companies preparing their accounts under IFRS.
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The financial statements have been prepared on the historical cost basis, with the exception of share based payments and financial
derivatives, which are incorporated using fair value.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the parent company
income statement.
No new standards were applied during the year ended 30 June 2011.
New standards and interpretations not applied
The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year
beginning 1 July 2010 but are not currently relevant for the Group, or have had no impact:
Annual improvements 2009 (effective 1 January 2010)
Amendment to IFRS 2, 'Share based payments – Group cash-settled share-based payment transactions' (effective 1 January 2010)
Amendments to IFRS 1 for additional exemptions (effective 1 January 2010)
Amendments IAS 32 Financial instruments: Presentation on classification of rights issues (effective 1 February 2010)
Amendment to IFRS 1, First time adoption on financial instrument disclosures (effective 1 July 2010)
IFRIC 15, 'Arrangements for construction of real estates' (effective 1 January 2009 but EU endorsed for 1 January 2010)
IFRIC 19, 'Extinguishing financial liabilities with equity instruments' (effective 1 July 2010)
AVN2725 AR11 6 Notes AW03.indd 34
10/10/2011 18:49
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
35
New standards and interpretati ons
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:
IAS 34, 'Interim fi nancial reporti ng', has been amended by the 2010 Improvements to require the following disclosures in interim fi nancial
reports in respect of fi nancial instruments, if they are signifi cant: Impairments recognised on fi nancial assets and the reversal of previous
impairments; Changes in the business or economic circumstances that aff ect the fair value of the enti ty’s fi nancial assets and fi nancial
liabiliti es, whether those assets or liabiliti es are recognised at fair value or amorti sed cost; Transfers between levels of the fair value
hierarchy used in measuring the fair value of fi nancial instruments; Changes in the classifi cati on of fi nancial assets as a result of a change in
the purpose or use of those assets. The disclosures apply for accounti ng periods beginning on or aft er 1 January 2011.
IFRS 9, ‘Financial instruments’, issued in December 2009. This addresses the classifi cati on and measurement of fi nancial assets and is likely to
aff ect the Group’s accounti ng for its fi nancial assets. The standard is not applicable unti l 1 January 2013 but is available for early adopti on.
Revised IAS 24, ‘Related party disclosures’, issued in November 2009. It supersedes IAS 24, ‘Related party disclosures’, issued in 2003. The
revised IAS 24 is required to be applied from 1 January 2011. Earlier applicati on, in whole or in part, is permitt ed.
‘Prepayments of a minimum funding requirement’ (Amendments to IFRIC 14), issued in November 2009. The amendments correct an
unintended consequence of IFRIC 14, ‘IAS 19 – The limit on a defi ned benefi t asset, minimum funding requirements and their interacti on’.
Without the amendments, enti ti es are not permitt ed to recognise as an asset some voluntary prepayments for minimum funding
contributi ons. The amendments are eff ecti ve for annual periods beginning 1 July 2011. Earlier applicati on is permitt ed.
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 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) 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.
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AVN2725 AR11 6 Notes AW03.indd 35
10/10/2011 18:49
36
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
1 Accounting Policies continued
(b) Impairment of satellites
The carrying amount of the satellites are dependent on the Group's ability to sell sufficient capacity in the satellites over their useful
economic lives. In management's view, at this early stage in the life of the HYLAS 1 satellite, the sale of capacity is progressing well and in
line with plans. The Group will assess impairment annually.
(c) European Space Agency funding and sale of capacity
In April 2006 the group entered into a contract with ESA to receive funding for the build of the satellite and also giving ESA the right to use
up to 10% of capacity on HYLAS 1 for a period of 3 years if the capacity is available. An assessment of the fair value of the revenues for the
sale of capacity has been performed in order to account for this as a multiple element arrangement . The fair value of the capacity sales
will be recognised on a straight line basis over a 3 year period commencing in this period given HYLAS 1 is now operational. Management
has made their best estimate of the fair value of the revenue element of the transaction based on market prices of the capacity at the
inception of the arrangement. The residual fair value represents the value of the capital grant and this will be released to other operating
income over a period of 15 years to match the useful economic life of the satellite. If the fair value of the capacity sale was altered by 10%
the impact on the revenue figure would be £110,000.
(d) Other financial assets
The Group carries a loan receivable as a financial asset to a strategic partner. The loan accrues interest at 7%. We have assumed that this
asset is fully recoverable over the term of the loan. The Group has collateral over the balance which constitutes 75% of the equity interest
in the borrower should there be a default.
Going concern
The accounts have been prepared on a going concern basis which assumes that the Group will continue in operational existence for the
foreseeable future.
Basis of consolidation
Where the company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business
so as to obtain benefits from its activities, it is classified as a subsidiary. The financial statements present the results of the company and
its subsidiaries, including the Employee Benefit Trust (“the group”) as if they formed a single entity. Intercompany transactions, balances,
income and expenses are therefore eliminated in full. The results of subsidiaries acquired during the year are included in the consolidated
income statement from the date of acquisition.
There is no minority interest in the net assets of the Group, and no goodwill arising on acquisition of subsidiaries.
The financial statements of subsidiaries are prepared for the same reporting year as the parent company using consistent accounting policies.
Revenue recognition
The group currently earns revenue primarily from the sale of satellite broadband services to customers and from providing consultancy
advice connected with the exploitation 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 proportion of the total revenues.
Broadband satellite communications 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 installation when the risks and rewards of ownership have transferred to the customer.
Revenue from space consultancy and other consultancy contracts connected with the exploitation of the space assets are recognised by
reference to the stage of completion of the contract activity at the balance sheet date. The contracts are broken down into separable
elements which are all judged individually on a percentage of completion basis in order to ascertain the completeness of an overall
project. By its nature these projects require a certain element of judgement by management. Contract costs are recognised as an expense
in the period they are incurred.
Accrued income represents the excess of revenue recognised over amounts invoiced. Deferred income represents any unearned balances
remaining from amounts received from customers pursuant to prepaid contracts.
AVN2725 AR11 6 Notes AW03.indd 36
10/10/2011 18:49
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
37
Appropriate allowances for esti mated irrecoverable amounts are recognised as an expense 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
The determinati on of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires
an assessment of whether the fulfi lment of the arrangement is dependent on the use of a specifi c asset or assets and whether the
arrangement conveys the right to use the asset.
Leases of property, plant and equipment where the group holds substanti ally all the risks and rewards of ownership are classifi ed as
fi nance leases. Assets acquired under hire purchase or a 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.
Leases where a signifi cant porti on of the risks and rewards are held by the lessor are classifi ed as operati ng leases. Rentals are charged to
the income statement on a straight line basis over the period of the lease.
Interest income and expense
Borrowing costs incurred for the constructi on of the satellite assets are capitalised during the period of ti me required to complete
and prepare the assets for their 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 recognised immediately in the income statement.
The presentati onal currency of the Group is sterling.
On consolidati on, assets and liabiliti es of foreign undertakings are translated into Sterling at year end exchange rates. The results of
foreign undertakings are translated into Sterling at average rates of exchange for the year (unless this average is not a reasonable
approximati on of the cumulati ve eff ects of the rates prevailing on the transacti on dates, in which case income and expenses are translated
at the dates of the transacti ons). Foreign exchange diff erences arising on retranslati on are recognised directly in a separate component of
equity, the foreign currency translati on reserve.
In the event of the disposal of an undertaking with assets and liabiliti es denominated in a foreign currency, the cumulati ve translati on
diff erence associated with the undertaking in the translati on reserve is charged or credited to the gain or loss on disposal recognised in
the income statement.
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 payment arrangements, under which the group receives services from
employees as considerati on for equity instruments (share opti ons and shares) of the group. Equity sett led share-based payments are
measured at fair value (excluding the eff ect of non market-based vesti ng conditi ons) at the date of grant, but including any market-
based performance criteria and the impact of non investi ng conditi ons. The fair value determined at the grant date is recognised on a
straight-line basis over the vesti ng period, based on the group’s esti mate of the opti ons or shares that will eventually vest and adjusted
for the eff ect of non market-based vesti ng conditi ons. Fair value is measured using either the Binomial opti ons pricing model or Monte Carlo
simulati ons, whichever is most appropriate to the award.
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AVN2725 AR11 6 Notes AW03.indd 37
10/10/2011 18:49
38
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
1 Accounting Policies continued
Share based payments continued
Service and performance conditions are vesting conditions. Any other conditions are non-vesting conditions which have to be taken into
account to determine the fair value of equity instruments granted. In the case that an award or option does not vest as a result of a failure
to meet a non-vesting condition that is within the control of either counterparty, this is accounted for as a cancellation. Cancellations
must be treated as accelerated vesting and all remaining future charges are immediately recognised. As the requirement to save under an
employee share save arrangement is a non-vesting condition, employee cancellations must be treated as an accelerated vesting.
Current tax
The charge for taxation is based on taxable profits for the year. Taxable profits differ from profit as reported in the income statement
because it excludes items of income and expenses that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities based on
tax rates that have been enacted or substantially enacted by the balance sheet date.
Deferred tax
Deferred tax is recognised on differences between the carrying amount of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for
all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible
temporary difference can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or
the asset realised, based on tax rates that have been enacted or substantially enacted by the balance sheet date. The measurement of
the deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the
reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when the group has a legally enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable group company; or different
group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liability
simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.
Property plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is
provided so as to write off the cost or valuation of assets, other than assets under construction, over their estimated useful lives using the
straight-line method.
Cost includes the original purchase price of the asset and the costs directly attributable to bringing the asset to its working condition 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 fittings
25% per annum
Satellite in construction
Nil
Satellite in operation
6.67% per annum
AVN2725 AR11 6 Notes AW03.indd 38
10/10/2011 18:49
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
39
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.
Once the satellites become operati onal and placed into service, the assets are transferred to a space asset category and depreciated over
the life of the satellites. Following its successful launch in November 2010, Hylas 1 assets have been transferred to "satellites in operati on"
and are being depreciated over 15 years. The fi rst depreciati on expense was recorded in the year ended June 2011.
Where the conditi ons are not met the costs are expensed through the income statement.
Intangible assets
Intangible assets 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.
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.
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, individual satellites are treated as individual CGUs.
Investments
Investments are recorded at cost. Investments are reviewed for impairment when events or changes in circumstances indicate that the
carrying amount may not be fully recoverable. Investments in subsidiaries are stated at cost and reviewed for impairment on an annual basis.
European Space Agency (ESA) Funding
As noted in the criti cal esti mates and judgements, an element of income from ESA represents revenue for the sale of capacity on the
satellite. The fair value of the capacity sold to ESA will be recognised as revenue over 3 years on a straight line basis.
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AVN2725 AR11 6 Notes AW03.indd 39
10/10/2011 18:49
40
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
1 Accounting Policies continued
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises all costs of purchase, cost of conversion and other costs
incurred in bringing the inventories to their present location and condition.
Cost is determined by the first-in first-out method.
Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of directly attributable issue costs.
Trade receivables and other financial assets
Trade and loan receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the
effective interest rate method where the time value of money is material. Appropriate allowances for estimating irrecoverable amounts
are recognised in the Income Statement where there is evidence that the asset is impaired. This impairment would be recognised within
operating expenses.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise of cash on hand and demand deposits, and other short term highly liquid
investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value. For the
purpose of the consolidated cash flow statement, cash and cash equivalents are stated net of outstanding bank overdrafts.
Provisions
Provisions are recognised when the Group has a legal or constructive obligation to transfer economic benefits arising from past events and
the amount of the obligation can be estimated reliably. Provisions are not recognised unless the outflow of economic benefits to settle the
obligation is more likely than not to occur.
Borrowings
Interest-bearing bank loans and overdrafts are measured initially at fair value, net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost; any difference between the proceeds and the redemption value is recognised in the income
statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least
12 months after the balance sheet date.
Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost.
Derivative financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
The group uses derivative financial instruments mainly to reduce exposure to foreign exchange risks. The group does not hold or issue
derivative financial instruments for trading purposes. Derivatives are recognised at fair value on the date a contract is entered into and are
subsequently re-measured at their fair value.
Hedge accounting is currently not applied. Changes in fair value of derivative financial instruments are recognised in the income statement
as they arise.
AVN2725 AR11 6 Notes AW03.indd 40
10/10/2011 18:49
Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
41
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 £5,462,000 (2010: £5,815,000) 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. As referred to
in the criti cal esti mates and judgements, revenues from ESA representi ng the sale of capacity on HYLAS 1 comprise 20.6% (2010: £nil)
of total revenue.
The group derived £1,081,000 (2010: £1,334,000) of its turnover from European countries outside the United Kingdom, and £4,381,000
(2010: £4,481,000) from the United Kingdom.
3. Operati ng expenses
Operati ng expenses by functi on are as follows:
Selling and distributi on
Administrati on
Operati ng profi t for the year is stated aft er charging the following:
Operati ng expenses:
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 received
– Onerous lease provision uti lised
Cost of sales:
Satellite depreciati on on HYLAS 1
Release of ESA grant
Satellite services
Materials purchased
Sub contractors
30 June 2011
£’000
30 June 2010
£’000
990
10,289
11,279
805
8
19
5,433
588
(50)
(30)
2,311
(185)
3,005
1,634
529
551
8,188
8,739
759
10
15
4,542
408
(50)
(30)
–
–
2,183
524
146
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AVN2725 AR11 6 Notes AW03.indd 41
11/10/2011 17:03
42
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
4. Auditors’ remuneration
Fees payable to company’s auditor for the audit of parent company
and consolidated financial statements
Fees payable to the company’s auditor and its associates for other services:
– The audit of company’s subsidiaries pursuant to legislation
– Other services pursuant to legislation
– Tax services
– Other services
30 June 2011
£’000
30 June 2010
£’000
82
20
13
541
36
692
54
20
13
270
4
361
£520,000 (2010: £244,000) of the tax services fees relate to the advice given in respect of the re-domicile of the HYLAS 2 assets to Cyprus.
The remaining balance relates to fees for normal ongoing tax advice and compliance assistance.
5. Employee benefit costs
The aggregate remuneration of all employees comprised:
Wages and salaries
Social security costs
Pension costs
Share based payment expense
Less: costs capitalised as satellite in construction
30 June 2011
£’000
30 June 2010
£’000
6,073
666
168
776
7,683
(2,250)
5,433
4,898
534
229
602
6,263
(1,721)
4,542
Employee numbers
The average monthly number of people (including the Executive Directors) employed during the year by category of employment:
Operations
Sales and marketing
Development and engineering
Administration and executive
30 June 2011
No. employees
30 June 2010
No. employees
23
29
23
22
97
21
21
21
18
81
AVN2725 AR11 6 Notes AW03.indd 42
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
43
6. Other operati ng income
Exchange gain on trade receivables and payable balances
Interest received
Liquidated damages received
30 June 2011
£’000
30 June 2010
£’000
209
427
–
636
426
–
3,202
3,628
Interest of £427,000 was received from Space Explorati ons Inc ("SpaceX") on sett lement of their debt.
Liquidated damages were received from Astrium due to the late delivery of HYLAS 1 in November 2009. These damages compensated
for the additi onal costs incurred as a result of the late delivery of the satellite and were recognised on a straight-line basis over the
additi onal period that the incremental running costs were being incurred. All liquidated damages have now been recognised in the
income statement.
7. Net fi nance income
Finance income
Fair value gain on derivati ves
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 2011
£’000
30 June 2010
£’000
110
318
428
(59)
(214)
(23)
(296)
132
972
99
1,071
(88)
(456)
(47)
(591)
480
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AVN2725 AR11 6 Notes AW03.indd 43
11/10/2011 15:31
44
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
8. Income tax (credit)/expense
Current tax
Adjustment in respect of prior periods
Total current tax
Deferred tax
Origination and reversal of temporary differences
Adjustment in respect of prior periods
Impact of change in UK tax rate
Total deferred tax
Total income tax (credit)/expense
30 June 2011
£’000
30 June 2010
£’000
–
–
(3,332)
90
215
(3,027)
(3,027)
76
76
(403)
278
25
(100)
(24)
The tax on the group’s loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable
to profits of the consolidated entities as follows:
Loss before tax
Tax charge/(credit) at the corporate tax rate of 27.5% (2010: 28%)
Tax effect of non-deductible 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
30 June 2011
£’000
30 June 2010
£’000
(12,727)
(3,500)
168
90
215
(3,027)
(1,956)
(548)
145
354
25
(24)
30 June 2011
pence
30 June 2010
pence
(12.14)
(3.68)
The calculation of basic and diluted earnings/(loss) per share is based on the earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the year.
(Loss)/profit for the year attributable to equity holders of the parent company
30 June 2011
£’000
30 June 2010
£’000
(9,700)
(1,932)
Weighted average number of ordinary shares for the purpose of basic earnings per share
79,920,631
52,430,725
10. Profit of the parent company
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent Company is not presented as part of
these accounts. The parent company’s loss after tax for the year ended 30 June 2011 amounted to £504,000 (2010: £723,000 profit).
AVN2725 AR11 6 Notes AW03.indd 44
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
45
11. Property, plant and equipment
Leasehold
improvements
£’000
Network
assets
£’000
Fixtures and
fi tti ngs
£’000
Satellite in
operati on
£’000
Satellite in
constructi on
£’000
Motor
vehicles
£’000
Cost
Balance at 1 July 2009
Additi ons
Disposals
Balance at 1 July 2010
Additi ons
Transfer
Disposals
Balance at 30 June 2011
Depreciati on
Balance at 1 July 2009
Charge for the year
Disposals
Balance at 1 July 2010
Charge for the year
Disposals
Balance at 30 June 2011
Net book value
Balance at 30 June 2011
Balance at 30 June 2010
250
4
–
254
9
–
–
263
181
39
–
220
24
–
244
19
34
3,321
2,239
–
5,560
985
–
–
515
92
–
607
63
–
–
–
–
–
–
–
49,712
117,094
–
166,806
147,233
148,730
(148,730)
–
–
6,545
670
148,730
165,309
–
–
–
–
2,311
–
2,311
–
–
–
–
–
–
–
1,809
618
–
2,427
672
–
3,099
3,446
3,133
365
68
–
433
76
–
509
161
174
Group
total
£’000
53,910
119,456
–
173,366
148,290
–
(44)
321,612
2,376
759
–
3,135
3,116
(29)
6,222
112
27
–
139
–
–
(44)
95
21
34
–
55
33
(29)
59
146,419
–
165,309
166,806
36
84
315,390
170,231
At 30 June 2011 the Group held assets under fi nance lease agreements with a net book value of £110,625 (2010: £416,000). A depreciati on
charge for the year of £305,234 (2010: £331,000) has been provided on these assets. These assets are included in network assets.
HYLAS 1 launched on 26 November 2010, consequently the HYLAS 1 assets of £148,544,000 (2010: £103,166,000) have been transferred
from satellites in constructi on to satellites in operati on. The satellite in constructi on assets of £165,308,000 now relate to HYLAS 2 and
HYLAS 3 satellites (2010: £63,640,000). Included in the satellite costs are capitalised fi nance costs of £15,224,096 in the HYLAS 2 satellite
and £21,116,117 in the HYLAS 1 satellite (2010: £18,159,523, HYLAS 1). The fi nance costs on HYLAS 2 will average 5.5% over the lifeti me of
the faciliti es (2010: HYLAS 1 16.5% above LIBOR).
Satellites in operati on have been depreciated from 1 April 2011 when the satellite came into commercial service.
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AVN2725 AR11 6 Notes AW03.indd 45
11/10/2011 15:36
46
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
12. Intangible assets
Cost
Balance at 1 July 2009
Additions
Disposals
Balance at 1 July 2010
Additions
Disposals
Balance at 30 June 2011
Amortisation
Balance at: 1 July 2009
Charge for the year
Disposals
Balance at: 1 July 2010
Charge for the year
Disposals
Balance at 30 June 2011
Net book value
Balance at 30 June 2011
Balance at 30 June 2010
13. Other financial assets
Group
Financial assets
Computer
software
£’000
395
–
–
395
–
–
395
374
10
–
384
8
–
392
3
11
30 June 2011
£’000
30 June 2010
£’000
9,135
–
The investment is represented by a loan to a major strategic partner. The initial interest rate is 7% with interest accruing for the first 12
months and repayments starting thereafter. The loan was made in February 2011 and the group has collateral over this balance which
constitutes 75% of the equity interest in the borrower should there be a default.
AVN2725 AR11 6 Notes AW03.indd 46
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
47
14. 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 2011
£’000
30 June 2010
£’000
41,320
–
43,408
84,728
289
15
41,016
41,320
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 15.
15. 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
Avanti Hylas 2 Cyprus Limited
Avanti Hylas 2 Services Limited
Avanti Communicati ons Marketi ng Services Limited
Avanti Communicati ons Germany GmBH*
Avanti Communicati ons Sweden AB*
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
Satellite broadband business
Project management services
Sales and marketi ng
Satellite services
Satellite services
All the above enti ti es were incorporated in England & Wales, except for Avanti Launch Services Limited, Avanti Hylas 2 Launch Services
Limited, Avanti Hylas 2 Cyprus Limited and Avanti Hylas 2 Services Limited.
Avanti Launch Services Limited, Avanti Hylas 2 Launch Services Limited were incorporated in the Isle of Man.
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.
* These enti ti es were incorporated during the 2011 fi nancial year
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AVN2725 AR11 6 Notes AW03.indd 47
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48
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
16. Inventories
Group
Finished goods
30 June 2011
at cost
£’000
30 June 2010
at cost
£’000
1,284
1,398
Finished goods represent customer premises equipment which includes dishes, modems and outdoor unit transceivers.
The cost of inventories recognised as an expense during the period was £1,538,000 (2010: £448,000).
There have been no write-downs of inventory during the year.
17. 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
For discussion of credit risk, refer to Note 23(b).
Group
Company
30 June 2011
£’000
30 June 2010
£’000
30 June 2011
£’000
30 June 2010
£’000
1,170
(53)
1,117
3,133
2,640
–
1,026
7,916
611
(3)
608
8,545
1,185
–
5,655
15,993
–
–
–
–
3
105,187
–
105,190
–
–
–
–
6
80,228
–
80,234
AVN2725 AR11 6 Notes AW03.indd 48
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
49
18. 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:
Group
Company
30 June 2011
£’000
30 June 2010
£’000
30 June 2011
£’000
30 June 2010
£’000
Deferred tax assets
Deferred tax liabiliti es
The gross movement on the deferred
income tax account is as follows:
Balance at 1 July
Income tax (expense)/credit
Tax credited directly to equity
Balance at 30 June
Group
30 June 2011
Tax assets
Provisions and deferred income
Share based payment
Unused tax losses
Total tax assets
Tax liabiliti es
Property, plant and equipment
Total tax liabiliti es
Net deferred tax asset/(liability)
14,658
(11,272)
3,386
268
3,027
91
3,386
6,157
(5,889)
268
5
100
163
268
191
–
191
62
133
(4)
191
Opening
balance
£’000
Charged to the
income statement
£’000
Charged to
equity
£’000
1,806
302
4,049
6,157
(5,889)
(5,889)
268
4,797
112
3,501
8,410
(5,383)
(5,383)
3,027
–
91
–
91
–
–
91
62
–
62
102
(73)
33
62
Closing
balance
£’000
6,603
505
7,550
14,658
(11,272)
(11,272)
3,386
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AVN2725 AR11 6 Notes AW03.indd 49
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50
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
18. Deferred taxation continued
Group
30 June 2010
Tax assets
Provisions and deferred income
Share based payment
Unused tax losses
Total tax assets
Tax liabilities
Property, plant and equipment
Total tax liabilities
Net deferred tax asset/(liability)
Company
30 June 2011
Tax assets
Share based payment
Unused tax losses
Total tax assets
Company
30 June 2010
Tax assets
Share based payment
Unused tax losses
Total tax assets
Opening
balance
£’000
Charged to the
income statement
£’000
Charged to
equity
£’000
Closing
balance
£’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
1,806
302
4,049
6,157
(5,889)
(5,889)
268
Opening
balance
£’000
Charged to the
income statement
£’000
Charged to
equity
£’000
Closing
balance
£’000
60
2
62
11
122
133
(4)
–
(4)
67
124
191
Opening
balance
£’000
Charged to the
income statement
£’000
Charged to
equity
£’000
Closing
balance
£’000
23
79
102
4
(77)
(73)
33
–
33
60
2
62
At 30 June 2011, none of the deferred tax asset of £14.7m (2010: £6.2m) is expected to be recovered in the next 12 months.
At 30 June 2011, none of the deferred tax liability of £11.3m (2010: £5.9m) is expected to be settled in the next 12 months.
Deferred tax assets have been recognised despite recurring losses as the group has strong expectations of future profits due to the recent
launch of Hylas 1 and forthcoming launch of HYLAS 2.
AVN2725 AR11 6 Notes AW03.indd 50
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
51
19. 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
20. Trade and other payables
Current
Trade payables
Social security and other taxes
Other payables
Accruals
Non-current
Accruals and deferred income
Included in the deferred income are grants
from ESA as follows:
Current porti on
Non-current porti on
21. Provisions for other liabiliti es
Group
Onerous lease provision
Balance at 1 July 2010
Used during the year
Balance at 30 June 2011
30 June 2011
£’000
30 June 2010
£’000
38,125
704
38,829
918
33,263
34,181
Group
Company
30 June 2011
£’000
30 June 2010
£’000
30 June 2011
£’000
30 June 2010
£’000
–
–
–
3
3
–
–
–
–
9
9
–
17,961
218
2,524
9,692
30,395
18,997
5,300
18,876
24,176
7,118
177
1,104
5,061
13,460
7,228
–
7,228
7,228
Current
£’000
Non-current
£’000
30
–
30
33
(30)
3
Total
£’000
63
(30)
33
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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 £32,500 will be released over the next 13 months.
AVN2725 AR11 6 Notes AW03.indd 51
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52
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
22. Loans and other borrowings
Secured at amortised cost
Bank loans
Finance lease liabilities (i)
Current
Non-current
30 June 2011
£’000
30 June 2010
£’000
30 June 2011
£’000
30 June 2010
£’000
–
397
397
–
269
269
118,475
203
118,678
49,191
213
49,404
(i) Finance lease obligations are secured by retention of title to the related assets. The borrowings are on fixed interest rate debt with repayment periods not
exceeding 5 years.
In December 2009 the group announced that it had agreed debt financing for HYLAS 2 with US Exim bank and COFACE. The total
drawdown in this agreement is $328.2m.
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 Construction in Note 11.
23. Financial instruments and risk management
Group
The Group is subject to the risks arising from adverse movements in interest rates and foreign currency. The Group uses a variety of
derivative financial instruments to manage these risks. The managing of these risks, along with the day-to-day managing of treasury
activities is performed by the Finance team.
All financial instruments have been measured at amortised cost, except for derivative assets recognised as fair value through the income
statement. As such, financial assets being cash and cash equivalents and trade and other receivables are classified as ‘Loans and Receivables’
and financial liabilities being trade and other payables and interest bearing liabilities have been classified as ‘Other Financial Liabilities’.
a) Market risk
i) Foreign exchange risk management
The Group trades in currency other than its functional currency and to hedge the foreign currency risk it enters into forward contracts
or natural hedges. These risks are assessed on a continual basis.
The derivative liability is in respect of two forward contracts hedging future Euro receivables.
The procurement of our second satellite HYLAS 2 has transactions mainly executed in US dollars. This is hedged naturally against the
corresponding financing loan denominated in US dollars.
At 30 June 2011, if the Euro had weakened/strengthened against the sterling by 5% with all other variables held constant, post tax loss would
have improved by £68,954 or worsened by £76,212 (2010: post tax profit would have worsened by £19,316 or improved by £21,349).
At 30 June 2011, if the US dollar had weakened/strengthened against the sterling by 5% with all other variables held constant, post tax
loss would have improved by £367,971 or worsened by £406,704 (2010: post tax profit would have worsened by £153,114 or improved by
£162,232). The US dollar cash reserves and US dollar loan are held in a US dollar denominated company and are revalued through reserves
upon consolidation.
Management believes that a 5% sensitivity rate provides an adequate analysis of the expected changes in foreign exchange rates. This is
the assumption we used last year and management feel it is still valid.
AVN2725 AR11 6 Notes AW03.indd 52
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
53
ii) Interest Risk Management
The Group borrows in pounds sterling and US dollars at fl oati ng and fi xed rates of interest and does not seek to miti gate the eff ect of
adverse movements in interest rates. 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 other fi nancial assets. 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. In respect of other fi nancial assets, the group has collateral over this balance which consti tutes 75% of the equity interest
in the borrower should there be a default.
Trade receivables
Other fi nancial assets
Total
Trade receivables
Other fi nancial assets
Total
The ageing of trade receivables which have not been impaired was as follows:
30 June 2011
30 June 2010
Not past due
£’000
1-30 days
£’000
31-60 days
£’000
9,870
89
330
60
39
135
60+ days
£’000
15
324
Movements in the provision for impairment of trade receivables are as follows:
2011
£’000
1,119
9,135
10,254
2010
£’000
608
–
608
Total
£’000
10,254
608
At 1 July 2010
Allowances made in the period
Amounts used and reversal of unused amounts
At 30 June 2011
30 June 2011
£’000
30 June 2010
£’000
3
53
(3)
53
16
21
(34)
3
The provision of £52,719 (2010: £2,986) has been raised against gross trade receivables of £1,117,000 (2010: £5,657,000). Every major
customer is assessed on an individual basis and we provide for bad debts when an impairment has been identi fi ed. Generally when the
balance becomes more than 60 days past its due date it is considered that the amount will not be fully recoverable.
c) Liquidity risk management
The group's exposure to liquidity risk management is minimised 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.
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54
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
23. Financial instruments and risk management continued
The following table analyses the Group’s financial liabilities into relevant maturity groupings based on the expected undiscounted cash flows.
30 June 2011
Bank loans
Finance leases
Trade Payables
30 June 2010
Bank loans
Finance leases
Trade Payables
Within 1
year
£’000
1,051
602
17,961
53,606
262
7,118
1 to 2
years
£’000
7,611
–
–
–
220
–
2 to 5
years
£’000
58,683
–
–
Over 5
years
£’000
Contractual
amount
£’000
Carrying
amount
£’000
85,908
–
–
153,253
602
17,961
118,476
600
17,961
–
–
–
–
–
–
53,606
482
7,118
49,191
519
7,118
The table below summarises the derivatives as at 30 June 2011 and 2010:
30 June 2011
Foreign currency forward contracts
30 June 2010
Foreign currency forward contracts
All derivatives are held in the company.
Notional
Principal
£’000
1,750
12,236
Derivative fair value
Asset
£’000
–
525
Liability
£’000
83
–
In addition the company has intercompany balances carried at £105,187,000 (2010: £80,228,000). The contractual amount is equal to the
carrying amount.
d) Fair value of financial instruments
The directors consider the carrying value of all financial assets and liabilities to be approximate to their fair values.
e) Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The capital
structure of the Group consists of debt, which includes the borrowings disclosed in (Note 22), cash and cash equivalents (Note 19) and equity
attributable to equity holders of the parent, comprising ordinary share capital, share premium, other reserves and retained earnings.
We endeavour to maximise earnings and minimise risk through an appropriate balance of debt and equity.
As well as the debt outlined in Note 22, the Group have a total debt facility of $328.2m in relation to Hylas 2 expenditure and is fully
funded in this respect.
Company
The company does not have a material exposure to interest rate risk and foreign exchange risk.
Overall market risk, credit risk and liquidity risk are managed on a group wide basis. Derivatives are measured at fair value and
intercompany balances and accruals are measured at amortised cost. All intercompany balances are repayable on demand and accruals
and derivatives mature in less than 1 year.
There is no provision for impairment against any of the company's financial assets.
AVN2725 AR11 6 Notes AW03.indd 54
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
55
24. Share capital – issued and fully paid
30 June 2010
At 1 July 2010
Shares issued
Less transacti on costs
At 30 June 2011
Number
of shares
‘000
Group and
company
ordinary shares
£’000
Group and
company
share premium
£’000
68,672
16,279
–
84,951
686
163
–
849
120,496
69,837
(1,655)
188,678
On 12 July 2010, the Group issued 16,279,070 shares at £4.30 per share.
The total authorised number of ordinary shares is 100 million shares (2010: 100 million) at £0.01 each.
25. Share based payments
The fair value of share opti ons charged to the income statement in the period was £776,000 (2010: £602,000). 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 eight share opti on schemes:
– Enterprise Management Incenti ves scheme (EMI)
– Long Term Incenti ve Plan (LTIP)
– Unapproved share opti on plan (2007)
– Unapproved share opti on plan (March 2010)
– Unapproved share opti on plan (July 2010)
– Unapproved share opti on plan (October 2010)
– Unapproved share opti on plan (April 2011)
– Save As You Earn scheme (SAYE)
The 2011 charges and weighted average fair value for each of the plans above were as follows:
2011 charge
Weighted average
fair value
LTIP
schemes
Unapproved
2007
Unapproved
March 2010
Unapproved
July 2010
Unapproved
Oct 2010
Unapproved
April 2011
EMI
£96,279
£440,203
£24,285
£63,281
£96,917
£35,396
£3,234
SAYE
scheme
£13,704
£2.04
£3.11
£1.76
£0.66
£2.95
£1.81
£0.80
£0.79
2010 charge
£150,000
£405,000
£47,000
Weighted average
fair value
£2.04
£2.72
£2.42
To date all opti ons (with excepti on of the SAYE scheme) have been granted with a strike price of 1 penny. The strike price on the SAYE
scheme is £4.70.
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56
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
25. Share based payments continued
In July 2007 an Employee Benefit 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.The options granted under each scheme are as follows:
2011
EMI
Number of options
Weighted average exercise price
Unapproved scheme (est. 2007)
Number of options
Weighted average exercise price
Unapproved scheme (est. March 2010)
Number of options
Weighted average exercise price
Unapproved scheme (est. July 2010)
Number of options
Weighted average exercise price
Unapproved scheme (est. Oct 2010)
Number of options
Weighted average exercise price
Unapproved scheme (est. April 2011)
Number of options
Weighted average exercise price
SAYE scheme (est. July 2010)
Number of options
Weighted average exercise price
Outstanding
at start of year
Granted
during year
Forfeited
in year
Exercised
during the year
Outstanding
at end of year
249,303
£0.01
107,863
£0.01
289,490
£0.01
–
–
–
–
–
–
–
–
–
–
–
–
58,000
£0.01
50,000
£0.01
99,000
£0.01
62,000
£0.01
66,437
£4.70
(6,000)
£0.01
(58,488)
£0.01
184,815
£0.01
–
–
(38,932)
£0.01
68,931
£0.01
(33,000)
£0.01
–
–
–
–
–
–
(7,483)
£4.70
–
–
–
–
–
–
–
–
–
–
314,490
£0.01
50,000
£0.01
99,000
£0.01
62,000
£0.01
58,954
£4.70
AVN2725 AR11 6 Notes AW03.indd 56
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
57
Outstanding
at start of year
Granted
during year
Forfeited
in year
Exercised
during the year
Outstanding
at end of year
339,505
£0.01
107,863
£0.01
–
–
–
–
(51,000)
£0.01
(39,202)
£0.01
249,303
£0.01
–
–
–
–
–
–
107,863
£0.01
289,490
£0.01
–
–
292,490
£0.01
(3,000)
£0.01
2010
EMI
Number of opti ons
Weighted average exercise price
Unapproved scheme (est. 2007)
Number of opti ons
Weighted average exercise price
Unapproved scheme (est. 2010)
Number of opti ons
Weighted average exercise price
The weighted average share price for the year ended 30 June 2011 was £5.40.
27,046 (2010: 17,926) of the EMI opti ons, 30,715 of the unapproved 2007 scheme, 16,667 of the unapproved July 2010 scheme, and
1,629,898 (2010: 170,423) of the LTIP opti ons had vested and were exercisable from 30 June 2011.
The exercise price of opti ons outstanding at 30 June 2011 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.
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 they 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.
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58
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
25. Share based payments continued
Long Term Incentive Plan
The LTIP has been established by the Company with approval from the Remuneration Committee to reward and incentivise the Executive
Directors and senior managers of the Company.
The LTIP allocations are in separate sub funds within the EBT and are subject to a discretionary Trust. The shares are subject to automatic
revocation if certain criteria (set out below) are not met and continue to be revocable for the entire Trust period.
Additional grants to further incentivise management were made during the year to two executive directors of 200,000 options each into
the exceptional achievement tranche. The exercise criteria of the grants is as shown below.
The allocations into the LTIP vary for each executive. The total allocation to each executive is split into three separate tranches:
i) The Core Tranche
This element of the grant becomes exercisable in 7 equal instalments. The first instalment was exercisable on grant and the second on
30 June 2008. The remaining 5 are yearly thereafter.
ii) The Exceptional Achievement Tranche
This element of the grant was amended during 2010. Originally, these options were only exercisable if the average market value of the
share exceeded £5 for a consecutive period of six months prior to 30 June 2010. Given the unprecedented market conditions over the
previous year, the remuneration committee considered that whilst the executives 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 still not be achieved.
In May 2010 the remuneration committee 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 consecutive period of six months before
30 June 2013.
Allocations to 1 July 2010
Core
Exceptional Extraordinary
Additional
grant July
2010
Revised
allocation Core vested
Exceptional
vested
Unvested
balance
outstanding
Number of options:
Executive Directors
1,192,960
Senior managers
125,000
1,317,960
679,570
62,500
742,070
679,213
62,500
741,713
400,000
2,951,743
(852,114)
(679,570)
1,420,059
–
250,000
(35,714)
(62,500)
151,786
400,000
3,201,743
(887,828)
(742,070)
1,571,845
The criteria for the exceptional achievement tranche was achieved in November 2010.
The Core Tranche has been modelled using the Black-Scholes model while the Exceptional and Extraordinary Tranches have been modelled
using the Monte-Carlo model, allowing for the market-based performance conditions.
The weighted average inputs to both models are as follows:
Share price at date of Grant
Weighted average exercise price
Expected volatility
Expected Life
Risk free rate
Expected dividend yield
£1.67
£0.01
34%
5 years
5.1%
1%
AVN2725 AR11 6 Notes AW03.indd 58
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
59
The weighted average inputs to the Black-Scholes model in relati on to the additi onal 400,000 opti ons granted in July 2010 are as follows:
Share price at date of Grant
Weighted average exercise price
Expected volati lity
Expected Life
Risk free rate
Expected dividend yield
£4.44
£0.01
25%
3 years
1.5%
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.
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 they 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. March 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 Monte Carlo model are as follows:
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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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60
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
25. Share based payments continued
Unapproved Scheme (est. July 2010)
The unapproved scheme was established in July 2010 and granted to one employee. The options are issued for 10 years with 33% vesting
in January 2011, January 2012 and January 2013. There are no performance criteria associated with these options and they are exercisable
as long as the option 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 volatility
Expected Life
Risk free rate
Expected dividend yield
£4.50
£0.01
24%
3 years
1.8%
1%
Expected volatility was determined by calculating the actual volatility of the Group’s share price since flotation. The expected life used
in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations.
Unapproved Scheme (est. Oct 2010)
The unapproved scheme was established in October 2010. The options are issued for 10 years with 33% vesting at the end of years 3, 4 and 5. In
order for the vesting conditions to be met the market value of the shares must be £10.00 or more per share for a consecutive period of six months.
The weighted average inputs to the Monte Carlo model are as follows:
Share price at date of Grant
Weighted average exercise price
Expected volatility
Expected Life
Risk free rate
Expected dividend yield
£6.20
£0.01
20%
3 years
1.8%
1%
Expected volatility was determined by calculating the actual volatility of the Group’s share price since flotation. The expected life usedin
the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations.
Unapproved Scheme (est. April 2011)
The unapproved scheme was established in April 2011. The options are issued for 10 years with 33% vesting at the end of years 3, 4 and 5. In order for
the vesting conditions to be met the market value of the shares must be £10.00 or more per share for a consecutive period of six months.
The weighted average inputs to the Monte Carlo model are as follows:
Share price at date of Grant
Weighted average exercise price
Expected volatility
Expected Life
Risk free rate
Expected dividend yield
£4.48
£0.01
24%
3 years
1.8%
1%
Expected volatility was determined by calculating the actual volatility of the Group’s share price since flotation. The expected life used
in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations.
AVN2725 AR11 6 Notes AW03.indd 60
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
61
Save as you earn (SAYE) scheme
The save as you earn scheme was established in July 2010 and was open to all employees of the company at the ti me.
Save as you earn is an HMRC approved all employee savings-related share opti on scheme under which employees save up to a limit of
£250 on a four-weekly basis with an opti on to buy shares in the company at the end of a three-year at a discount of up to 20% of the
market value on the grant date. Opti ons are not subject to performance conditi ons. All opti ons are exercisable from 1 July 2013 which is
three years from the date of grant. All opti ons expire six months from their exercise date (i.e. on 1 January of the relevant year).
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
£4.50
£4.70
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.
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
Included in the fi nancial statements as:
Current borrowings
Non-current borrowings
Present value of minimum lease payments
Minimum lease payments
Present value of lease payments
30 June 2011
£’000
30 June 2010
£’000
30 June 2011
£’000
30 June 2010
£’000
400
202
602
(2)
600
299
220
519
(37)
482
397
203
600
–
600
269
213
482
–
482
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£’000
30 June 2010
£’000
397
203
600
269
213
482
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62
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notes to the accounts continued
27. Obligations under operating leases
The Group’s future aggregate minimum lease payments under non-cancellable operating leases are as follows:
No later than one year
Within 1 to 5 years
After 5 years
30 June 2011
30 June 2010
Land & buildings
£’000
Other
£’000
Land & buildings
£’000
345
794
595
1,734
18
30
–
48
345
874
860
2,079
Other
£’000
–
–
–
–
Operating lease commitments principally relate to leased office space of the Group’s head office located at 74 Rivington Street, London.
New operating leases entered into in the year include a fleet of 4 vans.
The total of future sub-lease payments expected to be received under non-cancellable sub leases at 30 June 2011 is £50,000 over 1 year
(as at 30 June 2010: £100,000 over 2 years).
28. Capital commitments
As at 30 June 2011 the group has contracted but not provided for $50.8m. This amount relates to the procurement of Hylas 2, Avanti’s
second satellite. These commitments are fully funded by the Exim/COFACE facility outlined in note 22.
29. Related party transactions and directors’ emoluments
Transactions with Directors
Details of the Directors’ remuneration are set out below in aggregate for each of the categories specified in the Companies Act 2006.
Salaries and other short term employee benefits
Bonus
Payments into defined contribution schemes
Gain on exercise of share options
30 June 2011
£’000
30 June 2010
£’000
1,172
494
1,666
161
189
2,016
693
–
693
196
–
889
Pension contributions amounting to £161,424 (2010: £196,000) were made into personal pension schemes in respect of four (2010: four)
of the Directors.
The emoluments of the highest paid Director totalled £586,966 (2010: £255,000), made up of:
Total emoluments
Salaries and other short term benefits
Bonus
Payments into defined contribution schemes (current year)
Total emoluments
30 June 2011
£’000
30 June 2010
£’000
346
145
96
587
151
–
104
255
AVN2725 AR11 6 Notes AW03.indd 62
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
63
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
Bonus
Payments into defi ned contributi on schemes
Share based payments
Group
Company
30 June 2011
£’000
30 June 2010
£’000
30 June 2011
£’000
30 June 2010
£’000
1,517
667
221
488
2,893
1,053
–
265
474
1,792
364
82
–
52
498
255
–
–
19
274
Other related party transacti ons
Subsidiaries
Intra-group transacti ons are eliminated on consolidati on and are not reported in the group accounts. The company charged the following
management fees to its subsidiaries:
Avanti Communicati ons Limited
Avanti Broadband Limited
Avanti Space Limited
Avanti (NI) Limited
Avanti Caledonian Broadband Limited
Avanti Hylas 2 Limited
The parent company had the following intercompany balances outstanding at the year end:
Avanti Communicati ons Limited
Avanti Space Limited
Avanti Space 2 Limited and Avanti Space 3 Limited
Avanti Broadband Limited
Avanti Hylas 2 Limited
Avanti Communicati ons Infrastructure Limited
Intercompany balances are unsecured and repayable on demand.
30 June 2011
£’000
30 June 2010
£’000
755
1,829
459
969
1,634
213
5,859
688
1,368
1,212
1,172
784
–
5,224
30 June 2011
£’000
30 June 2010
£’000
42,244
2,456
–
3,144
(141)
57,484
105,187
73,662
1,997
(130)
1,315
(494)
3,878
80,228
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64
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of the Company for 2011 will be held on 24 November 2011 at 9.00 am at
74 Rivington Street, London EC2A 3AY, for the following purposes:
Ordinary business
1.
2.
3.
4.
5.
To receive the accounts for the year ended 30 June 2011, together with the reports of the Directors and Auditors therein.
To re-elect Nigel Fox as a Director of the Company.
To re-elect William Wyatt as a Director of the Company.
To elect Michael Walker as a Director of the Company.
To re-elect PricewaterhouseCoopers LLP as auditors to the Company.
Special business
6.
That the Directors are generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006 (The “Act”) (in
substitution for all or such existing authorities 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 securities”) at such times and to such persons, on such terms and in such manner as they think fit,
up to an aggregate nominal amount of £60,000, such authority to expire on 28th February 2012 or at the conclusion of the Annual
General Meeting next following the date on which this resolution is passed (whichever is earlier), save that the Company may before
such expiry make any offer or agreement which would or might require relevant securities to be allotted after such expiry and the
Directors may allot relevant securities in pursuance of such offer or agreement as if that authority had not expired.
Special resolutions
7.
That, in substitution for any equivalent authorities and powers granted to the directors prior to the passing of this resolution,
the directors be and they are hereby empowered pursuant to section 570(1) of the Act to allot equity securities (as defined
in section 560 of the Act) of the Company wholly for cash pursuant to the authority of the directors conferred by resolution 6
above, and/or where such an allotment constitutes an allotment of equity securities by virtue of section 560(2) of the Act, as if
section 561(1) of the Act did not apply to such allotment provided that the power conferred by this resolution shall be limited to:
(a)
(b)
(c)
the allotment of equity securities in connection with an invitation or offer of equity securities to the holders of
ordinary shares in the capital of the Company (excluding any shares held by the Company as treasury shares (as
defined in section 724(5) of the Act)) on a fixed record date in proportion (as nearly as practicable) to their respective
holdings of such shares or in accordance with the rights attached to such shares (but subject to such exclusions or
other arrangements as the directors may deem necessary or expedient in relation to fractional entitlements or as
a result of legal or practical problems under the laws of, or the requirements of any regulatory body or any stock
exchange in any territory or otherwise howsoever);
the allotment of equity securities pursuant to the exercise of any options granted by the Company at the date of this
resolution; and
the allotment, otherwise than pursuant to paragraph (a) above, of equity securities up to an aggregate nominal
value equal to £60,000, and unless previously renewed, revoked, varied or extended, this power shall expire on the
earlier of the date falling 15 months after the date of the passing of this resolution and the conclusion of the next
annual general meeting of the Company except that the Company may at any time before such expiry make an offer
or agreement which would or might require relevant securities to be allotted after such expiry and the directors may
allot relevant securities in pursuance of such an offer or agreement as if this power had not expired.
By Order of the Board
Nigel Fox
Secretary
Registered office: 74 Rivington Street, London EC2A 3AY
Registered number: 6133927
30 September 2011
AVN2725 AR11 6 Notes AW03.indd 64
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Avanti Communicati ons Group plc
Annual Report and Accounts for the year ended 30 June 2011
65
Notes to Notice of Annual General Meeting
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 24 November 2011 (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. In order to facilitate voti ng by corporate representati ves at the Annual General Meeti ng, arrangements will be put in place at the
Annual General Meeti ng so that (a) if a corporate shareholder has appointed the chairman of the Annual General Meeti ng as its corporate
representati ve to vote on a poll in accordance with the directi ons of all of the other corporate representati ves for that shareholder at
the Annual General Meeti ng, then on a poll those corporate representati ves will give voti ng directi ons to the chairman and the chairman
will vote (or withhold a vote) as corporate representati ve in accordance with those directi ons; and (b) if more than one corporate
representati ve for the same corporate shareholder att ends the Annual General Meeti ng but the corporate shareholder has not appointed
the chairman of the Annual General Meeti ng as its corporate representati ve, a designated corporate representati ve will be nominated,
from those corporate representati ves who att end, who will vote on a poll and the other corporate representati ves will give voti ng
directi ons to that designated corporate representati ve. Corporate shareholders are referred to the guidance issued by the Insti tute of
Chartered Secretaries and Administrators on proxies and corporate representati ves (www.icsa.org.uk) for further details of this procedure.
The guidance includes a sample form of appointment lett er if the chairman is being appointed as described in (a) above.
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.
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Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
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Notes to Notice of Annual General Meeting continued
Registration
To ensure your entrance to the meeting is dealt with promptly, please bring your attendance card with you and register at the registration
desk inside the building.
Shareholder information
If you have any questions concerning your shareholding, please speak to Avanti Communications Group plc staff.
Important
If you have questions about the meeting, or if you need any assistance, please telephone Georgina Campbell-Harris at Avanti
Communications Group plc on 0207 749 1600 during normal working hours.
Analysis of Shareholders
Range of holdings
Less than 10,001
10,001-20,000
20,001-50,000
50,001-100,000
100,001-150,000
150,001-300,000
300,001-500,000
500,001-1,000,000
1,000,001 +
Financial Calendar
November 2011
Annual General Meeting
Number of shares
3,604,946
1,101,597
2,187,758
2,160,449
1,963,502
6,009,844
6,023,984
11,379,105
50,519,950
Number of shareholders
2,214
75
71
29
16
28
16
17
14
February 2012
Interim results for the six months ended 31 December 2011
September 2012
Preliminary results for the year ended 30 June 2012
Shareholder information
Annual General Meeting
The Annual General Meeting will be held at 74 Rivington Street, London, EC2A 3AY.
Details of the resolutions to be proposed at the Annual General Meeting are contained in the Notice of Annual General Meeting
on page 64.
Dividend
The Directors have not recommended the payment of a dividend for the year ended 30 June 2011.
Listing
Ordinary shares of Avanti Communications Group plc are traded on AIM.
The share price is available from the Avanti website at www.avantiplc.com and in The Financial Times and The Times.
Registrars
All administrative enquiries relating to shareholdings should be directed to The Registrar, Neville Registrars Limited, Neville House,
18 Laurel Lane, Halesowen, West Midlands B63 3DA.
Avanti’s services
Information about Avanti’s services can be found at www.avantiplc.com
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Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
67
Form of Proxy for Avanti Communications Group plc
(incorporated and registered in England and Wales under number 6133927) (the ‘Company’)
For use by holders of ordinary shares of 1p each in the Company (the ‘Shareholders’) at the annual general meeting of the Company to be held
at 74 Rivington Street, London EC2A 3AY at 9.00 am on 24 November 2011 (the ‘AGM’). Please read the Notice of AGM and associated notes.
I/We*
of
being Shareholder(s)* entitled to attend and vote at meetings of Shareholders, hereby appoint the Chairman of the AGM †
as my/our proxy to attend, speak and vote for me/us and on my/our behalf at the AGM and at any adjournment thereof in relation
to the resolutions specified in the notice of the AGM dated 30 September 2011 (the “Resolutions”) and any other business (including
adjournments and amendments to the Resolutions) which may properly come before the AGM or any adjournment thereof.
† If it is desired to appoint some other person to be your proxy:
(i) delete ‘the Chairman of the AGM’;
(ii) initial the alteration; and
(iii) insert the full name, title and address of the person you wish to appoint as your proxy IN BLOCK CAPITALS.
* Delete as appropriate.
Please indicate with an ‘X’ in the appropriate space how you wish your proxy to vote on the Resolutions set out in the Notice
For
Against
Vote withheld
(note 2)
Discretionary
(note 2)
Ordinary Resolutions
To receive the accounts for the year ended 30 June 2011,
together with the reports of the Directors and Auditors therein.
To re-elect Nigel Fox as a Director of the Company.
To re-elect William Wyatt as a Director of the Company.
To elect Michael Walker as a Director of the Company.
To re-elect PricewaterhouseCoopers LLP as auditors to the Company.
Special Business
To authorise directors to allot shares
Special Resolutions
To disapply the statutory pre-emption rights in certain circumstances.
1
2
3
4
5
6
7
Number of shares:
Class of shares:
This proxy appointment is one of a multiple proxy appointment (Note 4)
Dates:
Signed:
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Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
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Form of Proxy for Avanti Communications Group plc continued
(incorporated and registered in England and Wales under number 6133927) (the ‘Company’)
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.
AVN2725 AR11 6 Notes AW03.indd 68
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This year we enjoyed the successful
launch of HYLAS 1, Europe’s first
Ka-band satellite.
Our second satellite, HYLAS 2, is fully
financed and under construction. It
is scheduled to launch in Q2 2012.
These satellites will operate for 15
years. Avanti is building a global
business with a very long term view.
Watch the launch of HYLAS 1:
www.avantiplc.com/satellite-fleet/
hylas-1
Avanti’s first satellite, HYLAS 1,
launched on 26 November 2010
and is the first superfast broadband
satellite launched in Europe.
Who we are
What we do
Our satellites
We are bringing a new
approach to the satellite
communications industry
We are 125 people drawn together from space,
telecoms and finance backgrounds bringing a new
approach to the satellite communications industry.
Our operational managers have an average of 7 years
service at Avanti. We have built this company together
from the beginning and have a shared long term
ambition to build a global business of significant scale.
We are headquartered in London but with significant
operations in Cornwall, Cyprus, Germany and the USA.
We are a data
communications provider
Avanti sells satellite data communications services
to telecoms companies which use them to supply
institutional, enterprise and consumer users. Our
technology is new, but so is our flexible business
model which responds to the different needs and
strategies of our service providers in 50 countries.
HYLAS 1
HYLAS 2
HYLAS 3
The first Ka-band satellite in Europe
serves every country between Ireland
and Poland. We enjoyed its successful
launch in November 2010 and target to
have it full by Spring 2014.
HYLAS 2, Avanti’s second satellite, is
being built by the Orbital Sciences
Corporation in the USA. HYLAS 2 will
quadruple Avanti’s satellite capacity
and provide new capacity across
the Middle East and Africa. Thus we
become predominantly an emerging
markets telecoms business. The
business plans seeks to fill it by 2017,
but the pre-sales activity suggests we
will beat this target by a long way.
HYLAS 3 is being financed with very
low cost government funded debt
and customer pre-sales, which over
the long term greatly enhances
shareholder returns. It will put new
capacity into the Americas and Africa.
Avanti Communications Group plc
Annual Report and Accounts for the year ended 30 June 2011
69
Officers and Professional Advisers
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 6RH
Directors
F E J G Brackenbury CBE
Chairman
D J Williams
Chief Executive
D J Bestwick
Managing Director Cyprus
N A D Fox
Group Finance Director
M J O’Connor
Chief Operating Officer
D A Foster
Non-Executive Director
W P Wyatt
Non-Executive Director
C R Vos
Non-Executive Director
M Walker OBE
Non-Executive Director
Secretary
N A D Fox
Registered Office
74 Rivington Street
London
EC2A 3AY
Company Number
6133927
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Avanti Communications Group plc
Avanti Communications Group plc
Annual Report & Accounts 2011
New high speed communications
products for high growth markets.
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Avanti Communications Group plc
74 Rivington Street
London
EC2A 3AY
www.avantiplc.com