TIDMAVN
RNS Number : 6010B
Avanti Communications Group Plc
10 June 2019
10 June 2019
AVANTI COMMUNICATIONS GROUP PLC
Audited results for the 18 months ended 31 December 2018
Avanti Communications Group plc ("Avanti", the "Company" or the
"Group"), a leading provider of satellite data communications
services in Europe, the Middle East and Africa, issues the
following audited results for the financial period ended 31
December 2018. The report and accounts for the 18 months ended 31
December 2018will shortly be available from the Company's website
www.avantiplc.com.
Highlights
-- Changed financial year end to 31 December 2018
-- Revenue of $73.7m for the 18 month period (12 months to June 2017: $56.6m)
-- Appointed new CEO, Kyle Whitehill, and strengthened the Senior Executive team
-- Successful launch of HYLAS 4 in April 2018
-- Completed the debt for equity restructuring
-- Successfully recovered outstanding debt from Government of
Indonesia after an arbitration process
-- Transitioned the business to delivering improved bandwidth
revenue from a higher quality customer base
-- Raised additional 1.5 lien debt financing post period end to
fully fund the current business plan
-- Impairment provision against HYLAS 2 & HYLAS 2B as a
consequence of higher WACC and lower average yields
Kyle Whitehill Avanti's CEO said:
"We can look forward to a positive future. We have an enviable
network of assets, demand in our coverage is growing and the
actions taken in the last 12 months to re-focus the business and to
bring in new commercial talent to the executive team should bring
rewards in the near term."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 ("MAR"). Upon the
publication of this announcement, the inside information is now
considered to be in the public domain for the purposes of MAR.
For further information please contact:
Avanti: Nigel Fox, +44 (0)207 749 1600
Cenkos Securities: Max Hartley / Katy Birkin, +44 (0)207 397
8900
Newgate Communications: Adam Lloyd, +44(0)20 3757 6767
Chairman's statement
2018 was a year of significant change for Avanti. I must first
thank Alan Harper for stepping in as Interim Chief Executive until
April 2018. Alan provided steadying experienced leadership for the
business through what can often be a vulnerable time.
It is clear that whilst Avanti has a very good set of assets in
its satellites, ground segment network and orbital slots, it has
for some time struggled to deliver sufficient bandwidth revenue
from these assets. This has led to the need for Avanti to find a
new direction and has resulted in the impairment of HYLAS 2 and 2B
reflected in the accounts. I believe that this has now been
achieved and that the company has started to transition towards a
stronger future path.
Three key events occurred in April 2018 that have set the
foundations for a new start for Avanti. Firstly, we welcomed our
new Chief Executive, Kyle Whitehill, who in a very short period of
time has transformed the focus and priorities of the business which
he discusses in his review that follows. Kyle has held various CEO
roles in the Telecommunications industry, most recently CEO of
Liquid Telecom South Africa, formerly known as Neotel. Previously
Kyle spent 15 years with Vodafone Group plc, holding various CEO,
COO and Executive Board Member roles in 4 continents.
Secondly, and of equal importance, was the successful launch of
HYLAS.4. This excellent spacecraft completes our coverage of
sub-Saharan Africa and, with four powerful steerable Ka-band beams,
provides dynamic flexibility that is both scarce and in high
demand. We are grateful to Orbital Sciences and to Arianespace for
the safe delivery of this key asset which more than triples our
available capacity.
Finally, we completed our balance sheet restructuring. On 26
April, our shareholders agreed to issue new shares to repay all of
the 2023 notes which reduced the Group's debt by $557m. In
addition, the Board agreed with our Bondholders to reduce the
interest rate on the 2021 notes to 9% with the ability to pay cash
or roll up the interest as appropriate and to extend the maturity
of the notes to 2022. I would like to thank all of our stakeholders
that helped us through this process.
As recently announced, subsequent to the balance sheet date, the
Group has successfully completed a consent solicitation process
over debt facilities amendments that has enabled it to enter into a
new 1.5 lien debt facility of up to $75m. As part of the consented
amendments, we have agreed an option to extend the maturity of our
existing Super Senior Facility by 6 months to December 2020. This
additional funding will enable the Group to meet its remaining
capital expenditure requirements related to the HYLAS 3 and HYLAS 4
projects, whilst also providing the cash to meet the Group's
working capital needs and support future EBITDA growth.
HYLAS 3 is now due for launch in quarter 3 of this year and will
complete our investment cycle for the foreseeable future. It will
supplement HYLAS 4 over Africa and provide additional steerable
capacity.
As I said at the beginning, 2018 has laid the foundations for a
new start for Avanti and the changes that Kyle had made to the
Executive team means that the Company has new momentum and a bright
future. After 5 years as Chairman I will be stepping down at the
General Meeting in June and, as previously announced, will be
handing over the Chair to Alan Harper, knowing that, despite
falling capacity prices and increased competition in some markets,
we have a strong and focused Executive team with supportive
shareholders.
Thank you to our employees, customers, suppliers and investors
for their ongoing support.
Operating review
Chief executive's review
Our satellites provide high performance, affordable connectivity
to governments, businesses and individuals across EMEA either
directly through satellite dishes installed at the user location,
or by providing backhaul connectivity to mobile networks.
As I start my second year as your Chief Executive I can reflect
on the changes that have happened over the last 12 months. Upon
joining the business, I was delighted to find that I had inherited
a world class network and recognised that the focus needed to be on
the strategy to monetise the investment you had made in that
network.
Our strategy
Historically our bandwidth revenues had been earned from the
consumer broadband sector. Avanti had been successful in winning a
reasonable proportion of that market. It became clear to me that,
in order to fill our fleet quickly and at good yields, our focus
needed to be elsewhere. Consumer Broadband remains part of our
strategy but, over time, will be a smaller constituent of our
bandwidth revenues.
The satellite industry has always bought capacity from each
other and historically that was an opportunity from which we had
not seen any traction. It is now one of our main priorities and we
have developed a wholesale division which is already beginning to
win material bandwidth contracts.
The US Department of Defence is the single largest buyer of
commercial satellite capacity in the world and we have established
a small operation in Washington DC to help us access that market.
We have also signed an agreement with SD Comsat who are an approved
supplier into the US Government.
HYLAS 4 is ideally designed to complement the existing networks
in Africa to assist the major mobile and fibre operators with their
cellular backhaul requirements. We already provide a resilient
backhaul service to EE and the Home Office for emergency services
in the UK, and have now been appointed as the preferred supplier of
Ka-band services for MTN across Africa. Over time we expect this
area to be a significant revenue stream for HYLAS 4.
We intend to build on our experience with iMlango, where we have
connected 500 schools in Kenya and Tanzania with not only
connectivity but also content and hardware, and will work with
outside agencies to roll out further initiatives. Educating Africa
is a key priority for many aid agencies and we will endeavour to
contribute with the experience we have gained over the last five
years.
Trading
During the first 12 months of the 18 month financial period new
business was extremely slow as customers considered the state of
the Company's balance sheet and then latterly absorbed the impact
of the debt for equity swap. However, during the final 6 months of
the period we executed against our new strategy, closing
significant contracts in the wholesale and government sectors, more
than doubling the value of our backlog.
Whilst HYLAS 4 is our main satellite to serve the government and
carrier markets in Africa and the Middle East and has seen
encouraging early business signed up since its launch, the consumer
broadband sector has continued to be subject to aggressive pricing
competition, resulting in a lower average yield, which has resulted
in our need to impair the carrying values of HYLAS 2 and 2B.
Seven-Year Wholesale Capacity Agreement
In September 2018, Avanti signed a seven-year capacity wholesale
agreement, worth US$ 84 million over the period, with a major
international satellite service provider. The Company will receive
$12 million per annum in quarterly instalments for the duration of
the agreement once commenced. The agreement is expected to commence
in Q3 of the Company's next financial year ending 31 December 2019.
The capacity agreement will increase significantly the Company's
usage and fill-rates for its HYLAS-fleet of satellites.
$10 million Contract with ViaSat
In June 2018, Avanti signed our first HYLAS 4 contract for
steerable capacity with ViaSat. The contract is worth $10 million
over two years.
Master Distribution Agreement agreed with Comsat
Avanti is establishing a strategic presence in Washington, D.C.
which will be focused on selling our Mil-Ka capacity to the US
Government and related agencies.
We have concluded a unique Master Distribution Agreement with
Comsat Inc, USA. They are a fully approved, long term satellite
communications supplier to the US Department of Defense, US
Government and other related agencies. The seven-year contract
enables Avanti to immediately access these key growth markets to
offer its HTS network.
Pricing
As we reported at the end of the last financial year, in order
to win volume in certain markets where end-customers are highly
price sensitive, such as broadband in Europe, we have adjusted our
prices. Our products are sold as Mb or managed accounts or as fully
integrated projects but we calculate the Price, or Yield, per MHz
per month. Global pricing for satellite capacity is falling in many
markets, although each region is different.
Satellite assets
Following its successful launch in April 2018, HYLAS 4 was
brought into service in late 2018 and has some early stage
customers including on two of the four steerable beams. The Company
has also deployed one of its steerable beams on HYLAS 4 over
Mozambique to assist humanitarian efforts following the recent
typhoon and flooding.
HYLAS 3 is in the final stages of preparation for launch which
is due in Q3 2019. The Company anticipates bringing this 4GHz
payload into service during Q4 2019. Whilst this tactical 4GHz
payload is extremely late, its steerable capability of 8 beams,
including Mil-Ka capacity, is of significant interest to many
Government customers. HYLAS 3 is steerable over most of the African
continent and we expect to announce capacity contracts later in the
year.
Customers on HYLAS 1 have been successfully migrated onto HYLAS
4. HYLAS 1 is currently undertaking two specific short-term
bandwidth projects for wholesale customers, which will occupy most
of the remainder of 2019. After this time the capacity on HYLAS 1
will be fully utilised by a single wholesale customer, previously
announced. HYLAS 1 will generate $12 million of bandwidth revenues
annually over the remainder of its 7 year life. This contract will
commence in quarter 4 of the current fiscal year.
Steady progress continues with HYLAS 2 sales and the Company
expects to make further contract announcements over the coming
months.
HYLAS 2B is currently providing coverage over France, Germany,
Poland and the Baltic Sea. This capacity is also steerable and we
may consider re-deploying that capacity over the UK where we are
experiencing significant demand.
Whilst we have a strong fleet of satellites that provide future
growth for the company, falling capacity prices and a higher WACC
have meant we have taken impairment charges against HYLAS 2 and
HYLAS 2B.
Working Capital
During 2017 we had to make a significant bad debt provision
against a receivable from the Government of Indonesia (GoI). Avanti
had used the Artemis satellite to support GoI's need to bring into
use and maintain its orbital slot at 123 degrees East. The total
contract value was in excess of $30 million. Avanti performed all
of its obligations under the contract and had extended payment
deadlines for GoI to assist with administrative delays. Avanti
followed the contractual arbitration process and received full
value for the outstanding amounts in August 2018. The provision of
$13.9 million was reversed and $4.3 million of deferred revenue
recognised. Artemis was re-orbited during the period.
Outlook
2018 saw a re-setting of the shape of the balance sheet and the
strategic direction of the business. With the balance sheet
restructuring completed in April 2018, the business refined its
strategy to focus on Wholesale, Government and Cellular backhaul
opportunities. This bore fruit in the second half of 2018 with over
$100 million of long term bandwidth contracts signed.
Revenues for the 18 month period were $73.7 million of which
bandwidth revenues for the 18 month period were $41.2 million, and
for the 12 months to December 2018 were $31 million. Bandwidth
revenues are exclusive of low margin project and equipment
revenues. Total revenues are forecast to increase by 67% in 2019
and a further 30% in 2020. The growth is anticipated to come from
Government business on HYLAS 4 and HYLAS 3, once operational.
Costs of delivering bandwidth are around $80 million for a 12
month period. However, the Company has instigated a cost
optimisation project, which is expected to reduce the costs
associated with bandwidth sales by at least 15% per annum by
2020.
These measures should result in a positive EBITDA from the
bandwidth business in 2019, with further material growth in
2020.
After the balance sheet date, the Group was successful in
obtaining consents from its existing investors over debt facilities
amendments that has enabled it to enter into a new 1.5 lien debt
facility of up to $75m, whilst also agreeing an option to extend
the maturity of our existing Super Senior Facility by 6 months to
December 2020. This additional funding, noting that $20 million of
the facility remains uncommitted, will enable the Group to meet its
remaining capital expenditure requirements related to the HYLAS 3
and HYLAS 4 projects, whilst also providing the cash to meet the
Group's working capital needs and support the budgeted future
EBITDA growth. Whilst the Board is confident for the future, there
remains some risk around the delivery of our budgets and the future
refinancing of our debt facilities.
We can look forward to a positive future. We have an enviable
network of assets, demand in our coverage is growing and the
actions taken in the last 12 months to re-focus the business and to
bring in new commercial talent to the executive team should bring
rewards in the near term.
Financial Review
Income Statement
For the early part of 2018 the business continued to be held
back by the finalisation of the balance sheet restructuring.
However, during the final two quarters we started to see the
benefits of the refined sales and marketing strategy as new
contracts were concluded.
The 18 month period to 31 December 2018 was one of considerable
change for Avanti as we transitioned from the founding CEO, via our
interim Alan Harper, to Kyle Whitehill in April 2018.
The trading in the first 10 months of this period was largely
overshadowed by the need to restructure our balance sheet which was
concluded in late April 2018. In those 10 months we continued to
serve our existing customers maintaining our excellent performance
SLA.
In the remaining 8 months key management changes took place and
the strategy was refined. This resulted in some significant
contract wins in late 2018 with over $100 million of bandwidth
contracts signed. Whilst little of this flowed through the income
statement in the period under review, we were able to increase
bandwidth revenue in the last 6 months of the period.
Revenue in the period increased to $73.7 million from $56.6
million in 2017. The vast majority of this is due to the extended
reporting period for 2018.
Costs of sale reduced to $51.8 million from $60.6 million in
2017. The increases associated with the longer 2018 reporting
period were more than offset by the reversal, in the same period,
of the bad debt provision previously made in 2017 against the
amounts due from the Government of Indonesia ($13.9m credit in
FY18, $12.5m expense in FY!7).
Staff costs increased substantially to $44.1 million from $19.7
million in 2017. A combination of factors contributed to this
including the extended period, headcount (12% increase), bonuses
($5.8m) and additional short term contractors during 2018.
Other operating expenses increased to $23.4 million from $12.0
million in 2017. The factors affecting this were primarily the
extended reporting period in combination with rent reviews, US
travel costs and legal fees.
Other operating income increased to $4.0 million from $3.2
million. The increase reflected proceeds from the arbitration with
the Government of Indonesia.
As a result of the combination of the above variances EBITDA
losses increased to $41.6 million from $32.5 million.
12 month comparatives
Given the change in year end from 30 June to 31 December, the
income statement commentary is based on the 12 month periods to 31
December 2018 and 30 June 2017 as shown in the table below.
Revenue decreased from $56.6m to $53.5 million primarily as a
result of lower bandwidth revenue generated by Artemis in 2018
prior to being re-orbited during the period (2018: $4m; 2017:
$12m).
Costs of sale were distorted across the two periods due to the
provision of $13.9 million made against the Government of Indonesia
receivable in 2017 which was reversed in 2018 after our successful
arbitration. The funds of $20.1 million were received by Avanti in
August 2018.
Staff costs were inflated in 2018 mainly because of the change
of year end which meant that two staff bonuses were included in
2018 - one for the 12 month period to June 2018 and a smaller one
for the 6 month period to 31 December 2018, compared to none for
the 12 months to June 2017. In addition, included within staff
costs in 2018 are additional short term contractor costs who have
been brought in as part of the review of strategy.
Other operating expenses were negatively affected by a
combination of rent reviews, US travel costs and legal fees
associated with the re-financing.
Depreciation, amortisation and impairment reduced significantly
in 2018 following the impairment charge against HYLAS 1 and 2 in
2017.
Both twelve month periods benefitted from exceptional gains from
substantial modifications of our debt resulting in a profit before
tax for the 12 months to 31 December 2018 of $83.2 million (2017:
loss $77.7 million).
(unaudited)
12m ended Year ended
31 December 30 June
2018 2017
Notes $'m $'m
================================================ ====== ============ ==========
Total Revenue 53.5 56.6
======================================================== ============ ==========
Cost of sales - capacity, services & equipment
(excluding satellite depreciation) (33.5) (59.4)
Staff costs (30.7) (19.7)
Other operating expenses (17.7) (12.0)
Other operating income 1.9 2.0
======================================================== ============ ==========
EBITDA (26.5) (32.5)
======================================================== ============ ==========
Depreciation, amortisation and impairment (125.3) (171.2)
Operating loss (151.8) (203.7)
======================================================== ============ ==========
Finance income 1.3 -
Finance expense (75.0) (93.2)
Exceptional gain on substantial modification of
debt 308.7 219.2
======================================================== ============ ==========
Profit/(loss) before taxation 83.2 (77.7)
======================================================== ============ ==========
Tax
There was a tax charge of $31.4m to the income statement (2017:
$12.0m credit). The effective tax rate is impacted by the
de-recognition of previously recognised deferred tax assets ($56.8m
charge), the non recognition of deferred tax assets arising in the
current year ($60.3m charge), offset by the non-taxable credit
recognised as a result of the debt for equity swap ($84.0m
credit).
Corporate Interest Restrictions
With effect from April 1st 2017, the tax deductibility of
interest costs was broadly restricted to 30% of 'UK Tax EBITDA' (a
new measure based on taxable profit). Disallowed interest is
carried forward indefinitely, but only becomes deductible if
interest costs fall below 30% of UK Tax EBITDA in a future
period.
Group forecasts suggest that interest is unlikely to fall
beneath 30% of UK Tax EBITDA, which would result in the disallowed
interest being carried forwards indefinitely. Therefore, no
deferred tax asset has been recognised on these amounts ($28.5m at
31 December 2018). However, if the Group's performance exceeds
current expectations, or future debt/interest levels fall, future
interest costs may fall beneath 30% of UK Tax EBITDA such that the
disallowed interest costs would become deductible in the
future.
Changes to Loss Utilisation Rules
With effect from 1 April 2017, restrictions were introduced in
the UK on the use of brought forward losses, which broadly limit
the use of brought forward losses to 50% for taxable profits above
GBP5m. This will result in a slower utilisation of those
losses.
Loss for the year
The loss for the period was $38.2 million (2017: $65.7 million
loss) resulting in a basic and diluted loss per share of 3.50 cents
(2017: loss 44.7 cents).
Balance Sheet
Impairments
At each reporting date the Group considers the carrying value of
its assets and looks for indications of impairment.
HYLAS 2 is now 6 years into service and by today's standards has
a relatively high cost per MHz. With lower than forecast growth in
the earlier years of the asset combined with decreasing market
prices we have made an impairment provision of $67.1 million.
In addition the impairment review identified that due to low
utilisation rates and price decrease in the 18 month period it was
necessary to recognise an impairment provision of $12.5 million
against the HYLAS 2B asset.
Shortly after the period end Avanti handed back control of
Filiago to its founder and local management. As a result, Filiago
will no longer be consolidated into the results of Avanti, and the
balance of the intangible asset has been impaired in the results
for the period.
Deferred tax assets
The closing deferred tax asset recognised at 31 December 2018 is
$nil (2017: $30.8m). Management consider it is no longer
appropriate to recognise the deferred tax asset due to the Group's
history of recent losses and the debt restructuring in the period.
Therefore, management has concluded that there is insufficient
convincing other evidence to support the recognition of the
deferred tax assets.
Receivables
Receivables at 31 December were $33.5 million (30 June 2017:
$60.6 million). This fall is primarily due to the early settlement
of long term receivables which have decreased from $14.6 million to
$nil at the balance sheet date.
Spectrum stock
In November 2017, the Group paid $17.0m to exercise an option
giving the Group exclusive spectrum rights at 21.5E, which were
subsequently brought into use during HYLAS 4 in-orbit testing.
These spectrum rights, purchased with the intention of resale, are
recognised in inventory at cost.
Cash flow
Net cash outflow from operating activities during the 18 months
ended 31 December 2018 was $49.2 million as compared to an outflow
of $4.1 million during the 12 months ended 30 June 2017.
Interest paid was $14.7 million (2017: $3.5 million), the
increase being due to the coupon payments due on the Super Senior
Facility which was drawn down in July 2017. Coupon payments on
existing debt were settled through the issue of additional notes
rather than payments of cash.
Capital expenditure in the 18 month period to 31 December 2018
was $84.6 million, compared to $66.5 million in the 12 month period
to 30 June 2017, reflecting the completion and launch of the HYLAS
4 satellite.
Trapped cash
Avanti has cash balances of $3.1 million in a bank account in
Zimbabwe. Exchange controls in place require local customers to pay
locally. Due to the illiquid nature of US dollars in Zimbabwe,
Avanti has not been able to extract those balances. The Group
continues to review its options. However, there remains a risk that
this cash balance may be impaired in the future if there is an
adverse change in circumstances that prevents management from being
able to realise economic benefit from this asset.
Insurance
Avanti maintains a full suite of insurance policies covering not
only space assets, but also business interruption associated with
the failure of its ground earth stations. The HYLAS 1 and 2
in-orbit insurance policies were renewed in November 2018 with an
insured value of GBP100m and $200m respectively.
The HYLAS 4 launch +1 policy was taken out in early 2018 for
$325 million. The in-orbit policy for the year commencing 5 April
2019 was taken out for an insured value of $325 million.
HYLAS 3 is insured for launch + 1 year for $85 million.
HYLAS 2B is not insured, given that it is a hosted payload.
Backlog
Our backlog comprises our customers' committed contractual
expenditure under existing contracts for the sale of bandwidth,
satellite services, consultancy services and equipment sales over
their current terms. Backlog does not include the value arising
from potential renewal beyond a contract's current term or
projected revenue from framework contracts. Our backlog totalled
$166.4m as of December 31, 2018.
Principal risks and uncertainties
The Group faces a number of risks and uncertainties that may
adversely affect our business, operations, liquidity, financial
position or future performance, not all of which are wholly within
our control or known to us. Some such risks may currently be
regarded as immaterial and could turn out to be material. We accept
risk is an inherent part of doing business, and we manage the risks
based on a balance of risk and reward determined through careful
assessment of both the potential likelihood and impact as well as
risk appetite. The Group faces a number of ongoing operational
risks including credit and foreign exchange risk.
Fleet utilisation and pricing
With the launch of HYLAS 4 during the year available capacity
increased from 17Ghz to 49Ghz. Fleet utilisation will be a key KPI
going forward.
Average pricing has fallen over the last year, although yields
do vary significantly by geography and by application. The mix of
revenue could have a positive or negative effect on average
yield.
Liquidity risk
Liquidity risk is the risk that we may have difficulty in
obtaining funds in order to be able to meet both our day-to-day
operating requirements and our debt servicing obligations. We
manage our exposure to liquidity risk by regularly monitoring our
liabilities. Cash and cash forecasts are monitored on a daily
basis, and our cash requirements are met by a mixture of short term
cash deposits, debt and finance leases.
Future liquidity is also affected by the rate at which we fill
the satellites and the yield achieved.
Launch of HYLAS 3
At this time HYLAS 3 is due for launch in late July 2019. Whilst
the risk of launch failure is historically very low when using the
Arianespace 5 launch vehicle, and the spacecraft is insured for $85
million, any failure would impact the business model. A replacement
vehicle would take approximately 30 months to procure.
Global economy
The global economy remains fragile and it continues to be
difficult to predict customer demand. Avanti is susceptible to
decreased growth rates within high growth markets and/or continued
economic and market downturn in developing markets. The effects
could lead to a decline in demand and deteriorating financial
results, which in turn could result in the Group not realising its
financial targets.
There are significant trade receivables with customers operating
in the African and Middle East regions. These businesses are often
operating in immature emerging markets for satellite communication
services and may have cashflow difficulties due to the market and
geopolitical environment in which they operate.
Brexit
Continued uncertainty around the shape and timing of Brexit is
unhelpful. However, from our perspective, we expect that whatever
the outcome, the impact on Avanti should be minimal. With the
majority of our European capacity sold, our focus is firmly on the
African coverage of HYLAS 3 and HYLAS 4. We continue to have
operations and legal entities within the EU in Germany, Cyprus and
Sweden and we would continue to use those operations as
appropriate.
The continued uncertainty regarding the terms of the UK's exit
from the EU may have some effect on our ability to attract suitable
UK-based staff.
Foreign exchange risk
We operate internationally and are exposed to foreign exchange
risk arising from various currency exposures, primarily with
respect to the pound Sterling and the Euro. In order to mitigate
the foreign currency risk, the Group monitors the level at which
natural hedges occur and continually reviews the need to enter into
forward contracts in order to mitigate any material forecast
exposure. Our reported results of operations and financial
condition are affected by exchange rate fluctuations due to both
transaction and translation risks.
Interest rate risk
We borrow in US Dollars and pounds Sterling at fixed rates of
interest and do not seek to mitigate the effect of adverse
movements in interest rates. Cash and deposits earn interest at
fixed rates based on banks' short-term treasury deposit rates.
Short-term trade and other receivables are interest free.
Credit risk
Credit risk is the risk of financial loss arising from a
counterparty's inability to repay or service debt in accordance
with contractual terms. Credit risk includes the direct risk of
default and the risk of deterioration of creditworthiness. We
assess the credit quality of major customers before trading
commences, taking into account customers' financial position, past
experience and other factors. Generally when a balance becomes more
than 90 days past its due date, we consider that the amount will
not be fully recoverable.
Post balance sheet events
At the end of February 2019, Avanti handed back control of
Filiago to its founder and local management. As a result, Filiago
will no longer be consolidated into the results and balance sheet
of Avanti with effect from 1 March 2019.
Going Concern
As fully described in note 2 below, these accounts have been
prepared on a going concern basis.
In arriving at the conclusion, the Board of Directors has
considered the forecast for the next 2 years in conjunction with
the progress made with the new strategy and the cost optimisation
program. Furthermore, the Board has approved additional funding of
$75 million, of which $55m is fully committed, by way of a 1.5
lien. This facility will be non-cash paying with the interest
rolling up over time. In addition to this funding, our Super Senior
lender has agreed an option to extend the maturity of that loan
from June 2020 to the end of December 2020.
The Directors have accordingly formed the judgement that it is
appropriate to prepare the financial statements on a going concern
basis. However, this judgement is formed on the basis of: achieving
significant growth in bandwidth revenue through the remainder of
2019 and through 2020; delivery of the forecast annualised cost
savings; successfully negotiating the deferral of an embarkation
fee due ahead of the launch of HYLAS 3; the drawdown of a further
$20 million of 1.5 lien debt; and the refinancing of the Super
Senior Facility ahead of its maturity at the end of December
2020.
Accordingly, these matters represent a material uncertainty that
may cast significant doubt on the group and the parent company's
ability to continue as a going concern. The group and the parent
company may, therefore, be unable to continue realising their
assets and discharging their liabilities in the normal course of
business, but the financial statements do not include any
adjustments that would result if the going concern basis of
preparation is inappropriate.
Consolidated Income Statement
18 month period ended 31 December 2018
18m period
ended Year ended
31 December 30 June
2018 2017
Notes $'m $'m
================================================ ===== ============ ==========
Revenue
Capacity, services & equipment 3 73.7 56.6
Total Revenue 73.7 56.6
================================================ ===== ============ ==========
Cost of sales - capacity, services & equipment
(excluding satellite depreciation) (51.8) (60.6)
Staff costs (44.1) (19.7)
Other operating expenses (23.4) (12.0)
Other operating income 4.0 3.2
================================================ ===== ============ ==========
EBITDA(2) (41.6) (32.5)
================================================ ===== ============ ==========
Depreciation and amortisation (63.2) (47.2)
Impairment of satellites in operation (79.6) (114.1)
Impairment of other intangible assets (1.0) -
Impairment of goodwill (0.1) (9.9)
================================================ ===== ============ ==========
Operating loss (185.5) (203.7)
================================================ ===== ============ ==========
Finance income 2.5 -
Finance expense (132.5) (93.2)
Exceptional gain on substantial modification of
debt 308.7 219.2
================================================ ===== ============ ==========
Loss before taxation (6.8) (77.7)
================================================ ===== ============ ==========
Income tax 4 (31.4) 12.0
================================================ ===== ============ ==========
Loss for the year (38.2) (65.7)
================================================ ===== ============ ==========
Loss attributable to:
Equity holders of the parent (37.2) (65.2)
Non-controlling interests (1.0) (0.5)
Basic loss per share (cents) 5 (3.50c) (44.74c)
Diluted loss per share (cents) 5 (3.50c) (44.74c)
================================================ ===== ============ ==========
Consolidated Statement of Comprehensive income
18 month period ended 31 December 2018
18m period
ended Year ended
31 December 30 June
2018 2017
$'m $'m
=============================================================== ============ ==========
Loss for the year (38.2) (65.7)
=============================================================== ============ ==========
Other comprehensive income
Exchange differences on translation of foreign operations
and investments that may be recycled
to the Income Statement:
Foreign currency translation differences on foreign operations (3.6) 3.7
Monetary items that form part of the net investment in
a foreign operation (1.2) (9.7)
=============================================================== ============ ==========
Total comprehensive loss for the year (43.0) (71.7)
=============================================================== ============ ==========
Attributable to:
Equity holders of the parent (42.0) (71.2)
Non-controlling interests (1.0) (0.5)
=============================================================== ============ ==========
Consolidated Statement of Financial Position
As at 31 December 2018
31 December 30 June
2018 2017
Notes $'m $'m
===================================== ===== =========== =======
ASSETS
Non-current assets
Property, plant and equipment 6 714.4 671.8
Intangible assets 7 9.1 9.3
Deferred tax assets - 30.8
===================================== ===== =========== =======
Total non-current assets 723.5 711.9
===================================== ===== =========== =======
Current assets
Inventories 19.5 2.6
Trade and other receivables 8 33.5 60.6
Cash and cash equivalents 24.0 32.7
===================================== ===== =========== =======
Total current assets 77.0 95.9
===================================== ===== =========== =======
Total assets 800.5 807.8
===================================== ===== =========== =======
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 60.4 70.3
Loans and other borrowings 1.4 2.1
Provisions 0.6 -
===================================== ===== =========== =======
Total current liabilities 62.4 72.4
===================================== ===== =========== =======
Non-current liabilities
Trade and other payables 7.3 9.1
Loans and other borrowings 465.7 592.6
Provisions 3.6 -
===================================== ===== =========== =======
Total non-current liabilities 476.6 601.7
===================================== ===== =========== =======
Total liabilities 539.0 674.1
===================================== ===== =========== =======
Equity
Share capital 30.6 2.7
EBT shares (0.1) (0.1)
Share premium 1,104.4 519.4
Retained earnings (797.0) (317.7)
Foreign currency translation reserve (72.3) (67.5)
===================================== ===== =========== =======
Total parent shareholders' equity 265.6 136.8
Non-controlling interests (4.1) (3.1)
===================================== ===== =========== =======
Total equity 261.5 133.7
===================================== ===== =========== =======
Total liabilities and equity 800.5 807.8
===================================== ===== =========== =======
Consolidated Statement of Cash Flows
18 month period ended 31 December 2018
Group
=========================
*Restated
Year ended
18m period
ended 30 June
31 December
2018 2017
Notes $'m $'m
========================================== ===== ============ ===========
Cash flow from operating activities
Cash absorbed by operations 10 (49.2) (4.1)
Interest paid (14.7) (3.5)
Interest received 2.5 -
Debt restructuring costs (7.8) (23.2)
Taxation (0.4) -
========================================== ===== ============ ===========
Net cash absorbed by operating activities (69.6) (30.8)
========================================== ===== ============ ===========
Cash flows from investing activities
Payments for property, plant and
equipment (84.7) (66.5)
Net cash used in investing activities (84.7) (66.5)
========================================== ===== ============ ===========
Cash flows from financing activities
Net proceeds from debt issue 148.6 78.7
Net proceeds from share issue 0.2 0.2
Payment of finance lease liabilities (2.8) (3.8)
Net cash received from financing
activities 146.0 75.1
========================================== ===== ============ ===========
Effects of exchange rate on the
balances of cash and cash equivalents (0.4) (1.5)
Net (decrease)/increase in cash
and cash equivalents (8.7) (23.7)
Cash and cash equivalents at the
beginning of the financial year 32.7 56.4
========================================== ===== ============ ===========
Cash and cash equivalents at the
end of the financial year 24.0 32.7
========================================== ===== ============ ===========
* The consolidated and company statement of cash flows for the
year ended 30 June 2017 has been restated to classify Debt
restructuring costs as a cash flow from operating activities, which
the directors believe to be more consistent with the chosen
accounting policy to classify interest as an operating cash flow.
Debt restructuring costs were previously classified as a cash flow
from financing activities. This has reduced Net cash absorbed by
operating activities by $23.2 million in both consolidated and
company cash flows and increased Net cash received from financing
activities by the same amount.
Consolidated Statement of Changes in Equity
18 month period ended 31 December 2018
Share Share Total
Employee Foreign currency
benefit trust Retained translation Non-controlling
capital (EBT) premium earnings reserve interests equity
Notes $'m $'m $'m $'m $'m $'m $'m
=================== ====== ======== ============== ======== ========= ================ =============== =======
2017
At 1 July 2016 2.5 (0.1) 515.9 (252.7) (61.5) (2.6) 201.5
Loss for the
year - - - (65.2) - (0.5) (65.7)
Other comprehensive
income - - - - (6.0) - (6.0)
Issue of share
capital 0.2 - 3.5 - - - 3.7
Share based payments - - - 0.2 - - 0.2
=========================== ======== ============== ======== ========= ================ =============== =======
At 30 June 2017 2.7 (0.1) 519.4 (317.7) (67.5) (3.1) 133.7
=========================== ======== ============== ======== ========= ================ =============== =======
2018
At 1 July 2017 2.7 (0.1) 519.4 (317.7) (67.5) (3.1) 133.7
Profit/(loss)
for the period - - - (37.2) - (1.0) (38.2)
Other comprehensive
income - - - - (4.8) - (4.8)
Issue of share
capital 27.9 - 142.7 - - - 170.6
Transfer* - - 442.3 (442.3) - - -
Share based payments - - - 0.2 - - 0.2
=========================== ======== ============== ======== ========= ================ =============== =======
At 31 December
2018 30.6 (0.1) 1,104.4 (797.0) (72.3) (4.1) 261.5
=========================== ======== ============== ======== ========= ================ =============== =======
Notes to the preliminary statement
1. Basis of preparation
The financial information set out above does not constitute the
Group's statutory financial statements for the periods ended 31
December 2018 or 30 June 2017. Statutory consolidated financial
statements for the Group for the year ended 30 June 2017, prepared
in accordance with adopted IFRS, have been delivered to the
Registrar of Companies and those for 31 December 2018 will be
delivered in due course. The auditors have reported on those
accounts: their report on the accounts for the periods ended 30
June 2017 and 31 December 2018 were (i) unqualified and (ii) drew
attention by way of emphasis without qualifying their report to a
material uncertainty in respect of going concern and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
This financial information for the period ended 31 December 2018
has been prepared by the directors based upon the results and
position that are reflected in the consolidated financial
statements of the Group. The consolidated financial statements of
Avanti Communications Group plc and its subsidiaries have been
prepared in accordance with International Financial Reporting
Standards as adopted by the EU as relevant to the financial
statements of Avanti Communications Group plc.
Full disclosure of the group accounting policies can be found in
the 2017 Annual Report and Accounts as presented on the Avanti
Communications Group plc website. These have been consistently
applied throughout the 2018 financial period and the disclosures
made in this statement. See below for additional disclosure with
regard to going concern.
2. Principal accounting policies
Going concern
The financial statements have been prepared on a going concern
basis. In reaching their assessment, the Directors have considered
a period extending at least 12 months from the date of approval of
these financial statements. Following the successful closure of the
debt facilities amendments announced by the Group on 28 May 2019,
the Group meets its day to day working capital requirements
from:
-- a Super Senior Facility ($152.5m, fully drawn), which is
subject to EBITDA covenants, a breach of which would result in the
amounts becoming repayable on demand, and matures in June 2020 with
an option to extend to December 2020;
-- a '1.5 Facility' ($75m, of which $9.2m is drawn and $20m is
uncommitted), which is not subject to covenants and matures in May
2021, or in July 2021 if the Super Senior Facility maturity is
extended; and
-- PIK Toggle notes ($360.1m, fully drawn), which are not
subject to covenants and mature in October 2022
The Directors' assessment has focused on the ability of the
business to meet FY19 and FY20 EBITDA covenants in the Super Senior
Facility agreement, as well as those factors considered on an
annual basis such as forecast trading performance of the Group for
the foreseeable future, deferral of certain payments, key
assumptions, sensitivities and available cash balances and
facilities.
Forecast cash flows
Following the closure of the debt facilities amendments, and in
order to prepare and approve these Financial Statements, the
Directors have assessed forecast future cash flows for the
foreseeable future. In assessing the Group's ability to meet its
obligations as they fall due, management prepared cash flow
forecasts based on the business plan for a period in excess of 30
months.
The forecasts include the following key assumptions:
-- Growth in bandwidth revenues of 125% in 2019 and at least a further 40% in 2020
-- The delivery of a cost optimisation project, which is
expected to reduce costs associated with bandwidth sales by at
least 15% per annum by 2020
-- The successful negotiation of the deferral of a $30m
embarkation fee, currently due ahead of the launch of the HYLAS 3
payload, by at least 12 months
-- The drawdown of the remaining 1.5 Facility committed facility
of $45.2 million together with the uncommitted $20m of that
facility, as permitted under the 1.5 Facility agreement. The draw
of the $20 million is subject to the lenders agreeing to subscribe
for this debt
-- The refinancing of the Super Senior Facility ahead of
maturity, that currently occurs in June 2020 but which the Group
now has the option to extend to the end of December 2020
Following recent refinancing negotiations, management is of the
opinion that the Group will be well-positioned to refinance the
Super Senior Facility ahead of its maturity if it substantially
achieves its forecast revenue and EBITDA performance for FY19 and
into FY20.
In addition, there is no indication currently available which
suggests that the lenders would not be willing to subscribe for the
additional $20 million of the 1.5 lien debt.
Management has also considered various downside scenarios to
test the Group's resilience against operational risks
including:
-- The failure to achieve the forecast revenue
-- The Group being unable to deliver the forecast level of cost savings
-- An extension to the time taken for the Group to recover debtor balances
-- Adverse movements in Sterling and Euro exchange rates against US Dollar
The directors consider the Group to be in a strong position with
regards to the negotiation of the embarkation fee deferrals, based
upon the extremely late launch of the payload alongside the
response to negotiations that have occurred to date, though there
can be no certainty that this deferral will be agreed. In the
absence of a deferral of this amount, reasonably possible changes
in the base case forecasts indicate that the available facilities
will not be sufficient to enable the Group to meet its liabilities
as they fall due and the directors would need to seek additional
debt (and possibly equity) funding.
Based on the sensitised forecasts, should a scenario materialise
in which the Group's achievement of revenue and cost-savings in
aggregate results in an EBITDA underperformance against forecast of
$13.1m in FY19 and $18.8m in FY20, (which are considered reasonably
possible scenarios) the Group would be in breach of the covenants
in the Super Senior Facility agreement. Such a scenario could
result in the facility being withdrawn and immediately becoming
repayable.
The absence of the additional $20 million of the 1.5 lien debt
would worsen the shortfalls in the various downside scenarios noted
above.
Assuming that the existing facilities remain available, the
Directors have concluded that the Group's Capital Structure
following the debt facilities amendments and including the assumed
drawdown of an additional $20m of 1.5 lien funding, together with
the ability to defer the payment of interest on the PIK Toggle
notes, provides sufficient headroom in the cash position of the
business.
In the event that the Super Senior Facility remains available
but the Group does not achieve the forecast revenue and EBITDA
performance, a refinancing of the Super Senior Facility on maturity
in June 2020 or, if extended, December 2020, may not be possible
and may well require the assistance of the existing lenders.
The Directors believe that the Group will be able to have
sufficient liquidity and will be able to meet its obligations as
they fall due and have accordingly formed the judgement that it is
appropriate to prepare the financial statements on a going concern
basis. There can, however, be no certainty that the Group will
reach agreement on the expected deferral of the HYLAS 3 embarkation
fee, that the additional $20 million 1.5 lien facility will be
subscribed for, that the forecasts will be substantially achieved
such that existing facilities remain available, or that the Super
Senior Facility can be successfully refinanced ahead of maturity.
These matters represent a material uncertainty that may cast
significant doubt on the Group and the parent company's ability to
continue as a going concern. The Group and the parent company may,
therefore, be unable to continue realising their assets and
discharging their liabilities in the normal course of business, but
the financial statements do not include any adjustments that would
result if the going concern basis of preparation is
inappropriate.
3. Revenue
The Group generates its revenues from the utilisation of its
space assets, namely its spectrum rights and satellites. These
revenues include the sale of satellite broadband services, the sale
and leasing of spectrum rights, the sale of services, typically to
Government customers, and the sale of terminals and other satellite
communications equipment.
The Avanti Executive Board, which is the chief operating
decision-maker in the Group's corporate governance structure,
manages the business and the allocation of resources on the basis
of the utilisation of its space assets, resulting in one
segment.
Revenue generated for the period was as follows:
18m ended Year ended
31 December 30 June
2018 2017
$'m $'m
======================================= ============ ==========
Capacity, services & equipment revenue 73.7 56.6
Total revenue 73.7 56.6
======================================= ============ ==========
The majority of total revenue for the period represents the sale
of satellite broadband capacity and related services provided to
external customers and the sale of terminals and other satellite
communications equipment. Of this, $9.6m (2017: $5.3m) relates to
the sale of terminals and other satellite communications
equipment.
The Group derived $16.8m (2017: $11.1m) of its turnover from
European countries outside the United Kingdom, $6.9m (2017: $4.8m)
from Africa, $18.7m (2017: $20.3m) from countries outside Europe
and $31.3m (2017: $20.2m) from the United Kingdom.
4. Income Tax
18m ended Year ended
31 December 30 June
2018 2017
$'m $'m
==================================================== ============= ==========
Current tax
Adjustment in respect of prior periods - 0.2
===================================================== ============ ==============
Total current tax 0.4 0.2
===================================================== ============ ==============
Deferred tax
Origination and reversal of temporary differences 34.8 (15.9)
Adjustment in respect of prior periods (0.2) 0.4
Impact of change in UK tax rate (3.6) 3.3
===================================================== ============ ==============
Total deferred tax 31.0 (12.2)
===================================================== ============ ==============
Total income tax charge/(credit) 31.4 (12.0)
===================================================== ============ ==============
The tax on the Group's loss before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to profits of the consolidated entities as
follows:
*Restated
18m ended Year ended
31 December 30 June
2018 2017
$'m $'m
============================================================= ============= ===========
Loss before tax (6.8) (77.7)
============================================================= ============= ===========
Tax charge/(credit) at the UK corporation tax rate of
19.0% (2017: 19.75%) (1.3) (15.3)
Non taxable credit arising on debt for equity swap (84.0) -
Non taxable credit arising on substantial modification
of debt (10.2) (43.2)
Tax effect of non-deductible expenses 3.2 13.1
Adjustment in respect of prior periods (0.2) 0.5
Withholding taxes suffered 0.3 -
Impact of change in UK tax rate (3.7) 9.3
Temporary differences for which no deferred tax has
been recognised 96.5 39.6
Recognition of previously unrecognised temporary differences - (30.3)
Derecognition of previously recognised temporary differences 30.8 14.3
Income tax (credit)/charge recognised in the Income
Statement 31.4 (12.0)
============================================================= ============= ===========
The standard rate of corporation tax in the UK fell from 20% to
19% with effect from 1 April 2017. Accordingly, the Group's losses
for this accounting period are taxed at an effective rate of 19%
(2017: 19.75%).
The income tax charge of $31.4m (2017: $12.0m credit) equates to
an effective tax rate of 462% (2017: 15.0%). This effective rate is
higher than the effective rate of tax of 19.0% due to a number of
items as shown above. The rate is primarily driven by the Group no
longer recognising deferred tax assets, offset by the non-taxable
credit arising as a result of the debt for equity swap.
Factors that may affect future tax charges
Changes to reduce the UK corporation tax rate to 19% from 1
April 2017 and to 17% from 1 April 2020 were substantially enacted
on 15 September 2016. The deferred tax balance as at the year end
has been recognised at 17% (2017: 17%) which materially reflects
the rate for the period in which the deferred tax assets and
liabilities are expected to reverse.
Tax losses
At the balance sheet date the Group has unrecognised deferred
tax assets of $145.7m (2017: $64.7m) available for offset against
future profits. No deferred tax asset has been recognised (2017:
$30.8m recognised) in respect of the remaining losses and other
temporary differences due to the Group's history of recent losses
and because of the debt restructuring in the period. Therefore,
management has concluded that there is insufficient convincing
other evidence to support the recognition of the deferred tax
assets.
Under present tax legislation, these losses and other temporary
differences may be carried forward indefinitely. In the future if
these assets are recognised there will be a positive impact to the
Group's effective tax rate.
In the UK, with effect from 1 April 2017, only 50% of profits
above GBP5m may be offset by losses brought forwards. This will
slow the rate at which the deferred tax asset on losses can be
utilised, and hence will result in the Group paying cash tax in the
UK earlier than would otherwise be the case.
Prior year restatement
After reassessment in the current financial period, we have
concluded the exceptional gain recognised upon the substantial
modification of debt in January 2017 is non-taxable and the
amortisation of interest in future periods is non-deductible for
tax purposes. As such, for deferred tax purposes, this is a
permanent timing difference and not a temporary difference as
recorded in 2017. The deferred tax liability on financial
instruments of $35.0 million recognised as at 30 June 2017 has been
restated to $nil accordingly.
In the prior year consolidated group accounts, a deferred tax
asset of $35 million with respect to unused tax losses and
temporary difference on property, plant and equipment was
recognised on the basis that it would be utilised against this
deferred tax liability. Consistent with the recognition of deferred
tax assets in excess of deferred tax liabilities at 30 June 2017,
no asset has now been recognised resulting in an overall net nil
impact to the consolidated group deferred tax position at 30 June
2017 and no effect on the consolidated income statement or
statement of financial position for that period.
As no deferred tax asset was recognised in the company, the
company's loss for the year ended 30 June 2017 disclosed in note 12
has reduced by $35.0 million and net assets as at 30 June 2017 have
increased by $35.0 million.
The restatement of the deferred tax liability and connected
deferred tax asset has been corrected in the prior year tax
reconciliation shown above.
5. Loss per share
31 December 30 June
2018 2017
cents cents
================================= =========== =======
Basic and diluted loss per share (3.50) (44.74)
================================= =========== =======
The calculation of basic and diluted loss per share is based on
the earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the year.
30 June 30 June
2017 2016
=========================================================== ============= ===========
Loss for the year attributable to equity holders of
the parent Company $(37.2)m $(65.2)m
Weighted average number of ordinary shares for the purpose
of basic earnings per share 1,065,920,979 145,625,369
===========================================================
6. Property, plant and equipment
Leasehold Network Fixtures Satellites Satellites Group
improvement assets and fittings in operation in construction total
$'m $'m $'m $'m $'m $'m
================================ ============ ======= ============= ============= ================ =======
Cost
Balance at 30 June 2016 1.6 12.7 2.6 657.0 296.7 970.6
Additions - 3.0 0.1 1.4 64.0 68.5
Reclassification* - (1.1) - (5.8) - (6.9)
Effect of movements in exchange
rates 0.1 1.4 - (7.6) (1.2) (7.3)
================================ ============ ======= ============= ============= ================ =======
Balance at 30 June 2017 1.7 16.0 2.7 645.0 359.5 1,024.9
Additions - 8.4 0.1 170.6 6.4 185.5
Disposals - (0.3) - (0.1) - (0.4)
Transfer** - - - 307.9 (307.9) -
Effect of movements in exchange
rates - (0.2) (0.1) (7.4) (1.0) (8.7)
================================ ============ ======= ============= ============= ================ =======
Balance at 31 December 2018 1.7 23.9 2.7 1,116.0 57.0 1,201.3
================================ ============ ======= ============= ============= ================ =======
Accumulated depreciation
and impairment
Balance at 30 June 2016 1.2 9.4 2.0 182.9 - 195.5
Charge for the year 0.4 2.2 0.3 43.1 - 46.0
Reclassification* - (0.6) - (0.2) - (0.8)
Impairment - - - 114.1 - 114.1
Effect of movements in exchange
rates (0.1) 0.7 - (2.3) - (1.7)
================================ ============ ======= ============= ============= ================ =======
Balance at 30 June 2017 1.5 11.7 2.3 337.6 - 353.1
Charge for the year - 5.1 0.3 55.4 - 60.8
Impairment - - - 79.6 - 79.6
Effect of movements in exchange
rates - (0.2) - (6.4) - (6.6)
================================ ============ ======= ============= ============= ================ =======
Balance at 31 December 2018 1.5 16.6 2.6 466.2 - 486.9
================================ ============ ======= ============= ============= ================ =======
Net book value
Balance at 31 December 2018 0.2 7.3 0.1 649.8 57.0 714.4
================================ ============ ======= ============= ============= ================ =======
Balance at 30 June 2017 0.2 4.3 0.4 307.4 359.5 671.8
================================ ============ ======= ============= ============= ================ =======
* Reclassifications relate to the reclassification of satellite
control software between tangible and intangible assets.
** Transfers relate to assets under construction being brought
in to use in the year
Property, plant and equipment under finance lease
At 31 December 2018, the Group held satellite assets under
finance lease agreements with a net book value of $29.5m (2017:
$33.4m) and network assets under finance lease agreements with a
net book value of $1.2m (2017: $6.4m). A depreciation charge for
the period of $2.3m (2017: $2.3m) has been provided on these
assets.
Satellites in operation
Satellites in operation include the following:
HYLAS 1 - Came into service on 1 April 2011
HYLAS 2 - Came into service on 1 October 2012
HYLAS 2B - Indefeasible right to the use of a payload received
as consideration on 24 June 2015 and which came into service on 7
November 2016
HYLAS 4 - Came into service on 1 September 2018
All four satellites and their related ground infrastructure have
been depreciated from the date that they came into operational
service.
Satellite in construction
The satellites in construction assets of $57.0m relate to HYLAS
3 (2017: $359.5m in relation to HYLAS 3 and HYLAS 4).
Capitalised finance costs
Included in the satellites in operation and satellites in
construction are capitalised finance costs of $219.6m (2017:
$145.7m) related to the HYLAS 2 and HYLAS 4 satellites. Finance
costs of $73.9m (2017: $48.3m) were capitalised relating to HYLAS 4
in the period, with $nil (2017: $nil) capitalised against the HYLAS
2 satellite.
HYLAS 1 satellite impairment review
HYLAS 1 is a 3 GHz Ka-band High Throughput Satellite that came
into operational service on 1 April 2011. Each year the Group
consider the carrying value of its assets and looks for indications
of impairment. The carrying value of HYLAS 1 and associated ground
infrastructure, considered together as the Cash Generating Unit
("CGU"), at 31 December 2018 was $60.2 million. No impairment
indicators were identified as a seven-year wholesale capacity lease
agreement was signed prior to the period end. This agreement with a
major international satellite service provider is worth $84m over
the period and will result in a significant increase in the
satellite's usage and fill-rate.
HYLAS 2 satellite impairment review
HYLAS 2 is an 11 GHz Ka-band High Throughput Satellite that came
into operational service on 1 October 2012. Each year the Group
considers the carrying value of its assets and looks for
indications of impairment. Impairment indicators were assessed to
exist due to the falling market prices for Ka-band services in the
context of the age of the asset and the slower than expected
revenue generation in the earlier years of service of HYLAS 2.
The review showed that an impairment of $67.1m was required to
bring the carrying value of HYLAS 2 and associated ground
infrastructure, considered together as the CGU, to $111m.
The recoverable amount of each asset is based on the value in
use, which is determined using cash flow projections derived from
the most recent financial budgets and forecasts approved by
management covering the remaining useful life of the asset. The
cash flows reflect management's expectations of future outcomes
taking into account past experience, adjusted for anticipated
growth from both existing and new business in line with our
strategic plans for each sector in which we operate. The cash flows
also take into consideration our assessment of the potential impact
of external economic factors.
Forecasts are driven by the following key assumptions:
-- Capacity sold - The discounted cash flow forecast assumes a
ramp up in capacity utilisation of 6% per year to the end of FY24
with modest incremental growth thereafter, from a combination of
contractual ramps, development of existing customer relationships
and new business development
-- Yield - price per unit of capacity - The discounted cash flow
forecast makes assumptions about the price per unit of capacity
which is driven by both market conditions and the efficiency of
data throughput which varies due to a number of factors such as
customer type and hardware platform
-- Satellite life - The discounted cash flow forecast is
prepared over the estimated remaining useful economic life of the
asset of 9.3 years
-- Salvage value - Included in the cash flow model is an
estimate of the salvage value of the geostationary orbital slot in
which HYLAS 2 operates of $54m
-- Discount rate - Management estimates discount rates using
pre-tax rates that reflect the current market assessment of the
time value of money and the risks specific to the industry. The
discount rates are derived from the Group's post-tax weighted
average cost of capital. The impairment is based upon a pre-tax
WACC of 13.9%
Sensitivity analysis was carried out by management over the
assumptions made in the impairment model relating to yield, growth
in utilisation and the discount factor applied. The sensitivities
applied were based upon reasonable possible changes in the key
assumptions, and performed as a part of the impairment exercise in
order to provide insight into the sensitivity of the impairment
charge to those changes.
-- A 10% decrease in the forecast yield on capacity over the
life of the cash flow forecast would increase the impairment charge
by $15.9m. A 10% increase in the forecast yield would decrease the
impairment charge by $18.0m
-- A 10% decrease in the forecast EBITDA over the life of the
cash flow forecast would increase the impairment charge by $10.7m.
A 10% increase in the forecast EBITDA would decrease the impairment
charge by $10.7m
-- The Group's WACC was derived with reference to the Group's
incremental borrowing cost and cost of equity as assessed by the
market. An increase of one percentage point in the discount rate
would increase impairment by $5.4m. A decrease of one percentage
point would decrease impairment by $5.8m
The position adopted in the HYLAS 2 impairment review represents
management's best estimate of the forecasts and assumptions.
HYLAS-2B satellite impairment review
Satellites in operation also includes a Ka-band payload that the
Group operates under an indefeasible right of use ('IRU') agreement
entered into in June 2015 for the estimated remaining useful life
of the payload. This payload is known as HYLAS 2B. The IRU
agreement is accounted for as a finance lease. This is included
within satellites in operation and also within the assets held
under finance lease disclosure provided above.
Each year the Group considers the carrying value of its assets
and looks for indications of impairment. Impairment indicators were
assessed to exist due to the low utilisation rates on this
asset.
The review showed that an impairment of $12.5m was required to
bring the carrying value of HYLAS 2B and associated ground
infrastructure, considered together as the CGU, to $25.5m.
The recoverable amount of each asset is based on the value in
use, which is determined using cash flow projections derived from
the most recent financial budgets and forecasts approved by
management covering the remaining useful life of the asset. The
cash flows reflect management's expectations of future outcomes
taking into account past experience, adjusted for anticipated
growth from both existing and new business in line with our
strategic plans for each sector in which we operate. The cash flows
also take into consideration our assessment of the potential impact
of external economic factors.
Forecasts are driven by the following key assumptions:
-- Capacity sold - The discounted cash flow forecast assumes a
ramp up in capacity utilisation of 4% per year to the end of FY24
with modest incremental growth thereafter, from a combination of
contractual ramps, development of existing customer relationships
and new business development
-- Yield - price per unit of capacity - The discounted cash flow
forecast makes assumptions about the price per unit of capacity
which is driven by both market conditions and the efficiency of
data throughput which varies due to a number of factors such as
customer type and hardware platform
-- Satellite life - The discounted cash flow forecast is
prepared over the estimated remaining useful economic life of the
asset of 10 years.
-- Discount rate - Management estimates discount rates using
pre-tax rates that reflect the current market assessment of the
time value of money and the risks specific to the industry. The
discount rates are derived from the Group's post-tax weighted
average cost of capital. The impairment is based upon a pre-tax
WACC of 13.5%
Sensitivity analysis was carried out by management over the
assumptions made in the impairment model relating to yield, growth
in utilisation and the discount factor applied. The sensitivities
applied were based upon reasonable possible changes in the key
assumptions, and performed as a part of the impairment exercise in
order to provide insight into the sensitivity of the impairment
charge to those changes.
-- A 10% decrease in the forecast yield on capacity over the
life of the cash flow forecast would increase the impairment charge
by $4.9m. A 10% increase in the forecast yield would result in an
equivalent decrease on the impairment charge
-- A 10% decrease in the forecast EBITDA over the life of the
cash flow forecast would increase the impairment charge by $3.3m. A
10% increase in the forecast EBITDA would have an equivalent impact
in decreasing the impairment
-- The Group's WACC was derived with reference to the Group's
incremental borrowing cost and cost of equity as assessed by the
market. An increase of one percentage point in the discount rate
would increase impairment by $1.5m. A decrease of one percentage
point would have an equivalent impact in decreasing the
impairment
The position adopted in the HYLAS 2B impairment review represent
management's best estimate of the forecasts and assumptions.
HYLAS 3 satellite impairment review
HYLAS 3 is a Ka-band Spot Beam cluster which will provide
Ka-band satellite services over selected new markets in Africa or
the Middle-East. The carrying value of HYLAS 3 and associated
ground infrastructure, considered together as the CGU, at 31
December 2018 was $43.8 million. The asset is still under
construction with expected launch in Q3 2019. The satellite will
have steerable capacity, enabling Avanti and its partners to have a
high degree of flexibility in terms of usage. This flexibility will
allow Avanti to seek an optimum return and, when combined with a
useful life of 15 years, no impairment indicators have been
identified.
HYLAS 4 satellite impairment review
HYLAS 4 is a 32 GHz Ka-band High Throughput Satellite that came
into operational service on 1 September 2018. The carrying value of
HYLAS 4 and associated ground infrastructure, considered together
as the CGU, at 31 December 2018 was $479.2 million. HYLAS 4 is the
largest satellite of the Avanti fleet which doubled the available
capacity of the Group when launched, and completed Avanti's
coverage Across Africa. In addition, HYLAS 4's steerable fleet
capacity offers a unique market proposition whereby capacity can be
placed anywhere across the Earth's disk visible from the orbital
slot of the satellite. The launch configuration of HYLAS 4 provided
a lower mission risk profile, with sufficient fuel to be embarked
to support the satellite for up to 19 years in orbit, an increase
of 27% over previous expectations. As a result there are no
indicators that HYLAS 4 will not perform as expected, thus no
indicators of impairment exist.
Impairment of other assets
There are no indicators of impairment for any other assets
within Property, Plant and Equipment. As a part of their assessment
of the presence of any indicators of impairment, management have
performed a comparison of the current market capitalisation of the
Group to the net asset value in the balance sheet. Management are
of the opinion that the market capitalisation of the Group is
suppressed by negative investor sentiment and highly illiquid free
float that has arisen from the historical performance of the
business, which is currently outweighing the potential value of the
Group's assets under new management. As detailed in the Strategic
Report, the go-to-market strategy of the business has been refined
in the period which is forecast to result in the delivery of
improved revenue. This, combined with the cost optimisation
project, should result in a positive EBITDA in FY19 and further
material growth in FY20, the impact of which is not currently
reflected in the market capitalisation of the Group. Consequently,
management are confident that the conclusion reached by their
assessment of impairment remains appropriate.
7. Intangible assets
Computer Brand Customer Group
software name lists Goodwill total
$'m $'m $'m $'m $'m
================================ ========= ===== ======== ======== ======
Cost
Balance at 30 June 2016 0.6 0.2 1.9 9.7 12.4
Additions 3.0 - - - 3.0
Reclassification* 6.9 - - - 6.9
Effect of movements in exchange
rates - - 0.1 0.3 0.4
================================= ========= ===== ======== ======== ======
Balance at 30 June 2017 10.5 0.2 2.0 10.0 22.7
Additions 1.6 - - - 1.6
Effect of movements in exchange
rates 1.1 - - - 1.1
Balance at 31 December 2018 13.2 0.2 2.0 10.0 25.4
================================= ========= ===== ======== ======== ======
Accumulated amortisation
and impairment
Balance at 30 June 2016 0.6 0.2 0.8 - 1.6
Charge for the year 1.1 - 0.1 - 1.2
Reclassification* 0.8 - - - 0.8
Impairment - - - 9.9 9.9
Effect of movements in exchange
rates - - (0.1) - (0.1)
================================= ========= ===== ======== ======== ======
Balance at 30 June 2017 2.5 0.2 0.8 9.9 13.4
Charge for the year 2.2 - 0.2 - 2.4
Impairment - - 1.0 0.1 1.1
Effect of movements in exchange
rates (0.6) - - - (0.6)
================================= ========= ===== ======== ======== ======
Balance at 31 December 2018 4.1 0.2 2.0 10.0 16.3
================================= ========= ===== ======== ======== ======
Net book value
Balance at 31 December 2018 9.1 - - - 9.1
================================= ========= ===== ======== ======== ======
Balance at 30 June 2017 8.0 - 1.2 0.1 9.3
================================= ========= ===== ======== ======== ======
* Reclassifications in the year to 30 June 2017 relate to the
reclassification of satellite control software between tangible and
intangible assets.
Filiago impairment review
The goodwill, customer lists and brand name intangibles arose
from the Group obtaining control of Filiago GmbH & Co
('Filiago') on 1 November 2011. Filiago is a German based Internet
service provider specialising in the sale of satellite broadband
services to consumer and enterprise customers. The Filiago
operation is considered a Cash Generating Unit ('CGU').
The Filiago goodwill is not subject to amortisation and so is
required to be reviewed annually for impairment. A review of
Filiago's forecast cash flows showed the carrying value of the
customer lists and brand name was not supported. In addition,
underlying the forecast cashflow is the position that Filiago's
current management team have not been successful at achieving
revenue targets that have been set for recent financial years.
Whilst the business has been capable of maintaining a largely
steady state, it has not been able to capitalise on the significant
advantage it has been bestowed as a result of Avanti's HYLAS-2B
payload coming into operational service early in FY17. As a result
of recent and expected future performance, control of Filiago was
relinquished after the period end on 1 March 2019, and the
intercompany loan balances which Filiago owed to Avanti were
forgiven. Since the carrying value of the assets are not expected
to be recovered through future use, an impairment of the remaining
$1.1m has been recognised as at 31 December 2018.
8. Trade and other receivables
Group Company
==================== ====================
30 June 30 June
31 December 31 December
2018 2017 2018 2017
$'m $'m $'m $'m
=================================================== =========== ======= =========== =======
Trade receivables 10.0 44.3 1.5 5.5
Less provision for impairment of trade receivables (1.1) (21.5) - -
=================================================== =========== ======= =========== =======
Net trade receivables 8.9 22.8 1.5 5.5
=================================================== =========== ======= =========== =======
Accrued income 6.2 13.7 33.7 17.2
Prepayments 14.1 17.7 0.4 4.0
Amounts due from Group companies - - 685.5 132.6
Other receivables 4.3 6.4 1.5 4.8
=================================================== =========== ======= =========== =======
33.5 60.6 722.6 164.1
=================================================== =========== ======= =========== =======
Net trade receivables and accrued income have decreased mainly
as a result of the recovery of significant debts during the period.
A significant debt for a government receivable, described below,
has been settled in full. In addition an early settlement was
reached on a long term trade receivable.
Of the accrued income balance $2.6m (2017: $9.6m) was due from
investment grade customers who are either Governments or very well
established corporations whose underlying customer is a
government.
Government of Indonesia
The reduction in provisions for trade receivables is primarily
due to the resolution of a dispute with the Government of
Indonesia. Due to the uncertainty in relation to the recovery of
this debt in the 2017 accounts, the debt had been provided for in
full. The settlement has resulted in a credit to bad debt expense
of $13.9m and additional revenue in year of $4.4m relating to
services that had been provided but for which revenue had not been
recognised due to the uncertainty of the recoverability of the
debt.
Avanti had contracted with the Government of Indonesia (GoI) to
provide services on its Artemis satellite related to GoI's need to
firstly bring into use, and, secondly, to maintain its orbital slot
at 123 degrees east. The total contract value was in excess of $30
million. Avanti performed all of its obligations under the contract
and had extended payment deadlines for GoI to assist with
administrative delays. However, after no payments had been received
for a significant period of time, Avanti terminated the contract
and commenced arbitration proceedings in London. The arbitration
tribunal rendered a final award ordering the Government of
Indonesia to pay to Avanti the total sum of $20.1m. This was
received in full during 2018.
Long Term Receivables
There are $nil (2017: $14.6m) long term receivables included in
the Group's trade receivable balances at 31 December 2018. Long
term receivables in the prior year were recovered in full or are
receivable within 12 months of the balance sheet date.
Company Receivables
The Company has non-current trade and other receivables of $nil
(2017: $663.0m) relating to amounts due from Group companies
classified as loans receivable. The Company has current trade and
other receivables of $685.5m (2017: $138.1m) relating to amounts
due from Group companies, of which $nil (2017: $5.5m) was included
within trade receivables.
As a result of the continued challenges in the business
achieving forecast results, and in light of the Group's new
strategy, there are potential indicators of impairment as at 31
December 2018, and therefore management has performed an impairment
assessment of the Company's outstanding receivables due from
subsidiaries. Based on the underlying net assets recorded on the
balance sheet of each subsidiary, the value of spectrum rights that
have no corresponding balance sheet asset and the future forecast
cash flows of those subsidiaries, the Directors have made a
provision totalling $385.0m against the investments in subsidiaries
($148.6m) and against intercompany receivables ($236.4m). The
remaining carrying value of the outstanding debt of $685.5m is
believed to be supported by the underlying assets of the
subsidiaries.
The provision against intercompany receivables is an estimate
which is based on the difference between the book value of the
receivables and the forecast net present value of the cash flows
that the business will generate from assets held by the
subsidiaries. The sensitivities referred to in the Property, Plant
and Equipment note give an indication of how upward or downward
changes in the forecast performance of the HYLAS 2 and HYLAS 2B
assets would impact the impairment assessment. Those sensitivities
also apply to the provision for intercompany receivables. In
addition, the assessment is also based upon the carrying value of
the HYLAS 3 and HYLAS 4 assets, for which no impairment indicators
have been identified.
9. Loans and borrowings
Group current Group non-current
==================== ====================
30 June 30 June
31 December 31 December
2018 2017 2018 2017
$'m $'m $'m $'m
========================================== =========== ======= =========== =======
Secured at amortised cost
Super Senior Facility - - 150.2 -
High Yield Bonds - Amended Existing Notes - - - 293.6
High Yield Bonds - PIK Toggle Notes - - 306.2 287.6
Finance lease liabilities (i) (note 27) 1.4 2.1 9.3 11.4
1.4 2.1 465.7 592.6
========================================== =========== ======= =========== =======
(i) Finance lease obligations are secured by retention of title
to the related assets. The borrowings are on fixed interest rate
debt with repayment periods between 3 and 12.5 years.
High yield bonds
Debt for Equity Swap
On 26 April 2018 the Company completed a debt for equity swap
consisting of repayment of the 12%/17.5% Senior Secured Notes due
2023 of $557.0m by issuing 1,999,676,704 new ordinary shares with a
nominal value of 1 pence each in Avanti Communications Group plc.
The interest accrued on the Amended Existing Notes as at 25 April
2018 was settled through the issue of additional notes, and
included in the debt for equity swap. $55.7m of Amended Existing
Notes were issued in respect of interest due on these notes between
2 October 2017 and 1 April 2018. The fair value of the shares at
the date of the Swap was 6.11 pence per share, giving total
consideration of $170.4m. As the fair value was derived by
reference to the closing share price at the date of the Swap, it is
considered to be a Level 1 fair value measurement. The carrying
value of the liability at the date of the Swap was $425.3m, after
issue of the April PIK. The resulting gain of $254.9m has been
recognised in the Income Statement as an exceptional gain on debt
for equity swap. Costs identified as being directly associated with
the transaction, of $0.024m, have been taken directly to share
premium.
Modification of debt
On 26 April 2018 the restructuring of the 10%/15% Senior Secured
Notes due 2021 completed, and from this date the interest rate
reduced from 12.5%/17.5% to 9% for both cash and PIK and their
maturity was extended by one year to 2022. The interest accrued on
the PIK Toggle Notes as at 25 April 2018 was settled through the
issue of additional notes. $20.2m of PIK Toggle Notes were issued
in respect of interest due on these notes between 2 October 2017
and 1 April 2017.
The Group performed an assessment under its accounting policies
and the requirements of IAS 39 as to whether the restructuring of
the terms of the PIK Toggle Notes represented a substantial
modification. As the net present value of the cash flows under the
original terms and the modified terms was greater than 10%
different, the modification was accounted for as substantial.
As a result, on completion of the restructuring, the carrying
value of the PIK Toggle Notes of $312.4m was de-recognised and the
amended PIK Toggle notes with a nominal value of $343.7m were
recognised on the balance sheet at the date of modification at
their fair value of $258.6m. The fair value of $0.80 per Note was
derived by reference to the trading price of the PIK Toggle Notes
on the modification date. This is considered to be a Level 1 fair
value measurement. A review of the trading price of the Notes in
the period from the restructuring circular being issued and
subsequent to the modification being completed did not identify any
material difference in the fair value. The gain arising on
substantial modification of the PIK Toggle Notes was $53.8m which
has been recognised in the Income Statement as an exceptional gain
on substantial modification. All costs associated with the
transaction were expensed and included within finance costs.
Interest accrued from 26 April 2018 was settled through the
issue of additional notes. $16.3m of PIK Toggle Notes were issued
in respect of interest due on these notes between 26 April 2018 and
1 October 2018.
In July 2017 the Company drew down $100 million of the
three-year super senior facility agreed in June 2017 which had an
interest rate of 7.5%. On 2 November the Company drew down an
additional $18 million of the super senior facility at an interest
rate of 7.5%. Interest on this facility has been paid in cash in
October 2017, April 2018, and October 2018.
On 16 November 2018 the Company agreed an amendment to the super
senior facility signed in June 2017. This amendment had the
following terms:
-- an incremental facility notice to increase the facility by $34.5 million to $152.5 million
-- an increase in the interest rate on the facility from 7.5% to 8.5%
The Group performed an assessment under its accounting policies
and the requirements of IAS 39 as to whether the restructuring of
the terms of the June 2017 Super Senior Facility in November 2018
represented a substantial modification. As the net present value of
the cash flows under the original terms and the modified terms was
less than 10% different, the modification was accounted for as
non-substantial.
As a result, the existing debt of $118.0 million remained on the
balance sheet at its current carrying value. The debt will be
accreted up to its final redemption value over the extended term to
maturity using an amended Effective Interest Rate.
31 December 2018
=========================== ================= ========================= ==============
Original notional
Issuer value Description of instrument Due
=========================== ================= ========================= ==============
Avanti Communications Group
plc $360.1m PIK Toggle Notes 1 October 2022
Avanti Communications Group
plc $152.5m Super Senior Facility 30 June 2020
===========================
30 June 2017
=========================== ================= ========================= ==============
Original notional
Issuer value Description of instrument Due
=========================== ================= ========================= ==============
Avanti Communications Group $512.2m Amended Existing Notes 1 October 2022
plc
Avanti Communications Group $300.8m PIK Toggle Notes 1 October 2021
plc
=========================== ================= ========================= ==============
The high yield bonds are disclosed in non-current loans and
borrowings as detailed below:
31 December 30 June
2018 2017
$'m $'m
=====================================================
High yield bonds 360.1 813.0
Super Senior notes 152.5 -
===================================================== =========== =======
Less: Unamortised credit on substantial modification (53.9) (218.6)
Less: Unamortised debt issuance costs (2.3) (13.2)
===================================================== =========== =======
456.4 581.2
===================================================== =========== =======
10. Cash absorbed by operations
Group Group
31 December 30 June
2018
$'m 2017
$'m
================================================ ============= =========
(Loss)/profit before taxation (6.8) (77.7)
Interest receivable (2.5) -
Interest payable 89.1 74.4
Amortised bond issue costs 54.0 19.0
Foreign exchange loss/(gain) 0.2 (0.1)
Depreciation and amortisation of non-current
assets 64.3 47.2
Provision for doubtful debts (20.3) 15.0
Exceptional credit on substantial modification (64.7) (219.2)
Exceptional credit on debt for equity swap (254.9) -
Share based payment expense 0.2 0.2
Impairment 80.7 124.0
(Increase)/decrease in stock (16.9) (0.8)
Decrease/(increase) in debtors 41.9 (95.5)
(Decrease)/increase in trade and other payables (6.2) 104.4
Effects of exchange rate on the balances
of working capital (7.3) 5.0
================================================
Cash absorbed by from operations (49.2) (4.1)
================================================ ============= =========
11. Post balance sheet events
Filiago
On 4 March 2019, N Fox resigned as a director of Filiago and the
Group returned control to the founder and joint Director of
Filiago, and forgave the loans which have been fully provided for
by the Group as at 31 December 2018.
Debt Facilities Amendments
The Group had the following debt instruments, excluding finance
leases, as at 31 December 2018:
31 December 2018
=========================== ================= ========================= ==============
Original notional
Issuer value Description of instrument Due
=========================== ================= ========================= ==============
Avanti Communications Group
plc $360.1m PIK Toggle Notes 1 October 2022
Avanti Communications Group
plc $152.5m Super Senior Facility 30 June 2020
===========================
The debt facilities amendments announced on 28 May 2019
comprised the following components which are described in further
detail below:
-- Additional funding borrowed in the form of a new 1.5 lien
facility (the "New 1.5 Facility")
-- Extension of the maturity of the Super Senior Facility
New 1.5 Facility
On 9 May 2019, the Group commenced a consent solicitation to all
holders of the PIK Toggle Notes (the "Notes") in order to give the
Company the ability to raise additional funding borrowed in the
form of super senior debt, including in the form of the New 1.5
Facility. Approval of the Proposed Indenture Amendments required
consent from Holders representing at least 60% in aggregate
principal amount of the then outstanding PIK Toggle Notes.
On 16 May 2019, the Group announced that it had received
consents for the Proposed Amendments from holders representing
94.94% in aggregate principal amount of its Notes. On 28 May 2019,
the Group announced that it had entered into an agreement for the
New 1.5 Facility, with the following key terms:
-- Initial drawdown of $9.2m
-- The commitment by lenders of an additional $45.8m of funds to
be available for drawdown from the closing date of the facility
-- The ability to increase the aggregate principal amount of the
New 1.5 Facility by up to $20m in the 12 months following the
closing date
-- Maturity date of May 2021 or, if the Company's existing Super
Senior Facility is extended, in July 2021
-- 12.5% per annum PIK interest, accruing quarterly in arrears
Extension of the maturity of the Super Senior Facility
On 28 May 2019, the Group announced that it had agreed an option
to extend the maturity of its Super Senior Facility by 6 months to
21 December 2020. The amended Super Senior Facility agreement
includes covenants over FY19 EBITDA, tested on an annual basis, and
FY20 EBITDA, tested on a quarterly basis.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UKRARKVANRUR
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