Avanti Communications Group plc Interim Report

Avanti Communications Group plc Interim Report

The Board of Avanti Communications Group plc, the satellite operator, announced its Interim Results for the six months ended 31 December 2011.

Key Points:

  • £75m raised through share placing to fully finance HYLAS 3 through a partnership with the European Space Agency ("ESA")
  • HYLAS 2 on track for delivery in June 2012. One month launch window opens 30th June
  • Sales momentum accelerating, £23m announced in the last two months.   
  • Backlog at end December 2011 of firm orders of £181m
  • Pipeline of transactions in negotiation of £530m (excluding £170m options on HYLAS 2)
  • Almost at cash break-even after just eight months of HYLAS 1 service
  • Increasing demand for Ka band capacity sees reduction in estimate of time to fill HYLAS 2 from five years to four years, and HYLAS 1 on track to hit three year target.

Financial highlights:

  • Revenue  at £5.1 million (2010 : £1.2 million)
  • Operating cash outflow before working capital of £1.2m (2010: outflow £5.8 million)
  • HYLAS 2 insured for $328 million at 8.8%.
  • Cash balances £26 million (June 2011: £38.8 million)
  • HYLAS 2 debt $227 million (June 2011: $190 million). $101 million facility undrawn

"I am delighted that we have raised the capital required to fully finance our third satellite, HYLAS 3.  We will once again work with the European Space Agency, with whom we had a very successful partnership on the development of HYLAS 1.  The project delivers attractive returns, flexible capacity and a low risk profile. 

"In our European business, underlying demand is evident, but sales experience differs between Northern and Southern Europe.  In the North, service providers are expanding aggressively and successfully with us.  In the South, we are having to work harder to activate this demand.  In the Enterprise, backhaul and Military segments, we are finding that the flexibility and resilience of our satellite design is allowing us to seize opportunities through technical competitive advantage.  Sales momentum has accelerated lately with £23m of new contract wins announced in the last two months.  A full HYLAS 1 could generate approximately £50m in annual revenue.  We expect to reach full saturation at the end of the third year in service.  In the first full year of operation, the year to June 2012, we expect to achieve at least one third of that level of revenue, no less than £17m.  We believe this is a reasonably encouraging start in achieving a straight line in the direction of our target.

"As we approach the launch of HYLAS 2, demand in Emerging markets is strong and we are seeing increasing orders and enquiries for Ka band capacity from large and small customers. The typical order size for HYLAS 2 is far larger than on HYLAS 1.  Our confidence in the strength of demand is illustrated by our reduction in the target period in which we will sell-out the capacity on HYLAS 2 from five years after service launch to four years. We maintain our expectation for full sell-out within three years for HYLAS 1.

"Avanti is well positioned to benefit from demand growth and market adoption of new satellite technology. We are particularly fortunate that, following the launch of HYLAS 2, over 70% of our fleet capacity will be dedicated to emerging markets which are experiencing high underlying economic growth.  With the launch of HYLAS 3, this will increase to over 80%."

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