Avanti Communications Group plc Interim Results Presentation

Transcription

1 Avanti Communications Group plc Interim Results Presentation February 2014 MONETISING GLOBAL DATA GROWTH

2 Presenters Today David Williams: Chief Executive Co founded Avanti in 2002 Ten years of prior experience in financing telecommunications projects Nigel Fox: Finance Director Chartered accountant Extensive range of senior finance roles in tech companies prior to joining Avanti in

3 Summary of the Half Year Sales up 81%, EBITDA positive Customer acquisition Strategy is working 40 new contracts in half, 122 customers Sales Momentum growing across all four sectors Global scale customers are buying market acceptance is achieved Government, Carrier and Enterprise strong, W. Europe broadband improving Artemis satellite acquisition completed $370m bond offer closed successfully Paul Walsh became Chairman Designate, will become Chairman in March 2014

4 Financials

5 Financial Highlights Change to USD reporting $370 million bond issue in September 2013 Took ownership of Artemis satellite and spectrum rights at end of period Revenues increased by 81% to $25.0 million (Dec 12 $13.8 million) Backlog now at $455 million $76 million of that backlog goes to revenue in 2015 $78.3 million cash at period end Avanti Communications Group plc 4

6 Income Statement Period ended 31 Dec 2013 $ 000 Period ended 31 Dec 2012 $ 000 Year ended 30 June 2013 $ 000 Revenue 24,961 13,819 32,125 Costs of sale (excl depreciation) (15,071) (8,547) (19,517) Overheads (excl depreciation) (15,394) (13,607) (27,087) Other Operating Income 6, ,513 EBITDA 996 (7,398) (12,966) Depreciation (23,657) (16,089) (39,853) Interest (19,128) (1,976) (6,065) Loss before tax (41,789) (25,463) (58,884) Basic loss per share (cents) (38.68) (20.41) (44.49) 5

7 Overheads Period ended 31 Dec 2013 $ 000 Period ended 31 Dec 2012 $ 000 Year ended 30 June Overheads Employment costs 9,192 7,966 16,028 Share based payments Non satellite depreciation 1, ,394 SG&A and other 5,918 5,313 10,474 TOTAL 16,581 14,329 28,484 Headcount

8 Balance Sheet 31 Dec 2013 $ Dec 2012 $ June 2013 $ 000 Non-current assets 647, , ,193 Current assets 112, ,962 83,893 Total assets 760, , ,086 Current liabilities 36,577 34,689 55,061 Total liabilities 412, , ,774 Total equity 347, , ,312 Total liabilities and equity 760, , ,086 7

9 Net Debt 31 Dec 2013 $ June 2013 $ 000 Bank debt and finance leases (362,531) (313,049) Cash 78,297 58,699 Net debt (284,234) (254,350) The bond of $370 million is disclosed net of the costs of debt issuance of $11.9 million as at the end of December

10 Cash Flow 9

11 Strong and Diversified Backlog Strong near term backlog supports highly visible revenue projections Diversified backlog across end market, geography and contract length significantly lowers risk profile Near Term Backlog Rolloff ($m) Millions FYE June 2015 FYE June 2016 Peak Utilisations Backlog Composition By End User Enterprise 48% Carrier 2% Government 20% Broadband 30% Backlog Composition By Customer Location Note: Framework contracts do not add to Peak Utilisation until monthly orders received 10

12 Business Update I Carrier Services early success now translating more broadly Our first commercial 3G backhaul network signed was further extended in the period Several new 3G Backhaul Pilot Projects were initiated in Africa in January Enterprise becoming more mainstream New customers signing include Internet Solutions (NTT), Hermes, Globecomm Existing customers like Bentley Walker extending capacity based on success Mainstream acceptance of SNG Avanti live now from Sochi and RSA in December Government Avanti solving the big needs: Major opportunities in both Security and Civil One $15m contract awarded for Africa network in the period Broadband different competitive environments Market is growing well in Africa with little competitive pressure Avanti is installed with all incumbent telcos now in our main markets in Africa Europe has been price competitive but we are winning business from rivals based on service quality recently Avanti Communications Group plc 11

13 Business Update II ARTEMIS Short Term revenues, New Valuable spectrum Avanti participated in an auction held by the ESA and won the rights to acquire the Artemis data relay satellite and associated orbital slot and spectrum at nil cost Artemis was launched in 2001, costing 720 million (c. 620 million equivalent) Located at 21.5E, with spectrum in several bands: 2.7 GHz of high value Ka band FSS spectrum 22 MHz of S band used for inter satellite links (ISL) and drone communications 2.1 MHz of L band MSS spectrum currently used for satellite mobile services L band navigation (RNSS) spectrum used to support EGNOS navigation enhancement 8 MHz of Ku band FSS spectrum used for feeder links Short term revenue opportunities mainly in Ka band data relay Positions Avanti strongly to use the 21.5E orbital slot for a future HYLAS project to serve the EMEA region Bond issuance success $370m first time issuance Repaid existing debts 181 Basis Points below B/Caa1 New Issuer average for % Oversubscribed Highly experienced satellite investor base 12

14 QUESTIONS AND ANSWERS

15 Company Overview

16 Strategy Objective: To be a World Leader in Ka Band Satellite communications Axioms: The World s demand for data will rise indefinitely Technology must remain flexible to accommodate change High growth markets carry the highest returns for satellite service Strategy Extend comprehensive coverage in EMEA for scale and resilience Sell to service providers in telecoms and media Wholesale managed service with maximum flexibility to adapt to change Quality SLA not low price Avanti Communications Group plc 15

17 Avanti An Established Track Record in the Satellite Industry License awarded in m grant funding from ESA Balance of HYLAS 1 funded with equity and debt Avanti floated on AIM in present form Raised 89m of equity in January 2010 to fund HYLAS 2 HYLAS 1 launched November 26, 2010 Raised 70m of equity in order to repay HYLAS 1 debt $370m Bond issued Ba1 10% Raised 75m of equity for HYLAS 3 HYLAS 2 launched August 2, Founded in 2002 Raised 32m of equity to fund the upgrade of the HYLAS 1 launch service provider HYLAS 1 service commenced April 2011 HYLAS 3 project work commenced HYLAS 3 expected launch To date, Avanti has raised > 260 million in equity from a blue chip, institutional investor base, creating an EMEA Kaband market leader with two operating, revenue generating satellites and one in construction 16

18 Why Ka band? Satellite spectrum bands Ka band Advantages Frequency range (GHz) Band Usage / markets Broader reception L S C Mobile satellite services Mobile satellite services Hybrid satellite terrestrial mobile network Cable head end broadcasting Video trunking Higher data throughput Highly efficient Higher frequency range and spectral efficiency enables larger data carrying capacity Ka band wide transponders ( MHz), 10 fold Ku band transponders (27 54 MHz) Multiple spot beams are used to cover the same territory Frequency re use allows depth of coverage Ka frequencies ( 30 GHz uplink & 20 GHz downlink) twice those used by Ku ( 14 GHz uplink and 12 GHz downlink) X Ku Military Feeder links DTH broadcasting Enterprise VSAT Military applications Costeffective Lowest cost/mb produced relative to competing offerings Customer equipment (dish + modem) is cheaper and easier to install Ka band capacity may be sold at <50% price of Ku band in many markets, and with higher speeds Higher data rates Ka Broadband applications Enterprise VSAT Mobile backhaul Military applications Large addressable market Cheaper for traditional Ku band markets (milsatcom, enterprise VSAT, mobile backhaul) as well as new markets (consumer broadband, IP Trunking) Technological superiority and efficiency allows for cheaper cost/mb produced 10x Ku band capacity 17

19 Ka Band Is The Fastest Growing Frequency Band Ka is expected to be the fastest growing band in terms of both transponders and revenues and will make a positive impact on global supply and eventually lower demand for traditional Ku and C bands Ka band will open up new satellite possibilities in Africa, as applications including trunking and cellular backhaul services, broadband access, video distribution, enterprise networks and government communications will demand more Ka band capacity in the future As the first operator outside the US to embrace Ka band satellites, Avanti is well positioned to take advantage of the attractive growth dynamics Global Satellite Transponder Market Percent Sales Breakdown By Band 2010A 2017E Ku band 49% C band 15% Ka band 21% Ka band 54% Ku band 31% Source: Frost & Sullivan (May 2012). C band 30% 18

20 Trends In Key Target Markets Are Highly Attractive Total Revenue ( m) Transponder Demand (36 MHz TPEs) Macro Highlights Europe 7,000 6,000 5,000 4,000 3,000 2,000 1,000 4,920 5,393 3,960 4,402 3,633 3,268 2,882 2, CAGR 12.6% 39.4% 7.5% 0.8% 9,000 7,500 6,000 4,500 3,000 1,500 3,688 4,086 4,892 5,185 5,476 5,744 6, CAGR 7, % 19.2% 4.4% 2.7% Europe remains the most congested region for satellite communications The region has the highest population density, which also make wire line and wireless communications very tough competitors Satellite operators in Europe are just now utilizing Ka band, which will continue and ramp up through the forecast period European Ka band pricing is expected to increase in the forecasted period Middle East 1, CAGR 7.3% 24.2% 4.3% 2.3% 3,500 2,800 2,100 1, CAGR 28.5% 2,858 2,593 2,197 1, % 1, % 5.2% The Middle East is the world region with the strongest demand The region has the least amount of capacity versus demand due to the U.S. military s presence and needforhigh speed communications Regional lack of supply for transponders over the Middle East will keep lease pricing high for the immediate future Africa C band Ku band Ka band CAGR 22.8% 63.8% 18.8% 12.1% Source: Frost & Sullivan (May 2012). Converted from USD assuming $ / FX rate of , CAGR % % % 11.9% Africa is the smallest of Avanti s major target markets, but is expected to grow the fastest The high growth reflects a combination of emerging economies and a lack of wire line or wireless communication infrastructure in the region Africa will also see solid growth due to the development of oil and gas resources on the continent and in the offshore regions, which drives the need for satellite communication 19

21 An Established & Growing Bandwidth Infrastructure Key Fleet Data HYLAS 1 HYLAS 2 HYLAS 3 Artemis Launch Date November 2010 August 2012 Early 2016 July 2001 Service Life 15 years 15 years 15 years (from launch) 15 years Remaining Propellant Life (12/31/12) 13.5 years 14.7 years N/A 3 years Orbital Position 33.5 West 31 East TBD 21.5 East Footprint Europe EMEA EMEA EMEA Capacity (GHz) Insurance Coverage $185million $312 million N/A TPL $60m Features Flexible power shifting between beams PPP with ESA 44 beams available Two steerable beams Single steerable cluster of beams JV with ESA Ka/S band Intersatellite Link L band mobile payload EGNOS Navigation Payload 20

22 A Resilient Ground Infrastructure Avanti owns three Gateway Earth Stations (GES): Goonhilly, UK (HYLAS 1 and 2) Hamlyn, Germany (HYLAS 2) Nicosia, Cyprus (HYLAS 2) Plus Back up Antenna facilities All GES fibred to the main Internet PoPs in Europe Note: ARTEMIS acquisition to be completed shortly 21

23 Proprietary Cloud Platform and Broad Service Offering Avanti Cloud Three Products SPs access fleet via Proprietary Avanti Cloud Creates virtual networks, unlimited configuration options The benefits of network ownership without the cost PURE CUSTOM MHz bandwidth and hosting Build with your own components For established Service Providers. Virtual Network Operator Virtualised IP throughput For flexibility and scale SELECT Off the shelf end user accounts Pre-packaged accounts Low risk start or OU Your Hub

24 Best In Class Products through Quality and Flexibility Quality Flexibility Full Coverage 100% national coverage of primary countries Overlapping beam patterns (no in country coverage gaps) Service providers can offer truly national service with consistent quality Unique Avanti Operational Support System (OSS) Proprietary OSS, backed up by high levels of training and support puts service providers in total control, allowing them to configure and manage service as if they owned the satellite fleet High Spectral Density, Compact Customer Premises Equipment Service providers can use the smallest possible terminals providing a cheaper, attractive and more efficient way of delivering bandwidth to customers Multi Vendor Platform Open architecture enabling the use of any vendor s hub or modem to satisfy service providers preferences for vendor hardware Smart Beam Clustering 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 Contracting Flexibility Three methods of operation/contract to suit their own risk appetite, technical capability and budget: raw bandwidth, managed megabit and packaged customer accounts and change between them as business evolves Diverse Networks Deliver Resilience Avanti s ground network is protected from atmospheric events Redundant ground earth station with market beating SLAs with no atmospheric outages at gateway Niche Applications Avanti s cloud enables service providers to form their own applications using their own hardware, software and skills Significant R&D to date has accelerated customer's service offerings 23

25 Attractive Key End Market Dynamics Estimated Total Market Size in Avanti s coverage areas : 351 GHz Carrier Services Avanti has World first in Ka band Mobile backhaul Our data from initial projects suggest satellite backhaul needed in one base station per 89k in Africa EU and 113k in EU This suggests 15,632 Base Stations in our coverage area, assuming 50% network sharing MARKET SIZE: 81Ghz Enterprise Data The traditional Market for VSAT Corporate users Specialist service providers are now churning from Ku band to Ka band Industry Installed base in EMEA of 474k customers expected to grow by 2016 by 32% thus opportunity for Avanti is in growth and churn MARKET SIZE: 34 GHz Government US sequestration process limits spending, yet underlying demand factors are rising Thus service provider are seeking better value for money Also, in Africa, most governments have launched projects to connect schools, healthcare and police facilities which can only be done with satellite MARKET SIZE : 28 GHz Broadband Ka band an established broadband technology in US HYLAS 1 and 2 gives full coverage of 50 countries with a population of 708 million In UK, 2% of population needs satellite, according to HMG If this applies in EMEA, it is 18m users in our coverage area MARKET SIZE: 208 GHz Market Size assumption sources: Avanti customer usage, customers demand predictions, UK Government and CTO statistics, EUROCONSULT 24

26 Strong Experienced Board of Directors Chairman John Brackenbury CBE Founder Chairman of Avanti. John is a leading industrialist with over 40 years experience in the public and private equity Executive Directors David Williams: Chief Executive Co founder of Avanti. Prior to this, David spent ten years working in the city financing telecoms projects Nigel Fox: Finance Director Nigel is a Chartered Accountant and held a number of senior finance roles before joining Avanti in 2007 Matthew O'Connor: Chief Operating Officer Matthew joined Avanti in 2005, previously MD at Telewest and General Manager BT David Bestwick: Technical Director Co founder of Avanti. Prior to this David worked as an engineer at Marconi and Vega Non Executive Directors Alan Foster Former senior partner of dezoete & Bevan and Deputy Chairman of BZW Asset Management William Wyatt Will is CEO of Caledonia Investments plc. Non Exec Director of Bristow Group Inc, Cobepa and Melrose Resources plc Paul Walsh, Chairman Designate Paul Walsh is the former CEO of Diageo plc. He has held commercial and finance positions in Grandmet and was appointed CEO of Diageo in 2000 Richard Vos Telecoms and satellite professional with 36yrs experience, previously Chairman of Inmarsat Paul Johnson For the last 12 years he was Chairman of KPMG London and Eastern Counties and a member of KPMG's UK Markets Executive Professor Michael Walker OBE Previously Group Research and Development Director for the Vodafone Group of companies. Chairman of the Board of the European Telecommunications Standards Institute 25

27 SUMMARY Strong Credit Profile Leading Provider of Ka band Services in Growth markets Strong, Experienced Management Superior Competitive Positioning Blue Chip Customer Base Unique Product Offering Highly Visible Revenue and Strong Backlog Substantial Collateral Value Underpinned by Young Fleet and Attractive Orbital Slots Multi Layered Barriers to Entry 26