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Avanti
Communications
Group plc
Annual
Report and
Accounts
2013
Avanti
Avanti owns and operates
a fleet of satellites and earth
stations which deliver high
speed Ka‑band data
communications services
for Europe, the Middle
East and Africa.
www.avantiplc.com
Contents
Avanti’s first satellite, HYLAS 1, launched
in November 2010 and was the first
superfast Ka‑band satellite launched for
Europe. Avanti’s second satellite, HYLAS
2, was launched in August 2012 and
extends Avanti’s coverage to Africa
and the Middle East. Avanti’s third
satellite, HYLAS 3, is to be launched in
partnership with ESA and will provide
further capacity in the EMEA region.
01 — Strategic Review
Highlights
Chairman’s Statement
Chief Executive’s Statement
Investment Case
Markets
Unique Product Advantages
Strategy
Business Model
Strategy Case Studies
Finance and Operating Review
Sustainability
02 — Corporate Governance
Board of Directors
Corporate Governance Report
Audit Committee
Nominations Committee
Technical Committee
Report of the Remuneration Committee
Report of the Board of Directors
Statement of Directors’ Responsibilities
1
2
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03 — Financial Statements
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
47
Financial Position
Company Statement of Financial Position 48
Consolidated and Company Statement
of Cash Flows
Consolidated and Company Statement
50
of Changes in Equity
51
Notes to the Accounts
Notice of Annual General Meeting
81
Notes to Notice of Annual General Meeting 84
Further Notes to the Annual General Meeting 85
87
Form of Proxy
88
Form of Proxy Notes
Ibc
Officers and Professional Advisors
49
Highlights
“ Avanti achieved major milestones this year in
launching the HYLAS 2 satellite, expanding service
to 50 countries and becoming operating cash flow
positive. Market adoption is maturing and the
Company has an increasingly “blue chip”
customer base.”
John Brackenbury CBE
Chairman
Operational highlights
Financial highlights
Successful launch of HYLAS 2,
service available in 50 countries
Market adoption now strong
with increasingly “blue chip”
customer base
Strong progress in key high value
markets such as cellular backhaul
Valuable spectrum filings completed
Revenues increased by 65% to
£20.6 million (2012: £12.5 million)
£290 million backlog
(2012: £245 million)
£42 million of that backlog
expected to convert to revenues
in 2014
Cash flow positive for the first time
in June 2013
£38.6 million cash at year end
1
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Chairman’s
Statement
The Company has best in
class products with clear
competitive advantages,
good customers and the
right people to make the
investments a success.
John Brackenbury CBE
Chairman
2
I am pleased to announce the results
for the year ended 30 June 2013. Avanti
achieved major milestones this year, with
the launch of HYLAS 2, expansion of
services to 50 primary countries and the
completion of important spectrum rights.
All these helped us to grow revenues to
£20.6 million and to reach operating cash
flow positive in June. The backlog of
£42 million which is expected to be taken
to revenue in FYE 2014 points to a positive
year of growth ahead. Total backlog was
£290 million.
Following the year end, the Board has
conducted a detailed appraisal of our
strategy and backlog, and we are confident
that we have the right strategy in place and
a strong base of business from which to
grow profitability.
The Board believes that a move to the Full
List in due course is in the best interest of
shareholders but does not expect this to
happen in the current financial year given
other priorities.
Market adoption of Avanti’s technology is
progressing strongly and the Company has
an increasingly blue chip customer base.
The Company has best in class products
with clear competitive advantages, good
customers and the right people to make
the investments a success.
John Brackenbury CBE
Chairman
Avanti Communications Group plcAnnual Report and Accounts 2013 Strategic review
01–27
Corporate governance 28–44
Financial statements 45–80
Achievements to date
2002
Founded in 2002
2005
Licence awarded in 2005; £25 million
funding from ESA, balance of HYLAS 1
funded with equity and debt
2007
Avanti floated on AIM in present form
2009
Raised £32 million of equity to fund
the upgrade of the HYLAS 1 launch
service provider
2010
Raised £89 million of equity in January
2010 to fund HYLAS 2
2011
HYLAS 1 launched 26 November 2010,
raised £70 million of equity in order
to repay HYLAS 1 debt
HYLAS 1 service commenced April 2011,
HYLAS 3 project work commenced
2012
Raised £75 million of equity for HYLAS 3,
HYLAS 2 launched Q3 2012. HYLAS 2
service commenced January 2013
3
Chief Executive’s
Statement
In 2013, major global telecoms and media
companies began to adopt Ka‑band for
the first time across all four of our
markets. We believe this has been a
major catalyst which should accelerate
revenue growth and are now seeing
a shortening of the sales cycle.
Summary
During the financial year ended 30 June
2013, Avanti launched its HYLAS 2 satellite.
Revenues therefore included HYLAS 2 for
the first time, with sales growing by 65%
to £20.6 million. The Company became
operating cash flow positive for the first
time in the final quarter, and had £39 million
cash at year end. The backlog for FYE
June 2014 (which is expected to be taken
to revenue in FYE 2014) is £42 million.
In 2013, progress was made in all
geographies and market sectors which
demonstrated that Avanti’s business model
is resilient and that its products have key
competitive advantages. In particular, we
prioritised the generation of near term
revenues from large multinational telecoms
and media companies. These efforts are
producing good results in generating an
increasingly “blue chip” customer base.
Avanti has pioneered the use of Ka‑band
satellites for data communications in
Europe, the Middle East and Africa.
Because of the innovative nature of our
business and products, schedules have
not been easy to predict and revenues
have been impacted by timing issues.
HYLAS 2 was delivered seven months late.
It also took longer than we expected to
get some customers up and running due
to delays in their own logistical planning
until HYLAS 2 testing was completed.
In some cases, we allowed customers
to delay their service start date by several
months, which affected 2013 revenues.
However, market adoption of our
technology is now progressing well in
all of our four markets and in all
geographies. The satellite specialist
companies such as Speedcast, TTcomm
and Bentley Walker, who adopted Avanti’s
technology early, have generated
significant advantages in deploying their
products. In all regions our customers are
increasing their utilisation.
David Williams
Chief Executive
4
Avanti Communications Group plcAnnual Report and Accounts 2013 £290m
backlog
In 2013, major global telecoms and media
companies began to adopt Ka‑band for
the first time across all four of our markets.
We believe this to have been a major
catalyst which should accelerate revenue
growth and are now seeing a shortening
of the sales cycle with larger customers
like Vodafone, Technicolor and CNN. We are
creating new markets where the technology
is an enabler, but also customers are
churning from legacy Ku‑band technology
to Ka‑band because of price and efficiency
improvements, especially in Africa where
there is only limited competition to Avanti’s
best in class services.
Avanti is succeeding in application areas
where customers value the quality and
flexibility of its systems and Avanti has
key advantages. We made major progress
in turning pilots into long term contracts
in strategically important areas.
Recent milestones include:
• The world’s first fully operational and
commercial Ka‑band 3G cellular
backhaul service, on HYLAS 1. A second
backhaul contract is in planning and 2
further networks are at pilot stage;
• Several contracts to provide our Satellite
News Gathering service in Africa,
Middle East and Europe;
• An exclusive pan‑European contract for
video distribution;
• An exclusive contract for consumer
broadband provision with a
Eurostoxx50 customer;
• Several contracts via Service Providers
or directly to build networks for
government customers in Europe, as
well as Africa and Middle East; and
• Progress in the defence market as
Service Providers supplying the sector
seek more flexible and cheaper solutions.
We now have customers active in all beams
on both HYLAS 1 and HYLAS 2, and are
working with Tier 2 carriers in most countries.
During the year, our success in selling
highly complex products to multinational
telecoms and media companies who are
new to satellite products was stimulated
in part by our ability to be flexible. These
companies have typically made initial
orders under framework contracts which
allow them to buy enough for their needs
on a pay as you go basis and easily
increase their usage with new purchase
orders, rather than having to renegotiate
contracts. Thus whilst long term demand
from these large customers may not be
fully evident in backlog yet, we expect
these customers to lock in price and
availability as their usage grows.
Backlog at 30 June 2013 was £290 million
(which covers orders extending to the full
lifetime of our satellites). In addition to KPI
reporting, Avanti will now also report
backlog, for each of the next three years.
Backlog for these three periods at 30 June
2013 stood at:
FYE June 2014: £42 million
FYE June 2015: £46 million
FYE June 2016: £40 million
2017 Onwards: £162 million
We expect orders under framework
contracts (not included in backlog), new
contracts (pipeline) and expected renewals
(of contracts expiring between 2014 and
2016) to increase these numbers.
40 new contracts were signed in total in
the second half of FYE 2013 (2012 second
half: 17) showing that market adoption
is accelerating well. The total number
of customers was 96 at year end. Whilst
HYLAS 2 accounts for 79% of our current
orbit capacity and thus accounts for a
similar proportion of new orders, it is
satisfying that major break‑throughs in high
end applications such as cellular backhaul,
outside broadcasting and digital cinema
were made in Europe using HYLAS 1.
At 30 June 2013, peak utilisation (which
accounts for contracted increases) was
45% on HYLAS 1 and 15% on HYLAS 2.
Backlog is an important measure of the
forward business Avanti has booked and
we are pleased to have booked £7 million
per month of new orders in 2013. There
was a surge in orders in the six months
leading to HYLAS 2 launch, then a slower
rate in the second half. We expect
three factors to impact backlog growth
in the coming year.
Firstly, the satellite specialists who made
significant commitments to HYLAS 2
pre‑launch are now digesting their orders.
We expect that as their own plans mature
many of these customers will increase their
orders; several have already. Secondly, we
expect volumes under existing framework
contracts to grow. Thirdly, many HYLAS 1
contracts are entering their third year,
and we expect most of these contracts
to renew, adding to backlog. It is difficult to
predict new order intake for future backlog
periods in a new business like this, and it
may continue to be variable for some time.
Operational performance of our networks
continues to be outstanding. We delivered a 12
month Service Level Agreement performance
across the fleet exceeding 99.9%.
The successful launch of HYLAS 2
during the financial year enabled Avanti to
complete its regulatory spectrum filings at
the ITU. As a result, our filings for spectrum
use at 31.0°E (supporting HYLAS 2 and
HYLAS 3) as well as 33.5°W (HYLAS 1) are
now recorded in the ITU Master Frequency
Register. This means that Avanti has
perpetual rights to use the allocated
spectrum, and this can be applied to
multiple satellites in the future.
It also means that other operators who wish
to use Ka‑band near Avanti have to seek
co‑ordination agreements from Avanti, and
none is in a position to constrain Avanti’s
operations. Thus, achieving ‘priority’ has
removed all material spectrum risks in our
business, and is a major step forward in
protecting and enhancing the value of our
assets and in creating a strong platform
for future growth.
The HYLAS 3 project is a partnership
project with ESA, whereby Avanti gained
a 4GHz payload at low cost by paying for
its payload to be flown on‑board a scientific
satellite called EDRS‑C. Avanti expects to
position its payload to cover West Africa,
but in a unique innovation, the entire
capacity is 100% steerable, so it could be
used anywhere in EMEA. Avanti expects
to launch service to customers with this
satellite in 2016.
Avanti remains conservatively financed,
with a long term repayment profile on its
debts and remains in full compliance with
all covenants. We ended the year with a
cash balance of £39 million and gross
debt of £206 million.
5
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Chief Executive’s
Statement continued
Our business
Market context
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Current trading and outlook
Sales momentum is growing well with
40 contracts signed in the second half
of the year producing revenues in the
current financial year. Several major
tenders have either been awarded subject
to contract or are due to complete soon
and we currently have 17 pilot projects
live with potential customers.
With £39 million of cash on the balance
sheet at year end and operating cash
flow positive reached in June, we have
the comfort of sufficient cash to cover debt
repayments for two years. We plan to meet
those obligations from cash generated
from operations and with backlog in FYE
2014 of £42 million, we expect to generate
strong positive cash flow from operations
this year.
The Company continues to investigate
some significant new business
opportunities, and believes that the
flexibility to grow offered by a bond
financing structure might be more suited
to its medium term needs. Avanti has
accordingly retained advisors to consider
bond finance options, with a view to
enabling it to respond quickly and positively
to these opportunities as they arise.
6
Strategic capabilities
Strategy
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Business
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Fill the fl e
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Business overview
Avanti sells managed satellite data
communications services using Ka‑band
satellites on a wholesale basis to service
providers. Service is available in 50
countries, plus we have partial coverage
(where our marketing strategy is different)
in a further 38 countries. Because the
use of Ka‑band in EMEA is new, we have
created new business models as well
as new technologies. It is obvious that
the very large (often greater than 50%)
customer savings that Ka‑band systems
create are leading Service Providers to
churn from Ku‑band systems to Ka‑band.
However, this is not solely where Avanti’s
advantages are to be found. With the
benefit of two years of talking to customers
with live service, it has become apparent
that Avanti has some key competitive
advantages in its approach which
differentiate it from competitors, which
are found in our approach to quality and
flexibility. The advantages are described
in detail in a White Paper published on our
website (http://www.avantiplc.com/wp4),
called “Not All Ka Satellites Are The Same”.
Our advantages arise from the planning
we did on our design and business model,
tailoring them very specifically at
addressing the technical and business
needs of sophisticated Service Providers
in four different market sectors, rather
than designing a one size fits all system
to address just the consumer broadband
resale sectors.
In quality for example, we designed our
beams in Africa so that, in each primary
country we serve, the Service Provider
can be guaranteed equal quality of service
regardless of location – this is currently a
unique advantage. So too is our operation
of resilient gateway earth station systems,
which means that ground control of
network traffic can be automatically
transferred to a backup in the event of a
problem. This is a major factor in Avanti’s
consistent delivery of an SLA of over
99.9%. These factors have persuaded
customers who care about quality to
choose Avanti, particularly large
corporations who do not want to
take a risk with their brand.
Avanti Communications Group plcAnnual Report and Accounts 2013
In flexibility, Avanti is unique in the Ka‑band
market in being able to offer the Select,
Custom and Pure methods of purchase,
which means that customers can either
buy bundled service packages, managed
megabits or pure Megahertz. These
packages appeal to different types of
customers depending on their risk appetite
of relative desire for control and security.
But also our technology is incredibly
flexible, meaning that we can respond to
the extremely varied specifications which
sophisticated telecoms Service Providers
require. This has helped us to win complex
projects this year in the cellular backhaul,
digital cinema and defence and security
sectors without competition.
Broadband
In Africa and the Middle East, competition
is limited and Service Providers show clear
desire to service the end users, apparently
unconstrained by the economic backdrop
of the West. Thus we now have consumer
broadband programmes up and running
in all of our HYLAS 2 beams. In these
markets Ku‑band systems were used for
broadband by consumers willing to pay
high charges, and a lot of Service Providers
are churning from those systems to come
to Ka‑band.
In Europe, the broadband market has been
negatively affected by limited capital for
growth in the telecom Service Provider
market and aggressive price competition
from other satellite operators. Avanti has
focused with some success on supporting
a small number of committed Service
Providers who either have government
backing for deployments or aggressive
growth plans, and have secured reasonable
market share in Northern Europe. However,
our competitors are unable to offer the
higher value added services that Avanti
offers in Carrier, Enterprise and Government
and so we have chosen not to follow pricing
down everywhere to chase unattractive
business, preferring to sell on our strengths
in other markets. Broadband accounts
for 30% of backlog.
Enterprise
In Enterprise, we have achieved success
in selling to some of the most respected
names in the VSAT industry, such as
Bentley Walker, Speedcast and TTComm
for corporate connectivity and private
network services. We have also achieved
success in the video distribution business,
launching services in digital cinema with
Technicolor and selling outside
broadcasting services directly or via
service providers to CNN, Sky, the
BBC and ITV.
We successfully launched a product to
provide leased line connectivity to building
sites and have deployed services to a
number of utility providers for telemetry
and monitoring of power generation
and environmental monitoring.
Avanti’s flexibility to provide a high
degree of customisation of technology to
its Enterprise customers has been a key
success criterion. Enterprise accounts
for 53% of backlog.
Carrier services
Carrier services means principally two things
to Avanti: cellular backhaul and trunking.
Cellular backhaul addresses Mobile phone
operators’ need for satellites to connect
base stations back to the core network if
they are in relatively remote locations, and
also in some more urban locations where
they need to use satellite to back up fibres.
Avanti commercially deployed the world’s
first Ka‑band cellular backhaul network for
3G in Europe in the second half of FYE
2013. We have three other network pilots
now live in Europe and Africa. Our success
in breaking new ground in 3G backhaul
with an important first customer, and the
publishing of a White paper on the subject
(available on our website), has greatly
increased traction in the sector and we
expect success to escalate rapidly. This is
important because Carrier Services is the
most bandwidth intensive of our segments,
and because the high spectral efficiency of
our satellites and ground systems also
supports reasonable pricing.
Trunking refers to the use of very high
bandwidth systems (up to 360Mbps)
to provide connectivity for ISPs into
the Internet for primary or backup use,
or sometimes for large corporate
customers with unusually high bandwidth
requirements. Our high spectral efficiency
means that with relatively small dishes and
modems costing a few thousand Dollars,
customers can access Megabyte prices
that are the lowest in the market. Trunking
systems have now launched in Northern,
Eastern and Southern Africa. Carrier
Services accounts for 1% of backlog, and
this is expected to be the market which
grows the fastest in 2014.
Government
We centralised the selling of all services to
Government under one function. In addition
to security and “blue light” customers, this
heading now covers services sold to
education, health and other ministries and
also the consulting and system integration
services we sell to government customers.
Avanti successfully deployed networks
via Service Providers for government
customers in South Africa, Libya,
Afghanistan, Iraq, the UK and elsewhere
in 2013. Our satellites and ground systems
were designed with government security
needs in mind, and the Company has
also complied with the ISO 27001 security
standard. Our encryption, ITAR
compliance, ISO standard and general
level of security have proven to be strong
advantages in selling beyond just defence
customers. Police and border security are
strong markets, as are education ministries
in Africa. Government accounts for 16%
of backlog.
David Williams
Chief Executive
7
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 01 Strong expected growth
• HYLAS 1 and HYLAS 2 are main drivers of near term
EBITDA growth
• HYLAS 2 and HYLAS 3 are uniquely positioned to benefit
from high growth market demand
02 Significant asset value
•
• All three satellites fully financed
•
c.$1 billion of asset value across satellites, slots and backlog
Asset value appreciation with time, in particular slots and backlog
03 Cash flows – operating leverage
•
Low fixed costs and high contribution margins drive EBITDA
growth and attractive run‑rate free cash flow generation
04 Growing revenue visibility
• High quality firm order book
•
• Clearly visible forward revenue stream
Growing pipeline of customer capacity negotiations
05 Ka‑band – rising demand
• Avanti benefits from first mover advantage in the attractive
Ka‑band industry
• Emphasis on attractive growth markets with limited competition
Investment
Case
The reasons to invest in Avanti
r o n g expected growth
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8
Avanti Communications Group plcAnnual Report and Accounts 2013
Our strengths include the following:
Leading provider of Ka‑band services
in high growth markets. We are a pioneer
in delivering Ka‑band solutions to the high
growth markets and are the largest Ka‑band
focused operator with 83% of capacity
focused on high growth markets post
launch of HYLAS 3. Ka‑band is forecast
to be the fastest growing satellite spectrum
band and is superior to alternative offerings
due to higher data throughput, lower cost,
smaller terminals and more sophisticated
product offerings. The Company is ideally
suited to serve highly attractive, rapidly
growing end markets where terrestrial
services are not feasible given topography,
population density and investment
requirement, and where competition is
limited in our key markets.
Unique product offering and low cost
advantage. Ka‑band enjoys certain
inherent technological advantages over
other spectrum bands (including Ku‑band)
including higher data throughput and
frequency reuse thereby enabling a more
cost‑effective data solution capable of
addressing a much larger market. The
HYLAS satellites are a relatively low cost
satellite constellation as a result of their
innovative design features, particularly
power efficiencies, together with the
research and development contribution
received from ESA. HYLAS 3, being
launched as a hosted payload on an ESA
satellite, provides an excellent low cost
intermediate alternative to the funding and
launching of a larger satellite. The cost per
GHz in launching HYLAS 3 is expected to
be over 40% lower than HYLAS 2 because
costs such as satellite platform, launch
vehicle and project management are borne
by ESA. The technological superiority and
flexibility of our satellites de‑risk the
business and allow swift market response.
The Company’s propriety technology,
Avanti Cloud, allows Service Providers
to run a virtual network where they can
choose to acquire layers of services.
In addition, our satellites have steerable
beams and flexible payloads that allow
dynamic capacity allocation to meet
demand. Our robust infrastructure provides
service quality and certainty and is a key
competitive advantage.
Revenue visibility with a blue chip
customer base. Most of our significant
Service Providers are well established
telecom services companies or
governmental entities; we do not service
retail Service Providers directly. We have
strong backing and support from blue chip
Service Providers comprised of leading
telecommunications providers, media
companies, governments, very small
aperture terminal (‘VSAT’) operators and
network integrators. The stability of our
revenue and cash flows is supported by
our multi‑year contracts with Service
Providers, which are typically three to five
years in duration. As of 30 June 2013, our
contracted FSS revenue backlog – which is
our future revenue under existing customer
contracts – was approximately £290
million, or approximately 14 times our
year‑ended 30 June 2013 satellite services
revenue of £20.6 million. Our backlog rolloff
provides visibility into near‑term projections
with £42 million rolling off in the year ended
30 June 2014, £46 million in the year ended
30 June 2015 and £40 million in the year
ended 30 June 2016.
Ideally positioned in high growth
markets with strong demand
dynamics and low competitive
intensity. Relatively underdeveloped
telecom infrastructure and demonstrable
demand dynamics across market sectors
like broadband, cellular backhaul, military
applications and enterprise data, provide a
significant growth opportunity for providers
of cost effective data capacity in the high
growth markets. With our existing and
planned satellite launches, we are
well‑positioned to be at the forefront
to capture the huge growth potential
in these markets.
Large addressable market with
significant growth characteristics.
The markets that we serve offer attractive
growth opportunities, with increasing
demand for applications that require
greater bandwidth, such as broadband
internet service, enterprise network
services and backhaul networks for cellular
data services. According to Euroconsult,
‘regular’ transponder demand growth is
expected to grow to over US$14.8 billion by
2020. Simultaneously, the market value of
High Throughput Satellite (‘HTS’) capacity
leasing should increase from approximately
US$340 million in 2010 to around
US$2 billion by 2014 and close to US$5.7
billion by 2020. This demand growth,
coupled with high barriers to entry, have
driven increased regional fill rates, which
are a measure of market‑wide capacity
utilisation. This has caused FSS prices in
MENA to increase over the last two years.
Multiple barriers to entry. We have
a number of key relationships which
have provided significant benefits to the
business over a number of years that would
be difficult to replicate. In particular, ESA
and the UK Department of Business
(through the UK Space Agency) have
provided a combination of funding and
technical credibility. We also receive strong
support and endorsement from OfCom
(Office of Communications, the UK’s
telecoms and broadcasting regulator)
as national regulator. We have made
significant capital investments to fund the
satellite construction and orbital launch
costs for HYLAS 1 and HYLAS 2, ensuring
that we have the capacity available to
address the rapidly rising demand for
Ka‑band in our markets. The Company
has also prefunded its HYLAS 3 satellite.
In addition, we have priority filings for
HYLAS 1 and HYLAS 2 submitted to the
ITU Master International Frequency Register.
Substantial asset value underpinned
by young fleet and attractive orbital
slots. We have access to attractive orbital
positions with usage rights in two satellite
filings and 14GHz of spectrum, resulting
from an active strategy of managing the
rights for orbital positions.
The orbital positions of HYLAS 1 and
HYLAS 2 are 33.5°W and 31.0°E
respectively, and are both in the ITU Master
Register. Our fleet is young with the
remaining useful life of HYLAS 1 and
HYLAS 2 being 13.5 and 14.7 years,
respectively. Our satellite and ground
assets are fully insured at c.£350 million.
9
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Markets
Sectors
Carrier Services
Government
Mobile networks need to offer broad
2G/3G/4G coverage in areas where
reliable backhaul is often hard to find.
Avanti offers flexible satellite backhaul
products at speeds of up to 365Mbps
and costs that are fundamentally
changing the viability of many rural
and remote base station deployments.
Ka‑band is revolutionising the delivery
of high speed operational and welfare
services for the defence, homeland
and civil security sectors. Avanti
offers significant cost savings with no
compromise to resilience, throughput
or security.
• Poor fixed line infrastructure and
explosive mobile data growth are
straining existing backhaul
infrastructure:
– significant opportunity as operators
seek low capex marginal revenues
from data growth.
– Ka‑band provides a credible cost
effective solution for cellular backhaul
and trunking.
• Increasing proliferation of military
applications and governments’
inclination to look for cost effective
satellite solutions creates a strong
growth opportunity for Ka‑band
operators:
– technology ideally suited to meet
growing demand for bandwidth.
– growth is independent of ‘boots
on the ground’.
10
Avanti Communications Group plcAnnual Report and Accounts 2013 Enterprise
Broadband
Enterprise Service Providers in sectors
such as oil and gas, utilities, Satellite
News Gathering (‘SNG’) and digital cinema
choose VSAT for its ubiquity and security.
Either for primary VPNs, for backup, or
occasional use, Avanti delivers these
services at higher quality and lower
cost than previously possible.
The HYLAS fleet of satellites provides
ubiquitous high speed coverage over areas
that terrestrial network operators cannot
reach. Even in the most challenging
locations, Avanti always delivers consistent,
reliable and fast broadband services.
• Ka‑band helps expand the enterprise
network services market due to its
lower cost and higher speed:
• Ka‑band is an established broadband
technology:
– successful business models developed
– structural growth in demand across
in US (>1 million users).
industry verticals.
– government, SNG, oil and gas, digital
cinema are the key target markets.
– significant opportunities in Africa and the
Middle East where it is currently nascent.
– focus on ‘broadband‑dark’ locations
– 10 million homes in EU alone attract
subsidy.
11
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Unique Product
Advantages
Quality
Full coverage
Smart beam clustering
Avanti has designed its fleet to offer 100% national
coverage of primary countries. Our beam patterns
overlap, so there are no in‑country coverage gaps.
Our Service Providers can guarantee consistent
quality for their customers.
Avanti’s beam clusters land in a single earth station
in the relevant country or region. Service Providers
who want a national service need only operate
through a single hub.
High spectral density, compact
customer premises equipment
Diverse networks deliver resilience
Avanti’s network design means that Service Providers
can use the smallest possible terminals. This provides
a cheaper, attractive and more efficient way of
delivering bandwidth to their customers.
Avanti’s ground network is protected from atmospheric
events. In the unlikely event of service degradation we
automatically switch to the relevant redundant ground
earth station. Service Providers experience market
beating SLAs with no atmospheric outages at gateway.
Flexibility
Unique Avanti Operational
Support System (‘OSS’)
Contracting flexibility
Our proprietary OSS, backed up by high levels of
training and support puts our Service Providers in
total control, allowing them to configure and manage
services as if they owned the satellite fleet.
Service Providers can choose from three methods
of operation/contract to suit their own risk appetite,
technical capability and budget: raw bandwidth,
managed megabit and packaged customer accounts.
They can then change between them as their
business evolves.
Multi‑vendor platform
Advanced applications
Service Providers often have preferences for vendor
hardware. Avanti operates an open architecture
enabling the use of any vendor’s hub or modem.
Service Providers can form their own applications
from Avanti’s cloud. They can use their own hardware,
software and skills, or they can pick plug and play
applications to deploy directly into their target markets.
Avanti has already done the research and development
heavy lifting to accelerate customer’s service offerings.
12
Avanti Communications Group plcAnnual Report and Accounts 2013HughesiDirectNewtecYour hubHughesct Fleet and coverage
HYLAS 2
HYLAS 3
HYLAS 1
HYLAS 1
Serving Europe from an orbital
position of 33.5˚West
HYLAS 2
Serving EMEA from an orbital
position of 31˚East
HYLAS 3
Will serve West Africa from
an orbital position of 31˚East
• Very high power (62dBW)
• Bi‑directional Ka‑band
• Eight fixed spot beams
• Broadcast only Ku‑band
• Up to 3GHz capacity
• Very high power (62dBW)
• Bi‑directional Ka‑band
• 24 fixed and one steerable spot beam
• Up to 11GHz capacity
• Very high power (62dBW)
• Bi‑directional Ka‑band
• Eight beams steerable antenna
• ESA Hosted Payload PPP
• Up to 4GHz capacity
With our systems delivering the highest spectral
efficiency, our fleet can deliver up to 90Gb of
throughput tightly focussed in 50 countries in EMEA.
13
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Support service providers
Avanti does not sell direct to end users and does not enter into
exclusivity arrangements with Service Providers. Thus we focus
on supporting a thriving ecosystem of Service Providers with high
quality channel management support, marketing and technical
development to optimise the Service Providers’ chances of
success. Service Providers were not well served by the satellite
industry in the past, and by focusing on customer service and a
courteous, flexible approach to addressing business challenges,
Avanti can generate enduring loyalty and market advantage. Avanti
operates a 24x7 multilingual customer support department.
Prioritise high growth markets
We aim to extend our coverage in fast growing markets in Africa
and the Middle East, as quickly as possible. With the launch of
HYLAS 3, 83% of our total satellite capacity will be able to cover
these markets, positioning us to benefit from demand growth and
market adoption of new satellite technology. Today, we are the
leading Ka‑band satellite operator in these high growth markets,
and we believe we are well positioned to take advantage of the
growth opportunity these markets represent.
Mitigate market risks
We use our flexible satellite technology to mitigate future market
and competition risks. Our HYLAS fleet has steerable beams
and flexible payloads that allow dynamic capacity allocation
to meet demand and adapt to changing market requirements.
29.4% of our capacity is steerable, while 77.8% of our capacity
is frequency shifting. Additionally, we aim to limit individual market
risk with small dedicated capacity per country and broad total
geographic coverage.
Strategy
Avanti’s business strategy is based on 4 Axioms:
1. The world’s demand for data will continue to grow
at high levels for the foreseeable future
2. Terrestrial telecoms networks will continue
to leave gaps in coverage
3. End user applications change frequently so our
technology must remain flexible
4. High Growth markets offer the best opportunities
The strategic priorities that result are as follows:
Use Ka‑band
The use of Ka‑band frequencies means that high speed data
services can be delivered at price points and quality levels that
were not possible with legacy Ku‑band systems. Price changes
the market, but on its own is not enough to win.
Sell on Quality and Flexibility
Avanti serves telecoms Service Providers who in the main have
been served in the past by satellite operators as an afterthought
with systems designed for TV broadcast, not telecoms. Avanti
has designed its systems to suit the requirements of telecoms
companies specifically. In Quality, this means that Avanti made
engineering decisions to increase the security and resilience of its
systems, and to guarantee a uniformity of service quality across
its national beam clusters that Service Providers can rely upon.
In Flexibility, Avanti understand that telecoms is a fast moving
environment where new protocols, software, applications and
hardware devices are introduced frequently, and our systems must
remain flexible enough to cope with these changes. Our systems
are designed to support complex systems integration with Service
Providers’ networks.
The Avanti Cloud system means that Service Providers can log
on to Avanti’s satellites and set up their own accounts without the
need for capex or large commitment, and can dynamically change
the service they use in many different ways. By giving telecoms
Service Providers maximum Quality and Flexibility, in a way that
has never been done before in the satellite industry, Avanti believes
it can create new markets, expand existing markets and generate
enduring loyalty in its customer base.
14
Avanti Communications Group plcAnnual Report and Accounts 2013 Business
Model
Avanti is a satellite operator providing fixed satellite
services (‘FSS’) throughout Europe, the Caucasus,
the Middle East and Africa through our fleet of
Ka‑band satellites. Ka‑band systems have higher
frequency ranges and significantly higher spectral
efficiency than satellites operating in other bands,
allowing larger data carrying capacity at lower cost.
However, not all Ka‑band systems are the same, and
Avanti has designed its systems to prioritise the
Quality and Flexibility that the most demanding
telecoms Service Providers require, across
the broadest range of applications and markets.
The Avanti Cloud means that we own and operate not only
the satellites, but also the earth stations and the routing and
processing equipment inside them which makes an end to
end service work. Therefore customers can log on to the Avanti
satellites without any need for capex, all they need to do is
install a dish at the end user site and set up the account online.
We offer three styles of managed service contract, with varying
levels of involvement in the management of the service, so that
customers can choose the risk/return that suits them best.
We sell managed services on a wholesale basis to a range of
Service Providers who supply four key end markets: Enterprise,
Broadband, Carrier Services and Government.
Enterprise
Enterprise end users are typically either: i) large companies
which need high bandwidth broadband connections to link
remote offices, or ii) businesses with more specialised
machine to machine communications needs.
Broadband
Our end users in this sector are typically consumers or
Small and Medium Enterprises (‘SMEs’) who live in places
that are too remote to be reached by terrestrial telecoms
services, and with a 74cm satellite dish fixed to a wall or
roof and a small modem plugged into their computer, can
receive two way broadband services at high speed and
low cost.
Carrier Services
Our customers in this sector are mainly mobile phone
companies who need base stations in remote places to
be connected to their core network with efficient, high
capacity links. Our technology provides an advance in
quality and a major reduction in cost, resulting in the
world’s first deployment in 2013, in a market which
is expected to accelerate rapidly. Also ISPs need
connections into the World Wide Web and use satellite
to replace or back up sub‑sea cables, a service called
IP trunking.
Government
Our end users and sometimes our direct customers
in this sector are government ministries buying a range
of communications services for a variety of needs.
The defence, civil security and first responder sectors
utilise high speed data services in connection with military
and counterterrorism operations, security and surveillance,
social and welfare programmes, Voice‑over‑IP networks
and disaster recovery, often in areas where terrestrial
communications networks have been damaged or
are non‑existent.
15
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80
Our customers in this sector are mainly
mobile phone companies who need
base stations in remote places to be
connected to their core network with
efficient, high capacity links.
Our technology provides an advance in quality
and a major reduction in cost, resulting in the
world’s first deployment in 2013, in a market
which is expected to accelerate rapidly. Also
ISPs need connections into the World Wide
Web and use satellite to replace or back up
sub‑sea cables, a service called IP trunking.
Fixed line and wireless carriers rely on their
ability to provide broad and consistent
connectivity to their customers. Carriers often
seek ways to extend their network coverage
and improve existing terrestrial infrastructure.
We provide mobile and Wi‑Fi network
operators with the capability to extend their
network reach, deal with network traffic
overload, improve coverage quality or build
satellite capacity into their backhaul strategy.
We also provide trunking services that allow
terrestrial internet Service Providers to provide
international backup capacity to restore
broken sub‑sea cables, a market that is
growing rapidly in Africa. Our range of satellite
solutions offers the flexibility to facilitate this
quickly and cost effectively. Approximately 7%
of our revenue for the year ended 30 June
2013 was attributed to our Carrier Services
end market, and approximately 1% of our
backlog related to our Carrier Services end
market as of 30 June 2013.
Carrier
Services
16
Avanti Communications Group plcAnnual Report and Accounts 2013 Government
Our end users and sometimes our
direct customers in this sector are
government ministries buying a
range of communications services
for a variety of needs.
The defence, civil security and first responder
sectors utilise high‑speed data services in
connection with military and counterterrorism
operations, security and surveillance, social
and welfare programmes, Voice‑over‑IP
networks and disaster recovery, often in areas
where terrestrial communications networks
have been damaged or are non‑existent. Our
satellites are equipped with steerable beams
that can be pointed at different geographic
locations, making it possible for us to quickly
deploy additional capacity to any location
within the satellite’s coverage in response to
Government customers’ needs. In addition,
our ground infrastructure and high levels of
encryption provide a secure and resilient base
for defence and security network operations.
But also other government users in health and
education value the experience that Avanti has
of working with a wide range of government
agencies and the security of our satellites and
business operations, even where their own
needs do not require the highest security.
Approximately 7% of our revenue for the year
ended 30 June 2013 was attributed to our
Government end market, and approximately
16% of our backlog related to our Government
end market as of 30 June 2013.
17
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Enterprise
Enterprise end users are
typically either:
i)
large companies which need high
bandwidth broadband connections
to link remote offices, or
ii) businesses with more specialised
machine to machine communications
needs.
They all typically require standardised and
ubiquitous services provided to multiple
sites across large geographic areas. The
applications for our technology in the
Enterprise sector include SNG, telemetry
for utility companies’ monitoring of water
treatment or power generation equipment,
remote medical diagnostic facility data
collection, electronic point‑of‑sale data
collection, as well as bespoke, proprietary
corporate networking. Approximately 46%
of our revenue for the year ended 30 June
2013 was attributed to our Enterprise end
market, and approximately 53% of our
backlog related to our Enterprise end
market as of 30 June 2013.
18
Avanti Communications Group plcAnnual Report and Accounts 2013 Broadband
Our end users in this sector are
typically consumers or SMEs who
live in places that are too remote to
be reached by terrestrial telecoms
services, and with a 74cm satellite
dish fixed to a wall or roof and a
small modem plugged into their
computer, can receive two way
broadband services at high
speed and low cost.
Traditional broadband internet networks
are not available in many parts of the world
where fixed line or wireless infrastructure
is not cost effective or technically viable,
creating a market for satellite broadband in
areas where there is limited or no terrestrial
internet network available. Our fleet of
satellites can provide high speed
broadband coverage with cheap small
dishes (up to 10Mb/s) over these areas.
Approximately 24% of our revenue for the
year ended 30 June 2013 was attributed
to our Broadband end market, and
approximately 30% of our backlog as of
30 June 2013.
19
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Finance and
Operating Review
During the last 12 months we signed
in excess of 50 new contracts creating
an average amount added to backlog
of £7 million per month.
Nigel Fox
Group Finance Director
20
Accounting policies
The Group has reviewed its accounting
policies in accordance with IAS 8
‘Accounting Policies, Changes in
Accounting Estimates and Errors’ and
determined that they are appropriate
for the Group.
Operating performance
Revenues for the financial year rose
to £20.6 million (2012: £12.5 million).
Revenues from HYLAS 2 were below
our expectations because of the delayed
launch of the satellite. Despite a more
efficient post launch in orbit testing
campaign enabling HYLAS 2 to be
commercially operational by Q2 of the
financial year, this was not matched by the
logistical and technical readiness of some
of our customers for service. Therefore,
we allowed several customers to defer the
start dates of their commitments which
resulted in a delay in revenue generation.
All customers on HYLAS 2 are now
receiving services.
Our previous revenue guidance also
included our expectation of the value of
several new large contracts which may
have completed in the last financial year.
Several of these contracts are now
expected to complete in the year ending
30 June 2014. These delays did not impact
our backlog and are part of the ordinary
course of business.
The costs of running the ground stations
increased during the year as planned.
We brought online two further stations in
Germany and Cyprus to support HYLAS 2.
Overheads increased to £18.2 million
(2012: £14.0 million) as a result of further
investment in staff and additional marketing
expenditure to support the launch of
HYLAS 2 and assisting HYLAS 2 Service
Providers in preparing for service.
Avanti Communications Group plcAnnual Report and Accounts 2013 £7m
monthly average added
to backlog
Depreciation
Depreciation of the satellites became
the largest expenditure in the income
statement during the period as a result of
the HYLAS 2 launch. All Avanti satellites
are depreciated on a straight line basis over
the warranted lives of 15 years irrespective
of the capacity sold in any given period.
Satellite depreciation increased from £9.8
million in 2012 to £24.6 million in 2013, the
increase being accounted for by 9 months
charge on HYLAS 2.
Loss per share
Loss attributable to shareholders is
£30.4 million resulting in a loss per share
of 28.37p (2012: loss per share 14.86p).
Financing and treasury
The Company’s primary source of debt
is the facility provided by US EXIM and
COFACE. The facility drawdown period
closed at the end of February 2013.
The Company utilised US$310 million
of the available US$328 million facility.
Other operating income
During the year, other operating income
fell from £2.6 million in 2012 to £1.0 million
in 2013. The figures for 2012 included
£1.8 million for the value of an arbitration
settlement which was not repeated in
2013. The 2013 income relates to regional
development grants for our investment in
the infrastructure and employment in
Cornwall. In addition, there was a late
delivery settlement from a supplier.
Interest
Net interest payable has increased to
£3.9 million (2012: £0.2 million), primarily
due to the interest on the HYLAS facility
being charged to the income statement
from October 2012, whereas previously
it has been capitalised as part of the
construction of the satellite.
The loss before interest and taxation
increased to £33.7 million (2012: £15.8
million) mainly as a result of the increased
depreciation charge.
Taxation
The group tax credit was £6.8 million (2012:
£2.1 million credit), resulting in an effective
tax rate of 18.1% (2012: 13.3%). The rate
has been negatively affected by the fall
in the UK corporation tax rate.
In December 2012, the first debt service
payments were made with a further one
in June 2013. The total debt service during
the year was US$8.0 million (2012: US$ nil).
Insurance
The Company maintains a full suite of
insurance policies covering not only space
assets, but also business interruption
associated with the failure of any of the
three ground stations. HYLAS 1 in orbit
policy was renewed in November 2012 with
an insured value of £120 million and HYLAS
2 was renewed shortly after the year end
for an insured risk of US$306 million.
Key performance indicators
As the business develops a track record
our KPI’s will also be updated. At the
moment the key metrics are in relation
to backlog. During the last 12 months we
signed in excess of 50 new contracts. In
the 6 month period to 31 December 2012
the average amount added to backlog
per month was £11 million. In the second
period to 30 June 2013 the number of
contracts increased, but the type of
contract was biased towards framework
and occasional use types of contract
which do not immediately add to backlog.
For this reason the average for the year
fell to £7 million per month.
HYLAS 1 and HYLAS 2 backlog
by business sector
1%
29%
53%
16%
8%
30%
63%
53% Enterprise
30% Broadband
16% Government
1% Carrier Services
2012 revenue by business sector
46%
14%
8%
63%
40%
46% Broadband
40% Enterprise
14% Government
2013 revenue by business sector
7%
29%
46%
24%
8%
63%
23%
46% Enterprise
24% Broadband
23% Government
7% Carrier Services
21
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Finance and
Operating Review continued
Currency hedging and
exchange rates
Our policy remains to hedge all currency
exposures as soon as they become certain
through a combination of natural offset
hedging and the use of vanilla products
through our relationship banks. Our most
significant exposure is the HYLAS 2 debt
which is denominated in US$. Given that
the majority of our HYLAS 2 revenues will
be US$ denominated, the HYLAS 2
companies have a functional currency
of US$ thus hedging this exposure.
Balance sheet
Tangible fixed assets increased to
£403.5 million (2012: £372.3 million)
after a depreciation charge of £25.4 million
(2012: £11.2 million). The increase
represents the final payments in relation to
the HYLAS 2 satellite and the supporting
ground stations as well as accrued interest
for the first three months of the fiscal year.
Total assets remained broadly constant at
£479.9 million (2012: £478.1 million)
although cash balances fell to £38.6 million
from £76.7 million.
Trade payables increased slightly to
£18.4 million (2012: £18.2 million) and
included a large milestone invoice for
HYLAS 3, which was payable after the
year end.
Gross debt increased to £206 million (2012:
£175 million) as the final drawdowns under
the US Exim Bank and COFACE facilities
were made. The drawdown period for this
facility is now complete. Debt service
repayments commenced in December
2012 and a further repayment was made
in June 2013.
Cash flow
Net cash balances decreased to
£39 million (2012: £77 million).
Post balance sheet events
There were no significant post balance
sheet events.
Principal risk and uncertainty
Foreign exchange risk
We operate internationally and are exposed
to foreign exchange risk arising from various
currency exposures, primarily with respect
to the US$ and the €. In order to hedge the
foreign currency risk we enter into forward
contracts or natural hedges. These risks
are assessed on a continual basis.
The procurement of our second satellite
HYLAS 2 has transactions mainly executed
in US$. This is hedged naturally against the
corresponding financing loan denominated
in US$. These items are held in a US$
denominated company and both are
translated into our accounts at the
year‑end exchange rate.
At 30 June 2013, if the Euro had
weakened/strengthened against the
Sterling by 5% with all other variables
held constant, post tax loss would have
improved by £253,346 or worsened
by £280,114.
At 30 June 2013, if the US$ had weakened/
strengthened against Sterling by 5% with
all other variables held constant, post tax
loss would have improved by £83,489 or
worsened by £92,278. The US$ cash
reserves and US$ loan are held in a US$
denominated company and are revalued
through reserves upon consolidation.
The average volatility of rates during the year
compared to the year end exchange rate was
3.55% and therefore management believes
that a 5% sensitivity rate provides a
reasonable basis upon which to assess
expected changes in foreign exchange rates.
Interest rate risk
We borrow in £ and US$ at fixed rates
of interest and do not seek to mitigate the
effect of adverse movements in interest
rates. Cash and deposits earn interest at
fixed rates based on banks’ short term
treasury deposit rates. Short term trade
and other receivables are interest free.
Credit risk
Credit risk is the risk of financial loss
arising from a counterparty’s inability to
repay or service debt in accordance with
contractual terms. Credit risk includes
both the direct risk of default and the
risk of deterioration of creditworthiness.
We believe we have no significant
concentrations of credit risk. The credit
quality of major Service Providers is
assessed before trading commences
taking into account its financial position,
past experience and other factors.
Generally when a balance becomes
more than 90 days past its due date
it is considered that the amount will
not be fully recoverable.
22
Avanti Communications Group plcAnnual Report and Accounts 2013 Going concern
The Group has available sufficient financial
resources at 30 June 2013. The Group’s
banking covenants have all been met in the
past and the expectation is that this will
continue. The Group has a strong backlog
underpinning the business, with a
significant pipeline of opportunities to
give the Directors a reasonable expectation
that the Group has adequate resources
and business demand drivers to adopt
the going concern basis of accounting
for the financial statements.
Corporate governance
As part of our ongoing corporate
governance programme, the Audit
Committee tendered our audit services
in late 2012. As a result KPMG LLP were
appointed. Avanti would like to thank PwC
for their services over the last five years.
Critical accounting policies
Details of our critical accounting policies
are in Note 1 to the consolidated
Annual Report.
Nigel Fox
Group Finance Director
Liquidity risk
Liquidity risk is the risk that we may have
difficulty in obtaining funds in order to be
able to meet both our day‑to‑day operating
requirements and our debt servicing
obligations. Our exposure to liquidity risk
management is minimised due to our
prudent monitoring of all of our liabilities.
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 finance leases.
As in prior years the two key risks to the
profitability and liquidity of the business are
the rate at which we can fill both satellites
and the prices at which we can do that.
Our satellite fleet footprint is widely spread
across fifty different countries. Whilst
demand obviously varies from country to
country, the breadth of coverage minimises
concentration risk to downturn in demand.
With limited competition in the markets
covered by HYLAS 1 and HYLAS 2 we
have not seen any significant downward
price pressure.
Global economic environment
The global financial system has suffered
considerable turbulence and uncertainty
in recent years. This turbulence has
contributed to a general economic
downturn in many of the countries served
by Avanti. If potential Service Providers
have difficulty accessing capital to fund
their business plans, this may have a
negative effect on the Avanti performance,
and may delay the onset of new revenue.
23
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Sustainability
Our approach to sustainability
Avanti is fully committed to sustainability
initiatives as part of an overall aim to
achieve a high international standard
of performance.
Long term sustainability of the Group is
secured by managing the current impacts of
its operations and products, and anticipating
the future global business environment to
ensure that we have in place:
• Responsible business practices
to underpin business activities and
support employees in making the
right decisions to drive business
performance.
• A safe work environment for employees.
• A diverse range of talented employees
with a broad range of skills and
capabilities to deliver against global
customer requirements.
• Programmes to manage the
environmental impact of the Group’s
operations and products, reducing
the Group’s carbon footprint and that
of the Group’s Service Providers.
The Chief Executive, supported by the
Board, has overall responsibility for the
Group’s ongoing commitment to
sustainability, to ensure that there are
appropriate policies, systems, reporting
structures and metrics in place to achieve
the Group’s sustainability objectives.
Additionally, employees all have some
responsibility for sustainability, whether
it be in their interactions with Service
Providers or making efficiencies which
support our environmental aims. The
effectiveness of policies and processes
are monitored and reviewed on an ongoing
basis and risks or opportunities are
assessed and managed.
24
Avanti Communications Group plcAnnual Report and Accounts 2013 We are increasingly adopting targets and
metrics to measure our performance and
provide our stakeholders with an overview
of our sustainability as a company. We
focus on improvement, which means
learning from our successes and
challenges and using these insights
to further enhance future performance.
We have evaluated possible sustainability
issues based on their relevance to our
current operations and the potential impact
on the business in order to ascertain our
priorities. These priorities may change as
the business develops and as we receive
feedback from our stakeholders and we
will therefore review on a regular basis.
For those issues identified as having a
high importance, we have either already
developed strategies and have controls in
place and are reporting on performance, or
we are developing more detailed strategies
within our existing systems to focus on
specific aspects. Once we have
established and agreed a strategy we will
then implement additional management
controls if required, set targets and
measure appropriate performance metrics.
This will then demonstrate the effectiveness
of both the strategy and the controls.
By monitoring our performance in this way
we will also get valuable feedback which
we can use to continuously improve our
policies, processes and procedures.
Stakeholder engagement is important to
Avanti, we currently hold dialogue with all of
our major stakeholders as well as listening
to others. We hope to encourage this
process still further through clear and
objective reporting of the key issues.
Talent/Avanti people
To have a sustainable business, Avanti
must attract, develop and retain talent
and manage it across the business.
Avanti contributes to the wider community
through the course of its business by
creating employment, offering
apprenticeships and graduate training
opportunities to young people and by
investing in good causes that are
relevant to the business.
Attract and retain
The measure of voluntary employee
turnover provides insight into retention,
with a target voluntary turnover of less than
15%, which is consistently met. This level
reflects the current average of turnover
experienced in London, Avanti’s head
office, with an appropriate level of churn to
refresh the talent base. Avanti monitors this
on a monthly basis and regular feedback
channels ensure that any potential issues
are identified and dealt with.
Like many companies operating in the
technology industry in the UK, Avanti has
concerns about future talent shortages in
the technology and engineering sectors.
To address this issue, Avanti have
extended recruitment into social media
and are using their own networks and web
presence to create a database of talented
individuals who have shown an interest in
future roles at Avanti. We have also built
links with colleges and universities as well
as local groups promoting opportunities
to leavers.
Working with young people
Avanti’s aim is to support science,
technology and engineering education
through building links with local colleges
and universities, in particular working
with the National Space Centre and
Loughborough College in the creation
of a Higher Apprenticeship in Space
Engineering. Avanti’s graduate scheme
attracted over 300 enquiries this year and
provides bright graduates with training and
hands on experience of technical roles
within the satellite communications
industry, prompting one graduate engineer
to say “Since joining the graduate
recruitment scheme at Avanti I have been
given real responsibilities and opportunities
and have been constantly challenged.
Avanti is a dynamic company where no
two days are the same and the scheme is
a great introduction to work and a career
in the space industry.”
Avanti key behaviours
Avanti continues to focus on driving the
right behaviours to ensure responsible
business practices across the Group.
Our key behaviours set out the principles
and standards of business conduct
expected of all employees wherever
they operate and in whatever role.
These behaviours are embedded into
our performance review processes and
employees are provided with guidance on
where to go for advice, to whom to report
concerns and other related policies.
25
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Sustainability
continued
Our approach to sustainability
Human rights
Avanti requires that its business be
conducted with honesty and integrity, and
in full compliance with all applicable laws.
Company policies establish clear ethical
standards and guidelines for how we do
business and establish accountability.
The Company has clear accountability
mechanisms in place to monitor and
report on compliance with these directives.
Additionally, Avanti supports and
upholds the elimination of discriminatory
practices with respect to employment
and occupation, and promotes and
embraces diversity in all aspects of
its business operations.
Developing Avanti’s talent
Our robust appraisal and performance
management processes enable us to
identify and develop talent within the
organisation. We are developing our
practices to improve analysis and planned
development activity to supplement the
existing offer of a wide variety of training,
including on the job training across the
business. Avanti is proud of its record of
developing people and promoting from
within; in 2012 alone, 30% of vacancies
were filled by internal promotion.
26
Measuring the
environmental impact
Avanti encourages all employees to avoid
all unnecessary travel by providing full
telephone or video conferencing in meeting
rooms at Avanti sites. Employees are
expected to consider the necessity of their
journeys and to use alternative methods
of communication where possible, such
as remote accreditation of partners and
supporting partners via video conferencing.
Future plans
Plans are in place to extend energy
monitoring to Avanti sites at Goonhilly,
Cornwall, and in Cyprus. We are also
extending our energy monitoring to include
greenhouse gas emissions for
transportation and other uses.
Stakeholders
Avanti’s principal stakeholders include
investors, employees, partners, suppliers,
government and non‑government
organisations and the communities
in which it operates. Avanti aims to
communicate openly with stakeholders
about its business in order to better
understand their views and concerns,
and explain the Company’s approach.
Key next steps
Avanti’s process for capturing development
activity is being constantly improved to allow
for better reporting against training needs
and appraisal objectives. Avanti continues
to develop and recruit talent using the most
effective methods available. Policies are
under review to ensure that we remain able
to meet the changing needs of the workforce
and remain an attractive employer.
Health and safety
Avanti wants its employees to work in a
safe, healthy environment. To achieve this
Avanti has in place policies, procedures
and practices to assess and mitigate
against risks and ensure continual review.
Processes remain under review and
improvements will be made to reflect
changes in work and location that occur as
well as to integrate site specific processes
into Company policies. Avanti is in the
process of reviewing its training offering to
ensure continued safe workplace behaviour
and adherence to safety standards.
Environment
At Avanti we feel an environmental
responsibility to both our Service Providers
and their wider communities. Fortunately,
our technology enables us and our Service
Providers to behave in an environmentally
responsible way. Services and applications
such as teleworking, videoconferencing,
distance learning and e‑commerce allow
Service Providers to exchange information
and ideas without actually travelling —
saving energy and reducing pollution.
Today, Service Providers can use our
wireless services to make the distribution
of goods more efficient; help reduce energy
use in workshops, offices and homes; and
take advantage of telemedicine and
distance learning.
Avanti Communications Group plcAnnual Report and Accounts 2013 Structure
Organisational
departments
The chart opposite shows the organisation
structure of Avanti as at 1 September 2013.
The structure at Avanti is designed to
promote flexibility and excellent customer
service by encouraging accountability
and allowing for focused working. This is
achieved by grouping the functions whose
main purposes are customer facing (the
partner support, deployment and logistics
teams), sales and revenue generation
(marketing, sales and presales) and
technical operations and innovation
(procurement, satellite operations, ground
operations and networks). Interdepartmental
working is encouraged through the use of
project teams and regular meetings of the
management team.
Board
Executive management
Space
Networks
Marketing
Sales
Consulting
Customer support
Infrastructure
Administration
27
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Board of
Directors
Strong and
experienced Board
01/
02/
03/
04/
05/
06/
07/
08/
09/
10/
11/
28
Avanti Communications Group plcAnnual Report and Accounts 2013 01/ John Brackenbury CBE + • ∆
Chairman
John is founder Chairman of Avanti. He
was awarded a CBE in June 2000 for his
contribution to Tourism, Education and
Employment. He is a leading industrialist
with over 40 years of experience in the
drinks and leisure sector. He is also
President of Business in Sport and
Leisure Limited, Trustee and Director of
Springboard Educational Trust, Chairman
of Brackenbury Leisure Ltd and Trustee of
GamCare. John is the Chairman of the
Nominations Committee of Avanti
Communications Group plc.
02/ David Williams
Chief Executive
David is a co‑founder of the Company.
Prior to this, he spent 10 years working
in the City financing telecommunications
projects with Chase Manhattan, CIBC
and Babcock and Brown. He graduated
from Leeds with a degree in Economics
and Politics.
03/ David Bestwick †
Technical Director
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, he joined VEGA
Group PLC in 1990 where he worked on a
wide range of satellite applications projects.
04/ Nigel Fox
Group Finance Director
Nigel is a Chartered Accountant and has
held various senior finance roles before
joining Avanti Communications in 2007,
including Chief Financial Officer of Climax
Group; Group Financial Controller at ARC
International; Finance Director of Ruberoid
Building Products, and Group Financial
Controller of Ruberoid Plc.
05/ Matthew O’Connor
Chief Operating Officer
Matthew joined Avanti in 2005 having
worked in the telecommunications industry
for 20 years, initially for BT where he held a
number of sales and marketing roles within
the UK and International Divisions.
He joined Telewest in 1996 and went
on to be Managing Director of the
Wholesale Division.
06/ Alan Foster • ∆
Non‑Executive
Alan was a senior partner of de Zoete
& Bevan for over 20 years and, on the
creation of BZW Asset Management,
he was appointed Deputy Chairman.
This company was the forerunner of
Barclays Global Investors.
07/ Professor Michael Walker OBE FREng †
Non‑Executive
Professor Walker is adviser to Vodafone
Group Technology, having spent 18 years
of his professional career there culminating
in the post of Group R&D Director. He is
visiting professor at the University of Surrey
and sits on the scientific advisory boards
for the Universities of Warwick and Surrey.
He also holds directorships with Alacrity
Foundation, Glasswall Solutions Ltd,
Mobile VCE and Walker and Associates
Telecoms Consultancy Ltd.
08/ Richard Vos + • †
Non‑Executive
Richard is a telecommunications and
satellite professional, with international
experience, gained over 40 years working in
the industry. His previous positions included
Chairman of SatCom Group Holdings plc,
Inmedia Communications Ltd. and of
Inmarsat Ventures PLC, and Head of
Satellite Investments for British
Telecommunications plc (‘BT’), serving as
Governor and Chairman for the UK and
Ireland on the Board of INTELSAT. Richard
has recently accepted a non‑executive role
in One Horizon Group Inc, effective from
1 September 2013. Richard is the Chairman
of the Remuneration Committee of Avanti
Communications Group plc.
09/ William Wyatt + • ∆
Non‑Executive
William is Chief Executive Officer of
Caledonia Investments plc. He is also
a Non‑Executive Director on the Boards
of Terrace Hill Group plc, Cobehold SA,
TGE Marine AC and Sterling Industries plc.
10/ Paul Walsh + •
Non‑Executive
Paul was the CEO of Diageo plc from
1 September 2000 to 1 July 2013, and
the Chief Operating Officer of Diageo
from 1 January 2000.
Paul joined GrandMet’s brewing division
in 1982 and became Finance Director in
1986. He held financial and commercial
positions with Inter‑Continental Hotels and
in the GrandMet food business, becoming
CEO of the Pillsbury Company in 1992.
Paul was appointed to the GrandMet Board
in October 1995, and to the Diageo Board
in December 1997. Paul is a Non‑Executive
Director at Unilever plc and FedEx
Corporation and was appointed to the
board of the United Spirits Limited on 19
August 2013. Paul will become Chairman
of Compass Group on 6 February 2014.
11/ Paul Johnson +
Non‑Executive
Paul is a Fellow of the Institute of Chartered
Accountants in England and Wales. He
spent 38 years with KPMG Europe LLP,
becoming a Partner in 1988 and has
extensive experience of working with
companies in a variety of different
industries in both the listed and private
sectors. For the last 12 years he was
Chairman of KPMG London and Eastern
Counties and a member of KPMG’s UK
Markets Executive. Paul is the Chairman
of the Audit Committee of Avanti
Communications Group plc.
+ Audit
• Remuneration
∆ Nomination
† Technical
29
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Corporate Governance Report
Chairman’s statement of
compliance with the UK
corporate governance code
John Brackenbury CBE
Chairman
30
Avanti firmly supports the upholding of good
principles of corporate governance, not only
because it is required for compliance
purposes but because effective corporate
governance serves to ensure that the
business is run properly and in the interests
of all of its stakeholders.
The Board recognises that it is accountable
to shareholders for the Group’s activities
and that it is responsible for the
effectiveness of corporate governance
practices. It remains committed to
maintaining high standards of corporate
governance and, whilst the Group is AIM
listed and therefore not required to comply
with the UK Corporate Governance Code
(‘the Code’), the Board seeks to comply
with the Code in all material respects
wherever it is practical to do so having
regard to the size of the Group and the
resources available to it.
As a Board we monitor closely for
developments in legislation, regulation
and industry guidelines to ensure that our
corporate governance policies are kept
up‑to‑date and that the Board committees
take into account all of the latest guidance
in their areas of activity.
The Board takes all appropriate measures
to ensure that no conflict of interest can
exist between members of the Board and
other stakeholders in the Company.
Throughout the year ended 30 June 2013,
the Board considers that the Company
complied in all material respects with
those parts of the Code that it considers
appropriate. This Corporate Governance
Report, the Report of the Board and the
Remuneration Report detail how the
Company has applied the main principles
of the Code.
John Brackenbury CBE
Chairman
Avanti Communications Group plcAnnual Report and Accounts 2013 Board of Directors
Role of the Board
The Board of Directors has a collective
duty to promote the long term success
of the Avanti Group for its shareholders.
The Board sets the Group’s strategy and
ensures that the necessary resources are
in place to achieve the strategic priorities.
In determining the long term strategy and
objectives of the Group, the Board takes
into account its duties and responsibilities
not just to its shareholders but also
to customers, employees and other
stakeholders and makes its decisions
objectively. It reviews management and
financial performance, monitors the
delivery of strategy and achievement of
objectives and works within a rigorous
framework of internal controls and risk
management. The Board develops and
promotes the collective vision of the
Group’s purpose, objectives, values
and key behaviours.
Composition of the Board
During the year, the Board comprised
a Non‑Executive Chairman, six other
Non‑Executive Directors and four Executive
Directors. The balance of the Board,
together with the advice sought from other
members of senior management and the
Company’s external advisors, ensures
that no individual has unfettered powers
of decision.
Chairman and the Chief Executive
The Board is chaired by John Brackenbury
who provides leadership that demonstrates
the values and behaviours of the Company.
The Chairman is responsible for creating
the conditions for overall Board and
individual Director effectiveness. He
ensures that both Executive Directors and
Non‑Executive Directors make available
sufficient time to execute their duties in
an appropriate manner, that all Directors
receive sufficient financial and operational
information and that there is proper debate
at Board meetings.
He is also responsible, in consultation
with the Chief Executive and the Company
Secretary, for setting the agenda for the
Board’s meetings.
David Williams is the Chief Executive and,
supported by the Group Finance Director,
the Chief Operating Officer and the
Technical Director, he is responsible for the
day‑to‑day management of the Company.
He provides leadership to the Group to
successfully plan and execute the objective
and strategy agreed by the Board.
The roles of the Chairman and Chief
Executive are separate with each having
clearly defined duties and responsibilities.
Non‑Executive Directors
The Group benefits from the extensive
experience of the Non‑Executive Directors
in areas critical to the long term future
success of the Company, encompassing
a deep understanding of the industry,
technology, corporate strategy, finance
and investment.
The Non‑Executive Directors help the
Executive Directors by contributing
independent challenge and rigour to
the Board’s deliberations and assisting
in the development of the Company’s
strategy. In addition, they are responsible
for monitoring the performance of the
Executive Directors against agreed goals
and objectives. Their views are essential
in overseeing the performance of
the Company.
Induction and ongoing training
All Directors have access to advice from
the Company Secretary and independent
professionals at the Company’s expense.
Training is available for Directors as
necessary. New Directors receive an
induction programme and all the Directors
are encouraged to continue professional
education programmes.
31
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Corporate Governance
Report continued
During the year, the Chairman continued
the practice of maintaining a 12 month
agenda for Board and committee meetings.
Agenda items included permanent items
such as progress reports from the Executive
Directors and the Company Secretary, as
well as periodic items such as updates from
the Board committees, review of the risk
register and internal controls, strategy and
succession planning.
In advance of each meeting, the Board
is provided with monthly management
reports and other relevant information in
a timely manner and in a form and quality
that it considers appropriate.
The Chairman and the Board have
confidence that the way in which the Board
meetings are conducted ensures that
they cover all the matters required to be
discussed and that sufficient time is allowed
for discussion of each matter at the most
appropriate meeting in the year, enabling
the members of the Board to discharge
their duties as Directors effectively.
The Company Secretary attends all
Board meetings and is available to advise
on any corporate governance issues that
may arise.
Reappointment of Directors
All Directors are required to retire every
three years and may offer themselves for
reappointment, which is not automatic.
As a Company with a long‑term growth
strategy, it is appropriate for Directors
to serve on the Board for more than
a single term, subject to continuing
satisfactory performance.
All Directors proposed to shareholders for
election or re‑election are accompanied by
a biography and a description of the skills
and experience that the Board considers
relevant. The Board is satisfied that all the
Directors standing for election or
re‑election continue to perform effectively
and demonstrate commitment to their
roles, including commitment of time for
Board and Board committee meetings
as well as any other duties which may
be undertaken by them from time to time.
Board committees
The Board has established a number of
committees to assist in the discharge of its
responsibilities. The principal committees
are the Nominations Committee, the Audit
Committee, the Remuneration Committee
and the Technical Committee. The
responsibilities of each of these Board
committees are set out in their individual
Terms of Reference. The role and
responsibilities of the committees
are discussed further below.
Matters reserved for the Board
The Board recognises that, to ensure the
long term success of the Company, certain
specific matters should be reserved for the
consideration and decision of the Board
alone. Decisions specifically reserved for
approval by the Board are formally
recorded and include:
• annual and interim accounts and
financial statements;
• dividend policy;
• Board appointments;
• Group strategy and annual operating
budget;
• changes to the Group’s capital structure;
• changes to the Group’s management
and control structure;
• major capital expenditure, acquisitions
and disposals;
• treasury policies;
• risk management strategy;
• Group corporate governance policy; and
• environmental, health and safety and
sustainability policies.
Board meetings
The Board meets on six occasions
during the year following a formal agenda.
Additional meetings can be held if the
business needs arise. The Board also
maintains an open dialogue throughout
the year and contact by telephone occurs
whenever necessary.
The attendance of Directors at Board
meetings during the year was as follows:
Board attendance for the financial
year 1 July 2012 to 30 June 2013
Chairman
Executive Directors
Non‑Executive Directors
32
John Brackenbury CBE
David Williams
David Bestwick
Matthew O’Connor
Nigel Fox
Alan Foster
William Wyatt
Richard Vos
Michael Walker OBE FREng
Paul Walsh
Paul Johnson
Attended
6/6
6/6
6/6
5/6
6/6
6/6
5/6
6/6
6/6
6/6
3/3
Avanti Communications Group plcAnnual Report and Accounts 2013 The Remuneration Committee determines,
within agreed Terms of Reference, specific
remuneration packages for the Chairman,
the Executive Directors and the officers of
the Company. This includes implementation
of Group share incentive plans. In
accordance with the Committee’s Terms
of Reference, no Director may participate
in discussions relating to his own terms
and conditions of service or remuneration.
With regards to the remuneration policy,
the Committee considers:
• the pay scales applied to each
Director’s package;
• the proportion of the different types
of reward within each package;
• the period within which performance
related elements become payable;
• what proportion of rewards should be
related to measurable performance or
enhanced shareholder value, and the
balance between short and long‑term
performance elements; and
• transparency of Directors’ remuneration
in the annual financial statements.
Further information on the activities of the
committee is set out in the Remuneration
Committee Report on page 39.
Technical Committee
The Technical Committee is comprised
of two Non‑Executive Directors, Michael
Walker and Richard Vos, the Technical
Director and other senior technical
management of the Company. It is chaired
by Michael Walker. For further information
on the activities of the Committee please
refer to page 38.
Committee meetings are held
independently of Board meetings and
invitations to attend are extended by the
committee Chairman to other Directors,
the Group’s advisors and management
as appropriate.
Audit Committee
The Audit Committee is comprised of
five Non‑Executive Directors; Richard Vos,
William Wyatt, Paul Walsh, Paul Johnson
and John Brackenbury. The Committee
was chaired by Richard Vos until February
2013. Paul Johnson was appointed a
Non‑Executive in January 2013, and took
over the chairmanship of the Committee
in February 2013. Through their other
business activities, each member of the
Committee has significant experience in
financial matters. The Company considers
that the composition of the Audit
Committee is in accordance with the
Code. Further information on the activities
of the Committee is set out in the Audit
Committee Report on page 36.
Nominations Committee
The Nominations Committee is comprised
of three Non‑Executive Directors; William
Wyatt, John Brackenbury and Alan Foster.
It is chaired by John Brackenbury, except
when the matters under consideration
relate to his position. For further information
on the activities of the Committee please
refer to page 37.
Remuneration Committee
The Remuneration Committee is
comprised of five Non‑Executive Directors;
Alan Foster, William Wyatt, Richard Vos,
Paul Walsh and John Brackenbury.
It is chaired by Richard Vos.
Executive Directors and senior management
attend Remuneration Committee meetings at
the invitation of the Committee Chairman only.
The Remuneration Committee meets
according to the Company’s requirements
at least twice a year.
33
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Corporate Governance
Report continued
Relations with shareholders
The Board recognises the importance
of establishing and maintaining good
relationships with all of the Company’s
shareholders. During the period under
review, the Chief Executive, Finance
Director, Chairman, Remuneration
Committee Chairman and Audit Committee
Chairman have met with analysts and
institutional shareholders to keep them
informed of significant developments and
report to the Board accordingly on the
views of these stakeholders.
The Interim Report and the Annual Report
and Financial Statements are the primary
means used by the Board for communication
during the year with all of the Company’s
shareholders. The Board also recognises
the importance of the internet as a means
of communicating widely, immediately
and cost effectively and a Group website
www.avantiplc.com is maintained to facilitate
communications with shareholders.
Information available online includes copies
of the full and half year Financial Statements,
press releases and Company news,
corporate governance information and
key dates in the financial calendar.
The Board is committed to the constructive
use of the AGM as a forum to meet with
shareholders and to hear their views and
answer their questions. The 2013 AGM will
be held on 14 November 2013 at 9.00 am.
Shareholders are encouraged to attend the
AGM and to participate in proceedings by
asking questions during the formal part of
the meeting, voting on resolutions put to
the meeting and providing Board members
with their views in informal discussions
after the meeting.
Notice of the AGM is on page 81 and
it is also available to download on the
Company’s website. Separate resolutions
are proposed on each issue so that they
can be given proper consideration and
there is a resolution to approve the Annual
Report and Accounts. The Company
counts all proxy votes and indicates the
level of proxies lodged on each resolution,
after it has been dealt with usually by a
show of hands.
The Company does not have an internal
audit function due to the small size of the
Company’s administrative function and
the high level of Director review and
authorisation of transactions. The Audit
Committee believes that these internal
controls are adequate for the Group’s
current size and does not feel that a
separate internal audit function is currently
warranted. This situation is kept under
regular review.
Financial reporting
At the half year and the year end, all
operating Group companies are required to
produce Financial Statements to comply with
local accounting regulations and to produce
sufficient information to enable the central
finance team to produce IFRS‑compliant
Consolidated Financial Statements.
The Board presents a balanced and
understandable assessment of the Group’s
position and prospects in all interim and price
sensitive public reports whilst also reporting
to regulators all information required to be
presented by statutory requirements.
Internal control and risk
management
The Board has overall responsibility
for the Group’s system of internal control
to safeguard Company assets and
shareholders’ investments. The risk
management process and systems of
internal control are designed to manage
rather than eliminate the risk of failure
to achieve the Group’s objectives.
The Board has reviewed the effectiveness
of the system of internal control for the year
ended 30 June 2013 and up to the date of
the signing of the Annual Report and
Accounts. The Board will continue to
develop and implement internal control
procedures appropriate to the Group’s
nature and scale.
The Board recognises that an essential
part of its responsibility is the effective
safeguarding of assets, the proper
recognition of liabilities and the accurate
reporting of results. The Group has a
comprehensive system for regular reporting
to the Board. This includes an annual
planning and budgeting system with
budgets approved by the Board.
The financial reporting system compares
against budget and prior year, and
reconsiders its financial year forecast
on a monthly basis.
The Board has established a formal policy
of authorisation setting out matters which
require its approval and certain authorities
delegated to the Executive Directors.
The key features of the Group’s system
of internal control are as follows:
• Management responsibility and
accountability: There are clearly defined
management responsibilities, reporting
lines and limits of authority. The Chief
Executive Officer and Finance Director
meet regularly with the Executive
Directors and other members of senior
management to review progress on
financial, commercial, operational,
supply chain, HR, health, safety and
environmental issues as well as regulatory
and legal compliance matters.
34
Avanti Communications Group plcAnnual Report and Accounts 2013 • Strategy and planning: The Group
updates its strategic plan each year
and this is approved by the Board.
• Budgeting and reporting: Detailed
management accounts are prepared
each month, consolidated and reviewed
in detail with senior management.
• Expenditure approval: Authorisation
and control procedures are in place for
capital expenditure and other major
projects. There is also a process to
review capital expenditure projects
post completion to highlight issues and
improve future projects. Authorisation
procedures for operating costs and
contractual commitments are
reviewed regularly.
• Independence of the finance
function: The finance function is
encouraged to act independently of
general management in the course
of its preparation of monthly accounts
and exercising of control procedures.
• Insurance and risk management
policies: This includes a formal annual
risk review report to the Board. Regular
meetings are held with insurance and
risk advisors to assess the risks
throughout the Group.
• Documented policies: There are
documented policies for a range of
areas including HR matters, expenditure,
treasury and financial reporting.
• Cash: The cash and debt position at
Group and operational level is monitored
daily and variances from forecast levels
are investigated thoroughly. Working
capital balances are reviewed on a
monthly basis at Group level, and
any significant variances are analysed
and investigated.
• Effectiveness: The Board continually
reviews the effectiveness of the systems
of internal control and risk management
procedures throughout the year.
Ethics
The Group prides itself on carrying out its
business in a fair, honest and open manner,
ensuring that it complies with all relevant
laws and regulations.
Under the Companies Act 2006, a Director of
a company must avoid a situation in which he
or she has, or can have, a direct or indirect
interest that conflicts, or may possibly conflict
with the interests of the company. The
Company has a formal procedure in place
to manage the disclosure consideration and,
if appropriate, the authorisation of any such
possible conflict. Directors are aware of the
requirement to notify the Board as soon as
they become aware of any possible future
conflict or a material change to an existing
authorisation. Only Directors who have no
interest in the matter being considered are
able to take the relevant decision.
The Executive Directors have contracts
of service with one year’s notice, whilst
Non‑Executive Directors’ appointments
can be terminated at any time with
six months’ notice.
None of the Non‑Executive Directors has
any material business or other relationship
with the Company or its management.
Details of the Directors’ service contracts,
emoluments, the interests of the Directors
in the share capital of the Company and
options to subscribe for shares in the
Company are provided in the
Remuneration Report on page 39.
Bribery Act 2010
The Board has performed an assessment
of the risk environment and implemented a
framework to ensure that the Group trades
in compliance with the Bribery Act 2010.
35
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Audit Committee
All members of the Audit Committee are
Independent Non‑Executive Directors.
The Board is confident that the collective
experience of the Audit Committee
members enables them, as a group,
to act as an effective committee.
By invitation, the meetings of the Audit
Committee may be attended by the Group
Finance Director. The KPMG LLP audit
engagement partner is present at the
Audit Committee meetings to ensure
full communication of matters relating
to the audit. The Chairman of the Audit
Committee meets regularly with the Group
Finance Director and external auditors.
The Audit Committee has particular
responsibility for monitoring the financial
reporting process, the adequacy and
effectiveness of the operation of internal
controls and risk management and the
integrity of the financial statements.
This includes a review of significant issues
and judgements, policies and disclosures.
Its duties include keeping under review
the scope and results of the audit and
its cost effectiveness, consideration of
management’s response to any major
external or internal audit recommendations
and the independence and objectivity of
the internal and external auditors.
During the year to 30 June 2013, the
Audit Committee reviewed and endorsed,
prior to submission to the Board, half‑year
and full‑year financial statements, interim
management statements and results
announcements. It considered internal
management reports and risk management
updates, agreed external audit plans,
received updates on management responses
to audit recommendations and approved the
review of accounting policies. Progress on
implementation of processes to meet the
requirements of the UK Bribery Act, 2010
were also provided to the Audit Committee.
During 2012, the Senior Statutory Auditor of
the external Auditor for PwC completed his
five‑year term working with the Company.
The Company decided at that point to put
the Audit to tender. KPMG LLP was
appointed and the process of introducing
a new Partner has gone smoothly, with
briefings from the Audit Committee
Chairman and management to provide
transparency of business activities.
Richard Vos stepped down as Chairman
of the Audit Committee in February 2013,
and Paul Johnson assumed the position
of Chairman. The Audit Committee would
like to thank Richard Vos for his work
as Chairman.
External Auditor
Auditor objectivity and independence
is safeguarded through a variety of
mechanisms. To ensure the Auditor’s
independence, the Audit Committee
annually reviews the Company’s
relationship with the Auditor. Following the
review in 2013, the Company concluded
that it continues to have an objective and
professional relationship with KPMG and
that there are sufficient controls and
processes in place to ensure the required
level of independence. In addition, the
Auditor is required to review and confirm
its independence to the Audit Committee
on a regular basis.
Non‑audit services
The Company’s Auditor may also be
employed where, as a result of its position
as Auditor, it either must, or is best placed
to, perform the work in question. A policy
is in place in relation to the provision of
non‑audit services by the Auditor to ensure
that there is adequate protection of its
independence and objectivity.
Paul Johnson
Audit Committee Chairman
36
Avanti Communications Group plcAnnual Report and Accounts 2013 Nominations Committee
Another area of activity, which the
Committee debated and which was also
discussed with the full Board, related to
Board diversity and agreement to the
issue of a statement of how the Board
considers diversity as part of its succession
planning. Gender is one element of the
considerations made in appointing senior
management, Board appointees and as
part of general recruitment practices
across the Group. The Nominations
Committee gives full consideration to
succession planning in the course of its
work, taking into account the challenges
and opportunities facing the Company,
how to take account of diversity, and what
skills and expertise are needed on the
Board and from senior management
in the future.
John Brackenbury CBE
Nominations Committee Chairman
The Nominations Committee comprises
a majority of Independent Non‑Executive
Directors. The Nominations Committee
meets as and when necessary. The
Nominations Committee has responsibility
for nominating to the Board candidates
for appointment as Directors, bearing in
mind the need for diversity and a broad
representation of skills across the Board.
The Nominations Committee will also make
recommendations to the Board concerning
the reappointment of any Independent,
Non‑Executive Director at the conclusion of
his or her specified term, the election and
re‑election of any Director by shareholders
in accordance with the provisions of the
Code and changes to senior management,
including Executive Directors.
During 2013, a significant activity for
the Nominations Committee was the
appointment of Paul Johnson. The
Chairman, Mr John Brackenbury, chaired
the Nominations Committee for these
meetings and throughout the process
would additionally call meetings of all the
Non‑Executive Directors to brief them
on progress.
37
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Technical Committee
To date, the Technical Committee has
been active in all of these areas, holding
regular meetings with a standing agenda
which includes all key operational issues.
In particular, the Committee receives
regular status reports on the performance
of all of Avanti’s in‑orbit and ground
based infrastructure. It also monitors
the progress and results from key
customer trials, identifying areas where
improved technology could enhance the
quality of service on offer. Finally, the
Technical Committee receives briefings
on all major new satellite projects prior
to their commissioning.
Professor Mike Walker OBE
Non‑Executive Director
The Board of Avanti has established a
Technical Committee to report on progress
by the Company with all aspects of the
technology that underpins its business.
The activities of the Committee include:
1. Reviewing progress on the
development, deployment and
operation of the technology that
supports Avanti’s business on an
ongoing basis.
2. Monitoring all technological risks
identified in the Company risk register.
3. Assisting the Company with the
resolution of technology problems
and the realisation of technology
opportunities.
4. Assessing whether the technology
employed is the best fit for the Avanti
business, and that the technology team
is strong enough to develop, deliver,
operate and maintain it in the best
interests of the business.
5. Bringing to the attention of the Board
any issues with technology, including
disruptive technology which might have
a significant impact on the business of
the Company.
6. Preparing and maintaining a Technology
Strategy for the Company which is
continuously updated.
The Technical Committee is chaired by
Professor Michael Walker, with support
from Richard Vos, David Bestwick and
senior executives from within the Company.
38
Avanti Communications Group plcAnnual Report and Accounts 2013 Report of the Remuneration Committee
The Remuneration Committee comprises Independent Non‑Executive Directors only. The Remuneration Committee, on behalf of the
Board, meets as and when necessary to review and approve, as appropriate, the remuneration of the Executive Directors and senior
management and major remuneration plans for the Group.
The Chairmanship was held by Alan Foster until February 2013, when it was assumed by Richard Vos. The Committee would like to thank
Alan Foster for his major contribution during the Company’s early development stages.
During the year the Remuneration Committee met six times.
Remuneration policy
The Company’s policy on remuneration of Directors is to attract, retain and motivate the best people, recognising the input they have to
the ongoing success of the business. Consistent with this policy, the remuneration and benefits package awarded to Directors is intended
to be competitive and comprises a mix of performance‑related and non‑performance related elements designed to incentivise Directors
in the short and longer term, and align their interests with those of shareholders. Their remuneration accordingly consists of base pay,
annual bonus, long term incentive plan, share options, pension contributions and other benefits such as health care.
The Long Term Incentive Plan (‘LTIP’) in operation since 2006 terminated on 30 June 2013. The Remuneration Committee accordingly
developed, with advice from Deloitte Touche Tomatsu (Deloitte), a new LTIP that would come into operation from July 2013. Under the
new LTIP, shares will only vest if specific targets are met that will reflect the desired performance of the Company as it develops from
a ‘start‑up’ to a more mature business.
Other than the new LTIP, the above represents no change from the Company’s remuneration policy and no further change is anticipated
in the coming year.
Remuneration 2013
The remuneration of the Directors for the year was as set out below. The previous year’s figures are shown for comparison:
Executive
D J Williams
D J Bestwick
N A D Fox
M J O’Connor
Non‑Executive
F E J G Brackenbury CBE
D A Foster
W P Wyatt
M Walker OBE
P Walsh
C R Vos
P Johnson
Total
Salaries
£
Bonus
£
Other
benefits
£
Post
employment
benefits
£
Total
2013
£
327,000
245,203
191,000
174,000
110,000
41,042
35,833
37,083
35,833
41,250
21,250
1,259,494
–
–
–
–
–
–
–
–
–
–
–
–
78,822
45,431
35,899
23,631
40,875
27,838
23,875
21,750
446,697
318,472
250,774
219,381
6,524
–
–
–
–
–
–
–
–
–
–
–
–
–
116,524
41,042
35,833
37,083
35,833
41,250
21,250
190,307 114,338 1,564,139
39
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80
Report of the Remuneration Committee continued
For the year ended 30 June 2012
Executive
D J Williams
D J Bestwick
N A D Fox
M J O’Connor
Non‑Executive
F E J G Brackenbury CBE
D A Foster
W P Wyatt
M Walker OBE
P Walsh
C R Vos
Total
Salaries
£
Bonus
£
Other
benefits
£
Post
employment
benefits
£
Total 2012
£
82,443
314,000 314,000
232,365 230,000 112,745
35,347
184,000 127,000
23,337
95,000
168,000
39,250 749,693
25,296 600,406
23,000 369,347
21,000 307,337
110,000
40,000
35,000
35,000
17,500
40,000
–
–
–
–
–
–
5,608
–
–
–
–
–
–
–
–
–
–
–
115,608
40,000
35,000
35,000
17,500
40,000
1,175,865 766,000 259,480 108,546 2,309,891
Basic salary
Base salary is set by the Committee and reviewed annually taking account of an individual’s performance and experience measured
by appraisal and market practice. The Executive Directors received a 4% increase for the year ended 30 June 2013.
Pension
The Company does not operate a pension scheme for the Executive Directors. The Executive Directors are entitled to a Company
contribution to their private pensions equal to 12.5% of their base salary.
Cash bonus
Bonus awards, which are not pensionable, are made to the Executive Directors based on Group financial and individual performance.
Personal performance is appraised against achievement of challenging objectives set at the start of each financial year, and is linked
to Group strategic and operational performance.
Save as you earn (‘SAYE’)
During the year, three Executive Directors made contributions into the Avanti SAYE schemes. Nigel Fox and Matthew O’Connor made
monthly contributions of £250 and £150 respectively into the July 2010 SAYE scheme, and David Bestwick made monthly contributions
of £250 into the November 2011 SAYE scheme.
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 J O’Connor
F E J G Brackenbury CBE
D A Foster
W P Wyatt
C R Vos
M Walker OBE
P Walsh
P Johnson
40
Fully paid Ordinary Shares of 1p each
10 September
2013
30 June
2013
30 June
2012
1,761,884 1,732,684 1,643,801
1,297,954 1,297,954 1,231,648
132,620 109,677
132,620
197,091 154,009
202,091
430,791 415,076
430,791
396,250 392,500
396,250
25,342
35,342
21,030
21,030
–
–
67,428
140,000
–
10,000
35,342
21,030
–
130,000
10,000
Avanti Communications Group plcAnnual Report and Accounts 2013
Long Term Incentive Plans (‘LTIPs’)
LTIPs have been established by the Company with approval of the Remuneration Committee to reward and incentivise the Executive Directors and
senior managers of the Company. The LTIP in force during 2013 was established in 2006 with a final maturity date of 30 June 2013. Accordingly,
the Remuneration Committee has developed, with the advice and assistance of Deloitte, a new LTIP which will replace the 2006–2013 LTIP.
All unvested shares are held in the Employee Benefit trust (‘EBT’). The LTIP allocations are in separate sub funds within the EBT and are
subject to automatic revocation if certain criteria are not met and continue to be revocable for the entire Trust period.
The allocations into the LTIP vary for each executive.
2006–2013 LTIP
The total allocation to the executive was split into three separate Tranches:
The Core Tranche
This element of the grant became exercisable in seven equal instalments. The first instalment was exercisable on grant, the second
on 30 June 2008 and the remaining five annually thereafter.
The Exceptional Achievement Tranche
This tranche vested in 2012.
The Extraordinary Achievement Tranche
This element of the grant was only exercisable if the market value of a share exceeded £10 for a consecutive period of 6 months before
June 2013. As this condition was not met, the grant did not vest and the outstanding shares were returned to the EBT.
Original allocations
D J Williams
D J Bestwick
N A D Fox
M J O’Connor
Total
Outstanding allocations
D J Williams
D J Bestwick
N A D Fox
M J O’Connor
Total
Core
Exceptional
Extraordinary
Total
565,480 350,741 279,884 1,196,105
350,741 209,384 279,884 840,009
50,000 237,501
137,501
69,445 278,128
139,238
50,000
69,445
1,192,960
679,570
679,213 2,551,743
Core
Exceptional
Extraordinary
Total
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
New LTIP 2013
Allocations to senior executives is subject to specific performance criteria, which must be met within a stated period after the grant.
For the first year, the criteria are twofold:
Two thirds of an award (‘the Revenue Part’), or a proportion thereof, will only vest if specific revenue targets are achieved or bettered. Revenue will
be based on the Company’s audited financial statements for the relevant financial year. The revenue part will lapse to the extent it does not vest.
One third of an award (‘the Share Price Part’), or a proportion thereof, will vest if the three‑month average share price is above a specified
amount. In the event of any variation in the share capital of the Company by way of capitalisation or rights issue, consolidation, subdivision or
reduction or otherwise, the Remuneration Committee shall make an appropriate adjustment to the share price targets to reflect this.
The share price part will lapse to the extent it does not vest in accordance with the schedule.
Richard Vos
Remuneration Committee Chairman
41
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Report of the Board of Directors
Research and development
The Group continues to invest in new services and technology
through its research and development programmes 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 and were in office up
to the date of signing 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
M Walker OBE
P Walsh
P Johnson (appointed 16 January 2013)
A biography for each Director is provided on page 28.
In accordance with the Company’s Articles of Association,
all Directors will offer themselves for re‑election every 3 years.
The Board believes that the members of the Board continue
to be effective and to demonstrate commitment to their roles,
the Board and the Group. The Board therefore recommends
the reappointment of all Directors who are up for re‑election
at the AGM.
Directors’ emoluments
Remuneration policy
The Company’s policy on remuneration of Directors is to attract,
retain and motivate the best people, recognising the input they
have to the ongoing success of the business. Consistent with this
policy, the benefit package awarded by Avanti Communications
Group plc to its Directors is intended to be competitive.
It comprises a mix of performance‑related and non‑performance
related remuneration designed to incentivise the Directors and
align their interest with those of shareholders and consists of
base pay, annual bonus, long term incentive plan, share options,
pension contributions and other benefits such as health care.
The Directors have pleasure in presenting their Annual Report
together with the audited Financial Statements for the year ended
30 June 2013.
Principal activities
The principal activity of the Company is the provision of satellite
communication services and it is expected to be so for the
foreseeable future. The services are principally provided via
Ka‑band satellites. Avanti’s first satellite, HYLAS 1, was launched in
November 2010 and brought into commercial service in April 2011.
The second satellite, HYLAS 2, was successfully launched on
2 August 2012 and came into commercial service in October 2012.
A review of the Group’s business and developments during the
year is included in the Chairman’s Statement, the Chief Executive’s
Statement and the Strategic Review.
Business review and key performance indicators
The information that fulfils the requirements of the Business
Review can be found in the Finance and Operating Review on
pages 20 to 23, which are incorporated by reference. As the
Company is still in the early stages of its strategy with a focus
on the future, we do not currently focus on traditional key
performance indicators (‘KPIs’). Instead our business model is
focused on development of the satellite fleet and sale of capacity.
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 KPIs.
Results and dividends
The results for the year ended 30 June 2013 are shown on page
46. No equity dividend was paid in the year ended 30 June 2013
(2012 £nil). No final dividend is proposed at the year end (2012
£nil). The loss for the year transferred to the shareholder’s funds
was £30.4 million (2012 loss of £13.4 million). The net asset
position at year end is £241.4 million (2012: £269.6 million).
Share capital
The Company did not issue any new Ordinary Shares during
the year ended 30 June 2013 (2012: 26,785,000). Details of the
Company’s share capital are given in Note 24 to the Consolidated
Financial Statements.
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 the Finance and
Operating Review, pages 20 to 23.
42
Avanti Communications Group plcAnnual Report and Accounts 2013 Major shareholders
At 28 August 2013, the Company had been notified, pursuant to the Financial Services Authority’s Disclosure & Transparency Rules,
of the following notifiable voting rights in the Company’s issued Ordinary Share capital.
M & G Investment Management Ltd.
Caledonia Investments plc
The Capital Group Companies, Inc.
Government of Singapore Investment Corporation Pte. Ltd.
Legal & General Investment Management Ltd. (UK)
Hargreaves Lansdown Asset Management
Directors & Related
Avanti Communications Group EBT
Barclays, Plc.
Policy and practice on payment of creditors
The Group’s policy and practice on payment of creditors is:
• to pay all suppliers within the time limit agreed at the start of
the business with that supplier;
• to ensure that all suppliers are aware of the terms of
payment; and
• to pay in accordance with the contractual and other legal
obligations whenever it is satisfied that the supplier has
provided the goods and/or services in accordance with the
agreed terms and conditions.
At 30 June 2013, the Company did not have any trade creditors
(2012 nil).
Employees
The Group employed 174 people at 30 June 2013.
Employees are key to the Group’s success and we rely on
the workforce being committed to helping us achieve our
business objectives.
Employees are regularly updated about market and industry
developments.
Communication between the Board and employees at all
levels is highly valued and this is achieved through regular staff
presentations given by the Chief Executive and regular
email communication.
London
London
London/Los Angeles
Singapore
London
Bristol
–
London
Geneva/London/Madrid
21,790,683
15,331,632
6,937,062
5,905,492
4,422,545
4,381,952
4,342,430
4,132,039
3,905,531
Corporate governance
The Corporate Governance Report is provided on page 30
and includes reports from the Board’s Audit, Nominations,
Remuneration and Technical Committees.
Notice of Annual General Meeting
The notice of the Company’s AGM can be found on page 81.
Independent Auditor
At the 2012 AGM, shareholders reappointed PricewaterhouseCoopers
LLP as auditor for the Group. During the year, the appointment of
Auditor was the subject of a tender as a result of which KPMG LLP was
appointed in December 2012, following the audit tender process.
On the recommendation of the Audit Committee, resolutions are
to be proposed at the AGM for the appointment of KPMG LLP
as Auditor of the Company and to authorise the Board to fix
its remuneration.
Directors’ and officers’ liability insurance
The Group maintains appropriate insurance to cover Directors’
and Officers’ liability for itself and its subsidiaries. At the date upon
which this report was approved and for the year ended 30 June
2013, the Company provided an indemnity in respect of all of the
Group’s Directors in respect of all losses arising out of or in
connection with the execution of their powers, duties and
responsibilities as Directors to the extent permitted by the
Companies Act 2006 and the Company’s Articles of Association.
The Group believes in equal opportunities for all employees and
prospective employees irrespective of nationality, ethnicity, religion,
age, gender, sexuality or disability. The Group has zero tolerance
of discrimination in any form.
By order of the Board.
Patrick Willcocks
Secretary
Political donations
During the year the Group made no political donations (2012 nil).
43
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulations.
In the case of each Director in office at the date on which the
Directors’ Report is approved:
• so far as the Directors are aware, there is no relevant audit
information of which the Company’s auditors are unaware; and
• 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 the Company’s Auditors
are aware of that information.
This confirmation is given in accordance with the provisions of
s.418 of the Companies Act 2006.
Approved by the Board of Directors and signed on behalf of the Board.
David Williams
Chief Executive
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. 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 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 departure
disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume 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 are able
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 corporate and financial information provided on the Company’s
website www.avantiplc.com. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Each of the Directors, confirms that to the best of his knowledge
and belief:
• the financial statements in this document, prepared in
accordance with the applicable set out accounting standards,
give a true and fair view of the assets, liabilities, financial
position and profit of the Company and of the Group as
a whole; and
• the Directors’ Report, including the Business Review, includes
a fair view of the development and performance of the business
and the position of the Company and of the Group as a whole,
including a description of the principal risks and uncertainties
that they face.
44
Avanti Communications Group plcAnnual Report and Accounts 2013 Independent Auditors’ Report
to the members of Avanti Communications Group plc
We have audited the financial statements of Avanti Communications Group Plc for the year ended 30 June 2013 set out on pages 46 to
80. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 44, 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, and express an opinion
on, 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.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
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 2013 and
of the group’s loss for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU 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.
Tudor Aw (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square,
London,
E14 5GL
10 September 2013
45
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Consolidated Income Statement
year ended 30 June 2013
Revenue
Cost of sales
Satellite depreciation
Other cost of sales
Gross loss
Operating expenses
Other operating income
Loss from operations
Finance income
Finance expense
Net financing expense
Loss before taxation
Income tax credit
Loss for the year
Loss attributable to:
Equity holders of the parent
Non‑controlling interests
Basic loss per share (pence)
Diluted loss per share (pence)
Year ended
30 June
2013
£’000
20,600
(37,096)
(24,603)
(12,493)
Year ended
30 June
2012
£’000
12,461
(16,781)
(9,831)
(6,950)
(16,496)
(4,320)
(18,198)
953
(13,998)
2,559
(33,741)
(15,759)
281
(4,172)
(3,891)
454
(702)
(248)
(37,632)
(16,007)
6,805
2,122
(30,827)
(13,885)
(30,438)
(389)
(28.37p)
(28.37p)
(13,400)
(485)
(14.86p)
(14.86p)
Notes
2
3
6
7
7
8
9
9
The notes on pages 51 to 80 are an integral part of these consolidated financial statements.
Consolidated Statement of Comprehensive Income
year ended 30 June 2013
Loss for the year
Other comprehensive income
Exchange differences on translation of foreign operations and investments
Total comprehensive loss for the year
Attributable to:
Equity holders of the parent
Non‑controlling interests
Year ended
30 June
2013
£’000
Year ended
30 June
2012
£’000
(30,827)
(13,885)
2,314
1,489
(28,513)
(12,396)
(28,124)
(389)
(11,911)
(485)
Items in the statement above are net of tax. The income tax relating to each component of other comprehensive income is disclosed in note 8.
All items in the statement above will be subsequently recycled to the income statement.
The notes on pages 51 to 80 are an integral part of these consolidated financial statements.
46
Avanti Communications Group plcAnnual Report and Accounts 2013 Consolidated Statement of Financial Position
as at 30 June 2013
ASSETS
Non‑current assets
Property, plant and equipment
Intangible assets
Deferred tax 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
Provisions for other liabilities
Loans and other borrowings
Total current liabilities
Non‑current liabilities
Trade and other payables
Loans and other borrowings
Total non‑current liabilities
Total liabilities
Equity
Share capital
EBT shares
Share premium
Foreign currency translation reserve
Retained earnings
Total parent shareholders’ equity
Non‑controlling interests
Total equity
Total liabilities and equity
30 June
2013
£’000
30 June
2012
£’000
Notes
11
12
18
403,489
8,882
12,393
372,278
9,008
5,591
424,764
386,877
16
17
23
19
2,963
13,597
–
38,585
881
13,475
129
76,700
55,145
91,185
479,909
478,062
20
21
22
18,417
–
17,776
18,157
3
4,967
36,193
23,127
20
22
14,269
188,001
15,347
170,001
202,270
185,348
238,463
208,475
24
24
24
1,070
47
262,319
1,662
(22,778)
1,070
47
262,319
(652)
7,288
242,320
(874)
270,072
(485)
241,446
269,587
479,909
478,062
The financial statements of company number 6133927 on pages 46 to 80 were approved by the Board of Directors on 10 September 2013
and signed on its behalf by:
Nigel Fox
Group Finance Director
47
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Company Statement of Financial Position
as at 30 June 2013
ASSETS
Non‑current assets
Deferred tax assets
Investments
Total non‑current assets
Current assets
Trade and other receivables
Derivative financial instruments
Total current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables
Loans and other borrowings
Total current liabilities
Non‑current liabilities
Loans and other borrowings
Total liabilities
Equity
Share capital
EBT shares
Share premium
Foreign currency translation reserve
Retained earnings
Total shareholders’ equity
Total liabilities and equity
30 June
2013
£’000
30 June
2012
£’000
Notes
18
14
327
97,725
282
97,725
98,052
98,007
17
23
165,001
–
165,946
129
165,001
166,075
263,053
264,082
20
22
71
240
311
31
232
263
22
109
349
420
612
24
24
24
1,070
47
262,319
174
(977)
1,070
47
262,319
174
(140)
262,633
263,470
263,053
264,082
The financial statements of company number 6133927 on pages 46 to 80 were approved by the Board of Directors on 10 September 2013
and signed on its behalf by:
Nigel Fox
Group Finance Director
48
Avanti Communications Group plcAnnual Report and Accounts 2013 Consolidated and Company Statement of Cash Flows
year ended 30 June 2013
Cash flow from operating activities
Cash (absorbed)/generated by operations
30
(11,860)
(12,314)
232
(60,913)
Group
Company
Year ended
30 June
2013
£’000
Year ended
30 June
2012
£’000
Year ended
30 June
2013
£’000
Year ended
30 June
2012
£’000
Notes
Interest received
Interest paid
Net cash (absorbed)/generated by 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
Cash received as part of business combination
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Proceeds from share issue
Share issue costs
Proceeds from lease and lease back
Finance lease paid
Net cash received from/(used by) financing activities
Effects of exchange rate on the balances of cash and cash equivalents
Net (decrease)/increase 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
19
38,585
76,700
The notes on pages 51 to 80 are an integral part of these consolidated financial statements.
267
(5,527)
34
(9)
–
–
–
–
(17,120)
(12,289)
232
(60,913)
–
(47,488)
–
–
–
(77,222)
10
2
(47,488)
(77,210)
–
–
–
–
–
(12,996)
–
–
–
(12,996)
28,806
(3,092)
–
–
–
(342)
48,452
–
75,000
(1,091)
5,337
(590)
25,372
127,108
1,121
262
(38,115)
37,871
76,700
38,829
–
–
–
–
–
(232)
(232)
–
–
75,000
(1,091)
–
–
73,909
–
–
–
–
–
–
49
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Consolidated and Company Statement of Changes in Equity
year ended 30 June 2013
Consolidated
2012
At 1 July 2011
Loss for the year
Other comprehensive income
Issue of share capital
Share based payments
Tax charge taken directly to reserves
At 30 June 2012
2013
At 1 July 2012
Loss for the year
Other comprehensive income
Share based payments
Tax credit taken directly to reserves
At 30 June 2013
Company
2012
At 1 July 2011
Loss for the year
Issue of share capital
Share based payments
Tax credit taken directly to reserves
At 30 June 2012
2013
At 1 July 2012
Loss for the year
Share based payments
Tax credit taken directly to reserves
At 30 June 2013
Share
capital
£’000
Employee
benefit trust
(EBT)
£’000
Share
premium
£’000
Retained
earnings
£’000
Notes
Foreign
currency
translation
reserve
£’000
(2,141)
–
1,489
–
–
–
Non‑
controlling
interests
£’000
Total
equity
£’000
–
(485)
–
–
–
–
207,360
(13,885)
1,489
73,909
631
83
188,678
–
–
73,641
–
–
19,974
(13,400)
–
–
631
83
262,319
7,288
(652)
(485)
269,587
262,319
–
–
–
–
7,288
(30,438)
–
375
(3)
(652)
–
2,314
–
–
(485)
(389)
–
–
–
269,587
(30,827)
2,314
375
(3)
262,319
(22,778)
1,662
(874) 241,446
802
–
–
268
–
–
1,070
1,070
–
–
–
–
1,070
25
18
47
–
–
–
–
–
47
47
–
–
–
–
47
Share
capital
£’000
Employee
benefit trust
(EBT)
£’000
Share
premium
£’000
Retained
earnings
£’000
Notes
Foreign
currency
translation
reserve
£’000
Non‑
controlling
interests
£’000
802
–
268
–
–
1,070
1,070
–
–
–
1,070
18
47
–
–
–
–
47
47
–
–
–
47
188,678
–
73,641
–
–
262,319
262,319
–
–
–
262,319
322
(480)
–
27
(9)
(140)
(140)
(840)
14
(11)
(977)
174
–
–
–
–
174
174
–
–
–
174
–
–
–
–
–
–
–
–
–
–
–
Total
equity
£’000
190,023
(480)
73,909
27
(9)
263,470
263,470
(840)
14
(11)
262,633
The notes on pages 51 to 80 are an integral part of these consolidated financial statements.
50
Avanti Communications Group plcAnnual Report and Accounts 2013 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 activity of the Company is the provision of satellite communication services. The services are principally provided via
Ka‑band satellites.
The Company is a public limited company, which is listed on the Alternative Investment Market (“AIM”) and domiciled and incorporated
in the UK.
The registered office of the Company is 20 Black Friars Lane, London, United Kingdom.
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 consolidated 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 disclose satellite depreciation as a separate item in cost of sales on the face of the consolidated income
statement due to the significance of the charge.
The Company has taken the exemption under section 408 of the Companies Act 2006 to not present the parent Company income
statement or statement of comprehensive income.
New and amended standards adopted by the Group
The following new standards, amendments to standards or interpretations were mandatory for the first time for the financial year
beginning 1 July 2012:
• Deferred Tax: Recovery of Underlying Assets – Amendment to IAS 12
• Presentation of Items of Other Comprehensive Income – Amendments to IAS 1
New standards, amendments and interpretations issued but not effective for the financial year beginning
1 July 2012 and not early adopted
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 27 Separate Financial Statements (2011)
IAS 28 Investments in Associates and Joint Ventures (2011)
•
•
•
•
•
•
• Amendments to IAS 19 Defined Benefit Plans
• Amendments to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities
• Amendments to IFRS 10, IFRS 12 and IAS 27 – Investment Entities
• Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities
• Amendments to IAS 36 Recoverable amount disclosures for non‑financial assets
•
IFRS 9 Financial Instruments
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
The Directors do not anticipate that the adoption of any of the above standards, amendments or interpretations will have a material
impact on the Group’s financial statements on initial application.
51
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to the accounts continued
1 Accounting policies continued
The Group continues to monitor the potential impact of other new standards and interpretations which may be endorsed by the European
Union and require adoption by the Group in future accounting periods.
Critical accounting estimates and management judgement
The presentation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are addressed below.
(a) Revenue recognition
The Group uses the percentage‑of‑completion method in accounting for its consultancy and space projects. Use of the percentage‑of
completion method requires the Group to estimate the services performed to date as a proportion of the total services to be performed.
(b) Impairment of satellites
The carrying amounts of the satellites is 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 and 2 satellites, the sale of capacity is progressing
well and in line with plans. The Group will assess impairment annually.
(c) European Space Agency (‘ESA’) Funding and Sale of Capacity
In April 2006, the Group entered into a contract with ESA to receive funding for the build of the HYLAS 1 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 as revenue on a straight line basis over a 3 year period. This 3 year period commenced when
HYLAS 1 became operational in April 2011. 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 is released to cost of sales 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 £450,000.
(d) Impairment of goodwill arising as part of business combinations
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units
(‘CGUs’), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the
goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.
Goodwill impairment reviews will be undertaken annually. The carrying value of goodwill is compared to the recoverable amount, which
is the higher of value in use and the fair value less costs to sell. Any impairment would be recognised immediately as an expense and
would not subsequently be reversed.
Going concern
The Directors have assessed forecast future cash flows for the foreseeable future, being a period of at least a year following the approval
of the Accounts, and are satisfied that the Group’s cash resources and facilities are sufficient to meet these cash flows.
Considering the above, the Directors believe that the Group is well placed to manage its business risks successfully despite the
continued current uncertain economic outlook and have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Therefore, they continue to adopt the going concern basis of accounting in preparing the
annual financial statements.
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 Filiago GmbH & Co. and 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.
52
Avanti Communications Group plcAnnual Report and Accounts 2013 1 Accounting policies continued
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. The Group applies the acquisition method
to account for business combinations. The cost of control for the acquisition of a subsidiary is the fair values of the assets transferred, the
settlement of pre‑existing relationships, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the
Group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at
their fair values at the acquisition date. The Group recognises any non‑controlling interest in the acquiree on an acquisition‑by‑acquisition
basis, either at fair value or at the non‑controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable
net assets.
Goodwill is initially measured as the excess of the aggregate of the cost of control and the fair value of non‑controlling interest over the
net identifiable assets acquired and liabilities assumed. If this cost of control is lower than the fair value of the net assets of the subsidiary
acquired, the difference is recognised in the income statement.
The financial statements of legal subsidiaries are prepared for the same reporting year as the parent Company using consistent
accounting policies.
Revenue recognition
Revenue is generated from the sale of satellite broadband services to customers, other exploitation of satellite assets, provision of
consultancy services and sales of end user terminals to customers. In the current year, revenue from the sale of satellite broadband
services on the HYLAS fleet is the key revenue stream of the business with consultancy contracts being a smaller proportion of the
total revenues.
Broadband satellite communications services revenues are recorded in accordance with the contracted amounts or the actual usage
of the customer. Revenue under framework agreements is recognised once an order has been placed and service has commenced.
For multiple element arrangements revenue is allocated to each element on fair value regardless of any separate prices stated within
the contract. The portion of the revenue allocated to an element is recognised when the revenue recognition criteria for that element
have been met.
Revenues also includes the sale of satellite equipment recognised 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 reporting 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.
Appropriate allowances for estimated irrecoverable amounts are recognised as an expense when there is objective evidence that trade
receivables are impaired. Accounts receivable balances are specifically reviewed to assess a customer’s ability to make payments.
Leased assets
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires
an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and whether the
arrangement conveys the right to use the asset.
Leases of property, plant and equipment where the Group holds substantially all the risks and rewards of ownership are classified as
finance leases. Assets acquired under hire purchase or a finance lease are capitalised in the statement of financial position. Those held
under hire purchase and finance lease contracts are depreciated over the shorter of either their estimated useful lives or the term of the
lease. The interest element of these obligations is charged to the income statement over the relevant period. The capital element of the
future payments is treated as a liability.
Leases where a significant portion of the risks and rewards are held by the lessor are classified as operating leases. Rentals are charged
to the income statement on a straight line basis over the period of the lease.
53
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to the accounts continued
1 Accounting policies continued
Interest income and expense
Borrowing costs incurred for the construction of the satellite assets are capitalised during the period of time 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 effective interest rate methodology, taking into account the principal amounts
outstanding and the interest rates applicable.
Foreign currency
Transactions entered into by the Group entities in a currency other than the currency of the primary economic environment in which it
operates (the “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rate ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary
assets and liabilities are recognised immediately in the income statement.
The presentational currency of the Group is Sterling.
On consolidation, assets and liabilities 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
approximation of the cumulative effects of the rates prevailing on the transaction dates, in which case income and expenses are
translated at the dates of the transactions). Foreign exchange differences arising on retranslation are recognised directly in a separate
component of equity, the foreign currency translation reserve.
In the event of the disposal of an undertaking with assets and liabilities denominated in a foreign currency, the cumulative translation
difference associated with the undertaking in the translation reserve is charged or credited to the gain or loss on disposal recognised
in the income statement.
Pension schemes
Employees have the option to establish their own pension scheme to which the Group will match employee contributions up to a
maximum amount. There is no ongoing liability to the Group beyond the period that the contributions are made. The cost of such
contributions are charged to the income statement when incurred.
Share based payments
The Group operates a number of equity settled share based payment arrangements, under which the Group receives services from
employees as consideration for equity instruments (share options and shares) of the Group. Equity settled share based payments are
measured at fair value (excluding the effect of non market‑based vesting conditions) at the date of grant, but including any market‑based
performance criteria and the impact of investing conditions. The fair value determined at the grant date is recognised on a straightline
basis over the vesting period, based on the Group’s estimate of the options or shares that will eventually vest and adjusted for the effect
of non‑market‑based vesting conditions.
Fair value is measured using either the Binomial options pricing model, the Black Scholes model or Monte Carlo simulations, whichever
is most appropriate to the award.
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.
54
Avanti Communications Group plcAnnual Report and Accounts 2013 1 Accounting policies continued
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it
relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive
income or directly in equity respectively.
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 reporting 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 reporting 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 substantively enacted by the reporting 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 of assets, other than assets under construction, over their estimated useful lives using the straightline
method. Depreciation on satellite assets commences once in‑orbit testing has been completed and the satellite is available for use.
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
Network assets 20–25% per annum
Fixtures and fittings 25% per annum
Satellite in operation 6.67% per annum
Plant and machinery 25% per annum
Leasehold improvements 25% per annum
Satellite in construction Nil
The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in
estimate accounted for on a prospective basis. The gain or loss arising on the disposal of assets is charged to the income statement
account and is calculated as the difference between the disposal proceeds and the carrying amount of the assets.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter,
the term of the relevant lease.
Satellite in construction relate to costs (including employee related costs) directly attributable to the construction of the HYLAS satellites.
Once the satellites become operational and placed into service, the assets are transferred to a space asset category and depreciated
over the life of the satellites.
Where the conditions are not met the costs are expensed through the income statement.
55
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80
Notes to the accounts continued
1 Accounting policies continued
Intangible assets
Intangible assets are stated at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is provided
so as to write off the cost of assets, other than assets under construction, over their estimated useful lives using the straight‑line method.
The amortisation rate on computer software is 25%. Newly acquired intangible assets as part of the business combination, customer lists
and trade name, are amortised over 15 and 5 years respectively.
Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its
intended use.
The estimated useful lives, residual values and amortisation method are reviewed at each year end, with the effect of any changes
in estimate accounted for on a prospective basis. The gain or loss arising on the disposal of assets is charged to the income statement
and is calculated as the difference between the disposal proceeds and the carrying amount of the assets.
Research and development costs in relation to the satellites are capitalised if they meet the conditions set out in IAS 38 ‘Intangible
Assets’ which are that development costs are only capitalised once a business case has been demonstrated as to the technical feasibility
and commercial viability. Capitalised development costs are amortised over the expected useful life of the assets.
Impairment of non‑financial assets
Assets that have an indefinite useful life, for example, goodwill or intangible assets not ready for use, are not subject to amortisation
and will be tested annually for impairment.
Assets that are subject to amortisation and depreciation 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
fixed 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
discounting the expected future cash flows obtainable as a result of the asset’s continued use, including those resulting from its ultimate
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 conducting impairment reviews, CGUs are identified as groups of assets and liabilities that generate cash flows that
are largely independent of other cash flow streams. The assets and liabilities include those directly involved in generating the cash flows
and an appropriate proportion 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 critical estimates 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 is being recognised as revenue over 3 years on a straight line basis.
Grant funding
Other grant income which has capital expenditure and job creation/safeguarding targets is recognised on a straight line basis over the
relevant period irrespective of cash and claims, and is disclosed as other operating income.
56
Avanti Communications Group plcAnnual Report and Accounts 2013 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 statement of financial position are comprised 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 reporting date.
Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost.
Business combinations
Business combinations are recognised in the consolidated financial statements from the time of acquisition. The comparative figures are
not restated for acquisitions.
Acquisitions are accounted for using the acquisition method and the identifiable assets and liabilities acquired are measured at their fair
values at the date of acquisition.
Any excess of the cost of control over the fair value of the acquired assets and liabilities is recognised as Goodwill, with intangible assets.
Intangible assets are amortised over their useful life and any Goodwill is tested annually for impairment.
57
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to the accounts continued
1 Accounting policies continued
Derivative financial instruments
Financial assets and financial liabilities are recognised on the Group’s statement of financial positions 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 remeasured at their fair value. Fair value is measured using the closing bank rate compared with the contract rate.
Hedge accounting is currently not applied. Changes in fair value of derivative financial instruments are recognised in the income
statement as they arise.
Segment reporting
Operating segment(s) are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segment(s),
has been identified as the Avanti Executive Board who make the strategic decisions.
2 Revenue
As stated 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 exploitation of the space assets. On adoption of IFRS 8, ‘Operating Segments’, the
Group concluded that the Chief Operating Decision Maker (the Avanti Executive Board) manage the business and the allocation of
resources on the basis of the provision of satellite services, resulting in one segment.
Revenue of £20,600,000 (2012: £12,461,000) represents invoiced sales of satellite broadband services provided to external customers,
revenue on space and consultancy contracts recognised on a percentage of completion basis and the sale of terminals. Of this,
£2,582,000 (2012: £1,780,000) relates to the sale of terminals. As referred to in the critical estimates and judgements, revenues from
ESA representing the sale of capacity on HYLAS 1 comprise 21.8% (2012: 36.1%) of total revenue.
The Group derived £3,945,000 (2012: £4,471,000) of its turnover from European countries outside the United Kingdom, £6,856,000
(2012: nil) from countries outside Europe and £9,799,000 (2012: £7,990,000) from the United Kingdom.
3 Operating expenses
Operating expenses by function are as follows:
Distribution
Administration
30 June
2013
£’000
3,760
14,438
30 June
2012
£’000
1,405
12,593
18,198
13,998
58
Avanti Communications Group plcAnnual Report and Accounts 2013 3 Operating expenses continued
Loss from operations for the year is stated after charging the following:
Operating expenses:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Research and development costs written off as incurred
Employee benefit expense
Operating lease expenses:
– Minimum lease payments
– Sublease payments received
– Onerous lease provision utilised
Cost of sales:
Space asset depreciation
Release of ESA grant
Satellite services
Materials purchased
Sub contractors
30 June
2013
£’000
30 June
2012
£’000
772
138
32
10,178
722
–
–
24,603
(866)
5,100
3,152
2,159
1,389
95
16
7,287
619
(50)
(30)
9,831
(858)
3,176
2,472
–
4 Auditor remuneration
The Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) (Amendment) Regulations 2011 is mandatory
for periods starting on/after 1 October 2011. The comparatives in respect of the disclosures of Auditor Remuneration have been
restated accordingly.
Audit of these financial statements
Disclosures below are based on amounts receivable in respect of other services to the company and its subsidiaries:
Amounts receivable by the company’s auditor and its associates in respect of:
– Audit of financial statements of subsidiaries of the company
– Taxation compliance services
– All other services
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
2013
£’000
110
15
17
–
142
30 June
2013
£’000
9,528
1,467
153
375
30 June
2012
(restated)
£’000
150
20
31
48
249
30 June
2012
£’000
8,448
1,080
172
634
11,523
(1,345)
10,334
(3,047)
10,178
7,287
59
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to the accounts continued
5 Employee benefit costs continued
Employee numbers
The average monthly number of people (including the Executive Directors) employed during the year by category of employment:
30 June
2013
No.
employees
30 June
2012
No.
employees
45
38
42
39
33
29
39
31
164
132
30 June
2013
£’000
(225)
869
309
–
953
30 June
2012
£’000
84
654
–
1,821
2,559
30 June
2013
£’000
30 June
2012
£’000
–
263
18
281
(5,124)
(127)
–
(159)
1,238
(4,172)
(3,891)
213
–
241
454
(4,017)
–
(514)
(179)
4,008
(702)
(248)
Operations
Sales and marketing
Development and engineering
Administration and executive
6 Other operating income
Exchange (loss)/gain on trade receivables and payable balances
Other grant income
Liquidated damages
Arbitration settlement
The arbitration settlement in the year ended 30 June 2012 of £1,821,462 included interest of £25,299.
7 Net finance (expense)/income
Finance income
Fair value gain on derivatives
Financing exchange gain
Interest income on bank deposits
Finance expense
Interest expense on borrowings and loans
Fair value loss on derivatives
Financing exchange loss
Finance lease expense
Less: interest capitalised to satellite in construction
Net finance expense
60
Avanti Communications Group plcAnnual Report and Accounts 2013 8 Income tax credit
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
Deferred tax asset write off
Impact of change in UK tax rate
Total deferred tax
Total income tax credit
30 June
2013
£’000
30 June
2012
£’000
–
–
–
–
(8,795)
1,447
–
543
(3,840)
246
649
823
(6,805)
(2,122)
(6,805)
(2,122)
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:
30 June
2013
£’000
30 June
2012
£’000
Loss before tax
Tax credit at the corporate tax rate of 23.8% (2012: 25.5%)
Tax effect of non‑deductible expenses
Adjustment in respect of prior periods
Deferred tax asset write off
Impact of change in UK tax rate
Income tax credit
(37,632)
(16,007)
(8,956)
161
1,447
–
543
(4,082)
242
246
649
823
(6,805)
(2,122)
The standard rate of corporation tax in the UK changed from 24% to 23% with effect from 1 April 2013. Accordingly, the Group’s profits
for this accounting period are taxed at an effective rate of 23.8% (2012: 25.5%).
Reductions in the UK corporation tax rate from 26% to 24% (effective from 1 April 2012) and to 23% (effective 1 April 2013) were
substantively enacted on 26 March 2012 and 3 July 2012 respectively. Further reductions to 21% (effective from 1 April 2014) and 20%
(effective from 1 April 2015) were substantively enacted on 2 July 2013. It has not yet been possible to quantify the full anticipated effect
of the announced further 2% rate reduction, although this will further reduce the Group’s future current tax charge and reduce the
Group’s deferred tax asset accordingly.
9 Earnings/(loss) per share
Basic and diluted loss per share
30 June
2013
pence
30 June
2012
pence
(28.37)
(14.86)
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.
30 June
2013
£’000
30 June
2012
£’000
Loss for the year attributable to equity holders of the parent Company
(30,438)
(13,400)
Weighted average number of ordinary shares for the purpose of basic earnings per share
107,306,711
90,138,692
61
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to the accounts continued
10 Profit of the parent Company
As permitted by Section 408 of the Companies Act 2006, the income statement 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 2013 amounted to £840,000 (2012: £480,000 loss).
11 Property, plant and equipment
Cost
Balance at 1 July 2011
Additions
Additions acquired through business combinations
Transfer
Disposals
Balance at 1 July 2012
Additions
Transfer
Disposals
Effect of movements in exchange rates
Leasehold
improvements
£’000
Network
assets
£’000
Fixtures and
fittings
£’000
Satellite in
operation
£’000
Satellite in
construction
£’000
Motor
vehicles
£’000
Group
total
£’000
263
–
–
–
–
263
938
–
–
–
6,545
935
547
2,202
–
10,229
155
(2,147)
(15)
49
670
87
–
–
–
757
270
–
–
3
148,730
2,745
–
(2,202)
(516)
148,757
17,377
242,177
–
8,000
165,309
64,242
–
–
–
229,551
30,098
(240,030)
–
–
95
–
–
–
(39)
56
–
–
(15)
–
321,612
68,009
547
–
(555)
389,613
48,838
–
(30)
8,052
Balance at 30 June 2013
1,201
8,271
1,030
416,311
19,619
41
446,473
Accumulated Depreciation
Balance at 1 July 2011
Charge for the year
Disposals
Balance at 1 July 2012
Charge for the year
Transfer
Disposals
Effect of movements in exchange rates
Balance at 30 June 2013
Net book value
Balance at 30 June 2013
Balance at 30 June 2012
244
9
–
253
46
–
–
–
299
902
10
3,099
1,271
–
4,370
616
(315)
(15)
7
4,663
3,608
5,859
509
92
–
601
100
–
–
2
703
327
156
2,311
9,831
(76)
12,066
24,603
315
–
294
37,278
–
–
–
–
–
–
–
–
–
59
17
(31)
45
10
–
(14)
–
41
6,222
11,220
(107)
17,335
25,375
–
(29)
303
42,984
379,033
19,619
–
403,489
136,691
229,551
11
372,278
At 30 June 2013, the Group held assets under finance lease agreements with a net book value of £2,693,942 (2012: £1,845,631).
A depreciation charge for the year of £139,719 (2012: £250,344) has been provided on these assets. These assets are included
in network assets.
Satellites in operation includes both the HYLAS 1 and 2 satellites. HYLAS 2 came into commercial service on 1 October 2012 and all
related satellite and ground station assets have been depreciated from this point. HYLAS 1 came into commercial service on 1 April 2011
and the associated satellite assets were depreciated from this point.
The satellite in construction assets of £19,619,000 now relate to HYLAS 3/4 design, the prior year included HYLAS 2 (2012: £229,551,000).
Included in the satellite in operation costs are capitalised finance costs of £35,813,037 (2012: £28,728,753) related to the HYLAS 2
satellite. The finance costs on HYLAS 2 will average 5.5% over the lifetime of the facilities (2012: HYLAS 2 average 5.5%). The HYLAS 2
assets are located in Cyprus.
The lenders of the HYLAS 2 loan facility (note 22) have a fixed and floating charge over all the assets of the Group.
Impairment reviews were conducted on the satellites in operation. The carrying value of the assets are supported and thus there is
no impairment loss recorded. A sensitivity analysis was carried out by management and is not considered to have a significant impact
on the impairment conclusions.
62
Avanti Communications Group plcAnnual Report and Accounts 2013 12 Intangible assets
Cost
Balance at 1 July 2011
Additions acquired through business combinations
Balance at 1 July 2012
Effect of movements in exchange rates
Balance at 30 June 2013
Accumulated amortisation
Balance at 1 July 2011
Charge for the year
Balance at 1 July 2012
Charge for the year
Balance at 30 June 2013
Net book value
Balance at 30 June 2013
Balance at 30 June 2012
Computer
software
£’000
Brand
name
£’000
Customer
lists
£’000
Goodwill
£’000
–
7,530
7,530
(81)
7,449
–
–
–
–
–
Group
total
£’000
395
9,100
9,495
12
9,507
392
95
487
138
625
–
181
181
11
192
–
26
26
39
65
–
1,389
1,389
82
1,471
–
66
66
99
165
127
155
1,306
1,323
7,449
7,530
8,882
9,008
395
–
395
–
395
392
3
395
–
395
–
–
The additions of goodwill and intangible assets were generated from the Group obtaining control of Filiago GmbH & Co (“Filiago”),
located in Germany, on 1 November 2011, and resulted in the recognition of £7.5 million of goodwill and £1.7 million of intangible
assets, representing the Filiago brand name and customer lists. The intangibles acquired with obtaining control of Filiago represent
the cash‑generating unit.
As set out in IAS 36 Impairment of Assets, a cash‑generating unit is the smallest identifiable group of assets that generate cash inflows
from continuing use that are largely independent of the cash flows from other assets or groups of assets. For the purpose of impairment
testing of goodwill, goodwill is allocated to a group of cash‑generating units (being subsidiaries acquired in each acquisition).
Such group of cash generating units represent the lowest level within the Group for which the goodwill is monitored for internal
management purposes.
The recoverable amount of the cash‑generating units is determined using value‑in‑use, which is calculated by using the discounted cash
flow method. This method considered the cash flows of the subsidiaries (cash‑generating units) for the 10 years from acquisition ending
30 June 2021 with subsequent transition to perpetuity. For the years following the detailed planning period, the assumed continual
growth of 4% for the operation to perpetuity was used which complied with general expectations for the business. The present value
of cash flows is calculated by discounting the cash flow by pre‑tax interest rate of approximately 14.6%.
The brand names acquired in the course of the Filiago business combination of £181,000 are amortised on a straight‑line basis over a
period of five years. At the year end the NBV of the brand names is £127,000 (2012: £155,000), after charging £39,000 (2012: £26,000)
of amortisation in the year.
The customer lists acquired in the course of the Filiago business combination of £1,389,000 are amortised on a straight‑line basis over
a period of 15 years. At the year end the carrying amount of the customer bases is £1,306,000 (2012: £1,323,000) after charging £99,000
(2012: £66,000) of amortisation in the year.
The lenders of the HYLAS 2 loan facility (note 22) have a fixed and floating charge over all the assets of the Group.
63
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to the accounts continued
13 Business combinations
On 1 November 2011 the Group took effective control of Filiago GmbH & Co (“Filiago”) by enhancing the security over its loans with
Filiago. From 1 November 2011 (“the date of control”) Filiago has been accounted for as a subsidiary in the consolidated financial
statements because of the control held but, because the Group has not purchased any equity shares in the company, a 100%
non‑controlling interest is recognised on the statement of financial position removing the impact of achieving control from
shareholders’ funds.
Filiago is a broadband reseller and has multiple distributors in several countries as well as a large direct customer base. The fair value
of net assets acquired, identifiable intangibles assets and the operating results of Filiago are included in the consolidated financial statements
since achieving control. During the year Filiago contributed to the group’s results with revenue of £1.5 million (2012: £1.1 million), and a loss of
£0.4 million (2012: £0.5 million). The loss of £0.4 million is removed from shareholders’ funds as a non‑controlling interest.
The following table summarises the consideration paid for Filiago, the fair value of the assets acquired, and liabilities assumed.
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Net liabilities acquired
Goodwill
Intangibles
Total cost of control
1 November
2011
Fair Value
£’000
547
229
2
(1,541)
(763)
7,530
1,681
8,448
The above goodwill and intangibles have been reduced by amortisation and foreign exchange revaluations totalling £126k (2012: £203k)
in the year.
Identified as part of this consideration are intangible assets valued at £1.7 million. These intangible assets are made up of the valuation
of the existing customer lists as well as the trade name.
Goodwill of £7.5 million was recognised on acquisition, this represents future economic benefits of the arrangement.
14 Investments
Company
Shares in subsidiary undertakings
Beginning of the year
Equity investments in Avanti HYLAS 2 Limited
Investment in Avanti Communications Germany GmbH
30 June
2013
£’000
97,725
–
–
30 June
2012
£’000
84,728
12,973
24
97,725
97,725
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.
64
Avanti Communications Group plcAnnual Report and Accounts 2013 15 Subsidiaries
As at the end of the year the Group and Company held the following investments in subsidiary companies:
Name of subsidiary
Nature of business
Avanti Communications Limited
Avanti Space Limited
Avanti Local TV Services Limited1
Avanti Space 3 Limited1
Avanti Launch Services Limited
Avanti Broadband Limited
Avanti Broadband (Ire) Limited1
Avanti HYLAS 2 Limited
Avanti HYLAS 2 Launch Services Limited
Avanti Communications Infrastructure Limited1
Avanti Employee Benefit Trust
Avanti HYLAS 2 Cyprus Limited
Avanti HYLAS Services Limited
Avanti Communications Marketing Services Limited
Avanti Communications Germany GmbH
Avanti Communications Sweden AB
1 Company was dormant in the year ending 30 June 2013.
Telecommunication consultancy
Satellite services
Satellite services
Satellite services
Management services
Satellite services
Satellite services
Satellite services
Management services
Holding company
Employee benefit trust
Satellite services
Project management services
Sales and marketing
Satellite services
Satellite services
The Company holds 100% ownership interest and voting power in all the above entities.
Place of incorporation
England & Wales
England & Wales
England & Wales
England & Wales
Isle of Man
England & Wales
England & Wales
England & Wales
Isle of Man
England & Wales
England & Wales
Cyprus
Cyprus
England & Wales
Germany
Sweden
On 1 November 2011 the Group took effective control of Filiago GmbH & Co (“Filiago”) by enhancing the security over its loans with
Filiago. From 1 November 2011 (“the date of control”) Filiago is accounted for as a subsidiary in the consolidated financial statements
because of the control now held but, because the Group has not purchased any equity shares in the Company, a 100% non‑controlling
interest is recognised on the statement of financial position removing the impact of achieving control from shareholders’ funds.
On 18 October 2012 the ordinary shares of Avanti Caledonian Broadband Limited and Avanti (NI) Limited were transferred to Alphasat
Communications Limited.
16 Inventories
Group
Finished goods
30 June
2013
at cost
£’000
2,963
30 June
2012
at cost
£’000
881
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 £3,100,000 (2012: £2,472,000).
There have been no write‑downs of inventory during the year.
65
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to the accounts continued
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
2013
£’000
6,301
(1,111)
5,190
3,054
3,638
–
1,715
30 June
2012
£’000
1,441
(268)
1,173
5,967
3,456
–
2,879
30 June
2013
£’000
30 June
2012
£’000
–
–
–
139
–
139
–
828
164,173
–
–
644
165,163
–
13,597
13,475
165,001
165,946
18 Deferred taxation
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:
Group
Company
Deferred tax assets
Deferred tax liabilities
The gross movement on the deferred income tax account is as follows:
Balance at 1 July 2012
Income tax recognised in the income statement
Loss transfer to Group company
Tax (credited)/charged directly to equity
Balance at 30 June 2013
30 June
2013
£’000
18,609
(6,216)
30 June
2012
£’000
13,029
(7,438)
12,393
5,591
5,591
6,805
–
(3)
12,393
3,386
2,122
–
83
5,591
30 June
2013
£’000
30 June
2012
£’000
327
–
327
282
224
(168)
(11)
327
–
(3)
–
(3)
–
–
282
–
282
191
100
–
(9)
282
Closing
balance
£’000
2,677
602
15,330
18,609
(6,216)
(6,216)
(3)
12,393
Credited/
(charged) to
the income
statement
£’000
Opening
balance
£’000
(Credited)/
charged
to equity
£’000
4,865
652
7,512
(2,188)
(47)
7,818
13,029
5,583
(7,438)
(7,438)
5,591
1,222
1,222
6,805
Group
30 June 2013
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)
66
Avanti Communications Group plcAnnual Report and Accounts 2013 18 Deferred taxation continued
Group
30 June 2012
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 2013
Tax assets
Share based payment
Unused tax losses
Total tax assets
Company
30 June 2012
Tax assets
Share based payment
Unused tax losses
Total tax assets
Credited/
(charged) to
the income
statement
£’000
(Credited)/
charged
to equity
£’000
Opening
balance
£’000
6,603
505
7,550
14,658
(1,738)
56
(30)
(1,712)
(11,272)
(11,272)
3,386
3,834
3,834
2,122
–
91
(8)
83
–
–
83
Credited/
(charged) to
the income
statement
£’000
(Credited)/
charged
to equity
£’000
Opening
balance
£’000
Closing
balance
£’000
4,865
652
7,512
13,029
(7,438)
(7,438)
5,591
Closing
balance
£’000
64
218
282
(1)
57
56
(11)
–
(11)
52
275
327
Credited/
(charged) to
the income
statement
£’000
(Credited)/
charged
to equity
£’000
Opening
balance
£’000
67
124
191
6
94
100
(9)
–
(9)
Closing
balance
£’000
64
218
282
At 30 June 2013, none of the deferred tax asset of £18.6 million (2012: £13.0 million) is expected to be recovered in the next 12 months.
At 30 June 2013, none of the deferred tax liability of £6.2 million (2012: £7.4 million) 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 from
communication services provided by the HYLAS 1 and HYLAS 2 satellites.
67
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to the accounts continued
19 Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents include cash in hand and at banks net of outstanding overdrafts.
Cash and cash equivalents at the end of the financial year as shown in the cash flow statement can be reconciled to the related items
in the balance sheet as follows:
30 June
2013
£’000
37,581
1,004
30 June
2012
£’000
39,699
37,001
38,585
76,700
Group
Company
30 June
2013
£’000
30 June
2012
£’000
30 June
2013
£’000
30 June
2012
£’000
11,892
318
(161)
6,368
6,686
271
1,267
9,933
18,417
18,157
14,269
15,347
14,269
15,347
4,277
10,726
5,358
15,347
15,003
20,705
–
–
70
1
71
–
–
–
–
–
–
–
23
8
31
–
–
–
–
–
Current
£’000
Total
£’000
3
(3)
–
3
(3)
–
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 and deferred income
Non‑current
Accruals and deferred income
The ESA grant is included in deferred income. The activity for the year is as follows:
Current
Non‑current
21 Provisions for other liabilities
Group
Onerous lease provision
Balance at 1 July 2012
Released during the year
Balance at 30 June 2013
The final release by the Group to the onerous lease provison was in July 2012.
The Company does not have any provisions (2012: £nil).
68
Avanti Communications Group plcAnnual Report and Accounts 2013 22 Loans and other borrowings
Secured at amortised cost
Bank loans
Finance lease liabilities (i) (note 26)
Secured at amortised cost
Finance lease liabilities (i) (note 26)
Group
Current
Group
Non‑current
30 June
2013
£’000
30 June
2012
£’000
30 June
2013
£’000
30 June
2012
£’000
14,882
2,894
17,776
2,645
2,322
185,889
2,112
166,975
3,026
4,967
188,001
170,001
Company
Current
Company
Non‑current
30 June
2013
£’000
30 June
2012
£’000
30 June
2013
£’000
30 June
2012
£’000
240
240
232
232
109
109
349
349
(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 $328.2 million at an interest rate of 5.5%.
This borrowing is repayable over a period of 7 years from December 2012 and the lenders have a charge over the assets of the Company.
The Company has to meet certain covenant criteria which is reported to the bank every 6 months.
In accordance with IAS 23 – Borrowing Costs, qualifying borrowing costs have been capitalised as part of the cost to HYLAS 2,
recognised as Satellite in Construction in Note 11.
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.
Consistent with covenant requirements in relation to the HYLAS 2 loan facility, the Group monitors capital on the basis of net tangible
worth of certain subsidiary companies and debt service coverage ratios of the Group and certain subsidiary companies.
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 derivatives used for hedging.
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 operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to the US Dollar and the Euro. In order to hedge the foreign currency risk the Group enters into forward contracts or natural
hedges. These risks are assessed on a continual basis.
69
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80
Notes to the accounts continued
23 Financial instruments and risk management continued
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. These items are held in a US Dollar denominated company and both
are translated into the Group accounts at the year end exchange rate.
At 30 June 2013, if the Euro had weakened/strengthened against the Sterling by 5% with all other variables held constant, post tax loss would
have improved by £253,346 or worsened by £280,114 (2012: post tax loss would have improved by £108,390 or worsened by £119,799).
At 30 June 2013, 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 £83,489 or worsened by £92,278 (2012: post tax loss would have improved by £62,744 or worsened by
£69,348). The US Dollar cash reserves and US Dollar loan are held in a US Dollar denominated company and are revalued through
reserves upon consolidation.
The average volatility of rates during the year compared to the year end exchange rate was 3.55% and therefore Management believes
that a 5% sensitivity rate provides a reasonable basis upon which to assess expected changes in foreign exchange rates.
ii) Interest Risk Management
The Group borrows in US Dollars at fixed rates of interest and does not seek to mitigate the effect of adverse movements in interest rates.
Cash and deposits earn interest at fixed 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 financial assets are cash and short term deposits and trade and other receivables. The Group has no significant
concentrations of credit risk with the exception of the other financial assets. Cash and cash equivalents are deposited with high‑credit
quality financial institutions with a minimum rating of A+ and trade receivables are principally from well established corporations. The
credit quality of major customers is assessed before trading commences taking into account its financial position, past experience
and other factors.
Trade receivables
Other financial assets
Total
Trade receivables
Other financial assets
Total
The ageing of trade receivables and other financial assets which have not been impaired was as follows:
Not past due
£’000
1–30 days
£’000
31–60 days
£’000
60+ days
£’000
2,158
701
976
162
335
1,721
183
127
30 June 2013
30 June 2012
70
30 June
2013
£’000
5,190
–
5,190
30 June
2012
£’000
1,173
–
1,173
Total
£’000
5,190
1,173
Avanti Communications Group plcAnnual Report and Accounts 2013 23 Financial instruments and risk management continued
Movements in the provision for impairment of trade receivables are as follows:
At 1 July 2012
Allowances made in the period
Amounts used and reversal of unused amounts
At 30 June 2013
30 June
2013
£’000
268
849
(6)
1,111
30 June
2012
£’000
53
317
(102)
268
The provision of £1,111,000 (2012: £268,000) has been raised against gross trade receivables of £6,301,000 (2012: £1,441,000). Every major
customer is assessed on an individual basis and we provide for bad debts when an impairment has been identified. 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 Group’s liabilities. 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
finance leases.
The following table analyses the Group’s financial liabilities into relevant maturity groupings based on the expected undiscounted cash flows.
30 June 2013
Bank loans
Finance leases
Trade payables
30 June 2012
Bank loans
Finance leases
Trade payables
Within
1 year
£’000
1 to 2
years
£’000
2 to 5
years
£’000
Over
5 years
£’000
Contractual
amount
£’000
Carrying
amount
£’000
23,885
3,023
11,892
30,025
1,390
–
141,941
770
–
39,496
–
–
235,347
5,183
11,892
200,771
5,006
11,892
10,274
2,476
6,686
19,821
2,305
–
99,828
805
–
75,607
–
–
205,530
5,586
6,686
169,620
5,348
6,686
The table below summarises the derivatives as at 30 June 2013 and 2012 into relevant maturity groupings:
Notional
principal
£’000
Within
1 year
£’000
1 to 2
years
£’000
Derivative
fair value
asset
£’000
Derivative
fair value
liability
£’000
30 June 2013
Foreign currency forward contracts
30 June 2012
Foreign currency forward contracts
All derivatives are held in the Company.
–
–
2,447
2,447
–
–
–
129
In addition, the Company has intercompany balances carried at £161.2 million (2012: £146.3 million). The contractual amount is equal
to the carrying amount.
–
–
71
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to the accounts continued
23 Financial instruments and risk management continued
d) 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 (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 has a total debt facility of US$328.2 million (2012: US$328.2 million) in relation to
Hylas 2 expenditure and is fully funded in this respect.
Loans and
receivables
£’000
9,959
38,585
48,544
–
10,019
76,700
86,719
Assets at fair
value through
the profit
and loss
£’000
Derivatives
used for
hedging
£’000
Available
for sale
£’000
–
–
–
–
–
–
–
–
–
–
129
–
–
129
–
–
–
–
–
–
–
Liabilities
at fair value
through
the profit
and loss
£’000
Derivatives
used for
hedging
£’000
Other
financial
liabilities at
amortised
cost
£’000
Total
£’000
9,959
38,585
48,544
129
10,019
76,700
86,848
Total
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
200,771
5,006
32,368
200,771
5,006
32,368
238,145
238,145
169,620
5,348
33,233
169,620
5,348
33,233
208,201
208,201
e) Financial instruments by category
Group
Assets as per balance sheet
30 June 2013
Trade and other receivables (excl prepayments)
Cash and cash equivalents
30 June 2012
Derivative financial instruments
Trade and other receivables (excl prepayments)
Cash and cash equivalents
Liabilities as per balance sheet
30 June 2013
Borrowings (excl finance lease liabilities)
Finance lease liabilities
Trade and other payables (excl non‑financial liabilities)
30 June 2012
Borrowings (excl finance lease liabilities)
Finance lease liabilities
Trade and other payables (excl non‑financial liabilities)
72
Avanti Communications Group plcAnnual Report and Accounts 2013 23 Financial instruments and risk management continued
Company
Assets as per balance sheet
30 June 2013
Trade and other receivables (excl prepayments)
30 June 2012
Derivative financial instruments
Trade and other receivables (excl prepayments)
Liabilities as per balance sheet
30 June 2013
Finance lease liabilities
Trade and other payables (excl non‑financial liabilities)
30 June 2012
Finance lease liabilities
Trade and other payables (excl non‑financial liabilities)
Loans and
receivables
£’000
164,173
164,173
–
165,302
165,302
Assets
at fair value
through
the profit
and loss
£’000
Derivatives
used for
hedging
£’000
Available
for sale
£’000
Total
£’000
–
–
–
–
–
–
–
129
–
129
–
–
–
–
–
164,173
164,173
129
165,302
165,431
Liabilities
at fair value
through
the profit
and loss
£’000
Derivatives
used for
hedging
£’000
Other
financial
liabilities at
amortised
cost
£’000
–
–
–
–
–
–
–
–
–
–
–
–
349
71
420
581
31
612
Total
£’000
349
71
420
581
31
612
Financial instruments and risk management – 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.
73
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to the accounts continued
24 Share capital – issued and fully paid
At 1 July 2011
Shares issued
Less transaction costs
At 30 June 2012
At 1 July 2012
At 30 June 2013
Group and
Company
ordinary
shares
£’000
802
268
–
Number of
shares
‘000
84,951
26,785
–
111,736
1,070
111,736
111,736
1,070
1,070
Group and
company
share
premium
£’000
188,678
74,732
(1,091)
262,319
262,319
262,319
EBT
shares
£’000
47
–
–
47
47
47
In the previous financial year, the Group issued 26,785,714 shares at £2.80 per share.
25 Share based payments
The fair value of share options charged to the income statement in the period was £374,809 (2012: £630,523). The full fair value of these
options is recognised over the vesting period for those options. All share based payment plans are equity settled and details of these
plans are set out below.
The Company has established 14 share option schemes:
– Enterprise Management Incentives scheme (EMI)
– Long Term Incentive Plan (LTIP)
– Unapproved share option plan (2007)
– Unapproved share option plan (March 2010)
– Unapproved share option plan (July 2010)
– Unapproved share option plan (October 2010)
– Unapproved share option plan (April 2011)
– Save As You Earn scheme (SAYE) (July 2010)
– Unapproved share option plan (July 2011)
– Unapproved share option plan (October 2011)
– Unapproved share option plan (October 2011) – key management personnel
– Save As You Earn scheme (SAYE) (November 2011)
– Unapproved share option plan (March 2012)
– Unapproved share option plan (April 2012)
The 2013 charges and weighted average fair value for each of the plans above were as follows:
EMI
LTIP schemes
Unapproved schemes
SAYE schemes
2013
charge
£
2012
charge
£
24,318
136,953
194,411
19,127
54,465
247,845
305,839
22,374
374,809
630,523
To date all options (with exception of the SAYE scheme) have been granted with a strike price of 1p. The strike price on the SAYE scheme
2010 is £4.70, and on the SAYE scheme 2011 is £3.09.
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
74
Avanti Communications Group plcAnnual Report and Accounts 2013 25 Share based payments continued
The table below sets out the number and weighted average exercise prices (WAEP) of, and movements in, the share options schemes
during the year:
2013
No.
2013
WAEP
2012
No.
EMI
Outstanding at the beginning of the year
Granted during the year
Forfeited in the year
Exercised during the year
Outstanding at the end of the year
Unapproved schemes
Outstanding at the beginning of the year
Granted during the year
Forfeited in the year
Exercised during the year
Outstanding at the end of the year
SAYE schemes
Outstanding at the beginning of the year
Granted during the year
Forfeited in the year
Exercised during the year
Outstanding at the end of the year
156,201
–
–
(15,807)
£0.01 184,815
–
£0.01
(2,644)
£0.01
(25,970)
£0.01
140,394
£0.01 156,201
563,705
–
–
(121,014)
£0.01 594,421
–
£0.01
–
£0.01
(30,716)
£0.01
442,691
£0.01 563,705
135,243
–
–
–
£4.10
£4.10
£4.10
£4.10
58,954
81,594
(5,305)
–
135,243
£4.10 135,243
2012
WAEP
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
£4.70
£3.90
£3.90
£3.90
£4.10
The weighted average share price for the year ended 30 June 2012 was £2.99 (2012: £2.98).
102,713 (2012: 80,040) of the EMI options, 15,000 (2012: 30,715) of the unapproved 2007 scheme, and 50,000 (2012: 33,333) of the
unapproved July 2010 scheme were exercisable from 30 June 2013. With exception of the LTIP shares issued to senior management,
all outstanding LTIP shares were returned to the EBT.
The exercise price of options outstanding at 30 June 2013 was £0.01 and the weighted average remaining contractual life was 6.7 years.
Each model has slightly different exercise criteria and therefore separate valuation models were used.
EMI Scheme
The EMI scheme was used to issue options to staff on 24 July 2007 at an exercise price of 1p. The new options were issued for 10 years
with 25% vesting at the end of years 3, 4, 5 and 6. Those staff who had previously held unvested options in the former parent company
at the time of the demerger were given a shorter vesting period for these new options. There are no performance criteria associated with
these options and they are exercisable as long as the option holder remains an employee of the Company.
The weighted average inputs to the Black‑Scholes model are as follows:
Share price at date of grant
Expected volatility
Weighted average exercise price
Expected life
Expected dividend yield
Risk‑free interest free
£2.16
35%
£0.01
4 years
1%
5.5%
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.
75
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to the accounts continued
25 Share based payments continued
Long Term Incentive Plan
The LTIP was 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.
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. The benchmark for this tranche of LTIP was satisfied in November 2010.
iii) The Extraordinary Achievement Tranche
This element of the grant was only exercisable if the Market Value of a Share exceeds £10 for a consecutive period of six months before
30 June 2013. At 30 June 2013, the criteria of the extraordinary achievement tranche had not been met, therefore the outstanding shares
have been returned to the EBT.
Original allocations:
Core
Exceptional
Extraordinary
Additional grant July 2010
Total allocation
Core vested
Exceptional vested
Unvested balance returned to the EBT
Outstanding balance 30 June 2013
2013 No. options
Executive
directors
2013 No. options
Senior
managers
2012 No. options
Executive
directors
2012 No. options
Senior
managers
1,192,960
679,570
679,213
400,000
2,951,743
(1,192,960)
(679,570)
(1,079,213)
125,000
62,500
62,500
–
250,000
(71,429)
(62,500)
(62,500)
1,192,960
679,570
679,213
400,000
2,951,743
(1,022,537)
(679,570)
–
–
53,571
1,249,636
125,000
62,500
62,500
–
250,000
(53,571)
(62,500)
–
133,929
Unapproved schemes
At 30 June 2013, there were 10 unapproved schemes in place, established at various dates since 2007. No new schemes were
established in the year ended 30 June 2013.
Under each scheme, the options are issued for 10 years with 25% or 33% vesting at the end of years 3, 4, 5 and 6.
Under 7 of the schemes (noted overleaf), the market value of the shares must be £10.00 or more per share for a consecutive period
of 6 months in order for the vesting conditions to be met. For all other schemes, there are no performance criteria and the options
are exercisable as long as the option holder remains with the company.
76
Avanti Communications Group plcAnnual Report and Accounts 2013 25 Share based payments continued
Unapproved schemes with £10.00 share price vesting criteria:
– Unapproved share option plan (March 2010)
– Unapproved share option plan (October 2010)
– Unapproved share option plan (April 2011)
– Unapproved share option plan (July 2011)
– Unapproved share option plan (October 2011)
– Unapproved share option plan (March 2012)
– Unapproved share option plan (April 2012)
SAYE schemes
The save as you earn schemes were established in July 2010 and November 2011 and were open to all employees of the company
at the time.
Save as you earn is an HMRC approved all employee savings‑related share option scheme under which employees save up to a limit
of £250 on a 4‑weekly basis with an option to buy shares in the company at the end of a 3‑year at a discount of up to 20% of the market
value on the grant date. Options are not subject to performance conditions. All options are exercisable from three years from the date
of grant. All options expire 6 months from their exercise date.
26 Obligations under finance leases
Leasing arrangements
Finance leases relate to capital equipment with lease terms of 3–5 years. The Group has the option to purchase the equipment for a
nominal value at the conclusion of the lease agreement. The Group’s obligations under finance leases are secured by the lessor’s title
to the leased assets.
Finance lease liabilities
No later than 1 year
Later than 1 year no later than 5 years
Less future finance charge
No later than 1 year
Later than 1 year no later than 5 years
Less future finance charge
Group
Minimum lease
payments
Group
Present value of lease
payments
30 June
2013
£’000
3,023
2,160
5,183
(177)
5,006
30 June
2012
£’000
2,476
3,110
5,586
(238)
5,348
30 June
2013
£’000
2,894
2,112
5,006
–
5,006
30 June
2012
£’000
2,322
3,026
5,348
–
5,348
Company
Minimum lease
payments
Company
Present value of
lease payments
30 June
2013
£’000
30 June
2012
£’000
30 June
2013
£’000
30 June
2012
£’000
240
109
349
–
349
232
349
581
–
581
240
109
349
–
349
232
349
581
–
581
77
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to the accounts continued
26 Obligations under finance leases continued
Included in the financial statements as:
Current borrowings
Non‑current borrowings
Present value of minimum lease payments
Group
Company
30 June
2013
£’000
2,894
2,112
5,006
30 June
2012
£’000
2,322
3,026
5,348
30 June
2013
£’000
30 June
2012
£’000
240
109
349
232
349
581
During the year the Group entered into a 3 year sale and leaseback agreement with Lombard Technology Services Limited for network
equipment with a fair value of £2.3 million. There was no profit or loss on the transaction as the sale was conducted at the fair value
of the assets.
27 Obligations under operating leases
The Group’s future aggregate minimum lease payments under non‑cancellable operating leases are as follows:
No later than 1 year
Later than 1 year no later than 5 years
After 5 years
30 June 2013
30 June 2012
Land &
Buildings
£’000
1,288
6,438
17,812
25,538
Other
£’000
13
–
–
13
Land &
Buildings
£’000
265
794
331
1,390
Other
£’000
18
13
–
31
Operating lease commitments principally relate to leased office space of the Group’s head office. During the year the Group exited from its lease
commitments at 74 Rivington Street, London and relocated its head office to Cobham House, 20 Black Friars Lane, London on 6 May 2013.
The Group entered in a 20 year lease on the property, with annual rent of £1.3 million. Other operating leases include a fleet of 4 vans.
28 Capital commitments
As at 30 June 2013 the Group has contracted but not provided for capital commitments of £10.5 million (2012: £12.0 million). This amount
relates to the procurement of Avanti’s third satellite, Hylas 3, as well as some small commitments remaining on Hylas 2.
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
2013
£’000
1,450
–
1,450
114
219
1,783
30 June
2012
£’000
1,435
766
2,201
109
60
2,370
Pension contributions amounting to £114,338 (2012: £108,546) were made into personal pension schemes in respect of 4 (2011: 4)
of the Directors.
Three non‑executive directors exercised share options in the period.
78
Avanti Communications Group plcAnnual Report and Accounts 2013 29 Related party transactions and Directors’ emoluments continued
The emoluments of the highest paid Director totalled £446,696 (2012 £749,693) made up of:
Total emoluments
Salaries and other short term employee benefits
Bonus
Payments into defined contribution schemes (current year)
Total emoluments
30 June
2013
£’000
30 June
2012
£’000
406
–
41
447
396
314
39
749
Transactions with Directors and key management personnel – Group and Company
Details of the remuneration of Directors and key management personnel are set out below in aggregate for each of the categories
specified in IAS 24 “Related Party Disclosures”.
Key management personnel are considered to be the executive board, the general counsel, the head of regulatory, and the managing
director of the consulting division.
Group
Company
Total emoluments
Salaries and other short term employee benefits
Bonus
Payments into defined contribution schemes
Share based payments
30 June
2013
£’000
2,235
–
155
327
2,717
30 June
2012
£’000
1,972
1,094
236
389
3,691
30 June
2013
£’000
30 June
2012
£’000
478
–
–
–
478
432
–
–
27
459
Other related party transactions
Subsidiaries
Intra‑group transactions are eliminated on consolidation and are not reported in the Group accounts. The Company charged the following
management fees to its subsidiaries:
30 June
2013
£’000
30 June
2012
£’000
Avanti Communications 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 Communications Limited
Avanti Space Limited
Avanti Broadband Limited
Avanti HYLAS 2 Limited
Avanti Communications Infrastructure Limited
Intercompany balances are unsecured and repayable on demand.
1,153
3,359
801
–
–
125
5,438
635
2,258
325
131
271
767
4,387
30 June
2013
£’000
93,450
3,582
8,762
727
57,484
30 June
2012
£’000
98,894
2,781
5,402
602
57,484
164,005
165,163
79
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80
Notes to the accounts continued
30 Cash (absorbed by)/generated from operations
Loss before taxation
Derivative valuation
Interest receivable
Foreign exchange losses in operating activities
Depreciation and amortisation of non‑current assets
Provision for doubtful debts and accrued income
Onerous lease provision
Share based payment expense
(Gain)/Loss on disposal of fixed assets
Movement in working capital:
(Decrease)/increase in stock
(Increase)/decrease in debtors
Increase/(decrease) in trade and other payables
Cash (absorbed by)/generated from operations
Group
30 June
2013
£’000
Company
30 June
2013
£’000
(37,632)
129
–
–
25,512
1,679
(3)
375
–
(2,082)
(2,619)
2,781
(1,064)
129
–
–
–
–
–
13
–
–
1,114
40
Group
30 June
2012
£’000
(16,007)
(213)
(207)
563
10,457
230
(30)
631
(2)
Company
30 June
2012
£’000
(580)
(213)
–
–
–
–
–
27
–
404
(5,802)
(2,338)
–
(59,990)
(157)
(11,860)
232
(12,314)
(60,913)
80
Avanti Communications Group plcAnnual Report and Accounts 2013 Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of the Company will be held at 9.00am on 14 November 2013 at Jefferies International,
Vintners Place, 68 Upper Thames Street, London EC4V 3BJ for the following purposes:
Ordinary business
To consider, and if thought fit, to pass the following resolutions, which will be proposed as ordinary resolutions:
1. Report and accounts
To receive the audited annual accounts for the year ended 30 June 2013, together with the reports of the Directors and Auditors therein.
2. Re‑election of directors
2.1 To re‑elect John Brackenbury as a Director of the Company who retires by rotation in accordance with the Company’s Articles
of Association.
2.2 To re‑elect David Williams as a Director of the Company who retires by rotation in accordance with the Company’s Articles
of Association.
2.3 To re‑elect Alan Foster as a Director of the Company who retires by rotation in accordance with the Company’s Articles
of Association.
3. Election of director
To appoint Paul Johnson as a Director of the Company, who having been appointed since the last Annual General Meeting, offers himself
for election in accordance with the Company’s articles of association.
4. Appointment of auditors
To appoint KPMG LLP as auditors of the Company.
5. Auditor’s remuneration
To authorise the Directors to determine the remuneration of the auditors.
Special Business
To consider, and if thought fit, to pass the following resolutions, of which resolution 6 will be proposed as an ordinary resolution,
and resolutions 7 and 8 will be proposed as special resolutions:
6. Directors’ authority to allot shares
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 person, on such terms and in such manner as they think fit, up to an aggregate
nominal amount of £372,456, such authority to expire on 14 May 2015 or at the conclusion of the Annual General Meeting following the date
on which this resolution is passed (whichever is the 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.
81
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notice of Annual General Meeting continued
7. Directors’ power to issue shares for cash
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(1) 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)
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);
(b)
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 paragraphs (a) and (b) above, of equity securities up to an aggregate nominal value equal
to £55,868 and unless previously renewed, revoked, varied or extended, this power shall expire on the earlier of the date falling
18 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.
8. Reduction of capital
That the balance standing to the credit of the share premium account of the Company be reduced by cancelling £100 million of such balance.
By Order of the Board
Patrick Willcocks
Secretary
Registered Office: Cobham House, 20 Black Friars Lane, London EC4V 6EB
Registered Number: 6133927
10 September 2013
82
Avanti Communications Group plcAnnual Report and Accounts 2013
5.
6.
7.
8.
The notes to the proxy form include instructions on how
to appoint a proxy by using the CREST proxy appointment
service. You may not use any electronic address provided
either in this Notice of Annual General Meeting or in any
related documents (including the proxy form) to communicate
with the Company for any purposes other than those
expressly stated.
In the case of joint holders of shares, the vote of the first
named in the register of members who tenders a vote,
whether in person or by proxy, shall be accepted to the
exclusion of the votes of other joint holders.
A member that is a company or other organisation not having
a physical presence cannot attend in person but can appoint
someone to represent it. This can be done in one of two ways:
either by the appointment of a proxy (described in Notes 3
to 5 above) or of a corporate representative. Members
considering the appointment of a corporate representative
should check their own legal position, the Company’s articles
of association and the relevant provision of the Companies
Act 2006.
Copies of the Executive Directors’ service contracts with the
Company and any of its subsidiary undertakings and letters
of appointment of the Non‑Executive Directors are available
for inspection at the registered office of the Company during
the usual business hours on any weekday (Saturday, Sunday
or public holidays excluded) from the date of this notice until
the conclusion of the Annual General Meeting and will also
be available for inspection at the place of the Annual General
Meeting from 8.45am on the day of the Annual General
Meeting until its conclusion.
Notes:
1.
Pursuant to Regulation 41 of the Uncertificated Securities
Regulation 2001 (as amended), only those members
registered in the register of members of the Company at
6.00pm on 12 November 2013 (or if the Annual General
Meeting is adjourned, 48 hours before the time fixed for the
adjourned Annual General Meeting) shall be entitled to attend
and vote at the Annual General Meeting in respect of the
number of shares registered in their name at the time. In each
case, changes to the register of members after such time
shall be disregarded in determining the rights of any person
to attend or vote at the Annual General Meeting.
2.
3.
If you wish to attend the Annual General Meeting in person
and 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.
A member who is entitled to attend, speak and vote at the
Annual General Meeting may appoint a proxy to attend, speak
and vote instead of him. A 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 proxy need not be a member of the Company but must
attend the Annual General Meeting in order to represent you.
A proxy must vote in accordance with any instructions given
by the member by who the proxy is appointed. Appointing a
proxy will not prevent a member from attending in person and
voting at the Annual General Meeting will terminate the proxy
appointment). A proxy form is enclosed. The notes to the
proxy form include instructions on how to appoint the
Chairman of the Annual General Meeting or another person
as proxy. You can only appoint a proxy using the procedures
set out in these notes and in the notes to the proxy form.
4.
To be valid, a proxy form, and the original or duly certified
copy of the power of attorney or other authority (if any)
under which it is signed or authenticated should reach
the Company’s registrar, Neville Registrars at Neville House,
18 Laurel Lane, Halesowen, West Midlands B63 3DA,
by no later than 9.00am on 12 November 2013.
83
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Notes to Notice of Annual General Meeting
Resolution 1 – Report and Accounts
All companies are required by law to lay their annual accounts
and reports before a general meeting of the Company, together
with the Directors’ report and auditor’s report on the accounts.
At the Annual General Meeting, the Directors will present these
documents to the shareholders for the financial year ended
30 June 2013.
Resolution 2 – Re‑election of Directors
These resolutions concern the re‑appointment of John Brackenbury,
David Williams, and Alan Foster who are retiring at the meeting by
rotation in accordance with the Company’s articles of association.
Resolution 3 – Election of Director
This resolution concerns the election of Paul Johnson as a Director
of the Company. Paul Johnson was appointed by the Board on
16 January 2013 as a non‑executive Director. Paul Johnson is
required by the Company’s Articles of Association to offer himself
for re‑election at the annual general meeting following his
appointment. Paul Johnson’s biography is set out on page 27.
Resolution 4 – Appointment of Auditors
This resolution concerns the appointment of KPMG LLP as
auditors in place of PriceWaterhouseCoopers LLP as auditors
until the conclusion of the next general meeting at which
accounts are laid, that is the next Annual General Meeting.
Resolution 5 – Auditors’ remuneration
This resolution authorises the directors to fix the auditors’ remuneration.
Resolution 6 – Director’s Authority to Allot Shares
This resolution grants the Directors authority to allot shares in
the capital of the Company and other relevant securities up to an
aggregate value of £372,456, representing approximately 33.33%
of the nominal value of the issued ordinary share capital as at
10 September 2013, being the latest practicable date before
publication of this notice. The Directors do not have any present
intention of exercising the authorities conferred by this resolution
but they consider it desirable that the specified amount of
authorised but unissued share capital is available for issue so that
they can more readily take advantage of possible opportunities.
Unless revoked, varied or extended, this authority will expire at the
conclusion of the next Annual General Meeting of the Company
or the date falling 18 months from the passing of this resolution,
whichever is the earlier.
Resolution 7 – Director’s Power to Issue Shares for
Cash
This resolution authorises the Directors in certain circumstances
to allot equity shares for cash other than in accordance with the
statutory pre‑emption rights (which require the company to offer
all allotments for cash first to existing shareholders in proportion
to their holdings). The relevant circumstances are either where
the allotment takes place in connection with a rights issue or the
allotment is limited to a maximum nominal amount of £55,868
representing approximately 5% of the nominal value of the issued
84
ordinary share capital of the Company as at 10 September 2013,
being the latest practicable before publication of this notice.
Unless revoked, varied or extended, this authority will expire at
the conclusion of the next AGM of the Company or 18 months after
the passing of the resolution, whichever is the earlier. The Directors
consider that the power proposed to be granted by resolution 7
is necessary to retain flexibility, although they do not have any
intention at the present time of exercising such power.
Resolution 8 – Reduction of capital
The Company is also seeking the approval of shareholders to
undertake a reduction of capital. As at 30 June 2013, the Company
had an accumulated deficit on its profit and loss account of
£22,778,000. Until such time as this deficit has been eliminated, the
Company will not have distributable reserves and would therefore
be unable to pay dividends (or make any other similar return of
value) to its shareholders.
The Company (as at 30 June 2013) had an amount of £262,319,000
standing to the credit of its share premium account. The Company
is now seeking the approval of shareholders (by special resolution)
to reduce the capital of the Company by cancelling the amount of
£100,000,000 standing to the credit of its share premium account
(the “Reduction of Capital”) subject to subsequent confirmation by
the Court, as permitted by the Companies Act 2006. Subject to the
special resolution being approved, the Board intends to make an
application to the Court for confirmation of the Reduction of Capital.
Upon the Reduction of Capital becoming effective, the reserve arising
as a result will be utilised to eliminate the accumulated deficit on the
Company’s profit and loss account and, subject to the protection
of creditors, the balance arising will be credited to the Company’s
profit and loss account thus eliminating the current deficit. Prior to
confirming the Reduction of Capital, the Court will need to be
satisfied that the interests of the Company’s creditors are adequately
protected. The precise form of creditor protection which may be
required will be a question for the Court: these may include seeking
the consent of creditors to the cancellation or the provision by the
Company of an undertaking to deposit a sum of money into a
blocked account created for the purpose of discharging creditors
of the Company or to create a special reserve in the company’s
accounts for the benefit of creditors. The Company intends to give
such undertakings as the Court requires and its lawyers advise
is appropriate in the circumstances.
If the resolution is passed it is expected that the cancellation would
become effective during the course of the current financial year and
would not be reflected in the accounts of the Company until it
becomes effective.
The Board considers that the proposed Reduction of Capital is in
the best interests of shareholders and unanimously recommends
that shareholders vote in favour of the special resolution to approve
the reduction.
Avanti Communications Group plcAnnual Report and Accounts 2013 Further Notes to the Annual General Meeting
Introduction
After his opening remarks, the Chairman will explain in detail the procedures for the conduct of the meeting, particularly for asking
questions. The resolutions which are set out in the Notice of Meeting will then be put to the meeting.
How to ask questions
At the meeting, shareholders will be given the opportunity to ask questions. Please explain the nature of your question and give
your name and address. You may be asked to wait until called upon to speak. Please remember to state your name before asking
your question.
Time
The doors will open at 8.30am and the meeting will start promptly at 9.00am.
Cameras, Tape Recorders etc.
No cameras, video recorders, tape recorders or mobile phones will be allowed into the meeting.
Registration
To ensure your entrance to the meeting is dealt with promptly, please bring your attendance card with you and register at the registration
desk inside the building.
Shareholder Information
If you have any questions concerning your shareholding, please speak to Avanti Communications Group plc.
Important
If you have questions about the meeting, or if you need any assistance, please telephone Georgina Newell 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 +
Number of Shares
3,877,652
1,416,038
1,948,301
2,083,112
1,712,153
5,237,133
6,699,010
8,168,551
80,594,899
Number of
Shareholders
2,066
96
64
29
14
23
18
12
18
85
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80 Further Notes to the Annual General Meeting continued
Financial Calendar
• November 2013: Annual General Meeting
• February 2014: Interim results for the six months ended 31 December 2013
• September 2014: Preliminary results for the year ended 30 June 2013
Annual General Meeting
The Annual General Meeting will be held at Jefferies International, Vintners Place, 68 Upper Thames Street, London EC4V 3BJ.
Details of the resolutions to be proposed at the Annual General Meeting are contained in the Notice of Annual General Meeting on page 81.
Dividend
The Directors have not recommended the payment of a dividend for the year ended 30 June 2013.
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.
86
Avanti Communications Group plcAnnual Report and Accounts 2013 T
e
a
r
l
a
o
n
g
p
e
r
f
o
r
a
t
i
o
n
Form of Proxy
for Avanti Communications Group plc
(incorporated and registered in England and Wales under number 6133927) (the ‘Company’)
Proxy form for use at the annual general meeting of Avanti Communications Group plc (the “Company”) to be held at Jefferies International,
Vintners Place, 68 Upper Thames Street, London EC4V 3BJ on 14 November 2013 at 9.00 a.m. (“AGM” or “Meeting”).
I/We
of
being a member/members of the Company entitled to receive notice, attend and vote at general meetings of the Company, hereby appoint
the Chairman of the Meeting (Note 1)
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 AGM dated 10 September 2013 (the “Resolutions” and the “Notice” respectively) and any other business
(including adjournments and amendments to the Resolutions) which may properly come before the Meeting or any adjournment thereof.
I/We direct my/our proxy to vote as follows in respect of the Resolutions (Note 2):
Ordinary Business
For
Against
Vote Withheld
(Note 2)
1
To receive the report and accounts for the year ended 30 June 2013 (ordinary resolution)
2.1 To re‑elect John Brackenbury as a director (ordinary resolution)
2.2 To re‑elect David Williams as a director (ordinary resolution)
2.3 To re‑elect Alan Foster as a director (ordinary resolution)
3
4
5
To elect Paul Johnson as a director (ordinary resolution)
To appoint KPMG LLP as auditors (ordinary resolution)
To authorise the Directors to fix the remuneration of the auditors (ordinary resolution)
Special Business
6
7
8
To authorise the Directors to allot relevant securities (ordinary resolution)
To enable the Directors to allot shares for cash without first offering them to existing
shareholders (special resolution)
To reduce the balance standing to the balance of the share premium account by cancelling
£100 million of such balance (special resolution)
(Note 3) Number of shares in relation to which proxy is authorised to act:
This proxy appointment is one of a multiple proxy appointment (Note 4)
This proxy appointment is signed on behalf of the member under power of attorney or other authority (Notes 5 and 6)
Signed
Dated
87
Strategic review 01–27 Corporate governance 28–44 Financial statements 45–80
Form of proxy notes
1 A member who is entitled to attend, speak and vote may appoint a proxy to
attend, speak and vote instead of him. A proxy need not be a member of the
Company but must attend the AGM in order to represent you. A member wishing
to appoint someone other than the Chairman of the Meeting as his or her proxy
should insert that person’s name in the space provided in substitution for the
reference to “the Chairman of the Meeting” (and delete that reference) and initial
the alteration.
2 Please indicate by inserting an “X” in the appropriate box how you wish your
vote to be cast on the Resolutions. Your proxy must vote in accordance with
any instructions given by you. If you mark the box “vote withheld” it will mean that
your proxy will abstain from voting. A “vote withheld” is not a vote in law and will
not be counted in the calculation of the proportion of the votes “For” and “Against”
a resolution. If you 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 in relation to less than your full voting entitlement,
please indicate on the line provided the number 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 voting entitlement or, if this proxy form has
been issued in respect of a designated account for a shareholder, the full voting
entitlement for that designated account.
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 proxy form
must be deposited for each proxy appointed. Further copies of this form may be
obtained from 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 on the line provided the number of shares in
relation to which the person named on this form is authorised to act as your proxy,
and also indicate by ticking the box provided that the proxy instruction is one of
multiple instructions being given. All forms must be signed and returned to Neville
Registrars Limited, the Company’s registrars, at the address below, 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 the
appointments invalid.
5 To be valid, this proxy form, and the original or duly certified copy of the power of
attorney or other authority (if any) under which it is signed or authenticated, must
be received by post or (during normal business hours only) by hand at the offices
of the Company’s registrars, Neville Registrars Limited, Neville House, 18 Laurel
Lane, Halesowen, West Midlands B63 3DA by 9.00 a.m. on 12 November 2013.
Alternatively, a member may appoint a proxy or proxies by using the CREST proxy
appointment service, by following the procedure set out in Note 11 below. You can
only appoint a proxy using the procedures set out in these Notes and in the notes
to the Notice.
6 An individual member or his attorney must sign this form. If the member is
a company, this proxy form must be executed under the company’s common
seal or signed on the company’s behalf by a duly authorised officer or attorney
of the company, stating their capacity (e.g. director, secretary).
7 The appointment of a proxy will not preclude a member from attending the
Meeting and voting in person. If the member appointing the proxy does so
attend and vote, any proxy appointment will terminate automatically.
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 A member wishing to change his or her proxy instructions should submit a new
proxy appointment using the methods set out, and by the time limit specified,
in Note 5. Any changes to proxy instructions received after that time will be
disregarded. A member who requires another form should contact 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. Subject to Note 4, if a member submits more than one valid proxy
appointment, the appointment received last before the time limit in Note 5
will take precedence.
10 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
or electronically by means of the facilities described in Note 11 below. The
revocation notice must be received by Neville Registrars Limited by the time limit
set out in Note 5. Any revocation notice received after this time will not have effect.
11 CREST members who wish to appoint a proxy or proxies through the CREST
proxy appointment service may do so for the Meeting (and any adjournment
thereof) by following the procedures described in the CREST Manual. CREST
personal members or other CREST sponsored members (and those CREST
members who have appointed a voting service provider) should refer to their
CREST sponsor or voting service provider, who will be able to take the
appropriate action on their behalf.
In order for a proxy appointment or instruction made by means of CREST to
be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must
be properly authenticated in accordance with Euroclear UK & Ireland Limited’s
(“Euroclear”) specifications and must contain the information required for such
instructions, as described in the CREST Manual. The message (regardless of
whether it relates to the appointment of a proxy, the revocation of a proxy
appointment or to an amendment to the instruction given to a previously
appointed proxy) must, in order to be valid, be transmitted so as to be received
by Neville Registrars Limited (ID 7RA11) by the latest time(s) for receipt of proxy
appointments specified in Note 5 above. For this purpose, the time of receipt will
be taken to be the time (as determined by the timestamp applied to the message
by the CREST Applications Host) from which Neville Registrars Limited is able to
retrieve the message by enquiry to CREST in the manner prescribed by CREST.
After this time any change of instructions to proxies appointed through CREST
should be communicated to the appointee through other means.
CREST members (and, where applicable, their CREST sponsors or voting service
providers) should note that Euroclear does not make available special procedures
in CREST for any particular messages. Normal system timings and limitations will
therefore apply in relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or if the CREST member
is a CREST personal member or sponsored member or has appointed a voting
service provider, to procure that his CREST sponsor or voting service provider
takes) such action as shall be necessary to ensure that a message is transmitted
by means of the CREST system by any particular time. In this connection, CREST
members (and, where applicable, their CREST sponsors or voting service
providers) are referred, in particular, to those sections of the CREST Manual
(available at www.euroclear.com/CREST) concerning practical limitations
of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances
set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001
(as amended).
88
Avanti Communications Group plcAnnual Report and Accounts 2013
Company Number
6133927
Bankers
HSBC Bank Plc
70 Pall Mall
London
SW1Y 5EZ
Solicitors
Osborne Clark
2 Temple Black East
Temple Quay
Bristol
BS1 6EG
Registered Auditors
KPMG LLP
15 Canada Square
London
E14 5GL
Officers and Professional Advisors
Directors
F E J G Brackenbury CBE
Chairman
D J Williams
Chief Executive
D J Bestwick
Technical Director
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
P Walsh
Non‑Executive Director
P Johnson
Non‑Executive Director
Secretary
P Willcocks
Registered Office
Cobham House
20 Black Friars Lane
London
EC4V 6EB
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Avanti
Communications
Group plc
Cobham House
20 Black Friars Lane
London EC4V 6EB
www.avantiplc.com