Q1 Trading Update
Avanti Communications Group plc
Q1 Trading Update
London – 13 November 2014. Avanti Communications Group plc (AIM: AVN, “Avanti” or “the Company”), the satellite operator, has published today its trading update for the three months ended 30 September 2014.
- 22 new contracts in the period
- Significant progress with large scale African education market: three new projects awarded
- New defence customer signed, and the first 4G cellular backhaul service deployed
- Finalised procurement contracts for HYLAS 4 under budget by $50m
- Launch of three unique industry technical innovations to widen competitive advantage
- 3 month revenues of $15.5 million as guided previously
- 3 month EBITDA of $(2) million
- Cash at period end of $143.2 million
- Net Debt at period end of $372.3 million
- Backlog at 30 September 2014 of $420 million
- Average days on pipeline continued to improve to 87 days
- Repeat rate remains over 50%
Commenting, David Williams, Avanti Chief Executive said: “The key to our business now is continuing to sign the highest quality customers who will distribute the products in increasing scale; to support their growth, keep them loyal and ensure that we have strong long term relationships. We do this by focusing on the quality of our product and the way it is delivered by our people, and by maintaining flexibility to unique customer requirements in each local market. If we continue to get this right, strong profitability will follow.”
Chief Executive’s Commentary
During the quarter we signed 22 new contracts across our four sectors. We now have a total of 149 customers.
Backlog at the end of the quarter was $420 million having taken $15.5 million from backlog to revenue. As we guided at the full year, the fourth quarter included some large project revenues. These one offs can be expected to occur again from time to time, and are associated usually with either the systems integration elements of large complex transactions or one off capacity sales of steerable beams – there were none of these in Q1. The new contracts signed, in what is generally a quiet Summer quarter, were primarily framework in nature, resulting in this modest fall in net backlog from the year end. However, with the repeat rate remaining above 50% and the average time prospects remain on pipeline continuing to fall, we are confident that our distribution strategy is working. Customers sign framework contracts more easily than large upfront commitments and delivering experience of our product is the most powerful form of advertising for us, usually resulting in increased orders. This was demonstrated by 16 contracts in the period from existing customers expanding capacity in existing or new territories, whilst 6 were brand new customers. Our service providers were awarded three new large scale schools projects in the year (exclusive to Avanti but revenues are not yet in backlog). We signed a new defence customer in the period, and deployed what we believe to be the World's first 4G cellular backhaul service, only shortly after our World first 3G service was announced earlier in the year. We have also seen new interest in inward investment into African Internet projects from a number of large international companies, so our market is developing well.
We concluded the initial funding of HYLAS 4 in June, since when we have finalised the procurement contracts with Orbital Sciences and Arianespace, which will more than double our total fleet capacity and complete our sub Saharan coverage. The efficient procurement of the Satellite and Launch has generated significant savings on our original HYLAS 4 budget and as a result the balance of the financing requirement, through junior capital and High Yield Bonds, has also been reduced. Initial marketing has resulted in strong reaction from existing customers for the new beams and we expect to expand many customers’ existing contracts to cover new HYLAS 4 territories.
Avanti competes in the market not only based on the exceptionally low price and high speeds that are a function of the use of Ka band, but also on the quality and flexibility of its technology. Avanti's unique variant of Ka band is based on over 60 separate inventions, many of which are patented or patent pending. During the period we continued to enhance the system with the introduction of three new technologies. A proprietary "SNG" booking system makes it easy for Outside Broadcasters to flexibly deploy low cost capacity, building on the success we saw with broadcasts from South Africa this year. A new smartphone installation tool which also works with Google Glasses was deployed to make the installation process deskilled and faster, which is crucial when aiming for scale in markets like consumer broadband. Finally "Multi-Beam VNO", a unique technology enabling Avanti customers to share capacity between different beams and geographies, was launched to a warm reception from our customers, because it makes their investment more efficient in the early phase of deployment. Through constant customer focused innovation, we are maintaining the competitive advantages that keep customers loyal to our managed service approach.
Current Trading and Outlook
Avanti has gained an unparalleled reputation for Quality and Flexibility with both new and existing customers. Even in our quietest Summer quarter we signed 22 new contracts and we expect that momentum to carry forward into the next quarter and the year as a whole. Some of the new contracts in respect of which we will recognise revenue in the next quarter will have set up costs associated with them and generate similar margins as those in quarter one. We still have selling to do to achieve our growth target for the year but there are a dozen large projects at RFP stage or beyond that can help us to achieve this, as well as good signs of existing customers growing strongly. We are getting the fundamentals right and building a strong base.
For further information please contact:
Avanti Communications Group Plc Tel: +44 (0) 20 7749 1600
David Williams, Chief Executive
Nigel Fox, Finance Director
Cenkos Securities plc Tel: +44 (0) 20 7397 8900
Max Hartley (Nomad)/Julian Morse
Jefferies Hoare Govett Tel: +44 (0) 20 7029 8000
Tulchan Communications Tel: +44 (0) 20 7353 4200
Redleaf PR Tel: +44 (0) 2073824734
Dwight Burden/Hannah Nicolas
- Avanti is a carriers’ carrier, selling wholesale data telecoms to service providers which use them to create networks for enterprise, carrier, government and consumer users.
- Avanti serves customers in Europe, Middle East and Africa.
- Avanti's network consists of two high throughput satellites in orbit, called HYLAS 1 and HYLAS 2 and a multiband satellite called Artemis plus a fourth and a fifth satellite under construction called HYLAS 3 and HYLAS 4 and an international fibre network connecting data centres in several countries.
- Customers access the fleet through the Avanti Cloud platform, the most powerful proprietary system in the Industry.
- Avanti Communications has GEO satellite network spectrum filings in the ITU Master Register for Ka band at 33.5° West and 31.0° East and for Ka, Ku