10 July 2013
Avanti
Communications Group
plc has
published today a
trading update for
the year ending 30
June 2013.
- Revenues below
market consensus as
a result of timing
movements of certain
contracts
- Positive
outlook from recent
contract wins with
£42m in order book
for FYE June 2014
- Contract
wins with major
telecoms and media
companies including
Vodafone,
Technicolor, CNN
-
Accelerating success
with the leading
satellite service
providers with new
contracts
with Speedcast,
TTCom and Bentley
Walker amongst
others
- Company
was operating
cashflow positive in
June
Revenue
guidance for the period
included the value of
several major contracts
in Africa that
were expected to close
before 30 June 2013 but
which are now expected
to be completed in the
next financial year. At
the same time, since the
period end, the revenue
due from a contract
which was signed during
the financial year is no
longer assured. As a
result, revenues for the
financial year ended 30
June 2013 are likely to
be up to £10m below
previous market
consensus.
Sales progress was
otherwise
encouraging, with
particular success
in signing contracts
with major telecoms
and media companies
including Vodafone,
Technicolor and CNN.
We are also pleased
that the highest
quality specialist
VSAT service
companies are also
choosing Avanti,
with major
new contracts in the
year with Speedcast,
TTcomm and Bentley
Walker amongst
others.
During the
year the HYLAS 2
satellite launched.
Some customers
started service
later in the
second half than
expected and the
average HYLAS 2
customer was
invoiced for three
months during
the financial
period.
Avanti is succeeding
in application areas
where customers
value the quality
and flexibility of
its systems
and Avanti has key
advantages. As a
result this year 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 two
further networks are
at pilot stage;
- Several
contracts to provide
our Satellite News
Gathering service in
Africa, Middle East
and Europe;
- Exclusive
pan‐European
contract for video
distribution;
- An
exclusive contract
for consumer
broadband provision
with a Eurostox50
customer;
- Several
contracts via
service providers or
directly to build
networks for
government customers
in Europe, as well
as Africa and Middle
East; and
- Avanti has
also seen a benefit
from the reduction
in defence spending
as service
providers supplying
the sector seek more
flexible and cheaper
solutions. Several
service
providers flourished
with us in this
market and some
regional beams are
almost full.
We have
learned that the easiest
way to progress with
approvals from major
multinational companies
is to sign framework
agreements under which
purchase orders can then
be made. Whilst these do
not add to backlog
initially, they
circumvent lengthy
approval processes and
we found that orders
were produced rapidly
under them, and thus
should make a
significant contribution
to revenues in 2014. 40
new contracts were
signed in total in the
second half. Total
customers now number 96.
Our KPI reporting
has not generated
clarity, so in
direct response to
the question we are
asked most often
by shareholders, we
will now report our
backlog, (i.e. order
book), for each of
the next
three years. Backlog
for these three
periods currently
stands at:
FYE June 2014: £42m
FYE June 2015: £46m
FYE June 2016: £40m
We expect orders
under framework
contracts (not
included in
backlog), new
contracts and
possible renewals
(of contracts
expiring between
2014 and 2016) to
increase these
numbers. We note
that new backlog
added in the year
fell below our
target at an average
of £7m per month due
to the contract
slippages and focus
on framework
contracts with large
customers.
In June we achieved
our objective to
become cash flow
positive at the
operating level.
Operational
performance of our
networks continues
to be outstanding.
We delivered a 12
month Service
Level Agreement
performance across
the fleet exceeding
99.9%.
Avanti’s spectrum
filing for HYLAS 2
at 31.0 East has
completed the final
stage in the
standard ITU registration
process and been
recorded in the
ITU’s Master
Register. Avanti is
secure in its rights
to use spectrum and
is protected from
harmful interference
from other
satellites.
Avanti remains
conservatively
financed, with a
very long term
repayment profile on
its debts and remains
in full compliance
with all covenants.
We ended the year
with a cash balance
of £38m and gross
debt of £205m.
David Williams,
Chief Executive,
commented:
“We designed our
fleet with an
emphasis on quality
and flexibility. As
a result, our
products have competitive
advantages which
enable us to win
good business with
strong customers,
albeit later than
hoped. The progress
we have made this
year in selling to
large multinational
companies
in applications like
cellular backhaul,
video distribution
and government
networks have shown
that Avanti can
create World firsts
with its superior
technology and this
points the way to
filling our fleet.”
John Brackenbury,
Chairman, Commented
“We are only a few
months in to billing
on HYLAS 2, and it
is clear that we are
winning significant business
with good customers.
We have also won
important business
on HYLAS 1 as a
result of technical
advantages. Whilst
forecasting the
precise timing of
revenue trajectory
in this
emerging business
has been difficult,
I am confident that
the outlook for
filling our fleet is
strong."
