Avanti Communications Group Plc Year End Trading Update (9820I)

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RNS Number : 9820I

Avanti Communications Group Plc

10 July 2013

Avanti Communications Group plc

Year-end trading update

London - 10 July 2013. Avanti Communications Group plc (AIM: AVN, "Avanti" or "the Company"), the satellite operator, 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 GBP42m 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 GBP10m 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: GBP42m

FYE June 2015: GBP46m

FYE June 2016: GBP40m

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 GBP7m 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 GBP38m and gross debt of GBP205m.

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.

---ENDS---

For further information please contact:

Avanti Communications Group Plc Tel: [phone]

David Williams, Chief Executive

Nigel Fox, Finance Director

Cenkos Securities plc Tel: [phone]

Max Hartley (Nomad)/Julian Morse

Jefferies Hoare Govett Tel: [phone]

Neil Collingridge/John Fishley

College Hill Tel: [phone]

Adrian Duffield/Kay Larsen

About Avanti

-- Avanti sells satellite data communications services to telecoms companies which use them to supply residential, enterprise and institutional users.

-- Avanti's first satellite called HYLAS 1, launched on November 26th 2010 and was the first superfast broadband satellite launched for Europe.

-- Avanti's second satellite, called HYLAS 2, launched on August 2nd 2012. It extended Avanti's coverage to Africa, Caucasia and the Middle East.

-- Avanti's third satellite HYLAS 3, to be launched in partnership with ESA in 2015, will provide further capacity in the EMEA region.

               --     83% of Avanti's fleet capacity addresses the emerging telecommunications markets of Africa, 

Caucasia and the Middle East.

This information is provided by RNS

The company news service from the London Stock Exchange

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